Good morning, ladies and gentlemen, and welcome to the Tempur Sealy Business Update Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, February 6, 2025. I would now like to turn the conference over to Aubrey Moore with Investor Relations. Please go ahead. Good morning, everyone, and thank you for participating in today's call. Joining me today are Scott Thompson, Chairman, President, and CEO, and Bhaskar Rao, Executive Vice President and Chief Financial Officer. This call includes forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve uncertainties, and actual results may differ materially due to a variety of factors that could adversely affect the company's business. These factors are discussed in the company's SEC filings, including its annual reports on Form 10-K and quarterly reports on Form 10-Q. Any forward-looking statement speaks only as of the date on which it is made. The company undertakes no obligation to update any forward-looking statements. Now, I will turn the call over to Scott. Thank you, Aubrey. Good morning, everyone, and thank you for participating in today's call. As you all know, yesterday we closed our acquisition of Mattress Firm after the United States District Court for the Southern District of Texas declined to enjoin the transaction. We're glad to finish, finally finish, and move forward on this transaction and capitalize on the incredible opportunities this combined combination creates. This is a significant milestone. With the acquisition of Mattress Firm, we are now the world's largest bedding company with superior capabilities in design, manufacturing, distribution, and retail, while also owning a portfolio of the most highly recognized brands in the industry. Given that some time has passed since our last discussion about this transaction, we thought it would be helpful to reiterate the compelling strategic rationale. Please note that today's comments will focus on the strategic long-term benefits of the acquisition. We expect to provide detailed commentary regarding the financial impact of the acquisition on our next earnings call, which is scheduled for February 20th. Before I go into that, let me acknowledge another announcement we made in conjunction with the closing of the acquisition of Mattress Firm. Effective February 18, 2025, our parent company name will change from Tempur Sealy International to Somnigroup International, to better reflect our position as a global provider of sleep solutions with a portfolio of outstanding businesses. The name Somnigroup is derived from the Latin somni, meaning sleep, omni, meaning all, and group, to represent our broad channel strategy. Tempur Sealy, Dreams, and Mattress Firm will all operate under their own name as decentralized business units under Somnigroup holding company structure. Mattress Firm and Dreams will continue to operate as a multi-branded retailer, while Tempur Sealy, primarily a manufacturer, will continue serving third-party retailers, as well as Mattress Firm, Dreams, and Tempur Sealy's direct-to-consumer business. Under our updated structure, Somnigroup, as the parent company, will oversee corporate governance, capital allocation, and high-level strategic direction, while the decentralized businesses will focus on day-to-day operations. At the time of the name change, Somnigroup common stock will trade on the New York Stock Exchange under the ticker symbol SGI. Now, I'd like to take a few minutes and discuss the details of the Mattress Firm acquisition, why it is so strategically important to us, and the value we expect to create for our company, our partners, global bedding consumers, and our shareholders. For transaction overview, as a quick reminder, the total purchase price was approximately $5 billion, comprised of approximately $2.7 billion in cash consideration and 34.2 million shares of common stock. Legacy Tempur Sealy and Mattress Firm shareholders own approximately 83% and 17% of the combined company, respectively. Using Mattress Firm's four-year average adjusted EBITDA, we paid approximately nine times adjusted EBITDA. After run-rate synergies, we paid approximately eight times run-rate synergies. Eight times adjusted EBITDA. In conjunction with the transaction, we're expanding our board of directors through the appointment of a prior Mattress Firm director, Peter Sachse. Peter is CEO of Tailored Brands Inc, a men's omnichannel retailer. Previously, Peter spent 34 years in various senior positions at Macy's Inc, including as its Chief Growth Officer, and joined Mattress Firm's board in 2019. His extensive career in the retail industry and his experience as an executive offer makes him well qualified to serve on our board. We look forward to gaining his fresh perspective and deep industry expertise. Turning to the divestiture we are making in connection with this transaction, we expect to complete the previously announced divestiture of 73 Mattress Firm retail locations and our Sleep Outfitters subsidiary, which includes 103 specialty mattress retail locations and seven distribution centers, to Mattress Warehouse in the second quarter of 2025. The impact of the divestiture will be considered in our full