What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-07 compared with 2026-05-08 · 301 added, 159 removed, 285 unchanged (62% 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, 2026, 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, 2026, including the following topics:

• an overview of our business and strategy;

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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.

As of June 30, 2026, we operated 2,842 company-owned stores, including 2,155 Mattress Firm stores, Tempur Sealy owned stores, Dreams stores and joint venture stores.

Our distribution model operates through an omni-channel strategy.

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General Business and Economic Conditions

We believe the bedding industry is structured for sustained growth, driven by product innovation, sleep technology advancements, consumer confidence, housing formations and population growth.

In our opinion, the industry is no longer engaged in uneconomical retail store expansion, startups have shifted from uneconomical strategies to becoming profitable and legacy retailers and manufacturers have become skilled in producing profitable online sales.

Over the last decade, consumers have made the connection between a good night's sleep and overall health and wellness.

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 2025 due to certain macroeconomic pressures on the consumer, which continued during the first quarter of 2026.

As consumers make this connection, they are willing to invest more in their bedding purchases.

We believe the bedding industry is structured for sustained long-term growth, driven by product innovation, sleep technology advancements, consumer confidence, housing formations and population growth.

Due to our dedication to product innovation and other competitive advantages, we believe Somnigroup is well-positioned to take advantage of the industry’s long-term growth potential.

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

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

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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 is currently anticipated to close by the end of the third quarter of 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.

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Mattress Firm operates as a separate business segment.

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.

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

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").

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Results of Operations

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.

A summary of our results for the three months ended June 30, 2026 include:

• Total net sales decreased 3.0% to $1,823.5 million as compared to $1,880.8 million in the second quarter of 2025.

• Gross margin was 44.8% as compared to 44.0% in the second quarter of 2025.

Adjusted gross margin, which is a non-GAAP financial measure, was 45.1% as compared to 44.2% in the second quarter of 2025.

• Operating income increased 12.1% to $201.7 million as compared to $179.9 million in the second quarter of 2025.

Adjusted operating income, which is a non-GAAP financial measure, decreased 3.5% to $216.6 million as compared to $224.4 million in the second quarter of 2025.

Both were primarily driven by realized sales and cost synergies.

• Net income increased 12.0% to $110.9 million as compared to $99.0 million in the second quarter of 2025.

Adjusted net income, which is a non-GAAP financial measure, increased 8.4% to $122.6 million as compared to $113.1 million in the second quarter of 2025.

• Earnings per diluted share ("EPS") increased 10.6% to $0.52 as compared to $0.47 in the second quarter of 2025.

Adjusted EPS, which is a non-GAAP financial measure, increased 9.4% to $0.58 as compared to $0.53 in the second 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 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,

THREE MONTHS ENDED JUNE 30, 2026 COMPARED TO THE

THREE MONTHS ENDED JUNE 30, 2025

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) 2026 2025

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General, administrative and other expenses 165.1 9.1 175.9 9.4

Loss on disposal of business — — 13.9 0.7

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

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Total other expense, net 53.9 2.9 77.2 4.1

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)

Income before income taxes 147.8 8.1 102.7 5.5

Income tax provision (37.2) (2.0) (3.2) (0.2)

Net income before non-controlling interest 110.6 6.1 99.5 5.3

Net (loss) income attributable to non-controlling interest (0.3) — 0.5 —

Net income (loss) attributable to Somnigroup International Inc.

Net income attributable to Somnigroup International Inc.

$ 110.9 6.1 % $ 99.0 5.3 %

Earnings (loss) per common share:

Earnings per common share:

Basic $ 0.53 $ 0.47

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Diluted 212.5 212.4

Three Months Ended March 31,

Three Months Ended June 30,

2026 2025 2026 2025 2026 2025 2026 2025

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Total net sales $ 1,823.5 $ 1,880.8 $ 922.2 $ 948.8 $ 601.8 $ 638.4 $ 299.5 $ 293.6

Net sales increased 12.3%, and on a constant currency basis increased 10.4%.

Net sales decreased 3.0%, and on a constant currency basis decreased 3.3%.

The change in net sales was driven by the following:

• 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.

