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Sleep Number (SNBR)

Participants
David Schwantes Vice President, Finance & Investor Relations
Shelly Ibach President & Chief Executive Officer
David Callen Chief Financial Officer
Peter Keith Piper Sandler
Alessandra Jimenez Raymond James
Atul Maheswari UBS
Seth Basham Wedbush Morgan
Curtis Nagle Bank of America
Call transcript
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Operator

Welcome to Sleep Number's Q2 2021 Earnings Conference Call. All lines have been placed in a listen-only mode until the question-and-answer session. Today's call is being recorded. [Operator Instructions] I would now like to introduce David Schwantes, Vice President of Finance and Investor Relations. Thank you.

begin. may You

David Schwantes

Investor sleepnumber.com. welcome Please Callen, XXXX details also and to to our financial will us. the just this fiscal at Sleep of Corporation a call. the or telephone financial and being Finance refer Number am the our Shelly access to may is today Good our conference Chief results Ibach, conference to is release certain of call available Financial the news call. be supplemental of that for website quarter this President and of President earnings release The to Schwanes, information and joining and be With Thank news second primary on me our Dave are in David the ended. afternoon period CEO; on discuss Vice the included release replay. Relations. purpose non-GAAP our refer you Please recorded I and This for reconciliation in measures news discussed Officer.

over in earnings forward-looking release and and commentary certain may uncertainties XX-K Shelly include detail of results The call filings are These company's now for in in may a will and actual her forward-looking your statements outlined our vary questions our responses subject on our discussed risks to and to However, some to statements. number annual news with report the Form turn future periodic comments. other the SEC. materially. I

Shelly Ibach

XXXX SleepIQ was night. score to Good My afternoon XX and second quarter our call. earnings welcome last

smart society deliver individualized the beds life-changing and purpose, health is with Every night smart of long-term improve our sleepers. that benefits sleep on through SleepIQ with focused sleep. Number innovation Sleep company technology millions that effortless a higher-quality As and solution an well-being of XXX investments keenly

and are Number and smart to consumers activities continue we their health, for relevance. And travel increase their our demand entertainment XXX brand even broadening beds. consumers our exceptional deepening are prioritize we driving Sleep as As

unprecedented growth combined global supply with limited chain demand disruption deliveries. Our our QX

on of scale customers' contribute has our focus mission-driven value acceleration efficiency, our experience initiatives to that relentless stakeholder superior the led Our creation. to team's our capabilities, and increase key

As exceeding expectations full we EPS guidance. our XXXX year again of are raising a our internal result

Our with EPS at year week XXXX for least $X.XX our of new of of times and $X.XX $X.XX. XXXX outlook the EPS nearly compared excluding three full is XXrd

half model. integrated and first another advantages vertically represents and demonstrating power our benefits performance record the Our business sales of our of profit competitive

XXXX up for the Specifically, XXXX, was consumer beds reflecting versus smart demand an XX% more the acceleration than our of half in first in quarter. second

our material global from $X.XX generated by We over and up while up and since transitioning a fact of in we $X.XX of and shortages. a the XX% inflationary $XXX year-to-date XX%, exceptional the half $XXX delivered cash on as half ago labor operations our of were half sales, market to year average XX% for EPS million record XXXX trailing of a half and a was first our absorbing more than XX% grew half was continue to versus $X.XX XXXX. chain with disciplined from XXXX. that return quarters these realize In We first XX-month market first from to more compared was the capital capital profit results deployment. significantly and to first remains invested the up tremendous and Net supply value rate challenged impacts XX% million net from billion XXXX's of operating XXX% share. EBITDA for up XX% XX beds the accelerated grew XXXX. the XXX% to quarterly and our further outperforming of all $X XX% demand than sales growth first increasing ago, Net smart

vertically chain integrated customer component fulfillment we To to supply progress delivery addressing May our related the benefit four have weeks. with better accelerated manage in we inventory six effectively availability align to late ability business closely to our is in our made Working extended shortages. and across temporary Our significant model. windows of partners key weeks challenges demand, a with

now available First balance delivery weeks. three And the the delivery we dates of are for volumes robust expect year.

