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Item 2. Management’s Discussion and Analysis

2025-08-08 compared with 2025-05-12 · 277 added, 152 removed, 296 unchanged (59% of the section changed)

5 unchanged sentences

Our actual results may differ materially from those contained in any forward-looking statements.

In this discussion and analysis, we discuss and explain the consolidated financial condition and results of operations for the three months ended March 31, 2025, including the following topics:

In this discussion and analysis, we discuss and explain the consolidated financial condition and results of operations for the three and six months ended June 30, 2025, including the following topics:

• an overview of our business and strategy;

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Ongoing geopolitical conflicts, including trade disputes and the imposition of tariffs, may also introduce further uncertainty for the consumer.

We have taken actions to mitigate the impact of the proposed tariffs, and we will implement pricing actions to mitigate the remaining impact.

We have taken actions to mitigate the impact of proposed tariffs, and we implemented pricing actions to mitigate the remaining impact.

The majority of our products sold are also manufactured in the U.S.

Accordingly, we believe the proposed tariffs will not have a material impact on our results of operations in 2025.

Accordingly, we believe proposed tariffs will not have a material impact on our results of operations in 2025.

However, the duration and extent of tariffs remain uncertain, and we are continuing to evaluate the potential future impacts of the imposition of tariffs.

We expect to outperform the bedding industry as a result of our investments in new product launches and continued investments in innovation, quality, advertising and customer service.

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In addition, approximately $1,592.0 million of proceeds in respect of the Term B Loan were released from escrow.

The proceeds of this financing were collectively used to fund a portion of the cash consideration, the repayment of Mattress Firm's debt and the payment of certain fees and expenses related to the merger.

The proceeds of this financing were collectively used to fund a portion of the cash consideration, for the repayment of Mattress Firm's debt and for the payment of certain fees and expenses related to the merger.

Mattress Firm operates as a separate business segment.

Mattress Firm's financial results for the period from February 5, 2025 through March 31, 2025 (the "stub period") are included in our consolidated financial statements in the first quarter of 2025.

On May 1, 2025, we completed the previously announced divestiture of 73 Mattress Firm retail locations and our Sleep Outfitters subsidiary, which includes 103 specialty mattress retail locations and seven distribution centers, to Mattress Warehouse.

We do not expect the divestiture to have a material impact on our results of operations.

Mattress Firm's financial results for the periods from April 1, 2025 through June 30, 2025 and February 5, 2025 through June 30, 2025 (the "stub period") are included in the Company's Condensed Consolidated Financial Statements for the three and six months ended June 30, 2025, respectively.

In the three months ended June 30, 2025, the Company recorded a $13.9 million loss on disposal of business associated with the divestiture, net of proceeds of $9.0 million.

We do not expect the divestiture to have a material impact on our results of operations for the twelve months ended December 31, 2025.

Product Launches

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Results of Operations

A summary of our results for the three months ended March 31, 2025 include:

• 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 elimination of $130.1 million of sales from the Tempur Sealy North America segment to the Mattress Firm segment for the stub period.

• Gross margin was 36.2% as compared to 39.9% in the first quarter of 2024.

Adjusted gross margin, which is a non-GAAP financial measure, 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, which is a non-GAAP financial measure, 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, primarily driven by the acquisition of Mattress Firm.

Adjusted net income, which is a non-GAAP financial measure, 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") $0.43 in the first quarter of 2024.

Adjusted EPS, which is a non-GAAP financial measure, was $0.49 as compared to $0.50 in the first quarter of 2024.

A summary of our results for the three months ended June 30, 2025 include:

• Total net sales increased 52.5% to $1,880.8 million as compared to $1,233.6 million in the second quarter of 2024, primarily driven by the inclusion of $948.8 million of Mattress Firm sales for the quarter, offset by the elimination of $263.5 million of sales from the Tempur Sealy North America segment to the Mattress Firm segment.

• Gross margin was 44.0% as compared to 42.0% in the second quarter of 2024.

Adjusted gross margin, which is a non-GAAP financial measure, was 44.2% as compared to 42.0% in the second quarter of 2024.

• Operating income increased 3.8% to $179.9 million as compared to $173.3 million in the second quarter of 2024.

Adjusted operating income, which is a non-GAAP financial measure, increased 24.3% to $224.4 million as compared to $180.6 million in the second quarter of 2024, primarily driven by the inclusion of Mattress Firm.

• Net income decreased 6.7% to $99.0 million as compared to $106.1 million in the second quarter of 2024.

Adjusted net income, which is a non-GAAP financial measure, increased 1.3% to $113.1 million as compared to $111.7 million in the second quarter of 2024.

• Earnings per diluted share ("EPS") decreased 21.7% to $0.47 as compared to $0.60 in the second quarter of 2024.

Adjusted EPS, which is a non-GAAP financial measure, decreased 15.9% to $0.53 as compared to $0.63 in the second quarter of 2024.

For a discussion and reconciliation of non-GAAP financial measures as discussed above to the corresponding GAAP financial results, refer to the non-GAAP financial information set forth below under the heading "Non-GAAP Financial Information."

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Refer to Part I, ITEM 3 of this Report for a discussion of our foreign currency exchange rate risk.

THREE MONTHS ENDED MARCH 31, 2025 COMPARED TO THE

THREE MONTHS ENDED MARCH 31, 2024

The following table sets forth the various components of our Condensed Consolidated Statements of (Loss) Income and expresses each component as a percentage of net sales:

Three Months Ended March 31,

THREE MONTHS ENDED JUNE 30, 2025 COMPARED TO THE

THREE MONTHS ENDED JUNE 30, 2024

The following table sets forth the various components of our Condensed Consolidated Statements of Income and expresses each component as a percentage of net sales:

Three Months Ended June 30,

(in millions, except percentages and per share amounts) 2025 2024

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General, administrative and other expenses 175.9 9.4 107.8 8.7

Loss on disposal of business 13.9 0.7 — —

Equity income in earnings of unconsolidated affiliates (3.0) (0.2) (3.1) (0.3)

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Total other expense, net 77.2 4.1 32.8 2.7

(Loss) income before income taxes (49.3) (3.1) 97.5 8.2

Income tax benefit (provision) 16.5 1.0 (20.7) (1.7)

Net (loss) income before non-controlling interest (32.8) (2.0) 76.8 6.5

Income before income taxes 102.7 5.5 140.5 11.4

Income tax provision (3.2) (0.2) (34.0) (2.8)

Net income before non-controlling interest 99.5 5.3 106.5 8.6

Net income attributable to non-controlling interest 0.5 — 0.4 —

Net (loss) income attributable to Somnigroup International Inc.

