EDGAR 10-K Filing

Company CIK: 827187
Filing Year: 2025
Filename: 827187_10-K_2025_0000827187-25-000018.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
Overview
Sleep Number is a wellness technology company and market leader in the design, manufacturing, marketing and
distribution of highly innovative sleep solutions. The Company’s purpose is to improve the health and wellbeing of
society through higher quality sleep; to date, it has improved the lives of approximately 16 million people. Sleep
Number’s Smart Sleepers benefit from individualized sleep experiences, night after night, and are experiencing the
physical, mental and emotional benefits of life-changing sleep.
Sleep Number’s life-changing, differentiated smart beds combine physical and digital innovations, integrating
unparalleled physical comfort with a highly advanced technology 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 bed to keep
the sleeper comfortable throughout the night. Active temperature balancing technology supports the ideal climate for
each sleeper and solves a prevalent sleep challenge. Additionally, the smart beds are an exceptional value, with
personalized sleep insights delivered daily, new features regularly added to all smart beds through over-the-air updates
and prices to meet most budgets. Sleep Number ® smart beds 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 highly engaged Smart Sleepers, a vertically integrated operating model and a
culture of individuality, with an ambitious vision to become one of the world’s most beloved brands. Sleep Number’s
exclusive distribution meets its customers whenever and wherever they choose - through digital and in-store touchpoints
- to provide an exceptional experience and a lifelong relationship. The Company partners with world-leading institutions
to bring the power of 31  billion hours of longitudinal sleep data to sleep science and research. And Sleep Number’s
3,700 purpose-driven team members are dedicated to the Company’s mission of improving lives by individualizing sleep
experiences.
The bedding industry has been in a sector level recession for three years with mattress industry unit volumes returning to
an estimated 24 million units in 2024, the lowest level since 2015. Consumer sentiment remains well below historical
averages, and high interest rates are putting ongoing pressure on the housing market. Consumers continue to scrutinize
spending, with inflation and other factors weighing on their purchasing power. Since initiating the Company’s operating
model transformation in the fourth quarter of 2023 , the Company has executed structural changes to reduce fixed
expenses, while prioritizing improving margins and generating cash to create greater financial resilience across market
cycles.
Financial Highlights
In the face of the ongoing mattress industry recession the Company has taken decisive actions to build a more durable
operating model, while also positioning itself for accelerating returns when the demand environment improves. For
2024, the ongoing recessionary environment contributed to an 11% net sales decline for the Company. Against this
recessionary backdrop, the Company continued to focus on improving gross margins and streamlining it’s cost structure
to optimize Adjusted EBITDA and cash flow generation. For 2024, the Company delivered a 190 percentage point
increase in gross margin rate, which was nearly double the original target for the year of a 100 percentage point
improvement. The Company also executed an additional $88 million of operating cost reduction actions for 2024, prior
to restructuring costs, which was double the original target for the year of $40 to $45 million. This brings the cumulative
operating cost reduction over the last two years to $173 million. These actions resulted in full-year Adjusted EBITDA of
$120 million , with an Adjusted EBITDA margin of 7.1% , up 40 percentage points versus the prior year, despite
deleverage from the year-over-year net sales decline. The Company also delivered positive free cash flow in 2024, with
free cash flow up $70 million versus the prior year.
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Integrated Sleep Solutions
Smart Bed
With a relentless focus on the consumer, Sleep Number has continued to advance its award-winning Sleep Number ®
smart bed. Enhancing its trademark comfort, adjustability and highly accurate detection of sleep and biosignal data, the
smart bed has evolved into a progressive and adaptive 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. These 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 ® 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.
In October 2022, the Company introduced its award-winning Sleep Number Climate360 ® smart bed, which actively
adjusts warming and cooling to keep both sleepers at their ideal temperature, solving a sleep challenge that 80% of
couples face. In 2024, the Company expanded the ClimateSeries ™ of products with the ClimateCool ® smart bed, which
actively cools and effortlessly adjusts to both sleepers - ideal for couples with different sleep needs and preferences. The
new offering gave sleepers climate-related choices to fit their individual needs at varying price points to fit more
budgets.
Smart Adjustable Bases
Sleep Number’s smart bed ecosystem includes a full line of exclusive FlexFit™ 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.
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 ® 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.
Sleep Number Proprietary Ecosystem
Sleep Number builds lifelong relationships with its customers. The proprietary ecosystem of over 3 million Smart
Sleepers with an average monthly engagement rate of 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, which accounts for
approximately 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.
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It also provides a nightly score - a SleepIQ ® 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 ,
c ircadian 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
Brand Communications
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 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 individualized messaging and brand marketing strategies are designed to emotionally connect with
consumers while highlighting the value and relevancy of Sleep Number’s innovations to help solve consumers’ most
pressing sleep challenges. In 2024, as consumers became more financially conservative and discerning of major
purchases, Sleep Number aligned its brand messaging to support these changing consumer preferences and be
distinctive on the most important differentiator of our smart beds, effortlessly adjusting firmness, position and
temperature for proven high-quality sleep. The Company pivoted to focus on the benefits of smart beds first before
communicating the additional benefits of the total sleep solutions. For example, Sleep Number increased its messaging
that its Smart Sleepers can get 28 minutes more restful sleep each night*. Additionally, the Company honed its
messaging on meeting the needs of couples who crave individualized temperature and comfort preferences to “Sleep
Better Together™.” These actions ensure consumers clearly understand the brand’s differentiators and the value of the
smart bed. Brand health metrics indicate that despite significant headwinds in 2023 and 2024 - including low levels of
consumer sentiment - Sleep Number continues to be thought of as a sleep innovation, sleep health and sleep science
leader.
*Based on average SleepIQ ® data from sleepers who engaged with their Sleep Number ® setting, SleepIQ® data and FlexFit TM adjustable base versus
sleepers who had those same features but did not similarly engage with them.
The Sleep Number ® Rewards loyalty program drives significant brand engagement. After the launch of the program, the
Company welcomed over one million members who participated in over 5 million engagements with over 1,100
activities 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 ® 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.
Exclusive Direct-to-Consumer Distribution
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,
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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 ® 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 December 28, 2024 , the Company operated 640 Sleep
Number ® stores, with locations in all 50 states. More than 30% of its stores (including remodels) are less than five years
old and approximately 50% are less than seven years old.
The Company’s Stores accounted for 88% of net sales in 2024 . Average annual net sales per store in 2024 , based on
Total Retail, was $2.6 million . In 2024, 57% of Stores open for a full year generated net sales of greater than $2 million,
and 18% of Stores open for a full year generated more than $3 million in net sales. In 2024 , Online, Phone, Chat and
Other sales accounted for 12% of net sales.
Operations
Integrated Sourcing and Logistics
The Company completed a multi-year evolution of its supply chain network in 2022. Now, 100% of its smart beds are
pre-assembled in its assembly distribution centers prior to delivery versus being assembled in customers’ homes by
Sleep Number delivery technicians. Sleep Number's evolved 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 new 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 five additional assembly distribution centers (Ontario, CA;
Tampa, FL; Minneapolis, MN; 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 also operates a bedding fulfillment center at the same location as its Cincinnati, OH assembly distribution
center.
The Company sources the raw materials and components used in its products from third parties. 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 vertically-integrated model to respond nimbly as conditions change.
Home Delivery Service
Sleep Number’s home delivery teams are another direct touchpoint with its customers. Sleep Number smart beds 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.
Customer Service
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
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products and strengthen its service quality and innovation. This integration enables operational synergies and
organizational efficiencies. In 2024, Sleep Number outsourced a portion of its customer service operations for greater
efficiency.
Innovation
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 $45 million in 2024 compared to $56 million in 2023 .
With over 900 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 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 wellness technology
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 wellness technology 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 31 billion hours of sleep data gathered from over 3 billion real-world sleep
sessions, generating comprehensive longitudinal and ecologically-valid data to improve sleep quality. More than
5 06,00 0 individuals in its Smart Sleeper SM 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.
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.
National Football League (NFL)
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*. With the extension of the
partnership through 2027, 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. As the NFL is expanding its
schedule of international games, Sleep Number works directly with team training staff on integrating sleep into the
teams’ schedule to ensure best on-field performance during and after international travel. Additionally, the Company
also offers 1:1 coaching for players, deepening their engagement with their smart bed and quality sleep.
*Based on the number of active roster players eligible for the NFL player Sleep Number ® bed program who purchased a bed between 7/23/18 and
1 2/13/24.
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Sleep Number’s NFL partnership also includes partnership 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, the only education of its kind for this community.
In 2024, Sleep Number had partnerships with four clubs - Super Bowl LIV, LVII and LVIII Champion Kansas City Chiefs,
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. Together, Sleep Number
and ACS won the “Golden Halo Award” for Best Intersectional Initiative in 2024.
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. In 2023, Sleep Number was named American Cancer Society’s Corporate Partner
of the Year and won the 2024 “Golden Halo Award” for Best Intersectional Initiative.
Health & Research Institutions
Through partnerships with world-leading health and wellness institutions, Sleep Number is advancing 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 current partnerships and collaborations with physicians, researchers and institutions - including the Mayo Clinic,
ACS , Northwestern University, University of Pittsburgh and Sleep Number’s own Scientific Advisory Board - will deliver
meaningful health solutions.
These partnerships will provide society with a comprehensive, accurate picture of how sleep affects health. In 2020,
Sleep Number announced a collaboration with Mayo Clinic. Sleep Number is advancing the science of sleep by funding
several Mayo Clinic research projects, including:
• 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;
• Research to explore the relationship between disrupted sleep and markers of aging (telomeres,
senescence, chronological EKG based on AI); and
• Research to explore excessive daytime sleepiness (EDS) and its cardiovascular implications.
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 November 2025 and December 2042, and numerous U.S. patent applications pending. The Company also has
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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 ® , SleepIQ ® , Sleep Number 360 ® , 360 ® , the Double Arrow logo, Select Comfort ® , AirFit ® ,
Climate360 ® , Comfortaire ® , Dreamaire ® , DualTemp®, the DualTemp logo, the DualAir Technology Inside logo,
FlexTop ® , HealthIQ ® , IndividualFit ® , Know Better Sleep ® , Pillow[ology] ® , PillowFit ® , Responsive Air ® , Sleep Is Training ® ,
Sleep Number Inner Circle ® , Sleep30 ® , Smart Sleeper SM ,Tech-e ® , This Is Not A Bed ® , We Make Beds Smart ®, 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, ClimateCool™, EnviroIQ™, FlexFit™,
HeartIQ™, Individualized Sleep Experiences™, RespiratoryIQ™, 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
Up to 50% of the developed world’s population experiences sleep deficiencies. In the United States, sleep disorders
have been declared a public health epidemic by the U.S. Center for Disease Control. Sleep Number is focused on
innovations that will address this growing problem. The total U.S. sleep-health economy was estimated to be over $30
billion in a 2017 report published by McKinsey & Company. This reflects the traditional view of the bedding industry,
which includes the sales of mattresses and foundations, as well as emerging solutions for insufficient sleep such as
routine modifications and therapeutic treatments. As the sleep-health economy continues to evolve, Sleep Number
intends to play a role in the digital health market as consumers look for products and reliable data sources to address
their overall wellbeing. The digital health market is estimated at $ 81 billion in the U.S. alone; $241 billion globally with
markets expecting to expand by 4x by 2030 .
The traditional view of the U.S. bedding industry, including mattresses and foundations (static and adjustable), is
measured through data provided by the International Sleep Products Association (ISPA). According to ISPA*, the industry
has grown by approximately 4% annually over the last 20 years. According to ISPA* and the Company’s estimates,
industry wholesale shipments of mattresses and foundations (including imported products and adjustable bases) were
approximately $11 billion in 2023 (approximately $22 billion at retail). The U.S. bedding industry has experienced
recessionary demand levels for the past three years. After peaking at 33 million mattress units in 2020, the U.S. bedding
industry has experienced an estimated 28% decline in units to end 2024 at an estimated 24 million mattress units. The
2024 U.S. mattress unit levels are the lowest annual levels since 2015 and per capita spending on mattresses is also at
historic lows approaching levels not seen since the 2008/2009 great recession. These data points signal the potential for
pent-up demand as the sector recovers.
The retail 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. Furniture Today, a furniture industry trade publication, has ranked Sleep Number as the third
largest U.S. bedding retailer and e-tailer for 2023, with an estimated 8% market share of industry retail revenue. Sleep
Number’s consumer innovation strategy with proprietary sleep innovations and exclusive direct-to-consumer distribution
is highly differentiated resulting in lifelong customer relationships .
*2024 ISPA industry information had not been published at the time of this report.
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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 Simmons. National manufacturers
still dominate the bedding industry. Newer brands like 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 $678 million . The Credit Agreement contains an accordion feature that allows
the Company to increase the amount of the credit facility from $678 million up to $1.0 billion in total availability, subject
to Lenders’ approval. The Credit Agreement matures in December 2026 .
Qualified customers are offered revolving credit to finance purchases through a private-label consumer credit facility
provided by Synchrony Bank. Approximately 45% of net sales in 2024 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.
Information Systems
The Company uses information technology systems to operate, analyze and manage its business, to reduce operating
costs and to enhance its customers’ experience. The Company’s major systems include an order entry system, a
customer relationship management system, a payment processing system, inbound and outbound telecommunications
systems for direct marketing, delivery scheduling and customer service systems, e-commerce systems, a data warehouse
system and an enterprise resource planning system. These systems are primarily comprised of packaged applications
licensed from various software vendors plus a limited number of internally developed programs and digital solutions.
See “Part 1, Item 1C. Cybersecurity ” for further information regarding the Company’s cybersecurity risk management
program.
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,
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SLEEP NUMBER CORPORATION
conflict minerals sourcing and disclosure, end-of-life disposal, recycling and packaging requirements, transportation,
electrification of the Company’s vehicle fleet 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
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
Grounded in Sleep Number’s shared values of passion, integrity, innovation, courage and teamwork, and guided by its
purpose to improve society’s health and wellbeing through higher quality sleep, the Company’s team members are
highly engaged and make a difference in the world every day. With sleep at the center, Sleep Number’s culture supports
the wellbeing of its team members across the pillars of physical, emotional, financial, career and community, and
connects their work to the Sleep Number mission and goals. Sleep Number embraces every individual’s unique talents,
perspectives and experiences, and strives to create an environment where team members can each be their best self,
which fuels innovation and teamwork.
At December 28, 2024 , Sleep Number employed a total of 3,654 team members, of which 67 were classified as part-
time and 7 were employed on a temporary basis. The breakdown of team members by area was as follows: 2,059 in
retail sales and support, 421 in field services, 147 in customer service, 365 in manufacturing and logistics, and 662 in
technology, corporate, management and administrative positions. Forty percent of team members are racially diverse
and 38% are women .
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. During 2024, team members
completed an estimated 200,000 hours of learning and development activities;
• 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
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SLEEP NUMBER CORPORATION
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. In 2024, team members contributed more than $21,000 to
help their teammates in need through the Team Member Support Fund and reported 3,800 hours dedicated to
volunteering.
Commitment to Sustainability
Guided by the Company’s purpose to improve the health and wellbeing of society through higher quality sleep, 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.
• 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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SLEEP NUMBER CORPORATION
Information about the Company’s Executive Officers
SHELLY R. IBACH, 65
Chair, President and Chief Executive Officer (Joined the Company in April 2007, was promoted to President and CEO in
June 2012 and became Chair of the Board of Directors in May 2022)
Shelly R. Ibach, Sleep Number ® setting 40, serves as the Chair, President and Chief Executive Officer (CEO) for Sleep
Number (Nasdaq: SNBR). From June 2011 to June 2012, Ms. Ibach served as the Company’s Executive Vice President
and Chief Operating Officer and from October 2008 to June 2011, she served as Executive Vice President, Sales and
Merchandising. Ms. Ibach joined the Company in April 2007 as Senior Vice President of U.S. sales for Company-owned
channels. Before joining the Company, Ms. Ibach was Senior Vice President and General Merchandise Manager for
Macy’s home division. From 1982 to 2005, Ms. Ibach held various leadership and executive positions within Target
Corporation.
FRANCIS K. LEE, 53
Executive Vice President and Chief Financial Officer (Joined the Company in August 2023)
Francis K. Le e, Sleep Number ® setting 45, serves as Executive Vice President and Chief Financial Officer. Mr Lee leads
the Company’s teams to drive sustainable, profitable growth and strengthen total shareholder return. Mr. Lee is a global
finance and strategy leader with extensive experience across consumer product, retail, and technology companies.
Formerly the CFO at Wyze Labs, a smart home products company, from 2021 to 2023, Mr. Lee increased cash flow and
profitability through a business model evolution, adding a software recurring revenue stream. From 2007 to 2020, Mr.
Lee served at Nike, Inc., an athletic footwear and apparel company, in several corporate and operating unit leadership
positions, including CFO of Nike Japan and executive roles in global finance. Mr. Lee also worked at Gap Inc., leading
long-range planning across the company on the Corporate Strategy and Development team. After completing his MBA
at Northwestern University Kellogg School of Management, Mr. Lee served as a consultant to Fortune 500 companies at
Marakon Associates.
MELISSA BARRA, 53
Executive Vice President and Chief Sales and Services Officer (Joined the Company in 2013 and was promoted to
current role in December 2020)
Melissa Barra, Sleep Number ® setting 30, serves as Executive Vice President and Chief Sales and Services Officer. Ms.
Barra leads the Company’s customer-focused strategy and its sales, real estate, field services, customer relationship, and
corporate technology teams. From June 2019 to December 2020, Ms. Barra was Senior Vice President, Chief Sales,
Services and Strategy Officer. Ms. Barra was Senior Vice President and Chief Strategy and Customer Relationship Officer
from January 2015 to June 2019 and Vice President, Consumer Insights and Strategy from February 2013 to January
2015. 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.
ANDREA L. BLOOMQUIST, 55
Executive Vice President and Chief Innovation Officer (Joined the Company in 2008 and was promoted to current role in
December 2020)
Andrea L. Bloomquist, Sleep Number ® setting 25, serves as Executive Vice President and Chief Innovation Officer. Ms.
Bloomquist leads the Company’s sleep innovation strategy, including research and development of its physical and
digital smart bed ecosystem, digital engagement with its Smart Sleeper community, and strategic partnerships to further
sleep science, health and wellbeing. Ms. Bloomquist was the Senior Vice Presid ent and Chief Product Officer from June
2012 to December 2020 and Chief Merchandising Officer from June 2011 to June 2012. Ms. Bloomquist joined Sleep
Number in May 2008 as Vice President and General Merchandise Manager. Prior to Sleep Number, Ms. Bloomquist held
leadership positions in general management, sourcing, buying, development and planning at Macy’s and The
Depart ment Stores for Target Corporation.
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SLEEP NUMBER CORPORATION
KEVIN K. BROWN, 56
Executive Vice President and Chief Marketing Officer (Joined the Company in 2014 and was promoted to current role in
December 2020)
Kevin K. Brown, Sleep Number ® setting 40, serves as Executive Vice President and Chief Marketing Officer. Mr. Brown
leads all brand marketing and communications strategies for the Company, including brand storytelling; strategic brand
partnerships; paid, earned and social media; and loyalty and advocacy with the Company’s millions of Smart Sleepers.
He joined the Company in 2014 as Senior Vice President and Chief Marketing Officer. Before joining Sleep Number in
2014, Mr. Brown served in executive leadership roles at Meijer, Inc.; Sears Holdings Corporation; Jo-Ann Stores, Inc. and
Accenture.
SAMUEL R. HELLFELD, 46
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 ® setting 65, 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 intellectual property and litigation. Prior to 2010, Mr.
Hellfeld was an Associate at several 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.
CHRISTOPHER D. KRUSMARK, 45
Executive Vice President and Chief Human Resources Officer (Joined the Company in 2005 and was promoted to Chief
Human Resources Officer in July 2020 )
Christopher D. Krusmark, Sleep Number ® setting 55, serves as Executive Vice President and Chief Human Resources
Officer, where he leads all human resources, training and learning functions. 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.
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SLEEP NUMBER CORPORATION
Available Information
Sleep Number is subject to the reporting requirements of the 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 (including any amendment to, or waiver from, a provision of its Code of Business Conduct)
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

