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]

Financial Data and Key Metrics Changes - Full year net sales were $1.41 billion, in line with guidance despite reduced marketing spend and lower traffic [8] - Adjusted EBITDA was $78 million, exceeding guidance of $70 million [8] - Full year pro forma adjusted EBITDA margin was approximately 9%, a 200 basis point improvement versus the prior year [40] - Gross profit margin for Q4 was 55.6%, a 430 basis point decline year-over-year, primarily due to a non-recurring inventory obsolescence charge [37] - Operating expenses for the full year were $824 million, a $136 million reduction from the prior year [40] Business Line Data and Key Metrics Changes - The launch of the ComfortMode mattress resulted in sales being 3.5 times expectations, nearly twice the sales of the three c-series beds it replaces [14] - The ComfortMode bed has a gross margin improvement of 10 percentage points compared to the beds it replaces [59] - Operating expenses in Q4 were down 9% year-over-year, driven by ongoing cost savings initiatives [38] Market Data and Key Metrics Changes - The company experienced significant pressures from severe weather and macroeconomic impacts, leading to 236 store closures for at least one day in January [11] - Brand consideration among premium shoppers grew 10%, achieving the highest consideration in the premium category [25] Company Strategy and Development Direction - The company is focused on executing a turnaround strategy that includes growth and cost-cutting measures [6] - A new product line was launched to address customer needs for comfort, durability, and value, while also simplifying the buying experience [15][17] - The company aims to modernize its marketing engine and has partnered with Travis Kelce to strengthen brand presence [33] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the need to fix the capital structure and is actively implementing a plan to address liquidity pressures [27][48] - The company expects Q1 net sales to decline in the high teens percentage due to early-year softness, but anticipates significant improvement in Q2 with the full impact of new product launches [46] - Adjusted EBITDA for the full year is expected to increase in the high teens to mid-20s percentage range year-over-year [47] Other Important Information - The company removed more than $185 million of annualized costs and has identified another $50 million of annualized fixed costs to be executed in 2026 [11][32] - Total liquidity at year-end was $58 million, well above the amended $30 million covenant floor [41] Q&A Session Summary Question: What were the main pain points addressed by the new product launches? - The company aimed to expand its audience and focus on comfort, value, and durability, utilizing luxurious materials at accessible price points [53][54] Question: What are the major sources of the $50 million of additional savings? - The savings will come from logistics, delivery, last mile labor model resets, and corporate overhead structure adjustments [61][62] Question: How will the new product launches impact ASPs, cost per bed, and margins? - The new beds are designed to maintain strong margin profiles while addressing customer needs, with the ComfortMode bed being margin accretive [56][59] Question: Will marketing spend increase in 2026? - Marketing spend will be held flat in 2026 compared to 2025, with a more even distribution throughout the year to avoid inefficiencies [88][89] Question: Will there be further clearance activity as new products are launched? - The company expects some margin pressure in Q1 due to inventory clearance but anticipates leveraging volume for long-term benefits [99][100]

Financial Data and Key Metrics Changes - Full year net sales were $1.41 billion, in line with guidance despite reduced marketing spend and lower traffic [8] - Adjusted EBITDA was $78 million, exceeding guidance of $70 million [8] - Pro forma adjusted EBITDA margin was approximately 9%, a 200 basis point improvement versus the prior year [39] - Gross profit margin for Q4 was 55.6%, a 430 basis point decline year-over-year, primarily due to a non-recurring inventory obsolescence charge [36] Business Line Data and Key Metrics Changes - The ComfortMode mattress launched in January saw sales 3.5 times expectations, nearly twice the sales of the three c-series beds it replaces [14] - The company is reducing its core lineup from 12 mattresses to 7, organized into three clear collections [17] - Operating expenses for the full year were $824 million, a $136 million reduction from the prior year [39] Market Data and Key Metrics Changes - Brand consideration among premium shoppers grew 10%, achieving the highest consideration in the premium category [24] - The company experienced significant increases in critical consideration drivers, including value, quality, and comfort [25] Company Strategy and Development Direction - The company is focused on executing a turnaround strategy that includes growth and cost-cutting measures [6] - A new product line is being launched to address customer needs for comfort, durability, and value [15] - The marketing strategy has been modernized to improve customer acquisition and brand strength [22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged pressures from severe weather and macroeconomic impacts affecting sales at the start of the year [11] - The company expects Q1 net sales to decline in the high teens percentage due to early-year softness, but anticipates significant improvement in Q2 [45] - Adjusted EBITDA for the full year is expected to increase in the high teens to mid-20s percentage range year-over-year [46] Other Important Information - The company has identified $50 million of additional annualized cost savings that are currently being executed [31][60] - Total liquidity at year-end was $58 million, well above the amended $30 million covenant floor [40] Q&A Session Summary Question: What were the main pain points addressed by the new product launches? - Management focused on expanding the audience to serve existing customers and attract younger demographics, emphasizing comfort, value, and durability [52] Question: What are the major sources of the $50 million of additional savings? - The savings will come from logistics, delivery, labor model resets, and corporate overhead structure adjustments [59] Question: What is the phasing for getting the new beds across the portfolio? - The new beds will be available for purchase starting March 23rd, with most stores set by mid-April [72] Question: Will the EBITDA growth reference the reported number or the pro forma number? - The growth will reference the reported adjusted EBITDA base of $78 million [75] Question: Will marketing spend trend back up in 2026? - Marketing spend will be held flat in 2026 compared to 2025, with increased spending in Q2, Q3, and Q4 [86]

