Q3 2021 Sleep Number Corp Earnings Call
Okay.
Welcome to sleep Number's Q3, 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 if anyone has any objections you may disconnect at this time.
I would now like to introduce Steve <unk>.
Nice President of Finance and Investor Relations. Thank you you may begin.
Good afternoon, and welcome to the Sleep number Corporation third quarter 2021 earnings Conference call. Thank you for joining us.
I'm, Dave Schwantes, Vice President of Finance and Investor Relations.
With me today are Shelly ibach, our president and CEO and David Callen, Our Chief Financial Officer.
This telephone conference is being recorded and will be available on our website at sleep number of Dot com.
Please refer to the details in our news release to access the replay.
Please also refer to our news release for a reconciliation of certain non-GAAP financial measures and supplemental financial information included in the news release for the Navy discussed on this call the.
The primary purpose of this call is to discuss the results of the fiscal period. Just ended however, our commentary and responses to your questions may include certain forward looking statements.
These forward looking statements are subject to a number of risks and uncertainties outlined in our earnings news release and discussed in some detail in our annual report on Form 10-K, and other periodic filings with the SEC.
The company's actual future results may vary materially.
I'll now turn the call over to Shelly for her comments.
Good afternoon, and welcome to our 2021 third quarter earnings call My Sleep IQ score was 87 last night.
The value of our sleep number carpet to improve the health and wellbeing of society through higher quality sleep is evident in our record third quarter top and bottom line performance we.
We improved more than 225000 lives during the quarter.
Before sharing greater performance fee count I'll highlight three key takeaways for today's call.
First we continued to drive.
<unk> command and market share gains.
Our life changing.
Mark bed, including delivering our fourth consecutive third quarter, a double digit demand growth.
Second global supply chain shortages continue to challenge our business.
Gus how we navigated this disruptive environment in Q3, and the implications going forward.
And third robust demand and operating leverage are producing record financial results as we continued to advance key initiatives.
In our proven strategy to deliver sustainable profitable growth.
Third quarter results exceeded our expectations net sales were up 21% versus prior year and was 35% higher in 2019 in earnings per share were $2 20 to 10.
24% higher than our record 2023rd quarter and up 136% from 2019.
Our third quarter performance was particularly gratifying given the significant global supply chain disruption.
Our team's dedication to nasty and agility once again made a meaningful difference enabling fleet number to service the growing demand for our life changing 360 smart beds.
The year to date financial performance.
<unk> demonstrated the power of our advantaged business model and our team's stellar execution.
Earnings per share of $5 63 for the first nine months of 2021 is greater than our record 2020 total year results and more than double our 2019 annual EPS.
We are driving strong leverage across our business with a year to date net operating profit rate at 10, 6% up 200 basis points from prior year and up 430 basis points versus 2019.
Year to date cash from operations with a record $293 million with a trailing 12 month ROIC of more than 34%.
These results are being driven by heightened levels of consumer demand.
Deep affinity for our brand and clear operating efficiencies associated with our strategy business model and execution.
With our unique competitive positioning at the intersection of wellbeing and technology the worldwide shortages.
Semi conductors and other electronic components became a problem in Q3 and continue to be a challenge for us.
Our performance in this unpredictable environment is a testament to the years of investment in our vertically integrated exclusive direct to consumer business.
By utilizing multiple levers across our sourcing product design fulfillment sales and service operation we are mitigating the impact of the current supply chain constraints.
Our business model has also enabled us to chase demand fulfillment and manage supply even with minimal inventory.
And with our team's dedication to our mission, we have earned our customers' trust and built enduring relationships.
As a result, we generated impressive net operating profit leverage during the third quarter, despite input cost pressures and freight inefficiency.
Over the years, we have built strong partnerships with an increasingly diversified set of suppliers. These relationships have contributed to additional supply sources and help align our tight inventory with scheduled delivery.
Having to reduce the risk of electronic component shortages in the near term.
We have aggressively pursued a range of solutions, including work, we working directly with second and third tier suppliers employing market brokers <unk> and.
In other digital tools, and expedited shipping, including Airfreight and.
In addition, we have quickly qualified new component suppliers.
To fight alternative components and developed validated and applied product changes we.
Have shaped demand through promotional planning and our selling process.
Implemented additional price increases and thoughtfully managed customer delivery and expectations through increased communication home delivery staffing and overtime.
