Sleep Number Announces Fourth Quarter and Full Year 2025 Results

Sleep Number Announces Fourth Quarter and Full Year 2025 Results March 12, 2026 Reports FY2025 Net Sales of $1.4 Billion, Exceeding Adjusted EBITDA Guidance Realized $185 Million of Annualized Cost Savings Launches New Products as the Next Phase of Turnaround Strategy to Return to Profitable Growth Sleep Number Corporation (Nasdaq: SNBR) today reported results for fourth quarter and the year ended January 3, 2026. Linda Findley, President and CEO, commented, "Sleep Number exceeded 2025 guidance provided on our last earnings call. We are still in full turnaround mode and made significant progress against our new product and marketing strategies while continuing to reduce costs. For the full year 2025, pro-forma adjusted EBITDA margin was approximately 9% and anticipate double-digit adjusted EBITDA growth in 2026 as we continue to execute on our strategy. "The launch of our ComfortMode bed in January exceeded our expectations and is outselling plan by 3.5 times, with stronger margins than the beds it replaces. The rest of the new product line, available this month, is all built on the same consumer research highlighting comfort and value, and we anticipate similar strength from the new beds, as the supporting marketing is also performing well. "Even with the strength of our product and marketing strategies, the negative industry impact at the start of the year plus the clearance of our existing products had an outsized impact on our liquidity. We are implementing a plan to address our liquidity and capital strategy as we move towards topline growth in the second half of the year." Fourth Quarter Overview (all comparisons year-over-year unless otherwise noted) Net sales of $347 million, down 8%, driven by ongoing industry demand pressure and lower store traffic.Gross profit of $193 million, a decrease of $32 million. Gross profit margin of 55.6% compared to 59.9% for the same period last year, primarily due to a $9.6 million inventory obsolescence charge associated with the introduction of the company's new product line. Excluding the charge, adjusted gross profit margin was 58.4%.Operating expenses were $201 million. Adjusted operating expenses before restructuring and other non-recurring costs were $197 million, a decrease of $20 million, or 9%, driven by lower marketing and selling expenses, general and administrative expenses, and research and development expenses.Restructuring and other non-recurring costs were $14 million, driven primarily by the $9.6 million inventory obsolescence charge and contract termination costs due to store closures.Net loss of $59 million compared with a net loss of $5 million for the same period last year, driven primarily by lower net sales and recognition of a $47.9 million deferred tax valuation adjustment during the fourth quarter of 2025.Adjusted EBITDA of $19 million, down 26%, driven by a year-over-year net sales decline, partially offset by lower operating expenses. Adjusted EBITDA margin of 5.6%, down 140 basis points ("bps"). Full Year Overview (all comparisons year-over-year unless otherwise noted) Net sales of $1.4 billion, down 16%, driven by driven by ongoing industry pressure and lower store traffic.Gross profit of $833 million, a decrease of $170 million. Gross profit margin of 59.0% of net sales, down 60 bps, driven by the $9.6 million inventory write-down charge and partially offset by the benefit of product cost reductions through value engineering and ongoing supplier negotiations and ongoing efficiencies in our home delivery and logistics operations.Operating expenses were $880 million. Adjusted operating expenses before restructuring and other non-recurring costs were $824 million, a decrease of $136 million, or 14%, driven by lower marketing and selling expenses, general and administrative expenses, and research and development expenses.Restructuring and other non-recurring costs were $65 million, driven primarily by severance and employee-related benefits, contract termination costs due to store closures, asset impairment charges, and inventory obsolescence.Net loss of $132 million compared with a net loss of $20 million last year.Adjusted EBITDA of $78 million, down 35%, driven by year-over