# EDGAR Filing Document

**Accession Number:** 0000827187
**File Stem:** 0000827187-26-000014
**Filing Date:** 2026-3
**Character Count:** 441494
**Document Hash:** 0a2245c9e20d2dbf7bcd1edbadef1d03
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000827187-26-000014.hdr.sgml**: 20260312

**ACCESSION NUMBER**: 0000827187-26-000014

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 117

**CONFORMED PERIOD OF REPORT**: 20260103

**FILED AS OF DATE**: 20260312

**DATE AS OF CHANGE**: 20260312

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Sleep Number Corp
- **CENTRAL INDEX KEY:** 0000827187
- **STANDARD INDUSTRIAL CLASSIFICATION:** HOUSEHOLD FURNITURE [2510]
- **ORGANIZATION NAME:** 04 Manufacturing
- **EIN:** 411597886
- **STATE OF INCORPORATION:** MN
- **FISCAL YEAR END:** 0103

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-25121
- **FILM NUMBER:** 26745625

**BUSINESS ADDRESS:**
- **STREET 1:** 1001 THIRD AVENUE SOUTH
- **CITY:** MINNEAPOLIS
- **STATE:** MN
- **ZIP:** 55404
- **BUSINESS PHONE:** 7635517000

**MAIL ADDRESS:**
- **STREET 1:** 1001 THIRD AVENUE SOUTH
- **CITY:** MINNEAPOLIS
- **STATE:** MN
- **ZIP:** 55404

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** SELECT COMFORT CORP
- **DATE OF NAME CHANGE:** 19980821

?xml version='1.0' encoding='ASCII'? snbr-20260103

**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

**FORM 10-K** 

**(Mark one)**

**☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the fiscal year ended January 3, 2026** 

**☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the transition period from _________ to _________**

**Commission file number 000-25121** 

**SLEEP NUMBER CORPORATION** 

**(Exact name of registrant as specified in its charter)**

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| | |
|:---|:---|
| **Minnesota** | **41-1597886** |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |

---

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| | | | |
|:---|:---|:---|:---|
| **1001 Third Avenue South** | **1001 Third Avenue South** | **1001 Third Avenue South** |  |
| **Minneapolis** | **,**  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Minnesota** | **55404** |
| (Address of principal executive offices) | (Address of principal executive offices) | (Address of principal executive offices) | (Zip Code) |

---

**Registrant's telephone number, including area code: (763) 551-7000** 

Securities registered pursuant to Section 12(b) of the Act:

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| | | |
|:---|:---|:---|
| **Title of each class** | **Trading Symbol(s)** | **Name of each exchange on which registered** |
| Common Stock, par value $0.01 per share | SNBR | Nasdaq Global Select Market |

---

Securities registered pursuant to Section 12(g) of the Act: **None**

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes **☐** No **☒**

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes **☐** No **☒**

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the

preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the

past 90 days. Yes **☒** No **☐**

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes **☒** No **☐**

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging

growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of

the Exchange Act.

---

| | | | | |
|:---|:---|:---|:---|:---|
| Large accelerated filer | ☐ |  | Accelerated filer | ☒ |
| Non-accelerated filer | ☐ | Smaller reporting company | Smaller reporting company | ☐  |
|  |  | Emerging growth company | Emerging growth company | ☐  |

---

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised

financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over

financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit

report. **☒**

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect

the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any

of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes **☐** No **☒**

The aggregate market value of the common stock held by non-affiliates of the registrant as of June 28, 2025, was $131,813,000 (based on the last reported sale

price of the registrant's common stock on that date as reported by Nasdaq).

As of January 31, 2026, there were 22,864,000 shares of the registrant's Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's proxy statement to be furnished to shareholders in connection with its 2026 Annual Meeting of Shareholders are incorporated by

reference in Part III, Items 10-14 of this Annual Report on Form 10-K.

**i \| 2025 FORM 10-K**<br>

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
| **[PART I](#id85bc2f5d2ad4583a9197c95587784c2_10)** | **[PART I](#id85bc2f5d2ad4583a9197c95587784c2_10)** | [3](#id85bc2f5d2ad4583a9197c95587784c2_13) |
| Item 1. | [Business](#id85bc2f5d2ad4583a9197c95587784c2_13) | [3](#id85bc2f5d2ad4583a9197c95587784c2_13) |
| Item 1A. | [Risk Factors](#id85bc2f5d2ad4583a9197c95587784c2_94) | [15](#id85bc2f5d2ad4583a9197c95587784c2_94) |
| Item 1B. | [Unresolved Staff Comments](#id85bc2f5d2ad4583a9197c95587784c2_97) | [29](#id85bc2f5d2ad4583a9197c95587784c2_97) |
| Item 1C. | Cybersecurity | [29](#id85bc2f5d2ad4583a9197c95587784c2_100) |
| Item 2. | [Properties](#id85bc2f5d2ad4583a9197c95587784c2_103) | [32](#id85bc2f5d2ad4583a9197c95587784c2_103) |
| Item 3. | [Legal Proceedings](#id85bc2f5d2ad4583a9197c95587784c2_106) | [33](#id85bc2f5d2ad4583a9197c95587784c2_106) |
| Item 4. | [Mine Safety Disclosures](#id85bc2f5d2ad4583a9197c95587784c2_109) | [33](#id85bc2f5d2ad4583a9197c95587784c2_109) |
| **[PART II](#id85bc2f5d2ad4583a9197c95587784c2_112)** | **[PART II](#id85bc2f5d2ad4583a9197c95587784c2_112)** | [34](#id85bc2f5d2ad4583a9197c95587784c2_112) |
| Item 5. | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of](#id85bc2f5d2ad4583a9197c95587784c2_115)<br>[Equity Securities](#id85bc2f5d2ad4583a9197c95587784c2_115)<br>| [34](#id85bc2f5d2ad4583a9197c95587784c2_115) |
| Item 6. | Reserved | [35](#id85bc2f5d2ad4583a9197c95587784c2_118) |
| Item 7. | [Management's Discussion and Analysis of Financial Condition and Results of Operations](#id85bc2f5d2ad4583a9197c95587784c2_121) | [36](#id85bc2f5d2ad4583a9197c95587784c2_121) |
| Item 7A. | [Quantitative and Qualitative Disclosures About Market Risk](#id85bc2f5d2ad4583a9197c95587784c2_178) | [49](#id85bc2f5d2ad4583a9197c95587784c2_178) |
| Item 8. | [Financial Statements and Supplementary Data](#id85bc2f5d2ad4583a9197c95587784c2_181) | [50](#id85bc2f5d2ad4583a9197c95587784c2_181) |
| Item 9. | [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](#id85bc2f5d2ad4583a9197c95587784c2_280) | [81](#id85bc2f5d2ad4583a9197c95587784c2_280) |
| Item 9A. | [Controls and Procedures](#id85bc2f5d2ad4583a9197c95587784c2_283) | [81](#id85bc2f5d2ad4583a9197c95587784c2_283) |
| Item 9B. | [Other Information](#id85bc2f5d2ad4583a9197c95587784c2_286) | [82](#id85bc2f5d2ad4583a9197c95587784c2_286) |
| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | [82](#id85bc2f5d2ad4583a9197c95587784c2_289) |
| **[PART III](#id85bc2f5d2ad4583a9197c95587784c2_292)** | **[PART III](#id85bc2f5d2ad4583a9197c95587784c2_292)** | [82](#id85bc2f5d2ad4583a9197c95587784c2_292) |
| Item 10. | [Directors, Executive Officers and Corporate Governance](#id85bc2f5d2ad4583a9197c95587784c2_295) | [82](#id85bc2f5d2ad4583a9197c95587784c2_295) |
| Item 11. | [Executive Compensation](#id85bc2f5d2ad4583a9197c95587784c2_298) | [82](#id85bc2f5d2ad4583a9197c95587784c2_298) |
| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder](#id85bc2f5d2ad4583a9197c95587784c2_301)<br>[Matters](#id85bc2f5d2ad4583a9197c95587784c2_301)<br>| [82](#id85bc2f5d2ad4583a9197c95587784c2_301) |
| Item 13. | [Certain Relationships and Related Transactions, and Director Independence](#id85bc2f5d2ad4583a9197c95587784c2_304) | [82](#id85bc2f5d2ad4583a9197c95587784c2_304) |
| Item 14. | [Principal Accountant Fees and Services](#id85bc2f5d2ad4583a9197c95587784c2_307) | [83](#id85bc2f5d2ad4583a9197c95587784c2_307) |
| **[PART IV](#id85bc2f5d2ad4583a9197c95587784c2_310)** | **[PART IV](#id85bc2f5d2ad4583a9197c95587784c2_310)** | [83](#id85bc2f5d2ad4583a9197c95587784c2_310) |
| Item 15. | [Exhibit and Financial Statement Schedules](#id85bc2f5d2ad4583a9197c95587784c2_313) | [83](#id85bc2f5d2ad4583a9197c95587784c2_313) |
| Item 16. | [Form 10-K Summary](#id85bc2f5d2ad4583a9197c95587784c2_319) | [89](#id85bc2f5d2ad4583a9197c95587784c2_319) |
|  | [Signatures](#id85bc2f5d2ad4583a9197c95587784c2_322) | [90](#id85bc2f5d2ad4583a9197c95587784c2_322) |

---

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| | |
|:---|:---|
| **2 \| 2025 FORM 10-K** | **FORWARD-LOOKING STATEMENTS** |

---

**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

Sleep Number®, SleepIQ®, Sleep Number 360®, 360®, the Double Arrow logo, Select Comfort®, AirFit®, Climate360®,

ClimateCool<sup>®</sup>, Comfortaire®, DualTemp®, the DualTemp logo, the DualAir Technology Inside logo, FlexFit<sup>®</sup>, FlexTop®,

HealthIQ®, IndividualFit®, Know Better Sleep®, Pillow[ology]®, PillowFit®, RespiratoryIQ<sup>®</sup>, Responsive Air®, Sleep Is

Training®, Sleep Number Inner Circle®, Sleep30®, This Is Not A Bed®, We Make Beds Smart®, WhisperFlo®, Auto

Snore™, BreatheIQ™, BreatheIQ+™, the BreatheIQ logo, the BreatheIQ+ logo, ComfortMode™, EnviroIQ™, HeartIQ™,

Individualized Sleep Experiences™, Tri-Brid™, Smart SleeperSM, WellnessIQ™, ActiveComfort™, Clima-Temp™,

ClimateSeries™, Comfort Service™, ComfortFit™, CoolFit™, Coolgenex™, Create Your Perfect Comforter™, Create

Your Perfect Pillow™, Does Your Bedding Do that?™, Does Your Pillow Do That?™, DownComfort™, DualAir™,

ExactFit™, Firmness Control™, FlexTop™, In Balance™, Knows You. Senses You. Adjusts to You™, Logic™ Label,

LuxWarmth™, NaturalFit™, No Shift™, Partner Snore™, PlushComfort™, Relaxation™, ResponseFit™, Rest&Read™,

Sleep Better Together™, Sleep Number Does That™, Smart™ Skirt, Smart Button™, SmartFit™, Smart Temp™, Smart

Sleeper™, The Best Bed for Couples™, ThermaLux™, True Temp™, VariaCool™, Winter Soft™, its bed model names,

and the Company's other marks and stylized logos are trademarks and/or service marks of Sleep Number. This Form

10-K may also contain trademarks, trade names and service marks that are owned by other persons or entities.

The Company's fiscal year ends on the Saturday closest to December 31, and, unless the context otherwise requires, all

references to years in this Form 10-K refer to its fiscal years. The Company's fiscal year is based on a 52- or 53-week

year. All years presented in this Form 10-K are 52 weeks, except for the 2025 fiscal year ended January 3, 2026, which is

a 53-week year.

**Forward-looking Statements**

This Annual Report on Form 10-K contains or incorporates by reference certain forward-looking statements within the

meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in or

incorporated by reference into this Annual Report on Form 10-K that are not statements of historical fact may be deemed

to be forward-looking statements, including but not limited to projections of revenues, results of operations, financial

condition or other financial items; management's conclusion regarding its substantial doubt about the Company's ability to

continue as a going concern, and related mitigation plans; any statements of plans, strategies and objectives of

management for future operations; any statements regarding proposed new products, services or developments, including

potential features of Sleep Number's products that may be developed in the future; any statements regarding future

economic conditions, prospects or performance; any statements regarding proposed financing, capital solutions, strategic

alternatives; statements of belief and any statement or assumptions underlying any of the foregoing. In addition, the

Company or others on its behalf may make forward-looking statements from time to time in oral presentations, including

telephone conferences and/or Webcasts open to the public, in press releases or reports, on the Company's website or

otherwise. The Company tries to identify forward-looking statements in this report and elsewhere by using words such as

"may," "will," "should," "could," "expect," "anticipate," "believe," "estimate," "plan," "project," "predict," "intend," "potential,"

"continue" or the negative of these or similar terms.

The forward-looking statements speak only as of the date made and by their nature involve substantial risks and

uncertainties. The Company's actual results may differ materially depending on a variety of factors, including the items

discussed in greater detail below under the caption "Risk Factors." These risks and uncertainties are not exclusive and

further information concerning the Company and its business, including factors that potentially could materially affect its

financial results or condition, may emerge from time to time, including factors that it may consider immaterial or do not

anticipate at this time.

The Company wishes to caution readers not to place undue reliance on any forward-looking statement and to recognize

that forward-looking statements are predictions of future results, which may not occur as anticipated. Sleep Number

assumes no obligation to update forward-looking statements to reflect actual results or changes in factors or assumptions

affecting such forward-looking statements. The Company advises you, however, to review and consider any further

disclosures it makes on related subjects in its quarterly reports on Form 10-Q and current reports on Form 8-K that it files

with or furnishes to the Securities and Exchange Commission.

---

| | |
|:---|:---|
| **3 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**PART I**

**ITEM 1. BUSINESS**

**Overview**

Sleep Number is the leader in personalized sleep wellness. Its mattresses are designed to evolve with each sleeper to

help them feel and perform their best. With adjustable firmness, pressure-relieving support and temperature balancing

comfort built into every mattress, Sleep Number beds adapt to customers' changing needs, night after night, year after

year. Backed by over 40 years of innovation, over 1,000 patents and patents pending, and billions of hours of sleep data,

Sleep Number has helped more than 16 million people achieve their best sleep. The fully integrated model ensures quality,

durability, and care at every step—from design and craftsmanship to delivery and long-term support.

Sleep Number products are awarded the industry's top recognitions, including ranked #1 in customer satisfaction for

mattresses purchased in-store and online, and #1 in comfort, by J.D. Power. In addition, the company is the Official Sleep +

Wellness Partner of the NFL, marking a relationship that leverages players, team partnerships, and league-wide initiatives

to amplify brand awareness and drive consumer engagement.

Sleep Number's life-changing, differentiated smart mattresses combine physical and digital innovations, integrating

unparalleled physical comfort with a highly advanced sleep wellness platform. The smart beds offer the Company's

signature firmness adjustability, enabling each sleeper adjustable comfort. Embedded digital sensors learn the sleep

needs of each individual; "sense and do" technology uses the sensed data to automatically adjust the smart mattress to

keep the sleeper comfortable throughout the night. Temperature balancing technology supports the ideal climate for each

sleeper and solves a prevalent sleep challenge. Additionally, smart mattresses are an exceptional value, with personalized

sleep insights delivered daily, new features regularly added to all smart mattresses through over-the-air updates and

prices to meet most budgets. Sleep Number's mattresses provide unmatched features, benefits and comfort that can lead

to improved sleep health and wellness for both sleepers.

The Company's advantaged business model is supported by its consumer innovation strategy: an individualized, digital

sleep wellness platform, a network of millions of highly engaged Smart Sleepers who are loyal brand advocates, a

vertically integrated operating model and a team member culture of individuality.

The Company's 3,100 mission-driven team members are focused on driving value creation, including our exclusive direct-

to-consumer selling in 600 stores and online, which meets customers whenever and wherever they choose to provide an

exceptional experience and a lifelong relationship. Additionally, the Company partners with world-leading institutions to

bring the power of over 38 billion hours of longitudinal sleep data to sleep science and research.

**Turnaround Strategy**

2025 was a transformational year for Sleep Number. Under the leadership of its new CEO, Linda Findley, who joined the

Company in April 2025, the business has undergone change at every level. The Company:

• Created a more streamlined operation designed to enable faster decision-making by consolidating roles across

key functions and strengthening accountability;

• Reduced operating costs across the business by $136 million as compared to 2024, excluding restructuring and

other non-recurring costs;

• Added financial flexibility by extending the Credit Agreement through the end of 2027; and

• Executed the Twelfth Amendment to the Amended and Restated Credit and Security Agreement, dated as of

February 14, 2018 (as amended, supplemented or otherwise modified from time to time), among U.S. Bank

National Association, as Administrative Agent, Swing Line Lender and Issuing Lender, and certain other financial

institutions party thereto (the "Credit Agreement") to amend financial covenants.

---

| | |
|:---|:---|
| **4 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

With a stronger foundation, in November 2025, the Company introduced its turnaround strategy "Sleep Number Shifts," a

focused, company-wide effort to reposition the brand, expand reach to new customer groups, and reignite growth. The

aim is to drive value for shareholders, customers and team members with efforts rooted in the consumer through all

dimensions of the business. It is centered on three key areas:

• **Product:** The Company is simplifying its offering with the goal of growing its customer base while building on the

demand from repeat customers

• **Marketing:** The Company is modernizing its efforts by expanding channels and reach with new creative to better

connect with today's consumer and drive engagement with a focus on better ROI

• **Distribution:** The Company is focused on optimizing store footprint as well as exploring opportunities to expand

distribution into new channels, both physical and digital.

"Sleep Number Shifts" is being implemented as the Company continues to execute cost savings and operating

efficiencies, including real estate optimization and right-sizing the fixed cost base. While the Company is focused on

implementing the "Sleep Number Shifts" and executing cost savings and operating efficiencies, it faces liquidity

challenges. See "Risk Factors—Risks Related to Indebtedness and Liquidity."

**Financial Highlights**

Ongoing industry demand decline and the impact of lower store traffic contributed to a 16% net sales decline in 2025 for

the Company. Against this recessionary backdrop, the Company continued to focus on improving gross margins and

streamlining its cost structure to optimize Adjusted EBITDA and cash flow generation. For 2025, the Company had a

0.6 percentage point decrease in gross margin rate, including an inventory write-down charge offset by the benefit of

product cost reductions through value engineering and ongoing supplier negotiations and ongoing efficiencies in our home

delivery and logistics operations. The Company also executed an additional $136 million of operating cost reduction

actions for 2025, prior to restructuring and other non-recurring costs, bringing the cumulative operating cost reduction over

the last three years to $308 million. The Company's net loss for 2025 was $132 million and delivered full-year Adjusted

EBITDA of $78 million, with an Adjusted EBITDA margin of 5.5%, down 1.6 percentage points versus the prior year,

largely a result of the year-over-year net sales decline. Our 2025 fiscal year included an extra week which we estimate

benefited net sales by $25 million.

See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results from Operations - *Non-*

*GAAP Data Reconciliations* for additional information on Adjusted EBITDA and other non-GAAP reconciliations.

**Integrated Sleep Solutions**

<u>Smart Beds</u> <u>and Mattresses</u>

With a relentless focus on the consumer, Sleep Number has continued to advance its award-winning Sleep Number<sup>®</sup>

smart beds and mattresses. Enhancing its trademark comfort, adjustability and highly accurate detection of sleep and

biosignal data, the smart bed has evolved into a progressive and adaptive sleep wellness technology platform.

The combination of physical and digital innovation enables the Sleep Number smart bed's proprietary "sense and do"

technology, which digitally responds to each sleeper's movements, effortlessly adjusting firmness, comfort and support to

relieve pressure points. Through the analysis of sleeper-generated sleep and biosignal data, the smart bed can deliver

both real-time interventions – including automatic comfort adjustments during the night, with no action required by the

sleeper – and personalized sleep insights through its accompanying app. By combining artificial intelligence (AI) and

machine learning (ML) technology, which "learn" from each sleeper over time, the Sleep Number smart bed allows

sleepers to understand metrics related to health and wellbeing during sleep. This data may ultimately enable the

Company's Smart Sleepers to take preventative and proactive wellness actions. Additionally, the longitudinal data

generated from Sleep Number's wellness technology platform can be shared with sleepers' physicians through a monthly

HealthIQ<sup>®</sup> report, leading to insights that may guide health-provider diagnostics.

Sleep Number's product innovation roadmap is driven by proprietary data from its millions of Smart Sleepers and sleep

science. This allows the Company to address some of the most pressing sleep health needs and differentiate itself among

mattress brands as one that consumers perceive to improve their health and wellbeing.

---

| | |
|:---|:---|
| **5 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

As the Company heads into 2026, and as part of its turnaround, Sleep Number announced it is simplifying its offering with

a significant product transition and the goal of growing the new customer base while building on the demand from repeat

customers.

<u>Smart Adjustable Bases</u>

Sleep Number's smart bed ecosystem includes a full line of exclusive FlexFit<sup>®</sup>smart adjustable bases that seamlessly

integrate with Sleep Number smart beds for an individualized sleep experience that is proven to deliver more restful sleep

per night. The Company's industry-leading smart bases offer endless adjustability by raising the head and feet for ultimate

relaxation. Additional features include Partner Snore™ technology, which allows a sleeping partner to temporarily relieve

mild snoring by raising the companion's head at the touch of a button; Foot Warming, which is designed to help an

individual fall asleep faster; and under-bed lighting, for nighttime visibility.

<u>Sleep Number Bedding and Furniture</u>

The exclusive Sleep Number® bedding collection and upholstered furniture line are designed to improve sleep comfort

and quality, including pillows designed to fit each individual's sleeping position. The Sleep Number<sup>®</sup>Lifestyle Collection

furniture enhances the sleep environment and supports the health and wellness benefits of the Sleep Number smart bed

and FlexFit smart adjustable bases. The Lifestyle Collection also provides an integrated sleep experience with

accessories for aging and recovery, providing comfort, aiding in mobility and helping maintain independence at home.

<u>Sleep Number Proprietary Ecosystem</u>

Sleep Number builds lifelong relationships with its customers. The proprietary ecosystem of over 3 million Smart Sleepers

with an average monthly engagement rate of approximately 80 percent is best-in-class for digital products. This high

engagement with the Company's sleep wellness platform increases customer lifetime value and drives efficient customer

acquisition through advocacy and referrals. The Company measures its repeat and referral customers, which account for

over 50% of sales. The Company's innovation roadmap supports ongoing engagement initiatives within this ecosystem for

future growth.

An important part of the smart bed ecosystem, the Sleep Number app, puts the "brand in the hand" of the Company's loyal

Smart Sleepers every day. It enables control of the smart bed and smart adjustable base from one's mobile device. It also

provides a nightly score – a SleepIQ<sup>®</sup> score – that indicates how sleepers slept against their personal best metrics and

goals. Paired with personalized insights and details about each sleeper's heart rate, breath rate, heart rate variability,

circadian rhythm and more, the Sleep Number app is an invaluable tool in helping Smart Sleepers better understand how

to improve their sleep health and wellbeing. A monthly summary report – the HealthIQ® report – comes to the inbox of

each sleeper for a monthly assessment of how they slept; this report can be downloaded to be shared with health

professionals and caregivers.

**Sales and Marketing**

<u>Brand Communications</u>

Sleep Number continues to invest in its brand and demand drivers for near- and long-term performance. The mattress

industry is a highly commoditized, competitive low-interest category. The Sleep Number brand strategy focuses on brand

amplification to drive awareness and consumer benefits to drive consideration. The Company has several highly visible

strategic partnerships; it engages consumers seamlessly across multiple touchpoints, with an emphasis on digital; and it

creates lifelong customer relationships and brand advocacy by delivering an unparalleled sleep experience. Together,

these actions result in strong brand health, increased brand interest, heightened consumer consideration, customer

engagement and authentic advocacy for Sleep Number's brand, innovations and services.

The Company leverages a sophisticated media mix to drive its performance marketing and advertising, with emphasis on

digital and aligned with consumer consumption, contributing to improved media return on investment. High-profile video,

including television and online streaming, is its most efficient media, followed by digital and social platforms. Sleep

Number's in-house digital capabilities, content marketing, online user experience and data-driven tools give it the flexibility

to pivot quickly and optimize media investment, messages and audience by platform in real-time. The Company's

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promotional strategy focuses on simplicity and relevance, driving consumers to the brand at the time when they are

seeking a sleep solution.

The Company's brand marketing strategies are designed to deliver Sleep Number value messaging to a broader set of

consumers. In 2025, Sleep Number reset its marketing strategy, building on top of a strong brand relevance to attract

consumers from a larger addressable market. The Company is leveraging the correlation between marketing and

consumer demand to deliver improvements in marketing effectiveness and return on investment at greater scale. In

parallel, Sleep Number is evolving all aspects of marketing and creative work, including deploying a brand refresh focused

on target segments.

The Sleep Number® Rewards loyalty program drives significant brand engagement. Since the launch of the program, the

Company welcomed over 1.9 million members who participated in over 3 million engagements per year on its digital

platform. The Company's most dedicated Smart Sleepers regularly interact with branded content – including video, web,

email and blog content – which educates them about Sleep Number<sup>®</sup> products and sleep expertise, adding value to their

investment. They actively write product reviews and post on social media, further activating the marketing flywheel and

advancing the Company's purpose.

<u>Exclusive Direct-to-Consumer Distribution</u>

Sleep Number's exclusive, direct-to-consumer distribution model supports lifelong relationships with its customers. Across

its customer touchpoints, defined as Total Retail (Stores, Online, Phone and Chat), it delivers a value-added retail

experience that seamlessly integrates Sleep Number's digital and physical experiences to meet customer needs. The

Company offers an engaging and dynamic online experience to educate consumers and advance their purchase path,

driving highly-qualified traffic to all of its retail touchpoints. Sleep Number's mission-driven sleep experts use digital

technology and a best-in-class, relationship-based selling process, which is continually tested and refined to meet the

changing consumer priorities. Processes are designed to match the right sleep solutions and right price point for its

customers – wherever and whenever they want to shop. This "sell-from-anywhere" model supports customers' shopping

preferences and results in new customer acquisition, sustained repeat and referral, high conversion and strong revenue

per smart bed unit – all of which drive future sales and profitable growth.

As the exclusive distributor of Sleep Number<sup>®</sup> products, the Company has a nationwide portfolio of retail stores. The

Company targets high-quality, convenient and visible store locations based on several factors, including each market's

overall sales and profit potential, store geography, demographics and proximity to other brand experiences. Since 2010,

the Company has invested to reposition a large percentage of its mall stores to stronger, optimally-sized, non-mall

locations, adding stores in both existing and new markets. As of January 3, 2026, the Company operated 600 Sleep

Number<sup>®</sup> stores, with locations in all 50 states.

The Company's Stores accounted for 88% of net sales in 2025. Average annual net sales per store in 2025, based on

Total Retail, was $1.9 million. In 2025, 32% of Stores open for a full year generated net sales of greater than $2 million,

and 8% of Stores open for a full year generated more than $3 million in net sales. In 2025, Online, Phone, Chat and Other

sales accounted for 12% of net sales.

**Operations**

<u>Integrated Sourcing and Logistics</u>

All of Sleep Number's smart beds and mattresses are pre-assembled in its assembly distribution centers prior to delivery.

Sleep Number's network delivers improved visibility, efficiency and waste reduction. Bedding fulfillment is centralized to

leverage improved logistics costs and to serve the entire United States from Ohio. Sleep Number continues to advance its

outbound logistics network by evolving its mix of truckload carriers and dedicated cross docks to reduce product handling,

hand-offs, damage and costs while in transit to customers' homes. This network design enables scale and provides a

superior and reliable experience for customers.

In addition to a network of global suppliers, Sleep Number operates a dedicated cut and sew facility for cover production

in Irmo, SC and an advanced engineering and prototyping facility in Salt Lake City, UT. Each of these facilities are

combined with an assembly distribution center. There are three additional assembly distribution centers (Minneapolis, MN;

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Cincinnati, OH; and Dallas, TX). The assembly distribution centers fulfill customer orders that are made-to-order daily and

assemble final mattress and order kitting with bases and accessories for shipment.

The Company sources the raw materials and components used in its products from third parties. A significant percentage

of the Company's products are assembled after it receives orders from customers utilizing manufacturing processes with

minimal levels of raw materials, work-in-process and finished goods inventories. The Company has taken, and continues

to take, various measures to mitigate the potential impact of supply disruptions, including strengthening relationships with

primary suppliers, identifying new alternate suppliers, redesigning products, exploring alternative components and

maintaining safety stocks. Sleep Number is leveraging the flexibility, visibility and resilience of its operating model to

respond nimbly as conditions change.

<u>Home Delivery Service</u>

Sleep Number's home delivery teams are another direct touchpoint with its customers. Sleep Number smart beds and

mattresses are delivered and installed by Sleep Number delivery technicians or by trained third-party service providers.

This blended model enables the Company to efficiently deliver a strong customer experience.

<u>Customer Service</u>

Sleep Number provides comprehensive post-purchase support that improves Smart Sleepers' experience and supports its

business. Through ongoing interactions with customers via phone, email, chat and social media, the customer service

team also provides a unique opportunity to benefit from insights that help the Company continuously improve its products

and strengthen its service quality and innovation. This integration enables operational synergies and organizational

efficiencies. Sleep Number has outsourced a portion of its customer service operations for greater efficiency.

<u>Innovation</u>

Sleep Number's global research and development (R&D) team is comprised of onshore teams in Minneapolis, MN and

San Jose, CA and offshore teams in Europe and Asia. Together, these teams are the driving force of the entire smart bed

ecosystem including all smart beds, adjustable base designs and bedding solutions, and are comprised of experts in

mechanical engineering, comfort, adjustability, temperature, anthropometrics and test systems. The Company's research

and development expenses were $34 million in 2025 compared to $45 million in 2024.

With over 1,000 patents and patent applications pending worldwide, Sleep Number's innovation pipeline is robust. The

combination of trademark individualized comfort and adjustability features – with AI, biometric analysis and other digital

tools – creates the sleep wellness platform, which is the foundation of a long-term value proposition. Paired with millions

of connected sleepers with approximately 80% monthly average smart bed user engagement and high customer lifetime

value, the Company believes in the potential for expanded market relevance beyond the traditional mattress space into

wellness technology and data, where there are many untapped consumer opportunities to solve persistent sleep issues.

Sleep Number is redefining the standards for monitoring sleep for research and health, and its smart bed ecosystem

offers a non-invasive, real-world and accurate method to conduct sleep research. The Company's sleep wellness platform

generates longitudinal sleep and biosignal data through a research-grade, multi-sensor ecosystem including

ballistocardiography and AI/ML algorithms. This platform leverages high-resolution, full-body, continuous sensor

recordings, as well as utilizing signal processing and machine-learning methods. Cloud infrastructure enables scale for

one-to-many security and data sharing capabilities. Cloud intelligence and edge intelligence engines deliver advanced AI

and analytics to generate a physical and digital immersive, adaptive and effortless sleep experience for each sleeper.

Sleep Number's sleep wellness platform automatically collects and analyzes billions of data points from millions of Smart

Sleepers, conducting one of the largest sample sizes of sleep studies every night. To date, the Company has leveraged

and learned from more than 38 billion hours of sleep data gathered from over 4.8 billion real-world sleep sessions,

generating comprehensive longitudinal and ecologically-valid data to improve sleep quality. More than 558,000 individuals

in its Smart Sleeper<sup>SM</sup> Community — and counting — have opted in to participate in ongoing sleep research and advance

the science of sleep and health. This participation has led to rapid enrollment in Institutional Review Board (IRB)-approved

studies, which combine the power of Sleep Number's broad sleep database with subjective understanding of sleeper

behaviors to understand real-world outcomes. The smart bed ecosystem is helping to advance the linkage of quality sleep

to health, bringing significant benefits to real-world sleepers.

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Sleep Number is pairing data and innovations with meaningful collaborations with world-leading partners in sleep,

leveraging the potential of the Company's research and technology to advance sleep science and to develop new

products, services and synergistic interactions.

**Partnerships and Collaborations**

Strategic partnerships amplify the effectiveness, impact and scale of Sleep Number's brand and marketing efforts.

<u>National Football League (NFL)</u>

As the Official Sleep and Wellness Partner of the NFL since 2018, the partnership broadens Sleep Number's brand reach,

deepens its brand relevance and amplifies the benefits of its proprietary innovations. The partnership has led to

unparalleled product adoption: 83% of NFL players have a Sleep Number smart bed\*. Through 2028, Sleep Number

expects to continue to actively support players and team personnel with their performance and recovery programs through

sleep assessments, new innovations and more.

Sleep Number's NFL partnership also includes partnerships with the NFL Players Association (NFLPA) and the

Professional Football Athletic Trainers Society (PFATS), which helps drive greater engagement on and off the field.

Through Sleep Number content, seminars and team sleep education meetings, the trainers and football medical personnel

qualify for continuing education credits.

In 2025, Sleep Number had partnerships with three clubs — Super Bowl LVI Champion Los Angeles Rams, the Dallas

Cowboys, and the Minnesota Vikings — which add to its national media and community-activation efforts. These

partnerships allow for focused communications in some of Sleep Number's most important markets.

Additionally, the Company leverages the NFL audience to further support American Cancer Society (ACS), being

recognized as "an Official Partner of Crucial Catch" and a presenting sponsor of the Defender, an online tool developed by

ACS and the NFL to provide cancer prevention, screening and support. The Company included ACS in its brand

communications to Smart Sleepers, in its work with the NFL, across its social media and more.

In 2022, Sleep Number formed a partnership with the ACS to study the connection between cancer and sleep quality, with

the goal of developing the first-ever sleep strategies and guidance for cancer patients and survivors. With contributions

from Sleep Number's proprietary sleep data, ACS will conduct research over six years, which may lead to improved sleep

outcomes for cancer patients and survivors. Additionally, Sleep Number supports cancer patients and caregivers through

donations of sleep solutions to ACS's Hope Lodges across the country. And, as part of the Crucial Catch partnership,

Sleep Number inspired tens of thousands of NFL fans to learn more about cancer risks and prevention by driving

activation of The Defender.

<u>Health & Research Institutions</u>

Through partnerships with world-leading health and wellness institutions, Sleep Number has advanced sleep science with

its highly accurate, longitudinal sleep data. This data serves as the foundation for groundbreaking research on various

health-related issues.

By enabling a longitudinal view of sleep habits for organizations that otherwise may not have access, Sleep Number

believes partnerships and collaborations with physicians, researchers and institutions can deliver meaningful health

solutions.

Sleep Number has partnered with the Mayo Clinic, ACS, Northwestern University, and the University of Pittsburgh in

several research studies, with the aim of providing insights into how sleep affects health.

\*Based on the number of active roster players eligible for the NFL player Sleep Number<sup>®</sup> bed program who purchased a bed between 7/23/18 and

12/13/24.

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In 2020, Sleep Number announced a collaboration with Mayo Clinic, resulting in multiple research projects including:

• Research to explore the relationship between disrupted sleep and markers of aging (telomeres,

senescence, chronological EKG based on AI);

• Research to explore excessive daytime sleepiness (EDS) and its cardiovascular implications; and

• Research to investigate the prevalence of disordered sleep (sleep apnea, insomnia, and short sleep) in patients with

Somali heritage and the implications for cardiovascular risk.

**Intellectual Property**

As a result of the Company's R&D and strategic efforts, Sleep Number has continued to strengthen its patent portfolio,

with a particular focus on smart features that improve sleep quality and thermal solutions to solve temperature disruptions

to sleep. The Company holds various U.S. and foreign patents and patent applications regarding certain elements of the

design and function of Sleep Number products, including air control systems, remote control systems, air chamber

features, mattress construction, foundation systems, sensing systems, automated adjustments, in-bed temperature

control, as well as other technology. Sleep Number has numerous U.S. patents expiring at various dates between January

2027 and May 2044, and numerous U.S. patent applications pending. The Company also has numerous foreign patents

expiring at various dates between September 2026 and June 2047, and foreign patent applications pending.

Notwithstanding these patents and patent applications, the Company cannot ensure that these patent rights will provide

substantial protection or that others will not be able to develop products that are similar to, or competitive with, Sleep

Number products.

Sleep Number has a number of trademarks and service marks registered with the U.S. Patent and Trademark Office,

including Sleep Number<sup>®</sup>, SleepIQ<sup>®</sup>, Sleep Number 360<sup>®</sup>, 360<sup>®</sup>, the Double Arrow logo, Select Comfort<sup>®</sup>, AirFit<sup>®</sup>,

Climate360<sup>®</sup>, ClimateCool<sup>®</sup>, Comfortaire<sup>®</sup>, Dreamaire<sup>®</sup> , DualTemp®, the DualTemp logo, the DualAir Technology Inside

logo, FlexFit<sup>®</sup>, FlexTop<sup>®</sup>, HealthIQ<sup>®</sup>, IndividualFit<sup>®</sup>, Know Better Sleep<sup>®</sup>, Pillow[ology]<sup>®</sup>, PillowFit<sup>®</sup>, RespiratoryIQ<sup>®</sup>,

Responsive Air<sup>®</sup>, Sleep Is Training<sup>®</sup>, Sleep Number Inner Circle<sup>®</sup>, Sleep30<sup>®</sup>, Smart Sleeper<sup>SM</sup>, This Is Not A Bed<sup>®</sup>, We

Make Beds Smart<sup>®,</sup> and WhisperFlo®. The Company has several trademarks that are the subject of pending applications,

including Auto Snore™, BreatheIQ™, BreatheIQ+™, the BreatheIQ logo, the BreatheIQ+ logo, ComfortMode™,

EnviroIQ™, HeartIQ™, Individualized Sleep Experiences™, Tri-Brid™, and WellnessIQ™. Each registered mark is

renewable indefinitely as long as the mark remains in use and/or is not deemed to be invalid or canceled. The Company

also has a number of common law trademarks, including Clima-Temp™, ClimateSeries™, Comfort Service™,

ComfortFit™, CoolFit™, Coolgenex™, Create Your Perfect Comforter™, Create Your Perfect Pillow™, Does Your Bedding

Do that?™, Does Your Pillow Do That?™, DownComfort™, DualAir™, ExactFit™, Firmness Control™, FlexTop™, In

Balance™, Knows You. Senses You. Adjusts to You™, Logic™ Label, LuxWarmth™, NaturalFit™, No Shift™, Partner

Snore™, PlushComfort™, Relaxation™, ResponseFit™, Rest&Read™, Sleep Better Together™, Sleep Number Does

That™, Smart™ Skirt, Smart Button™, SmartFit™, Smart Temp™, Smart Sleeper™, The Best Bed for Couples™,

ThermaLux™, True Temp™, VariaCool™, Winter Soft™, and the Company's bed model names.

Several of the Company's trademarks have been registered, or are the subject of pending applications for registration, in

various foreign countries. Sleep Number also has other intellectual property rights related to its products, processes and

technologies, including trade secrets, trade dress and copyrights. The Company protects and enforces its intellectual

property rights, including through litigation, as necessary.

**Industry and Competition**

The Company competes in the bedding industry that is comprised of mattresses and foundations, pillows and

accessories. The mattress category includes both traditional innerspring models and a wide range of non-innerspring

options, such as viscoelastic and foam mattresses, hybrids, airbeds, and latex mattresses. The foundation category

includes static and adjustable foundations. The bedding industry is commoditized and highly competitive. Sleep Number

competes against regional and local specialty bedding retailers, bedding manufacturers, home furnishing stores, mass

merchants, national discount stores and online marketers.

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Manufacturers in the bedding industry mostly compete through national and regional retail partners, regional

manufacturing verticals and online direct-to-consumer. Price, quality, brand name recognition, product availability and

product performance are the primary ways manufacturers differentiate themselves. There is a high degree of

concentration among manufacturers who produce innerspring, memory foam and hybrid beds under nationally recognized

brand names, including Tempur-Pedic, Sealy, Stearns & Foster, Serta and Beautyrest. National manufacturers still

dominate the bedding industry. There has recently been market consolidation, with Somnigroup owning the Tempur-Pedic,

Sealy and Stearns & Foster brands, and also owning the Mattress Firm brand and stores. Brands including Saatva,

Purple, Casper and Nectar, which started online have now moved into traditional retail channels for growth.

**Seasonality**

The Company's business is modestly impacted by seasonal influences inherent in the U.S. bedding industry and general

retail shopping patterns. The U.S. bedding industry generally experiences lower sales demand in the second quarter of

the calendar year and increased sales demand during selected holiday or promotional periods.

**Working Capital**

The Company is able to operate with minimal working capital requirements because it sells directly to customers, utilizes

both "make-to-order" and "make-to-stock" production processes and operates retail stores that serve mainly as

showrooms. Sleep Number has historically generated sufficient cash flows to self-fund operations through an accelerated

cash-conversion cycle. The Company's Credit Agreement provides a revolving credit facility for general corporate

purposes with net aggregate availability of $655 million. The Credit Agreement matures in December 2027.

Qualified customers are offered revolving credit to finance purchases through a private-label consumer credit facility

provided by Synchrony Bank. Approximately 40% of net sales in 2025 were financed by Synchrony Bank. The Company's

current agreement with Synchrony Bank expires December 31, 2028, subject to earlier termination upon certain events.

