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Item 2. Management’s Discussion and Analysis

2026-05-08 compared with 2025-11-07 · 203 added, 347 removed, 241 unchanged (70% of the section changed)

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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 and nine months ended September 30, 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 months ended March 31, 2026, including the following topics:

• an overview of our business and strategy;

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Business Overview

We are the world's largest bedding company, dedicated to improving people's lives through better sleep.

We are the world's leading bedding company, dedicated to transforming how the world sleeps.

With superior capabilities in design, manufacturing, distribution and retail, we deliver breakthrough sleep solutions and serve the evolving needs of consumers in more than 100 countries worldwide through our fully-owned businesses, Tempur Sealy, Mattress Firm and Dreams.

We operate in three segments:

Tempur Sealy North America, Tempur Sealy International and Mattress Firm.

Mattress Firm, Tempur Sealy North America and Tempur Sealy International.

These segments are strategic business units that are managed separately.

Our Mattress Firm segment consists of retail stores and distribution centers located in the U.S.

Our Tempur Sealy North America segment consists of manufacturing, distribution and retail subsidiaries and licensees located in the U.S., Canada and Mexico (other than Mattress Firm retail and distribution locations).

Our Tempur Sealy International segment consists of manufacturing, distribution and retail subsidiaries, joint ventures and licensees located in Europe, Asia-Pacific and Latin America (other than Mexico).

The Mattress Firm segment consists of retail stores and distribution centers located in the U.S.

Corporate operating expenses are not included in any of the segments and are presented separately as a reconciling item to consolidated results.

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For additional information refer to Note 12, "Business Segment Information," included in Part I, ITEM 1 of this Report.

Our portfolio includes the most highly recognized brands in the industry, including Tempur-Pedic®, Sealy®, Stearns & Foster® and Sleepy's® and our global omni-channel platform enables us to meet consumers wherever they shop, offering a personal connection and innovation to provide a unique retail experience and tailored sleep solutions.

Our products allow for complementary merchandising strategies and are sold through third-party retailers, our company-owned and joint venture operated retail stores worldwide and our e-commerce channel.

Our portfolio includes the most highly recognized brands in the industry, including Tempur-Pedic®, Sealy® and Stearns & Foster® and our global omni-channel platform enables us to meet consumers wherever they shop, offering a personal connection and innovation to provide a unique retail experience and tailored sleep solutions.

As of March 31, 2026, we operated 2,839 company-owned stores, including 2,161 Mattress Firm stores, Tempur Sealy owned stores, Dreams stores and joint venture stores.

Our distribution model operates through an omni-channel strategy.

We distribute through two channels in the Tempur Sealy North America and Tempur Sealy International operating business segments:

Wholesale and Direct.

We distribute through one channel in the Mattress Firm operating business segment:

Our Wholesale channel consists of third-party retailers, including third-party distribution, hospitality and healthcare.

Our Direct channel includes company-owned stores, online and call centers.

The Mattress Firm segment sells products through one channel:

The Tempur Sealy North America and Tempur Sealy International operating business segments sell products through two channels:

Direct and Wholesale.

Our Direct channel includes product sales through company-owned stores, online and call centers.

Our Wholesale channel includes all product sales to third-party retailers, including third-party distribution, hospitality and healthcare.

General Business and Economic Conditions

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As consumers make this connection, they are willing to invest more in their bedding purchases, which positions us well for long-term growth.

The global bedding industry was challenged in 2024 due to certain macroeconomic pressures on the consumer, which have continued during 2025.

The global bedding industry was challenged in 2025 due to certain macroeconomic pressures on the consumer, which continued during the first quarter of 2026.

Ongoing geopolitical conflicts, including trade disputes and the imposition of tariffs, along with the U.S.

government shutdown, may also introduce further uncertainty for the consumer.

government shutdowns, may also introduce further uncertainty for the consumer.

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.

The majority of our products sold in the U.S.

are also manufactured in the U.S.

Accordingly, we believe proposed tariffs will not have a material impact on our results of operations in 2026.

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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.

Definitive Agreement with Leggett & Platt, Incorporated

On April 13, 2026, Somnigroup International and Leggett & Platt, Incorporated ("Leggett & Platt") entered into a definitive agreement (the "Merger Agreement") for a proposed business acquisition in which Somnigroup International, through a wholly-owned subsidiary, will acquire Leggett & Platt in an all-stock transaction valued at approximately $2.5 billion based on the closing price of Somnigroup International's common stock as of April 10, 2026 and inclusive of Leggett & Platt's existing indebtedness.

The transaction is currently anticipated to close by year-end 2026, subject to the satisfaction of customary closing conditions, including approval by Leggett & Platt’s shareholders and receipt of applicable regulatory approvals.

The transaction does not require Somnigroup International shareholder approval.

Following the close of the transaction, Leggett & Platt is expected to operate as a separate business unit within Somnigroup and to maintain its offices in Carthage, Missouri.

Acquisition of Mattress Firm

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The aggregate purchase price consisted of $3.1 billion in cash and approximately 34.2 million shares of common stock valued at $65.65 per share, which represents the simple average of the opening and closing price per share of our common stock on the NYSE on the trading day immediately prior to the date of acquisition, with the value of any fractional shares paid in cash.

In connection with the consummation of the merger, we borrowed $625.0 million on the Delayed Draw Term A Loan and $679.5 million of revolving commitments under our senior credit facility.

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, 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 periods from July 1, 2025 through September 30, 2025 and February 5, 2025 through September 30, 2025 (the "stub period") are included in the Company's Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2025, respectively.

Mattress Firm's financial results for the period February 5, 2025 through March 31, 2025 (the "stub period") are included in our Condensed Consolidated Financial Statements for the three months ended March 31, 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 MW SO Holdings Company, LLC ("Mattress Warehouse").

In the nine months ended September 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

In 2025, we launched an all-new collection of Sealy Posturepedic products in North America.

This reinvention of the Sealy Posturepedic® brand is strategically aimed at reigniting growth in the mid-to-entry level market, which has experienced outsized pressures relative to other price points in recent years.

The new collection incorporates innovative technologies, including our proprietary PrecisionFit™ coils which were expertly designed to provide superior support.

In 2026, we plan to launch an all new collection of Stearns & Foster products in North America.

