Somnigroup International (SGI) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales declined 2.8% year-over-year to $1,233.6 million, with North America down 3.8% and International up 0.9%. Gross margin expanded to 44.9%, and adjusted EBITDA reached $231.4 million, up 6% year-over-year.

• Adjusted EPS grew 9% to $0.63, and leverage ratio improved to 2.70x, with net income up 14.8% to $106.1 million.

• U.S. business outperformed the market, driven by strong brands, new product launches, and effective marketing.

• The pending $4.0 billion Mattress Firm acquisition faces an FTC challenge, with litigation ongoing and a temporary restraining order in place.

• Robust free cash flow of $122 million, the strongest Q2 since 2021.

Financial highlights

• Q2 2024 net sales: $1,233.6 million (down 2.8% year-over-year); adjusted EBITDA: $231.4 million; adjusted EPS: $0.63.

• Gross margin improved to 44.9% (up 220 bps year-over-year); North American gross margin at 41.9%, International at 56.6%.

• Operating income rose 9.1% to $173.3 million; adjusted operating income at $180.6 million.

• Free cash flow reached $122 million; debt to EBITDA leverage at 2.7x.

• Total debt at quarter-end was $2.5 billion; cash and equivalents $95.8 million.

Outlook and guidance

• 2024 adjusted EPS guidance set at $2.45–$2.65, implying 6% growth at midpoint; full-year sales expected to be flat year-over-year.

• U.S. bedding industry unit volumes projected down mid-single digits for 2024.

• CapEx expected at $140 million, with $110 million for maintenance and $30 million for growth.

• Advertising spend to approach $475 million; adjusted EBITDA guidance at ~$940 million.

• Management expects continued macroeconomic headwinds in H2 2024, but anticipates outperforming the bedding industry.