Sleep Number Corp

Q1 net sales were $319 million, down 19% year over year. Gross profit margin was 57.9%, down 329 basis points from last year, and adjusted EBITDA was $5.8 million, down about $16 million year over year. Adjusted operating expenses before restructuring and other nonrecurring costs were $195 million, down $42 million or 18% year over year. Total liquidity was $40 million at quarter-end, above the $30 million covenant floor, and free cash flow was a use of $13.2 million. For Q2, management expects net sales to be down low single digits to flat versus last year; it will not provide further full-year financial guidance while strategic and financing options are evaluated.

Linda Findley emphasized that the quarter showed early progress in the turnaround despite weak January and February demand. She highlighted the March demand rebound, the successful full product reset, stronger NPS on ComfortMode, improved organic/e-commerce performance, and early traction from new marketing, influencer activity, and the Costco test. Her tone was cautiously optimistic: she said the company is encouraged by customer response and that product, marketing, and capital structure remain the key workstreams.

Amy O'Keefe focused on the balance sheet and execution against the turnaround plan. She said the lender amendment provided about $55 million of near-term incremental liquidity, including a new $25 million senior secured term loan due June 30, 2026, and relief from the $30 million minimum liquidity covenant through June 30, 2026. On the quarter, she cited 57.9% gross margin, $195 million of adjusted operating expenses, $5.8 million of adjusted EBITDA, and $13.2 million of free cash flow use, noting the quarter was in line with expectations and that cost savings are proceeding, with about 30% of the $50 million annualized savings plan executed year to date.

Analysts pressed on whether Q2 needs to show meaningful improvement, and management said media spend is largely unchanged from prior plans but is being weighted around Memorial Day as the new products are now fully in market. On liquidity and the new June 30, 2026 term loan, O'Keefe said the company expects to progress a longer-term financial transaction over the next few months and that lenders will hold the company accountable. Questions on input costs/tariffs and gross margin showed management expects some headwind, but said the new product pricing was set with current data and that cost savings should offset pressure; management also said legacy inventory discounting is mostly behind it, though some clearance will continue while supplies last.