Net income attributable to Somnigroup International Inc.

$ 99.0 5.3 % $ 106.1 8.6 %

(Loss) earnings per common share:

Earnings per common share:

Basic $ 0.47 $ 0.61

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Diluted 212.4 178.0

Three Months Ended March 31,

Three Months Ended June 30,

2025 2024 2025 2024 2025 2024 2025 2024

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• Tempur Sealy North America net sales decreased $340.0 million, or 34.8%.

Net sales in the Wholesale channel decreased $192.4 million, primarily driven by a 16.7% decline from the elimination of intercompany sales to Mattress Firm of $130.1 million and an 8.0% decline from continued macroeconomic pressures impacting U.S.

consumer behavior of $62.3 million.

Net sales in the Direct channel decreased $2.5 million, or 2.0%, as compared to the first quarter of 2024.

Net sales in the Wholesale channel decreased $320.8 million, primarily driven by a 30.8% decline from the elimination of intercompany sales to Mattress Firm of $263.5 million, and a 6.7% decrease in sales of $57.3 million, primarily driven by a customer's acquisition which foreclosed distribution to this customer.

Net sales in the Direct channel decreased $19.2 million, or 15.5%, primarily driven by a decrease in sales due to the divestiture of Sleep Outfitters.

• Tempur Sealy International net sales increased $38.4 million, or 15.0%, primarily driven by the success of new product launches.

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Net sales in the Direct channel increased 9.8% on a constant currency basis.

• Mattress Firm net sales were $593.7 million for the stub period.

Three Months Ended March 31,

• Mattress Firm net sales were $948.8 million for the three months ended June 30, 2025.

Three Months Ended June 30,

(in millions, except percentages) Gross Profit Gross Margin Gross Profit Gross Margin Margin Change

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Our margins are also impacted by the growth in our Wholesale channel as sales in our Wholesale channel are at wholesale prices, whereas sales in our Direct channel are at retail prices.

Gross margin improved 200 basis points.

The primary drivers of changes in gross margin by segment are discussed below:

• Tempur Sealy North America gross margin improved 1,430 basis points.

The improvement in gross margin was primarily driven by the elimination of sales to Mattress Firm of 1,590 basis points and operational efficiencies of 60 basis points.

These improvements were partially offset by expense deleverage of 130 basis points and product launch costs.

• Tempur Sealy International gross margin declined 40 basis points.

The decline in gross margin was primarily driven by commodity cost inflation.

• Mattress Firm gross margin was 35.6% for the three months ended June 30, 2025.

OPERATING EXPENSES

Selling and marketing expenses include advertising and media production associated with the promotion of our brands, other marketing materials such as catalogs, brochures, videos, product samples, direct customer mailings and point of purchase materials and sales force compensation.

We also include in selling and marketing expense certain new product development costs, including market research and new product testing.

General, administrative and other expenses include salaries and related expenses, IT, professional fees, depreciation and amortization of long-lived assets not used in the manufacturing, distribution and retail store operations, expenses for administrative functions and research and development costs.

Three Months Ended June 30,

2025 2024 2025 2024 2025 2024 2025 2024 2025 2024

(in millions) Consolidated Tempur Sealy North America Tempur Sealy International Mattress Firm Corporate

Operating expenses:

Advertising expenses $ 189.5 $ 119.3 $ 103.3 $ 98.5 $ 24.1 $ 20.8 $ 62.1 $ — $ — $ —

Other selling and marketing expenses 271.0 120.3 64.0 69.1 50.9 47.0 151.8 — 4.3 4.2

General, administrative and other expenses 175.9 107.8 41.0 45.7 29.8 27.4 56.2 — 48.9 34.7

Total operating expenses $ 636.4 $ 347.4 $ 208.3 $ 213.3 $ 104.8 $ 95.2 $ 270.1 $ — $ 53.2 $ 38.9

Operating expenses increased $289.0 million, or 83.2%, and increased 560 basis points as a percentage of net sales.

The primary drivers of changes in operating expenses by segment are explained below:

• Tempur Sealy North America operating expenses decreased $5.0 million, or 2.3%, and increased 1,080 basis points as a percentage of net sales.

The decrease in operating expenses was primarily driven by decreases in other selling and marketing and general, administrative and other expenses, partially offset by investments in advertising.

• Tempur Sealy International operating expenses increased $9.6 million, or 10.1%, and decreased 160 basis points as a percentage of net sales.

The increase in operating expenses was primarily driven by investments in growth initiatives.

• Mattress Firm operating expenses were $270.1 million for the three months ended June 30, 2025.

• Corporate operating expenses increased $14.3 million, or 36.8%.

The increase in operating expenses was primarily driven by business combination charges related to the Mattress Firm Acquisition.

Research and development expenses for the three months ended June 30, 2025 were $7.8 million, compared to $7.7 million for the three months ended June 30, 2024.

OPERATING INCOME

Three Months Ended June 30,

(in millions, except percentages) Operating Income Operating Margin Operating Income Operating Margin Margin Change

Tempur Sealy North America $ 130.1 20.4 % $ 180.4 18.4 % 2.0 %

Tempur Sealy International 39.8 13.6 % 31.8 12.5 % 1.1 %

Mattress Firm 63.2 6.7 % — — % 6.7 %

Corporate expenses (53.2) (38.9)

Total operating income $ 179.9 9.6 % $ 173.3 14.0 % (4.4) %

Operating income increased $6.6 million and operating margin declined 440 basis points.

The primary drivers of changes in operating income and operating margin by segment are discussed below:

• Tempur Sealy North America operating income decreased $50.3 million and operating margin improved 200 basis points.

The improvement in operating margin was primarily driven by the improvement in gross margin of 1,430 basis points, partially offset by operating expense deleverage of 1,080 basis points.

