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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 28, 2025
OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-25121
_______________________________________________________________________
SLEEP NUMBER CORPORATION
(Exact name of registrant as specified in its charter)

Minnesota |  | 41-1597886
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

1001 Third Avenue South |  |
Minneapolis, |  | Minnesota |  | 55404
(Address of principal executive offices) |  | (Zip Code)

Registrant’s telephone number, including area code: (763) 551-7000
Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock, par value $0.01 per share |  | SNBR |  | Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☐ |  | Accelerated filer | ☒
Non-accelerated filer | ☐ |  | Smaller reporting company | ☐
|  |  | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 28, 2025, 22,771,000 s hares of the registrant’s Common Stock were outstanding.

i | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
INDEX

| Page
PART I: FINANCIAL INFORMATION | 1
Item 1. | Financial Statements (unaudited) | 1
| Condensed Consolidated Balance Sheets | 1
| Condensed Consolidated Statements of Operations | 2
| Condensed Consolidated Statements of Shareholders' Deficit | 3
| Condensed Consolidated Statements of Cash Flows | 4
| Notes to Condensed Consolidated Financial Statements | 5
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 27
Item 4. | Controls and Procedures | 27
PART II: OTHER INFORMATION | 28
Item 1. | Legal Proceedings | 28
Item 1A. | Risk Factors | 28
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 28
Item 3. | Defaults Upon Senior Securities | 28
Item 4. | Mine Safety Disclosures | 28
Item 5. | Other Information | 28
Item 6. | Exhibits | 29
SIGNATURES | 31

1 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of contents
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited - in thousands, except per share amounts)

| June 28, 2025 |  | December 28, 2024
Assets |  |  |
Current assets: |  |  |
Cash and cash equivalents | $1,349 |  | $1,950
Accounts receivable, net of allowances of $1,127 and $1,113, respectively | 16,017 |  | 17,516
Inventories | 99,450 |  | 103,152
Prepaid expenses | 20,824 |  | 14,568
Other current assets | 37,885 |  | 44,098
Total current assets | 175,525 |  | 181,284
Non-current assets: |  |  |
Property and equipment, net | 109,105 |  | 129,574
Operating lease right-of-use assets | 339,149 |  | 356,641
Goodwill and intangible assets, net | 66,301 |  | 66,412
Deferred income taxes | 31,803 |  | 33,575
Other non-current assets | 82,629 |  | 93,324
Total assets | $804,512 |  | $860,810
Liabilities and Shareholders’ Deficit |  |  |
Current liabilities: |  |  |
Borrowings under revolving credit facility | $563,900 |  | $546,600
Accounts payable | 111,212 |  | 107,619
Customer prepayments | 41,141 |  | 46,933
Accrued sales returns | 15,650 |  | 19,092
Compensation and benefits | 20,929 |  | 31,038
Taxes and withholding | 17,854 |  | 18,619
Operating lease liabilities | 82,209 |  | 82,307
Other current liabilities | 50,326 |  | 55,804
Total current liabilities | 903,221 |  | 908,012
Non-current liabilities: |  |  |
Operating lease liabilities | 287,585 |  | 307,201
Other non-current liabilities | 94,394 |  | 97,183
Total liabilities | 1,285,200 |  | 1,312,396
Shareholders’ deficit: |  |  |
Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding | — |  | —
Common stock, $0.01 par value; 142,500 shares authorized, 22,771 and 22,388 shares issued and outstanding, respectively | 228 |  | 224
Additional paid-in capital | 31,942 |  | 27,390
Accumulated deficit | (512,858) |  | (479,200)
Total shareholders’ deficit | (480,688) |  | (451,586)
Total liabilities and shareholders’ deficit | $804,512 |  | $860,810

See accompanying notes to condensed consolidated financial statements.

2 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited - in thousands, except per share amounts)

| Three Months Ended |  | Six Months Ended
| June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Net sales | $327,925 |  | $408,413 |  | $721,186 |  | $878,862
Cost of sales | 134,180 |  | 166,923 |  | 286,906 |  | 361,198
Gross profit | 193,745 |  | 241,490 |  | 434,280 |  | 517,664
Operating expenses: |  |  |  |  |  |  |
Sales and marketing | 146,464 |  | 182,400 |  | 335,567 |  | 390,912
General and administrative | 29,604 |  | 39,573 |  | 68,223 |  | 78,652
Research and development | 9,420 |  | 11,578 |  | 20,323 |  | 24,019
Restructuring costs | 8,332 |  | 1,819 |  | 8,392 |  | 12,419
Total operating expenses | 193,820 |  | 235,370 |  | 432,505 |  | 506,002
Operating (loss) income | (75) |  | 6,120 |  | 1,775 |  | 11,662
Interest expense, net | 11,734 |  | 12,270 |  | 22,815 |  | 24,569
Loss before income taxes | (11,809) |  | (6,150) |  | (21,040) |  | (12,907)
Income tax expense (benefit) | 13,203 |  | (1,099) |  | 12,618 |  | (374)
Net loss | $(25,012) |  | $(5,051) |  | $(33,658) |  | $(12,533)
Basic net loss per share: |  |  |  |  |  |  |
Net loss per share – basic | $(1.09) |  | $(0.22) |  | $(1.48) |  | $(0.56)
Weighted-average shares – basic | 22,903 |  | 22,614 |  | 22,804 |  | 22,560
Diluted net loss per share: |  |  |  |  |  |  |
Net loss per share – diluted | $(1.09) |  | $(0.22) |  | $(1.48) |  | $(0.56)
Weighted-average shares – diluted | 22,903 |  | 22,614 |  | 22,804 |  | 22,560

See accompanying notes to condensed consolidated financial statements.

3 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders’ Deficit
(unaudited - in thousands)

| Common Stock |  | Additional Paid-in Capital |  | Accumulated Deficit |  | Total
| Shares |  | Amount |  |  |
Balance at December 28, 2024 | 22,388 |  | $224 |  | $27,390 |  | $(479,200) |  | $(451,586)
Net loss | — |  | — |  | — |  | (8,646) |  | (8,646)
Stock-based compensation | 346 |  | 3 |  | 3,948 |  | — |  | 3,951
Repurchases of common stock | (74) |  | — |  | (563) |  | — |  | (563)
Balance at March 29, 2025 | 22,660 |  | $227 |  | $30,775 |  | $(487,846) |  | $(456,844)
Net loss | — |  | — |  | — |  | (25,012) |  | (25,012)
Stock-based compensation | 149 |  | 1 |  | 1,548 |  | — |  | 1,549
Repurchases of common stock | (38) |  | — |  | (381) |  | — |  | (381)
Balance at June 28, 2025 | 22,771 |  | $228 |  | $31,942 |  | $(512,858) |  | $(480,688)

| Common Stock |  | Additional Paid-in Capital |  | Accumulated Deficit |  | Total
| Shares |  | Amount |  |  |
Balance at December 30, 2023 | 22,235 |  | $222 |  | $16,716 |  | $(458,866) |  | $(441,928)
Net loss | — |  | — |  | — |  | (7,482) |  | (7,482)
Stock-based compensation | 134 |  | 1 |  | 4,116 |  | — |  | 4,117
Repurchases of common stock | (43) |  | — |  | (570) |  | — |  | (570)
Balance at March 30, 2024 | 22,326 |  | $223 |  | $20,262 |  | $(466,348) |  | $(445,863)
Net loss | — |  | — |  | — |  | (5,051) |  | (5,051)
Stock-based compensation | 32 |  | 1 |  | 3,991 |  | — |  | 3,992
Repurchases of common stock | (3) |  | — |  | (42) |  | — |  | (42)
Balance at June 29, 2024 | 22,355 |  | $224 |  | $24,211 |  | $(471,399) |  | $(446,964)

See accompanying notes to condensed consolidated financial statements.

4 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)

| Six Months Ended
| June 28, 2025 |  | June 29, 2024
Cash flows from operating activities: |  |  |
Net loss | $(33,658) |  | $(12,533)
Adjustments to reconcile net loss to net cash provided by operating activities: |  |  |
Depreciation and amortization | 29,096 |  | 34,177
Stock-based compensation | 5,500 |  | 8,109
Net loss on disposals and impairments of assets | 775 |  | 2,500
Deferred income taxes | 1,772 |  | (5,144)
Changes in operating assets and liabilities: |  |  |
Accounts receivable | 1,499 |  | 6,587
Inventories | 3,702 |  | 19,588
Income taxes | 2,470 |  | 774
Prepaid expenses and other assets | 10,381 |  | (1,483)
Accounts payable | 8,354 |  | (18,464)
Customer prepayments | (5,792) |  | (4,625)
Accrued compensation and benefits | (10,086) |  | 7,153
Other taxes and withholding | (3,235) |  | (1,345)
Other accruals and liabilities | (9,582) |  | (11,776)
Net cash provided by operating activities | 1,196 |  | 23,518
Cash flows from investing activities: |  |  |
Purchases of property and equipment | (8,052) |  | (14,075)
Payment to secure contractual rights | (3,280) |  | —
Issuance of note receivable | — |  | (2,942)
Net cash used in investing activities | (11,332) |  | (17,017)
Cash flows from financing activities: |  |  |
Net increase (decrease) in short-term borrowings | 12,356 |  | (6,408)
Repurchases of common stock | (944) |  | (612)
Debt issuance costs | (1,877) |  | —
Net cash provided by (used in) financing activities | 9,535 |  | (7,020)
Net decrease in cash and cash equivalents | (601) |  | (519)
Cash and cash equivalents, at beginning of period | 1,950 |  | 2,539
Cash and cash equivalents, at end of period | $1,349 |  | $2,020

See accompanying notes to condensed consolidated financial statements.