The Company pays Synchrony Bank a fee for extended credit promotional financing offers. Under the terms of the

agreement, Synchrony Bank sets the minimum acceptable credit ratings, interest rates, fees and all other terms and

conditions of the customers' accounts, including collection policies and procedures. As the receivables are owned by

Synchrony Bank, at no time are the receivables purchased or acquired from the Company. Sleep Number is not liable to

Synchrony Bank for its customers' credit defaults. In connection with all purchases financed under these arrangements,

Synchrony Bank pays the Company an amount equal to the total amount of such purchases, net of promotional related

discounts, upon delivery to the customer.

**Governmental Regulation and Compliance**

As a vertically integrated manufacturer and retailer, the Company is subject to extensive federal, state and local laws and

regulations affecting all aspects of its business. As a manufacturer, Sleep Number is committed to product quality and

safety, including adherence to all applicable laws and regulations affecting the Company's products and services.

Compliance with health, safety and environmental laws and regulations, including the federal fire retardant standards

developed by the U.S. Consumer Product Safety Commission, which requires rigorous and costly testing, has increased

the cost and complexity of manufacturing the Company's products and may adversely impact the speed and cost of

product development efforts. Further, the Company's manufacturing, distribution, delivery and other business operations

and facilities are subject to additional federal, state or local laws or regulations including supply chain transparency,

conflict minerals sourcing and disclosure, end-of-life disposal, recycling and packaging requirements, transportation and

other laws or regulations relating to environmental protection and health and safety requirements.

As a retailer, the Company is subject to additional laws and regulations that apply to retailers generally and govern the

marketing and sale of the Company's products and the operation of both Sleep Number retail stores and e-commerce

activities. Many of the statutory and regulatory requirements that impact the Company's retail and e-commerce operations

are consumer-focused and pertain to activities such as the Company's promotions, advertising claims, marketing

practices, pricing, consumer credit offerings, truth-in-advertising, consumer privacy, "do not call/mail" requirements, text

messaging requirements, warranty disclosure, delivery timing requirements, accessibility and similar requirements.

The Company's operations are subject to federal, state and local labor laws including, but not limited to, those relating to

occupational health and safety, employee privacy, wage and hour, overtime pay, pay transparency, harassment and

discrimination, equal opportunity and employee leaves and benefits. The Company is also subject to existing and

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emerging federal and state laws relating to insider trading, data security, privacy, cybersecurity disclosure, clawback policy

disclosures and greenhouse gas measurement and climate impact disclosure.

It is Sleep Number's policy and practice to comply with all legal and regulatory requirements. The Company's procedures

and internal controls are designed to promote such compliance.

**Human Capital**

Guided by its purpose to improve lives by personalizing sleep, Sleep Number fosters a culture where team members are

highly engaged and contribute meaningfully to the company and its communities. With sleep at the center, Sleep Number

supports the wellbeing of its team members across the pillars of physical, emotional, financial, career and community

wellbeing. The company values every individual's unique talents, perspectives and experiences, and strives to create an

inclusive environment where team members can do their best work, which supports collaboration, innovation, and long-

term success.

At January 3, 2026, Sleep Number employed a total of 3,133 team members, of which 53 were classified as part-time and

3 were employed on a temporary basis. The breakdown of team members by area was as follows: 1,863 in retail sales

and support, 305 in field services, 160 in customer service, 294 in manufacturing and logistics, and 511 in technology,

corporate, management and administrative positions. Team members include racially diverse members of 40% of team

and women of 38%.

Attracting, motivating and retaining the right talent is critical to Sleep Number's success, which is why it is unyielding in its

commitment to its team members' wellbeing, connection to one another and sense of belonging. The Company strives to

create and sustain a culture in which all team members feel welcomed and valued and can bring their authentic and whole

selves to work every day and it reinforces this commitment through investment in programs and initiatives including:

• Career Wellbeing: The Company's Learning and Development programs enhance team member capabilities, driving

personal growth, mentoring opportunities and organizational performance;

• Financial, Emotional and Physical Wellbeing: Sleep Number's compensation practices and comprehensive benefits

highlight its commitment to improving its team's economic opportunity and promoting their physical and emotional

stability. The Company annually benchmarks its total rewards programs to ensure market competitiveness and offers

all team members a form of variable compensation tied to performance in addition to their base pay. To support

emotional wellbeing, Sleep Number offers all team members mental health resources in addition to flexible time off

benefits;

• Health and Safety Policies: Sleep Number establishes clear expectations for all team members to ensure a physically

and psychologically safe environment. As part of the Company's effort to improve safety, it collects and analyzes

workplace injury and accident information across all locations and takes steps to reduce incident rates. The Company

actively evolves its health and safety policies during the year to ensure the safety of its team members and

customers; and

• Community Engagement: Sleep Number fosters a strong sense of belonging, connection and service through Team

Member Resource Groups, Team Member Support Fund and Team Member Volunteer opportunities. Sleep Number

actively supports eight Team Member Resource Groups.

**Commitment to Sustainability**

Sleep Number is committed to sustainability through initiatives that support the resilience of its business. The Company's

efforts focus on aligning and integrating environmental stewardship and social progress with its pursuit of long-term

shareholder value creation.

Sleep Number takes seriously its responsibility to its stakeholders, including team members, consumers, community,

suppliers and shareholders. To continue to earn their trust, the Company proactively advances and discloses practices,

priorities and metrics that demonstrate its accountability and commitment to sustainability.

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• Sleep Number is strengthening systems and processes that reinforce sound governance, high integrity decision-

making and transparent, consistent reporting practices.

• To attract and retain highly engaged team members, the Company continues to prioritize programs that promote well-

being, provide opportunities for professional development and reward strong performance.

• Through volunteerism, financial and in-kind support, and meaningful contributions to sleep science, research and

sleep innovations, Sleep Number is improving millions of lives – delivering significant value to consumers and their

communities.

• Recognizing the benefit of collaboration in achieving the Company's goals, Sleep Number is strengthening its

relationships with suppliers and engaging with them to increase its operating model durability and sustainability.

• And the Company is monitoring – and taking responsible actions to control – its greenhouse gas emissions, waste

and other environmental outputs, including through improved network design, transportation optimization and

innovations that extend the useful life of product components.

Additional information is available in the Company's Corporate Sustainability Report, posted within the Investor Relations

section of the Sleep Number website at http://ir.sleepnumber.com. Select the "ESG" link and then "Sustainability Reports."

The information contained on the Company's website or connected to its website is not incorporated by reference into this

Form 10-K and should not be considered part of this report.

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**Information about the Company's Executive Officers**

**LINDA FINDLEY, 52**

*Board Member, President and Chief Executive Officer (Joined the Company in April 2025)*

Linda Findley, Sleep Number<sup>®</sup> setting 30, serves as the President and Chief Executive Officer for Sleep Number. From

April 2019 to May 2024, Ms. Findley served as the President, Chief Executive Officer and Director of Blue Apron Holdings,

Inc. (formerly Nasdaq: APRN), an ingredient and recipe meal kit company. From May 2016 to December 2018, she was

the Chief Operating Officer at Etsy, Inc. (NYSE: ETSY), a global e-commerce marketplace for unique and creative goods,

where she oversaw product, design, marketing, and customer engagement and acquisition. Prior to Etsy, Ms. Findley held

a variety of senior executive roles at Evernote Corp. from October 2012 to December 2015, including most recently as

Chief Operating Officer, and led global marketing, business development, and customer service for Alibaba.com Ltd. from

June 2009 to October 2012, based out of Hong Kong. Ms. Findley has served on the board of directors of Ralph Lauren

(NYSE: RL) since August 2018 and HeliosX since February 2025.

**AMY O'KEEFE, 55**

*Executive Vice President and Chief Financial Officer (Joined the Company in December 2025)*

Amy O'Keefe, Sleep Number<sup>®</sup> setting 65, serves as Executive Vice President and Chief Financial Officer for Sleep

Number and brings over 30 years of experience leading operational, strategic, and financial transformations across public

and private companies in the consumer products, technology, and wellness sectors. From June 2023 to May 2025, Ms.

O'Keefe served as Chief Financial and Administrative Officer of Avaya LLC, a global communications software company,

where she played a key leadership role in its operational, strategic, and financial transformation, driving significantly

improved free cash flow. Prior to Avaya, O'Keefe spent nearly half of her career at The Black & Decker Corporation

(NYSE: SWK) and subsequently served as Chief Financial Officer for multiple public and private companies, including

Weight Watchers International (Nasdaq: WW), a global wellness company providing subscription-based commercial

weight management programs with both in-person and digital-only offerings, from October 2020 to December 2022, Drive

DeVilbiss Healthcare, Savant Systems, and D&M Holdings. Ms. O'Keefe has served on the board of directors of

TruBridge, Inc. (Nasdaq: TBRG) since October 2024.

**MELISSA BARRA, 54**

*Executive Vice President and Chief Product and Enterprise Strategy Officer (Joined the Company in 2013 and was* 

*promoted to current role in April 2025)*

Melissa Barra, Sleep Number<sup>®</sup> setting 30, serves as Executive Vice President and Chief Product and Enterprise Strategy

Officer. Ms. Barra oversees the Company's product portfolio, from development through distribution and is responsible for

streamlining research and development efforts and ensuring that products, partnerships and distribution continue to

evolve in ways that meet the needs of today's customers. From June 2019 to April 2025, Barra served as Executive Vice

President, Chief Sales and Services Officer, where she led the company's customer-focused strategy and the

organization's sales, real estate, field services, customer relationships, and corporate technology teams. Barra joined

Sleep Number in 2013 as Vice President, Consumer Insights and Strategy. Prior to joining Sleep Number in February

2013, Ms. Barra held leadership positions in the U.S. and internationally in process reengineering, finance, strategic

alliances and corporate development for Best Buy, Grupo Futuro S.A., Citibank and GE Capital. Ms. Barra has served on

the board of directors of Pentair PLC (NYSE: PNR) since December 2021.

**SAMUEL R. HELLFELD, 47**

*Executive Vice President and Chief Legal and Risk Officer and Secretary (Joined the Company in 2013 and was* 

*promoted to current role in March 2022)*

Samuel R. Hellfeld, Sleep Number<sup>®</sup> setting 35, serves as Executive Vice President and Chief Legal and Risk Officer and

Secretary and leads legal, internal audit, corporate security and asset protection. From September 2018 to March 2022,

Mr. Hellfeld served as Senior Vice President and Chief Legal and Risk Officer. From October 2015 to September 2018,

Mr. Hellfeld served as Vice President, Associate General Counsel. Mr. Hellfeld joined Sleep Number in March 2013 as

Corporate Counsel. Prior to joining Sleep Number, Mr. Hellfeld was a Partner in the law firm of Fox Rothschild LLP (fka

Oppenheimer Wolff & Donnelly LLP), practicing in the areas of litigation and intellectual property. Prior to 2010, Mr.

Hellfeld was an Associate at several national law firms and also served as Law Clerk in the United States Court of Appeals

for the Ninth Circuit and the United States District Court, Southern District of California.

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**CHRISTOPHER D. KRUSMARK, 46**

*Executive Vice President and Chief Retail and People Officer (Joined the Company in 2005 and was promoted to Chief* 

*Retail and People Officer in April 2025)*

Christopher D. Krusmark, Sleep Number<sup>®</sup> setting 55, serves as Executive Vice President and Chief Retail and People

Officer, where he leads the retail selling experience and real estate footprint, ensuring both customers and team members

are supported through connected enterprise processes. From July 2020 to April 2025, Mr. Krusmark served as Sleep

Number as Executive Vice President and Chief Human Resources Officer. From January 2023 through August 2023, Mr.

Krusmark also served as Interim CFO. Prior to being promoted to his Chief Human Resources Officer role in July 2020,

Mr. Krusmark served as Sleep Number's Vice President of Sales Operations, Field Services and Training where he led

retail and home delivery operations and wholesale business development. From June 2005 to October 2015, Mr.

Krusmark held a variety of leadership roles in finance at Sleep Number supporting sales, real estate, marketing and

product. Prior to joining Sleep Number, Mr. Krusmark worked on the financial audit staff of EY and Arthur Andersen.

**AMBER L. MINSON, 56**

*Executive Vice President and Chief Marketing Officer (Joined the Company in May 2025)*

Amber L. Minson, Sleep Number<sup>®</sup> setting 55, serves as the Executive Vice President and Chief Marketing Officer for

Sleep Number. She leads the company's integrated marketing strategy, driving sustained demand generation, enhancing

brand visibility and delivering media efficiency. She is an accomplished leader with more than two decades of marketing

and brand strategy experience. Most recently, from July 2024 to April 2025, Ms. Minson served as Chief Marketing Officer

of Casper Sleep Inc., a consumer sleep products company that designs, manufactures, and sells mattresses and related

sleep accessories, under a contract agreement. From January 2023 to May 2024, she served as Chief Revenue Officer,

as well as from October 2022 to January 2023, as Chief Marketing Officer at Blue Apron Holdings, Inc. (formerly Nasdaq:

APRN), an ingredient and recipe meal kit company. where she was responsible for all revenue generating and customer-

facing functions, including growth through strategic pricing and promotional initiatives. From 2020 to 2022, Ms. Minson

served at Chief Marketing Officer for Foreground LLC, a company that helps photographers and photo consumers create

memories that last a lifetime. Ms. Minson also built and scaled high performance marketing organizations for companies

including Intuit, Alibaba, Home Shopping Network (HSN) and Comcast NBCUniversal.

**TANYA SKOGERBOE, 50**

*Senior Vice President and Chief Supply Chain and Transformation Officer (Joined the Company in February 2007 and* 

*was promoted to Chief Supply Chain and Transformation Officer in February 2025)*

Ms. Skogerboe, Sleep Number<sup>®</sup> setting 35, serves as the Senior Vice President and Chief Supply Chain and

Transformation Officer for Sleep Number. In her role, she is responsible for leading all aspects of the company's supply

chain operations – from manufacturing to fulfillment – to ensure quality, consistency and efficiency at every step of the

customer journey. Ms. Skogerboe also oversees the rigorous transformation efforts of the company to get closer to the

customer and optimize operations. Over her almost 20 year career at Sleep Number, she has held senior leadership

positions in services and strategy, customer experience and commercial channel operations. Prior to joining Sleep

Number, Ms. Skogerboe served as manager of global sales for Northwest Airlines.

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**Available Information**

Sleep Number is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (Exchange

Act) and its rules and regulations. The Exchange Act requires the Company to file reports, proxy statements and other

information with the Securities and Exchange Commission (SEC).

Sleep Number's corporate website is www.sleepnumber.com. Through a link to a third-party content provider, the

corporate website provides free access to its annual reports on Form 10-K, quarterly reports on Form 10-Q, current

reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the

Securities Exchange Act of 1934 as soon as reasonably practicable after the Company electronically files such material

with, or furnishes it to, the SEC. These documents are posted on the corporate website at www.sleepnumber.com: select

the "Investors" link, the "Financials" link, and then the "SEC Filings" link. The information contained on the Company's

website or connected to its website is not incorporated by reference into this Form 10-K and should not be considered part

of this report.

The Company also makes available, free of charge on its website, the charters of the Audit Committee, Management

Development and Compensation Committee and Corporate Governance and Nominating Committee, as well as its Code

of Business Conduct and Ethics (including any amendment to, or waiver from, a provision of its Code of Business Conduct

and Ethics) adopted by the Company's Board of Directors (Board). These documents are posted on the Company's

website: select the "Investors" link, the "Governance" link and then the "Governance Documents" link. The information

contained on the Company's website or connected to its website is not incorporated by reference into this Form 10-K and

should not be considered part of this report.

Copies of any of the above-referenced information will also be made available, free of charge, upon written request to:

**Sleep Number Corporation**

Investor Relations Department

1001 Third Avenue South

Minneapolis, MN 55404

**ITEM 1A. RISK FACTORS**

*An investment in Sleep Number's common stock involves a high degree of risk. Stakeholders should carefully consider* 

*the specific risks set forth below and other matters described in this Annual Report on Form 10-K before making an* 

*investment decision. The risks and uncertainties described below are not the only ones facing the Company. Additional* 

*risks and uncertainties, including risks and uncertainties that impact the business environment generally, those not* 

*presently known to the Company, or those that it currently sees as immaterial, may also harm its business. If any of these* 

*risks occur, the Company's business, results of operations, cash flows and financial condition could be materially and* 

*adversely affected.*

**<u>Risks Related to our Business and Industry</u>**

***Adverse changes in general economic conditions and consumer sentiment have reduced, and could continue to***

***reduce discretionary consumer spending and, as a result, have adversely affected and could continue to***

***adversely affect the Company's sales, profitability, cash flows, availability of credit, and financial condition.***

The Company's success depends significantly upon discretionary consumer spending, which is influenced by a number of

general economic factors, including without limitation economic growth, consumer confidence and sentiment, consumer

disposable income, the housing market, employment, fuel prices, income and debt levels, interest rates, inflation, taxation,

consumer shopping trends and the level of customer traffic, political conditions, inclement weather, natural disasters,

recession and fears of recession, civil unrest and disturbances, terrorist activities, war and fears of war, as well as

perceptions of personal wellbeing and security, health epidemics or pandemics. Adverse trends in these general economic

factors and reduced consumer spending have and may continue to adversely affect the Company's sales, profitability,

cash flows, financial condition, availability of credit, including with respect to the Company's current credit facility, its ability

to service and pay down debt, and any potential new or replacement sources of credit, or cause the Company to breach

covenants or other terms contained in its Credit Agreement, which could materially adversely affect the Company's

business, results of operations, cash flows and financial condition. In the first quarter of 2026, to date, our net sales have

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been adversely affected by negative consumer sentiment, inclement weather, and we have experienced a year-over-year

decrease in net sales.

Although previously high inflation subsided somewhat in 2024 and 2025, it may again increase due to various economic

factors, such as the imposition of increased tariffs or other inflationary economic policies, and adversely affect the

Company's business operations and financial results by increasing the costs of fuel, shipping, raw materials, labor,

commodity, and other costs. While the Company has historically been able to pass along some cost increases to its

customers, it has not and may not be able to offset such higher costs through price increases or other means, and its

margins, profitability, cash flows, availability of credit, and financial condition have been and could continue to be

adversely impacted.

The federal funds rates have fluctuated over the past three years and remain relatively high compared to the 10-year

average, adversely affecting customer purchasing behavior. It is uncertain whether the Federal Reserve will hold, reduce,

or increase the rate going forward and such uncertainty, as well as any Federal Reserve action or non-action with respect

to the rate, has and may continue to negatively affect customer purchasing behavior, which has and may continue to

adversely affect the Company's sales, profitability, cash flows, credit availability and financial condition.

The United States (U.S.) debt ceiling and budget deficit concerns have increased the possibility of credit-rating

downgrades, economic slowdowns, or a recession in the U.S. The federal government has shutdown in 2026 and risks of

additional government shutdowns or sovereign defaults remain if the spending bills necessary to fund the government

through 2026 are not passed by Congress. Whether or not these concerns materialize, growing uncertainty may reduce

consumer confidence and increase levels of unemployment, all of which may reduce demand for the Company's products,

causing harm to its sales, profitability, cash flows, availability of credit, and financial condition.

Additionally, instability or disruptions to credit markets or the financial services industry, including banks that fail or

otherwise become distressed, could adversely affect the Company's, sales, operations, profitability, cash flows, availability

of credit, and financial condition.

***Interest rates remain elevated, and may further increase, and impact the cost of servicing the Company's***

***indebtedness and have an adverse effect on its results of operations, cash flows and stock price.***

The Company's Credit Agreement currently bears interest at a variable rate. The Company bears the risk that the rates

charged by the Company's lenders will outpace expectations and the earnings and cash flow of its business. This has

reduced the Company's profitability and has potential to continue to reduce profitability in addition to the potential to

adversely affect the Company's ability to service its debt, or cause the Company to breach covenants or other terms

contained in its Credit Agreement, which could materially adversely affect the Company's business, results of operations,

cash flows and financial condition.

***A reduction in the availability of, or increase in the cost of, credit to consumers generally or under the***

***Company's existing consumer credit programs has negatively impacted, and could continue to negatively***

***impact, the Company's sales, profitability, cash flows and financial condition.***

A significant percentage of the Company's sales are made under consumer credit programs through third parties. The

amount and cost of credit available to consumers may be adversely impacted by macroeconomic factors, including

general economic conditions, consumer confidence and sentiment, consumer disposable income, the housing market,

employment, fuel prices, income and debt levels, interest rates, inflation, taxation, political conditions and uncertainty with

respect to the presidential administration, inclement weather, natural disasters, recession and fears of recession, civil

unrest and disturbances, terrorist activities, war and fears of war, including the war between Russia and Ukraine and the

conflicts in the Middle East, as well as consumer perceptions of personal wellbeing and security, health epidemics or

pandemics, which could cause suppliers of credit to adjust their lending criteria and costs. These macroeconomic factors

have, and may continue to, adversely impact the cost of credit which, in turn, has and may continue to negatively impact

the Company's sales, profitability, cash flows and financial condition.

Synchrony Bank provides credit to the Company's customers through a private label credit card agreement that is

currently scheduled to expire on December 31, 2028, subject to earlier termination upon certain events. Adverse trends in

general economic factors and reduced consumer spending have and may continue to adversely affect the Company's

sales, profitability, cash flows, financial condition, availability of credit, including with respect to the Company's agreement

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with Synchrony Bank, or cause the Company to breach covenants or other terms contained in its agreement with

Synchrony Bank, which could materially adversely affect the Company's business, results of operations, cash flows and

financial condition. Synchrony Bank has discretion to control the content of financing offers to the Company's customers

and to set minimum credit standards under which credit is extended to customers.

Reduction of credit availability due to changing economic conditions, including rising inflation, increased interest rates,

changes in credit standards under the Company's private label credit card program or changes in regulatory requirements,

or the termination of its agreement with Synchrony Bank, could harm the Company's sales, profitability, cash flows and

financial condition.

***The Company may not be successful in achieving the expected improvements, growth, cost savings, and other***

***benefits related to its turnaround strategy and such actions could have adverse effects on the Company.***

The Company's turnaround strategy is centered on product, marketing and distribution, as well as ongoing cost savings

and operating efficiencies, to reignite growth and increase financial resilience. The Company's turnaround strategy and its

execution thereof may not be successful, which could adversely impact the Company's business, results, profitability, cash

flows, availability of credit, and financial condition. Current or future demand may not support the costs of the Company's

turnaround strategy, infrastructure at an acceptable margin, or vertically integrated business model. A failure or delay in

implementing or realizing the anticipated improvements, growth, cost savings, and other benefits of the turnaround

strategy could materially and adversely impact the Company's business, results, profitability, cash flows, availability of

credit, and financial condition. Investments, costs and charges necessary or incurred in connection with implementing the

turnaround strategy may be significant and have been and may continue to be higher than expected. In addition,

implementing the cost savings and operating efficiency plans has and could continue to negatively impact the Company's

workforce, partnerships, initiatives, innovation, brand, customer experience, and development plans or otherwise interfere

with the Company's ability to grow and compete effectively, each of which could adversely impact the Company's

business, results, profitability, cash flows, availability of credit, and financial condition.

**<u>Risks Related to Indebtedness and Liquidity</u>**

***There is substantial doubt about the Company's ability to continue as a going concern, and this may adversely***

***affect our stock price, our ability to raise capital or enter into strategic transactions, and our relationships with***

***key stakeholders.***

In accordance with ASC Topic 205-40, Going Concern, the Company's management evaluates whether there are certain

conditions and events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue

as a going concern. This evaluation includes considerations related to the Company's forecasted liquidity and cash

consumption requirements for one year from the date of issuance of our consolidated financial statements included in this

Annual Report on Form 10-K.

As discussed in Item 7, *Management's Discussion and Analysis of Financial Condition and Results of Operations* –

Liquidity and Capital Resources, the Company has, throughout 2025, announced certain fixed cost reductions, pursued

alternative financing, and continues to pursue its turnaround strategy, however the timing, costs and realization of these

cannot be guaranteed to ensure sufficient cash flow is generated to provide liquidity to meet the Company's obligations.

While these actions demonstrate a series of material steps taken to improve the Company's financial condition, the

Company has a history of net losses over the past three years and expects to continue to incur additional losses in the

near future. In addition, the Company anticipates that it will not remain in compliance with the financial covenants of its

Credit Agreement for the next twelve months. Inability to remain in compliance with such covenants will result in an event

of default under the Credit Agreement, allowing the lenders thereunder to declare all indebtedness thereunder due and

payable and terminate remaining commitments. As a result of these considerations, the Company's liquidity may be

insufficient to meet its obligations for at least one year from the date of issuance of these financial statements, which

raises substantial doubt about the Company's ability to continue as a going concern.

Management's plans to address the substantial doubt about the Company's ability to continue as a going concern, as

described above, include the following actions:

• execute the Company's turnaround strategy centered on product, marketing and distribution with ongoing cost

savings and operating efficiencies to reignite growth and increase financial resilience;

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• engage in negotiations with the lenders in its Credit Agreement with the goal of amending or waiving financial

covenants and certain other provisions of its credit facility; and

• engaged financial advisors to assist in negotiating with the lenders and identifying and securing additional capital

options, alternative financing arrangements, strategic alternatives, or other comprehensive solutions to address

the Company's capital structure and leverage needs to return to growth and create long-term value.

There can be no assurance of the Company's ability to realize these plans, and the Company's ability to realize these

plans depends, in part, on factors beyond the Company's control. As a result, the Company has concluded that

management's plans do not alleviate substantial doubt about the Company's ability to continue as a going concern for at

least one year from the date of issuance of these financial statements.

There may be adverse impacts to the Company's stock price, the Company's ability to obtain supplies and services on

credit and the Company's ability to raise capital, obtain waivers of the covenants under, or refinance the indebtedness

under, its Credit Agreement or enter into strategic transactions, or the Company's relationship with its key stakeholders

and other counterparties as a result of the uncertainty regarding its ability to continue as a going concern or successfully

execute its plan to address the substantial doubt related thereto. If the Company is unable to successfully execute its

mitigation plan or obtain sufficient financial resources, its business, results of operations, financial condition, and cash

flows could be materially and adversely affected and it could be forced to terminate, significantly curtail or cease our

operations, pursue strategic alternatives or commence a case under the U.S. Bankruptcy Code.

***The Company will require additional capital and its access to such capital or alternative financing options may***

***depend on factors beyond the Company's control or may require the Company to accept unfavorable terms.***

Absent a material improvement in the Company's performance, the Company will need to obtain additional capital to

enable the Company to fund its operations, execute its business and turnaround strategies, service and repay its

indebtedness or to fund other liquidity needs. If the Company is unable to obtain additional capital to fund its operations

and strategies or satisfy its debt obligations, it will have to undertake alternative financing options, such as refinancing or

restructuring its indebtedness, selling assets, reducing or delaying capital investments, raising additional capital or

pursuing strategic alternatives, including commencement of a case under the U.S. Bankruptcy Code. The Company's

ability to execute on these actions will depend on numerous factors including the Company's financial condition at such

time and the condition of the capital markets and other factors beyond the Company's control. Any new capital or

refinancing of the Company's indebtedness could be at higher interest rates and could require the Company to comply

with more onerous covenants or other unfavorable terms, which could further restrict its business operations. The

Company cannot assure that any new capital raise, refinancing or debt restructuring would be possible, or if possible,

would be completed on favorable or acceptable terms. If sufficient cash from operations, refinancing, or external funding is

not available, the Company may be unable to adequately fund its business plan and operations and the Company's

business, results of operations, cash flows and financial condition would be materially and adversely affected.

***The Company's credit facility contains financial covenants and other restrictions that may limit the Company's***

***financial and operational flexibility or otherwise adversely affect our results of operations.***

The terms of the Company's credit facility, as set out in the Credit Agreement, includes a number of covenants, restrictions

and payment requirements that limit the Company's ability to, among other things, incur additional indebtedness, grant

liens, sell or otherwise dispose of our assets, pay dividends, make redemptions and repurchases of stock, make

investments, loans and acquisitions or change the nature of our business. These may restrict the Company's current and

future operations and could adversely affect its ability to finance its future operations or capital needs. In addition,

complying with the covenants and restrictions may make it more difficult for the Company to successfully execute its

business and turnaround strategies. In addition, the Credit Agreement includes financial covenants that, among other

things, require the Company to maintain a minimum liquidity amount and to satisfy certain leverage ratios, interest

coverage ratios and EBITDA targets. Absent a material improvement in the Company's financial performance, it will be

unable to satisfy these ratios during 2026. A failure to comply with the covenants, restrictions or payment requirements set

out in the Credit Agreement could result in an event of default, which, if not cured or waived, would give the lenders the

right to terminate their commitments to provide additional loans, declare all borrowings outstanding, together with accrued

and unpaid interest and fees, to be immediately due and payable, increase the interest rates applicable to such debt, and

exercise rights and remedies, including by way of initiating foreclosure proceedings against any assets constituting

collateral for the obligations under the credit facilities. If our debt were to be accelerated, the Company may not have

sufficient liquidity or the ability to refinance the debt or sell sufficient assets to repay the debt, which could immediately

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adversely affect the Company's business, results of operations, financial condition, and cash flows. Even if the Company

were able to obtain new financing, such financing may not be on favorable or acceptable terms.

**<u>Risks Related</u> <u>to the Company's Marketing Strategy and Execution of Total Retail Distribution Strategy</u>**

***The Company's future growth and profitability depend upon the effectiveness and efficiency of its marketing***

***programs and promotions.***

The Company is highly dependent on the effectiveness of its marketing messages, the efficiency of its advertising

expenditures in generating consumer awareness, consideration and conversation leading to sales of its products, and the

ability to competitively price its products. Sleep Number continues to evolve its marketing strategies, adjust its messages

and promotional discounts, differentiate its products, and review the amount it spends on advertising, the timing of its

spend, and where it is spent. The Company may not always be successful in developing effective messages or

addressing consumer perception regarding the price of its products, as the consumer and competition change, or in

achieving efficiency in its advertising expenditures. The Company has been and may continue to be constrained in its

ability to invest in advertising at a rate sufficient to drive demand.

The Company relies in part upon third parties, such as social media influencers and athletes, to market its brand, and is

unable to fully control their efforts. Influencers and athletes with whom the Company maintains a relationship could

engage in behavior or use their platforms to communicate directly with Sleep Number's customers in a manner that

reflects poorly on its brand, and these communications may be attributed to the Company or otherwise adversely affect

the Company. It is not possible to prevent such behavior, and the precautions the Company takes to prevent or detect this

activity may not be effective.

Consumers expect seamless digital experiences and interactions as a part of their shopping experience. As a result, the

Company's future growth and profitability will depend in part on (i) the effectiveness and efficiency of the Company's

online experience, including without limitation advertising and search marketing and optimization programs and how our

brand shows up in artificial intelligence overviews and summaries, in generating consumer awareness and sales of its

products; (ii) the Company's ability to prevent confusion among consumers that can result from search engines that allow

competitors to use its trademarks to direct consumers to competitors' websites through confusing or misleading

advertisements; (iii) its ability to prevent Internet publication of false or misleading information regarding its products or the

Company's competitors' products; (iv) reviews of Sleep Number's products; (v) the nature and tone of consumer

sentiment, including those published online or elsewhere; and (vi) the stability and effectiveness of the Company's

website. Competitor spending on digital marketing programs has and may continue to increase, including without limitation

from a number of direct-to-consumer, digital and omnichannel retailers, which, in turn, has and may continue to increase

the cost of the Company's digital marketing programs and online search terms.

If the Company's marketing messages are ineffective or its advertising expenditures and other marketing programs,

including digital programs, are inefficient in creating awareness and consideration of its products and brand name, and in

driving consumer traffic to the Company's website, call centers, or stores, the Company's sales, profitability, cash flows,

availability of credit, and financial condition may be adversely impacted. In addition, if the Company is not effective in

preventing the publication of confusing, false or misleading information regarding its brand or its products, or if there is

publication online or elsewhere of significant negative consumer sentiment regarding the Company, brand or products,

sales, profitability, cash flows, availability of credit, and financial condition may be adversely impacted.

***The Company's future growth and profitability depend on its ability to execute its Total Retail distribution***

***strategy.***

The vast majority of the Company's sales occur through Total Retail, including its retail stores and website. The

Company's retail stores carry significant fixed costs, and it has made significant capital expenditures in that store footprint.

The Company is highly dependent on its ability to maintain and increase sales per store to cover these fixed expenses,

provide a return on its capital investments and improve the Company's operating margins. As a part of the Company's

cost savings and operational efficiencies, select stores have been closed and additional stores are expected to be closed,

and store remodels have been delayed. These closures and older retail store designs have resulted and may continue to

result in higher than expected costs, charges, continued rent liability, lost sales, lower brand awareness, weakened

customer experience, deteriorated reputation, or otherwise negatively impact the Company's sales, profitability, cash

flows, availability of credit, and financial condition.

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Some of the Company's stores are mall-based, which stores depend on the continued popularity of malls as shopping

destinations and the ability of mall anchor tenants and other attractions to generate customer traffic. Any decrease in mall

traffic, including due to increased online shopping, could adversely affect the Company's sales, profitability, cash flows,

availability of credit, and financial condition.

The Company's Total Retail distribution strategy results in relatively few points of distribution, including 600 retail stores in

50 U.S. states as of the end of 2025, Online, Phone and Chat. Several of the mattress manufacturers and retailers with

which the Company competes have significantly more brick-and-mortar points of distribution than it does, which makes

the Company highly dependent on its ability to drive consumers to its points of distribution to maintain and gain market

share.

When the Company is better positioned to extend existing leases or open new stores in the future, it may encounter

higher than anticipated rents, be unable to find or obtain suitable new locations or renew existing locations, and may need

to navigate a deteriorated reputation among potential landlords.

**<u>Risks Related to the Company's Ability to Compete Effectively</u>**

***Significant competition has affected and is likely to continue to adversely affect the Company's business.***

As a vertically integrated business, the Company's products and distribution face significant competition from both

manufacturers of different types of mattresses and a variety of retailers.

The mattress industry is becoming more concentrated among the largest manufacturers of innerspring mattresses and

foam mattresses and one dominant national mattress manufacturer and retailer. The dominant national mattress

manufacturer and retailer may further consolidate through an announced potential acquisition of a national foam and

adjustable base supplier. In recent years, numerous direct-to-consumer companies and low-cost importers have entered

the market, offering "bed-in-a-box" or similar products primarily through online distribution directly to consumers though

many now also partner with traditional mattress retailers. A variety of sleep tracking and monitoring products that compete

with the Company's SleepIQ technology have been introduced by various manufacturers and retailers, both within and

outside of the traditional mattress industry. A variety of mattress and base manufacturers have also come to market with

copycat smart beds, some featuring a version of what they market as "adjustable firmness." This competition has and may

continue to increase the costs of search terms and digital advertising and otherwise adversely affect the Company's

business.

Some of the Company's competitors have substantially greater financial, marketing and manufacturing resources, greater

investment in customer experience, and greater brand name recognition than the Company does and sell products

through broader and more established distribution touchpoints, which has and may continue to negatively impact traffic to

the Company's distribution points. Consolidation in the mattress industry has and may continue to amplify this disparity.

The Company's national, exclusive distribution competes with other retailers who generally provide a wider selection of

mattress and brand alternatives at varying price points than the Company offers.

These manufacturing and retailing competitors, or a combination of these competitors, or new entrants into the market,

may compete aggressively and maintain and gain market share with existing or new products, and may pursue or expand

their presence in the adjustable firmness air bed segment of the market as well as in the market for sleep tracking and

monitoring products. The Company has limited ability to anticipate the timing and scale of new product introductions,

advertising campaigns or new pricing strategies by its competitors, which could inhibit its ability to maintain or increase

market share, or to maintain the Company's profit margins.

If the Company is unable to effectively compete with other manufacturers and retailers of mattress and sleep tracking and

monitoring products, the Company's sales, profitability, cash flows and financial condition may be adversely impacted.

***Failure to achieve and maintain high levels of product and service quality could negatively impact the Company's***

***sales, profitability, cash flows and financial condition.***

The Company's products and services are highly differentiated from traditional innerspring mattresses and from

viscoelastic and other foam mattresses, which have little or no technology and do not rely on electronics and air control

systems. As a result, the Company's beds may be susceptible to failures that do not exist with traditional or foam

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mattresses. Also, the Company has launched and is launching new products on a faster timeline than the Company's prior

product launches, which truncated timeline could result in unforeseen issues like potential technical or quality issues.

Failure to achieve and maintain acceptable quality standards could impact consumer acceptance of its products and

services or result in negative media and Internet reports or owner dissatisfaction that could negatively impact the

Company's brand image and sales levels. In addition, a decline in product or service quality could result in an increase in

return rates and a corresponding decrease in sales, or an increase in product warranty claims in excess of the Company's

warranty reserves. An unexpected increase in return rates or warranty claims could harm the Company's sales,

profitability, cash flows and financial condition.

The Company faces an inherent risk of exposure to product liability claims or regulatory actions if the use of its products is

alleged to have resulted in personal injury or property damage. If any of the Company's products proves to be defective or

non-compliant with applicable regulations such as the federal Consumer Product Safety Commission flammability

standards, the Company may be required to recall or redesign such products. The Company has at times experienced

product liability claims and regulatory actions and may experience such actions in the future. The Company maintains

insurance against some forms of product liability claims, but such coverage may not be applicable to, or adequate for,

liabilities actually incurred. A successful claim brought against the Company outside of, or in excess of, available

insurance coverage, or any claim or product recall that results in significant adverse publicity about the Company, may

have a material adverse effect on the Company's sales, profitability, cash flows and financial condition.

***The Company's future growth and profitability depend in part on its ability to continue to improve and expand its***

***product line, anticipate and respond to changing consumer trends, and to successfully execute new product***

***introductions.***

The Company's ability to compete effectively in the highly competitive sleep and wellness field and to profitably maintain

or grow its market share depend in part on its ability to continue to improve and expand the Company's product line of

adjustable firmness air beds, adjustable bases, SleepIQ technology, and related accessory products. The Company incurs

significant research and development and other expenditures in the pursuit of improvements and additions to its product

line and is re-prioritizing research and development resources in this highly constrained environment. As part of the

Company's turnaround strategy, it is repositioning the brand and reducing its core lineup from twelve mattresses to seven

mattresses, including five new mattresses, and doing so on a faster timeline than the Company's prior product launches. If

these efforts do not result in meaningful product improvements, if the Company is not able to timely anticipate and

respond to changing consumer trends and to gain widespread consumer acceptance of product improvements or new

product introductions, or there are delays or production limitations with respect to its product improvements or new

product introductions, the resulting impacts on our product mix and distribution strategy could adversely affect the

Company's sales, profitability (including margin), cash flows and financial condition. The Company's comprehensive new

product launch as part of its turnaround strategy has and may continue to result in inventory management issues including

increased obsolescence and write-offs, as well as, inventory shortages and longer fulfillment times, which would adversely

affect the Company's sales, profitability (including margin), cash flows and financial condition.

In addition, if any significant product improvements or new product introductions are not successful, delayed, or

constrained the Company's reputation and brand image may be adversely affected.

***The Company's intellectual property rights may not prevent others from using its technology or trademarks in***

***connection with the sale of competitive products. The Company is from time to time subject to claims that its***

***products, processes or trademarks infringe intellectual property rights of others.***

The Company owns various U.S. and foreign patents and patent applications related to certain elements of the design and

function of the Company's beds, biosignal monitoring and related products. The Company owns numerous registered and

unregistered trademarks and trademark applications, including in particular the Sleep Number, Climate360 and SleepIQ

trademarks, as well as other intellectual property rights, including trade secrets, trade dress and copyrights, which it

believes has significant value and is important to the development, function, and marketing of its products. These

intellectual property rights may not provide adequate protection against infringement or piracy, may not prevent

competitors from developing and marketing products that are similar to or competitive with Sleep Number beds, biosignal

monitoring or other products, and may be costly and time-consuming to protect and enforce. The Company's patents are

also subject to varying expiration dates. In addition, the laws of some foreign countries may not protect its intellectual

property rights and confidential information to the same extent as the laws of the U.S. If the Company is unable to protect

and enforce its intellectual property, the Company may be unable to prevent other companies from using the Company's

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| **22 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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technology or trademarks in connection with competitive products, which could adversely affect the Company's sales,

profitability, cash flows and financial condition.

The Company is from time to time subject to claims that its products, processes, advertising, or trademarks infringe the

intellectual property rights of others. The defense of these claims, even if ultimately successful, may result in costly

litigation, and if the Company is not successful in its defense, it could be subject to injunctions and liability for damages or

royalty obligations, and the Company's sales, profitability, cash flows and financial condition could be adversely affected.

**<u>Risks Related to the Company's Reliance on Third Parties and Reliance on a Global Supply Chain</u>**

***The Company relies upon several key suppliers and third parties that are, in some instances, the only source of***

***supply or services currently used by the Company for particular materials, components, products, systems,***

***services, or consumer financing. A disruption in the supply or substantial increase in cost of any of these***

***products or services has, and could continue to, harm the Company's sales, profitability, cash flows, availability***

***of credit, and financial condition.***

Sleep Number currently obtains all the materials and components used to produce its smart beds from outside sources

including some that are located outside the U.S. In several cases, including its air chambers, integrated non-adjustable

foundations, adjustable foundations, various components for its Firmness Control and Smart Control systems, certain

electronic componentry, certain foam formulations, as well as its fabrics and zippers, the Company obtains these

materials, components and products from suppliers who serve as the only source of supply, or who supply the vast

majority of the Company's needs of the particular material, component or product. While the Company believes that some

of these materials, components and products, or suitable replacements, could be obtained from other sources in the event

of a disruption or loss of supply, it has not been able to, and in the future may not be able to, find alternative sources of

supply or alternative sources of supply on comparable terms, quantities and timelines. If the Company's relationship with

these suppliers or the suppliers' services are disrupted, terminated or otherwise negatively impacted, including by

consolidations in the industry or by government actions, such as the imposition of tariffs or other trade restrictions, the

Company could have difficulty in replacing these sources since there are relatively few other suppliers presently capable

of manufacturing these components and products or that offer similar services. Constraints on the ability of certain of its

suppliers to timely meet commitments, including in an environment of increased demand for consumer products and

services and labor challenges, has, and may continue to, adversely impact the Company's ability to meet its products and

services demand, result in additional costs, or otherwise adversely impact the Company's business, operations and

financial results.

