SGI · Somnigroup International Inc

Somnigroup's Q1 2026 results showed strong recovery with net sales up 12.3% to $1,802 million and adjusted EBITDA up 19.7% to $297 million, driven by operational execution across its vertically integrated model including Mattress Firm, Tempur Sealy, and Dreams. Net income swung to a $104 million profit from a prior-year loss, reflecting improved margins and scale. The company acquired Mattress Firm in February 2025, boosting direct-to-consumer sales to 63-66% of total from 4% in 2015, with expected $235 million in net synergies by 2027 from cost savings in sourcing and logistics plus sales uplift at Mattress Firm. Full-year 2026 guidance projects sales of $7.8 billion at midpoint, adjusted EBITDA of $1.45 billion, and adjusted EPS of $3.00-$3.40, assuming flat-to-slightly-down global bedding industry, with $700 million in advertising and gross margins slightly above 45%. A major development is the announced $2.5 billion all-stock acquisition of Leggett & Platt, where Leggett shareholders receive 0.1455 Somnigroup shares per share, owning ~9% post-close. This deal is expected to be EPS accretive in year one pre-synergies, lower net leverage, and add $50 million annual EBITDA run-rate ($10 million in first 12 months), with Leggett operating as a separate unit led initially by Karl Glassman. Leverage stood at 3.1x with $873 million liquidity as of March 31, 2026, targeting 2-3x, and plans to allocate 50% of 2026 free cash flow to dividends and repurchases. Long-term, sales targeted for mid-single-digit CAGR to 2028 with adjusted EPS reaching ~$5.15, a 24% CAGR from 2025.