We have also partnered top to top with large global electronics and technology company for the near and long term integrating our work and Cherry resources as we strive for sustainable outcome.
We continuously advance key initiatives and use multiple levers within our proven strategy for consistent demand creation.
Our digital ecosystem to drive relevance and engagement, which leads to a lifelong brand relationships.
Automation and personalization are also improving the quality of our customers experience, which builds trust.
Both new and existing customers are actively engaged at record level.
Levers include digital storytelling to attract and engage NFL media and ads are driving record digital traffic.
In house digital capabilities to personalize message by media audience and platform and real time.
Sleep IQ technology advancements to strengthen engagement and improve.
Customers wellness.
And customer advocacy, which is driving record referral and repeat sales growth.
Results produced by our in our innovations and initiatives include four consecutive third quarters of double digit demand growth.
And to your demand growth versus 2019 of nearly 30% for the quarter as we lap last year's robust 16% demand increase.
Our teams are highly engaged and passionate about improving life for all our stakeholders.
In our annual engagement survey, our team's performance intensity, which is a measure of effort and their commitment intensity, which measured their intent to stay with sleep number four at best in class levels. This.
This shows up in how we continue to overcome the many challenges associated with this global pandemic.
We are targeting full year 2021 earnings per share of $7 25.
Reflecting our strong demand and leverage and the impact of supply chain constraints, we continue to employ and refined strategy that were effectively used in the third quarter to fulfill demand and deliver exceptional performance.
However, the timing of receiving electronic component.
Ultimately elongate when we can deliver our customer smart guys.
As a result, it is still possible that we will have a shift of expected fourth quarter deliveries into the first quarter of 2022.
Well global supply chain issue will likely continue through next year. There are indications that supply will improve from current levels.
Pliers have made stronger commitment for electronic component deliveries in Q1 than we've had in the back half of 2021.
In addition supplier scaling initiatives are expected to favorably impact their output as the year progresses.
Longer term the necessity of understanding the customer and their purchasing behavior is essential to supply chain management.
It's already a hallmark strength of sleep number.
Operational decisions and scenario planning are informed by real time data and analytics Digitization enables both immediate action and our ability to be more responsive in the future.
Moving from connected to intelligent beads and to and orchestration from manufacturing to customer delivery.
Regional Assembly allows fast action.
Our relationships with suppliers through multiple tiers are essential to weather disruption.
As we prioritize our customer centric supply chain design for a dynamic global environment, we are adding to <unk>.
Directors, Phil either an Angel Mendez will join our board effective January 2nd.
Very experienced in transformational global supply chain and purpose driven leadership will augment our board strategic capability.
We are leaning into our purpose and utilizing the levers of our vertically integrated business to.
To deliver sustainable superior value for all stakeholders.
I am grateful for our team's ongoing resilience and passion for improving life and extremely proud of their exceptional accomplishments, while navigating high uncertainty and rapidly changing conditions.
The strength of our demand drivers continue to support mid to high single digit demand growth in 2022, driven by our life changing innovation pricing action advancement of our digital ecosystem initiatives retail expansion, including 40 to 50 incremental.
New stores and online evolution.
Now David will provide additional financial details on our third quarter 2021 performance and Q4 outlook.
Thanks Shelly.
The fundamentals of our business remains strong.
Managing business risks amid global Covid disruption is bringing out the best and great companies like sleep number.
Our team's resilience and ingenuity are driving exceptional financial performance.
We embrace our common goal to improve lives through proven quality sleep.
The technology embedded in our 360 smart beds is driving strong and steady double digit demand growth now into our fourth straight year.
In fact, our demand creation has exceeded our net sales year to date by more than $50 million.
Our Q3, ending backlog was comparable to the balance at the end of Q2.
These booked orders provide confidence in future net sales.
Unfortunately, the electronics that enable our smart technologies and steady double digit demand growth are also creating uncertainty and fulfillment timing and cost.
While we believe these electronics supply constraints are temporary we know the highly differentiated life improving benefits of our smart beds are enduring.
Customers recognize that and are choosing sleep number.
Our record referral and repeat business engagement scores and low cancellation rates are all indicators of our customers' passion for sleep number innovations.
So what has changed.
The three supply challenges noted on the Q2 earnings call were resolved as expected.
Since August our teams have been working directly with two very large electronics vendors three layers beef and our supply chain. After they have roughly decommit it against our open purchase orders.
We recaptured some of that supply from them directly and some electronics through higher cost open market purchases.
