UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES<br><br>EXCHANGE ACT OF 1934

For the quarterly period ended March 29, 2025

OR

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

Commission File Number: 000-25121

_______________________________________________________________________

SLEEP NUMBER CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota	41-1597886
(State or other jurisdiction of incorporation or<br><br>organization)	(I.R.S. Employer Identification No.)		1001 Third Avenue South
---	---	---
Minneapolis,	Minnesota	55404
(Address of principal executive offices)		(Zip Code)

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

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

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

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

Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),

and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted

pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the

registrant was required to submit such files). Yes  ☒ No ☐

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

reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller

reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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

As of March 29, 2025, 22,660,000 shares of the registrant’s Common Stock were outstanding.

i	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

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SLEEP NUMBER CORPORATION

AND SUBSIDIARIES

INDEX

		Page
PART I: FINANCIAL INFORMATION		1
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Shareholders' Deficit	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
PART II: OTHER INFORMATION		26
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	27
Item 6.	Exhibits	28
SIGNATURES		29
1	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION
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Table of contents

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SLEEP NUMBER CORPORATION

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(unaudited - in thousands, except per share amounts)

	March 29,<br><br>2025	December 28,<br><br>2024
Assets
Current assets:
Cash and cash equivalents	$1,691	$1,950
Accounts receivable, net of allowances of $1,112 and $1,113, respectively	14,225	17,516
Inventories	103,876	103,152
Prepaid expenses	17,570	14,568
Other current assets	38,004	44,098
Total current assets	175,366	181,284
Non-current assets:
Property and equipment, net	119,780	129,574
Operating lease right-of-use assets	345,483	356,641
Goodwill and intangible assets, net	66,357	66,412
Deferred income taxes	34,896	33,575
Other non-current assets	94,909	93,324
Total assets	$836,791	$860,810
Liabilities and Shareholders’ Deficit
Current liabilities:
Borrowings under revolving credit facility	$557,700	$546,600
Accounts payable	114,312	107,619
Customer prepayments	40,357	46,933
Accrued sales returns	16,777	19,092
Compensation and benefits	21,371	31,038
Taxes and withholding	17,430	18,619
Operating lease liabilities	82,614	82,307
Other current liabilities	53,818	55,804
Total current liabilities	904,379	908,012
Non-current liabilities:
Operating lease liabilities	294,295	307,201
Other non-current liabilities	94,961	97,183
Total liabilities	1,293,635	1,312,396
Shareholders’ deficit:
Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding	—	—
Common stock, $0.01 par value; 142,500 shares authorized, 22,660 and 22,388 shares issued<br><br>and outstanding, respectively	227	224
Additional paid-in capital	30,775	27,390
Accumulated deficit	(487,846)	(479,200)
Total shareholders’ deficit	(456,844)	(451,586)
Total liabilities and shareholders’ deficit	$836,791	$860,810

See accompanying notes to condensed consolidated financial statements.

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SLEEP NUMBER CORPORATION

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Condensed Consolidated Statements of Operations

(unaudited - in thousands, except per share amounts)

	Three Months Ended
	March 29,<br><br>2025	March 30,<br><br>2024
Net sales	$393,261	$470,449
Cost of sales	152,726	194,275
Gross profit	240,535	276,174
Operating expenses:
Sales and marketing	189,103	208,512
General and administrative	38,619	39,079
Research and development	10,903	12,441
Restructuring costs	60	10,600
Total operating expenses	238,685	270,632
Operating income	1,850	5,542
Interest expense, net	11,081	12,299
Loss before income taxes	(9,231)	(6,757)
Income tax (benefit) expense	(585)	725
Net loss	$(8,646)	$(7,482)
Basic net loss per share:
Net loss per share – basic	$(0.38)	$(0.33)
Weighted-average shares – basic	22,706	22,506
Diluted net loss per share:
Net loss per share – diluted	$(0.38)	$(0.33)
Weighted-average shares – diluted	22,706	22,506

See accompanying notes to condensed consolidated financial statements.

3	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

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SLEEP NUMBER CORPORATION

AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Deficit

(unaudited - in thousands)

	Common Stock		Additional<br><br>Paid-in<br><br>Capital	Accumulated<br><br>Deficit	Total
	Shares	Amount
Balance at December 28, 2024	22,388	$224	$27,390	$(479,200)	$(451,586)
Net loss	—	—	—	(8,646)	(8,646)
Stock-based compensation	346	3	3,948	—	3,951
Repurchases of common stock	(74)	—	(563)	—	(563)
Balance at March 29, 2025	22,660	$227	$30,775	$(487,846)	$(456,844)			Common Stock		Additional<br><br>Paid-in<br><br>Capital	Accumulated<br><br>Deficit	Total
---	---	---	---	---	---
	Shares	Amount
Balance at December 30, 2023	22,235	$222	$16,716	$(458,866)	$(441,928)
Net loss	—	—	—	(7,482)	(7,482)
Stock-based compensation	134	1	4,116	—	4,117
Repurchases of common stock	(43)	—	(570)	—	(570)
Balance at March 30, 2024	22,326	223	20,262	(466,348)	(445,863)

See accompanying notes to condensed consolidated financial statements.

4	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

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SLEEP NUMBER CORPORATION

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited - in thousands)

	Three Months Ended
	March 29,<br><br>2025	March 30,<br><br>2024
Cash flows from operating activities:
Net loss	$(8,646)	$(7,482)
Adjustments to reconcile net loss to net cash provided by operating<br><br>activities:
Depreciation and amortization	14,836	17,487
Stock-based compensation	3,951	4,117
Net loss on disposals and impairments of assets	17	2,500
Deferred income taxes	(1,321)	(928)
Changes in operating assets and liabilities:
Accounts receivable	3,291	5,026
Inventories	(724)	14,529
Income taxes	736	1,587
Prepaid expenses and other assets	781	5,473
Accounts payable	8,784	(2,765)
Customer prepayments	(6,576)	1,119
Accrued compensation and benefits	(9,686)	30
Other taxes and withholding	(1,925)	(2,060)
Other accruals and liabilities	(6,144)	(4,888)
Net cash (used in) provided by operating activities	(2,626)	33,745
Cash flows from investing activities:
Purchases of property and equipment	(4,599)	(9,308)
Issuance of note receivable	—	(2,942)
Net cash used in investing activities	(4,599)	(12,250)
Cash flows from financing activities:
Net increase (decrease) in short-term borrowings	9,087	(21,396)
Repurchases of common stock	(563)	(570)
Debt issuance costs	(1,558)	—
Net cash provided by (used in) financing activities	6,966	(21,966)
Net decrease in cash and cash equivalents	(259)	(471)
Cash and cash equivalents, at beginning of period	1,950	2,539
Cash and cash equivalents, at end of period	$1,691	$2,068

See accompanying notes to condensed consolidated financial statements.

5	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

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SLEEP NUMBER CORPORATION

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Business and Summary of Significant Accounting Policies

Business & Basis of Presentation

The Company prepared the condensed consolidated financial statements as of and for the three months ended

March 29, 2025 of Sleep Number Corporation and its 100%-owned subsidiaries (Sleep Number or the Company),

without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and they reflect, in

the opinion of management, all normal recurring adjustments, including the elimination of all significant intra-entity

balances and transactions, necessary to present fairly its financial position as of March 29, 2025 and December 28, 2024,

and the consolidated results of operations and cash flows for the periods presented. The historical and quarterly

consolidated results of operations may not be indicative of the results that may be achieved for the full year or any future

period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.

Generally Accepted Accounting Principles (GAAP) have been condensed or omitted pursuant to such rules and

regulations. These condensed consolidated financial statements should be read in conjunction with the most recent

audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for

the fiscal year ended December 28, 2024 and other recent filings with the SEC.

The preparation of condensed consolidated financial statements in conformity with U.S. 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 condensed 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.

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.

6	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

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SLEEP NUMBER CORPORATION

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 March 29, 2025 and December 28, 2024, the Company had $19 million of debt and equity securities that fund

the 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 March 29, 2025 and December 28, 2024, respectively, which

are included in other non-current liabilities. The majority of the debt and equity securities are Level 1 as they trade with

sufficient frequency and volume to enable the Company 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):

	March 29,<br><br>2025	December 28,<br><br>2024
Raw materials	$10,734	$11,434
Work in progress	133	130
Finished goods	93,009	91,588
	$103,876	$103,152

4. Goodwill and Intangible Assets, Net

Goodwill and Indefinite-lived Intangible Assets

Goodwill was $64.0 million at March 29, 2025 and December 28, 2024. Indefinite-lived trade name/trademarks totaled

$1.4 million at both March 29, 2025 and December 28, 2024.

Definite-lived Intangible Assets

Patents were $2.0 million at both March 29, 2025 and December 28, 2024. Accumulated amortization was $1.1 million at

March 29, 2025 and $1.0 million at December 28, 2024. Amortization expense for both the three months ended

March 29, 2025 and March 30, 2024, was $0.1 million.

Annual amortization for patents for subsequent years are as follows (in thousands):

2025 (excluding the three months ended March 29, 2025 )	$171
2026	222
2027	222
2028	155
2029	99
2030	45
Total future amortization for definite-lived intangible assets	$914
7	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION
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SLEEP NUMBER CORPORATION

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

5. Credit Agreement

As of March 29, 2025, the Company’s credit facility had a total commitment amount of $675 million. The credit facility, as

amended, is for general corporate purposes and to meet seasonal working capital requirements. The Amended and

Restated Credit and Security Agreement, dated February 14, 2018, among the Company, U.S. Bank National Association

and the several banks and other financial institutions from time to time party thereto (as amended, the Credit

Agreement), includes an accordion feature which allows the Company to increase the amount of the credit facility from

$675 million to $1.0 billion, subject 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 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) 4.35 to 1.00 for the quarterly reporting period ending January 3, 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 3, 2026, and (III) 3.00 to 1.00 for

each quarterly reporting period occurring thereafter. A fee for the amendment was paid 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 carrying amount of the outstanding borrowings under the Credit Agreement approximates fair value because

interest rates approximate the current rates available to the Company. 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 March 29, 2025.