Additionally, we incurred a $9.8 million loss on disposal of business associated with the divestiture of Sleep Outfitters.

• Tempur Sealy International operating income increased $8.0 million and operating margin improved 110 basis points.

The improvement in operating margin was driven by operating expense leverage of 160 basis points, partially offset by the decline in gross margin of 40 basis points and Asia joint venture performance.

• Mattress Firm operating income was $63.2 million and operating margin was 6.7% for the three months ended June 30, 2025.

Additionally, we incurred a $4.1 million loss on disposal of business associated with the divestiture of 73 retail stores.

• Corporate operating expenses increased $14.3 million, which negatively impacted our consolidated operating margin.

INTEREST EXPENSE, NET

Three Months Ended June 30,

(in millions, except percentages) 2025 2024 % Change

Interest expense, net $ 72.5 $ 33.4 117.1 %

Interest expense, net, increased $39.1 million, or 117.1%.

The increase in interest expense, net, was primarily driven by increased average levels of outstanding variable rate debt.

INCOME TAX PROVISION

Three Months Ended June 30,

(in millions, except percentages) 2025 2024 % Change

Income tax provision $ 3.2 $ 34.0 (90.6) %

Effective tax rate 3.1 % 24.2 %

Our income tax provision includes income taxes associated with taxes currently payable and deferred taxes and includes the impact of net operating losses for certain of our foreign operations.

Our income tax provision decreased $30.8 million driven by certain discrete items, as discussed below, and a decrease in income before income taxes.

Our effective tax rate for the three months ended June 30, 2025 as compared to the prior year declined by 2,110 basis points.

The effective tax rate as compared to the U.S.

federal statutory rate for the three months ended June 30, 2025 included the favorable impact of the deductibility of stock compensation in the U.S.

and a net unfavorable impact of other discrete items.

The effective tax rate as compared to the U.S.

federal statutory rate for the three months ended June 30, 2024 included a net favorable impact of other discrete items.

SIX MONTHS ENDED JUNE 30, 2025 COMPARED TO THE

SIX MONTHS ENDED JUNE 30, 2024

The following table sets forth the various components of our Condensed Consolidated Statements of Income and expresses each component as a percentage of net sales:

Six Months Ended June 30,

(in millions, except percentages and per share amounts) 2025 2024

Net sales $ 3,485.5 100.0 % $ 2,423.0 100.0 %

Cost of sales 2,077.8 59.6 1,431.1 59.1

Gross profit 1,407.7 40.4 991.9 40.9

Selling and marketing expenses 823.1 23.6 466.3 19.2

General, administrative and other expenses 385.4 11.1 228.8 9.4

Loss on disposal of business 13.9 0.4 — —

Equity income in earnings of unconsolidated affiliates (7.8) (0.2) (8.0) (0.3)

Operating income 193.1 5.5 304.8 12.6

Other expense, net:

Interest expense, net 133.8 3.8 67.7 2.8

Other expense (income), net 5.9 0.2 (0.9) —

Total other expense, net 139.7 4.0 66.8 2.8

Income before income taxes 53.4 1.5 238.0 9.8

Income tax provision (benefit) 13.3 0.4 (54.7) (2.3)

Net income before non-controlling interest 66.7 1.9 183.3 7.6

Net income attributable to non-controlling interest 0.8 — 0.9 —

Net income attributable to Somnigroup International Inc.

$ 65.9 1.9 % $ 182.4 7.6 %

Earnings per common share:

Basic $ 0.33 $ 1.05

Diluted $ 0.32 $ 1.02

Weighted average common shares outstanding:

Basic 202.1 173.6

Diluted 205.7 178.0

Six Months Ended June 30,

2025 2024 2025 2024 2025 2024 2025 2024

(in millions) Consolidated Tempur Sealy North America Tempur Sealy International Mattress Firm

Net sales by channel

Wholesale $ 1,341.4 $ 1,836.3 $ 1,118.5 $ 1,631.7 $ 222.9 $ 204.6 $ — $ —

Direct 2,144.1 586.7 226.1 247.8 375.5 338.9 1,542.5 —

Total net sales $ 3,485.5 $ 2,423.0 $ 1,344.6 $ 1,879.5 $ 598.4 $ 543.5 $ 1,542.5 $ —

Net sales increased 43.9%, and on a constant currency basis increased 44.0%.

The change in net sales was driven by the following:

• Tempur Sealy North America net sales decreased $534.9 million, or 28.5%.

Net sales in the Wholesale channel decreased $513.2 million, or 31.5%, primarily driven by a 24.2% decline from the elimination of intercompany sales to Mattress Firm of $393.6 million, and a 7.3% decrease in sales of $119.6 million, primarily driven by a customer's acquisition which foreclosed distribution to this customer.

Net sales in the Direct channel decreased $21.7 million, or 8.8%, primarily driven by a decrease in sales from the divestiture of Sleep Outfitters.

• Tempur Sealy International net sales increased $54.9 million, or 10.1%, primarily driven by the success of new product launches.

On a constant currency basis, International net sales increased $47.8 million, or 8.8%.

Net sales in the Wholesale channel increased 9.3% on a constant currency basis.

Net sales in the Direct channel increased 8.5% on a constant currency basis.

• Mattress Firm net sales were $1,542.5 million for the stub period.

Six Months Ended June 30,

(in millions, except percentages) Gross Profit Gross Margin Gross Profit Gross Margin Margin Change

Tempur Sealy North America $ 588.2 43.7 % $ 730.4 38.9 % 4.8 %

Tempur Sealy International 290.9 48.6 % 261.5 48.1 % 0.5 %

Mattress Firm 528.6 34.3 % — — % 34.3 %

Consolidated gross margin $ 1,407.7 40.4 % $ 991.9 40.9 % (0.5) %

Costs associated with net sales are recorded in cost of sales and include the costs of producing, shipping, warehousing, receiving and inspecting goods during the period, as well as depreciation and amortization of long-lived assets used in the manufacturing process.

Cost of sales also includes retail store occupancy costs such as rent, common area maintenance charges, real estate and other asset-based taxes, general maintenance, utilities, depreciation and certain insurance expenses.