5 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of Contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Business and Summary of Significant Accounting Policies
Business & Basis of Presentation
The Company prepared the condensed consolidated financial statements as of and for the three and six months ended
June 28, 2025 of Sleep Number Corporation and its 100%-owned subsidiaries (Sleep Number or the Company), without
audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and they reflect, in the
opinion of management, all normal recurring adjustments, including the elimination of all significant intra-entity balances
and transactions, necessary to present fairly its financial position as of June 28, 2025 and December 28, 2024, and the
consolidated results of operations and cash flows for the periods presented. The historical and quarterly consolidated
results of operations may not be indicative of the results that may be achieved for the full year or any future period.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.
Generally Accepted Accounting Principles (GAAP) have been condensed or omitted pursuant to such rules and
regulations. These condensed consolidated financial statements should be read in conjunction with the most recent
audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for
the fiscal year ended December 28, 2024 and other recent filings with the SEC.
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to
make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the
reported amounts of sales, expenses and income taxes during the reporting period. Predicting future events is inherently
an imprecise activity and, as such, requires the use of judgment. As future events and their effects cannot be determined
with precision, actual results could differ significantly from these estimates. Changes in these estimates will be reflected
in the consolidated financial statements in future periods and could be material.
The Company’s critical accounting policies consist of stock-based compensation, warranty liabilities and revenue
recognition.
Accounting Pronouncements Issued But Not Yet Effective
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements in Income Tax Disclosures"
to enhance the transparency and decision usefulness of income tax disclosures. This amendment requires public
companies to disclose specific categories in the rate reconciliation and provide additional information for reconciling
items that meet a quantitative threshold. Additionally, under the amendment, entities are required to disclose the
amount of income taxes paid disaggregated by federal, state and foreign taxes, as well as disaggregated by material
individual jurisdictions. Finally, the amendment requires entities to disclose income from continuing operations before
income tax expense disaggregated between domestic and foreign and income tax expense from continuing operations
disaggregated by federal, state and foreign. The new rules are effective for annual periods beginning after December
15, 2024. The adoption of this standard is not expected to have a material impact on the Company’s consolidated
financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense
Disaggregation Disclosures (Subtopic 220-40)", which requires public business entities to disclose in the notes to the
financial statements more detailed information about the types of expenses included in certain expense captions in the
consolidated financial statements, including purchases of inventory, employee compensation, and depreciation and
amortization. The amendments are effective for the Company beginning with the 2027 annual period and in interim
periods beginning in 2028. Early adoption is permitted. The ASU may be adopted prospectively or retrospectively. The
Company is currently evaluating the impact of ASU 2024-03 on its consolidated financial statements and related
disclosures.
Currently, management does not believe that any other recently issued, but not yet effective accounting
pronouncements, if adopted in their current form, would have a material impact on the Company’s consolidated financial
statements.

6 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of Contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
Other Investments
The Company made a payment of $3.3 million during the three months ended June 28, 2025 to secure contractual rights
from a strategic product-development partner. This payment is included in prepaid expenses in the Company’s
condensed consolidated balance sheet and as an investing activity in the Company’s condensed consolidated statement
of cash flows.
2. Fair Value Measurements
At both June 28, 2025 and December 28, 2024, the Company had $19 million of debt and equity securities that fund the
deferred compensation plan and are classified in other non-current assets. The Company also had corresponding
deferred compensation plan liabilities of $19 million at both June 28, 2025 and December 28, 2024 which are included
in other non-current liabilities. The majority of the debt and equity securities are Level 1 as they trade with sufficient
frequency and volume to enable the Company to obtain pricing information on an ongoing basis. Unrealized gains/
(losses) on the debt and equity securities offset those associated with the corresponding deferred compensation plan
liabilities.
3. Inventories
Inventories consisted of the following (in thousands):

| June 28, 2025 |  | December 28, 2024
Raw materials | $6,415 |  | $11,434
Work in progress | 168 |  | 130
Finished goods | 92,867 |  | 91,588
| $99,450 |  | $103,152

4. Goodwill and Intangible Assets, Net
Goodwill and Indefinite-lived Intangible Assets
Goodwill was $64.0 million at June 28, 2025 and December 28, 2024. Indefinite-lived trade name/trademarks totaled
$1.4 million at both June 28, 2025 and December 28, 2024.
Definite-lived Intangible Assets
Patents were $2.0 million at both June 28, 2025 and December 28, 2024. Accumulated amortization was $1.1 million at
June 28, 2025 and $1.0 million at December 28, 2024. Amortization expense was $55 thousand for both the three
months ended June 28, 2025 and June 29, 2024, and $0.1 million for both the six months ended June 28, 2025 and
June 29, 2024.
Annual amortization for patents for subsequent years is as follows (in thousands):

2025 (excluding the six months ended June 28, 2025 ) |  | $117
2026 |  | 222
2027 |  | 222
2028 |  | 155
2029 |  | 99
2030 |  | 45
Total future amortization for definite-lived intangible assets |  | $860

7 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of Contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
5. Credit Agreement
As of June 28, 2025, the Company’s credit facility had a total commitment amount of $673 million. The credit facility, as
amended, is for general corporate purposes and to meet seasonal working capital requirements. The Amended and
Restated Credit and Security Agreement, dated February 14, 2018, among the Company, U.S. Bank National Association
and the several banks and other financial institutions from time to time party thereto (as amended, the Credit
Agreement), includes an accordion feature which allows the Company to increase the amount of the credit facility from
$673 million to $1.0 billion, subject to lenders’ approval. The Credit Agreement provides the lenders with a collateral
security interest in substantially all of the Company’s assets and those of its subsidiaries and requires the Company to
comply with, among other things, a maximum net leverage ratio and a minimum interest coverage ratio.
The Company amended the Credit Agreement on March 3, 2025. The amendment, among other things: (a) adds a
definition for "Liquidity" which means, on any date of determination, the sum of (x) Borrower's and its Subsidiaries'
unrestricted cash that is free and clear of Liens (other than those in favor of the Administrative Agent) plus (y) the
aggregate amount of unused Revolving Credit Commitments available for Credit Events on such date (including the
Borrower's ability to satisfy the requirements of Section 4.1 on such date) (as each is defined in the Credit Agreement);
(b) adds a Liquidity financial covenant wherein the Borrower shall cause the Liquidity to be equal or exceed $40 million
as of the last day of each fiscal month; (c) deems our Net Leverage Ratio as greater than or equal to 4.50 to 1.00 as of
the effective date to set pricing for the Applicable Commitment Fee Rate and Applicable Margin until receipt of the
compliance certificate for the quarterly reporting period ending September 27, 2025, (d) adjusts the permissible
maximum Net Leverage Ratio (as defined in the Credit Agreement) to (I) 4.75 to 1.00 for the quarterly reporting period
ending June 28, 2025, (II) 4.50 to 1.00 for the quarterly reporting period ending September 27, 2025, (III) 4.35 to 1.00 for
the quarterly reporting period ending January 3, 2026, and (IV) 4.00 to 1.00 for each quarterly reporting period occurring
thereafter, and (e) adjusts the permissible minimum Interest Coverage Ratio (as defined in the Credit Agreement) to (I)
1.90 to 1.00 for the quarterly reporting periods ending June 28, 2025 and September 27, 2025, (II) 2.10 to 1.00 for the
quarterly reporting period ending January 3, 2026, and (III) 3.00 to 1.00 for each quarterly reporting period occurring
thereafter. A fee for the amendment was paid to the approving lenders in an amount equal to 20 basis points multiplied
by the sum of such lender's Revolving Credit Commitment and outstanding Term Loans (as each is defined in the Credit
Agreement).
The carrying amount of the outstanding borrowings under the Credit Agreement approximates fair value because
interest rates approximate the current rates available to the Company. Under the terms of the Credit Agreement, the
Company pays a variable rate of interest and a commitment fee based on its leverage ratio. The Credit Agreement
matures in December 2026. The Company was in compliance with all financial covenants as of June 28, 2025.
The following table summarizes the Company’s borrowings under the credit facility ($ in thousands):

| June 28, 2025 |  | December 28, 2024
Outstanding borrowings | $563,900 |  | $546,600
Outstanding letters of credit | $6,847 |  | $7,147
Additional borrowing capacity | $101,753 |  | $123,753
Weighted-average interest rate | 7.9% |  | 7.6%

Subsequent to June 28, 2025, the Company’s outstanding letters of credit increased to $9 million.
6. Leases
The Company leases its retail, office and manufacturing space under operating leases which, in addition to the minimum
lease payments, may require payment of a proportionate share of the real estate taxes and certain building operating
expenses. While the Company’s local market development approach generally results in long-term participation in given
markets, the retail store leases generally provide for an initial lease term of five to ten years. The Company’s office and
manufacturing leases provide for an initial lease term of up to fifteen years. In addition, the Company’s mall-based retail
store leases may require payment of variable rent based on net sales in excess of certain thresholds. Certain leases may