and strong customer Our conversion and metrics steady. remain

XX% strategic sleep substantial We and digital by of now message This in in emotional years is sales real and this storytelling reach; from that audience and and and engagement; amplified digital up across are at X% increases our; strategy in engagement. new these over are across our profitable realizing creating platform the Together in-house strategy while two XX-month our in sleep synergies and model; XX growth brand total driving two record store clearly key types, traffic culture, health is digital digital and ago. are capabilities media perpetuating benefit which demand average of ago, years online It for a now million development relevance touch months $X.X initiatives. on points. of with up And purpose, tailor per and time. synergies investment consumer strong sales value Trailing from our innovations; starts interest business levels sustainable XX% stakeholders. high-quality sales double-digit converting are our trailing phone consumer smart basis all ecosystem by we

increase wellness features daytime to with and engagement which link health well-being quality customers. sleep our SleepIQ Our

rate active ago. XX% year XXX Our usage smart from a is bed XX% over up monthly

This time approaching level is advocacy, is referral sales. Circle growth data data Denver sustainability having impact the repeat awake doctor sleep daytime have SleepIQ brand our recent my This treatments examples me of passionate of Columbus get and sleep. or by of root of And shared, Circadian and with I from on Without and able have of of better has Tracker. I of sleep It is exciting indicator my the not This to feature. ongoing flywheel. It Bill helps Here this net bedtime important trends favorite been adjust and XX% Inner to incremental been would feature sufferer drives issues. at the Colorado in technology and favorite known program are noticed provided our show drive my of is this a loyalty my by engagement voice We continuously sales in our resulting growth. the our cause routine benefits as and said, Rhythm my relevance of my also loyalty see in, the from initiatives share for performance. an to effects our clear to allergy refine two bolstered rewards, health Ohio innovation. energy. sleep brand the as invest Marta customers’ can which this test

some the Here XXXX. of are back highlights for half

We are our reliability The advancements, supply extending strengthen, digital capabilities across our responsiveness, data operations analytics. fulfillment, and including chain.

additional Edition which across we're effect new Limited our and entire efficiency in smart We Innovation experience took customer from temperature XX a the gains. to a net last balancing We're launching line half. benefit on Dallas week. campaign seeing with five approximately XXX already points price bed track ad the Sleep And increases back Number new of about technology. capturing against benefit contribute our by featuring of are health We just in final will of growth We're stores advancing and which note, introduced health. science we'll opener feature On Number's the a Buccaneers. will sleep Cowboys future into the research. an coming as NFL and easily sleep sleep to overall we introduce fleet quality In way extend health to more leadership Sleep months, the package link individual's The quarterback most are season supported the to robust Dak we paving campaign our Prescott a Brady media Tampa Tom be the during in NFL Bay date. brand

Research data-driven researchers, and and which is insights we database hours now only world's The potential long-term billion value informs build this of garnering progresses health our a identifying on of that sleep number like improving stakeholder The have month, of relevance, outcome cumulative longitudinal two meaningful and We new of our the science health data I've includes sleep at we sleep level. with the our solutions life. positive power a population the continue Last the benefit vertically of strengthens demonstrates potential increase in revolution the development sleep nearly also highlights based our the data. are to and innovative shows shared institutions. for and This and of are health integrated presented on loyalty studies further respiratory real-world impact model in sleep not illness. sleep our results the demonstrate for XX They the strategy brand partnership data health. understanding new to leading data, our sleep The value. business customer model. physicians

individualizing sleep unparalleled. of dedication customers' this mission and in on performance Their superior well well-being for is The our passion driver are extremely exceptional unwavering for team's growth. pace and lives positioned another are improving of by We is to for behind all of year long-term our our experiences. XXXX