These rapid actions enabled record weekly deliveries in Q3, and relieves pressure on deliveries previously expected in Q4.
To achieve our full year EPS target.
We need to deliver Q4 net sales of approximately $600 million to $610 million versus the $640 million in Q3.
The timing of electronics supply because support these deliveries has been misaligned versus our demand, sometimes resulting in longer delivery windows.
Like in Q3, our teams or clothing electronics supply gaps and reducing lead times.
Our teams are employing all the tenacity ingenuity and passion they applied to deliver extraordinary Q3 results to improve many more labs in Q4 and beyond.
Let's take a deeper look at that Q3 performance now.
Q3, net sales were up 21% versus record 2020 performance and up 35% over 2019.
Results exceeded the expectations, we outlined during our Q2 earnings call due to the resilience and problem solving by our teams.
For example, with new electronics shortages emerging in August we launched an alternate flex this base in just 30 days.
We rapidly validate this ultimate resins and electronic components employed integrated digital tools to schedule deliveries ahead of supply confirmation.
And levered efficiencies throughout our vertical business to more than offset significant cost inflation.
Q3 sales metrics reflect this performance with 15 15 points of one year growth from units and five points from ARU.
16 points of comp growth and five points from new stores and more than 11% of sales came from E com phone and chat versus about 7% historically.
Q3, net operating profit of $73 million or.
We're 11, 4% of net sales is 4% higher than last year, when we hadn't yet rebuild our infrastructure following COVID-19 cutbacks and 86% higher than 2019.
Since 2019, we have increased operating margin 320 basis points.
Q3, EPS of $2 22.
Also exceeded expectations for a 50% increase over 2019.
Coming in with earnings 136% stronger than two years back.
Year to date, we have delivered net sales of $1 7 billion.
Up 35% since 2019 with $100 million more net operating profits.
That's 24% two year incremental profit flow through.
Operating margin of 10, 6% is up 430 basis points since year to date 2019, while absorbing 30 basis points of gross margin pressures.
Rapid increasing input costs to buy and ship components and labor to produce and deliver our smart beds is pressuring results as seen in the 140 basis 0.2 year decline of our Q3 gross margin.
We are offsetting $140 million of annualized cost pressures with $140 million of annualized pricing actions, while continuing to benefit from leverage volume leverage and digital efficiency gains across the business.
For example, we have leveraged our year to date, selling and marketing cost 470 basis points versus 2019.
This derived from highly integrated growth drivers working synergistically to deliver year to date growth through both ARU and units up 4% and 28% respectively versus 2019.
Specifically digital tools and interconnections across functions leverage our marketing and retail resources to effectively to efficiently drive and process significantly more sales volume.
One proof point is the $3 7 million dollar average TTM sales per store, including E com up 29% since this point in 2019.
Another is that half of our comp stores generated more than $3 million in CCM sales through Q3.
The number of these highly productive stores is up to 90% in two years.
We ended the quarter with 632 stores and expect to end the year with about 650.
Investing in our innovation marketing and retail continues to drive value creation and provides steadiness and performance over time, while navigating temporary electronic component disruption.
These investments include direct spending through the P&L like the 72% two year acceleration and year to date RMB and through capital spend like the $49 million invested year to date to expand retail reach expand manufacturing and assembly capacity and to create <unk>.
Digital solutions that enable profitable growth.
Our 2021 year to date EPS of $5 63.
Is three times the $1 88 earned year to date, just two years ago.
Execution of our disciplined capital deployment strategy, offset 50 basis points of year to date, two year income tax rate headwinds with 17% fewer weighted average shares outstanding and lower net interest costs of more than $4 5 million.
After investing in the business and maintaining strong liquidity our final priority for capital deployment is investing in food number of shares.
With our strong performance and the value we see in sleep number we have repurchased $364 million of our stock year to date.
This nearly equals the $374 million repurchased.
We purchased during all of 2019 and 2020 combined.
Still we are maintaining a relatively conservative leverage stance and ended Q3 with a debt leverage ratio of two two times EBITDAR.
Longer term, we expect to operate with leverage of two five to three times EBITDAR.
Given the strong growth in the business and currently favorable banking conditions, we are opportunistically right sizing and extending our debt facility here in Q4.
We expect to increase our total facility by $200 million to 800.
Hundred million dollars.
With a renewed five year term and similar conditions.
Yes.
