- Fourth-quarter demand increased high-single digits over
prior-year demand (adjusted for extra fiscal week last year); a
late receipt of semiconductor components from a large global
supplier delayed more than $125 million of delivered net
sales
- Full-year net sales grew to a record $2.18 billion with
full-year diluted earnings per share (EPS) of $6.16
- Generated record operating cash flows of $300 million for
the year and full-year ROIC of 27.6%
- Provides 2022 outlook for a 10-15% increase in diluted EPS
versus 2021, including constrained first quarter
Sleep Number Corporation (Nasdaq: SNBR) today reported results
for the year ended January 1, 2022.
“Strong demand for Sleep Number’s 360 smart beds again drove
record earnings in 2021, even with pandemic-induced global supply
chain disruptions,” said Shelly Ibach, President and CEO. “The
fourth quarter proved to be the most challenging as we received
semiconductor components too late in December to fulfill our
planned deliveries. Global electronics supplies remain constrained
in the near-term, while demand for our 360 smart beds remains
strong, reflecting increased consumer engagement and referrals from
more than two million connected smart sleepers. We continue to
focus on delivering long-term stakeholder value to build upon our
5-year EPS CAGR of 41% through 2021.”
Fourth Quarter Overview
- Net sales decreased 13% to $492 million (-7% adjusted);
with a late December receipt of semiconductor components
constraining delivered net sales by more than $125 million (about
two and half weeks of deliveries)
- Diluted EPS of $0.47 for the fourth quarter, compared to
$2.19 for the same period last year, or $1.89 excluding the 53rd
week
- Fiscal 2020 included a 53rd week in the fourth quarter, which
we estimate added approximately $41 million in net sales, $11.2
million in operating income and $0.30 of diluted EPS
Full Year Overview
- Net sales increased 18% (+20% adjusted) to $2.18 billion
in 2021, including a 17% comparable sales gain; up 29% compared to
2019
- Gross profit increased 14% (+17% adjusted) to $1.32
billion, or 60.4% of net sales, while offsetting significant input
cost increases with pricing actions and efficiency gains; up 25%
compared to 2019
- Operating income increased 5% (+11% adjusted) to $194
million; up 73% compared to 2019
- Diluted EPS increased 26% (+34% adjusted) to a record
$6.16; up 128% compared to 2019
Cash Flows and Liquidity Review
- Generated $300 million in net cash from operating activities,
up 7% versus last year and 59% higher than 2019
- Invested $67 million in capital expenditures and repurchased
$364 million of Sleep Number stock during 2021
- Leverage ratio of 2.6x EBITDAR at the end of 2021
- Return on invested capital (ROIC) of 27.6% for the year, up 260
bp versus prior year and nearly four times our weighted-average
cost of capital
Financial Outlook
The company expects full-year 2022 diluted EPS to increase 10 to
15% versus 2021. The outlook for 2022 assumes continued global
electronics supply constraints with the greatest impact expected in
the first quarter. Accordingly, the 2022 outlook assumes first
quarter EPS of 30 to 40 cents with EPS growth of approximately 80%
expected for the last nine months of the year. The company
anticipates 2022 capital expenditures of $70 million to $80
million.
Conference Call Information
Management will host its regularly scheduled conference call to
discuss the company’s results at 5 p.m. EST (4 p.m. CST; 2 p.m.
PST) today. To access the webcast, please visit the investor
relations area of the Sleep Number website at
https://ir.sleepnumber.com. The webcast replay will remain
available for approximately 60 days.
About Sleep Number Corporation
Individuality is the foundation of Sleep Number. Our purpose
driven company is comprised of over 5,000 passionate team members
who are dedicated to our mission of improving lives by
individualizing sleep experiences. We have improved nearly 14
million lives and are positively impacting society’s wellbeing
through higher-quality sleep.
Our award-winning 360® smart beds are informed by science. They
learn from over one billion sleep sessions of highly-accurate,
real-world sleep data – the cumulation of almost 14 billion hours’
worth - to automatically adjust to each sleeper and provide
effortless comfort and proven quality sleep. Our 360 smart beds
deliver individualized sleep health reports and insights, including
a daily SleepIQ® score, and are helping to advance meaningful sleep
health solutions by applying sleep science and research.
For life-changing sleep, visit SleepNumber.com or one of our 650
Sleep Number® stores. More information is available on our newsroom
and investor relations sites.