The following table summarizes the Company’s borrowings under the credit facility ($ in thousands):

	March 29,<br><br>2025	December 28,<br><br>2024
Outstanding borrowings	$557,700	$546,600
Outstanding letters of credit	$6,847	$7,147
Additional borrowing capacity	$110,453	$123,753
Weighted-average interest rate	7.9%	7.6%

6. 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, the retail store leases generally provide for an initial lease term of five to ten years. The Company’s office and

manufacturing leases provide for an initial lease term of up to fifteen years. In addition, the Company’s 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.

8	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

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SLEEP NUMBER CORPORATION

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

The Company’s lease agreements do not contain any material residual value guarantees. The Company also leases

vehicles and certain equipment under operating leases with an initial lease term of three to six years.

The Company’s operating lease costs include facility, vehicle and equipment lease costs, but exclude variable lease

costs. Operating lease costs are recognized on a straight-line basis over the lease term, after consideration of rent

escalations and rent holidays. The lease term for purposes of the calculation begins on the earlier of the lease

commencement date or the date the Company takes possession of the property. During lease renewal negotiations that

extend beyond the original lease term, the Company estimates straight-line rent expense based on current market

conditions. Variable lease costs are recorded when it is probable the cost has been incurred and the amount can be

reasonably estimated. Future payments for real estate taxes and certain building operating expenses for which the

Company is obligated are not included in operating lease costs.

At March 29, 2025, the Company’s finance right-of-use assets and lease liabilities were not significant.

Lease costs were as follows (in thousands):

	Three Months Ended
	March 29,<br><br>2025	March 30,<br><br>2024
Operating lease costs(1)	$26,537	$26,826
Variable lease costs(2)	$103	$(49)

___________________________

(1)Includes short-term lease costs which are not significant.

(2)Variable lease costs include adjustments to percentage rent.

The maturities of operating lease liabilities for subsequent years are as follows(1) (in thousands):

2025 (excluding the three months ended March 29, 2025)	$79,025
2026	96,149
2027	79,655
2028	66,229
2029	45,658
2030	31,636
Thereafter	47,078
Total operating lease payments(2)	445,430
Less: Interest	68,521
Present value of operating lease liabilities	$376,909

___________________________

(1)Total operating lease payments exclude $13 million of legally binding minimum lease payments for leases signed but not yet commenced.

(2)Includes the current portion of $83 million for operating lease liabilities.

Other information related to operating leases was as follows:

	March 29,<br><br>2025	December 28,<br><br>2024
Weighted-average remaining lease term (in years)	5.3	5.4
Weighted-average discount rate	6.6%	6.6%			Three Months Ended
---	---	---
(in thousands)	March 29,<br><br>2025	March 30,<br><br>2024
Cash paid for amounts included in present value of operating lease liabilities	$26,589	$27,222
Right-of-use assets obtained in exchange for operating lease liabilities	$7,711	$12,990
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SLEEP NUMBER CORPORATION

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

7. Repurchases of Common Stock

For both the three months ended March 29, 2025 and March 30, 2024, we repurchased $0.6 million of common stock in

connection with the vesting of restricted stock grants. We made no purchases under the Board-approved stock purchase

plan in either period. As of March 29, 2025, the remaining authorization under the Board-approved $600 million share

repurchase program was $348 million.

8. Revenue Recognition

Deferred contract assets and deferred contract liabilities are included in the condensed consolidated balance sheets as

follows (in thousands):

	March 29,<br><br>2025	December 28,<br><br>2024
Deferred contract assets included in:
Other current assets	$29,755	$30,154
Other non-current assets	47,600	48,988
	$77,355	$79,142			March 29,<br><br>2025	December 28,<br><br>2024
---	---	---
Deferred contract liabilities included in:
Other current liabilities	$37,910	$38,129
Other non-current liabilities	59,762	60,988
	$97,672	$99,117

Deferred revenue and costs related to SleepIQ® technology are currently recognized on a straight-line basis over the

product's estimated life of 4.5 to 5.0 years because the Company’s inputs are generally expended evenly throughout the

performance period. During both the three months ended March 29, 2025 and March 30, 2024, the Company

recognized revenue of $10 million, that was included in the deferred contract liability balances at the beginning of the

respective periods.

Revenue from goods and services transferred to customers at a point in time accounted for approximately 97% and 98%

of revenues for the three months ended March 29, 2025 and March 30, 2024, respectively.

Net sales were as follows (in thousands):

	Three Months Ended
	March 29,<br><br>2025	March 30,<br><br>2024
Retail stores	$344,442	$414,755
Online, phone, chat and other	48,819	55,694
Total Company	$393,261	$470,449
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SLEEP NUMBER CORPORATION

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

Obligation for Sales Returns

The activity in the sales returns liability account was as follows (in thousands):

	Three Months Ended
	March 29,<br><br>2025	March 30,<br><br>2024
Balance at beginning of year	$19,092	$22,402
Additions that reduce net sales	18,787	25,470
Deductions from reserves	(21,102)	(25,457)
Balance at end of period	$16,777	$22,415

9. Stock-Based Compensation Expense

Total stock-based compensation expense was as follows (in thousands):

	Three Months Ended
	March 29,<br><br>2025	March 30,<br><br>2024
Stock awards (1)	2,933	$3,144
Stock options	1,018	973
Total stock-based compensation expense (1)	3,951	4,117
Income tax benefit	873	910
Total stock-based compensation expense, net of tax	$3,078	$3,207

___________________________

(1) Changes in stock-based compensation expense include the cumulative impact of the change in the expected achievements of certain performance

targets.

10. Profit Sharing and 401(k) Plan

Under the Company’s profit sharing and 401(k) plan, eligible employees may defer up to 50% of their compensation on a

pre-tax basis, subject to Internal Revenue Service limitations. Each pay period, the Company makes a contribution equal

to a percentage of the employee’s contribution. During the three months ended March 29, 2025 and March 30, 2024,

the Company’s contributions, net of forfeitures, were $1.8 million and $2.0 million, respectively.

11. Net Loss per Common Share

The components of basic and diluted net loss per share were as follows (in thousands, except per share amounts):

	Three Months Ended
	March 29,<br><br>2025	March 30,<br><br>2024
Net loss	$(8,646)	$(7,482)
Reconciliation of weighted-average shares outstanding:
Basic weighted-average shares outstanding	22,706	22,506
Dilutive effect of stock-based awards	—	—
Diluted weighted-average shares outstanding	22,706	22,506
Net loss per share – basic	$(0.38)	$(0.33)
Net loss per share – diluted	$(0.38)	$(0.33)
11	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION
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SLEEP NUMBER CORPORATION

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

Additional potential dilutive stock-based awards totaling 1.9 million and 1.3 million for the three months ended

March 29, 2025 and March 30, 2024, respectively, have been excluded from the diluted net loss per share calculations

because these stock-based awards were anti-dilutive. For the three months ended March 29, 2025 and March 30, 2024,

otherwise dilutive stock-based awards have been excluded from the calculation of diluted weighted-average shares

outstanding, as their inclusion would have had an anti-dilutive effect on our net loss per diluted share.

12. Restructuring Costs

In the fourth quarter of 2023, the Company initiated cost reduction actions to reduce operating expenses and accelerate

gross margin initiatives, and recognized $33.8 million of restructuring costs through December 28, 2024. The Company

has incurred an additional $0.1 million of restructuring costs during the three months ended March 29, 2025. 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 condensed consolidated statement of operations. The Company expects an additional $10 million to

$15 million of restructuring costs to be incurred through the remainder of 2025, primarily due to severance and

employee-related benefits, contract termination costs, and asset impairment charges.

The following table provides a summary of the Company’s restructuring costs during the three months ended March 29,

2025 and March 30, 2024 (in thousands):

	Three Months Ended
	March 29,<br><br>2025	March 30,<br><br>2024
Cash restructuring costs:
Contract termination costs (1)	$(114)	$4,413
Severance and employee-related benefits	157	841
Professional fees and other	17	2,846
Total cash restructuring costs	60	8,100
Non-cash restructuring costs:
Asset impairments (2)	—	2,500
Total restructuring costs	$60	$10,600

____________________

(1) Primarily comprised of lease termination costs. Costs incurred during the three months ended March 29, 2025 were favorable to original estimates.

(2) Primarily comprised of impairments of property and equipment.

The following table provides the activity in the Company’s restructuring related liabilities, which are included within

accounts payable, compensation and benefits and other current liabilities on the condensed consolidated balance sheet

(in thousands):

	March 29,<br><br>2025	December 28,<br><br>2024
Balance at the beginning of year	$3,341	$8,720
Expenses	60	14,888
Cash payments	(2,914)	(20,267)
Balance at the end of the period	$487	$3,341
12	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION
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SLEEP NUMBER CORPORATION

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

Since the initiation of cost reduction actions in the fourth quarter of 2023, the Company has recognized a cumulative

$33.9 million of restructuring costs, as follows (in thousands):

	Cumulative
	March 29,<br><br>2025
Cash restructuring costs:
Contract termination costs (1)	$14,323
Severance and employee-related benefits	8,350
Professional fees and other	5,761
Total cash restructuring costs	28,434
Non-cash restructuring costs:
Asset impairments (2)	5,420
Total restructuring costs	$33,854

____________________

(1)Primarily comprised of lease termination costs.

(2) Includes impairments of both lease right-of-use assets and property and equipment.

13. Income Taxes

Income tax benefit totaled $0.6 million for the three months ended March 29, 2025, compared with income tax expense

of $0.7 million for the same period one year ago. The change in income tax expense was primarily due to the change in

discrete tax expense, driven by stock-based compensation tax shortfalls, which were $1.0 million for the three months

ended March 29, 2025, compared to $2.2 million for the same period one year ago.

14. 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 consolidated earnings and losses, as reported on the Company’s condensed

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 condensed 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.