Now, remainder of second provide the on details quarter XXXX. and additional for David will financial our outlook performance

David Callen

Thanks, Shelly.

and logistics suppliers QX been QX. component and Despite teams second manage including accelerating constraints consecutive quarter four They tirelessly expanding quarters Our have unit navigating records. pressures. output bottom to temporary and are in capacity velocity performance demand line labor escalated of while and and inflation working expedited broke this, top

net installation least now $X.XX shortages expect July. have at upside This demand will which QX. carrying Component Tier sales have marketing digital of suppliers additional experiential EPS COVID-driven growth. in Demand delayed our exceeded into of in XX% double-digit year the through of X growth now June supply. back production on continually and years forward third-tier affecting deliveries progressing driven shortages We average half limited their operations. consecutive at a two our teams lines and at innovations, our two and is from three temporarily has XXXX resolved, differentiated deliver Our momentum constrain retail output by delivery been supplier labor least XXXX. to

suppliers and gains. invested delivery in to delivery share XXXX, fleet double market home and to workforce and and rapidly expanded XX% Already production in working skill teams our Our support training, output more deliver capabilities. our significantly than continued we digital are capacity

third multiple support suppliers. extraordinary fourth strategy We support capacity offers geographically also have modular demand advanced growth and the resilient of to get tier ahead suppliers possible. wherever and second, distributed source for including from We are This partnerships even increased driving. greater flexibility supply of we plants

proximity demand growth has the led In fulfillment our Sustained network. prioritizes double-digit customers. logistics outbound to approach us to our of execution addition to sourcing, accelerate flexible

a XX eight centers distribution from total flexibility up plans delivery to next currently. six of evolved supported with by to distribution have from will by be assembly XX year, XX These currently. increase up centers, We approximately

to larger costs XX damage term actions while we DDCs. XX in the assembly analytics. improving envision opening data than carriers investing narrow XX footprint in These and ADCs and to as are reduce many waste, key use growing equipment, Longer to as We and this experience. truckload technology markets facilities higher less customer of output network and

of XXXX. Now I'll review and results provide brief expectations a for QX our financial

expediting remember and QX year. normally performance that case four quarter and resulting our smallest of not Demand profits. quarters last each First, breaking is operational sales have in growth the accelerated this That seasonally was record the lower with and materials results, labor were constraints, versus QX absorbed and and and $XXX XX% COVID-affected sales components. while labor on up of up versus inbound costs million we XX% XXXX, supply net inflation and XXXX. logistics QX

more $X sales of over new First including ARU and growth from the and grew comps of than XXXX, half growth first unit half and stores. XX% XX% growth X% billion both two-year net

first growth at the QX half Operating nearly net $XX We year both XX%. in profits versus records. expect and full million sales least to are XXXX million $XXX of of in continue

operating half QX demand and XX.X% half $XX points million of was vertical digital across input cost offset XXXX. than Accelerated business of incremental versus XXX the operating of pressures. first efficiencies First based the more basis up margin

in price million value-packed while products our across customers. We $XXX sleep are annualized activating deliver innovative continuing increases for to nearly solutions

inflation operating We to continue half, leverage our into two-year growth XXX than of lean efficiencies the expected gross and and our structure margin, Operational versus prioritize in the on our in Despite expansion drive more profit first vertically we of growth full basis driving media. XXXX operating year EPS XXX near-term we significant sales including the integrated as continue operating pressures to demand growth deleverage to while than drove XX basis points pressures. profits to XXXX efficiencies marketing in of drivers benefits of are stronger basis margin points operating employ and overcome expected points.