• Mattress Firm net sales decreased $26.6 million, or 2.8%, primarily driven by store closures.

Mattress Firm same store sales increased slightly as compared to the second quarter of 2025.

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.

• Tempur Sealy North America net sales decreased $36.6 million, or 5.7%, primarily driven by market conditions.

Net sales to Mattress Firm increased 11.6% to $294.0 million as compared to $263.5 million in the second quarter of 2025.

These sales are eliminated on a reported basis.

Net sales in the Wholesale channel decreased $29.6 million, or 5.5%.

Net sales in the Direct channel decreased $7.0 million, or 6.7%, 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.

• Tempur Sealy International net sales increased $5.9 million, or 2.0%.

On a constant currency basis, International net sales increased 1.3%.

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

Net sales in the Direct channel decreased 1.6% on a constant currency basis.

Net sales in the Wholesale channel increased 6.2% on a constant currency basis.

Three Months Ended March 31,

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 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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• Mattress Firm gross margin declined 230 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.

The decline in gross margin was primarily driven by product mix of 100 basis points, consumer financing costs of 70 basis points and investments in Mattress Firm's stores of 60 basis points.

• Tempur Sealy North America gross margin improved 660 basis points.

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.

The improvement in gross margin was primarily driven by the achievement of synergies from the Mattress Firm Acquisition of 480 basis points, operational efficiencies of 210 basis points and favorable mix of 110 basis points.

These improvements were partially offset by commodity cost inflation before pricing actions of 110 basis points.

• Tempur Sealy International gross margin declined 80 basis points.

The decline in gross margin was primarily driven by commodity cost inflation before pricing actions of 100 basis points, partially offset by operational efficiencies.

OPERATING EXPENSES

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, 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 June 30,

2026 2025 2026 2025 2026 2025 2026 2025 2026 2025

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

Operating expenses:

Advertising expenses $ 177.6 $ 189.5 $ 45.8 $ 62.1 $ 109.8 $ 103.3 $ 22.0 $ 24.1 $ — $ —

Other selling and marketing expenses 275.9 271.0 154.2 151.8 61.3 64.0 54.4 50.9 6.0 4.3

General, administrative and other expenses 165.1 175.9 48.1 56.2 40.8 41.0 31.0 29.8 45.2 48.9

Total operating expenses $ 618.6 $ 636.4 $ 248.1 $ 270.1 $ 211.9 $ 208.3 $ 107.4 $ 104.8 $ 51.2 $ 53.2

Operating expenses decreased $17.8 million, or 2.8%, and increased 10 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 decreased $22.0 million, or 8.1%, and decreased 160 basis points as a percentage of net sales.

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

• Tempur Sealy North America operating expenses increased $3.6 million, or 1.7%, and increased 260 basis points as a percentage of net sales.

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

• Tempur Sealy International operating expenses increased $2.6 million, or 2.5%, and increased 20 basis points as a percentage of net sales.

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

• Corporate operating expenses decreased $2.0 million, or 3.8%.

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

Research and development expenses for the three months ended June 30, 2026 were $10.2 million, compared to $7.8 million for the three months ended June 30, 2025, an increase of $2.4 million, or 30.8%.

OPERATING INCOME

Three Months Ended June 30,

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

Mattress Firm $ 59.4 6.4 % $ 63.2 6.7 % (0.3) %

Tempur Sealy North America 155.9 25.9 % 130.1 20.4 % 5.5 %

Tempur Sealy International 37.2 12.4 % 39.8 13.6 % (1.2) %

Corporate expenses (50.8) (53.2)

Total operating income $ 201.7 11.1 % $ 179.9 9.6 % 1.5 %

Operating income increased $21.8 million and operating margin improved 150 basis points.

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

• Mattress Firm operating income decreased $3.8 million and operating margin declined 30 basis points.

The decline in operating margin was primarily driven by the decline in gross margin of 230 basis points, partially offset by operating expense leverage of 160 basis points.

Additionally, in 2025, we incurred a $4.1 million loss on disposal of business associated with the divestiture of 73 retail stores, which were not incurred in 2026.

• Tempur Sealy North America operating income increased $25.8 million and operating margin improved 550 basis points.