This new line is designed to further elevate our high‑end traditional innerspring brand by introducing incremental technologies, expanding our range of hybrid offerings and providing a refreshed aesthetic.

Results of Operations

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

• Total net sales increased 63.3% to $2,122.6 million as compared to $1,300.0 million in the third quarter of 2024, primarily driven by the inclusion of $1,070.8 million of Mattress Firm sales for the quarter, offset by the elimination of $313.7 million of sales from the Tempur Sealy North America segment to the Mattress Firm segment.

• Gross margin was 44.9% as compared to 42.4% in the third quarter of 2024.

Adjusted gross margin, which is a non-GAAP financial measure, was 45.6% as compared to 43.2% in the third quarter of 2024.

• Operating income increased 55.9% to $314.7 million as compared to $201.8 million in the third quarter of 2024.

Adjusted operating income, which is a non-GAAP financial measure, increased 53.6% to $343.7 million as compared to $223.7 million in the third quarter of 2024.

Both were primarily driven by the inclusion of Mattress Firm.

• Net income increased 36.5% to $177.4 million as compared to $130.0 million in the third quarter of 2024.

Adjusted net income, which is a non-GAAP financial measure, increased 37.5% to $201.4 million as compared to $146.5 million in the third quarter of 2024.

• Earnings per diluted share ("EPS") increased 13.7% to $0.83 as compared to $0.73 in the third quarter of 2024.

Adjusted EPS, which is a non-GAAP financial measure, increased 15.9% to $0.95 as compared to $0.82 in the third quarter of 2024.

A summary of our results for the three months ended March 31, 2026 include:

• Total net sales increased 12.3% to $1,801.5 million as compared to $1,604.7 million in the first quarter of 2025, primarily driven by the inclusion of Mattress Firm sales for a full quarter as compared to the first quarter of 2025, which included Mattress Firm for the stub period.

• Gross margin was 43.1% as compared to 36.2% in the first quarter of 2025.

Adjusted gross margin (1) was 43.6% as compared to 42.2% in the first quarter of 2025.

• Operating income increased 1,317.4% to $187.1 million as compared to $13.2 million in the first quarter of 2025.

Adjusted operating income (1) increased 17.4% to $214.6 million as compared to $182.8 million in the first quarter of 2025.

Both were primarily driven by the inclusion of Mattress Firm and realized sales and cost synergies.

• Net income increased 414.8% to $104.2 million as compared to net loss of $(33.1) million in the first quarter of 2025.

Adjusted net income (1) increased 28.4% to $124.5 million as compared to $97.0 million in the first quarter of 2025.

• Earnings per diluted share ("EPS") increased 388.2% to $0.49 as compared to loss per diluted share of $(0.17) in the first quarter of 2025.

Adjusted EPS (1) increased 20.4% to $0.59 as compared to $0.49 in the first quarter of 2025.

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 SEPTEMBER 30, 2025 COMPARED TO THE

THREE MONTHS ENDED SEPTEMBER 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 September 30,

THREE MONTHS ENDED MARCH 31, 2026 COMPARED TO THE

THREE MONTHS ENDED MARCH 31, 2025

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

Three Months Ended March 31,

(in millions, except percentages and per share amounts) 2026 2025

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Interest expense, net 60.0 3.3 61.3 3.8

Other expense, net 10.9 0.5 0.4 —

Other (income) expense, net (10.2) (0.6) 1.2 0.1

Total other expense, net 49.8 2.8 62.5 3.9

Income before income taxes 233.9 11.0 170.6 13.1

Income tax provision (56.2) (2.6) (40.8) (3.1)

Net income before non-controlling interest 177.7 8.4 129.8 10.0

Net income (loss) attributable to non-controlling interest 0.3 — (0.2) —

Net income attributable to Somnigroup International Inc.

Income (loss) before income taxes 137.3 7.6 (49.3) (3.1)

Income tax (provision) benefit (33.4) (1.9) 16.5 1.0

Net income (loss) before non-controlling interest 103.9 5.8 (32.8) (2.0)

Net (loss) income attributable to non-controlling interest (0.3) — 0.3 —

Net income (loss) attributable to Somnigroup International Inc.

$ 104.2 5.8 % $ (33.1) (2.0) %

Earnings per common share:

Earnings (loss) per common share:

Basic $ 0.50 $ (0.17)

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Diluted 212.6 198.9

Three Months Ended September 30,

Three Months Ended March 31,

2026 2025 2026 2025 2026 2025 2026 2025

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

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

Net sales by channel

Wholesale $ 739.3 $ 981.8 $ 626.4 $ 878.4 $ 112.9 $ 103.4 $ — $ —

Direct $ 1,196.3 $ 906.0 $ 885.9 $ 593.7 $ 90.0 $ 121.7 $ 220.4 $ 190.6

Wholesale 605.2 698.7 — — 473.5 584.5 131.7 114.2

Total net sales $ 1,801.5 $ 1,604.7 $ 885.9 $ 593.7 $ 563.5 $ 706.2 $ 352.1 $ 304.8

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The change in net sales was driven by the following:

• Tempur Sealy North America net sales decreased $279.2 million, or 27.5%.

Net sales in the Wholesale channel decreased $252.0 million, primarily driven by a 35.7% decline from the elimination of intercompany sales to Mattress Firm of $313.7 million, offset by a 7.0% increase in net sales of $61.7 million, primarily driven by growth at third-party retailers.

Net sales in the Direct channel decreased $27.2 million, or 19.9%, primarily driven by a decrease in sales from the divestiture of Sleep Outfitters.

• Tempur Sealy International net sales increased $31.0 million, or 10.9%, primarily driven by expanded distribution.

• Mattress Firm net sales increased $292.2 million, or 49.2%, primarily driven by the inclusion of net sales for a full quarter as compared to the first quarter of 2025, which included Mattress Firm for the stub period.

All Mattress Firm sales are reported through the direct channel.

• Tempur Sealy North America net sales decreased $142.7 million, or 20.2%, net sales in the Wholesale channel decreased $111.0 million, primarily driven by the accounting elimination of sales to Mattress Firm for a full quarter in 2026 as compared to the first quarter of 2025, which eliminated sales to Mattress Firm for the stub period.

Net sales in the Direct channel decreased $31.7 million, or 26.0%, primarily driven by a decrease in sales from the divestiture of Sleep Outfitters in the second quarter of 2025.