The Company also relies on limited critical suppliers for its information technology systems and services and e-commerce

as well as Synchrony Financial for the majority of its consumer financing services. If the Company's relationship with

these suppliers or the suppliers' services are disrupted, terminated or otherwise negatively impacted, the Company could

have difficulty in replacing these systems, services and e-commerce in a timely and cost-effective manner, adversely

impacting the Company's sales, profitability, cash flows, availability of credit, and financial condition.

In addition, third parties on which the Company relies, for various reasons have demanded or required or may demand or

require changes to their payment terms and frequency, credit limits and exposures, or other contractual terms with the

Company. As a part of its turnaround strategy and cost savings and operational efficiencies, the Company has and will

continue to carefully manage its cash, including extending payment terms and delaying payments. If the Company is

unable to accommodate or otherwise resolve third-party demands, changes to contractual terms or perceived

deterioration of its credit worthiness, the Company's supply of goods, products and services from these third parties could

be disrupted, terminated or otherwise negatively impacted and the Company may not be able to or could have difficulty in

replacing the supply of such goods, products and services in a timely and cost-effective manner, adversely impacting the

Company's sales, profitability, cash flows, availability of credit, and financial condition.

***Fluctuations in commodity prices or availability, or third-party delivery or logistics costs, have resulted, and***

***could continue to result, in an increase in component costs and/or delivery costs.***

The Company's business is subject to significant increases or volatility in the prices or availability of certain commodities,

including but not limited to electronic componentry, fuel, oil, natural gas, rubber, cotton, plastic resin, corrugate, steel and

chemical ingredients used to produce foam, as well as third-party logistic costs. Tariffs on these commodities, increases in

prices of these commodities or logistics costs, supply shortages or other inflationary pressures have resulted, and may

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| **23 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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continue to result, in significant cost increases for the Company's raw materials and product components, as well as

increases in the cost of delivering its products to customers. The Company has been, and may continue to be, unable to

offset any such increased costs through value engineering and similar initiatives, or through price increases or availability,

and, as a result, the Company's profitability, cash flows and financial condition have been, and may continue to be

adversely impacted. Price increases to offset the increased costs, have, and may continue to, adversely impact the

Company's sales volumes.

The Company relies on third parties to deliver some of its products to its facilities and customers on a timely and cost-

effective basis. These third-party providers could be vulnerable to labor challenges, liquidity concerns, the impacts of

global health conditions, or other factors that may result in disruption, delays in deliveries or increased costs of deliveries.

Any significant delay in deliveries to its customers could lead to increased cancellations or returns and cause the

Company to lose sales or incur increased costs. Delays in deliveries and increases in freight charges or other costs of

deliveries has and could continue to harm the Company's sales, profitability, cash flows and financial condition.

***The Company's business is subject to risks inherent in global sourcing activities.***

Sleep Number's air chambers, certain electronic components, and some of its other components are manufactured

outside the U.S., and therefore are subject to risks associated with foreign sourcing of materials, including but not limited

to:

• Existing or potential duties, tariffs or quotas on certain types of goods that may be imported into the U.S., including

recent and proposed unilateral tariffs, tariffs on certain goods from China and Mexico, tariffs on goods subject to the

United States-Mexico-Canada Agreement (USMCA), and recent and proposed tariffs on materials such as steel;

• Foreign regulations that may impact availability or cost of supply;

• Political instability, unrest, geopolitical turmoil, acts of terrorism, global conflicts, including geopolitically challenging

situations in regions such as Russia, the Middle East and China, outbreaks of pandemics or contagious diseases,

shipping delays, foreign or domestic strikes, customs inspections, changes in immigration rates, laws, and

enforcement, or other factors resulting in disruption in supply, transportation, trade, labor, or the availability of global

contractors utilized in the Company's business operations;

• Foreign currency fluctuations;

• Economic uncertainties, including inflation and policies that may have an inflationary effect, such as tariffs; and

• Adverse weather conditions, climate change or other natural or man-made disasters.

The Company cannot predict whether the countries in which some of its components are manufactured, or may be

manufactured in the future, or where the Company contracts for labor will be subject to new or additional trade restrictions

imposed by the U.S. or other foreign governments, including the likelihood, type, or effect of any such restrictions. The

U.S. government has implemented certain trade policies, including imposing and proposing tariffs on most of our foreign

suppliers. A significant portion of the Company's imports are subject to the USMCA, so any changes increasing tariffs

under the USMCA would have negative consequences. Similarly, some of the Company's third-party suppliers have

disclosed that they may source, directly or indirectly, a portion of their supply chain requirements of 3TGs or fabrics from

China, which materials have generally been under scrutiny for potential ties to Uyghur forced labor camps. These factors

have, and could continue to, increase the costs of doing business with foreign suppliers, lead to inadequate inventory

levels or delays in shipping products to customers, or the need to find new sources for certain materials on short notice,

which could harm the Company's sales, customer satisfaction, profitability, cash flows and financial condition.

The locations where Sleep Number and its suppliers and global contractors operate have experienced, and may

experience in the future, adverse regional events such as extreme weather conditions, climate change and other natural

and man-made disasters, which could have a significant adverse effect on the Company, its ability to source necessary

materials, components and products, and its ability to develop, launch, sell and deliver its products to customers. Climate

change may increase the frequency and severity of adverse weather conditions and other natural disasters. All regions of

the U.S. and warmer climates globally may be particularly impacted by extreme weather, such as hurricanes, natural

disasters, droughts, wildfires and rising sea levels. These events have disrupted, and may continue to, disrupt the

Company's operations and ability to source components and products.

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| **24 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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***The Company has been, and could continue to be, vulnerable to shortages in supply of components necessary to***

***manufacture its products due to its manufacturing processes which operate with minimal levels of inventory or***

***due to global shortages of supply of electronic componentry or other materials, unexpected increased consumer***

***demand or inadequate demand forecasting, which, in turn, has and may continue to harm its ability to satisfy***

***consumer demand and adversely impact the Company's sales and profitability.***

A significant percentage of the Company's products are assembled after it receives orders from customers utilizing

manufacturing processes with minimal levels of raw materials, work-in-process and finished goods inventories. Lead times

for ordered components may vary significantly, and some components used to manufacture its products are provided on a

sole source basis. The Company's ongoing efforts to mitigate supply chain weaknesses may not be successful or may

have unfavorable effects such as increased storage costs or excess supply. Shortage of materials caused by disruptions

and unavailability of supply, an increase in the demand for some or all of its products or inability to adequately forecast

supply needs, has harmed and could continue to harm the Company's ability to satisfy customer demand, delay deliveries

of its products to customers, lead to customer cancellations and returns, delay the development and launch of new

products, and increase its costs. These risks have been and will continue to be exacerbated by developments in the

semiconductor and technology supply chain, including increased global demand for more sophisticated, high-performance

computing and artificial intelligence-related chips, which has and will continue to strain and divert manufacturing capacity

and supplier resources from the production of lower-capacity or legacy chips that remain critical to many of the Company's

products. In addition, the Company may carry some excess inventory of certain components for various products from

time to time especially when the Company has faced component shortages or when the Company introduces new

products that use different components, and if the Company is unable to use that excess inventory fully or timely, the

Company may run the risk of obsolescence, which could result in write-downs of inventory and an adverse effect on gross

margins. As the Company executes its turnaround strategy, and has launched and is launching new products, for a

product transition that repositions the brand and reduces its core lineup from twelve mattresses to seven mattresses,

including five new mattresses, on a faster timeline than any prior product launches, it has incurred and may continue to

incur inventory obsolescence related to this significant product transition. Any such impacts or delays have and may

continue to adversely affect the Company's sales, customer satisfaction, profitability, cash flows and financial condition.

**<u>Risks Related to the Company's Vertically Integrated Business Model</u>**

***Disruption to the Company's facilities and operations could increase its costs of doing business or harm the***

***Company's ability to satisfy customer demand, develop, test and launch new products, and service its products***

***and customers.***

As a vertically integrated business, the Company has various facilities and operations including manufacturing, assembly,

distribution, logistics, field services, home delivery, headquarter, product development, retail and customer service. Sleep

Number operates a dedicated cut and sew facility for cover production in Irmo, SC and an advanced engineering and

prototyping facility in Salt Lake City, UT. Each of these facilities are combined with an assembly distribution center (ADC).

There are three additional ADCs (Minneapolis, MN; Cincinnati, OH; and Dallas, TX). The five ADCs leverage component

inventory to pre-assemble 100% of its mattresses to order rather than stocking finished goods. The Company has field

service and home delivery operations and contractors that deliver and service its products across the country as well as a

bedding fulfillment center that ships bedding products to consumers via third-party services. The product development and

testing operations primarily occur in the Company's corporate headquarters in Minneapolis, Minnesota and Sleep Number

Labs facility in San Jose, California. Sleep Number's customer service operations are largely remote positions with team

members located across the country and international third-party contractors, and the Company has retail stores across

the country. Disruption to any of the Company's operations, facilities, workforce, third-party contractors, or the Company's

nationwide logistics network, could harm or delay its ability to satisfy customer demand, develop, test and launch new

products, service its products and customers, and increase its costs. While the Company's metrics related to customer's

experience indicate that the customer experience has improved over prior year, the Company's customer service

operations remain reliant on third-party contractors. Such impacts and delays could adversely affect the Company's sales,

customer satisfaction, profitability, cash flows, availability of credit, and financial condition.

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| **25 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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***Any future acquisitions, business combinations or divestitures the Company completes involve a number of***

***risks, the occurrence of which could adversely affect the Company's business, reputation, operating results and***

***financial condition.***

The Company's ability to complete future acquisitions, business combinations or divestitures will depend, in part, on the

availability of suitable candidates at acceptable prices, terms, and conditions; the Company's ability to compete effectively

for transaction candidates; and the availability of capital and personnel to complete such transactions and run the resulting

operations effectively. The benefits of the transaction may take more time than expected to develop, integrate into or

divest from the Company's operations, and the Company cannot guarantee that future transactions will, in fact, produce

any benefits. Such transactions may involve a number of risks, the occurrence of which could adversely affect the

Company's business, reputation, operating results and financial condition, including: (i) diversion of management's

attention; (ii) disruption to the Company's existing operations and plans or the inability to effectively manage the

Company's expanded operations; (iii) reallocation of amounts of capital from other operating initiatives and/or an increase

in the Company's leverage and debt service requirements to fund any such transactions, which could in turn restrict the

Company's ability to access additional capital when needed or pursue other important elements of its business strategy;

(iv) infringement by acquired businesses of intellectual property rights of others; (v) violation of confidentiality, intellectual

property and non-compete obligations or agreements by employees of an acquired business or lack of or inadequate

formal intellectual property protection mechanisms in place at an acquired business; (vi) inaccurate assessment of

additional post-transaction investments, undisclosed, contingent, tax or other liabilities or problems, unanticipated costs

associated with an acquisition, and an inability to recover or manage such liabilities and costs; (vii) incorrect estimates

made in the accounting for transactions and incurrence of non-recurring charges, including restructuring charges in

connection with any future effort to reduce costs and streamline operations; and (viii) additional risks that may arise as a

result of the transaction with international entities, including managing international laws and regulations applicable to the

business, operations and personnel.

**<u>Risks Related to Workforce</u>**

***The Company's operating performance, profitability, and future growth depend upon its ability to attract, retain***

***and motivate qualified and effective personnel.***

As a vertically integrated manufacturer and retailer, the Company's future growth and profitability will depend upon its

ability to attract, retain and motivate qualified personnel in a wide variety of areas to execute its growth strategy, including

qualified management and executive personnel, retail sales professionals and managers, and manufacturing, home

delivery and technical personnel. In addition, the Company's success will depend upon the effectiveness of its

organizational leadership and managers as well as the capabilities of its team members; some of these risks may be

heightened while the Company executes its turnaround strategy and ongoing cost savings and operational efficiencies.

Labor challenges or other economic factors may prevent the Company, and its suppliers and vendors, from successfully

hiring and retaining qualified personnel especially for critical business functions. The failure to attract, retain and motivate

qualified personnel or the lack of effective organizational leadership, management or appropriate team capabilities or

resources may hinder the Company's ability to execute its turnaround strategy, growth initiatives, business operations,

and may adversely impact the Company's sales, profitability, cash flows and financial condition.

Certain portions of the Company's workforce, in particular its home delivery, logistics, manufacturing, warehouse, and

retail, may seek to unionize or engage in unionization activities. Such activities may cause distraction from the Company's

core business, reduce the Company's ability to manufacture, sell, or deliver its products, increase the Company's costs,

reduce efficiency, and adversely impact the Company's sales, profitability, cash flows and financial condition.

**<u>Risks Related to Legal Compliance and Legal Proceedings</u>**

***The Company's business is subject to a wide variety of government laws and regulations. These laws and***

***regulations, as well as any new or changed laws or regulations, could disrupt the Company's operations or***

***increase its compliance costs. Failure to comply with such laws and regulations could have further adverse***

***impacts on the Company's operations.***

The Company is subject to a variety of laws and regulations. Laws and regulations at the international, federal, state and

local levels frequently change and the Company cannot always reasonably predict the impact from, or the ultimate cost of

compliance with, future regulatory or administrative changes. Changes in law, the imposition of new or additional

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| **26 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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regulations or the enactment of any new or more stringent legislation that impacts employment and labor, trade,

advertising claims, marketing practices, pricing, consumer credit offerings, "do not call/mail" requirements, text messaging

requirements, product testing and safety, health and wellness product requirements, use of artificial intelligence,

transportation and logistics, health care, tax, accounting, privacy and data security, health and safety or environmental

issues, warranty disclosures, delivery timing requirements, accessibility requirements, among others, could require the

Company to change the way it does business and could have a material adverse impact on the Company's sales,

profitability, cash flows and financial condition. New or different laws or regulations could increase direct compliance costs

for the Company or may cause its vendors to raise the prices they charge the Company because of increased compliance

costs. Further, the adoption of a multi-layered regulatory approach to any one of the state or federal laws or regulations to

which the Company is currently subject, particularly where the layers are in conflict, could require alteration of its

manufacturing processes or operational parameters which may adversely impact the Company's business.

Legislative or regulatory changes that impact the Company's relationship with its workforce, such as minimum wage

requirements or health insurance or other employee benefits mandates, could increase the Company's expenses and

adversely affect its operations. While it is Sleep Number's policy and practice to comply with legal and regulatory

requirements and its procedures and internal controls are designed to promote such compliance, the Company cannot

assure that all of its operations will comply with all such legal and regulatory requirements. Further, laws and regulations

change over time and the Company may be required to incur significant expenses, modify its operations, or delay new

product introductions in order to ensure compliance. This could harm the Company's profitability, cash flows and financial

condition. If Sleep Number is found to be in violation of any laws or regulations, it could become subject to fines, penalties,

damages or other sanctions as well as potential adverse publicity or litigation exposure. This could adversely impact the

Company's business, reputation, sales, profitability, cash flows and financial condition.

**<u>Risks Related to the Company's Information Systems and Cybersecurity</u>**

***Information systems that contain confidential Company data, consumers' personal information, and team***

***members' personal information may be subject to attacks by hackers or other cyber threats that could***

***compromise the confidentiality, integrity, and availability of the data, which could substantially disrupt the***

***Company's business and could result in a breach of the data.***

The Company's information systems and information systems of third-party vendors it uses to assist in the storage and

management of information, including on-premise and cloud-based systems, contain personal, financial, and SleepIQ<sup>®</sup>

data and information related to its customers and team members collected and maintained in the ordinary course of its

business. These information systems also contain confidential Company data regarding its business and innovations. The

Company's use and dependence on its information systems requires data storage in cloud-based systems. While the

Company maintains, and requires the Company's third-party vendors to maintain, security measures to protect this

information, a breach of these security measures, such as through third-party action and attacks, team member error,

access to its data and systems, malfeasance or otherwise, could compromise the security of the Company's data and

customers' and team members' personal information. Like many other businesses, Sleep Number has and will likely

continue to experience cyber-based attacks and incidents from time to time. As the techniques used to breach security

measures change frequently and may not be recognized until launched against a target, the Company may be unable to

anticipate these techniques or to implement adequate preventive measures. In addition, the Company or its third-party

vendors may not be successful in timely identification or containment of cyber-based attacks and incidents. Any failure of

the Company's systems and processes or its third-party vendors' systems and processes to adequately protect its data or

customer or team member personal information from exposure, theft or loss could adversely impact the Company's

business, reputation, sales, profitability, cash flows and financial condition.

***Advancements in and adoption of, or the failure to effectively adopt, artificial intelligence and related***

***technologies may increase cost and risks associated with competition, regulatory requirements, and***

***cybersecurity threats.***

Rapidly evolving technological and regulatory developments related to artificial intelligence and related technologies may

increase competitive, legal, and security risks facing the Company. To effectively compete, the Company needs identify

and evolve with emerging technological and broader industry trends, including technologies such as artificial intelligence

and related technologies as well as to develop appropriate protections, safeguards, and policies for handling the

processing of data. In addition, the regulatory and legal landscape regarding artificial intelligence is rapidly evolving and

the Company may be challenged to timely comply in a cost-effective manner. Any actual or perceived failure to effectively

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| **27 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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adopt artificial intelligence or related technologies, comply with evolving regulatory frameworks regarding, or if adoption

introduces bias or other issues, the development and use of artificial intelligence could adversely affect the Company's

business operations, reputation, customer satisfaction, profitability, cash flows and financial condition. In addition, new

artificial intelligence technologies may increase the risk of internal or external data loss, misappropriation of intellectual

property, and enable cyber-attackers to create increasingly effective and powerful methods of cyber-attack, including, for

example, the development of malicious code, denial-of-service attacks, use of quantum computing, sophisticated phishing

attempts, and other attacks. The Company may not be able to sufficiently identify, withstand, and contain such attacks,

which may cause disruption to business operations and harm the Company's sales, customer satisfaction, profitability,

cash flows and financial condition.

***Any maintenance, improvements or upgrades to information systems and services that may be required to meet***

***the ongoing and evolving needs of the Company's business and cybersecurity needs as well as existing and***

***emerging regulatory requirements may be costly to implement, may take longer or require greater resources than***

***anticipated and may result in disruptions to its systems or business.***

The Company depends on its information systems and services for many aspects of its business including those provided

by suppliers and third parties. Sleep Number has and may continue to have disruptions or outages to these information

systems and services that negatively impact its business and systems. If the Company's information systems and services

or if any suppliers or other third-parties' information systems and services upon which the Company relies are disrupted in

any material way, or maintenance, improvements or upgrades are required to meet the ongoing or evolving needs of its

business, cybersecurity needs, and existing and emerging regulatory requirements, then the Company may be required to

incur significant capital expenditures in the pursuit of continuity, improvements or upgrades to its information systems and

services. These efforts may take longer and may require greater financial and other resources than anticipated, may

cause distraction of key personnel, and may cause short-term disruptions, fines, security vulnerabilities to, or otherwise

negatively impact the Company's existing systems and business. Any of these outcomes could impair the Company's

ability to achieve critical strategic initiatives and could adversely impact the Company's sales, profitability, cash flows and

financial condition.

**<u>Risks Related to the Company's Stock</u>**

***The Company's stock price has and may continue to fluctuate and the Company's financial results, removal from***

***various stock indices and other factors have and may continue to adversely affect the Company's stock price.***

The Company's stock price has and may continue to fluctuate significantly in response to numerous factors such as: the

overall performance of the equity markets and the economy as a whole; the Company's' financial and operating

performance, which may fluctuate due to the risk factors set forth herein; changes in the financial projections the

Company or third parties may provide to the public or the Company's failure to meet these projections; actual or

anticipated changes in its growth rate relative to that of its competitors; inclusion or removal from various stock indices;

significant stock trades by large shareholders; failure of securities analysts to maintain coverage of the Company;

changes in financial estimates by securities analysts who follow the Company or its failure to meet these estimates or the

expectations of investors; sales of shares of the Company's common stock by Sleep Number or its shareholders

particularly sales by its directors, executive officers and significant shareholders or the perception that these sales could

occur. Although the Company's common shares are listed on the Nasdaq Stock Market, the volume of trades on any given

day may be limited and, as a result, shareholders might not be able to sell or purchase its common shares at the volume,

price or time desired.

***A substantial amount of the Company's stock is held by a small number of large investors and significant sales***

***of its common stock by one or more of these holders could adversely affect the Company's stock price.***

As of January 2, 2026, the Company's 25 largest holders of common stock were investors who held approximately 79% of

the outstanding shares of common stock in the aggregate. These investors have sold and may sell some or all of their

shares at any time for a variety of reasons, and such sales could depress the market price of the Company's common

stock, which could adversely affect the Company's stock price. In addition, any such sales of the Company's common

stock by these entities could also impair its ability to raise capital through the sale of additional equity securities.

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| **28 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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***The Company's business could be negatively affected as a result of shareholder activism.***

While the Company welcomes shareholders' constructive input, the Company could be negatively affected as a result of

shareholder activism, which could cause the Company to incur significant expense, disrupt the execution of its business

strategy, and impact the performance of its stock price. The Company has been, and may continue to be, the subject of

shareholder activism, and it is subject to the risks associated therewith. Responding to shareholder activism, including

proxy contests, requires significant time and attention from management and the Board, potentially interfering with the

Company's ability to execute its strategic plan. The Company may be required to incur significant legal fees and other

expenses, and the attention of management may be diverted by such activism. Any of these impacts could materially and

adversely affect the Company's business and operating results, and the Company's stock price has experienced, and may

continue to experience, fluctuation or otherwise be adversely affected by shareholder activism.

***If securities analysts do not publish, or cease publishing, research or reports about the Company, the Company's***

***business, or if they change their recommendations regarding the Company's stock adversely, the price of the***

***Company's common stock and trading volume could decline.***

The trading market for the Company's common stock could be influenced by any research and reports that securities or

industry analysts publish about the Company, the Company's business or the Company's market. If one or more of the

analysts who covers the Company downgrades the Company's common stock or publishes inaccurate or unfavorable

research about the Company, the Company's business or the Company's market, the price of the Company's common

stock would likely decline. If one or more of these analysts ceases coverage of the Company or fails to publish reports on

the Company regularly, demand for the Company's common stock could decrease, which could cause the price of the

Company's common stock and trading volume to decline.

**<u>Risks Related to Tax Treatment</u>**

***Unfavorable tax treatment may adversely affect the Company's financial condition.***

The Company's effective tax rate could be adversely affected by changes in the valuation allowance of deferred tax assets

or changes in tax laws. The Company has significant deferred tax assets and must generate sufficient earnings of the

appropriate character in order to utilize its deferred tax assets. If the Company's earnings remain flat or decline over an

extended period of time, it may not be able to utilize its deferred tax assets and it has and may in the future need to record

a valuation allowance against them that could adversely affect its results of operations, cash flows and financial condition

in the period in which the valuation allowance is recorded. As of January 3, 2026, a valuation allowance of $55.3 million

has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized.

**<u>Risks Related to Environmental, Social and Governance Matters</u>**

***The Company's priorities and progress with respect to sustainability, or Environmental, Social and Governance***

***(ESG), matters, and scrutiny and evolving expectations from the public, investors, regulators, vendors, and other***

***stakeholders may expose the Company to numerous risks, including risks to its reputation and stock price,***

***additional costs, and compliance risks.***

Different stakeholder groups have divergent views on ESG matters such environment, climate change, health and safety,

supply chain management, diversity, equity and inclusion, labor conditions and human rights in the Company's operations

and supply chain, which increases the risk that any action or lack thereof with respect to ESG matters may be perceived

negatively by at least some stakeholders and adversely impact the Company's reputation and business. Sleep Number's

current ESG priorities reflect the Company's strategic plans and aspirations and are not guarantees that it will be able to

achieve them. The Company's ability to achieve any ESG-related objectives is subject to numerous risks, many of which

are outside of its control, including: the availability and cost of relevant technologies and materials and evolving regulatory

requirements affecting relevant standards or disclosures. While some stakeholders may not be satisfied with the

Company's ESG practices or initiatives or the speed with which the Company is implementing such initiatives, other

stakeholders may be opposed to the implementation of such initiatives at all, which could result in customer backlash or

other adverse effects. The ESG performance of the Company's competitors, some of which are subject to more rigorous

international ESG-related disclosure regulations, may be better perceived than the Company's, which may result in

potential or current customers, suppliers or investors electing to do business with its competitors rather than the Company,

and may detract from the Company's ability to attract or retain employees. Furthermore, the Company's efforts to

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| **29 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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accurately report its ESG status under evolving and competing standards has resulted and may continue to result in a lack

of consistent or meaningful comparative data from period to period and which has and could result in revisions to the

Company's ESG priorities and reported progress. The Company's failure, or perceived failure, to pursue or fulfill its ESG

priorities or to satisfy various reporting standards may present numerous operational, reputational, competitive, financial,

legal, government enforcement action and other risks, any of which could have a material adverse impact, including on

the Company's reputation, stock price, and results of operations, cash flows and financial condition.

The SEC adopted climate disclosure rules, which would have required new climate-related disclosures in SEC filings,

including certain climate-related metrics and greenhouse gas emissions data, information about climate-related targets

and goals, transition plans, if any, and extensive attestation requirements. However, these climate-related disclosure rules

remain stayed pending litigation in the Eighth Circuit Court of Appeals. The SEC has withdrawn its defense of the rules,

creating uncertainty regarding their future applicability. At the state level, California has enacted legislation that would

require the Company to make broad-based climate-related disclosures, and other states are considering similar

measures. In addition to requiring companies to quantify and disclose direct emissions data, the California rules seek

disclosure of climate impact arising from companies' operations, their business partners and the end-users of their

products. The Company is refining its measurements and readiness to report under the California rules. Sleep Number

has and will continue to incur costs relating to the collection, review and assurance for required disclosures of climate-

related information and may experience increased costs, litigation, regulatory, business, reputation, or other risks.

***Climate change and legal or regulatory responses may adversely affect the Company's business, operations and***

***financial condition.***

Climate change presents various near- and long-term risks that may adversely impact the Company's business. The

enactment of certain laws and regulations to address or limit the effects of climate change, or changes to existing laws

and regulations, could mandate more restrictive standards or require such changes on a more accelerated time frame.

The consequences of climate change and the ensuing governmental regulations could disrupt the Company's operations

or harm its ability to source necessary materials and components and manufacture its products, which may adversely

affect the Company's financial condition. If public perception of Sleep Number's compliance with laws and regulations

related to climate change is negative, it could adversely affect the Company's business, reputation and shareholder

perception. Adverse publicity or climate-related litigation that impacts the Company could also have a negative impact on

its business.

Extreme weather, natural disasters, power outages, or other unexpected climate-related events could result in physical

damage to and complete or partial closure of one or more of the Company's manufacturing, distribution centers or other

facilities or those of its suppliers, temporary or long-term disruption in its supply chain or logistics, disruption of or harm to

the Company's workforce and/or disruption of its ability to deliver products to customers. Current or future insurance

arrangements may not provide protection for costs that may arise from such events, particularly if such events are

catastrophic in nature or if multiple such events occur. Climate change may also subject the Company's business to

significant increases or volatility in the prices of certain commodities, including but not limited to electronic componentry,

fuel, oil, natural gas, rubber, cotton, plastic resin, corrugate, plywood, steel and chemical ingredients used to produce

foam, as well as third-party logistic costs. Further, the long-term effects of climate change on general economic conditions

and the Company's industry in particular are unclear, and changes in the supply, demand, or available sources of energy

and the regulatory and other costs associated with energy production and delivery may affect the availability or cost of

goods and services, including natural resources, necessary to run its business. Any long-term disruption in the Company's

ability to service its customers from one or more manufacturing, distribution centers or other facilities could have an

adverse effect on the Company's results of operations, cash flows and financial condition.

**ITEM 1B. UNRESOLVED STAFF COMMENTS**

None.

**ITEM 1C. CYBERSECURITY** 

Sleep Number uses a "defense in depth" approach for its cybersecurity risk management program leveraging the National

Institute of Standards and Technology (NIST) framework, which organizes cybersecurity risks into five categories: identify,

protect, detect, respond and recover. The Company regularly assesses the threat landscape for cybersecurity risks, with a

strategy based on prevention, detection and mitigation. The Company's information technology (IT) security team–led by

the Chief Product and Enterprise Strategy Officer (CPESO)–reviews cybersecurity risks on an ongoing basis. IT security

---

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| **30 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

team members who support the Company's information security program have relevant educational and industry

experience. The CPESO, and their team, provide regular reports to senior management, the Audit Committee, and other

relevant teams on various cybersecurity threats, assessments and findings. The IT security team has established policies,

standards, processes, and practices for assessing, identifying, and managing material risks from cybersecurity threats

(including Generative AI associated risks). These threats are also identified and assessed through the Company's overall

risk management program, including quarterly assessments of IT systems, cybersecurity, and related risks. The Company

engages in an ongoing review of all cybersecurity events and threats to assess the materiality of each event, if any.

The Company maintains controls and procedures that are designed to ensure prompt escalation of certain cybersecurity

incidents so that decisions regarding public disclosure and reporting of such incidents can be made by management and

the Audit Committee in a timely manner.

The Company assesses cybersecurity risks on an ongoing basis, including assessing and deploying technical safeguards

designed to protect its information systems from cybersecurity threats. The Company has established comprehensive

incident response and recovery plans, regularly tests and evaluates the effectiveness of those plans, and maintains

cybersecurity risk insurance.

The Company implements processes to identify, prioritize, assess, mitigate and remediate risks associated with third-party

service providers. It conducts security assessments of critical third-party providers before engagement and maintains

ongoing monitoring to ensure compliance with the Company's cybersecurity standards. The monitoring includes ongoing

assessments by the IT security team. This approach is designed to mitigate risks related to data breaches or other

security incidents originating from third parties. The Company also contractually requires third parties it engages to have

security programs commensurate with their risk, while retaining certain audit rights for higher risk third parties.

The Company regularly reminds its team members and contractors of the importance of handling and protecting customer

and employee data. The Company provides all its team members with dedicated cybersecurity awareness training

annually and conducts monthly phishing simulation testing and other cybersecurity awareness campaigns (e.g., intranet

articles, cybersecurity awareness month). Further, the Company sponsors a year-long "Cybersecurity Champions

Academy" where team members from all across the Company are engaged in a cybersecurity-focused community which

more deeply embeds cybersecurity awareness through monthly meetings, topical projects, and cyber-skill sharing.

The Company engages with a range of external experts, including cybersecurity assessors, auditors, and legal counsel, in

evaluating and testing its cybersecurity risk management systems. This enables the Company to leverage specialized

knowledge, experience and insights, to help ensure its cybersecurity strategies and processes remain current.

• The Company has cybersecurity operations and security engineering capabilities that provide comprehensive

monitoring to detect and respond to cyber threats and alerts and execute cyber incident response playbooks. This

includes a vulnerability management program which identifies and drives remediation of risks. The Company employs

a wide array of industry-leading security platforms and tools.

• The Company has retained data security and data privacy legal counsel whose practices focus on data breach

response, information security compliance, and compliance with the data privacy laws in the various jurisdictions in

which the Company operates.

• In addition, the Company engages specialized consultants and third-party managed service providers on a project-

specific basis to assist it with projects that will improve the Company's IT infrastructure, strengthen its security posture

and cyber incident investigations, and improve its cyber readiness.

**Management's Role**

The CPESO has primary operational responsibility for the Company's cybersecurity function. The CPESO has served in

various leadership positions for over 20 years, with 3 years specifically leading information technology. The CPESO, and

the Chief Legal and Risk Officer have primary responsibility for assessing and managing material cybersecurity risks. This

group, and their supporting teams, meets quarterly to review security performance metrics, identify security risks, and

assess the status of approved security enhancements. This group also considers and makes recommendations on

security policies and procedures, security service requirements, and risk mitigation strategies.

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**Board Oversight**

At the Board level, the Audit Committee is formally tasked with assisting the full Board in overseeing information security

systems, including cybersecurity, and reporting to the Board with respect to significant and material developments or

proposed changes to the Company's cybersecurity framework. The Audit Committee receives regular reports from the

CPESO about the prevention, detection, mitigation, and remediation of cybersecurity incidents, including material security

risks and information security threats and risks. The Audit Committee also receives regular updates from management on

cybersecurity risk resulting from risk assessments, progress of risk reduction initiatives, and relevant internal and industry

cybersecurity incidents and emerging threats.

The Company has not experienced any material security incidents or data breaches as a result of a compromise of its

information systems and is not aware of any cybersecurity incidents that have had a material impact, or are reasonably

likely to materially effect, its business strategy, operating results, cash flows and financial condition.

---

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| **32 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**ITEM 2. PROPERTIES**

**Retail Locations**

Sleep Number currently leases all of its existing retail store locations and expects that its policy of leasing stores, rather

than owning stores, will continue. The Company leases its retail stores under operating leases which, in addition to the

minimum lease payments, may require payment of a proportionate share of the real estate taxes and certain building

operating expenses. The Company retail store leases generally provide for an initial lease term of five to 10 years. In

addition, the mall-based retail store leases may require payment of contingent rent based on net sales in excess of certain

thresholds. Certain retail store leases may contain options to extend the term of the original lease.

The following table summarizes the geographic locations of Sleep Number's 600 retail stores as of January 3, 2026:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Retail**<br>**Stores**<br>|  | **Retail**<br>**Stores**<br>|  | **Retail**<br>**Stores**<br>|
| Alabama | 9 | Louisiana | 10 | Ohio | 20 |
| Alaska | 1 | Maine | 3 | Oklahoma | 5 |
| Arizona | 14 | Maryland | 14 | Oregon | 8 |
| Arkansas | 7 | Massachusetts | 9 | Pennsylvania | 24 |
| California | 62 | Michigan | 19 | Rhode Island | 1 |
| Colorado | 15 | Minnesota | 14 | South Carolina | 10 |
| Connecticut | 6 | Mississippi | 5 | South Dakota | 2 |
| Delaware | 2 | Missouri | 12 | Tennessee | 14 |
| Florida | 44 | Montana | 4 | Texas | 54 |
| Georgia | 20 | Nebraska | 4 | Utah | 6 |
| Hawaii | 2 | Nevada | 6 | Vermont | 1 |
| Idaho | 3 | New Hampshire | 4 | Virginia | 18 |
| Illinois | 23 | New Jersey | 14 | Washington | 17 |
| Indiana | 14 | New Mexico | 4 | West Virginia | 3 |
| Iowa | 6 | New York | 19 | Wisconsin | 11 |
| Kansas | 5 | North Carolina | 20 | Wyoming | 2 |
| Kentucky | 8 | North Dakota | 2 |  |  |
|  |  |  |  | Total | 600 |

---

**Manufacturing, Distribution and Headquarters**

The Company leases its 238,000 square-foot corporate headquarters in Minneapolis, MN. The lease term commenced in

November 2017 and runs through October 2032. The lease includes three five-year renewal options.

The Company has five assembly distribution centers (Irmo, SC; Salt Lake City, UT; Minneapolis, MN; Cincinnati, OH; and

Dallas, TX) with a combined total square footage of approximately 745,000 square feet. The Irmo, SC facility's lease term

ends June 2026. The other four facilities have lease terms ending between December 2029 through July 2032. The

leases include one or two, five-year option renewals. The Company also operates a cut and sew manufacturing facility at

the same location as it's Irmo, SC assembly distribution center and a bedding fulfillment center at the same location as its

Cincinnati, OH assembly distribution center. The Company subleases two former assembly distribution centers with lease

terms ending May 2028 and April 2030.

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**ITEM 3. LEGAL PROCEEDINGS**

The Company's legal proceedings are discussed in Note 14, *Commitments and Contingencies,* <u>Legal Proceedings</u>, of the

Notes to Consolidated Financial Statements included in Item 8, *Financial Statements and Supplementary Data*, of this

Annual Report on Form 10-K.

**ITEM 4. MINE SAFETY DISCLOSURES**

Not applicable.

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| **34 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**PART II**

**ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER** 

**PURCHASES OF EQUITY SECURITIES**

Sleep Number's common stock trades on The Nasdaq Stock Market LLC (Nasdaq Global Select Market) under the

symbol "SNBR." As of January 31, 2026, there were approximately 174 holders of record of Sleep Number common stock.

Under the Company's Credit Agreement, the Company is restricted from paying cash dividends, subject to narrow

exceptions. However, Sleep Number has not historically paid, and has no current plans to pay, cash dividends on the

Company's common stock.

Information concerning share repurchases completed during the fourth quarter of fiscal 2025 is set forth below:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Period** | **Total Number**<br>**of Shares**<br>**Purchased**<sup>(1)(2)</sup><br>| **Average** <br>**Price**<br>**Paid per** <br>**Share**<br>| **Total Number of**<br>**Shares** <br>**Purchased**<br>**as Part of** <br>**Publicly**<br>**Announced** <br>**Plans**<br>**or Programs**<sup>(1)</sup><br>| **Approximate**<br>**Dollar Value of**<br>**Shares that May**<br>**Yet Be Purchased**<br>**Under the Plans**<br>**or Programs**<sup>(3)</sup><br>|
| September 28, 2025 through October 25, 2025 | 523 | $6.94 |  | $348071000 |
| October 26, 2025 through November 29, 2025 | 34617 | $5.27 |  | 348071000 |
| November 30, 2025 through January 3, 2026 | 1560 | $8.32 |  | 348071000 |
| Total | 36700 | $5.43 |  | $348071000 |

---

____________________

<sup>(1)</sup> Sleep Number did not repurchase any shares during the three months ended January 3, 2026 under its Board-approved $600 million share

repurchase program (effective April 4, 2021).

<sup>(2)</sup> In connection with the vesting of employee restricted stock grants, the Company repurchased 36,700 shares of its common stock at a cost of

$199,000 during the three months ended January 3, 2026.

<sup>(3)</sup> There is no expiration date governing the period over which the Company can repurchase shares under its Board-approved share repurchase

program. Any repurchased shares are constructively retired and returned to an unissued status.

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**Comparative Stock Performance**

The graph below compares the total cumulative shareholder return on Sleep Number's common stock over the last five

years to the total cumulative return on the Standard and Poor's (S&P) 400 Specialty Stores Index and The Nasdaq Stock

Market (U.S.) Index assuming a $100 investment made on December 28, 2019. Each of the three measures of cumulative

total return assumes reinvestment of dividends. The stock performance shown on the graph below is not necessarily

indicative of future price performance. The information contained in this "Comparative Stock Performance" section shall

not be deemed to be "soliciting material" or "filed" or incorporated by reference in future filings with the SEC, or subject to

the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Company

specifically requests that it be treated as soliciting material or incorporate it by reference into a document filed under the

Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

![2661](snbr-20260103_g1.gif)

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **12/28/19** | **01/01/22** | **12/31/22** | **12/30/23** | **12/28/24** | **01/03/26** |
| Sleep Number Corporation | $100 | $94 | $32 | $18 | $19 | $10 |
| S&P 400 Specialty Stores Index | $100 | $146 | $136 | $167 | $164 | $159 |
| The Nasdaq Stock Market (U.S.) Index | $100 | $122 | $82 | $117 | $154 | $181 |

---

**ITEM 6. RESERVED**

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| **36 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF** 

**OPERATIONS**

**Forward-Looking Statements**

***The discussion in this Annual Report contains certain forward-looking statements that relate to future plans,***

***events, financial results or performance. You can identify forward-looking statements by those that are not***

***historical in nature, particularly those that use terminology such as "may," "will," "should," "could," "expect,"***

***"anticipate," "believe," "estimate," "plan," "project," "predict," "intend," "potential," "continue" or the negative***

***of these or similar terms. These statements are subject to certain risks and uncertainties that could cause actual***

***results to differ materially from the Company's historical experience and present expectations or projections.***

***These risks and uncertainties include, among others:***

• Changes in economic conditions and consumer sentiment and related impacts on discretionary consumer spending;

• Interest rates remain elevated, and may further increase and impact the cost of servicing the Company's

indebtedness;

• Availability of attractive and cost-effective consumer credit options;

• Ability to achieve the improvements, growth, cost savings, efficiencies and other benefits related to its turnaround

strategy to avoid adverse effects and the costs to implement its turnaround strategy;

• Ability to continue as a going concern;

• Access to additional capital and its access to such capital or alternative financing options may depend on factors

beyond the Company's control or require the Company to accept unfavorable terms;

• Ability to manage our credit agreement, which contains financial covenants and other restrictions on our actions;

• Effectiveness and efficiency of the Company's marketing strategy and promotions;

• Ability to execute Sleep Number's Total Retail distribution strategy;

• Ability to compete effectively;

• Ability to achieve and maintain high levels of product and service quality;

• Ability to improve and expand the product line, anticipate and respond to changing consumer trends, and execute new

product introductions;

• Ability to protect the Company's technology, trademarks and brand, and the adequacy of its intellectual property

rights;

• Dependence on, and ability to maintain working relationships with key suppliers and third parties, including some that

are the only source of supply or services currently used by the Company;

• Fluctuations in commodity prices or third-party delivery or logistics costs and other inflationary pressures;

• Risks inherent in global-sourcing activities, including tariffs, foreign regulation, geo-political turmoil, war, pandemics,

labor challenges, foreign currency fluctuations, inflation, climate or other disasters and resulting supply shortages, and

production and delivery delays and disruptions;

• Operating with minimal levels of inventory, which may leave the Company vulnerable to supply shortages;

• Risks of disruption in the operation of any of the Company's facilities and operations, including manufacturing,

assembly, distribution, logistics, field services, home delivery, headquarters, product development, retail or customer

service operations;

• Ability to effectively complete potential future acquisitions, business combinations or divestitures;

• Sleep Number's ability, and the ability of its suppliers and vendors, to attract, retain and motivate qualified and

effective personnel;

• Ability to comply with existing and changing government regulations and laws;

• Ability to identify and withstand cyber threats that could compromise the security of the Company's systems or those

of third parties upon which it relies and could result in a data breach or business disruption;

• Risks associated with advancements in, adoption of, or the failure to effectively adopt, artificial intelligence and related

technologies;

• Adequacy of the Company's and third-party information systems, and costs and disruptions related to upgrading or

maintaining these systems;

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• Volatility of Sleep Number stock, its removal from various stock indices and the potential negative effects of

shareholder activism or of changes in coverage by securities analysts;

• Unfavorable tax treatment;

• Environmental, social and governance risks, including increasing scrutiny and evolving regulatory and stakeholder

expectations; and

• Ability to adapt to climate change and readiness for legal or regulatory responses thereto.

