Somnigroup International Inc. · NYSE:SGI
Somnigroup International — Tempur Sealy International — Investor Presentation (November 2024)
51 slides from Somnigroup International's investor presentation, Nov 7, 2024
Slide 1: Resilience of our business model
We continue to demonstrate the resilience of our business model by generating healthy profits, investing in our business and returning capital to shareholders, while consistently enhancing our competitive position. - Scott Thompson, Chairman & CEO 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 the Bedding Industry
3 TTM 3Q’24 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 including Tempur‐
Slide 4: Industry, Consumer and Tempur Sealy
Industry • Represents ~$120 billion1 in retail value globally and has historically experienced consistent growth. • U.S. bedding averages mid‐single digit growth annually, driven by units and dollars.1 • 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
6 Current TPX Management Track Record Since 2015 Total GrowthCAGR Trailing Twelve Months Ended September 30, 2024 Year Ended December 31, 2015 (in millions, except percentages, multiples, and per common share amounts) 55%5%$4,894$3,151Net Sales 504%23%$390$65Net Income 121%9%$442$200Adjusted Net Inc
Slide 7: U.S. Industry Historical Volumes
• U.S. produced units declined ‐27% from 2021 to 2023 • 2022 and 2023 volumes were well below the industry 20‐year average of 21.7M units • U.S. produced units as a percent of total U.S. population is also trending at a 10‐ year trough – down 5.4% in 2023 relative to the 10‐year average of 7.0% • 20
Slide 8: U.S. Bedding Industry Premiumization
8 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 7% since 2015 • $2,000+ premium segment has grown more rapidly than $1,000 – $2,000 segment, with 30% dollar share, up from 2
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‐$9,998* 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 • 20 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 (31) Joint Venture (9) Licensee (27)Tempur‐Pe
Slide 12: Successful Omni-Distribution Platform
• Significant worldwide sales growth • Highly profitable and rapidly expanding • Direct customer relationships Ecommerce • Luxury Tempur‐Pedic®, Dreams, and multi‐branded showroom experiences • Operate over 750 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 Product Brands Brick & Mortar & E-Commerce DTC Retail Owned Manufacturing Vertical Integration Multi‐brand retail Mono‐brand retail E‐commerce
Slide 14: Growth Potential
Growth Potential
Slide 15: Building Blocks to Future Growth
Increase total addressable market internationally through new product launches in Europe & APAC. Expand into OEM market. Grow wholesale through existing and new retail relationships. Invest in innovation to meet customer demand. Execute on capital allocation strategy. Expand direct‐to‐consumer throu
Slide 16: Innovative Technologies
Natural Comfort Snoring Support Climate Sleep-Health Metrics Innovative Technologies 16
Slide 17: Wholesale and OEM Opportunity
17 • Our OEM business leverages global manufacturing expertise, diversifies sales streams and realizes the manufacturing profits of the bedding brands it produces • Expanded into OEM market through the acquisition of Sherwood Bedding in 2020; a 3rd generation American manufacturer of private label i
Slide 18: Stearns & Foster Growth Initiatives
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 growing Stearns & Foster to be our next billion‐dollar brand. • We launched an all‐new collection of Stearns & Foster prod
Slide 19: Direct to Consumer
$‐ $200 $400 $600 $800 $1,000 $1,200 $1,400 FY 2020 FY 2021 FY 2022 FY 2023 TTM 9.30.2024 Global Direct Sales International North America • 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
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 an opportunity to organically increase our store count through opening an average of 60+ new stores per year. 20 Company-Owned Store Strategy Operating Over 750 Retail Stores
Slide 21: International Markets Four-Pronged Strategy
21 International Markets Total Brand Sales $398M $672M Four-Pronged Strategy $333M $350M Wholly‐Owned TEMPUR Wholesale Brand & Manufacturing Licensing Wholly‐Owned Direct (Dreams Retail, TEMPUR Retail, TEMPUR E‐commerce) Sealy Joint Ventures Our traditional wholesale business operating in 22 key mar
Slide 22: International Markets: Wholly-Owned
• Broad geographic presence, established leading position at the cutting edge of sleep technology in highly fragmented global bedding market • TEMPUR sold in 90+ countries, 22 key markets served through wholly owned subsidiaries and the rest by distributors • Acquired Dreams, the leading bedding ret
Slide 23: International Markets: Sealy Joint Venture
• Founded in 2000 • Operates in 22 countries and territories • Top 3 internationally branded bedding manufacturer in China • Full-time employees: 1,300+ Asia • Acquired in 2020 • Full-time employees: 210+ United Kingdom $333 MILLION OF JOINT VENTURE SALES IN 2023 23 International Markets: Sealy Join
Slide 24: 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 25: Generative Artificial Intelligence