year 2025 outlook that we expect to provide on the next earnings call. Mattress Warehouse is a multi-branded bedding retailer and has been a customer of Tempur Sealy for more than 20 years. In terms of the funding source for the transaction, the cash payment to Mattress Firm shareholders and the repayment of Mattress Firm's debt was funded using combined cash on hand and proceeds from our existing borrowings, including the $1.6 billion Term B loan entered into in October of 2024. Tempur Sealy's net leverage at closing was approximately 3.5 times EBITDA. We expect to return to our target leverage range of two to three times, and for shareholder repurchases, or share repurchases, be minimal over the near term. Strategic rationale. Let me do a quick refresher of the strategic benefits we expect to realize from this acquisition. First, this transaction accelerates our transformation from being a pure manufacturer to a vertically integrated omnichannel retailer and significantly improves our competitive position around the world. Second, this transaction brings us closer to the end consumer, giving us the capabilities to develop better products and ensure our innovation pipeline is on track to stay ahead of evolving preferences. Our number one priority is the service of customers, and with incremental direct relationships, we are unlocking a greater lifetime value for each customer. Third, our increased customer touchpoints create opportunities to simplify the consumer purchase journey and make it easier for consumers to find the perfect sleep solution. Our blended advertising and increased share of voice will drive brand awareness and enhance consumers' understanding of bedding innovation. Fourth, the acquisition enables us to take a more targeted approach to innovation. This will drive opportunities to invest in new sleep technologies, bringing cutting-edge products to the market faster, and position us to provide enhanced service and products to all retail partners. Fifth, the combination business is the largest bedding company in the world by far. This will drive economies of scale, allowing us to streamline operations, reduce production costs, pour more advertising, and drive total industry volume. And finally, we expect this transaction to drive earnings, de-risk distribution volatility, creating long-term shareholder value, and position us for sustainable growth. Financial impact. Pro forma for the acquisition, Somnigroup generated approximately $8 billion in sales for the trailing 12 months ended 12/31/2024, with approximately 85% in North America and 15% coming in from international. We expect to have a diversified retail channel mix, with approximately 65% of our sales from direct-to-consumer channel and 35% from third-party retailers. We see a long runway of growth as the market normalizes. Consumers continue to make the connection between good night's sleep, health, and wellness, and are increasingly looking to invest in premium mattresses with proven differentiated innovation. In closing, over the coming months, we'll focus on joining with Mattress Firm and exploring complementary strengths and new opportunities. We see this as an opportunity to grow the U.S. bedding market for all by investing in advertising focused on driving industry demand. As we've only just closed the transaction, we'll need a bit of time before reporting on further Somnigroup and Mattress Firm opportunities in more detail. Thank you for your continued support and confidence in our business strategy. We're excited about the future and look forward to sharing our progress with you as we unlock the full potential of this combination. Operator, with that, will you open up the call for questions, please? Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by one on your touch-tone phone, and you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are a speakerphone, please lift up the handset before pressing any keys, and we ask that you limit your question to one only, and you may queue again for any follow-up. Your first question comes from the line of Susan Maklari with Goldman Sachs. Please go ahead. Thank you. Good morning, everyone. Good morning. Scott, my question is on, you mentioned finding the complementary strengths of this deal. Can you talk a bit about, as you initially get in and start integrating the stores, what you'll be most focused on and how you're thinking about improving their sales and their profitability on a per-unit basis? Sure. First off, I'm going to not use the word integrate because we're running these businesses as decentralized, so there's not really an integration of the stores. What I would say is we'll review Mattress Firm's business plans and strategies and align on a go-forward strategy and then with decentralized operation implemented. We've obviously got some ideas and some opinions. During this process, we were not able to see store-level performance, brand-level performance, and other detailed data that we were certainly interested in, and we wouldn't draw any conclusions without going through that data and making sure we fully understand it. So you have to understand that as I answer your question. We've