13	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

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SLEEP NUMBER CORPORATION

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

The following is a summary of the significant expense categories and consolidated net loss details provided to the

CODM (in thousands):

	Three Months Ended
	March 29,<br><br>2025	March 30,<br><br>2024
Net Sales	$393,261	$470,449
Less:
Cost of sales	(152,726)	(194,275)
Marketing expenses	(97,940)	(109,031)
Selling expenses	(91,163)	(99,481)
General and administrative	(38,619)	(39,079)
Research and development	(10,903)	(12,441)
Restructuring costs	(60)	(10,600)
Interest expense	(11,081)	(12,299)
Income tax benefit (expense)	585	(725)
Net loss	$(8,646)	$(7,482)

15. Commitments and Contingencies

Warranty Liabilities

The activity in the accrued warranty liabilities account was as follows (in thousands):

	Three Months Ended
	March 29,<br><br>2025	March 30,<br><br>2024
Balance at beginning of period	$6,947	$8,503
Additions charged to costs and expenses for current-year sales	3,131	4,551
Deductions from reserves	(3,162)	(4,535)
Changes in liability for pre-existing warranties during the current year, including<br><br>expirations	(405)	231
Balance at end of period	$6,511	$8,750

Legal Proceedings

The Company is involved from time to time in various legal proceedings arising in the ordinary course of its business,

including primarily commercial, product liability, employment and intellectual property claims. In accordance with U.S.

GAAP, the Company records a liability in its consolidated financial statements with respect to any of these matters when

it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated. If a

material loss is reasonably possible but not known or probable, and may be reasonably estimated, the estimated loss or

range of loss is disclosed. With respect to currently pending legal proceedings, the Company has not established an

estimated range of reasonably possible material losses either because it believes that it has valid defenses to claims

asserted against it, the proceeding has not advanced to a stage of discovery that would enable it to establish an

estimate, or the potential loss is not material. The Company currently does not expect the outcome of pending legal

proceedings to have a material effect on its consolidated results of operations, financial position or cash flows. Litigation,

however, is inherently unpredictable, and it is possible that the ultimate outcome of one or more claims asserted against

the Company could adversely impact its consolidated results of operations, financial position or cash flows. The

Company expenses legal costs as incurred.

14	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

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SLEEP NUMBER CORPORATION

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 attorney’s fees. Sleep Number brought a motion to dismiss for failure to state a claim and

a motion to transfer or, alternatively, dismiss based on the first-to-file doctrine (citing the purported class action

complaint filed on September 27, 2024 as described below). The Court granted Sleep Number’s motion to transfer or,

alternatively, dismiss and dismissed the matter in its entirety based on the first-to-file doctrine.

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 attorney’s fees.

15	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide

a reader of the Company’s condensed 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 the

Company’s future results. MD&A is presented in seven sections:

•Forward-Looking Statements and Risk Factors

•Business Overview

•Results of Operations

•Liquidity and Capital Resources

•Non-GAAP Data Reconciliations

•Critical Accounting Policies

Forward-looking Statements and Risk Factors

The discussion in this Quarterly Report on Form 10-Q 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 its 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;

16	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

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•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;

•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 “Risk

Factors” in Part I, Item 1A. in the Company’s Annual Report on Form 10-K and in Part II. Item 1A. in subsequent

Quarterly Reports on Form 10-Q.

The Company has no obligation to publicly update or revise any of the forward-looking statements contained in this

Quarterly Report on Form 10-Q.

Business Overview

Sleep Number is a wellness 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 nearly 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 sleep wellness platform. The smart beds offer the Company’s

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

needs of each individual; “sense and do” technology uses the sensed data to automatically adjust the smart 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 millions of highly engaged Smart Sleepers who are loyal brand advocates, a

vertically integrated operating model and a culture of individuality, with an ambitious vision to become one of the

world’s most beloved brands.

The Company’s 3,600 mission-driven team members are dedicated to the Company’s mission of improving lives by

individualizing sleep experiences. They passionately innovate to drive value creation, including our exclusive direct-to-

consumer selling in nearly 640 stores and online, which meets customers whenever and wherever they choose to provide

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

to bring the power of 33 billion hours of longitudinal sleep data to sleep science and research.

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.

17	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

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Results of Operations

Quarterly and Year-to-Date Results

Quarterly and year-to-date operating results may fluctuate significantly as a result of a variety of factors, including

increases or decreases in sales, timing, amount and effectiveness of advertising expenditures, changes in sales return

rates or warranty experience, timing of investments in growth initiatives and infrastructure, timing of store openings/

closings and related expenses, changes in net sales resulting from changes in the Company’s store base, timing of new

product introductions and related expenses, timing of promotional offerings, competitive factors, changes in commodity

costs, disruptions in global supplies or third-party service providers, seasonality of retail and bedding industry sales,

consumer sentiment and general economic conditions. The extent to which these external factors will impact the

Company’s business and its consolidated financial results will depend on future developments, which are highly

uncertain and cannot be predicted. Therefore, the historical results of operations may not be indicative of the results that

may be achieved for any future period.

Highlights

Financial highlights for the three months ended March 29, 2025 were as follows:

•Net sales for the three months ended March 29, 2025 of $393 million decreased 16% from $470 million for the same

period one year ago driven by lower volume and reduced store count.

•The net sales change resulted from a 15% Total Retail comparable sales decrease. For additional details, see the

components of total net sales change on page 19.

•Average sales per store (sales for stores open at least one year, Total Retail, including online, phone and chat) on a

trailing twelve-month basis for the period ended March 29, 2025 totaled $2.5 million, compared with $2.8 million for

the same period one year ago.

•Operating income for the three months ended March 29, 2025 was $2 million, compared with $6 million for the

same period one year ago. The $4 million decrease in operating income was driven by the lower net sales; partially

offset by a $32 million reduction in operating expenses and a 2.5 ppt. increase in the gross profit rate.

•Adjusted EBITDA for the three months ended March 29, 2025 was $22 million, compared to $37 million for the same

period one year ago as ongoing gross margin improvements and cost reduction actions partially offset the year-

over-year net sales decline.

•Gross profit rate of 61.2% was 2.5 ppt. higher than the prior-year period. The increase was primarily due to year-

over-year product cost reductions through value engineering and ongoing supplier negotiations and favorable

product mix. See the gross profit discussion on page 20 for additional details.

•The $32 million year-over-year reduction in the Company’s operating expenses was due to lower sales and

marketing expenses and restructuring costs.

•Net loss for the three months ended March 29, 2025 was $9 million, compared with $7 million for the same period

one year ago. Net loss per diluted share was $0.38, compared with $0.33 for the same period one year ago.

•The Company’s adjusted return on invested capital (Adjusted ROIC) was 7.2% on a trailing twelve-month basis for

the period ended March 29, 2025, compared with 4.5% for the comparable period one year ago.

•The Company used $3 million in cash from operating activities for the three months ended March 29, 2025,

compared with providing $34 million for the same period one year ago.

•Free cash flow used $7 million for the three months ended March 29, 2025, compared with providing $24 million for

the same period one year ago.

•As of March 29, 2025, the Company had $558 million of borrowings under its revolving credit facility.

18	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

Table of Contents

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.

	Three Months Ended
	March 29,2025	March 30,2024
Net sales	393.3	470.4
Cost of sales	152.7	194.3
Gross profit	240.5	276.2
Operating expenses:
Sales and marketing	189.1	208.5
General and administrative	38.6	39.1
Research and development	10.9	12.4
Restructuring costs	0.1	10.6
Total operating expenses	238.7	270.6
Operating income	1.9	5.5
Interest expense, net	11.1	12.3
Loss before income taxes	(9.2)	(6.8)
Income tax (benefit) expense	(0.6)	0.7
Net loss	(8.6)	(7.5)
Net loss per share:
Basic	(0.38)	(0.33)
Diluted	(0.38)	(0.33)
Weighted-average number of common shares:
Basic	22.7	22.5
Diluted	22.7	22.5

All values are in US Dollars.

The percentage of total net sales, by dollar volume, was as follows:

	Three Months Ended
	March 29,<br><br>2025	March 30,<br><br>2024
Retail stores	87.6%	88.2%
Online, phone, chat and other	12.4%	11.8%
Total Company	100.0%	100.0%
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The components of total net sales change, including comparable net sales changes, were as follows:

	Three Months Ended
	March 29,<br><br>2025	March 30,<br><br>2024
Sales change rates:
Retail comparable-store sales (1)	(15%)	(10%)
Online, phone and chat	(12%)	(19%)
Total Retail comparable sales change (1)	(15%)	(11%)
Net opened/closed stores and other	(1%)	0%
Total Company	(16%)	(11%)

___________________________

(1)Stores are included in the comparable-store calculations 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.

Other sales metrics were as follows:

	Three Months Ended
	March 29,<br><br>2025	March 30,<br><br>2024
Average sales per store (1) (in thousands)	$2,495	$2,786
Average sales per square foot (1)	$807	$903
Stores > $2 million in net sales (2)	51%	63%
Stores > $3 million in net sales (2)	15%	23%
Average revenue per smart bed unit – Total Retail (3)	$5,992	$5,765

___________________________

(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:

	Three Months Ended
	March 29,<br><br>2025	March 30,<br><br>2024
Beginning of period	640	672
Opened	2	6
Closed	(5)	(17)
End of period	637	661
20	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION
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Comparison of Three Months Ended March 29, 2025 with Three Months Ended March 30, 2024

Net sales

Net sales for the three months ended March 29, 2025 of $393 million decreased 16% from $470 million for the same

period one year ago  driven by lower volume and reduced store count. The net sales change consisted primarily of a

15% Total Retail comparable sales decrease.

The $77 million net sales decrease compared with the same period one year ago was comprised of the following: (i) a

$60 million decrease in Retail comparable net sales; (ii) a $7 million decrease from online, phone and chat; and (iii) a $10

million decrease from net store closings and other. Total Retail smart bed unit sales decreased 19% compared with the

prior year. Total Retail average revenue per smart bed unit increased by 4% to $5,992, compared with $5,765 in the

prior-year period.

Gross profit

Gross profit of $241 million for the three months ended March 29, 2025 decreased by $36 million, or 13%, compared

with $276 million for the same period one year ago. The gross profit rate increased to 61.2% of net sales for the three

months ended March 29, 2025, compared with 58.7% for the prior-year comparable period.

