Somnigroup International Inc. Reports First Quarter Results

- First Quarter 2025 Net Sales Growth of 35%
- Strong First Quarter Cash Flow from Operations of $106 Million

DALLAS, May 8, 2025 /PRNewswire/ -- Somnigroup International Inc. (NYSE: SGI, "Company") announced financial results for the first quarter ended March 31, 2025 and revised financial guidance for the full year 2025.

On February 5, 2025, the Company completed its previously reported acquisition of Mattress Firm. The Company's 2025 first quarter financials include Mattress Firm's operations for the period February 5, 2025 through March 31, 2025 (the "stub period").

FIRST QUARTER 2025 FINANCIAL SUMMARY

• Total net sales increased 34.9% to $1,604.7 million as compared to $1,189.4 million in the first quarter of 2024, primarily driven by the inclusion of $593.7 million of Mattress Firm sales for the stub period, offset by the accounting elimination of $130.1 million of sales from the Tempur Sealy North America segment to the Mattress Firm segment during the stub period.
• Gross margin was 36.2% as compared to 39.9% in the first quarter of 2024. Adjusted gross margin⁽¹⁾ was 42.2% as compared to 40.1% in the first quarter of 2024.
• Operating income was $13.2 million as compared to $131.5 million in the first quarter of 2024, primarily driven by costs during the quarter related to the Mattress Firm acquisition. Adjusted operating income⁽¹⁾ was $182.8 million as compared to $149.4 million in the first quarter of 2024.
• Net loss was $(33.1) million as compared to net income of $76.3 million in the first quarter of 2024. Adjusted net income⁽¹⁾ was $97.0 million as compared to $89.7 million in the first quarter of 2024.
• Loss per diluted share was $(0.17) as compared to earnings per diluted share ("EPS") of $0.43 in the first quarter of 2024. Adjusted EPS⁽¹⁾ was $0.49 as compared to $0.50 in the first quarter of 2024.

KEY HIGHLIGHTS

Company Chairman and CEO Scott Thompson commented, "Our results this quarter both reflect the transformational acquisition of Mattress Firm and highlight our ability to navigate a weak global market. All of our business units, domestically and internationally, successfully made progress on their growth opportunities as we leverage the core strengths of our business, including scale, operational flexibility and manufacturing capabilities. I continue to be impressed by our people, all around the world, as they focus on execution and taking care of our customers to deliver share gains and efficient cost management across the Somnigroup enterprise. Everyone in the organization has stepped up to quickly advance our near and longer term initiatives to continue delivering value to shareholders."

Business Segment Highlights

The Company's business segments include Tempur Sealy North America, Tempur Sealy International and Mattress Firm. Corporate operating expenses are not included in any of the business segments and are presented separately as a reconciling item to consolidated results.

Tempur Sealy North America net sales were impacted by the accounting elimination of $130.1 million of sales to Mattress Firm for the stub period. Net sales decreased $194.9 million to $706.2 million as compared to $901.1 million in the first quarter of 2024. Net sales through the wholesale channel decreased $192.4 million to $584.5 million as compared to the first quarter of 2024, primarily driven by a 16.7% decline from this accounting elimination of $130.1 million and an 8.0% decline from continued macroeconomic pressures impacting U.S. consumer behavior of $62.3 million. Net sales through the direct channel decreased $2.5 million, or 2.0%, to $121.7 million as compared to the first quarter of 2024.

North America gross margin declined 340 basis points to 34.0% as compared to 37.4% in the first quarter of 2024. Adjusted gross margin⁽¹⁾ improved 760 basis points to 45.3% as compared to 37.7% in the first quarter of 2024. The improvement was primarily driven by the elimination of sales to Mattress Firm for the stub period, operational efficiencies and favorable mix. These improvements were offset by operating expense deleverage and commodity cost inflation.

North America operating margin was 5.7% as compared to 14.9% in the first quarter of 2024. Adjusted operating margin⁽¹⁾ improved 190 basis points to 17.2% as compared to 15.3% in the first quarter of 2024. The improvement was primarily driven by the improvement in gross margin, partially offset by investments in advertising.

Tempur Sealy International net sales increased 5.7% to $304.8 million as compared to $288.3 million in the first quarter of 2024, primarily driven by the success of new product launches. On a constant currency basis⁽¹⁾, International net sales increased 7.7% as compared to the first quarter of 2024. Net sales through the wholesale channel increased $5.3 million, or 4.9%, to $114.2 million as compared to the first quarter of 2024. Net sales through the direct channel increased $11.2 million, or 6.2%, to $190.6 million as compared to the first quarter of 2024.

