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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number 001-31922

SOMNIGROUP INTERNATIONAL INC.

(Exact name of registrant as specified in its charter)


Delaware						33-1022198
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

100 Crescent Ct. Suite 700

Dallas, Texas 75201

(Address of registrant’s principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (800) 878-8889

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.01 par value	SGI	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ Yes o No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes ☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated filer ☒ Accelerated filer o Non-Accelerated filer o Smaller Reporting Company ☐ Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Yes o No

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): ☐ Yes ☒ No

The aggregate market value of the common equity held by non-affiliates of the registrant on June 30, 2025, computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrants most recently completed second fiscal quarter was approximately $13,757,330,408.

The number of shares outstanding of the registrant’s common stock as of February 23, 2026 was 210,340,624 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for the 2026 Annual Meeting of Stockholders, which is to be filed subsequent to the date hereof, are incorporated by reference into Part III of this Form 10-K.

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TABLE OF CONTENTS


		Page
PART I.		4
ITEM 1.	Business	4
ITEM 1A.	Risk Factors	12
ITEM 1B.	Unresolved Staff Comments	12
ITEM 1C.	Cybersecurity	13
ITEM 2.	Properties	14
ITEM 3.	Legal Proceedings	14
ITEM 4.	Mine Safety Disclosures	14
PART II.		15
ITEM 5.	Market for Registrant 's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	15
ITEM 6.	[Reserved]	17
ITEM 7.	Management 's Discussion and Analysis of Financial Condition and Results of Operations	17
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	34
ITEM 8.	Financial Statements and Supplementary Data	34
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	66
ITEM 9A.	Controls and Procedures	66
ITEM 9B.	Other Information	67
ITEM 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	67
PART III.		67
ITEM 10.	Directors, Executive Officers and Corporate Governance	67
ITEM 11.	Executive Compensation	67
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	68
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	68
ITEM 14.	Principal Accountant Fees and Services	68
PART IV.		69
ITEM 15.	Exhibits and Financial Statement Schedules	69
ITEM 16.	Form 10-K Summary	73
Signatures		74

When used in this Report, except as specifically noted otherwise, the term "Somnigroup International" refers to Somnigroup International Inc. only, and the terms "Somnigroup," "Company," "we," "our," "ours" and "us" refer to Somnigroup International Inc. and its consolidated subsidiaries. When used in this Report, the term "Tempur" may refer to Tempur-branded products and the term "Sealy" may refer to Sealy-branded products or to Sealy Corporation and its historical subsidiaries, in all cases as the context requires. When used in this Report, the term "Mattress Firm" refers to Mattress Firm Group Inc. and its direct and indirect wholly-owned subsidiaries or Mattress Firm Group LLC and its direct and indirect wholly-owned subsidiaries as the context requires, and the term "Mattress Firm Acquisition" refers to the acquisition of Mattress Firm which was completed on February 5, 2025. In addition, when used in this Report, "2023 Credit Agreement" refers to the Company's senior credit facility entered into in 2023, and amended in February 2024, October 2024 and June 2025;"Term B Loan" refers to the incremental term B loan entered into in 2024;"Delayed Draw Term A Loan" refers to the delayed draw term A loan commitment entered into in 2024; "2029 Senior Notes" refers to the 4.00% senior notes due 2029 issued in 2021; and "2031 Senior Notes" refers to the 3.875% senior notes due 2031 issued in 2021. In addition, when used in this Report, "Danish Tax Matter" refers to the Company's dispute with the Danish Tax Authority ("SKAT") regarding the royalty paid by a U.S. subsidiary of Somnigroup International to a Danish subsidiary for tax years 2012 through 2022.

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Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K (the "Report"), including the information incorporated by reference herein, contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which includes information concerning one or more of our plans; objectives; goals; strategies and other information that is not historical information. Many of these statements appear, in particular, under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, ITEM 7 of this Report. When used in this Report, the words "assumes," "estimates," "expects," "guidance," "anticipates," "might," "projects," "predicts," "plans," "proposed," "targets," "intends," "believes," "will," "may," "could," "is likely to" and variations of such words or similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon our current expectations and beliefs and various assumptions. There can be no assurance that we will realize our expectations or that our beliefs will prove correct.

Numerous factors, many of which are beyond the Company's control, could cause actual results to differ materially from any that may be expressed herein as forward-looking statements in this Report. These risk factors include the impact of the macroeconomic environment including its impact on consumer behavior in both the U.S. and internationally on our business segments and expectations regarding growth of the mattress industry; changes in economic conditions, including inflationary trends in the price of raw materials; uncertainties arising from geopolitical events (including the war in Ukraine and conflicts in the Middle East), labor costs and other employment-related costs; the imposition of new tariffs and retaliatory tariffs, increases in existing tariffs and other changes in trade policy and regulations; a potential U.S. government shutdown and its effect on sales and supply of materials; loss of suppliers and disruptions in the supply of raw materials; competition in our industry; the effects of strategic investments on our operations, including our efforts to expand our global market share and actions taken to increase sales growth such as the acquisition of Mattress Firm; expectations regarding post-closing supply agreements, future performance, synergies and integration of acquired companies with our business, including Mattress Firm; the possibility that the expected benefits of the acquisition are not realized when expected or at all; general economic, financial and industry conditions, particularly conditions relating to the financial performance and related credit issues present in the retail sector, as well as consumer confidence and the availability of consumer financing; the ability to develop and successfully launch new products; capital project timelines; our reliance on information technology ("IT") and the associated risks involving realized or potential security lapses and/or cyber based attacks; the impact of cybersecurity incidents on our business, results of operations or financial condition, including our assessments of such impact; the Company's ability to restore its critical operational data and IT systems in a reasonable time frame following a cybersecurity incident; changes in interest rates; effects of changes in foreign exchange rates on our reported earnings; expectations regarding our target leverage and our share repurchase program; compliance with regulatory requirements and the possible exposure to liability for failures to comply with these requirements; the outcome of pending tax audits or other tax, regulatory or investigation proceedings and pending litigation; changes in foreign tax rates and changes in tax laws generally, including the ability to utilize tax loss carryforwards and the H.R. 1 tax act ("Tax Act"); and our capital structure and debt level, including our ability to meet financial obligations and continue to comply with the terms and financial ratio covenants of our credit facilities.

Other potential risk factors include the factors discussed under the heading "Risk Factors" under Part I, ITEM 1A of this Report. There may be other factors that may cause our actual results to differ materially from the forward-looking statements.

All forward-looking statements attributable to us apply only as of the date of this Report and are expressly qualified in their entirety by the cautionary statements included in this Report. Except as may be required by law, we undertake no obligation to publicly update or revise any of the forward-looking statements, whether as a result of new information, future events, or otherwise.

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PART I

ITEM 1. BUSINESS

General

Somnigroup is the world's largest bedding company, dedicated to enriching people's lives through the power of a good night's sleep and transforming how the world sleeps. With superior capabilities in design, manufacturing, distribution and retail, we deliver breakthrough sleep solutions and serve the evolving needs of consumers in over 100 countries worldwide through our fully-owned businesses, Tempur Sealy, Mattress Firm and Dreams. 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 solutions.

Somnigroup has a strong competitive presence in the bedding marketplace with a leadership position that comes from product and service quality, culture, strategy and people, backed with financial strength and a disciplined approach to returning value to shareholders.

On February 5, 2025, we completed the previously announced acquisition of Mattress Firm, the nation's largest mattress specialty retailer. The total purchase price was approximately $5.1 billion, net of cash acquired of $0.3 billion. The aggregate purchase price consisted of $3.1 billion in cash and approximately 34.2 million shares of common stock valued at $65.65 per share, which represents the simple average of the opening and closing price per share of our common stock on the NYSE on the trading day immediately prior to the date of acquisition, with the value of any fractional shares paid in cash.

In connection with the closing of the Mattress Firm Acquisition, we amended our Certificate of Incorporation to change our name to "Somnigroup International Inc." effective February 18, 2025. The name Somnigroup reflects our position as a global holding company and provider of sleep solutions with a portfolio of bedding businesses. Somnigroup's purpose is to drive long-term shareholder returns through sustainable competitive advantages and disciplined capital allocation as we oversee our investments in the $120 billion global sleep industry.

To comply with commitments made in securing approval for our acquisition of Mattress Firm, we set our merchandising plan to provide 43% of horizontal premium ($1,500+) floor slots, on average across all our open Mattress Firm stores, for the placement of third-party premium mattresses as assessed at calendar year end. To monitor the Company's fulfillment of the merchandising plan, the Company has designed and instituted certain protocols in conjunction with an independent consulting firm. Based on these protocols, management determined that the Company was in compliance with the floor slot commitment as assessed on December 31, 2025.

Our powerful distribution and retail model operates through an omni-channel strategy. As of December 31, 2025, Somnigroup's combined global footprint included over 2,800 retail stores, approximately 30 e-commerce platforms, over 70 manufacturing facilities and four state-of-the-art research and development facilities worldwide. Our combined operations are supported by more than 20,000 employees with a collective focus on providing breakthrough sleep solutions to consumers.

Our long-term strategy is to drive earnings growth with high return on invested capital and strong free cash flow, which is a non-GAAP financial measure. In order to achieve our long-term strategy, we focus on developing the most innovative bedding products in all the markets we serve, making significant investments in our iconic global brands and optimizing our worldwide omni-channel distribution. We also intend to generate earnings growth through ongoing investments in research and development and productivity initiatives, which will improve our profitability and create long-term stockholder value.

We have a balanced approach to capital allocation that includes investments in our operations to facilitate long-term growth and returning capital to shareholders via quarterly cash dividends and share repurchases. From time to time, we also look at acquisition opportunities that could complement and strengthen our core business. When doing so, we seek to balance our assessment of the industry environment, our business outlook and the potential for further strategic expansion, while also prudently managing our business.

Following the completion of the Mattress Firm Acquisition in the first quarter of 2025, we have operated in three segments: Mattress Firm, Tempur Sealy North America and Tempur Sealy International. These segments are strategic business units that are managed separately. Our Mattress Firm segment consists of retail stores and distribution centers located in the

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U.S. Our Tempur Sealy North America segment consists of manufacturing, distribution and retail subsidiaries and licensees located in the U.S., Canada and Mexico (other than Mattress Firm retail and distribution locations). Our Tempur Sealy International segment consists of manufacturing, distribution and retail subsidiaries, joint ventures and licensees located in Europe, Asia-Pacific and Latin America (other than Mexico). Corporate operating expenses are not included in any of the segments and are presented separately as a reconciling item to consolidated results.

Our principal executive office is located at 100 Crescent Ct. Suite 700, Dallas, Texas 75201 and our telephone number is (800) 878-8889. Somnigroup International Inc. was incorporated under the laws of the State of Delaware in September 2002. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to such reports filed with or furnished to the Securities and Exchange Commission ("SEC") pursuant to Section 13(a) of the Exchange Act, are available free of charge on our website at www.somnigroup.com as soon as reasonably practicable after such reports are electronically filed with the SEC. Our website and its contents are not incorporated by reference into this Report.

The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The website of the SEC is www.sec.gov.

Our Products and Brands

We have a comprehensive offering of products that appeal to a broad range of consumers, some of which are covered by one or more patents and/or patent applications. We also routinely introduce new bedding products and update our existing bedding products in each of our segments.

In order to deliver on our mission to be every consumer's choice for better sleep by advancing innovation and expertise in the bedding industry, one of our strategic initiatives is to leverage and strengthen our comprehensive portfolio of iconic brands and products. Our portfolio of product brands includes many highly recognized brands, including Tempur-Pedic®, Sealy® and Stearns & Foster®, which are described below:

•Tempur-Pedic® - Founded in 1991, the Tempur brand is our specialty innovation category leader designed to provide life changing sleep for our wellness-seeking consumers. Our proprietary Tempur material precisely adapts to the shape, weight and temperature of the consumer and creates fewer pressure points, reduces motion transfer and provides personalized comfort and support.

•Stearns & Foster® - The Stearns & Foster brand offers our consumers high quality mattresses built by certified craftsmen who have been specially trained. Founded in 1846, the brand is designed and built with precise engineering and relentless attention to detail and fuses new innovative technologies with time-honored techniques, creating supremely comfortable beds.

•Sealy® - The Sealy brand originated in 1881 in Sealy, Texas, and for over a century has focused on offering trusted comfort, durability and excellent value while maintaining contemporary styles and great support. The Sealy Posturepedic® brand, introduced in 1950, was engineered to provide all-over support and body alignment to allow full relaxation and deliver a comfortable night's sleep.

•Sleepy's® - The Sleepy's brand is our private label brand offering at our Mattress Firm stores and online at www.mattressfirm.com. Sleepy's is well-positioned to compete in a space where consumers prioritize quality and value.

•Non-Branded - We offer non-branded products through our OEM business, including mattresses, pillows and other bedding products and components at a wide range of price points. The addition of non-branded offerings expands our capabilities to service third-party retailers to capture manufacturing profits from bedding brands outside our own.

In 2026, we plan to launch an all-new collection of Stearns & Foster products in North America. This new line is designed to further elevate our high‑end traditional innerspring brand by introducing incremental technologies, expanding our range of hybrid offerings, and providing a refreshed aesthetic.

Our portfolio of retail brands includes Mattress Firm®, Dreams®, Tempur-Pedic® retail stores, SOVA retail stores in Sweden and a variety of other retail brands internationally, which operate in various countries. The retail brands named above are described below:

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•Mattress Firm® - Mattress Firm is the largest multi-branded mattress specialty retailer in the U.S., helping to make better sleep a reality by matching consumers to their perfect mattress through its highly trained team of Sleep Experts® across its over 2,100 stores and robust online operations. Mattress Firm is a leading retailer of brands such as Tempur-Pedic®, Sealy®, Stearns & Foster®, Purple®, Sleepy's®, Beautyrest®, Nectar®, Serta®, Simmons®, Tuft & Needle® and tulo®.

•Dreams® - Dreams is the leading specialty bedding retailer in the United Kingdom ("U.K."). As a multi-branded retailer, Dreams sells a variety of products across a range of price points. In addition to operating over 200 brick-and-mortar stores and an e-commerce channel throughout the U.K., Dreams also manufacturers the majority of the bedding products it sells in-house.

•Tempur-Pedic® retail stores - Tempur-Pedic® retail stores are designed for the consumers that prefer to purchase directly from the manufacturer, and for those seeking a more personalized and educational sales experience. These retail boutiques are strategically located in high traffic, premium retail centers that attract customers whose interests and purchasing behaviors align with our brand.

•SOVA - SOVA is a highly respected and well-established premium bedding chain in Sweden. Our stores are connected to the urban areas of Stockholm, Gothenburg and Malmö. The assortment primarily focuses on premium to ultra-premium brands and well-trained sales staff targeting to sell quality beds with a strong average selling price.

Omni-Channel Distribution

Our primary selling channels are Direct and Wholesale. These channels align to the operating margin characteristics of our business and our marketplace. Direct channel sales represented 63.5% of net sales in 2025, compared to 24.9% in 2024, primarily driven by the acquisition of Mattress Firm. Our wholesale distribution complements our broad direct channel distribution, and we believe this balanced approach enhances the overall global sales potential and profitability of Somnigroup.

Our Direct channel includes over 2,800 company-owned retail stores and our e-commerce platforms and call centers worldwide. Growth opportunities for our Direct channel include improving conversion, average order value and traffic, and through opening new brick and mortar stores and e-commerce channels.

Our Wholesale channel includes sales of product to third-party retailers, hospitality businesses and healthcare customers. Growth opportunities for our Wholesale business include driving slot velocity, increasing our slot placements with existing customers and expanding distribution through new retail partners and alternative distribution channels.

Our third-party retailers, Mattress Firm®, Tempur-Pedic® retail stores, Dreams® and our other company-owned store concepts reach the vast majority of consumers who still prefer to touch and feel a mattress and speak to a retail sales associate prior to making a purchase decision. However, our consumer insights also demonstrate that there is a growing segment of the population that prefers to purchase products online and, to a lesser degree, via a call center. As such, having an omni-channel presence is more important than ever, with most customers completing research and shopping both online and in-stores before making their purchase decision.

For customers that prefer the convenience of making purchases online and having their bedding products delivered right to their front door, we have evolved our distribution model to include multiple online options to reach those that want to purchase our products without the need to go into a brick-and-mortar store.

Marketing

Our overall marketing strategy is to drive consumer demand for our brands by distinguishing them in the marketplace. To accomplish this, we target each brand to a particular and complementary audience, and tailor our product design/development, distribution and advertising accordingly. To maximize awareness and purchase intent for our brands, we invest at industry-leading levels in national television, radio, search-engine marketing, social media and other media channels. We also complement our own direct-to-consumer marketing activities and investments with marketing activity conducted in cooperation with our retail partners. This activity includes investments in co-operative advertising, new product launches and the deployment of in-store point-of-sale material and training programs designed to enhance the visibility of, and advocacy, for our brands.

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Seasonality

We believe that sales of products to furniture and bedding stores are typically subject to modest seasonality inherent in the bedding industry, with sales expected to be generally lower in the second and fourth quarters. Sales in a particular quarter can also be impacted by competitive industry dynamics and global macroeconomic conditions. Additionally, the U.S. bedding industry generally experiences increases in sales around holidays and promotional periods.

Operations

Mattress Firm

Manufacturers ship merchandise directly to our national network of 62 distribution centers that serve our over 2,100 retail stores and e-commerce operations. Our merchandise is received, inspected and processed at our distribution centers and then delivered to customers’ homes or to stores through third-party delivery services.

Tempur Sealy

Our products are currently manufactured and distributed through our global network of facilities. For a list of our principal manufacturing and distribution facilities, please refer to ITEM 2, "Properties".

Suppliers

We obtain the raw materials used to produce our pressure-relieving Tempur® material and components used in the manufacture of Tempur-Pedic® products from third-party sources. We currently acquire chemicals and proprietary additives for Tempur-Pedic® products as well as other components such as textiles from a number of suppliers with manufacturing locations around the world. These supplier relationships may be modified in order to maintain quality, cost and delivery expectations. All critical components are purchased under supply agreements. We do not consider ourselves to be dependent in the long term upon any single outside vendor as a source of supply to our bedding business, and we believe over time that sufficient alternate sources of supply for the same, similar or alternate components will become available.

Raw materials for Sealy® and non-branded products consist mainly of polyurethane foam, textiles and steel innerspring components that we purchase from various suppliers. In the U.S. and Canada, we source the majority of our requirements for polyurethane foam components and spring components for our Sealy and Stearns & Foster mattress units from key suppliers for each component. We also purchase a significant portion of our Sealy foundation parts from third-party sources.

Our Mattress Firm segment sources finished goods from various bedding manufacturers, including our Tempur Sealy North America segment. Additionally, we source our adjustable bed bases and foundations from third-party manufacturers. These are purchased under supply agreements from a limited number of key suppliers. These products are dependent on components supply chains originating in China. We believe over time that sufficient alternate sources of supply for the same or similar components will be available outside of China from our current or alternate suppliers.

For further information regarding the loss of suppliers and disruptions in the supply of our raw materials and components on the Company, please refer to "Risk Factors" in ITEM 1A of Part I of this Report.

Research and Development

We have four research and development centers, three in the U.S. and one in Denmark, that conduct technology and product development. Additionally, we have a product testing facility that conducts hundreds of consumer tests annually. We believe our consumer-research driven approach to innovation results in best-in-class products that benefit the consumer.

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Industry and Competition

We compete in the global bedding industry, comprised of mattresses and foundations, pillows and accessories. The mattress category is comprised of traditional innerspring mattresses and non-innerspring mattresses, which includes visco-elastic and foam mattresses, innerspring/foam hybrid mattresses, airbeds and latex mattresses. The foundation category is comprised of traditional foundations and adjustable foundations. Additionally, the pillow market is comprised of traditional foam and feather pillows, as well as pillows made of visco-elastic, latex, foam, gel, rubber and down. The primary distribution channels for bedding products are retail furniture and bedding stores, big-box retailers and e-commerce channels.

We encounter competition from other bedding manufacturers and retailers. The domestic market for manufacturers is concentrated and the domestic market for retailers is fragmented. The international market for both manufacturers and retailers is highly fragmented, with a large number of competitors primarily operating on a regional and local basis. Participants in the global bedding industry offer a broad range of mattress, bed base and pillow products and compete primarily on price, quality, brand name recognition, product availability and product performance.

Manufacturers and retailers in the global bedding industry are seeking to increase their channels of distribution and are looking for new ways to reach the consumer, resulting in an increase in the number of U.S. and international companies pursuing online direct-to-consumer models for mattresses. In addition, retailers both in the U.S. and internationally are increasingly seeking to offer their own private label products.