Gross margin declined 50 basis points.

The primary drivers of changes in gross margin by segment are discussed below:

• Tempur Sealy North America gross margin declined 340 basis points.

The decline in gross margin was primarily driven by operating expense deleverage of 120 basis points and commodity cost inflation.

Additionally, we incurred $78.0 million of one-time business combination accounting adjustments related to the Mattress Firm Acquisition, which contributed to the decline in gross margin.

These declines were partially offset by the elimination of intercompany sales to Mattress Firm of 530 basis points, operational efficiencies of 120 basis points and favorable mix of 110 basis points.

• Tempur Sealy North America gross margin improved 480 basis points.

The improvement in gross margin was primarily driven by elimination of intercompany sales to Mattress Firm of 990 basis points, operational efficiencies of 90 basis points and favorable mix.

These improvements were partially offset by expense deleverage of 130 basis points, commodity cost inflation and product launch costs.

Additionally, we incurred $78.0 million of one-time business combination accounting adjustments related to the Mattress Firm Acquisition.

• Tempur Sealy International gross margin improved 50 basis points.

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We also include in selling and marketing expense certain new product development costs, including market research and new product testing.

Three Months Ended March 31,

General, administrative and other expenses include salaries and related expenses, IT, professional fees, depreciation and amortization of long-lived assets not used in the manufacturing process, expenses for administrative functions and research and development costs.

Six Months Ended June 30,

2025 2024 2025 2024 2025 2024 2025 2024 2025 2024

(in millions) Consolidated Tempur Sealy North America Tempur Sealy International Mattress Firm Corporate

(in millions) Consolidated North America International Mattress Firm Corporate

Operating expenses:

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• Tempur Sealy North America operating expenses decreased $7.6 million, or 1.8%, and increased 820 basis points as a percentage of net sales.

The decrease in operating expenses was primarily driven by decreases in advertising and other selling and marketing expenses.

The decrease in operating expenses was primarily driven by decreases in other selling and marketing and general, administrative and other expenses, partially offset by investments in advertising.

• Tempur Sealy International operating expenses increased $14.9 million, or 7.7%, and decreased 80 basis points as a percentage of net sales.

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• Corporate operating expenses increased $51.6 million, or 59.6%.

The increase in operating expenses was primarily driven by transaction costs related to the Mattress Firm Acquisition.

Research and development expenses for the three months ended March 31, 2025 were $8.1 million, consistent with the three months ended March 31, 2024.

The increase in operating expenses was primarily driven by business combination charges related to the Mattress Firm Acquisition.

Research and development expenses were $15.9 million for the six months ended June 30, 2025 as compared to $15.8 million for the six months ended June 30, 2024, an increase of $0.1 million, or 0.6%.

OPERATING INCOME

Three Months Ended March 31,

Six Months Ended June 30,

(in millions, except percentages) Operating Income Operating Margin Operating Income Operating Margin Margin Change

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• Tempur Sealy North America operating income decreased $144.4 million and operating margin declined 400 basis points.

The decline in operating margin was primarily driven by operating expense deleverage of 580 basis points and the decline in gross margin of 340 basis points.

The decline in operating margin was primarily driven by operating expense deleverage of 820 basis points, offset by the improvement in gross margin of 480 basis points.

Additionally, we incurred a $9.8 million loss on disposal of business associated with the divestiture of Sleep Outfitters.

• Tempur Sealy International operating income increased $14.3 million and operating margin improved 110 basis points.

The improvement in operating margin was driven by the improvement in gross margin of 130 basis points.

The improvement in operating margin was primarily driven by operating expense leverage of 80 basis points and the improvement in gross margin of 50 basis points, partially offset by Asia joint venture performance.

• Mattress Firm operating income was $70.0 million and operating margin was 4.5% for the stub period.

Additionally, we incurred a $4.1 million loss on disposal of business associated with the divestiture of 73 retail stores.

• Corporate operating expenses increased $51.6 million, which negatively impacted our consolidated operating margin.

INTEREST EXPENSE, NET

Three Months Ended March 31,

Six Months Ended June 30,

(in millions, except percentages) 2025 2024 % Change

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INCOME TAX PROVISION

Three Months Ended March 31,

Six Months Ended June 30,

(in millions, except percentages) 2025 2024 % Change

1 unchanged sentence

Effective tax rate (24.9) % 23.0 %

Our income tax provision includes income taxes associated with taxes currently payable and deferred taxes and includes the impact of net operating losses for certain of our foreign operations.

Our income tax provision decreased $37.2 million due to a decrease in income before income taxes.

Our effective tax rate for the three months ended March 31, 2025 as compared to the prior year increased by 1,230 basis points.

The effective tax rates as compared to the U.S.

federal statutory rates for the three months ended March 31, 2025 and 2024 included the favorable impact of the deductibility of stock compensation in the U.S.

and a net unfavorable impact of other discrete items.

Our income tax provision decreased $68.0 million driven by a decrease in income before income taxes and certain discrete items, as discussed below.

Our effective tax rate for the six months ended June 30, 2025 as compared to the prior year declined 4,790 basis points.

The effective tax rate as compared to the U.S.

federal statutory rate for the six months ended June 30, 2025 and 2024 included the net favorable impact of the deductibility of stock compensation in the U.S., which was offset by the unfavorable impact of discrete items.

Liquidity and Capital Resources

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Cash and Working Capital

Cash and cash equivalents were $111.1 million and $117.4 million as of March 31, 2025 and December 31, 2024, respectively.

We had a working capital deficit of $268.9 million as of March 31, 2025, as compared to working capital of $105.1 million as of December 31, 2024.

The reduction in our working capital to a deficit position in the first quarter of 2025 was primarily driven by a $251.2 million increase in our short-term operating lease obligations as a result of the Mattress Firm Acquisition, and we expect to operate with a working capital deficit in the future.

Cash and cash equivalents were $98.1 million and $117.4 million as of June 30, 2025 and December 31, 2024, respectively.

We had a working capital deficit of $294.5 million as of June 30, 2025, as compared to working capital of $105.1 million as of December 31, 2024.

The reduction in our working capital to a deficit position in 2025 was primarily driven by a $250.5 million increase in our short-term operating lease obligations as a result of the Mattress Firm Acquisition, and we expect to operate with a working capital deficit in the future.