The current-year gross profit rate increase of 2.5 ppt. was mainly due to: (i) year-over-year product cost reductions

through value engineering and ongoing supplier negotiations, increased the rate by 250 ppt; (ii) a favorable product mix,

increased the rate by 30 ppt; (iii) and efficiency gains in our home delivery and logistics operations, increased the rate by

30 ppt; partially offset by (iv) lower delivered smart bed volume deleveraged the rate by 90 ppt. In addition, the gross

profit rate may fluctuate from quarter to quarter due to a variety of other factors, including changes in warranty

expenses, return and exchange costs, manufacturing and supply chain operations and performance-based incentive

compensation.

Sales and marketing expenses

Sales and marketing expenses for the three months ended March 29, 2025 were $189 million, or 48.1% of net sales,

compared with $209 million, or 44.3% of net sales, for the same period one year ago. The current-year sales and

marketing expenses rate increase of 3.8 ppt. was primarily due to the deleveraging impact of an 16% net sales decline,

partially offset by a 9% decrease in sales and marketing expenses including a 9% lower media spend.

General and administrative expenses

General and administrative (G&A) expenses totaled $39 million for both the three months ended March 29, 2025 and

March 30, 2024 which was 9.8% and 8.3% of net sales, respectively. The changes in G&A expenses consisted mainly of:

(i) a $1.4 million year-over-year decrease in company-wide, performance-based incentive compensation and (ii) a $0.9

million decrease in depreciation and amortization; offset by (iii) a $1.6 million increase in professional and consulting fees

primarily related to proxy contest and CEO search costs that occurred during the three months ended March 29, 2025;

and (iv) a $0.3 million increase in employee compensation. The G&A expenses rate increased by 1.5 ppt. in the current-

year period, compared with the same period one year ago due to the items discussed above offset by the deleveraging

impact of lower net sales.

Research and development expenses

Research and development (R&D) expenses totaled $11 million for the three months ended March 29, 2025, compared

with $12 million with the same period one year ago. The changes in R&D expenses were primarily due to lower

headcount and outside services. Moving forward, the Company’s innovation agenda will focus on maintaining and

improving the Company’s core technologies and introducing additional advancements, while driving costs out of the

product.

Interest expense, net

Interest expense, net totaled $11 million for the three months ended March 29, 2025, compared with $12 million for the

same period one year ago. The $1 million decrease was mainly driven by a lower weighted-average interest rate

compared with the same period one year ago.

21	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

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Restructuring Costs

Restructuring costs for the three months ended March 29, 2025 were $0.1 million, compared with $11 million for the

same period one year ago. In the fourth quarter of 2023, the Company initiated business restructuring activities. 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 condensed consolidated statement of operations. The Company expects an additional $10 million to

$15 million of restructuring costs to be incurred through the remainder of 2025, primarily due to severance and

employee-related benefits, contract termination costs, and asset impairment charges. See Note 12, Restructuring Costs,

of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Information, of this

Quarterly Report on Form 10-Q for further information on restructuring costs.

Income tax (benefit) expense

Income tax benefit totaled $0.6 million for the three months ended March 29, 2025, compared with income tax expense

of $0.7 million for the same period one year ago. The change in income tax expense was primarily due to the change in

discrete tax expense, driven by stock-based compensation tax shortfalls, which were $1.0 million for the three months

ended March 29, 2025, compared to $2.2 million for the same period one year ago.

Liquidity and Capital Resources

Managing liquidity and capital resources is an important part of the Company’s 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

$675 million revolving credit facility, as amended. As of March 29, 2025, the Company does 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 the 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 stores for the foreseeable future.

Cash and cash equivalents totaled $1.7 million and $2.0 million at March 29, 2025 and December 28, 2024, respectively.

Significant changes in cash and cash equivalents during the three months ended March 29, 2025 primarily consisted of

$3 million of cash used in operating activities, $5 million of cash used to purchase property and equipment, a $9 million

increase in short-term borrowings, offset by $2 million used for debt issuance costs.

The following table summarizes cash flows (in millions). Amounts may not add due to rounding differences:

	Three Months Ended
	March 29,<br><br>2025	March 30,<br><br>2024
Total cash (used in) provided by:
Operating activities	$(2.6)	$33.7
Investing activities	(4.6)	(12.3)
Financing activities	7.0	(22.0)
Net decrease in cash and cash equivalents	$(0.3)	$(0.5)

Net cash used in operating activities for the three months ended March 29, 2025 was $3 million, compared with net cash

provided by operating activities of $34 million for the three months ended March 30, 2024. Significant components of

the year-over-year change in cash provided by operating activities included: (i) a $15 million fluctuation in inventory as

last year benefited from reduction in inventory levels driven by operational improvements; (ii) a $10 million fluctuation in

the amount of compensation and benefits accrued and timing of the related payments resulting from year-over-year

changes in Company-wide performance-based incentive compensation; and (iii) a $8 million fluctuation in customer

prepayments; (iv) partially offset by a $12 million fluctuation in accounts payable.

Net cash used in investing activities for the three months ended March 29, 2025 was $5 million, compared with

$12 million for the three months ended March 30, 2024. Cash used to purchase property and equipment was $5 million

22	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

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for the three months ended March 29, 2025, compared with $9 million for the same period one year ago. In addition, the

Company issued $3 million of notes receivable during the three months ended March 30, 2024.

Net cash provided by financing activities was $7 million for the three months ended March 29, 2025, compared with net

cash used in financing activities of $22 million for the same period one year ago. Short-term borrowings increased by

$9 million during the current-year period due to an $11 million increase in borrowings under the revolving credit facility

to $558 million and a $2 million decrease in book overdrafts, which are included in the net change in short-term

borrowings. During the three months ended March 29, 2025, the Company used $2 million of cash for debt issuance

costs related to the credit facility amendment during the three months ended March 29, 2025. During both the three

months ended March 29, 2025 and March 30, 2024, the Company repurchased $1 million of its stock in connection with

the vesting of employee restricted stock awards.

In the second quarter of fiscal 2022, the Company suspended share repurchases under its Board-approved share

repurchase program. At March 29, 2025, there was $348 million remaining authorization under the Board-approved

$600 million share repurchase program. There is no expiration date governing the period over which the Company can

repurchase shares. The Company made no share repurchases under its Board-approved share repurchase program in

either period.

At March 29, 2025, the Company had $558 million of borrowings under its revolving credit facility, $7 million in

outstanding letters of credit and net liquidity available under the credit facility of $110 million. Total availability under its

revolving credit facility was $675 million, which amortizes by $2.5 million per quarter through December 2026. At

March 29, 2025, the Company’s leverage ratio as defined in the credit agreement was

4.5

x versus the permissible net

leverage ratio of

4.75

x, the weighted-average interest rate on borrowings under the credit facility was

7.9%

and the

Company was in compliance with all financial covenants.

23	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

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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 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.

Adjusted EBITDA calculations are as follows (in thousands):

	Three Months Ended		Trailing-Twelve<br><br>Months Ended
	March 29,<br><br>2025	March 30,<br><br>2024	March 29,<br><br>2025	March 30,<br><br>2024
Net loss	$(8,646)	$(7,482)	$(21,498)	$(34,234)
Income tax (benefit) expense	(585)	725	(6,472)	(9,107)
Interest expense	11,081	12,299	47,150	45,892
Depreciation and amortization	14,406	17,145	62,240	71,633
Stock-based compensation	3,951	4,117	11,278	14,333
Restructuring costs (1)	60	10,600	7,526	26,328
CEO transition/Proxy contest costs (2)	1,774	—	2,772	—
Asset impairments	—	—	1,220	660
Adjusted EBITDA	$22,041	$37,404	$104,216	$115,505

_____________________

(1) Represents costs related to business restructuring actions initiated in the fourth quarter of fiscal 2023.

(2) Represents costs related to CEO transition activities and proxy contest costs of $0.6 million and $1.2 million, respectively, for the three months

ended March 29, 2025 and $0.8 million and $2.0 million, respectively, for the trailing twelve months ended March 29, 2025. These costs 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 operating activities,” or GAAP financial data. However, the Company is providing

this information as it believes it facilitates analysis for investors and financial analysts.

The following table summarizes free cash flow calculations (in thousands):

	Three Months Ended		Trailing-Twelve<br><br>Months Ended
	March 29,<br><br>2025	March 30,<br><br>2024	March 29,<br><br>2025	March 30,<br><br>2024
Net cash (used in) provided by operating<br><br>activities	$(2,626)	$33,745	$(9,228)	$6,136
Subtract: Purchases of property and<br><br>equipment	4,599	9,308	18,796	50,808
Free cash flow	$(7,225)	$24,437	$(28,024)	$(44,672)
24	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION
---	---

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Non-GAAP Data Reconciliations (continued)

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):

	Trailing-Twelve Months Ended
	March 29,<br><br>2025	March 30,<br><br>2024
Adjusted net operating profit after taxes (Adjusted NOPAT)
Operating income	$19,180	$2,550
Add: Operating lease expense (1)	26,098	27,882
Less: Income taxes (2)	(10,022)	(7,479)
Adjusted NOPAT	$35,256	$22,953
Average adjusted invested capital
Total deficit	$(456,844)	$(445,863)
Add: Long-term debt (3)	557,921	523,800
Add: Operating lease obligations (4)	376,909	424,746
Total adjusted invested capital at end of period	$477,986	$502,683
Average adjusted invested capital (5)	$487,361	$505,498
Adjusted return on invested capital (Adjusted ROIC) (6)	7.2%	4.5%

___________________________

(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 22.1% and 24.6% for March 29, 2025 and March 30, 2024, 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.

GAAP - generally accepted accounting principles in the U.S.

Critical Accounting Policies

The Company discusses its critical accounting policies and estimates in Management’s Discussion and Analysis of

Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the fiscal year ended

December 28, 2024. There were no significant changes in the Company’s critical accounting policies since the end of

fiscal 2024.

25	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to changes in market-based short-term interest rates that will impact net interest expense. If

overall interest rates were one percentage point higher than current rates, annual net income would decrease by

$4.3 million based on the $558 million of borrowings under the credit facility at March 29, 2025. The Company does not

manage the interest-rate volatility risk of borrowings under the credit facility through the use of derivative instruments.