International gross margin improved 130 basis points to 49.0% as compared to 47.7% in the first quarter of 2024. The improvement was primarily driven by decreased product launch costs.

International operating margin improved 130 basis points to 16.8% as compared to 15.5% in the first quarter of 2024. The improvement was primarily driven by the improvement in gross margin.

Mattress Firm net sales were $593.7 million for the stub period. All Mattress Firm sales are reported through the direct channel.

Mattress Firm gross margin was 32.2% for the stub period. Adjusted gross margin⁽¹⁾ was 35.1% for the stub period.

Mattress Firm operating margin was 1.1% for the stub period. Adjusted operating margin⁽¹⁾ was 7.2% for the stub period.

Corporate operating expense increased to $85.0 million as compared to $47.7 million in the first quarter of 2024, primarily driven by costs related to the acquisition of Mattress Firm. Adjusted operating expense⁽¹⁾ was $32.8 million as compared to $32.9 million in the first quarter of 2024.

Consolidated net loss was $(33.1) million as compared to net income of $76.3 million in the first quarter of 2024, primarily driven by the acquisition of Mattress Firm. Adjusted net income⁽¹⁾ increased 8.1% to $97.0 million as compared to $89.7 million in the first quarter of 2024. Loss per share was $(0.17) as compared to earnings per share of $0.43 in the first quarter of 2024. Adjusted EPS⁽¹⁾ decreased 2.0% to $0.49 as compared to $0.50 in the first quarter of 2024.

The Company ended the first quarter of 2025 with total debt of $5.1 billion and consolidated indebtedness less netted cash⁽¹⁾ of $5.0 billion. Leverage based on the ratio of consolidated indebtedness less netted cash⁽¹⁾ to adjusted EBITDA⁽¹⁾ was 3.51 times for the trailing twelve months ended March 31, 2025.

Financial Guidance

For the full year 2025, the Company revised its expectations for an adjusted EPS⁽¹⁾ range of $2.30 to $2.65. This contemplates the Company's current sales outlook, which includes approximately 11 months of expected Mattress Firm operations, net of intercompany sales, and the previously announced divestiture of Sleep Outfitters and 73 Mattress Firm stores, which closed on May 1, 2025.

The Company noted that its expectations are based on information available at the time of this release, and are subject to changing conditions and risks, many of which are outside the Company's control, including the possible imposition of new tariffs or retaliatory tariffs, increases in existing tariffs and other changes in trade policy and regulations, and the resulting uncertainty of the macroeconomic environment. The Company is unable to reconcile forward–looking adjusted EPS, a non–GAAP financial measure, to EPS, its most directly comparable forward–looking GAAP financial measure, without unreasonable efforts, because the Company is currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact EPS in 2025.

Dividend Declared

The Company's Board of Directors declared a quarterly cash dividend of $0.15 per share, payable on June 5, 2025, to shareholders of record at the close of business on May 22, 2025.

Prior Period Recast

Prior period information on the condensed consolidated statements of (loss) income has been recast to conform to the current period presentation for the reclassification of certain costs from selling and marketing expenses to cost of sales.

Conference Call Information

Somnigroup International Inc. will host a live conference call to discuss financial results today, May 8, 2025, at 8:00 a.m. Eastern Time. The call will be webcast and can be accessed on the Company's investor relations website at investor.somnigroup.com. After the conference call, a webcast replay will remain available on the investor relations section of the Company's website for 30 days.

Non-GAAP Financial Measures and Constant Currency Information

For additional information regarding EBITDA, adjusted EBITDA, adjusted EPS, adjusted net income, adjusted gross profit, adjusted gross margin, adjusted operating income (expense), adjusted operating margin, consolidated indebtedness and consolidated indebtedness less netted cash (all of which are non-GAAP financial measures), please refer to the reconciliations and other information included in the attached schedules. For information on the methodology used to present information on a constant currency basis, please refer to "Constant Currency Information" included in the attached schedules.

