Sleep Number(US:SNBR)2021-10-28 01:52Financial Data and Key Metrics Changes - Net sales increased by 21% compared to the previous year and were 35% higher than 2019 [10][30] - Earnings per share (EPS) reached $2.22, which is 24% higher than Q3 2020 and up 136% from 2019 [10][33] - Year-to-date EPS of $5.63 is more than double the $1.88 earned in the same period two years ago [38] Business Line Data and Key Metrics Changes - The company achieved four consecutive quarters of double-digit demand growth for its smart beds [8][18] - Q3 sales metrics included 15 points of growth from units and 5 points from average revenue per unit (ARU) [32] - More than 11% of sales came from e-commerce, phone, and chat, compared to about 7% historically [32] Market Data and Key Metrics Changes - The company reported a year-to-date cash from operations of $293 million, with a trailing 12-month return on invested capital (ROIC) exceeding 34% [12] - The company ended Q3 with 632 stores and expects to reach about 650 by year-end [37] Company Strategy and Development Direction - The company is focused on leveraging its vertically integrated business model to navigate supply chain challenges and drive sustainable profitable growth [9][13] - Plans for retail expansion include opening 40 to 50 new stores and enhancing online capabilities [24] - The company is targeting mid-to-high single-digit demand growth for 2022, driven by innovation, pricing actions, and digital ecosystem advancements [24][41] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing global supply chain shortages but expressed confidence in the company's ability to meet demand through strategic partnerships and operational efficiencies [9][21] - The company anticipates that supply will improve in the first quarter of 2022, with suppliers making stronger commitments for electronic component deliveries [21] - Management remains optimistic about achieving a full-year EPS target of $7.25, despite potential shifts in delivery timing due to supply constraints [19][41] Other Important Information - The company has repurchased $364 million of its stock year-to-date, nearly matching the total repurchased during 2019 and 2020 combined [39] - The company is extending its debt facility by $200 million to $800 million with a renewed five-year term [40] Q&A Session Summary Question: Guidance for $7.25 EPS and demand expectations - Management confirmed strong demand and backlog but noted constraints due to electronic supply shortages [44] Question: Backlog and revenue carryover into 2022 - Management estimated about $100 million in excess net sales equivalents that will carry over into 2022 [45] Question: Impact of electronics shortages on product components - The main challenges are related to semiconductor chips and other electronic components in smart beds [57] Question: Clarification on backlog and customer deposits - Management clarified that customer deposits do not perfectly reflect backlog due to fluctuations in offers and timing [60] Question: EPS guidance and cost inflation in Q4 - Management indicated that the EPS target considers ongoing cost pressures and supply constraints [76][79] Question: Efficiency gains and pricing actions - Management highlighted that efficiency gains are driven by increased volume and digital integration, with pricing actions taken across product offerings [85][87]