SGI Somnigroup International Inc

- Fourth Quarter 2024 Net Sales increased 3% to $1.2 Billion
- Strong Fourth Quarter Operating Income Growth
- Fourth Quarter 2024 EPS of $0.40 and Adjusted EPS⁽¹⁾ of $0.60, increased 13%
- Increased Quarterly Cash Dividend 15% to $0.15 per share
- Issues 2025 Guidance and Perspective on Consolidated Long-Term Growth

LEXINGTON, Ky., Feb. 20, 2025 /PRNewswire/ -- As previously announced, Tempur Sealy International, Inc. changed its name to Somnigroup International Inc. (NYSE: SGI, "Company") effective February 18, 2025. The Company today announced financial results for the fourth quarter and year ended December 31, 2024. The Company also issued financial guidance for the full year 2025, which reflects the previously announced acquisition of Mattress Firm.

FOURTH QUARTER 2024 FINANCIAL SUMMARY

• Total net sales increased 3.2% to $1,207.9 million as compared to $1,170.5 million in the fourth quarter of 2023, with a decrease of 0.1% in the North America business segment and an increase of 14.1% in the International business segment. On a constant currency basis⁽¹⁾, total net sales increased 3.4%, with an increase of 0.5% in the North America business segment and an increase of 13.0% in the International business segment.
• Gross margin was 43.3% as compared to 43.8% in the fourth quarter of 2023. Adjusted gross margin⁽¹⁾ was 45.3% as compared to 44.2% in the fourth quarter of 2023.
• Operating income increased 4.7% to $127.6 million as compared to $121.9 million in the fourth quarter of 2023. Adjusted operating income⁽¹⁾ increased 8.0% to $167.6 as compared to $155.2 million in the fourth quarter of 2023.
• Net income decreased 6.7% to $71.9 million as compared to $77.1 million in the fourth quarter of 2023. Adjusted net income⁽¹⁾ increased 14.2% to $107.2 million as compared to $93.9 million in the fourth quarter of 2023.
• Earnings per diluted share ("EPS") decreased 7.0% to $0.40 as compared to $0.43 in the fourth quarter of 2023. Adjusted EPS⁽¹⁾ increased 13.2% to $0.60 as compared to $0.53 in the fourth quarter of 2023.
• Leverage based on the ratio of consolidated indebtedness less netted cash⁽¹⁾ to adjusted EBITDA⁽¹⁾ was 2.31 times for the twelve months ended December 31, 2024 compared to 2.87 times for the twelve months ended December 31, 2023.

KEY HIGHLIGHTS

Company Chairman and CEO Scott Thompson commented, "We are pleased to report another strong quarter with market leading sales growth and double digit adjusted EPS growth. Our 2024 results are reflective of the strong fundamentals of our business model as we delivered record sales and gross margins while the industry is experiencing trough volumes."   

Thompson continued, "On February 5, 2025, we completed the acquisition of Mattress Firm, the nation's largest mattress specialty retailer. This is a significant milestone – with the acquisition of Mattress Firm we are now clearly the world's largest bedding company, with superior capabilities in design, manufacturing, distribution and retail, and a portfolio of the most highly recognized brands in the industry."

Business Segment Highlights: Fourth Quarter 2024

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

North America net sales were consistent at $894.1 million as compared to $895.4 million in the fourth quarter of 2023, primarily driven by continued macroeconomic pressure impacting U.S. consumer behavior. Net sales through the wholesale channel increased $2.3 million, or 0.3%, to $765.1 million as compared to the fourth quarter of 2023. Net sales through the direct channel decreased $3.6 million, or 2.7%, to $129.0 million, as compared to the fourth quarter of 2023.

North America gross margin was 38.2% as compared to 40.2% in the fourth quarter of 2023. Adjusted gross margin⁽¹⁾ improved 10 basis points to 40.8% as compared to 40.7% in the fourth quarter of 2023. The improvement was primarily driven by operational efficiencies.

North America operating margin was 11.6% as compared to 15.4% in the fourth quarter of 2023. Adjusted operating margin⁽¹⁾ declined 110 basis points to 14.8% as compared to 15.9% in the fourth quarter of 2023. The decline was primarily driven by operating expense deleverage from investments in advertising and incremental bad debt expense.

International net sales increased a robust 14.1% to $313.8 million as compared to $275.1 million in the fourth quarter of 2023, primarily driven by the success of new product launches. On a constant currency basis⁽¹⁾, International net sales increased 13.0% as compared to the fourth quarter of 2023. International net sales through the wholesale channel increased $11.5 million, or 10.8%, to $118.4 million as compared to the fourth quarter of 2023. International net sales through the direct channel increased $27.2 million, or 16.2%, to $195.4 million as compared to the fourth quarter of 2023.

