Somnigroup International Inc. · NYSE:SGI
Somnigroup International — Tempur Sealy International — Investor Presentation (February 2023)
47 slides from Somnigroup International's investor presentation, Feb 9, 2023
Slide 1: Tempur Sealy International, Inc.
© 2023 Tempur Sealy International, Inc. All rights reserved. We continue to demonstrate the resilience of our business model as we generate profits, invest in our business, return capital to shareholders, and outperform the global bedding market. TEMPUR SEALY INTERNATIONAL, INC., TPX “ “
Slide 2: Who We Are
To Improve the Sleep of More People, Every Night, All Around the World Who We Are Tempur Sealy is committed to improving the sleep of more people, every night, all around the world. As a leading designer, manufacturer, distributor and retailer of bedding products worldwide, we know how crucial a goo
Slide 3: A Premium Leader in a Growing Bedding Industry
69% 10% 8% 13% TTM 4Q’22 Sales North America Wholesale North America Direct-to- Consumer International Wholesale International Direct-to- Consumer • Headquartered in Lexington, KY, Tempur Sealy International, Inc is the leading global bedding products company, with a portfolio of iconic brands inclu
Slide 4: Industry, Consumer and Tempur Sealy overview
Industry • The global bedding industry of ~$120 billion1 has historically experienced consistent growth. • The U.S. bedding averages mid- single digit growth annually, driven by units and dollars.1 • The international bedding is highly fragmented and about 40% larger than the size of the U.S. market
Slide 5: Investment Thesis
Investment Thesis 5 The leading vertically integrated global bedding company with iconic brands and extensive manufacturing capabilities History of market share gains across global omnichannel distribution Seasoned, well-aligned management with proven track record Legacy of strong value creation via
Slide 6: Tenured Leadership Team
6 U.S. Market International Markets >185 YEARS COMBINED TPX EXPERIENCE 14 YEARS AVERAGE TPX TENURE Shared Services Scott Thompson Chairman, President & CEO Bhaskar Rao EVP, CFO Cliff Buster CEO, North America Diana Strickland SVP, Human Resources Kindra Bellis SVP, CIO David Montgomery EVP, Global B
Slide 7: Current TPX Management Track Record Since 2015
7 Current TPX Management Track Record Since 2015 (in millions, except percentages, multiples, and per common share amounts) Tailing Twelve Months Ended December 31, 2015 Trailing Twelve Months Ended December 31, 2022 CAGR Total Growth Net Sales $3,151 $4,921 7% 56% Adjusted EBITDA2 $456 $892 10% 96%
Slide 8: Competitive Advantages
• Worldwide omni-channel presence • Iconic brand and product portfolio • World-class manufacturing capabilities • Industry-leading balance sheet and free cash flow2 Adjusted earnings per share2 is expected to grow at a CAGR of 30% between 2018-2023 Competitive Advantages 8 *2023 EPS based on the mid
Slide 9: Product, Retail, and E-Comm Brands
Product, Retail, and E-Comm Brands 9 E-Commerce Retail Brands SOVA Product Brands Brick & Mortar Retail Brands SOVA * *Through our international Sealy joint venture operations
Slide 10: U.S. Bedding Industry Premiumization
10 U.S. Bedding Industry Premiumization1 U.S. Mattress Market Segmentation (Units) U.S. Mattress Market Segmentation (Dollars) • The $1,000+ ASP segment of the market has grown unit share by 8% and dollar share by 6% since 2015 • $2,000+ premium segment has grown more rapidly than $1,000 – 2,000 seg
Slide 11: Strategic Advantages
TEMPUR#*#SEALY Strategic Advantages
Slide 12: Portfolio of Global Brands
Tempur-Pedic®: leading worldwide premium bedding brand • Tempur-Pedic® uniquely adapts, supports, and aligns to you to deliver truly life-changing sleep. $2,200-$9,000* Stearns & Foster®: high-end-targeted brand • The world’s finest beds that are made with exceptional materials, time-honored craftsm
Slide 13: Leading Manufacturing Capabilities
Leading Manufacturing Capabilities • 71 manufacturing facilities • 16 million square feet of manufacturing & distribution operations R&D Innovation • 75,000 square feet of research & development • 4 state-of-the art product-testing locations Wholly owned (32) Joint Venture (8) Licensee (27)Tempur-Pe
Slide 14: Successful Omni-Distribution Platform