per speed operate and outcome for the comp technology years of sales teams innovation, in sales by million QX, with Our XX% million. to stores demand, is reached $X.X The in leveraging in exceeding illustrated XX% up $X lockstep drive TTM two and agility. store marketing

innovation enablers, R&D million. gross more basis margin half growth two-year infrastructure leveraged we offset investments points XX% in is expect leverage of XXXX. XX growth. R&D XX.X% invest for costs, also and spend to driving includes than half, investments points was continue We basis XX in XXXX, first G&A the pressures to and R&D absorbing our R&D. of half the favorably, In compares And XX.X% increased This QX, two-year up while first the nearly in G&A of We of which in XX.X% $XX half. Gross since cost incremental we first continue IT cost in expect of while incremental $XX XXXX. of XXXX, now the first million to headwinds. the margin

We behalf teams acting of service to and customers volume-based our are efficiencies, pricing and tenaciously on have actions digital taken delivering ensure levels. while

strategy, These weighted XXXX. earnings basis of delivering capital by $X.XX XXXX. over more the headwinds. long-term nearly was our the was EPS First lowered shareholder versus at first value which and of superior than including, half earnings X.X half while share of EPS of our XXX count the absorbing earned capital creation, $X.XX methodical That execution the our Deploying pressure in XXXX. first in average the efficiently two-year of achieved income tax efficient offset were points times drivers is half least, XXXX record through across XX%, all of $X.XX

continue bottom-line limited XXXX, XXXX QX of and expect we growth quarter to deliver each versus deliveries top be by will availability. supply While to

capacity demand high to of our We support to deliveries gains with expect supplier catch-up QX. robust in volume

the growth and quarter sales year. full about XX% For in net earnings EPS and in modeling purposes, exceptional fourth we and QX anticipate two-year

to, Turning $XX in prepayments In projects investing demand first capital and reflects, Sleep growth million, balance and $XXX of million and accelerated larger cash from generated we the cash our Customer of flows. Number $XXX stock. $XXX million million backlogs. sheet half record in operations

half. greater stores continue sales new approximately in XXX contribution from year-end to back by and expect We stores growth the

end debt in Sleep compared million X times. continues our $XXX to authorization leverage shareholder creation. X.X remains repurchases of our At be our value times of was QX Investing Our longer-term attractive of target EBITDAR, the ending times X.X stock. with of future for Number for QX, to

expected and $XXX operations, more above from generate XXXX. increase, million the expect of guidance performance further than cash to we With in

for us please Our liquidity, point, for deliver questions. and balance Session open the to sheet positioned, have and team's Question-and-Answer creation superior XXXX beyond. passion, balance the operator, well of value this At line

Operator

Piper of first Sandler. line [Operator question Instructions] the Our comes from Peter Keith of

Peter Keith

Hi. I'll commentary inflation just for made taking guess pressure. off with everyone. of it I Good my Thanks afternoon, some kick questions. you the and around pricing

pricing to Dave, $XXX And I of of is my million about, the of So, believe $XX said in inflation pressure X% back X% the million of half you math. year. which then,

increases incremental or when taking? basis, about price we're that of is wash, effectively to the is thinking half $XX that So, a year inflation pressure, a that million you're

David Callen

the previous just Hi, an QX we week. incremental relative started annualized price took, Peter. the expectations. number including that Thanks The of for through the And balance million the year, last in the to increases I million $XXX highlighted $XX and question. cost pressures is progressed

follow pieces. a cost So little up moving Are on not prices going equal? could the bit a if more up of or couple input the than I

David Callen

a timing There's Peter. difference

the deliver P&L. backlog costs some in we're of as the going So incremental of comes to we benefit out pricing that some the -- through the be before QX absorbing some of

for in included get the QX assumption year. those balance in -- X-year some then I of more That's later and we But EPS will think then delivered QX. the those pressure pricing So, I in and QX. expect in increases kick XX%, growth that cost highlighted then for the

Peter Keith

makes That sense... Okay.

