Core Insights - Sleep Number reported a significant decline in revenue and a widening net loss for Q2 2025, indicating a challenging quarter for the business [1][5][10] Financial Performance - Q2 2025 GAAP revenue was $327.9 million, down 19.7% from $408.4 million in Q2 2024 and below analyst expectations of $357.4 million [1][2] - The company reported a net loss per share of $(1.09), compared to expectations of $(0.11) and a loss of $(0.22) per share a year ago, reflecting a 395.5% increase in loss [1][2] - Gross profit margin remained stable at 59.1%, consistent with Q2 2024, despite the revenue decline [2][6] - Adjusted EBITDA fell 16.7% year-over-year to $23.6 million [2][6] - Free cash flow was negative at $(6.9) million, a decline of 173.4% from $9.4 million in Q2 2024 [2][6] Business Strategy and Operations - Sleep Number focuses on smart beds with technology that personalizes sleep experiences, with nearly 88% of sales from its direct-to-consumer network [3] - The company has been reducing marketing expenses significantly, attributing the revenue decline to previous inefficient marketing strategies [5][7] - Operating expenses before restructuring decreased by 21% year-over-year, but the net loss widened to $25 million due to weaker sales volume and adjustments to deferred tax assets [7] Market Position and Sales Channels - Sleep Number ended Q2 2025 with 630 retail stores, a decrease of 16 from the previous year, with comparable-store sales down 18% [8] - Online and phone sales also fell by 19%, while the average revenue per smart bed unit increased slightly to $5,880 [8] Future Outlook - The company forecasts full-year 2025 net sales of $1.45 billion, representing a 14% year-over-year decline, with an expected slight improvement in gross profit margin to 61% [10] - Operating expenses are projected to be $830 million for the year, with a target of break-even free cash flow in the second half [10] - The leverage ratio stands at 4.56 times EBITDAR, nearing the maximum allowed by banks, indicating potential financial strain [10]

Company Overview - Sleep Number is a sleep wellness technology leader, designing, engineering, manufacturing, distributing, and marketing innovative sleep solutions[4] - The company has 28 million smart sleepers[5] - Sleep Number has over 800 patents and patents pending worldwide[7] Financial Performance - Sleep Number's revenue was $22 billion in 2014, $21 billion in 2015, and $19 billion in 2016[5] - Adjusted EBITDA was $148 million in 2014, $146 million in 2015, and $133 million in 2016[5] - The company expects to generate $60 million to $80 million of free cash flow in 2024 to pay down debt[59, 69] Market and Strategy - 33% of American adults are not getting enough sleep on a regular basis[12] - 45% of consumers rank better sleep as a "very high priority"[12] - Sleep Number's smart bed monthly active user rate (MAU) is over 80%[39] - The company is targeting $40 million to $45 million of operating expense reductions in 2024, with $130 million of operating expense reductions over a two-year period (2023/2024)[59]