***Additional information concerning these and other risks and uncertainties is contained under the caption "Item***

***1A. Risk Factors" in this Annual Report on Form 10-K.***

Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide a

reader of the Company's consolidated financial statements with a narrative from the perspective of management on its

financial condition, results of operations, liquidity and certain other factors that may affect its future results. The

Company's MD&A is presented in the following sections:

• Business Overview

• Results of Operations

• Liquidity and Capital Resources

• Non-GAAP Data Reconciliations

• Critical Accounting Policies and Estimates

• Recent Accounting Pronouncements

**Business Overview**

Sleep Number is the leader in personalized sleep wellness. Its mattresses are designed to evolve with each sleeper to

help them feel and perform their best. With adjustable firmness, pressure-relieving support and temperature balancing

comfort built into every mattress, Sleep Number beds adapt to customers' changing needs, night after night, year after

year.

2025 was a transformational year for Sleep Number. Under the leadership of its new CEO, Linda Findley, who joined the

Company in April 2025, the business has undergone change at every level. The Company:

• Created a more streamlined operation designed to enable faster decision-making by consolidating roles across

key functions and strengthening accountability;

• Reduced operating costs across the business by $136 million as compared to 2024, excluding restructuring and

other non-recurring costs;

• Added financial flexibility by extending the Credit Agreement through the end of 2027; and

• Executed the Twelfth Amendment to the Amended and Restated Credit and Security Agreement, dated as of

February 14, 2018 (as amended, supplemented or otherwise modified from time to time), among U.S. Bank

National Association, as Administrative Agent, Swing Line Lender and Issuing Lender, and certain other financial

institutions party thereto (the "Credit Agreement") to amend financial covenants.

With a stronger foundation, in November 2025, the Company introduced its turnaround strategy "Sleep Number Shifts," a

focused, company-wide effort to reposition the brand, expand reach to new customer groups, and reignite growth. The

aim is to drive value for shareholders, customers and team members with efforts rooted in the consumer through all

dimensions of the business. It is centered on three key areas:

• **Product:** The Company is simplifying its offering with the goal of growing its customer base while building on the

demand from repeat customers

• **Marketing:** The Company is modernizing its efforts by expanding channels and reach with new creative to better

connect with today's consumer and drive engagement with a focus on better ROI

• **Distribution:** The Company is focused on optimizing store footprint as well as exploring opportunities to expand

distribution into new channels, both physical and digital.

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"Sleep Number Shifts" is being implemented as the Company continues to execute cost savings and operating

efficiencies, including real estate optimization and right-sizing the fixed cost base. While the Company is focused on

implementing the "Sleep Number Shifts" and executing cost savings and operating efficiencies, it faces liquidity

challenges. See "Risk Factors—Risks Related to Indebtedness and Liquidity."

**Results of Operations**

<u>Financial Highlights for Fiscal</u> <u>2025</u> <u>were as follows:</u>

• Net sales for 2025 decreased 16% to $1.4 billion, compared with $1.7 billion in 2024. Demand was impacted by

ongoing industry demand pressure and lower store traffic. In addition, 2025 included 53 weeks compared with 52

weeks in the prior year, with the extra week benefiting 2025 net sales by approximately $25 million. For additional

details, see the components of total net sales growth on page [39](#id85bc2f5d2ad4583a9197c95587784c2_145).

• The net sales change resulted from a 17% comparable sales decrease in Total Retail. For additional details, see the

components of total net sales change on page [39](#id21e3066f2ef4529a2a19d88ad18cb3e_338).

• Average sales per store (sales for stores open at least one year, Total Retail, including online, phone and chat,

adjusted for the additional 53rd week) for the year ended January 3, 2026 totaled $1.9 million, compared with

$2.6 million for the same period last year.

• Gross profit margin of 59.0% was 0.6 percentage points (ppt.) lower than the prior-year. For additional details, see the

gross profit discussion on page [40](#i6c8a726405314638b5d3f4c910f718a7_5379).

• The $100 million year-over-year reduction in the Company's operating expenses was due to sales and marketing

expenses decrease of $102 million, general and administrative expenses decrease of $19 million, and research and

development expenses decrease of $11 million, partly offset by an increase in restructuring costs of $33 million when

compared to 2024.

• Operating loss for 2025 was $47 million compared to operating income of $23 million for 2024. The $69 million

decrease in operating income in the current year was driven by the lower gross profit, partially offset by the

Company's $100 million reduction in total operating expenses. The Company's 2025 operating loss rate was impacted

by the deleveraging impact of the 16% decrease in net sales.

• Adjusted EBITDA for 2025 was $78 million, compared to $120 million in 2024 due to year-over-year net sales decline

offset by ongoing cost reduction actions. For additional details, see *Non-GAAP Data Reconciliations* section on page

[44](#id85bc2f5d2ad4583a9197c95587784c2_160).

• Income tax expense in 2025 was $36.0 million, compared to income tax benefit of $5.2 million in 2024. In 2025, the

Company recorded a $55 million valuation allowance on its deferred income taxes resulting primarily from its inability

to utilize certain net operating losses and state R&D tax credits. This was partially offset by a decrease in income tax

expense of $14 million when compared to 2024 due to higher net loss in 2025.

• Net loss in 2025 was $132 million, compared with $20 million in 2024. Net loss per diluted share increased to $5.77,

compared with $0.90 in 2024.

• The Company's adjusted return on invested capital (Adjusted ROIC) was negative 4.0% in 2025, compared with 7.6%

in 2024. For additional details, see *Non-GAAP Data Reconciliations* section on page [44](#id85bc2f5d2ad4583a9197c95587784c2_160).

• The Company used $3 million in cash from operating activities in 2025, compared with generated cash of $27 million

in 2024.

• Free cash flow used $18 million for the year ended January 3, 2026, compared with free cash flow provided of

$4 million for the same period last year.

• The Company ended 2025 with $588 million of borrowings under its revolving credit facility, compared with

$547 million at the end of 2024.

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The following table sets forth the Company's results of operations expressed as dollars and percentages of net sales.

Figures are in millions, except percentages and per share amounts. Amounts may not add due to rounding differences.

---

| | | | |
|:---|:---|:---|:---|
| | **2025** | **2024** | **2023** |
| | $**% of**<br>**Net** <br>**Sales**<br>| $**% of**<br>**Net** <br>**Sales**<br>| $**% of**<br>**Net Sales**<br>|
| Net sales | 100.0% | 100.0% | 100.0% |
| Cost of sales | 41.0% | 40.4% | 42.3% |
| Gross profit | 59.0% | 59.6% | 57.7% |
| Operating expenses: |  |  |  |
| Sales and marketing | 47.1% | 45.6% | 44.9% |
| General and administrative | 9.3% | 8.9% | 7.8% |
| Research and development | 2.4% | 2.7% | 3.0% |
| Restructuring costs | 3.6% | 1.1% | 0.8% |
| Total operating expenses | 62.3% | 58.2% | 56.5% |
| Operating (loss) income | (3.3%) | 1.4% | 1.2% |
| Interest expense, net | 3.5% | 2.9% | 2.3% |
| Loss before income taxes | (6.8%) | (1.5 %) | (1.0)% |
| Income tax expense (benefit) | 2.5% | (0.3 %) | (0.2)% |
| Net loss | (9.3%) | (1.2 %) | (0.8)% |
| Net loss per share: |  |  |  |
| Basic and diluted |  |  |  |
| Weighted-average number of common shares: |  |  |  |
| Basic and diluted |  |  |  |

---

The percentage of the Company's total net sales, by dollar volume, was as follows:

---

| | | | |
|:---|:---|:---|:---|
| | **2025** | **2024** | **2023** |
| Retail stores | 87.6% | 87.6% | 86.8% |
| Online, phone, chat and other | 12.4% | 12.4% | 13.2% |
| Total Company | 100.0% | 100.0% | 100.0% |

---

The components of total net sales change, including comparable net sales changes, were as follows:

---

| | | | |
|:---|:---|:---|:---|
| | **Net Sales Increase/(Decrease)** | **Net Sales Increase/(Decrease)** | **Net Sales Increase/(Decrease)** |
| | **2025** | **2024** | **2023** |
| Retail comparable-store sales<sup>(1)</sup> | (17%) | (9%) | (12%) |
| Online, phone and chat<sup>(1)</sup> | (17%) | (17%) | (15%) |
| Total Retail comparable sales change<sup>(1)</sup> | (17%) | (10%) | (12%) |
| Net opened/closed stores and 53rd week | 1% | (1%) | 1% |
| Total Company | (16%) | (11%) | (11%) |

---

<sup>(1)</sup> Stores are included in the comparable-store calculation in the 13th full month of operations. Stores that have been remodeled or repositioned within

the same shopping center remain in the comparable-store base. Fiscal 2025 included 53 weeks, as compared to 52 weeks for the other periods

presented. Total Retail comparable sales have been adjusted to remove the estimated impact of the additional week.

---

| | |
|:---|:---|
| **40 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

Other sales metrics were as follows:

---

| | | | |
|:---|:---|:---|:---|
| | **2025** | **2024** | **2023** |
| Average sales per store ($ in thousands)<sup>(1)(4)</sup> | $1946 | $2601 | $2853 |
| Average sales per square foot<sup>(1)(4)</sup> | $629 | $841 | $926 |
| Stores > $2 million in net sales<sup>(2)(4)</sup> | 32% | 57% | 65% |
| Stores > $3 million in net sales<sup>(2)(4)</sup> | 8% | 18% | 24% |
| Average revenue per smart bed unit – Total Retail<sup>(3)</sup> | $6060 | $5818 | $5755 |

---

<sup>(1)</sup> Trailing-twelve months Total Retail comparable sales per store open at least one year.

<sup>(2)</sup> Trailing-twelve months for stores open at least one year (excludes Online, Phone and Chat sales).

<sup>(3)</sup> Represents Total Retail net sales divided by Total Retail smart bed units.

<sup>(4)</sup> Fiscal 2025 included 53 weeks, as compared to 52 weeks in fiscal 2024. The additional week in 2025 was in the fiscal fourth quarter. Total Retail

comparable sales have been adjusted to remove the estimated impact of the additional week on the twelve months ended January 3, 2026.

The number of retail stores operating was as follows:

---

| | | | |
|:---|:---|:---|:---|
| | **2025** | **2024** | **2023** |
| Beginning of period | 640 | 672 | 670 |
| Opened | 6 | 12 | 36 |
| Closed | (46) | (44) | (34) |
| End of period | 600 | 640 | 672 |

---

<u>Comparison of</u> <u>2025</u> <u>and</u> <u>2024</u>

*Net sales*

Net sales in 2025 decreased 16% to $1.4 billion, compared with $1.7 billion in 2024. The decrease was driven by ongoing

industry demand pressure and lower store traffic. The net sales change consisted primarily of a 17% Total Retail

comparable sales decrease. In addition, 2025 included 53 weeks compared with 52 weeks in the prior year, with the extra

week benefiting 2025 net sales by approximately $25 million. For additional details, see the components of total net sales

change on page [39](#id85bc2f5d2ad4583a9197c95587784c2_145).

The $271 million net sales decrease compared with the same period one year ago was primarily comprised of: (i) a

$240 million decrease in the Company's Total Retail comparable net sales; (ii) a $34 million decrease from phone, online

and chat; (iii) a $22 million decrease resulting from net opened/closed stores in the past 12 months; partially offset by (iv)

$25 million from the additional 53rd week. Total Retail smart bed unit sales decreased 12% compared with the prior year.

Average revenue per smart bed unit in Total Retail increased to $6,060, compared with $5,818 in the prior-year period.

*Gross profit*

Gross profit for 2025 of $833.0 million decreased by $170 million, or 17%, compared with $1.0 billion in 2024. The 2025

gross profit rate decreased to 59.0% of net sales, compared with 59.6% for the prior-year period. The 0.6 ppt. decrease in

the gross profit rate was mainly due to: (i) higher manufacturing costs driven primarily by increased obsolescence, tariffs,

and the impacts of lower volume decreased the rate by 1.2 ppt; partially offset by (ii) a favorable product sales mix which

increased the rate by 0.3 ppt, (iii) logistics savings and return rate favorability led to a 0.2 ppt. increase, and (iv) pricing

increases during the current year benefited the rate by 0.1 ppt.

*Sales and marketing expenses*

Sales and marketing expenses decreased $102 million to $664 million in 2025, compared with $767 million in 2024. The

sales and marketing expense rate increased to 47.1% of net sales, compared with 45.6% for the same period one year

ago. The current-year sales and marketing expense rate increase of 1.5 ppt. was primarily due to the deleveraging impact

of an 16% net sales decrease offset by a 13% decrease in expenses including a 9% lower media spend.

---

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| **41 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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*General and administrative expenses*

General and administrative (G&A) expenses decreased $19 million to $131 million in 2025, compared with $150 million in

2024, and increased to 9.3% of net sales, compared with 8.9% of net sales one year ago. The $19 million decrease in

G&A expenses mainly consisted of the following: (i) a $8 million year-over-year decrease in company-wide, performance-

based incentive compensation; (ii) a $5 million decrease in depreciation and amortization; (iii) a $4 million decrease in

employee compensation; and (iv) a $2 million decrease in other occupancy and miscellaneous expenses. The G&A

expenses rate increased by 0.4 ppt. in 2025, compared with 2024 due to the items discussed above in addition to the

deleveraging impact of the 16% net sales decrease.

*Research and development expenses*

Research and development (R&D) expenses decreased $11 million to $34 million in 2025, compared with $45 million in

2024. While the Company's consumer innovation pipeline remains robust, it is re-prioritizing R&D resources in this highly

constrained environment. Moving forward, the Company's innovation agenda will focus on maintaining and improving the

Company's core technologies and introducing additional advancements, while driving costs out of the product.

*Restructuring costs*

Restructuring costs increased $33 million to $51 million in 2025, compared with $18 million in 2024. Charges incurred

related to this initiative were primarily comprised of contract termination costs, severance and employee-related benefits,

professional fees and asset impairment charges. These costs are included in the restructuring costs line in the Company's

consolidated statement of operations. The Company expects approximately $13 million of additional restructuring costs to

be incurred during 2026, primarily due to severance and employee-related benefits, contract termination costs, and asset

impairment charges. See Note 11, *Restructuring Costs*, of the Notes to Consolidated Financial Statements included in

Item 8, *Financial Statements and Supplementary Data*, of this Annual Report on Form 10-K for further information on

restructuring costs.

*Interest expense, net*

Interest expense, net increased $1 million to $49 million in 2025, compared with $48 million in 2024. The increase in the

average debt outstanding during 2025 compared to the prior year was partially offset by a lower weighted-average interest

rate.

*Income tax expense (benefit)*

Income tax expense was $36 million in 2025, compared with an income tax benefit of $5 million in 2024. In 2025, the

Company recorded a $55 million valuation allowance on its deferred income taxes resulting primarily from its inability to

utilize certain net operating losses and state R&D tax credits. This was partially offset by a decrease in income tax

expense of $14 million when compared to 2024 due to higher net loss in 2025. The effective income tax rate for the year

ended January 3, 2026 was (37.5)% compared with 20.2% for the year ended December 28, 2024.

The Company evaluates its deferred income taxes quarterly to determine if valuation allowances are required. As part of

this evaluation, the Company assess whether valuation allowances should be established for any deferred tax assets that

are not considered more likely than not to be realized, using all available evidence, both positive and negative. This

assessment considers, among other matters, the nature, frequency, and severity of historical losses, forecasts of future

profitability, taxable income in available carryback periods and tax planning strategies. In making such judgments,

significant weight is given to evidence that can be objectively verified. In 2025, the Company recorded a change in

valuation allowance of $55 million on the basis of management's reassessment of the amount of its deferred tax assets

that are more likely than not to not be realized. This decreased the effective tax rate for the year ended January 3, 2026.

The Company continues to assess the need for the valuation allowance and will make adjustments when appropriate.

<u>Comparison of</u> <u>2024</u> <u>and</u> <u>2023</u>

For a discussion of the Company's 2024 versus 2023 results, see its 2024 Form 10-K.

---

| | |
|:---|:---|
| **42 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**Liquidity and Capital Resources**

*Going Concern Considerations*

In accordance with ASC Topic 205-40, Going Concern, the Company's management evaluates whether there are certain

conditions and events, considered in aggregate, that raise substantial doubt about the Company's ability to continue as a

going concern. This evaluation includes considerations related to the Company's forecasted liquidity and cash

consumption requirements for one year from the date of issuance of its consolidated financial statements included in this

Annual Report on Form 10-K.

Historically, the Company has relied principally on liquidity generated from operating activities to fund the Company's day-

to-day operations and service its debt. Over the past three years, the Company has a history of net losses and expects to

continue to incur additional net losses in the near future. Although the Company continues to pursue its turnaround

strategy "Sleep Number Shifts," the timing, costs and realization of its turnaround strategy cannot be guaranteed to ensure

sufficient cash flow is generated to provide adequate liquidity to meet the Company's obligations. As a result, the

Company anticipates that it will not remain in compliance with the financial covenants of its Credit Agreement for the next

twelve months. These conditions and events raise substantial doubt about the Company's ability to continue as a going

concern.

Management's plan to address the substantial doubt about the Company's ability to continue as a going concern, as

described above, includes the following actions:

• execute the Company's turnaround strategy centered on product, marketing and distribution with ongoing cost

savings and operating efficiencies to reignite growth and increase financial resilience;

• engage in negotiations with the lenders in its Credit Agreement with the goal of amending or waiving financial

covenants and certain other provisions of its credit facility; and

• engaged financial advisors to assist in negotiating with the lenders and identifying and securing additional capital

options, alternative financing arrangements, strategic alternatives, or other comprehensive solutions to address

the Company's capital structure and leverage needs to return to growth and create long-term value.

There can be no assurance of the Company's ability to realize these plans. As a result, the Company has concluded that

management's plans do not alleviate substantial doubt about the Company's ability to continue as a going concern for at

least one year from the date of issuance of these financial statements.

*Sources and Uses of Cash*

Managing the Company's liquidity and capital resources is an important part of its commitment to deliver superior

shareholder value over time.

The Company's primary sources of liquidity are cash flows provided by operating activities and cash available under its

$655 million revolving credit facility. As of January 3, 2026, the Company did not have any off-balance sheet financing

other than its $9 million in outstanding letters of credit. As discussed above in "Going Concern Considerations," the cash

anticipated to be generated from ongoing operations and cash available under its Credit Agreement are not expected to

be sufficient to generate adequate liquidity to meet the Company's obligations over the next twelve months. See Notes 7,

*Leases*, and Note 14, *Commitments and Contingencies*, of the Notes to Consolidated Financial Statements included in

Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for further details on the

Company's obligations.

The Company's credit facility, as amended, is for general corporate purposes and to meet seasonal working capital

requirements. The credit facility, as amended, provides the lenders with a collateral security interest in substantially all of

the Company's assets and those of its subsidiaries and requires the Company to comply with, among other things, a

maximum net leverage ratio and a minimum interest coverage ratio.

On November 4, 2025, the Company amended the Credit Agreement. The amendment, among other things: (a) extends

the maturity date of the Credit Agreement to December 3, 2027; (b) reduces the revolving credit facility from $485 million

to $475 million, which decreases further to $465 million on July 31, 2026; (c) replaces the leverage-based pricing grids

used to determine the Applicable Margin and Applicable Commitment Fee Rate (each as defined in the Credit Agreement)

---

| | |
|:---|:---|
| **43 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

in favor of (I) with respect to Applicable Margin for Term SOFR Loans, (x) 4.0% until December 31, 2026 and (y) 4.25%

starting January 1, 2027 and continuing thereafter, and (II) with respect to the Applicable Commitment Fee Rate, (x)

0.50% until December 31, 2026 and (y) 0.75% starting January 1, 2027 and continuing thereafter; (d) on each Regularly

Scheduled Payment Date (as defined in the Credit Agreement) occurring on and after March 31, 2027, increases the

amortization of outstanding term loans an additional $1,250,000 (for an aggregate scheduled principal payment of

$3,750,000); (e) terminates the accordion feature; (f) adjusts the permissible maximum Net Leverage Ratio (as defined in

the Credit Agreement) to (I) 5.25 to 1.00 for the quarterly reporting period ended September 27, 2025, (II) 4.50 to 1.00 for

the quarterly reporting period ending January 3, 2026, (III) 4.75 to 1.00 for the quarterly reporting period ending April 4,

2026, (IV) 4.80 to 1.00 for the quarterly reporting period ending July 4, 2026, and (V) 4.00 to 1.00 for each quarterly

reporting period thereafter; (g) adjusts the Liquidity financial covenant so that the Company must ensure that liquidity is no

lower than $30 million until September 30, 2026, and $40 million for each monthly reporting period thereafter; (h) adjusts

the permissible minimum Interest Coverage Ratio to (I) 1.50 to 1.00 for the quarterly reporting period ended September

27, 2025, (II) 2.10 to 1.00 for the quarterly reporting periods ending January 3, 2026 and April 4, 2026, (III) 1.80 to 1.00 for

the quarterly reporting period ending July 4, 2026, (IV) 2.10 to 1.00 for the reporting period ending October 3, 2026, and

(V) 2.20 to 1.00 for each quarterly reporting period occurring thereafter; (i) adds a new quarterly minimum EBITDA

covenant test that begins for the quarterly reporting period ending April 4, 2026; (j) adjusts the consolidated EBITDA

calculation to include an addback for certain expenses and costs incurred for the trailing twelve months for discontinued

operations, downsized functions and employment expenses for laid-off employees; and (k) provides for additional and

more frequent reporting requirements. Following such amendment, the Company was in compliance with all covenants.

In connection with the amendment, the Company also agreed to pay the lenders certain amendment fees and to

reimburse the lenders for certain expenses.

The Company's management believes that its existing cash on hand combined with its anticipated future net losses may

be insufficient to fund its operations and debt obligations for at least the next 12 months. The Company's management

has concluded that there is substantial doubt about the Company's ability to continue as a going concern, which is not

alleviated, for one year from the date of issuance of this Annual Report on Form 10-K. The Company's future capital

requirements will depend on many factors, including, but not limited to, amending or waiving financial covenants of the

Credit Agreement, the successful execution of any future financing arrangements, its ability to achieve cost efficiencies

and the success of its turnaround strategy. To the extent that the Company's existing cash balance and ongoing cash from

operations is insufficient to fund its future activities, the Company may need to raise additional funds through public or

private equity or debt financing, and such funds may not be available on acceptable terms. If sufficient cash from

operations or external funding is not available, the Company may be unable to adequately fund its business plan and the

Company's business, results of operations, cash flows and financial condition could be materially and adversely affected.

As of January 3, 2026, the Company had an aggregate amount of $588 million of borrowings outstanding under its credit

facility, including $185 million in outstanding term loans and $403 million outstanding under its revolving credit facility,

along with $9 million in outstanding letters of credit. Availability under the revolving credit facility amounted to $58 million.

At January 3, 2026, the company's leverage ratio as defined in the Credit Agreement was 4.1x versus the permissible net

leverage ratio of 4.5x, the weighted-average interest rate on borrowings under the credit facility was 7.8% and the

Company was in compliance with all financial covenants.

*Cash Flow Information*

Cash and cash equivalents totaled $2 million at both January 3, 2026 and December 28, 2024. The following table

summarizes the Company's cash flows (dollars in millions). Amounts may not add due to rounding differences:

---

| | | |
|:---|:---|:---|
| | **2025** | **2024** |
| Total cash provided by (used in): |  |  |
| Operating activities | $(3283) | $27143 |
| Investing activities | (17687) | (26291) |
| Financing activities | 20713 | (1441) |
| Net decrease in cash and cash equivalents | $(257) | $(589) |

---

Cash used in operating activities for the fiscal year ended January 3, 2026 was $3 million, compared with net cash

provided by operating activities of $27 million for the fiscal year ended December 28, 2024. Significant components of the

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|:---|:---|
| **44 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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$30 million year-over-year decrease in cash from operating activities included: (i) an $112 million year-over-year increase

in net loss; (ii) a $19 million fluctuation in the amount of compensation and benefits accrued and timing of the related

payments resulting from decreased headcount in 2025 and year-over-year changes in Company-wide performance-based

incentive compensation; an (iii) $11 million reduction in depreciation and amortization due to recent lower capital spending

levels and restructuring related fixed asset impairments; partially offset by (iv) a $46 million fluctuation in deferred income

taxes primarily due to a valuation allowance recorded on deferred taxes; (v) a $39 million fluctuation in accounts payable

due to lower expenses in the current year and timing of payments; (vi) a $32 million fluctuation in the impairment of lease

and store related assets and strategic investment assets; and (vii) a $21 million change in prepaid expenses and other

assets.

Net cash used in investing activities was $18 million for the fiscal year ended January 3, 2026, compared with net cash

used in investing activities of $26 million during the fiscal year ended December 28, 2024. Investing activities in 2025

included $14 million of property and equipment purchases, compared with $24 million in 2024. In addition, the Company

used $3 million cash for payment to secure contractual rights in 2025.

Net cash provided by financing activities was $21 million for the fiscal year ended January 3, 2026, compared with net

cash used in financing activities of $1 million in 2024. Short-term borrowings increased by $29 million in 2025 due to a $42

million increase in borrowings under the revolving credit facility to $588 million, offset by a $13 million decrease in book

overdrafts, which are included in the net change in short-term borrowings. During the fiscal year ended January 3, 2026,

the Company used $6 million of cash for debt issuance costs related to the credit facility amendment during the first

quarter of 2025. During both 2025 and 2024 the Company repurchased $1 million of its stock in connection with the

vesting of employee restricted stock awards.

*Share Repurchases*

The Company suspended share repurchases under its Board-approved share repurchase program during fiscal 2022. As

of January 3, 2026, the remaining authorization under its Board-approved $600 million share repurchase program was

$348 million. There is no expiration date governing the period over which the Company can repurchase shares. The

Company did not make any share repurchases under its Board-approved share repurchase program during 2025 or 2024.

**Non-GAAP Data Reconciliations**

<u>Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA)</u>

The Company defines earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) as net loss plus:

income tax expense (benefit), interest expense, depreciation and amortization, stock-based compensation, restructuring

costs, other non-recurring costs and asset impairments. Management believes Adjusted EBITDA is a useful indicator of

the Company's financial performance and its ability to generate cash from operating activities. The Company's definition of

Adjusted EBITDA may not be comparable to similarly titled definitions used by other companies. The table below

reconciles Adjusted EBITDA, which is a non-GAAP financial measure, to the comparable GAAP financial measure.

The Company's Adjusted EBITDA calculations are as follows (in thousands):

---

| | | | |
|:---|:---|:---|:---|
|  | **Year** | **Year** | **Year** |
|  | **2025** | **2024** | **2023** |
| Net loss | $(131958) | $(20334) | $(15287) |
| Income tax expense (benefit)  | 35984 | (5162) | (4466) |
| Interest expense | 49382 | 48368 | 42695 |
| Depreciation and amortization | 53169 | 64979 | 72479 |
| Stock-based compensation | 6282 | 11444 | 14855 |
| Restructuring costs<sup>(1)</sup> | 50697 | 18066 | 15728 |
| Other non-recurring items<sup>(2)</sup> | 14699 | 998 |  |
| Asset impairments |  | 1220 | 672 |
| Adjusted EBITDA | $78255 | $119579 | $126676 |

---

<sup>(1)</sup> Represents costs related to business restructuring actions. See Note 11, *Restructuring Costs*, of the Notes to Consolidated Financial Statements

included in Item 8, *Financial Statements and Supplementary Data*, of this Annual Report on Form 10-K for further information on restructuring costs.

---

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|:---|:---|
| **45 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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<sup>(2)</sup> Other non-recurring items includes the following:

---

| | | |
|:---|:---|:---|
| | **Year** | **Year** |
| | **2025** | **2024** |
| Inventory obsolescence write off | $9565 | $— |
| CEO transition costs | 1584 | 224 |
| Debt issuance cost write off | 1596 |  |
| Proxy contest costs | 1148 | 774 |
| CFO search costs | 340 |  |
| Legal and consulting costs | 466 |  |
| Other non-recurring items | $14699 | $998 |

---

<u>Free Cash Flow</u>

The Company's "free cash flow" data is considered a non-GAAP financial measure and is not in accordance with, or

preferable to, "net cash provided by operations," or GAAP financial data. However, the Company is providing this

information management believes facilitates analysis for investors and financial analysts.

The following table summarizes the Company's free cash flow calculations (in thousands):

---

| | | | |
|:---|:---|:---|:---|
|  | **Year** | **Year** | **Year** |
|  | **2025** | **2024** | **2023** |
| Net cash (used in) provided by operating activities | $(3283) | $27143 | $(9028) |
| Subtract: Purchases of property and equipment | (14407) | (23505) | (57056) |
| Free cash flow | $(17690) | $3638 | $(66084) |

---

<u>Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses</u>

The Company's "non-GAAP operating expenses" is considered a non-GAAP financial measure and is not in accordance

with, or preferable to, "operating expenses," or GAAP financial data. However, the Company is providing this information

management believes facilitates analysis for investors and financial analysts.

The following table summarizes the Company's non-GAAP operating expenses calculations (in thousands):

---

| | | |
|:---|:---|:---|
|  | **Year** | **Year** |
|  | **2025** | **2024** |
| Operating expenses | $879543 | $979901 |
| Subtract: Restructuring costs | 50697 | 18066 |
| Subtract: Other non-recurring items<sup>(1)</sup> | 5134 | 998 |
| Non-GAAP operating expenses | $823712 | $960837 |
| Operating expense reduction versus prior period, excluding restructuring costs and <br>non-recurring items<br>| $137125 |  |

---

<sup>(1)</sup> Excludes inventory obsolescence write off of $9.6 million, which is included in the cost of sales line on the Company's consolidated statement of

operations.

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|:---|:---|
| **46 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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<u>Return on Invested Capital (Adjusted ROIC)</u>

Adjusted ROIC is a financial measure the Company uses to determine how efficiently it deploys its capital. It quantifies the

return the Company earns on its adjusted invested capital. Management believes Adjusted ROIC is also a useful metric

for investors and financial analysts. The Company computes Adjusted ROIC as outlined below. Its definition and

calculation of Adjusted ROIC may not be comparable to similarly titled definitions and calculations used by other

companies.

The tables below reconcile adjusted net operating profit after taxes (Adjusted NOPAT) and total adjusted invested capital,

which are non-GAAP financial measures, to the comparable GAAP financial measures (in thousands):

---

| | | | |
|:---|:---|:---|:---|
|  | **Year** | **Year** | **Year** |
|  | **2025** | **2024** | **2023** |
| Adjusted net operating profit after taxes (Adjusted NOPAT) |  |  |  |
| Operating (loss) income | $(46592) | $22872 | $22942 |
| Add: Operating lease interest<sup>(1)</sup> | 24346 | 26775 | 27777 |
| Add/Less: Income taxes<sup>(2)</sup> | 4495 | (11907) | (11851) |
| Adjusted NOPAT | $(17751) | $37740 | $38868 |
| Average adjusted invested capital |  |  |  |
| Total deficit | $(578475) | $(451586) | $(441928) |
| Add: Long-term debt<sup>(3)</sup> | 588359 | 546841 | 539819 |
| Add: Operating lease obligations<sup>(4)</sup> | 354302 | 389508 | 433154 |
| Total adjusted invested capital at end of period | $364186 | $484763 | $531045 |
| Average adjusted invested capital<sup>(5)</sup> | $439902 | $497972 | $496612 |
| Adjusted return on invested capital (Adjusted ROIC) | (4.0)% | 7.6% | 7.8% |

---

<sup>(1)</sup> Represents the interest expense component of lease expense included in the Company's financial statements under ASC 842, *Leases*.

<sup>(2)</sup> Reflects annual effective income tax rates, before discrete adjustments, of 20.2%, 24.0% and 23.4% for 2025, 2024 and 2023, respectively.

<sup>(3)</sup> Long-term debt includes existing finance lease liabilities.

<sup>(4)</sup> Reflects operating lease liabilities included in the Company's financial statements under ASC 842.

<sup>(5)</sup> Average adjusted invested capital represents the average of the last five fiscal quarters' ending adjusted invested capital balances.

<sup>(6)</sup> Adjusted ROIC equals Adjusted NOPAT divided by average adjusted invested capital.

Note – The Company's Adjusted ROIC calculation and data are considered non-GAAP financial measures and are not in accordance with, or preferable

to, GAAP financial data. However, the Company is providing this information as it believes it facilitates analysis of the Company's financial performance

by investors and financial analysts.

GAAP - generally accepted accounting principles in the U.S.

**Critical Accounting Policies and Estimates**

The Company's consolidated financial statements are prepared in accordance with U.S. generally accepted accounting

principles (GAAP). In connection with the preparation of its financial statements, the Company is required to make

estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities,

sales, expenses and the related disclosures. Predicting future events is inherently an imprecise activity and as such

requires the use of judgment. The Company bases its assumptions, estimates and judgments on historical experience,

current trends and other factors that management believes to be relevant at the time its consolidated financial statements

are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to

ensure that its financial statements are presented fairly and in accordance with GAAP. However, because future events

and their effects cannot be determined with certainty, actual results could differ from the Company's assumptions and

estimates, and such differences could be material.

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| **47 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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The Company's significant accounting policies are discussed in Note 1, *Business and Summary of Significant Accounting* 

*Policies*, of the Notes to Consolidated Financial Statements, which are included in Item 8, *Financial Statements and* 

*Supplementary Data*, of this Annual Report on Form 10-K. Management believes the accounting policies discussed below

are the most critical because they require management's most difficult, subjective or complex judgments, resulting from

the need to make estimates about the effect of matters that are inherently uncertain. Management has reviewed these

critical accounting policies and estimates, and related disclosures with the Audit Committee of its Board.

The Company's critical accounting policies and estimates relate to stock-based compensation, warranty liabilities and

revenue recognition.

---

| | | |
|:---|:---|:---|
| **Description** | **Judgments and Uncertainties** | **Effect if Actual Results**<br>**Differ from Assumptions**<br>|
| **Stock-Based Compensation** |  |  |
| The Company has stock-based <br>compensation plans, which include non-<br>qualified stock options and stock <br>awards.<br>See Note 1, *Business and Summary of* <br>*Significant Accounting Policies*, and <br>Note 8, *Shareholders' Deficit*, to the <br>Notes to Consolidated Financial <br>Statements, included in Item 8, *Financial* <br>*Statements and Supplementary Data*, of <br>this Annual Report on Form 10-K, for a <br>complete discussion of its stock-based <br>compensation programs.<br>| Option-pricing models and generally <br>accepted valuation techniques require <br>management to make assumptions and <br>to apply judgment to determine the fair <br>value of the awards. These assumptions <br>and judgments include estimating the <br>volatility of its stock price, future <br>employee forfeiture rates and future <br>employee stock option exercise <br>behaviors. Changes in these <br>assumptions can materially affect the <br>fair value estimates or future earnings <br>adjustments.<br>Performance-based stock awards <br>require management to make <br>assumptions regarding the likelihood of <br>achieving performance targets.<br>| The Company does not believe there is <br>a reasonable likelihood that there will be <br>a material change in the future estimates <br>or assumptions it uses to determine <br>stock-based compensation expense. <br>However, if actual results are not <br>consistent with its estimates or <br>assumptions, the Company may be <br>exposed to changes in stock-based <br>compensation expense that could be <br>material.<br>In addition, if actual results are not <br>consistent with the assumptions used, <br>the stock-based compensation expense <br>reported in its financial statements may <br>not be representative of the actual <br>economic cost of the stock-based <br>compensation. Finally, if the actual <br>forfeiture rates, or the actual <br>achievement of performance targets, are <br>not consistent with the assumptions <br>used, the Company could experience <br>future earnings adjustments.<br>A 10% change in its stock-based <br>compensation expense for the year <br>ended January 3, 2026, would have <br>affected net loss by approximately <br>$0.5 million in 2025.<br>|

---

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|:---|:---|
| **48 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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| | | |
|:---|:---|:---|
| **Description** | **Judgments and Uncertainties** | **Effect if Actual Results**<br>**Differ from Assumptions**<br>|
| **Warranty Liabilities** | |  |
| The Company provides a limited <br>warranty on most of the products it sells.<br>See Note 1, *Business and Summary of* <br>*Significant Accounting Policies*, to the <br>Notes to Consolidated Financial <br>Statements, included in Item 8, *Financial* <br>*Statements and Supplementary Data*, of <br>this Annual Report on Form 10-K, for a <br>complete discussion of its warranty <br>program and liabilities.<br>| The majority of its warranty claims are <br>incurred within the first year. However, <br>the Company's warranty liability contains <br>uncertainties because its warranty <br>obligations cover an extended period of <br>time. A revision of estimated claim rates <br>or the projected cost of materials and <br>freight associated with sending <br>replacement parts to customers could <br>have a material adverse effect on future <br>results of operations.<br>| The Company has not made any <br>material changes in its warranty liability <br>assessment methodology during the <br>past three fiscal years. The Company <br>does not believe there is a reasonable <br>likelihood that there will be a material <br>change in the estimates or assumptions <br>it uses to calculate its warranty liability. <br>However, if actual results are not <br>consistent with its estimates or <br>assumptions, the Company may be <br>exposed to losses or gains that could be <br>material.<br>A 10% change in its warranty liability at <br>January 3, 2026, would have affected <br>net loss by approximately $0.5 million in <br>2025.<br>|
| **Revenue Recognition** |  |  |
| Certain accounting estimates relating to <br>revenue recognition contain uncertainty <br>because they require management to <br>make assumptions and to apply <br>judgment regarding the effects of future <br>events.<br>See Note 1, *Business and Summary of* <br>*Significant Accounting Policies*, and <br>Note 9, *Revenue Recognition*, to the <br>Notes to Consolidated Financial <br>Statements, included in Item 8, *Financial* <br>*Statements and Supplementary Data*, of <br>this Annual Report on Form 10-K, for a <br>complete discussion of its revenue <br>recognition policies.<br>| The Company's estimates of sales <br>returns contain uncertainties as actual <br>sales return rates may vary from <br>expected rates, resulting in adjustments <br>to net sales in future periods. These <br>adjustments could have an adverse <br>effect on future results of operations.<br>| The Company has not made any <br>material changes in the accounting <br>methodology used to establish its sales <br>returns allowance during the past three <br>fiscal years. The Company does not <br>believe there is a reasonable likelihood <br>that there will be a material change in <br>the estimates or assumptions it uses to <br>calculate its sales returns allowance. <br>However, if actual results are not <br>consistent with its estimates or <br>assumptions, the Company may be <br>exposed to additional losses or gains in <br>future periods.<br>A 10% change in its sales returns <br>allowance at January 3, 2026 would <br>have affected net loss by approximately <br>$1.0 million in 2025.<br>|
| **Valuation Allowance for Deferred Tax Assets** | **Valuation Allowance for Deferred Tax Assets** |  |
| The Company records a reduction to the <br>carrying amounts of deferred tax assets <br>by recording a valuation allowance if, <br>based on the available evidence, it is <br>more likely than not such assets will not <br>be realized.<br>See Note 1, *Business and Summary of* <br>*Significant Accounting Policies*, and <br>Note 12, *Income Taxes*, to the Notes to <br>Consolidated Financial Statements, <br>included in Item 8, *Financial Statements* <br>*and Supplementary Data*, of this Annual <br>Report on Form 10-K, for a complete <br>discussion of its income taxes policies.<br>| The Company considers both positive <br>and negative evidence when measuring <br>the need for a valuation allowance. The <br>weight given to the evidence is <br>commensurate with the extent to which it <br>may be objectively verified. Current and <br>cumulative financial reporting results are <br>a source of objectively verifiable <br>information. We give operating results <br>during the most recent three-year period <br>a significant weight in our analysis. We <br>perform scheduling exercises to <br>determine if sufficient taxable income of <br>the appropriate character exists in the <br>periods required in order to realize our <br>deferred tax assets with limited lives <br>prior to their expiration.<br>| On the basis of the Company's <br>evaluation, as of January 3, 2026, a <br>valuation allowance of $55.3 million <br>has been recorded to recognize only the <br>portion of the deferred tax asset that is <br>more likely than not to be realized. The <br>amount of the deferred tax asset <br>considered realizable, however, could be <br>adjusted if additional objectively <br>verifiable positive evidence materializes <br>in future reporting periods, such as a <br>demonstrated operating profitability.<br>|

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|:---|:---|
| **49 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**Recent Accounting Pronouncements**

See "Part II, Item 8. *Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements* – Note

1, *Business and Summary of Significant Accounting Policies - "Recently Adopted and Recently Issued Accounting* 

*Pronouncements*" for recent accounting pronouncements that may affect the Company's financial reporting.

**ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

The Company is exposed to changes in market-based short-term interest rates that will impact its net interest expense. If

overall interest rates were one percentage point higher than current rates, its annual loss would increase by $5 million

based on the $588 million of borrowings under its credit facility at January 3, 2026. The Company does not manage its

interest-rate volatility risk through the use of derivative instruments.

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|:---|:---|
| **50 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** 

To the shareholders and the Board of Directors of Sleep Number Corporation

**Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheets of Sleep Number Corporation and subsidiaries (the

"Company") as of January 3, 2026 and December 28, 2024, the related consolidated statements of operations,

shareholders' deficit, and cash flows, for each of the three years in the period ended January 3, 2026, and the related

notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion,

the financial statements present fairly, in all material respects, the financial position of the Company as of January 3, 2026

and December 28, 2024, and the results of its operations and its cash flows for each of the three years in the period

ended January 3, 2026, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United

States) (PCAOB), the Company's internal control over financial reporting as of January 3, 2026, based on criteria

established in *Internal Control — Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of

the Treadway Commission and our report dated March 12, 2026, expressed an unqualified opinion on the Company's

internal control over financial reporting.

**Going Concern**

The accompanying financial statements have been prepared assuming that the Company will continue as a going

concern. As discussed in Note 1 to the financial statements, the Company is projecting noncompliance with future debt

covenants, and lack of liquidity that raise substantial doubt about its ability to continue as a going concern. Management's

plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments

that might result from the outcome of this uncertainty.

**Basis for Opinion**

These financial statements are the responsibility of the Company's management. Our responsibility is to express an

opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the

PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities

laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and

perform the audit to obtain reasonable assurance about whether the financial statements are free of material

misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material

misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those

risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide

a reasonable basis for our opinion.

**Critical Audit Matters**

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements

that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or

disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex

judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements,

taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the

critical audit matters or on the accounts or disclosures to which they relate.

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|:---|:---|
| **51 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**Warranty Liability - Refer to "Note 1 - Warranty Liabilities"** 

*Critical Audit Matter Description*

The Company provides a limited warranty on most products sold. The estimated warranty liabilities, which are expensed

at the time of sale and included in cost of sales, are based on historical trends and warranty claim rates incurred and the

assumptions are adjusted for any current trends as appropriate. As of January 3, 2026, the Company has warranty

liabilities of $5.7 million.

We identified the warranty liability as a critical audit matter because of the significant judgments made by management to

estimate warranty claim rates. This required a high degree of auditor judgment and an increased extent of effort when

performing audit procedures to evaluate the reasonableness of management's estimates of future warranty claims based

on historical claims paid, from which management uses to develop warranty liability estimates.

*How the Critical Audit Matter Was Addressed in the Audit*

Our procedures related to the warranty liabilities included the following, among others:

• We tested the effectiveness of relevant controls related to warranty liabilities, including those over historical

warranty claim data and estimated future warranty claim rates.

• We evaluated the reasonableness of management's estimate of warranty liabilities by comparing the historical

warranty claim trends to the current warranty claim rates of the Sleep Number beds and other products.

• We evaluated the completeness of the warranty liabilities through inquiries of operational and executive

management regarding knowledge of known product warranty claims or product issues and evaluated whether

they were appropriately considered in the determination of the warranty liabilities.

• We evaluated the methods and assumptions used by management to estimate the warranty liabilities by:

• Testing the underlying data that served as the basis for the estimate, to test that the inputs to the estimate

were reasonable and to test the mathematical accuracy of the calculation.

• Developing an expectation of warranty liabilities and comparing it to the recorded balance.

• Comparing management's prior-year assumption of expected claim rates to actuals incurred during the

year to evaluate management's ability to estimate the warranty liabilities.

**Valuation Allowance — Refer to "Note 1 – Income Taxes" & "Note 12 – Income Taxes"**

*Critical Audit Matter Description* 

The Company recognizes deferred income taxes for tax attributes and for differences between the financial statement and

tax basis of assets and liabilities at enacted statutory tax rates in effect for the years in which the deferred tax liability or

asset is expected to be settled or realized. A valuation allowance is provided to offset deferred tax assets if, based upon

the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Future

realization of deferred tax assets depends on the existence of sufficient taxable income of the appropriate character.

Sources of taxable income include future reversals of deferred tax assets and liabilities, expected future taxable income,

taxable income in prior carryback years if permitted under the tax law, and tax planning strategies. Management has

determined that it will not have sufficient taxable income generated in the future to realize its deferred tax assets;

therefore, a valuation allowance has been recorded. The Company's valuation allowance as of January 3, 2026, was

$55.3 million.

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|:---|:---|
| **52 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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*How the Critical Audit Matter Was Addressed in the Audit*

Our audit procedures related to the determination that it is more likely than not that sufficient taxable income will be

generated in the future to realize deferred tax assets included the following, among others:

• We tested the effectiveness of relevant controls over deferred tax assets, including management's controls over

the estimates of taxable income and the determination of whether it is more likely than not that the deferred tax

assets will be realized.

• We evaluated the reasonableness of the methods, assumptions, and judgments used by management to

determine whether a valuation allowance was necessary.

• With the assistance of our income tax specialists, we evaluated whether the sources of management's estimated

taxable income were of the appropriate character and sufficient to utilize the deferred tax assets under the

relevant tax law.

• We evaluated whether the taxable income in prior carryback years was of the appropriate character and available

under the tax law.

/s/ DELOITTE & TOUCHE LLP

Minneapolis, Minnesota

March 12, 2026

We have served as the Company's auditor since 2010.

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|:---|:---|
| **53 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** 

To the shareholders and the Board of Directors of Sleep Number Corporation

**Opinion on Internal Control over Financial Reporting**

We have audited the internal control over financial reporting of Sleep Number Corporation and subsidiaries (the

"Company") as of January 3, 2026, based on criteria established in *Internal Control — Integrated Framework (2013)* 

issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the

Company maintained, in all material respects, effective internal control over financial reporting as of January 3, 2026,

based on criteria established in *Internal Control — Integrated Framework (2013)* issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United

States) (PCAOB), the consolidated financial statements and financial statement schedule as of and for the year ended

January 3, 2026, of the Company and our report dated March 12, 2026, expressed an unqualified opinion on those

financial statements and financial statement schedule.

**Basis for Opinion** 

The Company's management is responsible for maintaining effective internal control over financial reporting and for its

assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's

Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal

control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are

required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the

applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and

perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was

maintained in all material respects. Our audit included obtaining an understanding of internal control over financial

reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating

effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered

necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

**Definition and Limitations of Internal Control over Financial Reporting**

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the

reliability of financial reporting and the preparation of financial statements for external purposes in accordance with

generally accepted accounting principles. A company's internal control over financial reporting includes those policies and

procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the

transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are

recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting

principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of

management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely

detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the

financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,

projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become

inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may

deteriorate.

/s/ DELOITTE & TOUCHE LLP

Minneapolis, Minnesota

March 12, 2026

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|:---|:---|
| **54 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Consolidated Balance Sheets**

**January 3, 2026 and December 28, 2024**

**(in thousands, except per share amounts)**

---

| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| **Assets** |  |  |
| Current assets: |  |  |
| Cash and cash equivalents | $1693 | $1950 |
| Accounts receivable, net of allowances of $694 and $1,113, respectively | 15502 | 17516 |
| Inventories | 82233 | 103152 |
| Prepaid expenses | 13656 | 14568 |
| Other current assets | 36873 | 44098 |
| Total current assets | 149957 | 181284 |
| Non-current assets: |  |  |
| Property and equipment, net | 86528 | 129574 |
| Operating lease right-of-use assets | 311723 | 356641 |
| Goodwill and intangible assets, net | 66186 | 66412 |
| Deferred income taxes | 399 | 33575 |
| Other non-current assets | 65267 | 93324 |
| Total assets | $680060 | $860810 |
| **Liabilities and Shareholders' Deficit** |  |  |
| Current liabilities: |  |  |
| Borrowings under revolving credit facility | $588200 | $546600 |
| Accounts payable | 117977 | 107619 |
| Customer prepayments | 39527 | 46933 |
| Accrued sales returns | 12817 | 19092 |
| Compensation and benefits | 14975 | 31038 |
| Taxes and withholding | 11429 | 18619 |
| Operating lease liabilities | 81191 | 82307 |
| Other current liabilities | 46430 | 55804 |
| Total current liabilities | 912546 | 908012 |
| Non-current liabilities: |  |  |
| Operating lease liabilities | 273111 | 307201 |
| Other non-current liabilities | 72878 | 97183 |
| Total liabilities | 1258535 | 1312396 |
| Shareholders' deficit: |  |  |
| Undesignated preferred stock; 5,000 shares authorized, no shares issued and <br>outstanding<br>|  |  |
| Common stock, $0.01 par value; 142,500 shares authorized, 22,860 and 22,388 <br>shares issued and outstanding, respectively<br>| 229 | 224 |
| Additional paid-in capital | 32454 | 27390 |
| Accumulated deficit | (611158) | (479200) |
| Total shareholders' deficit | (578475) | (451586) |
| Total liabilities and shareholders' deficit | $680060 | $860810 |

---

See accompanying notes to consolidated financial statements.

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|:---|:---|
| **55 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Consolidated Statements of Operations**

**Years ended January 3, 2026, December 28, 2024 and December 30, 2023**

**(in thousands, except per share amounts)**

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| Net sales | $1411450 | $1682296 | $1887482 |
| Cost of sales | 578499 | 679523 | 798952 |
| Gross profit | 832951 | 1002773 | 1088530 |
| Operating expenses: |  |  |  |
| Sales and marketing | 664235 | 766624 | 847442 |
| General and administrative | 130669 | 149956 | 146621 |
| Research and development | 33942 | 45255 | 55797 |
| Restructuring costs | 50697 | 18066 | 15728 |
| Total operating expenses | 879543 | 979901 | 1065588 |
| Operating (loss) income | (46592) | 22872 | 22942 |
| Interest expense, net | 49382 | 48368 | 42695 |
| Loss before income taxes | (95974) | (25496) | (19753) |
| Income tax expense (benefit) | 35984 | (5162) | (4466) |
| Net loss | $(131958) | $(20334) | $(15287) |
| Basic and diluted net loss per share: |  |  |  |
| Net loss per share – basic and diluted | $(5.77) | $(0.90) | $(0.68) |
| Weighted-average shares – basic and diluted | 22883 | 22606 | 22429 |

---

See accompanying notes to consolidated financial statements.

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|:---|:---|
| **56 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Consolidated Statements of Shareholders' Deficit**

**Years ended January 3, 2026, December 28, 2024 and December 30, 2023**

**(in thousands)**

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Common Stock** | **Common Stock** | **Additional**<br>**Paid-in**<br>**Capital** | **Accumulate**<br>**d**<br>**Deficit** | |
|  | **Shares** | **Amount** | **Additional**<br>**Paid-in**<br>**Capital** | **Accumulate**<br>**d**<br>**Deficit** | <br>**Total** |
| Balance at December 31, 2022 | 22014 | $220 | $5182 | $(443579) | $(438177) |
| Net loss |  |  |  | (15287) | (15287) |
| Exercise of common stock options | 20 |  | 428 |  | 428 |
| Stock-based compensation | 335 | 3 | 14852 |  | 14855 |
| Repurchases of common stock | (134) | (1) | (3746) |  | (3747) |
| Balance at December 30, 2023 | 22235 | $222 | $16716 | $(458866) | $(441928) |
| Net loss |  |  |  | (20334) | (20334) |
| Stock-based compensation | 209 | 3 | 11441 |  | 11444 |
| Repurchases of common stock | (56) | (1) | (767) |  | (768) |
| Balance at December 28, 2024 | 22388 | $224 | $27390 | $(479200) | $(451586) |
| Net loss |  |  |  | (131958) | (131958) |
| Stock-based compensation | 628 | 6 | 6276 |  | 6282 |
| Repurchases of common stock | (156) | (1) | (1212) |  | (1213) |
| Balance at January 3, 2026 | 22860 | $229 | $32454 | $(611158) | $(578475) |

---

See accompanying notes to consolidated financial statements.

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|:---|:---|
| **57 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Consolidated Statements of Cash Flows**

**Years ended January 3, 2026, December 28, 2024 and December 30, 2023**

**(in thousands)**

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| Cash flows from operating activities: |  |  |  |
| Net loss | $(131958) | $(20334) | $(15287) |
| Adjustments to reconcile net loss to net cash (used in) provided by <br>operating activities:<br>|  |  |  |
| Depreciation and amortization | 55608 | 66351 | 74043 |
| Stock-based compensation | 6282 | 11444 | 14855 |
| Inventory obsolescence write off | 9565 |  |  |
| Loss on impairment of strategic investment asset | 16225 |  |  |
| Loss on disposal and impairment of leased assets | 20319 | 4315 | 2898 |
| Deferred income taxes | 33176 | (13322) | (12295) |
| Changes in operating assets and liabilities: |  |  |  |
| Accounts receivable | 2014 | 9343 | (854) |
| Inventories | 11354 | 12281 | (1399) |
| Income taxes | (4378) | 3987 | (5969) |
| Prepaid expenses and other assets | 9889 | (10867) | (5220) |
| Accounts payable | 22673 | (15910) | (28934) |
| Customer prepayments | (7406) | (2210) | (24038) |
| Accrued compensation and benefits | (16113) | 2755 | (2943) |
| Other taxes and withholding | (2812) | (2502) | (519) |
| Other accruals and liabilities | (27721) | (18188) | (3366) |
| Net cash (used in) provided by operating activities | (3283) | 27143 | (9028) |
| Cash flows from investing activities: |  |  |  |
| Purchases of property and equipment | (14407) | (23505) | (57056) |
| Proceeds from sales of property and equipment |  | 156 | 21 |
| Issuance of notes receivable |  | (2942) | (1317) |
| Payment to secure contractual rights | (3280) |  |  |
| Net cash used in investing activities | (17687) | (26291) | (58352) |
| Cash flows from financing activities: |  |  |  |
| Net increase (decrease) in short-term borrowings | 28068 | (673) | 73463 |
| Repurchases of common stock | (1213) | (768) | (3747) |
| Proceeds from issuance of common stock |  |  | 428 |
| Debt issuance costs | (6142) |  | (2017) |
| Net cash provided by (used in) financing activities | 20713 | (1441) | 68127 |
| Net (decrease) increase in cash and cash equivalents | (257) | (589) | 747 |
| Cash and cash equivalents, at beginning of period | 1950 | 2539 | 1792 |
| Cash and cash equivalents, at end of period | $1693 | $1950 | $2539 |
| **Supplemental Disclosure of Cash Flow Information** |  |  |  |
| Income taxes paid, net of refunds | $8624 | $4012 | $13716 |
| Interest paid | $50570 | $45092 | $40570 |
| Purchases of property and equipment included in accounts payable | $3128 | $1994 | $6670 |

---

See accompanying notes to consolidated financial statements.

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|:---|:---|
| **58 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements**

**1. Business and Summary of Significant Accounting Policies**

*Business & Basis of Presentation*

Sleep Number Corporation and its 100%-owned subsidiaries (Sleep Number or the Company) have a vertically integrated

business model and are the exclusive designer, manufacturer, marketer, retailer and servicer of Sleep Number beds which

allows it to offer consumers high-quality, individualized sleep solutions and services. Sleep Number also offers FlextFit

adjustable bases, and Sleep Number pillows, sheets and other bedding products.

Sleep Number generates revenue by marketing its innovations directly to new and existing customers, and selling

products through its Stores, Online, Phone, Chat (Total Retail) and Other.

The consolidated financial statements include the accounts of Sleep Number Corporation and its 100%-owned

subsidiaries. All intra-entity balances and transactions have been eliminated in consolidation.

*Fiscal Year*

The Company's fiscal year ends on the Saturday closest to December 31. Fiscal years and their respective fiscal year

ends were as follows: fiscal 2025 ended January 3, 2026; fiscal 2024 ended December 28, 2024; and fiscal 2023 ended

December 30, 2023. Fiscal 2025 had 53 weeks, 2024 and 2023 each had 52 weeks.

*Use of Estimates in the Preparation of Financial Statements*

The preparation of consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles

(GAAP) requires the Company to make estimates and assumptions. These estimates and assumptions affect the reported

amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial

statements, and the reported amounts of sales, expenses and income taxes during the reporting period. Predicting future

events is inherently an imprecise activity and, as such, requires the use of judgment. As future events and their effects

cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these

estimates will be reflected in the consolidated financial statements in future periods and could be material.

The Company's critical accounting policies consist of stock-based compensation, warranty liabilities, revenue recognition

and valuation allowance for deferred tax assets.

*Cash and Cash Equivalents*

Cash and cash equivalents include highly-liquid investments with original maturities of three months or less. The carrying

value of these investments approximates fair value due to their short-term maturity. The Company's banking

arrangements allow it to fund outstanding checks when presented to the financial institution for payment, resulting in book

overdrafts. Book overdrafts are included in accounts payable in the consolidated balance sheet and in net increase

(decrease) in short-term borrowings in the financing activities section of the Company's consolidated statement of cash

flows. Book overdrafts totaled $8 million and $22 million at January 3, 2026 and December 28, 2024, respectively.

*Accounts Receivable*

Accounts receivable are recorded net of an allowance for expected credit losses and consist primarily of receivables from

third-party financiers for customer credit purchases. The allowance is recognized in an amount equal to anticipated future

write-offs. The Company estimates future write-offs based on delinquencies, aging trends, industry risk trends, its

historical experience and current trends. Account balances are charged off against the allowance when the Company

believes it is probable the receivable will not be recovered.

---

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| **59 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

*Inventories*

Inventories include materials, labor and overhead and are stated at the lower of cost or net realizable value. Cost is

determined by the first-in, first-out method. The Company reviews inventory quantities on hand and records reserves for

obsolescence based on historical selling prices, current market conditions and forecasted product demand, to reduce

inventory to net realizable value.

*Property and Equipment*

Property and equipment, carried at cost, is depreciated using the straight-line method over the estimated useful lives of

the assets. The cost and related accumulated depreciation of assets sold or retired is removed from the accounts with any

resulting gain or loss included in net loss in the consolidated statement of operations. Maintenance and repairs are

charged to expense as incurred. Major renewals and betterments that extend useful life are capitalized.

Leasehold improvements are depreciated over the shorter of the estimated useful lives of the assets or the contractual

term of the lease, with consideration of lease renewal options if renewal appears probable.

Estimated useful lives of the Company's property and equipment by major asset category are as follows:

---

| | |
|:---|:---|
| Leasehold improvements | 5 to 15 years |
| Furniture and equipment | 3 to 15 years |
| Production machinery | 3 to 7 years |
| Computer equipment and software | 3 to 12 years |

---

*Goodwill and Intangible Assets, Net*

Goodwill is the difference between the purchase price of a company and the fair market value of the acquired company's

net identifiable assets. The Company's intangible assets include developed technologies and trade names/trademarks.

Definite-lived intangible assets are being amortized using the straight-line method over their estimated lives, ranging from

8-10 years.

*Asset Impairment Charges*

<u>Long-lived Assets and Definite-lived Intangible Assets</u>

The Company reviews its long-lived assets and definite-lived intangible assets for impairment whenever events or

changes in circumstances indicate that the carrying amount of an individual asset or asset group may not be recoverable.

When evaluating long-lived assets for potential impairment, the Company first compares the carrying value of the asset to

the estimated future cash flows (undiscounted and without interest charges plus proceeds expected from disposition, if

any). If the estimated undiscounted cash flows are less than the carrying value of the asset, the Company calculates an

impairment loss. The impairment loss calculation compares the carrying value of the asset to the asset's estimated fair

value. When the Company recognizes an impairment loss, the carrying amount of the asset is reduced to estimated fair

value based on discounted cash flows, quoted market prices or other valuation techniques. Assets to be disposed of are

reported at the lower of the carrying amount of the asset or fair value less costs to sell. The Company reviews retail stores

by asset group, defined by designated market areas, for potential impairment based on historical cash flows, lease

termination provisions and expected future operating results. If the Company recognizes an impairment loss for a

depreciable long-lived asset or asset group, the adjusted carrying amount becomes its new cost basis and will be

depreciated (amortized) over the remaining useful life.

<u>Goodwill and Indefinite-lived Intangible Assets</u>

Goodwill and indefinite-lived intangible assets are not amortized but are tested for impairment annually, or when there are

indicators of impairment, using a fair value approach. The goodwill impairment test involves a comparison of the fair value

of a reporting unit with its carrying value. Fair value is determined using a market-based approach utilizing widely

accepted valuation techniques, including quoted market prices and the Company's market capitalization. The Company

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| **60 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

has only one reporting unit, which has a negative carrying value. The reporting unit had a goodwill balance of $64 million

at January 3, 2026 and December 28, 2024. Indefinite-lived intangible assets are assessed for impairment by comparing

the carrying value of an asset with its fair value. If the carrying value exceeds fair value, an impairment loss is recognized

in an amount equal to the excess. Based on the Company's 2025 assessments, it determined there was no impairment.

*Other Investments*

The Company made a payment of $3 million during the second quarter of 2025 to secure contractual rights from a

strategic product-development partner. This payment was included in prepaid expenses in the Company's consolidated

balance sheet and as an investing activity in the Company's consolidated statement of cash flows. In the third quarter of

2025, the Company made the decision to end business operations with the strategic-development partner. In connection

with this decision, the Company evaluated the recoverability of assets associated with those operations and determined

that the carrying amounts of those assets were unlikely to be recoverable and recorded an impairment charge of

$16 million, which is included in restructuring costs in the consolidated statements of operations for the year ended

January 3, 2026.

*Warranty Liabilities*

The Company provides a standard limited warranty on most of the products it sells. The estimated warranty costs, which

are expensed at the time of sale and included in cost of sales, are based on historical trends and warranty claim rates

incurred by the Company and are adjusted for any current trends as appropriate. The majority of the Company's warranty

claims are incurred within the first year. The Company's warranty liability contains uncertainties because its warranty

obligations cover an extended period of time and require management to make estimates for claim rates and the projected

cost of materials and freight associated with sending replacement parts to customers. The Company regularly assesses

and adjusts the estimate of accrued warranty claims by updating claims rates for actual trends and projected claim costs.

The warranty liabilities are included in other current liabilities and other non-current liabilities in the consolidated balance

sheet.

The Company classifies as non-current those estimated warranty costs expected to be paid out in greater than one year.

The activity in the accrued warranty liabilities account was as follows (in thousands):

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| Balance at beginning of period | $6947 | $8503 | $8997 |
| Additions charged to costs and expenses for current-year sales | 10171 | 13821 | 15939 |
| Deductions from reserves | (10834) | (14657) | (16438) |
| Change in liabilities for pre-existing warranties during the current <br>year, including expirations<br>| (628) | (720) | 5 |
| Balance at end of period | $5656 | $6947 | $8503 |

---

The Company also offers the option for customers to purchase an extended warranty contract through an unrelated third

party. The extended warranty extends parts and labor coverage on their purchase. Extended warranty revenue and

premium remitted to the underwriter are recognized at the time of delivery because the third party is the primary obligor

under these contracts.

*Fair Value Measurements*

Fair value measurements are reported in one of three levels based on the lowest level of significant input used:

• Level 1 – observable inputs such as quoted prices in active markets;

• Level 2 – inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

• Level 3 – unobservable inputs in which there is little or no market data, which require the reporting entity to develop its

own assumptions.

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|:---|:---|
| **61 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

The Company generally estimates fair value of long-lived assets, including its retail stores, using the income approach,

which the Company based on estimated future cash flows (discounted and with interest charges). The inputs used to

determine fair value relate primarily to future assumptions regarding sales volumes, gross profit rates, retail store

operating expenses and applicable probability weightings regarding future alternative uses. These inputs are categorized

as Level 3 inputs under the fair value measurements guidance. The inputs used represent management's assumptions

about what information market participants would use in pricing the assets and are based upon the best information

available at the balance sheet date.

<u>Non-Recurring Fair Value Measurements</u>

In 2025, the Company initiated cost savings and operational efficiencies to reduce operating expenses and accelerate

gross margin initiatives. As a result the Company recorded $50.7 million of restructuring costs in 2025. Refer to Note 11,

*Restructuring Costs* for additional information. In the $50.7 million, we recorded $30.9 million of long-lived asset

impairment charges primarily related to lease right-of-use assets, property and equipment and strategic partner long-lived

assets. The restructuring costs are included on the Company's consolidated statements of operation. All non-recurring fair

value remeasurements discussed above were based on significant unobservable inputs (Level 3). The remaining carrying

value of net long-lived assets subject to impairment approximates fair value and was immaterial as of January 3, 2026.

*Shareholders' Deficit*

<u>Dividends</u>

Under the Company's Amended and Restated Credit and Security Agreement, dated as of February 14, 2018 (as

amended, supplemented or otherwise modified from time to time), among U.S. Bank National Association, as

Administrative Agent, Swing Line Lender and Issuing Lender, and certain other financial institutions party thereto (the

"Credit Agreement"), the Company is restricted from paying cash dividends, subject to narrow exceptions. However, Sleep

Number has not historically paid, and has no current plans to pay, cash dividends on the Company's common stock.

<u>Share Repurchases</u>

At January 3, 2026, there was $348 million remaining authorization under the $600 million board-approved share

repurchase program. There is no expiration date governing the period over which the Company can repurchase shares.

Any repurchased shares are constructively retired and returned to an unissued status. The cost of stock repurchases is

first charged to additional paid-in-capital. Once additional paid-in capital is reduced to zero, any additional amounts are

charged to accumulated deficit.

*Revenue Recognition*

The Company recognizes revenue when control of the promised goods or services is transferred to its customers in an

amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. Revenue

recognized excludes sales taxes. Amounts billed to customers for delivery and setup are included in net sales. For most

products, the Company receives payment before or promptly after the products or services are delivered to the customer.

The Company accepts sales returns of most products during a 100-night trial period. Accrued sales returns represent a

refund liability for the amount of consideration that the Company does not expect to be entitled to because it will be

refunded to customers. The refund liability estimate is based on historical return rates and is adjusted for any current

trends as appropriate. Each reporting period, the Company remeasures the liability to reflect changes in the estimate, with

a corresponding adjustment to net sales.

Sleep Number beds sold with SleepIQ technology contain multiple performance obligations including the bed, and

SleepIQ hardware and software. The Company analyzes its multiple performance obligations to determine whether they

are distinct and can be separated or whether they must be accounted for as a single performance obligation. The

Company determined that beds sold with the SleepIQ technology have two performance obligations consisting of: (i) the

bed; and (ii) SleepIQ hardware and software. SleepIQ hardware and software are not separable as the hardware and

related software are not sold separately and the software is integral to the hardware's functionality. Prior to the fourth

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|:---|:---|
| **62 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

quarter of fiscal 2025, the Company determined the transaction price for multiple performance obligations based on their

relative standalone selling prices. In the fourth quarter of fiscal 2025, the Company determined the transaction price for

multiple performance obligations based on a cost plus margin approach. The Company determined the cost plus margin

approach was the most reasonable approach based on the significance of the SleepIQ technology. The Company

determined an observable price is not available for SleepIQ. The Company estimated the standalone selling price by (1)

identifying the expected costs of providing the good or service and (2) adding an appropriate margin that reflects market

assumptions for similar offerings. The performance obligation related to the bed is satisfied at a point in time. The

performance obligation related to SleepIQ technology is satisfied over time based on the ongoing access and usage by

the customer of software essential to the functionality of SleepIQ technology. The deferred revenue and costs related to

SleepIQ technology are recognized on a straight-line basis over the estimated period of benefit to the customer of

4.5 years because its inputs are generally expended evenly throughout the performance period.

See Note 9, *Revenue Recognition*, for additional information on revenue recognition and sales returns.

*Cost of Sales, Sales and Marketing, General and Administrative (G&A) and Research & Development (R&D) Expenses*

The following tables summarize the primary costs classified in each major expense category (the classification of which

may vary within the Company's industry):

---

| | | | |
|:---|:---|:---|:---|
| | **Cost of Sales** | | **Sales & Marketing** |
| •  | Costs associated with purchasing, manufacturing, shipping, <br>handling and delivering the Company's products to its retail <br>stores and customers, including payroll and benefits; | **•** | Advertising, marketing and media production; |
|  | Costs associated with purchasing, manufacturing, shipping, <br>handling and delivering the Company's products to its retail <br>stores and customers, including payroll and benefits; | **•** | Marketing and selling materials such as brochures, videos, <br>websites, customer mailings and in-store signage;<br>|
| **•** | Physical inventory losses, scrap and obsolescence; | **•** | Payroll and benefits for sales and customer service staff; |
| **•** | Purchase commitment obsolescence; | **•** | Store occupancy costs; |
| **•** | Related occupancy and depreciation expenses; | **•** | Store depreciation expense; |
| **•** | Costs associated with returns and exchanges; and | **•** | Credit card processing fees; and |
| **•** | Estimated costs to service customer warranty claims. | **•** | Promotional financing costs. |
|  | **G&A** |  | **R&D**<sup>(1)</sup> |
| **•** | Payroll and benefit costs for corporate employees, including <br>information technology, legal, human resources, finance, sales <br>and marketing administration, investor relations and risk <br>management; | **•** | Internal labor and benefits related to research and development <br>activities;<br>|
|  | Payroll and benefit costs for corporate employees, including <br>information technology, legal, human resources, finance, sales <br>and marketing administration, investor relations and risk <br>management; | **•** | Outside consulting services related to research and <br>development activities; and<br>|
| **•** | Occupancy costs of corporate facilities; | **•** | Testing equipment related to research and development  |
| **•** | Depreciation related to corporate assets; |  | ___________________________<br><sup>(1)</sup> Costs incurred in connection with R&D are charged to expense as incurred. |
| **•** | Information hardware, software and maintenance; |  | ___________________________<br><sup>(1)</sup> Costs incurred in connection with R&D are charged to expense as incurred. |
| **•** | Insurance; |  |  |
| **•** | Investor relations costs; and |  |  |
| **•** | Other overhead costs. |  |  |

---

*Leases*

The Company determines if an arrangement is a lease at inception. Right-of-use (ROU) assets and operating lease

liabilities are recognized at the lease commencement date based on the estimated present value of future lease payments

over the lease term. The Company elected the option to not separate lease and non-lease components for all of its

leases. Most of the Company's leases do not provide an implicit interest rate nor is the rate available to it from its lessors.

As an alternative, the Company uses its estimated incremental borrowing rate, which is derived from information available

at the lease commencement date, including publicly available data, in determining the present value of lease payments.

Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet as an ROU asset or

operating lease liability. The Company recognizes operating lease costs for these short-term leases, primarily small

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|:---|:---|
| **63 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

equipment leases, on a straight-line basis over the lease term. At January 3, 2026, the Company's finance lease ROU

assets and associated lease liabilities were not significant.

See Note 7, *Leases*, for further information regarding the Company's operating leases and Note 11*, Restructuring Costs*,

for further information regarding the Company's cost savings for right-of-use assets.

*Pre-opening Costs*

Costs associated with the start-up and promotion of new retail store openings are expensed as incurred.

*Advertising Costs*

The Company incurs advertising costs associated with print, digital and broadcast advertisements. Advertising costs are

charged to expense when the ad first runs. Advertising expense was $197 million, $248 million and $272 million in 2025,

2024 and 2023, respectively and is included in sales and marketing expenses on the consolidated statement of

operations. Advertising costs deferred and included in prepaid expenses in the consolidated balance sheet were not

significant at January 3, 2026 or December 28, 2024, respectively.

*Insurance*

The Company is self-insured for certain losses related to health and workers' compensation claims, although the

Company obtains third-party insurance coverage to limit exposure to these claims. The Company estimates its self-

insured liabilities using a number of factors including historical claims experience and analysis of incurred but not reported

claims. The Company's self-insurance liability was $10 million and $11 million at January 3, 2026 and December 28, 2024,

respectively. At January 3, 2026 and December 28, 2024, $5 million and $7 million, respectively, were included in current

liabilities: compensation and benefits in the consolidated balance sheet and $5 million and $4 million, respectively, were

included in other non-current liabilities in the consolidated balance sheet.

*Software Capitalization*

For software developed or obtained for internal use, the Company capitalizes direct external costs associated with

developing or obtaining internal-use software. In addition, the Company capitalizes certain payroll and payroll-related

costs for employees who are directly involved with the development of such applications. Capitalized costs related to

internal-use software under development are treated as construction-in-progress until the program, feature or functionality

is ready for its intended use, at which time depreciation commences. The Company expenses any data conversion or

training costs as incurred. Capitalized software costs are included in property and equipment, net in the consolidated

balance sheet.

The Company capitalizes costs incurred with the implementation of a cloud computing arrangement that is a service

contract, consistent with its policy for software developed or obtained for internal use. The capitalized implementation

costs of cloud computing arrangements are expensed over the term of the cloud computing arrangement in the same line

item in the statement of operations as the associated hosting fees. Capitalized costs incurred with the implementation of a

cloud computing arrangement are included in prepaid expenses and other non-current assets in the Company's

consolidated balance sheet, and in operating cash flows in its consolidated statement of cash flows.

*Stock-based Compensation*

The Company compensates officers, directors and key employees with stock-based compensation under stock plans

approved by its shareholders and administered under the supervision of the Company's Board of Directors (Board). At

January 3, 2026, a total of 3.4 million shares were available for future grant. These plans include non-qualified stock

options and stock awards.

The Company records stock-based compensation expense based on the award's fair value at the grant date and the

awards that are expected to vest. The Company recognizes stock-based compensation expense over the period during

which an employee is required to provide services in exchange for the award. The Company reduces compensation

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| **64 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

expense by estimated forfeitures. Forfeitures are estimated using historical experience and projected employee turnover.

The Company includes, as part of cash flows from operating activities, the benefit of tax deductions in excess of

recognized stock-based compensation expense. In addition, excess tax benefits or deficiencies are recorded as discrete

adjustments to income tax expense.

<u>Stock Options</u>

Stock option awards are granted at exercise prices equal to the closing price of the Company's stock on the grant date.

Generally, options vest proportionally over three years and expire after 10 years. Compensation expense is recognized

ratably over the vesting period.

The Company determines the fair value of stock options granted and the resulting compensation expense at the date-of-

grant using the Black-Scholes-Merton option-pricing model. Descriptions of significant assumptions used to estimate the

expected volatility, risk-free interest rate and expected term are as follows:

*Expected Volatility* – expected volatility was determined based on implied volatility of the Company's traded options

and historical volatility of the Company's stock price.

*Risk-Free Interest Rate* – the risk-free interest rate was based on the implied yield available on U.S. Treasury zero-

coupon issues at the date of grant with a term equal to the expected term.

*Expected Term* – expected term represents the period that the Company's stock-based awards are expected to be

outstanding and was determined based on historical experience and anticipated future exercise patterns, giving

consideration to the contractual terms of unexercised stock-based awards.

<u>Stock Awards</u>

The Company issues stock awards to certain employees in conjunction with its stock-based compensation plan. The stock

awards generally vest over three years based on continued employment (time-based). Compensation expense related to

stock awards, except for stock awards with a market condition, is determined on the grant date based on the publicly

quoted closing price of the Company's common stock and is charged to earnings on a straight-line basis over the vesting

period. Stock awards with a market condition are valued using a Monte Carlo simulation model. The significant

assumptions used to estimate the expected volatility and risk-free interest rate are similar to those described above in

Stock Options.

Certain time-based stock awards have a performance condition (performance-based). The final number of shares earned

for performance-based stock awards and the related compensation expense is adjusted up or down to the extent the

performance target is met. The actual number of shares that will ultimately be awarded range from 0% - 200% of the

targeted amount for the 2025, 2024 and 2023 awards. The Company evaluates the likelihood of meeting the performance

targets at each reporting period and adjusts compensation expense, on a cumulative basis, based on the expected

achievement of each of the performance targets. For performance-based stock awards granted in 2025, 2024 and 2023,

the performance targets are based on growth in net sales and in operating profit, and the performance periods are fiscal

2025 through 2027, 2024 through 2026 and fiscal 2023 through 2025, respectively.

See Note 8, *Shareholders' Deficit*, for additional information on stock-based compensation.

*Income Taxes*

The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to temporary

differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax

bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the

years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on

deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A valuation

allowance is established for any portion of deferred tax assets that are not considered more likely than not to be realized.

The Company evaluates all available positive and negative evidence, including its forecast of future taxable income, to

assess the need for a valuation allowance on its deferred tax assets.

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|:---|:---|
| **65 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

The Company records a liability for unrecognized tax benefits from uncertain tax positions taken, or expected to be taken,

in the Company's tax returns. The Company follows a two-step approach to recognizing and measuring uncertain tax

positions. The first step is to evaluate the tax position for recognition by determining if the available evidence indicates it is

more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation

processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of

being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax

positions and tax benefits, which may require periodic adjustments, and may not accurately forecast actual outcomes.

The Company classifies net interest and penalties related to income taxes as a component of income tax expense in its

consolidated statement of operations.

Refer to Note 12, *Income Taxes* for further information on the Company's income taxes.

*Net Loss Per Share*

The Company calculates basic net loss per share by dividing net loss by the weighted-average number of common shares

outstanding during the period. It calculates diluted net loss per share based on the weighted-average number of common

shares outstanding adjusted by the number of potentially dilutive common shares as determined by the treasury stock

method. Potentially dilutive shares consist of stock options and stock awards.

*Sources of Supply*

The Company currently obtains materials and components used to produce its beds from outside sources. As a result, the

Company is dependent upon suppliers that in some instances, are its sole source of supply, or supply the vast majority of

the particular component or material. The Company continuously evaluates opportunities to dual-source key components

and materials. The failure of one or more of the Company's suppliers to provide it with materials or components on a

timely basis could significantly impact the consolidated results of operations and net loss per share. While the Company

believes that these materials and components, or suitable replacements, could be obtained from other sources in the

event of a disruption or loss of supply, it may not be able to find alternative sources of supply or alternative sources of

supply on comparable terms and an unexpected loss of supply over a short period of time may not allow the Company to

replace these sources in the ordinary course of business.

*Going Concern*

The Company's financial statements have been prepared under the assumption that the Company will continue as a going

concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business for the

foreseeable future.

Historically, the Company has relied principally on liquidity generated from operating activities to fund the Company's day-

to-day operations and service its debt. Over the past three years, the Company has a history of net losses. For 2025, net

loss was $132 million. Although the Company continues to pursue its turnaround strategy "Sleep Number Shifts," centered

on product, marketing and distribution, as well as ongoing cost savings and operating efficiencies, to reignite growth and

increase financial resilience, the timing and realization of its turnaround strategy cannot be guaranteed to ensure sufficient

cash flow is generated to provide liquidity to meet the Company's obligations. In addition, the Company anticipates that it

will not remain in compliance with the financial covenants of its Credit Agreement for the next twelve months. These

conditions and events raise substantial doubt about the Company's ability to continue as a going concern.

Management's plan to address the substantial doubt about the Company's ability to continue as a going concern, as

described above, includes the following actions:

• execute the Company's turnaround strategy centered on product, marketing and distribution with ongoing cost

savings and operating efficiencies to reignite growth and increase financial resilience;

• engage in negotiations with the lenders in its Credit Agreement with the goal of amending or waiving financial

covenants and certain other provisions of its credit facility; and

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| **66 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

• engaged financial advisors to assist in negotiating with the lenders and identifying and securing additional capital

options, alternative financing arrangements, strategic alternatives, or other comprehensive solutions to address

the Company's capital structure and leverage needs to return to growth and create long-term value.

There can be no assurance of the Company's ability to realize these plans. As a result, the Company has concluded that

management's plans do not alleviate substantial doubt about the Company's ability to continue as a going concern for at

least one year from the date of issuance of these financial statements.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of

recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this

uncertainty.

*Recently Adopted and Recently Issued Accounting Pronouncements*

<u>Accounting Pronouncements Recently Adopted</u>

In the fourth quarter of 2025, the Company prospectively adopted the annual disclosure requirements of Accounting

Standards Update ("ASU") 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." The

amendments in this ASU require a public business entity to disclose a tabular tax rate reconciliation, using both

percentages and currency, with specific categories. A public business entity is also required to provide a qualitative

description of the states and local jurisdictions that make up the majority of the effect of the state and local income tax

category and the net amount of income taxes paid, disaggregated by federal, state and foreign taxes and also

disaggregated by individual jurisdictions. The Company has adopted ASU 2023-09 on a prospective basis, which resulted

in additional disclosures, but did not have any other impact on its consolidated financial statements. See Note 12, *Income* 

*Taxes*, for applicable income tax-related disclosures required by this guidance.

<u>Accounting Pronouncements Issued But Not Yet Effective</u>

In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense

Disaggregation Disclosures (Subtopic 220-40)", which requires public business entities to disclose in the notes to the

financial statements more detailed information about the types of expenses included in certain expense captions in the

consolidated financial statements, including purchases of inventory, employee compensation, and depreciation and

amortization. The amendments are effective for the Company beginning with the 2027 annual period and in interim

periods beginning in 2028. Early adoption is permitted. The ASU may be adopted prospectively or retrospectively. The

Company is currently evaluating the impact of ASU 2024-03 on its consolidated financial statements and related

disclosures.