8 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of Contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
contain options to extend the term of the original lease. The exercise of lease renewal options is at the Company’s sole
discretion. Lease options are included in the lease term only if exercise is reasonably certain at lease commencement.
The Company’s lease agreements do not contain any material residual value guarantees. The Company also leases
vehicles and certain equipment under operating leases with an initial lease term of three to six years.
The Company’s operating lease costs include facility, vehicle and equipment lease costs, but exclude variable lease
costs. Operating lease costs are recognized on a straight-line basis over the lease term, after consideration of rent
escalations and rent holidays. The lease term for purposes of the calculation begins on the earlier of the lease
commencement date or the date the Company takes possession of the property. During lease renewal negotiations that
extend beyond the original lease term, the Company estimates straight-line rent expense based on current market
conditions. Variable lease costs are recorded when it is probable the cost has been incurred and the amount can be
reasonably estimated. Future payments for real estate taxes and certain building operating expenses for which the
Company is obligated are not included in operating lease costs.
At June 28, 2025, the Company’s finance right-of-use assets and lease liabilities were not significant.
Lease costs were as follows (in thousands):

| Three Months Ended |  | Six Months Ended
| June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Operating lease costs(1) | $26,649 |  | $26,909 |  | $53,186 |  | $53,735
Variable lease costs(2) | $37 |  | $8 |  | $140 |  | $(41)

___________________________
(1)Includes short-term lease costs which are not significant.
(2)Variable lease costs include adjustments to percentage rent.
The maturities of operating lease liabilities for subsequent years are as follows(1) (in thousands):

2025 (excluding the six months ended June 28, 2025) | $52,797
2026 | 99,002
2027 | 82,575
2028 | 69,001
2029 | 48,062
2030 | 34,064
Thereafter | 51,219
Total operating lease payments(2) | 436,720
Less: Interest | 66,926
Present value of operating lease liabilities | $369,794

___________________________
(1)T otal operating lease payments exclude $8 million of legally binding minimum lease payments for leases signed but not yet commenced.
(2)Includes the current portion of $82 million for operating lease liabilities.
Other information related to operating leases was as follows:

|  | June 28, 2025 |  | December 28, 2024
Weighted-average remaining lease term (in years) |  | 5.2 |  | 5.4
Weighted-average discount rate |  | 6.7% |  | 6.6%

9 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of Contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)

|  | Six Months Ended
(in thousands) |  | June 28, 2025 |  | June 29, 2024
Cash paid for amounts included in present value of operating lease liabilities |  | $53,092 |  | $54,300
Right-of-use assets obtained in exchange for operating lease liabilities |  | $12,752 |  | $16,313

7. Repurchases of Common Stock
For the three months ended June 28, 2025 and June 29, 2024, we repurchased $0.4 million and $42 thousand,
respectively, of common stock in connection with the vesting of restricted stock grants. For the six months ended
June 28, 2025 and June 29, 2024, we repurchased $0.9 million and $0.6 million, respectively, of common stock in
connection with the vesting of restricted stock grants. We made no purchases under the Board-approved stock purchase
plan in either period. As of June 28, 2025, the remaining authorization under the Board-approved $600 million share
repurchase program was $348 million.
8. Revenue Recognition
Deferred contract assets and deferred contract liabilities are included in the condensed consolidated balance sheets as
follows (in thousands):

| June 28, 2025 |  | December 28, 2024
Deferred contract assets included in: |  |  |
Other current assets | $28,793 |  | $30,154
Other non-current assets | 45,996 |  | 48,988
| $74,789 |  | $79,142

| June 28, 2025 |  | December 28, 2024
Deferred contract liabilities included in: |  |  |
Other current liabilities | $37,008 |  | $38,129
Other non-current liabilities | 58,362 |  | 60,988
| $95,370 |  | $99,117

Deferred revenue and costs related to SleepIQ® technology are currently recognized on a straight-line basis over the
product's estimated life of 4.5 to 5.0 years because the Company’s inputs are generally expended evenly throughout the
performance period. During the three months ended June 28, 2025 and June 29, 2024, the Company recognized
revenue of $7 million and $10 million, respectively, that was included in the deferred contract liability balances at the
beginning of the respective periods. During the six months ended June 28, 2025 and June 29, 2024, the Company
recognized revenue of $17 million and $19 million, respectively, that was included in the deferred contract liability
balances at the beginning of the respective periods.
Revenue from goods and services transferred to customers at a point in time accounted for a pproximate ly 98% of
revenues for both the three and six months ended June 28, 2025 and June 29, 2024.

10 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of Contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
Net sales were as follows (in thousands):

| Three Months Ended |  | Six Months Ended
| June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Retail stores | $287,974 |  | $358,584 |  | $632,415 |  | $773,339
Online, phone, chat and other | 39,951 |  | 49,829 |  | 88,771 |  | 105,523
Total Company | $327,925 |  | $408,413 |  | $721,186 |  | $878,862

Obligation for Sales Returns
The activity in the sales returns liability account was as follows (in thousands):

| Six Months Ended
| June 28, 2025 |  | June 29, 2024
Balance at beginning of year | $19,092 |  | $22,402
Additions that reduce net sales | 36,098 |  | 46,664
Deductions from reserves | (39,540) |  | (48,535)
Balance at end of period | $15,650 |  | $20,531

9. Stock-Based Compensation Expense
Total stock-based compensation expense was as follows (in thousands):

| Three Months Ended |  | Six Months Ended
| June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Stock awards (1) | $1,064 |  | $3,294 |  | $1,503 |  | $6,438
Stock options | 485 |  | 698 |  | 3,997 |  | 1,671
Total stock-based compensation expense (1) | $1,549 |  | $3,992 |  | $5,500 |  | $8,109

___________________________
(1) Changes in stock-based compensation expense include the cumulative impact of the change in the expected achievements of certain performance
targets.
10. Profit Sharing and 401(k) Plan
Under the Company’s profit sharing and 401(k) plan, eligible employees may defer up to 50% of their compensation on a
pre-tax basis, subject to Internal Revenue Service limitations. Each pay period, the Company makes a contribution equal
to a percentage of the employee’s contribution. During the three months ended June 28, 2025 and June 29, 2024, the
Company’s contributions, net of forfeitures, were $1.7 million and $1.2 million, respectively and during the six months
ended June 28, 2025 and June 29, 2024, were $3.5 million and $3.2 million, respectively.

11 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of Contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
11. Net Loss per Common Share
The components of basic and diluted net loss per share were as follows (in thousands, except per share amounts):

| Three Months Ended |  | Six Months Ended
| June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Net loss | $(25,012) |  | $(5,051) |  | $(33,658) |  | $(12,533)
Reconciliation of weighted-average shares outstanding: |  |  |  |  |  |
Basic weighted-average shares outstanding | 22,903 |  | 22,614 |  | 22,804 |  | 22,560
Dilutive effect of stock-based awards | — |  | — |  | — |  | —
Diluted weighted-average shares outstanding | 22,903 |  | 22,614 |  | 22,804 |  | 22,560
Net loss per share – basic | $(1.09) |  | $(0.22) |  | $(1.48) |  | $(0.56)
Net loss per share – diluted | $(1.09) |  | $(0.22) |  | $(1.48) |  | $(0.56)

For the three and six month periods ende d June 28, 2025 and June 29, 2024, otherwise dilutive stock-based awards
have been excluded from the calculation of diluted weighted-average shares outstanding, as their inclusion would have
had an anti-dilutive effect on our net loss per diluted share. Additional potential dilutive stock-based awards totaling
1.6 million and 1.3 million for the three months ended June 28, 2025 and June 29, 2024, respectively, and 1.8 million
and 1.3 million for the six months ended June 28, 2025 and June 29, 2024, respectively, have been excluded from the
diluted net loss per share calculations because these stock-based awards were anti-dilutive.
12. Restructuring Costs
In the fourth quarter of 2023, the Company initiated cost reduction actions to reduce operating expenses and accelerate
gross margin initiatives, and recognized $33.8 million of restructuring costs through December 28, 2024. The Company
has incurred an additional $8.4 million and of restructuring costs during the six months ended June 28, 2025. Charges
incurred related to this initiative were comprised of contract termination costs, severance and employee-related benefits,
professional fees and other, and asset impairment charges and are included in the restructuring costs line in the
Company’s condensed consolidated statement of operations. The Company expects approximately $8 million of
additional restructuring costs to be incurred through the remainder of 2025, primarily due to severance and employee-
related benefits, contract termination costs, and asset impairment charges.
The following table provides a summary of the Company’s restructuring costs during the three and six months ended
June 28, 2025 and June 29, 2024 (in thousands):

| Three Months Ended |  | Six Months Ended
| June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Cash restructuring costs: |  |  |  |  |  |  |
Contract termination costs (1) | $1,409 |  | $(230) |  | $1,295 |  | $4,183
Severance and employee-related benefits | 6,335 |  | 401 |  | 6,492 |  | 1,242
Professional fees and other | — |  | 1,648 |  | 17 |  | 4,494
Total cash restructuring costs | 7,744 |  | 1,819 |  | 7,804 |  | 9,919
Non-cash restructuring costs: |  |  |  |  |  |  |
Asset impairments (2) | 588 |  | — |  | 588 |  | 2,500
Total restructuring costs | $8,332 |  | $1,819 |  | $8,392 |  | $12,419

____________________
(1) Primarily comprised of lease termination costs and includes changes in estimate.
(2) Primarily comprised of impairments of property and equipment.