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ITEM 1A. RISK FACTORS
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.
Economic Conditions, Consumer Sentiment and the Availability of Credit
Adverse changes in general economic conditions 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 in malls and shopping centers, political
conditions and uncertainty with respect to the new presidential administration, 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
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SLEEP NUMBER CORPORATION
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.
Although previously high inflation subsided somewhat in 2024, 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 Reserve significantly increased the federal funds rate in 2023. Although the Federal Reserve lowered the
federal funds rate in September, November and December 2024, the federal funds rate remains relatively high,
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 debt ceiling and budget deficit concerns have increased the possibility of credit-rating downgrades,
economic slowdowns, or a recession in the United States. There remain increased risks of a government shutdown or
sovereign default if the spending bills necessary to fund the government through 2025 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 facility currently bears interest at a variable rate based on its leverage ratio. 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.
The Company’s access to alternative financing options may depend on factors beyond the Company’s control or
require the Company to accept unfavorable terms.
No assurance can be given that the Company will generate sufficient cash flows from operations or that future
borrowings will be available to the Company in an amount sufficient to enable the Company to service and repay its
indebtedness or to fund other liquidity needs. If the Company is unable to satisfy its debt obligations, it may have to
undertake alternative financing options, such as refinancing or restructuring its indebtedness, selling assets, reducing or
delaying capital investments or seeking to raise additional capital. The Company’s ability to restructure or refinance its
indebtedness will depend on the condition of the capital markets and the Company’s financial condition at such time.
Any refinancing of the Company’s indebtedness could be at higher interest rates and could require the Company to
comply with more onerous covenants, which could further restrict its business operations. The Company cannot assure
that any refinancing or debt restructuring would be possible, or if possible, would be completed on favorable or
acceptable terms.
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SLEEP NUMBER CORPORATION
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 new 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 war between Israel and Hamas, 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. 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 cost savings, efficiencies, and other benefits
related to its business restructuring actions and such actions could have adverse effects on the Company.
The Company’s strategy includes identifying and executing cost savings and operating efficiencies to increase financial
resilience by expanding profit margins and cash flows to pay down debt as part of its operating transformation to a more
durable business model. The Company may not be successful in fully implementing its cost savings plans or realizing
anticipated savings and efficiencies, including potentially as a result of factors outside the Company’s control. Current or
future demand may not support the fixed cost of the Company’s infrastructure at an acceptable margin or its vertically
integrated business model. A failure or delay in implementing or realizing the anticipated savings and efficiencies of its
cost savings plans and related strategic initiatives could materially and adversely impact the Company’s business, results,
profitability, cash flows, availability of credit, and financial condition. Charges and costs incurred in connection with
implementing the cost savings plan and business restructuring actions may be significant and have and may continue to
be higher than expected. In addition, implementing the cost savings plans has and could 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.
Risks Related to the Company’s Marketing Strategy and Execution of Total Retail Distribution Strategy
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 despite competitors’ attempts to copy or adopt its messaging, 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, as the consumer and competition change, or in achieving efficiency in its
advertising expenditures. The Company may be constrained in its ability to invest in advertising at a rate sufficient to
drive demand.
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SLEEP NUMBER CORPORATION
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 are increasingly having 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,
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 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. Total Retail
represents the Company’s largest opportunity for growth in sales and improvement in profitability. The Company’s retail
stores carry significant fixed costs. Sleep Number also makes significant capital expenditures as it opens new stores and
r emodel or reposition existing stores. 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 operating
margins. As a part of the Company’s cost savings plan and business restructuring actions, select stores have been closed
and additional stores are expected to be closed, and, in some cases, store remodels have been delayed. These closures
and older retail store designs may result in higher than expected costs, charges, lost sales, lower brand awareness,
weakened customer experience, or otherwise negatively impact the Company’s sales, profitability, cash flows, availability
of credit, and financial condition.
Some of the Company’s stores are mall-based. The Company depends on the continued popularity of malls as shopping
destinations and the ability of mall anchor tenants and other attractions to generate customer traffic for its mall-based
retail stores. 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 640 retail stores
in 50 U.S. states as of the end of 2024 , 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.
The Company’s longer-term Total Retail distribution strategy is also dependent on its ability to effectively select stores to
close, renew existing store leases and to secure suitable locations for new store openings, in each case on a cost-
effective basis. The Company may encounter higher than anticipated rents and other costs in connection with managing
its retail store base. The Company may also be unable to find or obtain suitable new locations or renew existing
locations.
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SLEEP NUMBER CORPORATION
Ris ks Related to the Company’s Ability to Compete Effectively
Significant competition could adv ersely affect the Company’s business.
Because of the vertical integration of the Company’s business model, its products and distribution face significant
competition from both manufacturers of different types of mattresses and a variety of retailers. The Company’s SleepIQ
technology also faces significant competition from various manufacturers and retailers of sleep tracking and monitoring
products.
The mattress industry is characterized by a high degree of concentration among the largest manufacturers of innerspring
mattresses and foam mattresses and one dominant national mattress retailer, including further consolidation through a
merger of one such mattress manufacturer and a national mattress retailer that closed in early 2025. 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 website, call centers or stores. 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. A number of these retailers
also have more points of distribution, greater marketing resources, greater investment in customer experience, and
greater brand name recognition than the Company does.
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, its beds may be susceptible to failures that do not exist with traditional or foam mattresses. 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.
As a consumer innovation Company with differentiated products, 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
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recall or redesign such products. The Company has at times experienced increased returns and adverse impacts on
sales, as well as product liability litigation, as a result of media reports related to the alleged propensity of it products to
develop mold. The Company may experience additional adverse impacts on sales and additional litigation if any similar
media reports were to occur 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 and to successfully execute new product introductions.
As described herein, the bedding industry, as well as the market for sleep monitoring products, are both highly
competitive, and the Company’s ability to compete effectively 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, SleepIQ technology, sleep health monitoring technologies, a nd 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. If these
efforts do not result in meaningful product improvements or new product introductions, if the Company is not able 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 Company’s sales,
profitability, cash flows and financial condition may be adversely affected. If the Company offers products or services in
other countries, the Company’s business may be exposed to additional risks, such as additional and varied legal/
regulatory requirements, complexity and cost to maintain operations in multiple countries, adapting and localizing
products for enhanced market acceptance, ability to enforce intellectual property rights, tariffs and non-tariff barriers,
which may become more prevalent in retaliation to tariffs recently imposed and proposed by the U.S. government,
fluctuation in and barriers to currency exchange, and political or social unrest, and economic instability. 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 United States. 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 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.
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Risks Related to the Company’s Reliance on Third Parties and Reliance on a Global Supply Chain
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, 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 United States. 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 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 a few critical suppliers for information technology systems and services, on another supplier
for the majority of its customer service support, and on 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 services 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. If the Company is unable to accommodate or otherwise resolve such demands or changes, the Company’s
supply of goods, products and services from these third parties could be disrupted, terminated or otherwise negatively
impacted and t he 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 has 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 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. Increases in prices of these commodities or
logistics costs or other inflationary pressures have resulted, and may 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. For example, the U.S. government has recently proposed the implementation of a tariff on non-U.S. steel,
which could increase the cost of steel to the Company. 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, 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
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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 United States, 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 United States,
including recent and proposed tariffs on certain goods from Canada, China, and Mexico as well as 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 (such as any conflict that may arise
between China and Taiwan) or war (such as the war between Russia and Ukraine and the war between Israel and
Hamas), 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 United States or other foreign governments, including the likelihood, type, or effect of any
such restrictions. The United States government has implemented certain trade policies, including imposing and
proposing tariffs on certain goods imported from Canada, China, and Mexico and other countries and imposing
sanctions against Russia as a result of the war in Ukraine, and may take further actions with respect to these policies in
the future. Additionally, although the Company does not have operations in Russia, Belarus, or Ukraine and has not been
directly impacted by the war in Ukraine, 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 gold, tantalum, tin, and tungsten (collectively
the “3TGs”), as well as birch plywood from Russia. 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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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, 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 or unavailability of supply or an increase in the demand for some or all of its products, 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. 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. Any such impacts or delays could adversely affect the Company’s sales, customer satisfaction,
profitability, cash flows and financial condition.
Risks Related to the Company’s Vertically Integrated Business Model
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 five additional ADCs (Ontario, CA; Tampa, FL; Minneapolis, MN; Cincinnati, OH; and Dallas, TX) and
one former assembly distribution center now used as a distribution center (Baltimore, MD). The seven ADCs leverage
component inventory to pre-assemble 100% of its smart 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. The
Company’s metrics related to customer’s experience indicate that the customer experience has declined due to reduced
investments and a change in the Company’s approach to its customer service operations, including through the use of
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.
Any future acquisitions or business combinations 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 and business combinations will depend, in part, on the availability
of suitable candidates at acceptable prices, terms, and conditions; the Company’s ability to compete effectively for
acquisition candidates; and the availability of capital and personnel to complete such acquisitions and run the acquired
business effectively. The benefits of an acquisition or business combination may take more time than expected to
develop or integrate into the Company’s operations, and the Company cannot guarantee that future acquisitions or
business combinations will, in fact, produce any benefits. Acquisitions and business combinations may involve a number
of risks, the occurrence of which could adversely affect the Company’s business, reputation, operating results and
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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 acquisitions or other business venture investments, 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-acquisition 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 acquisitions 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 acquisition of international entities, including managing international laws and regulations applicable to the
business, operations and personnel.
Risks Related to Workforce
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 works through the current CEO transition. T he current labor challenges or other
economic factors may prevent the Company, and its suppliers and vendors, from successfully hiring and retaining
qualified personnel. 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
business strategy and growth initiatives 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.
Risks Related to Legal Compliance and Legal Proceedings
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 wide variety of laws and regulations relating to the bedding industry or to various aspects of
its business. 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 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,
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SLEEP NUMBER CORPORATION
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 and/or to modify its operations 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.
The Company’s ability to commercialize new products and innovations may be delayed or prevented by
regulatory requirements.
As the Company works to develop innovations with enhanced health capabilities, including possible capabilities of
providing advanced monitoring and health risk evaluations, depending on the features that ultimately become
commercially available, some features may require regulatory requirements or approvals beyond those that apply to
Sleep Number’s current products or features. Further, if the Company partners with third-parties to assist in providing
customers with health risk evaluations, diagnosis, or care, such relationships may implicate regulations that do not
currently apply to the Company or its operations. These additional regulatory requirements or approvals may be
prohibitively expensive or otherwise delay or prevent certain features, innovations, or product from being
commercialized or, if regulations are applied in an unanticipated manner, could require removal of previously
commercialized products, ceasing partnerships or business relationships, or result in further regulatory actions or
penalties. This could adversely impact the Company’s business, reputation, sales, profitability, cash flows and financial
condition.
Risks Related to the Company’s Information Systems and Cybersecurity
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 ®
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 has increased with amplified remote working and has
required additional 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 identifying or
remediating 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.
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SLEEP NUMBER CORPORATION
Advancements in and adoption of artificial intelligence 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 may need
to increase investments to innovate new capabilities and features based on artificial intelligence 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 comply with evolving regulatory frameworks regarding, or
the introduction of potential or actual bias through, 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 remediate 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.
Risks Related to the Company’s Stock
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 share 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 quoted 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. Effective December 4, 2023, the Company’s common shares were removed from the S&P
SmallCap 600 index. This removal and any other removal from various stock indices has and may continue to cause index
funds, institutional investors, or other shareholders attempting to track the composition of that index to sell the
Company’s common stock, adversely affecting the stock price.
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SLEEP NUMBER CORPORATION
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 December 28, 2024, the Company’s 25 largest holders of common stock were investors who held approximately
68% 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.
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.
Risks Related to Tax Treatment
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 may 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.
Risks Related to Environmental, Social and Governance Matters
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, and others related thereto,
may expose the Company to numerous risks, including risks to its reputation and stock price, and may impose
additional costs on the Company.
There has been an increased focus on the Company’s ESG practices within the general markets. Investor advocacy
groups, investment funds and influential investors are also increasingly focused on these practices, especially as they
relate to the environment, climate change, health and safety, supply chain management, diversity, equity and inclusion,
labor conditions and human rights, both in their own operations and in the Company’s operations and supply chain.
28 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
Additionally, different stakeholder groups have divergent views on ESG matters, 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 low-or non-carbon-based energy sources and technologies, evolving regulatory requirements affecting
relevant standards or disclosures, the availability of vendors and suppliers that can meet its sustainability and other
standards, and the availability of raw materials that meet and further the Company’s ESG objectives. It is possible that
some stakeholders may not be satisfied with the Company’s ESG practices or initiatives or the speed with which the
Company is implementing these initiatives. Equally, it is possible that some stakeholders may be opposed to the
implementation of such initiatives at all, which could result in customer backlash or other adverse effects. Anti-ESG
sentiment has gained momentum across the United States, with several states having enacted or proposed “anti-ESG”
policies or legislation, or issued related legal opinions. The federal government has similarly taken action to curtail ESG
initiatives. Accordingly, the Company’s efforts to accomplish and accurately report its progress present numerous
operational, reputational, financial, legal, 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 . Sleep Number
could also incur additional costs and require additional resources to implement various projects that impact the progress
made against its priorities and hurt its ability to monitor and track its performance with respect to such priorities.
If the Company’s ESG practices do not meet evolving standards or the Company cannot make progress on its priorities,
then the Company’s reputation, its ability to attract or retain employees and its competitiveness, including as an
investment and business partner, could be negatively impacted. Furthermore, if Sleep Number’s competitors’ ESG
performance is perceived to be better than the Company’s, potential or current customers and investors may elect to do
business with its competitors instead, and the Company’s ability to attract or retain employees could be negatively
impacted. The Company’s failure, or perceived failure, to pursue or fulfill its priorities and objectives or to satisfy various
reporting standards within the timelines the Company announces, or at all, could also expose the Company to
government enforcement actions and private litigation.
The standards for tracking and reporting on ESG matters are relatively new, have not been formalized and continue to
evolve. Collecting, measuring, and reporting ESG information and metrics can be difficult and time consuming. While
Sleep Number has taken steps to evolve its priorities and related disclosures, including through implementing enhanced
data collection methods and reporting certain data under recognized reporting frameworks and standards, the
Company’s practices may not meet the standards of all of its stakeholders and advocacy groups may campaign for
further changes. Additionally, the Company’s selected disclosure framework or standards may need to be changed from
time to time, which may result in a lack of consistent or meaningful comparative data from period to period. Further, the
Company’s interpretation of reporting frameworks or standards may differ from those of others and such frameworks or
standards may change over time, any of which could result in significant revisions to the Company’s ESG priorities or
reported progress. Organizations that provide information to investors on corporate governance and other matters have
developed rating systems for evaluating companies on their approach to ESG. Unfavorable ratings may lead to negative
investor sentiment, which could have a negative impact on the Company’s stock price.
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 new 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
29 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
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.
Climate disclosure rules may increase the Company’s compliance costs and may subject the Company to litigation
or other risks, which would materially and adversely affect its future results of operations and financial condition.
The SEC adopted climate disclosure rules, which require 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 disclosure rules have been the
subject of multiple legal challenges, so the extent to which the rules will go into effect remains uncertain. At the state
level, California has enacted legislation that would require the Company to make broad-based climate-related
disclosures for its fiscal year 2025, and other states are considering similar measures. In addition to requiring filers to
quantify and disclose direct emissions data, the California rules and the SEC rules (should they become effective) also
would require disclosure of climate impact arising from the operations and uses by the filer’s business partners and
contractors and end-users of the filer’s products and/or services. The Company is taking steps to refine measurements
and ensure readiness for third-party assurance of greenhouse gas measurements and increasing readiness to report
under prescribed frameworks as required by the California rules, but at this time, it cannot predict the costs of
implementation or any specific potential adverse impacts resulting from the new rules. Sleep Number will incur increased
costs relating to the collection, review and assurance for new required disclosures of climate metrics and climate-related
risks and may experience increased litigation, regulatory, business, reputation, or other risks related to disclosures made
pursuant to the new rules. Either the increased cost to comply with the new rules or the potential for increased litigation
and other risks could materially and adversely affect the Company’s future results of operations, cash flows and financial
condition. Additionally, standards for tracking and reporting on sustainability matters have not been harmonized.
Changes to these standards could require adjustments to the Company’s accounting or operational policies, as well as
updates to the Company’s existing systems to meet these obligations. The Company will, therefore, likely need to be
prepared to contend with overlapping, yet distinct, climate-related disclosure approaches, frameworks and
requirements.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

