Executive Summary

Q1 2025 delivered mixed results: adjusted EPS of $0.49 beat consensus $0.47, but revenue of $1.60B missed consensus $1.63B and adjusted gross margin of 42.2% was below 43.0% consensus. Drivers included Mattress Firm consolidation (stub period), intercompany eliminations, and acquisition-related costs; international strength offset U.S. softness . Values retrieved from S&P Global for consensus.
Management revised FY2025 adjusted EPS guidance to $2.30–$2.65, citing weaker U.S. bedding industry and tariff timing; CFO flagged Q2 EPS around ~$0.50 with a one-time ~$5M tariff headwind before price increases mitigate in Q3 .
Positives: International net sales +5.7% reported (+7.7% CC), favorable mix and efficiency improvements, and synergy execution ahead of plan (targeting ~$15M cost synergies in 2025, on path to ≥$100M run-rate by 2028) .
Challenges: GAAP net loss of $(33.1)M on acquisition costs and interest, U.S. demand softness around Presidents’ Day, commodity inflation, and tariff exposure requiring mitigation and price increases from Q3 .
Potential stock catalysts: clear delivery on synergy ramp and advertising efficiency, successful Sealy Posturepedic launch scaling by Memorial Day, tariff pass-through and Q2 margin stabilization, and positive signs of demand normalization .

What Went Well and What Went Wrong

What Went Well

International resilience and product momentum: “This is the eighth quarter of mid- to high single digit sales expansion on a constant currency basis… new Tempur collection… broadened our total addressable market” . International net sales +5.7%, CC +7.7% .
Mattress Firm outperformance and synergy acceleration: Like-for-like sales down ~1% vs industry down high-single digits; near-term cost synergies raised to ~$15M in 2025, tracking ≥$100M annual run-rate by 2028 .
Sealy Posturepedic relaunch: “We expect the product to be ~80% floored by Memorial Day… early results are encouraging with solid performance and share gain,” backed by national advertising .

What Went Wrong

GAAP profitability: Operating income fell to $13.2M (from $131.5M YoY) and GAAP EPS was $(0.17) due to acquisition-related costs and transaction expenses; adjusted EPS declined slightly to $0.49 (from $0.50) .
U.S. demand softness: Presidents’ Day was “challenged,” with choppy intra-quarter trends; consumer confidence deterioration forced a guidance reset and industry outlook to down mid-single digits .
Cost/tariff headwinds: CFO flagged ~$25–$30M commodity cost pressure and a one-time ~$5M tariff headwind in Q2 before pricing offsets fully take effect in Q3; mix and deleverage weighed on margins .

Financial Results

GAAP Metrics (YoY and Seq. comparison)

Metric	Q1 2024	Q4 2024*	Q1 2025
Revenue ($USD Millions)	$1,189.4	$1,207.9*	$1,604.7
Gross Margin %	39.9%	43.33%*	36.2%
Operating Income ($USD Millions)	$131.5	$119.2*	$13.2
Net Income ($USD Millions)	$76.3	$71.9*	$(33.1)
Diluted EPS ($USD)	$0.43	$0.41*	$(0.17)
EBITDA ($USD Millions)	N/A	$162.4*	$78.3

Values retrieved from S&P Global for cells marked with *.

Adjusted (Non-GAAP) Metrics

Metric	Q1 2024	Q1 2025
Adjusted Gross Margin %	40.1%	42.2%
Adjusted Operating Income ($USD Millions)	$149.4	$182.8
Adjusted Net Income ($USD Millions)	$89.7	$97.0
Adjusted EPS ($USD)	$0.50	$0.49
Adjusted EBITDA ($USD Millions)	$198.2	$247.9

Segment Breakdown (Q1 2025)

Segment	Net Sales ($USD Millions)	Gross Margin %	Adjusted Gross Margin %	Operating Margin %	Adjusted Operating Margin %
Tempur Sealy North America	$706.2	34.0%	45.3%	5.7%	17.2%
Tempur Sealy International	$304.8	49.0%	49.0%	16.8%	16.8%
Mattress Firm (stub)	$593.7	32.2%	35.1%	1.1%	7.2%

KPIs and Channel Mix (Q1 2025)

KPI	Q1 2025
Wholesale Sales ($USD Millions)	$698.7
Direct Sales ($USD Millions)	$906.0
Operating Cash Flow ($USD Millions)	$106.4
Total Debt, Net ($USD Millions)	$5,033.0
Consolidated Indebtedness less Netted Cash ($USD Millions)	$4,958.8
Leverage (Consol. Indebtedness less Netted Cash / Adjusted EBITDA per credit facility, TTM)	3.51x
Quarterly Dividend per Share ($USD)	$0.15 (declared May 8; payable Jun 5)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EPS	FY 2025	Not retrieved (FY24 release unavailable in system)	$2.30–$2.65	Lowered vs prior expectations on industry softness
Gross Margin % (company-level)	FY 2025	~45% exiting 2024 (context from prior commentary)	Slightly above 44%	Lowered (deleverage, tariff timing)
Advertising Investment	FY 2025	N/A	~$700M	Established (scale/efficiency focus)
CapEx	FY 2025	N/A	~$225M; ~$25M to refresh Mattress Firm stores	New detail (store refresh)
D&A	FY 2025	N/A	~$295–305M	Established
Interest Expense	FY 2025	N/A	~$260–270M	Established
Tax Rate	FY 2025	N/A	~25%	Established
Diluted Shares	FY 2025	N/A	~210M	Established
Q2 EPS (color)	Q2 2025	N/A	~ $0.50 (down ~20% YoY)	One-time ~$5M tariff headwind; pricing offsets start Q3

Note: Prior FY2025 guidance from FY24 release could not be retrieved due to document access issues; we show current guidance and qualitative change versus prior expectations.