Shelly Ibach

more the an than pricing All in on basis offset. would annualized

Peter Keith

you the the Very margin XXXX the points talked basis Okay. about And financial modeling since of good. improvement just half a question EBIT in XXX first of Got but another you. year.

now points guided the going You've for for back year XXX full basis to XXXX.

bigger seems pretty a improvement X-year inflation or notable down causing back that have Is step that in to implies off half. it it for sequential look the would expected? So pressures, drop I what's than the

David Callen

to operating this the answer. half year's the the your worth lapping a first lies or of Right. first in Peter, half the in at improvement just do XXXX in we And XXXX in There's you of Q -- drive hurdle in versus we're sequential efficiencies higher we more look back in back there if full second and continue leverage. that sales half half. deliver year of also We're operational than the as expecting a half

Peter Keith

Very good.

Okay, thanks much. very

David Callen

You bet.

Operator

line next Your question comes the Bradley KeyBanc. with Tom from of

Q –Unidentified Analyst

give taking more around perhaps quarterly weekend? the on average XX about things this I Thanks last recently and quarter month-by-month to I Davis, know Memorial a color little Hi, Brad. any you XX%. good or wanted for over around Day was your nuances are that on out, questions. for hoping start demand. played grew have the demand Shelly the and talking specifically afternoon, Andrew how us by there months on on could about you. growth our four But I if more a and basis July Thank is

Shelly Ibach

XX% Andrew. average transitioned smart quarters years over demand XXX clarification Well so Hi Sure. three the growth is for beds. since we our to ever XX

it in year. exactly So, to that important And lap the prior shows because was ability the we strong performance quarter. share last in that's what And to the also, from it's felt quarters. accelerating second four number happened been sustainability our the it for

really, we're And overall. very, about our drive able Again, double-digit the deeper growth will performance. initiatives back So with we the initiatives And to had opportunity in demand half of really And so lapping to this outlined. be the as and in very that pleased to year fourth double-digit here I our about half. accelerated quarter doing strong year-over-year with quarter. ability very the be here demand excited the second then therefore demonstrated got we we our into excited in the also lap we're back

Unidentified Analyst

I the shift that issues now? given give chain And higher-than-usual been sense And you from the wanted the facing. of size backlog the us you've Understood. customers? of orders have it. times you back cancellations to near-term of any right Got evidence a Could seen delivery to supply for extended

David Callen

part not. Well, the absolutely is easy last answer that to

their of our been are and beds. our We've demand And wait All very for benefits metrics, the steady. stable organization, changing creation. to a with of metric-driven demonstrating smart very consumers pleased we're XXX are life very willingness

know a we're to specific as far to XXXX been providing or least to demand the assumption of in the are that deliver is lot from year to committed that quarter about net need sales. EPS in of as of amounts. we one backlog, that's we'll As you at delivering two-year to avoid this $X.XX growth the next. on least What color We've the XX% going defer carryover talking based and at

Shelly Ibach

we for talked about and in strong And year. deliveries balance August deliveries of the -- the strong

Unidentified Analyst

great particular your others? if how so, my chain hear. to on, these That's challenges line last question how a are more product that and they is product Understood. -- And be mix? would impacting supply are than And impacting

David Callen

we the the No. place our deliveries production impacted thinking color QX of some shape There third additional will two, in somewhat to our limited of tier by QX went been with July. year overall provided that additional suppliers. how our the one in one had delay were equipment we're tier be about issues that of June I specific and suppliers. they and deliveries and challenges Those in have in resolved about that two then And

give all issues, a them with excited to challenges, shout of about through and demand problems. they've I COVID been have huge what having suppliers logistics supply So, out, extraordinary growth and working teams. chain our tirelessly because to deal work to we're is our

out shout So, congratulations.

balance it. guidance that that am year. killing progress confidence the gives the supports upsized the that I at we're of are making for our guys You And thrilled us

Unidentified Analyst

me. That’s Understood. Thank you all Thank you. both. for

Shelly Ibach

Andrew. Thank Great. you,

Operator

the Raymond comes question of next Our Alessandra line James. from Jimenez from

Alessandra Jimenez

Griffin. Good for Bobby afternoon. is our Alessandra This Jimenez Thank question. taking on for you

you the of the in on First any quarter backlog. impacted I terms color XQ? wanted chain much sales to Could in follow-up on how supply the give us