ITEM 4. 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 principal executive officer and principal 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 quarterly 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 quarterly report.

Changes in Internal Control

There were no changes in the Company’s internal control over financial reporting during the fiscal quarter ended

March 29, 2025, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control

over financial reporting.

26	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

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PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company’s legal proceedings are discussed in Note 15 – Commitments and Contingencies, Legal Proceedings, of

the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, Notes to Condensed

Consolidated Financial Statements, of this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

The Company’s business, financial condition and operating results are subject to a number of risks and uncertainties,

including both those that are specific to the Company’s business and others that affect all businesses operating in a

global environment. Investors should carefully consider the information in this report under the heading, Management’s

Discussion and Analysis of Financial Condition and Results of Operations, and also the information under the heading,

Risk Factors, in the Company’s most recent Annual Report on Form 10-K and in subsequent Quarterly Reports on

Form 10-Q. The risk factors discussed in the Annual Report on Form 10-K and in subsequent Quarterly Reports on Form

10-Q including this Quarterly Report on Form 10-Q do not identify all risks that the Company faces because its business

operations could also be affected by additional risk factors that are not presently known to the Company or that it

currently considers to be immaterial to its operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS, AND ISSUER PURCHASES OF

EQUITY SECURITIES

(a) – (b) Not applicable.

(c) Issuer Purchases of Equity Securities

Period	Total<br><br>Number<br><br>of Shares<br><br>Purchased(1)(2)	Average<br><br>Price<br><br>Paid per<br><br>Share	Total Number<br><br>of<br><br>Shares<br><br>Purchased<br><br>as Part of<br><br>Publicly<br><br>Announced<br><br>Plans<br><br>or Programs(1)	Approximate<br><br>Dollar Value of<br><br>Shares that May<br><br>Yet Be Purchased<br><br>Under the Plans<br><br>or Programs(3)
December 29, 2024 through January 25, 2025	627	$15.83	—	$348,071,000
January 26, 2025 through February 22, 2025	1,439	$17.99	—	$348,071,000
February 23, 2025 through March 29, 2025	71,719	$7.35	—	$348,071,000
Total	73,785	$7.63	—	$348,071,000

___________________________

(1)The Company did not purchase any shares under its Board-approved $600 million share repurchase program (effective April 4, 2021), during the

three months ended March 29, 2025.

(2)In connection with the vesting of employee restricted stock grants, the Company repurchased 73,785 shares of its common stock at a cost of

$0.6 million during the three months ended March 29, 2025.

(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.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

27	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

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ITEM 5. OTHER INFORMATION

Rule 10b5-1 Trading Plan and Non-rule 10b5-1 Trading Arrangement Adoptions, Modifications and Terminations

During the quarter ended March 29, 2025, 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.

28	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

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ITEM 6. EXHIBITS

Exhibit<br><br>Number	Description
10.1†	Amendment dated March 31, 2025 to the Offer Letter dated March 3, 2025 from Sleep Number<br><br>Corporation to Linda Findley (incorporated by reference to Exhibit 10.1 contained in Sleep Number’s<br><br>Current Report on Form 8-K filed on March 31, 2025 (File No. 000-25121))
10.2†	Form of Restricted Stock Unit with Modifier Award Agreement (Inducement RSU w/ Modifier)<br><br>(incorporated by reference to Exhibit 99.1 contained in Sleep Number’s Registration Statement on<br><br>Form S-8 filed on April 15, 2025 (File No. 000-25121))
10.3†	Form of Performance Stock Unit Award Agreement (Inducement PSUs)  (incorporated by reference to<br><br>Exhibit 99.2 contained in Sleep Number’s Registration Statement on Form S-8 filed on April 15, 2025<br><br>(File No. 000-25121))
10.4†	Form of Restricted Stock Unit Award Agreement (Inducement RSUs) (incorporated by reference to<br><br>Exhibit 99.3 contained in Sleep Number’s Registration Statement on Form S-8 filed on April 15, 2025<br><br>(File No. 000-25121))
10.5†*	Sleep Number Annual Incentive Plan (AIP) effective December 29, 2024
10.6†*	Form of Performance Adjusted Restricted Stock Unit Award Agreement (Executive Team) under the<br><br>Sleep Number Corporation 2020 Equity Incentive Plan
10.7	Agreement, dated March 13, 2025, between Sleep Number Corporation and Stadium Capital<br><br>Management, LLC (incorporate by reference to Exhibit 10.1 contained in Sleep Number’s Current<br><br>Report on Form 8-K filed on March 13, 2025 (File No. 000-25121))
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<br><br>1350
32.2*	Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section<br><br>1350
101.INS*	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File<br><br>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)

*Filed Herein.

†        Management contract or compensatory plan or arrangement.

29	1Q 2025 FORM 10-Q	SLEEP NUMBER CORPORATION

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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be

signed on its behalf by the undersigned thereunto duly authorized.

		SLEEP NUMBER CORPORATION
		(Registrant)
Dated:	May 6, 2025	By:	/s/ Linda Findley
			Linda Findley
			Chief Executive Officer
			(principal executive officer)
		By:	/s/ Joel J. Laing
			Joel J. Laing
			Chief Accounting Officer
			(principal accounting officer)

Document

Exhibit 10.5

Sleep Number Annual Incentive Plan (AIP)

Effective December 29, 2024-January 3, 2026

Introduction

The Annual Incentive Plan (the “AIP” or the “Plan”) is a variable compensation program that rewards eligible team members (“Participants”) with an incentive opportunity tied to Sleep Number Corporation (“Company” or “Sleep Number”) results. The AIP opportunity is part of Sleep Number’s overall total rewards program, which is designed to be competitive, comprehensive, flexible, and performance based.

This Plan document outlines the terms and conditions for the AIP effective December 29, 2024, and as approved by the Management Development and Compensation Committee of the Sleep Number Board of Directors (the “Committee”). The Company retains the discretion to modify, amend or change the terms of the AIP at any time, and will determine and approve the incentive payouts earned by eligible team members in connection with Company performance.

Eligible Team Members

Full-time and part-time team members (excluding temporary team members and interns) who work in areas of the business the Company has designated are eligible for this Plan. Team members are eligible for this Plan if AIP is shown in Workday (under the “Compensation” heading) as their incentive plan. Team members will also be able to see current Target Incentive Opportunity (as a percent of Eligible Earnings) in Workday. Team members who do not have AIP listed as their incentive plan in Workday, are not eligible for this Plan. Please read this document for more information on Plan rules regarding eligibility for incentive payments under the Plan.

Newly hired, AIP eligible Participants, become eligible for participation in AIP on the first day of employment with the Company.

The AIP is a variable compensation program tied to Company performance as measured by adjusted EBITDA, which is earnings before interest, taxes, depreciation, and amortization, adjusted for certain one-time expenses (as detailed in quarterly and annual financial filings). EBITDA is a good indicator of the Company’s financial performance and our ability to generate cash flow from operating activities, an important source of shareholder value creation.

The Annual Incentive Payments under the Plan are based on the components listed below.

Your Eligible Earnings	x	Target Incentive Opportunity Percent<br><br>(a percent of Eligible Earnings)	x	Percent of Target Payout<br><br>(earned for adjusted EBITDA performance vs. goals)	=	Annual Incentive Earned for the Fiscal Year
Your Eligible Earnings (as defined under the Plan – see the next page) for the fiscal year.		Your Target Incentive Opportunity (percent of Eligible Earnings, as listed in your profile information in Workday).		The payout as a percent of target earned for Company EBITDA performance vs. goals (can be up to 200% of target).

Percent of Target Payout Determination – Adjusted EBITDA Performance

Each year a threshold, target and maximum adjusted EBITDA performance is set and aligned to % of Target Payout opportunities under the plan.

•Threshold – this is the minimum adjusted EBITDA performance that will result in a payout under the plan. For 2025, meeting this threshold performance will result in a payment of 25% of the target incentive opportunity. Adjusted EBITDA performance below this level will result in no payment under the plan.

•Target – this represents the adjusted EBITDA target set in our Annual Operating Plan (AOP). Performance at this level will result in 100% of the target incentive opportunity.

•Maximum – this represents stretch adjusted EBITDA performance that will result in 200% of the target incentive opportunity.

•Final payout percent of target will be interpolated between the points noted below.

	Threshold	Target (@AOP)	Maximum
% of Adj Target Payout	25%	100%	200%
% of AOP Adj EBITDA Achieved	80%	100%	130%

First Half Progress Payment

The AIP includes an opportunity to receive a progress payment if the Company achieves or exceeds EBITDA goals for the first half of the fiscal year (excluding CEO and Executive Team). The progress payment is equal to 50% of the AIP Target Incentive Opportunity for the first half of the year (based on Eligible Earnings received in the first half of the year). If the progress payment is earned and paid out, it is subtracted from the annual payout earned and paid out following the end of the fiscal year. By having this opportunity for a progress payment in our AIP, it reinforces the importance of starting out the year with strong first half performance.

Annual Incentive Earned	Minus	First Half Progress Payment<br><br>(July 2025)	=	Annual Incentive Payment<br><br>(Q1 2026)
Earned for the entire fiscal year based on your Eligible Earnings, Target Incentive, and Company performance		Equals 50% of Target Incentive Opportunity for the first half of the year<br><br>Typically paid by the end of July of the fiscal year		Annual incentive earned for the fiscal year minus the first half progress payment (if any)<br><br>Paid no later than March 15 following the end of the fiscal year

The following is an example of a team member who earned $60,000 and had a 5% target incentive. In this example, the First Half Progress Payment was paid out and it was subtracted from the Annual Incentive Payment earned for the year as calculated following the end of the fiscal year end (example assumes that a 110% of target payout was earned for the year).