Forward-looking Statements
Statements used in this news release relating to future plans,
events, financial results or performance, such as the company’s
expectations for full-year 2022 diluted EPS and capital
expenditures, are forward-looking statements subject to certain
risks and uncertainties including, among others, such factors as
current and future general and industry economic trends and
consumer confidence; risks inherent in outbreaks of pandemics or
contagious disease, including the COVID-19 pandemic; risks inherent
in global-sourcing activities, including tariffs, outbreaks of
pandemics or contagious diseases, such as the COVID-19 pandemic,
strikes and the potential for shortages in supply or disruption or
delay of production and delivery of materials and products in our
supply chain; risks of disruption in the operation of any of our
main manufacturing, distribution, logistics, home delivery, product
development, or customer service facilities or operations; our
manufacturing processes with minimal levels of inventory, which may
leave us vulnerable to shortages in supply; our dependence on
significant suppliers and third parties and our ability to maintain
relationships with key suppliers or third parties, including
several sole-source suppliers or service providers; rising
commodity costs and other inflationary pressures; the effectiveness
of our marketing messages; the efficiency of our advertising and
promotional efforts; our ability to execute our Total Retail
distribution strategy; our ability to achieve and maintain
acceptable levels of product and service quality, and acceptable
product return and warranty claims rates; our ability to continue
to improve and expand our product line, and consumer acceptance of
our products, product quality, innovation and brand image; industry
competition, the emergence of additional competitive products and
the adequacy of our intellectual-property rights to protect our
products and brand from competitive or infringing activities;
claims that our products, processes, advertising, or trademarks
infringe the intellectual-property rights of others; availability
of attractive and cost-effective consumer credit options;
increasing government regulation; pending or unforeseen litigation
and the potential for adverse publicity associated with litigation;
the adequacy of our and third-party information systems to meet the
evolving needs of our business and existing and evolving risks and
regulatory standards applicable to data privacy and cybersecurity;
the costs and potential disruptions to our business related to
upgrading or maintaining our information systems; the vulnerability
of our and third party information systems to attacks by hackers or
other cyber threats that could compromise the security of our
systems, result in a data breach or disrupt our business;
environmental risks, including increasing environmental regulation
and the broader impacts of climate change such as from
weather-related events; and our ability to attract, retain and
motivate qualified management, executive and other key team
members, including qualified retail sales professionals and
managers. Additional information concerning these and other risks
and uncertainties is contained in the company’s filings with the
Securities and Exchange Commission (SEC), including the Annual
Report on Form 10-K, and other periodic reports filed with the SEC.
The company has no obligation to publicly update or revise any of
the forward-looking statements in this news release.
SLEEP NUMBER
CORPORATION
AND SUBSIDIARIES Consolidated Statements of
Operations (unaudited – in thousands, except per share
amounts)
Thirteen
Fourteen
Weeks Ended
Weeks Ended
January 1,
% of
January 2,
% of
2022
Net Sales
2021
Net Sales
Net sales
$
491,984
100.0
%
$
567,896
100.0
%
Cost of sales
212,260
43.1
%
211,997
37.3
%
Gross profit
279,724
56.9
%
355,899
62.7
%
Operating expenses: Sales and marketing
220,236
44.8
%
221,712
39.0
%
General and administrative
29,924
6.1
%
47,084
8.3
%
Research and development
14,907
3.0
%
12,511
2.2
%
Total operating expenses
265,067
53.9
%
281,307
49.5
%
Operating income
14,657
3.0
%
74,592
13.1
%
Interest expense, net
1,845
0.4
%
813
0.1
%
Income before income taxes
12,812
2.6
%
73,779
13.0
%
Income tax expense
1,671
0.3
%
12,420
2.2
%
Net income
$
11,141
2.3
%
$
61,359