David Callen

we now four we as customer Well, demand six to available of guidance for fluctuations through to to drive three kinds stand and the the point the deliveries. to that's And weeks, as through down have at first the to balance the with we We're the strong we here at today, balance weeks continue going And our going very terms way to of are Shelly were expecting through inflate one be our year. strong continue those highlighted, date to as normal end in of year. all that's to the growth backlogs. backlogs expect go the our of year of even

Alessandra Jimenez

That's Okay. on versus quarter XX% a for the of in me then sales second profitability? XX% the follow-up represented impact about had And in in XQ. e-commerce step-down Did is penetration any e-commerce helpful.

David Callen

another and one they point about That's of our happy it's they it's her -- -- points can wherever XX% the as our But, touch basis was us. There's our versus than years to pleased in transact change highlighted we're now and a ago is to the really very touch the that it -- will remarks customers support you fluctuate on business it's thing with great X%. we're year. or the percentage historically want two however year-to-date is to Shelly a been. proportion through through it what want prepared shop substantially go quarterly higher

Shelly Ibach

to from ago. two trailing Yes, XX-month X% a basis years XX% on compared

good total. you one more of online. $X.X a benefits we're we look driving we generated we trailing exclusive per at about And And number than $X We're distribution. months. looking XX track our the on level store. now nearly in million. productivity highlighted, gives direct-to-consumer of So stores It's are I million the averaging that in on so excited XX sustainable of and also average as are over And that at with the that stores

us profitable as through revenue very or put assets. we volume is this continue of our this to So level yeah, for

Alessandra Jimenez

the of second Thank best That Perfect. helpful. half. luck very is Okay. you and on

Shelly Ibach

Thank you.

Operator

with next line of Your comes the Maheswari from Atul question UBS.

Atul Maheswari

the questions. did to the And go done or four were in a or taking are my weeks like the color from essentially, on component the Can more from what's to what it then shortfalls is impacted? Good be been start more a the times for forward, further to get things weeks? progressively Thanks evening. term? to And you components back lot expecting volatile provide near here, problems when bit on three improve little you to lead six going

David Callen

in the our question strain have We quarter. Thanks some Atul. and deliveries the our the specific supply we you're in why progress expand challenges then When been our June our with fulfillment that for And Those capabilities. had said I the of in late been radically impacted making deliveries shortages supplier happened highlighted that's going And two to growth the of to labor suppliers and that some that's been capacities availability COVID-related QX. I delivery driving resolved. one accelerated it's for But that July. in managing have demand challenges driving, to that's been we're kinds constrain earlier, chain we've excited bound about we've your through. of as some what

very year. on with the in be deliveries said, to strong starting August track going balance So through as we're I the of

Atul Maheswari

as question, demand also reporting Shelly, X% a backdrop growth. less Okay. is strong my the double-digit and of numbers release This growth are in very competitors strong or your And you all over very some against then range. even follow-up of in the quoted population some

meaningful b, might And that risk worry? once way So and be when you worry think the if environment you since overall normalizes? that do the that the unit plays forward yourselves that a, of demand that periods do from you So this for in future for a risk industry pulling is a a out? trends is some could drop level off expansion

Shelly Ibach

start have beds. to Well, moving smart with Atul, the I'm to pointing creation created we by to Sleep demand Number all going at

the quarterly three – that last average growth an delivered we've years of XX% quarters growth. So over demand XX demand of

their that that and are the improving So why quarters differentiated sleep absolutely, we've product one's focused industry performance. lives a with wellness. trends. and very improves have accelerated been and And We proven health And people's you is sell creating overall was leader saw these innovation product our before last in sleep. quality that on this is the being we truly a four

years sleep trends to that consumer ago. we also how and higher their improving have is so one gravitating health impacting adapting services a And a the their the a and and ours. purpose the meaningful that way like understanding are third in well-being society. and quality making see caring trends those include anticipated that about consumer this health more we and and products digital in important of difference And really time through sleep and at purpose well-being is brands And our contributing of to society a health,

of repeat That's So them we've continuing forward. move for all Sleep Number. I levels continuously in to we favor perpetuates we those and initiatives referrals created, flywheel sustainable. trends as existing sales. We about this are and Numbers' then digital the Sleep see that this work that that higher of And talked engagement in our created, ecosystem customers that drives

sales to our leads and repeat sustainability of overall. in XX% nearly now and have referrals We