EXAMPLE					EXAMPLE
FIRST HALF PROGRESS PAYMENT					FIRST HALF PROGRESS PAYMENT
Eligible Earnings Received	30,000				Eligible Earnings Received	60,000
Target Incentive (% of earnings)		%			Target Incentive (% of earnings)		%
Target Incentive ( amount)	1,500				Target Incentive ( amount)	3,000
First- Half Amount Paid Out	750
					Adjusted EBITDA % of Target Payout		%
The First Half Progress Payment is equal to 50% of the Target Incentive Opportunity for the first half of the year (in this example 50% x 1,500 = 750					Annual Incentive Earned	3,300
	Less First Half Progress Payment		$	-750
	Final Annual Amount Paid Out		$	2,550
					The Annual Incentive Payment is earned with full year performance. In this example, the payout earned based on Adjusted EBITDA performance was 110% of target payout, resulting in an annual incentive for the full year of 3,300 (3,000 x 110% = 3,300). Subtractive the First Half Progress Payment of 750, the final full year amount paid would be 2,550.

All values are in US Dollars.

Eligible Earnings

Generally, for purposes of this Plan, “Eligible Earnings” means the total base pay earnings (including both straight time and overtime) paid to Participants by Sleep Number during the fiscal year, while a participant in this plan, and before any payroll deductions or tax withholdings. This includes base pay earnings paid for paid time off (including vacation and sick time) and holiday pay. Other payments received from the Company or its team member benefit plans are not considered Eligible Earnings under this Plan (except as required by law) including, but not limited to, expense reimbursement payments and team member discounts.

Target Annual Incentive

The Plan’s Target Incentive Opportunity for Participants is established based on grade level. Participants can look up their Target Incentive Opportunity in Workday under the “Compensation” heading. Target Incentive Opportunity is expressed as a percent of Eligible Earnings and represents the Annual Incentive Payment if the Company achieves its annual performance goal for a 100% of target payout. If a Participant’s Target Incentive Opportunity changes during the fiscal year (e.g., due to promotion), the Target Incentive Opportunity will be a combination of old and new target incentive, prorating for the portion of the fiscal year that was worked at either the old or new target incentive level.

Payment Eligibility Requirements

Except for the special termination reasons described below and where prohibited by law, a Participant must be employed with the Company through the following dates to be eligible for an incentive payment under the Plan:

•For the First Half Progress Payment, the Participant must be employed as of the end of the last day of the second fiscal quarter.

•For the Annual Incentive Payment, the Participant must be employed as of the end of the last day of the fiscal year.

Subject to the Special Terminations section below, if a Participant terminates employment and is rehired by the Company during the fiscal year, the Participant’s AIP will only be based on Eligible Earnings paid to the Participant after the rehire date. Also, Participants who transfer during the year to a position that is AIP eligible, their Eligible Earnings for purposes of the AIP calculation will only be those earnings from the date of the transfer forward.

Payment Timing

The following is the typical timing for incentive payouts under the Plan, but this timing can vary at the Company’s discretion.

•For the First Half Progress Payment, it is generally made following the fiscal second quarter earnings release when first half financial results for the Company have been determined and disclosed.

•For the Annual Incentive Payment, it is generally made following the fiscal fourth quarter earnings release when the annual financial results for the Company have been determined and disclosed, no later than March 15, 2026.

Participants have no legal, contractual, or equitable right to receive any incentive payment under the Plan prior to the payment date determined by the Committee.

Special Termination of Employment Provisions

If a Participant dies during the fiscal year and prior to the Participant’s termination of

employment with the Company, the Participant’s estate will receive a prorated Annual Incentive Payment calculated by assuming a target payout of 100% and based on the Participant’s Target Incentive Opportunity and Eligible Earnings paid to the Participant during the fiscal year as of the date of death. Payment will be made as soon as administratively practical following the Participant’s death (and no later than March 15 of the following fiscal year). The amount of any First Half Progress Payment made to the Participant will be deducted from the prorated Annual Incentive Payment made to the Participant’s estate.

If a Participant becomes permanently disabled – meaning for purposes of this Plan that the Participant is entitled to disability income benefits under the Company’s long-term disability plan – the Participant may

receive a prorated Annual Incentive Payment calculated by assuming a target payout of 100% and based on the Participant’s Target Incentive Opportunity and Eligible Earnings paid to the Participant during the fiscal year up to the date Participant became disabled. Payment will be made within 90 days after the plan administrator of the Company’s long-term disability plan has determined the Participant is entitled to disability income benefits under the long-term disability plan (and no later than March 15 of the following fiscal year). The amount of the First Half Progress Payment made to the Participant (if any) will be deducted from the prorated Annual Incentive Payment.

If a Participant terminates employment during the fiscal year, is at least age fifty-five (55) and has completed at least five (5) years of continuous service with the Company prior to termination, the Participant may be eligible for a prorated Annual Incentive Payment (if one is made) based on the Participant’s Eligible Earnings paid to the Participant during the fiscal year through the date of termination, subject to the following exception. If a Participant is entitled to receive a prorated annual incentive payment under any other Sleep Number plan during the fiscal year, the Participant is not eligible to receive a prorated First Half Progress Payment or Annual Incentive Payment under the terms of this paragraph.  Participants will otherwise not be entitled to a prorated AIP, except where required by law. The prorated Annual Incentive Payment will be based on the Participant’s Target Incentive Opportunity and the actual percent of target payout earned for Company EBITDA performance vs. goals and will be paid to the Participant at the same time as other Plan Participants. If the date of termination occurs within the first half of the fiscal year, the Participant may be entitled to a prorated First Half Progress Payment, if one is made, on the same basis as all other Plan Participants. The amount of the First Half Progress Payment made to the Participant (if any) will be deducted from the Annual Incentive Payment.

Other Terms and Conditions

This Plan is subject to the terms and conditions as summarized in this Plan and in the Sleep Number Corporation 2020 Equity Incentive Plan. Sleep Number Corporation has the authority to take such actions as it deems necessary and advisable with respect to the execution and administration of this Plan including, without limitation, the full and exclusive discretionary power and authority to: (a) construe and interpret the terms of this Plan and the rights of any Participant or anyone claiming the right to be treated as a Plan Participant, (b) determine the amounts payable to any Plan Participant including, without limitation, the full power and authority to reduce or eliminate the amount payable to any Participant, (c) modify, amend or terminate this Plan or any rights of any Participant or other individual claiming a right under the Plan at any time and (d) delegate to one or more of its members or to one or more officers of the Company such authority, duties or powers with respect to the execution and administration of this Plan; provided, the Company may not take any action or exercise any discretion after the end of the Company’s fiscal year to reduce the unpaid amount of a Participant’s Annual Incentive Payment that was unconditionally earned as of the end of the Company’s fiscal year. All decisions of the Company with respect to any aspect of the Plan including, without limitation, the administration of the Plan, the interpretation or enforcement of any term or condition of the Plan or the determination of any amount payable to any Plan Participant (or anyone else claiming a right to payment under the Plan) shall be final, conclusive, and binding for all purposes.

Only Sleep Number team members are eligible for this Plan. Accordingly, an individual who is classified as an independent contractor, leased employee, or as any other status in which the individual is not classified as a common law employee of Sleep Number or the affiliate at the time services are performed is not an eligible team member under this Plan. No judicial or administrative reclassification or reclassification by Sleep Number or the affiliate will be applied to grant retroactive eligibility to any individual under this Plan.

Nothing contained in this Plan shall be construed as a contract with or guaranty to any Participant or other team member of continued employment with Sleep Number Corporation or any of its subsidiaries for any period of time, at any grade level or at any rate of compensation. All team members are team members “at will” whose employment is subject to termination at any time with or without cause. Nothing in this Plan will interfere with or limit in any way the right of Sleep Number Corporation or any subsidiary to terminate the employment or service of any team member at any time, nor confer upon any team member any right to continue in the employment or service of Sleep Number Corporation or any subsidiary. Any incentive compensation payable pursuant to this Plan will be subject to the terms and conditions of the Sleep Number Corporation Clawback and Forfeiture Policy, unless prohibited by law.

The Company may withhold and deduct from any amount payable hereunder to any participant all amounts the Company reasonably determines are required, including any amounts necessary to satisfy any and all foreign, federal, state and local withholding and employment-related tax requirements attributable to any amount payable hereunder where permitted by law.

The Plan participant agrees that the validity, construction, interpretation, administration and effect of the Plan and any rules, regulations and actions relating to the Plan will be governed by and construed exclusively in accordance with the laws of the State of Minnesota, notwithstanding the conflicts of laws principles of any jurisdiction and the Plan participant consents to the jurisdiction and venue of the federal and state courts located in the State of Minnesota. California team members may elect to void this provision, to the extent it is construed to violate Cal. Labor Code § 925.

The Plan as described in this document is effective December 29, 2024, and only applies to fiscal years of Sleep Number Corporation commencing on or after this date. Nothing contained in this document should be construed as an indication of the Plan being in effect or applying with respect to any other period.

Document

Exhibit 10.6

PERFORMANCE ADJUSTED RESTRICTED STOCK UNIT AWARD AGREEMENT

(Executive Team)

THIS AGREEMENT is entered into and effective as of __________, 20__ (the “Date of Grant”), by and between Sleep Number Corporation (the “Company”) and          (the “Grantee”).

Unless defined in this Agreement, capitalized terms used in this Agreement shall have the meanings established in the Sleep Number Corporation 2020 Equity Incentive Plan (the “Plan”).

The Company has adopted the Plan, which authorizes the grant of Restricted Stock Unit Awards to Employees, Non-Employee Directors, and Consultants. The Company desires to give the Grantee a proprietary interest in the Company and its Subsidiaries in recognition of the Grantee’s contributions and as an added incentive to advance the interests of the Company and its Subsidiaries by granting to the Grantee a Restricted Stock Unit Award pursuant to the Plan.

Accordingly, the parties agree as follows:

1.Grant of Award Units and Performance Adjustments.

1.1Grant of Award Units. The Company hereby grants to the Grantee a Restricted Stock Unit Award (the “Award”) consisting of __________ units (the “Award Units”) that will be settled in shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), subject to the terms, conditions, and restrictions set forth below and in the Plan. Reference in this Agreement to the Award Units or the Adjusted Award Units (as defined in Section 1.2 of this Agreement) will be deemed to include the Dividend Proceeds (as defined in Section 3.3 of this Agreement) with respect to such Award Units or Adjusted Award Units as provided in Section 3.3 of this Agreement.