The amount of cash and cash equivalents held by subsidiaries outside of the U.S.

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The table below presents net cash provided by (used in) operating, investing and financing activities from operations for the periods indicated below:

Three Months Ended March 31,

Six Months Ended June 30,

(in millions) 2025 2024

3 unchanged sentences

Financing activities 940.2 (195.0)

Cash provided by operating activities decreased $23.8 million in the three months ended March 31, 2025 as compared to the same period in 2024.

The decrease in cash provided by operating activities was driven by a $109.6 million decrease in net income, offset by a $18.5 million increase in non-cash depreciation expense, primarily associated with our new Tempur manufacturing facility and a $65.1 million increase in cash provided by changes in operating assets and liabilities.

Cash used in investing activities increased $2,827.7 million in the three months ended March 31, 2025 as compared to the same period in 2024.

The increase in cash used in investing activities was primarily driven by the acquisition of Mattress Firm on February 5, 2025.

Cash provided by financing activities increased $1,220.0 million in the three months ended March 31, 2025 as compared to the same period in 2024.

For the three months ended March 31, 2025, we had net borrowings of $1,217.3 million on our credit facilities as compared to net repayments of $3.7 million in the same period in 2024.

We paid dividends to shareholders of $32.9 million and $24.9 million, during the three months ended March 31, 2025 and 2024, respectively.

Additionally, we repurchased $37.5 million and $43.8 million of our common stock to satisfy tax withholding obligations upon the vesting of our long-term incentive plans during the three months ended March 31, 2025 and 2024, respectively.

Cash provided by operating activities increased $11.7 million in the six months ended June 30, 2025 as compared to the same period in 2024.

The increase in cash provided by operating activities was driven by a $70.6 million increase in cash provided by changes in operating assets and liabilities and a $36.5 million increase in non-cash depreciation expense, primarily associated with our new Tempur manufacturing facility, offset by a $116.6 million decrease in net income.

Cash used in investing activities increased $2,818.4 million in the six months ended June 30, 2025 as compared to the same period in 2024.

The increase in cash used in investing activities was primarily driven by the Mattress Firm Acquisition.

Cash provided by financing activities increased $1,135.2 million in the six months ended June 30, 2025 as compared to the same period in 2024.

For the six months ended June 30, 2025, we had net borrowings of $1,098.5 million on our credit facilities as compared to net repayments of $93.7 million in the same period in 2024.

We paid dividends to shareholders of $64.4 million and $47.5 million, during the six months ended June 30, 2025 and 2024, respectively.

Additionally, we repurchased $132.4 million and $43.8 million of our common stock to satisfy tax withholding obligations upon the vesting of our long-term incentive plans during the six months ended June 30, 2025 and 2024, respectively.

Proceeds from exercise of stock options increased $48.8 million as compared to the same period in 2024.

Capital Expenditures

Capital expenditures totaled $24.0 million and $31.5 million for the three months ended March 31, 2025 and 2024, respectively.

Capital expenditures totaled $60.7 million and $60.0 million for the six months ended June 30, 2025 and 2024, respectively.

We currently expect our 2025 capital expenditures to be approximately $200 million, including $25 million of investments to refresh Mattress Firm stores.

Our total debt increased to $5,069.9 million as of March 31, 2025 from $3,844.5 million as of December 31, 2024.

Total availability under our revolving senior secured credit facility was $708.3 million as of March 31, 2025.

Our total debt increased to $4,951.6 million as of June 30, 2025 from $3,844.5 million as of December 31, 2024.

Total availability under our revolving senior secured credit facility was $707.7 million as of June 30, 2025.

Refer to Note 5, "Debt" in the "Notes to Condensed Consolidated Financial Statements," under Part I, ITEM 1 for further discussion of our debt.

As of March 31, 2025, our ratio of consolidated indebtedness less netted cash to adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA"), which is a non-GAAP financial measure, in accordance with our 2023 Credit Agreement was 3.51 times.

As of June 30, 2025, our ratio of consolidated indebtedness less netted cash to adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA"), which is a non-GAAP financial measure, in accordance with our 2023 Credit Agreement was 3.56 times.

This ratio is within the terms of the financial covenants for the maximum consolidated total net leverage ratio as set forth in the 2023 Credit Agreement, which limits this ratio to 5.00 times.

As of March 31, 2025, we were in compliance with all of the financial covenants in our debt agreements, and we do not anticipate material issues under any debt agreements based on current facts and circumstances.

As of June 30, 2025, we were in compliance with all of the financial covenants in our debt agreements, and we do not anticipate material issues under any debt agreements based on current facts and circumstances.

Our debt agreements contain certain covenants that limit restricted payments, including share repurchases and dividends.

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Our Board of Directors authorized a share repurchase program in 2016 pursuant to which we were authorized to repurchase shares of our common stock, and the Board of Directors has authorized increases to this authorization from time to time.

During the three months ended March 31, 2025, we did not repurchase shares under our share repurchase program.

As of March 31, 2025, we had $774.5 million remaining under our share repurchase authorization.

During the six months ended June 30, 2025, we did not repurchase shares under our share repurchase program.

As of June 30, 2025, we had $774.5 million remaining under our share repurchase authorization.

Share repurchases under this program may be made through open market transactions, negotiated purchases or otherwise, at times and in such amounts as management deems appropriate.

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Future Liquidity Sources and Uses

As of March 31, 2025, we had $819.4 million of liquidity, including $111.1 million of cash on hand and $708.3 million available under our 2023 Credit Agreement.

As of June 30, 2025, we had $805.8 million of liquidity, including $98.1 million of cash on hand and $707.7 million available under our 2023 Credit Agreement.

In addition, we expect to generate cash flow from operations in the full year 2025.

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Our capital allocation strategy follows a balanced approach focused on supporting the business, returning shareholder value through strategic acquisition opportunities that enhance our global competitiveness, as well as quarterly dividends and opportunistic share repurchases.

The Board of Directors declared a dividend of $0.15 per share for the second quarter of 2025.

The dividend is payable on June 5, 2025 to shareholders of record as of May 22, 2025.