been blind to certain data because of the FTC and competitive reasons. But still, there's certainly ideas and thoughts that I think we have that I think clearly would align with Mattress Firm's team as we've talked about them. First thing we need to do, there are some stores that need to be refreshed, and we've allocated some capital in our thinking going forward to freshen up the stores to make sure that we provide our customers and our employees a working environment that is fresh, clean, and crisp. We also think that there's some alignment from an advertising standpoint. Although we all operate in a co-op environment, at times we have disjointed messages, and I think being able to align more closely on messaging between the manufacturer and the retailer should be beneficial not just to Mattress Firm in driving traffic, but the entire industry. So those would be kind of the two first ideas, and then we'll look at their other strategies and align on it, but it'll be data-driven. Your next question comes from Bobby Griffin with Raymond James. Please go ahead. Good morning, everybody. Thanks for taking the questions, and congrats on getting the deal done. Very long process, so congratulations. Thank you. Scott and the team, my question is just more centered on the ROIC kind of the deal, and when you look at it and improving that based on where the EBITDA is today, is it more in your control of some of the things you can do inside the organization as you guys combine, or is it more just a market function? Just kind of curious of your thoughts around that versus some of the other returns that investors are accustomed to from Tempur Sealy. Sure. And the answer to that is yes, both. First of all, obviously, we think we're doing this transaction towards the bottom, if not the bottom, of the cycle, and there's probably some pent-up demand that's been built over the last couple of years. So we think our timing is good. So we think we're going to have a tailwind over the next few years of just call it industry going back to normalization. And I think, as you know, a retailer on an upswing performs better than the manufacturer because of the fixed cost leverage. So we think our timing from the macro standpoint is good. Then we think the combination, as I mentioned before on Susan's question, is by being able to be a, we'll call it, stronger advertiser. We think that's beneficial both to the individual companies, we'll call it Somnigroup, and to the industry. We think that's additive. And then we have some thoughts on how to improve operations at Mattress Firm, and I'm sure they have some thoughts about some things we can do from the manufacturing side that would make their life easier. I think when we put that together, that will help drive, we'll call it, cash flow, which would go to your return on invested capital. Your next question comes from Rafe Jadrosich with Bank of America. Please go ahead. Great. Thank you. Good morning. It's Rafe. Just from when you first announced the deal in May 2023, just stepping back, can you just talk about what has changed from an industry perspective and from maybe the Mattress Firm perspective when you look at it today versus a year and a half ago? Mattress Firm's earnings are down a little bit. The industry is probably maybe closer to a trough here. I'm just wondering, if you look at Mattress Firm today versus a year and a half ago. Sure. The way I'd look at it is the industry has been much weaker than we would have thought at this period of time. I think you probably know the industry is at historical low volumes, and we're talking about the U.S. only, obviously, at this point, and so the, if you want to call it the downdraft, has been one deeper than historically, so it certainly was deeper than we expected, and it's lasted longer than historically and that we would expect, so that would be the first time, first item, then, and we'll call that, that's kind of like, oh, that's the bad news, I guess, or the good news, depending on how you think about that perspective, but then if you look at Mattress Firm's, call it EBITDA, you're right. It is down below what we would have expected it to be at this time. But if you look at its EBITDA compared to the market, and we clearly did downside scenarios before we launched off on this, they have performed better, and I might even say much better in a downdraft of this extreme than we would have expected. So in a strange way, it's given us more confidence in the business model from a risk profile than we had going in. Before, of course, we had Dreams and we had Sleep Outfitters, and we, of course, had our Excel worksheets and did lots of modeling, but it is wildly positive to actually see a downturn and see Mattress Firm's performance during that period where it's taken share in the marketplace and continues to deliver reasonable EBITDA in a very tough market. I think you also know, if you look at the market, some of the retail competitors of Mattress Firm, some large, some small, which I won't name, have not made it through this downturn, and I think that also should be a positive for Mattress Firm going forward as the market normalizes. Your next