Sleep Number Corporation · NASDAQ:SNBR
Sleep Number — Select Comfort — Investor Presentation (January 2013)
21 slides from Sleep Number's investor presentation, Jan 24, 2013
Slide 1: Driving long-term profitable growth
Driving long-term profitable growth January 2013 ®
Slide 2: Forward looking statements
Forward looking statements Statements used in this presentation relating to future plans, events, financial results or performance are forward- looking statements subject to certain risks and uncertainties including, among others, such factors as current general and industry economic trends; consume
Slide 3: Customer-focused strategy: proprietary, end-to-end Sleep Number experience
p Proprietary, end-to-end Sleep Number® experience focused on individuality to meaningfully improve our customers’ lives Customer-focused strategy SERVICE AWARENESS LIFETIME ENGAGEMENT HOME DELIVERY RETAIL PRODUCT 3
Slide 4: Sleep Number competitive advantages
Sleep Number® competitive advantages Extraordinary retail experience Unique product experience • Individualized • Proprietary beds & bedding • Difficult to replicate • Relationship-based • Interactive • Lifetime engagement • Both retailer & manufacturer • Exclusive distribution • Control pricing & b
Slide 5: Consistent profitable growth
Consistent profitable growth EPS Net Sales Growth Operating Margin $ 0.24* $ 0.57 $ 1.07 $ 1.43* 2009 2010 2011 2012 (11%) 11% 23% 26% 2009 2010 2011 2012 (4%) 19% 26% 23% (30%) 15% 45% 49% 1-yr comp‡ 2-yr stacked comp‡ ‡ Company-Controlled comparable sales 4.4%^ 8.6% 12.2% 13.4%^ 2009 2010 2011 201
Slide 6: Size of the opportunity
$ 5.8 $ 6.5 $ 6.8 $ 6.9 $ 6.2 $ 5.7 $ 5.9 $ 6.3 $ 7.0 $ 7.5 $ 8.1 2004 2005 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F Size of the opportunity US wholesale mattress sales $ in billions Industry sales $M Premium segment (>$1,000) percent of total Non-innerspring percent of total Source: Industry
Slide 7: Integrated growth formula
7 Integrated growth formula 2015 Goals Net sales growth Key drivers • Increase awareness (brand & store) • Develop local markets • Advance product innovation • Gross margin rate improvement • Modest SG&A leverage as we invest in growth • Comp 10-12% • New stores + 5-8% $1.5B+ 15%+ NET SALES OPERATIN
Slide 8: Increase awareness
8 Increase awareness Broadened target customer Media investment & effectiveness Redefined target customer • Includes prime mattress buying years • Moving from need state to aspirational Advertising migration towards broader customer • New TV campaign • Targeted media placement • 30-54 yrs. old • $75
Slide 9: Brand awareness opportunity
54% 30% 21% 9 Brand awareness Awareness opportunity Awareness correlates to market share • Leading markets illustrate opportunity through local market development • Sleep Number unaided brand awareness below industry leaders – significant opportunity 21% 35% 5% 13% Leading Innerspring Sleep Number L
Slide 10: Local market development: optimize stores
10 Local market development Optimize stores Location • format • design • Relocate mall to non-mall - Increased flexibility and billboard for brand - 2 times square footage with similar fixed costs • Mall remodels/expansions • New design: 50% 90%+ of stores by 2015 • Store leverage - 2012 4-wall prof
Slide 11: Local market development: grow stores
11 Local market development Grow stores Fill-in national footprint • New store economics - Capital investment ~$350K - Inventory $30K - Payback 12-18 months - Average year 1 sales ~$2M 403 386 381 410 >500 2009 2010 2011 2012 2015E 2% 3% 8% 19% % Non-Mall Ending store count
Slide 12: Aggressive growth strategy
12 Aggressive growth strategy Initial 7 markets 13 large underdeveloped markets • Strategy - 13 markets – 1/3 of U.S. bedding sales - Objective: double market share in 3 years - Heavy-up local media and real estate optimization - Launched 4 in 2011 and 3 in 2012; 6 remain for 2013-2015 • Results to
Slide 13: Product innovation
13 Product innovation Comfort. Individualized. SM • Consumer insights driven • Exclusive DualAir™ technology • Complete sleep solution - Beds - Bedding collection - Bases • Robust product innovation roadmap
Slide 14: Acquisition – Comfortaire Corporation
14 Acquisition – Comfortaire Corporation Overview Strategic rationale • $15.5 million asset purchase – January 2013 • Funded by internally-generated cash reserves • 2nd largest adjustable air bed company - $10.5 million sales in 2012 • Strong intellectual property • Experienced team with shared pass
Slide 15: Unique business model: operating margin
15 Unique business model Operating margin Key drivers 4.4%^ 8.6% 12.2% 13.4%^ 15%+ 2009 2010 2011 2012 2015E ^Pro forma Operating Margin • Gross margin rate improvement - Product innovation - Operational efficiency • Modest SG&A leverage as we invest in growth - New stores/occupancy - Marketing to b
Slide 16: Unique business model: Adjusted EBITDA and cash
16 Unique business model Record Adjusted EBITDA Cash balance $ in millions, trailing-twelve months $ in millions • Operate with strong cash reserves • Self-funding growth ... #1 priority for cash • Maintain share count through stock repurchase program • No debt, strong balance sheet $76 $146 $76 $52
Slide 17: Sleep Well and Dream Big
17 Sleep Well and Dream Big
Slide 18: Sleep Number Bed Series Pricing (Queen Sets)
18 Appendix Sleep Number® Bed Series Pricing (Queen Sets): c3 c4 p5 p6 c2 Classic Performance Memory Foam m7 m9 $1,399 $1,699 $2,099 $2,599 $999 $3,299 $4,699 Innovation i8 i10 $3,299 $4,699
Slide 19: Management team
Andy Carlin SVP & Chief Sales Officer Sleep Number since 2008 Other experience: Gander Mountain, Kohl’s, Target 19 Kathy Roedel EVP & Chief Services & Fulfillment Officer Sleep Number since 2005 Other experience: GE Healthcare Shelly Ibach President & CEO Sleep Number since 2007 Other experience: Ma
Slide 20: Footnotes to financial reconciliation
20 (1) Reflects annual effective tax rate, before discrete adjustments, of 38.0% for 2009 and 34.7% for 2012 (2) In 2009, we expensed direct, incremental costs incurred in connection with a terminated equity financing transaction (3) In 2008, we established a $26.8 million valuation allowance agains
Slide 21: Adjusted EBITDA reconciliation
21 (trailing-twelve month basis) Adjusted EBITDA for 2009, 2010, 2011, and 2012 SELECT COMFORT CORPORATION AND SUBSIDIARIES Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) (in millions) We define earnings before interest, taxes, depreciation and amortization (Adjuste
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