In July 2025, the FASB issued ASU 2025-05, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit

Losses for Accounts Receivable and Contract Assets", which provides a practical expedient related to the estimation of

expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for

under Topic 606, including those assets acquired in a business combination. The practical expedient permits an entity to

assume that current conditions as of the balance sheet date do not change for the remaining life of the current accounts

receivable and current contract assets. This guidance is effective for the Company for its fiscal year and all interim periods

beginning January 4, 2026 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the

impact of the adoption of this guidance on its consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11, "Interim Reporting - Narrow Scope Improvements (Topic 270), which

clarifies the guidance to improve the consistency of interim financial reporting. The guidance provides a comprehensive

list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end

of the last annual reporting period that have a material impact on the entity. The guidance is effective for the Company for

its fiscal year and all interim periods beginning with the 2027 annual period and in interim periods beginning in 2028. Early

adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated

financial statements.

---

| | |
|:---|:---|
| **67 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

In December 2025, the FASB issued ASU 2025-12, "Codification Improvements", which makes amendments to various

topics within the Accounting Standards Codification intended to clarify existing guidance and correct minor

inconsistencies. The guidance is effective for the Company beginning with the 2027 annual period and in interim periods

beginning in 2028. Early adoption is permitted. Certain amendments require retrospective application. The Company is

currently evaluating the impact of the adoption of this guidance on its consolidated financial statements.

Currently, management does not believe that any other recently issued, but not yet effective accounting pronouncements,

if currently adopted, would have a material impact on the Company's consolidated financial statements.

**2. Fair Value Measurements**

At January 3, 2026 and December 28, 2024, the Company had $17 million and $19 million, respectively, of debt and

equity securities that fund its deferred compensation plan and are classified in other non-current assets. The Company

also had corresponding deferred compensation plan liabilities of $17 million and $19 million at January 3, 2026 and

December 28, 2024, respectively, which are included in other non-current liabilities. The majority of the debt and equity

securities are Level 1 as they trade with sufficient frequency and volume to enable it to obtain pricing information on an

ongoing basis. Unrealized gains/(losses) on the debt and equity securities offset those associated with the corresponding

deferred compensation plan liabilities.

**3. Inventories**

Inventories consisted of the following (in thousands):

---

| | | |
|:---|:---|:---|
|  | **January 3,**<br>**2026**<br>| **December 28,**<br>**2024**<br>|
| Raw Materials | $5842 | $11434 |
| Work in Progress | 137 | 130 |
| Finished goods | 76254 | 91588 |
|  | $82233 | $103152 |

---

Finished goods inventories consisted of the following (in thousands):

---

| | | |
|:---|:---|:---|
|  | **January 3,**<br>**2026**<br>| **December 28,**<br>**2024**<br>|
| Finished beds, including deliveries in-transit to those customers who have utilized <br>home delivery services<br>| $33135 | $34725 |
| Finished components that were ready for assembly for the completion of beds | 28249 | 39634 |
| Retail accessories | 14870 | 17229 |
|  | $76254 | $91588 |

---

**4. Property and Equipment**

Property and equipment consisted of the following (in thousands):

---

| | | |
|:---|:---|:---|
|  | **January 3,** <br>**2026**<br>| **December 28,**<br>**2024**<br>|
| Leasehold improvements | $127311 | $136127 |
| Furniture and equipment | 144877 | 153106 |
| Production machinery, computer equipment and software | 272407 | 300486 |
| Construction in progress | 3575 | 3310 |
| Less: Accumulated depreciation and amortization | (461642) | (463455) |
|  | $86528 | $129574 |

---

---

| | |
|:---|:---|
| **68 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

Depreciation for 2025, 2024 and 2023 was $53 million, $65 million and $71 million, respectively.

**5. Goodwill and Intangible Assets, Net**

*Goodwill and Indefinite-lived Intangible Assets*

Goodwill was $64 million at January 3, 2026 and December 28, 2024. Indefinite-lived trade name/trademarks totaled

$1.4 million at January 3, 2026 and December 28, 2024.

*Definite-lived Intangible Assets*

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **January 3, 2026** | **January 3, 2026** | **December 28, 2024** | **December 28, 2024** |
| | **Gross** <br>**Carrying**<br>**Amount**<br>| **Accumulated**<br>**Amortization**<br>| **Gross** <br>**Carrying**<br>**Amount**<br>| **Accumulated**<br>**Amortization**<br>|
| Developed technologies | $18851 | $18851 | $18851 | $18851 |
| Patents | 1972 | 1229 | 1972 | 1002 |
|  | $20823 | $20080 | $20823 | $19853 |

---

There was no amortization expense for developed technologies in 2025 or 2024. Amortization expense for developed

technologies was $1.2 million in 2023. Amortization expense for patents was $0.2 million, in each of 2025, 2024 and 2023.

Annual amortization for definite-lived intangible assets for subsequent years are as follows (in thousands):

---

| | |
|:---|:---|
| 2026 | $222 |
| 2027 | 222 |
| 2028 | 155 |
| 2029 | 99 |
| 2030 | 45 |
| Total future amortization for definite-lived intangible assets | $743 |

---

**6. Credit Agreement**

As of January 3, 2026, the Company's credit facility had a total commitment amount of $655 million. The credit facility, as

amended, is for general corporate purposes and to meet seasonal working capital requirements. The Credit Agreement

provides the lenders with a collateral security interest in substantially all of the Company's assets and those of its

subsidiaries and requires the Company to comply with, among other things, a maximum net leverage ratio and a minimum

interest coverage ratio.

The following tables summarizes the Company's borrowings under the credit facility ($ in thousands):

---

| | | |
|:---|:---|:---|
|  | **January 3,** <br>**2026**<br>| **December 28,** <br>**2024**<br>|
| Outstanding borrowings | $588200 | $546600 |
| Outstanding letters of credit | $8800 | $7147 |
| Additional borrowing capacity | $58000 | $123753 |
| Weighted-average interest rate | 7.8% | 7.6% |

---

On November 4, 2025, the Company amended the Credit Agreement. The amendment, among other things: (a) extends

the maturity date of the Credit Agreement to December 3, 2027; (b) reduces the revolving credit facility from $485 million

to $475 million, which decreases further to $465 million on July 31, 2026; (c) replaces the leverage-based pricing grids

---

| | |
|:---|:---|
| **69 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

used to determine the Applicable Margin and Applicable Commitment Fee Rate (each as defined in the Credit Agreement)

in favor of (I) with respect to Applicable Margin for Term SOFR Loans, (x) 4.0% until December 31, 2026 and (y) 4.25%

starting January 1, 2027 and continuing thereafter, and (II) with respect to the Applicable Commitment Fee Rate, (x)

0.50% until December 31, 2026 and (y) 0.75% starting January 1, 2027 and continuing thereafter; (d) on each Regularly

Scheduled Payment Date (as defined in the Credit Agreement) occurring on and after March 31, 2027, increases the

amortization of outstanding term loans an additional $1,250,000 (for an aggregate scheduled principal payment of

$3,750,000); (e) terminates the accordion feature; (f) adjusts the permissible maximum Net Leverage Ratio (as defined in

the Credit Agreement) to (I) 5.25 to 1.00 for the quarterly reporting period ended September 27, 2025, (II) 4.50 to 1.00 for

the quarterly reporting period ending January 3, 2026, (III) 4.75 to 1.00 for the quarterly reporting period ending April 4,

2026, (IV) 4.80 to 1.00 for the quarterly reporting period ending July 4, 2026, and (V) 4.00 to 1.00 for each quarterly

reporting period thereafter; (g) adjusts the Liquidity financial covenant so that the Company must ensure that liquidity is no

lower than $30 million until September 30, 2026, and $40 million for each monthly reporting period thereafter; (h) adjusts

the permissible minimum Interest Coverage Ratio to (I) 1.50 to 1.00 for the quarterly reporting period ended September

27, 2025, (II) 2.10 to 1.00 for the quarterly reporting periods ending January 3, 2026 and April 4, 2026, (III) 1.80 to 1.00 for

the quarterly reporting period ending July 4, 2026, (IV) 2.10 to 1.00 for the reporting period ending October 3, 2026, and

(V) 2.20 to 1.00 for each quarterly reporting period occurring thereafter; (i) adds a new quarterly minimum EBITDA

covenant test that begins for the quarterly reporting period ending April 4, 2026; (j) adjusts the consolidated EBITDA

calculation to include an addback for certain expenses and costs incurred for the trailing twelve months for discontinued

operations, downsized functions and employment expenses for laid-off employees; and (k) provides for additional and

more frequent reporting requirements. In connection with the amendment, the Company also agreed to pay the lenders

certain amendment fees and to reimburse the lenders for certain expenses.

The Company was in compliance with all financial covenants as of January 3, 2026.

**7. Leases**

The Company leases its retail, office and manufacturing space under operating leases which, in addition to the minimum

lease payments, may require payment of a proportionate share of the real estate taxes and certain building operating

expenses. While the Company's local market development approach generally results in long-term participation in given

markets, its retail store leases generally provide for an initial lease term of five to 10 years. Sleep Number's office and

manufacturing leases provide for an initial lease term of up to 15 years. In addition, its mall-based retail store leases may

require payment of variable rent based on net sales in excess of certain thresholds. Certain leases may contain options to

extend the term of the original lease. The exercise of lease renewal options is at the Company's sole discretion. Lease

options are included in the lease term only if exercise is reasonably certain at lease commencement. The Company lease

agreements do not contain any material residual value guarantees. The Company also leases vehicles and certain

equipment under operating leases with an initial lease term of three to six years.

The Company's operating lease costs include facility, vehicle and equipment lease costs, but exclude variable lease costs.

Operating lease costs are recognized on a straight-line basis over the lease term, after consideration of rent escalations

and rent holidays. The lease term for purposes of the calculation begins on the earlier of the lease commencement date or

the date the Company takes possession of the property. During lease renewal negotiations that extend beyond the original

lease term, the Company estimates straight-line rent expense based on current market conditions. Variable lease costs

are recorded when it is probable the cost has been incurred and the amount can be reasonably estimated. Future

payments for real estate taxes and certain building operating expenses for which the Company is obligated are not

included in operating lease costs.

At January 3, 2026, the Company's finance lease right-of-use assets and lease liabilities were not significant.

The Company evaluates its operating lease ROU assets for impairment whenever events or changes in circumstances

indicate that the carrying amount of the assets may not be recoverable. During 2025, certain retail locations have ceased

operations ("go-dark stores") but remain under lease obligations. As a result, the Company recorded impairment charges

of $17.7 million, which are included in restructuring costs in the consolidated statements of operations and cash flows.

The Company continues to monitor its real estate footprint and may incur additional impairment charges in future periods.

---

| | |
|:---|:---|
| **70 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

Lease costs were as follows (in thousands):

---

| | | | |
|:---|:---|:---|:---|
| | **2025** | **2024** | **2023** |
| Operating lease costs<sup>(1)</sup> | $104797 | $107049 | $113510 |
| Variable lease costs<sup>(2)</sup> | $174 | $43 | $278 |

---

<sup>(1)</sup> Includes short-term lease costs which are not significant.

<sup>(2)</sup> Variable lease costs include adjustments to percentage rent.

The maturities of operating lease liabilities as of January 3, 2026, were as follows<sup>(1)</sup> (in thousands):

---

| | |
|:---|:---|
| 2026 | $102010 |
| 2027 | 88395 |
| 2028 | 75387 |
| 2029 | 53696 |
| 2030 | 39629 |
| Thereafter | 56863 |
| Total operating lease payments<sup>(2)</sup> | 415980 |
| Less: Interest | 61678 |
| Present value of operating lease liabilities | $354302 |

---

<sup>(1)</sup> Total operating lease payments exclude $3 million of legally binding minimum lease payments for leases signed but not yet commenced.

<sup>(2)</sup> Includes the current portion of $81 million for operating lease liabilities.

Other information related to operating leases was as follows:

---

| | | |
|:---|:---|:---|
|  | **January 3,**<br>**2026**<br>| **December 28,**<br>**2024**<br>|
| Weighted-average remaining lease term (years) | 5.0 | 5.4 |
| Weighted-average discount rate | 6.7% | 6.6% |

---

---

| | | | |
|:---|:---|:---|:---|
| (in thousands) | **2025** | **2024** | **2023** |
| Cash paid for amounts included in present value of operating lease <br>liabilities<sup>(1)</sup><br>| $105915 | $108116 | $108294 |
| Right-of-use assets obtained in exchange for operating lease <br>liabilities<br>| $58281 | $57712 | $69396 |

---

<sup>(1)</sup> Cash paid for amounts included in present value of operating lease liabilities are included within the change in other accruals and liabilities within the

Consolidated Statement of Cash Flows offset by non-cash right-of-use asset amortization and lease liability accretion.

**8. Shareholders' Deficit**

**Stock-Based Compensation Expense**

Total stock-based compensation expense was as follows (in thousands):

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| Stock awards<sup>(1)</sup> | $4641 | $8157 | $11053 |
| Stock options | 1641 | 3287 | 3802 |
| Total stock-based compensation expense<sup>(1)</sup> | $6282 | $11444 | $14855 |

---

<sup>(1)</sup> Changes in annual stock-based compensation expense includes the cumulative impact of the change in the expected achievements of certain

performance targets.

---

| | |
|:---|:---|
| **71 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

*Stock Options*

A summary of the Company's stock option activity was as follows (in thousands, except per share amounts and years):

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | Stock<br>Options<br>| Weighted-<br>Average<br>Exercise<br>Price per<br>Share<br>| Weighted-<br>Average<br>Remaining<br>Contractual<br>Term (years)<br>| Aggregate<br>Intrinsic<br>Value<sup>(1)</sup><br>|
| Outstanding at December 28, 2024 | 942 | $40.85 | 5.6 | $— |
| Granted |  |  |  |  |
| Exercised |  |  |  |  |
| Canceled/Forfeited | (182) | 33.86 |  |  |
| Outstanding at January 3, 2026 | 760 | $42.47 | 2.7 | $— |
| Exercisable at January 3, 2026 | 739 | $42.85 | 2.6 | $— |
| Vested and expected to vest at January 3, 2026 | 755 | $42.51 | 2.7 | $— |

---

<sup>(1)</sup> Aggregate intrinsic value includes only those options where the current share price is equal to or greater than the share price on the date of grant.

Other information pertaining to options was as follows (in thousands, except per share amounts):

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| Weighted-average grant date fair value of stock options granted | $— | $— | $16.41 |
| Total intrinsic value (at exercise) of stock options exercised | $— | $— | $298 |

---

There were no grants or exercises of stock options for the fiscal year ended January 3, 2026 or December 28, 2024.

At January 3, 2026, there was $0.3 million of total stock option compensation expense related to non-vested stock options

not yet recognized, which is expected to be recognized over a weighted-average period of 0.5 years.

The assumptions used to calculate the fair value of options granted using the Black-Scholes-Merton option-pricing model

were as follows. There were no grants of new stock option awards for the fiscal year ended January 3, 2026 or

December 28, 2024.

---

| | | | |
|:---|:---|:---|:---|
| **Valuation Assumptions** | **2025** | **2024** | **2023** |
| Expected dividend yield | —% | —% | 0.0% |
| Expected volatility | —% | —% | 64% |
| Risk-free interest rate | —% | —% | 3.8% |
| Expected term (years) |  |  | 5.7 |

---

---

| | |
|:---|:---|
| **72 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

*Stock Awards*

Stock award activity was as follows (in thousands, except per share amounts):

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Time-**<br>**Based**<br>**Stock**<br>**Awards**<br>| **Weighted-**<br>**Average**<br>**Grant Date**<br>**Fair Value**<br>| **Performance-** <br>**Based**<br>**Stock Awards**<br>| **Weighted-**<br>**Average**<br>**Grant Date**<br>**Fair Value**<br>|
| Outstanding at December 28, 2024 | 813 | $18.60 | 777 | $31.74 |
| Granted | 1233 | 7.36 | 751 | 6.36 |
| Vested | (423) | 20.28 |  |  |
| Canceled/Forfeited | (500) | 10.72 | (422) | 35.30 |
| Outstanding at January 3, 2026 | 1123 | $9.12 | 1106 | $13.19 |

---

At January 3, 2026, there was $6.8 million of unrecognized compensation expense related to non-vested time-based

stock awards, which is expected to be recognized over a weighted-average period of 1.8 years, and $3.7 million of

unrecognized compensation expense related to non-vested performance-based stock awards, which is expected to be

recognized over a weighted-average period of 2.1 years.

**Repurchases of Common Stock**

Repurchases of the Company's common stock were as follows (in thousands):

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| Amount repurchased under Board-approved share repurchase <br>program<br>| $— | $— | $— |
| Amount repurchased in connection with the vesting of employee <br>restricted stock grants<br>| 1213 | 768 | 3747 |
| Total amount repurchased (based on trade dates) | $1213 | $768 | $3747 |

---

As of January 3, 2026, the remaining authorization under the Board-approved $600 million share repurchase program

was $348 million.

**Net Loss per Common Share**

The components of basic and diluted net loss per share were as follows (in thousands, except per share amounts):

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| Net loss | $(131958) | $(20334) | $(15287) |
| **Reconciliation of weighted-average shares outstanding:** |  |  |  |
| Basic weighted-average shares outstanding | 22883 | 22606 | 22429 |
| Dilutive effect of stock-based awards |  |  |  |
| Diluted weighted-average shares outstanding | 22883 | 22606 | 22429 |
| Net loss per share – basic and diluted | $(5.77) | $(0.90) | $(0.68) |

---

Additional potential dilutive stock-based awards totaling 1.5 million, 1.2 million and 1.3 million for 2025, 2024 and 2023,

respectively, have been excluded from the diluted net loss per share calculations because these stock-based awards were

anti-dilutive. For 2025, 2024 and 2023, otherwise dilutive stock-based awards of 0.3 million, 0.1 million, and 0.1 million,

respectively, have been excluded from the calculation of diluted weighted-average shares outstanding, as their inclusion

would have had an anti-dilutive effect on net loss per diluted share.

---

| | |
|:---|:---|
| **73 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

**9. Revenue Recognition**

Deferred contract assets and deferred contract liabilities are included in the consolidated balance sheet as follows (in

thousands):

---

| | | |
|:---|:---|:---|
|  | **January 3,** <br>**2026**<br>| **December 28,** <br>**2024**<br>|
| Deferred contract assets included in: |  |  |
| Other current assets | $28704 | $30154 |
| Other non-current assets | 33522 | 48988 |
|  | $62226 | $79142 |

---

---

| | | |
|:---|:---|:---|
|  | **January 3,** <br>**2026**<br>| **December 28,** <br>**2024**<br>|
| Deferred contract liabilities included in: |  |  |
| Other current liabilities | $35690 | $38129 |
| Other non-current liabilities | 40961 | 60988 |
|  | $76651 | $99117 |

---

During the years ended January 3, 2026, December 28, 2024 and December 30, 2023 the Company recognized revenue

of $42 million, $36 million and $36 million, respectively, that was included in the deferred contract liability balance at the

beginning of the year.

Revenue from goods and services transferred to customers at a point in time accounted for approximately 97% of the

Company's revenues for 2025, and 98% for 2024 and 2023.

Net sales consisted of the following (in thousands):

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| Retail stores | $1234593 | $1474250 | $1639073 |
| Online, phone, chat and other | 176857 | 208046 | 248409 |
| Total Company | $1411450 | $1682296 | $1887482 |

---

*Obligation for Sales Returns*

The activity in the sales returns liability account for 2025 and 2024 was as follows (in thousands):

---

| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Balance at beginning of year | $19092 | $22402 |
| Additions that reduce net sales | 67411 | 91375 |
| Deduction from reserves | (73686) | (94685) |
| Balance at end of period | $12817 | $19092 |

---

**10. Profit Sharing and 401(k) Plan**

Under the Company's profit sharing and 401(k) plan, eligible employees may defer up to 50% of their compensation on a

pre-tax basis, subject to Internal Revenue Service limitations. Each pay period, the Company may make a discretionary

contribution equal to a percentage of the employee's contribution. During 2025, 2024 and 2023, the Company's

contributions, net of forfeitures, were $5 million, $7 million and $10 million, respectively. Effective October 10, 2025, the

Company suspended the 401(k) matching contribution due to current business performance.

---

| | |
|:---|:---|
| **74 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

**11. Restructuring Costs**

In the fourth quarter of 2023, the Company initiated cost reduction actions to reduce operating expenses and accelerate

gross margin initiatives and recognized $33.8 million of restructuring costs through December 28, 2024. The Company

has incurred an additional $50.7 million of restructuring costs in 2025. Charges incurred related to this initiative are

primarily comprised of contract termination costs, severance and employee-related benefits, professional fees, right-of-

use asset and property and equipment impairment charges and are included in the restructuring costs line in the

Company's consolidated statement of operations. The Company expects approximately $13 million of additional

restructuring costs to be incurred during 2026, primarily due to lease and other contract termination costs and asset

impairment charges.

During the years ended January 3, 2026 and December 28, 2024, the Company recognized $50.7 million and

$18.1 million respectively, of restructuring costs, as follows (in thousands):

---

| | | |
|:---|:---|:---|
| | **2025** | **2024** |
| Cash restructuring costs: |  |  |
| Contract termination costs<sup>(1)</sup> | $8408 | $7027 |
| Severance and employee-related benefits | 9529 | 3227 |
| Professional fees and other | 1817 | 4634 |
| Total cash restructuring costs | 19754 | 14888 |
| Non-cash restructuring costs: |  |  |
| Asset impairments<sup>(2)</sup> | 30943 | 3178 |
| Total restructuring costs | $50697 | $18066 |

---

<sup>(1)</sup> Primarily comprised of strategic-development partner termination costs and lease termination costs.

<sup>(2)</sup> Primarily comprised of impairments of strategic-development partner long-lived assets, lease right-of-use assets and property and equipment.

The following table provides the activity in the Company's restructuring related liabilities, which are included within

accounts payable, compensation and benefits and other current liabilities on the consolidated balance sheet (in

thousands):

---

| | | |
|:---|:---|:---|
| | **2025** | **2024** |
| Balance at December 28, 2024 | $3341 | $8720 |
| Expenses | 19754 | 14888 |
| Cash payments | (17019) | (20267) |
| Balance at January 3, 2026 | $6076 | $3341 |

---

---

| | |
|:---|:---|
| **75 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

Since the initiation of cost reduction actions in the fourth quarter of 2023, the Company has recognized a cumulative

$84.5 million of restructuring costs, as follows (in thousands):

---

| | |
|:---|:---|
| | **Cumulative** |
| | **January 3, 2026** |
| Cash restructuring costs: |  |
| Contract termination costs <sup>(1)</sup> | $22845 |
| Severance and employee-related benefits | 17722 |
| Professional fees and other | 7561 |
| Total cash restructuring costs | 48128 |
| Non-cash restructuring costs: |  |
| Asset impairments <sup>(2)</sup> | 36363 |
| Total restructuring costs | $84491 |

---

<sup>(1)</sup> Primarily comprised of strategic-development partner termination costs and lease termination costs.

<sup>(2)</sup> Primarily comprised of impairments of strategic-development partner long-lived assets, lease right-of-use assets and property and equipment.

**12. Income Taxes**

The Company has adopted ASU 2023-09 on a prospective basis, which resulted in additional income tax disclosures for

the rate reconciliation and related to income taxes paid for 2025. Given that the Company has elected to adopt ASU

2023-09 prospectively, the 2024 and 2023 rate reconciliation is not disaggregated in accordance with ASU 2023-09 and

the income taxes paid are not presented by jurisdiction.

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted into law. The OBBBA makes permanent key

elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the

business interest expense limitation. ASC 740, "Income Taxes", requires the effects of changes in tax rates and laws on

deferred tax balances to be recognized in the period in which the legislation is enacted. which occurred during the

Company's second quarter of fiscal 2025. Therefore, the Company has reflected the effect of the OBBBA within the

provision for income taxes for the fiscal year ended January 3, 2026.

*Provision for Income Taxes*

Income tax expense (benefit) consisted of the following (in thousands):

---

| | | | |
|:---|:---|:---|:---|
| | **2025** | **2024** | **2023** |
| Current: |  |  |  |
| Federal | $428 | $6904 | $5474 |
| State | 2380 | 1256 | 3106 |
|  | 2808 | 8160 | 8580 |
| Deferred: |  |  |  |
| Federal | 24057 | (12568) | (10151) |
| State | 9119 | (754) | (2895) |
|  | 33176 | (13322) | (13046) |
| Income tax expense (benefit) | $35984 | $(5162) | $(4466) |

---

---

| | |
|:---|:---|
| **76 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

The following table is a reconciliation of the U.S. federal statutory tax rate of 21 percent to the Company's effective tax

rate for the year ended January 3, 2026 in accordance with the guidance in ASU 2023-09, which was adopted

prospectively in 2025.

---

| | | |
|:---|:---|:---|
| | **2025** | **2025** |
| Statutory federal income tax | $(20154) | 21.0% |
| State and local income taxes<sup>(1)</sup> |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;State and local income taxes | 835 | (0.8) |
| &nbsp;&nbsp;&nbsp;&nbsp;Changes in valuation allowance | 9512 | (9.9) |
| Tax credits - research and development tax credit | (1449) | 1.5 |
| Changes in valuation allowance | 45006 | (46.9) |
| Nontaxable or nondeductible items |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation | 2218 | (2.3) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other | 548 | (0.7) |
| Changes in unrecognized tax benefits | (361) | 0.4 |
| Other | (171) | 0.2 |
| Effective income tax | $35984 | (37.5)% |

---

<sup>(1)</sup> State taxes in California, Texas and Minnesota make up the majority of the effect of the state and local tax category.

The following table is a reconciliation of the U.S. federal statutory tax rate of 21 percent to our effective tax rate for the

years ended December 28, 2024 and December 30, 2023 prior to the adoption of the guidance in ASU 2023-09

---

| | | |
|:---|:---|:---|
| | **2024** | **2023** |
| Statutory federal income tax | 21.0% | 21.0% |
| State income taxes, net of federal benefit | 0.8 | (3.5) |
| R&D tax credits | 9.0 | 14.1 |
| Return to provision | 6.2 | 6.1 |
| Investment tax credit |  | 1.1 |
| Stock-based compensation | (9.5) | (6.2) |
| Non-deductible compensation | (2.6) | (5.7) |
| Non-deductible expenses | (2.1) | (2.8) |
| Changes in unrecognized tax benefits | (0.5) | (0.5) |
| Valuation allowance | (3.0) |  |
| Other | 0.9 | (1.0) |
| Effective income tax rate | 20.2% | 22.6% |

---

The Company files income tax returns with the U.S. federal government and various state jurisdictions. In the normal

course of business, the Company is subject to examination by federal and state taxing authorities. The Company is no

longer subject to federal income tax examinations for years prior to 2022 or state income tax examinations prior to 2021.

---

| | |
|:---|:---|
| **77 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

*Deferred Income Taxes*

The tax effects of temporary differences that give rise to deferred income taxes were as follows (in thousands):

---

| | | |
|:---|:---|:---|
| | **2025** | **2024** |
| Deferred tax assets: |  |  |
| Stock-based compensation | $5243 | $7090 |
| Operating lease liabilities | 88673 | 97604 |
| Warranty and returns liabilities | 4139 | 5880 |
| Net operating loss carryforwards and credits | 11203 | 2327 |
| Compensation and benefits | 6172 | 7220 |
| Research and development | 11544 | 19017 |
| Interest | 19182 | 9503 |
| Other | 7705 | 4163 |
| Total gross deferred tax assets | 153861 | 152804 |
| Valuation allowance | (55323) | (806) |
| Total gross deferred tax assets after valuation allowance | 98538 | 151998 |
| Deferred tax liabilities: |  |  |
| Property and equipment | 15302 | 23240 |
| Operating lease right-of-use assets | 77923 | 89276 |
| Deferred revenue | 1453 | 2516 |
| Other | 3461 | 3391 |
| Total gross deferred tax liabilities | 98139 | 118423 |
| Net deferred tax assets | $399 | $33575 |

---

At January 3, 2026, the Company had net operating loss carryforwards for federal purposes of $30.4 million and have an

indefinite carryforward period. At January 3, 2026, the Company had net operating loss carryforwards for state purposes

of $25.5 million which expire from 2030 through 2055.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income

will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence

evaluated was the cumulative loss incurred over the three-year period ended January 3, 2026. Such objective evidence

limits the ability to consider other subjective evidence, such as our projections for future growth.

On the basis of this evaluation, as of January 3, 2026, a valuation allowance of $55.3 million has been recorded to

recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred

tax asset considered realizable, however, could be adjusted if additional objectively verifiable positive evidence

materializes in future reporting periods, such as a demonstrated operating profitability.

---

| | |
|:---|:---|
| **78 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

*Income Taxes Paid*

In accordance with the guidance in ASU 2023-09 (which was adopted prospectively in 2025), net income tax paid in 2025

to the following jurisdictions were as follows (in thousands):

---

| | |
|:---|:---|
| | **2025** |
| Cash paid for income taxes, net: |  |
| Federal | $7036 |
| State and local |  |
| Texas | 700 |
| Illinois | 194 |
| Other | 694 |
|  | 1588 |
| Total cash paid for income taxes, net: | $8624 |

---

We paid net income tax and related interest of $4 million and $14 million in 2024 and 2023, respectively.

*Unrecognized Tax Benefits*

Reconciliations of the beginning and ending amounts of unrecognized tax benefits were as follows (in thousands):

---

| | | | |
|:---|:---|:---|:---|
| | **Federal and State Tax** | **Federal and State Tax** | **Federal and State Tax** |
| | **2025** | **2024** | **2023** |
| Beginning balance | $3658 | $3671 | $3645 |
| Increases related to current-year tax positions | 419 | 639 | 753 |
| Increases related to prior-year tax positions | 121 | 51 | 40 |
| Decreases related to prior-year tax positions |  | (15) |  |
| Lapse of statute of limitations | (957) | (688) | (601) |
| Settlements with taxing authorities |  |  | (166) |
| Ending balance | $3241 | $3658 | $3671 |

---

At January 3, 2026 and December 28, 2024, the Company had $3.2 million and $3.5 million, respectively, of unrecognized

tax benefits, which if recognized, would affect its effective tax rate.

**13. Segments**

The Company's chief operating decision maker (CODM), who is the Chief Executive Officer, assesses company-wide

performance and allocates resources based on consolidated financial information. Consequently, the Company views the

entire organization as one reportable segment and the strategic purpose of all operating activities is to support that one

segment.

The CODM manages the Company's business activities as a single operating and reportable segment at the consolidated

level. The CODM uses net loss, as reported on the Company's consolidated statement of operations, in evaluating

performance of the Company in determining how to allocate resources of the Company as a whole, including investing in

the Company's product development, sales and marketing campaigns, and employee compensation. The measure of

segment assets that is reviewed by the CODM is reported within the consolidated balance sheet as consolidated total

assets. The CODM also uses consolidated earnings or losses before interest, taxes, depreciation and amortization

(Adjusted EBITDA) as the basis for the CODM to evaluate the performance of the Company.

---

| | |
|:---|:---|
| **79 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

The following is a summary of the significant expense categories and consolidated net loss details provided to the CODM

(in thousands):

---

| | | | |
|:---|:---|:---|:---|
| | **2025** | **2024** | **2023** |
| Net Sales | $1411450 | $1682296 | $1887482 |
| Less: |  |  |  |
| Cost of sales | (578499) | (679523) | (798952) |
| Marketing expenses | (315189) | (393693) | (432982) |
| Selling expenses | (349046) | (372931) | (414460) |
| General and administrative | (130669) | (148736) | (145949) |
| Research and development | (33942) | (45255) | (55797) |
| Restructuring costs | (50697) | (18066) | (15728) |
| Asset impairment charges |  | (1220) | (673) |
| Interest expense | (49382) | (48368) | (42694) |
| Income tax (expense) benefit | (35984) | 5162 | 4466 |
| Net loss | $(131958) | $(20334) | $(15287) |

---

**14. Commitments and Contingencies**

*Legal Proceedings*

The Company is involved from time to time in various legal proceedings arising in the ordinary course of its business,

including primarily commercial, product liability, employment and intellectual property claims. In accordance with U.S.

GAAP, the Company records a liability in its consolidated financial statements with respect to any of these matters when it

is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated. If a material

loss is reasonably possible but not known or probable, and may be reasonably estimated, the estimated loss or range of

loss is disclosed. With respect to currently pending legal proceedings, the Company has not established an estimated

range of reasonably possible material losses either because it believes that it has valid defenses to claims asserted

against it, the proceeding has not advanced to a stage of discovery that would enable it to establish an estimate, or the

potential loss is not material. The Company currently does not expect the outcome of pending legal proceedings to have a

material effect on its consolidated results of operations, financial position or cash flows. Litigation, however, is inherently

unpredictable, and it is possible that the ultimate outcome of one or more claims asserted against the Company could

adversely impact its consolidated results of operations, financial position or cash flows. The Company expenses legal

costs as incurred.

<u>Purported Class Action Complaint</u>

On September 27, 2024, a purported customer served a putative class action complaint on behalf of themself and a

putative class of California consumers against Sleep Number in the United States District Court for the Eastern District of

California alleging that Sleep Number's beds are perpetually on sale in violation of California law. The plaintiff seeks

injunctive relief, damages and attorney's fees. Sleep Number moved to dismiss the amended complaint, which motion the

Magistrate recommended be granted by the Court without prejudice. The Magistrate's recommendation is pending with

the Court.

*Consumer Credit Arrangements*

The Company refers customers seeking extended financing to certain third-party financiers (Card Servicers). The Card

Servicers, if credit is granted, establish the interest rates, fees, and all other terms and conditions of the customer's

account based on their evaluation of the creditworthiness of the customer. As the accounts are owned by the Card

---

| | |
|:---|:---|
| **80 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**SLEEP NUMBER CORPORATION**

**AND SUBSIDIARIES**

**Notes to Consolidated Financial Statements - (continued)**

Servicers, at no time are the accounts purchased or acquired from Sleep Number. The Company is not liable to the Card

Servicers for its customers' credit defaults.

*Commitments*

As of January 3, 2026, the Company has $28 million of inventory purchase commitments. As part of the normal course of

business, there are a limited number of inventory supply contracts that contain penalty provisions for failure to purchase

contracted quantities. The Company does not currently expect any material payments under these provisions.

At January 3, 2026, the Company had entered into 3 lease commitments primarily for future retail store locations. These

lease commitments provide for total lease payments over the next 7 to 10 years, which if consummated based on current

cost estimates, would approximate $3 million over the initial lease term. The future lease payments for these lease

commitments have been excluded in the total operating lease payments in Note 7, *Leases*.

**15. Subsequent Event**

During fiscal 2025, U.S. tariffs were imposed under the International Emergency Powers Act ("IEEPA") that applied to

some of the Company's direct import products. On February 20, 2026, the U.S. Supreme Court ruled that the tariffs were

unauthorized. The ruling did not address potential refunds. In light of this, there is uncertainty regarding the likelihood and

timing of collection pending further direction from the courts and/or U.S. Customs.

---

| | |
|:---|:---|
| **81 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL** 

**DISCLOSURE**

None

**ITEM 9A. CONTROLS AND PROCEDURES**

**Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures**

The Company maintains disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), that are

designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under

the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time

periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated

and communicated to the Company's management, including its principal executive officer and principal financial officer,

or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The

Company's management, with the participation of its chief executive officer and chief financial officer, evaluated the

effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period

covered by this annual report. Based on this evaluation, its principal executive officer and principal financial officer

concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by

this annual report.

**Management's Report on Internal Control Over Financial Reporting**

Sleep Number's management is responsible for establishing and maintaining adequate internal control over financial

reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company's internal control over financial reporting

is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation

of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's

internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of

records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the

Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial

statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the

Company are being made only in accordance with authorizations of management and directors of the Company; and (3)

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of

the Company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,

projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become

inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may

deteriorate.

Management, with the participation of its principal executive officer and principal financial officer, evaluated the

effectiveness of the Company's internal control over financial reporting based on the framework in Internal Control –

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based

on this evaluation under these criteria, management concluded that its internal control over financial reporting was

effective as of January 3, 2026. The report of Deloitte & Touche LLP, the Company's independent registered public

accounting firm, regarding the effectiveness of the Company's internal control over financial reporting is included in this

report in "Part II, Item 8, Financial Statements and Supplementary Data" under "Report of Independent Registered Public

Accounting Firm."

**Fourth Quarter Changes in Internal Control Over Financial Reporting**

There were no changes in the Company's internal control over financial reporting during the quarter ended January 3,

2026 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over

financial reporting.

---

| | |
|:---|:---|
| **82 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**ITEM 9B. OTHER INFORMATION**

During the quarter ended January 3, 2026, none of the Company's directors or officers adopted, modified or terminated

any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the

affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement" as defined in Item 408 of

SEC Regulation S-K.

**ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS**

Not applicable.

**PART III**

**ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**

The information under the captions "Our Board; Who We Are" and "Our Board; How We are Governed and Govern" in the

Company's Proxy Statement for its 2026 Annual Meeting of Shareholders is incorporated herein by reference. Information

concerning the Company's executive officers is included in Part I of this report under the caption "Information about the

Company's Executive Officers."

The Company has adopted a Code of Business Conduct and Ethics applicable to its directors, officers and employees

(including its principal executive officer, principal financial officer and principal accounting officer). The Code of Business

Conduct and Ethics is available on the Investor Relations section of the Company's website at www.sleepnumber.com:

select the "Investors" link, "Governance" link and then the "Governance Documents" link. In the event that the Company

amends or waives any of the provisions of the Code of Business Conduct and Ethics applicable to the Company's

principal executive officer, principal financial officer and principal accounting officer, the Company intends to disclose the

same on its website. The Company also has adopted an Insider Trading Policy that applies to its directors, officers and

employees who have access to material, nonpublic information regarding the Company. As described in the policy, filed as

Exhibit 19.1 to this Annual Report on Form 10-K, the policy is reasonably designed to promote compliance with insider

trading laws, rules and regulations, and NASDAQ listing standards.

**ITEM 11. EXECUTIVE COMPENSATION**

The information under the captions "How We Are Paid" for director compensation and "Our Pay" for executive

compensation in the Company's Proxy Statement for its 2026 Annual Meeting of Shareholders is incorporated herein by

reference.

**ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED** 

**STOCKHOLDER MATTERS**

**Stock Ownership**

The information under the caption "Our Shareholders; Stock Ownership of Management and Certain Beneficial Owners" in

the Company's Proxy Statement for its 2026 Annual Meeting of Shareholders is incorporated herein by reference.

**Securities Authorized for Issuance under Equity Compensation Plans**

The information under the caption "Proposal 7 - Vote on Proposed Amendment to the Sleep Number Corporation 2020

Equity Incentive Plan, As Amended; Equity Compensation Plan Information" in the Company's Proxy Statement for its

2026 Annual Meeting of Shareholders is incorporated herein by reference.

**ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE**

The information under the caption "Provisions Applicable to All Directors; Related Party Transactions Policy" and

"Provisions Applicable to All Directors; Independence," each under the heading "Our Board" in the Company's Proxy

Statement for the 2026 Annual Meeting of Shareholders is incorporated herein by reference.

---

| | |
|:---|:---|
| **83 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES**

The information under the caption "Proposal 5 - Ratification of Appointment of Independent Registered Public Accounting

Firm" for Deloitte & Touche (PCAOB No. 34) in the Company's Proxy Statement for the 2026 Annual Meeting of

Shareholders is incorporated herein by reference.

**PART IV**

**ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES**

**(a)Consolidated Financial Statements and Schedule**

**(1)Financial Statements**

All financial statements as set forth under Item 8 of this report.

**(2)Consolidated Financial Statement Schedule**

The following Report and financial statement schedule are included in this Part IV:

Schedule II - Valuation and Qualifying Accounts

All other schedules are omitted because they are not applicable or the required information is

included in the consolidated financial statements or notes thereto.

**(3)Exhibits**

The exhibits to this Report are listed in the Exhibit Index below.