Generative Artificial Intelligence AI Driving for Success 25 Tempur Sealy utilizes artificial intelligence to avoid cost, increase effectiveness, and gain new insights across a variety of functions. AI strategy as a fast follower. EffectivenessCost AvoidanceNew Insights DTC E‐commerce & Marketing Pr
Slide 26: Recent Performance
TEMPUR*SEALY Recent Performance
Slide 27: Third Quarter Performance
Trailing Twelve Months EndedThree Months Ended % ChangeSeptember 30, 2023 September 30, 2024% ChangeSeptember 30, 2023 September 30, 2024 (in millions, except percentages and per common share amounts) ‐1.0%$4,942.3$4,893.51.8%$1,277.1$1,300.0Net Sales ‐0.8%$392.7$389.514.7%$113.3$130.0Net Income 3.2
Slide 28: 2024 Outlook
Expect full-year adjusted EPS2 between $2.45 and $2.55 Other Modeling Assumptions $200M ‐ $205MDepreciation & Amortization ~$125MCapital Expenditures $125M ‐ $130MInterest Expense 24%U.S. Federal Tax Rate 179M sharesDiluted Share Count 2024 Outlook4 28 Our 2024 expectations include: • Sales slightly
Slide 29: Flexible Cost Structure
Flexible Cost Structure1 29 • 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 30: Leading Balance Sheet & Cash Flow
Leading Balance Sheet & Cash Flow
Slide 31: Strong Balance Sheet & Cash Flow
Credit ratings: Fitch: BB+ (August 2021) Moody’s: Ba1 (September 2021) S&P: BB (August 2023) Strong Balance Sheet & Cash Flow 31 $0 $200 $400 $600 $800 $1,000 $1,200 2020 2021 2022 2023 TTM 3Q24 Full-Year Adjusted EBITDA2 1.00x 1.50x 2.00x 2.50x 3.00x 3.50x 3Q23 4Q23 1Q24 2Q24 3Q24 Leverage2 Target
Slide 32: Capital Structure
32 Capital Structure • In October 2023, we refinanced our credit facilities, which include a $1.15B revolving credit facility and a $500M term loan facility • In February 2024 and October 2024*, we entered amendments under the same terms and conditions that provides for increased term loan commitmen
Slide 33: Balanced Capital Allocation Strategy
• Long‐term target leverage ratio of 2.0 – 3.0x2 • Continue to invest in the business, including a new domestic foam‐ pouring plant that became operational in 2023 • Disciplined approach to long‐term shareholder returns includes a quarterly dividend and opportunistic share repurchases • Maintain cap
Slide 34: 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 35: 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 36: 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 37: Mattress Firm Transaction Terms
• 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 Consideration • 83.4% TPX shareholders • 16.6% Mattress Firm shareholders Pro Forma Ow
Slide 38: Environmental, Social, & Corporate Governance
Environmental, Social, & Corporate Governance
Slide 39: Environmental, Social, & Governance
Environmental, Social, & Governance Tempur Sealy is committed to protecting and improving our communities and environment. 39
Slide 40: Environmental and Social Highlights
Environmental • Achieved zero waste to landfill status at our Canadian and Mexican manufacturing operations and maintained our zero waste to landfill status at our U.S. and European manufacturing operations • Achieved zero waste to landfill status at 75% of our corporate offices and R&D labs, in lin
Slide 41: Thank You for Your Interest
Thank You for Your Interest in Tempur Sealy International For more information, please email: investor.relations@tempursealy.com 41 SOVA
Slide 42: Appendix
TEMPUR*#SEALY Appendix
Slide 43: Forward-Looking Statements
This investor presentation contains statements regarding the announced Mattress Firm acquisition including the related regulatory approval process, to the Company’s quarterly cash dividend, the Company’s expectations regarding geopolitical events (including the war in Ukraine and the conflict in the
Slide 44: 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 45: QTD Adjusted Net Income and Adjusted EPS
45 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. Three Months Ended September 30, 2023September 30, 2024(in millions, except per share amounts) $ 113.3$ 130.0N
Slide 46: TTM Adjusted Net Income and Adjusted EPS
46 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. Trailing Twelve Months Ended September 30, 2024(in millions, except per common share amounts) $ 389.5Net incom
Slide 47: QTD Adjusted EBITDA
47 QTD Adjusted EBITDA2 *For a reconciliation net income to EBITDA and Adjusted EBITDA in prior reporting periods, please refer to the Company’s SEC filings. Three Months Ended September 30, 2023September 30, 2024(in millions) $ 113.3$ 130.0Net income 32.630.8Interest expense, net 36.840.8Income tax
Slide 48: TTM Adjusted EBITDA
48 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. Trailing Twelve Months Ended September 30, 2024(in millions) $ 389.5Net income 129.4Interest expense, net 3.2Loss on extinguishment of debt (1
Slide 49: Leverage Reconciliation
49 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. September 30, 2024(in millions) $ 2,273.5Total debt, net 14.3Plus: Deferred financing costs(1) 2,287.8Total debt 104.2Les
Slide 50: Footnotes
1 Management estimates, informed by equity research notes and other industry reports. 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 f
Slide 51: Thank You
TEMPUR#SEALY Thank You
Tempur Sealy International — Investor Presentation (November 2024) on 6ix