---

ITEM 2. PROPERTIES
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 640 retail stores as of December 28, 2024 :
Retail
Stores
Retail
Stores
Retail
Stores
Alabama
Louisiana
Ohio
Alaska
Maine
Oklahoma
Arizona
Maryland
Oregon
Arkansas
Massachusetts
Pennsylvania
California
Michigan
Rhode Island
Colorado
Minnesota
South Carolina
Connecticut
Mississippi
South Dakota
Delaware
Missouri
Tennessee
Florida
Montana
Texas
Georgia
Nebraska
Utah
Hawaii
Nevada
Vermont
Idaho
New Hampshire
Virginia
Illinois
New Jersey
Washington
Indiana
New Mexico
West Virginia
Iowa
New York
Wisconsin
Kansas
North Carolina
Wyoming
Kentucky
North Dakota
Total
Manufacturing, Distribution and Headquarters
T he 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 leases facilities, each of which is combined with an assembly distribution center, (Irmo, SC and Salt Lake
City, UT) of approximately 151,000 square feet and approximately 158,000 square feet, respectively. The Irmo facility
lease runs through June 2026, with two five-year renewal options. The Salt Lake City facility leases run through July 2025,
with one five-year renewal option.
The Company has five additional assembly distribution centers (Ontario, CA; Tampa, FL; Minneapolis, MN; Cincinnati,
OH; and Dallas, TX) and one former assembly distribution center now used as a distribution center (Baltimore, MD), with
a combined total square footage of approximately 700,000 square feet and lease terms ending in October 2025 through
May 2032. The leases include one or two, three- to five-year option renewals. The Company also operates a bedding
fulfillment center at the same location at its Cincinnati, OH assembly distribution center.
33 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION

---

ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
The Company’s legal proceedings are discussed in Note 14, Commitments and Contingencies, Legal Proceedings , 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 DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
34 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
PART II

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
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 25, 2025 , there were approximately 181 holders of record of Sleep Number common
stock.
The Company is not restricted from paying cash dividends under the Credit Agreement so long as it is not in default
under the Credit Agreement, its leverage ratio (as defined in the Credit Agreement) after giving effect to such restricted
payments (as defined in the Credit Agreement) would not exceed 3.00:1.00 and no default or event of default (as
defined in the Credit Agreement) would result therefrom. At December 28, 2024 , the Company exceeded the 3.00:1:00
leverage ratio. 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 2024 is set forth below:
Period
Total Number
of Shares
Purchased (1)(2)
Average
Price
Paid per
Share
Total Number of
Shares Purchased
as Part of
Publicly
Announced Plans
or Programs (1)
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans
or Programs (3)
September 29, 2024 through October 26, 2024
$ 14.65
-
$ 348,071,000
October 27, 2024 through November 23, 2024
1,530
$ 12.34
-
348,071,000
November 24, 2024 through December 28, 2024
$ 19.84
-
348,071,000
Total
2,626
$ 15.07
-
$ 348,071,000
____________________
(1) Sleep Number did not repurchase any shares during the three months ended December 28, 2024 under its Board-approved $600 million share
repurchase program (effective April 4, 2021 ).
(2) In connection with the vesting of employee restricted stock grants, the Company repurchased 2,626 shares of its common stock at a cost of
$39 thousand during the three months ended December 28, 2024 .
(3) 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.
35 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
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.
12/28/19
01/02/21
01/01/22
12/31/22
12/30/23
12/28/24
Sleep Number Corporation
$ 100
$ 165
$ 154
$ 52
$ 30
$ 31
S&P 400 Specialty Stores Index
$ 100
$ 119
$ 173
$ 162
$ 199
$ 195
The Nasdaq Stock Market (U.S.) Index
$ 100
$ 145
$ 177
$ 118
$ 170
$ 223
36 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION

---

ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. RESERVED

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
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;
• Access to alternative financing options may depend on factors beyond the Company’s control or require the
Company to accept unfavorable terms;
• Availability of attractive and cost-effective consumer credit options;
• Ability to achieve cost savings, efficiencies and other benefits from its business restructuring actions and to avoid
adverse effects;
• 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 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 costs 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 and business combinations;
• 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, and to commercialize new products
and innovations that meet those 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 or adoption of artificial intelligence technologies;
37 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
• Adequacy of the Company’s and third-party information systems, and costs and disruptions related to upgrading or
maintaining these systems;
• 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:
• Overview
• Results of Operations
• Liquidity and Capital Resources
• Critical Accounting Policies and Estimates
• Recent Accounting Pronouncements
Business Overview
Sleep Number is a wellness technology company and market leader in the design, manufacturing, marketing and
distribution of highly innovative sleep solutions. The Company’s purpose is to improve the health and wellbeing of
society through higher quality sleep; to date, it has improved the lives of approximately 16 million people. Sleep
Number’s Smart Sleepers benefit from individualized sleep experiences, night after night, and are experiencing the
physical, mental and emotional benefits of life-changing sleep.
Sleep Number’s life-changing, differentiated smart beds combine physical and digital innovations, integrating
unparalleled physical comfort with a highly advanced technology 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 bed to keep
the sleeper comfortable throughout the night. Active temperature balancing technology supports the ideal climate for
both sleepers and solves a prevalent sleep challenge. Additionally, the smart beds are an exceptional value, with
personalized sleep insights delivered daily, new features regularly added to all smart beds through over-the-air updates
and prices to meet most budgets. Sleep Number ® smart beds 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 highly engaged Smart Sleepers, a vertically integrated operating model and a
culture of individuality, with an ambitious vision to become one of the world’s most beloved brands. Sleep Number’s
exclusive distribution meets its customers whenever and wherever they choose - through digital and in-store touchpoints
- to provide an exceptional experience and a lifelong relationship. The Company partners with world-leading institutions
to bring the power of 31 billion hours of longitudinal sleep data to sleep science and research. And Sleep Number’s
3,700 purpose-driven team members are dedicated to the Company’s mission of improving lives by individualizing sleep
experiences.
The bedding in dustry has been in a sector level recession for three years with mattress industry unit volumes returning to
an estimated 24 million units in 2024, the lowest level since 2015. Consumer sentiment remains well below historical
averages and high interest rates are putting ongoing pressure on the housing market. Consumers continue to scrutinize
spending, with inflation and other factors weighing on their purchasing power. Since initiating the Company’s operating
38 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
model transformation in the back-half of 2023, the Company has executed structural changes to reduce fixed expenses,
while prioritizing improving margins and generating cash to create greater financial resilience across market cycles. The
Company generates revenue by marketing and selling its innovative smart beds directly to new and existing customers
through its vertically integrated, exclusive, direct-to-consumer retail touch points including Stores, Online, Phone, and
Chat (Total Retail).
Results of Operations
Financial Highlights for Fiscal 2024 were as follows:
• Net sales for 2024 decreased 11% to $1.7 billion , compared with $1.9 billion in 2023 . Demand was impacted by the
ongoing weakness in the mattress industry and consumers continuing to scrutinize their spending.
• The net sales change resulted from a 10% comparable sales decrease in Total Retail. For additional details, see the
components of total net sales change on page 39 .
• Average sales per store (sales for stores open at least one year, Total Retail, including online, phone and chat) for the
year ended December 28, 2024 totaled $2.6 million , compared with $2.9 million for the same period last year.
• Operating income for both 2024 and 2023 was $23 million . Operating income was pressured by the decrease in net
sales that was partially offset by the Company’s $86 million reduction in total operating expense that included $18
million of restructuring costs during 2024 . The Company’s 2024 operating income rate increased to 1.4% of net
sales, compared with 1.2% of net sales in 2023 . Its 2024 operating income rate was impacted by the deleveraging
impact of the 11% decrease in net sales.
• Adjusted EBITDA for 2024 was $120 million , compared to $127 million in 2023 due to year-over-year net sales
decline offset by ongoing gross margin improvements and cost reduction actions.
• Gross profit rate of 59.6% was 1.9 percentage points (ppt.) higher than the prior-year. The increase was primarily due
to year-over-year product cost reductions through value engineering and ongoing supplier negotiations and
efficiency gains in home delivery and logistics operations. For additional details, see the gross profit discussion on
page 40 .
• The $86 million year-over-year reduction in the Company’s operating expenses was due to lower sales and
marketing of $81 million and decreased research and development expenses of $11 million , partly offset by slight
increases in general and administrative expenses and restructuring costs when compared to 2023 .
• Net loss in 2024 was $20 million , compared with $15 million in 2023 . Net loss per diluted share increased to $0.90 ,
compared with $0.68 in 2023 .
• The Company’s adjusted return on invested capital (Adjusted ROIC) was 7.6% in 2024 , compared with 7.8% in 2023 .
• The Company generated $27 million in cash from operating activities in 2024 , compared with cash used in operating
activities of $9 million in 2023 . Purchases of property and equipment for 2024 was $24 million , compared with
$57 million in 2023 .
• Free cash flow provided $4 million for the year ended December 28, 2024 , compared with using $66 million for the
same period last year.
• The Company ended 2024 with $547 million of borrowings under its revolving credit facility, compared with
$540 million at the end of 2023 .
39 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
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.
$
% of
Net
Sales
$
% of
Net
Sales
$
% of
Net Sales
Net sales
$ 1,682.3
100.0%
$ 1,887.5
100.0 %
$ 2,114.3
100.0 %
Cost of sales
679.5
40.4%
799.0
42.3 %
912.0
43.1 %
Gross profit
1,002.8
59.6%
1,088.5
57.7 %
1,202.3
56.9 %
Operating expenses:
Sales and marketing
766.6
45.6%
847.4
44.9 %
919.6
43.5 %
General and administrative
150.0
8.9%
146.6
7.8 %
153.3
7.2 %
Research and development
45.3
2.7%
55.8
3.0 %
61.5
2.9 %
Restructuring costs
18.1
1.1%
15.7
0.8 %
-
- %
Total operating expenses
979.9
58.2%
1,065.6
56.5 %
1,134.4
53.7 %
Operating income
22.9
1.4%
22.9
1.2 %
67.9
3.2 %
Interest expense, net
48.4
2.9%
42.7
2.3 %
19.0
0.9 %
(Loss) income before income taxes
(25.5)
(1.5%)
(19.8)
(1.0 %)
48.9
2.3 %
Income tax (benefit) expense
(5.2)
(0.3%)
(4.5)
(0.2 %)
12.3
0.6 %
Net (loss) income
$ (20.3)
(1.2%)
$ (15.3)
(0.8 %)
$ 36.6
1.7 %
Net (loss) income per share:
Basic
$ (0.90)
$ (0.68)
$ 1.63
Diluted
$ (0.90)
$ (0.68)
$ 1.60
Weighted-average number of common shares:
Basic
22.6
22.4
22.4
Diluted
22.6
22.4
22.9
The percentage of the Company’s total net sales, by dollar volume, was as follows:
Retail stores
87.6 %
86.8 %
86.3 %
Online, phone, chat and other
12.4 %
13.2 %
13.7 %
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)
Retail comparable-store sales (1)
(9%)
(12%)
(8%)
Online, phone and chat (1)
(17%)
(15%)
4%
Total Retail comparable sales change (1)
(10%)
(12%)
(6%)
Net opened/closed stores and other
(1%)
1%
3%
Total Company
(11%)
(11%)
(3%)
____________________
(1) 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.
40 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
Other sales metrics were as follows:
Average sales per store ($ in thousands) (1)
$ 2,601
$ 2,853
$ 3,281
Average sales per square foot (1)
$ 841
$ 926
$ 1,081
Stores > $2 million in net sales (2)
57 %
65 %
76 %
Stores > $3 million in net sales (2)
18 %
24 %
36 %
Average revenue per smart bed unit - Total Retail (3)
$ 5,818
$ 5,755
$ 5,403
____________________
(1) Trailing-twelve months Total Retail comparable sales per store open at least one year.
(2) Trailing-twelve months for stores open at least one year (excludes Online, Phone and Chat sales).
(3) Represents Total Retail net sales divided by Total Retail smart bed units.
The number of retail stores operating was as follows:
Beginning of period
Opened
Closed
(44)
(34)
(27)
End of period
Comparison of 2024 and 2023
Net sales
Net sales in 2024 decreased 11% to $1.7 billion , compared with $1.9 billion in 2023 due to t he ongoing weakness in the
mattress industry and consumers continuing to scrutinize their spending. The net sales change consisted primarily of a
10% Total Retail comparable sales decrease. For additional details, see the components of total net sales growth on
page 39 .
The $205 million net sales decrease compared with the same period one year ago was primarily comprised of: (i) a
$144 million decrease in the Company’s Total Retail comparable net sales; (ii) a $41 million decrease from phone, online
and chat; (iii) a $21 million decrease resulting from net opened/closed stores in the past 12 months; (iv) offset by a $1
million increase in wholesale/other. Total Retail smart bed unit sales decreased 12% compared with the prior year.
Average revenue per smart bed unit in Total Retail increased to $5,818 , compared with $5,755 in the prior-year period.
Gross profit
Gross profit for 2024 of $1.0 billion decreased by $86 million , or 8% , compared with $1.09 billion in 2023 . The 2024
gross profit rate increased to 59.6% of net sales, compared with 57.7% for the prior-year period. The 1.9 ppt. increase in
the gross profit rate was mainly due to: (i) year-over-year product cost reductions through value engineering and
ongoing supplier negotiations that increased the rate by 1.1 ppt; (ii) efficiency gains in home delivery and logistics
operations increased the rate by 1.0 ppt; (iii) favorable pricing actions taken over the past twelve months that increased
the rate by 0.8 ppt; (iv) lower returns costs increased the rate by 0.3 ppt; partially offset by (v) product mix of FlexFit
smart adjustable bases, which pressured the rate by 0.8 ppt; and (vi) lower delivered smart bed volume deleveraged the
rate by 0.5 ppt.
Sales and marketing expenses
Sales and marketing expenses decreased to $767 million in 2024 , compared with $847 million last year. The sales and
marketing expense rate increased to 45.6% of net sales, compared with 44.9% for the same period one year ago. The
current-year sales and marketing expense rate increase of 0.7 ppt. was primarily due to the deleveraging impact of an
11% net sales decrease offset by a 10% decrease in expenses including a 9% lower media spend.
41 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
General and administrative expenses
General and administrative (G&A) expenses increased $3 million to $150 million in 2024 , compared with $147 million in
the prior year, and increased to 8.9% of net sales, compared with 7.8% of net sales one year ago. The $3 million increase
in G&A expenses mainly consisted of the following: (i) an increase in miscellaneous other expense of $4.8 million, which
benefited during the prior year from legal and insurance settlements of $4.1 million; (ii) $4.6 million increase in company-
wide, performance-based incentive compensation due to the achievement of fiscal year performance targets in the
current year; partially offset by (iii) a $5.9 million reduction in employee compensation on lower headcount; and (iv) a
$1.0 million benefit from a decrease in other occupancy expenses. The G&A expenses rate increased by 1.1 ppt. in 2024 ,
compared with 2023 due to the items discussed above in addition to the deleveraging impact of the 11% net sales
decrease.
Research and development expenses
Research and development (R&D) expenses decreased by $11 million to $45 million in 2024 , compared with $56 million
in 2023 on lower outside services and headcount. While the Company’s consumer innovation pipeline remains robust, it
is re-prioritizing R&D resources in this highly constrained environment.
Restructuring costs
In fiscal 2024 , the Company incurred $18.1 million of restructuring costs compared with $15.7 million in 2023 . In the
fourth quarter of 2023 , the Company initiated business restructuring actions. Charges incurred related to this initiative
were comprised of contract termination costs, severance and employee-related benefits, professional fees and other,
and asset impairment charges and are included in the restructuring costs line in the Company’s consolidated statement
of operations. The Company expects an additiona l $5 million to $7 million of restructuring costs to be incurred during
2025, primarily due to lease contract termination costs. 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 to $48 million for the year ended December 28, 2024 , compared with $43 million for the
same period one year ago. The $6 million increase was primarily related to a higher weighted-average interest rate
during 2024 compared with 2023 .
Income tax (benefit) expense
Income tax benefit was $5 million for the year ended December 28, 2024 , compared with $4 million for the same period
one year ago. The effective income tax rate for the year ended December 28, 2024 was 20.2% compared with 22.6% for
the year ended December 30, 2023 .
The Company regularly assesses the likelihood that its deferred tax assets will be recovered from future Company
earnings. The Company considers projected future taxable earnings and ongoing tax planning strategies in assessing the
amount of the valuation allowance necessary. If the Company’s earnings decline over an extended period of time, it may
not be able to utilize its deferred tax assets and it may need to record a valuation allowance against them.
Comparison of 2023 and 2022
For a discussion of the Company’s 2023 versus 2022 results, see its 2023 Form 10-K.
42 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
Liquidity and Capital Resources
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
$678 million revolving credit facility. As of December 28, 2024 , the Company did not have any off-balance sheet
financing other than its $7 million in outstanding letters of credit. The cash generated from ongoing operations and cash
available under its revolving credit facility are expected to be adequate to maintain operations and fund anticipated
expansion, strategic initiatives and contractual obligations such as lease payments and capital commitments for new
retail store locations over the next twelve months . See Notes 7, Leases , and 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 contractual obligations.
Cash and cash equivalents totaled $2.0 million and $2.5 million at December 28, 2024 and December 30, 2023 ,
respectively. Significant changes in cash and cash equivalents during 2024 included $27 million of cash provided by
operating activities, which was offset by $24 million of cash used to purchase property and equipment and $3 million
used in the issuance of a note receivable.
The following table summarizes the Company’s cash flows (dollars in millions). Amounts may not add due to rounding
differences:
Total cash provided by (used in):
Operating activities
$ 27,143
$ (9,028)
Investing activities
(26,291)
(58,352)
Financing activities
(1,441)
68,127
Net (decrease) increase in cash and cash equivalents
$ (589)
$ 747
Cash provided by operating activities for the fiscal year ended December 28, 2024 was $27 million , compared with net
cash used in operating activities of $9 million for the fiscal year ended December 30, 2023 . Significant components of
the $36 million year-over-year increase in cash from operating activities included: (i) a $22 million fluctuation in customer
prepayments due to the timing of customer deliveries; (ii) a $14 million fluctuation in inventory due to lower sales
volumes and operational improvements; (iii) a $13 million fluctuation in accounts payable due to lower expenses in the
current year’s fourth quarter and timing of payments; (iv) a $10 million fluctuation in accounts receivable due to lower
sales volumes and timing of orders at the end of fiscal 2024 compared with 2023 ; partially offset by (v) a $15 million
fluctuation in other accruals and liabilities due to timing of store buyout costs; (vi) an $8 million decrease in depreciation
and amortization due to recent lower capital spending levels and restructuring related fixed asset impairments.
Net cash used in investing activities was $26 million for the fiscal year ended December 28, 2024 , compared with
$58 million in 2023 . Investing activities in 2024 included $24 million of property and equipment purchases, compared
with $57 million last year.
Net cash used in financing activities was $1 million for the fiscal year ended December 28, 2024 , compared with net cash
provided by financing activities of $68 million in 2023 . The decrease in cash provided by financing activities is primarily
due to a $74 million decrease in cash provided by short-term borrowings. During 2024 , the Company repurchased
$1 million of its stock compared with $4 million (based on settlement dates, in connection with the vesting of employee
restricted stock awards ) in 2023 . The Company made no share repurchases under its Board-approved share repurchase
program in either fiscal year . The Company also paid $2 million for debt issuance costs associated with the Credit
Agreement amendment incurred during 2023 . Financing activities for 2023 reflect the cash proceeds from the minimal
exercise of employee stock options. There was no option exercise activity during 2024 .
The Company suspended share repurchases under its Board-approved share repurchase program during fiscal 2022. As
of December 28, 2024 , 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.
43 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
The Company’s credit facility, as amended, is for general corporate purposes, to meet seasonal working capital