Forward-Looking Statements

This press release contains statements that may be characterized as "forward-looking," within the meaning of the federal securities laws. Such statements might include information concerning one or more of the Company's plans, guidance, objectives, goals, strategies, and other information that is not historical information. When used in this release, the words "assumes," "estimates," "expects," "guidance," "anticipates," "might," "projects," "plans," "proposed," "targets," "intends," "believes," "will," "contemplates" and variations of such words or similar expressions are intended to identify forward-looking statements. These forward-looking statements include, without limitation, statements relating to the Company's expectations regarding the Mattress Firm acquisition, expectations regarding post-closing supply agreements, future performance, integration of acquired companies with our business, the Company's expected quarterly results, full year guidance and outperformance relative to the broader industry, the Company's quarterly cash dividend, the Company's expectations regarding geopolitical events (including the war in Ukraine and the conflict in the Middle East), the imposition of new tariffs or retaliatory tariffs, increases in existing tariffs and other changes in trade policy and regulations, loss of suppliers and disruptions in the supply of raw materials, the macroeconomic environment including its impact on consumer behavior, foreign exchange rates and fluctuations in such rates, the bedding industry, financial infrastructure, adjusted EPS for 2025 and subsequent periods and the Company's expectations for sales and adjusted EPS growth, product launches, expected hiring and advertising, capital project timelines, channel growth, acquisitions and commodities outlook. Any forward-looking statements contained herein are based upon current expectations and beliefs and various assumptions. There can be no assurance that the Company will realize these expectations, meet its guidance, or that these beliefs will prove correct.

Numerous factors, many of which are beyond the Company's control, could cause actual results to differ materially from any that may be expressed herein as forward-looking statements. These potential risks include Mattress Firm's ongoing operations; the ability to successfully integrate Mattress Firm into the Company's operations and realize synergies from the transaction; the possibility that the expected benefits of the acquisition are not realized when expected or at all; general economic, financial and industry conditions, particularly conditions relating to the financial performance and related credit issues present in the retail sector, as well as consumer confidence and the availability of consumer financing; the impact of the macroeconomic environment in both the U.S. and internationally on Mattress Firm and the Company; uncertainties arising from national and global events; industry competition; the effects of consolidation of retailers on revenues and costs; and consumer acceptance and changes in demand for Mattress Firm's and the Company's products and the factors discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024. There may be other factors that may cause the Company's actual results to differ materially from the forward-looking statements. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.

About Somnigroup International Inc.

Somnigroup (NYSE: SGI) is the world's largest vertically-integrated bedding company. We are dedicated to improving people's lives through better sleep. With superior capabilities in design, manufacturing, distribution and retail, we deliver breakthrough sleep solutions and serve the evolving needs of consumers in more than 100 countries worldwide. We achieve our mission through our fully-owned businesses, Tempur Sealy, Mattress Firm and Dreams. Our asset portfolio includes the most highly recognized brands in the industry, including Tempur-Pedic®, Sealy®, Stearns & Foster® and Sleepy's®, and our global omni-channel platform enables us to meet consumers wherever they shop, offering a personal connection and innovation to provide a unique retail experience and tailored sleep solutions.

We seek to deliver long-term value for our shareholders through prudent capital allocation and rigorous management of our businesses. We are guided by our core value of Doing the Right Thing and committed to our global responsibility to protect the environment and the communities in which we operate. For more information, please visit www.somnigroup.com.

Investor Relations Contact:

Aubrey Moore
Investor Relations
Somnigroup International Inc.
Investor.relations@somnigroup.com

Summary of Channel Sales

The following table highlights net sales information, by channel and by business segment, for the three months ended March 31, 2025 and 2024:

SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(in millions, except percentages, ratios and per common share amounts)

The Company provides information regarding adjusted net income, EBITDA, adjusted EBITDA, adjusted EPS, adjusted gross profit, adjusted gross margin, adjusted operating income (expense), adjusted operating margin, consolidated indebtedness and consolidated indebtedness less netted cash, which are not recognized terms under GAAP and do not purport to be alternatives to net income, earnings per share, gross profit, gross margin, operating income (expense) and operating margin as a measure of operating performance, or an alternative to total debt as a measure of liquidity. The Company believes these non-GAAP financial measures provide investors with performance measures that better reflect the Company's underlying operations and trends, providing a perspective not immediately apparent from net income, gross profit, gross margin, operating income (expense) and operating margin. The adjustments management makes to derive the non-GAAP financial measures include adjustments to exclude items that may cause short-term fluctuations in the nearest GAAP financial measure, but which management does not consider to be the fundamental attributes or primary drivers of the Company's business.