Using all our performance levers over the years has enabled us to navigate challenges while driving exceptional earnings expansion.
As we target EPS of $7 25 in 2021.
We will employ our strong demand generation to nation supply pursuits, and efficiencies across the business to deliver performance.
We operate the business for the long term and remain confident in its fundamentals.
We continue to expect longer term top line growth of mid to high single digits.
With twice that growth in EPS.
At this point operator, please open the lines for questions.
Thank you Sir we will now begin the question and answer session. If you have a question. Please press star one on your telephone keypad again.
<unk> one on your telephone keypad, please standby with compile the Q&A rosman.
Your first question comes from the line of Peter Keith with Piper Sandler Your line is open.
Thank you good afternoon, everyone.
Nice results here for the quarter.
We've got a couple of questions on the guidance for.
<unk> thousand 725, so it's kind of a subtle change, but you took out the words at least with regards to $7 25.
Seems like the demand trends are pretty strong. So it's kind of a two part question has there been any change in your demand expectations.
And as the removal of at least more a function of just some of the backlog and some of the potential carryover into 2022.
Yeah, Hi, Peter Thanks for the question absolutely. What you just described we certainly have sufficient demand and backlog to deliver a number higher than $7 25 for clearly constrained by the electronic supply so.
It is a timing issue.
We entered Q4 here with strong demand and that's after delivering four.
Second and third quarters.
Double digit demand again lapping the 16% growth here in the third quarter from 2020 with another double digit growth.
So we're bullish on our demand.
Q4 revenue imply that 600 to 610 I guess.
You have an estimate on like how much backlog would then carryover into 2022, you wouldn't be recognizing in the fourth quarter.
Peter that's a hard one to gauge Guy would say because our demand is very strong and.
We don't yet know, what that's going to actually tally up to be for the for the full year.
But I would say.
I highlighted that this year, we've added about $50 million net sales equivalents that haven't yet been delivered.
Where our demand exceeded our net sales.
That's in addition to what we talked about as we came into the year I would say probably in that order of magnitude of about $100 million.
Excess net sales equivalents that at some point are going to come through.
Okay, Alright thats helpful.
One more question.
You did.
Throw in a comment Shelley.
Caught my attention just on.
The 2022 do you expect demand growth of mid to high single digit.
So that would exceed the current sales estimates out there today.
And I'm guessing you'd probably have some pricing on top of that for sales growth would be more high single digit low double digit.
Could you give us maybe your some let me just say maybe unpack that a little bit help us understand why you are so enthusiastic about that level of demand growth as we look out the next year.
Okay.
Well, we had continued strength of demand and demand for our smart beds remains strong.
Just had the fourth consecutive quarter, we lapped the 16% growth here in Q3, and Peter we've been we've been advancing key initiatives every quarter since we transitioned to all smart beds and this drives a consistency.
Each quarter and it's around the engagement the digital ecosystem.
Ovation and we're really pleased with how Formula Inc.
In the ongoing strong demand and the in house capabilities in AI get that real time progression.
Helps us within the quarter and then we have clarity of the advancement of the initiatives each quarter.
Going back to what I said about 2022.
Thinking about the demand and.
Mid to high single digit growth.
For our 360 smart beds that includes innovation pricing the digitally ecosystem initiative, the retail expansion and online evolution.
Okay. So that makes sure that would include pricing within the mid to high <unk>.
Okay very good thanks for the clarification and the insight I appreciate it.
Absolutely. Thank you.
Your next question comes from the line of Bobby Griffin with Raymond James Your line is open.
Good afternoon, everybody. Thanks for taking my questions and congrats on a strong quarter and a very difficult supply chain environment.
Thank you Bobby.
I guess first I just wanted to touch on the electronics side of things that Youre talking about your beds or include a lot of technology in it and.
It's very common out there than electronics orders are happened, but what parts of the beds.
Is it just the adjustable basis or is it the motors and some of the other controls for the adjustable bladder what parts to help us visualize where on your products are getting hung up at.
Well the main the main challenge has been semi conductor chips and other electronic components associated with our smart beds and smart basis.
Okay. So both so inside the basins as well as some of the other smart bed components for just the acquisition itself.
That's helpful and then.
Dave I just want to clarify you mentioned the backlog comparable to <unk>, but on the balance sheet customer deposits down quarter over quarter and I know those don't include the financing side of the business. So it can get a little funky from different quarters, but.