The improvement in operating margin was primarily driven by the improvement in gross margin of 660 basis points, partially offset by operating expense deleverage of 260 basis points.

Additionally, in 2025, we incurred a $9.8 million loss on disposal of business associated with the divestiture of Sleep Outfitters, which were not incurred in 2026.

• Tempur Sealy International operating income decreased $2.6 million and operating margin declined 120 basis points.

The decline in operating margin was primarily driven by decline in gross margin of 80 basis points and operating expense deleverage of 20 basis points.

• Corporate operating loss decreased $2.4 million, which positively impacted our consolidated operating margin.

INTEREST EXPENSE, NET

Three Months Ended June 30,

(in millions, except percentages) 2026 2025 % Change

Interest expense, net $ 59.0 $ 72.5 (18.6) %

Interest expense, net, decreased $13.5 million, or 18.6%.

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

INCOME TAX PROVISION

Three Months Ended June 30,

(in millions, except percentages) 2026 2025 % Change

Income tax provision $ 37.2 $ 3.2 1,062.5 %

Effective tax rate 25.2 % 3.1 %

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 $34.0 million due to an increase in income before income taxes.

Our effective tax rate for the three months ended June 30, 2026 as compared to the prior year increased by 2,210 basis points.

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

federal statutory rate for the three months ended June 30, 2026 included the favorable 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, 2025 included the favorable impact of the deductibility of stock compensation in the U.S.

and a net unfavorable impact of other discrete items.

SIX MONTHS ENDED JUNE 30, 2026 COMPARED TO THE

SIX MONTHS ENDED JUNE 30, 2025

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) 2026 2025

Net sales $ 3,625.0 100.0 % $ 3,485.5 100.0 %

Cost of sales 2,030.9 56.0 2,077.8 59.6

Gross profit 1,594.1 44.0 1,407.7 40.4

Selling and marketing expenses 882.0 24.3 823.1 23.6

General, administrative and other expenses 332.0 9.2 385.4 11.1

Loss on disposal of business — — 13.9 0.4

Equity income in earnings of unconsolidated affiliates (8.7) (0.2) (7.8) (0.2)

Operating income 388.8 10.7 193.1 5.5

Other expense, net:

Interest expense, net 119.0 3.3 133.8 3.8

Other (income) expense, net (15.3) (0.4) 5.9 0.2

Total other expense, net 103.7 2.9 139.7 4.0

Income before income taxes 285.1 7.8 53.4 1.5

Income tax (provision) benefit (70.6) (1.9) 13.3 0.4

Net income before non-controlling interest 214.5 5.9 66.7 1.9

Net (loss) income attributable to non-controlling interest (0.6) — 0.8 —

Net income attributable to Somnigroup International Inc.

$ 215.1 5.9 % $ 65.9 1.9 %

Earnings per common share:

Basic $ 1.02 $ 0.33

Diluted $ 1.01 $ 0.32

Weighted average common shares outstanding:

Basic 210.4 202.1

Diluted 212.6 205.7

Six Months Ended June 30,

2026 2025 2026 2025 2026 2025 2026 2025

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

Net sales by channel

Direct $ 2,398.6 $ 2,144.1 $ 1,808.1 $ 1,542.5 $ 187.4 $ 226.1 $ 403.1 $ 375.5

Wholesale 1,226.4 1,341.4 — — 977.9 1,118.5 248.5 222.9

Total net sales $ 3,625.0 $ 3,485.5 $ 1,808.1 $ 1,542.5 $ 1,165.3 $ 1,344.6 $ 651.6 $ 598.4

Net sales increased 4.0%, and on a constant currency basis increased 3.0%.

The change in net sales was driven by the following:

• Mattress Firm net sales increased $265.6 million, or 17.2%, primarily driven by the inclusion of net sales for a full quarter in the first quarter of 2026 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 $179.3 million, or 13.3%.

Net sales in the Wholesale channel decreased $140.6 million, or 12.6%, primarily driven by the accounting elimination of sales to Mattress Firm for a full quarter in the first quarter of 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 $38.7 million, or 17.1%, primarily driven by a decrease in sales from the divestiture of Sleep Outfitters.