10.8
%
Net income per share – basic
$
0.49
$
2.28
Net income per share – diluted
$
0.47
$
2.19
Reconciliation of weighted-average shares
outstanding: Basic weighted-average shares outstanding
22,939
26,960
Dilutive effect of stock-based awards
877
1,100
Diluted weighted-average shares outstanding
23,816
28,060
SLEEP NUMBER
CORPORATION
AND SUBSIDIARIES Consolidated Statements of
Operations (unaudited – in thousands, except per share
amounts)
Fifty-Two
Fifty-Three
Weeks Ended
Weeks Ended
January 1,
% of
January 2,
% of
2022
Net Sales
2021
Net Sales
Net sales
$
2,184,949
100.0
%
$
1,856,555
100.0
%
Cost of sales
866,102
39.6
%
700,555
37.7
%
Gross profit
1,318,847
60.4
%
1,156,000
62.3
%
Operating expenses: Sales and marketing
905,359
41.4
%
771,195
41.5
%
General and administrative
161,412
7.4
%
158,999
8.6
%
Research and development
58,540
2.7
%
40,910
2.2
%
Total operating expenses
1,125,311
51.5
%
971,104
52.3
%
Operating income
193,536
8.9
%
184,896
10.0
%
Interest expense, net
6,245
0.3
%
8,924
0.5
%
Income before income taxes
187,291
8.6
%
175,972
9.5
%
Income tax expense
33,545
1.5
%
36,783
2.0
%
Net income
$
153,746
7.0
%
$
139,189
7.5
%
Net income per share – basic
$
6.40
$
5.03
Net income per share – diluted
$
6.16
$
4.90
Reconciliation of weighted-average shares
outstanding: Basic weighted-average shares outstanding
24,038
27,665
Dilutive effect of stock-based awards
909
763
Diluted weighted-average shares outstanding
24,947
28,428
SLEEP NUMBER CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (unaudited – in thousands,
except per share amounts) subject to reclassification
January 1,
January 2,
2022
2021
Assets Current assets: Cash and cash equivalents
$
2,389
$
4,243
Accounts receivable, net of allowances of $924 and $1,046,
respectively
25,718
31,871
Inventories
105,644
81,362
Prepaid expenses
18,953
20,839
Other current assets
54,917
43,489
Total current assets
207,621
181,804
Non-current assets: Property and equipment, net
195,128
175,223
Operating lease right-of-use assets
371,133
314,226
Goodwill and intangible assets, net
70,468
72,871
Other non-current assets
75,190
56,012
Total assets
$
919,540
$
800,136
Liabilities and Shareholders’ Deficit Current
liabilities: Borrowings under revolving credit facility
$
382,500
$
244,200
Accounts payable
162,547
91,904
Customer prepayments
129,499
72,017
Accrued sales returns
22,368
24,765
Compensation and benefits
51,240
76,786
Taxes and withholding
22,087
23,339
Operating lease liabilities
72,360
62,077
Other current liabilities
64,177
60,856
Total current liabilities
906,778
655,944
Non-current liabilities: Deferred income taxes
688
242
Operating lease liabilities
336,192
283,084
Other non-current liabilities
100,835
84,844
Total non-current liabilities
437,715
368,170
Total liabilities
1,344,493
1,024,114
Shareholders’ deficit: Undesignated preferred stock; 5,000
shares authorized, no shares issued and outstanding
-
-
Common stock, $0.01 par value; 142,500 shares authorized, 22,683
and 25,390 shares issued and outstanding, respectively
227
254
Additional paid-in capital
3,971
-
Accumulated deficit
(429,151
)
(224,232
)
Total shareholders’ deficit
(424,953
)
(223,978
)
Total liabilities and shareholders’ deficit
$
919,540
$
800,136
SLEEP NUMBER CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited - in
thousands) subject to reclassification
Fifty-Two
Fifty-Three
Weeks Ended
Weeks Ended
January 1,
January 2,
2022
2021
Cash flows from operating activities: Net income
$
153,746
$
139,189
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
60,394
61,563
Stock-based compensation
23,214
21,813
Net loss on disposals and impairments of assets
37
247
Deferred income taxes
446
(3,566
)
Changes in operating assets and liabilities: Accounts receivable
6,153
(11,893
)
Inventories
(24,282
)
5,703
Income taxes
(3,066
)
1,057
Prepaid expenses and other assets
(13,836
)
(13,717
)
Accounts payable
54,405
(16,755
)
Customer prepayments
57,482
37,769
Accrued compensation and benefits
(24,790
)
36,825
Other taxes and withholding
1,814
111
Other accruals and liabilities
8,293
21,315
Net cash provided by operating activities
300,010
279,661
Cash flows from investing activities: Purchases of property
and equipment
(66,900
)
(37,100
)
Proceeds from sales of property and equipment
257
55
Purchase of intangible assets
-
(1,973
)