Just to ask you directly did deliveries this quarter outpaced demand. So we actually worked down a little of the backlog.
No and Thats why I was.
Compelled to say that our backlog at the end of Q3 was comparable to Q2 because.
That's one of the dangers of making the assumption based on the.
Customer prepayments that number is fluctuates with the kinds of offers that we are providing the timing of when things happen. Both in terms of the orders and the delivery. So.
It's not a perfect.
Roxy for backlog.
Perfect. That's helpful. That's all I was afraid it by doing that math. So that's helpful to clarify and I guess, just lastly for me on when you kind of back into the implied EPS for <unk> and compare it to last year, obviously last year had an extra week 30 benefit.
There is clearly some pressure coming on gross margin, but when were looking side the sales and marketing side, what what is what's happening there is that still leveraging NPS flowing through as expected or is there. Another round are you stepping up investments in media or anything there in the fourth quarter to get the EPS to kind of shake out.
Where the guidance is implying.
Well last year, we did benefit from additional operating profit from the extra week and that was reflected in and how we adjusted out.
30.
<unk> from our total results from from last year.
We do we do expect some pressure on our gross margin rate.
In Q4.
That's temporary I think as we.
Balance out the cost pressures would be pricing actions that we've taken.
And the efficiency gains that we're getting what we're relying on is we're leaning into our efficiency gains.
Through the sales and marketing.
The rest of the P&L effectively to deliver strong overall performance, we expect for the full year is still consistent with what we how we started the year Ravi to deliver more than 300 basis points of net operating profit margin expansion versus 2019.
Okay I appreciate the details and let me sneak in an extra one and back to work during the fourth quarter.
Great. Thanks, a lot Bob.
And your next question comes from the line of Brad Thomas with Keybanc. Your line is open.
Hey, good afternoon, Shelley, David and Dave Thanks for taking my question.
Nice results and demand.
I wanted to ask that the guidance and gross margin.
Maybe first on the guidance just to clarify.
So.
Is the 725 that you are targeting does that align with the prior sales guidance actually if I remember correctly was.
<unk>, 35% growth versus 2016 is that how to back into that 725 number.
Yes, it is and on top of that I gave you. The <unk>. The 600 to 610 net sales for Q4 that that supports us getting to the 795.
Great great.
And David.
What.
Do you do you have line of sight to.
To the <unk>.
Components to hit that number today or is that in question or is it possible you may get more of that.
I know, it's still early in the quarter, but any more color on.
Your line of sight to hitting or beating that number would be of interest.
Well just like we saw in Q3.
If you'd asked me the same question at that point in time, we had no idea of what happened in harvest was going to happen and yet our teams.
We are resilient and found ways to overcome those challenges and got the supply we needed to deliver record results in Q3, including record deliveries.
For the last eight weeks of the quarter.
As we sit here today, there is some misalignment between our demand and the supply and we're solving that every single day, Brad but as Shelly highlighted in our call in her comments.
It's possible that some of those components could come too late in the quarter and then cause a shift in deliveries into Q1, we feel great about the expectations for components.
Next year relative to the back half here, but.
We are working every lever to get there.
That's really helpful color.
And then just at a high level could you share a little bit more insight into just how you think about sort of your product margins. Today I know your gross margin can have an element of leverage to it and the strong productivity of your stores can help you have a higher gross margin but.
But how are you thinking about product margin given we're seeing inflation.
In so many areas of the world right now.
Great question, Brad I love that because there are tradeoffs, we make all the time between for example financing and discounts and that affects different parts of our P&L and so if we give greater discounts then it affects our gross margin rate if we give greater final.
<unk>, it's also a closing mechanism and.
But that affects us in our operating expenses so.
In total we love what we're seeing with the business the fundamentals are very strong.
Selling process the marketing efforts. The innovations are all working together to drive people into the store into the onto the website around to the E com platforms.
And then converting that very high level. So all the way around really excited about the performance and fundamentals of the business.
Great very helpful. Thank you so much.
Yes, Thanks, Brad.
And your next question is from <unk>.
<unk> with UBS Your line is open.
Good evening tanks electric taking my questions. So just to clarify on the 600 to six of $10 million drink in your guidance for the fourth quarter.
So for you to achieve that that change.
Would you be able to achieve that range, even if the supply remains constrained as it is today.
Our windows supply have to improve for you tool to fix that.
Great.
Yes.
Was highlighting.
With my previous answer.
We have great line of sight to.