requirements and to repurchase its stock. The Credit Agreement includes an accordion feature which allows the
Company to increase the amount of the credit facility from $678 million to $1.0 billion , s ubject to lenders’ approval. 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 Company amended the Credit Agreement on November 2, 2023. The amendment, among other things: (a)
decreased the total aggregate commitment under the Credit Agreement from $825 million to $685 million ; (b)
decreased the $625 million revolving loan commitment to $485 million ; (c) decreased the accordion from $400 million to
$343 million ; (d) increased the Applicable Commitment Fee Rate to 50 basis points when the Net Leverage Ratio is
greater than or equal to 3.50 to 1.00 (as each is defined in the Credit Agreement); (e) increased the Applicable Margin
by 25 to 75 basis points for each respective range of Net Leverage Ratios (as each is defined in the Credit Agreement);
(f) deemed the Company’s Net Leverage Ratio as greater than or equal to 4.00 to 1.00 but less than 4.50 to 1.00 as of
the amendment effective date to set pricing for the Applicable Commitment Fee Rate and Applicable Margin until
receipt of the compliance certificate for the quarterly reporting period ending December 30, 2023; (g) amended the
definition of Consolidated EBITDA (as defined in the Credit Agreement) to include cash add backs, capped at
$30 million for the quarterly reporting periods ending December 30, 2023, March 30, 2024, June 29, 2024, September
28, 2024, and December 28, 2024 and capped at $20 million for each quarterly reporting period ending thereafter; (h)
amended the definitions of each of Net Leverage Ratio and Senior Secured Leverage Ratio (as each is defined in the
Credit Agreement) to include the total operating lease liabilities of borrower, as calculated in accordance with ASC 842
accounting guidance (as of the end of the most recently completed quarterly reporting period) replacing the prior
language of six multiplied by Consolidated Rent Expense (for the most recently completed four quarterly reporting
periods); (i) adjusted the permissible maximum Net Leverage Ratio (as defined in the Credit Agreement) to (I) 5.00 to
1.00 for the quarterly reporting periods ending December 30, 2023 and March 30, 2024, (II) 5.50 to 1.00 for the quarterly
reporting period ending June 29, 2024, (III) 5.00 to 1.00 for the quarterly reporting period ending September 28, 2024,
(IV) 4.80 to 1.00 for the quarterly reporting period ending December 28, 2024, and (V) 4.00 to 1.00 for each quarterly
reporting period occurring thereafter; (j) adjusted the permissible minimum Interest Coverage Ratio (as defined in the
Credit Agreement) to (I) 1.50 to 1.00 for the quarterly reporting periods ending December 30, 2023 and March 30, 2024,
(II) 1.25 to 1.00 for the quarterly reporting period ending June 29, 2024, (III) 1.50 to 1.00 for the quarterly reporting
periods ending September 28, 2024 and December 28, 2024, and (IV) 3.00 to 1.00 for each quarterly reporting period
occurring thereafter; and (k) decreased the requisite Net Leverage Ratio from 3.75 to 1.00 down to 3.00 to 1.00 (under
the new applicable definitions) before any Acquisitions (with the exception of the Specified Acquisition) or Restricted
Payments (as each is defined in the Credit Agreement) may be made. A fee for the amendment was payable to the
approving lenders in an amount equal to 20 basis points multiplied by the sum of such lender's Revolving Credit
Commitment and outstanding Term Loans (as each is defined in the Credit Agreement). The foregoing description of the
Tenth Amendment is qualified in its entirety by reference to the complete terms of the Tenth Amendment, which is filed
as an exhibit to this Annual Report on Form 10-K.
The Company amended the Credit Agreement on March 3, 2025. The amendment, among other things: (a) adds a
definition for "Liquidity" which means, on any date of determination, the sum of (x) Borrower's and its Subsidiaries'
unrestricted cash that is free and clear of Liens (other than those in favor of the Administrative Agent) plus (y) the
aggregate amount of unused Revolving Credit Commitments available for Credit Events on such date (including the
Borrower's ability to satisfy the requirements of Section 4.1 on such date) (as each is defined in the Credit Agreement);
(b) adds a Liquidity financial covenant wherein the Borrower shall cause the Liquidity to be equal or exceed $40 million
as of the last day of each fiscal month; (c) deems our Net Leverage Ratio as greater than or equal to 4.50 to 1.00 as of
the effective date to set pricing for the Applicable Commitment Fee Rate and Applicable Margin until receipt of the
compliance certificate for the quarterly reporting period ending September 27, 2025, (d) adjusts the permissible
maximum Net Leverage Ratio (as defined in the Credit Agreement) to (I) 4.75 to 1.00 for the quarterly reporting periods
ending March 29, 2025 and June 28, 2025, (II) 4.50 to 1.00 for the quarterly reporting period ending September 27,
2025, (III) 4.25 to 1.00 for the quarterly reporting period ending January 1, 2026, and (IV) 4.00 to 1.00 for each quarterly
reporting period occurring thereafter, and (e) adjusts the permissible minimum Interest Coverage Ratio (as defined in the
Credit Agreement) to (I) 1.90 to 1.00 for the quarterly reporting periods ending March 29, 2025, June 28, 2025, and
September 27, 2025, (II) 2.10 to 1.00 for the quarterly reporting period ending January 1, 2026, and (III) 3.00 to 1.00 for
each quarterly reporting period occurring thereafter. A fee for the amendment is payable to the approving lenders in an
amount equal to 20 basis points multiplied by the sum of such lender's Revolving Credit Commitment and outstanding
Term Loans (as each is defined in the Credit Agreement). The foregoing description of the Eleventh Amendment is
44 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
qualified in its entirety by reference to the complete terms of the Eleventh Amendment, which is filed as an exhibit to
t his Annual Report on Form 10-K.
As of December 28, 2024 , the Company had $547 million of borrowings under its revolving credit facility, $7 million in
outstanding letters of credit and net liquidity available under the credit facility of $124 million . At December 28, 2024 ,
the company’s leverage ratio as defined in the Credit Agreement was 4.2 x versus the permissible net leverage ratio of
4.8x, the weighted-average interest rate on borrowings under the credit facility was 7.6% and the Company was in
compliance with all financial covenants.
Non-GAAP Data Reconciliations
Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA)
The Company defines earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) as net (loss)
income plus: income tax expense (benefit), interest expense, depreciation and amortization, stock-based compensation,
restructuring costs, CEO transition/proxy contest 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
Net (loss) income
$ (20,334)
$ (15,287)
$ 36,610
Income tax (benefit) expense
(5,162)
(4,466)
12,285
Interest expense
48,368
42,695
18,985
Depreciation and amortization
64,979
72,479
66,626
Stock-based compensation
11,444
14,855
13,223
Restructuring costs (1)
18,066
15,728
-
CEO transition/Proxy contest costs (2)
-
-
Asset impairments
1,220
Adjusted EBITDA
$ 119,579
$ 126,676
$ 148,024
_____________________
( 1) Represents costs related to business restructuring actions initiated in the fourth quarter of fiscal 2023.
(2) Represents costs related to CEO transition activities of $0.2 million and proxy contest costs of $0.8 million, which were both initiated in the fourth
quarter of fiscal 2024.
Free Cash Flow
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
Net cash provided by (used in) operating activities
$ 27,143
$ (9,028)
$ 36,138
Subtract: Purchases of property and equipment
(23,505)
(57,056)
(69,454)
Free cash flow
$ 3,638
$ (66,084)
$ (33,316)
45 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
Return on Invested Capital (Adjusted ROIC)
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
Adjusted net operating profit after taxes (Adjusted NOPAT)
Operating income
$ 22,872
$ 22,942
$ 67,880
Add: Operating lease interest (1)
26,775
27,777
25,912
Less: Income taxes (2)
(11,907)
(11,851)
(23,542)
Adjusted NOPAT
$ 37,740
$ 38,868
$ 70,250
Average adjusted invested capital
Total deficit
$ (451,586)
$ (441,928)
$ (438,177)
Add: Long-term debt (3)
546,841
539,819
460,020
Add: Operating lease obligations (4)
389,508
433,154
436,412
Total adjusted invested capital at end of period
$ 484,763
$ 531,045
$ 458,255
Average adjusted invested capital (5)
$ 497,972
$ 496,612
$ 400,038
Adjusted return on invested capital (Adjusted ROIC)
7.6 %
7.8 %
17.6 %
_____________________
(1) Represents the interest expense component of lease expense included in the Company’s financial statements under ASC 842, Leases .
(2) Reflects annual effective income tax rates, before discrete adjustments, of 24.0% , 23.4% and 25.1% for 2024 , 2023 and 2022 , respectively.
(3) Long-term debt includes existing finance lease liabilities.
(4) Reflects operating lease liabilities included in the Company’s financial statements under ASC 842.
(5) Average adjusted invested capital represents the average of the last five fiscal quarters’ ending adjusted invested capital balances.
(6) 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. The Company updated its Adjusted ROIC calculation effective beginning with the reporting period ended
December 31, 2022, to reflect adjustments consistent with ASC 842.
GAAP - generally accepted accounting principles in the U.S.
46 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
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.
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
Differ from Assumptions
Stock-Based Compensation
The Company has stock-based
compensation plans, which include non-
qualified stock options and stock
awards.
See Note 1, Business and Summary of
Significant Accounting Policies , and
Note 8, Shareholders’ Deficit , to the
Notes to Consolidated Financial
Statements, included in Item 8, Financial
Statements and Supplementary Data , of
this Annual Report on Form 10-K, for a
complete discussion of its stock-based
compensation programs.
Option-pricing models and generally
accepted valuation techniques require
management to make assumptions and
to apply judgment to determine the fair
value of the awards. These assumptions
and judgments include estimating the
volatility of its stock price, future
employee forfeiture rates and future
employee stock option exercise
behaviors. Changes in these
assumptions can materially affect the
fair value estimates or future earnings
adjustments.
Performance-based stock awards
require management to make
assumptions regarding the likelihood of
achieving performance targets.
The Company does not believe there is
a reasonable likelihood that there will
be a material change in the future
estimates or assumptions it uses to
determine stock-based compensation
expense. However, if actual results are
not consistent with its estimates or
assumptions, the Company may be
exposed to changes in stock-based
compensation expense that could be
material.
In addition, if actual results are not
consistent with the assumptions used,
the stock-based compensation expense
reported in its financial statements may
not be representative of the actual
economic cost of the stock-based
compensation. Finally, if the actual
forfeiture rates, or the actual
achievement of performance targets,
are not consistent with the assumptions
used, the Company could experience
future earnings adjustments.
A 10% change in its stock-based
compensation expense for the year
ended December 28, 2024 , would have
affected net loss by approximately
$0.9 million in 2024 .
47 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
Description
Judgments and Uncertainties
Effect if Actual Results
Differ from Assumptions
Warranty Liabilities
The Company provides a limited
warranty on most of the products it
sells.
See Note 1, Business and Summary of
Significant Accounting Policies , to the
Notes to Consolidated Financial
Statements, included in Item 8, Financial
Statements and Supplementary Data , of
this Annual Report on Form 10-K, for a
complete discussion of its warranty
program and liabilities.
The majority of its warranty claims are
incurred within the first year. However,
the Company’s warranty liability
contains uncertainties because its
warranty obligations cover an extended
period of time. A revision of estimated
claim rates or the projected cost of
materials and freight associated with
sending replacement parts to customers
could have a material adverse effect on
future results of operations.
The Company has not made any
material changes in its warranty liability
assessment methodology during the
past three fiscal years. The Company
does not believe there is a reasonable
likelihood that there will be a material
change in the estimates or assumptions
it uses to calculate its warranty liability.
However, if actual results are not
consistent with its estimates or
assumptions, the Company may be
exposed to losses or gains that could be
material.
A 10% change in its warranty liability at
December 28, 2024 , would have
affected net loss by approximately
$0.5 million in 2024 .
Revenue Recognition
Certain accounting estimates relating to
revenue recognition contain uncertainty
because they require management to
make assumptions and to apply
judgment regarding the effects of future
events.
See Note 1, Business and Summary of
Significant Accounting Policies , and
Note 9, Revenue Recognition , to the
Notes to Consolidated Financial
Statements, included in Item 8, Financial
Statements and Supplementary Data , of
this Annual Report on Form 10-K, for a
complete discussion of its revenue
recognition policies.
The Company’s estimates of sales
returns contain uncertainties as actual
sales return rates may vary from
expected rates, resulting in adjustments
to net sales in future periods. These
adjustments could have an adverse
effect on future results of operations.
The Company has not made any
material changes in the accounting
methodology used to establish its sales
returns allowance during the past three
fiscal years. The Company does not
believe there is a reasonable likelihood
that there will be a material change in
the estimates or assumptions it uses to
calculate its sales returns allowance.
However, if actual results are not
consistent with its estimates or
assumptions, the Company may be
exposed to additional losses or gains in
future periods.
A 10% change in its sales returns
allowance at December 28, 2024 would
have affected net loss by approximately
$1.5 million in 2024 .
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
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 net (loss) income would decrease by
$4.2 million based on the $547 million of borrowings under its credit facility at December 28, 2024 . The Company does
not manage its interest-rate volatility risk through the use of derivative instruments.
48 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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 December 28, 2024 and December 30, 2023, the related consolidated statements of operations,
shareholders’ deficit, and cash flows, for each of the three years in the period ended December 28, 2024 , 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
December 28, 2024 and December 30, 2023, and the results of its operations and its cash flows for each of the three
years in the period ended December 28, 2024 , 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 December 28, 2024 , 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 7 , 2025, expressed an unqualified opinion on the Company's
internal control over financial reporting.
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 Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that (1) relates 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 matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
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 December 28, 2024 , the Company has warranty
liabilities of $6.9 million.
49 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
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 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 360 smart bed line 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.
/s/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
March 7, 2025
We have served as the Company’s auditor since 2010.
50 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
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 December 28, 2024 , 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 December 28, 2024 ,
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
December 28, 2024 , of the Company and our report dated March 7 , 2025, 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 7, 2025
51 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
December 28, 2024 and December 30, 2023
(in thousands, except per share amounts)
Assets
Current assets:
Cash and cash equivalents
$ 1,950
$ 2,539
Accounts receivable, net of allowances of $1,113 and $1,437 , respectively
17,516
26,859
Inventories
103,152
115,433
Prepaid expenses
14,568
16,660
Other current assets
44,098
44,637
Total current assets
181,284
206,128
Non-current assets:
Property and equipment, net
129,574
179,503
Operating lease right-of-use assets
356,641
395,411
Goodwill and intangible assets, net
66,412
66,634
Deferred income taxes
33,575
20,253
Other non-current assets
93,324
82,951
Total assets
$ 860,810
$ 950,880
Liabilities and Shareholders’ Deficit
Current liabilities:
Borrowings under revolving credit facility
$ 546,600
$ 539,500
Accounts payable
107,619
135,901
Customer prepayments
46,933
49,143
Accrued sales returns
19,092
22,402
Compensation and benefits
31,038
28,273
Taxes and withholding
18,619
17,134
Operating lease liabilities
82,307
81,760
Other current liabilities
55,804
61,958
Total current liabilities
908,012
936,071
Non-current liabilities:
Operating lease liabilities
307,201
351,394
Other non-current liabilities
97,183
105,343
Total liabilities
1,312,396
1,392,808
Shareholders’ deficit:
Undesignated preferred stock; 5,000 shares authorized, no shares issued and
outstanding
-
-
Common stock, $0.01 par value; 142,500 shares authorized, 22,388 and 22,235
shares issued and outstanding, respectively
Additional paid-in capital
27,390
16,716
Accumulated deficit
(479,200)
(458,866)
Total shareholders’ deficit
(451,586)
(441,928)
Total liabilities and shareholders’ deficit
$ 860,810
$ 950,880
See accompanying notes to consolidated financial statements.
52 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 28, 2024 , December 30, 2023 and December 31, 2022
(in thousands, except per share amounts)
Net sales
$ 1,682,296
$ 1,887,482
$ 2,114,297
Cost of sales
679,523
798,952
912,001
Gross profit
1,002,773
1,088,530
1,202,296
Operating expenses:
Sales and marketing
766,624
847,442
919,629
General and administrative
149,956
146,621
153,266
Research and development
45,255
55,797
61,521
Restructuring costs
18,066
15,728
-
Total operating expenses