Net cash used in investing activities
(66,643
)
(39,018
)
Cash flows from financing activities: Net increase
(decrease) in short-term borrowings
145,473
(11,639
)
Repurchases of common stock
(382,376
)
(235,644
)
Proceeds from issuance of common stock
4,441
9,602
Debt issuance costs
(2,759
)
(312
)
Net cash used in financing activities
(235,221
)
(237,993
)
Net (decrease) increase in cash and cash equivalents
(1,854
)
2,650
Cash and cash equivalents, at beginning of period
4,243
1,593
Cash and cash equivalents, at end of period
$
2,389
$
4,243
SLEEP NUMBER CORPORATION AND SUBSIDIARIES
Supplemental Financial Information (unaudited)
Thirteen
Fourteen
Fifty-Two
Fifty-Three
Weeks Ended
Weeks Ended
Weeks Ended
Weeks Ended
January 1,
January 2,
January 1,
January 2,
2022
2021
2022
2021
Percent of sales: Retail stores
85.8
%
85.3
%
87.1
%
85.2
%
Online, phone, chat and other
14.2
%
14.7
%
12.9
%
14.8
%
Total Company
100.0
%
100.0
%
100.0
%
100.0
%
Sales change rates: Retail comparable-store sales 4
(11
%)
12
%
19
%
(3
%)
Online, phone and chat 4
(11
%)
93
%
4
%
104
%
Total Retail comparable sales change 4
(11
%)
19
%
17
%
6
%
Net opened/closed stores, other and 53rd week
(2
%)
10
%
1
%
3
%
Total Company
(13
%)
29
%
18
%
9
%
Stores open: Beginning of period
632
596
602
611
Opened
22
10
77
30
Closed
(6
)
(4
)
(31
)
(39
)
End of period
648
602
648
602
Other metrics: Average sales per store ($ in 000's)
1, 4
$
3,600
$
3,052
Average sales per square foot 1, 4
$
1,212
$
1,051
Stores > $2 million net sales 2, 4
84
%
67
%
Stores > $3 million net sales 2, 4
48
%
29
%
Average revenue per smart bed unit 3
$
5,309
$
4,931
$
5,102
$
4,856
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 (stores, online, phone and chat) net sales
divided by Total Retail smart bed units.
4
Fiscal 2020 included 53 weeks, as compared to 52 weeks in fiscal
2021 and 2019. The additional week in 2020 was in the fiscal fourth
quarter. Total Retail comparable sales have been adjusted to remove
the estimated impact of the additional week on those metrics.
SLEEP NUMBER CORPORATION AND SUBSIDIARIES Earnings before
Interest, Taxes, Depreciation and Amortization (Adjusted
EBITDA) (in thousands) We define earnings before
interest, taxes, depreciation and amortization (Adjusted EBITDA) as
net income plus: income tax expense, interest expense, depreciation
and amortization, stock-based compensation and asset impairments.
Management believes Adjusted EBITDA is a useful indicator of our
financial performance and our ability to generate cash from
operating activities. Our 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:
Thirteen
Fourteen
Fifty-Two
Fifty-Three
Weeks Ended
Weeks Ended
Weeks Ended
Weeks Ended
January 1,
January 2,
January 1,
January 2,
2022
2021
2022
2021
Net income
$
11,141
$
61,359
$
153,746
$
139,189
Income tax expense
1,671
12,420
33,545
36,783
Interest expense
1,844
813
6,245
9,021
Depreciation and amortization
15,434
15,194
59,779
60,783
Stock-based compensation
3,512
6,259
23,214
21,813
Asset impairments
60
42
172
302
Adjusted EBITDA
$
33,662
$
96,087
$
276,701
$
267,891
Free Cash Flow (in thousands)
Thirteen
Fourteen
Fifty-Two
Fifty-Three
Weeks Ended
Weeks Ended
Weeks Ended
Weeks Ended
January 1,
January 2,
January 1,
January 2,
2022
2021
2022
2021
Net cash provided by (used in) operating activities
$
7,326
$
(7,621
)
$
300,010
$
279,661
Subtract: Purchases of property and equipment
17,530
9,026
66,900
37,100
Free cash flow
$
(10,204
)
$
(16,647
)
$
233,110
$
242,561
Calculation of Net Leverage Ratio under Revolving Credit
Facility (in thousands)
Fifty-Two
Fifty-Three
Weeks Ended
Weeks Ended
January 1,
January 2,
2022
2021
Borrowings under revolving credit facility
$
382,500
$
244,200
Outstanding letters of credit
3,997
3,997
Finance lease obligations
537
650
Consolidated funded indebtedness
$
387,034
$
248,847
Capitalized operating lease obligations1
610,072
548,749
Total debt including capitalized operating lease obligations (a)
$
997,106
$
797,596
Adjusted EBITDA (see above)
$
276,701
$
267,891
Consolidated rent expense
101,679
91,458
Consolidated EBITDAR (b)
$
378,380
$
359,349
Net Leverage Ratio under revolving credit facility (a
divided by b) 2.6 to 1.0 2.2 to 1.0 1 A multiple of six times
annual rent expense is used as an estimate for capitalizing our
operating lease obligations in accordance with our credit facility.