12 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of Contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following table provides the activity in the Company’s restructuring related liabilities, which are included within
accounts payable, compensation and benefits and other current liabilities on the condensed consolidated balance sheet
(in thousands):

| June 28, 2025 |  | December 28, 2024
Balance at the beginning of year | $3,341 |  | $8,720
Expenses | 7,804 |  | 14,888
Cash payments | (7,973) |  | (20,267)
Balance at the end of the period | $3,172 |  | $3,341

Since the initiation of cost reduction actions in the fourth quarter of 2023, the Company has recognized a cumulative
$42.2 million of restructuring costs, as follows (in thousands):

|  | Cumulative
|  | June 28, 2025
Cash restructuring costs: |  |
Contract termination costs (1) |  | $15,732
Severance and employee-related benefits |  | 14,685
Professional fees and other |  | 5,761
Total cash restructuring costs |  | 36,178
Non-cash restructuring costs: |  |
Asset impairments (2) |  | 6,008
Total restructuring costs |  | $42,186

____________________
(1)Primarily comprised of lease termination costs.
(2) Includes impairments of both lease right-of-use assets and property and equipment.
13. Income Taxes
Income tax expen se was $13.2 million for the three months ended June 28, 2025, compared with income tax benefit of
$1.1 million for the same period one year ago. Income tax expense totaled $12.6 million for six months ended June 28,
2025, compared with income tax benefit of $0.4 million for the same period one year ago.
The Company evaluates its deferred income taxes quarterly to determine if valuation allowances are required. As part of
this evaluation, the Company assess whether valuation allowances should be established for any deferred tax assets that
are not considered more likely than not to be realized, using all available evidence, both positive and negative. This
assessment considers, among other matters, the nature, frequency, and severity of historical losses, forecasts of future
profitability, taxable income in available carryback periods and tax planning strategies. In making such judgments,
significant weight is given to evidence that can be objectively verified. During the three months ended June 28, 2025,
the Company recorded a change in valuation allowance of $14 million on the basis of management’s reassessment of
the amount of its deferred tax assets primarily related to interest expense that are more likely than not to not be realized.
This decreased the effective tax rate by 66.5% for the three months ended June 28, 2025. The Company continues to
assess the need for the valuation allowance and will make adjustments when appropriate.

13 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of Contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
14. Segments
The Company’s chief operating decision maker (CODM), who is the Chief Executive Officer, assesses company-wide
performance and allocates resources based on consolidated financial information. Consequently, the Company views the
entire organization as one reportable segment and the strategic purpose of all operating activities is to support that one
segment.
The CODM manages the Company’s business activities as a single operating and reportable segment at the
consolidated level. The CODM uses consolidated earnings and losses, as reported on the Company’s condensed
consolidated statement of operations, in evaluating performance of the Company in determining how to allocate
resources of the Company as a whole, including investing in the Company’s product development, sales and marketing
campaigns, and employee compensation. The measure of segment assets that is reviewed by the CODM is reported
within the condensed consolidated balance sheet as consolidated total assets. The CODM also uses consolidated
earnings or losses before interest, taxes, depreciation and amortization (Adjusted EBITDA) as the basis to evaluate the
performance of the Company.
The following is a summary of the significant expense categories and consolidated net loss details provided to the
CODM (in thousands):

| Three Months Ended |  | Six Months Ended
| June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Net Sales | $327,925 |  | $408,413 |  | $721,186 |  | $878,862
Less: |  |  |  |  |  |  |
Cost of sales | (134,180) |  | (166,923) |  | (286,906) |  | (361,198)
Marketing expenses | (62,427) |  | (89,483) |  | (160,368) |  | (198,512)
Selling expenses | (84,037) |  | (92,917) |  | (175,199) |  | (192,400)
General and administrative | (29,604) |  | (39,573) |  | (68,223) |  | (78,652)
Research and development | (9,420) |  | (11,578) |  | (20,323) |  | (24,019)
Restructuring costs | (8,332) |  | (1,819) |  | (8,392) |  | (12,419)
Interest expense | (11,734) |  | (12,270) |  | (22,815) |  | (24,569)
Income tax (expense) benefit | (13,203) |  | 1,099 |  | (12,618) |  | 374
Net loss | $(25,012) |  | $(5,051) |  | $(33,658) |  | $(12,533)

14 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of Contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
15. Commitments and Contingencies
Warranty Liabilities
The activity in the accrued warranty liabilities account was as follows (in thousands):

| Six Months Ended
| June 28, 2025 |  | June 29, 2024
Balance at beginning of period | $6,947 |  | $8,503
Additions charged to costs and expenses for current-year sales | 5,878 |  | 7,675
Deductions from reserves | (5,800) |  | (8,048)
Changes in liability for pre-existing warranties during the current year, including expirations | (983) |  | (171)
Balance at end of period | $6,042 |  | $7,959

Legal Proceedings
The Company is involved from time to time in various legal proceedings arising in the ordinary course of its business,
including primarily commercial, product liability, employment and intellectual property claims. In accordance with U.S.
GAAP, the Company records a liability in its consolidated financial statements with respect to any of these matters when
it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated. If a
material loss is reasonably possible but not known or probable, and may be reasonably estimated, the estimated loss or
range of loss is disclosed. With respect to currently pending legal proceedings, the Company has not established an
estimated range of reasonably possible material losses either because it believes that it has valid defenses to claims
asserted against it, the proceeding has not advanced to a stage of discovery that would enable it to establish an
estimate, or the potential loss is not material. The Company currently does not expect the outcome of pending legal
proceedings to have a material effect on its consolidated results of operations, financial position or cash flows. Litigation,
however, is inherently unpredictable, and it is possible that the ultimate outcome of one or more claims asserted against
the Company could adversely impact its consolidated results of operations, financial position or cash flows. The
Company expenses legal costs as incurred.
Purported Class Action Complaint
On January 14, 2025, purported customers served a putative class action complaint on behalf of themselves and a
putative class of California consumers against Sleep Number in the United States District Court for the Central District of
California alleging that Sleep Number’s beds are perpetually on sale in violation of California law. The Plaintiff seeks
injunctive relief, damages and attorney’s fees. Sleep Number brought a motion to dismiss for failure to state a claim and
a motion to transfer or, alternatively, dismiss based on the first-to-file doctrine (citing the purported class action
complaint filed on September 27, 2024 as described below). On April 8, 2025, t he Court granted Sleep Number’s
motion to transfer or, alternatively, dismiss and dismissed the matter in its entirety based on the first-to-file doctrine. The
plaintiffs did not appeal the dismissal.
Purported Class Action Complaint
On September 27, 2024, a purported customer served a putative class action complaint on behalf of themself and a
putative class of California consumers against Sleep Number in the United States District Court for the Eastern District of
California alleging that Sleep Number’s beds are perpetually on sale in violation of California law. The p laintiff seeks
injunctive relief, damages and attorney’s fees.

15 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of Contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
16. Subsequent Event
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted into law. The OBBBA makes permanent key
elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the
business interest expense limitation. ASC 740, “Income Taxes”, requires the effects of changes in tax rates and laws on
deferred tax balances to be recognized in the period in which the legislation is enacted. Consequently, as of the date of
enactment, and during the third quarter of 2025, the Company will evaluate all deferred tax balances under the newly
enacted tax law and identify any other changes required to its financial statements as a result of the OBBBA. The
Company is currently evaluating the impact of the OBBBA on its consolidated financial statements and related
disclosures.

16 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide
a reader of the Company’s condensed consolidated financial statements with a narrative from the perspective of
management on its financial condition, results of operations, liquidity and certain other factors that may affect the
Company’s future results. MD&A is presented in seven sections:
•Forward-Looking Statements and Risk Factors
•Business Overview
•Results of Operations
•Liquidity and Capital Resources
•Non-GAAP Data Reconciliations
•Critical Accounting Policies
Forward-looking Statements and Risk Factors
The discussion in this Quarterly Report on Form 10-Q contains certain forward-looking statements that relate to
future plans, events, financial results or performance. You can identify forward-looking statements by those that
are not historical in nature, particularly those that use terminology such as “may,” “will,” “should,” “could,”
“expect,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “predict,” “intend,” “potential,” “continue” or
the negative of these or similar terms. These statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from the Company’s historical experience and its present expectations or
projections. These risks and uncertainties include, among others:
•Changes in economic conditions and consumer sentiment and related impacts on discretionary consumer spending;
•Interest rates remain elevated, and may further increase and impact the cost of servicing the Company’s
indebtedness;
•Access to alternative financing options may depend on factors beyond the Company’s control or require the
Company to accept unfavorable terms;
•Availability of attractive and cost-effective consumer credit options;
•Ability to achieve cost savings, efficiencies and other benefits from its business restructuring actions and to avoid
adverse effects;
•Effectiveness and efficiency of the Company’s marketing strategy and promotions;
•Ability to execute Sleep Number’s Total Retail distribution strategy;
•Ability to compete effectively;
•Ability to achieve and maintain high levels of product and service quality;
•Ability to improve and expand the product line and execute new product introductions;
•Ability to protect the Company’s technology, trademarks and brand, and the adequacy of its intellectual property
rights;
•Dependence on, and ability to maintain working relationships with key suppliers and third parties, including some
that are the only source of supply or services currently used by the Company;
•Fluctuations in commodity costs or third-party delivery or logistics costs and other inflationary pressures;
•Risks inherent in global-sourcing activities, including tariffs, foreign regulation, geo-political turmoil, war, pandemics,
labor challenges, foreign currency fluctuations, inflation, climate or other disasters and resulting supply shortages,
and production and delivery delays and disruptions;
•Operating with minimal levels of inventory, which may leave the Company vulnerable to supply shortages;
•Risks of disruption in the operation of any of the Company’s facilities and operations, including manufacturing,
assembly, distribution, logistics, field services, home delivery, headquarters, product development, retail or customer
service operations;
•Ability to effectively complete potential future acquisitions and business combinations;
•Sleep Number’s ability, and the ability of its suppliers and vendors, to attract, retain and motivate qualified and
effective personnel;