year net sales decline, partially offset by lower operating expenses. Adjusted EBITDA margin of 5.5%, down 160 bps, exiting the year with an annualized pro forma adjusted EBITDA margin of approximately 9%, a 200 bps improvement versus the prior year. Cash Flows and Liquidity Review (all comparisons year-over-year unless otherwise noted) Net cash used in operating activities was $3 million, down $30 million.Free cash flow was a use of $18 million, down $21 million.The company's leverage ratio calculated under its credit agreement was 4.1x EBITDAR at the end of the year versus the amended covenant maximum of 4.5x. Additional Business Highlights Sleep Number is executing a turnaround strategy centered on product, marketing and distribution with ongoing cost savings and operating efficiencies to reignite growth and increase financial resilience. Recent highlights include: Leadership and Organizational Realignment – After appointing a new CEO in April 2025, the company further strengthened the executive team with the appointment of a new Chief Marketing Officer in May 2025 and Chief Financial Officer in December 2025 while reorganizing reporting lines and responsibilities to improve accountability, accelerate decision-making, and enhance customer responsiveness.Product Portfolio Transformation – The company announced a new product line, taking only ten months versus the historical two years to design and develop, aimed to meet customer demands and simplify the shopping experience to address a broader range of sleep needs. Sleep Number launched the ComfortMode™ bed in January and sales have exceeded expectations by more than three times. The remainder of the new product line was announced separately today and will be available for purchase on March 23.Modernized Marketing Foundation – Under new leadership, Sleep Number has rebuilt its marketing foundation with refreshed creative and channel-specific media strategies aimed at strengthening brand awareness and funnel performance to drive purchase intent.Cost Structure Reset – Implemented $185 million of annualized cost reductions through efficiencies in general and administrative, corporate structure, technology, and adapting Sleep Number’s existing real estate footprint. These changes created a more agile organization while preserving innovation. In 2026, Sleep Number is implementing another $50 million of annualized fixed costs savings.Capital Structure Review – Engaged Guggenheim Securities to evaluate inbound interest and other opportunities to address the company's amended credit facility and improve Sleep Number’s liquidity, balance sheet and flexibility. Conference Call Information Management will host its regularly scheduled conference call to discuss the company’s results at 8:30 a.m. ET (7:30 a.m. CT; 5:30 a.m. PT) today. To access the webcast, please visit the investor relations area of the Sleep Number website at https://ir.sleepnumber.com. The webcast replay will remain available for approximately 60 days. About Sleep Number Corporation Sleep Number is the leader in personalized sleep wellness. Its mattresses are designed to evolve with each sleeper to help them feel and perform their best. With adjustable firmness, pressure-relieving support and temperature balancing comfort built into every mattress, Sleep Number® beds adapt to customers’ changing needs, night after night, year after year. Backed by almost 40 years of innovation, 1,000+ patents and patents pending, and billions of hours of sleep data, Sleep Number has helped more than 16 million people achieve their best sleep. The fully integrated model ensures quality, durability, and care at every step—from design and craftsmanship to delivery and long-term support. Sleep Number products are awarded the industry's top recognitions, including ranked #1 in customer satisfaction for mattresses purchased in-store and online, and #1 in comfort, by J.D. Power. In addition, the company is the Official Sleep + Wellness Partner of the NFL, marking a relationship that leverages player health data, team partnerships, and league-wide initiatives to amplify brand awareness and drive consumer engagement. Sleep Number mattresses, bases, bedding, and furniture are available exclusively at its 600 stores nationwide and