• Significant worldwide sales growth • Highly profitable and expanding rapidly • Direct customer relationships Ecommerce • Luxury Tempur-Pedic®, Dreams, and multi-branded showroom experiences • Operate over 700 stores worldwide and expanding direct customer relationships • Highly profitable Company-
Slide 15: Vertical Integration
15 Tempur-Pedic manufacturing Sealy / S&F manufacturing Private label manufacturing Dreams manufacturing Portfolio of Owned Brands Brick & Mortar & E-Commerce RetailOwned Manufacturing Vertical Integration Multi-brand retail Mono-brand retail E-commerce
Slide 16: Growth Potential
TEMPUR*SEALY Growth Potential 16
Slide 17: Building Blocks to Future Growth
Increase total addressable market internationally through new product launches in Europe & APAC. Expand into OEM market to drive further sales growth. Grow wholesale through existing and new retail relationships. Invest in innovation to meet customer demand. Execute on capital allocation strategy. E
Slide 18: Innovative Technologies
Natural Comfort Snoring Support Climate Sleep-Health Metrics Innovative Technologies 18
Slide 19: OEM and Wholesale Growth
19 • Expanded into OEM market through the acquisition of Sherwood Bedding in 2020; a 3rd generation American manufacturer of private label innerspring mattresses, and subsequently began exploring opportunities to leverage foam-pouring capabilities to manufacture private label foam mattresses • Our O
Slide 20: Stearns & Foster Opportunity
20 Stearns & Foster Opportunity Product Investments • Launched new, innovative Stearns & Foster products in 4Q’22 Marketing Investments • Supported Stearns & Foster with record advertising in 2022 and continued investments in 2023 Opportunity to grow Stearns & Foster to be our next $1 BILLION BRAND,
Slide 21: Stearns & Foster: Dual-Approach to Luxury Bedding
<$500 M $1,000 M 21 • With more than 175 years of history, Stearns & Foster is a meaningful brand and can become the luxury leader in innerspring beds and grow to be our next billion-dollar brand • After years of no direct advertising, Stearns & Foster began spending in 2021 and accelerated in 2022
Slide 22: Direct to Consumer
$- $50 $100 $150 $200 $250 $300 $350 $400 Q4 2018 Q4 2019 Q4 2020 Q4 2021 Q4 2022 Global Direct Sales Intl NA • Strong, long-term growth of high-margin sales from web, call center, and company-owned stores. • Ability to own customer relationship allows for market insights that we leverage for innova
Slide 23: Company-Owned Store Strategy
TEMPUR® EuropeSealy® Gallery Asia SOVA® SwedenSleep Outfitters® U.S. Tempur-Pedic® U.S. Tempur-Pedic® MexicoDreams UK We see a potential opportunity to organically increase our store count through opening an average of 60+ new stores per year. Company-Owned Store Strategy O P E R A T I N G O V E R 7
Slide 24: International Markets
• Highly fragmented with broad geographic diversity across Europe and Asia • TEMPUR sold in 90+ countries, 22 countries served through wholly owned subsidiaries, rest by distributors • Acquired Dreams, the leading bedding retailer in the UK in 2021 • Launching new TEMPUR® line of mattresses to expan
Slide 25: Rapidly Growing International Joint Ventures
Rapidly Growing International Joint Ventures • Founded in 2000 • Operates in 21 countries and territories • Top 3 internationally branded bedding manufacturer in China • Full-time employees: 1,100+ Asia • Acquired in 2020 • Full-time employees: 250+ United Kingdom ~$320 MILLION OF JOINT VENTURE SALE
Slide 26: Expanding Global Licensing Sales
Expanding Global Licensing Sales Sealy Manufacturing Licensees: • Our 27 licensee manufacturing facilities generate high return on investment • They represent a low-risk opportunity to introduce our brands and products in regions in which we do not currently operate, primarily across EMEA, APAC, and
Slide 27: Recent Performance
TEMPUR*#SEALY Recent Performance
Slide 28: Fourth Quarter and Full Year Performance
Three Months Ended Trailing Twelve Months Ended (in millions, except percentages and per common share amounts) December 30, 2022 December 30, 2021 % Change December 30, 2022 December 30, 2021 % Change Net Sales $1,187.5 $1,359.6 -12.7% $4,921.2 $4,930.8 -0.2% Net Income $101.7 $175.8 -42.2% $455.7 $
Slide 29: 2023 Outlook
Expect full-year adjusted EPS 2 between $2.60 and $2.80 Other Modeling Assumptions Depreciation & Amortization $200M - $210M Capital Expenditures ~$200M Interest Expense $135M - $140M U.S. Federal Tax Rate 24% - 25% Diluted Share Count 178M shares 2023 Outlook4 29 Our 2023 expectations include: • Sa
Slide 30: Flexible Cost Structure
Flexible Cost Structure 1 30 • The business model is highly-variable, with 85% of COGS and 45% of operating expenses flexing with sales • In total, the variability of our operating cost structure is approximately 70% • Our business model also provides opportunity for costs to further flex with sales
Slide 31: Leading Balance Sheet & Cash Flow
Leading Balance Sheet & Cash Flow 31
Slide 32: Strong Balance Sheet & Cash Flow
Credit ratings: Fitch: BB+ (January 2023) Moody’s: Ba1 (September 2021) S&P: BB+ (September 2021) Strong Balance Sheet & Cash Flow 32 $0 $200 $400 $600 $800 $1,000 $1,200 2018 2019 2020 2021 2022 Full-Year Adjusted EBITDA2 1.00x 1.50x 2.00x 2.50x 3.00x 3.50x 4Q21 1Q22 2Q22 3Q22 4Q22 Leverage2 Target
Slide 33: Capital Structure
33 Capital Structure • Favorable borrowing rates, over $450 million of liquidity and no meaningful maturities until 2024 $337 $639 $139 $800 $800 2023 2024 2025 2026 2027 2028 2029 2030 2031 Revolving Credit Facility Term Loan Securitized Debt 2029 Senior Notes 2031 Senior Notes
Slide 34: Balanced Capital Allocation Strategy
• Long-term target leverage ratio of 2.0 – 3.0x2, we anticipate returning to the midpoint of the range in 2023 • Continue to invest in the business, including a new domestic foam-pouring plant to be operational in 2023 • Disciplined approach to shareholder returns includes a quarterly dividend and o
Slide 35: Environmental, Social, & Corporate Governance
Environmental, Social, & Corporate Governance 35
Slide 36: Environmental, Social, & Governance
Environmental, Social, & Governance Tempur Sealy is committed to protecting and improving our communities and environment. 36
Slide 37: Environmental
Environmental • Improved the percent of waste diverted from landfills from our U.S. wholly owned manufacturing operations to 100% as of September 30, 2022, compared to 96% as of September 30, 2021 • Expanded our commitment to achieving zero landfill waste to include our corporate offices and our res
Slide 38: Thank You for Your Interest in Tempur Sealy International
Thank You for Your Interest in Tempur Sealy International For more information, please email: investor.relations@tempursealy.com 38 SOVA
Slide 39: Appendix
TEMPUR*#SEALY Appendix 39
Slide 40: Forward-Looking Statements
This investor presentation contains statements relating to the Company’s quarterly cash dividend, the Company’s share repurchase targets, the Company’s expectations regarding net sales for 2022 and adjusted EPS for 2023 and subsequent periods and the Company’s expectations for increasing sales growt
Slide 41: Use of Non-GAAP Financial Measures
In this investor presentation and certain of its press releases and SEC filings, the Company provides information regarding adjusted net income, adjusted EPS, EBITDA, adjusted EBITDA, free cash flow, consolidated indebtedness less netted cash, and leverage, which are not recognized terms under U.S.
Slide 42: QTD Adjusted Net Income and Adjusted EPS
42 QTD Adjusted Net Income(2) and Adjusted EPS(2) *For a reconciliation net income to adjusted net income and adjusted EPS in prior reporting periods, please refer to the Company’s SEC filings.
Slide 43: TTM Adjusted Net Income and Adjusted EPS
43 TTM Adjusted Net Income(2) and Adjusted EPS(2) *For a reconciliation net income to adjusted net income and adjusted EPS in prior reporting periods, please refer to the Company’s SEC filings.
Slide 44: TTM Adjusted EBITDA
44 TTM Adjusted EBITDA(2) *For a reconciliation net income to EBITDA and Adjusted EBITDA in prior reporting periods, please refer to the Company’s SEC filings.
Slide 45: Leverage Reconciliation
45 Leverage(2) Reconciliation *For a reconciliation of leverage to consolidated indebtedness less netted cash in prior reporting periods, please refer to the Company’s SEC filings.
Slide 46: Footnotes
© 2023 Tempur Sealy International, Inc. All rights reserved. 1 Management estimates 2 Adjusted net income, EBITDA, adjusted EBITDA, adjusted EPS, leverage, and free cash flow are non-GAAP financial measures. Please refer to the “Use of Non-GAAP Financial Measures Information” on a previous slide for
Slide 47: TEMPUR#*#SEALY
TEMPUR#*#SEALY
Tempur Sealy International — Investor Presentation (February 2023) on 6ix