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•Ability to comply with existing and changing government regulations and laws, and to commercialize new products
and innovations that meet those existing and changing government regulations and laws;
•Ability to identify and withstand cyber threats that could compromise the security of the Company’s systems or those
of third parties upon which it relies and could result in a data breach or business disruption;
•Risks associated with advancements in or adoption of artificial intelligence technologies;
•Adequacy of the Company’s and third-party information systems, and costs and disruptions related to upgrading or
maintaining these systems;
•Volatility of Sleep Number stock, its removal from various stock indices and the potential negative effects of
shareholder activism or of changes in coverage by securities analysts;
•Unfavorable tax treatment;
•Environmental, social and governance risks, including increasing scrutiny and evolving regulatory and stakeholder
expectations; and
•Ability to adapt to climate change and readiness for legal or regulatory responses thereto.
Additional information concerning these, and other risks and uncertainties is contained under the caption “Risk
Factors” in Part I, Item 1A. in the Company’s Annual Report on Form 10-K and in Part II. Item 1A. in subsequent
Quarterly Reports on Form 10-Q.
The Company has no obligation to publicly update or revise any of the forward-looking statements contained in this
Quarterly Report on Form 10-Q.
Business Overview
Sleep Number is a wellness company and market leader in the design, manufacturing, marketing and distribution of
highly innovative sleep solutions. The Company’s purpose is to improve the health and wellbeing of society through
higher quality sleep; to date, it has improved the lives of nearly 16 million people. Sleep Number’s Smart Sleepers
benefit from individualized sleep experiences, night after night, and are experiencing the physical, mental and emotional
benefits of life-changing sleep.
Sleep Number’s life-changing, differentiated smart beds combine physical and digital innovations, integrating
unparalleled physical comfort with a highly advanced sleep wellness platform. The smart beds offer the Company’s
signature firmness adjustability, enabling each sleeper adjustable comfort. Embedded digital sensors learn the sleep
needs of each individual; “sense and do” technology uses the sensed data to automatically adjust the smart bed to keep
the sleeper comfortable throughout the night. Active temperature balancing technology supports the ideal climate for
each sleeper and solves a prevalent sleep challenge. Additionally, the smart beds are an exceptional value, with
personalized sleep insights delivered daily, new features regularly added to all smart beds through over-the-air updates
and prices to meet most budgets. Sleep Number® smart beds provide unmatched features, benefits and comfort that
can lead to improved sleep health and wellness for both sleepers.
The Company’s advantaged business model is supported by its consumer innovation strategy: an individualized, digital
sleep wellness platform, a network of millions of highly engaged Smart Sleepers who are loyal brand advocates, a
vertically integrated operating model and a culture of individuality, with an ambitious vision to become one of the
world’s most beloved brands.
The Company’s 3,400 mission-driven team members are dedicated to the Company’s mission of improving lives by
individualizing sleep experiences. They passionately innovate to drive value creation, including our exclusive direct-to-
consumer selling in 630 stores and online, which meets customers whenever and wherever they choose to provide an
exceptional experience and a lifelong relationship. Additionally, the Company partners with world-leading institutions to
bring the power of 34 billion hours of longitudinal sleep data to sleep science and research.
The bedding industry has been in a sector level recession for three years with mattress industry unit volumes returning to
an estimated 24 million units in 2024, the lowest level since 2015. Consumer sentiment remains well below historical
averages, and high interest rates are putting ongoing pressure on the housing market. Consumers continue to scrutinize
spending, with inflation and other factors weighing on their purchasing power. Since initiating the Company’s operating
model transformation in the fourth quarter of 2023, the Company has executed structural changes to reduce fixed
expenses, while prioritizing improving margins and generating cash to create greater financial resilience across market
cycles.

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On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted into law. The OBBBA makes permanent key
elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the
business interest expense limitation. The Company is currently evaluating the impact of the OBBBA on its consolidated
financial statements and related disclosures.
Results of Operations
Quarterly and Year-to-Date Results
Quarterly and year-to-date operating results may fluctuate significantly as a result of a variety of factors, including
increases or decreases in sales, timing, amount and effectiveness of advertising expenditures, changes in sales return
rates or warranty experience, timing of investments in growth initiatives and infrastructure, timing of store openings/
closings and related expenses, changes in net sales resulting from changes in the Company’s store base, timing of new
product introductions and related expenses, timing of promotional offerings, competitive factors, changes in commodity
costs, disruptions in global supplies or third-party service providers, seasonality of retail and bedding industry sales,
consumer sentiment and general economic conditions. The extent to which these external factors will impact the
Company’s business and its consolidated financial results will depend on future developments, which are highly
uncertain and cannot be predicted. Therefore, the historical results of operations may not be indicative of the results that
may be achieved for any future period.
Highlights
Financial highlights for the three months ended June 28, 2025 were as follows:
•Net sales for the three months ended June 28, 2025 of $328 million decreased 20% from $408 million for the same
period one year ago driven by lower volume and reduced store count.
•The net sales change resulted from a 19% Total Retail comparable sales decrease. For additional details, see the
components of total net sales change on page 20.
•Average sales per store (sales for stores open at least one year, Total Retail, including online, phone and chat) on a
trailing twelve-month basis for the period ended June 28, 2025 totaled $2.4 million, compared with $2.7 million for
the same period one year ago.
•Operating loss for the three months ended June 28, 2025 was $0.1 million, compared with operating income of
$6.1 million for the same period one year ago. The $6 million decrease in operating income was driven by the lower
net sales and an increase in restructuring expenses of $7 million; partially offset by a $42 million reduction in
operating expenses.
•Adjusted EBITDA for the three months ended June 28, 2025 was $24 million, compared to $28 million for the same
period one year ago. The decrease was primarily due a higher level of net loss.
•Gross profit rate of 59.1% for both the three months ended June 28, 2025 and June 29, 2024. See the gross profit
discussion on page 21 for additional details.
•The $42 million year-over-year reduction in the Company’s operating expenses was due to lower sales and
marketing expenses, general and administrative expenses, and research and development expenses, partially offset
by higher restructuring costs.
•Net loss for the three months ended June 28, 2025 was $25 million, compared with $5 million for the same period
one year ago. Net loss per diluted share was $1.09, compared with $0.22 for the same period one year ago.
•The Company’s adjusted return on invested capital (Adjusted ROIC) was 8.4% on a trailing twelve-month basis for
the period ended June 28, 2025, compared with 3.7% for the comparable period one year ago.
•The Company provided $1 million in cash from operating activities for the six months ended June 28, 2025,
compared with $24 million for the same period one year ago.
•Free cash flow used $7 million for the six months ended June 28, 2025, compared with providing $9 million for the
same period one year ago.
•As of June 28, 2025, the Company had $564 million of borrowings under its revolving credit facility.