online. To learn more, visit SleepNumber.com or a store near you. Forward-looking Statements Statements used in this news release relating to future plans, events, financial results or performance, such as the statements that: the company is launching new products as the next phase of its turnaround strategy to return to profitable growth; it anticipates double digit increase to adjusted EBITDA in 2026; it anticipates strong sales and margins from the new product line launching this month; it is implementing a plan to address liquidity and capital strategy as it moves towards topline growth in the second half of 2026; it is executing a turnaround strategy centered on product, marketing and distribution with ongoing cost savings and operating efficiencies to reignite growth and increase financial resilience; it is implementing $50 million of annualized fixed costs savings in 2026; and it is working with Guggenheim Securities to address the company's amended credit facility and improve its liquidity, balance sheet and flexibility are forward-looking statements subject to certain risks and uncertainties which could cause the company’s results to differ materially. The most important risks and uncertainties are described in the company’s filings with the Securities and Exchange Commission, including in Item 1A of the company’s Annual Report on Form 10-K and other periodic reports. Forward-looking statements speak only as of the date they are made, and the company does not undertake any obligation to update any forward-looking statement. SLEEP NUMBER CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (unaudited – in thousands, except per share amounts) Fourteen Weeks Ended Thirteen Weeks Ended January 3, 2026 % of Net Sales December 28, 2024 % of Net Sales Net sales $ 347,385 100.0 % $ 376,817 100.0 % Cost of sales 154,103 44.4 % 151,236 40.1 % Gross profit 193,282 55.6 % 225,581 59.9 % Operating expenses: Sales and marketing 161,238 46.4 % 170,232 45.2 % General and administrative 30,654 8.8 % 38,234 10.1 % Research and development 6,291 1.8 % 10,653 2.8 % Restructuring costs 3,151 0.9 % 3,684 1.0 % Total operating expenses 201,334 58.0 % 222,803 59.1 % Operating (loss) income (8,052 ) (2.3 %) 2,778 0.7 % Interest expense, net 13,880 4.0 % 11,742 3.1 % Loss before income taxes (21,932 ) (6.3 %) (8,964 ) (2.4 %) Income tax expense (benefit) 36,578 10.5 % (4,299 ) (1.1 %) Net loss $ (58,510 ) (16.8 %) $ (4,665 ) (1.2 %) Net loss per share – basic and diluted $ (2.55 ) $ (0.21 ) Reconciliation of weighted-average shares outstanding: Basic weighted-average shares outstanding 22,952 22,659 Dilutive effect of stock-based awards — — Diluted weighted-average shares outstanding 22,952 22,659 For the fourteen weeks ended January 3, 2026 and the thirteen weeks ended December 28, 2024, potentially 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. SLEEP NUMBER CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (unaudited – in thousands, except per share amounts) Fifty-Three Weeks Ended Fifty-Two Weeks Ended January 3, 2026 % of Net Sales December 28, 2024 % of Net Sales Net sales $ 1,411,450 100.0 % $ 1,682,296 100.0 % Cost of sales 578,499 41.0 % 679,523 40.4 % Gross profit 832,951 59.0 % 1,002,773 59.6 % Operating expenses: Sales and marketing 664,235 47.1 % 766,624 45.6 % General and administrative 130,669 9.3 % 149,956 8.9 % Research and development 33,942 2.4 % 45,255 2.7 % Restructuring costs 50,697 3.6 % 18,066 1.1 % Total operating expenses 879,543 62.3 % 979,901 58.2 % Operating (loss) income (46,592 ) (3.3 %) 22,872 1.4 % Interest expense, net 49,382 3.5 % 48,368 2.9 % Loss before income taxes (95,974 ) (6.8 %) (25,496 ) (1.5 %) Income tax expense (benefit) 35,984 2.5 % (5,162 ) (0.3 %) Net loss $ (131,958 ) (9.3 %) $ (20,334 ) (1.2 %) Net loss per share – basic and diluted $ (5.77 ) $ (0.90 ) Reconciliation of weighted-average shares outstanding: Basic weighted-average shares outstanding 22,883 22,606 Dilutive effect of stock-based awards — — Diluted weighted-average shares outstanding 22,883 22,606 For the fifty-three weeks ended January 3, 2026 and the fifty-two weeks ended December 28, 2024, potentially 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. SLEEP NUMBER CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (unaudited – in thousands, except per share amounts) subject to reclassification January 3, 2026 December 28, 2024 Assets Current assets: Cash and cash equivalents $ 1,693 $ 1,950 Accounts receivable, net of allowances of $694 and $1,113, respectively 15,502 17,516 Inventories 82,233 103,152 Prepaid expenses 13,656 14,568 Other current assets 36,873 44,098 Total current assets 149,957 181,284 Non-current assets: Property and equipment, net 86,528 129,574 Operating lease right-of-use assets 311,723 356,641 Goodwill and intangible assets, net 66,186 66,412 Deferred income taxes 399 33,575 Other non-current assets 65,267 93,324 Total assets $ 680,060 $ 860,810 Liabilities and Shareholders’ Deficit Current liabilities: Borrowings under revolving credit facility $ 588,200 $ 546,600 Accounts payable 117,977 107,619 Customer prepayments 39,527 46,933 Accrued sales returns 12,817 19,092 Compensation and benefits 14,975 31,038 Taxes and withholding 11,429 18,619 Operating lease liabilities 81,191 82,307 Other current liabilities 46,430 55,804 Total current liabilities 912,546 908,012 Non-current liabilities: Operating lease liabilities 273,111 307,201 Other non-current liabilities 72,878 97,183 Total non-current liabilities 345,989 404,384 Total liabilities 1,258,535 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, 22,860 and 22,388 shares issued and outstanding, respectively 229 224 Additional paid-in capital 32,454 27,390 Accumulated deficit (611,158 ) (479,200 ) Total shareholders’ deficit (578,475 ) (451,586 ) Total liabilities and shareholders’ deficit $ 680,060 $ 860,810 SLEEP NUMBER CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (unaudited – in thousands) subject to reclassification Fifty-Three Weeks Ended Fifty-Two Weeks Ended January 3, 2026 December 28, 2024 Cash flows from operating activities: Net loss $ (131,958 ) $ (20,334 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 55,608 66,351 Stock-based compensation 6,282 11,444 Inventory obsolescence write off 9,565 — Loss on impairment of strategic investment asset 16,225 — Loss on disposal and impairment of leased assets 20,319 4,315 Deferred income taxes 33,176 (13,322 ) Changes in operating assets and liabilities: Accounts receivable 2,014 9,343 Inventories 11,354 12,281 Income taxes (4,378 ) 3,987 Prepaid expenses and other assets 9,889 (10,867 ) Accounts payable 22,673 (15,910 ) Customer prepayments (7,406 ) (2,210 ) Accrued compensation and benefits (16,113 ) 2,755 Other taxes and withholding (2,812 ) (2,502 ) Other accruals and liabilities (27,721 ) (18,188 ) Net cash (used in) provided by operating activities (3,283 ) 27,143 Cash flows from investing activities: Purchases of property and equipment (14,407 ) (23,505 ) Proceeds from sales of property and equipment — 156 Issuance of notes receivable — (2,942 ) Payment to secure contractual rights (3,280 ) — Net cash used in investing activities (17,687 ) (26,291 ) Cash flows from financing activities: Net increase (decrease) in short-term borrowings 28,068 (673 ) Repurchases of common stock (1,213 ) (768 ) Debt issuance costs (6,142 ) — Net cash provided by (used in) financing activities 20,713 (1,441 ) Net decrease in cash and cash equivalents (257 ) (589 ) Cash and cash equivalents, at beginning of period 1,950 2,539 Cash and cash equivalents, at end of period $ 1,693 $ 1,950 SLEEP NUMBER CORPORATION AND SUBSIDIARIES Supplemental Financial Information (unaudited) Fourteen Weeks Ended Thirteen Weeks Ended Fifty-Three Weeks Ended Fifty-Two Weeks Ended January 3, 2026 December 28, 2024 January 3, 2026 December 28, 2024 Percent of sales: Retail stores 86.6 % 86.6 % 87.6 % 87.6 % Online, phone, chat and other 13.4 % 13.4 % 12.4 % 12.4 % Total Company 100.0 % 100.0 % 100.0 % 100.0 % Sales change rates: Retail comparable-store sales4 (15 %) (9 %) (17 %) (9 %) Online, phone and chat4 (15 %) (17 %) (17 %) (17 %) Total Retail comparable sales change4 (15 %) (10 %) (17 %) (10 %) Net opened/closed stores and other 7 % (2 %) 1 % (1 %) Total Company (8 %) (12 %) (16 %) (11 %) Stores open: Beginning of period 611 643 640 672 Opened 1 1 6 12 Closed (12 ) (4 ) (46 ) (44 ) End of period 600 640 600 640 Other metrics: Average sales per store ($ in 000's)1,4 $ 1,946 $ 2,601 Average sales per square foot1,4 $ 629 $ 841 Stores > $2 million net sales2,4 32 % 57 % Stores > $3 million net sales2,4 8 % 18 % Average revenue per smart bed unit3 $ 6,393 $ 5,959 $ 6,060 $ 5,818 1 Trailing twelve months Total Retail comparable sales per store open at least one year. 2 Trailing twelve months for stores open at least one year (excludes online, phone and chat sales). 