Every single day week in terms of deliveries.
And are working the levers to pull in some of that supply earlier into the quarter to support to support our deliveries. This is very similar to what we did in Q3 and had to do in Q3.
And.
Our teams are I have to give a shout out I mean working magic.
Finding different solutions and.
Keeping our customers are getting life, improving benefits of our series number smart beds into our customers' homes.
Okay.
And then on the EPS guidance.
735, it does seem like even ex.
Backing out the extra week, it seems like a little bit more pressure in the fourth quarter.
So are you, making it more cost inflation in the fourth quarter.
And if so.
What are the sources of those pressures.
Yes.
This is Kelly.
Highlighting.
The constrained pit.
The constraint we had in the fourth quarter, our deliveries due to the electronic supply short Hs.
Those constraints are constraining, our ability to deliver to our demand and our backlog certainly is sufficient for a much higher number in the fourth quarter.
The actual inventory is not so that's the constraint that you're seeing and in the fourth quarter, we're continuing to drive our demand of course being very focused on the long term.
And ensuring that our customers benefit from the life improving.
Benefits from the smart bed.
Moving into our demand drivers as you would expect us to.
Q4 overall value and.
Constrained on the supply and that's what we've taken some of the risk and moved.
The fourth quarter because of that over performance in Q3.
This is what we have to do yet in the fourth quarter to hit our 725 target.
Well, let me just add one more thing I don't know, whether youre, making comparisons only to 2020, but as I highlighted as it pertains to the Q3 comparison.
Last year was a was a year when we had taken significant cost cuts.
Post COVID-19 and we hadn't yet rebuilt our infrastructure.
Through Q3 and into Q4.
We expect operating profit margin expansion in Q4 versus 2019, just like we've done all year long.
And as we've said, we expect top and Bottomline performance increases over 2019 for each quarter of 2021.
So I hopefully hopefully that helps you.
Calibrating properly.
Yes that definitely helps thanks, a lot Chilean Dave and good luck with the rest of the year.
Yes. Thank you. Thank you.
Your last question comes from the line of Seth.
Awesome.
Wedbush Securities Your line is open.
Thanks, a lot and good afternoon, I just have to get all of them are color on two items that you guys mentioned, one the efficiency gains that European wholesale what are those specifically and whats community ability to drive them earlier than anticipated I presume youre not just volume based.
Well.
It starts with volume and creating more demand for your business as the <unk>.
Best way to generate leverage and we've been doing that we've been as I highlighted the.
Synergy synergies between our selling and marketing efforts are tremendous and being vertically integrated the way. We are we can share that those insights across those platforms digitally and engage with customers in a way because of that lifelong relationship we're driving.
Lot more volume with.
With a given set of resources.
I highlighted two specific examples pertaining to our store productivity the $3 7 million average sales per store per comp store, including E com.
Up 29% since 2019, and then having.
More than half of our comp stores with more than $3 million in sales that they are processing trailing 12 months.
That's incredible volume that's going to.
Those resources and so that's generating a significant amount of it.
Efficiency gains.
Okay.
And then secondly in terms of the price actions that you've mentioned to offset some of the cost pressures, what's the timing of those and.
Broad based loyalty.
They were across the product offerings and they have been there are three different pricing actions that we've taken during the year. One was in the spring one was in July and one we just took last week.
Got it okay, and just to recap relative to your prior guidance of 35% plus sales growth versus 2019 and 725 in earnings at least.
Going for those specific points, rather than seeing the upside the upside is less likely because of some of the dynamics in the environment that you are talking to now correct.
Well.
Yes, I mean, not because of demand there is plenty of demand.
And there is plenty of efficiencies in our business. It is just really dependent on the electronics supply and yet again I'm just going to make a comparison back to what we did in Q3.
<unk> has had similar kinds of challenges and delivered record performance. So.
The opportunity for us to deliver upside is still there.
Just feel like it's.
Pragmatic and appropriate for us to call it as targeting 725.
Understood. Thank you guys.
Okay. Thanks, a lot.
And that concludes today's question and answer session I will now hand, the conference back to the company for closing remarks.
Thank you for joining us today, we look forward to discussing our fourth quarter 2021 performance with you in February sleep, well and Dream Big.
Sure.
Ladies and gentlemen. This concludes today's conference call. Thank you for joining you may now disconnect have a great day.
Yes.
[music].
For the year.
Sure.
Okay.
Right.
Sure.