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 improved to 44.9% from 42.7% last year.

• Adjusted EBITDA was $231.4 million, up 6% year-over-year, and adjusted EPS grew 8.6% to $0.63. Net income rose 14.8% to $106.1 million.

• Operating income increased 9.1% to $173.3 million, with leverage ratio improving to 2.70x adjusted EBITDA.

• Outperformed the global bedding market despite industry volumes declining mid-single digits, driven by brand strength, innovation, and marketing.

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

Financial highlights

• Q2 2024 net sales: $1,233.6 million (down 2.8% year-over-year); North America: $978.4 million (down 3.8%); International: $255.2 million (up 0.9%).

• Q2 gross margin: 44.9% (up 220 bps year-over-year); North America gross margin: 41.9%; International: 56.6%.

• Q2 operating income: $173.3 million (14.0% margin); adjusted operating income: $180.6 million.

• Q2 adjusted EBITDA: $231.4 million; free cash flow: $122 million, the strongest Q2 since 2021.

• Total debt at quarter-end: $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, with slight growth in the back half; industry volumes projected down mid-single digits.

• Adjusted EBITDA expected at ~$940 million; CapEx of $140 million, with $110 million maintenance and $30 million growth.

• Quarterly dividend increased 18% year-over-year to $0.13 per share, payable August 29, 2024.

• Management expects continued macroeconomic headwinds in H2 2024, but anticipates outperforming the bedding industry due to new product launches and U.S. distribution gains.