International gross margin improved 230 basis points to 58.0% as compared to 55.7% in the fourth quarter of 2023. The improvement was primarily driven by operational efficiencies and favorable mix.

International operating margin improved 200 basis points to 21.2% as compared to 19.2% in the fourth quarter of 2023. The improvement was primarily driven by the improvement in gross margin and operating expense leverage, partially offset by a decline in the Asia joint venture performance.

Corporate operating expense decreased to $43.0 million as compared to $68.4 million in the fourth quarter of 2023. Corporate adjusted operating expense⁽¹⁾ was $31.0 million as compared to $39.6 million in the fourth quarter of 2023, primarily driven by decreased variable compensation expense.

Consolidated net income decreased 6.7% to $71.9 million as compared to $77.1 million in the fourth quarter of 2023. Adjusted net income⁽¹⁾ increased 14.2% to $107.2 million as compared to $93.9 million in the fourth quarter of 2023. EPS decreased 7.0% to $0.40 as compared to $0.43 in the fourth quarter of 2023. Adjusted EPS⁽¹⁾ increased 13.2% to $0.60 as compared to $0.53 in the fourth quarter of 2023.

The Company ended the fourth quarter of 2024 with total debt of $3.8 billion and consolidated indebtedness less netted cash⁽¹⁾ of $2.1 billion. Leverage based on the ratio of consolidated indebtedness less netted cash⁽¹⁾ to adjusted EBITDA⁽¹⁾ was 2.31 times for the year ended December 31, 2024.

Dividend Increase

Today, the Company announced that its Board of Directors increased the quarterly cash dividend by 15% to $0.15 per share. This is the fifth increase to the dividend in the last few years. The dividend is payable on March 20, 2025 to shareholders of record at the close of business on March 6, 2025.

Company Chairman and CEO Scott Thompson commented, "We are pleased to announce this increase to our quarterly dividend. Our Board of Directors increased the quarterly dividend to $0.15 per share based on the strength of the Company's market position and demonstrated ability to generate significant free cash flow. This marks the fifth increase to our dividend over the last four years, more than doubling the cash dividend since its initiation in 2021."

Financial Guidance

For the full year 2025, the Company currently expects adjusted EPS⁽¹⁾ between $2.60 to $3.00 which, at the midpoint, represents a 10 percent increase from the prior year. 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.

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. The Company is unable to provide forward–looking EPS guidance for 2025 and for long-term guidance described below and the applicable reconciliation to adjusted EPS, 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 the future.

Long-Term Perspective

Company Chairman and CEO Scott Thompson commented, "Let me conclude by taking a step back to share longer-term perspectives. We have seen our markets performing below their historical trend line of growth and, despite this, our execution has led to adjusted earnings per share growth. We believe 2025 will benefit from continued execution and the Mattress Firm transaction. Looking beyond this year, we are planning for markets to return to growth, while simultaneously realizing incremental benefits from the Mattress Firm transaction and continued industry leading execution. We are internally targeting sales to grow at a compound annual rate of mid single digits starting in 2026. This indicates Somnigroup adjusted EPS⁽¹⁾ would increase from the $2.80 mid-point for 2025 to approximately $4.85 by 2028, a compounded annual growth rate of 20%."

Conference Call Information

Somnigroup International Inc. will host a live conference call to discuss financial results today, February 20, 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 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, 2023 and in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 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 bedding company, 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 through our fully-owned businesses, Tempur Sealy, Mattress Firm and Dreams. Our portfolio includes the most highly recognized brands in the industry, including Tempur-Pedic®, Sealy® and Stearns & Foster®, 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 solutions. 

We seek to deliver long-term value for our shareholders through prudent capital allocation, including managing investments in 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 December 31, 2024 and 2023:

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 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 income to adjusted net income and the calculation of adjusted EPS for the three months ended December 31, 2024 and 2023:

The following table sets forth the reconciliation of the Company's reported net income to adjusted net income and the calculation of adjusted EPS for the years ended December 31, 2024 and 2023:

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 December 31, 2024.

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 December 31, 2023.

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 year ended December 31, 2024.

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 year ended December 31, 2023.

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 December 31, 2024 and 2023:

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

Under the 2023 Credit Agreement, the definition of adjusted EBITDA contains certain restrictions that limit adjustments to net income when calculating adjusted EBITDA. For the twelve months ended December 31, 2024, 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 is 2.31 times for the twelve months ended December 31, 2024. 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 December 31, 2024. "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