Intellectual Property

Patents, Trademarks and Licensing

As of December 31, 2025, we hold over one thousand U.S. and foreign patents and patent applications regarding certain elements of the design and function of many of our mattress and pillow products.

As of December 31, 2025, we held thousands of trademark registrations worldwide, which we believe have significant value and are important to the marketing of our products to retailers and consumers. Tempur®, Tempur-Pedic®, Sealy®, Sealy Posturpedic®, Stearns & Foster®, Sleepy's® and Mattress Firm® are our primary trademarks registered with the U.S. Patent and Trademark Office and various foreign trademark offices, as are many other of our registered trademarks and pending applications. Each U.S. trademark registration is renewable indefinitely as long as the trademark remains in use. We also own numerous trademarks, trade names, service marks, logos and design marks in the U.S. and a number of other countries, including Dreams® and SOVA.

We derive income from royalties by licensing Sealy®, Stearns & Foster® and Tempur® brands, technology and trademarks to other manufacturers. Under the license arrangements, licensees have the right to use certain trademarks and current proprietary and/or patented technology in designated jurisdictions. We also provide our licensees with product specifications, research and development, statistical services and marketing programs. We license the Mattress Firm® trademark to our retail franchisees for use in retail store operations in certain U.S. jurisdictions in exchange for royalty fees. For the year ended December 31, 2025, our licensing activities generated royalty and franchise revenue of $39.5 million.

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Governmental Regulation

Our operations are subject to international, federal, state and local consumer protection and other regulations, primarily relating to the mattress and pillow industry. These regulations vary among the states, countries and localities in which we do business. The regulations generally impose requirements as to the proper labeling of bedding merchandise, restrictions regarding the identification of merchandise as "new" or otherwise, controls as to chemical and other substances, hygiene and other aspects of product safety, handling, marketing and sale and penalties for violations. New regulations can require us to change the way in which our products are labeled and marketed. For example, the European Union's General Product Safety Regulation, which came into force on December 13, 2024, required us to make changes to the way in which our products are labeled and to add product safety and manufacturer information to all of our online product listings. In July 2025, the U.K. government published a new framework law on product regulation, the Product Regulation and Metrology Act 2025, which provides for further detailed regulations to be enacted which may have a similar impact. The U.S. Consumer Product Safety Commission ("CPSC") has adopted rules relating to fire retardancy standards for the mattress industry. Many foreign jurisdictions also regulate fire retardancy standards. Future changes to these regulations and standards may require modifications to our products to comply with such changes. For example, the U.K. is in the process of a major reform of furniture fire safety regulations which would include measures to reduce the use of chemical fire retardants. We are also subject to environmental and health and safety requirements with regard to the manufacture of our products and the conduct of our operations and facilities. We have made and will continue to make expenditures necessary to comply with these requirements. Currently these expenditures are immaterial to our financial results. For a discussion of the risks associated with our compliance programs in connection with these regulations, please refer to "Risk Factors" under Part I, ITEM 1A of this Report.

Our principal waste products are foam and fabric scraps, wood, cardboard and other non-hazardous materials derived from product component supplies and packaging. We also periodically dispose of small amounts of used machine lubricating oil and air compressor waste oil, primarily by recycling. In the U.S., we are subject to federal, state and local laws and regulations relating to environmental health and safety, including the Federal Water Pollution Control Act, the Clean Air Act and the Resource, Conservation and Recovery Act. We are subject to similar requirements in Canada, the EU and other jurisdictions, with further waste management and prevention, and other environmental protection regulations coming into effect both this year and over the next few years. Additionally, California, Connecticut, Oregon and Rhode Island have all enacted laws requiring the collection of fees to help facilitate the recycling of mattresses discarded in their states. We believe that we are in compliance with all applicable international, federal, state and local environmental statutes and regulations. We do not expect that compliance with international, federal, state or local provisions that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, will have a material effect upon our capital expenditures, earnings or competitive position. We are not aware of any pending international or federal environmental legislation that would have a material impact on our operations, and have not been required to make, and do not expect to make, any material capital expenditures for environmental control facilities or other regulatory requirements in the foreseeable future.

In connection with sales of our products and operation of our business, we collect and process personal data from our customers, business partners and employees. As such, we are subject to certain laws and regulations relating to IT security, artificial intelligence ("AI") and personal data protection and privacy. For example, the European Union ("EU") adopted the General Data Protection Regulation ("GDPR"). The GDPR imposed ongoing compliance requirements on companies, including us, that process personal data from citizens resident in the EU. In addition, there are country-specific data privacy laws in Europe that impose additional requirements on data controllers and several of these laws are more stringent than the GDPR.

In recent years, U.S. states have adopted legislation offering similar protections for resident citizens, such as the California Privacy Rights Act (which amends the California Consumer Privacy Act ("CCPA")). Numerous other states have introduced similar privacy laws. These U.S. state privacy laws grant consumers new rights over their personal information, such as access to and deletion of their personal information, placing strict data collection requirements on businesses, including ours.

In the Asia-Pacific region, several data privacy laws regulate the processing of personal data of resident citizens and compliance requirements vary widely. For example, the People's Republic of China consolidated its data privacy laws into one overarching regime with the introduction of the Personal Information Protection Law ("PIPL"). The PIPL is widely considered one of the strictest personal data protection laws in the world, with significant restrictions placed on the transfer of personal information outside of China or use without separate citizen consent.

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Recently the EU harmonized its existing laws governing AI with the introduction of the consolidated EU AI Act ("AI Act"). The AI Act regulates the development and/or use of AI and has extra-territorial reach. The law places risk and technology-based obligations on companies deploying AI in their operations, such as ours. To address the requirements, we have implemented a global AI policy and set up AI governance and controls through a new management committee and compliance program.

In response to the changing regulatory global landscape, we have implemented a global compliance system, appointed dedicated resources and have put measures in place to facilitate adherence to the continuing compliance requirements of applicable worldwide data privacy laws.

Sustainability and Corporate Social Values

Our Board of Directors and executive management team believe that our commitment to robust sustainability practices unlocks shareholder value and contributes to our long-term financial growth by helping us to identify and manage associated risks and opportunities most relevant to our business.

Additional details on our approach to sustainability can be found in our annual Corporate Social Values reports located on the Somnigroup website at http://somnigroup.com under the "Sustainability" tab. Our website and its contents are not incorporated by reference into this Report.

In 2024, we shifted our annual sustainability reporting period to be aligned with our fiscal year. Our latest Sustainability report, published in 2025, covers our 2024 operations.

Sustainability Governance

Somnigroup's Nominating and Corporate Governance ("NCG") Committee has primary responsibility for oversight of risk associated with leadership structure, corporate governance matters and the Company's sustainability practices and positions. The NCG Committee reviews our practices and positions relating to sustainability, technology (including artificial intelligence) and social issues that may affect the Company's business and key stakeholders and exercises oversight on such matters. As part of this oversight, the NCG Committee reviews the effectiveness of management's strategies and programs in progressing towards the Company's goals, including with respect to responsible sourcing and waste management.

The NCG Committee is supported in its oversight of our key sustainability topics by our Human Resources/Capital and Talent Committee and our Audit Committee. The Human Resources/Capital and Talent Committee oversees risks related to compensation and initiatives related to talent management. The Audit Committee has primary responsibility for independent, objective oversight with respect to our accounting and financial reporting functions; internal and external audit functions and systems of internal controls over financial reporting and oversight regarding the Company's legal, ethical and regulatory compliance, including safety and health, data privacy and cybersecurity risks; and compliance with the Foreign Corrupt Practices Act of the United States, the Bribery Act of 2010 of the United Kingdom and similar laws and regulations.

At a management level, our Sustainability Working Group is a cross-functional team overseen by our Chief Financial Officer that plays a critical role in shaping and executing our sustainability strategy. Through partnering with internal subject matter experts and external advisors, the group helps to identify emerging sustainability-related risks and opportunities, informs strategic objectives and accelerates initiatives that advance our sustainability commitments. The Sustainability Working Group provides regular updates to the Board on sustainability initiatives, emerging opportunities and potential risks to help mitigate business impacts.

Note on Sustainability Discussion and Mattress Firm

The impact of any acquisitions will generally be integrated into our Sustainability and Corporate Responsibility disclosures and initiatives approximately 24 months after closing. We plan to formally incorporate Mattress Firm into our next sustainability report to be published in 2026 covering our activities in fiscal year 2025.

While we anticipate that we will apply the same or similar strategies to managing these focus areas with Mattress Firm as a part of our company, the following descriptions regarding the Company's approach to Environment and Human Capital Management pertain to the Company immediately prior to the Mattress Firm Acquisition. Because of the acquisition, we also plan to revisit, and update if needed, our key sustainability-related targets, including our goal to achieve carbon neutrality by 2040 discussed below.

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Environment

Somnigroup's approach to managing our environmental impact is focused on three pillars: resource conservation, product and packaging and waste management. This approach helps to ensure compliance with relevant regulations, better positions our products to meet evolving consumer expectations and drives cost savings through efficiency gains.

Resource Conservation. We are investing in resource efficiency throughout our production and distribution processes. This includes our efforts to manage risks associated with the transition to a lower-carbon economy by investing in renewable energy and reducing our greenhouse gas emissions. We are committed to achieving carbon neutrality in our global wholly-owned operations by 2040. Our objective is to reduce or offset 100% of Scope 1 and 2 greenhouse gas emissions from our wholly-owned manufacturing, retail and logistics operations.

Product and Packaging. In line with our unwavering focus on consumer and employee safety and meeting the regulations of different jurisdictions, we are building these regulatory requirements into our product plans. This includes considering the entire lifecycle of our products, beginning with our supplier engagement and ensuring the safety of all materials used on our products.

Our Chemical Safety Policy demonstrates our commitment to maintaining a healthy and safe work environment for our employees and providing a safe product for our customers. It also reflects our efforts to ensure safety through comprehensive chemical safety management, compliance with regulations, rigorous product testing and employee training and preparedness.

Waste Management. We are committed to reducing waste from our operations and improving the recyclability of our products. We seek to achieve zero waste-to-landfill status across our global operations which not only helps reduce costs related to waste management but also reinforces our efforts to improve resource efficiency throughout our production and distribution processes.

Human Capital Management

As a global organization, our workforce is important to us. As of December 31, 2025, we had over 19,000 full-time employees. Our joint ventures also employ over 1,500 full-time employees. We believe a key driver of long-term success is the strength of our workforce and we are committed to investing in our workforce. As part of our commitment to our workforce, we focus on the following key areas:

Wellness, Health and Safety

With sleep, health and wellness at the core of what we do every day, we recognize the importance of employee well-being and offer a holistic suite of programs and initiatives to support employee's health.

We also strive to continue to be proactive in our operational health and safety initiatives. We are focused on ensuring compliance with health and safety best practices, requiring employee health and safety training for 100% of our applicable employees, raising workplace awareness through safety initiatives and identifying risk elimination opportunities.

Equal Opportunity Employment

We have a diverse global workforce that includes a range of skill sets, perspectives, backgrounds and qualifications. As an Equal Employment Opportunity Employer, we are committed to providing opportunities to all employees and applicants and prohibiting discrimination and harassment. The following are some of the actions that we take to realize our commitment to equal opportunity employment:

•Promotion of a qualified slate of candidates during the hiring process based on merit and regardless of background, with the goal of having a workforce that brings broad experiences and ideas to strengthen our Company

•Employ a uniform, global process for determining compensation based on experience and skillsets to remove potential biases

•Conduct a review of compensation practice periodically

•Participate in external, community-based activities sponsored by local organizations to support the resilience of the communities where we operate and where our employees live

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People Development and Training

Our goal is to design and offer development opportunities that improve Company performance and meet employees' individual learning and development needs and strengthen our culture by reinforcing Company values. We use the 70/20/10 learning and development model. This approach gives employees the opportunity to develop their skills through a combination of job experience (70%), mentoring (20%) and formal training (10%). Training at Somnigroup includes, but is not limited to, formal training programs, leadership development mentorships, professional and industry conferences and education assistance.

We offer employees access to a learning management system where they can take courses on a variety of individual and leadership development topics. All our professional employees have access to this system which offers thousands of individual learning modules.

ITEM 1A. RISK FACTORS

The following risk factors and other information included in this Report should be carefully considered. Please also see "Special Note Regarding Forward-Looking Statements" on page 3.

Risks related to our Business and Economic Environment

We operate in a highly competitive industry and if we are unable to compete successfully, we may lose customers and our sales may decline.

Participants in the mattress and pillow industries compete primarily on price, quality, brand name recognition, product availability and product performance across a range of distribution channels.

A number of our significant competitors offer mattress and pillow products that compete directly with our products. The effectiveness of our competition relative to our performance, including by established manufacturers or new entrants into the market, could have a material adverse effect on our business, financial condition and/or operating results. For example, market participants continue to improve their channels of distribution to optimize their reach to the consumer, including by pursuing online direct-to-consumer models. In addition, retailers in the U.S. and internationally have integrated vertically in the furniture and bedding industries, and it is possible that such vertical integration may provide conditions that would negatively impact our net sales and results of operations. The pillow industry in particular is characterized by a large number of competitors, none of which is dominant. As such, conditions that substantially increase a single participant's market share could be detrimental to our financial performance. The highly competitive nature of the mattress and pillow industries means we are continually subject to the risk of loss of market share, loss of significant customers, reductions in margins and the inability to acquire new customers.

Loss of suppliers and disruptions in the supply of our raw materials and components has increased and may continue to increase our costs of sales and reduce our ability to compete effectively.

We acquire raw materials and components from a number of suppliers with manufacturing locations around the world. If we were unable to obtain raw materials and components from these suppliers for any reason, we would have to find replacement suppliers. Any substitute arrangements for raw materials and components might not be on terms as favorable to us. We maintain relatively small supplies of our raw materials and components at our manufacturing facilities, and any disruption in the shipment of supplies could interrupt production of our products, which in turn could result in a decrease of our sales or could cause an increase in our cost of sales, either of which could decrease our liquidity and profitability.

If a key supplier for an applicable component failed to supply components in the amount we require, this could significantly interrupt production of our products and increase our production costs in the near term. We have experienced and may continue to experience disruptions for a variety of reasons, including disruptions in international trade routes, changes in international trade duties and other aspects of international trade policy, labor shortages, natural disasters or climate change-related events (including severe weather events), pandemics and political events. If we are not able to successfully mitigate such supply chain risks, we could experience disruptions in production or increased costs, which may result in a decrease in our gross margin or reduced sales, and have a material adverse effect on our business, results of operations and financial condition.

Changes in economic conditions, including inflationary trends in the price of our input costs, such as raw materials, due to, among other things, current geopolitical events, have adversely affected our business and financial results and could continue to do so in the future.

The bedding industry is subject to volatility in the price of petroleum-based and steel products, which affects the cost of polyurethane foam, polyester and steel innerspring component parts. The price and availability of these raw materials are subject to market conditions affecting supply and demand. Given the significance of the cost of these materials to our products, volatility in the prices of the underlying commodities has and will significantly affect profitability.

The global economy continues to experience high rates of inflation, and inflationary pressure and price uncertainty may continue in 2026. We have experienced, and may continue to experience, volatility and increases in the price of certain of these raw materials as a result of global market and supply chain disruptions and the broader inflationary environment related to the ongoing macroeconomic conditions. Interest rates remain relatively high and may continue to remain at such levels. To the extent we are unable to absorb higher costs, or pass any such higher costs to our customers, our gross margin could be negatively affected, which could result in a decrease in our liquidity and profitability. In addition, monetary policies to counter inflation could negatively affect our borrowing costs and those of our customers and suppliers, as well as exchange rates and other macroeconomic factors.

Geopolitical developments, such as trade wars, the war in Ukraine conflicts in the Middle East (including disruptions to the Red Sea passage), have adversely impacted and could continue to adversely impact, among other things, our raw material, energy and transportation costs, certain of our suppliers, distributors, customers and local markets, global and local macroeconomic conditions and cause further supply chain disruptions (including by delaying the delivery times of raw materials needed for our business or our products to customers).

The Company may not realize the benefits it expects from the Mattress Firm Acquisition or acquisitions or other strategic transactions it may pursue in the future.

From time to time, the Company considers and may make acquisitions, such as our acquisition of Mattress Firm. The success of such acquisitions will depend upon a number of factors, some of which may not be within our control. For example, the success of our acquisition of Mattress Firm depends, in large part, on our ability to realize the anticipated benefits from combining our businesses. Our ability to realize these anticipated benefits depends on the successful integration of Mattress Firm with our businesses, which has been complex and time-consuming. This integration has involved numerous operational, strategic, financial, accounting, legal, tax and other risks, including liabilities assumed with the Mattress Firm Acquisition. Difficulties in combining the business of Mattress Firm and our ability to manage the combined company may result in the combined company performing differently than expected, in operational challenges or in the delay or failure to realize anticipated expense-related operating synergies and could have an adverse effect on our business and financial results.

Potential difficulties that may be encountered in the acquisition and merger process include, among other factors:

•the inability to obtain financing for potential acquisitions;

•delays in closing or the inability to close an acquisition for any reason, including third-party consents or approvals;

•the inability to successfully merge the acquired business, operationally and culturally, in a manner that permits us to achieve the financial results anticipated;

•the inability to deliver on our strategy as a combined company;

•complexities associated with managing a larger, more complex business, including the potential diversion of management's attention;

•not realizing anticipated operating synergies;

•the inability to retain key employees and otherwise combine personnel from the acquired companies;

•potential unknown liabilities and unforeseen expenses;

•merging relationships with customers, suppliers, distributors and business partners;

•performance shortfalls at one or any of the companies as a result of the diversion of management's attention caused by merging the acquired business' operations; and

•the disruption of, or the loss of momentum in, each company's ongoing business or inconsistencies in standards, controls, procedures and policies.

We could also issue a significant number of shares of our common stock in the future in connection with acquisitions. Any of these issuances could dilute our existing stockholders, and such dilution could be significant. Moreover, such dilution could have a material adverse effect on the market price for the shares of our common stock.

In addition, in connection with the acquisition of Mattress Firm, we have committed to maintain a merchandising plan that provides 43% of horizontal premium ($1,500+) floor slots for the placement of third-party premium mattresses. Failure to comply with this commitment could result in legal or administrative proceedings, such as regulatory action or private litigation, and could harm our business, reputation and financial condition.

Risks related to operating our business

The performance of our business depends on our ability to implement strategic initiatives and actions taken to increase sales growth may not be effective.

The performance of our business depends upon a number of factors, including the following:

•our ability to continuously improve our products to offer new and enhanced consumer benefits and better quality;

•the ability of our current and future product launches to increase net sales;

•the effectiveness of our advertising campaigns and other marketing programs to build product and brand awareness, driving traffic to our distribution channels and increasing sales;

•our ability to successfully launch new products;

•our ability to compete in the mattress and pillow industry;

•our ability to continue to expand into new distribution channels and optimize our existing channels;

•our ability to continue to successfully execute our strategic initiatives;

•our ability to manage growth and limit cannibalization associated with new or expanded supply agreements;

•our ability to reduce costs, including the level of consumer acceptance of our products at optimal price points;

•our ability to successfully mitigate the impact of headwinds facing our business, including increased commodity prices and the influx of low-end, imported beds that compete with certain of our products;

•our ability to pursue, successfully integrate and capture the synergies from potential acquisition opportunities;

•general economic factors that impact consumer confidence, disposable income or the availability of consumer financing; and

•our ability to successfully open new stores and profitably operate existing stores.

Our new product launches may not be successful due to development delays, failure of new products to achieve anticipated levels of market acceptance and significant costs associated with failed product introductions, which could adversely affect our revenues and profitability.

Each year we invest significant time and resources in research and development to improve our product offerings and launch new products. For example, in 2026, we plan to launch an all-new collection of Stearns & Foster products in North America, and in 2025, we launched an all-new collection of Sealy Posturepedic® products in North America. This all-new collection of Stearns & Foster products is designed to further elevate our high‑end traditional innerspring brand by introducing incremental technologies, expanding our range of hybrid offerings, and providing a refreshed aesthetic. This reinvention of the Sealy Posturepedic® brand is strategically aimed at reigniting growth in the mid-to-entry level market, which has experienced outsized pressures relative to other price points in recent years. The new collection incorporates innovative technologies, including our proprietary PrecisionFit™ coils that deliver superior support and exceptional comfort.

There are a number of risks that are inherent in our new product line introductions, including that the anticipated level of market acceptance may not be realized, which could negatively impact our sales. Further, introduction costs and manufacturing inefficiencies may be greater than anticipated, while the rollout of the product could be delayed, each of which could impact profitability.

We rely significantly on IT and we have experienced, and in the future could experience, cyber-based attacks which have and in the future could harm our ability to effectively operate our business.

We rely on IT systems to operate and manage our business and to process, maintain and safeguard information essential to our business as well as information relating to third-parties, including our customers, suppliers and employees. These systems are vulnerable to events beyond our reasonable control, including cyberattacks and security breaches. Such events have resulted, and in the future could result, in operational slowdowns, shutdowns or other difficulties; loss of sales, revenues or market share; compromise or loss of sensitive or proprietary information, including the misappropriation of our customers' or employees' personal information; destruction or corruption of data, including valuable business data; costs of remediation, upgrades, repair or recovery; breaches of obligations to third parties under privacy laws or contracts; exhaustion of insurance coverage and increased insurance premiums; fines or lawsuits; or other damage to our reputation or customer relationships; each of which, depending on the extent or duration of the event, could materially and adversely impact our business, operating results or financial condition.

We have been, and may in the future be, subject to cybersecurity incidents. As these attacks increase and become more sophisticated, the risks associated with such an event continue to increase, particularly as our digital business footprint expands. Our security measures and internal controls are designed to protect personal data, business information, including intellectual property, and other confidential information, to prevent data loss, and to prevent or detect security breaches. However, such measures and controls do not provide absolute security in preventing these cybersecurity events from occurring, particularly given that techniques used to access, disable or degrade service, or sabotage systems change frequently.

Moreover, we rely on third-party technology service providers in ordinary course operations of our Direct channel, such as website hosting, payment systems and digital advertising. Our third-party service providers may be victims to cybersecurity events from time to time, and failure to prevent, detect or remediate such events may disrupt our operations and could cause financial or reputational harm, including if insurance coverage is insufficient to cover all losses or all types of claims that may arise.

Cybersecurity events and breaches of our network or databases, or those of our third-party providers, have resulted and may in the future result in the risks discussed herein.

Furthermore, we are subject to a constantly evolving regulatory landscape of laws and regulations relating to IT security and personal data protection and privacy, including but not limited to the EU's GDPR and the CCPA, each of which have imposed new and expanded compliance requirements on companies, including us, that process personal data from citizens living in applicable jurisdictions. Any failure to comply with applicable laws and regulations relating to data security and privacy, due to various factors within or outside of our control, could result in costly investigations from regulators and litigation, expose us to potentially significant penalties and result in negative publicity that could damage our reputation and credibility.

Deterioration in labor relations could disrupt our business operations and increase our costs, which could decrease our liquidity and profitability.

As of December 31, 2025, we had over 19,000 full-time employees. Our joint ventures also employ over 1,500 full-time employees. Approximately 14.7% of our employees are represented by various labor unions with separate collective bargaining agreements or government labor union contracts for certain international locations. Our North American collective bargaining agreements, which are typically three years in length, expire at various times during any given three-year period. Due to the large number of collective bargaining agreements, we are periodically in negotiations with certain of the unions representing our employees. We may at some point be subject to work stoppages by some of our employees and, if such events were to occur, there may be a material adverse effect on our operations and profitability. Further, we may not be able to renew our various collective bargaining agreements on a timely basis or on favorable terms, or at all. Any significant increase in our labor costs could decrease our liquidity and profitability and any deterioration of employee relations, slowdowns or work stoppages at any of our locations, whether due to union activities, employee turnover or otherwise, could result in a decrease in our net sales or an increase in our costs, either of which could decrease our liquidity and profitability.

We may face exposure to product liability claims and premises liability claims, which could reduce our liquidity and profitability and reduce consumer confidence in our products.

We face an inherent business risk of exposure to product liability claims if the use of any of our products results in personal injury or property damage. In the event that any of our products prove to be defective or otherwise fail to meet safety standards, we may be required to recall, redesign or even discontinue those products. We maintain insurance against product liability claims, but such coverage may not continue to be available on terms acceptable to us or be adequate for liabilities actually incurred. A successful claim brought against us in excess of available insurance coverage could impair our liquidity and profitability, and any claim or product recall that results in significant adverse publicity against us could result in consumers purchasing fewer of our products, which would also impair our liquidity and profitability.

We also face inherent business risks by operating physical stores that are open to the public. By opening retail stores, we have increased our exposure to premises liability claims. We maintain insurance against premises liability claims, but such coverage may not continue to be available on terms acceptable to us or be adequate for liabilities actually incurred.

If we are not able to protect our trade secrets or maintain our trademarks, patents and other intellectual property, we may not be able to prevent competitors from developing similar products or from marketing in a manner that capitalizes on our intellectual property rights, and this loss of a competitive advantage could decrease our profitability and liquidity.

We rely on patents and trade secrets to protect the design, technology and function of our products. To date, we have not sought U.S. or international patent protection for our principal product formula for Tempur® material and certain of our manufacturing processes. Accordingly, we may not be able to prevent others from developing certain visco-elastic material and products that are similar to or competitive with our products. Our ability to compete effectively with other companies also depends, to a significant extent, on our ability to maintain the proprietary nature of our owned and licensed intellectual property. We own a significant number of patents or have patent applications pending on some aspects of our products and certain manufacturing processes. However, the principal product formula and manufacturing processes for our Tempur® material are not patented and we must maintain these as trade secrets in order to protect this intellectual property. We own U.S. and foreign registered trademarks and service marks and have applications for the registration of trademarks and service marks pending domestically and abroad. We also license certain intellectual property rights from third parties.

Certain of our trademarks are currently registered in the U.S. and are registered or pending in foreign jurisdictions. Certain other trademarks are the subject of protection under common law. However, there can be no assurance that the steps we take to protect our trademarks in the U.S. and foreign jurisdictions will be adequate to prevent third parties from copying or using our trademarks, including our retail and product brands, without authorization. Our rights to our trademarks could be circumvented, or violate the proprietary rights of others, or we could be prevented from using them if challenged. A challenge to our use of our trademarks could result in a negative ruling regarding our use of our trademarks, their validity or their enforceability, or could prove expensive and time consuming in terms of legal costs and time spent defending against such a challenge. Any loss of trademark protection could result in a decrease in sales or cause us to spend additional amounts on marketing, either of which could decrease our liquidity and profitability. We have made and continue to make significant investments to promote our retail and product brands. For example, in 2025, we launched a new "Sleep Easy" advertising campaign to promote our Mattress Firm retail brand. If our brands are copied or used without authorization, we may be unable to realize the benefits of such investments, and the value of our brands, their reputation, our competitive advantages and our goodwill could be harmed. In addition, if we incur significant costs defending our brands and other trademarks, our liquidity and profitability could be adversely affected, and we may not have the financial resources necessary to enforce or defend our brands and other trademarks. Furthermore, our patents may not provide meaningful protection and patents may never issue from pending applications. It is also possible that others could bring claims of infringement against us, as our principal product formula and manufacturing processes are not patented, and that any licenses protecting our intellectual property could be terminated. If we are unable to maintain the proprietary nature of our intellectual property and our significant current or proposed products, this loss of a competitive advantage could result in decreased sales or increased operating costs, either of which would decrease our liquidity and profitability.

In addition, the laws of certain foreign countries may not protect our intellectual property rights and confidential information to the same extent as the laws of the U.S. or the EU. Third parties, including competitors, may assert intellectual property infringement or invalidity claims against us that could be upheld. Intellectual property litigation, which could result in substantial cost to and diversion of effort by us, may be necessary to protect our trade secrets or proprietary technology, or for us to defend against claimed infringement of the rights of others and to determine the scope and validity of others' proprietary rights. We may not prevail in any such litigation, and if we are unsuccessful, we may not be able to obtain any necessary licenses on reasonable terms or at all.

The loss of the services of any members of our executive management team could impair our ability to execute our business strategy and as a result, reduce our sales and profitability.

We depend on the continued services of our executive management team. Our executive team's leadership experience provides us with a competitive advantage, as the team sets clear initiatives for the organization and enhances high-performing teams by empowering them to act quickly, especially during challenging periods. The loss of key personnel could have a material adverse effect on our ability to execute our business strategy and on our financial condition and results of operations. We do not maintain key-person insurance for members of our executive management team.

Regulatory, Legal and Financial Risks

We may be adversely affected by fluctuations in exchange rates, which could affect our results of operations, the costs of our products and our ability to sell our products in foreign markets.

Approximately 20.6% of our net sales were generated outside of the U.S. in 2025. We conduct our business in a wide variety of currencies and are therefore subject to market risk relating to changes in foreign exchange rates. If the U.S. dollar strengthens relative to the Euro or other foreign currencies where we have operations, for example, there will be a negative impact on our operating results upon translation of those foreign operating results into the U.S. dollar. In 2025, foreign currency exchange rate changes negatively impacted our net income by approximately 1.1% and negatively impacted adjusted EBITDA, which is a non-GAAP financial measure, by approximately 0.4%. Changes in foreign currency exchange rates could have an adverse impact on our financial condition, results of operations and cash flows. Except for the use of foreign exchange forwards contracts described immediately below, we do not hedge the translation of foreign currency operating results into the U.S. dollar.

We use foreign exchange forward contracts to manage a portion of the exposure to the risk of the eventual net cash inflows and outflows resulting from foreign currency denominated transactions among certain subsidiaries. These hedging transactions may not succeed or may be only partially successful in managing our foreign currency exchange rate risk.

Refer to "Management's Discussion and Analysis" included in Part II, ITEM 7 of this Report and "Quantitative and Qualitative Disclosures About Market Risk" included in Part II, ITEM 7A of this Report for further discussion on the impact of foreign exchange rates on our operations.

Our leverage affects how we manage our business and may limit our flexibility.

We operate in the ordinary course of our business with a certain amount of leverage, including debt incurred to close the acquisition of Mattress Firm on February 5, 2025. Our degree of leverage could have important consequences, such as:

•increasing our vulnerability to adverse economic, industry or competitive developments;

•requiring a substantial portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures and other business opportunities;

•making it more difficult for us to satisfy the obligations related to our indebtedness;

•restricting us from making strategic acquisitions or investments or causing us to make non-strategic divestitures;

•limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions and general corporate or other purposes;

•limiting our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate;

•exposing us to variability in interest rates, as a substantial portion of our indebtedness is and will be at variable rates; and

•limiting our ability to return capital to our stockholders, including through share repurchases and dividends.

In addition, the instruments governing our debt contain customary financial and other restrictive covenants, which limit our operating flexibility and could prevent us from taking advantage of business opportunities and reduce our flexibility to respond to changing business and economic conditions. Failure to comply with our debt covenants may result in a default or event of default under the related credit document. If such default or event of default is not cured or waived, as applicable, we may suffer adverse effects on our operations, business or financial condition, including acceleration of the maturity date of all amounts outstanding under our debt facilities. For further discussion regarding our debt covenants and compliance and the acquisition of Mattress Firm, refer to "Management's Discussion and Analysis" included in Part II, ITEM 7 of this Report, Note 6, "Debt," and Note 3, "Acquisitions and Divestitures," in our Consolidated Financial Statements included in Part II, ITEM 8 of this Report.

We are subject to risks from our international operations, such as complying with U.S. and foreign laws, foreign exchange exposure, tariffs, increased costs, political risks, geopolitical conflicts and our ability to expand in certain international markets, which could impair our ability to compete and our profitability.

We are a global company, selling our products in approximately 100 countries worldwide. We generated approximately 20.6% of our net sales outside of the U.S. in the year ended December 31, 2025. We operate through multiple wholly owned subsidiaries and we also participate in international license and joint venture arrangements with independent third parties.

Our international operations are subject to the customary risks of operating in an international environment, including complying with U.S. laws affecting operations outside of the U.S., such as the Foreign Corrupt Practices Act; complying with foreign laws and regulations, including disparate anti-corruption laws and regulations; and the potential imposition of trade or foreign exchange restrictions, tariffs and other tax increases, inflation, unstable political situations, labor issues and geopolitical conflicts (including the war in Ukraine and conflicts in the Middle East). We are also limited in our ability to independently expand in certain international markets where we have granted licenses to manufacture and sell Sealy® bedding products. Fluctuations in the rate of exchange between currencies in which we do business may affect our financial condition or results of operations.

Changes in international trade duties and other aspects of international trade policy, both in the U.S. and abroad, could materially impact our business. In particular, the imposition of new tariffs or increases in existing tariffs on products imported from countries where our suppliers operate increase the costs for raw materials and finished goods. These cost increases reduce our margins and may require us to raise prices, or make our products less competitive in the marketplace. In addition, other countries may change their business and trade policies in anticipation of or in response to increased import tariffs and other changes in trade policy and regulations already enacted or that may be enacted in the future. If we are unable to mitigate these risks through supply chain adjustments, pricing strategies or other measures, our financial performance and growth prospects could be negatively affected.

We are subject to various regulatory requirements, including, but not limited to, trade, environmental, health and safety requirements, any violation of which may require costly expenditures and expose us to liability.

We, and our products, are subject to extensive regulation in the U.S. by various federal, state and local regulatory authorities, including the Federal Trade Commission ("FTC"), the Consumer Product Safety Commission ("CPSC") and the U.S. Food and Drug Administration, and by similar international regulatory regimes, including the EU's General Product Safety Regulation. We are subject to various health and environmental provisions, such as California Proposition 65 (the Safe Drinking Water and Toxic Enforcement Act of 1986) and in our international jurisdictions we are subject to the medical devices regulatory authorities such as the Medicines and Healthcare products Regulatory Agency ("MHRA") and the International Chamber of Commerce Advertising and Marketing Communications Code. We are subject to laws and regulations both in the U.S. and internationally, relating to pollution, recycling, environmental protection and occupational health and safety, such as the Federal Water Pollution Control Act, and Registration, Evaluation, Authorization and Restriction of Chemicals ("REACH"), amongst others. As a manufacturer of bedding and related products, we are subject to regulations governing the environment. Any violation or failure to comply with any of these regulatory requirements may result in liability exposure and costly expenditures to remediate or pay for liabilities. For example, if a release of hazardous substances occurs on or from our properties or any associated offsite disposal location, or if contamination from prior activities is discovered at any of our properties, we may be held liable if there has been a violation of the regulatory requirement, and the amount of such liability could be material. Further, any of the rules and regulatory requirements we are subject to may change from time to time, or may conflict. For example, our operations could be impacted by a number of pending legislative and regulatory proposals to address greenhouse gas emissions in the U.S. and other countries, including the Kyoto Protocol.

We may not be in complete compliance with any such requirements, or at all times, and though we have made and will continue to make expenditures to comply with these regulatory requirements, violation of any of them or failure to comply could expose us to liability, subject us to monetary liabilities and could harm our business, reputation and financial condition.

Our pension plans are currently underfunded and we may be required to make cash payments to the plans, reducing our available cash.

We contribute to multi-employer pension plans according to collective bargaining agreements that cover certain union-represented employees. Participating in these multi-employer plans exposes us to potential liabilities if the multi-employer plan is unable to pay its underfunded obligations or we trigger a withdrawal event. The withdrawal liability is an exit fee for employers who cease contributions to multi-employer defined benefit pension plans with unfunded vested benefits. We participate in several plans which are in the Red Zone for 2025. A plan is in the Red Zone (Critical) if it has a current funded percentage of less than 65.0%. The following risks of participating in these multi-employer plans differ from single employer pension plan risks:

•Employer contributions to a multi-employer plan may be used to provide benefits to employees of other participating employers.

•If a participating employer stops contributing to a multi-employer plan, the remaining participating employers assume the unfunded obligations of the plan.

•If the multi-employer plan becomes significantly underfunded or is unable to pay its benefits, we may be required to contribute additional amounts in excess of the rate required by the collective bargaining agreements.

For more information, refer to Note 8, "Retirement Plans," in our Consolidated Financial Statements included in Part II, ITEM 8 of this Report.

Challenges to our pricing or promotional allowance policies or practices could adversely affect our operations.

Certain of our retail pricing and promotional allowance policies or practices are subject to antitrust and consumer protection regulations in the U.S. and abroad. If regulators or private parties in any jurisdiction in which we do business initiate investigations or claims that challenge our pricing or promotional allowance policies or practices, our efforts to respond could force us to divert management resources and we could incur significant unanticipated costs. If such an investigation or claim were to result in a charge that our practices or policies were in violation of applicable antitrust, consumer protection or other laws or regulations, we could be subject to significant additional costs of defending such charges in a variety of venues and, ultimately, if there were a finding that we were in violation of antitrust, consumer protection or other laws or regulations, there could be an imposition of fines, and damages for persons injured, as well as injunctive or other relief. Any requirement that we pay fines or damages (which, under the laws of certain jurisdictions, may be trebled) could decrease our liquidity and profitability, and any investigation or claim that requires significant management attention or causes us to change our business practices could disrupt our operations or increase our costs, also resulting in a decrease in our liquidity and profitability. An antitrust or consumer protection class action or individual suit against us could result in potential liabilities, substantial costs, treble damages and the diversion of our management's attention and resources, regardless of the outcome.

Climate change and related environmental issues could have a material adverse impact on us.

Climate-related events, such as an increase in frequency and severity of storms, floods, wildfires, droughts, hurricanes, freezing conditions and other natural disasters, may have a long-term impact on our business, financial condition and results of operations. For example, such climate-related events could result in, among other things, physical damage to and complete or partial closure of one or more of our facilities, temporary or long-term disruption in the supply of products, increased insurance costs or loss of coverage, legal liability and reputational harm. While we seek to mitigate our business risks associated with climate events, we recognize that there are inherent climate-related risks regardless of where we conduct our business. Current or future insurance arrangements may not provide protection for costs that may arise from such events, particularly if such events are catastrophic in nature or occur in combination.

Further, the long-term effects of climate change on general economic conditions and the mattress and pillow industries in particular are unclear, and changes in the supply, demand or available sources of energy and the regulatory and other costs associated with energy production and other impacts of climate-related events may affect the availability or cost of goods and services, including natural resources and raw materials, necessary to run our business. While we continue to focus on strategies and systems to address the long-term risks posed by climate change, such as reducing our greenhouse gas emissions and packaging waste, there can be no assurance that such strategies and systems will adequately protect against such risks. Any

disruption in our operations or additional expenses caused by the long-term effects of climate change could have a material adverse effect on our operations.

Risks Related to Ownership of Our Common Stock

There can be no assurance as to the declaration or amount of future dividends.

We recently announced an increase in our quarterly dividend to $0.17 per share, effective for the first quarter of 2026. Any decision to declare and pay dividends, and the amount of any such dividends, will be dependent on a variety of factors, including compliance with Section 170 of the Delaware General Corporation Law; changes to our capital allocation policies; our results of operations, liquidity and cash flows; contractual restrictions in our debt agreements; economic conditions, including the impact of geopolitical uncertainty and related macroeconomic impacts on our business and financial condition; and other factors the Board of Directors may deem relevant. There can be no assurance that we will declare dividends in any particular amounts or at all, and changes in our dividend policy could adversely affect the market price for our stock.

Our share repurchase program is subject to suspension or termination at any time, and may not enhance long-term stockholder value.

Our Board of Directors authorized a share repurchase program in 2016 pursuant to which we are authorized to repurchase shares of our common stock. The share repurchase program may be suspended or terminated at any time. From 2016 through December 31, 2025, we had repurchased an aggregate of 55.3 million shares for approximately $2,388.9 million under our share repurchase program. For the year ended and as of December 31, 2025, we did not repurchase shares under our share repurchase program and had approximately $774.5 million remaining under the share repurchase authorization. Shares may be repurchased from time to time, in the open market or through private transactions, subject to market conditions, in compliance with applicable state and federal securities laws. The timing and amount of repurchases, if any, will depend upon several factors, including market and business conditions, restrictions in our debt agreements, the trading price of our common stock and the nature of other investment opportunities. Repurchases of our common stock pursuant to our share repurchase program could affect the market price of our common stock or increase its volatility. Although our share repurchase program is intended to enhance long-term stockholder value, there is no assurance that it will do so and short-term stock price fluctuations could reduce the program's effectiveness.

Delaware law and our certificate of incorporation and bylaws contain anti-takeover provisions, any of which could delay or discourage a merger, tender offer or assumption of control of the Company not approved by our Board of Directors that some stockholders may consider favorable.

Provisions of Delaware law and our certificate of incorporation and by-laws could hamper a third party's acquisition of us, or discourage a third party from attempting to acquire control of us. You may not have the opportunity to participate in these transactions. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock. These provisions include:

•our ability to issue preferred stock with rights senior to those of the common stock without any further vote or action by the holders of our common stock;

•the requirements that our stockholders provide advance notice and certain disclosures when nominating our directors; and

•the inability of our stockholders to convene a stockholders' meeting without the chairperson of the Board of Directors, the president, or a majority of the Board of Directors first calling the meeting.

Our Board of Directors could determine in the future that adoption of a stockholder rights agreement is in the best interest of our stockholders and any such stockholder rights agreement, if adopted, could render more difficult, or discourage, a merger, tender offer, or assumption of control of the Company that is not approved by our Board of Directors.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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ITEM 1C. CYBERSECURITY

Risk Management and Strategy

Enterprise Risk Management. We utilize an enterprise risk management process undertaken on an ongoing basis pursuant to which we seek to identify various enterprise risks related to product safety and regulatory, global environmental exposure, site environmental matters, IT system interruption and cybersecurity, supply chain matters, business continuity, health and safety incidents and other matters. We have an enterprise risk management group that manages this process, which includes our executive leadership team. Their activities include assessing the risks, prioritizing the risks, measuring the risks, responding to an escalating risk or crisis by implementing mitigation plans and auditing the results.

Cybersecurity Risk Management. We maintain a comprehensive process for assessing, identifying and managing material risks from cybersecurity threats, including risks relating to disruption of business operations or financial reporting systems; intellectual property theft; fraud; violation of data privacy laws and other litigation and legal risk; reputational risk; and risks associated with our use of third-party service providers, as part of our overall risk management system and processes. We address cybersecurity risks and threats through a strategic program based on the National Institute of Standards and Technology (NIST) Cybersecurity Framework. Our dedicated cybersecurity team oversees and implements our cybersecurity management program, compliance with applicable legal and third-party data privacy requirements and our incident responses. Our team has a crisis management plan for security, communications and disaster recovery events.

We have also implemented additional security measures following the previously disclosed cybersecurity incident of July 2023, such as stronger privileged access policies and enhanced and expanded multi-factor authentication to help prevent unauthorized access to our systems. We face ongoing risks from certain cybersecurity threats, and we cannot provide assurance that, if those risks materialize, our business strategy, results of operations or financial condition will not be materially affected in the future. See "Risk Factors" in ITEM 1A of this Annual Report on Form 10-K for more information on our cybersecurity related risks.

Incident Response and Recovery Planning. We have established an information security policy and incident response and crisis management plans. We continue to regularly test and evaluate the effectiveness of those plans. Our incident response and crisis management plans address and guide our employees, management and the Board on our response to a cybersecurity incident.

Education and Awareness. Our cybersecurity team provides ongoing information security awareness education, including simulated phishing training, and cybersecurity training for our employees.

External Advisors. We, along with our Board and its committees, engage outside advisors where appropriate to assist in the identification, oversight, evaluation and management of the risks facing our business, including cybersecurity risks. Advisors may be engaged either on a regular basis to inform the Board or management of ongoing risks, or occasionally to advise on specific topics. Such advisors include law firms, cybersecurity experts and other consultants.

External Assessments. Our cybersecurity policies, standards, processes and practices are regularly assessed by consultants. Cybersecurity processes are adjusted based on the information provided from these assessments. In addition to annual attack and vulnerability testing, we engage a third-party cybersecurity provider for managed detection and response and as a managed security operation center.

Governance

Board Oversight. Our Board of Directors is ultimately responsible for overseeing and reviewing with management the Company's cybersecurity risks and the policies and practices established to manage such risks. In that effort, the Board delegates these responsibilities to the Audit Committee. The Audit Committee receives a cybersecurity update at each of its quarterly meetings from our Executive Vice President, Chief Information Officer ("CIO") or management. These updates address a range of topics, including updates on technology trends, policies and practices, and specific and ongoing efforts to prevent, detect and respond to internal and external critical threats.

Management's Role. Our CIO, as the leader of our IT organization, is responsible for executing enterprise, product and manufacturing cybersecurity programs with a focus on security architecture, vulnerability testing, cyber risk management, incident response, vulnerability management, intelligence, awareness and training and governance. Our CIO and IT management team meet regularly to develop and oversee strategies to protect our data, systems and technology across the

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organization. These strategies include reviewing security performance metrics, identifying security risks and assessing the status of approved security enhancements. Our CIO receives regular updates from our IT management team on cybersecurity matters, results of mitigation efforts and cybersecurity incident response and remediation. The IT organization also makes recommendations on security policies and procedures, security service requirements and risk mitigation strategies.

Our CIO has worked in the information technology industry since 1997 and has led our IT function since 2016. The IT management team responsible for developing and executing our cybersecurity policies is comprised of individuals with extensive experience working in the fields of information technology and cybersecurity, formal education and degrees in information technology and cybersecurity and industry certifications such as Certified Information Systems Security Professional, Certified Information Security Manager and Certified Information System Auditor. Our CIO and IT management team also receive regular training and education on cybersecurity-related topics.

ITEM 2. PROPERTIES

The following table sets forth certain information regarding our principal facilities by segment, which have been aggregated by principal manufacturing entity, at December 31, 2025.

Name

Location

Type of Facility

Tempur Sealy North America

Sealy Mattress Manufacturing Company, LLC

United States

Manufacturing

Tempur Production USA, LLC

United States

Manufacturing

Sherwood Bedding

United States

Manufacturing

Comfort Revolution, LLC

United States

Manufacturing

Sealy Canada, Ltd.

Canada

Manufacturing

Tempur Sealy Mattress Mexico, S. de R.L. de C.V.

Mexico

Manufacturing

Tempur Sealy International

Dan-Foam ApS

Denmark

Manufacturing

Dreams Limited

United Kingdom

Manufacturing

In addition to the properties listed above, we have other facilities in the U.S. and other countries, the majority under leases with one to ten year terms. We lease the land that our Tempur manufacturing facility in Albuquerque, New Mexico is located, as part of the related industrial revenue bond financing. We have an option to repurchase the land for one dollar upon termination of the lease. We do not have material properties related to our Mattress Firm segment, and nearly all Mattress Firm-operated properties are leased. Our largest Mattress Firm distribution centers are located in New York, Illinois and New Jersey.

We believe that our existing properties are suitable for the conduct of our business, are adequate for our present needs and will be adequate to meet our future needs.

ITEM 3. LEGAL PROCEEDINGS

Information regarding legal proceedings can be found in Note 12, "Commitments and Contingencies," of the Notes to the Consolidated Financial Statements, included in Part II, ITEM 8 of this Report, "Financial Statements and Supplementary Data," and is incorporated herein by reference.

ITEM 4. MINE SAFETY DISCLOSURES

None.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for Registrant’s Common Equity

Our sole class of common equity is our $0.01 par value common stock, which commenced trading on the New York Stock Exchange ("NYSE") under the symbol "TPX" on December 18, 2003. Prior to that time, there was no public trading market for our common stock. On February 18, 2025, our common stock began trading on the NYSE under the symbol "SGI" in connection with our name change to Somnigroup International Inc.

As of February 23, 2026, we had approximately 86 stockholders of record of our common stock.

Dividends

In February 2026, our Board of Directors declared a cash dividend of $0.17 per share on our common stock. The dividend is payable on March 19, 2026 to shareholders of record on the close of business March 5, 2026. However, payment of future dividends, and the timing and amount thereof, will be at the discretion of our Board of Directors and will depend on our earnings, operating and financial condition, capital requirements, legal requirements and other factors that our Board of Directors deems relevant. Further, we are subject to certain customary restrictions on dividends under our 2023 Credit Agreement and Indentures. See Note 6, "Debt," in our Consolidated Financial Statements, included in Part II, ITEM 8 of this Report, for a discussion of the 2023 Credit Agreement and Indentures.

Issuer Purchases of Equity Securities

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 year ended December 31, 2025, we did not repurchase shares under the program. We had approximately $774.5 million remaining under the share repurchase program as of December 31, 2025.

Share repurchases under this program may be made through open market transactions, negotiated purchases or otherwise, at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, financing, regulatory requirements and other market conditions. The program does not require the repurchase of any minimum number of shares and may be suspended, modified or discontinued at any time without prior notice. Repurchases may be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when we might otherwise be precluded from doing so under federal securities laws.

The following table sets forth purchases of our common stock for the three months ended December 31, 2025:


Period	(a) Total number of shares purchased	(b) Average price paid per share	(c) Total number of shares purchased as part of publicly announced plans or programs	(d) Maximum number of shares (or approximate dollar value of shares) that may yet be purchased under the plans or programs (in millions)
October 1, 2025 - October 31, 2025	—	$—	—	$774.5
November 1, 2025 - November 30, 2025	—	$—	—	$774.5
December 1, 2025 - December 31, 2025	—	$—	—	$774.5
Total	—		—

Equity Compensation Plan Information

Equity compensation plan information required by this Item is incorporated by reference from Part III, ITEM 12 of this Report.

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Performance Graph

The following Performance Graph and related information shall not be deemed to be "soliciting material" or to be "filed" with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act or Exchange Act, except to the extent that the Company specifically incorporates it by reference into such filing.

The following table compares cumulative stockholder returns for us over the last five years to the Standard & Poor's ("S&P") 500 Stock Composite Index, the S&P 400 Consumer Discretionary Sector and a custom peer group. We believe the custom peer group discussed below closely reflects our business and, as a result, provides a meaningful comparison of stock performance.

The peer issuers included in this graph are set forth below in the table. Each year we assess our peer group and evaluate if they meet our market capitalization criteria.

2025 Peer Group


Brunswick Corporation (BC)	Hasbro, Inc. (HAS)	RH (RH)
Capri Holdings Limited (CPRI)	Leggett & Platt, Incorporated (LEG)	Skechers U.S.A., Inc. (SKX)
Carter's, Inc. (CRI)	Levi Strauss & Co. (LEVI)	Tapestry, Inc. (TPR)
Columbia Sportswear Company (COLM)	Mohawk Industries Inc. (MHK)	Under Armour, Inc. (UA)
Deckers Outdoor Corporation (DECK)	Polaris Industries Inc. (PII)	Williams-Sonoma, Inc. (WSM)
Gildan Activewear Inc. (GIL)	PVH Corp. (PVH)
Hanesbrands Inc. (HBI)	Ralph Lauren Corporation (RL)

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	12/31/2020		12/31/2021		12/31/2022		12/31/2023		12/31/2024		12/31/2025
Somnigroup International Inc.	$	100.00	$	175.60	$	130.02	$	195.12	$	219.18	$	348.13
S&P 500	100.00		128.71		105.40		133.10		166.40		196.16
S&P 400 Consumer Discretionary	100.00		127.69		100.83		125.32		137.12		129.35
2025 Peer Group	100.00		126.14		90.66		103.73		126.22		132.87

ITEM 6. [RESERVED]

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the audited Consolidated Financial Statements and accompanying notes thereto included elsewhere in this Report. Unless otherwise noted, all of the financial information in this Report is consolidated financial information for the Company, including Mattress Firm's financial results for the period February 5, 2025 through December 31, 2025 (the "stub period"). The forward-looking statements in this discussion regarding the mattress and pillow industries, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are subject to numerous risks and uncertainties. See "Special Note Regarding Forward-Looking Statements" and Part I, ITEM 1A of this Report. Our actual results may differ materially from those contained in any forward-looking statements. For results of operations comparisons relating to years ending December 31, 2024 and 2023, refer to our annual report on Form 10-K, Part II, ITEM 7: Management's Discussion and Analysis of Financial Condition and Results of Operations filed with the Securities and Exchange Commission on February 28, 2025.

In this discussion and analysis, we discuss and explain the consolidated financial condition and results of operations for the years ended December 31, 2025 and 2024, including the following topics:

•an overview of our business and strategy;

•results of operations, including our net sales and costs in the periods presented as well as changes between periods;

•expected sources of liquidity for future operations; and

•our use of certain non-GAAP financial measures.

Business Overview

General

We are the world's largest bedding company, dedicated to transforming how the world sleeps. With superior capabilities in design, manufacturing, distribution and retail, we deliver breakthrough sleep solutions and serve the evolving needs of consumers in over 100 countries worldwide through our fully-owned businesses, Tempur Sealy, Mattress Firm and Dreams.

We operate in three segments: Mattress Firm, Tempur Sealy North America and Tempur Sealy International. These segments are strategic business units that are managed separately. Our Mattress Firm segment consists of retail stores and distribution centers located in the U.S. Our Tempur Sealy North America segment consists of manufacturing, distribution and retail subsidiaries and licensees located in the U.S., Canada and Mexico (other than Mattress Firm retail and distribution locations). Our Tempur Sealy International segment consists of manufacturing, distribution and retail subsidiaries, joint ventures and licensees located in Europe, Asia-Pacific and Latin America (other than Mexico). Corporate operating expenses are not included in any of the segments and are presented separately as a reconciling item to consolidated results. We evaluate segment performance based on net sales, gross profit and operating income. For additional information refer to Note 15, "Business Segment Information," included in Part II, ITEM 8 "Financial Statements and Supplementary Data," of this Report.

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 solutions.

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As of December 31, 2025, Somnigroup operated 2,852 company-owned stores, including 2,174 Mattress Firm stores, Tempur Sealy owned stores, Dreams stores and joint venture stores. Our distribution model operates through an omni-channel strategy. The Mattress Firm segment sells products through one channel: Direct. The Tempur Sealy North America and Tempur Sealy International segments sell products through two channels: Direct and Wholesale. The Direct channel includes product sales through company-owned stores, e-commerce and call centers. The Wholesale channel includes all product sales to third-party retailers, including third-party distribution, hospitality and healthcare.

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. Ongoing geopolitical conflicts, including trade disputes and the imposition of tariffs, along with the potential for U.S. government shutdowns, may also introduce further uncertainty for the consumer. We have taken actions to mitigate the impact of proposed tariffs, and we implemented pricing actions to mitigate the remaining impact. The majority of our products sold in the U.S. are also manufactured in the U.S. Accordingly, we believe proposed tariffs will not have a material impact on our results of operations in 2026. However, the duration and extent of tariffs remain uncertain, and we are continuing to evaluate the potential future impacts of the imposition of tariffs. We expect to outperform the bedding industry as a result of our investments in new product launches and continued investments in innovation, quality, advertising and customer service.

Acquisition of Mattress Firm

On February 5, 2025, we completed the acquisition of Mattress Firm for an aggregate purchase price of approximately $5.1 billion, net of cash acquired of $0.3 billion. The aggregate purchase price consisted of $3.1 billion in cash and approximately 34.2 million shares of our common stock valued at $65.65 per share, which represents the simple average of the opening and closing price per share of our common stock on the NYSE on the trading day immediately prior to the date of acquisition, with the value of any fractional shares paid in cash.

In connection with the consummation of the merger, we borrowed $625.0 million on the Delayed Draw Term A Loan and $679.5 million of revolving commitments under our senior credit facility. In addition, approximately $1,592.0 million of proceeds in respect of the Term B Loan were released from escrow. The proceeds of this financing were collectively used to fund a portion of the cash consideration, the repayment of Mattress Firm's debt and the payment of certain fees and expenses related to the merger.

Mattress Firm operates as a separate business segment. Mattress Firm's financial results for the stub period are included in our Condensed Consolidated Financial Statements for the year ended December 31 2025.

On May 1, 2025, we completed the previously announced divestiture of 73 Mattress Firm retail locations and our Sleep Outfitters subsidiary, which included 103 specialty mattress retail locations and seven distribution centers to MW SO Holdings Company, LLC ("Mattress Warehouse"). In the year ended December 31, 2025, we recorded a $13.9 million loss on disposal of business associated with the divestiture, net of proceeds of $9.0 million, which did not have a material impact on our results of operations.

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Product Launches

In 2025, we launched an all-new collection of Sealy Posturepedic® products in North America. This reinvention of the Sealy Posturepedic® brand is strategically aimed at reigniting growth in the mid-to-entry level market, which has experienced outsized pressures relative to other price points in recent years. The new collection incorporates innovative technologies, including our proprietary PrecisionFit™ coils which were expertly designed to provide superior support.

In 2026, we plan to launch an all new collection of Stearns & Foster products in North America. This new line is designed to further elevate our high‑end traditional innerspring brand by introducing incremental technologies, expanding our range of hybrid offerings, and providing a refreshed aesthetic.

Omni-Channel Distribution

We employ a balanced omni-channel strategy, which we believe enhances the overall global sales potential and profitability of Somnigroup.

Our direct channel is led by over 2,100 Mattress Firm retail stores and e-commerce in the U.S. and over 200 Dreams locations and e-commerce in the U.K, with additional brick and mortar stores and e-commerce channels in many other key markets around the world. We see opportunity to continue to drive sales growth on a per store basis across our existing footprint. There may be opportunities to open a new store or relocate a store to further optimize economics in the U.S. and U.K., and we foresee meaningful opportunity to continue to expand our brick-and-mortar presence in other key markets worldwide. We also have opportunity to continue to drive sales through our e-commerce channels globally.

Our wholesale distribution is comprised of a diverse group of strong retail partners with more than 20,000 doors, primarily concentrated in the U.S. While we are well represented at third-party retailers in the U.S. today, there are opportunities to both increase the presence of our brands with retail partners and to sell into certain key retailers that do not have our products on their floors today. We also have significant opportunity to expand our third-party retail distribution in our international business.

In addition to offering a portfolio of some of the most highly recognized brands in the industry, we also offer non-branded products through our OEM business. These offerings include mattresses, pillows and other bedding products and components, at a wide range of price points. Our non-branded offerings complement our suite of branded products, expanding our capability to service third-party retailers and creating opportunity to capture manufacturing profits from bedding brands outside our own. We target obtaining a meaningful share of the OEM market in the long-term.

We have been focused on building our direct channel, both online and company-owned retail stores. The development of our online business has been particularly important as consumers have grown more comfortable shopping for bedding products online. Following the acquisition of Mattress Firm, over 60% of our global sales are direct-to-consumer and no customer represents more than 5% of global sales. Our expanded direct channel distribution complements our wholesale business, and we believe this balanced approach enhances the overall global sales potential and profitability of Somnigroup.

2025 Results of Operations

A summary of our results for the year ended December 31, 2025 include:

•Total net sales increased 51.6% to $7,476.5 million as compared to $4,930.9 million in 2024, primarily driven by the inclusion of $3,505.4 million of Mattress Firm sales for the stub period, offset by the elimination of $976.2 million of sales from the Tempur Sealy North America segment to the Mattress Firm segment for the stub period.

•Gross margin was 42.6% as compared to 41.1% in 2024. Adjusted gross margin, which is a non-GAAP financial measure, was 44.4% as compared to 41.9% in 2024.

•Operating income increased 19.0% to $754.9 million as compared to $634.2 million in 2024. Adjusted operating income, which is a non-GAAP financial measure, increased 41.2% to $1,018.7 million as compared to $721.3 million in 2024. Both were primarily driven by the inclusion of Mattress Firm and realized sales and cost synergies.

•Net income decreased 0.1% to $384.1 million as compared to $384.3 million in 2024. Adjusted net income, which is a non-GAAP financial measure, increased 24.2% to $565.3 million as compared to $455.1 million in 2024.

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•Earnings per diluted share ("EPS") decreased 14.8% to $1.84 as compared to $2.16 in 2024. Adjusted EPS, which is a non-GAAP financial measure, increased 5.9% to $2.70 as compared to $2.55 in 2024.

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."

We may refer to net sales or earnings or other historical financial information on a "constant currency basis," which is a non-GAAP financial measure. These references to constant currency basis do not include operational impacts that could result from fluctuations in foreign currency rates. To provide information on a constant currency basis, the applicable financial results are adjusted based on a simple mathematical model that translates current period results in local currency using the comparable prior corresponding period's currency conversion rate. This approach is used for countries where the functional currency is the local country currency. This information is provided so that certain financial results can be viewed without the impact of fluctuations in foreign currency rates, thereby facilitating period-to-period comparisons of business performance. Constant currency information is not recognized under GAAP, and it is not intended as an alternative to GAAP measures. Refer to Part II, ITEM 7A of this Report for a discussion of our foreign currency exchange rate risk.

The following table sets forth the various components of our Consolidated Statements of Income and expresses each component as a percentage of net sales:


(in millions, except percentages and	Year Ended December 31,
per common share amounts)	2025				2024
Net sales	$	7,476.5	100.0	%	$	4,930.9	100.0	%
Cost of sales	4,293.3		57.4		2,903.0		58.9
Gross profit	3,183.2		42.6		2,027.9		41.1
Selling and marketing expenses	1,739.0		23.3		939.4		19.1
General, administrative and other expenses	695.0		9.3		473.2		9.6
Loss on disposal of business	13.9		0.2		—		—
Equity income in earnings of unconsolidated affiliates	(19.6)		(0.3)		(18.9)		(0.4)
Operating income	754.9		10.1		634.2		12.9

Other expense, net:
Interest expense, net	267.9		3.6		134.8		2.7
Other expense (income), net	6.0		0.1		(4.9)		(0.1)
Total other expense, net	273.9		3.7		129.9		2.6

Income before income taxes	481.0		6.4		504.3		10.2
Income tax provision	(95.7)		(1.3)		(118.6)		(2.4)


Net income before non-controlling interest	385.3		5.2		385.7		7.8
Less: Net income attributable to non-controlling interest	1.2		—		1.4		—
Net income attributable to Somnigroup International Inc.	$	384.1	5.2	%	$	384.3	7.8	%

Earnings per common share:




Basic	$	1.86			$	2.21




Diluted	$	1.84			$	2.16

Weighted average common shares outstanding:
Basic	206.0				173.6
Diluted	209.2				178.2

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NET SALES


	Year Ended December 31,
	Consolidated				Mattress Firm				Tempur Sealy North America				Tempur Sealy International
(in millions)	2025		2024		2025		2024		2025		2024		2025		2024
Net sales by channel
Direct	$	4,745.9	$	1,229.3	$	3,505.4	$	—	$	437.6	$	513.7	$	802.9	$	715.6
Wholesale	2,730.6		3,701.6		—		—		2,263.6		3,275.2		467.0		426.4
Total net sales	$	7,476.5	$	4,930.9	$	3,505.4	$	—	$	2,701.2	$	3,788.9	$	1,269.9	$	1,142.0

Net sales increased 51.6%, and on a constant currency basis increased 51.1%. The change in net sales was driven by the following:

•Mattress Firm net sales were $3,505.4 million for the stub period.

•Tempur Sealy North America net sales decreased $1,087.7 million, or 28.7%. Net sales in the Wholesale channel decreased $1,011.6 million, or 30.9%, primarily driven by a 29.8% decline from the elimination of inter-segment sales to Mattress Firm of $976.2 million and the impacts of foreclosed distribution. Net sales in the Direct channel decreased $76.1 million, or 14.8%, primarily driven by a decrease in sales from the divestiture of Sleep Outfitters.

•Tempur Sealy International net sales increased $127.9 million, or 11.2%, primarily driven by expanded distribution. On a constant currency basis, International net sales increased 8.3%. Net sales in the Direct channel increased 8.8% on a constant currency basis. Net sales in the Wholesale channel increased 7.6% on a constant currency basis.

GROSS PROFIT


	Year Ended December 31,
	2025				2024				Margin Change
(in millions, except percentages)	Gross Profit		Gross Margin		Gross Profit		Gross Margin		2025 vs 2024
Mattress Firm	$	1,171.7	33.4	%	$	—	—	%	33.4	%
Tempur Sealy North America	1,383.8		51.2	%	1,466.7		38.7	%	12.5	%
Tempur Sealy International	627.7		49.4	%	561.2		49.1	%	0.3	%
Consolidated gross margin	$	3,183.2	42.6	%	$	2,027.9	41.1	%	1.5	%

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.

Our gross margin is primarily impacted by the relative amount of net sales contributed by our premium or value products. Our value products have a significantly lower gross margin than our premium products. If sales of our value priced products increase relative to sales of our premium products, our gross margins will be negatively impacted across all segments.

Our gross margin is also impacted by fixed cost leverage based on manufacturing unit volumes; the cost of raw materials; operational efficiencies due to the utilization in our manufacturing facilities; product, brand, channel and country mix; foreign exchange fluctuations; volume incentives offered to certain retail accounts; participation in our retail cooperative advertising programs; vendor incentives earned on supply agreements; retail store fixed cost leverage based on unit volumes and costs associated with new product introductions. Future changes in raw material prices could have a significant impact on our gross margin. Our margins are also impacted by the growth in our Wholesale channel as sales in our Wholesale channel are at wholesale prices whereas sales in our Direct channel are at retail prices.

Gross margin improved 150 basis points. The principal factors impacting gross margin for each segment are discussed below:

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•Mattress Firm gross margin was 33.4% for the stub period.

•Tempur Sealy North America gross margin improved 1,250 basis points. The improvement in gross margin was primarily driven by the elimination of sales to Mattress Firm of 1,360 basis points and operational efficiencies of 100 basis points. These improvements were partially offset by expense deleverage of 70 basis points. Additionally, we incurred $78.0 million of one-time business combination accounting adjustments related to the Mattress Firm Acquisition.

•Tempur Sealy International gross margin improved 30 basis points. The improvement in gross margin was primarily driven by operational efficiencies.

OPERATING EXPENSES

Selling and marketing expenses include advertising and media production associated with the promotion of our brands, other marketing materials, such as catalogs, brochures, videos, product samples, direct customer mailings and point of purchase materials, and sales force compensation. 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 process, expenses for administrative functions and research and development costs.


	Year Ended December 31,
	2025		2024		2025		2024		2025		2024		2025		2024		2025		2024
(in millions)	Consolidated				Mattress Firm				Tempur Sealy North America				Tempur Sealy International				Corporate
Operating expenses:
Advertising	$	692.2	$	470.9	$	197.9	$	—	$	393.2	$	382.0	$	101.1	$	88.9	$	—	$	—
Other selling and marketing	1,046.8		468.5		575.1		—		254.6		270.6		199.4		181.7		17.7		16.2
General, administrative and other	695.0		473.2		203.8		—		172.9		202.0		125.6		114.6		192.7		156.6
Total operating expense	$	2,434.0	$	1,412.6	$	976.8	$	—	$	820.7	$	854.6	$	426.1	$	385.2	$	210.4	$	172.8

Operating expenses increased $1,021.4 million, or 72.3%, and increased 400 basis points as a percentage of net sales. The primary drivers of changes in operating expenses by segment are discussed below:

•Mattress Firm operating expenses were $976.8 million for the stub period.

•Tempur Sealy North America operating expenses decreased $33.9 million, or 4.0%, and increased 780 basis points as a percentage of net sales. The decrease in operating expenses was primarily driven by decreases in bad debt expense related to retailer bankruptcies and other selling and marketing, partially offset by investments in advertising.

•Tempur Sealy International operating expenses increased $40.9 million, or 10.6%, and decreased 10 basis points as a percentage of net sales. The increase in operating expenses was primarily driven by investments in growth initiatives. Additionally, we recorded a $6.2 million impairment charge related to certain cloud-based computing arrangements.

•Corporate operating expenses increased $37.6 million, or 21.8%. The increase in operating expenses was primarily driven by increased costs related to the Mattress Firm Acquisition.

Research and development expenses for the year ended December 31, 2025 were $32.9 million as compared to $30.8 million for the year ended December 31, 2024, an increase of $2.1 million, or 6.8%.

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OPERATING INCOME


	Year Ended December 31,
	2025				2024				Margin Change
(in millions, except percentages)	Operating Income		Operating Margin		Operating Income		Operating Margin		2025 vs 2024
Mattress Firm	$	190.8	5.4	%	$	—	—	%	5.4	%
Tempur Sealy North America	553.3		20.5	%	612.1		16.2	%	4.3	%
Tempur Sealy International	221.2		17.4	%	194.9		17.1	%	0.3	%
	965.3				807.0
Corporate expenses	(210.4)				(172.8)
Total operating income	$	754.9	10.1	%	$	634.2	12.9	%	(2.8)	%

Operating income increased $120.7 million and operating margin declined 280 basis points. The increase was driven by the following:

•Mattress Firm operating income was $190.8 million and operating margin was 5.4% for the stub period. Additionally, we incurred a $4.1 million loss on disposal of business associated with the divestiture of 73 retail stores.

•Tempur Sealy North America operating income decreased $58.8 million and operating margin improved 430 basis points. The improvement in operating margin was primarily driven by the improvement in gross margin of 1,250 basis points, partially offset by operating expense deleverage of 780 basis points. Additionally, we incurred a $9.8 million loss on disposal of business associated with the divestiture of Sleep Outfitters.

•Tempur Sealy International operating income increased $26.3 million and operating margin improved 30 basis points. The improvement in operating margin was primarily driven by the improvement in gross margin of 30 basis points and operating expense leverage of 10 basis points, partially offset by Asia joint venture performance.

•Corporate operating expenses increased $37.6 million, which negatively impacted our consolidated operating margin. The increase in operating expenses was primarily driven by increased costs related to the Mattress Firm Acquisition.

INTEREST EXPENSE, NET


	Year Ended December 31,				Percent Change
(in millions, except percentages)	2025		2024		2025 vs 2024
Interest expense, net	$	267.9	$	134.8	98.7	%

Interest expense, net, increased $133.1 million, or 98.7%. The increase in interest expense, net, was primarily driven by increased average levels of outstanding variable rate debt as a result of the Mattress Firm Acquisition.

INCOME TAX PROVISION


	Year Ended December 31,						Percent Change
(in millions, except percentages)	2025			2024			2025 vs 2024
Income tax provision	$	95.7		$	118.6		(19.3)	%
Effective tax rate	19.9		%	23.5		%	(15.3)	%

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.

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Our income tax provision decreased $22.9 million due to a decrease in income before income taxes. Our 2025 effective tax rate decreased 360 basis points as compared to 2024. The 2025 effective tax rate as compared to the U.S. federal statutory tax rate included a net favorable impact of discrete items, primarily related to excess tax benefits from the vesting of certain stock awards under our incentive stock compensation plan and other discrete items, including the impact of the Mattress Firm Acquisition. The 2024 effective tax rate as compared to the U.S. federal statutory tax rate also included a net favorable impact of discrete items, primarily related to excess tax benefits from the vesting of certain stock awards under our incentive stock compensation plan and other discrete items.

Refer to Note 13, "Income Taxes," in our Consolidated Financial Statements included in Part II, ITEM 8 of this Report for further information.

Liquidity and Capital Resources

Liquidity

Our principal sources of funds are cash flows from operations, supplemented with borrowings made pursuant to our credit facilities and cash and cash equivalents on hand. Principal uses of funds consist of payments of principal and interest on our debt facilities, share repurchases, capital expenditures and working capital needs.

Cash and Working Capital

Cash and cash equivalents were $134.9 million and $117.4 million, as of December 31, 2025 and 2024, respectively. We had a working capital deficit of $271.1 million as of December 31, 2025, as compared to working capital of $105.1 million as of December 31, 2024. The reduction in our working capital to a deficit position in 2025 was primarily driven by a $272.8 million increase in our short-term operating lease obligations as a result of the Mattress Firm Acquisition, and we will generally operate with a working capital deficit in the future.

The amount of cash and cash equivalents held by subsidiaries outside of the U.S. and not readily convertible into the U.S. dollar or other major foreign currencies is not material to our overall liquidity or financial position.

Cash Provided by (Used in) Continuing Operations

The table below presents net cash provided by (used in) operating, investing and financing activities from continuing operations for the years ended December 31, 2025 and 2024.


	Year Ended December 31,
(in millions)	2025		2024
Net cash provided by (used in) continuing operations:
Operating activities	$	800.1	$	666.5
Investing activities	(3,024.3)		(96.7)
Financing activities	616.9		1,077.4

Cash provided by operating activities increased $133.6 million in 2025 as compared to 2024, primarily driven by the Mattress Firm Acquisition and strong operational performance. Net income was unfavorably impacted by certain non-cash items, including an $84.4 million increase in depreciation and amortization expense and a $45.0 million increase in deferred income taxes, both of which were primarily driven by the Mattress Firm Acquisition.

Cash used in investing activities increased $2,927.6 million in 2025 as compared to 2024. The increase in cash used in investing activities was driven by cash used to partially fund the Mattress Firm Acquisition.

Cash provided by financing activities decreased $460.5 million in 2025 as compared to 2024. In 2025, we had net borrowings of $849.8 million as compared to net borrowings of $1,246.4 in 2024 in order to fund the Mattress Firm Acquisition. We repurchased shares of our common stock to satisfy tax withholding obligations upon the vesting of our long-term incentive plans for $132.4 million in 2025 as compared to $43.8 million in 2024. Additionally, we paid dividends to shareholders of $127.4 million in 2025 as compared to $92.7 million in 2024. Proceeds from exercise of stock options increased $49.0 million in 2025 as compared to 2024.

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Capital Expenditures

Capital expenditures were $166.9 million and $97.3 million for the years ended December 31, 2025 and 2024, respectively. We currently expect our 2026 capital expenditures to be approximately $250 million, including $75 million of one-time investments to refresh Mattress Firm stores.

Indebtedness

Our total debt increased to $4,717.3 million as of December 31, 2025 from $3,844.5 million as of December 31, 2024. Total availability under our revolving senior secured credit facility was $638.7 million as of December 31, 2025. Refer to Note 6, "Debt" in our Condensed Consolidated Financial Statements included in Part II, ITEM 8 for further discussion of our debt.

On February 5, 2025, upon the consummation of the Mattress Firm Acquisition, we borrowed $625.0 million of our Delayed Draw Term A Loan commitments and $679.5 million of revolving commitments under the 2023 Credit Agreement. In addition, approximately $1,592.0 million of proceeds in respect of the Term B Loan were released from escrow. The proceeds of this financing were collectively used to fund a portion of the cash consideration for the acquisition, the repayment of Mattress Firm's debt and the payment of certain fees and expenses related to the acquisition.

As of December 31, 2025, our ratio of consolidated indebtedness less netted cash to adjusted EBITDA, which is a non-GAAP financial measure defined in the 2023 Credit Agreement, was 3.21 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 December 31, 2025, 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. The 2023 Credit Agreement, 2029 Senior Notes and 2031 Senior Notes contain similar limitations which, subject to other conditions, allow unlimited restricted payments at times when the ratio of consolidated indebtedness less netted cash to adjusted EBITDA remains below 3.75 times in the case of the 2023 Credit Agreement and remains below 3.50 times in the cases of the 2029 Senior Notes and 2031 Senior Notes. In addition, these agreements permit limited restricted payments under certain conditions when the ratio of consolidated indebtedness less netted cash to adjusted EBITDA is above 3.75 times in the case of the 2023 Credit Agreement and above 3.50 times in the cases of the 2029 Senior Notes and 2031 Senior Notes. 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.

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 our 2023 Credit Agreement. Both consolidated indebtedness and adjusted EBITDA as used in discussion of the 2023 Credit Agreement are terms that are not recognized under GAAP and do not purport to be alternatives to net income as a measure of operating performance or total debt.

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Share Repurchase Program

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. For the year ended December 31, 2025, we did not repurchase shares under our share repurchase program and had approximately $774.5 million remaining under our share repurchase program.

Share repurchases under this program may be made through open market transactions, negotiated purchases or otherwise, at times and in such amounts as management deems appropriate. These repurchases may be funded by operating cash flows and/or borrowings under our debt arrangements. The timing and actual number of shares repurchased will depend on a variety of factors including price, financing and regulatory requirements and other market conditions. The program is subject to certain limitations under our debt agreements. The program does not require the purchase of any minimum number of shares and may be suspended, modified or discontinued at any time without prior notice. Repurchases may be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when we might otherwise be precluded from doing so under federal securities laws.

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. 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," of this Report.

Future Liquidity Sources and Uses

As of December 31, 2025, we had $773.6 million of liquidity, including $134.9 million of cash on hand and $638.7 million available under our 2023 Credit Agreement. We believe that cash flow from operations, availability under our existing credit facilities and arrangements, current cash balances and the ability to obtain other financing, if necessary, will provide adequate cash funds for our foreseeable working capital needs, necessary capital expenditures, debt service obligations, share repurchases and dividend payments.

Our capital allocation strategy follows a balanced approach focused on supporting the business and 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 at least 50% of free cash flow, which is a non-GAAP financial measure, to dividends and share repurchases. During the first quarter of 2026, we will repurchase shares 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 first quarter of 2026. The dividend is payable on March 19, 2026 to shareholders of record as of March 5, 2026.

As of December 31, 2025, we had $4,717.3 million in total debt outstanding and consolidated indebtedness less netted cash, which is a non-GAAP financial measure, of $4,582.4 million. Leverage based on the ratio of consolidated indebtedness less netted cash to adjusted EBITDA, which is a non-GAAP financial measure, was 3.21 times for the year ended December 31, 2025. We currently expect our target leverage ratio to return to 2.0 to 3.0 times in the first half of 2026. Total cash interest payments related to our borrowings are expected to be approximately $225 million in 2026.

Our debt service obligations could, under certain circumstances, have material consequences to our stockholders. Similarly, our cash requirements are subject to change as business conditions warrant and opportunities arise. The timing and size of any new business ventures or acquisitions that we may complete may also impact our cash requirements and debt service obligations.

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Material Cash Requirements

Our material cash requirements as of December 31, 2025 are summarized below:


(in millions)	Payment Due By Period
Contractual Obligations	2026		2027		2028		2029		2030		Thereafter		Total Obligations
Debt (1)	$	167.1	$	82.2	$	1,507.7	$	826.0	$	27.3	$	1,996.4	$	4,606.7
Letters of credit	34.8		—		—		—		—		—		34.8
Interest payments (2)	227.3		193.8		189.2		145.6		135.4		97.6		988.9
Operating lease obligations	499.8		450.2		380.5		321.1		225.8		473.4		2,350.8
Finance lease obligations (3)	25.1		23.0		20.4		16.3		12.4		13.4		110.6
Pension obligations	1.5		1.5		1.6		1.7		1.9		24.8		33.0
Total (4)	$	955.6	$	750.7	$	2,099.4	$	1,310.7	$	402.8	$	2,605.6	$	8,124.8

(1)Debt excludes finance lease obligations and deferred financing costs.

(2)Interest payments represent obligations under our debt outstanding as of December 31, 2025, applying December 31, 2025 interest rates and assuming scheduled payments are paid as contractually required through maturity. Interest payments may differ in future periods as a result of financing activities required to fund our operations and capital allocation strategies.

(3)The payments due for finance lease obligations excludes $16.8 million in future payments for interest.

(4)Uncertain tax positions are excluded from this table given the timing of payments cannot be reasonably estimated.

Non-GAAP Financial Information

We provide information regarding adjusted net income, EBITDA, adjusted EBITDA, adjusted EPS, adjusted gross profit, adjusted gross margin, adjusted operating income (expense), adjusted operating margin, consolidated indebtedness and consolidated indebtedness less netted cash, which are not recognized terms under GAAP and do not purport to be alternatives to net income, earnings per share, gross profit, gross margin, operating income (expense) and operating margin as a measure of operating performance or an alternative to total debt as a measure of liquidity. We believe these non-GAAP financial measures provide investors with performance measures that better reflect our underlying operations and trends, providing a perspective not immediately apparent from net income, gross profit, gross margin, operating income (expense) and operating margin. The adjustments we make to derive the non-GAAP financial measures include adjustments to exclude items that may cause short-term fluctuations in the nearest GAAP financial measure, but which we do not consider to be the fundamental attributes or primary drivers of our business.

We believe that exclusion of these items assists in providing a more complete understanding of our underlying results from continuing operations and trends, and we use these measures along with the corresponding GAAP financial measures to manage our business, to evaluate our consolidated and business segment performance compared to prior periods and the marketplace, to establish operational goals and to provide continuity to investors for comparability purposes. Limitations associated with the use of these non-GAAP financial measures include that these measures do not present all of the amounts associated with our results as determined in accordance with GAAP. These non-GAAP financial measures should be considered supplemental in nature and should not be construed as more significant than comparable financial measures defined by GAAP. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies. For more information about these non-GAAP financial measures and a reconciliation to the nearest GAAP financial measure, please refer to the reconciliations on the following pages.

Key Highlights


	Year Ended December 31,
(in millions, except percentages and per common share amounts)	2025		2024		% Change		% Change Constant Currency (1)
Net sales	$	7,476.5	$	4,930.9	51.6	%	51.1	%
Net income	$	384.1	$	384.3	(0.1)	%	(1.1)	%
Adjusted net income (1)	$	565.3	$	455.1	24.2	%	23.3	%


EPS	$	1.84	$	2.16	(14.8)	%	(15.7)	%
Adjusted EPS (1)	$	2.70	$	2.55	5.9	%	5.1	%

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(1)						Non-GAAP financial measure. Please refer to the reconciliations in the following tables.

Adjusted Net Income and Adjusted EPS

A reconciliation of reported net income to adjusted net income and the calculation of adjusted EPS is provided below. 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 to adjusted net income and the calculation of adjusted EPS for the years ended December 31, 2025 and 2024.


	Year Ended December 31,
(in millions, except per common share amounts)	2025		2024
Net income	$	384.1	$	384.3
Acquisition-related costs (1)	114.2		—
Transaction costs (2)	56.0		47.8
Business combination charges (3)	53.8		—
Loss on disposal of business (4)	13.9		—
Supply chain transition costs (5)	12.1		9.5
Disposition-related costs (6)	10.5		—
Transaction-related interest expense, net (7)	6.8		9.8
Cloud-based computing arrangements impairment (8)	6.2		—
Customer-related transition charges (9)	—		26.7
Operational start-up costs (10)	—		3.1
Cybersecurity event (11)	—		(4.9)
Adjusted income tax provision (12)	(92.3)		(21.2)
Adjusted net income	$	565.3	$	455.1

Adjusted earnings per share, diluted	$	2.70	$	2.55

Diluted shares outstanding	209.2		178.2

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(1)			In the year ended 2025, we recognized $114.2 million of acquisition-related costs following the Mattress Firm Acquisition, primarily related to one-time business combination accounting and purchase price allocation adjustments, professional fees and restructuring costs.
(2)			In the year ended 2025, we recorded $56.0 million of transaction costs primarily related to the Mattress Firm Acquisition and related divestitures. In the year ended 2024, we recorded $47.8 million of transaction costs, primarily related to legal and professional fees associated with the acquisition of Mattress Firm.
(3)			In the year ended 2025, we recognized $53.8 million of business combination charges related to the floor model transition associated with the refinement of Mattress Firm's multi-branded merchandising plan, the CEO transaction bonus, professional fees and restructuring costs.
(4)			In the year ended 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 years ended 2025 and 2024, we recorded $12.1 million and $9.5 million of supply chain transition costs associated with the consolidation of certain manufacturing facilities, respectively.
(6)			In the year ended 2025, we recorded $10.5 million of disposition-related costs, primarily related to retail store transition costs incurred for the divestiture to Mattress Warehouse.
(7)			In the year ended 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. In the year ended 2024, we incurred $9.8 million of transaction-related interest expense.
(8)			In the year ended 2025, we recorded $6.2 million of impairment charges related to certain cloud-based computing arrangements.
(9)			In the year ended 2024, we recorded $26.7 million of transition charges as a result of a customer's acquisition which foreclosed on our OEM distribution to this customer.
(10)			In the year ended 2024, we recorded $3.1 million of operational start-up costs related to the capacity expansion of our manufacturing and distribution facilities in the U.S.
(11)			In the year ended 2024, we received proceeds of $4.9 million for an insurance claim related to the previously disclosed cybersecurity event identified on July 23, 2023.
(12)			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

A reconciliation of gross profit and gross margin to adjusted gross profit and adjusted gross margin, respectively, and operating income (expense) and operating margin to adjusted operating income (expense) and adjusted operating margin, respectively, are provided below. 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 gross profit and operating income (expense) to the calculation of adjusted gross profit and adjusted operating income (expense) for the year ended December 31, 2025.

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	FULL YEAR 2025
(in millions, except percentages)	Consolidated		Margin		Mattress Firm		Margin		Tempur Sealy North America		Margin		Tempur Sealy International		Margin		Corporate
Net sales	$	7,476.5			$	3,505.4			$	2,701.2			$	1,269.9			$	—

Gross profit	$	3,183.2	42.6	%	$	1,171.7	33.4	%	$	1,383.8	51.2	%	$	627.7	49.4	%	$	—
Adjustments:
Acquisition-related charges (1)	95.4				17.4				78.0				—				—
Business combination charges (2)	30.1				26.5				3.6				—				—
Disposition-related costs (3)	3.7				1.4				2.3				—				—
Supply chain transition costs (4)	3.5				—				3.5				—				—
Total adjustments	132.7				45.3				87.4				—				—

Adjusted gross profit	$	3,315.9	44.4	%	$	1,217.0	34.7	%	$	1,471.2	54.5	%	$	627.7	49.4	%	$	—

Operating income (expense)	$	754.9	10.1	%	$	190.8	5.4	%	$	553.3	20.5	%	$	221.2	17.4	%	$	(210.4)
Adjustments:
Acquisition-related charges (1)	114.2				34.2				78.0				—				2.0
Transaction costs (5)	58.9				3.5				—				—				55.4
Business combination charges (2)	57.2				30.6				3.6				—				23.0
Loss on disposal of business (6)	13.9				4.1				9.8				—				—
Disposition-related costs (3)	8.3				2.9				5.4				—				—
Cloud-based computing arrangements impairment (7)	6.2				—				—				6.2				—
Supply chain transition costs (4)	5.1				—				5.1				—				—
Total adjustments	263.8				75.3				101.9				6.2				80.4

Adjusted operating income (expense)	$	1,018.7	13.6	%	$	266.1	7.6	%	$	655.2	24.3	%	$	227.4	17.9	%	$	(130.0)


(1)			In the year ended 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 year ended 2025, we recorded $53.8 million of business combination charges. Cost of sales included $30.1 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 $27.1 million related to the CEO transaction bonus, professional fees and restructuring costs. Other expenses consisted of a benefit of $3.4 million.
(3)			In the year ended 2025, we recorded $10.5 million of disposition-related costs, primarily related to retail store transition costs incurred for the divestiture to Mattress Warehouse. Cost of sales included $3.7 million of expenses and operating expenses included $4.6 million. Other expenses included $2.2 million.
(4)			In the year ended 2025, we recorded $12.1 million of supply chain transition costs associated with the consolidation of certain manufacturing facilities, with $3.5 million recorded in cost of sales and $1.6 million recorded in operating expenses. Other expenses included $7.0 million of costs, primarily related to a manufacturing facility lease termination.
(5)			In the year ended 2025, we recorded $58.9 million of transaction costs primarily related to the Mattress Firm Acquisition and related divestitures, including a $2.9 million benefit in other income.
(6)			In the year ended 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.
(7)			In the year ended 2025, we recorded $6.2 million of impairment charges related to certain cloud-based computing arrangements.

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	FULL YEAR 2024
(in millions, except percentages)	Consolidated		Margin		Tempur Sealy North America		Margin		Tempur Sealy International		Margin		Corporate
Net sales	$	4,930.9			$	3,788.9			$	1,142.0			$	—

Gross profit	$	2,027.9	41.1	%	$	1,466.7	38.7	%	$	561.2	49.1	%	$	—
Adjustments:
Customer-related transition charges (1)	21.9				21.9				—				—
Supply chain transition costs (2)	9.3				9.3				—				—
Operational start-up costs (3)	3.1				3.1				—				—
Transaction costs (4)	2.4				2.4				—				—
Total adjustments	36.7				36.7				—				—

Adjusted gross profit	$	2,064.6	41.9	%	$	1,503.4	39.7	%	$	561.2	49.1	%	$	—

Operating income (expense)	$	634.2	12.9	%	$	612.1	16.2	%	$	194.9	17.1	%	$	(172.8)
Adjustments:
Transaction costs (4)	47.8				2.5				—				45.3
Customer-related transition charges (1)	26.7				26.7				—				—
Supply chain transition costs (2)	9.5				9.5				—				—
Operational start-up costs (3)	3.1				3.1				—				—
Total adjustments	87.1				41.8				—				45.3

Adjusted operating income (expense)	$	721.3	14.6	%	$	653.9	17.3	%	$	194.9	17.1	%	$	(127.5)


(1)			In the year ended 2024, we recorded $26.7 million of transition charges as a result of a customer's acquisition which foreclosed on our OEM distribution to this customer, with $21.9 million recorded in cost of sales and $4.8 million in operating expenses.
(2)			In the year ended 2024, we recorded $9.5 million of supply chain transition costs primarily in cost of sales associated with the consolidation of certain manufacturing facilities.
(3)			In the year ended 2024, we recorded $3.1 million of operational start-up costs in cost of sales for the capacity expansion of our manufacturing and distribution facilities in the U.S.
(4)			In the year ended 2024, we recorded $47.8 million of transaction costs, primarily related to legal and professional fees associated with the acquisition of Mattress Firm, with $2.4 million recorded in cost of sales and $45.4 million in operating expenses.

EBITDA, Adjusted EBITDA and Consolidated Indebtedness Less Netted Cash

The following reconciliations are provided below:

•Net income to EBITDA and adjusted EBITDA

•Ratio of consolidated indebtedness less netted cash to adjusted EBITDA

•Total debt, net to consolidated indebtedness less netted cash

We believe that presenting these non-GAAP measures provides investors with useful information with respect to our operating performance, cash flow generation and comparisons from period to period, as well as general information about our progress in reducing our leverage.

The 2023 Credit Agreement provides the definition of adjusted EBITDA. Accordingly, we present adjusted EBITDA to provide information regarding our compliance with requirements under the 2023 Credit Agreement.

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The following table sets forth the reconciliation of our reported net income to the calculations of EBITDA and adjusted EBITDA for the years ended December 31, 2025 and 2024:


	Year Ended
(in millions)	December 31, 2025			December 31, 2024
Net income	$	384.1		$	384.3
Interest expense, net	261.1			125.0
Transaction-related interest expense, net (1)	6.8			9.8

Income tax provision	95.7			118.6
Depreciation and amortization	291.6			203.9
EBITDA	$	1,039.3		$	841.6
Adjustments:
Acquisition-related costs (2)	114.2			—
Transaction costs (3)	56.0			47.8
Business combination charges (4)	53.8			—
Loss on disposal of business (5)	13.9			—
Supply chain transition costs (6)	12.1			9.5
Disposition-related costs (7)	10.5			—
Cloud-based computing arrangements impairment (8)	6.2			—
Customer-related transition charges (9)	—			26.7
Operational start-up costs (10)	—			3.1
Cybersecurity event (11)	—			(4.9)
Adjusted EBITDA	$	1,306.0		$	923.8
Adjustments for financial covenant purposes:
Loss from unrestricted subsidiary (12)	3.1			—
Earnings from Mattress Firm prior to acquisition (13)	18.7			—
Future cost synergies to be realized from Mattress Firm Acquisition (14)	100.0			—
Adjusted EBITDA per credit facility	$	1,427.8		$	923.8

Consolidated indebtedness less netted cash	$	4,582.4		$	2,134.8

Ratio of consolidated indebtedness less netted cash to adjusted EBITDA	3.21		times	2.31		times

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(1)			In the year ended 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. In the year ended 2024, we incurred $9.8 million of transaction related interest expense.
(2)			In the year ended 2025, we recorded $114.2 million of acquisition-related costs following the Mattress Firm Acquisition, primarily related to one-time business combination accounting and purchase price allocation adjustments, professional fees and restructuring costs.
(3)			In the year ended 2025, we recorded $56.0 million of transaction costs primarily related to the Mattress Firm Acquisition and related divestitures. In the year ended 2024, we recorded $47.8 million of transaction costs, primarily related to legal and professional fees associated with the acquisition of Mattress Firm.
(4)			In the year ended 2025, we recorded $53.8 million of business combination charges primarily related to the floor model transition associated with the refinement of Mattress Firm's multi-branded merchandising plan, the CEO transaction bonus, professional fees and restructuring costs.
(5)			In the year ended 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.
(6)			In the years ended 2025 and 2024, we recorded $12.1 million and $9.5 million of supply chain transition costs associated with the consolidation of certain manufacturing facilities, respectively.
(7)			In the year ended 2025, we recorded $10.5 million of disposition-related costs, primarily related to retail store transition costs incurred for the divestiture to Mattress Warehouse.
(8)			In the year ended 2025, we recorded $6.2 million of impairment charges related to certain cloud-based computing arrangements.
(9)			In the year ended 2024, we recorded $26.7 million of transition charges as a result of a customer's acquisition which foreclosed on our OEM distribution to this customer.
(10)			In the year ended 2024, we recorded $3.1 million of operational start-up costs for the capacity expansion of our manufacturing and distribution facilities in the U.S.
(11)			In the year ended 2024, we received proceeds of $4.9 million for an insurance claim related to the previously disclosed cybersecurity event identified on July 23, 2023.
(12)			A subsidiary in the Tempur Sealy North America business segment was accounted for as held for sale and designated as an unrestricted subsidiary under the 2023 Credit Agreement. Therefore, this subsidiary's financial results were excluded from our adjusted financial measures for covenant compliance purposes.
(13)			We completed the Mattress Firm Acquisition on February 5, 2025 and designated this subsidiary as restricted under the 2023 Credit Agreement. For covenant compliance purposes, we included $18.7 million of Mattress Firm adjusted EBITDA for the period prior to acquisition in our calculation of adjusted EBITDA per credit facility for the year ended December 31, 2025.
(14)			For the year ended 2025, we are permitted to include $100.0 million of future cost synergies expected to be realized in connection with acquisitions for the purpose of calculating adjusted EBITDA in accordance with the 2023 Credit Agreement.

Under the 2023 Credit Agreement, the definition of adjusted EBITDA contains certain restrictions that limit adjustments to net income when calculating adjusted EBITDA. For the year ended December 31, 2025, our adjustments to net income when calculating adjusted EBITDA did not exceed the allowable amount under the 2023 Credit Agreement.

The ratio of consolidated indebtedness less netted cash to adjusted EBITDA was 3.21 times for the trailing twelve months ended December 31, 2025. The 2023 Credit Agreement requires us to maintain a ratio of consolidated indebtedness less netted cash to adjusted EBITDA of less than 5.00 times.

The following table sets forth the reconciliation of our reported total debt to the calculation of consolidated indebtedness less netted cash as of December 31, 2025 and 2024. "Consolidated Indebtedness" and "Netted Cash" are terms used in the 2023 Credit Agreement for purposes of certain financial covenants.


(in millions)	December 31, 2025		December 31, 2024
Total debt, net	$	4,685.7	$	3,809.9
Plus: Deferred financing costs (1)	31.6		34.6


Consolidated indebtedness	$	4,717.3	$	3,844.5

Less: Netted cash (2)	134.9		1,709.7
Consolidated indebtedness less netted cash	$	4,582.4	$	2,134.8


(1)			We present deferred financing costs as a direct reduction from the carrying amount of the related debt in the Consolidated Balance Sheets. For purposes of determining total debt for financial covenant purposes, we have added these costs back to total debt, net as calculated per the Consolidated Balance Sheets.
(2)			Netted cash includes cash and cash equivalents and restricted cash for domestic and foreign subsidiaries designated as "Restricted Subsidiaries" in the 2023 Credit Agreement.

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Critical Accounting Estimates

Our management is responsible for our financial statements and has evaluated the accounting policies to be used in their preparation. Our management believes these policies are reasonable and appropriate. The following discussion identifies those accounting policies that we believe are critical in the preparation of our financial statements, the judgments and uncertainties affecting the application of those policies and the possibility that materially different amounts will be reported under different conditions or using different assumptions.

The preparation of financial statements in conformity with GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of commitments and contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our actual results could differ from those estimates.

Business Combinations. We account for business combinations using the acquisition method of accounting, which requires that once control is obtained, all the assets acquired and liabilities assumed are recorded at their respective fair values at the date of acquisition. The determination of fair values of identifiable assets and liabilities requires estimates and the use of valuation techniques when fair value is not readily available and requires a significant amount of management judgment. For the valuation of intangible assets acquired in the Mattress Firm Acquisition, we applied the income approach through a relief from royalty method. Although we believe these estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on the determination of the fair values of the intangible assets acquired.

The excess of the purchase price over fair values of identifiable assets acquired and liabilities assumed is recorded as goodwill. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill due to the use of preliminary information in our initial estimates. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Revenue Recognition. Sales of product are recognized when the performance obligations under the terms of the contract with the customer are satisfied, which is generally when control of the product has transferred to the customer. Transferring control of each product sold is considered a separate performance obligation. We transfer control and recognize a sale when the product ships to the customer or when the customer receives the product based upon agreed shipping terms. Each unit sold is considered an independent, unbundled performance obligation. We do not have any additional performance obligations other than product sales that are material in the context of the contract. We extend volume discounts to certain customers and reflect these amounts as a reduction of net sales as variable consideration.

We allow product returns through certain sales channels and on certain products. The accrued sales returns in the accompanying Consolidated Balance Sheets, which include a current balance in accrued expenses and other current liabilities and a non-current balance in other non-current liabilities, was $106.9 million and $44.2 million as of December 31, 2025 and 2024, respectively. Estimated sales returns are provided at the time of sale based on historical sales channel return rates. Estimated future obligations related to these products are provided by a reduction of sales in the period in which the revenue is recognized. We considered the impact of recoverable salvage value on sales returns by product in determining its estimate of future sales returns. We recognized a return asset for the right to recover the goods returned by the customer. The right of return asset is recognized on a gross basis outside of the accrued sales returns and is not material to our Consolidated Balance Sheets. Our level of sales returns differs by channel, with our Direct channel typically experiencing a higher rate of returns. In the event future sales returns claims are higher than our historical experiences, such as a 50 basis point increase, the impact would not be material to the Consolidated Financial Statements.

The allowance for credit losses is our best estimate of the amount of estimated lifetime credit losses in our accounts receivable. The allowance for credit losses included in accounts receivable, net in the accompanying Consolidated Balance Sheets, was $39.2 million and $80.4 million as of December 31, 2025 and 2024, respectively. We regularly review the adequacy of our allowance for credit losses. We estimate losses over the contractual life using assumptions to capture the risk of loss, even if remote, based principally on how long a receivable has been outstanding. Account balances are charged off against the allowance for credit losses after all reasonable means of collection have been exhausted and the potential for recovery is considered remote. As of December 31, 2025, our accounts receivable were substantially current. Other factors considered include historical write-off experience, current economic conditions and also factors such as customer credit, past transaction history with the customer and changes in customer payment terms.

The credit environment in which our customers operate has been relatively stable over the past few years. Historically, less than 1.0% of net sales ultimately prove to be uncollectible. Total bad debt expense was $5.6 million in 2025, $22.5 million in 2024 and $8.2 million in 2023. If circumstances change, for example, due to the occurrence of higher-than-expected defaults or a significant adverse change in a major customer's ability to meet our financial obligations such as bankruptcies, estimates of the recoverability of receivable amounts due could be reduced.

We have not made any material changes in the accounting methodology we use to measure the estimated liability for sales returns or allowance for credit losses during the past three fiscal years.

We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to establish the liability for sales returns and credit losses. However, if actual results are not consistent with our estimates or assumptions which are based on our historical experiences, we may be exposed to losses or gains that could be material.

Income Taxes. Accounting for income taxes requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities.

We recognize deferred tax assets in our Consolidated Balance Sheets, and these deferred tax assets typically represent items deducted currently from operating income in the financial statements that will be deducted in future periods in tax returns. A valuation allowance is recorded against certain deferred tax assets to reduce the consolidated deferred tax asset to an amount that will, more likely than not, be realized in future periods. At December 31, 2025, the valuation allowance of $48.7 million was primarily related to certain tax attributes both domestically and in various foreign jurisdictions. The valuation allowance is based, in part, on our estimate of future taxable income, the expected utilization of foreign and domestic tax loss carryforwards and credits and the expiration dates of such tax loss carryforwards.

We did not recognize tax benefits from uncertain tax positions within the provision for income taxes. We may recognize a tax benefit only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2025, our estimated gross unrecognized tax benefits were $30.7 million which, if recognized, would favorably impact our future earnings. Due to uncertainties in any tax audit outcome, our estimates of the ultimate settlement of our unrecognized tax positions may change and the actual tax benefits may differ significantly from the estimates.

Goodwill and Indefinite-Lived Intangible Assets. Goodwill and indefinite-lived intangible assets are evaluated for impairment annually as of October 1 and whenever events or circumstances make it more likely than not that impairment may have occurred or when required by accounting standards.

We test goodwill for impairment at the reporting unit level. Our reporting units are Mattress Firm, Tempur Sealy North America, Tempur Sealy International (excluding Dreams) and Dreams. Mattress Firm was added as a separate reporting unit upon acquisition of the business on February 5, 2025. We test individual indefinite-lived intangible assets at the brand level. These assessments may be performed quantitatively or qualitatively.

Using the quantitative approach, we make various estimates and assumptions in determining the estimated fair value of each reporting unit using a combination of discounted cash flow models and valuations based on earnings multiples for guideline public companies in each reporting unit's industry peer group, when externally quoted market prices are not readily available. Discounted cash flow models are reliant on various assumptions, including projected business results, long-term growth factors and weighted-average cost of capital. Management judgment is involved in estimating these variables, and they include inherent uncertainties as they are forecasting future events. We perform sensitivity analyses by using a range of inputs to confirm the reasonableness of the long-term growth rate and weighted average cost of capital. Additionally, we compare the indicated equity value to our market capitalization and evaluate the resulting implied control premium/discount to determine if the estimated enterprise value is reasonable compared to external market indicators.

Under the qualitative approach, we review macroeconomic conditions, industry and market conditions and entity specific factors, including strategies and financial performance for potential indicators of impairment.

In 2025, other than the addition of the Mattress Firm reporting unit, we did not make any changes to our reporting units or the accounting methodology we use to assess impairment loss on goodwill and indefinite-lived intangible assets. Prior to 2025, Management performed an assessment of the impairment of goodwill for our reporting units and indefinite-lived intangible assets using a quantitative approach, which indicated that the fair values of each of our reporting units and indefinite-lived intangible assets were substantially in excess of their carrying values. In 2025, we elected to qualitatively perform our annual impairment analysis for all reporting units and indefinite-lived intangible assets. Subsequent to our October 1, 2025 annual impairment test, no indications of impairment were identified.

We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to test for impairment losses on goodwill and indefinite-lived intangible assets. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to an impairment charge that could be material.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our primary exposure to interest rate risk is due to our variable-rate debt agreements, including our 2023 Credit Agreement. These variable-rate debt agreements use Secured Overnight Financing Rate ("SOFR"), which is subject to fluctuation and uncertainty. As of December 31, 2025, the value of our variable-rate debt was $3,006.7 million. A sensitivity analysis using a one hundred basis point increase in interest rates on our variable-rate debt as of December 31, 2025, and holding other variables consistent, would cause an estimated reduction in income before income taxes of $30.1 million. We continue to evaluate the interest rate environment and look for opportunities to improve our debt structure and minimize our interest rate risk and expense.

Foreign Currency Exchange Risk

We hedge a portion of our currency exchange exposure relating to foreign currency transactions with foreign exchange forward contracts. A sensitivity analysis indicates the potential loss in fair value on foreign exchange forward contracts outstanding at December 31, 2025, resulting from a hypothetical 10.0% adverse change in all foreign currency exchange rates against the U.S. dollar, is approximately $4.0 million. Such losses would be largely offset by gains from the revaluation or settlement of the underlying assets and liabilities that are being protected by the foreign exchange forward contracts.

During the year ended 2025, we converted $150.0 million of our 4.00% fixed-rate USD-denominated 2029 Senior Notes, including the semi-annual interest payments thereunder, to fixed-rate DKK denominated debt at rate of 1.9809%. We have designated these cross currency swap agreements as net investment hedges.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


INDEX TO HISTORICAL FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm (PCAOB ID: 42)			35
Consolidated Statements of Income for the years ended December 31, 2025, 2024 and 2023			36
Consolidated Statements of Comprehensive Income for the years ended December 31, 2025, 2024 and 2023			37
Consolidated Balance Sheets as of December 31, 2025 and 2024			38
Consolidated Statements of Stockholders' (Deficit) Equity for the years ended December 31, 2025, 2024 and 2023			39
Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023			40
Notes to the Consolidated Financial Statements			41

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Somnigroup International Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Somnigroup International Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, stockholders' (deficit) equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 27, 2026, expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosure to which it relates.


			Accounting for the Acquisition of Mattress Firm Group Inc. (Mattress Firm)

Description of the Matter			As described in Note 3 of the consolidated financial statements, on February 5, 2025, the Company completed its acquisition of Mattress Firm Group Inc. (Mattress Firm) for a total purchase price of $5,141.4 million. The acquisition was accounted for as a business combination in accordance with Accounting Standards Codification Topic 805, Business Combinations. The consideration paid in the acquisition must be allocated to the acquired assets and liabilities assumed, generally based on their fair value with the excess of the purchase price over those fair values allocated to goodwill. Auditing the Company’s accounting for its acquisition of Mattress Firm was complex primarily due to the significant estimation uncertainty involved in estimating the fair value of the trade name intangible asset and significant judgment regarding the recognition of the deferred tax liability for stock basis recapture stemming from Mattress Firm’s 2018 debt restructuring. The significant assumptions used to estimate the fair value of the trade name intangible asset included the forecasted revenue, revenue growth, royalty rate, and discount rate assumptions. These significant assumptions are forward-looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit			We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company’s accounting for business combinations, including internal controls over the Company’s determination of the fair value of the acquired trade name and internal controls over the recognition of deferred tax liabilities acquired. To test the estimated fair value of the acquired trade name intangible asset, we performed audit procedures that included, among others, assessing the valuation methodology used and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis. For the forecasted revenue and revenue growth, we compared the financial projections to current industry and economic trends, the historic financial performance of the acquired business, the Company’s history with other acquisitions, and forecasted performance of guideline public companies. In addition, we involved our internal valuation specialists to assist in assessing the methodology used in determining the royalty rate and discount rate and testing these assumptions. We also performed a sensitivity analysis on certain of the significant assumptions to evaluate the change in the fair value estimate that would result from changes in these significant assumptions. To test the recognition of the deferred tax liability for stock basis recapture, we performed audit procedures that included, among others, reading and evaluating the Company’s analysis that detailed the basis and technical merits of their tax position. We involved our tax subject matter resources in assessing the technical merits of the Company’s tax position based on our knowledge of relevant tax laws.

/s/ Ernst & Young LLP

We have served as the Company's auditor since 2002.

Louisville, Kentucky

February 27, 2026

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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per common share amounts)


	Year Ended December 31,
	2025		2024		2023
Net sales	$	7,476.5	$	4,930.9	$	4,925.4
Cost of sales	4,293.3		2,903.0		2,939.2
Gross profit	3,183.2		2,027.9		1,986.2
Selling and marketing expenses	1,739.0		939.4		920.9
General, administrative and other expenses	695.0		473.2		481.1
Loss on disposal of business	13.9		—		—
Equity income in earnings of unconsolidated affiliates	(19.6)		(18.9)		(23.0)
Operating income	754.9		634.2		607.2

Other expense, net:
Interest expense, net	267.9		134.8		129.9
Loss on extinguishment of debt	—		—		3.2
Other expense (income), net	6.0		(4.9)		—
Total other expense, net	273.9		129.9		133.1

Income before income taxes	481.0		504.3		474.1
Income tax provision	(95.7)		(118.6)		(103.4)


Net income before non-controlling interest	385.3		385.7		370.7
Less: Net income attributable to non-controlling interest	1.2		1.4		2.6
Net income attributable to Somnigroup International Inc.	$	384.1	$	384.3	$	368.1

Earnings per common share:



Basic	$	1.86	$	2.21	$	2.14




Diluted	$	1.84	$	2.16	$	2.08

Weighted average common shares outstanding:
Basic	206.0		173.6		172.2
Diluted	209.2		178.2		177.3

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)


	Year Ended December 31,
	2025		2024		2023
Net income before non-controlling interest	$	385.3	$	385.7	$	370.7
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	87.8		(51.7)		39.8
Net change in pension benefits, net of tax	0.6		1.6		0.4
Other comprehensive income (loss), net of tax	88.4		(50.1)		40.2
Comprehensive income	473.7		335.6		410.9
Less: Comprehensive income attributable to non-controlling interest	1.2		1.4		2.6
Comprehensive income attributable to Somnigroup International Inc.	$	472.5	$	334.2	$	408.3

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions)


	December 31, 2025		December 31, 2024
ASSETS

Current Assets:
Cash and cash equivalents	$	134.9	$	117.4
Accounts receivable, net	358.5		404.5
Inventories	630.0		447.0
Prepaid expenses and other current assets	170.7		96.5


Total Current Assets	1,294.1		1,065.4
Restricted cash	—		1,592.3
Property, plant and equipment, net	1,019.2		811.1
Goodwill	4,595.9		1,066.7
Trade name and other intangible assets, net	2,587.1		700.5
Operating lease right-of-use assets	1,878.8		598.8
Deferred income taxes	18.5		15.3
Other non-current assets	207.1		130.3
Total Assets	$	11,600.7	$	5,980.4

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Accounts payable	$	401.6	$	360.5
Accrued expenses and other current liabilities	636.5		393.9
Short-term operating lease obligations	399.6		126.8

Income taxes payable	15.1		9.6
Current portion of long-term debt	112.4		69.5

Total Current Liabilities	1,565.2		960.3
Long-term debt, net	4,573.3		3,740.4
Long-term operating lease obligations	1,589.8		532.1
Deferred income taxes	624.9		108.3

Other non-current liabilities	130.6		71.0
Total Liabilities	8,483.8		5,412.1

Redeemable non-controlling interest	8.9		9.3

Stockholders' Equity:
Common stock, $0.01 par value, 500.0 million shares authorized; 283.8 million shares issued as of December 31, 2025 and 2024	2.8		2.8
Additional paid in capital	1,038.7		501.2
Retained earnings	3,829.2		3,571.8
Accumulated other comprehensive loss	(98.4)		(186.8)
Treasury stock at cost; 73.9 million and 110.2 million shares as of December 31, 2025 and 2024, respectively	(1,664.3)		(3,330.0)
Total Stockholders' Equity	3,108.0		559.0
Total Liabilities, Redeemable Non-Controlling Interest and Stockholders' Equity	$	11,600.7	$	5,980.4

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(in millions)


			Somnigroup International Inc. Stockholders' (Deficit) Equity
	Redeemable Non-controlling Interest		Common Stock			Treasury Stock							Accumulated Other Comprehensive (Loss)		Total Stockholders' (Deficit) Equity
			Shares Issued	At Par		Shares Issued	At Cost		Additional Paid in Capital		Retained Earnings
Balance as of December 31, 2022	$	9.8	283.8	$	2.8	113.4	$	(3,434.7)	$	598.2	$	2,988.5	$	(176.9)	$	(22.1)
Net income											368.1				368.1
Net income attributable to non-controlling interest	2.6														—
Dividend paid to non-controlling interest in subsidiary	(2.4)														—
Adjustment to pension liability, net of tax of $(0.1)													0.4		0.4
Foreign currency translation adjustments													39.8		39.8
Dividends declared on common stock ($0.44 per share)											(77.4)				(77.4)
Exercise of stock options						(0.2)	4.9		(2.0)						2.9
Issuance of PRSUs and RSUs						(2.7)	85.2		(85.2)						—
Treasury stock repurchased - open market purchases						0.1	(5.0)								(5.0)
Treasury stock repurchased - PRSU/RSU releases						0.9	(31.0)								(31.0)
Amortization of unearned stock-based compensation									47.7						47.7
Balance as of December 31, 2023	$	10.0	283.8	$	2.8	111.5	$	(3,380.6)	$	558.7	$	3,279.2	$	(136.7)	$	323.4
Net income											384.3				384.3
Net income attributable to non-controlling interest	1.4														—
Dividend paid to non-controlling interest in subsidiary	(2.1)														—
Adjustment to pension liability, net of tax of $0.5													1.6		1.6
Foreign currency translation adjustments													(51.7)		(51.7)
Dividends declared on common stock ($0.52 per share)											(91.7)				(91.7)
Exercise of stock options						—	2.3		(1.8)						0.5
Issuance of PRSUs and RSUs						(2.2)	92.1		(92.1)						—

Treasury stock repurchased - PRSU/RSU releases						0.9	(43.8)								(43.8)
Amortization of unearned stock-based compensation									36.4						36.4
Balance as of December 31, 2024	$	9.3	283.8	$	2.8	110.2	$	(3,330.0)	$	501.2	$	3,571.8	$	(186.8)	$	559.0
Net income											384.1				384.1
Net income attributable to non-controlling interest	1.2														—
Dividend paid to non-controlling interest in subsidiary	(1.6)														—
Adjustment to pension liability, net of tax of $0.2													0.6		0.6
Foreign currency translation adjustments													87.8		87.8
Dividends declared on common stock ($0.60 per share)											(126.7)				(126.7)
Shares issued in connection with Mattress Firm Acquisition						(34.2)	1,609.9		635.2						2,245.1
Exercise of stock options						(2.8)	107.1		(57.6)						49.5
Issuances of PRSUs and RSUs						(1.3)	81.1		(81.1)						—

Treasury stock repurchased - PRSU/RSU releases and options exercises						1.9	(125.0)								(125.0)
Treasury stock repurchased - merger consideration						0.1	(7.4)								(7.4)
Amortization of unearned stock-based compensation									41.0						41.0
Balance as of December 31, 2025	$	8.9	283.8	$	2.8	73.9	$	(1,664.3)	$	1,038.7	$	3,829.2	$	(98.4)	$	3,108.0

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


(in millions)	Year Ended December 31,
	2025		2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income before non-controlling interest	$	385.3	$	385.7	$	370.7

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	249.5		165.1		135.3
Amortization of stock-based compensation	41.0		36.4		47.7
Amortization of deferred financing costs and discounts	6.7		4.3		3.9
Bad debt expense	5.6		22.5		8.2
Deferred income taxes	25.8		(19.2)		8.3
Dividends received from unconsolidated affiliates	20.5		24.3		20.4
Equity income in earnings of unconsolidated affiliates	(19.6)		(18.9)		(23.0)
Loss on extinguishment of debt	—		—		1.4
Loss on disposal of business	13.9		—		—
Foreign currency adjustments and other	16.9		1.7		(0.9)
Changes in operating assets and liabilities, net of effect of business acquisitions:
Accounts receivable	72.6		(7.3)		(11.5)
Inventories	136.5		26.8		75.8
Prepaid expenses and other assets	(18.9)		(23.6)		50.1
Operating leases, net	8.8		2.3		5.3
Accounts payable	(133.1)		58.3		(46.9)
Accrued expenses and other liabilities	(35.5)		(21.1)		(14.7)
Income taxes receivable and payable	24.1		29.2		(59.8)
Net cash provided by operating activities	800.1		666.5		570.3

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(166.9)		(97.3)		(185.4)
Acquisitions, net of cash acquired	(2,824.5)		—		(3.0)
Purchases of investments	(41.7)		—		—
Other	8.8		0.6		0.6
Net cash used in investing activities	(3,024.3)		(96.7)		(187.8)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under long-term debt obligations	4,364.1		3,007.0		2,667.6
Repayments of borrowings under long-term debt obligations	(3,514.3)		(1,760.6)		(2,918.4)
Proceeds from exercise of stock options	49.5		0.5		2.9
Treasury stock repurchased	(132.4)		(43.8)		(36.0)
Dividends paid	(127.4)		(92.7)		(77.7)
Payment of deferred financing costs	—		(13.7)		(6.5)
Repayments of finance lease obligations and other	(22.6)		(19.3)		(16.2)
Net cash provided by (used in) financing activities	616.9		1,077.4		(384.3)









NET EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH	32.5		(12.4)		7.3
(Decrease) increase in cash, cash equivalents and restricted cash	(1,574.8)		1,634.8		5.5
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period	1,709.7		74.9		69.4
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period	$	134.9	$	1,709.7	$	74.9

Supplemental cash flow information:
Cash paid during the period for:
Interest	$	278.3	$	157.7	$	144.6

Non-cash investing activities:
Treasury stock issued in connection with Mattress Firm Acquisition	$	2,245.1	$	—	$	—

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies

(a) Basis of Presentation and Description of Business. Somnigroup International Inc., a Delaware corporation, together with its subsidiaries, is a U.S. based, multinational company. The term "Somnigroup" refers to Somnigroup International Inc. only, and the term "Company" refers to Somnigroup International Inc. and its consolidated subsidiaries, as of December 31, 2025. Certain prior period amounts have been reclassified in the accompanying consolidated financial statements and notes thereto to conform to the current period presentation.

On February 5, 2025, the Company completed the previously announced acquisition of Mattress Firm, the largest mattress specialty retailer in the U.S. Mattress Firm was founded in 1986 and operates over 2,100 brick and mortar retail locations and a growing e-commerce platform. Mattress Firm's highly trained retail sales associates provide personalized service to help consumers choose the ideal bedding products across their robust assortment of market-leading brands.

The Company designs, manufactures, distributes and retails bedding products, which includes mattresses, foundations and adjustable bases, and other products, which include pillows and other accessories. The Company also derives income from royalties by licensing Sealy® and Stearns & Foster® brands, technology and trademarks to other manufacturers, as well as licensing the Mattress Firm® trademark to retail franchisees. The Company sells its products through two sales channels: Direct and Wholesale.

(b) Basis of Consolidation. The accompanying financial statements include the accounts of Somnigroup and its controlled subsidiaries. Intercompany balances and transactions have been eliminated.

The Company has ownership interests in Asia-Pacific joint ventures to develop markets for Sealy® and Stearns & Foster® branded products and ownership in a United Kingdom joint venture to manufacture, market and distribute Sealy® and Stearns & Foster® branded products. The Company's ownership interest in each of these joint ventures is 50.0%. The equity method of accounting is used for these joint ventures, over which the Company has significant influence but does not have control, and consolidation is not otherwise required. The Company's equity in the net income and losses of these investments is reported in equity income in earnings of unconsolidated affiliates in the accompanying Consolidated Statements of Income.

(c) Use of Estimates. The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company's results are affected by economic, political, legislative, regulatory and legal actions. Economic conditions, such as recessionary trends, inflation, interest and monetary exchange rates, government fiscal policies and changes in the prices of raw materials, can have a significant effect on operations.

(d) Adoption of New Accounting Standards.

Income Tax Disclosures. In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-09, "Improvements to Income Tax Disclosures", which enhances income tax disclosure requirements for all entities by requiring specified categories and greater disaggregation within the rate reconciliation table, disclosure of income taxes paid by jurisdiction and providing clarification on uncertain tax positions and related financial statement impacts. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 (year ending December 31, 2025 for the Company). The Company adopted ASU 2023-09 for the year ended December 31, 2025 on a prospective basis. See Note 13, "Income Taxes," for additional details on new disclosures.

Financial Instruments - Credit Losses. In July 2025, the FASB issued ASU 2025-05, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets", which provides a practical expedient that all entities can use when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606. ASU 2025-05 is effective for the Company for fiscal year ending December 31, 2026. The Company adopted the practical expedient of ASU No. 2025-05 on October 1, 2025. The adoption did not have a material impact on its consolidated financial statements. See Note 1(n), "Allowance for Credit Losses," for additional details on new disclosures.

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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(e) Accounting Pronouncements Not Yet Adopted

Disaggregation of Income Statement Expenses. In November 2024, the FASB issued ASU 2024-03, "Disaggregation of Income Statement Expenses", which requires public entities to disclose disaggregated information about certain income statement expense line items annually and in interim periods. ASU 2024-03 is effective for the Company beginning in the December 31, 2027 Form 10-K and for interim periods beginning in the March 31, 2028 Form 10-Q.

Targeted Improvements to the Accounting for Internal Use Software. In September 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2025-06, "Intangibles, Goodwill and Other Internal-Use Software" (Subtopic 350-40), which removes all references to prescriptive and sequential software development stages (referred to as "project stages") throughout Subtopic 350-40 and specifies new requirements for determining when to begin capitalization of capitalizable project costs. ASU 2025-06 is effective for the Company beginning in December 31, 2027 Form 10-K and for interim periods beginning in the March 31, 2028 Form 10-Q. Early adoption is permitted as of the beginning of an annual reporting period. The Company is currently evaluating this ASU to determine the impact it will have on the Company's Condensed Consolidated Financial Statements.

(f) Foreign Currency. Assets and liabilities of non-U.S. subsidiaries, whose functional currency is the local currency, are translated into U.S. dollars at period-end exchange rates. Income and expense items are translated at the average rates of exchange prevailing during the period. The adjustments resulting from translating the financial statements of foreign subsidiaries are included in accumulated other comprehensive loss ("AOCL"), a component of stockholders' equity, and included in net earnings only upon sale or liquidation of the underlying foreign subsidiary or affiliated company. Foreign currency transaction gains and losses are recognized in net earnings based on differences between foreign exchange rates on the transaction date and on the settlement date. These amounts are not considered material to the Consolidated Financial Statements.

(g) Cash, Cash Equivalents and Restricted Cash. Cash and cash equivalents consist of all highly liquid investments with initial maturities of three months or less. The carrying value of cash and cash equivalents approximates fair value because of the short-term maturity of those instruments. Restricted cash consists of proceeds from the Term B Loan which were funded into escrow and released upon the closing of the Mattress Firm Acquisition. The carrying value of restricted cash approximates fair value because of the short-term maturity of those instruments.

Total cash, cash equivalents and restricted cash consisted of the following:


	December 31,
(in millions)	2025		2024
Cash and cash equivalents	$	134.9	$	117.4
Restricted cash	—		1,592.3
Cash, cash equivalents and restricted cash	$	134.9	$	1,709.7

(h) Inventories. Inventories are stated at the lower of cost and net realizable value, determined by the first-in, first-out or the weighted average cost method, depending on reportable segment, and consist of the following:


	December 31,
(in millions)	2025		2024
Finished goods	$	484.7	$	300.5
Work-in-process	16.5		16.1
Raw materials and supplies	128.8		130.4
	$	630.0	$	447.0

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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(i) Property, Plant and Equipment. Property, plant and equipment are carried at cost at acquisition date and are depreciated using the straight-line method over their estimated useful lives as follows:


			Estimated Useful Lives (in years)
Buildings			25-30
Computer equipment and software			3-7
Leasehold improvements			3-7
Machinery and equipment			3-7
Office furniture and fixtures			5-7

The Company records depreciation and amortization in cost of sales for long-lived assets used in the manufacturing process, and within each line item of operating expenses for all other long-lived assets. Leasehold improvements are amortized over the shorter of the life of the lease or their estimated useful lives. Assets under finance leases are included within property, plant and equipment and represent non-cash investing activities.