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The following table sets forth the Company’s results of operations expressed as dollars and percentages of net sales.
Figures are in millions, except percentages and per share amounts. Amounts may not add due to rounding differences.

| Three Months Ended |  | Six Months Ended
| June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Net sales | $327.9 |  | 100.0% |  | $408.4 |  | 100.0% |  | $721.2 |  | 100.0% |  | $878.9 |  | 100.0%
Cost of sales | 134.2 |  | 40.9% |  | 166.9 |  | 40.9% |  | 286.9 |  | 39.8% |  | 361.2 |  | 41.1%
Gross profit | 193.7 |  | 59.1% |  | 241.5 |  | 59.1% |  | 434.3 |  | 60.2% |  | 517.7 |  | 58.9%
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sales and marketing | 146.5 |  | 44.7% |  | 182.4 |  | 44.7% |  | 335.6 |  | 46.5% |  | 390.9 |  | 44.5%
General and administrative | 29.6 |  | 9.0% |  | 39.6 |  | 9.7% |  | 68.2 |  | 9.5% |  | 78.7 |  | 8.9%
Research and development | 9.4 |  | 2.9% |  | 11.6 |  | 2.8% |  | 20.3 |  | 2.8% |  | 24.0 |  | 2.7%
Restructuring costs | 8.3 |  | 2.5% |  | 1.8 |  | 0.4% |  | 8.4 |  | 1.2% |  | 12.4 |  | 1.4%
Total operating expenses | 193.8 |  | 59.1% |  | 235.4 |  | 57.6% |  | 432.5 |  | 60.0% |  | 506.0 |  | 57.6%
Operating (loss) income | (0.1) |  | —% |  | 6.1 |  | 1.5% |  | 1.8 |  | 0.2% |  | 11.7 |  | 1.3%
Interest expense, net | 11.7 |  | 3.6% |  | 12.3 |  | 3.0% |  | 22.8 |  | 3.2% |  | 24.6 |  | 2.8%
Loss before income taxes | (11.8) |  | (3.6%) |  | (6.2) |  | (1.5%) |  | (21.0) |  | (2.9%) |  | (12.9) |  | (1.5%)
Income tax expense (benefit) | 13.2 |  | 4.0% |  | (1.1) |  | (0.3%) |  | 12.6 |  | 1.7% |  | (0.4) |  | 0.0%
Net loss | $(25.0) |  | (7.6%) |  | $(5.1) |  | (1.2%) |  | $(33.7) |  | (4.7%) |  | $(12.5) |  | (1.4%)
Net loss per share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic | $(1.09) |  |  |  | $(0.22) |  |  |  | $(1.48) |  |  |  | $(0.56) |  |
Diluted | $(1.09) |  |  |  | $(0.22) |  |  |  | $(1.48) |  |  |  | $(0.56) |  |
Weighted-average number of common shares: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic | 22.9 |  |  |  | 22.6 |  |  |  | 22.8 |  |  |  | 22.6 |  |
Diluted | 22.9 |  |  |  | 22.6 |  |  |  | 22.8 |  |  |  | 22.6 |  |

The percentage of total net sales, by dollar volume, was as follows:

| Three Months Ended |  | Six Months Ended
| June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Retail stores | 87.8% |  | 87.8% |  | 87.7% |  | 88.0%
Online, phone, chat and other | 12.2% |  | 12.2% |  | 12.3% |  | 12.0%
Total Company | 100.0% |  | 100.0% |  | 100.0% |  | 100.0%

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The components of total net sales change, including comparable net sales changes, were as follows:

| Three Months Ended |  | Six Months Ended
| June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Sales change rates: |  |  |  |  |  |  |
Retail comparable-store sales (1) | (18%) |  | (11%) |  | (17%) |  | (10%)
Online, phone and chat | (19%) |  | (13%) |  | (16%) |  | (16%)
Total Retail comparable sales change (1) | (19%) |  | (11%) |  | (17%) |  | (11%)
Net opened/closed stores and other | (1%) |  | 0% |  | (1%) |  | 0%
Total Company | (20%) |  | (11%) |  | (18%) |  | (11%)

___________________________
(1)Stores are included in the comparable-store calculations in the 13th full month of operations. Stores that have been remodeled or repositioned
within the same shopping center remain in the comparable-store base.
Other sales metrics were as follows:

| Three Months Ended |  | Six Months Ended
| June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Average sales per store (1) (in thousands) | $2,395 |  | $2,732 |  |  |  |
Average sales per square foot (1) | $775 |  | $883 |  |  |  |
Stores > $2 million in net sales (2) | 47% |  | 62% |  |  |  |
Stores > $3 million in net sales (2) | 13% |  | 21% |  |  |  |
Average revenue per smart bed unit – Total Retail (3) | $5,880 |  | $5,802 |  | $5,940 |  | $5,782

___________________________
(1)Trailing-twelve months Total Retail comparable sales per store open at least one year.
(2)Trailing-twelve months for stores open at least one year (excludes online, phone and chat sales).
(3)Represents Total Retail net sales divided by Total Retail smart bed units.
The number of retail stores operating was as follows:

| Three Months Ended |  | Six Months Ended
| June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Beginning of period | 637 |  | 661 |  | 640 |  | 672
Opened | 1 |  | 4 |  | 3 |  | 10
Closed | (8) |  | (19) |  | (13) |  | (36)
End of period | 630 |  | 646 |  | 630 |  | 646

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Comparison of Three Months Ended June 28, 2025 with Three Months Ended June 29, 2024
Net sales
Net sales for the three months ended June 28, 2025 of $328 million decreased 20% from $408 million for the same
period one year ago driven by lower volume and reduced store count. The net sales change consisted primarily of a 19%
Total Retail comparable sales decrease.
The $80 million net sales decrease compared with the same period one year ago was comprised of the following: (i) a
$64 million decrease in Retail comparable net sales; (ii) a $9 million decrease from online, phone and chat; and (iii) a $7
million decrease from net store closings and other. Total Retail smart bed unit sales decreased 20% compared with the
prior year. Total Retail average revenue per smart bed unit increased by 1% to $5,880, compared with $5,802 in the
prior-year period.
Gross profit
Gross profit of $194 million for the three months ended June 28, 2025 decreased by $48 million, or 20%, compared with
$241 million for the same period one year ago. The gross profit rate totaled 59.1% of net sales for both the three months
ended June 28, 2025 and June 29, 2024.
The current-year gross profit rate was consistent with the prior-year period and was affected by the following items: (i)
year-over-year product cost reductions through value engineering and ongoing supplier negotiations, increased the rate
by 1.4 ppt; offset by (ii) an unfavorable product mix which deleveraged the rate by 1.1 ppt; and (iii) warranty expenses
along with return and exchange costs which deleveraged the rate by 0.3 ppt.
Sales and marketing expenses
Sales and marketing expenses for the three months ended June 28, 2025 were $146 million, or 44.7% of net sales,
compared with $182 million, or 44.7% of net sales, for the same period one year ago. The current-year sales and
marketing expenses rate was consistent with the same period one year ago primarily due to the deleveraging impact of
an 20% net sales decline, partially offset by a 20% decrease in sales and marketing expenses including a 32% lower
media spend.
General and administrative expenses
General and administrative (G&A) expenses totaled $30 million, or 9.0% of net sales, for the three months ended
June 28, 2025, compared with $40 million, or 9.7% of net sales, in the prior-year period. The changes in G&A expenses
consisted mainly of: (i) a $6.1 million year-over-year decrease in company-wide, performance-based incentive
compensation and (ii) a $1.7 million decrease in employee compensation; (iii) a $1.1 million decrease in depreciation and
amortization; and (iv) a $1.0 million decrease in professional and consulting fees. The G&A expenses rate decreased by
0.7 ppt. in the current-year period, compared with the same period one year ago due to the items discussed above
offset by the deleveraging impact of lower net sales.
Research and development expenses
Research and development (R&D) expenses totaled $9 million for the three months ended June 28, 2025, compared
with $12 million with the same period one year ago. The changes in R&D expenses were primarily due to lower
headcount and outside services. Moving forward, the Company’s innovation agenda will focus on maintaining and
improving the Company’s core technologies and introducing additional advancements, while driving costs out of the
product.
Interest expense, net
Interest expense, net totaled $12 million for both the three months ended June 28, 2025, and June 29, 2024.
The increase in the average debt outstanding compared to the same period one year ago was offset by a lower
weighted-average interest rate.

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Restructuring Costs
Restructuring costs for the three months ended June 28, 2025 were $8 million , compared with $2 million for the same
period one year ago. Charges incurred related to this initiative were comprised of contract termination costs, severance
and employee-related benefits, professional fees and other, and asset impairment charges and are included in the
restructuring costs line in the Company’s condensed consolidated statement of operations. The Company expects an
additional $8 million of restructuring costs to be incurred through the remainder of 2025, primarily due to severance and
employee-related benefits, contract termination costs, and asset impairment charges. See Note 12, Restructuring Costs,
of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Information, of this
Quarterly Report on Form 10-Q for further information on restructuring costs.
Income tax expense (benefit)
Income tax expense was $13.2 million for the three months ended June 28, 2025, compared with income tax benefit of
$1.1 million for the same period one year ago.
The Company evaluates its deferred income taxes quarterly to determine if valuation allowances are required. As part of
this evaluation, the Company assess whether valuation allowances should be established for any deferred tax assets that
are not considered more likely than not to be realized, using all available evidence, both positive and negative. This
assessment considers, among other matters, the nature, frequency, and severity of historical losses, forecasts of future
profitability, taxable income in available carryback periods and tax planning strategies. In making such judgments,
significant weight is given to evidence that can be objectively verified. During the three months ended June 28, 2025,
the Company recorded a change in valuation allowance of $14 million on the basis of management’s reassessment of
the amount of its deferred tax assets primarily related to interest expense that are more likely than not to not be realized.
This decreased the effective tax rate by 66.5% for the three months ended June 28, 2025. The Company continues to
assess the need for the valuation allowance and will make adjustments when appropriate.
Comparison of Six Months Ended June 28, 2025 with Six Months Ended June 29, 2024
Net sales
Net sales for the six months ended June 28, 2025 decreased by $158 million, or 18%, to $721 million, compared with
$879 million for the same period one year ago driven by lower volume and reduced store count.
The net sales decrease consisted primarily of a 17% comparable sales decrease in Total Retail. For additional details, see
the components of total net sales change on page 20.
The $158 million net sales decrease compared with the same period one year ago was comprised of the following: (i) a
$124 million decrease in Retail comparable net sales; (ii) a $17 million decrease in online, phone and other sales; and (iii)
a $17 million decrease resulting from net store closings. Total smart bed unit sales declined 20% compared with the
same period one year ago. Average revenue per smart bed unit in Total Retail increased by 3% to $5,940, compared
with $5,782 in the prior-year period.
Gross profit
Gross profit of $434 million for the six months ended June 28, 2025 decreased by $83 million, or 16%, compared with
$518 million for the same period one year ago. The gross profit rate increased to 60.2% of net sales for the six months
ended June 28, 2025, compared to 58.9% in the prior-year comparable period.
The current-year gross profit rate increase of 1.3 ppt. was impacted by: (i) year-over-year product cost reductions
through value engineering and ongoing supplier negotiations, increased the rate by 2.3 ppt; offset by (ii) an unfavorable
product mix which deleveraged the rate by 1.0 ppt
Sales and marketing expenses
Sales and marketing expenses for the six months ended June 28, 2025 were $336 million, or 46.5% of net sales,
compared with $391 million, or 44.5% of net sales, for the same period one year ago. The current-year sales and
marketing expenses rate increase of 2.0 ppt. was primarily due to deleveraging impact of an 18% net sales decline offset
by a 14% decrease in expenses including 19% lower media spend.