Financial Data and Key Metrics Changes - Full year net sales were $1.41 billion, in line with guidance despite reduced marketing spend and lower traffic [4] - Adjusted EBITDA was $78 million, exceeding guidance of $70 million [4] - Full year pro forma adjusted EBITDA margin was approximately 9%, a 200 basis point improvement versus the prior year [20] - Gross profit margin for Q4 was 55.6%, a 430 basis point decline year-over-year, primarily due to a non-recurring inventory obsolescence charge [18] - Full year gross margin was 59%, down 60 basis points year-over-year [20] - Total liquidity at year-end was $58 million, well above the amended $30 million covenant floor [20] Business Line Data and Key Metrics Changes - The launch of the ComfortMode mattress resulted in sales being 3.5 times what was expected, nearly twice the sales of the three c-series beds it replaces [7][8] - The ComfortMode bed has a gross margin improvement of 10 percentage points compared to the beds it replaces [31] Market Data and Key Metrics Changes - The company experienced significant sales declines in January due to store closures and macroeconomic impacts, with 236 stores closed for at least one day [6] - Sequential improvement in sales was observed in February and March, driven by the product launch [6] Company Strategy and Development Direction - The company is focused on a turnaround strategy that includes cost-cutting measures and a new product line launch [3][4] - A total of $185 million in annualized cost reductions have been executed, with an additional $50 million identified for 2026 [16][33] - The product line has been simplified from 12 mattresses to 7, organized into three clear collections to enhance customer experience [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges in the industry, including severe weather and macroeconomic pressures [5] - The company expects Q1 net sales to decline in the high teens percentage but anticipates significant improvement in Q2 due to new product launches and increased marketing spend [23] - Adjusted EBITDA for the full year is expected to increase in the high teens to mid-20s percentage range year-over-year [23] Other Important Information - The company has engaged Guggenheim Securities to evaluate refinancing opportunities for its credit facility [14][24] - The marketing strategy has been modernized, with a focus on improving customer acquisition costs and brand consideration [12] Q&A Session Summary Question: What were the main pain points addressed by the new product launches? - The company aimed to expand its audience and focus on comfort, value, and durability in the new product line [27] Question: What are the major sources of the $50 million of additional savings? - The savings will come from logistics, delivery, labor model resets, and corporate overhead structure adjustments [33] Question: What is the phasing for getting the new beds across the portfolio? - The new beds will be available for purchase starting March 23rd, with most stores set by mid-April [46] Question: Will marketing spend increase in 2026? - Marketing spend will be held flat in 2026 compared to 2025, with a more even distribution throughout the year [59] Question: Will the EBITDA growth translate into positive free cash flow for the year? - Yes, the company expects positive free cash flow if the projected EBITDA growth is achieved [52]

INVESTOR PRESENTATION Nasdaq: SNBR March 2026 FORWARD LOOKING STATEMENTS This investor presentation contains statements regarding the company's expectations, future plans, events, financial results or performance, such as: the company has a clear focus on the consumer through a simple turnaround strategy – Sleep Number Shifts: product – simplifying the offering with a focus on consumer benefits, marketing – modernization of tactics and focus on funnel optimization and ROI, and distribution – opportunity to ...