979,901
1,065,588
1,134,416
Operating income
22,872
22,942
67,880
Interest expense, net
48,368
42,695
18,985
(Loss) income before income taxes
(25,496)
(19,753)
48,895
Income tax (benefit) expense
(5,162)
(4,466)
12,285
Net (loss) income
$ (20,334)
$ (15,287)
$ 36,610
Basic net (loss) income per share:
Net (loss) income per share - basic
$ (0.90)
$ (0.68)
$ 1.63
Weighted-average shares - basic
22,606
22,429
22,396
Diluted net (loss) income per share:
Net (loss) income per share - diluted
$ (0.90)
$ (0.68)
$ 1.60
Weighted-average shares - diluted
22,606
22,429
22,852
See accompanying notes to consolidated financial statements.
53 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Deficit
Years ended December 28, 2024 , December 30, 2023 and December 31, 2022
(in thousands)
Common Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Shares
Amount
Total
Balance at January 1, 2022
22,683
$ 227
$ 3,971
$ (429,151)
$ (424,953)
Net income
-
-
-
36,610
36,610
Exercise of common stock options
-
1,131
-
1,131
Stock-based compensation
13,219
-
13,223
Repurchases of common stock
(1,122)
(11)
(13,139)
(51,038)
(64,188)
Balance at December 31, 2022
22,014
$ 220
$ 5,182
$ (443,579)
$ (438,177)
Net loss
-
-
-
(15,287)
(15,287)
Exercise of common stock options
-
-
Stock-based compensation
14,852
-
14,855
Repurchases of common stock
(134)
(1)
(3,746)
-
(3,747)
Balance at December 30, 2023
22,235
$ 222
$ 16,716
$ (458,866)
$ (441,928)
Net loss
-
-
-
(20,334)
(20,334)
Exercise of common stock options
-
-
-
-
-
Stock-based compensation
11,441
-
11,444
Repurchases of common stock
(56)
(1)
(767)
-
(768)
Balance at December 28, 2024
22,388
$ 224
$ 27,390
$ (479,200)
$ (451,586)
See accompanying notes to consolidated financial statements.
54 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 28, 2024 , December 30, 2023 and December 31, 2022
(in thousands)
Cash flows from operating activities:
Net (loss) income
$ (20,334)
$ (15,287)
$ 36,610
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
Depreciation and amortization
66,351
74,043
67,401
Stock-based compensation
11,444
14,855
13,223
Net loss on disposals and impairments of assets
4,315
2,898
Deferred income taxes
(13,322)
(12,295)
(8,646)
Changes in operating assets and liabilities:
Accounts receivable
9,343
(854)
(287)
Inventories
12,281
(1,399)
(11,560)
Income taxes
3,987
(5,969)
1,356
Prepaid expenses and other assets
(10,867)
(5,220)
19,379
Accounts payable
(15,910)
(28,934)
(4,743)
Customer prepayments
(2,210)
(24,038)
(56,318)
Accrued compensation and benefits
2,755
(2,943)
(19,821)
Other taxes and withholding
(2,502)
(519)
Other accruals and liabilities
(18,188)
(3,366)
(926)
Net cash provided by (used in) operating activities
27,143
(9,028)
36,138
Cash flows from investing activities:
Purchases of property and equipment
(23,505)
(57,056)
(69,454)
Proceeds from sales of property and equipment
Issuance of notes receivable
(2,942)
(1,317)
-
Investment in non-marketable equity securities
-
-
(1,202)
Net cash used in investing activities
(26,291)
(58,352)
(70,607)
Cash flows from financing activities:
Repurchases of common stock
(768)
(3,747)
(64,188)
Net (decrease) increase in short-term borrowings
(673)
73,463
97,647
Proceeds from issuance of common stock
-
1,131
Debt issuance costs
-
(2,017)
(718)
Net cash (used in) provided by financing activities
(1,441)
68,127
33,872
Net (decrease) increase in cash and cash equivalents
(589)
(597)
Cash and cash equivalents, at beginning of period
2,539
1,792
2,389
Cash and cash equivalents, at end of period
$ 1,950
$ 2,539
$ 1,792
Supplemental Disclosure of Cash Flow Information
Income taxes paid, net of refunds
$ 4,012
$ 13,716
$ 19,792
Interest paid
$ 45,092
$ 40,570
$ 16,918
Purchases of property and equipment included in accounts
payable
$ 1,994
$ 6,670
$ 11,707
See accompanying notes to consolidated financial statements.
55 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 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 in tra-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 2024 ended December 28, 2024 ; fiscal 2023 ended December 30, 2023 ; and fiscal 2022
ended December 31, 2022 . Fiscal 2024 , 2023 and 2022 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 and revenue
recognition.
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 $22 million and $30 million at December 28, 2024 and December 30, 2023 , 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.
56 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
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) income 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
Long-lived Assets and Definite-lived Intangible Assets
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 asset 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 store assets for
potential impairment based on historical cash flows, lease termination provisions and expected future retail store
operating results. If the Company recognizes an impairment loss for a depreciable long-lived asset, the adjusted carrying
amount of the asset becomes its new cost basis and will be depreciated (amortized) over the remaining useful life of that
asset.
Goodwill and Indefinite-lived Intangible Assets
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
57 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
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 December 28, 2024 and December 30, 2023 . 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 2024 assessments, it determined there was no
impairment.
Other Investments
The Company had an investment in non-marketable equity securities of $1.2 million at both December 28, 2024 and
December 30, 2023 . This investment was made in a strategic product-development partner and is included in other non-
current assets in the consolidated balance sheet. Non-marketable equity securities are equity securities without readily
determinable fair value that are measured and recorded using a measurement alternative that measures the securities at
cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes.
Warranty Liabilities
The Company provides a 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):
Balance at beginning of period
$ 8,503
$ 8,997
$ 10,069
Additions charged to costs and expenses for current-year sales
13,821
15,939
16,694
Deductions from reserves
(14,657)
(16,438)
(17,157)
Change in liabilities for pre-existing warranties during the current
year, including expirations
(720)
(609)
Balance at end of period
$ 6,947
$ 8,503
$ 8,997
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.
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.
58 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (continued)
Shareholders’ Deficit
Dividends
The Company is not restricted from paying cash dividends under the Credit Agreement so long as it is not in default
under the Credit Agreement, the Company’s leverage ratio (as defined in the Credit Agreement) after giving effect to
such restricted payments (as defined in the Credit Agreement) would not exceed 3.00 : 1.00 and no default or event of
default (as defined in the Credit Agreement) would result therefrom. At December 28, 2024 , the Company exceeded the
3.00 :1.00 leverage ratio. However, Sleep Number has not historically paid, and has no current plans to pay, cash
dividends on the Company’s common stock.
Share Repurchases
At December 28, 2024 , 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. The Company
determined the transaction price for multiple performance obligations based on their relative standalone selling prices.
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 to 5.0 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.
59 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (continued)
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 Comp any’s industry):
Cost of Sales
Sales & Marketing
•
Costs associated with purchasing, manufacturing, shipping,
handling and delivering the Company’s products to its retail
stores and customers, including payroll and benefits;
•
Advertising, marketing and media production;
•
Marketing and selling materials such as brochures, videos,
websites, customer mailings and in-store signage;
•
Physical inventory losses, scrap and obsolescence;
•
Payroll and benefits for sales and customer service staff;
•
Related occupancy and depreciation expenses;
•
Store occupancy costs;
•
Costs associated with returns and exchanges; and
•
Store depreciation expense;
•
Estimated costs to service customer warranty claims.
•
Credit card processing fees; and
•
Promotional financing costs.
G&A
R&D (1)
•
Payroll and benefit costs for corporate employees, including
information technology, legal, human resources, finance, sales
and marketing administration, investor relations and risk
management;
•
Internal labor and benefits related to research and
development activities;
•
Outside consulting services related to research and
development activities; and
•
Occupancy costs of corporate facilities;
•
Testing equipment related to research and development
•
Depreciation related to corporate assets;
___________________________
(1) Costs incurred in connection with R&D are charged to expense as incurred.
•
Information hardware, software and maintenance;
•
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 equipment leases, on a straight-line basis over the lease term. At December 28, 2024 , 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.
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 $248 million , $272 million and $309 million in 2024 ,
2023 and 2022 , respectively and is included in sales and marketing expenses on the consolidated statement of
60 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (continued)
operations. Advertising costs deferred and included in prepaid expenses in the consolidated balance sheet were not
significant at December 28, 2024 or December 30, 2023 , 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 $11 million and $13 million at December 28, 2024 and
December 30, 2023 , respectively. At December 28, 2024 and December 30, 2023 , $7 million and $8 million ,
respectively, were included in current liabilities: compensation and benefits in the consolidated balance sheet and
$4 million and $5 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
December 28, 2024 , a total of 2.2 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
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.
Stock Options
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.
61 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (continued)
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
consider ation to the contractual terms of unexercised stock-based awards.
Stock Awards
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 2024 , 2023 and 2022 awards. The Company evaluates the likelihood of meeting the
performance targets at each reporting period and adjust compensation expense, on a cumulative basis, based on the
expected achievement of each of the performance targets. For performance-based stock awards granted in 2024 , 2023
and 2022 , the performance targets are based on growth in net sales and in operating profit, and the performance
periods are fiscal 2024 through 2026 , 2023 through 2025 and fiscal 2022 through 2024 , 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.
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.
62 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (continued)
Net (Loss) Income Per Share
The Company calculates basic net (loss) income per share by dividing net (loss) income by the weighted-average number
of common shares outstanding during the period. It calculates diluted net (loss) income 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) income 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.
Recently Adopted and Recently Issued Accounting Pronouncements
Accounting Pronouncements Recently Adopted
In November 2023, the Financial Accounting Standards Board (FASB) issued guidance within Accounting Standards
Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU
requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments
in this ASU and all existing disclosures in Topic 280. The Company has determined that its current business and
operations consist of a single business segment and a single reporting unit.
The amendments in this ASU are intended to improve segment disclosure requirements, primarily through enhanced
disclosures about significant segment expenses. The key amendments included in this ASU:
• Require disclosure on an annual and interim basis, of significant segment expenses that are regularly provided to the
chief operating decision maker (CODM) and are included within each reported measure of segment profit and loss.
• Require disclosure on an annual and interim basis, an amount for other segment items (defined in this ASU) and a
description of its composition.
• Clarify that if the CODM uses more than one measure of the segment’s profit or loss in assessing performance, one
or more of those additional measures may be reported.
• Require disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported
measure(s) of segment profit or loss in assessing performance.
This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning
after December 15, 2024, with early adoption permitted. This guidance is required to be adopted by the Company
beginning with the annual period of 2024. The amendments should be applied retrospectively to all prior periods
presented in the consolidated financial statements. The Company adopted the new standard in the fourth quarter of
2024. The new required disclosures are included in Note 13, "Segments."
63 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (continued)
Accounting Pronouncements Issued But Not Yet Effective
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements in Income Tax Disclosures"
to enhance the transparency and decision usefulness of income tax disclosures. This amendment requires public
companies to disclose specific categories in the rate reconciliation and provide additional information for reconciling
items that meet a quantitative threshold. Additionally, under the amendment, entities are required to disclose the
amount of income taxes paid disaggregated by federal, state and foreign taxes, as well as disaggregated by material
individual jurisdictions. Finally, the amendment requires entities to disclose income from continuing operations before
income tax expense disaggregated between domestic and foreign and income tax expense from continuing operations
disaggregated by federal, state and foreign. The new rules are effective for annual periods beginning after December
15, 2024. The adoption of this standard is not expected to have a material impact on the Company’s consolidated
financial statements and related disclosures .
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.
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 both December 28, 2024 and December 30, 2023 , the Company had $19 million 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 $19 million at both December 28, 2024 and December 30, 2023 , 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):
December 28,
December 30,
Raw Materials
$ 11,434
$ 9,092
Work in Progress
Finished goods
91,588
106,249
$ 103,152
$ 115,433
64 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (continued)
Finished goods inventories consisted of the following (in thousands):
December 28,
December 30,
Finished beds, including deliveries in-transit to those customers who have utilized
home delivery services
$ 34,725
$ 39,235
Finished components that were ready for assembly for the completion of beds
39,634
46,179
Retail accessories
17,229
20,835
$ 91,588
$ 106,249
(4) Property and Equipment
Property and equipment consisted of the following (in thousands):
December 28,
December 30,
Leasehold improvements
$ 136,127
$ 143,006
Furniture and equipment
153,106
158,309
Production machinery, computer equipment and software
300,486
306,972
Construction in progress
3,310
6,552
Less: Accumulated depreciation and amortization
(463,455)
(435,336)
$ 129,574
$ 179,503
Depreciation for 2024 , 2023 and 2022 was $65 million , $71 million and $64 million , respectively.
(5) Goodwill and Intangible Assets, Net
Goodwill and Indefinite-lived Intangible Assets
Goodwill was $64 million at December 28, 2024 and December 30, 2023 . Indefinite-lived trade name/trademarks totaled
$1.4 million at December 28, 2024 and December 30, 2023 .
Definite-lived Intangible Assets
December 28, 2024
December 30, 2023
Gross Carrying
Amount
Accumulated
Amortization
Gross Carrying
Amount
Accumulated
Amortization
Developed technologies
$ 18,851
$ 18,851
$ 18,851
$ 18,851
Patents
1,972
1,002
1,972
$ 20,823
$ 19,853
$ 20,823
$ 19,631
There was no amortization expense for developed technologies in 2024. Amortization expense for developed
technologies was $1.2 million and $2.0 million in 2023 and 2022 , respectively. Amortization expense for patents was
$0.2 million , in each of 2024 , 2023 and 2022 .
65 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (continued)
Annual amortization for definite-lived intangible assets for subsequent years are as follows (in thousands):
$ 226
Thereafter
Total future amortization for definite-lived intangible assets
$ 970
(6) Credit Agreement
As of December 28, 2024 , the Company’s credit facility had a total commitment amount of $678 million . The credit
facility, as amended , is for general corporate purposes, to meet seasonal working capital requirements and to
repurchase its stock. The Credit Agreement includes an accordion feature which allows the Company to increase the
amount of the credit facility from $678 million to $1.0 billion , s ubject to lenders’ approval. 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 Company amended the Credit Agreement on November 2, 2023. The amendment, among other things: (a)
decreased the total aggregate commitment under the Credit Agreement from $825 million to $685 million ; (b)
decreased the $625 million revolving loan commitment to $485 million ; (c) decreased the accordion from $400 million to
$342.5 million ; (d) increased the Applicable Commitment Fee Rate to 50 basis points when the Net Leverage Ratio is
greater than or equal to 3.50 to 1.00 (as each is defined in the Credit Agreement); (e) increased the Applicable Margin
by 25 to 75 basis points for each respective range of Net Leverage Ratios (as each is defined in the Credit Agreement);
(f) deemed the Company’s Net Leverage Ratio as greater than or equal to 4.00 to 1.00 but less than 4.50 to 1.00 as of
the amendment effective date to set pricing for the Applicable Commitment Fee Rate and Applicable Margin until
receipt of the compliance certificate for the quarterly reporting period ending December 30, 2023; (g) amended the
definition of Consolidated EBITDA (as defined in the Credit Agreement) to include cash add backs, capped at
$30 million for the quarterly reporting periods ending December 30, 2023, March 30, 2024, June 29, 2024, September
28, 2024, and December 28, 2024 and capped at $20 million for each quarterly reporting period ending thereafter; (h)
amended the definitions of each of Net Leverage Ratio and Senior Secured Leverage Ratio (as each is defined in the