Atul Maheswari

luck the you the with Got and year. Thank of it. rest good

Shelly Ibach

Thank you, Atul

Operator

from with comes line Wedbush. question Basham the Next of Seth

Seth Basham

some these capacity, what and and pull number a quarterly is your delivery good question Thanks afternoon. around that assuming production have lot is My days? and you shortages,

David Callen

a number surrounding specific primarily or in back to the here expect up somewhat production providing into we that QX. were just the half in QX What delivery. in is we And that to will month of couple going June, not in catch we we're say get our of impacted weeks. by Seth, a

Shelly Ibach

come. We're output that work in accelerating of we think to And pace track. and capacity expand on support in the we're months I demand to initiatives ahead the that our well years of the other and and the highlighted is doing our positioned been able and our feel add really acceleration regard to quarters and we've that be to

David Callen

Seth got, doing we're that challenge. constraints our extraordinary to things, ability And are guess I really be right to things Just demand all to you're we've have if we to add would overcome. not that's doing. about up that that us question temporary though, worried the keep the with you the These expect

demand key so of both as creation support at have have we suppliers forward. plenty doubling multiple extraordinary that and components we've capacity capacity We sides, go been on we to

Seth Basham

for trend relates to the demand you are on half the XX% XXXX, three or last year-over-year than creation more it commented demand of second expecting As less you've years? growth that that

David Callen

expect we lot activities talking There year in strong to are to we're up incremental double-digit growth. highlighted in against the now a performance. continue of about half, the prepared here her back Well, just remarks fourth drive that of the Shelly elements

grows in XX% trend that rate excuse quarter same – up QX, been we've And QX. had XX% then pace what about as to so talking whether it been or the the at the to first went me,

when to the we significant on acceleration is percentage see of QX was the XX%. it's basis one dollar can back rate pretty talk back the the a up it's quarters now so a different. on and about half way But That of You basis. acceleration, all XXXX, smaller

So be quarters is to of going terms in dollars. of one our largest now QX

basis, So of it's to less. rate going course a on be

Seth Basham

Got increases it. price the million. regarding of And my last $XXX question

of have been implemented First they all time? this at point in fully

David Callen

did the we you last worth. $XX to in $XXX the that remember annualized we – And to million some Yes, week. we then million did last incremental put quarter about get

Seth Basham

growth any elasticity weigh Got because of price of to on the it. And do demand you increases? expect your demand

Shelly Ibach

and performance. points innovation process to together those financing of sales navigate teams We to advantages those our between our and of is be Yes, so optimize between and we can unique is and price one this able work selling increases. of This model all our marketing don't. closely where and and discounts

increases of the back contribute in to a half. price in growth do So ARU three expect good we our points

Seth Basham

months been any facing you not certain price these demand case to did wait price the for long now. increases the number in increases? take you've that's areas a from inflation of business destruction If you're so expecting of Why and

Shelly Ibach

on we're obviously -- point so model about have operating focused XXX business the over basis of growth the operating our profit in on with and with focused Seth years. been growing doing first Yes. last profit half two here

to it value we had back half this to like have model. pricing right we so our and overall And per and lines pricing take the for still also here we $XXX that introduce half for in and first we the was beyond to elasticity in some attach adds as power the that into the the head to And customer. us we time

Seth Basham

Understood. Thank you.