1.2Performance Adjustments. The number of Award Units granted hereunder is subject to adjustment based on the Company’s level of achievement versus annual Net Sales goals and annual NOP goals for the 2025, 2026, and 2027 fiscal years (the “Performance Period”). (For purposes of this Agreement, “NOP” will be defined as Net Operating Income). The Net Sales growth goals and NOP growth goals will be equally weighted.

The annual Net Sales and NOP goals and the corresponding performance adjustment multiples are as follows:

		Payout Multiple		Net Sales			NOP
	Percent of AOP * achieved for 2025		Annual growth achieved for 2026 and 2027		Percent of AOP* achieved for 2025	Annual growth achieved for 2026 and 2027
Threshold		0.5X
Target		1.0X
Maximum		2.0X

* The Company’s Annual Operating Plan (AOP) as approved by the Board of Directors for 2025.

The calculation of the “Adjusted Award Units” based on performance versus these annual goals will be determined as follows:

(a)The Company’s actual percent achievement of AOP for 2025 or achievement of annual growth for 2026 and 2027 will be measured for each of the two (2) performance measures and for each of the three (3) fiscal years of the Performance Period;

(b)A payout multiple will be determined for each performance goal and for each fiscal year, based on interpolation between the performance goals in the foregoing table (performance relative to a performance goal that is below the threshold for a fiscal year will result in a payout multiple of zero (0) for that performance goal for that fiscal year); and

(c)The mean, or average, of the resulting six (6) payout multiples will be applied to the number of Award Units to determine the number of Adjusted Award Units.

For example, if the annual Net Sales growth rate achieved for 2026 is X%, the multiple for that performance goal for that year will be 1.0X; and if the annual NOP growth rate achieved for 2026 is X%, the multiple for that performance goal for that year will be 2.0X. Similar multiples will be determined for each performance goal and for each of the following fiscal years. The resulting six (6) payout multiples will then be averaged to determine the final payout multiple. This final payout multiple times the number of Award Units originally granted results in the number of :Adjusted Award Units that would vest, subject to the Relative TSR Multiplier and all of the other proration and vesting provisions set forth in this Agreement.

(d)If any Adjusted Award Units are earned pursuant to the calculation outlined above, the number of Adjusted Award Units earned shall be adjusted by multiplying such amount by the Relative TSR Modifier (as defined below), which shall be determined in accordance with the schedule set forth below based on the Relative TSR Performance during the Performance Period, provided, however that the Relative TSR Modifier shall in no instance modify the award above 200% of the target PSUs.

Performance Levels	Relative TSR Percentile	Relative TSR Modifier
Threshold	Below 25th Percentile	80%
Target	25th – 75th Percentile	100%
Maximum	Above the 75th Percentile	120%

The Company’s actual performance relative to the performance goals set forth above and the calculation of the Adjusted Award Units shall be determined by the Management Development and Compensation Committee (the “Committee”) of the Board of Directors following the conclusion of the Performance Period. The Committee’s determination shall be final and conclusive for all purposes under this Agreement.

1.3Restrictive Covenant Agreement. In consideration for the grant of this Award, the Grantee agrees to execute and be bound by the terms of the Employee Inventions, Confidentiality, Non-Compete and Mutual Arbitration Agreement (the “Non-Compete Agreement”) attached hereto, and the Grantee acknowledges that the Grantee’s failure to execute the Non-Compete Agreement will cause this Award to automatically terminate and be forfeited without any further action.

2.Grant Restriction.

2.1Restriction and Forfeiture. The Grantee’s right to the Award Units or the Adjusted Award Units and the shares of Common Stock issuable under the Award Units or Adjusted Award Units will be subject to the Grantee remaining in continuous employment or service with the Company or any Subsidiary for a period of three (3) years (the “Vesting Period”) following the Date of Grant; provided, however, that such employment or service period restrictions (the “Restrictions”) will lapse and terminate prior to end of the Vesting Period as set forth in Section 2.2 below (or as otherwise set forth in the Plan for any circumstance not contemplated by the terms of Section 2.2).

2.2Death, Disability, or other Termination of Employment or Service.

(a)Death. In the event that the Grantee’s employment or service is terminated prior to the end of the Vesting Period due to the Grantee’s death, the Restrictions applicable to the Award Units or Adjusted Award Units will immediately lapse and terminate, and the shares of Common Stock to be issued in settlement of the Award Units will be issued within 90 days of the Grantee’s death, with the performance adjustment determination related to any incomplete fiscal year(s) within the Performance Period deemed to be satisfied at the target level, with no reduction or addition based on the Relative TSR Modifier.

(b)Disability. In the event that the Grantee’s employment or service is terminated prior to the end of the Vesting Period due to the Grantee’s Disability, the Grantee will become fully vested in the Award Units pending completion of the Performance Period and final determination of the Adjusted Award Units. The shares of Common Stock to be issued in settlement of the Adjusted Award Units will be retained and held by the Company pending the final determination of the Adjusted Award Units and will be issued within 90 days of the end of the Vesting Period.

(c)Termination Due to Retirement.

(i)In the event that the Grantee’s employment or other service is terminated prior to the end of the Vesting Period by reason of the Grantee’s retirement at or beyond age fifty-five (55) and the Grantee has five (5) or more years of service with the Company prior to such retirement, the Grantee will become vested in a pro rata portion of Award Units based on the number of calendar days elapsed in the Vesting Period as of the date of retirement (e.g., If the Grantee was granted 1,200 Award Units, and if retirement occurs 730 calendar days into the 1,095 calendar days vesting period, then the Grantee will become vested with respect to an aggregate of 800 Award Units and the remaining 400 Award Units will immediately terminate and be forfeited without notice of any kind) pending completion of the Performance Period and final determination of the Adjusted Award Units.

(ii)In the event that the Grantee’s employment or other service with the Company and all Subsidiaries is terminated prior to the end of the Vesting Period by reason of the Grantee’s retirement prior to age fifty-five (55) or the Grantee has fewer than five (5) years of service with the Company prior to retirement, all rights of the Grantee under the Plan and this Agreement relating to all Award Units with respect to which the Restrictions have not lapsed will immediately terminate and be forfeited without notice of any kind.

(iii)In the event that the Grantee’s employment or other service with the Company and all Subsidiaries is terminated prior to the end of the Vesting Period by reason of the Grantee’s retirement at or beyond age sixty (60) and the Grantee has five (5) or more years of service with the Company prior to retirement, the Grantee will become fully vested in the Award

Units pending completion of the Performance Period and final determination of the Adjusted Award Units if the following criteria are met: Grantee provides written notice of Grantee’s intention to retire three months before Grantee’s actual retirement date.  Provided, however, and only to the extent permitted by applicable law, that as a condition of Grantee becoming vested in the Award Units at completion of the Performance Period, Grantee cannot have engaged in competitive activities to Company’s business in the United States during the period between the Grantee’s termination date and the end of the Vesting Period, up to any duration limitation under applicable law.

(iv)The shares of Common Stock to be issued in settlement of the Adjusted Award Units pursuant to paragraphs (i) or (iii) above will be retained and held by the Company pending the final determination of the Adjusted Award Units and will be issued within 90 days of the end of the Vesting Period.

(d)Termination for Reasons other than Death, Disability, or Retirement. In the event the Grantee’s employment or other service with the Company and all Subsidiaries is terminated prior to the end of the Vesting Period for any reason other than death, Disability, or retirement as provided above, or if the Grantee is in the employ or service of a Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company (unless the Grantee continues in the employ or service of the Company or another Subsidiary), all rights of the Grantee under this Agreement relating to Award Units with respect to which the Restrictions have not lapsed will immediately terminate and be forfeited without notice of any kind.

3.Issuance of Shares.

3.1Timing. Vested Award Units or Adjusted Award Units shall be converted to shares of Common Stock on a one-for-one basis, and such shares shall be issued as soon as reasonably possible, but not more than 90 days, after the end of the Vesting Period, subject to the provisions set forth above applicable to vesting events that occur prior to the end of the Vesting Period.

3.2Limitations on Transfer. Award Units or Adjusted Award Units will not be assignable or transferable by the Grantee, either voluntarily or involuntarily, and may not be subjected to any lien, directly or indirectly, by operation of law or otherwise. Any attempt to transfer, assign, or encumber the Award Units or Adjusted Award Units, other than in accordance with this Agreement and the Plan, will be null and void and will void the Award, and all Award Units or Adjusted Award Units for which the Restrictions have not lapsed will be forfeited and immediately returned to the Company.

3.3Dividends and Other Distributions. The Award Units are being granted with an equal number of dividend equivalents. Accordingly, the Grantee is entitled to receive an additional award unit with a value equal to any dividends or distributions (including, without limitation, any cash dividends, stock dividends or dividends in kind, the proceeds of any stock split, or the proceeds resulting from any changes or exchanges described in Section 6 of this Agreement, all of which are referred to herein collectively as the “Dividend Proceeds”) that are paid or payable with respect to one share of Common Stock for each Award Unit, which will be subject to the same rights, restrictions, and performance adjustments under this Agreement as the Award Units to which such dividends or distributions relate. The number of additional award units to be received as dividend equivalents for each Award Unit shall be determined by dividing the cash dividend per share by the Fair Market Value of one share of Common Stock on the dividend or distribution payment date. All such additional award units received as dividend equivalents will be subject to the same restrictions and performance adjustments as the Award Units to which such Dividend Proceeds relate.

3.4Fractional Shares. The Grantee acknowledges that the Company will not issue or deliver fractional shares of Common Stock under this Agreement. All fractional shares will be rounded up to the nearest whole share.

4.Rights of Grantee.

4.1Employment or Service. Nothing in this Agreement will interfere with or limit in any way the right of the Company or any Subsidiary to terminate the employment or service of the Grantee at any time, nor confer upon the Grantee any right to continue in the employment or service with the Company or any Subsidiary at any particular position or rate of pay or for any particular period of time.

4.2Rights as a Shareholder. The Grantee will have no rights as a shareholder until the Grantee becomes the holder of record of shares of Common Stock issued in settlement of the Adjusted Award Units. As soon as reasonably possible after the satisfaction of any conditions to the effective issuance of shares of Common Stock in settlement of the Adjusted Award Units, the shares will be issued by the Company.