question comes from the line of Michael Lasser with UBS. Please go ahead. Good morning. Thank you so much for taking my question. How do you think Mattress Firm's merchandising will evolve over time such that Tempur Sealy products could get additional slots ahead? In addition, how would you compare the revenue synergy number potential to the $100 million of cost synergies that you've already laid out? Thank you very much. Yeah. Let me kind of talk to you about our merchandising thinking. And again, we have some work to do with the Mattress Firm team, and there's lots of data that we have not seen relative to performance of the floor. So we'll call this very high-level and preliminary kind of thinking. But what I expect is we're a manufacturer. We have certain skill set that is new to Mattress Firm as far as testing product and understanding the build of product, the cost of product. And so I think you'll find that we will be more aggressive in testing product to make sure that product that shows up on Mattress Firm's floor is the best in the industry. And it's product that when you sell it to a customer, you know it's going to last. So we're going to use some of our technical skills to help their merchandising department in that area. I also think with our expertise, we can tell you exactly what any bed on their floor costs to make. I think that gives us a competitive advantage in negotiating future contracts as opposed to kind of guessing or maybe having a broad understanding of the cost. We'll be able to build it up from cost and have that discussion with suppliers. So I think it puts us in a better competitive position from a cost standpoint. As far as how the share of shelf would change, because slots, we're already fully floored, you call it, at Mattress Firm in our product. We're really talking about slots. We're really talking about share of shelf, which is why I really think it's probably what your question is that drives revenue. That's going to be determined by the end customer. I mean, to the extent brands advertise, have quality product that is innovative, that customers want, that will be the primary way that share of shelf will shift on the floor. Do I expect over time that our share of shelf will move up with Mattress Firm? Sure, I do. That's because I got great confidence in the Tempur Sealy side of the house. I've seen our innovative pipeline and the products that we have that we're bringing to market, so I expect our share of shelf will grow. We may find that there's some products on their floor that don't meet our standards, and that may be some opportunity. But really, end customer is going to drive balance of share. You probably know that in order to kind of comfort, we'll call the system, we've made some slot commitments that were totally consistent with our long-term business plan, and we expect that we'll continue to have a significant amount of third-party product on the floor. Your next question comes from Peter Keith with Piper Sandler. Please go ahead. Hi, this is Alexia Morgan on for Peter Keith. Thanks for taking our question. I was hoping you could provide a bit more color on the key cost synergies. Are you expecting to recognize any of those in the first year, just such as procurement or production efficiencies, for example? Specifically, how are you thinking through the timing of those? Sure. I guess first point, we'll give you more information on the earnings call, but just at a very high level, we certainly believe this transaction is accretive day one, even without synergies. And then when you think about the synergies and you realize we're kind of already kind of into the year, people have budgets, the floor has been set, the first-year synergy realization is going to be not that significant, but all the synergies should be in the system within three to four years, and I would expect we would continue to find more. But we're not going to the first order of business is to run the business and make sure that we're all well-coordinated, and then look for items to improve the businesses. And you certainly don't want to be disruptive by making synergies your primary focus. So you should think about not that much in synergies. And again, we'll get Bhaskar to give you more detail on the earnings call, and really 2026, 2027, and a little bit of 2028 probably to get the balance in. Your next question comes from Keith Hughes with Truist. Please go ahead. Thanks, Ed. Actually, two quick questions. One on the number you gave us $8 billion of pro forma sales. Can you give us a pro forma EBITDA number? And I believe there's a lock-up agreement. I think it was like two years or something like that with the shares that are being issued in consideration. Is that still in place? Sure. On the EBITDA, I can assure you I cannot give you that number. We'll give you some more information on the earnings call. As you know, this came together very quickly, and everybody's been working really hard on closing. So I'm a little hesitant to throw around a bottom-line number, but we'll give you some more information on the earnings call without question. As far as the lock-up, they call it, what, 32 million shares were issued in the transaction. 