As of March 31, 2025, we had $5,069.9 million in total debt outstanding and consolidated indebtedness less netted cash, which is a non-GAAP financial measure, of $4,958.8 million.

Leverage based on the ratio of consolidated indebtedness less netted cash to adjusted EBITDA, which is a non-GAAP financial measure, was 3.51 times for the trailing twelve months ended March 31, 2025.

We currently expect our target leverage ratio to return to 2.0 to 3.0 times in the first twelve months following the close of the transaction.

The Board of Directors declared a dividend of $0.15 per share for the third quarter of 2025.

The dividend is payable on September 5, 2025 to shareholders of record as of August 21, 2025.

As of June 30, 2025, we had $4,951.6 million in total debt outstanding and consolidated indebtedness less netted cash, which is a non-GAAP financial measure, of $4,853.5 million.

Leverage based on the ratio of consolidated indebtedness less netted cash to adjusted EBITDA, which is a non-GAAP financial measure, was 3.56 times for the trailing twelve months ended June 30, 2025.

We currently expect our target leverage ratio to return to 2.0 to 3.0 times in 2026.

Total cash interest payments related to our borrowings are expected to be between approximately $260 million to $265 million in 2025.

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Adjusted Net Income and Adjusted EPS

A reconciliation of reported net (loss) income to adjusted net income and the calculation of adjusted EPS is provided below.

A reconciliation of reported net income to adjusted net income and the calculation of adjusted EPS is provided below.

We believe 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 below.

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

The following table sets forth the reconciliation of our reported net income to adjusted net income and the calculation of adjusted EPS for the three months ended June 30, 2025 and 2024:

Three Months Ended

(in millions, except per share amounts) March 31, 2025 March 31, 2024

Net (loss) income $ (33.1) $ 76.3

Acquisition-related costs (1)

(in millions, except per share amounts) June 30, 2025 June 30, 2024

Net income $ 99.0 $ 106.1

Business combination charges (1)

Loss on disposal of business (2)

Disposition-related costs (3)

Transaction costs (4)

Transaction-related interest expense, net (3)

Supply chain transition costs (5)

Operational start-up costs (5)

Adjusted income tax provision (6)

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Diluted shares outstanding 212.4 178.0

(1) In the first quarter of 2025, we recorded $114.2 million of acquisition-related costs.

Cost of sales included $95.4 million, primarily related to one-time business combination accounting and purchase price allocation adjustments.

Operating expenses included $18.8 million of professional fees and restructuring costs.

(2) In the first quarter of 2025, we recorded $51.9 million of transaction costs associated with the Mattress Firm Acquisition.

Operating expenses primarily included legal and professional fees associated with the Mattress Firm Acquisition.

In the first quarter of 2024, we recorded $14.8 million of transaction costs primarily related to legal and professional fees associated with the Mattress Firm Acquisition.

(3) In the first quarter of 2025, we incurred $6.8 million of transaction-related interest expense, net of interest income, related to the Term B Loan drawn and held in escrow.

The proceeds of the Term B Loan were released upon the closing of the Mattress Firm Acquisition on February 5, 2025.

(4) In the first quarter of 2025, we recorded $3.5 million of supply chain transition costs associated with the consolidation of certain manufacturing facilities, with $1.9 million recorded in cost of sales and $1.6 million recorded in operating expenses.

(5) In the first quarter of 2024, we recorded $3.1 million of operational start-up costs related to the capacity expansion of our manufacturing and distribution facilities in the U.S., including personnel and facility related costs.

(1) In the second quarter of 2025, we recorded $17.6 million of business combination charges, primarily related to the CEO transaction bonus, professional fees and restructuring costs.

(2) In the second quarter of 2025, we recorded a $13.9 million loss on disposal of business, net of proceeds of $9.0 million, associated with the divestiture of 73 Mattress Firm stores and our Sleep Outfitters subsidiary.

(3) In the second quarter of 2025, we recorded $9.2 million of disposition-related costs.

Cost of sales included $3.7 million, primarily related to retail store transition costs incurred for the divestiture to Mattress Warehouse.

Operating expenses included $3.7 million of merchandising, store personnel and other support costs related to the divestiture.

Other expenses included a $1.8 million loss on disposal for assets not divested to Mattress Warehouse.

(4) In the second quarter of 2025, we recorded $4.9 million of transaction costs associated with the Term B Loan repricing and the divestiture of 73 Mattress Firm stores and our Sleep Outfitters subsidiary, which primarily included legal and professional fees.

In the second quarter of 2024, we recorded $7.3 million of transaction costs primarily related to legal and professional fees associated with the Mattress Firm Acquisition.

(5) In the second quarter of 2025, we recorded $1.3 million of supply chain transition costs associated with the consolidation of certain manufacturing facilities, with $0.7 million recorded in cost of sales and $0.6 million recorded in other expenses.

(6) Adjusted income tax provision represents the tax effects associated with the aforementioned items.

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

The following table sets forth the reconciliation of our 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.

Three Months Ended March 31, 2025

Three Months Ended June 30, 2025

(in millions, except percentages) Consolidated Margin Tempur Sealy North America Margin Tempur Sealy International Margin Mattress Firm Margin Corporate

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Gross profit $ 827.2 44.0 % $ 348.2 54.5 % $ 141.6 48.2 % $ 337.4 35.6 % $ —

Acquisition-related costs (1)

Disposition-related costs (1)

3.7 2.3 — 1.4 —

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Operating income (expense) $ 179.9 9.6 % $ 130.1 20.4 % $ 39.8 13.6 % $ 63.2 6.7 % $ (53.2)

Acquisition-related costs (1)

Business combination charges (3)

17.6 — — 2.2 15.4

Loss on disposal of business (4)

13.9 9.8 — 4.1 —

Disposition-related costs (1)

7.4 4.5 — 2.9 —

Transaction costs (5)

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Adjusted operating income (expense) $ 224.4 11.9 % $ 145.1 22.7 % $ 39.8 13.6 % $ 73.9 7.8 % $ (34.4)

(1) In the first quarter of 2025, we recorded $114.2 million of acquisition-related costs.

Cost of sales included $95.4 million, primarily related to one-time business combination accounting and purchase price allocation adjustments.