---

| | |
|:---|:---|
| **84 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**SLEEP NUMBER CORPORATION**

**EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K**

**FOR THE YEAR ENDED January 3, 2026**

---

| | |
|:---|:---|
| **Exhibit**<br>**No.**<br>| **Description** |
| 3.1 | <u>[Third Restated Articles of Incorporation of the Company, as amended (incorporated by reference to](https://www.sec.gov/Archives/edgar/data/827187/000095012400001924/0000950124-00-001924.txt)</u><br><u>[Exhibit 3.1 contained in Sleep Number's Annual Report on Form 10-K for the fiscal year ended January](https://www.sec.gov/Archives/edgar/data/827187/000095012400001924/0000950124-00-001924.txt)</u><br><u>[1, 2000 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000095012400001924/0000950124-00-001924.txt)</u><br>|
| 3.2 | <u>[Articles of Amendment to Third Restated Articles of Incorporation of the Company (incorporated by](https://www.sec.gov/Archives/edgar/data/827187/000082718706000037/exhibit3_1.htm)</u><br><u>[reference to Exhibit 3.1 contained in Sleep Number's Current Report on Form 8-K filed May 16, 2006](https://www.sec.gov/Archives/edgar/data/827187/000082718706000037/exhibit3_1.htm)</u><br><u>[(File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718706000037/exhibit3_1.htm)</u><br>|
| 3.3 | <u>[Articles of Amendment to Third Restated Articles of Incorporation of the Company (incorporated by](https://www.sec.gov/Archives/edgar/data/827187/000082718710000020/exhibit3_1.htm)</u><br><u>[reference to Exhibit 3.1 contained in Sleep Number's Current Report on Form 8-K filed May 25, 2010](https://www.sec.gov/Archives/edgar/data/827187/000082718710000020/exhibit3_1.htm)</u><br><u>[(File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718710000020/exhibit3_1.htm)</u><br>|
| 3.4 | <u>[Articles of Amendment to Third Restated Articles of Incorporation of the Company (incorporated by](https://www.sec.gov/Archives/edgar/data/827187/000082718717000057/exhibit3_1articlesofamend.htm)</u><br><u>[reference to Exhibit 3.1 contained in Sleep Number's Current Report on Form 8-K filed November 1,](https://www.sec.gov/Archives/edgar/data/827187/000082718717000057/exhibit3_1articlesofamend.htm)</u><br><u>[2017 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718717000057/exhibit3_1articlesofamend.htm)</u><br>|
| 3.5 | <u>[Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 contained in Sleep](https://www.sec.gov/Archives/edgar/data/827187/000082718717000024/exhibit3_1.htm)</u><br><u>[Number's Current Report on Form 8-K filed May 22, 2017 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718717000024/exhibit3_1.htm)</u><br>|
| 4.1 | <u>[Description of Registrant's Securities (incorporated by reference to Exhibit 4.1 contained in Sleep](https://www.sec.gov/Archives/edgar/data/827187/000082718723000019/a2022-q4ex41.htm)</u><br><u>[Number's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (File No.](https://www.sec.gov/Archives/edgar/data/827187/000082718723000019/a2022-q4ex41.htm)</u><br><u>[000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718723000019/a2022-q4ex41.htm)</u><br>|
| 10.1 | <u>[Lease Agreement dated September 22, 2015 between the Company and Truluck Industries, Inc.](https://www.sec.gov/Archives/edgar/data/827187/000082718715000061/ex103_2015xq3.htm)</u><br><u>[(incorporated by reference to Exhibit 10.3 contained in Sleep Number's Quarterly Report on Form 10-Q](https://www.sec.gov/Archives/edgar/data/827187/000082718715000061/ex103_2015xq3.htm)</u><br><u>[for the fiscal quarter ended October 3, 2015 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718715000061/ex103_2015xq3.htm)</u><br>|
| 10.2 | <u>[Lease Agreement dated September 30, 1998 between the Company and ProLogis Development](https://www.sec.gov/Archives/edgar/data/827187/0001047469-98-038623.txt)</u><br><u>[Services Incorporated (incorporated by reference to Exhibit 10.28 contained in Sleep Number's](https://www.sec.gov/Archives/edgar/data/827187/0001047469-98-038623.txt)</u><br><u>[Registration Statement on Form S-1, as amended, filed October 29, 1998 (Reg. No. 333-62793))](https://www.sec.gov/Archives/edgar/data/827187/0001047469-98-038623.txt)</u><br>|
| 10.3 | <u>[Second Amendment to Lease Agreement dated June 15, 2015 between the Company and CLFP -](https://www.sec.gov/Archives/edgar/data/827187/000082718715000061/ex104_2015xq3.htm)</u><br><u>[SLIC 8, L.P. (successor in interest to ProLogis Development Services Incorporated) (incorporated by](https://www.sec.gov/Archives/edgar/data/827187/000082718715000061/ex104_2015xq3.htm)</u><br><u>[reference to Exhibit 10.4 contained in Sleep Number's Quarterly Report on Form 10-Q for the fiscal](https://www.sec.gov/Archives/edgar/data/827187/000082718715000061/ex104_2015xq3.htm)</u><br><u>[quarter ended October 3, 2015 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718715000061/ex104_2015xq3.htm)</u><br>|
| 10.4 | <u>[Third Amendment to Lease Agreement dated August 27, 2019 between Sleep Number Corporation and](https://www.sec.gov/Archives/edgar/data/827187/000156459019037917/snbr-ex101_66.htm)</u><br><u>[IPT SALT LAKE CITY DC II LLC (successor in interest to CLFP – SLIC 8, L.P.) (incorporated by](https://www.sec.gov/Archives/edgar/data/827187/000156459019037917/snbr-ex101_66.htm)</u><br><u>[reference to Exhibit 10.1 contained in Sleep Number's Quarterly Report on Form 10-Q for the fiscal](https://www.sec.gov/Archives/edgar/data/827187/000156459019037917/snbr-ex101_66.htm)</u><br><u>[quarter ended September 28, 2019 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000156459019037917/snbr-ex101_66.htm)</u><br>|
| 10.5 | <u>[Lease Agreement between DCI 1001 Minneapolis Venture, LLC, as Landlord, and Sleep Number](https://www.sec.gov/Archives/edgar/data/827187/000082718717000010/a2016-q4ex1012.htm)</u><br><u>[Corporation, as Tenant, dated October 21, 2016 (incorporated by reference to Exhibit 10.12 contained](https://www.sec.gov/Archives/edgar/data/827187/000082718717000010/a2016-q4ex1012.htm)</u><br><u>[in Sleep Number's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (File No.](https://www.sec.gov/Archives/edgar/data/827187/000082718717000010/a2016-q4ex1012.htm)</u><br><u>[000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718717000010/a2016-q4ex1012.htm)</u><br>|
| 10.6 | <u>[First Amendment, dated June 1, 2017, to Lease Agreement between DCI 1001 Minneapolis Venture,](https://www.sec.gov/Archives/edgar/data/827187/000082718717000045/a2017-q2ex101.htm)</u><br><u>[LLC, as Landlord, and Sleep Number Corporation, as Tenant, dated October 21, 2016 (incorporated by](https://www.sec.gov/Archives/edgar/data/827187/000082718717000045/a2017-q2ex101.htm)</u><br><u>[reference to Exhibit 10.1 contained in Sleep Number's Quarterly Report on Form 10-Q for the fiscal](https://www.sec.gov/Archives/edgar/data/827187/000082718717000045/a2017-q2ex101.htm)</u><br><u>[quarter ended July 1, 2017 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718717000045/a2017-q2ex101.htm)</u><br>|
| 10.7 | <u>[Second Amendment, dated May 25, 2023, to Lease Agreement between Legacy 1001 Minneapolis](https://www.sec.gov/Archives/edgar/data/827187/000082718723000081/a2023-q2ex107.htm)</u><br><u>[Venture, LLC (formerly known as DCI 1001 Minneapolis Venture, LLC), as Landlord, and Sleep](https://www.sec.gov/Archives/edgar/data/827187/000082718723000081/a2023-q2ex107.htm)</u><br><u>[Number Corporation, as Tenant, dated October 21, 2016 (incorporated by reference to Exhibit 10.7](https://www.sec.gov/Archives/edgar/data/827187/000082718723000081/a2023-q2ex107.htm)</u><br><u>[contained in Sleep Number's Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2023](https://www.sec.gov/Archives/edgar/data/827187/000082718723000081/a2023-q2ex107.htm)</u><br><u>[(File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718723000081/a2023-q2ex107.htm)</u><br>|
| 10.8 | <u>[Third Amendment, dated December 26, 2024, to Lease Agreement between Legacy 1001 Minneapolis](https://www.sec.gov/Archives/edgar/data/827187/000082718725000018/a2024-q4ex108.htm)</u><br><u>[Venture, LLC, as Landlord, and Sleep Number Corporation, as Tenant, dated October 21, 2016, as](https://www.sec.gov/Archives/edgar/data/827187/000082718725000018/a2024-q4ex108.htm)</u><br><u>[amended (incorporated by reference to Exhibit 10.8 contained in Sleep Number's Annual Report on](https://www.sec.gov/Archives/edgar/data/827187/000082718725000018/a2024-q4ex108.htm)</u><br><u>[Form 10-K for the fiscal year ended December 28, 2024 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718725000018/a2024-q4ex108.htm)</u><br>|

---

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| | |
|:---|:---|
| **85 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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| | |
|:---|:---|
| **Exhibit**<br>**No.**<br>| **Description** |
| 10.9 | <u>[Fourth Amendment, dated May 27, 2025, to Lease Agreement between Legacy 1001 Minneapolis](https://www.sec.gov/Archives/edgar/data/827187/000082718725000103/a2025-q2ex101.htm)</u><br><u>[Venture, LLC, as Landlord, and Sleep Number Corporation, as Tenant, dated October 21, 2016, as](https://www.sec.gov/Archives/edgar/data/827187/000082718725000103/a2025-q2ex101.htm)</u><br><u>[amended (incorporated by reference to Exhibit 10.1 contained in Sleep Number's Quarterly Report on](https://www.sec.gov/Archives/edgar/data/827187/000082718725000103/a2025-q2ex101.htm)</u><br><u>[Form 10-Q for the fiscal quarter ended June 28, 2025 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718725000103/a2025-q2ex101.htm)</u><br>|
| 10.10\* | <u>[Fifth Amendment, dated December 2, 2025, to Lease Agreement between Legacy 1001 Minneapolis](ex1010fifthamendmenttolease.htm)</u><br><u>[Venture, LLC, as Landlord, and Sleep Number Corporation, as Tenant, dated October 21, 2016, as](ex1010fifthamendmenttolease.htm)</u><br><u>[amended](ex1010fifthamendmenttolease.htm)</u><br>|
| 10.11<sup>†</sup> | <u>[Sleep Number Corporation Amended and Restated 2010 Omnibus Incentive Plan (incorporated by](https://www.sec.gov/Archives/edgar/data/827187/000082718713000041/amendedandrestated2010omni.htm)</u><br><u>[reference to Exhibit 10.1 contained in Sleep Number's Current Report on Form 8-K filed May 15, 2013](https://www.sec.gov/Archives/edgar/data/827187/000082718713000041/amendedandrestated2010omni.htm)</u><br><u>[(File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718713000041/amendedandrestated2010omni.htm)</u><br>|
| 10.12<sup>†</sup> | <u>[Form of Nonstatutory Stock Option Award Agreement under the 2010 Omnibus Incentive Plan](https://www.sec.gov/Archives/edgar/data/827187/000114036111011972/ex10_20.htm)</u><br><u>[(incorporated by reference to Exhibit 10.20 contained in Sleep Number's Annual Report on Form 10-K](https://www.sec.gov/Archives/edgar/data/827187/000114036111011972/ex10_20.htm)</u><br><u>[for the fiscal year ended January 1, 2011 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000114036111011972/ex10_20.htm)</u><br>|
| 10.13<sup>†</sup> | <u>[Form of Non-Statutory Stock Option Award Agreement (Employee) under the Sleep Number](https://www.sec.gov/Archives/edgar/data/827187/000156459019037917/snbr-ex102_521.htm)</u><br><u>[Corporation Amended and Restated 2010 Omnibus Incentive Plan (incorporated by reference to](https://www.sec.gov/Archives/edgar/data/827187/000156459019037917/snbr-ex102_521.htm)</u><br><u>[Exhibit 10.2 contained in Sleep Number's Quarterly Report on Form 10-Q for the fiscal quarter ended](https://www.sec.gov/Archives/edgar/data/827187/000156459019037917/snbr-ex102_521.htm)</u><br><u>[September 28, 2019 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000156459019037917/snbr-ex102_521.htm)</u><br>|
| 10.14<sup>†</sup> | <u>[Form of Non-Statutory Stock Option Award Agreement (Non-Employee Director) under the Sleep](https://www.sec.gov/Archives/edgar/data/827187/000156459019037917/snbr-ex108_527.htm)</u><br><u>[Number Corporation Amended and Restated 2010 Omnibus Incentive Plan (incorporated by reference](https://www.sec.gov/Archives/edgar/data/827187/000156459019037917/snbr-ex108_527.htm)</u><br><u>[to Exhibit 10.8 contained in Sleep Number's Quarterly Report on Form 10-Q for the fiscal quarter](https://www.sec.gov/Archives/edgar/data/827187/000156459019037917/snbr-ex108_527.htm)</u><br><u>[ended September 28, 2019 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000156459019037917/snbr-ex108_527.htm)</u><br>|
| 10.15<sup>†</sup> | <u>[Sleep Number Executive Deferral Plan (incorporated by reference to Exhibit 10.17 contained in Sleep](https://www.sec.gov/Archives/edgar/data/827187/000082718723000019/a2022-q4ex1017.htm)</u><br><u>[Number's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (File No.](https://www.sec.gov/Archives/edgar/data/827187/000082718723000019/a2022-q4ex1017.htm)</u><br><u>[000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718723000019/a2022-q4ex1017.htm)</u><br>|
| 10.16<sup>†\*</sup> | <u>[First Declaration of Amendment to Sleep Number Executive Deferral Plan effective as of January 1,](ex1016-firstamendmenttoexe.htm)</u><br><u>[2026](ex1016-firstamendmenttoexe.htm)</u><br>|
| 10.17<sup>†</sup> | <u>[Summary of Executive Tax and Financial Planning Program (incorporated by reference to Exhibit 10.15](https://www.sec.gov/Archives/edgar/data/827187/000082718724000011/a2023-q4ex1015.htm)</u><br><u>[contained in Sleep Number's Annual Report on Form 10-K for the fiscal year ended December 30,](https://www.sec.gov/Archives/edgar/data/827187/000082718724000011/a2023-q4ex1015.htm)</u><br><u>[2023 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718724000011/a2023-q4ex1015.htm)</u><br>|
| 10.18<sup>†</sup> | <u>[Sleep Number Corporation Executive Severance Pay Plan (incorporated by reference to Exhibit 10.16](https://www.sec.gov/Archives/edgar/data/827187/000082718724000011/a2023-q4ex1016.htm)</u><br><u>[contained in Sleep Number's Annual Report on Form 10-K for the fiscal year ended December 30,](https://www.sec.gov/Archives/edgar/data/827187/000082718724000011/a2023-q4ex1016.htm)</u><br><u>[2023 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718724000011/a2023-q4ex1016.htm)</u><br>|
| 10.19<sup>†</sup> | <u>[Summary of Non-Employee Director Compensation (incorporated by reference to Exhibit 10.17](https://www.sec.gov/Archives/edgar/data/827187/000082718724000011/a2023-q4ex1017.htm)</u><br><u>[contained in Sleep Number's Annual Report on Form 10-K for the fiscal year ended December 30,](https://www.sec.gov/Archives/edgar/data/827187/000082718724000011/a2023-q4ex1017.htm)</u><br><u>[2023 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718724000011/a2023-q4ex1017.htm)</u><br>|
| 10.20<sup>†</sup> | <u>[Sleep Number Annual Incentive Plan (AIP) Effective December 29, 2024 (incorporated by reference to](https://www.sec.gov/Archives/edgar/data/827187/000082718725000058/a2025-q1ex1052025sleepnumb.htm)</u><br><u>[Exhibit 10.5 contained in Sleep Number's Quarterly Report on Form 10-Q for fiscal quarter ended](https://www.sec.gov/Archives/edgar/data/827187/000082718725000058/a2025-q1ex1052025sleepnumb.htm)</u><br><u>[March 29, 2025 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718725000058/a2025-q1ex1052025sleepnumb.htm)</u><br>|
| 10.21<sup>†</sup> | <u>[Offer Letter dated March 3, 2025 from Sleep Number Corporation to Linda Findley (incorporated by](https://www.sec.gov/Archives/edgar/data/827187/000082718725000010/ex101ceoofferletter.htm)</u><br><u>[reference to Exhibit 10.1 contained in Sleep Number's Current Report on Form 8-K filed March 5, 2025](https://www.sec.gov/Archives/edgar/data/827187/000082718725000010/ex101ceoofferletter.htm)</u><br><u>[(File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718725000010/ex101ceoofferletter.htm)</u><br>|
| 10.22<sup>†</sup> | <u>[Amendment dated March 31, 2025 to the Offer Letter dated March 3, 2025 from Sleep Number](https://www.sec.gov/Archives/edgar/data/827187/000082718725000030/a2025-03x31form8xkex101.htm)</u><br><u>[Corporation to Linda Findley (incorporated by reference to Exhibit 10.1 contained in Sleep Number's](https://www.sec.gov/Archives/edgar/data/827187/000082718725000030/a2025-03x31form8xkex101.htm)</u><br><u>[Current Report on Form 8-K filed on March 31, 2025 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718725000030/a2025-03x31form8xkex101.htm)</u><br>|
| 10.23<sup>†</sup> | <u>[Offer Letter dated November 17, 2025 from Sleep Number Corporation to Amy O'Keefe (incorporated](https://www.sec.gov/Archives/edgar/data/827187/000082718725000128/exhibit101cfoofferletter.htm)</u><br><u>[by reference to Exhibit 10.1 contained in Sleep Number's Current Report on Form 8-K filed December](https://www.sec.gov/Archives/edgar/data/827187/000082718725000128/exhibit101cfoofferletter.htm)</u><br><u>[2, 2025 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718725000128/exhibit101cfoofferletter.htm)</u><br>|

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|:---|:---|
| **86 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

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| | |
|:---|:---|
| **Exhibit**<br>**No.**<br>| **Description** |
| 10.24<sup>†</sup> | <u>[Transition and Advisory Agreement between Sleep Number Corporation and Shelly R. Ibach effective](https://www.sec.gov/Archives/edgar/data/827187/000082718724000087/a2024-q3ex101skyway.htm)</u><br><u>[October 24, 2024 (incorporated by reference to Exhibit 10.1 contained in Sleep Number's Current](https://www.sec.gov/Archives/edgar/data/827187/000082718724000087/a2024-q3ex101skyway.htm)</u><br><u>[Report on Form 8-K filed October 30, 2024 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718724000087/a2024-q3ex101skyway.htm)</u><br>|
| 10.25<sup>†</sup> | <u>[Offer Letter dated June 29, 2023 from Sleep Number Corporation to Francis K. Lee (incorporated by](https://www.sec.gov/Archives/edgar/data/827187/000082718723000081/a2023-q2ex105.htm)</u><br><u>[reference to Exhibit 10.5 contained in Sleep Number's Quarterly Report on Form 10-Q for the fiscal](https://www.sec.gov/Archives/edgar/data/827187/000082718723000081/a2023-q2ex105.htm)</u><br><u>[quarter ended July 1, 2023 (File No. 000-25121)](https://www.sec.gov/Archives/edgar/data/827187/000082718723000081/a2023-q2ex105.htm)</u><br>|
| 10.26<sup>†</sup> | <u>[Interim Chief Financial Officer Agreement (incorporated by reference to Exhibit 10.1 contained in Sleep](https://www.sec.gov/Archives/edgar/data/827187/000082718725000084/exhibit101-interimcfocontr.htm)</u><br><u>[Number's Current Report on Form 8-K filed July 22, 2025 (incorporated by reference to Exhibit 10.3](https://www.sec.gov/Archives/edgar/data/827187/000082718725000084/exhibit101-interimcfocontr.htm)</u><br><u>[contained in Sleep Number's Quarterly Report on Form 10-Q for the fiscal quarter ended June 28,](https://www.sec.gov/Archives/edgar/data/827187/000082718725000084/exhibit101-interimcfocontr.htm)</u><br><u>[2025 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718725000084/exhibit101-interimcfocontr.htm)</u><br>|
| 10.27 | <u>[Agreement, dated March 13, 2025, between Sleep Number Corporation and Stadium Capital](https://www.sec.gov/Archives/edgar/data/827187/000082718725000021/ex101.htm)</u><br><u>[Management, LLC (incorporate by reference to Exhibit 10.1 contained in Sleep Number's Current](https://www.sec.gov/Archives/edgar/data/827187/000082718725000021/ex101.htm)</u><br><u>[Report on Form 8-K filed on March 13, 2025 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718725000021/ex101.htm)</u><br>|
| 10.28 | <u>[Retailer Program Agreement effective as of January 1, 2014 by and between Synchrony Bank, Sleep](https://www.sec.gov/Archives/edgar/data/827187/000082718714000059/ex101_q2fy14.htm)</u><br><u>[Number Corporation and Select Comfort Retail Corporation (incorporated by reference to Exhibit 10.1](https://www.sec.gov/Archives/edgar/data/827187/000082718714000059/ex101_q2fy14.htm)</u><br><u>[contained in Sleep Number's Quarterly Report on Form 10-Q for the fiscal quarter ended June 28,](https://www.sec.gov/Archives/edgar/data/827187/000082718714000059/ex101_q2fy14.htm)</u><br><u>[2014 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718714000059/ex101_q2fy14.htm)</u><sup>(1)</sup><br>|
| 10.29 | <u>[Fifth Amendment to Retailer Program Agreement, dated July 15, 2022, by and between Synchrony](https://www.sec.gov/Archives/edgar/data/827187/000082718722000057/a2022-q2ex102.htm)</u><br><u>[Bank, Sleep Number Corporation and Select Comfort Retail Corporation (incorporated by reference to](https://www.sec.gov/Archives/edgar/data/827187/000082718722000057/a2022-q2ex102.htm)</u><br><u>[Exhibit 10.2 contained in Sleep Number's Quarterly Report on Form 10-Q for the fiscal quarter ended](https://www.sec.gov/Archives/edgar/data/827187/000082718722000057/a2022-q2ex102.htm)</u><br><u>[July 2, 2022 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718722000057/a2022-q2ex102.htm)</u><sup>(2)</sup><br>|
| 10.30 | <u>[Seventh Amendment to Retailer Program Agreement, dated August 28, 2023, by and between](https://www.sec.gov/Archives/edgar/data/827187/000082718723000093/a2023-q3ex101.htm)</u><br><u>[Synchrony Bank, Sleep Number Corporation and Select Comfort Retail Corporation (superseded the](https://www.sec.gov/Archives/edgar/data/827187/000082718723000093/a2023-q3ex101.htm)</u><br><u>[Sixth Amendment to Retailer Program Agreement, dated November 28, 2022) (incorporated by](https://www.sec.gov/Archives/edgar/data/827187/000082718723000093/a2023-q3ex101.htm)</u><br><u>[reference to Exhibit 10.1 contained in Sleep Number's Quarterly Report on Form 10-Q for the fiscal](https://www.sec.gov/Archives/edgar/data/827187/000082718723000093/a2023-q3ex101.htm)</u><br>|
| 10.31 | <u>[Eighth Amendment to Retailer Program Agreement, dated October 16, 2023, by and between](https://www.sec.gov/Archives/edgar/data/827187/000082718723000093/a2023-q3ex102.htm)</u><br><u>[Synchrony Bank, Sleep Number Corporation and Select Comfort Retail Corporation (incorporated by](https://www.sec.gov/Archives/edgar/data/827187/000082718723000093/a2023-q3ex102.htm)</u><br><u>[reference to Exhibit 10.2 contained in Sleep Number's Quarterly Report on Form 10-Q for the fiscal](https://www.sec.gov/Archives/edgar/data/827187/000082718723000093/a2023-q3ex102.htm)</u><br><u>[quarter ended September 30, 2023 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718723000093/a2023-q3ex102.htm)</u><sup>(2)</sup><br>|
| 10.32 | <u>[Ninth Amendment to Retailer Program Agreement, dated October 16, 2023, by and between](https://www.sec.gov/Archives/edgar/data/827187/000082718723000093/a2023-q3ex103.htm)</u><br><u>[Synchrony Bank, Sleep Number Corporation and Select Comfort Retail Corporation (incorporated by](https://www.sec.gov/Archives/edgar/data/827187/000082718723000093/a2023-q3ex103.htm)</u><br><u>[reference to Exhibit 10.3 contained in Sleep Number's Quarterly Report on Form 10-Q for the fiscal](https://www.sec.gov/Archives/edgar/data/827187/000082718723000093/a2023-q3ex103.htm)</u><br><u>[quarter ended September 30, 2023 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718723000093/a2023-q3ex103.htm)</u><sup>(2)</sup><br>|
| 10.33 | <u>[Amended and Restated Credit and Security Agreement, dated as of February 14, 2018 among Sleep](https://www.sec.gov/Archives/edgar/data/827187/000082718718000009/a2017-q4ex1029.htm)</u><br><u>[Number Corporation, U.S. Bank National Association and the several banks and other financial](https://www.sec.gov/Archives/edgar/data/827187/000082718718000009/a2017-q4ex1029.htm)</u><br><u>[institutions from time to time party thereto (incorporated by reference to Exhibit 10.29 contained in](https://www.sec.gov/Archives/edgar/data/827187/000082718718000009/a2017-q4ex1029.htm)</u><br><u>[Sleep Number's Annual Report on Form 10-K for the fiscal year ended December 30, 2017 (File No.](https://www.sec.gov/Archives/edgar/data/827187/000082718718000009/a2017-q4ex1029.htm)</u><br><u>[000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718718000009/a2017-q4ex1029.htm)</u><br>|
| 10.34 | <u>[Twelfth Amendment to Amended and Restated Credit and Security Agreement, dated as of November](https://www.sec.gov/Archives/edgar/data/827187/000082718725000121/ex101usbsleepnumber-twelft.htm)</u><br><u>[4, 2025 among Sleep Number Corporation, U.S. Bank National Association and the several banks and](https://www.sec.gov/Archives/edgar/data/827187/000082718725000121/ex101usbsleepnumber-twelft.htm)</u><br><u>[other financial institutions from time to time party thereto (incorporated by reference to Exhibit 10.1](https://www.sec.gov/Archives/edgar/data/827187/000082718725000121/ex101usbsleepnumber-twelft.htm)</u><br><u>[contained in Sleep Number's Quarterly Report on Form 10-Q for the fiscal quarter ended September](https://www.sec.gov/Archives/edgar/data/827187/000082718725000121/ex101usbsleepnumber-twelft.htm)</u><br><u>[27, 2025 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718725000121/ex101usbsleepnumber-twelft.htm)</u><br>|
| 10.35<sup>†</sup> | <u>[Sleep Number Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.1](https://www.sec.gov/Archives/edgar/data/827187/000082718720000018/a2020-05x13ex101snbreq.htm)</u><br><u>[contained in Sleep Number's Current Report on Form 8-K filed May 13, 2020 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718720000018/a2020-05x13ex101snbreq.htm)</u><br>|
| 10.36<sup>†</sup> | <u>[Amendment No. 1 to the Sleep Number Corporation 2020 Equity Incentive Plan (incorporated by](https://www.sec.gov/Archives/edgar/data/827187/000082718724000043/exhibit101.htm)</u><br><u>[reference to Exhibit 10.1 contained in Sleep Number's Current Report on Form 8-K filed May 21, 2024](https://www.sec.gov/Archives/edgar/data/827187/000082718724000043/exhibit101.htm)</u><br><u>[(File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718724000043/exhibit101.htm)</u><br>|

---

---

| | |
|:---|:---|
| **87 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

---

| | |
|:---|:---|
| **Exhibit**<br>**No.**<br>| **Description** |
| 10.37<sup>†</sup> | <u>[Amendment No. 2 to the Sleep Number Corporation 2020 Equity Incentive Plan (incorporated by](https://www.sec.gov/Archives/edgar/data/827187/000082718725000070/amendmentno2tothesleepnumb.htm)</u><br><u>[reference to Exhibit 10.1 contained in Sleep Number's Current Report on Form 8-K filed May 29, 2025](https://www.sec.gov/Archives/edgar/data/827187/000082718725000070/amendmentno2tothesleepnumb.htm)</u><br><u>[(File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718725000070/amendmentno2tothesleepnumb.htm)</u><br>|
| 10.38<sup>†</sup> | <u>[Form of Non-Statutory Stock Option Award Agreement (Non-Employee Director) under the Sleep](https://www.sec.gov/Archives/edgar/data/827187/000082718720000034/ex101-formofnonxstatut.htm)</u><br><u>[Number Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 contained in](https://www.sec.gov/Archives/edgar/data/827187/000082718720000034/ex101-formofnonxstatut.htm)</u><br><u>[Sleep Number's Quarterly Report on Form 10-Q for fiscal quarter ended June 27, 2020 (File No.](https://www.sec.gov/Archives/edgar/data/827187/000082718720000034/ex101-formofnonxstatut.htm)</u><br><u>[000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718720000034/ex101-formofnonxstatut.htm)</u><br>|
| 10.39<sup>†</sup> | <u>[Form of Non-Statutory Stock Option Award Agreement (Employee) under the Sleep Number](https://www.sec.gov/Archives/edgar/data/827187/000082718720000034/ex103-formofnonxstatut.htm)</u><br><u>[Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 contained in Sleep](https://www.sec.gov/Archives/edgar/data/827187/000082718720000034/ex103-formofnonxstatut.htm)</u><br><u>[Number's Quarterly Report on Form 10-Q for fiscal quarter ended June 27, 2020 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718720000034/ex103-formofnonxstatut.htm)</u><br>|
| 10.40<sup>†</sup> | <u>[Form of Non-Statutory Stock Option Award Agreement (Senior Team) under the Sleep Number](https://www.sec.gov/Archives/edgar/data/827187/000082718721000022/a2021-q1ex102.htm)</u><br><u>[Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 contained in Sleep](https://www.sec.gov/Archives/edgar/data/827187/000082718721000022/a2021-q1ex102.htm)</u><br><u>[Number's Quarterly Report on Form 10-Q for fiscal quarter ended April 3, 2021 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718721000022/a2021-q1ex102.htm)</u><br>|
| 10.41<sup>†</sup> | <u>[Form of Restricted Stock Unit Award Agreement (Non-Employee Director) under the Sleep Number](https://www.sec.gov/Archives/edgar/data/827187/000082718720000034/ex102-formofrestricted.htm)</u><br><u>[Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 contained in Sleep](https://www.sec.gov/Archives/edgar/data/827187/000082718720000034/ex102-formofrestricted.htm)</u><br><u>[Number's Quarterly Report on Form 10-Q for fiscal quarter ended June 27, 2020 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718720000034/ex102-formofrestricted.htm)</u><br>|
| 10.42<sup>†</sup> | <u>[Form of Restricted Stock Unit Award Agreement (3-Year Ratable) (Sleep Number Labs) under the](https://www.sec.gov/Archives/edgar/data/827187/000082718721000022/a2021-q1ex104.htm)</u><br><u>[Sleep Number Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.4](https://www.sec.gov/Archives/edgar/data/827187/000082718721000022/a2021-q1ex104.htm)</u><br><u>[contained in Sleep Number's Quarterly Report on Form 10-Q for fiscal quarter ended April 3, 2021 (File](https://www.sec.gov/Archives/edgar/data/827187/000082718721000022/a2021-q1ex104.htm)</u><br><u>[No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718721000022/a2021-q1ex104.htm)</u> <br>|
| 10.43<sup>†</sup> | <u>[Form of Restricted Stock Unit Award Agreement (3-Year Cliff Vest) under the Sleep Number](https://www.sec.gov/Archives/edgar/data/827187/000082718721000022/a2021-q1ex105.htm)</u><br><u>[Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 contained in Sleep](https://www.sec.gov/Archives/edgar/data/827187/000082718721000022/a2021-q1ex105.htm)</u><br><u>[Number's Quarterly Report on Form 10-Q for fiscal quarter ended April 3, 2021 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718721000022/a2021-q1ex105.htm)</u> <br>|
| 10.44<sup>†</sup> | <u>[Form of Performance Adjusted Restricted Stock Unit Award Agreement under the Sleep Number](https://www.sec.gov/Archives/edgar/data/827187/000082718723000045/a2023-q1ex101.htm)</u><br><u>[Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 contained in Sleep](https://www.sec.gov/Archives/edgar/data/827187/000082718723000045/a2023-q1ex101.htm)</u><br><u>[Number's Quarterly Report on Form 10-Q for fiscal quarter ended April 1, 2023 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718723000045/a2023-q1ex101.htm)</u><br>|
| 10.45<sup>†</sup> | <u>[Form of Performance Adjusted Restricted Stock Unit Award Agreement (CEO and Executive Team)](https://www.sec.gov/Archives/edgar/data/827187/000082718723000045/a2023-q1ex102.htm)</u><br><u>[under the Sleep Number Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit](https://www.sec.gov/Archives/edgar/data/827187/000082718723000045/a2023-q1ex102.htm)</u><br><u>[10.2 contained in Sleep Number's Quarterly Report on Form 10-Q for fiscal quarter ended April 1, 2023](https://www.sec.gov/Archives/edgar/data/827187/000082718723000045/a2023-q1ex102.htm)</u><br><u>[(File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718723000045/a2023-q1ex102.htm)</u><br>|
| 10.46<sup>†</sup> | <u>[Form of Performance Adjusted Restricted Stock Unit Award Agreement (CEO and Executive Team)](https://www.sec.gov/Archives/edgar/data/827187/000082718724000029/a2024-q1ex101.htm)</u><br><u>[under the Sleep Number Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit](https://www.sec.gov/Archives/edgar/data/827187/000082718724000029/a2024-q1ex101.htm)</u><br><u>[10.1 contained in Sleep Number's Quarterly Report on Form 10-Q for fiscal quarter ended March 30,](https://www.sec.gov/Archives/edgar/data/827187/000082718724000029/a2024-q1ex101.htm)</u><br><u>[2024 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718724000029/a2024-q1ex101.htm)</u><br>|
| 10.47<sup>†</sup> | <u>[Form of Performance Adjusted Restricted Stock Unit Award Agreement (Executive Team) under the](https://www.sec.gov/Archives/edgar/data/827187/000082718725000058/a2025-q1ex1062025psuawarda.htm)</u><br><u>[Sleep Number Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.6](https://www.sec.gov/Archives/edgar/data/827187/000082718725000058/a2025-q1ex1062025psuawarda.htm)</u><br><u>[contained in Sleep Number's Quarterly Report on Form 10-Q for fiscal quarter ended March 29, 2025](https://www.sec.gov/Archives/edgar/data/827187/000082718725000058/a2025-q1ex1062025psuawarda.htm)</u><br><u>[(File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718725000058/a2025-q1ex1062025psuawarda.htm)</u><br>|
| 10.48<sup>†</sup> | <u>[Form of Restricted Stock Unit Award Agreement (Executive Team) under the Sleep Number](https://www.sec.gov/Archives/edgar/data/827187/000082718725000018/a2024-q4ex1042formofrsu.htm)</u><br><u>[Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.42 contained in Sleep](https://www.sec.gov/Archives/edgar/data/827187/000082718725000018/a2024-q4ex1042formofrsu.htm)</u><br><u>[Number's Annual Report on Form 10-K for fiscal year ended December 28, 2024 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718725000018/a2024-q4ex1042formofrsu.htm)</u><br>|
| 10.49<sup>†</sup> | <u>[Form of Performance Adjusted Restricted Stock Unit Award Agreement (CEO and Executive Team)](https://www.sec.gov/Archives/edgar/data/827187/000082718725000018/a2024-q4ex10432024psuaward.htm)</u><br><u>[under the Sleep Number Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit](https://www.sec.gov/Archives/edgar/data/827187/000082718725000018/a2024-q4ex10432024psuaward.htm)</u><br><u>[10.43 contained in Sleep Number's Annual Report on Form 10-K for fiscal year ended December 28,](https://www.sec.gov/Archives/edgar/data/827187/000082718725000018/a2024-q4ex10432024psuaward.htm)</u><br><u>[2024 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718725000018/a2024-q4ex10432024psuaward.htm)</u><br>|
| 10.50<sup>†</sup> | <u>[Form of Restricted Stock Unit with Modifier Award Agreement (Inducement RSU w/ Modifier)](https://www.sec.gov/Archives/edgar/data/827187/000082718725000036/a2025-04x15ex991rsuwithmod.htm)</u><br><u>[(incorporated by reference to Exhibit 99.1 contained in Sleep Number's Registration Statement on](https://www.sec.gov/Archives/edgar/data/827187/000082718725000036/a2025-04x15ex991rsuwithmod.htm)</u><br><u>[Form S-8 filed on April 15, 2025 (File No. 000-25121)](https://www.sec.gov/Archives/edgar/data/827187/000082718725000036/a2025-04x15ex991rsuwithmod.htm)</u><br>|

---

---

| | |
|:---|:---|
| **88 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

---

| | |
|:---|:---|
| **Exhibit**<br>**No.**<br>| **Description** |
| 10.51<sup>†</sup> | <u>[Form of Performance Stock Unit Award Agreement (Inducement PSUs) (incorporated by reference to](https://www.sec.gov/Archives/edgar/data/827187/000082718725000036/a2025-04x15ex992psuinducem.htm)</u><br><u>[Exhibit 99.2 contained in Sleep Number's Registration Statement on Form S-8 filed on April 15, 2025](https://www.sec.gov/Archives/edgar/data/827187/000082718725000036/a2025-04x15ex992psuinducem.htm)</u><br><u>[(File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718725000036/a2025-04x15ex992psuinducem.htm)</u><br>|
| 10.52<sup>†</sup> | <u>[Form of Restricted Stock Unit Award Agreement (Inducement RSUs) (incorporated by reference to](https://www.sec.gov/Archives/edgar/data/827187/000082718725000036/a2025-04x15ex993rsuinducem.htm)</u><br><u>[Exhibit 99.3 contained in Sleep Number's Registration Statement on Form S-8 filed on April 15, 2025](https://www.sec.gov/Archives/edgar/data/827187/000082718725000036/a2025-04x15ex993rsuinducem.htm)</u><br><u>[(File No. 000-25121)](https://www.sec.gov/Archives/edgar/data/827187/000082718725000036/a2025-04x15ex993rsuinducem.htm)</u><br>|
| 10.53<sup>†</sup> | <u>[Sleep Number Corporation Profit Sharing and 401(k) Plan (2022 Restatement) (incorporated by](https://www.sec.gov/Archives/edgar/data/827187/000082718723000060/a2023-07x12sx8ex991.htm)</u><br><u>[reference to Exhibit 99.1 to Sleep Number's Registration Statement on Form S-8 filed July 12, 2023](https://www.sec.gov/Archives/edgar/data/827187/000082718723000060/a2023-07x12sx8ex991.htm)</u><br><u>[(File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718723000060/a2023-07x12sx8ex991.htm)</u><br>|
| 10.54<sup>†</sup> | <u>[Sleep Number Corporation Profit Sharing and 401(k) Plan (2022 Restatement) (First Declaration of](https://www.sec.gov/Archives/edgar/data/827187/000082718723000060/a2023-07x12sx8ex992.htm)</u><br><u>[Amendment) effective May 30, 2022 (incorporated by reference to Exhibit 99.2 to Sleep Number's](https://www.sec.gov/Archives/edgar/data/827187/000082718723000060/a2023-07x12sx8ex992.htm)</u><br><u>[Registration Statement on Form S-8 filed July 12, 2023 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718723000060/a2023-07x12sx8ex992.htm)</u><br>|
| 10.55<sup>†</sup> | <u>[Sleep Number Corporation Profit Sharing and 401(k) Plan (2022 Restatement) (Second Declaration of](https://www.sec.gov/Archives/edgar/data/827187/000082718723000060/a2023-07x12sx8ex993.htm)</u><br><u>[Amendment) effective January 1, 2022 (incorporated by reference to Exhibit 99.3 to Sleep Number's](https://www.sec.gov/Archives/edgar/data/827187/000082718723000060/a2023-07x12sx8ex993.htm)</u><br><u>[Registration Statement on Form S-8 filed July 12, 2023 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718723000060/a2023-07x12sx8ex993.htm)</u><br>|
| 10.56<sup>†</sup> | <u>[Sleep Number Corporation Profit Sharing and 401(k) Plan (2022 Restatement) (Third Declaration of](https://www.sec.gov/Archives/edgar/data/827187/000082718723000060/a2023-07x12sx8ex994.htm)</u><br><u>[Amendment) effective as of December 31, 2022 (incorporated by reference to Exhibit 99.4 to Sleep](https://www.sec.gov/Archives/edgar/data/827187/000082718723000060/a2023-07x12sx8ex994.htm)</u><br><u>[Number's Registration Statement on Form S-8 filed July 12, 2023 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718723000060/a2023-07x12sx8ex994.htm)</u><br>|
| 10.57<sup>†\*</sup> | <u>[Sleep Number Corporation Profit Sharing and 401(k) Plan (2022 Restatement) (Fourth Declaration of](ex1057profitsharingand401k.htm)</u><br><u>[Amendment) effective as of October 10, 2025](ex1057profitsharingand401k.htm)</u><br>|
| 19.1\* | <u>[Sleep Number Corporation Insider Trading Policy](ex191insidertradingpolicy-.htm)</u> |
| 21.1 | <u>[Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 to Sleep Number's Annual](https://www.sec.gov/Archives/edgar/data/827187/000082718725000018/a2024-q4ex211.htm)</u><br><u>[Report on Form 10-K for fiscal year ended December 28, 2024 (File No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718725000018/a2024-q4ex211.htm)</u><br>|
| 23.1\* | <u>[Consent of Independent Registered Public Accounting Firm](a2025-q4ex231consent.htm)</u> |
| 24.1\* | <u>[Power of Attorney](#id85bc2f5d2ad4583a9197c95587784c2_325)</u> |
| 31.1\* | <u>[Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002](a2025-q4ex311.htm)</u> |
| 31.2\* | <u>[Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002](a2025-q4ex312.htm)</u> |
| 32.1\* | <u>[Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section](a2025-q4ex321.htm)</u><br><u>[1350](a2025-q4ex321.htm)</u><br>|
| 32.2\* | <u>[Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section](a2025-q4ex322.htm)</u><br><u>[1350](a2025-q4ex322.htm)</u><br>|
| 97.1<sup>†</sup> | <u>[Sleep Number Corporation Executive Clawback and Forfeiture Policy (incorporated by reference to](https://www.sec.gov/Archives/edgar/data/827187/000082718724000011/a2023-q4ex971.htm)</u><br><u>[Exhibit 97.1 contained in Sleep Number's Annual Report on Form 10-K filed on February 23, 2024 (File](https://www.sec.gov/Archives/edgar/data/827187/000082718724000011/a2023-q4ex971.htm)</u><br><u>[No. 000-25121))](https://www.sec.gov/Archives/edgar/data/827187/000082718724000011/a2023-q4ex971.htm)</u><br>|
| 101.INS\* | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File <br>because its XBRL tags are embedded within the Inline XBRL document<br>|
| 101.SCH\* | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL\* | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF\* | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB\* | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE\* | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104\* | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |

---

**____________________**

<sup>(1)</sup> Confidential treatment has been requested by the issuer with respect to designated portions contained within document. Such portions have been

omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as

amended.