• Tempur Sealy International net sales increased $53.2 million, or 8.9%, primarily driven by strong performance in key markets.

On a constant currency basis, International net sales increased $25.7 million, or 4.3%.

Net sales in the Direct channel increased 3.0% on a constant currency basis.

Net sales in the Wholesale channel increased 6.5% on a constant currency basis.

Six Months Ended June 30,

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

Tempur Sealy North America $ 694.2 59.6 % $ 588.2 43.7 % 15.9 %

Tempur Sealy International 319.5 49.0 % 290.9 48.6 % 0.4 %

Mattress Firm 580.4 32.1 % 528.6 34.3 % (2.2) %

Consolidated gross margin $ 1,594.1 44.0 % $ 1,407.7 40.4 % 3.6 %

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 360 basis points.

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

• Mattress Firm gross margin declined 220 basis points.

The decline in gross margin was primarily driven by product mix of 100 basis points, consumer financing costs of 90 basis points and investments in Mattress Firm's stores of 80 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 1,590 basis points.

The improvement in gross margin was primarily driven by the achievement of synergies from the Mattress Firm Acquisition of 480 basis points, elimination of intercompany sales to Mattress Firm of 290 basis points, operational efficiencies of 190 basis points and favorable mix.

These improvements were partially offset by commodity cost inflation before pricing actions.

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 40 basis points.

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

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

OPERATING EXPENSES

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Three Months Ended March 31,

Six Months Ended June 30,

2026 2025 2026 2025 2026 2025 2026 2025 2026 2025

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• Mattress Firm operating expenses increased $33.1 million, or 7.3%, and decreased 250 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.

The increase in operating expenses was primarily driven by the inclusion of operating expenses for a full quarter in the first quarter of 2026 as compared to the first quarter of 2025, which included operating expenses for the stub period.

• Tempur Sealy North America operating expenses decreased $1.4 million, or 0.3%, and increased 460 basis points as a percentage of net sales.

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• Corporate operating expenses decreased $43.6 million, or 31.5%.

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 %

The decrease in operating expenses was primarily driven by decreased transaction costs related to the Mattress Firm Acquisition in 2025, which were not incurred in 2026.

Research and development expenses were $18.7 million for the six months ended June 30, 2026 as compared to $15.9 million for the six months ended June 30, 2025, an increase of $2.8 million, or 17.6%.

OPERATING INCOME

Six Months Ended June 30,

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

Tempur Sealy North America $ 287.6 24.7 % $ 170.4 12.7 % 12.0 %

Tempur Sealy International 102.1 15.7 % 90.9 15.2 % 0.5 %

Corporate (42.9) (85.0)

Mattress Firm 92.8 5.1 % 70.0 4.5 % 0.6 %

Corporate expenses (93.7) (138.2)

Total operating income $ 388.8 10.7 % $ 193.1 5.5 % 5.2 %

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The improvement in operating margin was primarily driven by operating expense leverage of 250 basis points, offset by the decline in gross margin of 220 basis points.

Additionally, in 2025, we incurred a $4.1 million loss on disposal of business associated with the divestiture of 73 retail stores, which was not incurred in 2026.

• Tempur Sealy North America operating income increased $117.2 million and operating margin improved 1,200 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.

The improvement in operating margin was primarily driven by the improvement in gross margin of 1,590 basis points, offset by operating expense deleverage of 460 basis points.

Additionally, in 2025, we incurred a $9.8 million loss on disposal of business associated with the divestiture of Sleep Outfitters, which was not incurred in 2026.

• Tempur Sealy International operating income increased $11.2 million and operating margin improved 50 basis points.

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

The improvement in operating margin was primarily driven by the improvement in gross margin of 40 basis points and operating expense leverage of 10 basis points.

• Corporate operating loss decreased $44.5 million, which positively impacted our consolidated operating margin.

INTEREST EXPENSE, NET

Three Months Ended March 31,

Six Months Ended June 30,

(in millions, except percentages) 2026 2025 % Change

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INCOME TAX PROVISION

Three Months Ended March 31,

Six Months Ended June 30,

(in millions, except percentages) 2026 2025 % Change

1 unchanged sentence

Effective tax rate 24.8 % (24.9) %

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

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 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.