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General and administrative expenses
General and administrative (G&A) expenses totaled $68 million, or 9.5% of net sales, for the six months ended June 28,
2025, compared with $79 million, or 8.9% of net sales, in the prior-year period. The $11 million decrease in G&A
expenses consisted of: (i) a $7.5 million year-over-year decrease in company-wide, performance-based incentive
compensation and (ii) a $2.0 million decrease in depreciation and amortization; and (iii) a $1.5 million decrease in
employee compensation; offset by a (iv) a $0.6 million increase in professional and consulting fees primarily related to
proxy contest and CEO search costs that occurred during the first quarter of 2025. The G&A expenses rate increased by
0.6 ppt. in the current-year period, compared with the same period one year ago due to the deleveraging impact of
the 18% net sales decrease.
Research and development expenses
Research and development (R&D) expenses decreased by 15% to $20 million for the six months ended June 28, 2025,
compared with $24 million for the same period one year ago on lower outside services and headcount. While the
Company’s consumer innovation pipeline remains robust, it is re-prioritizing R&D resources in this highly constrained
environment. Moving forward, the Company’s innovation agenda will focus on maintaining and improving the
Company’s core technologies and introducing additional advancements, while driving costs out of the product.
Interest expense, net
Interest expense, net decreased to $23 million for the six months ended June 28, 2025, compared with $25 million for
the same period one year ago. The $2 million decrease was primarily driven by a lower weighted-average interest rate
compared with the same period one year ago.
Restructuring costs
Restructuring costs for the six months ended June 28, 2025 were $8 million, compared with $12 million for the same
period one year ago. Charges incurred related to this initiative were comprised of contract termination costs, severance
and employee-related benefits, professional fees and other, and asset impairment charges and are included in the
restructuring costs line in the Company’s condensed consolidated statement of operations. The Company expects an
additional $8 million of restructuring costs to be incurred through the remainder of 2025, primarily due to severance and
employee-related benefits, contract termination costs, and asset impairment charges. See Note 12, Restructuring Costs,
of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Information, of this
Quarterly Report on Form 10-Q for further information on restructuring costs.
Income tax expense (benefit)
Income tax expense totaled $12.6 million for the six months ended June 28, 2025, compared with income tax benefit of
$0.4 million for the same period one year ago.
The Company evaluates its deferred income taxes on a quarterly basis to determine if valuation allowances are required.
As part of this evaluation, the Company assess whether valuation allowances should be established for any deferred tax
assets that are not considered more likely than not to be realized, using all available evidence, both positive and
negative. This assessment considers, among other matters, the nature, frequency, and severity of historical losses,
forecasts of future profitability, taxable income in available carryback periods and tax planning strategies. In making such
judgments, significant weight is given to evidence that can be objectively verified. A valuation allowance of $14 million
that was recorded during the six months ended June 28, 2025. The valuation allowance primarily related to deferred tax
assets on interest expense that are more likely than not to not be realized. The Company continues to assess the need
for the valuation allowance and will make adjustments when appropriate.

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Liquidity and Capital Resources
Managing liquidity and capital resources is an important part of the Company’s commitment to deliver superior
shareholder value over time.
The Company’s primary sources of liquidity are cash flows provided by operating activities and cash available under its
$673 million revolving credit facility, as amended. As of June 28, 2025, the Company does not have any off-balance
sheet financing other than its $7 million in outstanding letters of credit. The cash generated from ongoing operations
and cash available under the revolving credit facility are expected to be adequate to maintain operations, and fund
anticipated expansion, strategic initiatives and contractual obligations such as lease payments and capital commitments
for new retail stores for the foreseeable future.
Cash and cash equivalents totaled $1.3 million and $2.0 million at June 28, 2025 and December 28, 2024, respectively.
Significant changes in cash and cash equivalents during the six months ended June 28, 2025 primarily consisted of
$1 million of cash provided by operating activities, $11 million of cash used in investing activities, a $12 million increase
in short-term borrowings, offset by $2 million used for debt issuance costs.
The following table summarizes cash flows (in millions). Amounts may not add due to rounding differences:

| Six Months Ended
| June 28, 2025 |  | June 29, 2024
Total cash provided by (used in) : |  |  |
Operating activities | $1.2 |  | $23.5
Investing activities | (11.3) |  | (17.0)
Financing activities | 9.5 |  | (7.0)
Net decrease in cash and cash equivalents | $(0.6) |  | $(0.5)

Net cash provided by operating activities for the six months ended June 28, 2025 was $1 million, compared with net
cash provided by operating activities of $24 million for the six months ended June 29, 2024. Significant components of
the year-over-year change in cash provided by operating activities included: (i) a $21 million year-over-year increase in
net loss; (ii) a $17 million fluctuation in the amount of compensation and benefits accrued and timing of the related
payments resulting from year-over-year changes in Company-wide performance-based incentive compensation; (iii) a
$16 million fluctuation in inventory as last year benefited from reduction in inventory levels driven by operational
improvements; (iv) a $5 million decrease in depreciation and amortization due to recent lower capital spending levels
and restructuring related fixed asset impairments, and (iv) a $5 million fluctuation in accounts receivable due to lower
sales volumes and timing of orders; offset by (v) a $27 million fluctuation in accounts payable due to lower expenses in
the current year and timing of payments; (vi) a $12 million fluctuation in prepaid expenses.
Net cash used in investing activities for the six months ended June 28, 2025 was $11 million, compared with $17 million
for the six months ended June 29, 2024. Cash used to purchase property and equipment was $8 million for the six
months ended June 28, 2025, compared with $14 million for the same period one year ago. In addition, the Company
used $3 million cash for payment to secure contractual rights during the six months ended June 29, 2024.
Net cash provided by financing activities was $10 million for the six months ended June 28, 2025, compared with net
cash used in financing activities of $7 million for the same period one year ago. Short-term borrowings increased by
$12 million during the current-year period due to an $17 million increase in borrowings under the revolving credit facility
to $564 million and a $5 million decrease in book overdrafts, which are included in the net change in short-term
borrowings. During the six months ended June 28, 2025, the Company used $2 million of cash for debt issuance costs
related to the credit facility amendment during the first quarter of 2025. During both the six months ended June 28,
2025 and June 29, 2024, the Company repurchased $1 million of its stock in connection with the vesting of employee
restricted stock awards.
In the second quarter of fiscal 2022, the Company suspended share repurchases under its Board-approved share
repurchase program. At June 28, 2025, there was $348 million remaining authorization under the Board-approved
$600 million share repurchase program. There is no expiration date governing the period over which the Company can
repurchase shares. The Company made no share repurchases under its Board-approved share repurchase program in
either period.

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At June 28, 2025, the Company had $564 million of borrowings under its revolving credit facility, $7 million in
outstanding letters of credit and net liquidity available under the credit facility of $102 million. Total availability under its
revolving credit facility was $673 million, which amortizes by $2.5 million per quarter through December 2026. A t
June 28, 2025, the Company’s leverage ratio as defined in the credit agreement was 4.6 x versus the permissible net
leverage ratio of 4.75 x, the weighted-average interest rate on borrowings under the credit facility was 7.9% and the
Company was in compliance with all financial covenants.
Non-GAAP Data Reconciliations
Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA)
The Company defines earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) as net loss plus:
income tax expense (benefit), interest expense, depreciation and amortization, stock-based compensation, restructuring
costs, CEO transition/proxy contest costs and asset impairments. Management believes Adjusted EBITDA is a useful
indicator of the Company’s financial performance and its ability to generate cash from operating activities. The
Company’s definition of Adjusted EBITDA may not be comparable to similarly titled definitions used by other
companies. The table below reconciles Adjusted EBITDA, which is a non-GAAP financial measure, to the comparable
GAAP financial measure.
Adjusted EBITDA calculations are as follows (in thousands):

| Three Months Ended |  | Trailing-Twelve Months Ended
| June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Net loss | $(25,012) |  | $(5,051) |  | $(41,459) |  | $(40,039)
Income tax expense (benefit) | 13,203 |  | (1,099) |  | 7,830 |  | (10,730)
Interest expense | 11,734 |  | 12,270 |  | 46,614 |  | 48,214
Depreciation and amortization | 13,697 |  | 16,347 |  | 59,590 |  | 69,676
Stock-based compensation | 1,549 |  | 3,992 |  | 8,835 |  | 13,073
Restructuring costs (1) | 8,332 |  | 1,819 |  | 14,039 |  | 28,147
CEO transition/Proxy contest costs (2) | 53 |  | — |  | 2,825 |  | —
Asset impairments | — |  | — |  | 1,220 |  | 490
Adjusted EBITDA | $23,556 |  | $28,278 |  | $99,494 |  | $108,831