34, Scott? Excuse me, 34. I'm not very good with numbers sometimes. 34 million shares issued. Thank you, Bhaskar. Were issued in connection with the acquisition. About 50% of those have lockup associated with those shares. I call it, oh, what do you think about 14 million shares have a 90-day lockup? I believe, Bhaskar, correct me if I'm a little off on that. And then there's about 2 million shares that have a two-year lockup. The two-year lockup is the management group, is the difference between the group of shares. And yes, those are generally all in place. Your next question comes from Brad Thomas with KeyBanc Capital Markets. Please go ahead. Hi. Let me add my congratulations as well. Maybe two quicker ones as well, if I could. First, you've got this wonderful Sealy refresh underway right now. Product that we saw last week obviously looks great. I'm just curious if the deal closing changes at all, timing or how much Sealy product is floored with Mattress Firm, and then wondering, Scott, if you could just give us some high-level thoughts around how you think about store count going forward on Mattress Firm? Thanks. Sure. Sure. Thank you for giving me an opportunity to talk about the new Sealy product, which we just got back from Las Vegas bedding show and was wildly positive and well-received. And the orders for that product are strong. And from a competitive standpoint, we think that product should be very competitive for years to come. As far as Mattress Firm specifically, no, you're not going to see any additional floor space because we already have a full offering of our product aligned with them as before we bought them. And they see the benefit in the product. So no, there's no additional there. And I'm sure they're going to be a strong supporter of the launch and the product and will be hopefully key in the success of the product, which, again, we feel very, very strongly about. And your second question was what? Bhaskar, do you remember your second question? The question? Store count, Scott. Store count. Store count. Got it. As you know, the history of Mattress Firm, they had quite a few more stores. They closed a considerable number of stores during bankruptcy. That economics worked out very well as it increased the productivity of the boxes. Since then, they've been, we'll call it, trimming around the edges. They're well-distributed. But like always, when you have a store base that large, there are stores that need to be relocated. There are some markets where there are holes, and there are still some markets where the density is probably too great. So I think whether the total is slightly up or slightly down in the near term, I think will depend on the particular situation. But I think the stores will constantly be being, we'll call it, optimized across the United States. They've got a very talented real estate team that has some very sophisticated software to help make those decisions. We have not been privy to some of the detail for competitive reasons. So once we get a better understanding of the detail, recapture percentages, and opportunities, we'll have a more crisp opinion of that. But I don't see the store count significantly increasing based on what I believe to be the opportunity from a store count. And there are certainly significant opportunities in realigning the stores throughout the United States. Your question comes from Jonathan Matuszewski with Jefferies. Please go ahead. Great. Good morning. Congrats on the deal, and thanks for taking my question. Scott, you mentioned the ability to speed up the innovation pipeline with this transaction now closed. Maybe elaborate on that, comment on the historical pace of new product development and what you see as possible ahead in terms of shortening that go-to-market window? Thanks so much. Sure. One thing it might not be evident to people is we design beds, but when we're doing that and we're making those investments, we don't actually have committed distribution. After we make the product and we show it to people and we say, "Hey, you want to sell it?" Okay. So that creates a limitation or uncertainty as to how much you can invest in products because you're not actually sure if people are going to take it. Now, obviously, we're large and somebody's going to take some of it. But when you're really talking about investment in product that is more complex and requires greater risk, and think about our active air bed at Tempur. It's air-conditioned, okay? Heating and cooling are Sleep tracker technology. Beds are getting complicated. To know that we have, we'll call it, a sister company that we have that distribution locked up, takes the volatility out of your distribution and revenue string and makes it more certain, and it gives you greater confidence that if you need to make an investment, take your Sleep tracker technology or sensor response technology in a bed to the next level that you can make those investments. We've been limited in the current structure to make some long-term investments with some new innovative product. With this, we think we're more likely to make more significant investments in R&D and bring