Credit Agreement) to include the total operating lease liabilities of borrower, as calculated in accordance with ASC 842
accounting guidance (as of the end of the most recently completed quarterly reporting period) replacing the prior
language of six multiplied by Consolidated Rent Expense (for the most recently completed four quarterly reporting
periods); (i) adjusted the permissible maximum Net Leverage Ratio (as defined in the Credit Agreement) to (I) 5.00 to
1.00 for the quarterly reporting periods ending December 30, 2023 and March 30, 2024, (II) 5.50 to 1.00 for the quarterly
reporting period ending June 29, 2024, (III) 5.00 to 1.00 for the quarterly reporting period ending September 28, 2024,
(IV) 4.80 to 1.00 for the quarterly reporting period ending December 28, 2024, and (V) 4.00 to 1.00 for each quarterly
reporting period occurring thereafter; (j) adjusted the permissible minimum Interest Coverage Ratio (as defined in the
Credit Agreement) to (I) 1.50 to 1.00 for the quarterly reporting periods ending December 30, 2023 and March 30, 2024,
(II) 1.25 to 1.00 for the quarterly reporting period ending June 29, 2024, (III) 1.50 to 1.00 for the quarterly reporting
periods ending September 28, 2024 and December 28, 2024, and (IV) 3.00 to 1.00 for each quarterly reporting period
occurring thereafter; and (k) decreased the requisite Net Leverage Ratio from 3.75 to 1.00 down to 3.00 to 1.00 (under
the new applicable definitions) before any Acquisitions (with the exception of the Specified Acquisition) or Restricted
Payments (as each is defined in the Credit Agreement) may be made. A fee for the amendment was payable to the
approving lenders in an amount equal to 20 basis points multiplied by the sum of such lender's Revolving Credit
Commitment and outstanding Term Loans (as each is defined in the Credit Agreement).
66 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (continued)
The following tables summarizes the Company’s borrowings under the credit facility ($ in thousands):
December 28,
December 30,
Outstanding borrowings
$ 546,600
$ 539,500
Outstanding letters of credit
$ 7,147
$ 7,147
Additional borrowing capacity
$ 123,753
$ 138,353
Weighted-average interest rate
7.6 %
8.5 %
The Company amended the Credit Agreement on March 3, 2025. The amendment, among other things : (a) adds a
definition for "Liquidity" which means, on any date of determination, the sum of (x) Borrower's and its Subsidiaries'
unrestricted cash that is free and clear of Liens (other than those in favor of the Administrative Agent) plus (y) the
aggregate amount of unused Revolving Credit Commitments available for Credit Events on such date (including the
Borrower's ability to satisfy the requirements of Section 4.1 on such date) (as each is defined in the Credit Agreement);
(b) adds a Liquidity financial covenant wherein the Borrower shall cause the Liquidity to be equal or exceed $40 million
as of the last day of each fiscal month; (c) deems our Net Leverage Ratio as greater than or equal to 4.50 to 1.00 as of
the effective date to set pricing for the Applicable Commitment Fee Rate and Applicable Margin until receipt of the
compliance certificate for the quarterly reporting period ending September 27, 2025, (d) adjusts the permissible
maximum Net Leverage Ratio (as defined in the Credit Agreement) to (I) 4.75 to 1.00 for the quarterly reporting periods
ending March 29, 2025 and June 28, 2025, (II) 4.50 to 1.00 for the quarterly reporting period ending September 27,
2025, (III) 4.25 to 1.00 for the quarterly reporting period ending January 1, 2026, and (IV) 4.00 to 1.00 for each quarterly
reporting period occurring thereafter, and (e) adjusts the permissible minimum Interest Coverage Ratio (as defined in the
Credit Agreement) to (I) 1.90 to 1.00 for the quarterly reporting periods ending March 29, 2025, June 28, 2025, and
September 27, 2025, (II) 2.10 to 1.00 for the quarterly reporting period ending January 1, 2026, and (III) 3.00 to 1.00 for
each quarterly reporting period occurring thereafter. A fee for the amendment is payable to the approving lenders in an
amount equal to 20 basis points multiplied by the sum of such lender's Revolving Credit Commitment and outstanding
Term Loans (as each is defined in the Credit Agreement).
Under the terms of the Credit Agreement, the Company pays a variable rate of interest and a commitment fee based on
its leverage ratio. The Credit Agreement matures in December 2026 . The Company was in compliance with all financial
covenants as of December 28, 2024 .
(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.
67 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (continued)
At December 28, 2024 , the Company’s finance lease right-of-use assets and lease liabilities were not significant.
Lease costs were as follows (in thousands):
Operating lease costs (1)
$ 107,049
$ 113,510
$ 109,766
Variable lease costs
$ 43
$ 278
$ 877
____________________
(1) Includes short-term lease costs which are not significant.
The maturities of operating lease liabilities as of December 28, 2024 , were as follows (1) (in thousands):
$ 104,800
94,005
77,310
64,734
44,711
Thereafter
76,495
Total operating lease payments (2)
462,055
Less: Interest
72,547
Present value of operating lease liabilities
$ 389,508
___________________
(1) Total operating lease payments exclude $12 million of legally binding minimum lease payments for leases signed but not yet commenced.
(2) Includes the current portion of $82 million for operating lease liabilities.
Other information related to operating leases was as follows:
December 28,
December 30,
Weighted-average remaining lease term (years)
5.4
5.9
Weighted-average discount rate
6.6 %
6.5 %
(in thousands)
Cash paid for amounts included in present value of operating
lease liabilities
$ 108,116
$ 108,294
$ 99,819
Right-of-use assets obtained in exchange for operating lease
liabilities
$ 57,712
$ 69,396
$ 82,117
68 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (continued)
(8) Shareholders’ Deficit
Stock-Based Compensation Expense
Total stock-based compensation expense was as follows (in thousands):
Stock awards (1)
$ 8,157
$ 11,053
$ 9,471
Stock options
3,287
3,802
3,752
Total stock-based compensation expense (1)
11,444
14,855
13,223
Income tax benefit
2,747
3,476
3,319
Total stock-based compensation expense, net of tax
$ 8,697
$ 11,379
$ 9,904
____________________
(1) Changes in annual stock-based compensation expense includes the cumulative impact of the change in the expected achievements of certain
performance targets.
Stock Options
A summary of the Company’s stock option activity was as follows (in thousands, except per share amounts and years):
Stock
Options
Weighted-
Average
Exercise
Price per
Share
Weighted-
Average
Remaining
Contractual
Term (years)
Aggregate
Intrinsic
Value (1)
Outstanding at December 30, 2023
1,046
$ 40.80
6.2
$ -
Granted
-
-
Exercised
-
-
Canceled/Forfeited
(104)
40.38
Outstanding at December 28, 2024
$ 40.85
5.6
$ -
Exercisable at December 28, 2024
$ 42.90
4.9
$ -
Vested and expected to vest at December 28, 2024
$ 40.95
5.6
$ -
____________________
(1) 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):
Weighted-average grant date fair value of stock options granted
$ -
$ 16.41
$ 30.22
Total intrinsic value (at exercise) of stock options exercised
$ -
$ 298
$ 1,298
There were no exercises of stock options for the fiscal year ended December 28, 2024 .
At December 28, 2024 , there was $2.1 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 1.2 years .
69 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (continued)
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 December 28, 2024 .
Valuation Assumptions
Expected dividend yield
- %
0.0 %
0.0 %
Expected volatility
- %
64 %
57 %
Risk-free interest rate
- %
3.8 %
2.2 %
Expected term (years)
-
5.7
5.3
Stock Awards
Stock award activity was as follows (in thousands, except per share amounts):
Time-
Based
Stock
Awards
Weighted-
Average
Grant Date
Fair Value
Performance-
Based
Stock Awards
Weighted-
Average
Grant Date
Fair Value
Outstanding at December 30, 2023
$ 37.38
$ 51.74
Granted
13.70
13.53
Vested
(181)
39.62
(45)
127.50
Canceled/Forfeited
(77)
23.05
(88)
99.19
Outstanding at December 28, 2024
$ 18.60
$ 31.74
At December 28, 2024 , there was $8.7 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 $2.8 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 1.7 years .
Repurchases of Common Stock
Repurchases of the Company’s common stock were as follows (in thousands):
Amount repurchased under Board-approved share repurchase
program
$ -
$ -
$ 54,868
Amount repurchased in connection with the vesting of employee
restricted stock grants
3,747
9,320
Total amount repurchased (based on trade dates)
$ 768
$ 3,747
$ 64,188
As of December 28, 2024 , the remaining authorization under the Board-approved $600 million share repurchase
program was $348 million .
70 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (continued)
Net (Loss) Income per Common Share
The components of basic and diluted net (loss) income per share were as follows (in thousands, except per share
amounts):
Net (loss) income
$ (20,334)
$ (15,287)
$ 36,610
Reconciliation of weighted-average shares outstanding:
Basic weighted-average shares outstanding
22,606
22,429
22,396
Dilutive effect of stock-based awards
-
-
Diluted weighted-average shares outstanding
22,606
22,429
22,852
Net (loss) income per share - basic
$ (0.90)
$ (0.68)
$ 1.63
Net (loss) income per share - diluted
$ (0.90)
$ (0.68)
$ 1.60
Additional potential dilutive stock-based awards totaling 1.2 million , 1.3 million and 0.6 million for 2024 , 2023 and 2022 ,
respectively, have been excluded from the diluted net (loss) income per share calculations because these stock-based
awards were anti-dilutive. For both 2024 and 2023 , otherwise dilutive stock-based awards of 0.1 million 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.
(9) Revenue Recognition
Deferred contract assets and deferred contract liabilities are included in the consolidated balance sheet as follows (in
thousands):
December 28,
December 30,
Deferred contract assets included in:
Other current assets
$ 30,154
$ 28,567
Other non-current assets
48,988
54,795
$ 79,142
$ 83,362
December 28,
December 30,
Deferred contract liabilities included in:
Other current liabilities
$ 38,129
$ 36,421
Other non-current liabilities
60,988
69,098
$ 99,117
$ 105,519
During the years ended December 28, 2024 , December 30, 2023 and December 31, 2022 the Company recognized
revenue of $36 million , $36 million and $34 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 98% of the
Company’s revenues for 2024 , 2023 and 2022 .
71 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (continued)
Net sales consisted of the following (in thousands):
Retail stores
$ 1,474,250
$ 1,639,073
$ 1,823,617
Online, phone, chat and other
208,046
248,409
290,680
Total Company
$ 1,682,296
$ 1,887,482
$ 2,114,297
Obligation for Sales Returns
The activity in the sales returns liability account for 2024 and 2023 was as follows (in thousands):
Balance at beginning of year
$ 22,402
$ 25,594
Additions that reduce net sales
91,375
109,153
Deduction from reserves
(94,685)
(112,345)
Balance at end of period
$ 19,092
$ 22,402
(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 year, the Company makes a contribution equal to a
percentage of the employee’s contribution. During 2024 , 2023 and 2022 , the Company’s contributions, net of
forfeitures, were $7 million , $10 million and $10 million , respectively.
(11) Restructuring Costs
I n the fourth quarter of 2023, the Company initiated cost reduction actions to reduce operating expenses and accelerate
gross margin initiatives and recognized $15.7 million of restructuring costs in that quarter. In addition to the costs
incurred in 2023, the Company incurred an additional $18.1 million of restructuring costs in 2024. Charges incurred
related to this initiative were comprised of contract termination costs, severance and employee-related benefits,
p rofessional fees and other, and asset impairment charges and are included in the restructuring costs line in the
Company’s consolidated statement of operations . The Company expects approximately $5 million to $7 million of
additional restructuring costs to be incurred during 2025, primarily due to lease contract termination costs.
During the years ended December 28, 2024 and December 30, 2023 , the Company recognized $18.1 million and
$15.7 million , respectively, of restructuring costs, as follows (in thousands):
Cash restructuring costs:
Contract termination costs (1)
$ 7,027
$ 7,410
Severance and employee-related benefits
3,227
4,966
Professional fees and other
4,634
1,110
Total cash restructuring costs
14,888
13,486
Non-cash restructuring costs:
Asset impairments (2)
3,178
2,242
Total restructuring costs
$ 18,066
$ 15,728
____________________
(1) Primarily comprised of lease termination costs.
(2) Includes impairments of both lease right-of-use assets and property and equipment.
72 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (continued)
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):
Balance at December 30, 2023
$ 8,720
$ -
Expenses
14,888
13,486
Cash payments
(20,267)
(4,766)
Balance at December 28, 2024
$ 3,341
$ 8,720
Since the initiation of cost reduction actions in the fourth quarter of 2023, the Company has recognized a cumulative
$33.8 million of restructuring costs, as follows (in thousands):
Cumulative
December 28, 2024
Cash restructuring costs:
Contract termination costs (1)
$ 14,437
Severance and employee-related benefits
8,193
Professional fees and other
5,744
Total cash restructuring costs
28,374
Non-cash restructuring costs:
Asset impairments (2)
5,420
Total restructuring costs
$ 33,794
____________________
(1) Primarily comprised of lease termination costs.
(2) Includes impairments of both lease right-of-use assets and property and equipment .
(12) Income Taxes
Income tax expense (benefit) consisted of the following (in thousands):
Current:
Federal
$ 6,904
$ 5,474
$ 15,518
State
1,256
3,106
5,174
8,160
8,580
20,692
Deferred:
Federal
(12,568)
(10,151)
(7,264)
State
(754)
(2,895)
(1,143)
(13,322)
(13,046)
(8,407)
Income tax (benefit) expense
$ (5,162)
$ (4,466)
$ 12,285
73 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (continued)
The following table provides a reconciliation between the statutory federal income tax rate and the Company’s effective
income tax rate:
Statutory federal income tax
21.0 %
21.0 %
21.0 %
State income taxes, net of federal benefit
0.8
(3.5)
6.4
R&D tax credits
9.0
14.1
(5.5)
Return to provision
6.2
6.1
0.8
Investment tax credit
-
1.1
-
Stock-based compensation
(9.5)
(6.2)
(1.2)
Non-deductible compensation
(2.6)
(5.7)
1.7
Non-deductible expenses
(2.1)
(2.8)
1.3
Changes in unrecognized tax benefits
(0.5)
(0.5)
(0.4)
Valuation allowance
(3.0)
-
-
Other
0.9
(1.0)
1.0
Effective income tax rate
20.2 %
22.6 %
25.1 %
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 2021 or state income tax examinations prior to 2020.
Deferred Income Taxes
The tax effects of temporary differences that give rise to deferred income taxes were as follows (in thousands):
Deferred tax assets:
Stock-based compensation
$ 7,090
$ 7,006
Operating lease liabilities
97,604
108,952
Warranty and returns liabilities
5,880
6,894
Net operating loss carryforwards and credits
2,327
1,738
Compensation and benefits
7,220
7,484
Research and development
19,017
18,079
Interest
9,503
3,747
Other
4,163
5,184
Total gross deferred tax assets
152,804
159,084
Valuation allowance
(806)
(48)
Total gross deferred tax assets after valuation allowance
151,998
159,036
Deferred tax liabilities:
Property and equipment
23,240
33,772
Operating lease right-of-use assets
89,276
99,351
Deferred revenue
2,516
3,065
Other
3,391
2,595
Total gross deferred tax liabilities
118,423
138,783
Net deferred tax assets
$ 33,575
$ 20,253
74 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (continued)
At December 28, 2024 , the Company had net operating loss carryforwards for federal purposes of $0.4 million , which
will expire between 2025 and 2027.
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. The Company has provided a $0.81 million
v aluation allowance resulting primarily from its inability to utilize certain net operating losses and state R&D tax credits.
Unrecognized Tax Benefits
Reconciliations of the beginning and ending amounts of unrecognized tax benefits were as follows (in thousands):
Federal and State Tax
Beginning balance
$ 3,671
$ 3,645
$ 3,869
Increases related to current-year tax positions
Increases related to prior-year tax positions
Decreases related to prior-year tax positions
(15)
-
(328)
Lapse of statute of limitations
(688)
(601)
(1,058)
Settlements with taxing authorities
-
(166)
-
Ending balance
$ 3,658
$ 3,671
$ 3,645
At December 28, 2024 and December 30, 2023 , the Company had $3.5 million and $3.4 million , respectively, of
unrecognized tax benefits, which if recognized, would affect its effective tax rate. The amount of unrecognized tax
benefits is not expected to change materially within the next 12 months .
Note 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) income, 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.
75 | 2024 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) income details provided to
the CODM (in thousands):
Net Sales
$ 1,682,296
$ 1,887,482
$ 2,114,297
Less:
Cost of sales
(679,523)
(798,952)
(912,002)
Marketing expenses
(393,693)
(432,982)
(497,269)
Selling expenses
(372,931)
(414,460)
(422,359)
General and administrative
(148,736)
(145,949)
(153,266)
Research and development
(45,255)
(55,797)
(61,521)
Restructuring costs
(18,066)
(15,728)
-
Asset impairment charges
(1,220)
(673)
-
Interest expense
(48,368)
(42,694)
(18,985)
Income tax benefit (expense)
5,162
4,466
(12,285)
Net (loss) income
$ (20,334)
$ (15,287)
$ 36,610
Note 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.
generally accepted accounting principles, 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 is
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.
Purported Class Action Complaint
On January 14, 2025 , purported customers served a putative class action complaint on behalf of themselves and a
putative class of California consumers against Sleep Number in the United States District Court for the Central 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 attorneys fees.
Purported Class Action Complaint
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 attorneys fees.
76 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (continued)
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
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 December 28, 2024 , the Company has $23 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 December 28, 2024 , the Company had entered into 7 lease commitments primarily for future retail store locations.
These lease commitments provide for total lease payments over the next 11 to 12 years , which if consummated based on
current cost estimates, would approximate $12 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 .
77 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None