• Tempur Sealy International net sales increased $47.3 million, or 15.5%, primarily driven by strong performance in key markets.

On a constant currency basis, International net sales increased 7.2%.

Net sales in the Wholesale channel increased 6.1% on a constant currency basis.

Net sales in the Direct channel increased 7.5% on a constant currency basis.

• Mattress Firm net sales were $1,070.8 million for the three months ended September 30, 2025.

Three Months Ended September 30,

Net sales in the Wholesale channel increased 6.7% on a constant currency basis.

Three Months Ended March 31,

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

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Our gross margin is primarily impacted by the relative amount of net sales contributed by our premium or value products.

Our value products have a significantly lower gross margin than our premium products.

If sales of our value priced products increase relative to sales of our premium priced products, our gross margins will be negatively impacted across all segments.

Our premium products have higher gross margins than our value products.

An increase in sales of our premium priced products can positively impact gross margins, while an increase in sales of our value priced products can negatively impact gross margins across all segments.

Our margins are also impacted by the relative amount of net sales contributed by each channel.

Sales in our Direct channel have higher gross margins than sales in our Wholesale channel.

Our gross margin is also impacted by fixed cost leverage based on manufacturing unit volumes;

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Future changes in raw material prices could have a significant impact on our gross margin.

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 690 basis points.

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

• Mattress Firm gross margin declined 140 basis points.

The decline in gross margin was primarily driven by investments in promotional expenses of 110 basis points, product mix of 100 basis points and fixed cost deleverage of 90 basis points.

Additionally, in 2025, we incurred $17.4 million of one-time business combination accounting adjustments related to the Mattress Firm Acquisition, which were not incurred in 2026.

• Tempur Sealy North America gross margin improved 2,390 basis points.

The improvement in gross margin was primarily driven by the elimination of sales to Mattress Firm of 1,740 basis points, operational efficiencies of 50 basis points and fixed cost absorption.

These improvements were partially offset by unfavorable mix of 80 basis points.

• Tempur Sealy International gross margin declined 40 basis points.

The decline in gross margin was primarily driven by unfavorable mix of 60 basis points, partially offset by operational efficiencies.

• Mattress Firm gross margin was 34.4% for the three months ended September 30, 2025.

The improvement in gross margin was primarily driven by the achievement of synergies of 620 basis points, the elimination of sales to Mattress Firm of 450 basis points, lower product launch costs and operational efficiencies.

Additionally, in 2025, we incurred $78.0 million of one-time business combination accounting adjustments related to the Mattress Firm Acquisition, which were not incurred in 2026.

• Tempur Sealy International gross margin improved 140 basis points.

The improvement in gross margin was primarily driven by favorable mix of 70 basis points and operational efficiencies.

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.

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

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 September 30,

General, administrative and other expenses include salaries and related expenses, information technology, 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 March 31,

2026 2025 2026 2025 2026 2025 2026 2025 2026 2025

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

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

Operating expenses:

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Total operating expenses $ 595.4 $ 572.1 $ 239.5 $ 184.4 $ 194.7 $ 199.7 $ 117.8 $ 103.0 $ 43.4 $ 85.0

Operating expenses increased $289.0 million, or 82.1%, and increased 310 basis points as a percentage of net sales.

Operating expenses increased $23.3 million, or 4.1%, and decreased 260 basis points as a percentage of net sales.

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

• Mattress Firm operating expenses increased $55.1 million, or 29.9%, and decreased 410 basis points as a percentage of net sales.

The increase was primarily driven by the inclusion of operating expenses for a full quarter as compared to the first quarter of 2025, which included operating expenses for the stub period.

• Tempur Sealy North America operating expenses decreased $5.0 million, or 2.5%, and increased 630 basis points as a percentage of net sales.

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

• Mattress Firm operating expenses were $286.9 million for the three months ended September 30, 2025.

• Corporate operating expenses decreased $41.6 million, or 48.9%.

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

Research and development expenses for the three months ended September 30, 2025 were $8.8 million, compared to $7.0 million for the three months ended September 30, 2024, an increase of $1.8 million, or 25.7%.

OPERATING INCOME

Three Months Ended September 30,

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

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

Research and development expenses for the three months ended March 31, 2026 were $8.5 million, compared to $8.1 million for the three months ended March 31, 2025, an increase of $0.4 million, or 4.9%.

OPERATING INCOME (LOSS)

Three Months Ended March 31,

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

Mattress Firm $ 33.4 3.8 % $ 6.8 1.1 % 2.7 %

Tempur Sealy North America 131.7 23.4 % 40.3 5.7 % 17.7 %

Tempur Sealy International 64.9 18.4 % 51.1 16.8 % 1.6 %

Mattress Firm 81.2 7.6 % — — % 7.6 %

Corporate expenses (37.9) (43.2)

Corporate (42.9) (85.0)

Total operating income $ 187.1 10.4 % $ 13.2 0.8 % 9.6 %

Operating income increased $112.9 million and operating margin declined 70 basis points.

Operating income increased $173.9 million and operating margin improved 960 basis points.

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

• Mattress Firm operating income increased $26.6 million and operating margin improved 270 basis points.

The improvement in operating margin was primarily driven by operating expense leverage of 410 basis points, offset by the decline in gross margin of 140 basis points.

• Tempur Sealy North America operating income increased $91.4 million and operating margin improved 1,770 basis points.

The improvement in operating margin was primarily driven by the improvement in gross margin of 2,390 basis points, partially offset by operating expense deleverage of 630 basis points.

• Tempur Sealy International operating income increased $5.3 million and operating margin declined 10 basis points.

The decline in operating margin was driven by decline in gross margin of 40 basis points, offset by operating expense leverage.

• Mattress Firm operating income was $81.2 million and operating margin was 7.6% for the three months ended September 30, 2025.

• Corporate operating expenses decreased $5.3 million, which positively impacted our consolidated operating margin.

• Tempur Sealy International operating income increased $13.8 million and operating margin improved 160 basis points.

The improvement in operating margin was driven by improvement in gross margin of 140 basis points and operating expense leverage.

• Corporate operating loss decreased $42.1 million, which positively impacted our consolidated operating margin.

