Welcome to Sleep Number’s Q4 and Full Year 2023 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 like to introduce Dave Schwantes, Vice President of Finance and Investor Relations. Thank you. You may begin.

Good afternoon, and welcome to the Sleep Number Corporation fourth quarter 2023 earnings conference call. Thank you for joining us. I am Dave Schwantes, Vice President of Finance and Investor Relations. With me today are Shelly Ibach, our Chair, President and CEO; and Francis Lee, our Chief Financial Officer. This telephone conference is being recorded and will be available on our website at sleepnumber.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 or that may be discussed on this call. 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 will now turn the call over to Shelly for her comments.

Good afternoon, everyone and thank you for joining our 2023 year-end earnings call. My SleepIQ score was 84 last night. While the consumer demand environment remains challenging for our industry, the swift actions we took to improve demand and reduce costs allowed us to make important progress in the fourth quarter. We are continuing to transform our operating model to improve our financial resilience through the broad-based restructuring actions we discussed with you last quarter. As we streamline our cost structure and strengthen our balance sheet, we are poised for accelerating growth as the mattress industry demand environment improves. Importantly, our long-term opportunity remains intact as we lead through this transformation. During today's call, I'll start with some observations on the industry and macroeconomic environment, then focus my comments on our performance in the three strategic comparatives for repositioning our business, which are competing effectively, restoring profit margins, and paying down debt. Following my remarks, Francis will provide further details on our 2023 financial results and 2024 outlook. Many of the macroeconomic challenges we discussed during our last call persisted in the fourth quarter. Low consumer sentiment, slower new home purchases, and elevated interest rates continued to pressure demand for our category. Additionally, consumer purchasing power continues its steady downward trend. We estimate that mattress units in 2023 were below 2015 levels and down more than 25% from their 2020 peak. Per capita spending on mattresses is also nearing historic lows, approaching levels not experienced since the 2008-2009 great recession. And although we are seeing some indications that the consumer environment may stabilize in the coming year, the mattress industry remains in a historic recession. Considerations like price and perceived value continue to drive consumer purchasing decisions, which remain highly responsive to external factors and events that are disruptive for…

Thank you, Shelly, and good afternoon. As we close fiscal year 2023 and have started the New Year, our teams have shown agility and diligence as we work to build a more durable operating model and greater financial resilience. As we navigated a pullback in demand for the industry over the last couple of years, the important actions we are taking will lead to a stronger foundation for our business, which will enable accelerating profitability as the industry backdrop improves. In my comments today, I will focus my remarks in three primary areas. One, review of our fourth quarter and full year results, two, progress we have made in our cost restructuring and impacts to our 2024 financial outlook, and three, key assumptions underlying our 2024 guidance. Let's move on to a review of our fourth quarter and full year results. Fourth quarter net sales of $430 million were down 14% versus last year. Demand for the quarter was down low single digits and slightly better than our expectations of a mid-single-digit demand decline. Year-over-year changes in backlog drove a majority of the net sales decline. Our fourth quarter gross margin of 56.6% was up 190 basis points year-over-year and included the benefit from pricing actions taken over the past 12 months and improvement in commodity prices. These benefits are partially offset by increased promotional offers aimed at budget and value-conscious consumers and fixed cost de-leverage from a year-over-year decline in delivered units. We also faced year-over-year gross margin rate pressure related to the mix of FlexFit smart adjustable bases as we had the full, good, better, best assortment of FlexFit smart bases in 2023. In 2022, the smart base portfolio was limited to higher margin product due to semiconductor chips constraints. We were ahead of plan with cost reduction…