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q1 2025)	Trend
Industry demand	N/A (Q3/Q4’24 not available)	U.S. bedding down high-single digits; choppy intra-quarter; international steadier	Weak but stabilizing into Q2; slight H2 improvement expected
Tariffs	N/A	~$750M COGS potentially exposed; ~50% mitigated via supplier actions; remaining offset by ~2% price increase starting Q3; ~$5M headwind in Q2	Managed; full offset from Q3
Sealy Posturepedic launch	N/A	~80% floored by Memorial Day; national advertising; strong early results	Building; supports H2
Synergies (Mattress Firm)	N/A	2025 cost synergies raised to ~$15M; ≥$100M run-rate by 2028; advertising efficiencies; logistics optimization	Ahead of plan
Mix/brand performance	N/A	Tempur strongest; Sealy mid-range uplift; some planned overlap with Stearns & Foster	Sealy acceleration; minor cannibalization planned
Commodities	N/A	~$25–$30M pressure (chems, steel); sequential easing into Q2	Easing modestly
Regulatory/Merchandising	N/A	Broad vendor strategy (Purple, Leggett & Platt); optimizing Mattress Firm assortment	Diversifying suppliers

Management Commentary

CEO: “Our results this quarter both reflect the transformational acquisition of Mattress Firm and highlight our ability to navigate a weak global market… leveraging scale, operational flexibility and manufacturing capabilities” .
CEO on international: “Eighth quarter of mid- to high single digit sales expansion on a constant currency basis… new Tempur collection… late stage customization manufacturing process… expanded distribution by over 10%” .
CFO: “Intercompany elimination will reduce Tempur Sealy sales but will be margin accretive and neutral to EPS… revised adjusted EPS to $2.30 to $2.65… expect gross margins slightly above 44%” .
CEO on tariffs: “We expect beginning in the third quarter… actions will fully offset the impact of the tariffs currently in place… [with] a one-time tariff related headwind of approximately $5 million in the second quarter” .
CEO on synergies: “On track to achieve our target of at least $100 million in annual run rate synergies by 2028… now anticipate $15 million of those cost synergies in 2025” .

Q&A Highlights

Demand trajectory: Q1 choppy with Presidents’ Day weakness; sequential stabilization into Q2; H2 slight improvement expected; Q2 EPS ~ $0.50 (down ~20% YoY) .
Tariffs: ~$750M COGS exposure; mitigated ~50% via supplier moves and cost sharing; residual covered by ~2% price increase effective Q3; ~$5M headwind in Q2 only .
Mattress Firm economics: Incremental dollar flow-through ~40%; divested stores impact ~$100M sales with 30–40% flow-through; like-for-like sales down ~1% but taking share .
Brand/mix: Tempur strongest; Sealy growth likely faster for a couple of quarters (margin percent headwind but EBITDA-accretive); minor planned cannibalization with Stearns & Foster .
Advertising and merchandising: Consolidated scale enables ~$20M marketing efficiencies; reimagined Mattress Firm advertising (“Sleep Easy”) and diversified vendor partnerships (Purple, Leggett & Platt) .

Estimates Context

Metric (Q1 2025)	Consensus	Actual	Beat/Miss
Revenue ($USD Millions)	1,628.7	1,604.7	Miss
Adjusted EPS ($USD)	0.47	0.49	Beat
Adjusted Gross Margin %	43.0%	42.2%	Miss
Adjusted EBITDA ($USD Millions)	256.1	247.9	Miss

Values retrieved from S&P Global for consensus.

Key Takeaways for Investors

Adjusted EPS beat amid top-line miss; the quality mix (direct channel expansion post-acquisition) and efficiency gains underpin margin resilience despite deleverage and tariff timing .
Guidance reset reflects realistic U.S. industry backdrop; watch Q3 for margin recovery as price increases offset tariffs and Sealy launch scales .
International momentum is durable with product-led distribution expansion; continued CC growth supports multi-year margin stability .
Synergy delivery is a central equity narrative: near-term ($15M 2025) and long-term (≥$100M run-rate) cost and revenue synergies, plus ~$20M advertising efficiencies and logistics optimization .
Balance sheet leverage (3.51x per credit facility) is manageable; expect de-levering as EBITDA scales, capex normalizes (~$200–225M run-rate), and interest savings accrue .
Near-term trading: stock likely responsive to Q2 cadence (tariff headwind absorbed, gross margin sequential lift), Mattress Firm comp performance, and Sealy launch velocity .
Medium-term thesis: vertically-integrated scale (manufacturing + retail), cohesive tech roadmap (Fullpower-AI), and brand-led merchandising at Mattress Firm should drive share gain and earnings power as macro normalizes .

Additional Q1 2025 Documents Reviewed

8-K and Exhibit 99.1: Q1 2025 earnings press release (financial statements, segment details, non-GAAP reconciliations) .
Dividend press release (Q2 cash dividend $0.15/share) .
Supplier partnerships (Purple, Leggett & Platt) for Mattress Firm merchandising strategy enhancement .

Values retrieved from S&P Global for all cells marked with *.

SOMNIGROUP INTERNATIONAL INC. (SGI)·Q1 2025 Earnings Summary