INTEREST EXPENSE, NET

Three Months Ended September 30,

Three Months Ended March 31,

(in millions, except percentages) 2026 2025 % Change

Interest expense, net $ 60.0 $ 61.3 (2.1) %

Interest expense, net, increased $39.1 million, or 126.9%.

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

Interest expense, net, decreased $1.3 million, or 2.1%.

The decrease in interest expense, net, was primarily driven by lower interest rates on outstanding variable rate debt.

INCOME TAX PROVISION

Three Months Ended September 30,

Three Months Ended March 31,

(in millions, except percentages) 2026 2025 % Change

Income tax provision $ 56.2 $ 40.8 37.7 %

Income tax provision (benefit) $ 33.4 $ (16.5) 302.4 %

Effective tax rate 24.3 % 33.5 %

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

Our income tax provision increased $49.9 million due to an increase in income before income taxes.

Our effective tax rate for the three months ended September 30, 2025 as compared to the prior year increased by 10 basis points.

Our effective tax rate for the first quarter of 2026 as compared to the prior year declined by 920 basis points.

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

federal statutory rate for the three months ended September 30, 2025 and 2024 included a net favorable impact of other discrete items.

NINE MONTHS ENDED SEPTEMBER 30, 2025 COMPARED TO THE

NINE MONTHS ENDED SEPTEMBER 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:

Nine Months Ended September 30,

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

Net sales $ 5,608.1 100.0 % $ 3,723.0 100.0 %

Cost of sales 3,247.6 57.9 2,179.6 58.5

Gross profit 2,360.5 42.1 1,543.4 41.5

Selling and marketing expenses 1,303.9 23.3 699.9 18.8

General, administrative and other expenses 545.8 9.7 347.4 9.3

Loss on disposal of business 13.9 0.2 — —

Equity income in earnings of unconsolidated affiliates (10.9) (0.2) (10.5) (0.3)

Operating income 507.8 9.1 506.6 13.6

Other expense, net:

Interest expense, net 203.7 3.6 98.5 2.6

Other expense (income), net 16.8 0.3 (0.5) —

Total other expense, net 220.5 3.9 98.0 2.6

Income before income taxes 287.3 5.1 408.6 11.0

Income tax provision (42.9) (0.8) (95.5) (2.6)

Net income before non-controlling interest 244.4 4.4 313.1 8.4

Net income attributable to non-controlling interest 1.1 — 0.7 —

Net income attributable to Somnigroup International Inc.

$ 243.3 4.3 % $ 312.4 8.4 %

Earnings per common share:

Basic $ 1.19 $ 1.80

Diluted $ 1.17 $ 1.75

Weighted average common shares outstanding:

Basic 204.7 173.6

Diluted 207.9 178.1

Nine Months Ended September 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 $ 2,080.7 $ 2,818.1 $ 1,744.9 $ 2,510.1 $ 335.8 $ 308.0 $ — $ —

Direct 3,527.4 904.9 335.8 384.7 578.3 520.2 2,613.3 —

Total net sales $ 5,608.1 $ 3,723.0 $ 2,080.7 $ 2,894.8 $ 914.1 $ 828.2 $ 2,613.3 $ —

Net sales increased 50.6%, and on a constant currency basis increased 50.4%.

The change in net sales was driven by the following:

• Tempur Sealy North America net sales decreased $814.1 million, or 28.1%.

Net sales in the Wholesale channel decreased $765.2 million, or 30.5%, primarily driven by a 28.2% decline from the elimination of intercompany sales to Mattress Firm of $707.3 million, and a 2.3% decrease in net sales of $57.9 million, primarily driven by foreclosed distribution.

Net sales in the Direct channel decreased $48.9 million, or 12.7%, primarily driven by a decrease in sales from the divestiture of Sleep Outfitters.

• Tempur Sealy International net sales increased $85.9 million, or 10.4%, primarily driven by the success of new product launches and expanded distribution.

On a constant currency basis, International net sales increased $67.9 million, or 8.2%.

Net sales in the Wholesale channel increased 8.1% on a constant currency basis.

Net sales in the Direct channel increased 8.2% on a constant currency basis.

• Mattress Firm net sales were $2,613.3 million for the stub period.

Nine Months Ended September 30,

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

Tempur Sealy North America $ 1,017.8 48.9 % $ 1,141.0 39.4 % 9.5 %

Tempur Sealy International 446.0 48.8 % 402.4 48.6 % 0.2 %

Mattress Firm 896.7 34.3 % — — % 34.3 %

Consolidated gross margin $ 2,360.5 42.1 % $ 1,543.4 41.5 % 0.6 %

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 improved 60 basis points.

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

• Tempur Sealy North America gross margin improved 950 basis points.

The improvement in gross margin was primarily driven by elimination of intercompany sales to Mattress Firm of 1,240 basis points and operational efficiencies of 80 basis points.

These improvements were partially offset by expense deleverage of 80 basis points.

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 20 basis points.

The improvement in gross margin was primarily driven by operational efficiencies.

• Mattress Firm gross margin was 34.3% for the stub period.

OPERATING EXPENSES

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 process, expenses for administrative functions and research and development costs.

Nine Months Ended September 30,

2025 2024 2025 2024 2025 2024 2025 2024 2025 2024

(in millions) Consolidated North America International Mattress Firm Corporate

Operating expenses:

Advertising expenses $ 524.4 $ 346.6 $ 297.9 $ 281.1 $ 71.6 $ 65.5 $ 154.9 $ — $ — $ —

Other selling and marketing expenses 779.5 353.3 194.6 205.4 148.0 135.8 424.0 — 12.9 12.1

General, administrative and other expenses 545.8 347.4 130.7 146.4 89.4 83.3 162.5 — 163.2 117.7

Total operating expenses $ 1,849.7 $ 1,047.3 $ 623.2 $ 632.9 $ 309.0 $ 284.6 $ 741.4 $ — $ 176.1 $ 129.8

Operating expenses increased $802.4 million, or 76.6%, and increased 490 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 $9.7 million, or 1.5%, and increased 810 basis points as a percentage of net sales.

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

• Tempur Sealy International operating expenses increased $24.4 million, or 8.6%, and decreased 60 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 $741.4 million for the stub period.

• Corporate operating expenses increased $46.3 million, or 35.7%.

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

Research and development expenses were $24.7 million for the nine months ended September 30, 2025 as compared to $22.8 million for the nine months ended September 30, 2024, an increase of $1.9 million, or 8.3%.