---

| | |
|:---|:---|
| **89 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

<sup>(2)</sup> Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10).

\*Filed herein.

<sup>†</sup>Management contract or compensatory plan or arrangement.

**ITEM 16. FORM 10-K SUMMARY**

Not applicable.

---

| | |
|:---|:---|
| **90 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly

caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | **SLEEP NUMBER CORPORATION** | **SLEEP NUMBER CORPORATION** |
|  | (Registrant) | (Registrant) |
| March 12, 2026 | By: | /s/ Linda Findley |
|  |  | Linda Findley |
|  |  | President and Chief Executive Officer |
|  |  | (principal executive officer) |
|  | By: | /s/ Amy K. O'Keefe |
|  |  | Amy K. O'Keefe |
|  |  | Chief Financial Officer |
|  |  | (principal financial officer) |

---

---

| | |
|:---|:---|
| By: | /s/ Kelly F. Baker |
|  | Kelly F. Baker |
|  | Principal Accounting Officer |
|  | (principal accounting officer) |

---

---

| | |
|:---|:---|
| **91 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**POWER OF ATTORNEY**

Know all persons by these presents, that each person whose signature appears below constitutes and appoints Linda

Findley, Amy K. O'Keefe and Sam R. Hellfeld, and each of them, as such person's true and lawful attorneys-in-fact and

agents, with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in

any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits thereto, and

other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-

fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and

necessary to be done in connection therewith, as fully to all intents and purposes as such person might or could do in

person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or any of them or their or such person's

substitute or substitutes, may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following

persons on behalf of the registrant and in the capacities and on the date or dates indicated.

---

| | | |
|:---|:---|:---|
| Name | Title | Date |
| /s/ Phillip M. Eyler | Chair of the Board | March 10, 2026 |
| Phillip M. Eyler |  |  |
| /s/ Linda A. Findley | Director | March 11, 2026 |
| Linda A. Findley |  |  |
| /s/ Julie M. Howard | Director | March 11, 2026 |
| Julie M. Howard |  |  |
| /s/ Deborah L. Kilpatrick | Director | March 10, 2026 |
| Deborah L. Kilpatrick |  |  |
| /s/ Stephen E. Macadam | Director | March 11, 2026 |
| Stephen E. Macadam |  |  |
| /s/ Angel L. Mendez | Director | March 10, 2026 |
| Angel L. Mendez |  |  |
| /s/ Hilary A. Schneider | Director | March 11, 2026 |
| Hilary A. Schneider |  |  |

---

---

| | |
|:---|:---|
| **92 \| 2025 FORM 10-K** | **SLEEP NUMBER CORPORATION** |

---

**SLEEP NUMBER CORPORATION AND SUBSIDIARIES**

**Schedule II - Valuation and Qualifying Accounts**

**(in thousands)**

---

| | | | |
|:---|:---|:---|:---|
| **Description** | **2025** | **2024** | **2023** |
| Allowances for credit losses |  |  |  |
| Balance at beginning of period | $1113 | $1437 | $1267 |
| Additions charged to costs and expenses | 952 | 2145 | 1437 |
| Deductions from reserves | (1371) | (2469) | (1267) |
| Balance at end of period | $694 | $1113 | $1437 |

---

## Exhibit 10.10

**Exhibit 10.10**

**FIFTH AMENDMENT TO LEASE**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**THIS FIFTH AMENDMENT TO LEASE** (this "<u>Fifth Amendment</u>" or this "<u>Amendment</u>") by and between LEGACY 1001 MINNEAPOLIS VENTURE, LLC, a Delaware limited liability company ("<u>Landlord</u>"), and SLEEP NUMBER CORPORATION, a Minnesota corporation ("<u>Tenant</u>"), is executed as of this 2nd day of December, 2025 (the "<u>Fifth Amendment Effective Date</u>").

**WITNESSETH**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**WHEREAS**, Landlord and Tenant have entered into that certain Lease dated as of October 21, 2016, subsequently amended by the First Amendment to Lease dated June 1, 2017, Second Amendment to Lease dated as May 25, 2023, Third Amendment to Lease with an effective date of December 26, 2024 (the "<u>Third Amendment</u>"), Fourth Amendment to Lease with an effective date of May 27, 2025 (collectively the "<u>Lease</u>") for space in the building commonly known as 1001 3<sup>rd</sup> Avenue South, Minneapolis, Minnesota 55404 (the "<u>Building</u>");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**WHEREAS**, Landlord and Tenant have agreed to amend the Lease so as to extend the Abatement Period (as defined below); and

**NOW, THEREFORE**, for and in consideration of the mutual covenants contained herein and in the Lease, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant hereby covenant and agree to amend and modify the Lease as follows:

1.**DEFINED TERMS.** Unless otherwise defined herein, terms used herein with initial capital letters shall have the same meanings assigned to such terms in the Lease.

2.**EXTENSION OF RENT ABATEMENT**. The Abatement Period (as defined in the Third Amendment) is hereby extended (subject to Section 2 of the Third Amendment) through and until April 30, 2026.

3.**EFFECT OF AMENDMENT**. Except as expressly amended by this Fourth Amendment, the terms and provisions contained in the Lease shall continue to govern the rights and obligations of the parties; and all provisions and covenants in the Lease shall remain in full force and effect.

4.**SEVERABILITY OF PROVISIONS**. A determination that any provision of this Amendment is unenforceable or invalid shall not affect the enforceability or validity of any other provision hereof, and any determination that the application of any provision of this Amendment to any person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to any other persons or circumstances.

5.**COUNTERPARTS**. This Amendment may be executed in any number of counterparts with the same effect as if all parties hereto had signed the same document. All such counterparts shall be construed together and shall constitute one instrument, but in making proof hereof it shall only be necessary to produce one such counterpart.

------

**Exhibit 10.10**

6.**GOVERNING LAW**. The terms and conditions of this Amendment shall be governed by the applicable laws of the State of Minnesota.

7.**INTERPRETATION**. Within this Amendment, words of any gender shall be held and construed to include any other gender, and words in the singular number shall be held and construed to include the plural, unless the context otherwise requires. The section headings used herein are intended for reference purposes only and shall not be considered in the interpretation of the terms and conditions hereof. The parties acknowledge that the parties and their counsel have reviewed and revised this Amendment and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Amendment or any exhibits or amendments hereto.

8.**SUCCESSORS AND ASSIGNS**. The terms and conditions of this Amendment shall be binding upon and shall inure to the benefit of the parties hereto, their successors and permitted assigns.

9.**TIME OF ESSENCE**. Landlord and Tenant agree that time is of the essence of this Amendment.

*[signature page follows]* 

------

**Exhibit 10.10**

**IN WITNESS WHEREOF**, Landlord and Tenant have executed this Amendment as of the day and year first above written.

 **L A N D L O R D:**

**LEGACY 1001 MINNEAPOLIS VENTURE, LLC,**

a Delaware limited liability company

---

| | |
|:---|:---|
| By: | /s/ Jay Rappaport |
|  | Name: Jay Rappaport |
|  | Title: Authorized Signatory |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;T E N A N T:

**SLEEP NUMBER CORPORATION,**

a Minnesota corporation

a Minnesota corporation

---

| | |
|:---|:---|
| By: | /s/ Chella Rasmussen |
|  | Name: Chella Rasmussen |
|  | Title: VP, Finance |

---

## Exhibit 10.16

Ex. 10.16

**SLEEP NUMBER EXECUTIVE DEFERRAL PLAN**

**(2019 Restatement)**

**<u>First Declaration of Amendment</u>**

Pursuant to Article 6 of the "Sleep Number Executive Deferral Plan (2019 Restatement)" (the "**Plan**"), the undersigned amends the Plan pursuant to this First Declaration of Amendment (the "**Amendment**") as set forth below. This Amendment is effective as of January 1, 2026 (the "**Effective Date**").

**<u>FIRST</u>: Section 4.10 (Six-Month Suspension for Specified Employees) is deleted in its entirety and restated as follows:**

"**4.10 &nbsp;&nbsp;&nbsp;&nbsp;<u>Six-Month Suspension for Specified Employees; Participants as</u> <u>Specified Employees on and after January 1, 2026.</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;<u>For amounts deferred or contributed into the Plan prior to January 1, 2026</u>. If a Participant is a Specified Employee on his or her Termination Date, distribution under this Plan made on account of such Participant's Termination of Employment will be suspended and not made (in the case of a lump sum payment) or the annual payments will not commence (in the case of annual installment payments) until the first date following the end of the six-month period following the Participant's Termination Date (and with respect to annual installment payments each payment thereafter will be made on the twelve month anniversary of such commencement date). For this purpose, a "Specified Employee" means a Participant who, on his or her Termination Date, is a 'key employee' (as defined below), and the Company or an Affiliate has stock that is traded on an established securities market (within the meaning of Code Section 409A(a)(2)(B)). The Participant is a 'key employee' during the twelve (12) month period beginning on the April 1 immediately following a calendar year at any time during which such Participant was a key employee as defined in Code Section 416(i) (without regard to Code Section 416(i)(5)) of the Company or an Affiliate. A Participant will not be treated as a Specified Employee if he or she would not be a 'specified employee' as defined under Treasury regulations issued under Code Section 409A.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;<u>For amounts deferred or contributed into the Plan on or after January 1,</u> <u>2026 (including with respect to elections made prior to January 1, 2026 but which</u> <u>become effective on or after January 1, 2026)</u>. All Participants shall be treated as a Specified Employee (whether or not the Participant would otherwise be a 'key employee' as defined above) on his or her Termination Date such that distribution under this Plan made on account of such Participant's Termination of Employment will be suspended and not made (in the case of a lump sum payment) or the annual payments will not commence (in the case of annual installment payments) until the first date following the end of the six-month period following the Participant's Termination Date (and with respect to annual installment payments each payment thereafter will be made on the twelve month anniversary of such commencement date). A Participant will be treated as a Specified Employee even if he or she would not be a 'specified employee' as defined under Treasury regulations issued under Code Section 409A."

------

Ex. 10.16

**<u>SECOND</u>: In all other respects, the Plan is hereby ratified and confirmed.**

The undersigned has caused this Amendment to be executed by its duly authorized officer this December 29, 2025 day to be effective as of the Effective Date.

SLEEP NUMBER CORPORATION

---

| | |
|:---|:---|
| | /s/ Christopher Krusmark |
| By: | Christopher Krusmark |
|  | EVP |

---

## Exhibit 10.57

**Exhibit 10.57**

**SLEEP NUMBER**

**PROFIT SHARING AND 401(K) PLAN**

**(2022 Restatement)**

**<u>Fourth Declaration of Amendment</u>**

Pursuant to Section 11.2 of the "Sleep Number Profit Sharing and 401(k) Plan - 2022 Restatement" (the "Plan"), the undersigned amends the Plan as set forth below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.Section 3.4 is amended, effective as of October 10, 2025, to read as follows:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Subject to the other provisions of this Section 3.4 and the limitations described in Article 9, the Participating Employer of an eligible Active Participant will make a Matching Contribution relative to an Active Participant's 401(k) Contributions and Roth 401(k) Contributions (which may include Catch-Up Contributions) prior to October 10, 2025, on behalf of the Active Participant for a Plan Year in an amount equal to one hundred percent (100%) of the amount of the Active Participant's 401(k) Contributions and Roth 401(k) Contributions (which may include Catch-Up Contributions) for each payroll period up to four percent (4%) of the Participant's Eligible Earnings for such payroll period. It is intended that such Matching Contributions will be used by the Participating Employer to satisfy the safe harbor provisions of Code sections 401(k)(12) and 401(m)(11) (a safe harbor enhanced matching formula). For Plan Years commencing after December 31, 2025, a Participating Employer subject to the other provisions of this Section 3.4 and the limitations described in Article 9, may, in its sole discretion, and in place of contributing safe harbor matching contributions, make Matching Contributions on behalf of each Active Participant. Matching Contributions may, as specified by the Participating Employer, be either (i) a dollar amount or (ii) a percentage of all or a portion of the 401(k) Contributions and Roth 401(k) Contributions made by the Active Participant for the Plan Year (or any period within the Plan Year) following his or her entry into the Plan as a Participant for the purpose of sharing in Matching Contributions. If the Participating Employer decides to make a Matching Contribution for a Plan Year the Participating Employer will specify either (i) the dollar amount of the Matching Contribution (which may be different for eligible Active Participants who are Highly Compensated Employees and eligible Active Participants who are not) or (ii) the Matching Contribution percentage and the portion of an eligible Active Participant's 401(k) Contributions and Roth 401(k) Contributions (and/or Catch-Up Contributions) to which the specified percentage applies (which may be different for eligible Active Participants who are Highly Compensated Employees and eligible Active Participants who are not). The Participating Employer will also specify the period (or periods) during

------

**Exhibit 10.57**

such Plan Year to which the specified Matching Contribution relates. To be eligible to receive the Participating Employer's Matching Contribution made for a given payroll period (if any is made) the Participant must have received Eligible Earnings for the payroll period from the Participating Employer and made 401(k) Contributions or Roth 401(k) Contributions during such payroll period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Subject to the other provisions of this Section 3.4 and the limitations described in Article 9, if, as of the end of a Plan Year, the aggregate amount of Matching Contributions made on behalf of an Active Participant is less than the Matching Contributions specified under Subsection (a) for the entire Plan Year, the Participating Employer may, in its sole discretion, make an additional Matching Contribution on behalf of each such Active Participant in an amount not exceeding the difference. To be eligible to share in such additional Matching Contribution the Participant must either:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)be employed with an Affiliated Organization as a Qualified Employee on either active status, on a paid leave of absence or on a leave of absence pursuant to the Family and Medical Leave Act of 1993 on the last day of the Plan Year or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)have terminated employment during the Plan Year -

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)on or after attaining his or her Normal Retirement Age,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)on account of his or her death or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)on account of his or her becoming Disabled;

*provided*, that this condition will be applied only once with respect to a Participant, such sole application being made for the Plan Year during which this clause (ii) first applies and the condition under clause (i) is not satisfied.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)A Participating Employer's Matching Contributions for a Plan Year (if any) will be paid to the Trustee on such date or dates during or following such Plan Year as the Participating Employer may elect but in no case more than 12 months after the end of the Plan Year. Except as allowed in Treasury Regulations, Matching Contributions will not be paid to the Trustee prior to the date the Active Participant performs the services with respect to which the Matching Contribution relates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)No Matching Contribution will be made with respect to any portion of a Participant's 401(k) Contributions and/or Roth 401(k) Contributions returned to the Participant pursuant to Article 9. For this purpose, 401(k) Contributions and Roth 401(k) Contributions with respect to which no Matching Contributions are made for a Plan Year will be deemed to be the

------

**Exhibit 10.57**

first such contributions returned to the Participant. If the Administrator determines that Matching Contributions that have been added to a Participant's Account should not have been added by reason of this Subsection, the contributions, increased by Fund earnings or decreased by Fund losses attributable to the contributions, as determined under Section 9.3, will be subtracted from the Account as soon as administratively practicable after the determination is made and will be applied to satisfy the contribution obligations of the Participating Employer that made the excess contributions for the Plan Year for which the excess contributions were made. If, because of the passage of time, the excess cannot be applied in this way, the excess will be allocated in the discretion of the Administrator:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)among the Matching Contribution Accounts of all Participants who made 401(k) Contributions and/or Roth 401(k) Contributions for the Plan Year as Qualified Employees of the Participating Employer in proportion to such 401(k) Contributions and Roth 401(k) Contributions up to six percent (6%) of the Participant's Eligible Earnings for the Plan Year; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)as a corrective contribution pursuant to Section 3.7.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)Notwithstanding any other provision of this Section to the contrary, a Participant covered by a collective bargaining agreement between his or her bargaining representative and a Participating Employer is eligible for Matching Contributions only if and to the extent provided in the collective bargaining agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)Participating Employers will make Matching Contributions for each Plan Year on behalf of each Active Participant who makes a Catch Up Contribution in accordance with the formula and provisions set forth in Subsections (a) and (b).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)Matching Contributions are made to the profit sharing portion of the Plan; any amounts invested in the Company Stock Fund are transferred from the profit sharing portion of the Plan to the stock bonus portion of the Plan and considered part of the Participant's ESOP Account.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.Section 3.7 is amended, effective as of October 10, 2025, to read as follows:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)For any Plan Year, a Participating Employer may, but is not required to, contribute on behalf of Active Participants who are not Highly Compensated Employees, or any group of such Participants identified by the Administrator, such amounts as the Participating Employer deems advisable to assist the Plan in satisfying the requirements of Section 9.2 or

------

**Exhibit 10.57**

Section 9.3 or any other requirement under the Code or Treasury Regulations for the Plan Year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)A Participating Employer may designate any contributions as "qualified nonelective contributions" or "qualified matching contributions" for purposes of satisfying the ADP test described in Section 9.2 or the ACP test described in Section 9.3 if the contributions meet all of the requirements of Treasury Regulation section 1.401(k)-2(a)(6). "Qualified matching contribution" means a matching contribution that is 100 percent (100%) vested when made and that may be withdrawn or distributed only under the conditions described in Treasury Regulation section 1.401(k)-1(d). "Qualified nonelective contribution" means a nonelective contribution that is 100 percent (100%) vested when made and that may be withdrawn or distributed only under the conditions described in Treasury Regulation section 1.401(k)-1(d). Pursuant to Treasury Regulations, the Plan Administrator may use "qualified nonelective contributions" or "qualified matching contributions" or both in satisfying the requirements of Section 9.2 or Section 9.3 for a Plan Year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Contributions pursuant to this Section will be allocated in accordance with one or more of the following clauses, as determined by the Administrator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)"Qualified matching contributions" are allocated among the Accounts of the Participants eligible to share in the allocation who made 401(k) Contributions and/or Roth 401(k) Contributions for the Plan Year in proportion to such 401(k) Contributions and/or Roth 401(k) Contributions up to five percent (5%) of the Participant's Eligible Earnings for the Plan Year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)"Qualified nonelective contributions" are allocated among the Accounts of the Participants eligible to share in the allocation in proportion to their respective Eligible Earnings from the Participating Employer for the Plan Year up to five percent (5%) of the Participant's Eligible Earnings for the Plan Year or, if greater, two times the Plan's "representative contribution rate" (as defined in Treas. Reg. §1.401(k)-2(a)(6)) for non-highly compensated Employees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Contributions pursuant to this Section which are used to satisfy the requirements of Section 9.2 or Section 9.3 will be paid to the Trustee no later than twelve (12) months after the end of the Plan Year to which such contributions relate (except as otherwise allowed under Treasury Regulations) and will be added to a separate sub-account with respect to which gains, losses, withdrawals and other credits or charges are

------

**Exhibit 10.57**

separately allocated on a reasonable and consistent basis pursuant to Section 4.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)Corrective contributions made pursuant to this Section 3.7 are made to the profit sharing portion of the Plan. Any amounts invested in the Company Stock Fund are transferred from the profit sharing portion of the Plan to the stock bonus portion of the Plan and considered part of the Participant's ESOP Account.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.Section 4.1(a)(iii) is amended, effective as of October 10, 2025, to read as follows:**

A Matching Contribution Account, to which there will be added any Matching Contributions made on the Participant's behalf together with a sub-account established and maintained for a Participant in connection with any Matching Contributions made prior to October 10, 2025, for purposes of satisfying the designed-based safe harbor alternative described in Code section 401(k)(12) and/or the designed-based safe harbor alternative described in Code section 401(m)(11) (a "**Safe Harbor Matching Sub-Account**");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.Section 7.1(b) is amended, effective as of October 10, 2025, to read as follows:**

A Participant always has a fully vested non-forfeitable interest in his or her Safe Harbor Matching Sub-Account established and maintained for the Participant in connection with any Matching Contributions made prior to October 10, 2025, for purposes of satisfying the designed-based safe harbor alternative described in Code section 401(k)(12) and/or the designed-based safe harbor alternative described in Code section 401(m)(11).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.Section 9.2 is amended, effective as of October 10, 2025, to read as follows:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2. ***<u>Actual Deferral Percentage Limitations.</u>***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Each Plan Year, the Plan will satisfy the requirements of Code section 401(k)(3) by satisfying the actual deferral percentage ("ADP") test described in Treasury Regulation section 1.401(k)-2 using the current year testing method described in such section.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)To the extent deemed advisable by the Administrator to comply with Code section 401(k)(3), the Administrator may, in accordance with Plan Rules, prospectively decrease a Participant's 401(k) Contributions and/or Roth 401(k) Contributions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)If, for any Plan Year, the requirements of Subsection (a) are not satisfied, the Administrator will determine the amount by which 401(k) Contributions and Roth 401(k) Contributions made by each Highly Compensated Employee for the Plan Year exceeds the permissible amount

------

**Exhibit 10.57**

as determined under Subsection (a). The determination will be made in accordance with Treasury Regulation section 1.401(k)-2(b)(2).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)The amount of excess 401(k) Contributions determined in accordance with Subsection (c), increased by Fund earnings or decreased by Fund losses attributable to such excess as determined in accordance with Treasury Regulation section 1.401(k)-2(b)(2), will be distributed to affected Highly Compensated Employees, at such time as the Administrator specifies on or following the last day of the Plan Year for which the determination is made, but in no case later than the last day of the following Plan Year. The amount to be distributed with respect to any Plan Year will be reduced by the portion of the amount, if any, distributed pursuant to Section 9.1 that is attributable to 401(k) Contributions and Roth 401(k) Contributions that relate to such Plan Year, determined by assuming that 401(k) Contributions and Roth 401(k) Contributions in excess of the limitation described in Section 9.1 for a given taxable year are the first contributions made for a Plan Year falling within such taxable year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)To the extent required or permitted by Treasury Regulations, the Administrator will or may, as the case may be, apply the limitation described in this Section separately to each group of eligible employees who are included in a unit of Employees covered by a collective bargaining agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)If the Administrator elects to apply Code section 410(b)(4)(B) in determining whether the Plan satisfies the ADP test for a Plan Year, all eligible employees who have not met either the minimum age and/or minimum service requirements of Code section 410(a)(l)(A) will be considered separately in accordance with the ADP test.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.**Section 9.3 is amended, effective as of October 10, 2025, to read as follows:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3 ***<u>Actual Contribution Percentage Limitations</u>*.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)For each Plan Year, the Plan will satisfy the requirements of Code section 401(m)(2) by satisfying the actual contribution percentage ("ACP") test described in Treasury Regulation section 1.401(m)-2 using the current year testing method described in such section.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)If, for any Plan Year, the requirements of Subsection (a) are not satisfied, the Administrator will determine the amount by which Matching Contributions made on behalf of each Highly Compensated Employee for the Plan Year exceeds the permissible amount as determined under Subsection (a), such determination being made in accordance with in accordance with Treasury Regulation section 1.401(m)-2(b)(2).

------

**Exhibit 10.57**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)The amount of excess Matching Contributions determined in accordance with Subsection (b), increased by Fund earnings or decreased by Fund losses attributable to such excess as determined in accordance with Treasury Regulation section 1.401(m)-2(b)(2), will be distributed to affected Highly Compensated Employees at such time as the Administrator specifies on or following the last day of the Plan Year for which the determination is made, but in no case later than the last day of the following Plan Year; provided, however, that to the extent the excess Matching Contributions would not be fully vested if retained in the Plan, such excess will be forfeited rather than distributed, and any such forfeitures will be applied as provided in Section 3.4(d).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)To the extent provided in Treasury Regulations, the limitations described in this Section do not apply to any group of eligible employees who are included in a unit of Employees covered by a collective bargaining agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)If the Administrator elects to apply Code section 410(b)(4)(B) in determining whether the Plan satisfies the ACP test for any Plan Year, all eligible employees who have not met either the minimum age and/or minimum service requirements of Code section 410(a)(l) (A) will be considered separately in accordance with the ACP test.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.Article 14 is amended, effective as of October 10, 2025, to read as follows:**

***<u>Safe Harbor Matching Sub-Account</u>.*** The "Safe Harbor Matching Sub-Account" is the sub-account established for safe harbor matching contributions made by a Participating Employer to an eligible Active Employee prior to October 10, 2025.

The undersigned has caused this instrument to be executed by its duly authorized officer this 10 day of October, 2025.

---

| |
|:---|
| **SLEEP NUMBER CORPORATION** |
| **By:** /s/ Christopher Krusmark |
| **Its:** Chief Retail and People Officer |

---

## Exhibit 19.1

![image_0.jpg](image_0.jpg)

**Exhibit 19.1**

**Insider Trading Policy**

**Policy Overview:** This Insider Trading Policy (the "**Policy**") applies to all Sleep Number team members,

officers of the Company (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended)

("**Officers**"), members of the Company's Board of Directors ("**Directors**"), and their respective Family

Members and Controlled Entities, as each is defined below. If you are an "Insider," as defined below, this

Policy restricts your ability to buy, sell, gift, and trade Sleep Number stock, it similarly restricts your

qualifying Family Members and Controlled Entities from engaging in such activities, and it places additional

obligations on you, as detailed below. Please review the Policy carefully and direct any questions to the Chief

Legal and Risk Officer.

**Purpose**

The purpose of this Policy is to:

• Protect confidential and proprietary information of Sleep Number Corporation and its subsidiaries

(collectively, the "Company" or "Sleep Number") from unauthorized disclosure;

• Prevent potentially unlawful trading in securities of the Company by team members, Officers, Directors,

and other covered persons while they are in possession of material non-public information relating to

the Company; and

• Provide guidelines with respect to lawful trading in the Company's Securities (as defined below) by team

members, Officers, Directors, and other covered persons.

This Policy also includes the Company's policies prohibiting (i) hedging transactions involving the Company's

Securities, and (ii) pledging of the Company's Securities.

**Scope**

**Persons Subject to this Policy.** This Policy applies to all Company team members, Officers, Directors, and

their respective Family Members and Controlled Entities (as each is defined below). The Company may also

determine that other persons should be subject to this Policy, such as business partners, contractors, or

consultants who have access to material non-public information.

**Applicability to Family Members and Others.** This Policy applies to (i) your family members who reside

with you (including a spouse, a partner, a child, a child away at college, stepchildren, grandchildren, parents,

stepparents, grandparents, siblings, and in-laws), (ii) anyone else who lives in your household, and (iii) anyone

else who does not live in your household but whose transactions in Company Securities are directed by you or

are subject to your influence or control, such as parents, children, or significant others who consult with you

before they trade in Company Securities (collectively referred to as "**Family Members**"). You are responsible

for the transactions of these other persons and therefore should make them aware of the need to confer with

you before they trade in Company Securities, and you should treat all such transactions for the purposes of this

Policy and applicable securities laws as if the transactions were for your own account. This Policy does not apply

to personal securities transactions of Family Members where the purchase or sale decision is made by a third

party not controlled by, influenced by, or related to you or your Family Members.

![image_0.jpg](image_0.jpg)

**Applicability to Entities that You Influence or Control.** This Policy applies to any entities that you

influence or control, including any corporations, partnerships, trusts, or non-profit/charitable organizations

(collectively referred to as "**Controlled Entities**"). Any transactions by these Controlled Entities are subject

to this Policy and should be treated as if they were for your own account for purposes of this Policy and

applicable securities laws.

**Policy**

It is the policy of the Company that no Director, Officer, or team member of the Company (which includes

Directors, Officers, and team members of subsidiaries) may:

• Engage in any transactions involving the Company's Securities *at any time* while in possession of

material non-public information about the Company, except as expressly permitted below under

"Specific Prohibitions, Requirements and Exceptions";

• Engage in any transactions involving securities of any third-party company with which the Company

does business, including a customer or supplier of the Company, or that is involved in a potential

transaction or business relationship with the Company while in possession of material non-public

information about such third-party company obtained through the Company (such as information

regarding purchases or sales of businesses or information obtained during the negotiation or

implementation of contracts or other transactions with any such third-party company);

• Disclose any such material non-public information to persons within the Company whose jobs do not

require them to have that information, or to any person outside of the Company (including Family

Members, Controlled Entities, friends, business associates, and investors) unless such disclosure is in

compliance with the Company's policies regarding authorized disclosure of Company information or

is authorized in writing by the Company's Chief Legal and Risk Officer or his or her designee;

provided, however, this policy in no way prohibits good faith reports of potential illegal conduct to

the Securities and Exchange Commission or other regulatory body;

• Recommend to any person any transaction involving the Company's Securities or otherwise express

an opinion with respect to trading in the Company's Securities *at any time* while in possession of

material non-public information about the Company or communicate or pass ("tip") that material

non-public information about the Company to anyone outside the Company who may trade on the

basis of that information; or

• Assist any person engaging in any of the foregoing prohibited activities.

**Definitions**

**Company Securities:** The term "**Company Securities**" includes the Company's common stock, options to

purchase common stock, or any other type of securities that the Company may issue, such as preferred

stock, convertible debentures, or warrants, and also includes derivative securities that are not issued by the

Company, such as exchange-traded put or call options or swaps related to any of the Company's Securities.

**Insiders:** The term "**Insiders**" includes Directors, Officers, director-level and above team members and

other team members as may be designated by the Company from time to time.

**Material Information:** Information should be considered material if a reasonable person would consider it

important in making a decision to buy, sell, or hold a company's securities, or if it would reasonably be

expected to affect the market price of such securities. There is no bright-line standard for assessing

materiality.

![image_0.jpg](image_0.jpg)

Materiality must be based on assessment of all relevant facts and circumstances at the time and is evaluated

by enforcement authorities with the benefit of perfect hindsight so questions concerning the materiality of

particular information will be resolved in favor of materiality. While it is not possible to define all categories

of potentially material information, some examples of information that may be considered material include:

• Current sales or earnings trends, or projections of future sales or earnings results, that differ from

previously announced guidance or market expectations;

• A pending or proposed joint venture, merger, or acquisition;

• Significant new product introductions;

• Major marketing changes;

• The gain or loss of a significant partner or supplier;

• Bank borrowings or other financing transactions out of the ordinary course;

• The establishment of a new share repurchase program or significant changes to an existing share

repurchase program;

• A significant change in senior management;

• Significant cybersecurity events; or

• Pending or threatened significant litigation, or the resolution of such litigation.

**Non-public Information:** Material Information that has not been disclosed to the public should be

considered non-public until after the first (1st) full trading day following its release to the public (by means

of a press release or a filing with the Securities and Exchange Commission).

**Specific Prohibitions, Requirements and Exceptions**

**Prohibition of Trading other than During Authorized Open Window Periods or Pursuant to** 

**Approved Trading Plans:** In addition to the general prohibition against trading in Company Securities or

the securities of any third-party company while in possession of material non-public information, Insiders

and their Family Members and Controlled Entities may only engage in transactions involving Company

Securities within the following requirements:

**Quarterly Open Window Periods.** Following the end of each of the Company's fiscal quarters and after

proper notice and approval from the Company's Chief Legal and Risk Officer as outlined below, Insiders may

buy or sell Company Securities during the period commencing after one (1) full trading day following the

public release of earnings information for the most recently ended quarter and continuing through the third

(3rd) trading day of the ninth (9th) week of the current fiscal quarter, provided, however, that

notwithstanding the foregoing, any quarterly open window period may be closed at any time without notice

for all Insiders or for any specific person or entity if it is determined that such Insider or Insiders may have

come into possession of material non-public information. Note that regardless of the open window, an

Insider may not buy or sell Company Securities at any time that such person or entity is in possession of

material non-public information. Further, any trades approved under this policy shall be commenced (i)

during the open window (and not before) and (ii) within five business days of approval or before the window

is closed, whichever is earlier.

• **Approved Rule 10b5-1 Trading Plan.** Insiders may buy or sell Company Securities pursuant to a

written trading plan that is: (i) established when the Insider is not in possession of material non-

public information and during an open window period; (ii) executed in full compliance with Rule

![image_0.jpg](image_0.jpg)

10b5-1 under the Exchange Act, and other applicable federal and state securities laws; and (iii)

approved in advance in writing by the Company's Chief Legal and Risk Officer. All Rule 10b5-1

trading plans established by Insiders will be subject to a waiting period between entry into such

trading plan and the first trade under such plan. For Directors and Officers of the Company, this

waiting period will end on the later of (i) 90 days following entry into such trading plan and (ii) two

(2) full trading days following the public release of earnings information in a Form 10-K or Form 10-

Q for the quarter in which the plan is entered into (but no more than 120 days following entry into

such trading plan). For other Insiders, this waiting period is 30 days. Entry into an amendment to

the material terms of an established Rule 10b5-1 trading plan (including any amendment to the

amount, price or timing of transactions under such plan) shall be treated like entry into a new Rule

10b5-1 trading plan and subject to the requirements set forth above. Rule 10b5-1 includes

limitations on Insiders entering into multiple plans with overlapping transaction periods and single-

trade plans. Entry into multiple plans with overlapping transaction periods and single trade plans

shall not be approved except in the limited circumstances in which such plans are permitted under

Rule 10b5-1. Prior to amending, suspending or terminating any existing Rule 10b5-1 trading plan,

Insiders must provide advance written notice to, and secure written approval from, the Company's

Chief Legal and Risk Officer. Please note that your broker may have more restrictive rules, so be

sure to initiate any actions with respect to any Rule 10b5-1 trading plans early. The requirement for

pre-clearance and the quarterly trading restrictions described above do not apply to transactions

conducted pursuant to approved Rule 10b5 -1 plans.

**Inapplicability of Policy.** This Policy does not apply to the following, except as specifically noted:

• **Stock Option Exercises.** Exercise of a stock option acquired pursuant to the Company's

compensatory plans, or to the exercise of a withholding right pursuant to which a person has elected

to have the Company withhold shares subject to an option to satisfy all or part of the exercise price

or tax withholding requirements. This Policy does apply, however, to any sale of stock as part of a

broker-assisted cashless exercise of an option, or any other market sale by Insiders for the purpose

of generating the cash needed to pay the exercise price of an option or the tax withholding

obligation.

• **Restricted Stock Awards.** The vesting of restricted stock, or the exercise of a withholding right

pursuant to which you elect to have the Company withhold shares of stock to satisfy tax withholding

requirements upon the vesting of any restricted stock. The Policy does apply, however, to any

market sale of restricted stock by Insiders.

• **401(k) Plan.** Purchases of Company Securities in the Company's 401(k) plan resulting from your

periodic contribution of money to the plan pursuant to your payroll deduction election. This Policy

does apply, however, to certain elections you may make under the 401(k) plan, including: (i) an

election to increase or decrease the percentage of your periodic contributions that will be allocated

to the Company stock fund; (ii) an election to make an intra-plan transfer of an existing account

balance into or out of the Company stock fund; (iii) an election to borrow money against your 401(k)

plan account if the loan will result in a liquidation of some or all of your Company stock fund

balance; and (iv) an election to pre-pay a plan loan if the prepayment will result in allocation of loan

proceeds to the Company stock fund. In all cases, any elections you may make are subject to the

terms or limits imposed by the Company's 401(k) plan documents.

• **Sales Directed by the Company.** Any market sale for the purpose of generating the cash needed

to pay the tax withholding obligation on an equity award if the sale decision is made by the

Company pursuant to authority granted to the Company under an equity incentive plan or award

agreement under such a plan.

**Requirement to Notify Chief Legal and Risk Officer and Receive Approval Prior to Engaging in** 

**any Transactions Involving the Company's Securities.** Each Insider and their Family Members and

Controlled Entities is required to notify the Company's Chief Legal and Risk Officer, and obtain the written

approval of the Company, prior to engaging in any purchase, sale, gift, or trade of Company Securities, or

any other transaction that would result in any change in the beneficial ownership of Company Securities.

![image_0.jpg](image_0.jpg)

Prior to the Company's public release of earnings information for the most recently ended quarter, the

Company sends a notice to Insiders informing them of the open window dates and reminding them of the

requirement to notify and receive approval from the Chief Legal and Risk Officer prior to any trades. For

more details, see above section: "**Quarterly Open Window Periods.**"

**Prohibition of Hedging Transactions, Short Sales and Trading in Publicly Traded Options and** 

**Other Derivatives.** Insiders are prohibited from engaging in any form of hedging or similar monetization

transactions involving Company Securities. Hedging or similar monetization transactions include, but may not

be limited to, the use of financial instruments such as prepaid variable forwards, equity swaps, collars and

exchange funds. In addition, Insiders are prohibited from engaging in short sales of Company Securities and

from trading in any form of publicly traded options, puts, calls or other derivatives of Company Securities.

Any questions as to whether any proposed transaction may be prohibited by these policies should be

directed to the Company's Chief Legal and Risk Officer.

**Prohibition of Pledging of Company Securities.** Insiders are prohibited from engaging in any form of

pledging of Company Securities. Specifically, Insiders are prohibited from: (i) purchasing Company Securities

on margin; (ii) holding Company Securities in any account which has a margin debt balance; (iii) borrowing

against any account in which Company Securities are held; or (iv) pledging Company Securities as collateral

for a loan. Any questions as to whether any proposed transaction or arrangement may be prohibited by

these policies should be directed to the Company's Chief Legal and Risk Officer.

**Gifts of Shares.** Insiders must seek the approval of the Company's Chief Legal and Risk Officer prior to

making any gift of shares.

**Post-Termination Transactions**

Following the termination of service to the Company as a Director , Officer, or as a Company team member,

you may not purchase or sell Company Securities if you are aware of material non-public information until

that information has become public or is no longer material. If you have any doubts or concerns about your

ability to trade in Company Securities after your role with the Company ceases, please contact the

Company's Chief Legal and Risk Officer.

**Compliance**

Persons subject to this Policy have ethical and legal obligations to maintain the confidentiality of information

about the Company and to not engage in transactions involving Company Securities while in possession of

material non-public information. Each individual is responsible for ensuring personal compliance with this

Policy, including ensuring their Family Members, other persons in their household, and any Controlled

Entities are in compliance. In all cases, the responsibility for determining whether an individual is in

possession of material non-public information rests with that individual. No action by the Company, the Chief

Legal and Risk Officer, an Officer, a Director or a team member pursuant to this Policy (or otherwise)

constitutes legal advice nor does any such action insulate an individual from disciplinary action by the

Company or liability under applicable securities laws. You could be subject to disciplinary action by the

Company and severe legal penalties for engaging in any conduct prohibited by this Policy or prohibited by

applicable securities laws. The Company may amend this Policy from time to time.

**Questions**

Any questions regarding this Policy or requests for assistance in complying with it should be directed to the

Company's Chief Legal and Risk Officer prior to any transaction involving the Company's Securities.

## Exhibit 23.1

**Exhibit 23.1**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We consent to the incorporation by reference in Registration Statement Nos. 333-167331, 333-188766, 333-238236, 333-279825, 333-286545, 333-287072, 333-289127 and 333-292133 on Form S-8 of our reports dated March 12, 2026, relating to the consolidated financial statements and consolidated financial statement schedule of Sleep Number Corporation and subsidiaries (the "Company"), and the effectiveness of the Company's internal control over financial reporting appearing in this Annual Report on Form 10-K for the year ended January 3, 2026.

/s/ DELOITTE & TOUCHE LLP

Minneapolis, Minnesota

March 12, 2026

## Exhibit 31.1

**Exhibit 31.1**

**Certification by Chief Executive Officer**

I, Linda Findley, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.I have reviewed this Annual report on Form 10-K of Sleep Number Corporation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Date:&nbsp;&nbsp;&nbsp;&nbsp;March 12, 2026 | |
| | /s/ Linda Findley |
| | Linda Findley |
| | Chief Executive Officer |

---

## Exhibit 31.2

**Exhibit 31.2**

**Certification by Chief Financial Officer**

I, Amy K. O'Keefe, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.I have reviewed this Annual report on Form 10-K of Sleep Number Corporation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Date:&nbsp;&nbsp;&nbsp;&nbsp;March 12, 2026 | |
| | /s/ Amy K. O'Keefe |
| | Amy K. O'Keefe |
| | Chief Financial Officer |

---

## Exhibit 32.1

**Exhibit 32.1**

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Sleep Number Corporation (the "Company") on Form 10-K for the period ended January 3, 2026, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Linda Findley, Chief Executive Officer of the Company, solely for the purposes of 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, does hereby certify, to her knowledge, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | |
|:---|:---|
| Date:&nbsp;&nbsp;&nbsp;&nbsp;March 12, 2026 | |
| | /s/ Linda Findley |
| | Linda Findley |
| | Chief Executive Officer |

---

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

## Exhibit 32.2

**Exhibit 32.2**

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Sleep Number Corporation (the "Company") on Form 10-K for the period ended January 3, 2026, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Amy K. O'Keefe, Chief Financial Officer of the Company, solely for the purposes of 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, does hereby certify, to his knowledge, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | |
|:---|:---|
| Date:&nbsp;&nbsp;&nbsp;&nbsp;March 12, 2026 | |
| | /s/ Amy K. O'Keefe |
| | Amy K. O'Keefe |
| | Chief Financial Officer |

---

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

<br>