David Callen

are hey, that operating and add -- to is just and share will add let to I on expansion EPS one gains. growth just And Seth me market on profit focused we

to that and drive We're trying superior not game trying to and to do operating for pricing EPS And to margin profits is share trying best path and we the just our drive that is so growth. to take execute. cover value create And to the think our shareholder stakeholders. shareholders take we're rate continue gross our

Seth Basham

Understood.

Shelly Ibach

combination a Seth. everything after it. all going It's of of We're

Operator

question is… next your And

Seth Basham

Thanks.

Operator

apologies. Your next I’ll question -- just

Curtis Nagle next from the Your Bank of of question with line America. comes

Curtis Nagle

Thanks evening. much. Good very

X%. be issues XQ. little Just around the light Totally chain margins dampening wanted margins. I to XQ get sales on know looked a focused supply But don't considering from

issues. chain historic the between much terms still levels in had You volumes. differential XQ, sales were had quarters they two sort In I of of overall a supply higher. levels. well there's realize you above But

pricing? and And having I not terms real what the the S&M of takes all added puts we the whole about it think cost the are of how sales? for rate in should So guess and year just Is here?

David Callen

Yes.

sales normal. QX lighter you and seasonally in that's highlighted Curtis. think it, I are The

high. exceptionally were these However,

quarter. You it's of in in continue of in backlog mind, much don't remember, end seeing we is tied in at not quarter. the drive we very And the at keep usually had what our Part performance you're all money the to we somewhat strong demand. and make up QX

service in that, delivered here paid we in As for gets some of we've QX the and that year. later it

element our an that's of So model.

very one basis, rate a at of quarterly little can on that looking So a on be quarter, looking a at the bit misleading. it it's --

at the over in years Looking It's basis point half. sense. operating lot the two a first profit way versus XX.X% on basis And first profit us least it of in the a improvement points expansion That's toward XXXX makes full more period XXX margin XXX at of half. operating year. ago time, longer gets it well a our for

last continuing year. carrying So led to ever the half we digitally efficiencies since are carry of operating forward the we've that been back

Curtis Nagle

sales of marketing lines I on then year think for the and about the if just that? sales percentage And

David Callen

Curtis. Could sorry I'm you?

Curtis Nagle

the for how lines should full marketing and in that? of of terms about sales The percentage we Yes. year sales, think

David Callen

to drivers. drivers, end Yes. into We're to our of near use growth our continue levers. to our growth going going lean We're all

the But, to have that actually those retail through additional in to having stores. to half, with depreciation delivering costs to going leverage our back layer -- significant we marketing. highlighted, some and for them. it's associated going the line, I while our higher contribution overall in as we're as media staffing yes, be our But delivering by sales sales come As in and there's delivered, be stores, going we more growth

the of points costs a headwinds XXX day, focus absorbing at basis, here the in basis while So end operating needs be incremental of least really on XXXX. ton and at a longer-term profit margin, to of the

deliver teams we're really they're with $X.XX this the that to year. we're and on pleased pace So in how at least and excited EPS performing

Curtis Nagle

a as Okay. to the have just things, just increases that orders, you're follow-up, just or I putting but is XQ, you going the say or just quick flow through did that things? mishear are that not slow through may misheard to of kind due And to I price did

David Callen

was not will Yes. we I two sometimes three to get what Thanks week, takes saying that weeks took five that's that the be recognized as just That's those for at products when weeks I delivered, last meant. those it weeks, that, clarifying, increases or higher price four revenue just price. if or Curtis.

Curtis Nagle

a you. your appreciate makes Okay. All more Thank That sense. I course. of right. insight, lot

David Callen

Okay.

You got it.

Operator

Thanks. And there this any there closing time. more at are Are no remarks? questions

David Schwantes

our dream XXXX third and today. in us quarter Sleep discussing October. to well joining you forward for look big. you We with Thank performance Yes.

Operator

participating. you concludes for conference today's This call. Thank

may disconnect. now You