---

ITEM 9A. CONTROLS AND PROCEDURES
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 December 28, 2024 . 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
December 28, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.
78 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION

---

ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
During the quarter ended December 28, 2024 , 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 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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”
and in “Our Pay; Compensation Oversight and Process: Insider Trading Policy” in the Company’s Proxy Statement for its
2025 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 applicable to its directors, officers and employees (including its
principal executive officer, principal financial officer and principal accounting officer). The Code of Business Conduct 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 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 at
www.sleepnumber.com.

---

ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
The information under the caption “Our Pay” in the Company’s Proxy Statement for its 2025 Annual Meeting of
Shareholders is incorporated herein by reference.

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Stock Ownership
The information under the caption “Stock Ownership of Management and Certain Beneficial Owners” in the Company’s
Proxy Statement for its 2025 Annual Meeting of Shareholders is incorporated herein by reference.
Securities Authorized for Issuance under Equity Compensation Plans
The information under the caption “Equity Compensation Plan Information” in the Company’s Proxy Statement for its
2025 Annual Meeting of Shareholders is incorporated herein by reference.

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information under the caption “Provisions Applicable to All Directors and the Board; Related Party Transactions
Policy” and “Provisions Applicable to All Directors and the Board; Independence” in the Company’s Proxy Statement for
the 2025 Annual Meeting of Shareholders is incorporated herein by reference.
79 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information under the caption “Ratification of Appointment of Independent Registered Public Accounting Firm” for
Deloitte & Touche LLP (PCAOB No. 34 ) in the Company’s Proxy Statement for the 2025 Annual Meeting of Shareholders
is incorporated herein by reference.
PART IV

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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.
80 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
SLEEP NUMBER CORPORATION
EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED December 28, 2024
Exhibit
No.
Description
3.1
Third Restated Articles of Incorporation of the Company, as amended (incorporated by reference to
Exhibit 3.1 contained in Sleep Number’s Annual Report on Form 10-K for the fiscal year ended
January 1, 2000 (File No. 000-25121))
3.2
Articles of Amendment to Third Restated Articles of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 contained in Sleep Number’s Current Report on Form 8-K filed May 16, 2006
(File No. 000-25121))
3.3
Articles of Amendment to Third Restated Articles of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 contained in Sleep Number’s Current Report on Form 8-K filed May 25, 2010
(File No. 000-25121))
3.4
Articles of Amendment to Third Restated Articles of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 contained in Sleep Number’s Current Report on Form 8-K filed November 1,
2017 (File No. 000-25121))
3.5
Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 contained in Sleep
Number’s Current Report on Form 8-K filed May 22, 2017 (File No. 000-25121))
4.1
Description of Registrant’s Securities (incorporated by reference to Exhibit 4.1 contained in Sleep
Number’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (File No.
000-25121))
10.1
Lease Agreement dated September 22, 2015 between the Company and Truluck Industries, Inc.
(incorporated by reference to Exhibit 10.3 contained in Sleep Number’s Quarterly Report on Form 10-
Q for the fiscal quarter ended October 3, 2015 (File No. 000-25121))
10.2
Lease Agreement dated September 30, 1998 between the Company and ProLogis Development
Services Incorporated (incorporated by reference to Exhibit 10.28 contained in Sleep Number’s
Registration Statement on Form S-1, as amended, filed October 29, 1998 (Reg. No. 333-62793))
10.3
Second Amendment to Lease Agreement dated June 15, 2015 between the Company and CLFP -
SLIC 8, L.P. (successor in interest to ProLogis Development Services Incorporated) (incorporated by
reference to Exhibit 10.4 contained in Sleep Number’s Quarterly Report on Form 10-Q for the fiscal
quarter ended October 3, 2015 (File No. 000-25121))
10.4
Third Amendment to Lease Agreement dated August 27, 2019 between Sleep Number Corporation
and IPT SALT LAKE CITY DC II LLC (successor in interest to CLFP - SLIC 8, L.P.) (incorporated by
reference to Exhibit 10.1 contained in Sleep Number’s Quarterly Report on Form 10-Q for the fiscal
quarter ended September 28, 2019 (File No. 000-25121))
10.5
Lease Agreement between DCI 1001 Minneapolis Venture, LLC, as Landlord, and Sleep Number
Corporation, as Tenant, dated October 21, 2016 (incorporated by reference to Exhibit 10.12
contained in Sleep Number’s Annual Report on Form 10-K for the fiscal year ended December 31,
2016 (File No. 000-25121))
10.6
First Amendment, dated June 1, 2017, to Lease Agreement between DCI 1001 Minneapolis Venture,
LLC, as Landlord, and Sleep Number Corporation, as Tenant, dated October 21, 2016 (incorporated
by reference to Exhibit 10.1 contained in Sleep Number’s Quarterly Report on Form 10-Q for the
fiscal quarter ended July 1, 2017 (File No. 000-25121))
10.7
Second Amendment, dated May 25, 2023, to Lease Agreement between Legacy 1001 Minneapolis
Venture, LLC (formerly known as DCI 1001 Minneapolis Venture, LLC), as Landlord, and Sleep
Number Corporation, as Tenant, dated October 21, 2016 (incorporated by reference to Exhibit 10.7
contained in Sleep Number’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2023
(File No. 000-25121))
10.8*
Third Amendment, dated December 26, 2024, to Lease Agreement between Legacy 1001
Minneapolis Venture, LLC, as Landlord, and Sleep Number Corporation, as Tenant, dated October
21, 2016, as amended
81 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
Exhibit
No.
Description
10.9 †
Sleep Number Corporation Amended and Restated 2010 Omnibus Incentive Plan (incorporated by
reference to Exhibit 10.1 contained in Sleep Number’s Current Report on Form 8-K filed May 15, 2013
(File No. 000-25121))
10.10 †
Form of Nonstatutory Stock Option Award Agreement under the 2010 Omnibus Incentive Plan
(incorporated by reference to Exhibit 10.20 contained in Sleep Number’s Annual Report on Form 10-K
for the fiscal year ended January 1, 2011 (File No. 000-25121))
10.11 †
Form of Non-Statutory Stock Option Award Agreement (Employee) under the Sleep Number
Corporation Amended and Restated 2010 Omnibus Incentive Plan (incorporated by reference to
Exhibit 10.2 contained in Sleep Number’s Quarterly Report on Form 10-Q for the fiscal quarter ended
September 28, 2019 (File No. 000-25121))
10.12 †
Form of Non-Statutory Stock Option Award Agreement (Non-Employee Director) under the Sleep
Number Corporation Amended and Restated 2010 Omnibus Incentive Plan (incorporated by
reference to Exhibit 10.8 contained in Sleep Number’s Quarterly Report on Form 10-Q for the fiscal
quarter ended September 28, 2019 (File No. 000-25121))
10.13 †
Sleep Number Executive Deferral Plan (incorporated by reference to Exhibit 10.17 contained in Sleep
Number’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (File No.
000-25121))
10.14 †
Summary of Executive Tax and Financial Planning Program (incorporated by reference to Exhibit 10.15
contained in Sleep Number’s Annual Report on Form 10-K for the fiscal year ended December 30,
2023 (File No. 000-25121))
10.15 †
Sleep Number Corporation Executive Severance Pay Plan (incorporated by reference to Exhibit 10.16
contained in Sleep Number’s Annual Report on Form 10-K for the fiscal year ended December 30,
2023 (File No. 000-25121))
10.16 †
Summary of Non-Employee Director Compensation (incorporated by reference to Exhibit 10.17
contained in Sleep Number’s Annual Report on Form 10-K for the fiscal year ended December 30,
2023 (File No. 000-25121))
10.17 †
Sleep Number Annual Incentive Plan (AIP) Effective December 31, 2023 (incorporated by reference to
Exhibit 10.2 contained in Sleep Number’s Quarterly Report on Form 10-Q for fiscal quarter ended
March 30, 2024 (File No. 000-25121))
10.18 †
Offer Letter dated March 3, 2025 from Sleep Number Corporation to Linda Findley (incorporated by
reference to Exhibit 10.1 contained in Sleep Number’s Current Report on Form 8-K filed March 5,
2025 (File No. 000-25121))
10.19 †
Transition and Advisory Agreement between Sleep Number Corporation and Shelly R. Ibach effective
October 24, 2024 (incorporated by reference to Exhibit 10.1 contained in Sleep Number’s Current
Report on Form 8-K filed October 30, 2024 (File No. 000-25121))
10.20 †
Offer Letter dated June 29, 2023 from Sleep Number Corporation to Francis K. Lee (incorporated by
reference to Exhibit 10.5 contained in Sleep Number’s Quarterly Report on Form 10-Q for the fiscal
quarter ended July 1, 2023 (File No. 000-25121))
10.21
Retailer Program Agreement effective as of January 1, 2014 by and between Synchrony Bank, Sleep
Number Corporation and Select Comfort Retail Corporation (incorporated by reference to Exhibit
10.1 contained in Sleep Number’s Quarterly Report on Form 10-Q for the fiscal quarter ended June
28, 2014 (File No. 000-25121)) (1)
10.22
Fifth Amendment to Retailer Program Agreement, dated July 15, 2022, by and between Synchrony
Bank, Sleep Number Corporation and Select Comfort Retail Corporation (incorporated by reference
to Exhibit 10.2 contained in Sleep Number’s Quarterly Report on Form 10-Q for the fiscal quarter
ended July 2, 2022 (File No. 000-25121)) (2)
82 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
Exhibit
No.
Description
10.23
Sixth Amendment to Retailer Program Agreement, dated November 28, 2022, by and between
Synchrony Bank, Sleep Number Corporation and Select Comfort Retail Corporation (incorporated by
reference to Exhibit 10.4 contained in Sleep Number’s Quarterly Report on Form 10-Q for the fiscal
quarter ended April 1, 2023 (File No. 000-25121))
10.24
Seventh Amendment to Retailer Program Agreement, dated August 28, 2023, by and between
Synchrony Bank, Sleep Number Corporation and Select Comfort Retail Corporation (incorporated by
reference to Exhibit 10.1 contained in Sleep Number’s Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 2023 (File No. 000-25121) )
10.25
Eighth Amendment to Retailer Program Agreement, dated October 16, 2023, by and between
Synchrony Bank, Sleep Number Corporation and Select Comfort Retail Corporation (incorporated by
reference to Exhibit 10.2 contained in Sleep Number’s Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 2023 (File No. 000-25121)) (2)
10.26
Ninth Amendment to Retailer Program Agreement, dated October 16, 2023, by and between
Synchrony Bank, Sleep Number Corporation and Select Comfort Retail Corporation (incorporated by
reference to Exhibit 10.3 contained in Sleep Number’s Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 2023 (File No. 000-25121)) (2)
10.27
Amended and Restated Credit and Security Agreement, dated as of February 14, 2018 among Sleep
Number Corporation, U.S. Bank National Association and the several banks and other financial
institutions from time to time party thereto (incorporated by reference to Exhibit 10.29 contained in
Sleep Number’s Annual Report on Form 10-K for the fiscal year ended December 30, 2017 (File No.
000-25121))
10.28
Tenth Amendment to Amended and Restated Credit and Security Agreement (incorporated by
reference to Exhibit 10.4 contained in Sleep Number’s Quarterly Report on Form 10-Q for fiscal
quarter ended September 30, 2023 (File No. 000-25121)) (2)
10.29*
Eleventh Amendment to Amended and Restated Credit and Security Agreement (2)
10.30 †
Sleep Number Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.1
contained in Sleep Number’s Current Report on Form 8-K filed May 13, 2020 (File No. 000-25121))
10.31†
Amendment No. 1 to the Sleep Number Corporation 2020 Equity Incentive Plan (incorporated by
reference to Exhibit 10.1 contained in Sleep Number’s Current Report on Form 8-K filed May 21, 2024
(File No. 000-25121))
10.32†
Form of Non-Statutory Stock Option Award Agreement (Non-Employee Director) under the Sleep
Number Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 contained
in Sleep Number’s Quarterly Report on Form 10-Q for fiscal quarter ended June 27, 2020 (File No.
000-25121))
10.33†
Form of Non-Statutory Stock Option Award Agreement (Employee) under the Sleep Number
Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 contained in Sleep
Number’s Quarterly Report on Form 10-Q for fiscal quarter ended June 27, 2020 (File No.
000-25121))
10.34†
Form of Non-Statutory Stock Option Award Agreement (Senior Team) under the Sleep Number
Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 contained in Sleep
Number’s Quarterly Report on Form 10-Q for fiscal quarter ended April 3, 2021 (File No. 000-25121))
10.35†
Form of Performance Adjusted Restricted Stock Unit Award Agreement (ROIC) (Senior Team) under
the Sleep Number Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.3
contained in Sleep Number’s Quarterly Report on Form 10-Q for fiscal quarter ended April 3, 2021
(File No. 000-25121))
10.36 †
Form of Restricted Stock Unit Award Agreement (Non-Employee Director) under the Sleep Number
Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 contained in Sleep
Number’s Quarterly Report on Form 10-Q for fiscal quarter ended June 27, 2020 (File No.
000-25121))
83 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
Exhibit
No.
Description
10.37 †
Form of Restricted Stock Unit Award Agreement (3-Year Ratable) (Sleep Number Labs) under the
Sleep Number Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.4
contained in Sleep Number’s Quarterly Report on Form 10-Q for fiscal quarter ended April 3, 2021
(File No. 000-25121))
10.38 †
Form of Restricted Stock Unit Award Agreement (3-Year Cliff Vest) under the Sleep Number
Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 contained in Sleep
Number’s Quarterly Report on Form 10-Q for fiscal quarter ended April 3, 2021 (File No. 000-25121))
10.39 †
Form of Performance Adjusted Restricted Stock Unit Award Agreement under the Sleep Number
Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 contained in Sleep
Number’s Quarterly Report on Form 10-Q for fiscal quarter ended April 1, 2023 (File No. 000-25121))
10.40 †
Form of Performance Adjusted Restricted Stock Unit Award Agreement (CEO and Executive Team)
under the Sleep Number Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit
10.2 contained in Sleep Number’s Quarterly Report on Form 10-Q for fiscal quarter ended April 1,
2023 (File No. 000-25121))
10.41†
Form of Performance Adjusted Restricted Stock Unit Award Agreement (CEO and Executive Team)
under the Sleep Number Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit
10.1 contained in Sleep Number’s Quarterly Report on Form 10-Q for fiscal quarter ended March 30,
2024 (File No. 000-25121))
10.42†*
Form of Stock Unit Award Agreement (Executive Team) under the Sleep Number Corporation 2020
Equity Incentive Plan
10.43†*
Form of Performance Adjusted Restricted Stock Unit Award Agreement (CEO and Executive Team)
under the Sleep Number Corporation 2020 Equity Incentive Plan
10.44 †
Sleep Number Corporation Profit Sharing and 401(k) Plan (2022 Restatement) (incorporated by
reference to Exhibit 99.1 to Sleep Number’s Registration Statement on Form S-8 filed July 12, 2023
(File No. 000-25121))
10.45 †
Sleep Number Corporation Profit Sharing and 401(k) Plan (2022 Restatement) (First Declaration of
Amendment) effective May 30, 2022 (incorporated by reference to Exhibit 99.2 to Sleep Number’s
Registration Statement on Form S-8 filed July 12, 2023 (File No. 000-25121))
10.46 †
Sleep Number Corporation Profit Sharing and 401(k) Plan (2022 Restatement) (Second Declaration of
Amendment) effective January 1, 2022 (incorporated by reference to Exhibit 99.3 to Sleep Number’s
Registration Statement on Form S-8 filed July 12, 2023 (File No. 000-25121))
10.47 †
Sleep Number Corporation Profit Sharing and 401(k) Plan (2022 Restatement) (Third Declaration of
Amendment) effective as of December 31, 2022 (incorporated by reference to Exhibit 99.4 to Sleep
Number’s Registration Statement on Form S-8 filed July 12, 2023 (File No. 000-25121))
19.1*
Rule 10b5-1 Sleep Number Corporation Trading Plan Policy
21.1*
Subsidiaries of the Company
23.1*
Consent of Independent Registered Public Accounting Firm
24.1*
Power of Attorney
31.1*
Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*
Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
32.2*
Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
97.1 †
Sleep Number Corporation Executive Clawback and Forfeiture Policy (incorporated by reference to
Exhibit 97.1 contained in Sleep Number’s Annual Report on Form 10-K filed on February 23, 2024
(File No. 000-25121))
84 | 2024 FORM 10-K
SLEEP NUMBER CORPORATION
Exhibit
No.
Description
101.INS*
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL document
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)
____________________
(1) 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.
(2) Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10).
* Filed herein.
† Management contract or compensatory plan or arrangement.