Note - Our Adjusted EBITDA and EBITDAR
calculations, Free Cash Flow data and Calculation of Net Leverage
Ratio under Revolving Credit Facility are considered non-GAAP
financial measures and are not in accordance with, or preferable
to, "as reported," or GAAP financial data. However, we are
providing this information as we believe it facilitates analysis of
the Company's financial performance by investors and financial
analysts.
GAAP - generally accepted accounting
principles in the U.S.
SLEEP NUMBER CORPORATION AND SUBSIDIARIES Calculation of
Return on Invested Capital (ROIC) (in thousands) ROIC is
a financial measure we use to determine how efficiently we deploy
our capital. It quantifies the return we earn on our invested
capital. Management believes ROIC is also a useful metric for
investors and financial analysts. We compute ROIC as outlined
below. Our definition and calculation of ROIC may not be comparable
to similarly titled definitions and calculations used by other
companies. The tables below reconcile net operating profit after
taxes (NOPAT) and total invested capital, which are non-GAAP
financial measures, to the comparable GAAP financial measures:
Fifty-Two
Fifty-Three
Weeks Ended
Weeks Ended
January 1, 2022
January 2, 2021
Net operating profit after taxes
(NOPAT) Operating income
$
193,536
$
184,896
Add: Rent expense 1
101,679
91,458
Add: Interest income
-
97
Less: Depreciation on capitalized operating leases 2
(25,592
)
(24,001
)
Less: Income taxes 3
(65,216
)
(59,387
)
NOPAT
$
204,407
$
193,063
Average invested capital Total
deficit
$
(424,953
)
$
(223,978
)
Add: Long-term debt 4
383,037
244,849
Add: Capitalized operating lease obligations 5
813,432
731,664
Total invested capital at end of period
$
771,516
$
752,535
Average invested capital 6
$
739,873
$
773,413
Return on invested capital (ROIC) 7
27.6
%
25.0
%
1
Rent expense is added back to operating income to show the impact
of owning versus leasing the related assets.
2
Depreciation is based on the average of the last five fiscal
quarters' ending capitalized operating lease obligations (see note
5) for the respective reporting periods with an assumed thirty-year
useful life. This life assumption is based on our long-term
participation in given markets though specific retail location
lease commitments are generally 5 to 10 years at inception. This is
subtracted from operating income to illustrate the impact of owning
versus leasing the related assets.
3
Reflects annual effective income tax rates, before discrete
adjustments, of 24.2% and 23.5% for 2021 and 2020, respectively.
4
Long-term debt includes existing finance lease liabilities.
5
A multiple of eight times annual rent expense is used as an
estimate for capitalizing our operating lease obligations. The
methodology utilized aligns with the methodology of a nationally
recognized credit rating agency.
6
Average invested capital represents the average of the last five
fiscal quarters' ending invested capital balances.
7
ROIC equals NOPAT divided by average invested capital. Note - Our
ROIC calculation and data are considered non-GAAP financial
measures and are not in accordance with, or preferable to, GAAP
financial data. However, we are providing this information as we
believe it facilitates analysis of the Company's financial
performance by investors and financial analysts. GAAP - generally
accepted accounting principles in the U.S.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220223005066/en/
Investor Contact: Dave Schwantes; (763) 551-7498;
investorrelations@sleepnumber.com Media Contact: Julie
Elepano; (414) 732-9840; julie.elepano@sleepnumber.com
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