Operating expenses included $18.8 million of professional fees and restructuring costs.

(2) In the first quarter of 2025, we recorded $3.5 million of supply chain transition costs associated with the consolidation of certain manufacturing facilities, with $1.9 million recorded in cost of sales and $1.6 million recorded in operating expenses.

(3) In the first quarter of 2025, we recorded $51.9 million of transaction costs associated with the Mattress Firm Acquisition.

Operating expenses primarily included legal and professional fees associated with the Mattress Firm Acquisition.

The following table sets forth our 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.

Three Months Ended March 31, 2024

(1) In the second quarter of 2025, we recorded $9.2 million of disposition-related costs.

Cost of sales included $3.7 million, primarily related to retail store transition costs incurred for the divestiture to Mattress Warehouse.

Operating expenses included $3.7 million of merchandising, store personnel and other support costs related to the divestiture.

Other expenses included a $1.8 million loss on disposal for assets not divested to Mattress Warehouse.

(2) In the second quarter of 2025, we recorded $1.3 million of supply chain transition costs associated with the consolidation of certain manufacturing facilities, with $0.7 million recorded in cost of sales and $0.6 million recorded in other expenses.

(3) In the second quarter of 2025, we recorded $17.6 million of business combination charges, primarily related to the CEO transaction bonus, professional fees and restructuring costs.

(4) In the second quarter of 2025, we recorded a $13.9 million loss on disposal of business, net of proceeds of $9.0 million, associated with the divestiture of 73 Mattress Firm stores and our Sleep Outfitters subsidiary.

(5) In the second quarter of 2025, we recorded $4.9 million of transaction costs associated with the Term B Loan repricing and the divestiture of 73 Mattress Firm stores and our Sleep Outfitters subsidiary, which primarily included legal and professional fees.

Three Months Ended June 30, 2024

(in millions, except percentages) Consolidated Margin Tempur Sealy North America Margin Tempur Sealy International Margin Corporate

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Gross profit $ 517.6 42.0 % $ 393.7 40.2 % $ 123.9 48.6 % $ —

Operational start-up costs (1)

Total adjustments 3.1 3.1 — —

Adjusted gross profit $ 477.4 40.1 % $ 339.8 37.7 % $ 137.6 47.7 % $ —

Operating income (expense) $ 173.3 14.0 % $ 180.4 18.4 % $ 31.8 12.5 % $ (38.9)

Transaction costs (1)

14.8 — — 14.8

Operational start-up costs (1)

Total adjustments 17.9 3.1 — 14.8

Adjusted operating income (expense) $ 180.6 14.6 % $ 180.4 18.4 % $ 31.8 12.5 % $ (31.6)

(1) In the first quarter of 2024, we recorded $3.1 million of operational start-up costs related to the capacity expansion of manufacturing and distribution facilities in the U.S., including personnel and facility related costs.

(2) In the first quarter of 2024, we recorded $14.8 million of transaction costs primarily related to legal and professional fees associated with the Mattress Firm Acquisition.

(1) In the second quarter of 2024, we recorded $7.3 million of transaction costs, primarily related to legal and professional fees associated with the Mattress Firm Acquisition.

EBITDA, Adjusted EBITDA and Consolidated Indebtedness less Netted Cash

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Accordingly, we present adjusted EBITDA to provide information regarding our compliance with requirements under the 2023 Credit Agreement.

The following table sets forth the reconciliation of our 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 our reported net income to the calculations of EBITDA and adjusted EBITDA for the three months ended June 30, 2025 and 2024:

Three Months Ended

(in millions) March 31, 2025 March 31, 2024

Net (loss) income $ (33.1) $ 76.3

(in millions) June 30, 2025 June 30, 2024

Net income $ 99.0 $ 106.1

Interest expense, net 72.5 33.4

Transaction-related interest expense, net (1)

Income tax (benefit) provision (16.5) 20.7

Income tax provision 3.2 34.0

Depreciation and amortization 69.1 50.6

EBITDA $ 243.8 $ 224.1

Acquisition-related costs (2)

Business combination charges (1)

Loss on disposal of business (2)

Disposition-related costs (3)

Transaction costs (4)

Supply chain transition costs (5)

Operational start-up costs (5)

Adjusted EBITDA $ 290.7 $ 231.4

(1) In the first quarter of 2025, we incurred $6.8 million of transaction-related interest expense, net of interest income, related to the Term B Loan drawn and held in escrow.

The proceeds of the Term B Loan were released upon the closing of the Mattress Firm Acquisition on February 5, 2025.

(2) In the first quarter of 2025, we recorded $114.2 million of acquisition-related costs.

Cost of sales included $95.4 million, primarily related to one-time business combination accounting and purchase price allocation adjustments.

Operating expenses included $18.8 million of professional fees and restructuring costs.

(3) In the first quarter of 2025, we recorded $51.9 million of transaction costs associated with the Mattress Firm Acquisition.

Operating expenses primarily included legal and professional fees associated with the Mattress Firm Acquisition.

In the first quarter of 2024, we recorded $14.8 million of transaction costs primarily related to legal and professional fees associated with the Mattress Firm Acquisition.

(5) In the first quarter of 2024, we recorded $3.1 million of operational start-up costs related to the capacity expansion of manufacturing and distribution facilities in the U.S., including personnel and facility related costs.

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

(1) In the second quarter of 2025, we recorded $17.6 million of business combination charges, primarily related to the CEO transaction bonus, professional fees and restructuring costs.

(3) In the second quarter of 2025, we recorded $9.2 million of disposition-related costs.

Cost of sales included $3.7 million, primarily related to retail store transition costs incurred for the divestiture to Mattress Warehouse.

Operating expenses included $3.7 million of merchandising, store personnel and other support costs related to the divestiture.

Other expenses included a $1.8 million loss on disposal for assets not divested to Mattress Warehouse.

In the second quarter of 2024, we recorded $7.3 million of transaction costs primarily related to legal and professional fees associated with the Mattress Firm Acquisition.