_____________________
(1) Represents costs related to business restructuring actions initiated in the fourth quarter of fiscal 2023.
(2) Represents costs related to CEO transition activities and proxy contest costs of $0.1 million and $0, respectively, for the three months ended
June 28, 2025 and $0.8 million and $2.0 million, respectively, for the trailing twelve months ended June 28, 2025. These costs were both initiated in
the fourth quarter of fiscal 2024.
Free Cash Flow
The Company’s “free cash flow” data is considered a non-GAAP financial measure and is not in accordance with, or
preferable to, “net cash provided by operating activities,” or GAAP financial data. However, the Company is providing
this information as it believes it facilitates analysis for investors and financial analysts.
The following table summarizes free cash flow calculations (in thousands):

| Six Months Ended |  | Trailing-Twelve Months Ended
| June 28, 2025 |  | June 29, 2024 |  | June 28, 2025 |  | June 29, 2024
Net cash provided by (used in) operating activities | $1,196 |  | $23,518 |  | $(9,228) |  | $(4,230)
Subtract: Purchases of property and equipment | 8,052 |  | 14,075 |  | 18,796 |  | 41,232
Free cash flow | $(6,856) |  | $9,443 |  | $(28,024) |  | $(45,462)

26 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

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Non-GAAP Data Reconciliations (continued)
Return on Invested Capital (Adjusted ROIC)
Adjusted ROIC is a financial measure the Company uses to determine how efficiently it deploys its capital. It quantifies
the return the Company earns on its adjusted invested capital. Management believes Adjusted ROIC is also a useful
metric for investors and financial analysts. The Company computes Adjusted ROIC as outlined below. Its definition and
calculation of Adjusted ROIC may not be comparable to similarly titled definitions and calculations used by other
companies.
The tables below reconcile adjusted net operating profit after taxes (Adjusted NOPAT) and total adjusted invested
capital, which are non-GAAP financial measures, to the comparable GAAP financial measures (in thousands):

| Trailing-Twelve Months Ended
| June 28, 2025 |  | June 29, 2024
Adjusted net operating profit after taxes (Adjusted NOPAT) |  |  |
Operating income | $12,983 |  | $(2,555)
Add: Operating lease expense (1) | 25,535 |  | 27,750
Less: Income taxes (2) | 1,500 |  | (6,104)
Adjusted NOPAT | $40,018 |  | $19,091
Average adjusted invested capital |  |  |
Total deficit | $(480,688) |  | $(446,964)
Add: Long-term debt (3) | 564,101 |  | 540,480
Add: Operating lease obligations (4) | 369,794 |  | 408,724
Total adjusted invested capital at end of period | $453,207 |  | $502,240
Average adjusted invested capital (5) | $477,676 |  | $509,369
Adjusted return on invested capital (Adjusted ROIC) (6) | 8.4% |  | 3.7%

___________________________
(1) Represents the interest expense component of lease expense included in the Company’s financial statements under ASC 842, Leases.
(2) Reflects annual effective income tax rates, before discrete adjustments, of (3.9)% and 24.2% for June 28, 2025 and June 29, 2024, respectively.
(3) Long-term debt includes existing finance lease liabilities.
(4) Reflects operating lease liabilities included in the Company’s financial statements under ASC 842.
(5) Average adjusted invested capital represents the average of the last five fiscal quarters’ ending adjusted invested capital balances.
(6) Adjusted ROIC equals Adjusted NOPAT divided by average adjusted invested capital.
Note - the Company’s adjusted ROIC calculation and data are considered non-GAAP financial measures and are not in accordance with, or preferable
to, GAAP financial data. However, the Company is providing this information as it believes it facilitates analysis of the Company's financial performance
by investors and financial analysts.
GAAP - generally accepted accounting principles in the U.S.
Critical Accounting Policies
The Company discusses its critical accounting policies and estimates in Management’s Discussion and Analysis of
Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the fiscal year ended
December 28, 2024. There were no significant changes in the Company’s critical accounting policies since the end of
fiscal 2024.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to changes in market-based short-term interest rates that will impact net interest expense. If
overall interest rates were one percentage point higher than current rates, annual net income would decrease by
$5.9 million based on the $564 million of borrowings under the credit facility at June 28, 2025. The Company does not
manage the interest-rate volatility risk of borrowings under the credit facility through the use of derivative instruments.
ITEM 4. CONTROLS AND PROCEDURES
Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), that are
designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under
the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is
accumulated and communicated to the Company’s management, including its principal executive officer and principal
financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required
disclosure. The Company’s management, with the participation of its principal executive officer and principal financial
officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as
of the end of the period covered by this quarterly report. Based on this evaluation, its principal executive officer and
principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end
of the period covered by this quarterly report.
Changes in Internal Control
There were no changes in the Company’s internal control over financial reporting during the fiscal quarter ended
June 28, 2025, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.

28 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

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PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company’s legal proceedings are discussed in Note 15 – Commitments and Contingencies, Legal Proceedings, of
the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, Notes to Condensed
Consolidated Financial Statements, of this Quarterly Report on Form 10-Q.
ITEM 1A. RISK FACTORS
The Company’s business, financial condition and operating results are subject to a number of risks and uncertainties,
including both those that are specific to the Company’s business and others that affect all businesses operating in a
global environment. Investors should carefully consider the information in this report under the heading, Management’s
Discussion and Analysis of Financial Condition and Results of Operations, and also the information under the heading,
Risk Factors, in the Company’s most recent Annual Report on Form 10-K and in subsequent Quarterly Reports on
Form 10-Q. The risk factors discussed in the Annual Report on Form 10-K and in subsequent Quarterly Reports on Form
10-Q including this Quarterly Report on Form 10-Q do not identify all risks that the Company faces because its business
operations could also be affected by additional risk factors that are not presently known to the Company or that it
currently considers to be immaterial to its operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS, AND ISSUER PURCHASES OF
EQUITY SECURITIES
(a) – (b) Not applicable.
(c) Issuer Purchases of Equity Securities

Period |  | Total Number of Shares Purchased(1)(2) |  | Average Price Paid per Share |  | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) |  | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(3)
March 29, 2025 through April 26, 2025 |  | 4,459 |  | $5.03 |  | — |  | $348,071,000
April 27, 2025 through May 24, 2025 |  | 426 |  | $8.87 |  | — |  | $348,071,000
May 25, 2025 through June 28, 2025 |  | 33,573 |  | $10.57 |  | — |  | $348,071,000
Total |  | 38,458 |  | $9.91 |  | — |  | $348,071,000

___________________________
(1)The Company did not purchase any shares under its Board-approved $600 million share repurchase program (effective April 4, 2021), during the
three months ended June 28, 2025.
(2)In connection with the vesting of employee restricted stock grants, the Company repurchased 38,458 shares of its common stock at a cost of
$0.4 million during the three months ended June 28, 2025.
(3)There is no expiration date governing the period over which the Company can repurchase shares under its Board-approved share repurchase
program. Any repurchased shares are constructively retired and returned to an unissued status.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

29 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

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ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Plan and Non-rule 10b5-1 Trading Arrangement Adoptions, Modifications and Terminations
During the quarter ended June 28, 2025, none of the Company’s directors or officers adopted, modified or terminated
any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the
affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408 of
SEC Regulation S-K.

30 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

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ITEM 6. EXHIBITS

Exhibit Number |  | Description
10.1* |  | Fourth Amendment, dated May 27, 2025, to Lease Agreement between Legacy 1001 Minneapolis Venture, LLC, as Landlord, and Sleep Number Corporation, as Tenant, dated October 21, 2016, as amended
10.2† |  | Amendment No. 2 to the Sleep Number Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 contained in Sleep Number’s Current Report on Form 8-K filed May 29, 2025 (File No. 000-25121))
10.3† |  | Interim Chief Financial Officer Agreement (incorporated by reference to Exhibit 10.1 contained in Sleep Number’s Current Report on Form 8-K filed July 22, 2025 (File No. 000-25121))
31.1* |  | Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2* |  | Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1* |  | Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
32.2* |  | Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
101.INS* |  | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH* |  | Inline XBRL Taxonomy Extension Schema Document
101.CAL* |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* |  | Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* |  | Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE* |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document
104* |  | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*Filed Herein.
† Management contract or compensatory plan or arrangement.

31 | 2Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.

|  | SLEEP NUMBER CORPORATION
|  | (Registrant)
Dated: | July 31, 2025 | By: | /s/ Linda Findley
|  |  | Linda Findley
|  |  | Chief Executive Officer
|  |  | (principal executive officer)
|  | By: | /s/ Kelly F. Baker
|  |  | Kelly F. Baker
|  |  | Interim Principal Accounting Officer
|  |  | (principal accounting officer)