Our income tax provision increased $83.9 million driven by an increase in income before income taxes and certain discrete items, as discussed below.

Our effective tax rate for the six months ended June 30, 2026 as compared to the prior year increased 4,970 basis points.

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

federal statutory rate for the six months ended June 30, 2026 and 2025 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 $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.

Cash and cash equivalents were $112.0 million and $134.9 million as of June 30, 2026 and December 31, 2025, respectively.

We had a working capital deficit of $434.0 million as of June 30, 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:

Three Months Ended March 31,

Six Months Ended June 30,

(in millions) 2026 2025

3 unchanged sentences

Financing activities (384.0) 940.2

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.

Cash provided by operating activities increased $190.3 million in the six months ended June 30, 2026 as compared to the same period in 2025, primarily driven by strong operational performance across all segments.

Cash used in investing activities decreased $2,763.0 million in the six months ended June 30, 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.

Cash used in financing activities increased $1,324.2 million in the six months ended June 30, 2026 as compared to the same period in 2025.

We had net repayments of $272.1 million on our credit facilities in 2026 as compared to net borrowings of $1,098.5 million in 2025, which were 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 $106.2 million in 2026 as compared to 2025.

Dividends paid to shareholders increased $8.1 million in 2026 as compared to 2025.

Proceeds from exercise of stock options decreased $49.1 million as compared to 2025.

Capital Expenditures

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

Capital expenditures totaled $115.2 million and $60.7 million for the six months ended June 30, 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.

Our total debt decreased to $4,436.3 million as of June 30, 2026 from $4,717.3 million as of December 31, 2025.

Total availability under our revolving senior secured credit facility was $897.7 million as of June 30, 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 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.

As of June 30, 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 2.99 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, 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.

As of June 30, 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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The limit on restricted payments under the 2023 Credit Agreement, 2029 Senior Notes and 2031 Senior Notes is in part determined by a basket that grows at 50% of adjusted net income each quarter, reduced by restricted payments that are not otherwise permitted.

On July 27, 2026, we entered into an Amendment No.

5 to the 2023 Credit Agreement ("Amendment No.

5"), which provides for (i) a term loan A of $1,200.0 million (the "Term A Loans") and (ii) an incremental revolving commitment of $510.0 million.

The proceeds of the Term A Loans were used to refinance the amounts outstanding under the term loan facility and the Delayed Draw Term A Loan under the 2023 Credit Agreement.

Our commitments under the revolving credit facility were $1,700.0 million after giving effect to Amendment No.

Amendment No.

5 was executed in connection with the pending acquisition of Leggett & Platt and extended the maturity dates of the Term A Loans and the revolving credit facility to July 27, 2031.

Borrowings under the Term A Loans and the revolving credit facility will generally bear interest at either (i) a base rate plus an applicable margin of 0.125% to 0.875%, (ii) a term SOFR rate plus an applicable margin of 1.125% to 1.875% or (iii) a daily simple SOFR rate plus an applicable margin of 1.125% to 1.875%.

For the Term A Loans and the revolving credit facility the applicable margin is determined by a pricing grid based on the consolidated total net leverage ratio.

In connection with Amendment No.

5, we prepaid $700.0 million of the outstanding Term B Loan with the remaining proceeds from the Term A Loans and revolving credit facility.

For additional information, refer to "Non-GAAP Financial Information" below for the calculation of the ratio of consolidated indebtedness less netted cash to adjusted EBITDA calculated in accordance with the 2023 Credit Agreement.

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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, 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.

During the six months ended June 30, 2026, we did not repurchase shares under our share repurchase program.

As of June 30, 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 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.

In 2026, we expect to 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 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.

As of June 30, 2026, we had $1,009.7 million of liquidity, including $112.0 million of cash on hand and $897.7 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 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.

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

During the six months ended June 30, 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 third quarter of 2026.

The dividend is payable on September 3, 2026 to shareholders of record as of August 20, 2026.

As of June 30, 2026, we had $4,436.3 million in total debt outstanding and consolidated indebtedness less netted cash, which is a non-GAAP financial measure, of $4,324.3 million.

