Somnigroup International Inc. · NYSE:SGI
Somnigroup International — Tempur Sealy International — Investor Presentation (August 2023)
48 slides from Somnigroup International's investor presentation, Aug 3, 2023
Slide 1: Resilience of our business model (quote from Chairman & CEO)
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. - Scott Thompson, Chairman & CEO TEMPUR SEALY INTERNATIONAL, INC., TPX “ “
Slide 2: To Improve the Sleep of More People, Every Night, All Around the World
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 2Q’23 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 incl
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: Current TPX Management Track Record Since 2015
6 Current TPX Management Track Record Since 2015 (in millions, except percentages, multiples, and per common share amounts) Trailing Twelve Months Ended December 31, 2015 Trailing Twelve Months Ended June 30, 2023 CAGR Total Growth Net Sales $3,151 $4,949 6% 57% Net Income $65 $412 28% 539% Adjusted
Slide 7: Current Industry Trends: U.S. Industry Historical Volumes
• U.S. produced units declined -17% y/y to 20.4M in 2022 and we expect U.S. produced units could decline a further -7% y/y to 19.0M in 2023. • 2022 and projected 2023 volumes are well below the industry 20-year average of 18.1M units • U.S. produced units as a percent of total U.S. population is als
Slide 8: U.S. Bedding Industry Premiumization
18% 17% 16% 16% 14% 14% 14% 14% 30% 28% 29% 28% 27% 27% 27% 27% 29% 28% 30% 31% 29% 30% 30% 30% 24% 27% 25% 25% 29% 29% 29% 30% 2015 2016 2017 2018 2019 2020 2021 2022 36% 38% 37% 41% 34% 34% 33% 33% 41% 35% 36% 32% 36% 35% 35% 35% 17% 19% 20% 19% 22% 22% 23% 23% 7% 7% 7% 8% 8% 9% 9% 9% 2015 2016 20
Slide 9: Strategic Advantages
Strategic Advantages
Slide 10: 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 11: World-Class 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 12: 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 13: Vertical Integration
13 Tempur-Pedic manufacturing Sealy / S&F manufacturing Private label manufacturing Dreams manufacturing Portfolio of Owned Brands Brick & Mortar & E-Commerce DTC Retail Owned Manufacturing Vertical Integration Multi-brand retail Mono-brand retail E-commerce
Slide 14: Growth Potential
TEMPUR*SEALY Growth Potential 14
Slide 15: 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 16: Innovative Technologies
Natural Comfort Snoring Support Climate Sleep-Health Metrics Innovative Technologies 16
Slide 17: Wholesale and OEM growth opportunity
17 • 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 18: Stearns & Foster positioned to become luxury leader in innerspring beds
18 With more than 175 years of history, Stearns & Foster is positioned to become the luxury leader in innerspring beds. We have several initiatives underway with an objective of more than doubling Stearns & Foster to be our next billion- dollar brand • We are launching an all-new collection of Stear
Slide 19: Direct to Consumer
• 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 innovation process and growth strategy Direct to Consumer 19 13% 15% 14% 22% 22% 5% 10% 15% 20% 25% 30% Q2 2019 Q2 20
Slide 20: 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. 20 Company-Owned Store Strategy Operating Over 700 Retai
Slide 21: International Markets: Wholly-Owned Market Share Growth Opportunity
• 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 22: International Markets: Joint Venture Market Share Growth Opportunity
• 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 SALES IN 2022 22 International Markets: Joint Ven
Slide 23: 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 24: Recent Performance
TEMPUR*#SEALY Recent Performance
Slide 25: Second Quarter Performance
Three Months Ended Trailing Twelve Months Ended (in millions, except percentages and per common share amounts) June 30, 2023 June 30, 2022 % Change June 30, 2023 June 30, 2022 % Change Net Sales $1,269.7 $1,211.0 4.8% $4,948.5 $5,168.4 -4.3% Net Income $92.4 $90.6 2.0% $412.1 $574.5 -28.3% Adjusted
Slide 26: 2023 Outlook
Expect full-year adjusted EPS 2 between $2.50 and $2.70 Other Modeling Assumptions Depreciation & Amortization $190M - $200M Capital Expenditures ~$200M Interest Expense $135M - $140M U.S. Federal Tax Rate 25% Diluted Share Count 178M shares 2023 Outlook4 26 Our 2023 expectations include: • Sales to
Slide 27: Flexible Cost Structure
Flexible Cost Structure 1 27 • 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 28: Leading Balance Sheet & Cash Flow
Leading Balance Sheet & Cash Flow 28
Slide 29: 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 29 $0 $200 $400 $600 $800 $1,000 $1,200 2019 2020 2021 2022 TTM 2Q23 Full-Year Adjusted EBITDA2 1.00x 1.50x 2.00x 2.50x 3.00x 3.50x 2Q22 3Q22 4Q22 1Q23 2Q23 Leverage2 Ta
Slide 30: Capital Structure
30 Capital Structure • Favorable borrowing rates, over $450 million of liquidity and no meaningful maturities until 2024 $282 $612 $175 $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 31: 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 long-term shareholder returns includes a quarterly divi
Slide 32: Mattress Firm Agreement
Mattress Firm Agreement Mattress Firm is the largest mattress specialty retailer in the U.S., operating over 2,300 brick and mortar retail locations and a growing e-commerce platform
Slide 33: Transaction Rationale
Transaction Rationale Expands consumer touchpoints to enhance ability to keep pace with evolving consumer preferences Accelerates U.S. omni-channel strategy, enabling a seamless consumer experience Simplifies consumer purchase journey, reducing friction at each touchpoint Aligns new product developm
Slide 34: TPX Go-Forward Investment Thesis
TPX Go-Forward Investment Thesis Leading, vertically-integrated global company with iconic brands and extensive manufacturing and direct-to-consumer capabilities Proven historical growth through organic and inorganic initiatives Proven ability to successfully operate worldwide omni- channel distribu
Slide 35: Transaction terms: consideration, pro forma ownership, financing
Consideration • Total purchase price of approximately $4.0B comprising: • $2.7B of cash consideration • $1.3B of stock consideration, based on 34.2M shares issued at $37.62 per share as of the closing share price on May 8, 2023 Pro Forma Ownership5 • 83.4% TPX shareholders • 16.6% Mattress Firm shar
Slide 36: Environmental, Social, & Corporate Governance
Environmental, Social, & Corporate Governance 36
Slide 37: Environmental, Social, & Governance
Environmental, Social, & Governance Tempur Sealy is committed to protecting and improving our communities and environment. 37
Slide 38: 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 39: 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 39 SOVA
Slide 40: Appendix
TEMPUR*SEALY Appendix 40
Slide 41: 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 and adjusted EPS for 2023 and subsequent periods and the Company’s expectations for increasing sales growth, produc
Slide 42: Use of Non-GAAP Financial Measures Information
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 43: QTD Adjusted Net Income and Adjusted EPS
43 QTD Adjusted Net Income2 and Adjusted EPS2 *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 Net Income and Adjusted EPS
44 TTM Adjusted Net Income2 and Adjusted EPS2 *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 45: TTM Adjusted EBITDA
45 TTM Adjusted EBITDA2 *For a reconciliation net income to EBITDA and Adjusted EBITDA in prior reporting periods, please refer to the Company’s SEC filings.
Slide 46: Leverage Reconciliation
46 Leverage2 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 47: Footnotes
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 more information regarding the definitions of adjusted net i
Slide 48: Tempur Sealy logo
TEMPUR#*#SEALY
Tempur Sealy International — Investor Presentation (August 2023) on 6ix