OPERATING INCOME

Nine Months Ended September 30,

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

Tempur Sealy North America $ 384.8 18.5 % $ 508.1 17.6 % 0.9 %

Tempur Sealy International 147.9 16.2 % 128.3 15.5 % 0.7 %

Mattress Firm 151.2 5.8 % — — % 5.8 %

Corporate expenses (176.1) (129.8)

Total operating income $ 507.8 9.1 % $ 506.6 13.6 % (4.5) %

Operating income increased $1.2 million and operating margin declined 450 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 $123.3 million and operating margin improved 90 basis points.

The improvement in operating margin was primarily driven by the improvement in gross margin of 950 basis points, offset by operating expense deleverage of 810 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 $19.6 million and operating margin improved 70 basis points.

The improvement in operating margin was primarily driven by operating expense leverage of 60 basis points and the improvement in gross margin of 20 basis points, partially offset by Asia joint venture performance.

• Mattress Firm operating income was $151.2 million and operating margin was 5.8% 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 $46.3 million, which negatively impacted our consolidated operating margin.

INTEREST EXPENSE, NET

Nine Months Ended September 30,

(in millions, except percentages) 2025 2024 % Change

Interest expense, net $ 203.7 $ 98.5 106.8 %

Interest expense, net, increased $105.2 million, or 106.8%.

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

INCOME TAX PROVISION

Nine Months Ended September 30,

(in millions, except percentages) 2025 2024 % Change

Income tax provision $ 42.9 $ 95.5 (55.1) %

Effective tax rate 14.9 % 23.4 %

Our income tax provision decreased $52.6 million driven by a decrease in income before income taxes and certain discrete items, as discussed below.

Our effective tax rate for the nine months ended September 30, 2025 as compared to the prior year declined 850 basis points.

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

federal statutory rate for the nine months ended September 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.

federal statutory rate for the first quarter of 2026 and 2025 included the favorable impact of the deductibility of stock compensation in the U.S.

and a net unfavorable impact of other discrete items.

Liquidity and Capital Resources

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Cash and Working Capital

Cash and cash equivalents were $100.2 million and $117.4 million as of September 30, 2025 and December 31, 2024, respectively.

We had a working capital deficit of $432.2 million as of September 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 $269.0 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 $110.8 million and $134.9 million as of March 31, 2026 and December 31, 2025, respectively.

We had a working capital deficit of $360.5 million as of March 31, 2026, as compared to working capital deficit of $271.1 million as of December 31, 2025.

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:

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2026 2025

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Financing activities (204.7) 1,142.1

Cash provided by operating activities increased $163.3 million in the nine months ended September 30, 2025 as compared to the same period in 2024.

The increase in cash provided by operating activities was driven by a $150.5 million increase in cash provided by changes in operating assets and liabilities and a $58.1 million increase in non-cash depreciation expense, primarily associated with the Mattress Firm Acquisition, offset by a $68.7 million decrease in net income.

Cash used in investing activities increased $2,872.5 million in the nine months ended September 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 $1,041.6 million in the nine months ended September 30, 2025 as compared to the same period in 2024.

For the nine months ended September 30, 2025, we had net borrowings of $801.2 million on our credit facilities as compared to net repayments of $307.3 million in the same period in 2024.

We paid dividends to shareholders of $95.9 million and $70.1 million, during the nine months ended September 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 nine months ended September 30, 2025 and 2024, respectively.

Proceeds from exercise of stock options increased $49.1 million as compared to the same period in 2024.

Cash provided by operating activities increased $140.1 million in the three months ended March 31, 2026 as compared to the same period in 2025, primarily driven by strong operational performance across all segments.

Cash used in investing activities decreased $2,798.2 million in the three months ended March 31, 2026 as compared to the same period in 2025.

The decrease in cash used in investing activities was primarily driven by the Mattress Firm Acquisition in 2025.

Cash used in financing activities decreased $1,346.8 million in the three months ended March 31, 2026 as compared to the same period in 2025.

We had net repayments of $134.4 million on our credit facilities in 2026 as compared to net borrowings of $1,217.3 million in 2025, which was driven by the Mattress Firm Acquisition.

Share repurchases of our common stock to satisfy tax withholding obligations upon the vesting of our long-term incentive plans decreased $11.3 million in 2026 as compared to in 2025.

Dividends paid to shareholders increased $3.8 million in 2026 as compared to 2025.

Capital Expenditures

Capital expenditures totaled $108.6 million and $76.4 million for the nine months ended September 30, 2025 and 2024, respectively.

We currently expect our 2025 capital expenditures to be approximately $175 million, including $25 million of investments to refresh Mattress Firm stores.

Our total debt increased to $4,658.4 million as of September 30, 2025 from $3,844.5 million as of December 31, 2024.

Total availability under our revolving senior secured credit facility was $885.7 million as of September 30, 2025.

Capital expenditures totaled $60.5 million and $24.0 million for the three months ended March 31, 2026 and 2025, respectively.

We currently expect our 2026 capital expenditures to be approximately $225 million, including $75 million of one-time investments to refresh Mattress Firm stores.

Our total debt decreased to $4,577.9 million as of March 31, 2026 from $4,717.3 million as of December 31, 2025.

Total availability under our revolving senior secured credit facility was $762.7 million as of March 31, 2026.

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 September 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 3.28 times.

As of March 31, 2026, 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 3.07 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 September 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.

As of March 31, 2026, 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 nine months ended September 30, 2025, we did not repurchase shares under our share repurchase program.

As of September 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.

These repurchases may be funded by operating cash flows and/or borrowings under our debt arrangements.

The timing and actual number of shares repurchased will depend on a variety of factors including price, financing and regulatory requirements and other market conditions.

The program is subject to certain limitations under our debt agreements.

The program does not require the purchase of any minimum number of shares and may be suspended, modified or discontinued at any time without prior notice.

Repurchases may be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when we might otherwise be precluded from doing so under federal securities laws.

During the three months ended March 31, 2026, we did not repurchase shares under our share repurchase program.

As of March 31, 2026, we had $774.5 million remaining under our share repurchase authorization.

We manage our share repurchase program based on current and expected cash flows, share price and alternative investment opportunities.