new product for everybody, not just Mattress Firm, but for all retailers that we probably might have been hesitant to do before without committed distribution. Your next question comes from Laura Champine with Loop Capital. Please go ahead. Thanks for taking my question. You mentioned the eight billion in pro forma sales. How significant a divot do the divestitures take out of that eight billion? Oh, what do you get? You get about 200 stores. Bhaskar, you want to throw a number around? I could throw one, but you're probably closer to it. Sure. The way I would think about that, again, a lot more detail and color to come as we get into the earnings call on February 20th. But the way I would think about it is call it an $8 billion number, not overly significant. In and around $200 million would be the way I would think about it. Good. You and I had the same number. Any other questions, Operator? Next question comes from Rafe Jadrosich with Bank of America. Please go ahead. Hi. Thanks for taking my follow-ups. Just two hopefully quick ones. Just can you remind us where you are with the supplier agreements that you've signed? Are there any major ones left out there with any of the other manufacturers? Would be the first question. And then sort of related to that, is there any color you can give us on what percentage of the slots today are Tempur, or Tempur Sealy at Mattress Firm? And then the agreement you came to in terms of how many slots are going to hold for non-TSI brands going forward? Sure. First one, just kind of update the supplier stuff. First of all, Mattress Firm has the supply contracts, and what we did was we asked not all suppliers, and we picked some large ones and asked them to sign some post-closing supply agreements that if closing happened, this is what would happen to the contracts, and we basically assumed their contract that was in place at the time and then extended the termination for convenience clause in those contracts. Normally, in the industry, termination for convenience clauses are in contracts, and most contracts can be terminated within 30-60 days. We extend those and told people, "Hey, if we close the deal, we'll extend it for a year so everybody knows you got a contract for a year, and we'll all get comfortable with each other." As I recall, I think we offered it to six suppliers of Mattress Firm, and excuse me, seven, and I think six signed. And we had one that was a non-supplier Mattress Firm, and they signed. So we'll call that just guaranteeing some distribution and giving some people some comfort. We still do not have a post-closing signing agreement or any agreement other than what's there at Mattress Firm with Serta Simmons. And I'm sure we'll be talking to them at some later date on that. As far as the floor, what we have contractually pre-closing is one number, and what's on the floor is more than that because the beds are performed. I think a better way to think about the business rather than floor space is really shelf share. We run, what, Bhaskar, 43% shelf share at Mattress Firm? I think that's within 1% or 2%. That's right, Josh. Where we are. If you look at, we'll call it the slot commitment that we have, and so we'll call that the minimum of what third parties would be on the floor. Because the third parties will be on the floor will be what performs. And so it could be more if it's performing product and makes financial sense for Somnigroup. But the commitment, if you think about a regular Mattress Firm store, is generally about 50 slots, okay? And where the focus was of the litigation was on, we'll call it, the luxury market, which ultimately the judge decided there wasn't one, but that was the focus. But we'll call it beds over $1,500 is our commitment. And on an average Mattress Firm store, that would be about 30 slots. So 30 of the 50, around numbers, call that 60% of the floor. Of the 30 slots, we committed that 12 of those slots would be third-party mattresses, which would be mattresses that had a brand on them that was not a Mattress Firm brand like a Sleepy's and not a Tempur Sealy brand like Tempur Sealy. So we'll call it 12 outside branded. So 40%-ish of the luxury beds would be third parties. Everything else on the floor, everything below $1,500, and what would that be? Eight to 28, 18. 18 of the luxury are wide open for it to be Tempur Sealy or Mattress Firm product. But again, that will depend on advertising by other manufacturers, quality of products in testing, economics given to the retailer for services rendered. And that'll get worked through over the next couple of years. There are no further questions. Scott, please continue. Thank you. Look, to our over 20,000 employees now, including 8,000 new Mattress Firm employees, by the way, welcome to the team, from all around the world, thank you for all you do every day to make our company successful. To our retail partners, thank you for your outstanding representation of our brands. And to our shareholders and lenders, thank you for your confidence in Somnigroup leadership team and its board of directors. And with that, operator, that ends our call today. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.