Leverage based on the ratio of consolidated indebtedness less netted cash to adjusted EBITDA, which is a non-GAAP financial measure, was 2.99 times for the trailing twelve months ended June 30, 2026.

Our target leverage ratio of consolidated indebtedness less netted cash, which is a non-GAAP financial measure, is 2.0 to 3.0 times in 2026.

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

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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 (loss) to adjusted net income and the calculation of adjusted EPS for the three months ended March 31, 2026 and 2025:

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, 2026 and 2025:

Three Months Ended

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

Net income (loss) $ 104.2 $ (33.1)

Business combination charges (1)

Legal and other charges (2)

(in millions, except per share amounts) June 30, 2026 June 30, 2025

Net income $ 110.9 $ 99.0

Transaction costs (1)

Acquisition-related costs (4)

Transaction-related interest expense (5)

Business combination charges (2)

Loss on disposal of business (3)

Disposition-related costs (4)

Supply chain transition costs (5)

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Diluted shares outstanding 212.5 212.4

(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 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.

(1) In the second quarter of 2026, we recorded $8.3 million of transaction costs, primarily associated with legal and professional fees related to the proposed acquisition of Leggett & Platt.

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.

(2) In the second quarter of 2026, we recorded $7.4 million of business combination charges primarily related to costs to achieve supply chain synergies, professional fees and restructuring costs..

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 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.

(4) 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.

(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 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 March 31, 2026.

Three Months Ended March 31, 2026

Three Months Ended June 30, 2026

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

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Operating income (expense) $ 201.7 11.1 % $ 59.4 6.4 % $ 155.9 25.9 % $ 37.2 12.4 % $ (50.8)

Business combination charges (1)

15.3 9.8 2.9 — 2.6

Legal and other charges (2)

8.6 — 2.5 — 6.1

Transaction costs (2)

8.3 — — — 8.3

Business combination charges (1)

6.6 0.5 4.6 — 1.5

Total adjustments 14.9 0.5 4.6 — 9.8

Adjusted operating income (expense) $ 216.6 11.9 % $ 59.9 6.5 % $ 160.5 26.7 % $ 37.2 12.4 % $ (41.0)

(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.

(1) In the second quarter of 2026, we recorded $7.4 million of business combination charges.

Cost of sales included $4.3 million of charges primarily related to costs to achieve supply chain synergies.

Operating expenses included $2.3 million of professional fees and restructuring costs.

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.

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, 2025.

Three Months Ended March 31, 2025

Other income, net also included $0.8 million of charges related to Mattress Firm store refreshes.

(2) In the second quarter of 2026, we recorded $8.3 million of transaction costs, primarily associated with legal and professional fees related to the proposed acquisition of Leggett & Platt.

Three Months Ended June 30, 2025

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

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

Acquisition-related costs (1)

Disposition-related costs (1)

3.7 1.4 2.3 — —

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

Acquisition-related costs (1)

Business combination charges (3)

17.6 2.2 — — 15.4

Loss on disposal of business (4)

13.9 4.1 9.8 — —

Disposition-related costs (1)

7.4 2.9 4.5 — —

Transaction costs (5)

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

(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.

(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.

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, 2026 and 2025:

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, 2026 and 2025:

Three Months Ended

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

Net income (loss) $ 104.2 $ (33.1)

(in millions) June 30, 2026 June 30, 2025

Net income $ 110.9 $ 99.0

Interest expense, net 59.0 72.5

Transaction-related interest expense, net (1)

Income tax provision (benefit) 33.4 (16.5)

Income tax provision 37.2 3.2

Depreciation and amortization 73.7 69.1

EBITDA $ 280.8 $ 243.8

Business combination charges (2)

Legal and other charges (3)

Transaction costs (1)

Acquisition-related costs (5)

Business combination charges (2)

Loss on disposal of business (3)

Disposition-related costs (4)

Supply chain transition costs (5)

Adjusted EBITDA $ 296.5 $ 290.7

(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:

(1) In the second quarter of 2026, we recorded $8.3 million of transaction costs, primarily associated with legal and professional fees related to the proposed acquisition of Leggett & Platt.

(2) In the second quarter of 2026, we recorded $7.4 million of business combination charges.