Sleep Number Corporation (NASDAQ: SNBR) reported Q2 EPS of ($0.45), $0.35 better than the analyst estimate of ($0.80). Revenue for the quarter came in at $285 million versus the consensus estimate of $216.36 million.

Second Quarter Overview

• Second quarter financial results reflect the significant impact of COVID-19
• Net sales were $285 million, down 20% compared with $356 million last year
• Gross profit rate of 57.2%, compared with 61.0% last year, reflecting product mix changes and sales deleverage as a result of COVID-19
• Operating expense reduction of $35 million or 17% versus prior year, reflects immediate actions taken to reduce expenses
• Net loss per diluted share of $0.45, compared to net income per diluted share of $0.14 last year

Cash Flows and Liquidity Review

• Generated $87 million in net cash from operating activities for the first six months of 2020, up 24% versus last year, with year-to-date operating free cash flows of $65 million, up 79% versus prior year
• Invested $22 million in year-to-date capital expenditures compared to $34 million for the prior year period
• Recently acquired a patent portfolio from Gentherm to further strengthen our competitive position related to cooling and heating beds and bedding
• Return on invested capital (ROIC) of 17.2% for the trailing twelve-month period, up 40 basis points versus the prior year comparable period
• Leverage ratio of 2.8x EBITDAR at the end of the second quarter, compared with 3.0x for the same period last year (covenant maximum of 4.5x)
• Cash and liquidity available under our credit facility was $295 million at the end of the second quarter, a $129 million increase versus the same period last year

“The mission of Sleep Number has never been more important or more relevant than it is today. The pandemic has heightened individuals’ concerns about their immunity and resilience, and there is increased understanding that sleep is vital for healthy living. With the proven quality sleep of our proprietary 360® smart beds, Sleep Number is at the forefront of delivering this life-changing benefit,” said Shelly Ibach, President and CEO. “Our increased relevance with consumers, combined with the significant competitive advantages of our integrated business model and the ingenuity of our purpose driven team, drove our stronger-than-expected second quarter results.”

Financial Outlook

On March 23, 2020, the company withdrew its fiscal 2020 financial guidance due to COVID-19. Given the continued uncertainty related to COVID-19, the company is not providing any further financial guidance at this time. The company expects to meet its liquidity needs from operating cash flows and its existing credit facility, while funding growth initiatives and other longer-term opportunities.

For earnings history and earnings-related data on Sleep Number Corporation (SNBR) click here.