In 2025, we do not expect to engage in share repurchases as we primarily focus on debt repayment to reduce leverage to our target ratio of 2.0 to 3.0 times.

In 2026, we expect to return to our target leverage range of 2.0 to 3.0 times and allocate at least 50% of free cash flow, which is a non-GAAP financial measure, to dividends and share repurchases.

For a complete description of our share repurchase program, please refer to ITEM 5 under Part II, "Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities," in the 2025 Annual Report.

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Future Liquidity Sources and Uses

As of September 30, 2025, we had $985.9 million of liquidity, including $100.2 million of cash on hand and $885.7 million available under our 2023 Credit Agreement.

As of March 31, 2026, we had $873.5 million of liquidity, including $110.8 million of cash on hand and $762.7 million available under our 2023 Credit Agreement.

In addition, we expect to generate cash flow from operations in the full year 2026.

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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.

In 2026, we expect to allocate approximately 50% of free cash flow, which is a non-GAAP financial measure, to capital returns to shareholders in the form of dividends and share repurchases.

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

The dividend is payable on December 4, 2025 to shareholders of record as of November 20, 2025.

As of September 30, 2025, we had $4,658.4 million in total debt outstanding and consolidated indebtedness less netted cash, which is a non-GAAP financial measure, of $4,558.2 million.

Leverage based on the ratio of consolidated indebtedness less netted cash to adjusted EBITDA, which is a non-GAAP financial measure, was 3.28 times for the trailing twelve months ended September 30, 2025.

In 2026, we expect to return to our target leverage range of 2.0 to 3.0 times and allocate approximately 50% of free cash flow, which is a non-GAAP financial measure, to dividends and share repurchases.

During the first quarter of 2026, we repurchased 0.3 million shares valued at $26.2 million to satisfy tax withholding obligations upon the vesting of certain long-term incentive awards in the ordinary course of business.

The Board of Directors declared a dividend of $0.17 per share for the second quarter of 2026.

The dividend is payable on June 4, 2026 to shareholders of record as of May 21, 2026.

As of March 31, 2026, we had $4,577.9 million in total debt outstanding and consolidated indebtedness less netted cash, which is a non-GAAP financial measure, of $4,467.1 million.

Leverage based on the ratio of consolidated indebtedness less netted cash to adjusted EBITDA, which is a non-GAAP financial measure, was 3.07 times for the trailing twelve months ended March 31, 2026.

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.

Total cash interest payments related to our borrowings are expected to be approximately $230 million in 2026.

Our debt service obligations could, under certain circumstances, have material consequences to our stockholders.

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We believe that exclusion of these items assists in providing a more complete understanding of our underlying results from operations and trends, and we use these measures along with the corresponding GAAP financial measures to manage our business, to evaluate our consolidated and business segment performance compared to prior periods and the marketplace, to establish operational goals and to provide continuity to investors for comparability purposes.

Limitations associated with the use of these non-GAAP measures include that these measures do not present all of the amounts associated with our results as determined in accordance with GAAP.

Limitations associated with the use of these non-GAAP financial measures include that these measures do not present all of the amounts associated with our results as determined in accordance with GAAP.

These non-GAAP financial measures should be considered supplemental in nature and should not be construed as more significant than comparable financial measures defined by GAAP.

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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 income to adjusted net income and the calculation of adjusted EPS for the three months ended September 30, 2025 and 2024:

The following table sets forth the reconciliation of our reported net income (loss) to adjusted net income and the calculation of adjusted EPS for the three months ended March 31, 2026 and 2025:

Three Months Ended

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

Net income $ 177.4 $ 130.0

(in millions, except per share amounts) March 31, 2026 March 31, 2025

Net income (loss) $ 104.2 $ (33.1)

Business combination charges (1)

Supply chain transition costs (2)

Disposition-related costs (3)

Legal and other charges (2)

Transaction costs (3)

Acquisition-related costs (4)

Transaction-related interest expense (5)

Supply chain transition costs (6)

Adjusted income tax provision (7)

2 unchanged sentences

Diluted shares outstanding 212.6 198.9

(1) In the third quarter of 2025, we recorded $32.2 million of business combination charges.

(1) In the first quarter of 2026, we recorded $13.9 million of business combination charges.

Cost of sales included $8.7 million of charges primarily related to the floor model transition associated with the refinement of Mattress Firm's multi-branded merchandising plan.

Operating expenses included $6.6 million of professional fees and restructuring costs.

Other expenses included $6.2 million of charges.

(2) In the third quarter of 2025, we recorded $7.3 million of supply chain transition costs associated with the consolidation of certain manufacturing facilities.

Cost of sales included $0.9 million of transition costs.

Other expenses included $6.4 million of costs, primarily related to a manufacturing facility lease termination.

In the third quarter of 2024, we recorded $8.2 million of supply chain transition costs associated with the consolidation of certain manufacturing facilities, with $8.0 million recorded in cost of sales and $0.2 million recorded in operating expenses.

(3) In the third quarter of 2025, we recorded $1.3 million of disposition-related costs, primarily related to retail store transition costs incurred for the divestiture to Mattress Warehouse.

Operating expenses and other expenses included $0.9 million and $0.4 million of costs, respectively.

(4) In the third quarter of 2025, we recorded a benefit of $0.9 million of transaction costs related to the Mattress Firm Acquisition.

Operating expenses included $1.2 million of costs, and other expenses included a benefit of $2.1 million.

This benefit relates to reimbursements for previously recorded transaction costs.

In the third quarter of 2024, we recorded $13.7 million of transaction costs, with $2.4 million in cost of sales and $11.3 million in operating expenses, primarily related to legal and professional fees associated with the Mattress Firm Acquisition.

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

Other income, net also included a benefit of $3.4 million resulting from the acquisition of Mattress Firm, offset by $2.0 million of charges related to Mattress Firm store refreshes.

(2) In the first quarter of 2026, we recorded $8.6 million of one-time charges, including $6.1 million of legal fees and $2.5 million of customer-related charges.

(3) In the first quarter of 2026, we recorded $3.6 million of transaction costs, primarily associated with legal and professional fees related to the proposed acquisition of Leggett & Platt.

In the first quarter of 2025, we recorded $51.9 million of transaction costs associated with legal and professional fees related to the Mattress Firm Acquisition.

(4) In the first quarter of 2025, we recognized $114.2 million of acquisition-related costs following the Mattress Firm acquisition.

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.

(5) 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 acquisition of Mattress Firm on February 5, 2025.

(6) 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.

(7) Adjusted income tax provision represents the tax effects associated with the aforementioned items and other non-recurring discrete 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 September 30, 2025.

Three Months Ended September 30, 2025

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

Three Months Ended March 31, 2026

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

Net sales $ 1,801.5 $ 885.9 $ 563.5 $ 352.1 $ —

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8.7 6.5 2.2 — —

Supply chain transition costs (2)

0.9 0.9 — — —

Total adjustments 8.7 6.5 2.2 — —

3 unchanged sentences

15.3 9.8 2.9 — 2.6

Transaction costs (4)

1.2 — — 0.3 0.9

Supply chain transition costs (2)

Legal and other charges (2)

8.6 — 2.5 — 6.1

Disposition-related costs (3)

Transaction costs (3)

3.6 — — — 3.6

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Adjusted operating income (expense) $ 214.6 11.9 % $ 43.2 4.9 % $ 137.1 24.3 % $ 64.9 18.4 % $ (30.6)

(1) In the third quarter of 2025, we recorded $32.2 million of business combination charges.

(1) In the first quarter of 2026, we recorded $13.9 million of business combination charges.

Cost of sales included $8.7 million of charges primarily related to the floor model transition associated with the refinement of Mattress Firm's multi-branded merchandising plan.

Operating expenses included $6.6 million of professional fees and restructuring costs.

Other expenses included $6.2 million of charges.

(2) In the third quarter of 2025, we recorded $7.3 million of supply chain transition costs associated with the consolidation of certain manufacturing facilities.

Cost of sales included $0.9 million of transition costs.

Other expenses included $6.4 million of costs, primarily related to a manufacturing facility lease termination.

(3) In the third quarter of 2025, we recorded $1.3 million of disposition-related costs, primarily related to retail store transition costs incurred for the divestiture to Mattress Warehouse.

Operating expenses and other expenses included $0.9 million and $0.4 million of costs, respectively.

(4) In the third quarter of 2025, we recorded a benefit of $0.9 million of transaction costs related to the Mattress Firm Acquisition.

Operating expenses included $1.2 million of costs, and other expenses included a benefit of $2.1 million.

This benefit relates to reimbursements for previously recorded transaction costs.

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 September 30, 2024.

Three Months Ended September 30, 2024

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

Other income, net also included a benefit of $3.4 million resulting from the acquisition of Mattress Firm, offset by $2.0 million of charges related to Mattress Firm store refreshes.

(2) In the first quarter of 2026, we recorded $8.6 million of one-time charges, including $6.1 million of legal fees and $2.5 million of customer-related charges.

(3) In the first quarter of 2026, we recorded $3.6 million of transaction costs, primarily associated with legal and professional fees related to the proposed acquisition of Leggett & Platt.

Three Months Ended March 31, 2025

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

Net sales $ 1,604.7 $ 593.7 $ 706.2 $ 304.8 $ —

Gross profit $ 580.5 36.2 % $ 191.2 32.2 % $ 240.0 34.0 % $ 149.3 49.0 % $ —

Acquisition-related costs (1)

95.4 17.4 78.0 — —

Supply chain transition costs (2)

Transaction costs (2)

1.9 — 1.9 — —

Total adjustments 97.3 17.4 79.9 — —

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Operating income (expense) $ 13.2 0.8 % $ 6.8 1.1 % $ 40.3 5.7 % $ 51.1 16.8 % $ (85.0)

Acquisition-related costs (1)

114.2 34.2 78.0 — 2.0

Transaction costs (3)

1 unchanged sentence

Supply chain transition costs (2)

3.5 — 3.5 — —

Total adjustments 169.6 35.9 81.5 — 52.2

Adjusted operating income (expense) $ 182.8 11.4 % $ 42.7 7.2 % $ 121.8 17.2 % $ 51.1 16.8 % $ (32.8)

(1) In the third quarter of 2024, we recorded $8.2 million of supply chain transition costs associated with the consolidation of certain manufacturing facilities, with $8.0 million recorded in cost of sales and $0.2 million recorded in operating expenses.

(2) In the third quarter of 2024, we recorded $13.7 million of transaction costs, with $2.4 million in cost of sales and $11.3 million in operating expenses, primarily related to legal and professional fees associated with the Mattress Firm Acquisition.

(1) In the first quarter of 2025, we recognized $114.2 million of acquisition-related costs following the Mattress Firm Acquisition.

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 legal and professional fees related to 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 September 30, 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 March 31, 2026 and 2025:

Three Months Ended

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

Net income $ 177.4 $ 130.0

(in millions) March 31, 2026 March 31, 2025

Net income (loss) $ 104.2 $ (33.1)

Interest expense, net 60.0 54.5

Income tax provision 56.2 40.8

Transaction-related interest expense, net (1)

Income tax provision (benefit) 33.4 (16.5)

Depreciation and amortization 73.1 66.6

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Business combination charges (2)

Supply chain transition costs (2)

Disposition-related costs (3)

Legal and other charges (3)

Transaction costs (4)

Acquisition-related costs (5)

Supply chain transition costs (6)

Adjusted EBITDA $ 296.8 $ 247.9

(1) In the third quarter of 2025, we recorded $32.2 million of business combination charges.

Cost of sales included $13.4 million of charges primarily related to the floor model transition associated with the refinement of Mattress Firm's multi-branded merchandising plan.

Operating expenses included $12.6 million of professional fees and restructuring costs.

Other expenses included $6.2 million of charges.

(2) In the third quarter of 2025, we recorded $7.3 million of supply chain transition costs associated with the consolidation of certain manufacturing facilities.

Cost of sales included $0.9 million of transition costs.

Other expenses included $6.4 million of costs, primarily related to a manufacturing facility lease termination.

(3) In the third quarter of 2025, we recorded $1.3 million of disposition-related costs, primarily related to retail store transition costs incurred for the divestiture to Mattress Warehouse.

Operating expenses and other expenses included $0.9 million and $0.4 million of costs, respectively.

(4) In the third quarter of 2025, we recorded a benefit of $0.9 million of transaction costs related to the Mattress Firm Acquisition.

Operating expenses included $1.2 million of costs, and other expenses included a benefit of $2.1 million.

This benefit relates to reimbursements for previously recorded transaction costs.

In the third quarter of 2024, the Company recorded $13.7 million of transaction costs, with $2.4 million in cost of sales and $11.3 million in operating expenses, 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 September 30, 2025:

(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 acquisition of Mattress Firm on February 5, 2025.

(2) In the first quarter of 2026, we recorded $13.9 million of business combination charges.

(3) In the first quarter ended March 31, 2026, we recorded $8.6 million of one-time charges, including $6.1 million of legal fees and $2.5 million of customer-related charges.

(4) In the first quarter of 2026, we recorded $3.6 million of transaction costs, primarily associated with legal and professional fees related to the proposed acquisition of Leggett & Platt.

In the first quarter of 2025, we recorded $51.9 million of transaction costs associated with legal and professional fees related to the Mattress Firm Acquisition.

(5) In the first quarter of 2025, we recognized $114.2 million of acquisition-related costs following the Mattress Firm Acquisition.

(6) In the first quarter of 2025, we recorded $3.5 million of supply chain transition costs associated with the consolidation of certain manufacturing facilities.

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, 2026:

Trailing Twelve Months Ended

(in millions) September 30, 2025

(in millions) March 31, 2026

Net income $ 521.4

Interest expense, net 266.6

Transaction-related interest expense, net (1)

Income tax provision 145.6

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EBITDA $ 1,231.7

Adjustments for financial covenant purposes:

Acquisition-related costs (2)

Transaction costs (3)

Business combination charges (1)

Customer-related transition charges (5)

Loss on disposal of business (2)

Supply chain transition costs (7)

Disposition-related costs (3)

Cybersecurity event (9)

Legal and other charges (4)

Supply chain transition costs (5)

Transaction costs (6)

Cloud-based computing arrangements impairment (7)

Adjusted EBITDA $ 1,354.9

Adjustments for financial covenant purposes:

Loss from unrestricted subsidiary (8)

Earnings from Mattress Firm prior to acquisition (11)

Future cost synergies to be realized from Mattress Firm acquisition (9)

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Consolidated indebtedness less netted cash $ 4,467.1

Ratio of consolidated indebtedness less netted cash to adjusted EBITDA 3.28 times

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

(3) In the trailing twelve months ended September 30, 2025, we recognized $67.9 million of transaction costs primarily associated with the Mattress Firm acquisition and related divestitures.

(4) In the trailing twelve months ended September 30, 2025, we recorded $49.8 million of business combination charges primarily related to the floor model transition associated with the refinement of Mattress Firm's multi-branded merchandising plan.

(5) In the trailing twelve months ended September 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.

(6) In the trailing twelve months ended September 30, 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 its Sleep Outfitters subsidiary.

(7) In the trailing twelve months ended September 30, 2025, we recognized $13.4 million in supply chain transition costs associated with the consolidation of certain manufacturing facilities.

(8) In the trailing twelve months ended September 30 2025, we recorded $10.5 million of disposition-related costs.

(9) In the trailing twelve months ended September 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.

Ratio of consolidated indebtedness less netted cash to adjusted EBITDA per credit facility 3.07 times

(1) In the trailing twelve months ended March 31, 2026, we recognized $67.7 million of business combination charges primarily related to the floor model transition associated with the refinement of Mattress Firm's multi-branded merchandising plan, professional fees and restructuring costs.

(2) In the trailing twelve months ended March 31, 2026, 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 its Sleep Outfitters subsidiary.

(3) In the trailing twelve months ended March 31, 2026, we recorded $10.5 million of disposition-related costs, primarily related to retail store transition costs incurred for the divestiture to Mattress Warehouse.

(4) In the first quarter and the trailing twelve months ended March 31, 2026, we recorded $8.6 million of one-time charges, including $6.1 million of legal fees and $2.5 million of customer-related charges.

(5) In the trailing twelve months ended March 31, 2026, we recorded $8.6 million of supply chain transition costs.

(6) In the trailing twelve months ended March 31, 2026, we recorded $7.7 million of transaction costs primarily related to the Mattress Firm acquisition and related divestitures, and the proposed acquisition of Leggett & Platt.

(7) In the trailing twelve months ended March 31, 2026, we recorded $6.2 million of impairment charges related to certain cloud-based computing arrangements.

(8) 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 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 $107.6 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 September 30, 2025.

(12) For the trailing twelve months ended September 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 3.28 times for the trailing twelve months ended September 30, 2025.

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

(9) In the trailing twelve months ended March 31, 2026, 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 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 3.07 times for the trailing twelve months ended March 31, 2026.

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 September 30, 2025.

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, 2026.

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

(in millions) September 30, 2025

(in millions) March 31, 2026

Total debt, net $ 4,548.5

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Consolidated indebtedness less netted cash $ 4,467.1

(1) We present deferred financing costs as a direct reduction from the carrying amount of the related debt in the Condensed Consolidated Balance Sheets.

(1) We presents deferred financing costs as a direct reduction from the carrying amount of the related debt in the Condensed Consolidated Balance Sheets.

For purposes of determining total debt for financial covenant purposes, we have added these costs back to total debt, net as calculated per the Condensed Consolidated Balance Sheets.

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Critical Accounting Policies and Estimates

During the nine months ended September 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.

We account for business combinations using the acquisition method of accounting, which requires that once control is obtained, all the assets acquired and liabilities assumed are recorded at their respective fair values at the date of acquisition.

The determination of fair values of identifiable assets and liabilities requires estimates and the use of valuation techniques when fair value is not readily available and requires a significant amount of management judgment.

For the valuation of intangible assets acquired in the Mattress Firm Acquisition, we applied the income approach through a relief from royalty method.

Although we believe these estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates.

Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on the determination of the fair values of the intangible assets acquired.

The excess of the purchase price over fair values of identifiable assets acquired and liabilities assumed is recorded as goodwill.

During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill due to the use of preliminary information in our initial estimates.

Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

For additional discussion of our critical accounting policies and estimates, please refer to ITEM 7 under Part II, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," in the 2024 Annual Report.

For a discussion of our critical accounting policies and estimates, please refer to ITEM 7 under Part II, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the 2025 Annual Report.

There have been no material changes to our critical accounting policies and estimates in 2026.

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