The Company believes that exclusion of these items assists in providing a more complete understanding of the Company's underlying results from operations and trends, and management uses these measures along with the corresponding GAAP financial measures to manage the Company's business, to evaluate its consolidated and business segment performance compared to prior periods and the marketplace, to establish operational goals and to provide continuity to investors for comparability purposes. Limitations associated with the use of these non-GAAP financial measures include that these measures do not present all of the amounts associated with the Company's results as determined in accordance with GAAP. These non-GAAP financial measures should be considered supplemental in nature and should not be construed as more significant than comparable financial measures defined by GAAP. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies. For more information about these non-GAAP financial measures and a reconciliation to the nearest GAAP financial measure, please refer to the reconciliations on the following pages.

Constant Currency Information

In this press release the Company refers to, and in other press releases and other communications with investors the Company may refer to, net sales, earnings or other historical financial information on a "constant currency basis", which is a non-GAAP financial measure. These references to constant currency basis do not include operational impacts that could result from fluctuations in foreign currency rates. To provide information on a constant currency basis, the applicable financial results are adjusted based on a simple mathematical model that translates current period results in local currency using the comparable prior corresponding period's currency conversion rate. This approach is used for countries where the functional currency is the local country currency. This information is provided so that certain financial results can be viewed without the impact of fluctuations in foreign currency rates, thereby facilitating period-to-period comparisons of business performance.

Adjusted Net Income and Adjusted EPS

A reconciliation of reported net (loss) income to adjusted net income and the calculation of adjusted EPS are provided below. Management believes that the use of these non-GAAP financial measures provides investors with additional useful information with respect to the impact of various adjustments as described in the footnotes at the end of this release.

The following table sets forth the reconciliation of the Company's reported net (loss) income to adjusted net income and the calculation of adjusted EPS for the three months ended March 31, 2025 and 2024:

Adjusted Gross Profit, Adjusted Gross Margin, Adjusted Operating Income (Expense) and Adjusted Operating Margin

A reconciliation of gross profit and gross margin to adjusted gross profit and adjusted gross margin, respectively, and operating income (expense) and operating margin to adjusted operating income (expense) and adjusted operating margin, respectively, are provided below. Management believes that the use of these non-GAAP financial measures provides investors with additional useful information with respect to the impact of various adjustments as described in the footnotes at the end of this release.

The following table sets forth the reconciliation of the Company's reported gross profit and operating income (expense) to the calculation of adjusted gross profit and adjusted operating income (expense) for the three months ended March 31, 2025.

The following table sets forth the reconciliation of the Company's reported gross profit and operating income (expense) to the calculation of adjusted gross profit and adjusted operating income (expense) for the three months ended March 31, 2024:

EBITDA, Adjusted EBITDA and Consolidated Indebtedness less Netted Cash

The following reconciliations are provided below:

• Net income to EBITDA and adjusted EBITDA
• Ratio of consolidated indebtedness less netted cash to adjusted EBITDA
• Total debt, net to consolidated indebtedness less netted cash

Management believes that presenting these non-GAAP measures provides investors with useful information with respect to the Company's operating performance, cash flow generation and comparisons from period to period, as well as general information about the Company's leverage.

The Company's credit agreement (the "2023 Credit Agreement") provides the definition of adjusted EBITDA. Accordingly, the Company presents adjusted EBITDA to provide information regarding the Company's compliance with requirements under the 2023 Credit Agreement.

The following table sets forth the reconciliation of the Company's reported net income to the calculations of EBITDA and adjusted EBITDA for the three months ended March 31, 2025 and 2024:

The following table sets forth the reconciliation of the Company's net income to the calculations of EBITDA and adjusted EBITDA for the trailing twelve months ended March 31, 2025:

Under the 2023 Credit Agreement, the definition of adjusted EBITDA per credit facility contains certain restrictions that limit adjustments to net income when calculating adjusted EBITDA. For the trailing twelve months ended March 31, 2025, the Company's adjustments to net income when calculating adjusted EBITDA did not exceed the allowable amount under the 2023 Credit Agreement.

The ratio of consolidated indebtedness less netted cash to adjusted EBITDA per credit facility is 3.51 times for the trailing twelve months ended March 31, 2025. The 2023 Credit Agreement requires the Company to maintain a ratio of consolidated indebtedness less netted cash to adjusted EBITDA of less than 5.00 times.

The following table sets forth the reconciliation of the Company's reported total debt to the calculation of consolidated indebtedness less netted cash as of March 31, 2025. "Consolidated Indebtedness" and "Netted Cash" are terms used in the 2023 Credit Agreement for purposes of certain financial covenants.

Footnotes:

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SOURCE Somnigroup International