The following table sets forth the reconciliation of our net income to the calculations of EBITDA and adjusted EBITDA for the trailing twelve months ended June 30, 2025:

Trailing Twelve Months Ended

(in millions) March 31, 2025

(in millions) June 30, 2025

Net income $ 267.8

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Customer-related transition charges (4)

Business combination charges (5)

Supply chain transition costs (6)

Loss on disposal of business (7)

Disposition-related costs (8)

Cybersecurity event (9)

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Adjustments for financial covenant purposes:

Unrestricted subsidiary (7)

Loss from unrestricted subsidiary (10)

Earnings from Mattress Firm prior to acquisition (11)

Future synergies to be realized from Mattress Firm Acquisition (9)

Future cost synergies to be realized from Mattress Firm Acquisition (12)

Adjusted EBITDA per credit facility $ 1,362.4

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Ratio of consolidated indebtedness less netted cash to adjusted EBITDA 3.56 times

(1) In the trailing twelve months ended March 31, 2025, we recognized $16.6 million of transaction-related interest expense, net of interest income, related to the Term B Loan drawn and held in escrow.

(1) In the trailing twelve months ended June 30, 2025, we incurred $16.6 million of transaction-related interest expense, net of interest income, related to the Term B Loan drawn and held in escrow.

The proceeds of the Term B Loan were released upon the closing of the Mattress Firm Acquisition on February 5, 2025.

(2) In the first quarter of 2025, we recorded $114.2 million of acquisition-related costs.

Cost of sales included $95.4 million, primarily related to one-time business combination accounting and purchase price allocation adjustments.

Operating expenses included $18.8 million of professional fees and restructuring costs.

(3) In the trailing twelve months ended March 31, 2025, we recognized $84.9 million of transaction costs associated with the Mattress Firm Acquisition.

(4) In the trailing twelve months ended March 31, 2025, we recorded $26.7 million of transition charges as a result of a customer's acquisition which foreclosed on our OEM distribution to this customer.

(5) In the trailing twelve months ended March 31, 2025, we recognized $13.0 million in supply chain transition costs associated with the consolidation of certain manufacturing facilities.

(6) In the trailing twelve months ended March 31, 2025, the Company received proceeds of $4.9 million for an insurance claim related to the previously disclosed cybersecurity event identified on July 23, 2023.

(2) In the trailing twelve months ended June 30, 2025, we recognized $114.2 million of acquisition-related costs, primarily related to one-time business combination accounting and purchase price allocation adjustments.

(3) In the trailing twelve months ended June 30, 2025, we recognized $82.5 million of transaction costs associated with the Mattress Firm Acquisition.

(4) In the trailing twelve months ended June 30, 2025, we recorded $26.7 million of transition charges as a result of a customer's acquisition which foreclosed on our OEM distribution to this customer.

(5) In the trailing twelve months ended June 30, 2025, we recorded $17.6 million of business combination charges, primarily related to the CEO transaction bonus, professional fees and restructuring costs.

(6) In the trailing twelve months ended June 30, 2025, we recognized $14.3 million in supply chain transition costs associated with the consolidation of certain manufacturing facilities.

(7) In the second quarter of 2025, we recorded a $13.9 million loss on disposal of business, net of proceeds of $9.0 million, associated with the divestiture of 73 Mattress Firm stores and our Sleep Outfitters subsidiary.

(8) In the second quarter of 2025, we recorded $9.2 million of disposition-related costs.

(9) In the trailing twelve months ended June 30, 2025, we received proceeds of $4.9 million for an insurance claim related to the previously disclosed cybersecurity event identified on July 23, 2023.

(10) A subsidiary in the Tempur Sealy North America business segment was accounted for as held for sale and designated as an unrestricted subsidiary under the 2023 Credit Agreement.

Therefore, this subsidiary's financial results were excluded from the Company's adjusted financial measures for covenant compliance purposes.

(8) We completed the Mattress Firm Acquisition on February 5, 2025 and the Mattress Firm subsidiaries are designated as restricted under the 2023 Credit Agreement.

For covenant compliance purposes, we included $329.6 million of Mattress Firm EBITDA for the period prior to acquisition in our calculation of adjusted EBITDA per credit facility for the trailing twelve months ended March 31, 2025.

(9) For the trailing twelve months ended March 31, 2025, we are permitted to include $100.0 million of future synergies expected to be realized with 36 months in connection with the Mattress Firm acquisition for the purpose of calculating our adjusted EBITDA in accordance with the 2023 Credit Agreement.

Under the 2023 Credit Agreement, the ratio of adjusted EBITDA to consolidated indebtedness less netted cash was 3.51 times for the trailing twelve months ended March 31, 2025.

Therefore, this subsidiary's financial results were excluded from our adjusted financial measures for covenant compliance purposes.

(11) We completed the Mattress Firm Acquisition on February 5, 2025 and designated the Mattress Firm subsidiary as restricted under the 2023 Credit Agreement.

For covenant compliance purposes, we included $223.4 million of Mattress Firm EBITDA for the period prior to acquisition in our calculation of adjusted EBITDA per the credit facility for the trailing twelve months ended June 30, 2025.

(12) For the trailing twelve months ended June 30, 2025, we are permitted to include $100.0 million of future cost synergies expected to be realized in connection with acquisitions for the purpose of calculating our adjusted EBITDA in accordance with the 2023 Credit Agreement.

Under the 2023 Credit Agreement, the ratio of adjusted EBITDA to consolidated indebtedness less netted cash was 3.56 times for the trailing twelve months ended June 30, 2025.

The 2023 Credit Agreement requires us 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 our reported total debt to the calculation of consolidated indebtedness less netted cash as of March 31, 2025.

The following table sets forth the reconciliation of our reported total debt to the calculation of consolidated indebtedness less netted cash as of June 30, 2025.

"Consolidated Indebtedness" and "Netted Cash" are terms used in the 2023 Credit Agreement for purposes of certain financial covenants.

(in millions) March 31, 2025

(in millions) June 30, 2025

Total debt, net $ 4,916.7

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Critical Accounting Policies and Estimates

During the three months ended March 31, 2025, there were no material changes to our critical accounting policies and estimates as described in our 2024 Annual Report, except as set forth below.

During the six months ended June 30, 2025, there were no material changes to our critical accounting policies and estimates as described in our 2024 Annual Report, except as set forth below.

Business Combinations.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis