As filed with the Securities and Exchange Commission on January 7, 2022.

Registration No. 333-

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Mattress Firm Group Inc.
(Exact Name of Registrant as Specified in Its Charter)

	Delaware			5712			38-4012800
	(State or Other Jurisdiction of Incorporation or Organization)			(Primary Standard Industrial Classification Code Number)			(I.R.S. Employer Identification No.)

10201 S. Main Street
Houston, Texas 77025
(866) 942-3551
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Kindel L. Nuño
Executive Vice President, Legal, General Counsel and Secretary
10201 S. Main Street
Houston, Texas 77025
(866) 942-3551

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to:

Roxane F. Reardon
Marisa D. Stavenas
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017
(212) 455-2000

Marc D. Jaffe
Ian D. Schuman
Erika L. Weinberg
Latham & Watkins LLP
1271 Avenue of the Americas
New York, NY 10020
(212) 906-1200

Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

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:

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☒

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 7(a)(2)(B) of the Securities Act. ☐

CALCULATION OF REGISTRATION FEE


Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price(1)(2)			Amount of Registration Fee
Common stock, par value $0.01 per share		$	100,000,000		$	9,270

(1)

Estimated solely for the purpose of determining the amount of the registration fee in accordance with Rule 457(c) under the Securities Act of 1933, as amended.

(2)

Includes the offering price of shares of common stock that may be sold if the underwriters fully exercise their option granted by the Registrant to purchase additional shares of common stock.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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The information in this preliminary prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting offers to buy these securities in any state or jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION—DATED January 7, 2022

PRELIMINARY PROSPECTUS

Mattress Firm Group Inc.

Common Stock

This is the initial public offering of shares of common stock of Mattress Firm Group Inc.

The selling stockholders are offering shares of common stock. We will not receive any proceeds from the sale of the shares being sold by the selling stockholders in this offering.

Prior to this offering, there was no public market for our common stock. We anticipate the initial public offering price will be between $ and $ per share.

We intend to apply to list our common stock on the New York Stock Exchange (the “NYSE”), subject to notice of official issuance, under the symbol “MFRM.”

Investing in our common stock involves risks. See “Risk Factors” beginning on page 21 to read about factors you should consider before buying shares of our common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Per share

Total

Initial public offering price

Underwriting discount(1)

Proceeds, before expenses, to the selling stockholders

(1)

We have agreed to reimburse the underwriters for certain expenses in connection with this offering. Please see the section entitled “Underwriting” for a description of compensation payable to the underwriters.

To the extent that the underwriters sell more than shares of common stock, the underwriters have the option to purchase up to an additional shares from the selling stockholders on a pro rata basis at the initial public offering price less the underwriting discount.

The underwriters expect to deliver the shares of common stock to investors on or about , 2022.

Joint Book-Running Managers

Goldman Sachs & Co. LLCBarclaysJefferies

UBS Investment BankGuggenheim Securities Piper Sandler Truist Securities

Co-Managers

KeyBanc Capital Markets Raymond James Wedbush Securities

Telsey Advisory Group Loop Capital Markets Academy Securities Ramirez & Co., Inc.

The date of this prospectus is , 2022.

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	NOTE REGARDING INDUSTRY AND MARKET DATA					iii
	NOTE REGARDING TRADEMARKS, TRADENAMES AND SERVICE MARKS					iii
	BASIS OF PRESENTATION					iv
	NON-GAAP FINANCIAL MEASURES					iv
	CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS					vi
	CERTAIN DEFINITIONS					viii
	SUMMARY					1
	RISK FACTORS					21
	USE OF PROCEEDS					49
	DIVIDEND POLICY					50
	CAPITALIZATION					51
	DILUTION					52
	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS					54
	BUSINESS					80
	MANAGEMENT					98
	EXECUTIVE COMPENSATION					104
	CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS					127
	PRINCIPAL AND SELLING STOCKHOLDERS					129
	DESCRIPTION OF CAPITAL STOCK					131
	DESCRIPTION OF CERTAIN INDEBTEDNESS					134
	SHARES ELIGIBLE FOR FUTURE SALE					139
	CERTAIN U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF OUR COMMON STOCK					141
	UNDERWRITING					144
	LEGAL MATTERS					151
	EXPERTS					151
	WHERE YOU CAN FIND MORE INFORMATION					151
	INDEX TO CONSOLIDATED FINANCIAL STATEMENTS					F-1

Until (the 25th day after the date of this prospectus), all dealers that effect transactions in these shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

None of us, the selling stockholders and the underwriters have authorized anyone to provide you with any information or to make any representation other than those contained in this prospectus, any amendment or supplement to this prospectus or any free writing prospectus prepared by us or on our behalf. None of we, the selling stockholders and the underwriters take any responsibility for, or can provide any assurance as to the reliability of, any information other than the information in this prospectus, any amendment or supplement to this prospectus or any free writing prospectus prepared by us or on our behalf.

Offers to sell, and solicitations of offers to buy, shares of our common stock are being made only in jurisdictions where offers and sales are permitted. No action is being taken in any jurisdiction outside the United States to permit a public offering of common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions

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outside the United States are required to inform themselves about and to observe any restriction as to this offering and the distribution of this prospectus applicable to those jurisdictions.

The information contained in this prospectus is accurate only as of its date, regardless of the time of delivery of this prospectus, or any free writing prospectus, as the case may be, or any shares of our common stock. Our business, results of operations, financial condition and prospects may have changed since that date.

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NOTE REGARDING INDUSTRY AND MARKET DATA

Within this prospectus, we reference information and statistics regarding the bedding industry and the mattress specialty retail industry as well as certain non-mattress retail categories. We have obtained this information and statistics from various independent third-party sources, including independent industry publications and groups, reports by market research firms and other independent sources. Some data and other information contained in this prospectus are also based on our estimates and calculations, which are derived from our review and interpretation of internal company research, surveys and independent sources. Data regarding the industry in which we compete and our market position and market share within this industry are inherently imprecise and are subject to significant business, economic and competitive uncertainties beyond our control, but we believe such data generally indicate size, position and market share within the industry in which we compete. While we believe our internal company research, surveys and estimates are reliable, such research, surveys and estimates are subject to significant uncertainties. In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” These and other factors could cause our future performance to differ materially from our assumptions and estimates. See “Cautionary Note Regarding Forward-Looking Statements.” As a result, you should be aware that market, ranking and other similar industry data included in this prospectus, and estimates and beliefs based on that data, may not be reliable. Neither we, nor the selling stockholders nor the underwriters can guarantee the accuracy or completeness of any such information contained in this prospectus.

NOTE REGARDING TRADEMARKS, TRADENAMES AND SERVICE MARKS

We own or have rights to use the trademarks, service marks and trade names that we use in conjunction with the operation of our business. Some of the more important trademarks that we own or have rights to use that appear in this prospectus include: “Mattress Firm,” “Sleep Experts,” “120 Night Sleep Trial,” “Sleepy’s,” “Tulo,” “MattressMatcher,” “Junk Sleep,” “Sleep.com” and “SleepScore.” Trademarks, trade names or service marks of other companies appearing in this prospectus are, to our knowledge, the property of their respective owners.

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BASIS OF PRESENTATION

Our fiscal year consists of 52 or 53 weeks ending on the Tuesday closest to September 30th. Accordingly, references herein to “fiscal 2019” relate to the 52 weeks ended October 1, 2019, references herein to “fiscal 2020” relate to the 52 weeks ended September 29, 2020, references herein to “fiscal 2021” relate to the 52 weeks ended September 28, 2021 and references herein to “fiscal 2022” relate to the 52 weeks to end September 27, 2022. Our fiscal quarters consist of the 13 or 14 weeks ending on the Tuesday closest to each of December 31, March 31, June 30 and September 30. References to any given year in this prospectus will be to a calendar year, and not a fiscal year, unless otherwise noted.

Subsequent to the date of the original issuance, we concluded that we were required to restate our audited consolidated financial statements as of and for the fiscal year ended September 28, 2021. The financial information in this prospectus include the effects of the restatement. Please see Note 20—Restatement of Previously Issued Consolidated Statement of Cash Flows to the consolidated financial statements. We adopted Accounting Standards (“ASU”) No. 2016-02, Leases (Topic 842), ASU No. 2018-10, Codification Improvements to Leases, Topic 842, and ASU No. 2018-11, Targeted Improvements (collectively “Topic 842”) effective as of October 2, 2019. As a result of this change in accounting standards, certain of our financial information for fiscal 2019 is not comparable to the subsequent periods, such as fiscal 2020 and fiscal 2021. Consequently, you should not put undue reliance on our relative performance in these periods.

All store count data presented in this prospectus excludes franchised stores.

Certain numerical figures included in this prospectus have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in various tables or charts may not be arithmetic aggregations of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.

NON-GAAP FINANCIAL MEASURES

This prospectus contains non-GAAP financial measures, which are financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”). These non-GAAP measures include Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income (Loss) and Adjusted Free Cash Flow. For definitions of these terms, see “Summary—Summary Historical Consolidated Financial and Other Data.” These non-GAAP financial measures should be considered along with, but not as alternatives to, the financial performance measures as calculated in accordance with GAAP.

Usefulness

While these non-GAAP financial measures are not in accordance with, or preferable to, GAAP financial data, our management, our board of directors and our major stakeholders, as well as securities analysts and ratings agencies, use various non-GAAP financial measures, including Adjusted EBITDA and Adjusted EBITDA Margin, along with the corresponding GAAP financial measures:

•

to assist in monitoring our ongoing financial performance, including underlying results and trends, particularly in comparison with prior periods on a consistent basis, by excluding items not considered representative of our ongoing operating performance;

•

to supplement GAAP measures of performance in evaluating the effectiveness of our business strategies and budgeting and capital allocation and investment decisions;

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to remove items that can vary substantially from period to period, depending on accounting and tax treatments, the book value of assets and the method by which assets were acquired;

•

to support internal planning and forecasting and establish operational goals; and

•

to assist with executive performance evaluations and compensation.

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Our management, our board of directors and our major stakeholders, as well as securities analysts and ratings agencies, also use Adjusted Net Income (Loss), along with the corresponding GAAP financial measures:

•

to supplement GAAP measures of performance in evaluating the effectiveness of our business strategies and budgeting and capital allocation and investment decisions;

•

to remove items that can vary substantially from period to period, depending on accounting and tax treatments, the book value of assets and the method by which assets were acquired;

•

to support internal planning and forecasting and establish operational goals; and

•

to understand the after tax impact of non-recurring adjustments.

Adjusted Free Cash Flow is a useful measure of liquidity and our ability to service our obligations and an additional basis for assessing our ability to convert net revenue into available cash, providing information to management, analysts and investors about the amount of cash flows from operating activities that, after capital expenditure plus cash payment of deferred paid-in-kind interest, can be used for strategic initiatives, including investing in our business, and strengthening our financial position.

Limitations

Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income (Loss) and Adjusted Free Cash Flow have their limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results of operations as reported under GAAP.

For example, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income (Loss):

•

do not reflect period over period changes in taxes, income tax expense or the cash necessary to pay income taxes;

•

do not reflect the interest expense and the cash requirements necessary to service interest or principal payments on our debt;

•

do not reflect cash requirements for replacement of assets that are being depreciated and amortized;

•

do not reflect our cash requirements for capital expenditures;

•

do not reflect changes in our cash requirements for our working capital needs;

•

do not reflect stock and other non-cash compensation, which is a key element of our overall long-term compensation; and

•

do not reflect the impact of certain cash charges or cash receipts resulting from matters we do not find indicative of our ongoing operations.

Adjusted Free Cash Flow is not intended to be a measure of free cash flow available for management’s discretionary use, as we do not consider certain cash requirements, such as interest payments or payments of deferred paid-in-kind interest, tax payments and debt service requirements. It also does not reflect changes in, or cash requirements for, working capital needs.

Non-Comparability

The non-GAAP financial measures that we use have no standardized meaning as prescribed by GAAP or otherwise and may be interpreted and calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies, including companies in our industry. Because not all companies use identical calculations or methods of adjustment, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company. In addition, other companies may use different measures to evaluate their performance, which also could reduce the usefulness of our non-GAAP financial measures for comparison.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. Statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, including, among others, statements regarding the offering, expected growth, future capital expenditures and debt service obligations, are forward-looking statements. In many cases, forward-looking statements can be identified by terminology such as “may,” “would,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential” or “continue” or the negative of these terms or other comparable terminology. These forward-looking statements are made based on management’s expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to operations and the business environment, all of which are difficult to predict and many of which are beyond our control. These uncertainties and other factors could cause the actual results to differ materially from those matters expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, there is no guarantee of future results, levels of activity, performance or achievements. Statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

All forward-looking statements contained herein are based on information available on the date of this prospectus. There is no obligation to publicly update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise.

Some of the important factors that could cause actual results, performance or financial condition to differ materially from expectations are:

•

conditions of the U.S. economy and reduction in discretionary spending by consumers;

•

risks inherent in outbreaks of pandemics or contagious disease, including COVID-19;

•

a deterioration in our relationships with our primary suppliers;

•

a failure by any of our limited number of primary suppliers to supply us with products;

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product safety and quality control;

•

competition within our industry;

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challenges posed by our planned growth or unexpected difficulties during our omni-focused growth;

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geographic concentration of stores within the United States;

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ability to establish and maintain a favorable brand presence with consumers;

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the ability to provide timely delivery to our customers;

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the ability to anticipate consumer trends;

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the effectiveness and efficiency of advertising expenditures;

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inability to renew existing leases or enter into new leases for additional stores on favorable terms;

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the success of our strategy to expand our e-commerce business and to drive customer traffic with our complementary website;

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the possible impairment of goodwill or other acquired intangible assets;

•

losses associated with store closings and impairment of store assets;

•

fluctuations in comparable sales;

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•

inability to balance national brands, national exclusive brands and private brands merchandise;

•

quarterly and seasonal fluctuations in our operating results;

•

availability of adequate capital to finance our growth;

•

the success in keeping warranty claims and comfort exchange return rates within acceptable levels;

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customers’ ability to obtain third-party financing;

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our status as a holding company;

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risks related to acquiring complementary businesses, including franchisees;

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risks related to our indebtedness;

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risks related to regulation and legal proceedings;

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risks related to human capital;

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risks related to information technology and intellectual property;

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risks related to our franchisees and licensees;

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risks related to this offering and our stock; and

•

other factors discussed under “Risk Factors” and elsewhere in this prospectus.

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CERTAIN DEFINITIONS

Unless the context otherwise requires, the terms “our company,” “we,” “us” and “our” refer to Mattress Firm Group Inc. and its consolidated subsidiaries.

The following terms are used in this prospectus unless otherwise noted or indicated by the context:

•

“2021 ABL Facility” means our senior secured asset-based revolving credit facility entered into on September 24, 2021, among Mattress Firm, Inc., as Borrower, the guarantors party thereto, and Barclays Bank PLC, as administrative agent, as described under “Description of Certain Indebtedness;”

•

“2021 Term Loan” means our senior secured term loan entered into on September 24, 2021, among Mattress Firm, Inc., as Borrower, the guarantors party thereto, and Barclays Bank PLC, as administrative agent, as described under “Description of Certain Indebtedness”;

•

“associate” and “associates,” when used in relation to our company, means our employees;

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“B&M” means our brick and mortar operating segment;

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“CAGR” means compound annual growth rate;

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“COVID-19” means the novel coronavirus disease and related global pandemic that started in 2019;

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“Digital” means our digital operating segment;

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“DTC” means Direct-to-Consumer;

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“impression” means the rendering of an advertisement or digital media on a user’s screen;

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“market” and “markets,” when used in relation to us, means the metropolitan statistical area or an aggregation of the metropolitan statistical areas in which we or our franchisees operate;

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“Other Business” means our other operating segment, which primarily includes events and expositions, commercial sales and customer fundraising solutions.

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“our stores” or “stores” means our company-operated stores and excludes our franchised stores;

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“payback” means the period required for a given store to generate enough direct cash flow to equal or exceed the direct costs of opening such store;

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“Senior Credit Facilities” means, collectively, the 2021 ABL Facility and 2021 Term Loan;

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“session” means one or more interactions with a given website by a user, with or without a transaction, within approximately 30 minutes;

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“share of voice” means the proportion of advertising spend of one retailer relative to that of the entire relevant industry; and

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“Sleep Experts” means our extensively trained, commissioned sales associates.

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SUMMARY

This summary highlights information contained in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes thereto and the information in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Overview

We Are the Trusted Authority on Sleep

We question whether America got up on the wrong side of the bed or the wrong bed altogether. Health, wellness and longevity are rooted in fitness and nutrition, but all start with the right mattress. We have been helping to solve America’s sleep problems for decades and have learned two fundamental truths: everyone deserves a good night’s sleep, and each individual has unique sleep needs. As the trusted authority on sleep, we are committed to match each customer with the right mattress for a perfect night’s sleep.

We are the largest omni-channel mattress specialty retailer in the United States (based on U.S. retail mattress revenue), offering our customers an exceptional personalized experience, whether in-store or online. We meet our customers wherever they choose to interact with our expertise-led ecosystem, whether in our 2,353 conveniently-located retail stores nationwide (as of September 28, 2021) or on our digital platforms, including MattressFirm.com and Sleep.com. Our customers can experience and compare the leading mattress brands in a single place, with a comprehensive and diversified product suite across comfort, style and prices and use data and digital tools, such as MattressMatcher, our proprietary, machine-learning enabled tool that helps match customers to their perfect mattress and identify products that will help them achieve a great night’s sleep. We have heard our customers’ demand for selection, innovation and technology and we constantly re-assess and curate our product offering accordingly. We are the number one retailer for Tempur-Pedic, Serta, Sealy, Purple, Stearns & Foster and Beautyrest brands (based on our purchases of units from these U.S. mattress vendors in 2020).

Our customer experience goes beyond our showrooms and speedy in-home delivery options, as we use our engaging digital platforms, like Sleep.com, and our digital tools, like MattressMatcher, and data-driven partnerships, like SleepScore, to educate our customers about how sleep affects one’s health and how to sleep better. Our team of more than 6,500 highly-trained “Sleep Experts” serves our communities every day, working and learning diligently to earn America’s trust as true experts in sleep.

We are the clear market leader in the large and growing U.S. retail mattress and foundations industry. In 2020, we estimated, based on data from Furniture Today and International Sleep Products Association (‘‘ISPA’’) market studies, that the U.S. retail mattress and foundations industry was approximately $18 billion. We are the category-defining national mattress specialty retailer (based on U.S. retail mattress revenue) across this attractive market with, according to our estimates, an approximately 20% market share as of the end of 2020. We estimate that we are nearly twice the size of our next largest competitor (based on U.S. retail mattress sales) and eight times larger than the next largest multi-branded mattress specialty retailer in the United States (based on store count). In fiscal 2021, our net revenue was $4,392.9 million, our net loss was $165.1 million and our Adjusted EBITDA was $669.2 million. See “Summary—Summary Historical Consolidated Financial and Other Data” for a reconciliation of Adjusted EBITDA to net income, the most comparable GAAP measure.

As a result of our national scale, our operational excellence and the value proposition to our customers, we have been able to consistently outgrow the industry. In 2020, we were able to grow our revenue by 13.1%, while the broader U.S. retail mattress and foundations industry grew by 6.9%, according to the ISPA. Our growth is driven by both a higher volume of units sold and higher average order value. For example, our comparable sales growth of 36.1% in fiscal 2021 was driven by a 21.6% increase in the number of customer transactions and a 14.5% increase in our average order value. As of September 28, 2021, our total liabilities were $3,461.9 million and our net long-term debt was $1,199.6 million.

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Since the beginning of fiscal 2019, we have fundamentally transformed our business across all functions, leaving us well-positioned to capitalize on growth opportunities and capture market share. As part of this transformation, we significantly enhanced our operations and profitability through the following key actions:

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rationalized and optimized our store footprint to create a highly productive and profitable store base. We closed more than 950 stores and estimate that we have been able to recapture a significant share of sales from these closed stores through neighboring locations as well as online. In addition, over the past three years we negotiated favorable modifications of lease terms for a significant majority of our stores;

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re-designed a best-in-class product assortment, including the return of Tempur Sealy products, that is focused on highly-recognized brands across different price points and styles. We also introduced an attractive mix of national brands, national exclusive brands and private brands to our product offering;

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strengthened our digital capabilities and scaled our e-commerce business to create a true omni-channel experience, opening our doors to customers when, where and how they wish to shop;

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enhanced our customer-facing digital toolkit with MattressMatcher, Sleep.com and SleepScore, among others, to support and personalize purchase decisions and educate customers on the effects of sleep on health and how to sleep better;

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introduced an incentivized compensation structure and upgraded the training and development of our Sleep Experts to optimize the efficiency, education and effectiveness of our sales force;

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better aligned our supply chain to leverage our distribution footprint more effectively;

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focused our marketing spend on digital alongside a more disciplined and analytical, data-driven approach; and

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streamlined our cost structure to create a leaner and more efficient organization.

Due to these actions, we have significantly improved our financial profile, sales productivity and other key performance metrics, as demonstrated in the comparison of fiscal 2019 to fiscal 2020 and fiscal 2020 to fiscal 2021 for the metrics set forth below:

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See “Summary—Summary Historical Consolidated Financial and Other Data” for definitions of comparable sales growth, revenue per store, average order value and website visitors.

(1)

Data as of the end of the period. In fiscal 2019, our net store count declined by 707 stores. Additionally, not accounting for acquired or newly opened stores, we closed 744, 128 and 100 stores in fiscal 2019, fiscal 2020 and fiscal 2021, respectively.

Our superior scale, differentiated value proposition and relentless focus on service and experience have driven net revenue and Adjusted EBITDA at a CAGR of 21.8% and 108.9%, respectively, from

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fiscal 2019 to fiscal 2021. Our growth trajectory and financial performance prior to COVID-19 were strong and we have continued to out-perform the market during and beyond COVID-19. The onset of COVID-19 in our third quarter of fiscal 2020 caused us to pivot sharply towards digital offerings, thereby accelerating our strategic initiatives in that area.

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Note: See “Summary—Summary Historical Consolidated Financial and Other Data” for a reconciliation of Adjusted EBITDA to net income, the most comparable GAAP measure.

Industry Overview

The Sleep Industry is Large, Growing and Resilient

We operate in the large, growing and resilient U.S. sleep industry, which we define as (i) our core mattress and foundations market and (ii) adjacent sleep products, such as pillows, bed linens and bedroom furniture, among others. We estimated, based on data from Furniture Today and ISPA market studies, the U.S. retail mattress and foundations industry to be approximately $18 billion in 2020. This includes both brick and mortar and online channels, which we estimated to be approximately $12 billion and approximately $6 billion, respectively. The U.S. wholesale mattress and foundations industry is the primary driver of retail mattress sales in the United States and grew at a 5.5% CAGR between 1974 and 2020, according to data compiled by the ISPA. Additionally, according to data compiled by the ISPA, the U.S. retail mattress industry’s average order value grew at a CAGR of 3.8% between 1974 and 2020, and mattress unit volume grew at a CAGR of 2.3% over the same period. Importantly, while sales have dipped during more challenging economic environments, the market has consistently recovered quickly, demonstrating the postponement, not cancelation, of purchases. The table below sets forth the U.S. mattress and foundations wholesale market revenue for the periods presented:

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In addition to our core focus on the retail mattress and foundations industry, we operate in select adjacencies across the broader sleep market, including pillows and bed linens. We estimate that the pillows market in North America will be approximately $14 billion in 2021 and we expect it to grow at a CAGR of approximately 6% from 2021 through 2024, according to data compiled by Technavio. We estimate that the bed linens market in North America will be approximately $12 billion in 2021 and we expect it to grow at a CAGR of approximately 6% from 2021 through 2024, according to data compiled by Infiniti. We may also selectively enhance our offering to include other sleep-related adjacencies, such as sleep products for pets, sleep technology, sleep services and bedroom furniture.

Market Growth is Supported by Favorable Economic Fundamentals and Attractive Consumer Trends

Strong macroeconomic backdrop. Historically, mattress sales growth has closely followed U.S. gross domestic product (“GDP”) growth. According to The International Monetary Fund, U.S. GDP is

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expected to grow 7% in 2021, the fastest rate since 1984, and expected to continue to grow at an attractive rate of 4.9% in 2022. Additionally, the U.S. retail mattress and foundations industry is expected to further benefit from near-term inflation, which is expected to grow 3.4% in 2021 and 2.1% in 2022, according to The Federal Reserve.

Robust housing market. The housing market is a strong indicator of mattress sales in the United States. According to statistics jointly issued by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, housing starts increased by 6.9% in 2020 and have increased by 19.5% year-to-date as of September 2021. Additionally, further tailwinds include increasing turnover of the existing housing stock, which has been powered by the new construction market and a favorable interest rate environment. According to National Association of Realtors, it is estimated that there is a shortage of 5.5 million houses for sale in the United States based on current demand dynamics, which we expect to further increase demand for our products in the coming years.

Home ownership by younger generations. According to the U.S. Census Bureau, the home ownership rate in the United States is currently 65.4%; however, the homeownership rate of adults under 35 years old is only 37.8%. The Millennial generation is currently the largest U.S. generation and, as the U.S. population continues to age, is expected to make up a larger portion of the population. As the younger population groups age, they are expected to form new households, including purchasing new homes. We believe this is a strong tailwind to our industry.

Consumers Increasingly Recognize Quality Sleep as a Key Component of a Healthy Lifestyle

The sleep industry benefits from important macroeconomic trends underlying an increasing focus on health and wellness. Consumers increasingly recognize that high-quality sleep is critical to health and wellness, as more high-profile individuals, such as business leaders, celebrities and medical professionals, increasingly speak about the importance of a good night’s sleep. According to a 2021 report by the Better Sleep Council, consumers rate sleep as the single most important factor for their health and wellbeing, ahead of diet, exercise and mental health.

Additionally, according to a 2021 report by the Better Sleep Council, two in every five Americans are dissatisfied with their quality of sleep. Furthermore, we believe as consumers become more educated about the potentially negative health consequences of poor-quality sleep, they are likely to spend more on sleep products. A 2016 study from the Better Sleep Council found that the price that consumers expect to pay for a quality mattress had increased by 19% from 2007 to 2016. In addition, the consistent replacement cycle of sleep products helps create a stable, resilient market. The same 2016 study found that the mattress replacement cycle in the United States accelerated by 14% from 2007 to 2016.

Our goal is to help Americans sleep better to live better and we have launched a website, Sleep.com, to help consumers explore the health benefits of quality sleep. Our Sleep.com platform is differentiated by providing education through credible sources like sleep doctors, scientists and neurologists, inspiration through design resources and technology ideas, and wellness guidance through custom in-house and influencer-created content. Our approach is focused on continuing to build sleep expertise credibility and cultural relevance for our brand. Since inception in August 2020 through September 28, 2021, over 2.1 million unique visitors have visited Sleep.com. By providing helpful, interesting educational content, this platform allows us to maintain meaningful contact with consumers in the time span between one mattress product need and another, reinforcing our belief that we are the place to visit when it comes to sleep.

Competitive Landscape is Favorable for Omni-Channel Retailers with National Scale and a Physical Presence

The mattress and foundations industry is fragmented and comprised of mattress specialty retailers, furniture and department stores, club stores and DTC brands. Many of these market participants are not able to offer category expertise, a broad product offering or an omni-channel experience. For these reasons, customers have gravitated toward mattress specialty retailers, like us.

As consumer purchasing preferences continue to shift, we believe that mattress specialty retailers with category expertise and knowledge and an omni-channel model will succeed by allowing the

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customer to seamlessly transition between online and offline shopping and to personalize their purchasing experience. Therefore, the importance of a nationwide store footprint that can service the vast majority of the U.S. population, coupled with a best-in-class distribution, a leading digital platform and delivery network becomes critically important given the increased focus on convenience. According to research from the Better Sleep Council conducted in 2017, 92% of consumers say it is important to try out a mattress before making a purchase. Our differentiated suite of omni-channel capabilities positions us well to continue to gain share in a growing and fragmented market.

Our Strengths

We believe there are several key attributes that define and differentiate us and position us to continue to win in the attractive markets in which we operate.

Mattress Market Leader in the United States

We are the market leader in the U.S. retail mattress and foundations industry with, based on our analysis of data provided by industry sources, a market share of approximately 20% at the end of 2020. As the largest mattress specialty retailer by sales, market share and store count, we are a leading sleep retail brand in the United States. We are known for our comprehensive and diversified product assortment, exceptional customer service and compelling value proposition.

Our market-leading position is further supported by industry-leading reach, based on our analysis of data provided by industry sources and the largest marketing spend in the mattress retail industry, which provides us with approximately 30% share of voice, according to our estimates. Mattress Firm is a household name with approximately 140 million consumer touchpoints annually, across in-store, online and event sponsorships. We believe this exposure positions us to be top-of-mind for consumers when they begin their mattress purchase journey. To bolster our brand awareness, we launched our “Junk Sleep” campaign in July 2021, which has resulted in over 125 earned media placements and more than 3.2 billion potential impressions across earned, traditional, digital and social media from the launch date of the campaign in July 2021 through the end of September 2021.

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(1)

Includes net revenue from our B&M and Other Business operating segments, excluding financing fees.

(2)

Includes net revenue from our Digital operating segment, excluding financing fees.

Proven Omni-Channel Strategy

We drive our sales by creating an omni-channel customer experience through our integrated platform that allows customers to transition across channels seamlessly and personalize their experience. A national, coast-to-coast physical network of 2,353 stores as of September 28, 2021 provides exceptional in-store customer service, which we enhance by leveraging our sleep expertise through our digital toolkit. In fiscal 2021, we had over 62 million website visitors to MattressFirm.com. In-store and online, customers can use our MattressMatcher digital tool to get real-time and personalized mattress recommendations. Customers can then test the bed at our conveniently located stores to assess comfort level before making a purchase. We combine this in-store option with an engaging digital experience, where they can learn about sleep, such as at Sleep.com, chat with Sleep Experts, browse mattresses and other sleep-related products and interact with digital tools, such as MattressMatcher. We

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believe that the combination of our best-in-class in-store and online experience allows our customers to transact irrespective of how, where and when they want to shop, so there is no reason for them to go outside of our expertise-led ecosystem.

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Unparalleled Physical Infrastructure

We have the largest national, coast-to-coast retail footprint of any mattress specialty retailer in the United States with 2,353 stores as of September 28, 2021, with an estimated 82% of the U.S. population living within 10 miles of one of our stores (excluding areas without enough of a concentrated population to profitably support a store, thereby excluding approximately 28 million people in fiscal 2021, which determination we make based on a complex algorithm driven by a significant number of objective criteria, including, among others, market rents, population, population density, average household income and other demographics). We estimate that we are nearly twice the size of our next largest competitor (based on U.S. retail mattress sales) and eight times larger than the next largest multi-branded mattress specialty retailer in the United States (based on store count). Our national scale enables us to provide convenience to customers that we believe our competitors cannot match. Our industry-leading fulfillment capabilities are supported by 70 distribution centers and an extensive network of over 30 third-party delivery providers. This national footprint allows us to more efficiently manage our inventory and working capital. We are actively testing the option for same day delivery on all sales in six markets and in many markets we can already meet certain same day delivery requests from customers. Additionally, we offer a full range of white-glove delivery services, including in-home set-up and removal of old mattresses.

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Exceptional Customer Service and Personalized Experience Driven by Highly-Trained and Incentivized Team of Sleep Experts

We enhance our customers shopping experience with a superior level of service and personalized experience. As customers increasingly seek advice on sleep products, we have made meaningful investments to develop expertise across our team of “Sleep Experts.”

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Large and Highly Trained Salesforce. We employ more than 6,500 highly-trained Sleep Experts, who each receive approximately 240 hours of training in a six- to eight-week new hire education program. Our Sleep Experts also complete approximately 200 hours of ongoing annual training thereafter, compared to the approximately 35-hour retail average in 2019, based on the Association for Talent Development’s 2020 State of the Industry Report. They leverage our customer-centric digital toolkit, such as MattressMatcher, that can be used online and in-store to personalize the mattress selection process. They also educate customers about our comfort, satisfaction and price guarantees, third-party financing programs, product warranties and the other aspects of our exceptional customer experience;

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Effective Incentive-based Compensation Structure. In early 2020, we optimized the compensation structure for our Sleep Experts, shifting towards more commission-based compensation to better align with performance and profitability on an omni-channel basis. Sales per employee increased in the subsequent six months;

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Sleep Experts Support and Advocate for Our Omni-Channel Offering. Our team developed and continues to improve tools that remove friction from our sales process by allowing our store managers to receive commission for any customers that visit a store but ultimately transact online and vice versa.

From fiscal 2019 to fiscal 2020, the number of Sleep Experts who generated annual revenue above $1 million increased by over 150%, and, from fiscal 2020 to fiscal 2021, that number increased by over 120%. Moving forward, we will continue to invest in education and new tools for our Sleep Experts, so we can maintain our reputation as an expertise-focused platform with the most knowledgeable and engaged sales force.

Comprehensive and Diversified Product Offering Driving Unique Value Proposition

We provide an expansive selection of brands and high-quality products across a wide range of technologies, styles and price points. Our differentiated value proposition allows us to meet our customers’ needs across an evolving lifecycle of consumer preferences and demographics. Our broad mattress assortment is driven by a mix of national brands, national exclusive brands and private brands, each catering to different customer preferences. We are the only mattress specialty retailer in the industry with all major national brands on omni-channel platforms, providing our customers with a best-in-class shopping experience. We stand behind the products we sell with our 120 Night Sleep Trial. If a mattress is not the perfect fit, we will happily pick it up and pair the customer with a new one, allowing an initially dissatisfied customer to switch to alternative brands, styles or technologies within the first 120 days of his or her original purchase. Because of our strong relationship with key suppliers, we are also able to offer customers many exclusive branded products and competitive prices, which adds to our differentiation. We also have a strong market position across all demographics, including the younger population. We believe we are well-positioned to acquire customers at a younger age and for life, with 33% of our customers transacting in the first seven months of 2021 categorized as “under 35 years old.”

We believe that our national scale, share of voice and omni-channel presence make us the retail partner of choice for major mattress brands. We are the number one retailer for Tempur-Pedic, Serta, Sealy, Purple, Stearns & Foster and Beautyrest brands (based on our purchases of units from these U.S. mattress vendors in 2020). Our approach centers around what we believe resonates with our customers, and we are nimble in adapting and changing our in-store, as well as online, offering based on innovation, technologies and customer demand.

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The following chart indicates revenue by brand type for fiscal 2021:

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Attractive Financial Profile with Consistent Growth

We have consistently increased sales productivity and increasingly generated meaningful positive cash flow. We have also rationalized and optimized our store footprint over the last five years. From fiscal 2019 to fiscal 2020, we reduced our store count by 115 stores, or 4.5%, and from fiscal 2020 to fiscal 2021, we reduced our store count by 66 stores or 2.7% and believe we recaptured a significant share of sales from the closed stores. In addition, we streamlined our workforce and retained top-performing Sleep Experts. As a result, from fiscal 2019 to fiscal 2020, our net revenue increased by $294.3 million, our net loss decreased by $1,091.4 million, resulting in net income of $125.6 million, and Adjusted EBITDA increased by $102.9 million. Moreover, from fiscal 2020 to fiscal 2021, our net revenue increased by $1,136.3 million, net income decreased by $290.7 million, resulting in a net loss of $165.1 million, and Adjusted EBITDA increased by $412.9 million.

In 2020, COVID-19 accelerated several already growing channel trends and industry tailwinds that we believe are secular and likely to continue. In the United States there was growth in housing starts and housing turnover, which resulted in consumers investing more in their homes, particularly through purchases made while shopping online. As consumers’ preferences shifted towards online shopping, we ramped up our digital marketing efforts and omni-channel presence and believe we benefitted from such efforts, as evidenced by our 13.0% comparable sales growth in fiscal 2020. More specifically, we believe that by leveraging our digital platform, we have captured market share from online competitors, large and small furniture stores, mattress specialty retailers and department stores.

Importantly, we do not believe that consumer demand for mattresses purchased by our customers was unusually high in 2020. Domestic mattress unit sales (which are meaningfully more expensive than imported mattresses) grew only 2.6% in 2020, based on data from the ISPA. Based on this and other factors, we believe that our growth in 2020 was primarily derived from market share gains, and that there is minimal evidence that our sales were pulled forward from future periods and disproportionately captured in 2020 as a result of COVID-19. We believe that we will continue to win market share and grow at above-market rates as consumers continue to seek a true omni-channel experience.

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operating leverage. Since fiscal 2019, we have improved cash flow from operating activities and Adjusted Free Cash Flow. In fiscal 2021, we generated $452.6 million in cash flow from operating activities and $445.9 million in Adjusted Free Cash Flow, respectively. See “Summary—Summary Historical Consolidated Financial and Other Data” for a reconciliation of Adjusted Free Cash Flow to cash flow from operating activities, the most comparable GAAP measure.

Best-in-Class Organization and Culture to Support Growth

Our entire organization shares a common goal: a relentless focus on being recognized as the trusted authority on sleep in the United States. We believe our data-driven accountability and performance culture continues to deliver outstanding results and supports such goals. We are currently led by a team of experienced executives with diverse backgrounds in the consumer and retail industry. Our management team has a proven track-record of delivering results through a focus on operational excellence, training and development and data-driven decision-making. Our leadership team is supported by an experienced board of directors and more than 8,600 employees across the United States, including more than 6,500 highly-trained and incentivized Sleep Experts in our retail stores.

Our Growth Strategy

According to our estimates, approximately 70% of all mattress buyers use online tools at some point during their customer journey, either starting with an online search, continuing online after an initial store visit or completing a transaction digitally. We therefore believe that companies that are able to offer a truly seamless omni-channel experience to their customers will win in the long-term. We have defined and formulated our growth strategy with this overarching concept in mind, and we believe that our multi-pillar growth strategy and omni-channel capabilities, along with our superior scale, position us to drive above-market growth and profitability in the markets we serve.

Build and Leverage our Brand and Expertise to Maintain our Leadership Position

We will continue to position Mattress Firm as the go-to sleep brand for customers and the trusted authority on sleep. Whether in-store, by talking with one of our more than 6,500 highly-trained and incentivized Sleep Experts, or online, by using our MattressMatcher tool or engaging with one of our digital platforms such as Sleep.com, we will leverage our powerful, expertise-led ecosystem to allow our customers to learn about sleep, receive advice and ultimately transact with us to purchase the optimal mattress for themselves. We will continue to invest behind our brand and customer awareness, to further diversify and expand our product offering to support our reputation.

Elevate Customer Experience across All Channels

We believe that we are well-positioned to continue to drive traffic, increase customer conversion and average order value by leveraging our omni-channel capabilities and better serving existing and new customers across all channels. We plan to grow by:

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Focusing on Customer Service and Personalized Experience. We continue to evolve and optimize our service model to drive best-in-class customer experience. Our integrated omni-channel platform allows customers to transition seamlessly across channels and customize their journey. While customers start by browsing online or in-store, our team of highly-trained Sleep Experts provide high-touch personalized service and advice to help customers choose their best mattress or bedding product across all our physical locations and online. Our aspiration is to create a stress-free environment for customers to choose their sleep products, and we are launching our “Store of the Future” concept to create such experience and further engage our customers using our omni-channel capabilities; and

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Enhancing our Customer-Focused Digital Toolkit. We will continue to invest in providing a personalized user experience when our customers start or continue their journey online. We will do so by harmonizing our digital marketing approach, offering an extended product aisle online and using data and analytics tools and capabilities, to create a seamless omni-channel experience.

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Leverage Data and Personalized Experience to Create Customers for Life

As a leading mattress retailer, we aim to develop customers for life. We believe that there are a meaningful number of mattress purchase opportunities over a customer’s lifetime, including college graduation, first apartment, first family home and retirement, among others, and we are therefore focused on the lifetime value of attracting new and retaining our existing customers. To accomplish this goal, we will continue to refine our customer engagement model to align with each customer’s preferences, purchasing process and lifecycle, including through the following efforts:

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Build Awareness. Continue to focus on “upper-funnel” marketing campaigns to allocate advertising dollars efficiently, identify potential customers and convince them that we are their sleep products retailer of choice;

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Facilitate Active Research. Refine and upgrade our omni-channel capabilities to encourage customers to use our in-store and digital toolkits to conduct mattress and sleep-related research;

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Offer a Seamless, Personalized Purchase Experience. Offer an engaging, personalized omni-channel experience and a market-leading value proposition;

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Engage with Customers Post-purchase. Enhance ongoing customer engagement by leveraging our digital toolkit, such as Sleep.com, so customers have access to a virtual Sleep Expert and interactive, educational resources when not in-store; and

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Increase Customer Loyalty. Focus on improving customer engagement and increase customer loyalty.

Accelerate Marketing Outcomes and Build Brand Recognition

We will continue to leverage our data-driven marketing capabilities across multiple channels to drive traffic to our stores and digital platform in a cost-effective way. We believe our ability to target and personalize our marketing will drive consumers to shop with us, increase conversion rates and increase average order value.

We have increased and optimized our marketing spend and aligned it with customer demand. In fiscal 2021, 58% of our marketing spend was digital. We plan to continue to utilize data and analytics capabilities to refine targets, track performance and accelerate our results. We will also be selectively investing in highly efficient “upper-funnel” marketing campaigns to further increase our brand recognition, strength and awareness, such as our “Junk Sleep” campaign. We are able to leverage our national scale and national presence to create efficiencies by running broad campaigns focused on building our brand that reach a wide audience across the United States. As a result, returns on our marketing investment have been increasing since 2019.

Moving forward, focusing on our “customer for life” strategy will allow us to increase repeat customer purchases and shorten replacement cycles. We believe that we will be able to continue to drive new and repeat customer growth with our targeted, locally-led and nationally supported marketing strategy.

Disciplined Footprint Expansion

We plan to reinforce our leadership in existing markets and restart our footprint expansion in some select underpenetrated markets. We have identified key markets, such as Los Angeles, CA and Buffalo/upstate NY, where we do not have a major presence and we believe we can successfully expand with attractive economics as well as filling out the remaining expansion opportunities in the Detroit market. We have developed a proven data-driven process for opening new locations, from site selection to post-opening local marketing initiatives, including tailoring floor offerings to local demand characteristics. We estimate potential for the key underpenetrated markets to be approximately new 300 stores over the next three years (without accounting for store closures). Newly opened stores, on average, have a payback period of approximately one year.

As part of our normal course operations, we plan to continue to monitor and, as necessary, close underperforming stores that no longer meet our operating and performance targets. The exit costs

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associated with such store closures typically are minimal and consist of unamortized leasehold improvements. Based upon our historical experience, we believe we will continue to achieve significant recapture rates from such closed stores with our nearby stores and digital platform.

Drive Operational Excellence to Fund Growth and Maximize Stockholder Value

We will continue to leverage our superior scale to fuel topline growth, enhance margins and drive operating leverage across our business. As we continue to serve more customers and operate our business using data-driven analytics, we will be able to analyze how our Sleep Experts perform and how our customers shop, both in-store and online. Our national scale and data-driven approach will allow us to learn from our day-to-day interactions, adapt our marketing efforts in real-time and continue to train our Sleep Experts on sleep and related best practices. We believe this will allow us to drive profitable revenue growth, including by maximizing attachment rates of auxiliary products, such as accessories and delivery, by minimizing discounted sales and by utilizing other opportunities to further drive topline efficiencies.

We expect to generate meaningfully increased efficiencies, leveraging our national scale and optimized retail footprint and digital operations, our distribution and delivery network, our corporate support functions, our national marketing reach, our training and development programs and our data and analytics capabilities, each over a growing revenue base. We also have an opportunity to expand gross margin by increasing share of our own private brands, including Sleepy’s and Tulo.

As a result of these growth strategies and our relatively low capital expenditures requirements, we expect to generate attractive growth, profitability and robust Adjusted Free Cash Flow to maximize value for our stockholders.

Corporate Information

We are a Delaware corporation formed on August 3, 2016 to facilitate the acquisition of Mattress Firm Holding Corp. and its mattress specialty retail business by Steinhoff International Holdings, N.V. (“Steinhoff International” and, together with its subsidiaries the “Steinhoff Group”). On September 7, 2021, we changed our name from Stripes US Holding, Inc. to Mattress Firm Group Inc.

In October 2018, Mattress Firm, Inc., its subsidiaries and certain of its affiliates filed voluntary petitions for relief under Title 11 of the U.S. Code in the U.S. Bankruptcy Court for the District of Delaware. Following our emergence from bankruptcy in November 2018, the Steinhoff Group owned 50.1% of our common stock and a group of creditors that provided exit financing (the “Creditor Stockholders”) owned the remaining 49.9%, in each case prior to dilution from equity awards granted to certain of our officers and non-employee directors.

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The following chart presents an overview of our ownership and organizational structure, after giving effect to this offering, assuming the underwriters do not exercise their option to purchase additional shares.

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Our principal executive offices are located at 10201 S. Main Street, Houston, Texas 77025 and our telephone number at that address is (713) 923-1090. Our internet address is www.mattressfirm.com. We also operate an internet site at

. Please note that any references to www.mattressfirm.com and www.sleep.com in this prospectus are inactive references only and that our websites, and the information contained on, or accessible through, our websites is not part of nor incorporated into this prospectus.

Recent Developments

On September 24, 2021, our operating subsidiary, Mattress Firm, Inc. (the “Borrower”), entered into a new term credit agreement by and among our indirect wholly-owned subsidiary, Mattress Holding Corp. (“Holdings”), Barclays Bank PLC, as administrative agent, and the other financial institutions parties thereto from time to time as lenders (as amended, restated, modified or supplemented, the “2021 Term Loan”), in an aggregate principal amount of $1,250 million, which matures on September 24, 2028. The proceeds of the 2021 Term Loan were used, together with $665 million of available cash on hand, to:

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pay $523 million to satisfy all obligations and terminate all commitments under the Borrower’s existing term and asset-based revolving credit agreements, both dated as of November 25, 2020;

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make distributions and other payments of $1,350 million in aggregate to existing stockholders, current and former management and certain of our non-employee directors (see “Executive Compensation—Compensation Discussion and Analysis—Elements of Executive Officer Compensation—Additional Discretionary Bonuses” and “ Executive Compensation—Compensation of Directors”); and

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the remaining $42 million was primarily used to pay related fees, costs and expenses in connection with the execution of 2021 Term Loan and related matters.

The Borrower may elect that the 2021 Term Loan bear interest at a rate per annum equal to either (i) a base rate (determined by reference to the highest of (a) the prime rate published by the Wall Street Journal, (b) the greater of (1) the federal funds effective rate and (2) the overnight bank funding rate,

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plus 0.5% and (c) one-month adjusted London Interbank Offered Rate (“LIBOR”) plus 1.00%) plus 3.25% or (ii) an adjusted LIBOR (which shall not be less than 0.75%) plus 4.25%. Additionally, the 2021 Term Loan is subject to amortization in equal calendar quarterly installments of principal in an amount equal to 0.25% of the aggregate principal amount of the 2021 Term Loan (which payment shall be reduced as a result of the application of certain prepayments, assignments and/or extensions, in each case, as set forth in the 2021 Term Loan) with the remaining balance payable at the final date of maturity. These quarterly payments in fiscal 2022 are expected to be $3.1 million per quarter. The 2021 Term Loan contains an annual requirement to calculate Excess Cash Flow (as defined in the 2021 Term Loan) and, if Excess Cash Flow exists, to prepay certain amounts of the 2021 Term Loan with the first payment due in the first quarter of fiscal 2023. See “Description of Certain Indebtedness.”

In addition, the Borrower entered into a new asset-based revolving credit agreement by and among Holdings, Barclays Bank PLC, as administrative agent, and the other financial institutions parties thereto from time to time as lenders (as amended, restated, modified or supplemented, the “2021 ABL Facility” and, together with the 2021 Term Loan, the “Senior Credit Facilities”), which provided an initial aggregate commitment amount of up to $125 million. As of September 28, 2021, no borrowings had been made under the 2021 ABL Facility.

Summary Risk Factors

Our business is subject to a number of risks, including risks that may prevent us from achieving business objectives or may adversely affect our business, results of operations and financial condition that you should consider before making a decision to invest in our common stock. These risks are discussed more fully under “Risk Factors” in this prospectus. Some of the most significant risks and uncertainties we face that may impact an investment in us include, among other matters, the following:

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the condition of the U.S. economy and U.S. consumer discretionary spending and a downturn in, or changing conditions of, the U.S. economy;

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the impact of COVID-19;

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a deterioration in our relationships with, or a deterioration of the brand images of, our primary suppliers;

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our dependence on a limited number of primary suppliers, and a failure by any of them to supply us with products in a timely manner or on acceptable terms or at all;

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product safety and quality control issues, including product recalls and product liability claims;

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intense competition and our ability to grow and maintain a competitive advantage;

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failure to successfully manage the challenges posed by our planned omni-focused growth;

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exposures to local economies, as well as local weather conditions and natural disasters as a result of our geographic concentration;

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our ability to establish and maintain a strong, favorable brand presence with consumers and successfully anticipate consumer trends;

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our ability to provide timely delivery to our customers, and any disruption in our delivery capabilities or our related forecasting, planning and control processes;

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our significant indebtedness under, and restrictions contained in, our Senior Credit Facilities;

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our ability to retain our senior management team and other key personnel;

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our ability to maintain effective internal controls over financial reporting;

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failure to protect the integrity, security and use of sensitive and confidential data that we hold relating to us and our customers, associates and suppliers;

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system failures, disruptions, security breaches or cyberattacks that could interrupt our information technology systems and operations; and

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the Steinhoff Group’s potentially differing interests from those of our other stockholders as well as sales or other transfers of our common stock by the Steinhoff Group as a result of its debt obligations and pursuant to various disputes and proceedings.

The Offering

Common stock offered by the selling stockholders

Option to purchase additional shares of common stock

The selling stockholders have granted the underwriters an option for a period of 30 days from the date of this prospectus to purchase up to an additional shares of common stock on a pro rata basis at the initial public offering price less the underwriting discount.

Shares of common stock to be outstanding after this offering

Use of proceeds

However, we will pay certain expenses, other than the underwriting discount, in connection with this offering.

Dividend policy

We currently expect to retain all future earning for use in the operation and expansion of our business and do not anticipate paying dividends on our common stock for the foreseeable future. Any future determinations with respect to the declaration, amount and payment of any dividends on our common stock will be subject to the sole discretion of our board of directors, and will depend on various factors, including applicable law. In addition, our ability to pay dividends is, and in the future may be, limited by the agreements governing any of our indebtedness we or our subsidiaries currently have or may in the future incur. See “Dividend Policy.”

Exchange / symbol

/ “MFRM”

Risk factors

You should read the “Risk Factors” section in this prospectus for a discussion of the factors to consider carefully before deciding to purchase any shares of our common stock.

The number of shares of our common stock outstanding immediately after this offering is based on shares of our common stock outstanding immediately prior to this offering, and:

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reflects the issuance of shares of our common stock upon settlement (to occur with respect to certain RSUs within 30 days after the closing of this offering and with respect to other RSUs within six months after the closing of this offering) of (i) performance-based restricted stock units (“Performance-Based RSUs”) awarded to certain of our officers (which performance conditions have been satisfied) and (ii) time-based restricted stock units (the “Time-Based RSUs”) for which the time-based conditions have been satisfied on or prior to the closing of this offering awarded to certain of our officers and non-employee directors, all of which restricted stock units (“RSUs”) were granted under our 2019 Omnibus Incentive Plan (the “2019 Plan”) and outstanding as of September 28, 2021;

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does not include shares of our common stock issuable upon settlement of Time-Based RSUs that remain subject to time-based conditions as of the closing of this offering awarded to certain of our officers under the 2019 Plan and outstanding as of September 28, 2021;

•

includes shares of our common stock issuable immediately following the closing of this offering upon the expected exercise of the stock options awarded to certain of our non-employee directors under the 2019 Plan outstanding as of September 28, 2021 at an exercise price of $ per share;

•

does not include shares of common stock reserved for issuance under our 2022 Omnibus Incentive Plan (the “2022 Plan”), which our board has approved and we intend to adopt in connection with this offering. See “Management—Executive Compensation—Compensation Arrangements Adopted in Connection with this Offering—2022 Omnibus Incentive Plan.” No additional grants will be made under the 2019 Plan;

•

does not include RSUs (all of which will be subject to vesting) to be issued under our 2022 Plan, that are expected to be granted to certain employees in connection with this offering;

•

assumes no exercise by the underwriters of their option to purchase additional shares from the selling stockholders;

•

assumes that the initial public offering price of our common stock will be $ per share (which is the midpoint of the price range on the cover page of this prospectus);

•

gives effect to a -to-one stock split effected on , ; and

•

gives effect to our amended and restated certificate of incorporation and amended and restated bylaws to be adopted in connection with the pricing of this offering.

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Summary Historical Consolidated Financial and Other Data

We present below our summary consolidated historical financial data for and as of the fiscal years ended October 1, 2019, September 29, 2020 and September 28, 2021. We have derived this data from our audited consolidated financial statements included elsewhere in this prospectus.

The following tables reflect the restatement of our audited consolidated financial statements as of and for the fiscal year ended September 28, 2021. Please see Note 20 — Restatement of Previously Issued Consolidated Statement of Cash Flows to the consolidated financial statements. We adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), ASU No. 2018-10, Codification Improvements to Leases, Topic 842, and ASU No. 2018-11, Targeted Improvements (collectively “Topic 842”) effective as of October 2, 2019. As a result of this change in accounting standards, certain of our financial information for the fiscal 2019 is not comparable to the subsequent periods, such as fiscal 2020 and fiscal 2021.

The historical results presented below are not necessarily indicative of the results to be expected for any future period. You should read the summary consolidated historical financial and other data presented below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Certain Indebtedness,” “Basis of Presentation” and our consolidated financial statements and related notes included elsewhere in this prospectus.

Statement of Operations Data

	Fiscal Year Ended
(in millions, except share and per share data)	October 1, 2019			September 29, 2020			September 28, 2021
Net revenue		$	2,962.3		$	3,256.6		$	4,392.9
Cost of sales			2,046.1			2,142.6			2,530.3
Total gross profit			916.2			1,114.0			1,862.6
Operating expenses:
Sales and marketing expenses			708.9			704.9			950.0
General and administrative expenses			276.1			247.2			316.1
Special bonus and director fees			—			—			151.9
Impairment of intangible assets			568.9			—			—
Impairment of goodwill			244.2			—			47.2
Total operating expenses			1,798.1			952.1			1,465.2
(Loss) income from operations			(881.9)			161.9			397.4
Other expense (income):
Interest expense, net			107.3			122.3			54.6
Remeasurement of embedded derivatives			12.2			(131.7)			—
Loss from debt extinguishments			8.5			—			490.3
(Loss) income before income taxes			(1,009.9)			171.3			(147.5)
Income tax (benefit) expense			(44.1)			45.7			17.6
Net (loss) income		$	(965.8)		$	125.6		$	(165.1)
(Loss) income per common share:
Basic		$			$			$
Diluted		$			$			$
Weighted average common shares outstanding:
Basic
Diluted

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Balance Sheet Data

(in millions)	September 29, 2020			September 28, 2021
Cash and cash equivalents		$	504.6		$	209.7
Inventories(1)			216.4			210.2
Working capital(2)			(7.4)			(443.6)
Total assets			3,797.7			3,539.1
Net long-term debt(3)			235.0			1,199.6
Total stockholders’ equity			1,441.6			77.2

(1)

Inventories is defined as the purchase price paid to vendors, adjusted to include the effect of vendor incentives that are generally based on a percentage of the cost of purchased merchandise. We utilize the weighted average cost method for determining inventory cost. Inventory is held at the lower of cost or net realizable value.

(2)

Working capital is defined as current assets less current liabilities.

(3)

Net long-term debt is defined as long-term debt net of unamortized discount and debt issuance costs.

Cash Flow Data

	Fiscal Year Ended
(in millions)	October 1, 2019			September 29, 2020			September 28, 2021 (As Restated)
Net cash (used in) provided by operating activities		$	(9.3)		$	379.0		$	452.6
Net cash used in investing activities		$	(41.1)		$	(46.3)		$	(102.2)
Net cash provided by (used in) financing activities		$	209.3		$	(3.1)		$	(645.3)

Operational Data and Other Financial Data(1)

	Fiscal Year Ended
(in millions, except percentages, number of stores at year-end and average order value)	October 1, 2019			September 29, 2020			September 28, 2021
	(unaudited)
Comparable sales growth(2)			7.5%			13.0%			36.1%
Revenue per store(3)		$	1.0		$	1.2		$	1.7
Number of stores at year-end			2,534			2,419			2,353
Average order value(4)		$	999		$	970		$	1,111
Website visitors(5)			27			56			62
Adjusted EBITDA(6)		$	153.4		$	256.3		$	669.2
Net income margin(7)			NM			3.9%			NM
Adjusted EBITDA margin(6)			5.2%			7.9%			15.2%
Adjusted Net (Loss) Income(8)		$	(34.9)		$	71.5		$	444.6
Capital expenditures		$	41.1		$	47.4		$	97.2
Adjusted Free Cash Flow (As Restated)(9)		$	(50.4)		$	331.6		$	445.9

NM = Not meaningful

(1)

This table contains non-GAAP financial measures which are financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States, or GAAP. These non-GAAP financial measures include Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income (Loss) and Adjusted Free Cash Flow. These non-GAAP financial measures should be considered along with, but not as alternatives to, the financial performance measures as

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calculated in accordance with GAAP. See “Non-GAAP Financial Measures” for a discussion of the usefulness, limitations and comparability of these non-GAAP financial measures.

(2)

Comparable sales are comprised of net revenue, net of discounts, returns and excluding customer financing fees, franchise fees and royalty income. A store is included in the comparable sales calculation on the first day of the thirteenth full fiscal month following such store’s opening. When a store is relocated, it is treated as a new store for purposes of this calculation. Comparable sales allow us to evaluate how our overall ecosystem is performing by measuring the change in period-over-period net revenue from physical stores that have been open for the applicable period and related online sales, assigned based on delivery address.

(3)

Revenue per store is defined as revenue from our B&M operating segment divided by the average number of stores for the applicable period presented.

(4)

Average order value is defined as net revenue, excluding customer financing fees, sales returns and exchange reserve, which totaled $77.5 million, $86.0 million and $90.6 million in fiscal 2019, fiscal 2020 and fiscal 2021, respectively, and income from Custom Fundraising Solutions (“CFS”) and franchise and royalty income, which totaled $9.9 million, $6.3 million and $7.2 million in fiscal 2019, fiscal 2020 and fiscal 2021, respectively, divided by the number of transactions for such fiscal periods.

(5)

Website visitors is defined as the number of website users, identified by internet protocol addresses and devices that have initiated at least one session on MattressFirm.com during the period. The number of website visitors is meaningful to our management of our digital channel because it allows us to better understand and measure (i) our customer engagement and conversion rates, (ii) our share of voice and its impact on driving visitors to our digital assets and (iii) the success of our omni-channel strategy.

(6)

Adjusted EBITDA is defined as net income (loss) before interest expense, net, income tax expense (benefit) and depreciation and amortization expense, as further adjusted to exclude impairment of intangible assets, impairment of goodwill, impairment of property and equipment and operating lease right-of-use assets and loss on disposal of property and equipment, loss from debt extinguishments and related adjustments to embedded derivatives, stock and other non-cash compensation, inventory reconfiguration initiative, restructuring costs, net, special bonus and director fees and offering costs. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by net revenue.

(7)

Net income margin is defined as net income divided by net revenue.

The following table provides a reconciliation of net (loss) income to Adjusted EBITDA for the periods presented. See “Non-GAAP Financial Measures” for further information, including usefulness, limitations and comparability.

	Fiscal Year Ended
(in millions, except for percentages)	October 1, 2019			September 29, 2020			September 28, 2021
Net (loss) income		$	(965.8)		$	125.6		$	(165.1)
Interest expense, net			107.3			122.3			54.6
Remeasurement of embedded derivatives			12.2			(131.7)			—
Income tax (benefit) expense			(44.1)			45.7			17.6
Depreciation and amortization expense			69.1			57.6			57.3
Impairment of intangible assets			568.9			—			—
Impairment of goodwill			244.2			—			47.2
Impairment of property and equipment and operating lease right-of-use assets and loss on disposal of property and equipment(a)			12.5			15.0			8.6
Loss from debt extinguishments(b)			8.5			—			490.3
Stock and other non-cash compensation(c)			8.2			13.2			3.7
Inventory reconfiguration initiative(d)			9.9			8.6			—
Restructuring costs, net(e)			122.5			—			—
Special bonus and director fees(f)			—			—			151.9
Offering cost(g)			—			—			3.1
Adjusted EBITDA		$	153.4		$	256.3		$	669.2
Net revenue		$	2,962.3		$	3,256.6		$	4,392.9
Adjusted EBITDA Margin			5.2%			7.9%			15.2%

(a)

We recorded loss on disposal of property and equipment primarily in connection with the store closings of $3.2 million, $1.8 million and $2.6 million for fiscal 2019, fiscal 2020 and fiscal 2021, respectively, an impairment on operating lease right-of-use assets of $9.5 million and $4.7 million for fiscal 2020 and fiscal 2021, respectively, and an impairment on property and equipment for underperforming store assets of $9.3 million, $3.7 million and $1.3 million for fiscal 2019, fiscal 2020 and fiscal 2021, respectively.

(b)

Represents a loss recorded upon the extinguishment of debt in fiscal 2019 associated with the Chapter 11 restructuring. Represents loss recorded upon the extinguishments of debt in fiscal 2021 associated with extinguishment of (i) the

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unfunded $150.0 million paid-in-kind loan (the “2018 PIK Loan”) and $418.0 million term loan (the “2018 Term Loan” and, together with the 2018 PIK Loan, the “2018 Loans”), (ii) the 2020 Term Loan, (iii) the $125 million ABL Facility entered into on November 21, 2018 (“2018 ABL Facility”) and (iv) the $125 million ABL Facility entered into on November 25, 2020 (“2020 ABL Facility”).

(c)

Represents stock and other non-cash compensation associated with our 2019 Plan.

(d)

During the fourth quarter of fiscal 2019 and during the first quarter of fiscal 2020, we undertook an initiative to re-configure and provide inventory slot availability within our B&M showrooms to facilitate the introduction of various new products. Costs incurred for the initiative include inventory liquidation and related sales associate incentive expenses.

(e)

Represents costs incurred by us associated with the restructuring program undertaken in conjunction with the Chapter 11 restructuring in fiscal 2019, including $90.2 million of lease termination fees, $42.8 million of legal and other professional fees and $10.8 million of various other costs, including inventory liquidation and severance, partially offset by the reversal of $21.3 million of portfolio fair value adjustments as a result of lease terminations.

(f)

Represents (i) a discretionary performance bonus of $135.3 million paid to eligible current and former employees in recognition of efforts made to exit bankruptcy and our post-restructuring transformation (ii) a payment of additional fees to certain non-employee directors of $14.6 million and (iii) and $2.0 million of payroll taxes associated therewith. These payments to our current and former employees and non-executive directors were made concurrently with the payment of a distribution to our common stockholders on September 24, 2021, in lieu of any adjustment to outstanding RSU awards.

(g)

Represents costs incurred during fiscal 2021 associated with this offering.

(8)

Adjusted Net (Loss) Income is defined as net (loss) income adjusted to exclude remeasurement of embedded derivatives, impairment of intangible assets, impairment of goodwill, impairment of property and equipment and operating lease right-of-use asset and loss on disposal of property and equipment, loss from debt extinguishments, stock and other non-cash compensation, inventory reconfiguration initiative, restructuring costs, net, special bonus and director fees, offering costs and net tax (expense) benefit of these adjustments and other discrete tax items.

The following table provides a reconciliation of net (loss) income to Adjusted Net (Loss) Income for the periods presented:

	Fiscal Year Ended
(in millions)	October 1, 2019			September 29, 2020			September 28, 2021
Net (loss) income		$	(965.8)		$	125.6		$	(165.1)
Adjustments:
Remeasurement of embedded derivatives			12.2			(131.7)			—
Impairment of intangible assets			568.9			—			—
Impairment of goodwill			244.2			—			47.2
Impairment of property and equipment and operating lease right-of-use asset lease and loss on disposal of property and equipment(a)			12.5			15.0			8.6
Loss from debt extinguishments(b)			8.5			—			490.3
Stock and other non-cash compensation(c)			8.2			13.2			3.7
Inventory reconfiguration initiative(d)			9.9			8.6			—
Restructuring costs, net(e)			122.5			—			—
Special bonus and director fees(f)			—			—			151.9
Offering cost(g)			—			—			3.1
Total Adjustments			986.9			(94.9)			704.8
Net tax (expense) benefit of adjustments(h)			(56.0)			25.2			(95.1)
Discrete tax items(i)			—			15.6			—
Adjusted Net (Loss) Income		$	(34.9)		$	71.5		$	444.6

NM = Not meaningful

(a)

We recorded a loss on disposal of property and equipment primarily in connection with the store closings of $3.2 million, $1.8 million and $2.6 million for fiscal 2019, fiscal 2020 and fiscal 2021, respectively, an impairment on operating lease of right-of-use assets of $9.5 million and $4.7 million for fiscal 2020 and fiscal 2021, respectively, and an impairment on property and equipment for underperforming store assets of $9.3 million, $3.7 million and $1.3 million for fiscal 2019, fiscal 2020 and fiscal 2021, respectively.

(b)

Represents loss recorded upon the extinguishment of debt in fiscal 2019 associated with the Chapter 11 restructuring. Represents loss recorded upon the extinguishments of debt in fiscal 2021 associated with extinguishment of (i) the 2018 Loans, (ii) the 2020 Term Loan, (iii) the 2018 ABL Facility and (iv) the 2020 ABL Facility.

(c)

Represents stock and other non-cash compensation associated with our 2019 Plan.

(d)

During the fourth quarter of fiscal 2019 and during the first quarter of fiscal 2020, we undertook an initiative to

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re-configure and provide inventory slot availability within our B&M showrooms to facilitate the introduction of various new products. Costs incurred for the initiative include inventory liquidation and related sales associate incentive expenses.

(e)

(f)

Represents (i) a discretionary performance bonus of $135.3 million paid to eligible current and former employees in recognition of efforts made to exit bankruptcy and our post-restructuring transformation, (ii) a payment of additional fees to certain non-employee directors of $14.6 million and (iii) and $2.0 million of payroll taxes associated therewith. These payments to our current and former employees and non-executive directors were made concurrent with the payment of a distribution to our common stockholders on September 24, 2021 in lieu of any adjustment to outstanding RSU awards.

(g)

Represents costs incurred during fiscal 2021 associated with this offering.

(h)

Represents the net impact on GAAP tax related to the adjustments to net income (loss).

(i)

Represents the reversal of discrete tax items incurred during the period.

(9)

Adjusted Free Cash Flow is defined as net cash provided by (used in) operating activities, less capital expenditures plus cash payment of deferred paid-in-kind interest.

The following table provides a reconciliation of net cash (used in) provided by operating activities to Adjusted Free Cash Flow for the periods presented:

	Fiscal Year Ended
(in millions)	October 1, 2019			September 29, 2020			September 28, 2021 (As Restated)
Net cash (used in) provided by operating activities		$	(9.3)		$	379.0		$	452.6
Less: Capital expenditures			41.1			47.4			97.2
Plus: Cash payment of deferred paid-in-kind interest(a)			—			—			90.5
Adjusted Free Cash Flow		$	(50.4)		$	331.6		$	445.9

(a)

Amount represents the cash payment of paid-in-kind interest deferred in fiscal 2019 and fiscal 2020, paid in connection with the extinguishment of the 2018 Loans in November 2020.

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with the other information contained in this prospectus, including our consolidated financial statements and the related notes thereto and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section, before deciding to invest in shares of our common stock. If any of the following risks actually occurs, our business, results of operations, financial condition and future prospects may be adversely affected. In such case, the trading price of our common stock could decline and you may lose all or part of your investment. Many of the following risks and uncertainties are, and will be, exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

Risks Related to Our Business

Our results of operations are dependent on the condition of the U.S. economy and U.S. consumer discretionary spending and a downturn in, or changing conditions of, the U.S. economy may cause a decline in U.S. consumer discretionary spending and may adversely affect our business, results of operations and financial condition.

Our results of operations are affected by the relative condition of the U.S. economy. All of our revenue is generated within the United States, making our results of operations dependent on the U.S. economy and consumer discretionary spending. Pressure on discretionary income brought on by economic downturns and slow recoveries, including housing market declines, pandemics or other widespread health crises, financial market volatility, changing energy prices, fiscal uncertainty, political uncertainty and weak labor markets, may cause consumers to reduce the amount they spend on discretionary items, including mattresses and other sleep-related products, and as a result, could materially adversely affect our business, results of operations and financial condition. General economic conditions, which are beyond our control and impact consumer discretionary spending, are affected by, among others:

•

consumer confidence in the economy;

•

wages, jobs and unemployment trends;

•

consumer debt levels;

•

consumer credit availability;

•

the housing market, including real estate prices and mortgage rates;

•

gasoline and fuel prices;

•

interest rates and inflation;

•

price deflation, which may result from the introduction of low cost imports;

•

slower rates of growth in real disposable personal income;

•

natural disasters;

•

national security concerns;

•

cyber-attacks;

•

outbreaks of pandemics or contagious disease, including the continued prevalence, resurgence and severity of COVID-19;

•

tax rates and tax policy;

•

immigration policy;

•

legislation and regulation, including the provision of economic relief, such as stimulus payments;

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•

trade disputes, labor shortages and other disruptions to the supply chain;

•

national and international security and safety concerns; and

•

other factors that influence consumer confidence and spending.

Increasing volatility in financial markets may cause some of the above factors to change with an even greater degree of frequency and magnitude.

The impact of COVID-19 has adversely affected and may continue to adversely affect our business, results of operations and financial condition.

In March 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. As a result of this declaration, as well as the imposition of various restrictions by governmental authorities and our own internally-imposed restrictions, each of which were and are intended to protect the health and safety of our associates, customers and communities, we closed our corporate headquarters and the majority of our stores during the three months ended June 30, 2020. Specifically, approximately 65% of our stores were closed for the majority of April 2020 and approximately 40% of our stores were closed for the majority of May 2020. In connection with such closures, we also temporarily furloughed a significant portion of our workforce, partially suspended lease payments and began lease renegotiations across our entire real estate portfolio. The COVID-19 pandemic has also necessitated the imposition of significant new safety measures to which we must adhere to safely serve our customers, while also providing for the safety of our associates, including, in certain cases, limitations on the number of customers allowed in our stores at any given time, increased distancing, face coverings, enhanced cleaning and sanitization protocols, and the temporary closure of certain of our facilities, including, but not limited to, retail stores and distribution centers, for cleaning and sanitization protocols. Each of these necessary measures has substantially increased our operating costs, including, but not limited to, costs incurred to implement the operational changes described above. As the COVID-19 pandemic continues, including the emergence of more virulent or transmissible variants, various governmental authorities and we may impose further requirements and restrictions on the operations of our facilities and business, such as, without limitation, the temporary, full or partial closures of our stores and distribution centers, that are intended to protect the health and safety of our associates, customers and communities. These requirements and restrictions are costly and disruptive to our business and as such may materially adversely affect our business, results of operations and financial condition.

Consumer spending generally may also be adversely affected by continued health concerns relating to the COVID-19 pandemic and by general macroeconomic conditions, including the impacts of any economic slowdown or recession resulting from the COVID-19 pandemic. Any decreased spending at our stores or online caused by decreased consumer confidence and spending, or unwillingness to visit our stores in-person as a result of the continued pandemic could result in a loss of revenue and profits and other material adverse effects. Also, if we do not respond appropriately to the pandemic, or if customers do not perceive our response to be adequate for a particular region or our company as a whole, we could suffer damage to our reputation and our brand, which could adversely affect our business, results of operations and financial condition.

The COVID-19 pandemic may also have a material adverse effect on our business, results of operations and financial condition by causing disruption to our supply chain. If the factories that manufacture our products or components of those products, the suppliers that supply us with our products, the distribution centers where we manage our inventory, or the operations of our logistics and other service providers are disrupted, temporarily closed or experience worker or raw material shortages, we may see further disruptions or delays in shipments and adverse effects to pricing of certain components of our products. The COVID-19 pandemic has already impacted the suppliers of products we sell, particularly as a result of mandatory shutdowns in locations where our products are manufactured and the redirection of raw materials for personal protective equipment and medical devices, which has resulted in inventory shortages and, in some cases, lengthened the time it has taken for us to deliver products to our customers.

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The full extent to which COVID-19 impacts our business, results of operations and financial condition will depend on future developments, including new information which may emerge concerning the severity of the pandemic, new variants and any actions or inactions to contain COVID-19 or mitigate its impact, among others, which are highly uncertain and cannot be predicted. The extent of the impact of COVID-19 on our business, results of operations and financial condition will also depend on the duration and spread of the outbreak, including whether available vaccines prove to have long-term efficacy or full acceptance, currently in-force and potential future vaccine mandate regulations and requirements, further mutations or related variants of the virus (or even the threat or perception that this could occur), within the markets in which we operate and the related impact on consumer confidence and spending, labor supply or product supply, all of which are highly uncertain. Actions we have taken or may take, or decisions we have made or may make, as a consequence of the COVID-19 pandemic may result in us becoming a party to litigation claims or legal proceedings, including, but not limited to, claims from our landlords arising from partially suspended rental payments and claims relating to our customers or associates becoming ill after visiting or working in our stores and other facilities, which could consume significant financial and managerial resources, result in decreased demand for our products and injury to our reputation. An extended period of ongoing disruption could materially affect our business, results of operations and financial condition.

A deterioration in our relationships with, or a deterioration of the brand images of, our primary suppliers could adversely affect our brand and customer satisfaction and result in reduced revenue and operating results.

Tempur Sealy and Serta Simmons are our primary suppliers of nationally branded mattresses. Purchases of products from these manufacturers accounted for 36.6% and 27.8%, respectively, in fiscal 2021, of our mattress product costs. Because of the large volume of our business with these manufacturers and our use of their branding in our marketing initiatives, our success depends on the continued popularity and reputation of these suppliers.

The partial or complete termination of, or prolonged negotiation over renewals or changes to, our supply agreements with our primary suppliers, or a significant adverse change in our relationship with any of these suppliers, could result in lost sales, harm to our reputation and ability to attract customers, added costs and distribution delays that could have a material adverse effect on our business, results of operations and financial condition. For example, in February 2017, following failed renegotiations related to our then-effective supply agreement with Tempur Sealy, Tempur Sealy sent us a notice of termination, and our supply of Tempur Sealy products ended during the subsequent fiscal quarter. As a result, we were unable to sell Tempur Sealy products, including all three national brands of Tempur-Pedic, Sealy and Stearns & Foster, until October 2019, when our supply of such products resumed following our entry into a new supply agreement with Tempur Sealy in June 2019.

Additionally, our continued focus on increasing market share may result in a material adverse effect on retailers who have different relationships with either of these suppliers or our other suppliers, which could affect our relationship with these suppliers. Any (i) deterioration of their brand image, (ii) reduction in supplier incentives, (iii) adverse change in our relationship with any of them, (iv) adverse change in their financial condition, production efficiency, product development or marketing capabilities, (v) disruptions to their supply of raw materials or production capabilities or (vi) change in their management could materially adversely affect our own brand, our product assortment and the level of our customers’ satisfaction, among others, which could result in a material adverse effect on our business, results of operations and financial condition.

We depend on a limited number of primary suppliers, and a failure by any of them to supply us with products in a timely manner or on acceptable terms or at all may impair our inventory and adversely affect our ability to meet customer demands, which could result in a decrease in net revenue.

Our current suppliers may not continue to sell or deliver products to us in a timely manner on acceptable terms or at all, and we may not be able to establish relationships with new suppliers to ensure delivery of products in a timely manner or on terms acceptable to us, as well as ensuring that

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such merchandise complies with applicable product safety laws and regulations, and meets customer demands. We may not be able to acquire desired merchandise in sufficient quantities on terms acceptable to us in the future. We are also dependent on suppliers for assuring the quality of merchandise supplied to us. Our suppliers’ ability to sell and deliver sufficient quantities of products to us, on acceptable terms or at all, ensure compliance with applicable product safety laws and regulations and meet customer demands may fluctuate based on a number of factors beyond our control, including:

•

oil prices and other energy-related costs;

•

changes in supply and demand;

•

general economic conditions;

•

severe weather;

•

labor costs;

•

competition;

•

import duties;

•

tariffs;

•

supply chain constraints or disruptions;

•

currency exchange rates;

•

government regulation; and

•

unforeseen casualty events.

Our inability to acquire a sufficient quantity of suitable merchandise in the future or the loss of one or more of our suppliers and our failure to timely or effectively replace them may harm our relationship with our customers and our ability to attract new customers, resulting in a material adverse effect on our business, results of operations and financial condition.

Moreover, the countries in which our merchandise or components thereof are currently manufactured, or may be manufactured in the future, could become subject to new trade restrictions imposed by the U.S. or other foreign governments. Trade restrictions, including increased tariffs or quotas, embargoes and customs restrictions, on mattresses, as well as domestic or foreign labor strikes, work stoppages or boycotts, including as a result of the COVID-19 pandemic, could increase the cost or reduce the supply of merchandise available to us and have a material adverse effect on our business, financial condition and results of operations. In addition, our merchandise supply could be impacted if our suppliers’ imports become subject to existing or future duties and quotas, or if our suppliers face increased competition from other companies for production facilities, import quota capacity and shipping capacity. Moreover, we may not be able to adjust the prices of our products or other fees charged to our customers, especially in the short term, to recover these cost increases in raw materials and energy. Any increase in the cost of our merchandise or limitation on the amount of merchandise we are able to purchase could have a material adverse effect on our business, results of operations and financial condition.

We depend on our executive officers and other key employees, and if we lose the services of such persons, we may not be able to run our business effectively.

Our future success depends in part on our ability to attract and retain key executive, merchandising, marketing, operational and sales personnel. In connection with our emergence from bankruptcy and the adoption of the 2019 Plan, we granted RSUs and Phantom PIK Loan Awards to certain of our officers. The value of these awards has appreciated considerably with the rapid growth of our business. In addition, as a result of this growth, our senior management received an additional discretionary bonus in September 2021, which, together with the vesting of the RSUs and Phantom PIK Loan Awards anticipated to occur immediately following the closing of this offering, will result in significant cash and stock payments. As a result of these significant payments to our senior management, we cannot assure you that we will be able to retain their services. See “Executive Compensation—Compensation Discussion and Analysis.”

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If any executive officer or other key employee ceases to be employed by us, we would have to hire additional qualified personnel. Our ability to successfully attract and hire other experienced and qualified employees to fill key operational or executive roles cannot be assured. In addition, we face competition for these professionals from our competitors, our suppliers and other companies operating in our industry as well as other non-retail companies. Additionally, if our employees have insufficient bandwidth to perform their operational responsibilities and implement our strategic initiatives, our business performance could suffer.

As a result, the loss or unavailability of any number of our executive officers or key employees due to any of the factors discussed above would likely have a material adverse effect on our business, results of operations and financial condition.

We have incurred significant losses from operations in the past and we may not be able to return to, maintain or increase our profitability.

We have incurred significant net losses in the past. Our net loss was $965.8 million for fiscal 2019, which was primarily driven by impairments of goodwill and intangibles and $165.1 million for fiscal 2021, which was primarily driven by the loss from debt extinguishments in connection with the repayment of the 2018 Loans and the entry into the 2021 Term Loan and payment of special bonus and director fees. Additionally, we have experienced, and may continue to experience, significant fluctuations in our net income (loss). Our ability to continue to generate revenue and maintain profitability depends upon our ability to successfully source, market and distribute our products. We expect to continue to incur significant expenses as we seek to grow our business. A meaningful portion of our expenses are fixed, including certain expenses related to our stores and personnel. Our expenses will also increase as we grow and operate as a public company and add operational, financial and management personnel, including personnel to support our transition to being a public reporting company. As a result, we may incur net losses in the future, including in connection with our stock-based compensation expenses which we expect to substantially increase in the first fiscal quarter following the closing of this offering, the majority of which will be determined based upon our value at the closing of this offering. Our net losses have had, and may continue to have, an adverse effect on our stockholders’ equity and working capital. There can be no assurance that we will return to or maintain profitability and, even if we do maintain profitability, we may not be able to increase profitability. If we are unable to return to or maintain profitability, the value of our equity securities may be adversely affected. In addition, our net cash flow from operations has been in the past, and may be in the future, negative.

Product safety and quality control issues, including product recalls and product liability claims, could harm our reputation, divert resources, reduce revenue and increase costs.

The products we sell in our stores are subject to regulation by the U.S. Consumer Product Safety Commission and similar state regulatory authorities. Such products could be subject to recalls and other actions by these authorities, and to product liability claims if the use of any such products results in personal injury or property damage. Product safety concerns may require us to voluntarily remove selected products from our stores or recall such products from our customers who purchased them. Further, because we do not manufacture our products, we are partially dependent on our manufacturers to maintain our high standards of quality. The insurance we maintain against product liability claims may not continue to be available on terms acceptable to us and such coverage may not be adequate to cover the types of liabilities actually incurred. A successful claim brought against us, if not fully covered by available insurance coverage, or any claim or product recall that results in significant adverse publicity against us and damage to our reputation, could result in customers purchasing fewer of our products and could have a material adverse effect on our business, results of operations and financial condition. Such recalls, voluntary removal of products and product liability claims can result in, among others, lost sales, increased return rates, diverted resources, potential harm to our reputation and increased customer service costs, which could have a material adverse effect on our business, results of operations and financial condition.

Our ability to grow and become profitable, and thereafter remain so, may be limited by direct or indirect competition in the U.S. retail bedding industry, which is highly competitive.

The retail bedding industry in the United States is highly competitive. Participants in the bedding industry compete primarily based on store location, service, price, product selection, brand name

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recognition and marketing. There can be no assurance that we will be able to continue to compete favorably with our competitors in these areas. Our retail competitors include other mattress specialty retailers with a national presence, such as Sleep Number, regional and local specialty retailers of bedding, national and regional chains of retail furniture stores carrying bedding, department store chains with bedding departments, big box retailers, warehouse clubs, factory direct stores, non-traditional mattress specialty retailers and e-commerce retailers, such as amazon.com. We also have experienced increased competition from online mattress specialty retailers, such as Casper, Purple and us-mattress.com. If we are unable to continue offering a compelling alternative to the shopping experience provided by online mattress specialty retailers or there is, in general, a significant shift in consumer preference to buying mattresses online, there could be a resulting decrease in traffic to our brick and mortar retail store locations, which could have a material adverse effect on our business, results of operations and financial condition.

Additionally, retail furniture stores or bedding manufacturers may open retail locations specifically targeting specialty bedding as a way to directly compete with us and other mattress specialty retailers. For example, in the period prior to our bankruptcy, we faced heightened competition that materially adversely affected our results of operations, impacting both our revenue and net income. In particular, the entry of online mattress specialty retailers, such as Casper, Purple and us-mattress.com, into the retail bedding industry increased the number of options available to customers. Certain of our competitors have substantially greater financial and other resources than us. Accordingly, we may face periods of intense competition in the future that could have a material adverse effect on our planned growth and future results of operations. In addition, the barriers to entry into the retail bedding industry are relatively low. New or existing bedding retailers could enter our markets and increase the competition we face. Competition in existing and new markets may also prevent or delay our ability to gain relative market share. Any of the developments described above could have a material adverse effect on our planned growth and our business, results of operations and financial condition.

If we fail to successfully manage the challenges posed by our planned omni-focused growth or encounter unexpected difficulties, our business, results of operations and financial condition could be materially adversely affected.

One of our central, long-term objectives is to increase revenue and profitability through market share leadership. Our ability to achieve and maintain market share leadership, however, is contingent upon our ability to (i) open or acquire stores in favorable locations, (ii) advertise our stores and products in an effective and cost-efficient manner, (iii) provide digital tools that resonate with consumers and drive traffic to our stores or e-commerce platforms and (iv) achieve operating results in new stores at the same level as our similarly situated current stores. There can be no assurance, however, that we will be able to open or acquire stores in new markets as required to achieve market leadership in such markets, identify and obtain favorable store sites, identify and acquire acquisition targets, arrange favorable leases for stores or obtain governmental and other third-party consents, permits and licenses needed to open or operate stores in a timely or cost-effective manner, hire, train and retain a sufficient number of qualified managers for new stores, attract a strong customer base and create brand familiarity in new markets, or successfully compete with established mattress stores in the new markets we enter. Moreover, if we are unable to open or acquire an adequate number of stores in a market, or if store level profitability is lower than expectations, we may be unable to achieve or maintain the market presence necessary to develop or sustain profitable operations in that market. Failure to open or acquire stores in favorable locations or to advertise, including through digital advertising, in an effective and cost-efficient manner could place us at a competitive disadvantage as compared to retailers who are more adept than us at managing these challenges, which, in turn, could materially adversely affect our business, results of operations and financial condition.

Because we have a significant concentration of stores in several geographic regions in the United States, we are subject to regional risks.

We have a high concentration of stores in certain geographic regions, such as the Gulf Coast, Northeast, Mid-Atlantic, Great Lakes, Southwest and Texas, and the Southeast. We therefore have exposure to these local economies as well as to local weather conditions and natural disasters, including

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hurricanes, severe flooding, snowstorms, severe freezing conditions, pandemics and other natural disasters. If these markets individually or collectively suffer an economic downturn or other significant adverse event, there could be a material adverse effect on our comparable sales, net revenue and profitability and our ability to implement our planned growth program. Any natural disaster or other serious disruption in these markets due to hurricanes, severe flooding, snowstorms, severe freezing conditions, pandemics or any other calamity could damage inventory and could result in decreased revenue.

Our growth strategy is partially dependent upon our ability to establish and maintain a strong, favorable brand presence with consumers.

For our growth strategy to succeed, consumers must be aware of our brand and perceive our brand as a trusted, reputable authority in the sleep industry. Our brand reputation can be materially adversely affected by negative or sensational claims, rumors or customer reviews made publicly by our competitors or others, including on social media, consumer review platforms, as well as litigation brought against our subsidiaries. If we do not continually invest in marketing efforts, in updating our e-commerce platforms or in maintaining the quality, appearance and optimum location of our brick and mortar presence, our brand awareness as well as the perception of our brand among consumers could erode. If our brand is not top of mind with consumers or consumers associate a negative reputation with our brand, our customer traffic and sales could decline, which could have a material adverse effect on our business, results of operations and financial condition.

Our success is highly dependent on our ability to provide timely delivery to our customers, and any disruption in our delivery capabilities or our related forecasting, planning and control processes may adversely affect our business, results of operations and financial condition.

An important part of our success is our ability to deliver mattresses and other sleep-related products quickly to our customers. Our ability to deliver our products is dependent on our successful planning and distribution infrastructure, including merchandise ordering, transportation and receipt processing, the ability of our suppliers to meet our distribution requirements and the ability of our contractors to meet our delivery requirements. Our ability to maintain this success depends on the continued identification and implementation of improvements to our forecasting and planning processes, consumer data analyses, distribution infrastructure and supply chain. We also need to ensure that our distribution infrastructure and supply chain keep pace with our anticipated growth and increased number of stores. The cost of these enhanced processes could be significant and any failure to maintain, grow or improve them could materially adversely affect our results of operations. Our business could also be adversely affected if there are delays in product shipments to us due to freight difficulties, natural disasters, disruptions in raw material supplies, plant closures, difficulties of our suppliers or contractors involving strikes or other difficulties at their principal transport providers or otherwise.

We may not be able to successfully anticipate consumer trends, and our failure to do so may lead to loss of consumer acceptance of the products we sell and damage to our reputation resulting in reduced net revenue.

Our success depends on our ability to anticipate and respond to changing trends and consumer demands in a timely manner. If we fail to identify and respond to emerging trends, consumer desire to patronize our stores and e-commerce platforms, as well as purchase our products, and our image or relevancy with current or potential customers may be harmed, which could reduce our net revenue. If we misjudge market trends, we may significantly overstock unpopular products and be forced to take significant inventory markdowns, which would have an adverse effect on our gross profit and cash flow. Conversely, shortages of models that prove popular could also reduce our net revenue.

Our future growth and profitability will be dependent in part on the effectiveness and efficiency of our advertising expenditures.

We expect that our advertising expenditures, which are the largest component of our sales and marketing expenses, will continue at similar levels, or increase, for the foreseeable future. Our paid

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advertising efforts consist of online channels, including search engine marketing (“SEM”), display advertising and paid social media, as well as more traditional forms of advertising, such as direct mail and television advertisements. These efforts are expensive and may not result in the cost-effective acquisition of customers. We cannot assure you that the net income from new customers we acquire will ultimately exceed the cost of acquiring those customers. We also cannot assure you that our advertising expenditures or the advertising message that we select will result in increased customer traffic, sales, brand name awareness or market share or that we will be able to manage such advertising expenditures on a cost-effective basis. Should we fail to realize the anticipated benefits of our advertising program, or should we fail to effectively manage advertising costs, this could have a material adverse effect on our business, results of operations and financial condition.

Moreover, we rely in part upon third parties, such as search engines, advertising agencies and social media influencers, for certain advertising services, and we are unable to fully control their efforts. We obtain a significant amount of traffic through search engines such as Google and, therefore, rely on those search engines. Search engines frequently update and change the algorithms that determine the placement and display of results of a user’s search, such that the purchased or algorithmic placement of links to our site can be adversely affected. Moreover, a search engine could, for competitive or other purposes, alter its algorithms or search results in a manner that negatively affects our paid or non-paid search ranking, and competitive dynamics could impact the effectiveness of SEM or search engine optimization (“SEO”). We also obtain traffic through social influencers utilizing networking websites or other channels used by our current and prospective customers. As e-commerce and social networking continue to rapidly evolve, we must continue to successfully establish relationships with these channels and influencers and may be unable to develop or maintain these relationships on acceptable terms, if at all. If we are unable to cost-effectively drive traffic to our websites and other properties, our ability to acquire new customers and our business, results of operations and financial condition could be materially adversely affected.

If we are unable to renew existing leases or enter into new leases for additional stores on favorable terms, our business, results of operations and financial condition could be negatively impacted.

We currently lease nearly all of our store locations. Many of our current leases provide for our unilateral option to renew for additional rental periods at specific rental rates. Our ability to re-negotiate favorable terms on an expiring lease, to negotiate favorable terms for a suitable alternate location or our ability to negotiate favorable lease terms for additional store locations will depend on conditions in the real estate market, competition for desirable properties, our relationships with current and prospective landlords or on other factors that are not within our control. Additionally, if a store location is not profitable, and we decide to close it, as we have done in the past and may do in the future, we may nonetheless be committed to perform our obligations under the applicable lease. Any or all of these factors and conditions could negatively impact our ability to negotiate or re-negotiate our leases on favorable terms or at all, which could have a material adverse impact on our business, results of operations and financial condition.

Our strategy to expand our e-commerce business and to drive customer traffic with our complementary website, Sleep.com, and related omni-partnerships may be unsuccessful.

We offer mattresses, other sleep-related products and furniture for sale through our websites. As a result, we encounter risks and difficulties frequently experienced by internet-based businesses, including risks related to our ability to attract and retain customers on a cost-effective basis and our ability to operate, support, expand and develop our internet operations, website and software and other related operational systems. Although we believe that our participation in both e-commerce and physical store sales is a distinct advantage for us due to synergies and the potential for new customers, supporting product offerings through both of these channels could create issues that have the potential to materially adversely affect our business, results of operations and financial condition. For example, if our e-commerce business successfully grows, it may do so in part by attracting existing customers from our B&M operations, rather than new customers, thereby reducing the financial performance of our stores. In addition, customers may use our website simply to research products that they intend to

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purchase from brick and mortar or other competitors and thereby reduce or eliminate the impact of funds spent on our e-commerce efforts.

As we continue to grow our e-commerce business, the impact of attracting existing rather than new customers, conflicts between product offerings online and through our stores and of opening up our channels to increased internet competition could have a material adverse effect on our business, results of operations, and financial condition. Also, as we continue to expand our e-commerce business and offer a broader assortment of products across all of our sales channels, we offer more DTC products that are shipped directly to consumers from the sellers of such products. From time to time, we encounter risks and difficulties related to DTC merchandise as the suppliers of these products do not have the benefit of our supplier relationships, distribution centers, internal logistics support and delivery contractors, which, in any case, can result in untimely deliveries or out-of-stock assortment. Continued difficulties with our DTC offerings may jeopardize our plans to expand our product assortment and leave us at a competitive disadvantage with other retailers.

In the fourth quarter of fiscal 2020, in furtherance of our omni-channel strategy, we launched a new website, Sleep.com, on which we provide consumers with curated content on sleep health and wellness and related products and services. While we have invested significant resources in Sleep.com and related omni-channel initiatives, there is no guarantee that our efforts will resonate with consumers or result in a level of attributable sales at our transactional properties that meets or exceeds our investment. If consumers do not use Sleep.com or the related mobile application or make purchases of products and services from our properties or program affiliates at levels that support our investment in these initiatives our business, results of operations and financial condition may be materially adversely affected.

If we determine that our goodwill or other acquired intangible assets are impaired, we may have to write off all or a portion of the impaired assets.

As of October 1, 2019, September 29, 2020 and September 28, 2021, we had goodwill and intangible assets, net of accumulated amortization, of approximately $1.5 billion, $1.5 billion and $1.5 billion, respectively. In fiscal 2019, we had, among other impairments, an impairment of intangible assets of $568.9 million and an impairment of goodwill of $244.2 million and in fiscal 2021 we had an impairment of goodwill of $47.2 million. Management exercises significant judgment in identifying and assessing whether impairment indicators exist, or if events or changes in circumstances have occurred, including market conditions, results of operations, competition and general economic conditions. Current accounting guidance requires that we test our goodwill and indefinite lived intangible assets for impairment on an annual basis, or more frequently if warranted by the circumstances. Any changes in key assumptions about the business units and their prospects or changes in market conditions or other external factors could result in an impairment charge, and such a charge could have a material adverse effect on our business, results of operations and financial condition. In addition, because we test goodwill impairment at the reporting unit level, we may be required to incur goodwill impairment charges based on adverse changes affecting such reporting unit, regardless of our overall performance. Such impairment charges may have a material adverse effect on our business, results of operations and financial condition.

Historically, we experienced losses on store closings and impairment of store assets, and there can be no guarantee that we will not experience similar or greater losses of this kind in the future.

In the past, we closed a significant number of our stores as we re-rationalized our footprint and we experienced losses on store closings and impairment of store assets as a result. We experienced losses on store closings and impairment of store assets of $12.5 million, $15.0 million and $8.6 million in fiscal 2019, fiscal 2020 and fiscal 2021, respectively, for this reason. Additionally, we may close certain locations going forward. There can be no guarantee that we will not experience similar or greater losses of this kind in the future due to (i) general economic conditions, (ii) competitive or operating factors or (iii) other reasons, which may have a material adverse effect on our business, results of operations and financial condition.

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Our comparable sales and results of operations fluctuate due to a variety of economic, operating, industry and environmental factors and may not be fair indicators of our performance.

Our comparable sales and results of operations have experienced fluctuations, which can be expected to continue. Numerous factors affect our comparable sales results, including, among others, the timing of new and relocated store openings, the relative proportion of new and relocated stores to mature stores, cannibalization resulting from the opening of new stores in existing markets, changes in advertising and other operating costs, the timing and level of markdowns, changes in our product mix, weather conditions, retail trends, the retail sales environment, economic conditions, changes in COVID-19 infection rates in a market and related government mandates, inflation, the impact of competition, changes in consumer preferences and our ability to execute our business strategy efficiently. As a result, comparable sales and results of operations may continue to fluctuate and may cause the price of our common stock to fluctuate significantly. Therefore, we believe period to period comparisons of our results may not be a fair indicator of and should not be relied upon as a measure of our operating performance.

Any inability to balance our merchandise offerings that consist of our national brands, national exclusive brands and private brands with merchandise that consist of our national brands may have an adverse effect on our business, results of operations and financial condition.

Our merchandise selection that consists of national brands, national exclusive brands and private brands represents a significant portion of our net sales. Our national brands, national exclusive brands and private brands merchandise generally has a higher gross margin than the comparable national brands merchandise we offer. As a result, we may determine that it is best for us to continue to hold or increase the penetration of our national brands, national exclusive brands and private brands in the future. However, carrying our national brands, national exclusive brands and private brands may limit the amount of national branded merchandise we can carry and, therefore, there is a risk that customers’ perception that we offer the appropriate breadth of assortment for many major brands could decline. By maintaining or increasing the amount of our national brands, national exclusive brands and private brands, we are also exposed to greater risk, as we may fail to anticipate trends correctly. In addition, to the extent our national brands, national exclusive brands and private brands underperform, our overall brand and reputation may be harmed. These risks, if they occur, could have a material adverse effect on our business, financial condition and results of operations.

Our results of operations are seasonal and subject to adverse weather and other circumstances, the occurrence of which during periods of expected higher sales may result in disproportionately reduced sales for the entire year.

We historically have experienced and expect to continue to experience seasonality in our net revenue and net income. We generally have experienced more sales and a greater portion of income during the fourth quarter of our fiscal year, which ends on the Tuesday closest to September 30th of each year, due to a concentration of holidays such as the Fourth of July and Labor Day occurring in the summer. Approximately 29%, 33% and 28% of our net revenue occurred in the fourth quarter of fiscal 2019, fiscal 2020 and fiscal 2021, respectively. Any decrease in our fiscal fourth quarter sales, whether because of adverse economic conditions, adverse weather conditions, pandemics, timing of holidays within our quarters or other unfavorable circumstances in our primary markets during any quarter, could have a disproportionately adverse effect on net revenue and results of operations for the entire fiscal year.

Our growth strategy will be dependent upon, and limited by, the availability of adequate capital.

Our growth strategy will require capital for, among others, opening new stores and entering into new markets, upgrading the look and feel of existing stores, making investments in digital tools, such as MattressMatcher, Sleep.com, and SleepScore, and developing partnerships with experts and influencers in sleep and wellness. We expect that such capital expenditures will include:

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researching real estate and consumer markets;

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lease, inventory, property and equipment costs;

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integration of new stores and markets into company-wide systems and programs;

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upgrades to our point of sale system, website and other digital tools;

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remodeling of existing stores; and

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other costs associated with our e-commerce platforms, new and existing stores and market entry expenses and growth.

If cash generated internally is insufficient to fund capital requirements, or if funds are not available under our 2021 ABL Facility, we will require additional debt or equity financing. Adequate financing may not be available or, if available, may only be available on unfavorable terms.

If we fail to obtain sufficient capital in the future, make capital expenditures in areas that are ineffective or do not realize the anticipated value of such capital expenditures, we could be forced to curtail our growth strategies by reducing or delaying capital expenditures relating to new or refreshed stores, new market entry, new digital tools and other omni-channel initiatives. As a result, there can be no assurance that we will be able to fund our current plans for the opening of new stores, remodeling of existing stores, entry into new markets or development of new digital tools. Additionally, we may use cash generated internally to fund investments in partnerships and joint ventures that align with our growth strategy. We may not achieve the anticipated return on any of these investments. As a result, the available cash resources may be limited to other capital expenditures such as inventory, property and equipment costs. If we fail to obtain sufficient capital to appropriately fund our growth strategies, or if we are unable to realize a value from a capital expenditure or partnerships to justify the amount that we invested, other capital expenditures could be delayed and our business, results of operations and financial condition could be materially adversely affected.

There can be no assurance that our warranty claims and comfort exchange return rates will remain within acceptable levels.

Under the terms of our supply agreements with some of our major suppliers of mattress products, we are currently compensated to assume the risk for returns resulting from product defects. Generally, we also provide our customers with a 120 Night Sleep Trial. Pursuant to this guarantee, within 120 nights from the date of original purchase, a customer that is not satisfied with the new mattress may exchange it for a mattress of equal or similar quality, subject to return delivery, restocking and exchange fees. Additionally, we provide our customers with a low-price guarantee whereby if a customer finds the same or comparable sleep set advertised for less than our displayed or advertised price within 120 days of purchase, we will match certain of our competitor’s advertised price on such comparable sleep set and refund the customer the difference. While we establish reserves at the time of sale for these exposures, there can be no assurance that our reserves adequately reflect this exposure and no assurance that warranty claims and comfort exchange return rates will remain within the levels for which we have reserved. An increase in warranty claims and comfort exchange return rates could have a material adverse effect on our business, results of operations and financial condition.

If customers are unable to obtain third-party financing, sales of our products could be materially adversely affected.

We offer financing options to consumers through third-party consumer finance companies. In fiscal 2019, fiscal 2020 and fiscal 2021, approximately 41.8%, 37.8% and 32.2%, respectively, of our sales were financed through these payment arrangements. We plan to continue to offer such payment services. Our business is affected by the availability and terms of financing to customers. A reduction in the availability of financing options to our customers or an increase in the costs to us to offer these financing options could have a material adverse effect on our business, results of operations and financial condition.

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We are a holding company with no business operations of our own and depend on cash flow from our subsidiaries to meet our obligations.

We are a holding company with no business operations of our own or material assets other than the stock of our subsidiaries. Accordingly, all of our operations are conducted by our subsidiaries. As a holding company, we require dividends and other payments from our subsidiaries to meet our cash requirements. If our subsidiaries are unable to pay us dividends or make other payments to us when needed, we will be unable to satisfy our obligations or pay dividends. If there is an insolvency, liquidation or other reorganization of any of our subsidiaries, our stockholders likely will have no right to proceed against the assets of those subsidiaries. Creditors of those subsidiaries will be entitled to payment in full from the sale or other disposal of the assets of those subsidiaries before we, as an equity holder, would be entitled to receive any distribution from that sale or disposal.

We may from time to time acquire complementary businesses, including operations of our franchisees, which will subject us to a number of risks.

Any acquisitions we may undertake involve a number of risks, including:

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failure of the acquired businesses to achieve the results we expect, including customer satisfaction;

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potential comparable sales declines as a result of sales culture integration challenges;

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diversion of capital and management attention from operational matters, which could potentially disrupt and strain our existing business and resources;

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our inability to retain key personnel of the acquired businesses; and

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risks associated with unanticipated events or liabilities.

If we are unable to fully or successfully integrate any business or franchise that we acquire, we may not realize anticipated cost savings, improved efficiencies or revenue growth, which may result in reduced profitability or operating losses. In addition, we may face competition for acquisition candidates, which may limit the number of acquisition opportunities and lead to higher acquisition prices. Moreover, acquisitions of businesses or franchises may require the incurrence of additional debt or the issuance of additional equity, which, respectively, could affect our credit rating and ability to obtain financing on favorable terms, or would result in the dilution of our existing stockholder base. The realization of such risks could materially adversely affect our business, results of operations and financial condition.

Additionally, from time to time, we may be involved in regulatory actions or legal proceedings instituted by third parties relating to actions or inactions of our franchisees, and entities in which we have made partnership investments, such as SleepScore. Such proceedings divert resources away from other operations and may result in adverse publicity. These factors could have a material adverse effect on our business, results of operations and financial condition. In addition, litigation with franchisees that may arise from time to time could be costly and the outcome thereof would be difficult to predict.

Risks Related to Our Indebtedness

Our debt could adversely affect us, make us more vulnerable to adverse economic or industry conditions and prevent us from fulfilling our debt obligations or from funding our growth strategy.

We have a significant amount of debt outstanding. As of the end of fiscal 2020 and fiscal 2021, our net long-term debt was $235.0 million and $1,199.6 million, respectively. The 2021 Term Loan is subject to amortization in equal calendar quarterly installments of principal in an amount equal to 0.25% of the aggregate principal amount of the 2021 Term Loan (which payment shall be reduced as a result of the application of certain prepayments, assignments and/or extensions, in each case, as set forth in the 2021 Term Loan) with the remaining balance payable at the final date of maturity. These quarterly payments in fiscal 2022 are expected to be $3.1 million per quarter. See “Description of Certain Indebtedness.”

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Our indebtedness could have serious consequences, such as:

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limiting our ability to obtain additional financing to fund our working capital, capital expenditures, debt service requirements, growth strategy or other purposes;

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placing us at a competitive disadvantage compared to competitors with less debt;

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increasing our vulnerability to, and reducing our flexibility in planning for, adverse changes in economic, industry and competitive conditions;

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increasing our vulnerability to increases in interest rates because borrowings under the Senior Credit Facilities are subject to variable interest rates; and

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encouraging our suppliers to demand more aggressive payment terms or collateralization in the form of letters of credit, cash deposits or other security in exchange for extending credit to us in the ordinary course of business.

The potential consequences of our indebtedness and any default under that indebtedness could place us at a competitive disadvantage. A substantial or extended increase in interest rates could significantly affect our cash available to make scheduled payments on our debt facilities or to fund our growth strategy.

Our ability to generate sufficient cash depends on many factors, some of which are not within our control. We may be unable to generate sufficient cash to service all of our indebtedness and other liquidity requirements and may be forced to take other actions to satisfy such requirements, which may not be successful.

Our 2021 Term Loan matures on September 24, 2028 and our 2021 ABL Facility matures on September 25, 2026. Our ability to make payments on and to refinance our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. If we are unable to generate sufficient cash flows to service our debt and meet our other commitments, we may need to restructure or refinance all or a portion of our debt, sell material assets or operations, or raise additional debt or equity capital. We may not be able to affect any of these actions on a timely basis, on commercially reasonable terms, or at all, and these actions may not be sufficient to meet our capital requirements. In addition, any refinancing of our indebtedness could be at a higher interest rate, and the terms of our existing or future debt arrangements may restrict us from affecting any of these alternatives. Our failure to make the required interest and principal payments on our indebtedness would result in an event of default under the agreement governing such indebtedness, which may result in the acceleration of some or all of our outstanding indebtedness.

Our Senior Credit Facilities contain restrictions that limit our flexibility in operating our business.

Our Senior Credit Facilities contain negative covenants that limit our ability to engage in specified types of transactions. These covenants limit our ability and the ability of our restricted subsidiaries to, among others:

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incur indebtedness;

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create liens;

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engage in mergers or consolidations;

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sell assets (including pursuant to sale and leaseback transactions);

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pay dividends and distributions or repurchase our capital stock;

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make investments, acquisitions, loans or advances;

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repay, prepay or redeem certain indebtedness;

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engage in certain transactions with affiliates;

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amend material agreements governing certain indebtedness;

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amend our organizational documents;

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change our status as a holding company; and

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change the conduct of our business or otherwise make fundamental changes in our business.

A breach of any of these covenants could result in an event of default under the relevant Senior Credit Facility. Upon the occurrence of an event of default under the relevant Senior Credit Facility, the lenders thereunder could elect to declare all amounts outstanding under any such facility to be immediately due and payable and terminate all commitments to extend further credit or seek amendments to our debt agreements that would provide for terms more favorable to such lenders and that we may have to accept under the circumstances. We have pledged substantially all of our assets as collateral under each of the Senior Credit Facilities. If we are unable to repay those amounts, the lenders under the relevant Senior Credit Facility could proceed against the priority collateral granted to them to secure that indebtedness. If the lenders under the relevant Senior Credit Facility accelerate the repayment of borrowings, we cannot guarantee that we will have sufficient assets to repay such amounts.

Further, interest on any outstanding borrowings under our 2021 Term Loan may be calculated based on LIBOR. On July 27, 2017, the U.K. Financial Conduct Authority (“FCA”), which regulates LIBOR, announced that it will no longer require banks to submit rates for the calculation of LIBOR after 2021. Further, on March 5, 2021, the Intercontinental Exchange Benchmark Administration, the FCA-regulated and authorized administrator of LIBOR, announced, and the FCA confirmed, that one-week and two-month U.S. dollar LIBOR settings will cease on December 31, 2021, and that the USD LIBOR panel for all other tenors will cease on June 30, 2023. Currently, it is not possible to determine with certainty the future utilization of U.S. dollar LIBOR or of any particular replacement benchmark. As such, the potential effect of any such event on our business, results of operations and financial condition cannot yet be determined. However, any such event could have a material adverse effect on our business, results of operations and financial condition could cause the market value of our common stock to decline.

Despite our significant indebtedness, we and our subsidiaries will still be able to incur significant additional amounts of debt, which could further exacerbate the risks associated with our significant indebtedness.

We and our subsidiaries may be able to incur significant additional indebtedness in the future. Although the agreements governing our indebtedness contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions and, under certain circumstances, the amount of indebtedness that could be incurred in compliance with these restrictions could be significant.

The amount of borrowings permitted under the 2021 ABL Facility may fluctuate significantly, which may adversely affect our business, results of operations and financial condition.

The amount of borrowings permitted at any one time under the 2021 ABL Facility is subject to a borrowing base valuation of the collateral thereunder, net of certain reserves. As a result, our access to credit under the 2021 ABL Facility is potentially subject to significant fluctuations depending on the value of the borrowing base of eligible assets as of any measurement date, as well as certain discretionary rights of the agents in respect of the calculation of such borrowing base value. The inability to borrow under the 2021 ABL Facility may adversely affect our business, results of operations and financial condition.

Risks Related to Regulation and Legal Proceedings

Our business exposes us to personal injury, property damage and product liability claims, which could result in adverse publicity and harm to our brands and our business, results of operations and financial condition.

We are from time to time subject to claims due to the alleged injury of an individual in our stores, on our property or in connection with our product deliveries. In addition, we may be subject to product

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liability claims for the products that we sell. We are also subject, from time to time, to property damage claims arising in connection with our product deliveries. Subject to certain exceptions, our supply agreements generally require the manufacturer to indemnify us against any product liability claims; however, if a manufacturer does not have insurance, becomes insolvent or refuses to pay, there is a risk we would not be indemnified. Similarly, our independent delivery contractor agreements require our independent delivery contractors to indemnify us, subject to certain exceptions, for any property damage or personal injury that may occur as a result of their actions. Our ability to be made whole under these arrangements is conditioned on our manufacturers’ and delivery contractors’ financial condition as well as their maintaining appropriate insurance coverage. Any personal injury, property damage or product liability claim made against us, whether or not it has merit, could be time consuming and costly to defend, resulting in adverse publicity, or damage to our reputation, and have an adverse effect on our business, results of operations and financial condition. In addition, any negative publicity involving our suppliers, employees, delivery contractors and other parties who are not within our control could adversely affect us.

We are subject to government regulation and audits from various taxing authorities, which could impose substantial costs on our operations or reduce our operational flexibility.

Our products and our marketing and advertising programs are and will continue to be subject to regulation in the United States by various federal, state and local regulatory authorities, including the Federal Trade Commission (the “FTC”). Compliance with these regulations may have a material adverse effect on our business, results of operations and financial condition. In addition, our operations are subject to federal, state and local consumer protection regulations and other laws relating specifically to the bedding industry. For example, the U.S. Consumer Product Safety Commission has adopted rules relating to fire retardancy standards for the mattress and pillow industry. Additionally, California, Rhode Island and Connecticut have all enacted laws requiring the recycling of mattresses discarded in their states. State and local bedding industry regulations vary among the states in which we operate but generally impose requirements as to the proper labeling of bedding merchandise, restrictions regarding the identification of merchandise as new or otherwise, controls as to hygiene and other aspects of product handling, disposal, sales and resales and penalties for violations. We and our suppliers may be required to incur significant expense to the extent that these regulations change and require new and different compliance measures. Such legislation and regulations include those aimed at improving the fire retardancy of mattresses, regulating the handling of mattresses in connection with preventing or controlling the spread of bed bugs, or requiring the recycling of the discarded mattresses that we pick up in connection with product deliveries, which could all result in product recalls or in, as applicable, a significant increase in the cost of operating our business. In addition, failure to comply with these various regulations may result in penalties, the inability to conduct business as previously conducted or at all, or adverse publicity, among other adverse effects.

We are also subject to FTC and state laws regarding the operations and management of franchises. State franchise laws may delay or prevent us from terminating a franchise or withholding consent to renew or transfer a franchise. We may, therefore, be required to retain an underperforming franchise and may be unable to replace the franchise, which could have an adverse effect on our franchise revenues. Although we believe that we are in compliance with these franchise regulations, we may be required in the future to incur expense or modify our operations in order to ensure such compliance.

We are also subject to audits from various taxing authorities. Changes in tax laws in any of the multiple jurisdictions in which we operate, or adverse outcomes from tax audits that we may be subject to in any of the jurisdictions in which we operate, could result in an unfavorable change in our effective tax rate, which could have an adverse effect on our business and results of our operations.

Anti-corruption, anti-money laundering, export control, sanctions and other compliance laws and regulations (“Compliance Laws”), prohibit, among other things, companies and their employees, agents, and other partners from providing or receiving corrupt or improper payments or anything else of value to or from recipients in the public or private sector. Any violation of Compliance Laws can result in, among others, substantial criminal fines and civil penalties, imprisonment, the loss of licenses, tax reassessments, breach of contract and fraud litigation, reputational harm and other material adverse consequences.

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Laws and regulations regarding information security and data collection, use and privacy are increasingly rigorous and subject to change, which may cause us to incur significant compliance costs.

The regulatory environment related to information security and data collection, use and privacy is increasingly rigorous, with new and constantly changing requirements applicable to certain aspects of our business, including our collection practices (as well as those of third parties), the manner in which we contact our customers, and the manner in which we process and store certain customer, employee and other information. There are a number of U.S. federal laws that that impose limits on or requirements regarding the collection, distribution, use, security and storage of personal data of individuals. The Federal Trade Commission (“FTC”) Act (the “FTC Act”) grants the FTC authority to enforce against unfair or deceptive practices, which the FTC has interpreted to require companies’ practices with respect to personal data comply with the commitments posted in their privacy policies. With respect to the use of personal information for direct marketing purposes, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or the CAN-SPAM Act, establishes specific requirements for commercial email messages and specifies penalties for the transmission of commercial email messages that are intended to deceive the recipient as to source or content, and obligates, among other things, the sender of commercial emails to provide recipients with the ability to opt out of receiving future commercial emails from the sender. All U.S. states have adopted laws requiring the timely notification to individuals and, at times, regulators, the media or credit reporting agencies, if a company experiences the unauthorized access or acquisition of personal data. Many states have enacted additional data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of personal data and other information. For instance, the California Consumer Privacy Act of 2018 (the “CCPA”), which became effective on January 1, 2020, contains, among others, new disclosure obligations for businesses that collect personal data from California residents and affords those individuals numerous rights relating to their personal data. It provides for civil penalties for CCPA violations, in addition to providing a private right of action for data breaches. The CCPA has changed the manner in which we collect, store and use consumer data and has resulted in increased regulatory oversight, litigation risks and costs of compliance. Furthermore, the California Privacy Rights Act (the “CPRA”) was passed in November 2020 and will take effect in January 2023 (with respect to information collected from and after January 2022), which will significantly modify the CCPA, including by creating a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA. Moreover, other jurisdictions in which we do business, including Nevada, Virginia and Colorado, have and may continue to adopt privacy-related laws whose restrictions and requirements differ from those of California, which could require us to design, implement and maintain different types of state-based, privacy-related compliance controls and programs simultaneously in multiple states, thereby further increasing the complexity and cost of compliance. These costs, including others relating to increased regulatory oversight and compliance, could materially and adversely affect our business. Further, while we do not conduct telephone-based marketing at this time, our operations are subject to the Telephone Consumer Protection Act, and we may receive in the future claims alleging violations by us of the same.

We expect that there will continue to be new proposed laws, regulations and industry standards concerning data privacy, data protection and information security. These laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are increasingly restricting the collection, processing and use of personal data. Although we make reasonable efforts to comply with all applicable laws and regulations, given that privacy and customer data protection laws may be interpreted and applied inconsistently and are in a state of flux that varies by jurisdiction, our data protection policies and practices may not be consistent with the most recent interpretations and applications of such laws at all times. Complying with these varying requirements could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business. Any failure, or perceived failure, by us to comply with our own privacy policies or with any regulatory requirements or orders or other privacy or consumer protection related laws and regulations could result in proceedings or actions against us by governmental entities or others, subject us to significant penalties and negative publicity, harm our reputation, and materially and adversely affect our operating results.

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We are subject to varying, inconsistent laws and regulations of state and local jurisdictions, which could result in penalties and other costs if we are unable to establish and maintain compliance efficiently.

We are subject to tax and employee related laws and regulations imposed by multiple state and local jurisdictions. Often these laws and regulations vary by jurisdiction and may not conform to our existing tax, payroll and other practices. If we are unable to efficiently identify, monitor and comply with these varying laws and regulations, penalties, fines and other costs may be imposed on us and our relationship with certain of our employees could be threatened, each of which could have an adverse effect on our business, results of operations and financial condition.

Government regulation of the internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business, results of operations and financial condition.

We are subject to general business regulations and laws as well as regulations and laws specifically governing the internet and e-commerce. Existing and future regulations and laws could impede the growth of the internet, e-commerce or mobile commerce. These regulations and laws may relate to taxes, tariffs, data privacy and security, anti-spam, content protection, electronic contracts and communications, consumer protection, internet neutrality and gift cards. It is not clear how existing laws governing issues such as property ownership, sales and other taxes and consumer privacy apply to the internet as the vast majority of these laws were adopted prior to the advent of the internet and do not contemplate or address the unique issues raised by the internet or e-commerce. It is possible that general business regulations and laws, or those specifically governing the internet or e-commerce, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. We cannot be sure that our practices have complied, currently comply or will continue to comply fully with all such laws and regulations. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation, a loss in business and proceedings or actions against us by governmental entities or others. Any such proceeding or action could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase our costs of doing business, decrease the use of our sites by customers and suppliers and may result in the imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any such laws or regulations. Adverse legal or regulatory developments could adversely affect our business, results of operations and financial condition.

Risks Related to Human Capital

If we fail to hire, train and retain qualified managers, sales associates and other employees, and maintain a positive employee culture, our customer service levels could be compromised and we could lose sales to our competitors and our reputation could be damaged.

A key element of our competitive strategy is to provide product expertise to our customers through our extensively trained, commissioned sales associates, who we call Sleep Experts. If we are unable to effectively communicate initiatives or attract, train and retain qualified personnel and managers as needed in the future, including qualified sales personnel, our level of customer service may decline, which may decrease our net revenue and profitability and materially adversely affect our business, results of operations and financial condition. Additionally, if we fail to create and foster a positive and inclusive employee work culture, our employee morale could be harmed, which could impact the customer experience offered by employees and materially and adversely affect our business, results of operations and financial condition.

Increases in labor costs related to changes in employment laws and regulations could adversely affect our business, results of operations and financial condition.

Our ability to control labor costs is subject to numerous external factors, including:

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prevailing wage rates and overtime pay regulations;

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enhancements in health and safety regulation as a result of COVID-19 or otherwise;

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the impact of proposed legislation limiting the flexibility of employee schedules;

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the impact of legislation or regulations governing healthcare benefits, such as the Patient Protection and Affordable Care Act;

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labor relations, such as the Employee Free Choice Act and other unionizations efforts;

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health and other insurance costs; and

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regulations concerning the proper classification of employees and independent contractors.

If our labor or benefit costs increase, we may not be able to hire or maintain qualified personnel to the extent necessary to execute our competitive strategy, which could adversely affect our business, results of operations and financial condition.

Risks Related to Our Information Technology and Intellectual Property

Our business operations could be disrupted if our information technology systems fail to perform adequately.

We depend largely upon our information technology systems in the conduct of all aspects of our operations. If our information technology systems fail to perform as anticipated, we could experience difficulties in virtually any area of our operations, including, but not limited to, processing sales transactions, replenishing inventories or delivering our products to store locations in response to consumer demands. If we experience difficulties in implementing new or upgraded information systems or experience significant system failures, or if we are unable to successfully modify our information systems to respond to changes in our business needs, our ability to run our business could be adversely affected. It is also possible that our competitors could develop better e-commerce platforms than ours, which could adversely affect our internet sales. Any of these or other systems related problems could, in turn, adversely affect our business, results of operations and financial condition.

We may be unable to protect our intellectual property, or may be alleged to have infringed upon the intellectual property rights of others, which could result in a loss of our competitive advantage and a diversion of resources and a material adverse effect on our business, results of operations and financial condition.

To protect our intellectual property rights, including those related to our key brand trademarks Mattress Firm, Sleep Experts, 120 Night Sleep Trial, Sleepy’s, MattressMatcher, Junk Sleep, Sleep.com and SleepScore, we rely, or may from time to time rely, on a combination of trademark, trade dress, domain name, copyright and trade secret laws, as well as confidentiality and license agreements with our employees, franchisees, contractors and other third parties with whom we have relationships. However, our efforts to protect our intellectual property rights may not be sufficient or effective to prevent misappropriation or infringement of our intellectual property, which could result in a loss of our competitive advantage. In addition, any of our intellectual property rights may be challenged, which could result in their being declared invalid or unenforceable. We could lose our right to license certain trademarks that we do not own, such as SleepScore, which could disrupt our business operations and marketing campaigns. We may litigate to protect our intellectual property from misappropriation or infringement by others, which could be expensive and cause a diversion of resources and ultimately may not be successful.

Additionally, we use open source software in connection with our own software and expect to continue to use open source software in the future. Use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of software.

Moreover, competitors or other third parties may allege that we, or consultants or other third parties retained or indemnified by us, infringe on their intellectual property rights. The potential risks and uncertainties of intellectual property-related litigation and an assertion of an infringement claim

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against us may cause us to spend significant amounts to defend the claim, and possibly pay significant money damages. In the event of a settlement or adverse judgment, our results of operation may materially decline if we are prohibited from using the relevant intellectual property, especially if we are forced to cease offering certain products in our stores or are required to pay to the alleged owner of the relevant intellectual property licensing fees, royalties or technology development expenses. Even in instances where we believe that claims and allegations of intellectual property infringement against us are without merit, defending against such claims may be time consuming and expensive and may result in the diversion of time and attention of our management and employees.

Any failure to protect the integrity, security and use of sensitive or confidential data that we hold relating to us and our customers, associates and suppliers, whether as a result of unauthorized disclosure, data loss or a breach of our information technology systems, could result in lost sales, fines or lawsuits, a loss of confidence in us, and harm to our reputation, business, results of operations and financial condition.

We are increasingly dependent on information technology systems and infrastructure to operate our business. The secure processing, maintenance, transmission and storage of our customer, associate, supplier and company data is critical to us, and we devote significant resources to protecting this data. We collect and store sensitive and confidential data, including our intellectual property and proprietary business information and that of our suppliers, and personally identifiable information of our customers and associates, in our data centers and on our networks. Additionally, the success of our retail stores and online operations depends upon the secure transmission of confidential information, including the use of cashless payments. Our customers provide personal, payment card and gift card information to purchase products or services, enroll in promotional programs, apply for credit, register and make purchases on our website, or otherwise communicate and interact with us. We may share information about such persons with suppliers that assist with performing certain aspects of our business.

We and our suppliers rely on commercially available information technology security measures, including systems, software, tools, plans and monitoring to provide security for processing, maintenance, transmission and storage of our customer, associate, supplier and company data. Despite the security measures we and our suppliers have in place, our facilities and information technology systems, and those of our third-party service providers, have in the past and may in the future be vulnerable to, and unable to detect and appropriately respond to, security breaches, cyber-security attacks by computer hackers, acts of vandalism, computer viruses, misplaced or lost data, programming or human errors or other similar disruptions. Any security breach could compromise our networks and the data and confidential personal or business information stored there could be accessed, publicly disclosed, misappropriated, destroyed, lost or stolen. In addition, data and security breaches can also occur as a result of non-technical issues, including intentional or inadvertent breach by our associates or by persons with whom we have commercial relationships that result in the unauthorized release of confidential personal or business information. Any such breach, access, misappropriation, loss or other unauthorized or inadvertent disclosure of confidential information, whether by us or our suppliers, could result in mandatory notification requirements and costly remediation measures, attract a substantial amount of media attention, damage our relationships with our customers, associates and suppliers, cause a loss of confidence in us, violate applicable privacy laws and obligations, impact our ability to process payment card information or subject us to fees and penalties from our payment card processing partners, and expose us to costly government enforcement investigations or actions private litigation, or financial liability, possibly beyond the scope or limits of our insurance coverage. Such events may also increase the costs we incur to protect against or remediate such breaches, deploy additional personnel, engage third-party experts and consultants, and comply with consumer protection and data privacy laws and obligations or disrupt our operations and distract our management and other key personnel from performing their primary operational duties, any of which could adversely affect our reputation, which, in turn, could adversely affect our business, results of operations and financial condition.

Despite our security measures, it is possible that computer hackers or other parties might defeat these security measures and obtain sensitive or confidential data that we hold relating to us and our customers, associates and suppliers. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems, change frequently and often are not recognized until launched

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against a target, and we may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks. Actual or anticipated attacks could require that we expend significant resources related to our information systems and infrastructure and could subject us to additional legal and financial risks, including increased investments in protection technologies, costs to deploy additional personnel, train associates and engage third-party experts and consultants, costs of compliance with privacy laws and obligations, expenses associated with providing our customers with credit protection and potential fees and penalties from our credit card processing partners, any of which could adversely affect our reputation, which, in turn, could adversely affect our business, results of operations and financial condition.

Risks Related to Our Franchisees and Licensees

The quality of our franchised and licensed operations may be diminished by factors beyond our control, which could adversely affect our image and reputation and in turn our business, results of operations and financial condition.

As of September 28, 2021, our franchisees owned and operated 83 stores (such stores are not included in our store count). We also license a proprietary school fundraiser program to third parties in certain markets through our subsidiary Custom Fundraising Solutions LLC. Our franchisees and licensees are independent contractors and are not our employees. We provide training and support to franchisees and licensees, but the quality of franchised or licensed operations may be diminished by any number of factors beyond our control, including, as the case may be, (i) the closing of franchised stores, (ii) the failure to comply with our standard operating procedures and brand standards, (iii) failure to honor our national advertising campaign offers, (iv) the failure to effectively run their operations, (v) the failure to hire and adequately train qualified personnel, (vi) the failure to maintain compliance with applicable regulations, (vii) publicity, including on social media, negatively impacting the reputation of our franchisees or licensees, or (viii) the failure to appropriately manage our brand, all of which could adversely affect our image and reputation, and the image and reputation of our franchisees or licensees, which, in turn, could adversely affect our business, results of operations and financial condition.

We may be unable to audit or otherwise independently monitor the results of our franchisees and licensees, which could adversely affect our business, results of operations and financial condition.

Franchisees pay us franchise fees and franchisees and licensees pay us royalties as a percentage of their gross sales. Although the agreements with our franchisees and licensees give us the right to audit certain of their books and records, we may not be able to audit or otherwise readily and independently monitor franchisee and licensee performance on a regular basis or at all. As a result, we may experience delays or failures in discovering or recouping underpayments. In addition, to the extent that we rely on the integrity of the financial and other information from our franchisees, we may experience difficulties with respect to internal control, measurement and reporting of our franchise and licensee fee and royalty receipts and receivables.

The existence of franchisees in some of our markets may restrict our ability to grow in those markets through acquisitions or organically.

Our franchise agreements with our franchisees limit our ability to compete with the franchisees in the markets in which they operate. If we determine at some point in the future that we would like to grow in those markets through acquisitions or organically, our ability to do so may be substantially restricted under the franchise agreements, which could have an adverse effect on our business, results of operations and financial condition.

Risks Related To This Offering and Our Common Stock

An active, liquid trading market for our common stock may not develop and our stock price could be extremely volatile.

Prior to this offering, there has not been a public market for our common stock. Neither we nor the selling stockholders can predict the extent to which investor interest in our company will lead to the

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development of a trading market on the or otherwise, or how active and liquid that market may become. If an active and liquid trading market does not develop, you may have difficulty selling any of our common stock that you purchase. The initial public offering price for the shares will be determined by negotiations between us, the selling stockholders and the underwriters and may not be indicative of prices that will prevail in the open market following this offering. The market price of our common stock may decline below the initial public offering price, and you may not be able to sell your shares of our common stock at or above the price you paid in this offering, or at all. The price of our common stock could be subject to wide fluctuations in response to a number of factors, including those described elsewhere in this prospectus and others such as:

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variations in our operating performance and the performance of our competitors;

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actual or anticipated fluctuations in our quarterly or annual results of operations;

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changes in our net revenue, comparable sales or earnings estimates or recommendations by securities analysts;

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publication of research reports by securities analysts about us or our competitors or our industry;

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our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;

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additions and departures of key personnel;

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strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;

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the passage of legislation or other regulatory developments affecting us or our industry;

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speculation in the press or investment community;

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changes in accounting principles;

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terrorist acts, acts of war or periods of widespread civil unrest; and

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changes in general market and economic conditions.

As we are a specialty retailer in a single industry, we are especially vulnerable to these factors to the extent that they affect our industry or our products, or to a lesser extent our markets. Other retailers with more diversified product offerings may not be similarly at risk. For example, department stores that experience adverse developments regarding their bedding products may be better able to absorb such adverse effects. In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation.

Requirements associated with being a public company will require significant company resources and management attention.

Prior to this offering, we have not been subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or the other rules and regulations of the Securities and Exchange Commission (the “SEC”) or any securities exchange relating to public companies. We are working with legal, accounting, financial and other advisors to identify those areas in which changes should be made to our financial, legal and management control systems to manage our growth and our obligations as a public company. These areas include corporate governance, corporate control, internal audit, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas, including our internal controls over financial reporting. However, we cannot assure you that these and other measures we may take will be sufficient to allow us to satisfy our obligations as a public company on a timely basis.

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In addition, compliance with reporting and other requirements applicable to public companies will create additional costs for us, will require the time and attention of management and will require the hiring of additional personnel and outside consultants. The expenses incurred by public companies generally for reporting and corporate governance purposes have been rising due, in part, to increased regulatory requirements related to accounting and reporting oversight. We cannot predict or estimate the amount of the additional costs we may incur, the timing of such costs or the degree to which our management’s attention will be consumed by these matters. In addition, being a public company could make it more difficult or more costly for us to obtain certain types of insurance, including directors’ and officers’ liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or our board committees or as executive officers. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation.

We currently have a material weakness in our internal control over financial reporting and while we have remediated prior material weaknesses in our internal control over financial reporting, we may be unable to remediate our current material weakness and may in the future identify new material weaknesses, and if we are unable to maintain effective internal controls, we may not be able to produce timely and accurate financial statements, which could cause the market price of our common stock to decline and could have a material adverse effect on our business, results of operations, and financial condition.

As a privately held company, we are not currently required to comply with the rules of the SEC implementing Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and are, therefore, not currently required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which will require management to certify financial and other information in our annual and quarterly reports and provide an annual management report on the effectiveness of internal control over financial reporting.

Subsequent to the issuance of our consolidated financial statements for fiscal 2021, we identified a material weakness in our internal control over financial reporting that resulted in a restatement of our financial statements for fiscal 2021. We determined we did not have in place an effective design of the internal control over the preparation and review of the consolidated statement of cash flows as it pertains to significant and non-routine transactions. The material weakness resulted in an error that was corrected by a reclassification of the cash repayment of paid-in-kind interest deferred in fiscal 2019 and fiscal 2020, paid in connection with the extinguishment of the 2018 Loans from financing activities to operating activities on the Consolidated Statement of Cash Flows.

In connection with the audit of our consolidated financial statements for fiscal 2019, we identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis. We did not have in place an effective control environment with controls over the establishment of provisions for tax liabilities, impairment analysis with respect to our goodwill, tradenames and intangible assets and lease accounting for deferred rent expense that would identify errors in a timely manner. In addition, the lack of adequate accounting personnel and formal processes and procedures resulted in several material audit adjustments to our consolidated financial statements for fiscal 2019.

As of September 29, 2020, we remediated the fiscal 2019 material weaknesses and addressed the underlying causes of such material weaknesses. Among other actions, we hired new finance and accounting personnel, and with the assistance of external advisors, enhanced the design and execution of our internal control over financial reporting which led to the remediation of the material weaknesses.

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Further, we have begun performing system and process evaluations and testing of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, with auditor attestation of the effectiveness of our internal controls, beginning with our annual report on Form 10-K for the second fiscal year ending after the effectiveness of the registration statement of which this prospectus forms a part. Our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or significant deficiencies, in addition to the fiscal 2021 material weakness described above. Each of the material weaknesses described above or any newly identified material weaknesses could result in a misstatement of our consolidated financial statements or disclosures that would result in a material misstatement of our annual or quarterly consolidated financial statements that would not be prevented or detected and cause us to fail to meet our reporting obligations and incur the expense of remediation.

If:

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we fail to effectively remediate deficiencies in internal control over financial reporting;

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we identify additional material weaknesses in our internal control over financial reporting;

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we are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective; or

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our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting or expresses an opinion that is qualified or adverse,

investors may lose confidence in the accuracy and completeness of our financial statements which could cause the market price of our common stock to decline. In addition, we could become subject to sanctions or investigations by the stock exchange upon which our common stock is listed, the SEC or other regulatory authorities, and we could be delayed in delivering financial statements, which could result in a default under the agreements governing our indebtedness and result in a material adverse effect on our business, results of operations and financial condition.

There may be sales of a substantial amount of our common stock after this offering by our current stockholders, and these sales could cause the price of our common stock to fall.

Sales of substantial amounts of our common stock in the public market after this offering, or the perception that such sales will occur, could cause the market price of our common stock to decline. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

Based on shares outstanding as of , 2021, upon the closing of this offering, we will have outstanding shares of common stock. Of these shares, shares to be sold pursuant to this offering (or shares if the underwriters exercise in full their option to purchase additional shares from the selling stockholders) will be immediately tradable without restriction under the Securities Act of 1933, as amended (the “Securities Act”), except for any shares held by “affiliates,” as that term is defined in Rule 144 under the Securities Act (“Rule 144”).

Of the remaining shares of common stock outstanding as of the closing of this offering (or shares outstanding if the underwriters exercise in full their option to purchase additional shares from the selling stockholders), we expect approximately shares will be restricted securities or control securities within the meaning of Rule 144, but will be eligible for resale subject to applicable volume, manner of sale, holding period and other limitations of Rule 144 or pursuant to an exemption from registration under Rule 701 under the Securities Act, subject to the lock-up agreements described below, and we expect approximately shares will be held by persons who were not, and not deemed to be, one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding this offering and who have beneficially owned such shares for at least six months prior to this offering, including any applicable tacking periods, and therefore should be entitled to sell

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such shares without registration, subject to compliance with the public information requirements of Rule 144 and subject to the lock-up agreements described below.

Executive officers, directors, and stockholders currently representing substantially all of the outstanding shares of our common stock, including the selling stockholders, have agreed, subject to certain exceptions described herein, not to sell, transfer or dispose of or hedge, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for shares of our common stock for a period of 180 days after the date of this prospectus, except with the prior written consent of Goldman Sachs & Co. LLC and Barclays Capital Inc. See “Underwriting.” Following the expiration of this 180-day lock-up period, approximately % of our outstanding common stock (or % if the underwriters exercise in full their option to purchase additional shares from the selling stockholders) will be eligible for future sale, subject to the applicable volume, manner of sale, holding period and other limitations of Rule 144 or pursuant to another exemption from registration under the Securities Act. See “Shares Eligible for Future Sale” for a discussion of the shares of common stock that may be sold into the public market in the future.

In the future, we may issue additional shares of common stock or other equity or debt securities convertible into or exercisable or exchangeable for shares of our common stock in connection with a financing, strategic investment, litigation settlement or employee arrangement or otherwise. Any of these issuances could result in substantial dilution to our existing stockholders and could cause the trading price of our common stock to decline.

We intend to file one or more registration statements on Form S-8 under the Securities Act to register shares of our common stock or securities convertible into or exchangeable for shares of our common stock issued pursuant to the 2022 Plan. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market. We expect that the initial registration statement on Form S-8 will cover shares of our common stock.

Future offerings of debt or equity securities which would rank senior to our common stock may adversely affect the market price of our common stock.

If, in the future, we decide to issue debt or equity securities that rank senior to our common stock, it is likely that such securities will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock and may result in dilution to owners of our common stock. We and, indirectly, our stockholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any future offerings. Thus, holders of our common stock will bear the risk of our future offerings reducing the market price of our common stock or diluting their ownership stake in us.

If securities or industry analysts do not publish research or publish misleading or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have, and may not obtain or sustain, research coverage for our common stock. If there is no research coverage of our common stock, the trading price for our common stock may be adversely affected. In the event we obtain research coverage for our common stock, if one or more of the analysts downgrades our stock or publishes misleading or unfavorable research about our business, our stock price would likely decline. If one or more of the analysts ceases coverage of our common stock or fails to publish reports on us regularly, demand for our common stock could decrease, which could cause our common stock price or trading volume to decline.

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Following this offering, the Steinhoff Group will indirectly hold a significant stake in us and it and its lenders may have interests that differ from those of our other stockholders.

Immediately prior to this offering, the Steinhoff Group owned 50.1% of our outstanding common stock. Immediately following this offering, the Steinhoff Group will continue to indirectly own % of our outstanding common stock, or % if the underwriters exercise their over-allotment option in full. As a result, the Steinhoff Group will be able to exert significant influence over a number of important aspects of our business, including:

•

the composition of our board of directors;

•

any determinations with respect to mergers, business combinations or other significant transactions requiring stockholder approval;

•

issuances of a significant number of new shares of our common stock;

•

amendments to our organizational documents; and

•

any other matters requiring a vote of our stockholders.

In addition, the Steinhoff Group requires consent by its lenders prior to taking a variety of actions which may both complicate and delay the Steinhoff Group’s ability to act as well as impact the actions taken.

The Steinhoff Group and its lenders may have interests that differ from yours and may vote in a way with which you disagree and that may be adverse to your interests. Among others, its influence over our affairs may adversely affect the price of our common stock due to investors’ perception that conflicts of interest may arise. The concentration of stock ownership could also delay, prevent or deter a change in our control or otherwise discourage a potential acquirer from attempting to obtain control of us, which may deprive our stockholders of an opportunity to receive a premium for their common stock.

The Steinhoff Group has obligations under a number of debt instruments and may have obligations pursuant to various disputes and legal and regulatory proceedings that may be satisfied by a sale or other transfer of our common stock, which could materially decrease the market price of our common stock.

The Steinhoff Group has substantial indebtedness outstanding, is highly leveraged and is involved in various disputes and legal proceedings, including a global litigation regarding its assets and indebtedness, certain of which its current lenders are parties thereto or claimants therein.

Following the Steinhoff Group’s announcement of certain accounting issues in December 2017, the Steinhoff Group became the subject of numerous legal proceedings, predominantly in the Netherlands and South Africa. To resolve these proceedings and related outstanding claims, the Steinhoff Group proposed a global litigation settlement. The proposed global settlement is valued at approximately €1.43 billion. In September 2021, it was approved by the Steinhoff Group’s financial creditors and, subsequently, by the relevant courts of the Netherlands. It has also been approved by the various classes of South African creditors. The remaining approval required to proceed with the implementation of the proposed global settlement is the sanction of the South African scheme of arrangement by the South African High Court. There can be no assurance that the proposed global settlement will ultimately be approved by South African High Court. In the event that the proposed global settlement is not fully approved, the Steinhoff Group will continue to defend the claims instituted against the Group, which will potentially subject it to significantly greater liability than that contemplated by the proposed global settlement.

There can be no assurance that the Steinhoff Group will be able to make the interest payments on its existing or future indebtedness, or satisfy any obligations or liabilities related to or resulting from such various disputes and legal proceedings. The Steinhoff Group may decide to sell or otherwise transfer all, or a significant portion, of its shares of our common stock to meet its obligations, including in the event the Steinhoff Group is unable to satisfy its obligations under its indebtedness on an interest payment

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date or at maturity or an earlier date in the event of an acceleration. If the Steinhoff Group sells or otherwise transfers all or a significant portion of its shares of our common stock, such a sale or other transfer could materially decrease the market price of our common stock. In addition, the perception that such a sale or other transfer could occur could materially depress the market price of shares of our common stock.

In connection with this offering, we expect to enter into a registration rights agreement with Steinhoff Group, which would allow the Steinhoff Group to more freely transfer the shares of our common stock that it holds.

The Steinhoff Group’s ability to pay the amounts owed on, or to refinance, its indebtedness prior to maturity or earlier date in the event of an acceleration or other obligations may be affected by general economic, financial, competitive, legislative, regulatory, business, legal and other factors beyond its control. We cannot assure you that future borrowings or equity financing will be available for the payment or refinancing of the obligations of the Steinhoff Group. If the Steinhoff Group is unable to pay amounts owed on, or to refinance, its obligations, it could have a material adverse effect on the market price of our common stock.

Our indirect parent company, Steinhoff International Holdings N.V., is subject to litigation and ongoing disputes by its creditors, which, while we are not directly involved in the litigation, could have a material adverse effect on the market price of our common stock.

Our indirect parent company, Steinhoff International Holdings N.V., is the subject of global litigation regarding its assets and indebtedness. Certain of the selling stockholders are creditors of Steinhoff International Holdings N.V. and therefore may have adverse interests in such litigated matters. Although we are not directly involved in the litigation, any setbacks or delays in resolution of ongoing litigation and disputes, or any new publicly announced litigation or disputes, could have a material adverse effect on the market price of our common stock.

Provisions in our charter documents and Delaware law may deter takeover efforts that you feel would be beneficial to stockholder value.

Our amended and restated certificate of incorporation and our amended and restated bylaws and Delaware law contain provisions which could make it harder for a third party to acquire us, even if doing so might be beneficial to our stockholders. These provisions include . In addition, our board of directors has the right to issue preferred stock without stockholder approval that could be used to dilute a potential hostile acquirer. Delaware law also imposes some restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock. As a result, you may lose your ability to sell your stock for a price in excess of the prevailing market price due to these protective measures and efforts by stockholders to change our direction or management may be unsuccessful. See “Description of Capital Stock.”

Our amended and restated certificate of incorporation and amended and restated bylaws provide for an exclusive forum in the Court of Chancery of the State of Delaware for certain disputes between us and our stockholders, and that the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act.

Our amended and restated certificate of incorporation and amended and restated bylaws provide that:

•

unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware) will, to the fullest extent permitted by law, be the sole and exclusive forum for: (A) any derivative action or proceeding brought on our behalf, (B) any action asserting a claim for or based on a breach of a fiduciary duty owed by any of our current or former director, officer, other employee, agent or stockholder to us or our stockholders, including without limitation a claim alleging the aiding and abetting of such a

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breach of fiduciary duty, (C) any action asserting a claim against us or any of our current or former director, officer, employee, agent or stockholder arising pursuant to any provision of the Delaware General Corporation Law or our amended and restated certificate of incorporation and amended and restated bylaws or as to which the Delaware General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware, or (D) any action asserting a claim related to or involving us that is governed by the internal affairs doctrine;

•

unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States will, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, and the rules and regulations promulgated thereunder;

•

any person or entity purchasing or otherwise acquiring or holding any interest in shares of our capital stock will be deemed to have notice of and consented to these provisions; and

•

failure to enforce the foregoing provisions would cause us irreparable harm, and we will be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions.

Nothing in our amended and restated certificate of incorporation and amended and restated bylaws precludes stockholders that assert claims under the Exchange Act, from bringing such claims in federal court to the extent that the Exchange Act confers exclusive federal jurisdiction over such claims, subject to applicable law.

We believe these provisions may benefit us by providing increased consistency in the application of Delaware law and federal securities laws by chancellors and judges, as applicable, particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. If a court were to find the choice of forum provision that is contained in our amended and restated certificate of incorporation and amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, results of operations and financial condition. For example, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act.

The choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our current or former director, officer, other employee, agent, or stockholder to us, which may discourage such claims against us or any of our current or former director, officer, other employee, agent, or stockholder to us and result in increased costs for investors to bring a claim. Investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

Because we have no current plans to pay cash dividends on our common stock for the foreseeable future, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.

We have no current plans to pay any cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the sole discretion of our board of directors and will depend on, among others, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our board of directors may deem relevant, including applicable law. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur, including our Senior Credit Facilities, as described in “Description of Certain Indebtedness.” As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than that which you paid for it.

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If you purchase shares in this offering, you will suffer immediate and substantial dilution.

If you purchase shares of our common stock in this offering, you will incur immediate and substantial dilution in the pro forma book value of your stock, which would have been $ per share as of , based on an assumed initial public offering price of $ per share (the mid-point of the offering range shown on the cover of this prospectus), because the price that you pay will be substantially greater than the net tangible book value per share of the shares you acquire. In addition, upon the closing of this offering, certain outstanding RSUs granted to our officers will vest and, concurrently with the pricing of this offering, outstanding RSUs granted to our non-employee directors will vest and, in each case, within 30 days with respect to certain of the RSUs and within six months with respect to other RSUs, be settled and outstanding options granted to certain of our non-employee directors are expected to be exercised and you will be diluted by the issuance of the underlying shares of common stock. Moreover, you will experience additional dilution upon (i) the vesting and settlement of outstanding Time-Based RSUs that do not vest at the closing of this offering that will vest in the future under the 2019 Plan and (ii) future grants of restricted stock units or other equity awards under our future stock incentive plans.

We have reserved shares for issuance under the 2022 Plan, subject to increase on the first day of each fiscal year beginning with fiscal 2023 in an amount equal to the lesser of (i) 2% of our issued and outstanding common stock on the last day of the immediately preceding fiscal year, (ii) the vesting and settlement of the RSUs to be issued under the 2022 Plan that are expected to be granted to certain employees in connection with this offering and (iii) a lower number of shares of common stock as may be determined by our board. See “Executive Compensation—Compensation Arrangements Adopted in Connection with this Offering—2022 Omnibus Incentive Plan.” Any common stock issued under the 2022 Plan (including under the RSUs that are expected to be granted to certain employees in connection with this offering) would dilute the percentage ownership held by the investors who purchase common stock in this offering. To the extent we raise capital in the future by issuing equity or equity-linked securities, our stockholders will also experience substantial additional dilution. See “Dilution.”

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USE OF PROCEEDS

The selling stockholders are selling all shares of our common stock that are being sold in this offering, including all of the shares, if any, that may be sold in connection with the exercise of the underwriters’ option to purchase additional shares from the selling stockholders. See “Principal and Selling Stockholders.”

We will not receive any proceeds from the sale of our common stock by the selling stockholders in the offering (including pursuant to the underwriters’ option to purchase additional shares from the selling stockholders). We will pay certain expenses, other than the underwriting discount, in connection with this offering.

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DIVIDEND POLICY

We currently expect to retain all future earnings for use in the operation and expansion of our business and do not anticipate paying dividends on our common stock for the foreseeable future. Any future determination with respect to the declaration, amount and payment of any dividends on our common stock will be subject to the sole discretion of our board of directors, and will depend on, among others, general and economic conditions, our results of operations and financial condition, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our stockholders or by our subsidiaries to us, including restrictions under our Senior Credit Facilities and other indebtedness we may incur, and such other factors as our board of directors may deem relevant. If we elect to pay such dividends in the future, we may reduce or discontinue entirely the payment of such dividends at any time. We are a holding company and our operations are conducted through our wholly-owned subsidiaries. In the event that we do pay a dividend, we intend to cause our operating subsidiaries to make distributions to us in an amount sufficient to cover such dividend.

Our primary operating subsidiary, Mattress Firm, Inc., and its subsidiaries are currently subject to certain restrictions and covenants under the credit agreements governing the Senior Credit Facilities, including limits on amounts of leverage, affiliate transactions, dividends to us and other restricted payments. These restrictions and covenants may restrict the ability of those entities to make distributions to us. See “Description of Certain Indebtedness.” Any additional financing arrangement we enter into in the future may include restrictive covenants that limit our subsidiaries’ ability to pay dividends to us. In addition, Delaware law may impose requirements that may restrict our ability to pay dividends to holders of our common stock.

In addition, on September 24, 2021, we paid a dividend of $1,200.4 million, or $ per share, to our common stockholders.

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and our capitalization as of September 28, 2021.

You should read this table in conjunction with the information contained in “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Certain Indebtedness” as well as our audited consolidated financial statements and the related notes included elsewhere in this prospectus.

(in millions, except per share data)	September 28, 2021
Cash and cash equivalents		$	209.7
Long-term debt, including current maturities:
2021 ABL Facility(1)		$	—
2021 Term Loan			1,250.0
Finance leases			2.7
Total long-term debt, including current maturities			1,252.7
Stockholders’ equity:
Preferred stock (par value $0.01 per share; shares authorized; 0 shares issued and outstanding)			—
Common stock (par value $0.01 per share; shares authorized; shares issued and outstanding)(2)			—
Additional paid-in-capital			4,748.1
Accumulated deficit			(4,670.9)
Treasury stock ( shares at cost)			—
Total stockholders’ equity(2)			77.2
Total capitalization		$	1,329.9

(1)

As of September 28, 2021, availability under the 2021 ABL Facility was $102.6 million.

(2)

The number of shares of our common stock outstanding in the table above reflects the shares of our common stock outstanding immediately prior to this offering, and:

•

reflects the issuance of shares of our common stock upon settlement (to occur with respect to certain RSUs within 30 days after the closing of this offering and with respect to other RSUs within six months after the closing of this offering) of (i) Performance-Based RSUs awarded to officers (which performance conditions have been satisfied) and (ii) Time-Based RSUs for which the time-based conditions have been satisfied on or prior to the closing of this offering awarded to certain of our officers and non-employee directors, all of which RSUs were granted under the 2019 Plan and outstanding as of September 28, 2021;

•

includes shares of our common stock issuable immediately following the closing of this offering upon the expected exercise of the stock options awarded to certain of our non-employee directors under the 2019 Plan and outstanding as of September 28, 2021 at an exercise price of $ per share;

•

does not include shares of common stock reserved for issuance under the 2022 Plan, which our board has approved and we intend to adopt in connection with this offering; and

•

does not include RSUs (all of which will be subject to vesting) to be issued under our 2022 Plan, that are expected to be granted to certain employees in connection with this offering.

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DILUTION

If you invest in our common stock in this offering, your ownership interest in us will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma net tangible book value (deficit) per share of our common stock after giving effect to this offering. Dilution results from the fact that the per share offering price of the common stock is substantially in excess of the pro forma net tangible book value per share attributable to our existing owners.

Our net tangible book value at , 2021 was $ , and our pro forma net tangible book value (deficit) as of , 2021 was approximately $ million, or $ per share of our common stock. We calculate pro forma net tangible value (deficit) per share by taking the amount of our total tangible assets, reduced by the amount of our total liabilities, and then dividing that amount by the total number of shares of common stock outstanding on a pro forma basis.

After giving effect to (i) the selling stockholders’ sale of shares of common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, and (ii) the use of proceeds therefrom, after deducting the underwriting discount and estimated offering expenses payable by us, our pro forma net tangible book value (deficit) as of would have been $ million, or $ per share of our common stock. This amount represents an immediate increase in pro forma net tangible book value (deficit) of $ per share of common stock to our existing owners and an immediate and substantial dilution in pro forma net tangible book value (deficit) of $ per share of common stock to new investors purchasing shares in this offering.

The following table illustrates this dilution on a per share of common stock basis assuming the underwriters do not exercise their option to purchase additional shares of common stock:

	Assumed initial public offering price per share				$
	Net tangible book value (deficit) per share as of , 2021 before this offering				$
	Increase in as adjusted net tangible book value per share attributable to new investors purchasing common stock in this offering
	As adjusted net tangible book value per share after this offering
	Dilution per share to new investors purchasing common stock in this offering				$

Dilution is determined by subtracting pro forma net tangible book value (deficit) per share of common stock after the offering from the initial public offering price per share of common stock.

Each $1.00 increase or decrease in the assumed initial public offering price per share of common stock would increase or decrease, as applicable, the pro forma net tangible book value by $ per share and the dilution to new investors in the offering by $ per share, assuming that the number of shares offered in this offering, as set forth on the cover page of this prospectus, remains the same and excluding estimated offering expenses payable by us. The pro forma information discussed above is for illustrative purposes only. Our net tangible book value (deficit) following the closing of the offering is subject to adjustment based on the actual offering price of our common stock and other terms of this offering determined at pricing.

The following table summarizes, on the same pro forma basis as of , the total number of shares of common stock purchased from the selling stockholders, the total cash consideration paid to the selling stockholders and the average price per share of common stock paid by our existing owners and by new investors purchasing shares of common stock in this offering.

Shares Purchased

Total consideration

Number

Percent

Amount

Percent

Average Price Per Share

Existing stockholders

New investors

Total

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After giving effect to the sale of shares by the selling stockholders in this offering (excluding shares sold pursuant to the underwriters’ option to purchase additional shares), new investors will hold shares, or % of the total number of shares of common stock after this offering and existing stockholders will hold % of the total shares outstanding. If the underwriters exercise their option to purchase additional shares in full, the number of shares held by new investors will increase to , or % of the total number of shares of common stock after this offering, and the percentage of shares held by existing stockholders will decrease to % of the total shares outstanding.

In addition, as of , 2021, shares of common stock, reflecting approximately ten percent of our authorized capital, are subject to issuance under restricted stock award agreements granted to our executive officers and certain of our officers and non-employee directors pursuant to the 2019 Plan. In accordance with the applicable grant agreements, the vesting conditions covering shares of common stock will be satisfied in full immediately following the closing of this offering. You will be immediately diluted by the issuance of those vested shares of common stock to the plan participants.

In addition, shares of common stock will be available for issuance under the 2022 Plan, which our board has approved and we intend to adopt in connection with this offering. We expect to make grants under the 2022 Plan to certain employees in connection with this offering. You will be immediately diluted by the issuance of shares of common stock pursuant to the terms of any awards made under the 2022 Plan. Additionally, shares available for issuance under the 2022 Plan will be subject to increase on the first day of each fiscal year beginning with fiscal 2023 in an amount equal to the lesser of (i) 2% of our issued and outstanding common stock on the last day of the immediately preceding fiscal year and (ii) a lower number of shares of common stock as may be determined by our board.

In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity, the issuance of such securities could result in further dilution to our stockholders.

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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the “Summary—Summary Historical Consolidated Financial and Other Data” and our consolidated financial statements and the related notes and other financial information included elsewhere in this prospectus. The following discussion gives effect to the restatement of our audited consolidated financial statements as of and for the fiscal year ended September 28, 2021. Please see Note 20—Restatement of Previously Issued Consolidated Statement of Cash Flows to the consolidated financial statements. Some of the information included in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” sections of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are the largest omni-channel mattress specialty retailer in the United States (based on U.S. retail mattress revenue), in an industry we estimate, based on data from Furniture Today and ISPA market studies, to be approximately $18 billion in 2020. We meet our customers wherever they choose to interact with our expertise-led ecosystem, whether in our 2,353 conveniently-located retail stores nationwide (as of September 28, 2021) or on our digital platforms, including MattressFirm.com and Sleep.com, with an estimated 62 million website visitors in fiscal 2021. Our customers can experience and compare the leading mattress brands in a single place, with a comprehensive and diversified product suite and use data and digital tools, such as MattressMatcher, to identify products that will help them achieve a great night’s sleep. Our network of 70 distribution centers and more than 30 third-party delivery providers across the country deliver products with speed, efficiency and in-home set-up services, completing the sleep solution that our approximately 6,500 well-trained and incentivized Sleep Experts offer to consumers. We are the number one retailer of Tempur-Pedic, Serta, Sealy, Purple, Stearns & Foster and Beautyrest brands (based on U.S. mattress vendors’ sales to us and units purchased, in each case, from these vendors in 2020). We increased our net revenue from $2,962.3 million in fiscal 2019 to $3,256.6 million in fiscal 2020 and to $4,392.9 million in fiscal 2021, representing a CAGR of 21.8% from fiscal 2019 to fiscal 2021, respectively.

We are the clear market leader in the large and growing U.S. retail mattress and foundations industry, with a market share we estimate to be approximately 20% as of the end of 2020. With a coast-to-coast optimized retail footprint, a strong and growing online presence, industry-leading fulfillment capabilities and a well-trained and incentivized sales force of Sleep Experts, we believe we are the retail partner of choice for major mattress brands. We estimate that we are nearly twice the size of our next closest competitor (based on U.S. retail mattress sales) and eight times larger than the next largest multi-branded mattress specialty retailer in the United States (based on store count). We offer a comprehensive and diversified product suite across comfort, style and price points from more than 30 brands. In fiscal 2021, our sale of mattresses, foundations and other, which primarily includes accessories and delivery, generated 77.4%, 15.0% and 7.6%, respectively, of our net revenue.

In addition to the scale and strength of the U.S. mattress industry, we believe we will benefit from strong macroeconomic fundamentals, including GDP growth and housing market indicators, such as housing starts, the trend toward suburbanization, increased housing turnover and increasing millennial home ownership. Furthermore, we believe we will benefit from a heightened focus on health and wellness generally, and increased recognition of the importance of high-quality sleep as a key component of a healthy lifestyle.

In October 2018, our operating subsidiary, Mattress Firm, Inc., its subsidiaries and certain of its affiliates filed voluntary petitions for relief under Title 11 of the U.S. Code in the U.S. Bankruptcy Court for the District of Delaware. Following our emergence from bankruptcy in November 2018, the Steinhoff Group owned 50.1% of our common stock and the Creditor Stockholders owned the remaining 49.9%,

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in each case prior to dilution from equity awards granted to certain of our officers and non-employee directors. Following our emergence from bankruptcy, we took a number of actions to fundamentally transform our business to capitalize on growth opportunities and drive market share capture in a favorable environment. Among other key actions, we:

•

brought in a new senior leadership team, including our President and Chief Executive Officer John Eck;

•

rationalized and optimized our store footprint to create a highly productive and profitable store base. As part of a deliberate effort to maximize real estate efficiency, eliminate duplicative and cannibalistic stores and reduce lease exposure, we closed 641 store locations in the first quarter of fiscal 2019. Nonetheless, through our neighboring stores and focus on Digital sales, we recaptured a significant share of sales from the stores we closed. During the second quarter of fiscal 2019 through the fourth quarter of fiscal 2021, we closed an additional 331 stores. The activity with respect to the number of our stores for the preceding three fiscal years is as follows:

	Fiscal 2019		Fiscal 2020		Fiscal 2021
Stores, beginning of fiscal year		3,241		2,534		2,419
New stores		37		10		33
Acquired stores		0		3		1
Closed stores		(744)		(128)		(100)
Stores, end of fiscal year		2,534		2,419		2,353

•

re-designed a best-in-class product assortment, that is focused on highly-recognized brands across a broad spectrum of price points and styles. In particular, we reintroduced Tempur-Pedic, Sealy and Stearns & Foster brand mattresses in our stores in October 2019 pursuant to a newly negotiated supply agreement entered into in June 2019, following the termination of the prior supply agreement in February 2017. We extended the term of this supply agreement in August 2021 to September 2025. We also introduced an attractive mix of national brand exclusive and private brands products to our offering;

•

strengthened our digital capabilities and scaled our e-commerce business to create a true omni-channel experience, including making investments of $34.5 million from the beginning of fiscal 2020 through the end of fiscal 2021 to enhance our customer-facing digital toolkit such as MattressMatcher, Sleep.com and SleepScore, and the soon to be launched PriceMatcher, and focused our marketing efforts on digital marketing alongside a more disciplined and analytical data-driven approach; and

•

upgraded the training and development of our Sleep Experts and optimized their compensation structure in order to enhance our customer service, optimize the effectiveness of our sales force and to better align with our performance and profitability on an omni-channel basis.

As a result of these transformative actions, we materially improved our financial profile and other key performance metrics. We increased our net revenue from $2,962.3 million in fiscal 2019 to $3,256.6 million in fiscal 2020 and to $4,392.9 million in fiscal 2021. While we drove our net loss of $965.8 million in fiscal 2019 to a net income of $125.6 million in fiscal 2020, we again recognized a net loss of $165.1 million in fiscal 2021. A majority of the volatility in our net income (loss) during these fiscal years was due to impairments of goodwill and intangible assets, the remeasurement of embedded derivatives, loss from debt extinguishments and a special bonus and director fees. Separately, while we incurred an Adjusted Net Loss of $34.9 million in fiscal 2019, we generated Adjusted Net Income of $71.5 million in fiscal 2020 and $444.6 million in fiscal 2021. We increased Adjusted EBITDA from $153.4 million in fiscal 2019 to $256.3 million in fiscal 2020 and to $669.2 million in fiscal 2021. Adjusted Net Income (Loss) and Adjusted EBITDA are non-GAAP measures, see “Non-GAAP Financial Measures.” In addition, average order value decreased from $999 in fiscal 2019 to $970 in fiscal 2020, and then increased from $970 in fiscal 2020 to $1,111 in fiscal 2021. Furthermore, we substantially increased our cash flows from operating activities. While we used $9.3 million of cash from operating activities in

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fiscal 2019, we generated $379.0 million of cash from operating activities in fiscal 2020 and $452.6 million in fiscal 2021, and while we had negative Adjusted Free Cash Flow of $50.4 million in fiscal 2019, we had positive Adjusted Free Cash Flow of $331.6 million in fiscal 2020 and positive Adjusted Free Cash Flow of $445.9 million in fiscal 2021.

As an omni-channel retailer, our operations consist of one reportable segment for the sale of mattresses and bedding-related products across the United States through our three operating segments, B&M, Digital and Other Business. In addition, we adopted ASU No. 2016-02, Leases (Topic 842), ASU No. 2018-10, Codification Improvements to Leases, Topic 842, and ASU No. 2018-11, Targeted Improvements (collectively “Topic 842”) effective as of October 2, 2019. As a result of this change in accounting standards, certain of our financial information for fiscal 2019 is not comparable to the subsequent periods, such as fiscal 2020 and fiscal 2021. Our fiscal year consists of 52 or 53 weeks ending on the Tuesday closest to September 30th. See “Basis of Presentation.”

Factors Affecting Our Performance

We believe that our performance and future success depends on a number of important factors, including the following:

Strong Macro Fundamentals

We believe we will benefit from the current strong macroeconomic fundamentals. Historically, mattress sales growth has closely followed U.S. GDP growth, which, according to the International Monetary Fund, is expected to grow by 7% in 2021, the fastest rate since 1984, and is expected to continue to grow at an attractive rate of 4.9% in 2022. The U.S. retail mattress and foundations industry is expected to further benefit from near-term inflation, which is expected to grow 3.4% in 2021 and 2.1% in 2022, according to The Federal Reserve. In addition, we believe we will benefit from a robust housing market and favorable demographic trends driving new household formation, which drives increased turnover of the existing housing stock, powered by the new construction market and a favorable interest rate environment. We also believe we will benefit from a heightened focus on health and wellness generally, and increased recognition of the importance of high-quality sleep as a key component of a healthy lifestyle. We believe, as a result, customers are more likely to spend more on quality sleep products.

Large, Growing and Resilient Mattress Industry

The U.S. sleep industry, which we define as core mattress and foundations market and adjacent sleep products, such as pillows, linens and bedroom furniture, has been stable over the long-term, and is large and growing. The U.S. wholesale mattress and foundations industry grew at a 5.5% CAGR between 1974 and 2020, according to data compiled by International Sleep Products Association. The market has demonstrated stability and growth over the long-term and relative resilience during periods of economic weakness. Furthermore, the U.S. wholesale mattress and foundations industry is projected to grow at 6% in 2021, according to the ISPA. The U.S. wholesale mattress and foundations industry is the primary driver of the U.S. retail mattress and foundations industry, which we estimate, based on data from Furniture Today and ISPA market studies, was approximately $18 billion in 2020, with approximately $12 billion in the brick and mortar market and approximately $6 billion in the e-commerce market. Furthermore, we believe that there is little evidence in the market that sales of mattresses were disproportionately captured in 2020 as a result of the COVID-19 pandemic.

Our Omni-Channel Capabilities

We meet our customers wherever they choose to interact with our expertise-led ecosystem. We offer our customers an exceptional personalized experience, in-store or online, opening our doors to customers when, where and how they wish to shop. We intend to continue to leverage our omni-channel capabilities, which include our recognized market leadership position, our unmatched retail footprint, digital platform and distribution infrastructure, our expertise led-ecosystem and our best-in-class product assortment. We expect these omni-channel capabilities will continue to drive traffic online and in-store, as well customer conversion and customer loyalty, and grow revenue, profitability and cash flows.

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Recognized market leader. Mattress Firm is a household name with approximately 140 million consumer touchpoints annually, across in-store, online and event sponsorships. This exposure positions us to be top-of-mind for consumers when they begin their mattress purchase journey. We drive that exposure through our ad spend, which we estimate to be the largest in the mattress retail industry. Our ad spend is bolstered by our national scale, which allows us to run locally-led, nationally-supported, data-driven campaigns that effectively drive traffic to our stores and digital properties. We gain additional exposure from our real estate footprint in high-traffic locations. We have increased the effectiveness of our marketing in part by increasing the percentage of digital campaigns in our marketing strategies. For example, in fiscal 2019, 29% of our marketing spend was digital compared to 56% in fiscal 2020 and 58% in fiscal 2021. We also recently launched our popular “Junk Sleep” campaign to raise awareness of the importance of quality-sleep and educate consumers about the potentially negative health consequences of poor-quality sleep. The campaign has generated over 125 earned media placements and more than 3.2 billion potential impressions across earned, traditional, digital and social media from the launch date of the campaign in July 2021 through the end of September 2021.

Unmatched retail footprint, digital platform and distribution infrastructure and resulting efficiencies of scale. Our optimized national store footprint of 2,353 stores and 70 distribution centers (in each case, as of September 28, 2021) and our more than 30 third-party delivery providers together with our strong and rapidly growing online presence, provides us with national geographic coverage and industry-leading delivery speed. Based on the significant increase in our website visitors during fiscal 2021, we believe we can capture a larger percentage of digital sales in the U.S. mattress and foundations industry than the approximately 5% we estimate we captured as of 2020. Further, in the future we plan to utilize data analytics to drive site selection and expand our footprint in selected underpenetrated markets, such as Los Angeles, CA and Buffalo/upstate NY followed by post-opening local marketing initiatives. In addition, commencing in fiscal 2020 we began utilizing data analytics effectively to drive lower costs in our operations, logistics and human capital and selectively leveraging our market scale to expand gross margin, and expect to continue to do so in the future.

Expertise-led ecosystem. We provide in-depth training to our more than 6,500 highly-trained and incentivized Sleep Experts so they can be well-positioned to help consumers find the mattress that best meets their needs and provide a holistic offering of sleep solutions beyond the mattress. Specifically, we provide more than 240 hours of training for new associates during their first year and more than 200 hours of ongoing annual training thereafter, compared to the approximately 35-hour retail average in 2019, based on the Association for Talent Development’s 2020 State of the Industry report. Additionally, we offer appealing compensation packages to attract and retain an effective sales force as well as incentivize omni-channel selling behaviors, by allowing our store managers to receive commission for any customers that visit a store but ultimately transact online.

Best-in-class product assortment. Our best-in-class assortment of brands and depth of product lines is designed to meet the full range of customer needs and price points. Our mattress assortment is driven by a mix of national brands, national exclusive brands and private brands, each serving different roles. In fiscal 2021, 40% of our net revenue was generated by the sales of national brands and 57% was generated by the sales of national exclusive brands and private brands. In addition, in fiscal 2021, 45% of our net revenue was generated by mattresses with a retail price greater than $2,000, 27% was generated by mattresses with a retail price of between $1,001 and $2,000, 16% was generated by mattresses with a retail price of between $501 and $1,000 and the remaining 12% was generated by mattresses with a retail price of $500 and lower.

COVID-19

The outbreak of COVID-19, which was declared a global pandemic by the World Health Organization in March 2020, has affected, and may continue to affect, our business, as well as our customers, associates and suppliers, and resulted in federal, state and local governmental authority safety recommendations and requirements aimed at mitigating the spread of the virus, such as stay-at-home orders, prohibitions of large group gatherings, travel restrictions and closures of certain businesses.

In March 2020, in response to these restrictions, we took many actions, including heightened cleaning protocols in our stores, equipping each store with hand sanitizer stations and signage

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illustrating how to socially distance within the store, wearing face coverings and, in certain cases, limiting the number of customers admitted to our stores at one time. We closed approximately 50% of our stores by the last week of March 2020, approximately 65% of our stores were closed for the majority of April 2020 and approximately 40% of our stores remained closed for the majority of May 2020. We suspended partial lease payments beginning in April 2020. We then commenced lease negotiations with our landlords and ultimately negotiated lease term modifications across our entire portfolio and, as of the end of fiscal 2020, had modified terms in the leases for approximately 51% of our stores, resulting in lease expense savings of $1.4 million for fiscal 2020 and abatements of $18.9 million and deferrals of $11.3 million (with the majority to be paid by the end of fiscal 2022), in each case, as of the end of fiscal 2020. Moreover, in April 2020 we also took various strategic actions to preserve liquidity and significantly reduce operating expenses, such as drawing $60.0 million on our then existing asset-based revolving facility, which was subsequently repaid in full, negotiating extended payment terms with several direct merchants and larger advertisers, and reducing merchandise purchases to manage on lower inventory levels. Additionally, we instituted a hiring freeze, a reduction in sales force, a furlough program (temporarily furloughing 4,687 field associates and 224 corporate support personnel), compensation and severance pay adjustments, a hold on certain employee benefits and a freeze on employee travel. We had approximately $28.5 million in cost reductions in fiscal 2020 due to these actions, excluding related severance costs of $0.9 million incurred in fiscal 2020. Capital expenditures for the remainder of fiscal 2020 were substantially reduced. We took these actions, without government or lender financial support, to successfully preserve our liquidity, fortify our balance sheet and protect our business.

While our comparable sales decreased in the third quarter of fiscal 2020 due to the effects of the COVID-19 pandemic, the momentum we experienced prior to the onset of the COVID-19 pandemic returned and our business rebounded significantly by the fourth quarter of fiscal 2020. This momentum continued throughout fiscal 2021. Despite the rebound experienced by a majority of our business operations, we recognized an impairment of goodwill in the Other Business reporting unit in the fourth quarter of fiscal 2021 of $47.2 million, due to, among other things, the prolonged impact of the COVID-19 and the delayed return of our events and expositions operations within the Other Business reporting unit in fiscal 2021. See “—Critical Accounting Policies and Estimates—Intangibles and long-lived assets—Goodwill.” See “Risk Factors—Risks Related to Our Business—The impact of COVID-19 has adversely affected and may continue to adversely affect our business, results of operations and financial condition.”

Seasonality

Our wide assortment of products across our omni-channel platforms makes us less susceptible to seasonal shopping patterns than many retailers. While our business is relatively consistent over quarterly periods, historically we have realized a higher portion of net revenue, gross profit and cash flows from operating activities in our fourth fiscal quarter, attributable primarily to the impact of Fourth of July and Labor Day sales. Approximately 29%, 33% and 28% of our net revenue occurred in the fourth quarter of fiscal 2019, fiscal 2020 and fiscal 2021, respectively.

Public Company Expenses

Prior to this offering, we have not been subject to the reporting requirements of the Exchange Act or the other rules and regulations of the SEC or any securities exchange applicable to public companies. Compliance with reporting and other requirements applicable to public companies has and will create additional costs for us, has and will require the time and attention of management and has and will require the hiring of additional personnel and outside consultants. The expenses incurred by public companies generally for reporting and corporate governance purposes have been rising due, in part, to increased regulatory requirements related to accounting and reporting oversight. Furthermore, we expect to incur a material cash obligation for the withholding of employee income taxes in connection with the settlement of vested RSUs. The amount of this cash obligation will be determined based upon the market value of our common stock at the time of settlement and is expected to be paid with respect to certain RSUs within 30 days after the closing of this offering and is expected to be paid with respect to other RSUs within six months after the closing of this offering. For illustrative purposes only, using an

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assumed market value of $ per share, which is the midpoint of the estimate price range set forth on the cover page of this prospectus, the amount of this obligation would be $ million with respect to the settlement of the first group of RSUs and $ million with respect to the settlement of the second group of RSUs. In the event the stock price at the time of settlement is higher than the midpoint, the cash obligation would be larger.

Key Operating Metrics and Non-GAAP and Other Financial Measures

Our management and board of directors use various key operating metrics and non-GAAP and other financial measures, along with the corresponding GAAP financial measures, to assist in monitoring our ongoing financial performance; to supplement GAAP measures of performance in evaluating the effectiveness of business strategies and budgeting decisions; to evaluate our performance compared to prior periods and the marketplace; to establish operational goals; and to provide continuity to investors for comparability purposes. In particular, our management and board of directors use Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income (Loss), and Adjusted Free Cash Flow, as well as comparable sales, average order value and website visitors. These non-GAAP and other financial measures should be considered along with, but not as alternatives to, the financial performance measures as calculated in accordance with GAAP. See “Non-GAAP Financial Measures.”

Significant Components of Our Results of Operations

Net Revenue and Comparable Sales

Net revenue consists of sales of our merchandise, plus other services provided, such as installation, shipping and delivery, as well as franchise and license fees and royalty income, and is recorded net of discounts and returns, customer financing costs paid by us, and sales tax collected from customers and remitted to various taxing jurisdictions. Sales, including fees collected for delivery services, are recognized when the obligations under the terms of the contract with the customer are satisfied, which is when control of the product has transferred to the customer, which is when customers receive the mattress and/or other bedding product. Changes in net revenue are driven by comparable sales, net store openings, changes in average order value, the number of transactions, expanded product offerings, our advertising and marketing and the efforts of our Sleep Experts.

Comparable sales are comprised of net revenue, net of discounts, returns and excluding customer financing fees, franchise fees and royalty income. A store is included in the comparable sales calculation on the first day of the thirteenth full fiscal month following the store’s opening. When a store is relocated, it is treated as a new store for purposes of this calculation. Comparable sales allow us to evaluate how our overall ecosystem is performing by measuring the change in period-over-period net revenue for the stores that have been open for the applicable period. We intend to grow comparable sales by continuing to curate and offer best-in-class, innovative product offerings, building trust among consumers through our Sleep Experts and ecosystem of data-driven digital tools and platforms, and promoting our omni-channel experience through our marketing campaigns.

Cost of Sales and Total Gross Profit

Cost of sales consists of (i) costs associated with purchasing and delivering our products to our stores and our customers, net of vendor incentives earned on the purchase of products subsequently sold, (ii) store and distribution center occupancy costs and related depreciation expense, (iii) store and distribution center operating costs, (iv) physical inventory losses and (v) events and expositions operating costs.

Total gross profit is calculated as net revenue less cost of sales. Gross margin is defined as total gross profit divided by net revenue. The shift to higher-price point product categories, a focus on incentivizing our associates based on margin, our economies of scale and wide product range has led to gross margin expansion. Additionally, our business model is based on an approximately 60% variable cost structure, which allows us to quickly and effectively adapt to changing economic conditions or industry dynamics.

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Operating Expenses

Sales and Marketing Expenses

Sales and marketing expenses consist of advertising and media production, payroll and benefits for Sleep Experts, and merchant service fees for customers’ credit and debit card payments. Advertising costs are primarily associated with print, broadcast and digital advertisements, which may be offset by funds received directly from vendors. Beginning in fiscal 2020, we have increasingly shifted our focus to data-driven digital marketing to optimize our marketing efforts, which has led to improvement in our return on marketing investment.

General and Administrative Expenses

General and administrative expenses consist of payroll and benefits for corporate and regional management employees, stock-based compensation costs, corporate headquarter occupancy expense, information technology expenses, depreciation related to corporate assets, insurance costs and certain overhead costs. General and administrative expenses generally include fixed cost components associated with corporate and regional management overhead and, therefore, are not directly correlated with net revenue. Our stock-based compensation expenses relate to our RSUs, which are non-cash, and cash-based Phantom PIK Loan Awards awarded to certain of our officers and non-employee directors and options awards to certain of our non-employee directors, in fiscal 2019, fiscal 2020 and fiscal 2021. We expect that our stock-based compensation expense will substantially increase in the fiscal quarter that includes the closing of this offering in connection with the vesting of our RSUs. The majority of this incremental stock-based compensation expense will be determined based upon the offering price of our common stock at the closing of this offering and, based upon the midpoint of the price range set forth on the cover page of this prospectus, we expect such expense to be approximately $ million. We expect our general and administrative expenses will increase in general in future periods in part due to additional expenses we expect to incur as a result of being a public company, such as additional legal, accounting, insurance, and other expenses, including compliance with the Sarbanes-Oxley Act.

Impairment of Intangible Assets and Goodwill

Intangible assets and goodwill are tested annually for impairment, or more frequently, if events or changes in business circumstances indicate the applicable asset might be impaired. The impairment test of the applicable asset compares the carrying amount of the applicable asset to its fair value. If the fair value of the applicable asset exceeds its carrying value, no impairment loss is recognized. In fiscal 2019, we had an impairment of intangible assets of $568.9 million and an impairment of goodwill of $244.2 million. While we performed a quantitative impairment test of goodwill in fiscal 2020, no impairment was recognized. In fiscal 2021, we recorded $47.2 million impairment of goodwill, related to our Other Business operating segment.

Interest Expense, Net

Interest expense, net consists of interest on our debt (which for fiscal 2019 and fiscal 2020 was comprised of the 2018 Loans), amortization of original issue discount and loan costs and interest income. Following our entry on September 24, 2021 into the 2021 Term Loan, our interest expense, net increased due to the significant increase in our outstanding indebtedness from the entry into the 2021 Term Loan, which more than doubled our outstanding indebtedness.

Remeasurement of Embedded Derivatives and Loss from Debt Extinguishments

In connection with our emergence from bankruptcy in November 2018, we entered into the 2018 Loans and a $125.0 million ABL revolving credit facility. As a result of the features of the 2018 Loans which were determined to be embedded derivatives, we bifurcated the embedded derivatives from the host instruments and accounted for them separately. In anticipation of the 2018 Loans being refinanced, we remeasured the fair value of such embedded derivatives during fiscal 2020, resulting in a $131.7 million benefit. In November 2020, we entered into a new $550.0 million term loan (the “2020

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Term Loan”) and amended and restated the $125.0 million ABL revolving credit facility, and repaid in full the principal amount of the 2018 Loans plus accrued and unpaid interest and incurred prepayment penalties. In September 2021, we entered into the 2021 Term Loan, pursuant to which we borrowed $1.25 billion, and the 2021 ABL Facility, pursuant to which we have potential availability of $125 million, and repaid in full the principal amount of the 2020 Term Loan plus accrued and unpaid interest and incurred a prepayment penalty. In connection with the repayment of the 2018 Loans, repayment of the 2020 Term Loan and entering into the 2021 ABL Facility, we recorded $490.3 million loss from debt extinguishments during fiscal 2021.

Income Tax Expense (Benefit)

Income taxes consist of an estimate of federal and state income taxes based on enacted federal and state tax rates, as adjusted for allowable credits, deductions, and the valuation allowance against deferred tax assets, as applicable. Our effective tax rate will vary depending upon change in the value and realizability of our deferred tax assets and liabilities and changes to tax laws.

Results of Operations

Fiscal 2020 Compared to Fiscal 2021

The following table indicates our results of operations for the periods presented as well as the percentage relationship to net revenue of each line item of the consolidated statements of operations, as well as the percentage change in dollar amounts compared to the prior year.

							Percentage of Net Revenue				Basis Point Increase/ (Decrease) Percentage of Net Revenue		Percentage Increase/ (Decrease) Dollar Amounts
(in millions, except percentages)	Fiscal 2020			Fiscal 2021			Fiscal 2020		Fiscal 2021		Fiscal 2021 vs. Fiscal 2020		Fiscal 2021 vs. Fiscal 2020
Net revenue		$	3,256.6		$	4,392.9		100.0%		100.0%		—		34.9%
Cost of sales			2,142.6			2,530.3		65.8%		57.6%		(820)		18.1%
Total gross profit			1,114.0			1,862.6		34.2%		42.4%		820		67.2%
Operating expenses:
Sales and marketing expenses			704.9			950.0		21.6%		21.6%		—		34.8%
General and administrative expenses			247.2			316.1		7.6%		7.2%		(40)		27.9%
Special bonus and director fees			—			151.9		—%		3.5%		350		NM
Impairment of goodwill			—			47.2		—%		1.1%		110		NM
Total operating expenses			952.1			1,465.2
Income from operations			161.9			397.4		5.0%		9.0%		400		145.5%
Interest expense, net			122.3			54.6		3.8%		1.2%		(260)		(55.4)%
Remeasurement of embedded derivatives			(131.7)			—		(4.0)%		—%		400		(100.0)%
Loss from debt extinguishments			—			490.3		—%		11.2%		1,120		NM
Income (loss) before income taxes			171.3			(147.5)		5.3%		(3.4)%		(870)		(186.1)%
Income tax expense			45.7			17.6		1.4%		0.4%		(100)		(61.5)%
Net income (loss)		$	125.6		$	(165.1)		3.9%		(3.8)%		(770)		(231.4)%

NM = Not meaningful

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The following tables set forth the periods presented operational data, and other non-GAAP and other financial measures:

(in millions, except percentages, number of stores and average order value)	Fiscal 2020			Fiscal 2021
Comparable sales growth			13.0%			36.1%
Number of stores at year-end			2,419			2,353
Average order value(1)		$	970		$	1,111
Website visitors(2)			56			62
Adjusted EBITDA(3)		$	256.3		$	669.2
Net income margin(4)			3.9%			NM
Adjusted EBITDA margin(3)			7.9%			15.2%

NM = Not meaningful

(1)

Average order value is defined as net revenue, excluding customer financing fees and sales returns and exchange reserves of $86.0 million and $90.6 million for fiscal 2020 and fiscal 2021, respectively, and income from CFS and franchise and royalty income of $6.3 million and $7.2 million for fiscal 2020 and fiscal 2021, respectively, divided by the number of transactions for such fiscal periods.

(2)

(3)

The following table provides a reconciliation of net income (loss) to Adjusted EBITDA for the periods presented. See “Non-GAAP Financial Measures” for further information, including definitions, usefulness, limitations and non-comparability.

(in millions, except percentages)	Fiscal 2020			Fiscal 2021
Adjusted EBITDA:
Net income (loss)		$	125.6		$	(165.1)
Interest expense, net			122.3			54.6
Remeasurement of embedded derivatives			(131.7)			—
Income tax expense			45.7			17.6
Depreciation and amortization expense			57.6			57.3
Impairment of goodwill			—			47.2
Impairment of property and equipment and operating lease right-of-use assets and loss on disposal of property and equipment(a)			15.0			8.6
Loss from debt extinguishments(b)			—			490.3
Stock and other non-cash compensation(c)			13.2			3.7
Inventory reconfiguration initiative(d)			8.6			—
Special bonus and director fees(e)			—			151.9
Offering cost(f)			—			3.1
Adjusted EBITDA		$	256.3		$	669.2
Net revenue		$	3,256.6		$	4,392.9
Adjusted EBITDA Margin(g)			7.9%			15.2%

NM = Not meaningful

(a)

We recorded a loss on disposal of property and equipment primarily in connection with the store closings of $1.8 million and $2.6 million for fiscal 2020 and fiscal 2021, respectively, an impairment on operating lease of right-of-use assets of $9.5 million and $4.7 million for fiscal 2020 and fiscal 2021, respectively, and an impairment on property and equipment for underperforming store assets of $3.7 million and $1.3 million for fiscal 2020 and fiscal 2021, respectively.

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(b)

Represents a loss recorded upon the extinguishments of the 2018 Loans in fiscal 2019 and 2020 Term Loan, 2018 ABL Facility and the 2020 ABL Facility in fiscal 2021. The loss included $470.4 million related to the extinguishments of the 2018 Loans, $18.6 million related to the extinguishment of the 2020 Term Loan and $1.3 million of costs related to the extinguishment of the 2018 ABL Facility and 2020 ABL Facility during fiscal 2021.

(c)

Represents stock and other non-cash compensation associated with our 2019 Plan.

(d)

During the first quarter of 2020, we undertook an initiative to re-configure and provide inventory slot availability within our B&M showrooms to facilitate the introduction of various new products. Costs incurred for the initiative include inventory liquidation and related sales associate incentive expenses.

(e)

(f)

Represents costs incurred in fiscal 2021 associated with this offering.

(g)

Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by net revenue.

(4)

Net income margin is defined as net income divided by net revenue.

Net Revenue and Comparable Sales

Net revenue increased by $1,136.3 million, or 34.9%, from $3,256.6 million in fiscal 2020 to $4,392.9 million in fiscal 2021. This increase was primarily driven by a $1,177.8 million, or 36.1%, increase in comparable sales, which was driven by a 21.6% increase in the number of customer transactions and a 14.5% increase in average order value for comparable sales. The increase in number of transactions includes a 37.9% increase in B&M sales due to higher traffic and conversions, as well as temporary store closures as a result of the COVID-19 pandemic in the third quarter of fiscal 2020. Furthermore, a 15.9% increase in Digital sales also contributed to the increase in the number of transactions, which was primarily driven by our ongoing efforts and investments to improve our customers’ experience in the Digital operating segment over the past several years, in addition to a general shift in customer spending patterns due to the COVID-19 pandemic. The increase in average order value was driven by consumer shift to luxury products. These increases were partially offset by a 39.3%, or $19.8 million, decrease in sales from our Other Business operating segment due to the impact of the COVID-19 pandemic and a 0.7%, or $23.9 million, decrease in sales due to store closures in fiscal 2021.

Cost of Sales and Total Gross Profit

Cost of sales increased by $387.7 million, or 18.1%, from $2,142.6 million in fiscal 2020 to $2,530.3 million in fiscal 2021. This increase in cost of sales was primarily attributable to the increase in net revenue in fiscal 2021. Gross margin expanded 820 basis points in fiscal 2021 compared to fiscal 2020 primarily as a result of a consumer shift to luxury products and occupancy leverage. Occupancy costs, which, after the cost of merchandise, represent the largest item within our cost of goods sold, are generally fixed on a per store basis and fluctuate based on the number of stores that we operate. As our occupancy costs decreased in fiscal 2021 compared to fiscal 2020 by $10.3 million primarily due to store closures in fiscal 2021, occupancy costs as a percentage of net revenue also decreased by approximately 388 basis points due to the increase in net revenue discussed above.

Sales and Marketing Expenses

Sales and marketing expenses increased $245.1 million, or 34.8%, from $704.9 million in fiscal 2020 to $950.0 million in fiscal 2021, and held flat as a percentage of net revenue. Advertising expense increased $112.4 million, or increased 40 basis points as a percentage of revenue, sales associates costs increased $112.0 million, or decreased 50 basis points as a percentage of revenue and other sales and marketing expenses increased $20.6 million, or increased 10 basis points as a percentage of revenue. The increase in advertising expense was primarily due to an increase in digital spend in fiscal 2021 that drove higher traffic and conversion and the launch of our “Junk Sleep” campaign in July 2021. The decrease in sales associate costs as a percentage of net revenue is primarily due to the re-alignment of our incentive structure in fiscal 2020. Additionally, cost reduction initiatives in the third quarter of fiscal 2020 related to the COVID-19 pandemic led to a comparable increase of approximately $20.2 million in sales and marketing expenses in fiscal 2021.

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General and Administrative Expenses

General and administrative expenses increased $68.9 million, or 27.9%, from $247.2 million in fiscal 2020 to $316.1 million in fiscal 2021, which was a 40 basis point decrease as a percentage of net revenue. The increase in general and administrative expenses was primarily due to an increase in contractor and consulting fees primarily related to preparation of this offering and various other executive projects to improve our operating efficiency and an increase in salaries and benefits as a result of human capital investments. Additionally, cost reduction initiatives in the third quarter of fiscal 2020 related to the COVID-19 pandemic led to a comparable increase of approximately $6.6 million in general and administrative expenses in fiscal 2021.

Special Bonus and Director Fees

The special bonus and director fees in fiscal 2021 represent a discretionary performance bonus of $135.3 million paid to eligible current and former employees, a payment of $14.6 million of additional fees to certain non-employee directors, and $2.0 million of payroll taxes associated therewith. This discretionary performance bonus was paid in recognition of efforts made to exit bankruptcy and our post-restructuring transformation. This bonus payment was made concurrently with the distribution we otherwise paid to our common stockholders on September 24, 2021, and it was paid in lieu of any adjustment to outstanding RSU awards granted to the current and former employees and certain non-employee directors.

Impairment of Intangible Assets and Goodwill

There were no impairments of intangible assets or goodwill in fiscal 2020. In fiscal 2021, we recorded a $47.2 million goodwill impairment related to our Other Business reporting unit. The impairment was driven by a decline in our long-term net revenue forecast for this reporting unit due to the prolonged impact of the COVID-19 pandemic and the delayed return of our events and expositions operations within the Other Business reporting unit in fiscal 2021, combined with the impact of a shift in strategy of its operations to better align with our omni-channel strategy that took effect in the fourth quarter. Key assumptions used to calculate the fair value of the Other Business reporting unit include the risk-adjusted weighted average cost of capital (“WACC”), forecast for net revenue, operating costs and long-term growth rates. As of September 28, 2021, we had $37.8 million of remaining goodwill allocated to our Other Business reporting unit. Any further downward revisions to the long-term forecast for net revenue and operating costs and long-term growth rates for this reporting unit or increases in the risk-adjusted WACC could result in additional goodwill impairments.

Interest Expense, Net

Interest expense, net for the periods presented consists of the following:

(in millions)	Fiscal 2020			Fiscal 2021
Interest expense		$	83.0		$	40.1
Amortization of original issue discount and loan costs			42.4			15.0
Interest income			(3.1)			(0.5)
Interest expense, net		$	122.3		$	54.6

Interest expense, net decreased $67.7 million, or 55.4%, from $122.3 million in fiscal 2020 to $54.6 million in fiscal 2021. This decrease was primarily attributable to a decrease in amortization of the original issue discount and loan costs and lower interest rate due to the extinguishments of the 2018 Loans in November 2020.

Remeasurement of Embedded Derivatives and Loss from Debt Extinguishments

Our embedded derivatives were associated with our 2018 Loans, both of which have been repaid in full, and were calculated using certain assumptions made by our management regarding future financing activities and estimates related to our credit spread and credit rating. The change in the value

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of the embedded derivatives during fiscal 2020 related to changes in management’s assumptions regarding the timing of certain future events that impacted the prepayment features within the 2018 PIK Loan. The refinancing of the 2018 PIK Loan in the first quarter of fiscal 2021 accelerated the prior assumption related to the timing of the prepayment and substantially changed the value of the embedded derivatives from a $113.5 million liability as of October 1, 2019 to an $18.3 million asset as of September 29, 2020.

In connection with the repayment of the 2018 Loans, 2020 Term Loan and amendments of the ABL revolving credit facility, we recorded a $490.3 million loss from debt extinguishments during fiscal 2021. In fiscal 2020, we did not have any losses from early debt extinguishment.

Income Tax Expenses

Our effective income tax rate was 26.7% in fiscal 2020 compared to (11.9)% in fiscal 2021. Significant items that impacted the fiscal 2020 effective tax rate included additional valuation allowances required as a result of the CARES Act and a change in the estimated timing of when certain tax attributes related to our debt structure would impact future periods. Significant items that impacted the fiscal 2021 effective tax rate included the November 2020 debt refinancing, valuation allowance placed on deferred tax assets and goodwill impairment.

Net Income (Loss)

We generated a net income of $125.6 million in fiscal 2020 compared to net loss of $165.1 million in fiscal 2021. The net loss in fiscal 2021 was primarily driven by the $490.3 million loss from debt extinguishments, $151.9 million attributable to the special bonus and director fees, inclusive of payroll taxes thereon and $47.2 million impairment of goodwill in fiscal 2021, each as further described above.

Adjusted EBITDA

Adjusted EBITDA increased $412.9 million, or 161.1%, from $256.3 million in fiscal 2020 to $669.2 million in fiscal 2021 and Adjusted EBITDA Margin increased from 7.9% in fiscal 2020 to 15.2% in fiscal 2021, which was a 730 basis point expansion. These increases were driven principally by increased net revenue and total gross profit, partially offset by increased general and administrative expenses and increased sales and marketing expenses, each as further described above.

Fiscal 2019 Compared to Fiscal 2020

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							Percentage of Net Revenue				Basis Point Increase / (Decrease) Percentage of Net Revenue		Percentage Increase / (Decrease) Dollar Amounts
(in millions, except percentages)	Fiscal 2019			Fiscal 2020			Fiscal 2019		Fiscal 2020		Fiscal 2020 vs. Fiscal 2019		Fiscal 2020 vs. Fiscal 2019
Net revenue		$	2,962.3		$	3,256.6		100.0%		100.0%		—		9.9%
Cost of sales			2,046.1			2,142.6		69.1%		65.8%		(330)		4.7%
Total gross profit			916.2			1,114.0		30.9%		34.2%		330		21.6%
Operating expenses:
Sales and marketing expenses			708.9			704.9		23.9%		21.6%		(230)		(0.6)%
General and administrative expenses			276.1			247.2		9.3%		7.6%		(170)		(10.5)%
Impairment of intangible assets			568.9			—		19.2%		—		(1,920)		(100.0)%
Impairment of goodwill			244.2			—		8.2%		—		(820)		(100.0)%
Total operating expenses			1,798.1			952.1		60.7%		29.2%		(3,150)		(47.0)%
Income (loss) from operations			(881.9)			161.9		(29.8)%		5.0%		3,480		NM
Interest expense, net			107.3			122.3		3.6%		3.8%		20		14.0%
Remeasurement of embedded derivatives			12.2			(131.7)		0.4%		(4.0)%		(440)		NM
Loss from debt extinguishments			8.5			—		0.3%		—		(30)		(100.0)%
Income (loss) before income taxes			(1,009.9)			171.3		(34.1)%		5.3%		3,940		NM
Income tax expense (benefit)			(44.1)			45.7		(1.5)%		1.4%		290		NM
Net income (loss)		$	(965.8)		$	125.6		(32.6)%		3.9%		3,650		NM

NM = Not meaningful.

The following tables set forth for the periods presented operational data, and other non-GAAP and other financial measures:

(in millions, except percentages, number of stores and average order value)	Fiscal 2019			Fiscal 2020
Comparable sales growth			7.5%			13.0%
Number of stores at year-end			2,534			2,419
Average order value(1)		$	999		$	970
Website visitors(2)			27			56
Adjusted EBITDA(3)		$	153.4		$	256.3
Net income margin(4)			NM			3.9%
Adjusted EBITDA margin(3)			5.2%			7.9%

NM = Not meaningful

(1)

Average order value is defined as net revenue, excluding customer financing fees, sales returns and exchange reserve, which totaled $77.5 million and $86.0 million in fiscal 2019 and fiscal 2020, respectively, and income from CFS and franchise and royalty income, which totaled $9.9 million and $6.3 million in fiscal 2019 and fiscal 2020, respectively, divided by the number of transactions for such fiscal periods.

(2)

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(3)

(in millions, except percentages)	Fiscal 2019			Fiscal 2020
Adjusted EBITDA:
Net income (loss)		$	(965.8)		$	125.6
Interest expense, net			107.3			122.3
Remeasurement of embedded derivatives			12.2			(131.7)
Income tax (benefit) expense			(44.1)			45.7
Depreciation and amortization expense			69.1			57.6
Impairment of intangible assets			568.9			—
Impairment of goodwill			244.2			—
Impairment of property and equipment and operating lease right-of-use assets and loss on disposal of property and equipment(a)			12.5			15.0
Loss from debt extinguishments(b)			8.5			—
Stock and other non-cash compensation(c)			8.2			13.2
Inventory reconfiguration initiative(d)			9.9			8.6
Restructuring costs, net(e)			122.5			—
Adjusted EBITDA		$	153.4		$	256.3
Net revenue		$	2,962.3		$	3,256.6
Adjusted EBITDA Margin(f)			5.2%			7.9%

NM = Not meaningful

(a)

We recorded a loss on disposal of property and equipment primarily in connection with the store closings of $3.2 million and $1.8 million for fiscal 2019 and fiscal 2020, respectively, an impairment on operating lease right-of-use assets of $9.5 million and $4.7 million for fiscal 2020 and fiscal 2021, respectively, and an impairment on property and equipment for underperforming store assets of $9.3 million and $3.7 million for fiscal 2019 and fiscal 2020, respectively.

(b)

Represents loss recorded upon the extinguishment of debt in fiscal 2019 associated with the Chapter 11 restructuring.

(c)

Represents stock and other non-cash compensation associated with our 2019 Plan.

(d)

(e)

(f)

Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by net revenue.

(4)

Net income margin is defined as net income divided by net revenue.

Net Revenue and Comparable Sales

Net revenue increased by $294.3 million, or 9.9%, from $2,962.3 million in fiscal 2019 to $3,256.6 million in fiscal 2020. This increase was primarily driven by a $381.3 million, or 13.0%, increase in comparable sales, which was driven by a 12.8% increase in the number of customer transactions and a 0.2% increase in average order value for comparable sales. The increase in the number of customer transactions includes a 131.9% increase in Digital sales, which was primarily driven by our ongoing efforts and investments to improve our customers’ experience in the Digital operating segment over the past several years, in addition to a general shift in customer spending patterns in the second half of fiscal 2020 due to the COVID-19 pandemic. These increases were partially offset by a 1.0% ($34.0 million) decrease in sales due to store closures in fiscal 2020 and a 47.7% ($45.9 million) decrease in sales from our Other Business operating segment due to the impact of the COVID-19 pandemic.

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Cost of Sales and Total Gross Profit

Cost of sales increased by $96.5 million, or 4.7%, from $2,046.1 million in fiscal 2019 to $2,142.6 million in fiscal 2020. This increase in cost of sales was primarily attributable to the increase in net revenue in fiscal 2020 and the reversal of $21.3 million of portfolio fair value adjustments as a result of lease terminations in connection with the Chapter 11 restructuring in fiscal 2019, partially offset by $90.2 million in lease termination fees incurred in fiscal 2019 in connection with the Chapter 11 restructuring. Gross margin expanded 330 basis points compared to fiscal 2019 primarily as a result of the lease termination fees incurred in fiscal 2019, which was partially offset by a general shift in product sales throughout fiscal 2020 to items with slightly lower margins.

Sales and Marketing Expenses

Sales and marketing expenses decreased $4.0 million, or 0.6%, from $708.9 million in fiscal 2019 to $704.9 million in fiscal 2020, which was a 230 basis point decrease as a percentage of revenue. The decrease was primarily attributable to a decrease in sales associate personnel costs driven by the closure of stores in the third fiscal quarter of 2020 and related furlough, the re-alignment in our incentive structure as well as significant advertising leverage as we optimized digital spend on those initiatives that drove higher traffic and conversion.

General and Administrative Expenses

General and administrative expenses decreased $28.9 million, or 10.5%, from $276.1 million in fiscal 2019 to $247.2 million in fiscal 2020, which was a 170 basis point decrease as a percentage of revenue. The decrease was primarily attributable to higher legal and professional fees incurred in fiscal 2019 associated with the Chapter 11 restructuring, partially offset by higher corporate and regional personnel costs in fiscal 2020.

Impairment of Intangible Assets and Goodwill

In fiscal 2019, we recorded an impairment of intangible assets of $ 568.9 million and goodwill impairment of $ 244.2 million. The impairment of intangible assets was largely driven by a change in management’s assumptions related to a change in the royalty rate utilized in the relief from royalty method. The impairment of goodwill was largely driven by a combination of (i) the change to multiple reporting units from a single reporting unit resulting from the completion of our restructuring post-bankruptcy and (ii) an increase in the WACC over the rate used in 2018 due to increased forecast risk post-bankruptcy. There were no impairments of intangible assets or goodwill in fiscal 2020.

Interest Expense, Net

Interest expense, net for the periods presented consists of the following:

(in millions)	Fiscal 2019			Fiscal 2020
Interest expense		$	102.9		$	83.0
Amortization of original issue discount and loan costs			6.7			42.4
Interest income			(2.3)			(3.1)
Interest expense, net		$	107.3		$	122.3

Interest expense, net increased $15.0 million, or 14.0%, from $107.3 million in fiscal 2019 to $122.3 million in fiscal 2020. This increase was primarily attributable to an increase in amortization of the original issue discount and loan costs, partially offset by a decrease in interest expense from a reduction in our debt balance due to the Chapter 11 restructuring in early fiscal 2019.

Remeasurement of Embedded Derivatives and Loss from Debt Extinguishments

Our embedded derivatives were associated with our 2018 Loans, both of which have been repaid in full, and were calculated using certain assumptions made by our management regarding future

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financing activities and estimates related to our credit spread and credit rating. The change in the value of the embedded derivatives during fiscal 2019 related to changes in estimates related to our credit spread and credit rating resulted in $12.2 million of expense. The change in the value of the embedded derivatives during fiscal 2020 related to changes in management’s assumptions regarding the timing of certain future events that impacted the prepayment features within the 2018 PIK Loan. The repayment of the 2018 Loans in the first quarter of fiscal 2021 accelerated the prior assumption related to the timing of the prepayment and substantially changed the value of the embedded derivatives from a $113.5 million liability as of October 1, 2019 to an $18.3 million asset as of September 29, 2020.

The loss from debt extinguishments in fiscal 2019 was a result of debt that was eliminated as part of our emergence from the Chapter 11 restructuring in early fiscal 2019. In fiscal 2020, we did not have any losses from early debt extinguishment.

Income Tax Expenses (Benefit)

Our effective income tax rate was 26.7% in fiscal 2020 compared to 4.4% in fiscal 2019. Significant items that impacted the fiscal 2019 effective tax rate included the impairment of goodwill and valuation allowances placed on certain deferred tax assets that are expected to expire unutilized. Significant items that impacted the fiscal 2020 effective tax rate included additional valuation allowances required as a result of the CARES Act and a change in the estimated timing of when certain tax attributes related to our debt structure would impact future periods.

Net Income (Loss)

We drove our net loss of $965.8 million in fiscal 2019 to a net income of $125.6 million in fiscal 2020, which was due to the factors described above.

Adjusted EBITDA

Adjusted EBITDA increased $102.9 million, or 67.1%, from $153.4 million in fiscal 2019 to $256.3 million in fiscal 2020 and Adjusted EBITDA Margin increased from 5.2% in fiscal 2019 to 7.9% in fiscal 2020, which was a 270 basis point expansion. These increases were driven principally by increased net revenue and total gross profit and decreased general and administrative expenses, partially offset by increased marketing spend and corporate expenses, including to support human capital.

Liquidity and Capital Resources

Sources of Funds

Our principal sources of funds are cash provided by operating activities, supplemented with cash and cash equivalents on hand and borrowings made pursuant to our 2021 ABL Facility. As of September 28, 2021, we had cash and cash equivalents of $209.7 million and full availability of our 2021 ABL Facility.

Funding Requirements

Our primary cash requirements have historically consisted of operating needs, working capital, capital expenditures and debt service. On September 24, 2021, we entered into the 2021 Term Loan, which is a $1,250.0 million term loan facility with a seven-year maturity and initial interest rate of 5.0%, applicable through fiscal 2021. The 2021 Term Loan is subject to amortization in equal calendar quarterly installments of principal in an amount equal to 0.25% of the aggregate principal amount of the facility (which payment shall be reduced as a result of the application of certain prepayments, assignments and/or extensions, in each case, as set forth in the facility) with the remaining balance payable at the final date of maturity. These quarterly payments in fiscal 2022 are expected to be $3.1 million per quarter. Furthermore, we expect to incur a material cash obligation for the withholding of employee income taxes in connection with the settlement of vested RSUs. The amount of this cash obligation will be determined based upon the market value of our common stock at the time of settlement is expected to be paid

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with respect to certain RSUs within 30 days after the closing of this offering and is expected to be paid with respect to other RSUs within six months after the closing of this offering. For illustrative purposes only, using an assumed market value of $ per share, which is the midpoint of the estimate price range set forth on the cover page of this prospectus, the amount of this obligation would be $ million with respect to the settlement of the first group of RSUs and $ million with respect to the settlement of the second group of RSUs. In the event the stock price at the time of settlement is higher than the midpoint, the cash obligation would be larger. Our working capital needs depend upon the timing of cash receipts from sales, payments to suppliers and others, changes in inventories and lease payment obligations. Our working capital management policy, given inventory-light stores that primarily serve as showrooms, leverages our balance sheet to fuel growth and provides us with operating leverage. Our capital expenditures are driven by the need to maintain and grow our business, as described below under “—Cash Flows—Operating Activities.”

A review of capital needs and various investing and financing alternatives to support our requirements is performed regularly. We believe that our existing cash and cash equivalents, future cash generated from operating activities and available borrowings under the 2021 ABL Facility will be sufficient to fund expected operating needs, working capital requirements, capital expenditures, cash obligations for the withholding of employee income taxes in connection with the settlement of vested RSUs and debt service requirements over the 12-month period beginning from the date of this prospectus.

We cannot assure you that cash provided by operating activities or cash and cash equivalents will be sufficient, or that borrowings under our 2021 ABL Facility will be available, to meet our future needs. If we are unable to generate sufficient cash flows from operating activities in the future, we may have to obtain additional financing. If we obtain additional capital by issuing equity, the interests of our existing stockholders will be diluted. If we incur additional indebtedness, that indebtedness may contain significant financial and other covenants and higher interest rates that may significantly restrict our operations. We cannot assure you that we could obtain refinancing or additional financing on favorable terms or at all. See “Risk Factors—Risks Related to Our Business—Our growth strategy will be dependent upon, and limited by, the availability of adequate capital.” In addition, in the future, our board of directors may, in certain circumstances, consider paying a dividend or effecting share repurchases. Any such future determination would be subject to the sole discretion of our board of directors and would depend upon various factors, including applicable law, and would be subject to limitations in the agreements governing any of the indebtedness we or our subsidiaries currently have or may in the future incur. There can be no assurance that we will pay any dividends or effect any share repurchases.

Cash Flows

(in millions)	Fiscal 2019			Fiscal 2020			Fiscal 2021 (As Restated)
Net cash (used in) provided by operating activities		$	(9.3)		$	379.0		$	452.6
Net cash used in investing activities			(41.1)			(46.3)			(102.2)
Net cash provided by (used in) financing activities			209.3			(3.1)			(645.3)

Operating Activities

Net cash provided by (used in) operating activities in fiscal 2020 increased by $388.3 million, as compared to fiscal 2019, primarily due to our increase in net revenue and decrease in sales and marketing expenses. This increase in net cash provided by (used in) operating activities was also driven by an increase in accounts payable and other accrued liabilities, primarily due to the timing of inventory receipts, customer deliveries and lease payments.

Net cash provided by operating activities in fiscal 2021 increased by $73.6 million, as compared to fiscal 2020, primarily due to our increase in net revenue, partially offset by $151.9 million paid for special bonus and director fees, inclusive of payroll taxes thereon, in fiscal 2021 and $90.5 million for the

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cash payment of paid-in-kind interest deferred in fiscal 2019 and fiscal 2020, paid in connection with the extinguishment of the 2018 Loans in fiscal 2021.

Investing Activities

Net cash used in investing activities increased by $5.2 million from $41.1 million in fiscal 2019, to $46.3 million in fiscal 2020 and by $55.9 million to $102.2 million in fiscal 2021. This increase was primarily due to an increase in additions to our property and equipment. Additionally, in fiscal 2021, we made a $5.0 million investment in SleepScore in the form of a senior convertible note.

Our capital expenditures consist of (i) investments in existing stores and distribution centers, primarily maintenance, (ii) investments in strategic initiatives to improve the customers’ experience, including omni-channel initiatives, and improve performance, such as investments in information technology and (iii) new store construction (primarily build-out of leasehold improvements). Capital expenditures were $41.1 million in fiscal 2019, $47.4 million in fiscal 2020 and $97.2 million in fiscal 2021.

The following table provides the allocation of capital expenditures for the periods presented:

(in millions)	Fiscal 2019			Fiscal 2020			Fiscal 2021
Existing store and distribution center investments		$	9.7		$	7.2		$	48.5
Strategic initiatives			24.3			36.0			36.0
New store construction			7.1			4.2			12.7
Total capital expenditures		$	41.1		$	47.4		$	97.2

Financing Activities

Net cash provided by (used in) financing activities changed from cash used of $3.1 million in fiscal 2020, primarily for payments on the 2018 Term Loan and finance leases as compared to cash provided of $209.3 million in fiscal 2019 primarily due to financing obtained during the Chapter 11 restructuring. Due to uncertainties related to COVID-19, we drew $60 million from the then-outstanding 2018 ABL Facility in March 2020 and subsequently repaid such borrowings in full in September 2020.

Net cash used in financing activities increased to $645.3 million in fiscal 2021 primarily due to $1.2 billion used for the repayment of debt and debt redemption premiums for the extinguishments of the 2018 Loans and 2020 Term Loan and the distributions of $1.2 billion to existing stockholders, partially offset by $1.8 billion in proceeds from borrowings on the 2020 Term Loan and 2021 Term Loan.

Indebtedness

Our Senior Credit Facilities consist of our 2021 Term Loan and 2021 ABL Facility. Our 2021 Term Loan is a senior secured term loan entered into on September 24, 2021, among Mattress Firm, Inc., as Borrower, the guarantors party thereto, and Barclays Bank PLC, as administrative agent. Our 2021 ABL Facility is a senior secured asset-based revolving credit facility entered into on September 24, 2021, among Mattress Firm, Inc., as Borrower, the guarantors party thereto and Barclays Bank PLC, as administrative agent. See “Description of Certain Indebtedness.”

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, cash flows, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make assumptions and estimates about future events and apply judgments that affect the reported

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amounts of assets, liabilities, net revenue, expenses and the related disclosures. These assumptions, estimates and judgments are based on historical experience, current trends and other factors that management believes to be relevant at the time the consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that the consolidated financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from these assumptions and estimates and such differences could be material.

The following accounting policies affect the most significant estimates and judgments used in preparing the consolidated financial statements.

Taxes

We evaluate the realizability of our deferred tax assets on a quarterly basis. We perform an analysis of all available evidence, both positive and negative, consistent with the provisions of Accounting Standard Codification (“ASC”) 740 Establishment of a Valuation Allowance for Deferred Tax Assets by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These estimates of future taxable income inherently require significant judgment. To the extent it is considered more likely than not that a deferred tax asset will not be recovered, a valuation allowance is established. As a result of our being in a three-year cumulative loss position as of September 28, 2021, we did not rely on forecasted operating earnings due to the subjective nature of forecasts. Therefore, after weighing both the positive and negative evidence available, we have determined that it is more likely than not that our various deferred tax assets will not be realizable, and accordingly continue to record a valuation allowance. As of September 28, 2021, our deferred tax asset valuation allowance was $441.3 million.

However, we believe that there is a reasonable possibility that sufficient positive evidence may become available in the near- to medium-term to allow us to reach a conclusion that a significant portion of the valuation allowance will no longer be needed. If, as a result of the above, the valuation allowance is released, we would recognize certain deferred tax assets, and there would be a material decrease to income tax expense for the period during which such release is recorded. The timing and amount of the valuation allowance release, if any, are subject to change on the basis of the level of profitability, if any, that we are able to actually achieve.

However, notwithstanding any possible reversal of any valuation allowance, pursuant to Section 382 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), our ability to utilize approximately $1.7 billion of tax attributes against taxable income earned in the future will be limited to approximately $2.3 million per year. As such, notwithstanding any possible reversal of any valuation allowance, approximately $778.1 million of tax attributes will expire unused and utilization of the remainder will be subject to such annual limitation under Section 382 of the Code. See Note 8—Income Taxes to our consolidated financial statements included elsewhere in this prospectus.

The determination of the consolidated provision for income taxes, deferred tax assets and liabilities and related valuation allowance requires us to make judgments and estimates. Although we believe that our tax estimates are reasonable, the ultimate tax determination involves significant judgments that could become subject to audit by tax authorities in the ordinary course of business, as well as the generation of sufficient future taxable income. We do not have any uncertain tax positions recorded.

Net Revenue

Net revenue is recorded net of returns and reflect sales of merchandise plus other services provided, such as installation, shipping, and delivery services. We recognize a sale when the obligations under the terms of the contract with the customer are satisfied, which is 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 customer receives the product. 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 also offer assurance type warranties on certain of our products, which is not accounted for

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as separate performance obligations under the revenue model, as well as third-party extended warranty services for certain products. Under the third-party extended warranties, we function as the agent and, therefore, these arrangements are considered service-type warranties. Because we act as an agent in these arrangements, we recognize revenue for extended warranty sales net of all associated costs.

Payment is typically due when the order is made. Customer deposits collected prior to the delivery of merchandise are recorded as a contract liability and are presented separately within ‘customer deposits’ on the consolidated balance sheet. Substantially all of the customer deposits held at the beginning of the fiscal year relate to performance obligations satisfied during the fiscal year and are therefore recognized in revenue for the current year ended. Customer financing costs paid by us are recorded as a reduction of revenue. Net revenue is recognized net of the sales tax collected from customers and remitted to various taxing jurisdictions.

The transaction price is measured as the amount of consideration we expect to receive in exchange for transferring goods. We provide our customers with a comfort satisfaction guarantee whereby the customer may receive a refund or exchange the original mattress for a replacement of equal or similar quality for a specified period (currently 120 days) after the original purchase date and, in some cases, subject to a restocking fee. Mattresses returned under this policy are reconditioned pursuant to applicable state laws and regulations and resold primarily through our clearance center stores as used merchandise. We accrue an asset for merchandise returns and a liability for the estimated costs, net of estimated restocking fees, for returned merchandise at the time the sale is recorded based upon historical experience. We regularly assess and adjust the estimated liability by updating return rates based on actual trends and projected return costs.

Vendor Incentives

We receive funds from vendors in the normal course of business, principally as a result of purchase volumes, sales, early payments or reimbursement of specific showroom display units. Generally, these vendor funds do not represent the reimbursement of specific, incremental and identifiable costs that were incurred to sell the vendor’s product. Many of the vendor funds associated with these purchases are earned under agreements that are negotiated on an annual basis or shorter.

Cash payments or credit memos received from vendors as incentives to enter into or to maintain long-term supply arrangements are systematically deferred and amortized as a reduction of cost of sales. Vendor incentives that are based on a percentage of the cost of purchased merchandise, such as cooperative advertising funds, are accounted for as a reduction of the price of the vendor’s products and result in a reduction of cost of sales when the merchandise is sold. Certain vendor arrangements provide for volume-based incentives that require minimum purchase volumes and may provide for increased incentives upon higher levels of volume purchased. The recognition of earned incentives that vary based on purchase levels includes the effect of estimates of our purchases of the vendor’s products and may result in adjustments in subsequent periods if actual purchase volumes deviate from the estimates.

Certain vendors provide funds that represent reimbursements of expenses incurred by us in selling or marketing the vendor’s products or services. These funds are recorded by us as a reduction of those expenses (e.g., a reduction of advertising expense) when recognized in our consolidated statements of operations if the funds provided by the vendor to us represent a reimbursement of a specific, incremental, identifiable expense incurred by us in selling or marketing the vendor’s products or services. If the amount of the funds provided by the vendor exceeds the expenses incurred by us, we recognize the excess amount in our consolidated statements of operations as a reduction of cost of sales. We classify deferred incentives as a non-current liability.

Accrual rates are developed based on the provisions of the agreements in place for vendor funds. Due to the complexity and diversity of the individual vendor agreements, analyses are performed and historical purchase trends and volumes are reviewed throughout the year to adjust accrual rates as appropriate and confirm actual amounts with select vendors to ensure the amounts earned are appropriately recorded. Amounts accrued throughout the year could be impacted if actual purchase

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volumes differ from projected purchase volumes, especially in the case of programs that provide for increased funding when graduated purchase volumes are met.

No material changes in the methodology used to recognize vendor funds during the past three fiscal years has occurred. If actual results are not consistent with the assumptions and estimates used, exposure to additional adjustments that could positively or negatively impact gross margin and inventory exist. However, substantially all receivables associated with these activities do not require subjective long-term estimates because they are collected within the following fiscal year. Adjustments to gross margin and inventory have historically not been material.

Leases

Leases Under ASU Topic 842

We lease real estate assets such as retail stores, warehouse facilities, distribution centers, storage space as well as equipment, including vehicles, trucks, forklifts, information technology equipment, printers, and copiers. The majority of our real estate leases are associated with our approximately 2,400 retail store locations.

We determine whether an arrangement is or contains a lease at inception by evaluating potential lease agreements, including service and operating agreements, to determine whether an identified asset exists that we control over the term of the arrangement. We use judgment in determining the interpretation of lease terms such as how to treat options and lease commencement. Lease commencement is determined to be when the lessor provides us access to, and the right to control, the identified asset. Upon lease commencement, we recognize a right-of-use asset and a corresponding lease liability measured at the present value of the fixed future minimum lease payments. We have elected the practical expedient upon adoption of ASU Topic 842, on October 2, 2019, to not separate lease and non-lease components for all of our leases. Therefore, lease payments included in the measurement of the lease liability include all fixed payments in the lease arrangement, and any variable payments in such arrangements meet the definition of variable lease payments and will be disclosed as such. We record a right-of-use asset for an amount equal to the lease liability, increased for any prepaid lease costs and initial direct costs and reduced by any lease incentives. We remeasure the lease liability and right-of-use asset when a remeasurement event occurs.

The adoption of ASU Topic 842 requires lessees to discount the lease liability using either the rate implicit within a lease or, if such rate is unknown to the lessee, the incremental borrowing rate. The rates implicit in our leases are not readily determinable. Therefore, we utilized an incremental borrowing rate to calculate the present value of our future lease obligations. The incremental borrowing rate represents the rate of interest we would have to pay on a collateralized borrowing, for an amount equal to the lease payments, over a similar term and in a similar economic environment. We use judgment in determining our incremental borrowing rate, which is applied to each lease based on the lease term. An increase or decrease in the incremental borrowing rate applied would impact the value of our operating lease right-of-use assets and lease liabilities.

Our real estate leases generally have an initial contractual term of ten years. In determining the lease term used in the operating lease right-of-use and lease liability calculations, we consider various factors such as market conditions and the terms of any renewal or termination options that may exist. Many of our leases contain renewal options and, in limited circumstances, early termination options exist. When the initial contractual term of the lease is less than ten years and a renewal period is for a five-year term, the renewal option period is generally included in the lease term used to measure our operating lease right-of-use assets and lease liabilities upon commencement, as we believe the exercise of these options to be reasonably certain. We remeasure the operating lease right-of-use asset and lease liability (i) when there is a change in circumstances within our control that impacts whether we are reasonably certain of exercising the option, (ii) there is an event that obliges us to exercise the option, (iii) we elect to exercise an option that was previously reasonably certain of not being exercised or (iv) we elect not to exercise an option that was previously certain of not being exercised. In identifying and determining the length of the lease term, leasehold improvements (build out costs) are taken into consideration to evaluate if we would suffer an economic penalty by either exercising an

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option to terminate a lease or choosing not to exercise an additional option as included within the lease agreement at the lease inception.

We are typically required to make fixed lease payments primarily related to payment of fixed real estate costs including base rent, storage rent, etc. Sometimes, we are required by the lessor to pay for certain fixed non-lease costs including fixed common area maintenance fees, fixed administration fees, and/or certain other fixed costs. Given we have elected the practical expedient to combine lease and non-lease components for all of our leases, we include the payments of both fixed lease and non-lease expenses within the calculation of the lease liability and also discloses them accordingly under ASU Topic 842. Variable payments for items such as utilities, trash collection, insurance and real estate taxes, are excluded from the lease liability, and are disclosed separately as a component of variable lease cost under ASU Topic 842.

Leases under ASU Topic 840

Lease expense on operating leases, including lease holidays and scheduled lease increases, is recorded on a straight-line basis over the term of the lease, commencing on the date of possession of the leased property. Common area maintenance costs are expensed as incurred. Lease expense is recorded in cost of sales and general and administrative expenses on the consolidated statements of operations. The net excess of lease expense over the actual cash paid was recorded as a deferred rent liability in the consolidated balance sheets. Tenant improvement allowances are also included in the consolidated balance sheets as deferred rent liabilities and are amortized as a reduction of lease expense over the term of the lease from the possession date. Contingent lease payments, typically based on a percentage of sales, are recognized in lease expense during the period in which the sales are recorded.

Intangibles and long-lived assets

Goodwill

Goodwill is evaluated annually to determine whether it is impaired. Goodwill is also tested between annual impairment tests if an event occurs or circumstances change that would indicate that the fair value of a reporting unit is less than its carrying amount. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate that could affect the value of an asset. If an impairment indicator exists, goodwill is tested for recoverability. We assess the carrying value of goodwill at the reporting unit level. A reporting unit is the operating segment, or the business unit that is one level below the operating segment. As of September 28, 2021, we had three reporting units which correspond to our three operating segments, B&M, Digital and Other Business. In fiscal 2019, the annual goodwill impairment test was performed on the last day of the fiscal year. In fiscal 2020, we changed the date of the annual goodwill impairment test to the first day of the fourth fiscal quarter which was a change in accounting policy. Management performed an analysis and determined this change in accounting policy would not have a material impact if retrospectively applied.

To test for impairment, the fair value of the reporting unit is compared to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is considered not impaired and there is no requirement to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then an impairment loss equal to the difference is recorded. The fair value of each reporting unit has historically been determined by using a discounted cash flow analysis using the income approach, as well as a market approach to compare the estimated fair value to comparable companies.

For fiscal 2020 and fiscal 2021, the market approach was forgone due to the lack of availability of comparable projections resulting from COVID-19 related uncertainty and only the income approach was applied. The market approach is expected to be reincorporated in future years if reasonable and comparable projections are available. The determination of fair value requires assumptions and estimates of many critical factors, including among others, financial and economic conditions, such as the economic downturn as a result of COVID-19, industry and the general economy, past results, current operations and future prospects, sales of similar businesses or capital stock of publicly held similar

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businesses, as well as prices, terms and conditions affecting past sales of similar businesses. Forecasts of future operations are based, in part, on results of operations and management’s expectations as to future market conditions.

These types of analyses contain uncertainties because they require management to make assumptions and to apply judgments to estimate industry economic factors and the profitability of future business strategies. If actual results are not consistent with estimates and assumptions, exposure to future impairment losses that could be material may exist.

In fiscal 2019, we recognized a goodwill impairment of $244.2 million, of which $240.0 million was for the B&M reporting unit and $4.2 million for the Other Business reporting unit. The fiscal 2019 goodwill impairment was largely driven by a combination of (1) the change to multiple reporting units from a single reporting unit resulting from the completion of our restructuring post-bankruptcy and (2) an increase in the WACC over the rate used in 2018 due to increased forecast risk post-bankruptcy. While we performed a quantitative impairment test of goodwill in fiscal 2020, no impairment was recognized. Future impairment charges could be required if current net revenue and profitability projections are not achieved or if WACC increases. Moreover, changes in our share of the retail bedding market may impact certain assumptions used in the income approach calculations.

In fiscal 2021, we recorded a $47.2 million goodwill impairment, related to our Other Business reporting unit. The impairment was driven by a decline in our long-term net revenue forecast for this reporting unit due to the prolonged impact of the COVID-19 pandemic and the delayed return of our events and expositions operations within the Other Business reporting unit in fiscal 2021, combined with the impact of a shift in strategy of its operations to better align with our omni-channel strategy that took effect in the fourth quarter. Key assumptions used to calculate the fair value of the Other Business reporting unit include the risk-adjusted WACC, forecast for net revenue, operating costs and long-term growth rates. A 1% increase in the WACC would have resulted in a decrease in fair value of this reporting unit and additional goodwill impairment expense of approximately $5 million, and a 1% decrease in WACC would have resulted in an increase in the fair value of this reporting unit and less goodwill impairment expense of approximately $7 million. A 0.5% decrease in the long-term growth rate would result in an approximate $2 million increase in goodwill impairment expense. As of September 28, 2021, we had $37.8 million of remaining goodwill allocated to our Other Business reporting unit. Any further downward revisions to the long-term forecast for net revenue and operating costs and long-term growth rates for this reporting unit or increases in the risk-adjusted WACC could result in additional goodwill impairments.

Trade names

Trade names are annually evaluated to determine if they continue to have an indefinite life. In fiscal 2019, we performed the annual trade name impairment test on the last day of the fiscal year. Similar to the goodwill impairment test, during fiscal 2020, we changed the date of the annual trade name impairment test to the first day of the fourth fiscal quarter. Trade names are reviewed for impairment annually and may be reviewed more frequently if indicators of impairment are present. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate that could affect the value of an asset or an adverse action or assessment by a regulator.

The impairment review is performed by comparing the carrying value to the estimated fair value, determined using a relief from royalty methodology. If the recorded carrying value of the trade name exceeds its estimated fair value, an impairment charge is recorded for the difference between its carrying value and its estimated fair value. Factors used in the valuation of intangible assets with indefinite lives include, but are not limited to, future net revenue growth assumptions, estimated market royalty rates that could be derived from the licensing of trade names to third parties, and a rate used to discount the estimated royalty cash flow projections to their present value (or estimated fair value).

The valuation of trade names requires assumptions and estimates of many critical factors, which are consistent with the factors discussed under “—Goodwill” above. Forecasts of future operations are based, in part, on results of operations and management’s expectations as to future market conditions.

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These types of analyses contain uncertainties because they require management to make assumptions and to apply judgments to estimate industry economic factors and the sales resulting from future business strategies. If actual results are not consistent with estimates and assumptions, exposure to future impairment losses that could be material may exist.

We recognized a $567.1 million impairment of the Mattress Firm trade name and a $1.8 million impairment of the Sleep Experts trade name in fiscal 2019, for total impairments of $568.9 million. The impairment of intangible assets was largely driven by a change in management’s assumptions related to a change in the royalty rate utilized in the relief from royalty method. No impairment of trade names was determined for fiscal 2020 or fiscal 2021, despite disruptions to operations, including temporary store closures, due to COVID-19 in fiscal 2020.

Long-Lived Asset Impairment

We review the carrying value of all long-lived assets for impairment, primarily at an individual store level, whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. Our impairment analyses determine whether projected cash flows from operations are sufficient to recover the carrying value of these assets.

After the adoption of ASU Topic 842, the asset group consists of both property and equipment and operating lease right-of-use assets. Impairment may result when the carrying value of the asset or asset group exceeds the estimated undiscounted future cash flows over its remaining useful life. For the retail store asset impairment, our estimate of undiscounted future cash flows over the store lease term is based upon our experience, the historical operations of the stores and estimates of future store profitability and economic conditions. The estimates of future store profitability and economic conditions require estimating such factors as sales growth, gross margin, employment costs, lease escalations, inflation and the overall economics of the retail industry, and are therefore subject to variability and difficult to predict.

For right-of-use assets, we determine the fair value of the assets by using estimated market rental rates. These estimates can be affected by factors such as future store results, real estate demand, store closure plans, and economic conditions that can be difficult to predict. Actual future results may differ from those estimates. If a long-lived asset is found to be impaired, the amount recognized for impairment is equal to the excess of the asset or asset group’s net carrying value over its estimated fair value.

For fiscal 2020, we recorded impairment charges for underperforming store assets of $3.7 million for property and equipment and $9.5 million for operating lease right-of-use assets. For fiscal 2021, we recorded impairment charges for underperforming store assets of $1.3 million for property and equipment and $4.7 million for operating lease right-of-use assets. Key assumptions for the fiscal 2021 calculation include the WACC, which ranged from 7% to 9%. A 1% change in the WACC used in this calculation would have resulted in a change in the impairment charges of approximately $0.5 million.

Recent Accounting Pronouncements

See Note 1—Significant Accounting Policies—Recent Accounting Guidance to our consolidated financial statements included elsewhere in this prospectus.

Quantitative and Qualitative Disclosure about Market Risk

We are exposed to certain market risks as part of our ongoing business operations, including interest rate risks and commodity price risk, that could adversely affect our consolidated financial position, results of operations or cash flows. These risks are managed through regular operating and financing activities.

Interest Rate Risk

We are subject to interest rate risk on a portion of our debt. A portion of this interest rate risk is managed by having the ability to lock in certain rates for periods up to one year. If interest rates were to annually change by 0.5%, we estimate our interest expense could fluctuate by approximately $6 million.

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Commodity Price Risk

We do not purchase raw materials. However, our merchandise suppliers purchase certain commodity products used in the production of our inventory purchases that are subject to price volatility caused by factors beyond our control. The price volatility of these products is partially mitigated by the ability to adjust selling prices and procure inventory from multiple suppliers. The changing prices for commodities due to inflation or deflation have not had a material effect on our net revenue or results of operations.

Impact of Inflation

Our results of operations and financial condition are presented based on historical cost. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on our historical results of operations and financial condition have been immaterial. We cannot assure you, however, that our results of operations and financial condition will not be materially impacted by inflation in the future.

Internal Control Over Financial Reporting

As a privately held company, we are not currently required to comply with the rules of the SEC implementing Section 404 of the Sarbanes-Oxley Act and are, therefore, not currently required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which will require management to certify financial and other information in our annual and quarterly reports and provide an annual management report on the effectiveness of internal control over financial reporting.

In connection with the audit of our consolidated financial statements for the year ended October 1, 2019, we identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis. We did not have in place an effective control environment with controls over the establishment of provisions for tax liabilities, impairment analysis with respect to our goodwill, tradenames and intangible assets and lease accounting for deferred rent expense that would identify errors in a timely manner. In addition, the lack of adequate accounting personnel and formal processes and procedures resulted in several material audit adjustments to our consolidated financial statements for fiscal 2019.

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subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, in addition to the now remediated material weaknesses described above. See “Risk Factors—Risks Related to This Offering and Our Common Stock—While we have remediated prior material weaknesses in our internal control over financial reporting, we may in the future identify new material weaknesses, and if we are unable to maintain effective internal controls, we may not be able to produce timely and accurate financial statements, which could cause the market price of our common stock to decline and could have a material adverse effect on our business, results of operations, and financial condition.”

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BUSINESS

We Are the Trusted Authority on Sleep

We are the clear market leader in the large and growing U.S. retail mattress and foundations industry. In 2020, we estimated, based on data from Furniture Today and ISPA market studies, that the U.S. retail mattress and foundations industry was approximately $18 billion, We are the category-defining national mattress specialty retailer (based on U.S. retail mattress revenue) across this attractive market with, according to our estimates, an approximately 20% market share as of the end of 2020. We estimate that we are nearly twice the size of our next largest competitor (based on U.S. retail mattress sales) and eight times larger than the next largest multi-branded mattress specialty retailer in the United States (based on store count). In fiscal 2021, our net revenue was $4,392.9 million, our net loss was $165.1 million and our Adjusted EBITDA was $669.2 million. See “Summary—Summary Historical Consolidated Financial and Other Data” for a reconciliation of Adjusted EBITDA to net income, the most comparable GAAP measure.

•

rationalized and optimized our store footprint to create a highly productive and profitable store base. We closed more than 950 stores and estimate that we have been able to recapture a

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significant share of sales from these closed stores through neighboring locations as well as online. In addition, over the past three years we negotiated favorable modifications of lease terms for a significant majority of our stores;

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strengthened our digital capabilities and scaled our e-commerce business to create a true omni-channel experience, opening our doors to customers when, where and how they wish to shop;

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introduced an incentivized compensation structure and upgraded the training and development of our Sleep Experts to optimize the efficiency, education and effectiveness of our sales force;

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better aligned our supply chain to leverage our distribution footprint more effectively;

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focused our marketing spend on digital alongside a more disciplined and analytical, data-driven approach; and

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streamlined our cost structure to create a leaner and more efficient organization.

See “Summary—Summary Historical Consolidated Financial and Other Data” for definitions of comparable sales growth, revenue per store, average order value and website visitors.

(1)

Our superior scale, differentiated value proposition and relentless focus on service and experience have driven net revenue and Adjusted EBITDA at a CAGR of 21.8% and 108.9%, respectively, from fiscal 2019 to fiscal 2021. Our growth trajectory and financial performance prior to COVID-19 were strong and we have continued to out-perform the market during and beyond COVID-19. The onset of COVID-19 in our third quarter of fiscal 2020 caused us to pivot sharply towards digital offerings, thereby accelerating our strategic initiatives in that area.

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Note: See “Summary—Summary Historical Consolidated Financial and Other Data” for a reconciliation of Adjusted EBITDA to net income, the most comparable GAAP measure.

Industry Overview

The Sleep Industry is Large, Growing and Resilient

Market Growth is Supported by Favorable Economic Fundamentals and Attractive Consumer Trends

Strong macroeconomic backdrop. Historically, mattress sales growth has closely followed U.S. GDP growth. According to The International Monetary Fund, U.S. GDP is expected to grow 7% in 2021, the fastest rate since 1984, and expected to continue to grow at an attractive rate of 4.9% in 2022. Additionally, the U.S. retail mattress and foundations industry is expected to further benefit from near-term inflation, which is expected to grow 3.4% in 2021 and 2.1% in 2022, according to The Federal Reserve.

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Consumers Increasingly Recognize Quality Sleep as a Key Component of a Healthy Lifestyle

Competitive Landscape is Favorable for Omni-Channel Retailers with National Scale and a Physical Presence

As consumer purchasing preferences continue to shift, we believe that mattress specialty retailers with category expertise and knowledge and an omni-channel model will succeed by allowing the customer to seamlessly transition between online and offline shopping and to personalize their purchasing experience. Therefore, the importance of a nationwide store footprint that can service the vast majority of the U.S. population, coupled with a best-in-class distribution, a leading digital platform and delivery network becomes critically important given the increased focus on convenience. According to research

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from the Better Sleep Council conducted in 2017, 92% of consumers say it is important to try out a mattress before making a purchase. Our differentiated suite of omni-channel capabilities positions us well to continue to gain share in a growing and fragmented market.

Our Strengths

We believe there are several key attributes that define and differentiate us and position us to continue to win in the attractive markets in which we operate.

Mattress Market Leader in the United States

(1)

Includes net revenue from our B&M and Other Business operating segments, excluding financing fees.

(2)

Includes net revenue from our Digital operating segment, excluding financing fees.

Proven Omni-Channel Strategy

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Unparalleled Physical Infrastructure

We have the largest national, coast-to-coast retail footprint of any mattress specialty retailer in the United States with 2,353 stores as of September 28, 2021, with an estimated 82% of the U.S. population living within 10 miles of one of our stores (excluding areas without enough of a concentrated population to profitably support a store, thereby excluding approximately 28 million people in fiscal 2021, which determination we make based on a complex algorithm driven by a significant number of objective criteria, including, among others, market rents, population, population density, average household income and other demographics). We estimate that we are nearly twice the size of our next largest competitor (based on U.S. retail mattress sales) and eight times larger than the next largest multi-branded mattress specialty retailer in the United States (based on store count). Our national scale enables us to provide convenience to customers that we believe our competitors cannot match. Our industry-leading fulfillment capabilities are supported by 70 distribution centers and an extensive network of over 30 third-party delivery providers. This national footprint allows us to more efficiently manage our inventory and working capital. We are actively testing the option for same day delivery on all sales in six markets and in many markets we can already meet certain requests from customers. Additionally, we offer a full range of white-glove delivery services, including in-home set-up and removal of old mattresses.

Exceptional Customer Service and Personalized Experience Driven by Highly-Trained and Incentivized Team of Sleep Experts

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Comprehensive and Diversified Product Offering Driving Unique Value Proposition

Attractive Financial Profile with Consistent Growth

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captured in 2020 as a result of COVID-19. We believe that we will continue to win market share and grow at above-market rates as consumers continue to seek a true omni-channel experience.

Our highly variable cost structure, working capital management policy and increasingly robust Adjusted Free Cash Flow generation are all part of our improved financial profile. Our business model is based on an approximately 60% variable cost structure, given marketing spend and commission-based compensation structure, which allows us to quickly and effectively adapt to changing economic conditions or industry dynamics. Our working capital management policy, given inventory-light stores that primarily serve as showrooms, leverages our balance sheet to fuel growth and provides us with operating leverage. Since fiscal 2019, we have improved cash flow from operating activities and Adjusted Free Cash Flow. In fiscal 2021, we generated $452.6 million in cash flow from operating activities and $445.9 million in Adjusted Free Cash Flow, respectively. See “Summary—Summary Historical Consolidated Financial and Other Data” for a reconciliation of Adjusted Free Cash Flow to cash flow from operating activities, the most comparable GAAP measure.

Best-in-Class Organization and Culture to Support Growth

Our Growth Strategy

Build and Leverage our Brand and Expertise to Maintain our Leadership Position

Elevate Customer Experience across All Channels

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is to create a stress-free environment for customers to choose their sleep products, and we are launching our “Store of the Future” concept to create such experience and further engage our customers using our omni-channel capabilities; and

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Leverage Data and Personalized Experience to Create Customers for Life

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Facilitate Active Research. Refine and upgrade our omni-channel capabilities to encourage customers to use our in-store and digital toolkits to conduct mattress and sleep-related research;

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Offer a Seamless, Personalized Purchase Experience. Offer an engaging, personalized omni-channel experience and a market-leading value proposition;

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Increase Customer Loyalty. Focus on improving customer engagement and increase customer loyalty.

Accelerate Marketing Outcomes and Build Brand Recognition

Disciplined Footprint Expansion

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upstate NY, where we do not have a major presence and we believe we can successfully expand with attractive economics as well as filling out the remaining expansion opportunities in the Detroit market. We have developed a proven data-driven process for opening new locations, from site selection to post-opening local marketing initiatives, including tailoring floor offerings to local demand characteristics. We estimate potential for the key underpenetrated markets to be approximately new 300 stores over the next three years (without accounting for store closures). Newly opened stores, on average, have a payback period of approximately one year.

As part of our normal course operations, we plan to continue to monitor and, as necessary, close underperforming stores that no longer meet our operating and performance targets. The exit costs associated with such store closures typically are minimal and consist of unamortized leasehold improvements. Based upon our historical experience, we believe we will continue to achieve significant recapture rates from such closed stores with our nearby stores and digital platform.

Drive Operational Excellence to Fund Growth and Maximize Stockholder Value

Our Products

We provide an expansive selection of brands and high-quality products across a wide range of technologies, styles and price points. The following charts show for fiscal our net revenues broken down by product type, and our sales of mattresses by price point:

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Our products are sold in three broad categories:

Mattresses:

Conventional Mattresses: Conventional mattresses, such as the Sealy Posturepedic and Stearns & Foster brands, manufactured by Tempur Sealy, and the Simmons Beautyrest brand, manufactured by Simmons-Serta Bedding, each utilize steel-coil innersprings to provide comfort and support.

Specialty Mattresses: Specialty mattresses, such as the Tempur-Pedic brand manufactured by Tempur Sealy, utilize materials other than, and in addition to, steel-coil innersprings to provide comfort and support and include materials that utilize a core of viscoelastic foam, also referred to as memory foam, a high-density, temperature sensitive foam that alleviates pressure points by contouring to one’s body. Other specialty mattresses, such as Purple and Intellibed, provide gel mattress alternatives with open air channels and temperature-neutral materials as well as hybrid mattresses, which have multi-layer cores comprised of viscoelastic foam and an innerspring system, to give customers the ability to adjust their mattress to personal sleeping positions and support needs.

Adjustable Bases and Box Springs: In our stores and digital platforms, we carry an assortment of adjustable bases, box springs and other bed frames.

Accessories: In our stores and digital platforms, we carry an assortment of accessories and other products, including bed linens, pillows and other sleep products.

Along with our other national brand suppliers, Tempur Sealy and Serta Simmons are our primary suppliers of nationally branded mattresses. Purchases of products from Tempur Sealy and Serta Simmons accounted for 36.6% and 27.8%, respectively, in fiscal 2021, of our mattress product costs. We reintroduced Tempur-Pedic, Sealy and Stearns & Foster brand mattresses in our stores in October 2019, following the termination of the prior supply agreement in February 2017. In connection with the reintroduction, we entered into an agreement with Tempur-Sealy on June 17, 2019, which we amended on October 1, 2020 and August 13, 2021, and as a result of the latter amendment, our agreement continues through September 30, 2025 and will automatically renew thereafter for another year. The agreement is terminable by either party, with or without cause, upon 60 days’ written notice. The agreement provides that we will maintain inventory of Tempur-Sealy products reasonably sufficient to meet anticipated customer needs. This agreement includes an indemnity by each party of the other in the event of certain third party claims. The total amount of vendor incentives received from Tempur Sealy were $0, $90.9 million and $169.3 million for fiscal 2019, fiscal 2020 and fiscal 2021, respectively, and are recognized as a reduction of our cost of sales as they primarily relate to volume-based incentive programs or are based on a percentage of our cost of purchased merchandise.

We entered into an agreement on January 1, 2017 with Serta Simmons. The agreement is terminable by either party upon 90 days’ written notice. Pricing is based on agreed market rates, which may be increased with 60 days’ notice. This agreement includes an indemnity by each party of the other in the event of certain third party claims. The total amount of vendor incentives received from Serta Simmons were $147.5 million, $100.0 million and $111.4 million for fiscal 2019, fiscal 2020 and fiscal 2021, respectively, and are recognized as a reduction of our cost of sales as they primarily relate to volume-based incentive programs or are based on a percentage of our cost of purchased merchandise.

Our supply contracts with other manufacturers generally have an initial term of at least two years, plus applicable automatic renewal provisions, subject to customary termination provisions.

In addition to our national brands and national exclusive brands, we offer our private brands. Our private brands are differentiated and key to our merchandise assortment strategy, as these brands comprise the value and promotional segments of our offerings, and drive loyalty to our brand. Our private brands offer customers high-quality alternatives to more well-known, luxury products.

Our private brands include Sleepy’s and Tulo. Sleepy’s competes in a space where customers look for quality and value and is positioned to provide high-quality mattresses, made from a wide range of materials, for the right price. Tulo is positioned to compete against “mattress-in-a-box,” DTC and e-commerce companies in our industry with great value and convenience.

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The following chart indicates revenue by brand type for fiscal 2021:

The merchandising team, in partnership with the supply chain and marketing departments, is responsible for all product selection, supplier negotiations, procurement, initial pricing determinations, product marketing plans and promotions, and coordination with local store and distribution center managers to implement our merchandise programs. Our merchandising team also regularly communicates with our field management and franchisees to monitor shifts in consumer preferences and market trends.

Our Store Footprint

We believe we have an unmatched, coast-to-coast optimized footprint, which is the largest of any mattress specialty retailer in the United States. Our corporate headquarters, which we refer to as the Store Support Center, are in Houston, Texas. Our stores are concentrated in certain geographic regions, such as the Gulf Coast, Northeast, Mid-Atlantic, Great Lakes, Southwest and Texas, and Southeast, with an estimated 82% of the U.S. population living within 10 miles of one of our stores (excluding areas without enough of a concentrated population to profitably support a store, thereby excluding approximately 28 million people in fiscal 2021, which determination we make based on a complex algorithm driven by a significant number of objective criteria, including, among others, market rents, population, population density, average household income and other demographics).

Since November 2018, we have rationalized and optimized our store footprint to create a highly productive and profitable store base. As part of a deliberate effort to maximize real estate efficiency, eliminate duplicative and cannibalistic stores and reduce lease exposure, we closed 972 stores in fiscal 2019, fiscal 2020 and fiscal 2021, in aggregate, and opened 80 new stores. Our rent expense in fiscal 2021 was $449.2 million (which included variable lease costs of $98.2 million). Further, the activity with respect to the number of our stores for fiscal 2019, fiscal 2020 and fiscal 2021 is as follows:

	Fiscal 2019		Fiscal 2020		Fiscal 2021
Stores, beginning of fiscal year		3,241		2,534		2,419
New stores		37		10		33
Acquired stores		—		3		1
Closed stores		(744)		(128)		(100)
Stores, end of fiscal year		2,534		2,419		2,353

We lease nearly all of our store locations. Most of our retail store leases contain multiple five-year renewal options and rent escalation provisions. We have historically been able to renew or extend leases

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for our stores. In connection with our temporary store closures in response to restrictions in response to COVID-19, we negotiated favorable lease term modifications across our entire portfolio.

Site Selection

Our data-driven site selection strategy is to select or develop premium locations, leveraging insights from third-party sales forecasting, market research, data analytics tools and market rent analysis. We select markets and store sites based on the demographics, quality of neighboring tenants, store visibility and signage opportunities, accessibility and lease economics. This strategy drives us to obtain convenient, high traffic stores, located as free-standing units or highly visible end-cap in power center locations targeting customers with discretionary income. Key demographic considerations include population density, household income and growth rates, among others. We also utilize relative market share analyses to determine the likelihood of becoming the market leader in each market we serve within a certain period of time.

We continue to evaluate our stores for closure candidates using our data-driven process. If it is determined that the sales recapture rate of nearby stores will drive an economic recoupment of associated termination fees and related costs within 18 months or less, we will strongly consider closing a store. Our calculated approach to managing our store fleet has helped to significantly improve sales productivity.

Store Refresh and Upgrade Program

We are committed to providing our customers with a differentiated shopping experience that addresses their sleep needs in a modern, convenient format. We have launched a “Store of the Future” concept that incorporates technology into our customers’ purchase journey and includes showcasing certain brands in a shop-in-shop format as well as opportunities to highlight additional sleep enhancing products as stand-alone purchases or to complement each mattress purchase. We plan to open all our new stores in this “Store of the Future” format and to refresh 15% to 20% of our existing store fleet annually. We will also incorporate elements of the “Store of the Future” concept into refreshed stores as well as other potential design updates, technology advances and digital components. We will leverage this program to provide an evolving experiential shopping environment for our customers.

Our Digital Platforms

We are a leading online mattress retailer in the approximately $5.6 billion U.S. mattress and foundations market, with, according to our estimates, an approximately 5% market share in 2020. As a result, our websites attracted 56 million visitors in fiscal 2020 and 62 million visitors in fiscal 2021, a significant increase over 27 million website visitors in fiscal 2019. As a result of our digital transformation in marketing and omni-channel efforts, our e-commerce business has grown to scale while benefiting our B&M business. Further, we have made investments of $34.5 million since the beginning of fiscal 2020 to enhance our customer-facing tools and optimized our marketing efforts by shifting to data analytics-driven digital marketing. We continue to innovate and invest in our digital capabilities in order to provide our customers an engaging digital experience, where they can learn about sleep, browse and research mattresses and other sleep-related products and engage with our digital tools, all with the goal of driving sales conversion. Innovations in our digital platform include:

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MattressMatcher: We developed a machine learning enabled tool designed to help customers find the perfect mattress whether online or in-store.

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Sleep.com: We introduced a go-to consumer website for sleep that provides consumers with curated content on sleep health and wellness and related products and services.

•

SleepScore Labs: We partnered with SleepScore Labs to incorporate their industry leading sleep measurement app, which uses data integration and advanced analytics to support a data-driven sales approach.

Our Other Business

Our Other Business is primarily comprised of events and exhibitions such as conventions, rodeos and state fairs, commercial sales and our custom fundraising solutions licensing businesses. This

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operating segment reflects our intention to meet our customers where they want to interact and shop, including outside of our store footprint and digital platforms.

Our Distribution and Delivery

Manufacturers typically ship merchandise directly to our extensive nationwide network of 70 distribution centers, that serve our B&M and Digital operations. We replenish our distribution centers based on the rate of sales, promotions and predetermined stocking levels. Our merchandise is received, inspected and processed at our distribution centers and then delivered to customers’ homes or to stores. We lease all of our distribution centers pursuant to leases that are generally subject to a term of five years, with the majority containing renewal options ranging from two to ten years.

We leverage our extensive network of over 30 third-party delivery providers with up to approximately 1,000 delivery trucks (after large holiday sales) to provide our customers with high-touch delivery offerings. Our delivery partners have specialized knowledge in the complexity of bedding setup and removal. We are actively testing the option for same day delivery on all sales in six markets and in many markets we can already meet requests from customers. We offer a range of delivery service options at various price points to meet customers’ needs and preferences, including product set-up and removal of old mattresses and packaging.

Marketing

We are disciplined in allocating our advertising spend. Using a data-driven approach to efficiently align our media spend with customer demand, we manage our brand exposure through locally-led, nationally supported campaigns to drive traffic to our stores in a cost-effective manner. We maintain a digital-first mindset to leverage our brand across a combination of advertising channels that maximize reach and frequency.

We have achieved cost-effectiveness in part by increasing the percentage of our campaigns that are digital, utilizing a data-driven approach. For example, in fiscal 2021, 58% of our marketing spend was digital compared to 56% in fiscal 2020 and 29% in fiscal 2019. We intend to continue to enhance our digital toolkit.

Our Customers

We endeavor to offer mattresses and adjacent sleep products for customers of all ages, incomes and stages of life. We give customers the ability to select their mattress brand considering their personal needs and preferences, across their lifetime sleep journey. As a result, we have a large customer base. We believe we are well-positioned to acquire customers at a younger age and for life, with 33% of our customers transacting in the first seven months of 2021 categorized as “under 35 years old.”

Our Competition

The retail mattress and foundations industry in the United States is highly competitive and fragmented. Our competitors include other mattress specialty retailers with a national presence, regional and local specialty mattress retailers, national and regional furniture stores, department stores, big box retailers, warehouse clubs, factory direct stores, non-traditional mattress retailers and online mattress specialty retailers as well as general e-commerce retailers. New or existing mattress retailers could enter our markets and increase the competition we face. Our adjacent sleep product competition includes a wide range of retail outlets and internet marketplaces.

Our Human Capital

As of September 28, 2021, we had approximately 8,600 employees, substantially all of whom were employed by us on a full-time basis and a small minority of our employees are covered by a collective bargaining agreement, which expires in June 2022. We have not experienced any work stoppages and we consider our relations with our employees to be good. In 2021, we hired our first director of diversity,

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equity and inclusion. This newly created position will lead our efforts to attract, engage, develop and retain a powerfully diverse, talented workforce for our corporate and retail field organizations.

Retail Store Operations. To provide our customers with what we believe is a superior level of customer service, we staff our stores with knowledgeable and enthusiastic Sleep Experts, who receive over 240 hours of new hire training and over 200 hours annually thereafter, compared to the approximately 35-hour retail average in 2019, based on the Association for Talent Development’s 2020 State of the Industry report, and are appropriately incentivized to achieve store performance objectives. In addition to our extensive internal training program, our Sleep Experts participate in product training sessions provided by suppliers and are enrolled in our online corporate university for extended learning and development opportunities. Our training program emphasizes product knowledge, selling skills and store operation fundamentals. Our Sleep Experts are trained to explain our comfort satisfaction and price guarantees as well as our third-party financing programs and product warranties. Each store is staffed by one or two Sleep Experts, depending on the sales volume and size of the store.

Field Management Organization. Our store operations are centralized, with corporate-level guidelines providing for enterprise-wide consistency, while still allowing store-level flexibility to meet our customers’ value and service requirements. We employ regional, district and area managers, who, in conjunction with our corporate recruiting and training department, are responsible for the hiring and training of store managers, assistant managers and Sleep Experts. Our training and communications programs are designed to ensure enterprise-wide consistency of merchandise presentation, communicate corporate information to stores and monitor sales and profit performance. In addition, our district and area managers are primarily responsible for developing store managers, assistant managers and Sleep Experts for succession and career development purposes.

We believe that these human capital efforts result in an attractive workplace for our employees as evidenced by the tenure of our employees, 37% of whom have been with us for five years or more as of September 1, 2021.

Environmental, Social and Governance

Focus on the Environment

We are focused on decreasing our environmental impact through the effective management of energy, recycling programs at our stores, distribution centers and corporate offices, and waste management.

For example, we have recycling programs for mattresses and other materials used in our operations, including plastic, cardboard and wood at many of our distribution centers. As of September 28, 2021, 27 of our 70 distribution centers conducted some level of solid waste recycling for mattresses, plastic, cardboard and wood. In addition, we have designed a pilot program for zero operational waste at our distribution centers that is focused on three test markets.

We estimate approximately one million mattresses were picked up for disposal from our customers in fiscal 2020. We estimate that in 2020 our third-party vendors recycled approximately 37% of such pickups and sold approximately 16% in secondary markets, where the mattresses were repurposed, reused, rebuilt or resold. Of the remaining 47%, we estimate that half entered the secondary market indirectly and the other half, approximately 23% of the 2020 total, was disposed of in landfills. We are actively pursuing additional avenues for recycling programs to further reduce the number of old mattresses that end up in landfills.

We are working to increase the energy efficiency of our stores, including through the use of energy saving lighting and lighting control solutions. Approximately half of our stores operate with an energy management system, whereby we can remotely control and schedule temperatures as well as interior and exterior lighting and building signage. In addition, we aim to source green energy to power our stores. In 2020, sustainable energy sources powered 450 of our stores across the twelve states where the option is commercially available.

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Connection with Our Communities

We believe that it is important to give back to our local communities. Our stores are involved with local community charities, and on a national level we support the Ticket to Dream Foundation, which aims to improve the lives of foster children. We also provide support to affected communities in times of disaster.

Information Technology

Information technology systems are critical to our omni-channel operations as well as to our long-term growth strategies, and we believe that continuous investment in our technology has given us a competitive advantage. Our systems are designed to deliver a consistent, scalable, high-performing and secure experience for our customers and partners. We utilize a combination of cloud-based and co-location data centers for our infrastructure and most of our applications consist of standard, integrated software solutions. Our systems provide the data analysis and automation necessary to support our marketing, merchandising, inventory, distribution, store operations and point-of-sale, e-commerce, finance, accounting and human resources operations and initiatives. We believe our current systems allow us to quickly identify and respond to operating trends in our business, as well as defend against threats to such systems. See “Risk Factors—Risks Related to Our Information Technology and Intellectual Property.”

Intellectual Property

As of September 28, 2021, we had, or had exclusive licenses to use, over 200 U.S. trademark registrations and applications, including “Mattress Firm,” “Sleepy’s,” “Sleep Experts,” “120 Night Sleep Trial,” “Sleep.com,” “SleepScore,” “Junk Sleep,” “Rest Assured Promise,” “All the Best Brands…All the Best Prices!,” “Love Your Mattress,” “MattressMatcher,” “Replace Every 8,” “Rest & Relax” and “Shop Smart. Sleep Better.,” as well as several foreign filed trademark registrations and applications. We hold one issued patent for a heating and cooling sleeping system, which will expire in 2035. We also hold the rights to several domain names, including mattressfirm.com, sleep.com, junksleep.com and mattress.com. We believe that our trademarks and other proprietary rights are important to our success and our competitive position, and, therefore, we devote resources to the protection of our trademarks and proprietary rights.

Seasonality

We believe our wide assortment of products across our omni-channel platforms makes us less susceptible to seasonal shopping patterns than many retailers. While our business is relatively consistent over quarterly periods, historically we have realized a higher portion of net revenue, gross profit and cash flows from operations in our fourth fiscal quarter, attributable primarily to the impact of Fourth of July and Labor Day sales. Approximately 29%, 33% and 28% of our net revenue occurred in the fourth quarter of fiscal 2019, fiscal 2020 and fiscal 2021, respectively.

Regulation

We are subject to various laws and regulations, including labor and employment laws, laws governing advertising, data privacy laws, safety regulations and other laws, such as consumer protection regulations. We monitor changes in these laws and believe that we are in material compliance with applicable laws and regulations.

Labor, Employment and Safety

We are subject to a variety of labor, employment and safety laws, including the Fair Labor Standards Act, the Occupational Safety and Health Act and various other federal and state laws, governing matters, including minimum and unpaid wages, tip pooling, overtime, workplace safety and other working conditions. We are also subject to the Equal Employment Opportunity Commission and other federal and state laws and regulations relating to workplace and employment matters, discrimination and similar matters.

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Data Privacy and Security

As part of our business, we collect personal information from a wide range of sources, including from our consumers, vendors, and employees. As a result, we are subject to various federal and state laws and regulations relating to the privacy and security of consumer, other customer and employee personal information. These laws often require companies to implement information security controls to protect certain types of data, such as personal data, and impose specific requirements relating to the collection or processing of such data.

For instance, certain activities involving personal information are subject to regulation by the Federal Trade Commission pursuant to Section 5 of the FTC Act, which prohibits companies from engaging in unfair or deceptive trade practices, including alleged violations of representations concerning data privacy protections and acts that allegedly violate individuals’ privacy interests. All U.S. states have adopted laws requiring the timely notification to individuals and, at times, regulators, the media or credit reporting agencies, if a company experiences the unauthorized access or acquisition of personal data. Many states have enacted additional data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of personal data and other information. For example, the CCPA became effective in California in January 2020. The CCPA established a privacy framework for covered businesses such as ours, created privacy rights for consumers residing in the state, and required us to modify our data processing practices and policies, which resulted in compliance related costs and expenses. In November 2020, the California Privacy Rights and Enforcement Act of 2020 was passed and will take effect in January 2023. This new legislation will further expand the CCPA by adding additional data privacy compliance requirements and rights and establishing a regulatory agency dedicated to enforcing those requirements. Other jurisdictions in which we do business, including Nevada, Virginia and Colorado, have and may continue to adopt privacy-related laws whose restrictions and requirements differ from those of California.

Additionally, there are also data privacy laws in the jurisdictions in which we operate that apply to direct marketing activities, including the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, which establishes specific requirements for commercial email messages and specifies penalties for the transmission of commercial email messages that are intended to deceive the recipient as to source or content, and obligates, among other things, the sender of commercial emails to provide recipients with the ability to opt out of receiving future commercial emails from the sender, Further, while we do not conduct telephone-based marketing at this time, our operations are subject to the Telephone Consumer Protection Act, and we may receive in the future claims alleging violations by us of the same.

Consumer Protection

We are subject to laws and regulations that apply to retailers generally and govern the marketing and sale of our products and the operation of both our retail stores and our e-commerce activities. Advertising and marketing of our products in the United States, for example, are subject to regulation by the FTC Act. Among others, the FTC Act prohibits unfair methods of competition and false or deceptive

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acts or practices in or affecting commerce as noted above. The FTC Act also makes it illegal to disseminate or cause to be disseminated any false advertisement. Many of the statutory and regulatory requirements that impact our retail and e-commerce operations are consumer-focused and pertain to activities, such as the advertising and selling of credit-based promotional offers, truth-in-advertising, privacy, “do not call/mail” requirements, warranty disclosure, delivery timing requirements, accessibility and similar requirements. In addition, the applicability of existing laws to practices conducted over the internet, in particular laws relating to intellectual property ownership and infringement, is uncertain and evolving. Regulators are also imposing new rules, interpretations and guidance regarding products offered over the internet, including rules regarding taxation and product quality.

In addition, our operations are subject to federal, state and local consumer protection regulations and other laws relating specifically to the mattress industry. For example, Consumer Product Safety Commission has adopted rules relating to fire retardancy standards for the mattress and pillow industry. Additionally, California, Rhode Island and Connecticut have all enacted laws requiring the recycling of mattresses discarded in their states. State and local mattress industry regulations vary among the areas in which we operate but generally impose requirements as to the proper labeling of mattress merchandise, restrictions regarding the identification of merchandise as “new” or otherwise, controls as to hygiene and other aspects of product handling, disposal, sales and resales and penalties for violations.

International Trade Commission and Department of Commerce

In September 2018 and again in December 2019, petitions were filed by industry groups and certain of our suppliers and competitors with the International Trade Commission and the Department of Commerce, alleging that many imported mattresses were being dumped into the U.S. market at prices less than fair value. The Department of Commerce issued an anti-dumping duty order regarding the 2018 petition on December 16, 2019. In response to the 2019 petition, the International Trade Commission reached an affirmative preliminary determination in May 2020 that there was a reasonable indication that imports of mattresses from some of the countries at issue negatively impact, or threaten to negatively impact, the domestic mattress industry. The Department of Commerce reached an affirmative preliminary determination reaching the same conclusion in October 2020 in response to the 2019 petition. The Department of Commerce and the International Trade Commission are scheduled to announce final determinations on the 2019 petition in 2021. Such orders have had, and will continue to have, a material impact on our suppliers and our manufacturers of our private brands outside of the United States.

Legal Proceedings

We are subject to legal proceedings and claims that arise in the ordinary course of businesses. These include proceedings and claims relate to employment matters and commercial disputes, including expected payments to employees following a wage and hour compliance audit and purported class action employment cases pending in various jurisdictions. It is not possible to predict the outcome of the pending actions, and, as with any litigation, it is possible that some of these actions could be decided unfavorably. We, with the assistance of legal counsel, periodically review the status of each significant matter and assess potential financial exposure. We recognize provisions for claims or pending litigation when we determine that an unfavorable outcome is probable and the amount of loss can be reasonably estimated. Due to the inherently uncertain nature of litigation, the ultimate outcome or actual cost of settlement may materially vary from estimates. We believe that there are meritorious defenses to these actions and that these actions will not, individually or in the aggregate, have a material adverse effect upon our business, results of operations or financial condition. These actions are being vigorously contested. See Note 12—Commitments and Contingencies to our consolidated financial statements included elsewhere in this prospectus.

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MANAGEMENT

The following table sets forth our executive officers and directors who will be in place immediately following the pricing of this offering, as well as their ages as of December 31, 2021:

Name	Age	Position
Executive Officers
John W. Eck	62	President, Chief Executive Officer and Director
Maarten O. Jager	56	Chief Financial Officer
Randy Carlin	64	Chief Real Estate Officer
Anne Dament	55	Chief Merchandising Officer and Executive Vice President
Larry L. Fultz	67	Chief Human Capital Officer
Jody W. Putnam	45	Chief Retail Officer
Jonathan L. Sider	42	Chief Information Officer and Chief Operating Officer of E-commerce
Richard J. Bingle Jr.	53	Executive Vice President, Supply Chain
Sumit Goyal	37	Executive Vice President, Product and Omni Technology
Kindel L. Nuño	41	Executive Vice President, Legal, General Counsel and Secretary
Non-Executive Directors
Paul W. Soldatos	72	Chairman of the Board of Directors
Robert F. Hull Jr.	57	Director
Peter R. Sachse	63	Director
Anne Donovan Bodnar	65	Director Nominee
Helen Lee Bouygues	49	Director Nominee
William Kim	49	Director Nominee

Executive Officers and Directors

John Eck has served as our President, Chief Executive Officer and Director since December 2019. From 2011 until December 2019, he served as the Chief Local Media Officer at Univision Communications, Inc., the leading Hispanic media company in the United States. Prior to joining Univision in 2011, Mr. Eck worked at NBC Universal (“NBCU”), a media and entertainment company, for 18 years, most recently serving as President of the NBC Television Network. While with NBCU, he also led MediaWorks, NBCU’s technology and operations division. Prior to joining NBCU, Mr. Eck held various other executive and financial positions at General Electric Company, a conglomerate industrial company.

Maarten Jager has served as our Chief Financial Officer since February 2020. From 2018 to February 2020, he served as Executive Vice President and Chief Financial Officer at PriceSmart, an operator of membership warehouse clubs. From June 2015 to January 2018, he served as Senior Vice President and Chief Financial Officer at Sam’s Club, a chain of retail warehouse clubs. Mr. Jager has more than 25 years of corporate strategy and finance experience, including as Chief Financial Officer of Sam’s Club, Senior Vice President of Finance for Supply Chain at Diageo North America, an alcoholic beverage company, and Vice President and Partner at Booz, Allen Hamilton, Inc., a consulting firm.

Randy Carlin has served as our Chief Real Estate Officer since October 2017, and previously served as our Senior Vice President of Real Estate & Development from September 2016. Mr. Carlin has more than 25 years of corporate real estate experience leading teams in site selection, leasing, acquisition, development, construction, lease administration, facilities, sustainability, and energy management, primarily in a retail and consumer facing environment.

Anne Dament has served as our Chief Merchandising Officer and Executive Vice President since September 2021. From January 2017 until May 2019, Ms. Dament served as Executive Vice President,

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Retail, Marketing and Exclusive Brands at United Natural Foods, Inc., a public wholesaler of health and specialty foods. From April 2015 to October 2016, she served as Senior Vice President, Merchandising for the Target Corporation, a retail corporation. Prior to her time at the Target Corporation, Ms. Dament held executive roles at PetSmart, a provider of goods and services for pets.

Larry Fultz has served our Chief Human Capital Officer since December 2017. From February 2014 to April 2017, Mr. Fultz served as Executive Vice President and Chief Operations Officer for The Limited, a clothing company. In addition, he served in various other leadership roles at The Limited, including Senior Vice President and Chief Human Resources Officer.

Jody Putnam has served as our Chief Retail Officer since February 2021. From February 2016 to February 2021, Mr. Putnam served in a variety of roles, including as our Executive Vice President of sales, Regional Vice President, Senior Vice President of Human Resources and Talent and Integration Officer.

Jonathan Sider has served as our Chief Information Officer since November 2015 and Chief Operating Officer of E-commerce since November 2020. From February 2015 to November 2015, Mr. Sider served as our Senior Vice President of Strategy. From April 2014 until February 2015, Mr. Sider served as Vice President of Real Estate and the Chief Information Officer at Sleep Experts, a mattress retailer. He had previously served as Sleep Experts’ Vice President of Operations.

Rick Bingle has served as our Executive Vice President of Supply Chain and Operations since March 2020. From August 2006 until January 2020, Mr. Bingle worked at Recreational Equipment, Inc. (REI), a retail and outdoor recreation services company, most recently serving as the Senior Vice President of Supply Chain.

Sumit Goyal has served as our Executive Vice President of Product and Omni Technology since March 2020. From 2018 until 2019, Mr. Goyal served as Chief Digital Officer at Overstock.com, an online retail company, where he led the digital group responsible for customer facing assets.

Kindel Nuño has served as our Executive Vice President of Legal since 2014 and General Counsel and Secretary since 2012. From 2004 through 2012, Ms. Nuño was an attorney in the Houston office of Fulbright & Jaworski LLP, now known as Norton Rose Fulbright LLP, an international law firm. During that time, Ms. Nuño spent one year on secondment in Tokyo, Japan with Mitsui & Co., Ltd., a large trading company traded on the Tokyo Stock Exchange.

Paul Soldatos has served on our board of directors since November 2018 and as the chairman of our board of directors since June 2019. Mr. Soldatos has been an active board member for a range of public and private companies, including Steenbok Newco 3 Limited (a holding company within Steinhoff Group), Pepco Group N.V. (a public company listed on the Warsaw Stock Exchange that is majority owned by Steinhoff Group), McDermott International, Ltd., Tailored Brands, Inc., Gucci Group N.V., Saks Holdings Inc., Convenience Foods Systems BV and Evoca S.P.A. During his tenure on these Boards, Mr. Soldatos has served as Board Chairman (Steenbok, Tailored Brands), Renumeration Committee Chairman (Pepco), Nominating Committee Chairman (Pepco) and Member (various Boards) of CEO Search, CFO Search, Director Search, Audit, Compensation and Nominating and Governance Committees. Additionally, Mr. Soldatos was previously a Partner and Member of the Management Committee of AEA Investors LP. Our board of directors has selected Mr. Soldatos to serve as a director because he is a senior advisor in the consumer/retail, industrial and service sectors and has broad international and leadership experience in driving strategic initiatives and organizational growth.

Bob Hull has served on our board of directors since July 2019. Since 2017, Mr. Hull has acted as the Chief Executive Officer of Integrity Strategic Solutions, an advisory services firm, and has served as an active director for a range of public and private companies, including SPX Flow, Inc. (NYSE) and Tailored Brands, Inc. He previously served as board director for Bojangles’, Inc. (NASDAQ) and Cedar Creek, LLC. During his tenure on these boards, he has served as Board Chairman (SPX Flow), Audit Committee Chair (Bojangles, Tailored Brands), Chair of Sub-Committee to Evaluate Strategic Alternatives (Bojangles), Interim Co-CEO (Tailored Brands), Interim CFO (Mattress Firm) and Member (various boards) of CEO Search, CFO Search, Director Search, Audit, Compensation, and Nominating and Governance Committees. Mr. Hull has also been active advisor to a number of early-stage

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companies across various sectors, including technology, business services and consumer. Prior to 2017, Mr. Hull spent 17 years at Lowe’s Companies, including 14 years as Chief Financial Officer and three years as VP of Financial Planning and Analysis. Prior to that, he held leadership roles at Food Lion, LLC and Shoe Show, Inc. as well as operational roles at Peebles Department Stores. Our board of directors has selected Mr. Hull to serve as a director because of his broad leadership experience, significant insight into the retail industry and track record of driving business growth.

Peter Sachse has served on our board of directors since March 2019. Since 2017, Mr. Sachse has served as Director at the Sachse Family Fund, an early-stage investor in digital startups. Mr. Sachse has also served as an active director for a range of public and private companies, including Citi Trends, Inc. (NASDAQ), Tailored Brands, Inc., XO Group Inc. (NYSE), Lumanu, Inc. and Charitybuzz, LLC. During his tenure on these boards, Mr. Sachse served as Interim CEO and Board Chairman (Citi Trends), Interim Co-CEO (Tailored Brands) and Member (various boards) of CEO Search, Director Search, Audit, Compensation and Nominating, and Governance Committees. Prior to 2017, Mr. Sachse spent 34 years in various positions at Macy’s, Inc., including Chief Growth Officer, Chief of Innovation and Business Development, Chief Stores Officer, Chief Marketing Officer and Chairman and Chief Executive Officer of macys.com. Our board of directors has selected Mr. Sachse to serve as a director because of his broad leadership experience, significant insight into the retail industry and track record of driving business growth.

Anne Donovan Bodnar will be appointed to our board of directors immediately following the pricing of this offering. Ms. Bodnar has served as Chief Administrative Officer at Willis Towers Watson since May 2019 and previously served as Chief Human Resources Officer from January 2016 to August 2021. From January 2015 to December 2015, she served on the Management Committee of Towers Watson, and from January 2010 to December 2015, she served as Chief Administrative Officer at Towers Watson. Ms. Bodnar previously served as Managing Director of Human Resources at Towers Perrin from 2001 through 2009. From 1995 to 2000, Ms. Bodnar led Towers Perrin’s recruiting and learning and development efforts. Prior to that, Ms. Bodnar was a strategy consultant in Towers Perrin’s Human Capital business. Earlier in her career, Ms. Bodnar held several operational and strategic planning roles at what is now JPMorgan Chase. Our board of directors has selected Ms. Bodnar to serve as a director because of her leadership expertise and extensive experience as a human resources executive.

Helen Lee Bouygues will be appointed to our board of directors immediately following the pricing of this offering. Since August 2019, Ms. Bouygues has served as a board member of Steenbok Newco 3 (a holding company within Steinhoff Group), Pepco N.V. (a public company listed on the Warsaw Stock Exchange that is majority owned by Steinhoff Group), Conforama SA and Greenlit Brands. Ms. Bouygues has also served as the Lead Director of Neoen SA since April 2018. In addition, since September 2017, Ms. Bouygues has been a member of the board of directors of multiple companies, including Burelle SA, Latecoere SA, CGG SA, and Guaranty Trust Holdco plc. From January 2014 to June 2017, Ms. Bouygues was a Partner at McKinsey & Company, where she led the division Recovery and Transformation Services for retail and distribution in Europe. From October 2004 to January 2014, Ms. Bouygues was a Partner at Alvarez & Marsal. From 2000 until 2004, Ms. Bouygues worked at Cogent Communications Inc. as Chief Operating Officer, Chief Financial Officer and Treasurer. Ms. Bouygues started her career working in the M&A group at J.P. Morgan’s New York and Hong Kong offices in 1995. Our board of directors has selected Ms. Bouygues to serve as a director because of her extensive service as a director of public and private companies and her broad international and leadership experience in driving strategic initiatives and organizational growth.

William Kim will be appointed to our board of directors immediately following the pricing of this offering. Since January 2022, Mr. Kim has served as the Chief Executive Officer at Rapha Racing Limited. From February 2019 to December 2021, Mr. Kim served as the Executive Vice President, Global Retail and Digital Commerce at Samsung Electronics in South Korea. From October 2012 to July 2018, Mr. Kim served as the Chief Executive Officer at AllSaints Limited. Prior to that, Mr. Kim served as Senior Vice President-Americas Retail at Burberry Group Plc and Chief Financial Officer & Vice President of Gucci Group Watches. Our board of directors has selected Mr. Kim to serve as a director because of his business and leadership expertise in the retail industry and extensive digital experience.

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Corporate Governance

Composition of Board of Directors After this Offering

Our business and affairs are managed under the direction of our board of directors. In connection with this offering, we will amend and restate our certificate of incorporation to provide (i) for seven directors immediately following this offering and (ii) that the authorized number of directors may be changed by resolution of our board of directors. Following this offering, we expect that during the next year our board of directors will increase the number of directors to nine.

Director and Independence

Our board of directors has affirmatively determined that each of , and qualify as independent directors under the NYSE listing standards.

Board Committees

We anticipate that, prior to the closing of this offering, our board of directors will reconstitute an audit committee and a compensation committee and establish a nominating and corporate governance committee. The composition and responsibilities of each committee are described below. Our board of directors may also establish from time to time any other committees that it deems necessary or desirable. Members serve on these committees until their resignation or until otherwise determined by our board of directors.

Audit Committee

Upon closing of this offering, we expect our audit committee will consist of , and , with serving as chair. Our audit committee will be responsible for, among others:

•

selecting and hiring our independent auditors, and approving the audit and non-audit services to be performed by our independent auditors;

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assisting the board of directors in evaluating the qualifications, performance and independence of our independent auditors;

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assisting the board of directors in monitoring the quality and integrity of our financial statements and our accounting and financial reporting;

•

assisting the board of directors in monitoring our compliance with legal and regulatory requirements;

•

reviewing the adequacy and effectiveness of our internal control over financial reporting processes;

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assisting the board of directors in monitoring the performance of our internal audit function;

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monitoring the performance of our internal audit function;

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reviewing with management and our independent auditors our annual and quarterly financial statements;

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establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters; and

•

preparing the audit committee report required per SEC rules and regulations to be included in our annual proxy statement.

The SEC rules and the NYSE rules require us to have one independen

Mattress Firm Group Inc. S-1