Property, plant and equipment, net consisted of the following:


	December 31,
(in millions)	2025		2024
Machinery and equipment	$	818.1	$	713.0
Land and buildings	489.6		453.3
Leasehold improvements	305.6		182.0
Computer equipment and software	293.1		256.0
Furniture and fixtures	170.7		106.1
Construction in progress	75.4		54.0
Total property, plant and equipment	2,152.5		1,764.4
Accumulated depreciation	(1,133.3)		(953.3)
Total property, plant and equipment, net	$	1,019.2	$	811.1

Depreciation expense, which includes depreciation expense for finance lease assets, for the Company was $236.2 million, $156.9 million and $125.1 million for the years ended December 31, 2025, 2024 and 2023, respectively.

(j) Long-Lived Assets. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is assessed by a comparison of the carrying amount of the asset to the estimated future undiscounted net cash flows expected to be generated by the asset or group of assets. If estimated future undiscounted net cash flows are less than the carrying amount of the asset or group of assets, the asset is considered impaired and an expense is recorded in an amount required to reduce the carrying amount of the asset to its then fair value. Fair value generally is determined from estimated discounted future net cash flows (for assets held for use) or net realizable value (for assets held for sale). The Company did not identify any impairments for long-lived assets for the years ended December 31, 2025, 2024 and 2023.

(k) Goodwill and Other Intangible Assets. Intangible assets with finite useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment whenever events or changes in circumstances indicate impairment may have occurred. The Company performs an annual impairment test on goodwill and indefinite-lived intangible assets on October 1 of each year and whenever events or circumstances make it more likely than not that impairment may have occurred. This assessment may be performed quantitatively or qualitatively. In conducting the impairment test for the Mattress Firm, Tempur Sealy North America, Tempur Sealy International and Dreams reporting units, the fair value of each is compared to its respective carrying amount including goodwill. If the fair value exceeds the carrying amount, then no impairment exists. If the carrying amount exceeds the fair value, the goodwill is written down for the amount by which the carrying amount exceeds the fair value. However, the loss recognized cannot exceed the carrying amount of goodwill.

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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Using the quantitative approach, the Company makes various estimates and assumptions in determining the estimated fair value of each reporting unit using a combination of discounted cash flow models and valuations based on earnings multiples for guideline public companies in each reporting unit's industry peer group, when externally quoted market prices are not readily available. Discounted cash flow models are reliant on various assumptions, including projected business results, long-term growth factors and weighted-average cost of capital. Management judgment is involved in estimating these variables, and they include inherent uncertainties as they are forecasting future events. The Company performs sensitivity analyses by using a range of inputs to confirm the reasonableness of the long-term growth rate and weighted average cost of capital. Additionally, the Company compares the indicated equity value to its market capitalization and evaluates the resulting implied control premium/discount to determine if the estimated enterprise value is reasonable compared to external market indicators.

Using the qualitative approach, the Company reviews macroeconomic conditions, industry and market conditions and entity specific factors, including strategies and financial performance for potential indicators of impairment.

The Company also tests its indefinite-lived intangible assets for impairment, principally the Mattress Firm, Tempur, Sealy and Dreams trade names. Under a quantitative approach, the Company uses a "relief-from-royalty" method. Significant assumptions inherent in the methodologies are employed and include such estimates as royalty and discount rates.

The Company performed its annual impairment test of goodwill and indefinite-lived intangible assets qualitatively in 2025 and quantitatively in 2024 and 2023 for Tempur Sealy and Dreams, none of which resulted in the recognition of impairment charges. For further information on goodwill and other intangible assets, refer to Note 4, "Goodwill and Other Intangible Assets."

(l) Accrued Sales Returns. The Company allows product returns through certain sales channels and on certain products. Estimated sales returns are provided at the time of sale based on historical sales channel return rates. Estimated future obligations related to these products are provided by a reduction of sales in the period in which the revenue is recognized. The Company considers the impact of recoverable salvage value on sales returns by product in determining its estimate of future sales returns. The Company recognizes a return asset for the right to recover the goods returned by the customer on a gross basis outside of the accrued sales returns on the Company's accompanying Consolidated Balance Sheets. As of December 31, 2025 and 2024, $26.7 million and $2.1 million of right of return assets is included on the Company’s accompanying Consolidated Balance Sheets, respectively.

The Company had the following activity for accrued sales returns from December 31, 2023 to December 31, 2025:


(in millions)
Balance as of December 31, 2023	$	43.7
Amounts accrued	209.9
Returns charged to accrual	(209.4)
Balance as of December 31, 2024	44.2
Amounts accrued	661.4
Liabilities assumed as a result of acquisition	57.2
Returns charged to accrual	(655.9)
Balance as of December 31, 2025	$	106.9

As of December 31, 2025 and 2024, $91.7 million and $30.3 million of accrued sales returns is included as a component of accrued expenses and other current liabilities and $15.2 million and $13.9 million of accrued sales returns is included in other non-current liabilities on the Company’s accompanying Consolidated Balance Sheets, respectively.

(m) Warranties. The Company provides product warranties on both manufactured and sourced products and service warranties, which vary by segment, product and brand. Estimates of warranty expenses are based primarily on historical claims experience, product testing and recent trends. Estimated future obligations related to these products are charged to cost of sales in the period in which the related revenue is recognized. The Company considers the impact of recoverable salvage value on warranty costs in determining its estimate of future warranty obligations.

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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company provides warranties on mattresses with varying warranty terms. Tempur-Pedic mattresses sold in the Tempur Sealy North America segment and all Sealy mattresses have warranty terms ranging from 10 to 25 years, generally non-prorated for the first 10 to 15 years and then prorated for the balance of the warranty term. Tempur-Pedic mattresses sold in the International segment have warranty terms ranging from 5 to 15 years, non-prorated for the first 5 years and then prorated on a straight-line basis for the last 10 years of the warranty term. Tempur-Pedic pillows have a warranty term of 3 years, non-prorated.

The Company had the following activity for its accrued warranty expense from December 31, 2023 to December 31, 2025:


(in millions)
Balance as of December 31, 2023	$	40.8
Amounts accrued	8.1

Warranties charged to accrual	(15.3)
Balance as of December 31, 2024	33.6
Amounts accrued	15.8
Liabilities assumed as a result of acquisition	25.3
Warranties charged to accrual	(20.7)
Balance as of December 31, 2025	$	54.0

As of December 31, 2025 and 2024, $21.4 million and $15.3 million of accrued warranty expense is included as a component of accrued expenses and other current liabilities and $32.6 million and $18.3 million of accrued warranty expense is included in other non-current liabilities on the Company's accompanying Consolidated Balance Sheets, respectively.

(n) Allowance for Credit Losses. The allowance for credit losses is the Company's best estimate of the amount of estimated lifetime credit losses in the Company's accounts receivable. The Company regularly reviews the adequacy of its allowance for credit losses. The Company estimates losses over the contractual life using assumptions to capture the risk of loss, even if remote, based principally on how long a receivable has been outstanding. Account balances are charged off against the allowance for credit losses after all reasonable means of collection have been exhausted and the potential for recovery is considered remote. As of December 31, 2025, the Company's accounts receivable were substantially current. Other factors considered include historical write-off experience, current economic conditions and also factors such as customer credit, past transaction history with the customer and changes in customer payment terms. The allowance for credit losses is included in accounts receivable, net in the accompanying Consolidated Balance Sheets.

The Company had the following activity for its allowance for credit losses from December 31, 2023 to December 31, 2025.


(in millions)
Balance as of December 31, 2023	$	66.9
Amounts accrued	22.5
Write-offs charged against the allowance	(9.0)
Balance as of December 31, 2024	80.4
Amounts accrued	5.6
Write-offs charged against the allowance	(46.8)
Balance as of December 31, 2025	$	39.2

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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(o) Fair Value. Financial instruments, although not recorded at fair value on a recurring basis, include cash and cash equivalents, accounts receivable, accounts payable and the Company's debt obligations. The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short-term maturity of those instruments. Borrowings under the 2023 Credit Agreement (as defined in Note 6, "Debt") and the securitized debt are at variable interest rates and accordingly their carrying amounts approximate fair value. The fair value of the following material financial instruments were based on Level 2 inputs, which include observable inputs estimated using discounted cash flows and market-based expectations for interest rates, credit risk and the contractual terms of debt instruments:


	Fair Value
(in millions)	December 31, 2025		December 31, 2024
2029 Senior Notes	$	780.1	$	739.1
2031 Senior Notes	748.8		698.2

(p) Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are also recognized for the estimated future effects of tax loss carry forwards. The effect of changes in tax rates on deferred taxes is recognized in the period in which the enactment dates change. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts expected to be realized. The Company accounts for uncertain foreign and domestic tax positions utilizing a proscribed recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Interest and penalties related to uncertain tax positions are recognized as part of the income tax provision and are accrued beginning in the period that such interest and penalties would be applicable under relevant tax law and until such time that the related tax benefits are recognized.

(q) Cost of Sales. Costs associated with net sales are recorded in cost of sales. Cost of sales includes the costs of receiving, producing, inspecting, warehousing, insuring and shipping goods during the period, as well as depreciation and amortization of long-lived assets used in these processes. 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. The Company believes the classification of occupancy costs could vary widely throughout the industry. Because of this, the Company's gross profit and gross profit as a percentage of net sales may not be comparable to others in the industry which may include occupancy costs in total operating expenses.

Additionally, cost of sales include royalties that the Company pays to other entities for the use of their names on products produced by the Company. Royalty expense is not material to the Company's Consolidated Statements of Income.

Prior to the Mattress Firm Acquisition, the Company recorded retail store occupancy costs in selling and marketing expenses. For the years ended December 31, 2024 and 2023, retail store occupancy costs of $152.2 million and $145.2 million, respectively, were reclassified to cost of sales in the accompanying consolidated financial statements and notes thereto to conform to the current period presentation.

(r) Vendor Incentives. The Company's Mattress Firm segment earns various types of incentives from its suppliers related to purchase volume rebates, sales, reimbursements of certain sales and marketing expenses, long-term supply agreements and other ordinary course transactions, collectively referred to as vendor incentives. Amounts earned for vendor incentives are recorded within accounts payable until realized and are not material to the Company's Condensed Consolidated Balance Sheets.

Vendor incentives are generally recorded as a reduction of inventory at the time of purchase and, subsequently, as a reduction to cost of sales when the product is sold. Vendor incentives earned for long-term supply agreements are deferred and ratably recorded as a reduction to cost of sales over the life of the supply agreement. Vendor incentives which represent the reimbursement of certain sales and marketing expenses for the vendor's products are recorded as a reduction of sales and marketing expenses.

Certain vendor incentives include product purchase estimates and assumptions which may result in subsequent period adjustments if actual results differ from the estimates and assumptions used at the time of recognition. Vendor incentives earned

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for expense reimbursements also include estimates for sales and marketing expenses incurred at the time of recognition. If vendor incentives exceed our sales and marketing expenses, the excess amount is recorded as a reduction to cost of sales. The Company regularly reviews the adequacy of its estimates and assumptions used in the recognition of vendor incentives.

(s) Cooperative Advertising, Rebate and Other Promotional Programs. The Company enters into programs with customers to provide funds for advertising and promotions. The Company also enters into volume and other rebate programs with customers. When sales are made to these customers, the Company records liabilities pursuant to these programs. The Company periodically assesses these liabilities based on actual sales and claims to determine whether all of the cooperative advertising earned will be used by the customer or whether the customer will meet the requirements to receive rebate funds. The Company generally negotiates these programs on a customer-by-customer basis. Some of these agreements extend over several years. Estimates may be required at any point in time with regard to the ultimate reimbursement to be claimed by the customers. Subsequent revisions to the estimates are recorded and charged to earnings in the period in which they are identified. Cooperative advertising costs are classified as advertising expense and presented within selling and marketing expenses in the accompanying Consolidated Statements of Income. These cooperative advertising expenses are reported as components of selling and marketing expenses because the Company receives an identifiable benefit and the fair value of the advertising benefit can be reasonably estimated. Any benefits not recognized from the retailers will be reclassified and presented within net sales.

(t) Advertising Costs. The Company expenses advertising costs as incurred except for production costs and advance payments, which are deferred and expensed when advertisements run for the first time. Direct response advance payments are deferred and amortized over the life of the program. Advertising costs are included in selling and marketing expenses in the accompanying Consolidated Statements of Income. Advertising costs charged to expense were $692.2 million, $470.9 million and $469.0 million for the years ended December 31, 2025, 2024 and 2023, respectively. Advertising costs include expenditures for shared advertising costs that the Company reimburses to customers under its integrated and cooperative advertising programs. Advertising costs deferred and included in prepaid expenses and other current assets in the accompanying Consolidated Balance Sheets were $8.6 million, $10.0 million and $10.2 million as of December 31, 2025, 2024 and 2023, respectively.

(u) Research and Development Expenses. Research and development expenses for new products are expensed as they are incurred and are included in general, administrative and other expenses in the accompanying Consolidated Statements of Income. Research and development costs charged to expense were $32.9 million, $30.8 million and $30.6 million for the years ended December 31, 2025, 2024 and 2023, respectively.

(v) Stock-based Compensation. The Company accounts for stock-based payment transactions in which the Company receives employee services in exchange for equity instruments of the Company. Stock-based compensation cost for restricted stock units ("RSUs") and performance restricted stock units ("PRSUs") is measured based on the closing fair market value of the Company's common stock on the date of grant. Stock-based compensation cost for stock options is estimated at the grant date based on each option's fair value as calculated by the Black-Scholes option-pricing model. The Company recognizes stock-based compensation cost as expense for awards other than its PRSUs ratably on a straight-line basis over the requisite service period. The Company recognizes stock-based compensation cost associated with its PRSUs over the requisite service period if it is probable that the performance conditions will be satisfied. The Company evaluates its awards, including modifications, and will adjust the fair value if any are determined to be spring-loaded. The Company recognizes forfeitures of awards as they occur. Further information regarding stock-based compensation can be found in Note 11, "Stock-based Compensation."

(w) Treasury Stock. Subject to Delaware law, and the limitations in the 2023 Credit Agreement (as defined in Note 6, "Debt") and the Company's other debt agreements, the Board of Directors may authorize share repurchases of the Company's common stock. Purchases made pursuant to these authorizations may be carried out through open market transactions, negotiated purchases or otherwise, at times and in such amounts as the Company deems appropriate. Shares repurchased under such authorizations are held in treasury for general corporate purposes, including issuances under various employee stock-based award plans. On February 1, 2016, the Board of Directors authorized a share repurchase program pursuant to which the Company was permitted to repurchase shares of Somnigroup's common stock. Treasury stock is accounted for under the cost method and reported as a reduction of stockholders' equity. The authority provided under the share repurchase program may be suspended, limited or terminated at any time without notice. Please refer to Note 9, "Stockholders' Equity", for additional information.

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(x) Pension Obligations. The Company has a noncontributory, defined benefit pension plan covering current and former hourly employees at two of its active Sealy plants and ten previously-closed Sealy U.S. facilities. Sealy Canada, Ltd. (a 100% owned subsidiary of the Company) also sponsors a noncontributory, defined benefit pension plan covering hourly employees at one of its facilities. Both plans provide retirement and survivorship benefits based on the employees' credited years of service. The Company's funding policy provides for contributions of an amount between the minimum required and maximum amount that can be deducted for federal income tax purposes. The funded status is measured as the difference between the fair value of plan assets and the benefit obligation at December 31, the measurement date. The benefit obligation is the projected benefit obligation ("PBO"). The PBO represents the actuarial present value of benefits expected to be paid upon retirement based on estimated future compensation levels. The measurement of the PBO is based on the Company's estimates and actuarial valuations. The fair value of plan assets represents the current market value of assets held by an irrevocable trust fund for the sole benefit of participants. These valuations reflect the terms of the plans and use participant-specific information such as compensation, age and years of service, as well as certain assumptions, including discount rates, expected return on plan assets, rate of compensation increases, interest crediting rates and mortality rates. The Company's PBO and fair value of plan assets were $33.0 million and $32.6 million as of December 31, 2025, respectively, and $31.0 million and $29.4 million as of December 31, 2024, respectively. The Company recognizes the funded status of each applicable plan within the Consolidated Balance Sheets as either an asset or liability based on its funded status measured as the difference between the fair value of plan assets and the PBO, which was not material as of December 31, 2025 or 2024.

(2) Net Sales

The following table presents the Company's disaggregated revenue by channel and geographical region, including a reconciliation of disaggregated revenue by segment, for the years ended December 31.


	Twelve Months Ended December 31, 2025
(in millions)	Mattress Firm		Tempur Sealy North America		Tempur Sealy International		Consolidated
Channel
Direct	$	3,505.4	$	437.6	$	802.9	$	4,745.9
Wholesale	—		2,263.6		467.0		2,730.6
Net sales	$	3,505.4	$	2,701.2	$	1,269.9	$	7,476.5







	Mattress Firm		Tempur Sealy North America		Tempur Sealy International		Consolidated
Geographical region
United States	$	3,505.4	$	2,429.3	$	—	$	5,934.7
All other	—		271.9		1,269.9		1,541.8
Net sales	$	3,505.4	$	2,701.2	$	1,269.9	$	7,476.5


	Twelve Months Ended December 31, 2024
(in millions)	Tempur Sealy North America		Tempur Sealy International		Consolidated
Channel
Direct	$	513.7	$	715.6	$	1,229.3
Wholesale	3,275.2		426.4		3,701.6
Net sales	$	3,788.9	$	1,142.0	$	4,930.9







	Tempur Sealy North America		Tempur Sealy International		Consolidated
Geographical region
United States	$	3,490.1	$	—	$	3,490.1
All other	298.8		1,142.0		1,440.8

Net sales	$	3,788.9	$	1,142.0	$	4,930.9

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	Twelve Months Ended December 31, 2023
(in millions)	Tempur Sealy North America		Tempur Sealy International		Consolidated
Channel
Direct	$	507.3	$	672.0	$	1,179.3
Wholesale	3,348.2		397.9		3,746.1
Net sales	$	3,855.5	$	1,069.9	$	4,925.4







	Tempur Sealy North America		Tempur Sealy International		Consolidated
Geographical region
United States	$	3,560.8	$	—	$	3,560.8
All other	294.7		1,069.9		1,364.6

Net sales	$	3,855.5	$	1,069.9	$	4,925.4

Substantially all revenue is associated with bedding product sales.

The Mattress Firm segment sells products through one channel: Direct. The Tempur Sealy North America and Tempur Sealy International segments sell product through two channels: Direct and Wholesale. The Direct channel includes product sales through company-owned stores, e-commerce and call centers. The Wholesale channel includes all product sales to third-party retailers, including third-party distribution, hospitality and healthcare.

The Wholesale channel also includes income from royalties derived by licensing Sealy®, Stearns & Foster® and Tempur® brands, technology and trademarks to other manufacturers. The licenses include rights for the licensees to use trademarks as well as current proprietary or patented technology that the Company utilizes. The Company also provides its licensees with product specifications, research and development, statistical services and marketing programs. The Company recognizes royalty income based on the occurrence of sales of Sealy®, Stearns & Foster® and Tempur® branded products by various licensees. Royalty income in the Wholesale channel was $31.0 million, $31.5 million and $32.3 million for the years ended December 31, 2025, 2024 and 2023, respectively. Royalty income and franchise revenue in the Direct channel was $7.2 million for the year ended December 31, 2025.

For product sales in each of the Company's channels, the Company recognizes a sale when the performance obligations under the terms of the contract with the customer are satisfied, which is generally when control of the product has transferred to the customer. Transferring control of each product sold is considered a separate performance obligation. The Company transfers control and recognizes a sale when the customer receives the product. Each unit sold is considered an independent, unbundled performance obligation. The Company does not have any additional performance obligations other than product sales that are material in the context of the contract. The Company also offers assurance type warranties on certain of its products, which is not accounted for as separate performance obligations under the revenue model.

The transaction price is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. The amount of consideration the Company receives, and correspondingly, the revenue that is recognized, varies due to sales incentives and returns the Company offers to its Direct and Wholesale channel customers. Specifically, the Company extends volume discounts, as well as promotional allowances, floor sample discounts, commissions paid to retail associates and slotting fees to its Wholesale channel customers and reflects these amounts as a reduction of sales at the time revenue is recognized based on historical experience. The Company allows returns following a sale, depending on the channel and promotion. The Company reduces revenue and cost of sales for its estimate of the expected returns, which is primarily based on the level of historical sales returns. The Company does not offer extended payment terms beyond one year to customers. As such, the Company does not adjust its consideration for financing arrangements.

In certain jurisdictions, the Company is subject to certain non-income taxes including, but not limited to, sales tax, value added tax, excise tax and other taxes. These taxes are excluded from the transaction price, and therefore, excluded from revenue. The Company has elected to account for shipping and handling activities as a fulfillment cost. Accordingly, the Company reflects all amounts billed to customers for shipping and handling in revenue and the costs of fulfillment in cost of sales.

SOMNIGROUP INTERNATIONAL INC. 10-K