On July 31, 2024, Sleep Number Corp (SNBR, Financial) released its 8-K filing detailing the financial results for the second quarter of 2024. Sleep Number Corp is a wellness technology company engaged in the design, manufacturing, marketing, and distribution of sleep solutions, including smart beds, bedding, pillows, and furniture.
Performance and Challenges
Sleep Number Corp reported net sales of $408 million for Q2 2024, an 11% decline compared to the same period last year. This figure fell short of the analyst estimate of $415.04 million. The company attributed approximately six percentage points of this decline to changes in the year-over-year order backlog.
Despite the challenging sales environment, Sleep Number Corp achieved a gross margin of 59.1%, up 150 basis points from the previous year. This improvement was driven by ongoing product cost reductions, efficiency gains in home delivery and logistics operations, and improved product return rates.
Operating expenses were reduced by $19 million year-over-year, totaling $234 million before restructuring charges. Adjusted EBITDA for the quarter was $28 million, down from $35 million in the prior year.
Financial Achievements
One of the notable achievements for Sleep Number Corp was the increase in year-to-date free cash flow by $21 million compared to the same period last year. The company also reduced operating expenses by $44 million year-to-date before restructuring costs.
Additionally, the company reiterated its full-year 2024 adjusted EBITDA outlook of $125 million to $145 million, despite the challenging industry sales environment.
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Net Sales | $408 million | $459 million |
| Gross Margin | 59.1% | 57.6% |
| Operating Expenses | $234 million | $253 million |
| Net Income | $(5.05) million | $0.75 million |
| EPS (Diluted) | $(0.22) | $0.03 |
Balance Sheet and Cash Flow
As of June 29, 2024, Sleep Number Corp reported total assets of $883.6 million, down from $950.9 million at the end of 2023. The company's cash and cash equivalents stood at $2.02 million, slightly down from $2.54 million at the end of 2023.
Net cash provided by operating activities for the first six months of 2024 was $24 million, a $5 million increase compared to the same period last year. Free cash flow for the first six months was $9 million, up $21 million year-over-year.
Analysis
Sleep Number Corp's performance in Q2 2024 highlights the challenges faced by the company in a tough sales environment. The decline in net sales and net income indicates the impact of macroeconomic headwinds and a prolonged industry recession. However, the company's ability to improve gross margin and reduce operating expenses demonstrates effective cost management and operational efficiency.
The increase in free cash flow and the reiteration of the full-year adjusted EBITDA outlook suggest that Sleep Number Corp is taking strategic steps to navigate the current challenges and position itself for future profitability.
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Explore the complete 8-K earnings release (here) from Sleep Number Corp for further details.
