Core Insights - Sleep Number reported a fourth-quarter net sales of $347 million, down 8% year-over-year, but results were described as "better than expected" by CEO Linda Findley [3][6] - The company is undergoing significant turnaround efforts, including cost reductions of over $185 million and an additional $50 million identified for 2026 [8][7] - A new product lineup, including the ComfortMode mattress, has been launched, with early sales exceeding expectations [9][11] Financial Performance - Operating expenses for the quarter were $197 million, a 9% decrease year-over-year, excluding restructuring costs [1] - Adjusted EBITDA for the quarter was $19 million, down $7 million from the prior year [1] - Full-year net sales reached $1.41 billion, aligning with guidance despite reduced marketing spend [5] - The full-year pro forma adjusted EBITDA margin improved by approximately 200 basis points to around 9% [4] Product and Market Strategy - The fourth-quarter gross margin was 55.6%, down 430 basis points year-over-year, primarily due to a $9.6 million inventory obsolescence charge [2] - The company is simplifying its product lineup from 12 mattresses to seven, aiming for consistent margins across all products [11] - ComfortMode sales were reported to be 3.5 times higher than expectations, indicating strong market reception [9] Marketing and Liquidity - Marketing spend for 2026 is expected to remain flat compared to 2025, with a different spending cadence throughout the year [14] - The company is focusing on improving liquidity and capital structure, ending the year with total liquidity of $58 million [17][19] - Early 2026 demand faced volatility due to macroeconomic factors and severe weather, impacting sales [15] Future Outlook - The company anticipates a decline in Q1 net sales in the high teens percentage range, with expectations for significant improvement in Q2 [16] - Adjusted EBITDA is expected to increase in the high teens to mid-20s percentage range year-over-year from the $78 million base in 2025 [16] - Positive free cash flow is projected for 2026, reflecting the anticipated benefits from new products and marketing efforts [16]