3 Represents Total Retail (stores, online, phone and chat) net sales divided by Total Retail smart bed units. 4 Fiscal 2025 included 53 weeks, as compared to 52 weeks in fiscal 2024. The additional week in 2025 was in the fiscal fourth quarter. Total Retail comparable sales have been adjusted to remove the estimated impact of the additional week on the three and twelve months ended January 3, 2026. SLEEP NUMBER CORPORATION AND SUBSIDIARIES Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) (in thousands) We define earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) as net loss plus: income tax expense (benefit), interest expense, depreciation and amortization, stock-based compensation, restructuring costs, other non-recurring items, and asset impairments. Management believes Adjusted EBITDA is a useful indicator of our financial performance and our ability to generate cash from operating activities. Our definition of Adjusted EBITDA may not be comparable to similarly titled definitions used by other companies. The table below reconciles Adjusted EBITDA, which is a non-GAAP financial measure, to the comparable GAAP financial measure: Three Months Ended Trailing Twelve Months Ended January 3, 2026 December 28, 2024 January 3, 2026 December 28, 2024 Net loss $ (58,510 ) $ (4,665 ) $ (131,958 ) $ (20,334 ) Income tax expense (benefit) 36,578 (4,299 ) 35,984 (5,162 ) Interest expense 13,880 11,742 49,382 48,368 Depreciation and amortization 12,091 15,628 53,169 64,979 Stock-based compensation 1,570 1,903 6,282 11,444 Restructuring costs1 3,151 3,684 50,697 18,066 Other non-recurring items2 10,643 998 14,699 998 Asset impairments — 1,220 — 1,220 Adjusted EBITDA $ 19,403 $ 26,211 $ 78,255 $ 119,579 1 Represents costs related to business restructuring actions. 2 Other non-recurring items includes the following: Three Months Ended Trailing Twelve Months Ended January 3, 2026 December 28, 2024 January 3, 2026 December 28, 2024 Inventory obsolescence write off $ 9,565 $ — $ 9,565 $ — CEO transition costs 450 224 1,584 224 Debt issuance cost write off — — 1,596 — Proxy contest costs — 774 1,148 774 CFO search costs 164 — 340 — Legal and consulting costs 464 — 466 Other non-recurring items $ 10,643 $ 998 $ 14,699 $ 998 Free Cash Flow (in thousands) Three Months Ended Trailing Twelve Months Ended January 3, 2026 December 28, 2024 January 3, 2026 December 28, 2024 Net cash provided by (used in) operating activities $ 1,876 $ (23,681 ) $ (3,283 ) $ 27,143 Subtract: Purchases of property and equipment 2,519 6,287 14,407 23,505 Free cash flow $ (643 ) $ (29,968 ) $ (17,690 ) $ 3,638 Note - Our Adjusted EBITDA and Free Cash Flow are considered non-GAAP financial measures and are not in accordance with, or preferable to, "as reported," or GAAP financial data. However, we are providing this information as we believe it facilitates analysis of the Company's financial performance by investors and financial analysts. GAAP - generally accepted accounting principles in the U.S. SLEEP NUMBER CORPORATION AND SUBSIDIARIES Reconciliation of GAAP to Non-GAAP Financial Measures (in thousands) Three Months Ended Trailing Twelve Months Ended January 3, 2026 December 28, 2024 January 3, 2026 December 28, 2024 Operating expenses $ 201,334 $ 222,803 $ 879,543 $ 979,901 Subtract: Restructuring costs 3,151 3,684 50,697 18,066 Subtract: Asset impairments — 1,220 — 1,220 Subtract: Other non-recurring items1 1,078 998 5,134 998 Non-GAAP operating expenses $ 197,105 $ 216,901 $ 823,712 $ 959,617 Operating expense reduction versus prior period, excluding restructuring costs and non-recurring items $ 19,796 $ 135,905 1 Excludes inventory obsolescence write off of $9.6 million, which is included in the cost of sales line on the statement of operations. Three Months Ended Trailing Twelve Months Ended January 3, 2026 December 28, 2024 January 3, 2026 December 28, 2024 Gross profit $ 193,282 $ 225,581 $ 832,951 $ 1,002,773 Gross profit margin 55.6 % 59.9 % 59.0 % 59.6 % Add: Inventory obsolescence write off 9,565 — 9,565 — Non-GAAP gross profit $ 202,847 $ 225,581 $ 842,516 $ 1,002,773 Non-GAAP gross profit margin 58.4 % 59.9 % 59.7 % 59.6 % Trailing Twelve Months Ended January 3, 2026 Adjusted EBITDA $ 78,255 Proforma annualized cost reductions1 50,000 Proforma adjusted EBITDA 128,255 Net sales 1,411,450 Proforma adjusted EBITDA margin 9.1 % 1 Represents annualized impact of cost reductions over the future trailing twelve months the Company has executed. Note - Our Non-GAAP Operating Expenses, Non-GAAP Gross Profit, Non-GAAP Gross Profit Margin, and Proforma Adjusted EBITDA measures are considered non-GAAP financial measures and are not in accordance with, or preferable to, "as reported," or GAAP financial data. However, we are providing this information as we believe it facilitates analysis of the Company's financial performance by investors and financial analysts. GAAP - generally accepted accounting principles in the U.S. SLEEP NUMBER CORPORATION AND SUBSIDIARIES Calculation of Net Leverage Ratio under Revolving Credit Facility (in thousands) Trailing Twelve Months Ended January 3, 2026 December 28, 2024 Borrowings under revolving credit facility $ 588,200 $ 546,600 Outstanding letters of credit 8,800 7,147 Finance lease obligations 159 241 Consolidated funded indebtedness $ 597,159 $ 553,988 Operating lease liabilities1 354,302 389,508 Total debt including operating lease liabilities (a) $ 951,461 $ 943,496 Adjusted EBITDA (see above) $ 78,255 $ 119,579 Consolidated rent expense 104,983 107,105 Proforma annualized cost reductions2 50,000 — Consolidated EBITDAR (b) $ 233,238 $ 226,684 Net Leverage Ratio under revolving credit facility (a divided by b) 4.1 to 1.0 4.2 to 1.0 1 Reflects operating lease liabilities included in our financial statements under ASC 842. 2 Represents annualized impact of cost reductions over the future trailing twelve months the Company has executed. Note - Our Net Leverage Ratio under Revolving Credit Facility, Adjusted EBITDA and EBITDAR calculations are considered non-GAAP financial measures and are not in accordance with, or preferable to, "as reported," or GAAP financial data. However, we are providing this information as we believe it facilitates analysis of the Company's financial performance by investors and financial analysts. GAAP - generally accepted accounting principles in the U.S. SLEEP NUMBER CORPORATION AND SUBSIDIARIES Calculation of Return on Invested Capital (Adjusted ROIC) (in thousands) Adjusted ROIC is a financial measure we use to determine how efficiently we deploy our capital. It quantifies the return we earn on our adjusted invested capital. Management believes Adjusted ROIC is also a useful metric for investors and financial analysts. We compute Adjusted ROIC as outlined below. Our 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: Trailing Twelve Months Ended January 3, 2026 December 28, 2024 Adjusted net operating profit after taxes (Adjusted NOPAT) Operating income $ (46,592 ) $ 22,872 Add: Operating lease interest1 24,346 26,775 Less: Income taxes2 4,495 (11,907 ) Adjusted NOPAT $ (17,751 ) $ 37,740 Average adjusted invested capital Total deficit $ (578,475 ) $ (451,586 ) Add: Long-term debt3 588,359 546,841 Add: Operating lease liabilities4 354,302 389,508 Total adjusted invested capital at end of period $ 364,186 $ 484,763 Average adjusted invested capital5 $ 439,902 $ 497,972 Adjusted ROIC6 (4.0 %) 7.6 % 1 Represents the interest expense component of lease expense included in our financial statements under ASC 842, Leases. 2 Reflects annual effective income tax rates, before discrete adjustments, of 20.2% and 24.0% for January 3, 2026 and December 28, 2024, respectively. 3 Long-term debt includes existing finance lease liabilities. 4 Reflects operating lease liabilities included in our 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, "as reported," or GAAP financial data. However, we are providing this information as we believe it facilitates analysis of the Company's financial performance by investors and financial analysts. GAAP - generally accepted accounting principles in the U.S. Source: Sleep Number Corporation