5.Withholding Taxes. The Company is entitled to (i) withhold and deduct from future wages of the Grantee (or from other amounts that may be due and owing to the Grantee from the Company), or to withhold from the shares of Common Stock that would otherwise be determined to be paid to the Company out of Dividend Proceeds, or make other arrangements for the collection of all amounts the Company determines are legally required to satisfy any federal, state, or local withholding and employment-related tax requirements attributable to the receipt of the Award, the receipt of dividends or distributions on Award Units or Adjusted Award Units, or the lapse or termination of the Restrictions applicable to Award Units or Adjusted Award Units, or (ii) require the Grantee promptly to remit the amount of such withholding to the Company. In the event that the Company is unable to withhold such amounts, for whatever reason, the Grantee agrees to pay to the Company an amount equal to the amount the Company would otherwise be required to withhold under federal, state, or local law.

6.Adjustments. In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, or divestiture (including a spin-off), or any other change in the corporate structure or shares of the Company, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation), in order to prevent dilution or enlargement of the rights of the Grantee, will make appropriate adjustment (which determination will be conclusive) as to the number and kind of securities or other property (including cash) subject to this Award.

7.Subject to Plan. The Award and the Award Units granted pursuant to this Agreement have been granted under the Plan and, except as otherwise expressly provided in this Agreement, are subject to all of the terms and conditions of the Plan. In addition, the Grantee, by execution hereof, acknowledges having received a copy of the Plan and acknowledges that the Company, or a third party vendor designated by the Company, may deliver to the Grantee any documents related to the Grantee’s participation in the Plan by electronic means, including through email, the Company’s website, and through the website of the third party vendor designated by the Company.  The provisions of this Agreement will be interpreted as to be consistent with the Plan, and any ambiguities in this Agreement will be interpreted by reference to the Plan. In the event that any provision of this Agreement is not authorized under the Plan, the terms of the Plan will prevail.

8.Forfeiture, Clawback or Recoupment. This Award is subject to the forfeiture and clawback provisions pursuant to the Plan. Additionally, the Grantee may be subject to the Company’s policy regarding clawback and forfeiture of certain compensation, as in effect at such time. In addition to the other rights of the Committee

under the Plan, if Grantee is determined by the Committee, acting in its sole discretion, to have taken any action that would constitute Adverse Action or Cause or that is subject to any other or additional “clawback,” forfeiture, or recoupment policy adopted by the Company, either prior to or after the date of this Agreement, or to have violated the Non-Compete Agreement, as defined in Section 1.3, (i) all of Grantee’s rights under the Plan and any agreements evidencing an award granted under the Plan, including this Agreement evidencing this Award, then held by Grantee shall terminate and be forfeited upon the effectiveness of such Committee action, and without notice of any kind, and (ii) the Committee, in its sole discretion may require Grantee to surrender and return, transfer, or assign to the Company all or any portion of the shares of Common Stock received, or to disgorge all or any profits or any other economic value (however defined by the Committee) made or realized by Grantee or Grantee’s affiliate, during the period beginning two (2) years prior to your termination of employment or service with the Company, in connection with any awards granted under the Plan, including this Award, or any shares of Common Stock issued upon the exercise or vesting of any awards, including this Award. This Section 8 shall not apply and shall automatically become void ab initio following a Change of Control.

9.Miscellaneous

9.1Binding Effect. This Agreement will be binding upon the heirs, executors, administrators, and successors of the parties to this Agreement.

9.2Governing Law. This Agreement and all rights and obligations under this Agreement will be construed in accordance with the Plan and governed by the laws of the State of Minnesota, without regard to conflicts of laws provisions. Any legal proceeding related to this Agreement will be brought in an appropriate Minnesota court, and the parties to this Agreement consent to the exclusive jurisdiction of the court for this purpose.

9.3Entire Agreement. This Agreement and the Plan set forth the entire agreement and understanding of the parties to this Agreement with respect to the grant and vesting of this Award and the administration of the Plan and supersede all prior agreements, arrangements, plans, and understandings relating to the grant and vesting of this Award and the administration of the Plan.

9.4Amendment and Waiver. Other than as provided in the Plan, this Agreement may be amended, waived, modified, or canceled only by a written instrument executed by the parties to this Agreement or, in the case of a waiver, by the party waiving compliance.

9.5Code Section 409A. Payments of amounts under this Agreement are intended to comply with the requirements of Code section 409A, and this Agreement shall in all respects be administered and construed to give effect to such intent. The Committee, in its sole discretion, may accelerate or delay distribution of any shares in payment of amounts due under this Agreement if and to the extent allowed under Code section 409A.

The parties hereto have executed this Agreement effective the day and year first above written.

SLEEP NUMBER CORPORATION

Samuel Hellfeld Chief Legal and Risk Officer

By execution of this Agreement,    GRANTEE the Grantee acknowledges having received a copy of the Plan.                             (Signature)

(Name and Address)

ATTACHMENT A: Definition for the Company’s “Relative TSR Modifier”

TSR performance for Sleep Number and for the S&P 1500 Specialty Retail Index shall be calculated as follows:

TSR =		Ending Average Share Price — Beginning Average Share Price + Reinvested Dividends
	Beginning Average Share Price

Definitions. For the purposes of this Relative TSR Modifier calculation the following terms shall be defined as follows:

•“Beginning Average Stock Price” means the average closing price of a share of common stock of a company, as reported on the principal national stock exchange on which such common stock is traded, over the 20 consecutive trading days immediately preceding the first day of the Relative TSR Modifier Performance Period.

•“Dividends Paid” means all dividends paid with respect to an ex-dividend date that occurs during the Relative TSR Modifier Performance Period (whether or not the dividend payment date occurs during the TSR Modifier Performance Period), which shall be deemed to have been reinvested in the underlying common shares and shall include dividends paid with respect to such reinvested dividends, appropriately adjusted to reflect stock splits, spinoffs, and similar transactions.

•“Ending Average Stock Price” means the average closing price of a share of common stock of a company, as reported on the principal national stock exchange on which such common stock is traded, over the 20 consecutive trading days ending on (and including) the last day of the Relative TSR Modifier Performance Period.

•“Relative TSR Percentile” means the percentile rank of the Company’s TSR relative to the TSR of the companies in the S&P 1500 Specialty Retail Index for the Relative TSR Modifier Performance Period. Relative TSR Percentile will be determined by ranking the TSR of the Company and each of the companies in the S&P 1500 Specialty Retail Index (with the company having the lowest TSR being ranked number 1, the company with the second lowest TSR being ranked number 2, and so forth) and determining the Company’s percentile rank based upon its position in the list by dividing the Company’s position by the total number of companies (including the Company) in the S&P 1500 Specialty Retail Index and rounding the quotient to the nearest hundredth.

•“TSR” means, for any company, the cumulative total shareholder return for the Relative TSR Modifier Performance Period as measured by dividing (A) the sum of (i) the cumulative amount of Dividends Paid, and (ii) the Ending Stock Price minus the Beginning Stock Price, by (B) the Beginning Stock Price.

•“S&P 1500 Specialty Retail Index” means the companies that are included in the S&P 1500 Specialty Retail Index on the first day of the Relative TSR Modifier Performance Period. If any of the companies included in the S&P 1500 Specialty Retail Index undergo transactions or other changes during the Relative TSR Modifier Performance Period, the following treatment shall apply or, if the transaction or other change is not covered by the list included below, the Management Development and Compensation Committee of the Board of Directors of the Company (the “Committee”) shall determine the treatment of such transaction or other change in its discretion:

oCompany 1 merges with or acquires Company 2 where Company 1 is surviving entity, then Company 1 is included and Company 2 is removed.

oCompany merges with or acquires a Non-Company where Company is surviving entity, then Company is included.

oCompany merges with or acquires a Non-Company where Company is not surviving entity, then Company is removed.

oCompany declares bankruptcy, then Company is included with a TSR of -100%.

oCompany spins out a portion of business but the parent company in the spinoff remains the same Company, then Company is included.

oCompany spins out a portion of business and spun out entity replaces Company in the S&P 1500 Specialty Retail Index, then Company is removed.

oCompany’s Ticker Changes, then Company is included.

oCompany merges with or acquires another Company where entirely new company is established, then the Committee has discretion regarding whether to include or remove the new company.

If any benchmark or index referenced above is unavailable at the time of the performance measurement, we will substitute with a substantially similar benchmark or index approved by the Compensation Committee.

The Committee shall use its reasonable discretion in determining the adjustment and the Committee’s determination of where the Actual TSR falls relative to the total shareholder return for the S&P 1500 Specialty Retail Index and the application of the modifier shall be adjusted in the event of any material non-recurring or unique event or circumstance that the Committee deems is appropriate, in such manner it determines is appropriate.

Document

Exhibit 31.1

Certification by Chief Executive Officer

I, Linda Findley, certify that:

1.I have reviewed this Quarterly report on Form 10-Q of Sleep Number Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:    May 6, 2025
	/s/ Linda Findley
	Linda Findley
	Chief Executive Officer

Document

Exhibit 31.2

Certification by Chief Financial Officer

I, Francis K. Lee, certify that:

1.I have reviewed this Quarterly report on Form 10-Q of Sleep Number Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:    May 6, 2025
	/s/ Francis K. Lee
	Francis K. Lee
	Executive Vice President and Chief Financial Officer

Document

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Sleep Number Corporation (the “Company”) on Form 10-Q for the period ended March 29, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Linda Findley, Chief Executive Officer of the Company, solely for the purposes of 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, does hereby certify, to her knowledge, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:    May 6, 2025
	/s/ Linda Findley
	Linda Findley
	Chief Executive Officer

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Document

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Sleep Number Corporation (the “Company”) on Form 10-Q for the period ended March 29, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Francis K. Lee, Executive Vice President and Chief Financial Officer of the Company, solely for the purposes of 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, does hereby certify, to his knowledge, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:    May 6, 2025
	/s/ Francis K. Lee
	Francis K. Lee
	Executive Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.