Earnings call transcript Q1 2023

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Operator

Good day and thank you for standing by. Welcome to the Tempur Sealy’s First Quarter 2023 Earnings. At this time, all participants are in a listen-only mode. After the speakers' presentation there will be a question-and-answer session. [Operator Instructions] And please be advised that today's conference is being recorded.

to Vice conference President, like speaker, to now Moore, Aubrey Investor would hand over the your I Relations. The floor is yours.

Aubrey Moore

Good call. Thank participating operator. morning thank and you, you in today's everyone, for

President Joining are Executive President call we Chief me and for remarks, and Officer. prepared open Scott Chairman, Vice After today Financial will Bhaskar and Thompson, Q&A. Rao, CEO; the

Regarding and Reform This actual of statements company's of These on Statements the SEC report on Factors. provisions the Safe the affect adversely call and Harbor forward-looking materially the differ includes forward-looking may annual XX-K in factors These Form Securities are Form results company's XX-Q statements could Act Risk including Litigation due that report Forward-Looking its involve business. Note factors variety XXXX. under are quarterly uncertainties discussed subject the to a of Private and filings, to Special heading that

date The financial update press the website Any statements. non-GAAP has of be speaks which it will also non-GAAP Reconciliations the as financial to the in found on obligation can which release, been no include at information. made. the company's forward-looking of only investor.tempursealy.com any filed morning's and with posted undertakes commentary the on is information investor This statement accompanying SEC. forward-looking company

provided will the Our the press information comments in detailed supplement release.

to And with that introduction, call to Scott. turn it's over my pleasure the

Scott Thompson

before After everyone, the will our earnings will in morning, some thank for on call that detail. first you Good for Bhaskar and Aubrey. and start open some comments performance, share Q&A. then financial I'll review call. up quarter you, by I performance closing highlights XXXX quarter Thank first more we joining us our sharing our from

sales quarter of were was the approximately billion quarter first over first and XXXX adjusted in XXX% XXXX, a represents approximately the a EPS $X.X XX% in growth EPS sales growth of a XX% adjusted X% represents less In $X.XX, which and in net driven EPS, a decline support to by and robust in last in to year, products launch decline same environment. sales period period. innovative this costs adjusted macroeconomic the a Compared new pre-COVID our

stable heightened Our We continued the wholesale channel prior macroeconomic wholesale mitigated global well. year our headwinds. over market performance to reported as performed sales

channel more Unfavorable environment. direct foreign the performance and rates share to operations by a impacted us challenge international Our was $X.XX our current quarter. presented exchange cost per

less a As of our trough were at favorable is is expectation to year-over-year, our level. our sales and than appear return to quarter continued will that it stabilizing clear the I market we very noted, industry by market historical and the In second though expected, products. to outperform continue outperformance rollout growth units conditions be the global new driven

in also anticipate industry back half ease. of slowly the demand We comps as will year the improve

unprecedented production approximately consumption was first XXXX unit trough the As an XX% Most representing quarter produced last declined a XXXX. for U.S. mattresses the XX post of decline years. reminder, in of

back a half environment the half. now stronger As the bedding full the anticipate first unit will prior we the comps, trends stable slowly year we've lapped U.S. XXXX year the recover, in resulting in challenging fully more industry than with

some and quarter. the Turning to key highlights wins in

First, we wholesale. momentum in see and private products label our continue to brands positive at

into leading our to third service retailers to products products. party customer quality continues high Our and drive lean brands non-branded

Foster especially product. of party supportive Our are the Stearns third partners new the U.S. in retail &

total Tempur presence brands Stearns retail approximately previous by of tracking the compared are enhancing will U.S. retail the from be to to these We believe expand slots floors. our Sealy coming competitors, of XX% We on third-party collection. slots

next size $X than billion We & doubling of continue to Stearns goal current more its make progress making towards our today. our brand Foster

differentiate consumers. our new differences needs products side, we're well The offering of products collection the Innerspring that to in the of while traditional new of rollout Stearns On & and high-end North Foster further brand, address America. lineup underway the product an our are also with extended designed

step-up The Innerspring underserved the needs seeking fastest enhanced & believe relative in the quarter, and major design what market collection's product. we luxury is Innerspring superior that of U.S. premium product consumer to innovation, U.S. it's elevated we Overall, a performed in unprecedented the opportunities, an together Stearns the and Foster meets growing well the currently create brand first believe

America's The of the new the These on and success is Tempur benefits the benefits. bases launch material characteristics cooling in The recommended our to TEMPUR-breeze of features of bases line which innovation, TEMPUR-breeze to our adjustable provide new the greater and U.S. mattress. products smart delivers product even generation our second and quarter greater build product new highlight highly of breeze greater adjustable yield most latest of consumer prior our Tempur innovative

line platform sleep In improving overall on our adjustable our bases, new of and enhanced our and we focus connected-sleep continued wellness of and consumers. health

snoring bases at acoustic base in prepare new previous and bodies minds and featured the help In button rejuvenative smart including feature first technologies, touch and a industry sense for technology and our customers' of a lumbar range that also addition our features collection, of to advanced with our massage support deep sleep. the response relaxation

rollout offers TEMPUR-Ergo new retail The have an to top-tier first date. quarter. ProSmart multi-sensory the consumer from power XX% started to After partner we four feedback and programs models and over and breeze bases TEMPUR-breeze previews, very studies the shipping of to we in going SoundScape according Base, is and Exclusive late shipped new immersive wind TEMPUR-Ergo the positive plan, and down experience. mode

our will advertising campaigns first North Most Tempur-Pedic retail Day, We and pre-built network. to which all is the a mattress smart years. base in Tempur support inventory new begin. This for launch our seamless and across breeze when Memorial is transition retailers America four selling be floored valued partners

fortified delivery within third orders to chain supply order our The is significantly we're and highlight we've normalized that times. executing

bit but to of in margin times overtime operating personnel This of and a positive cost overtime back be worked market. delivery order we're normal in and quarter, plant the we've The season us gross to while and normalized team, of accomplished ahead on U.S. this the especially to expediting broader Our thrilled selling have service prime amounts significant hurt is us customer to get outperforming point third the of second this quarter.

to and expanded shopping of and appeal for collection the consumer-centric above, consumer will consumers our while the price XXXX. The of International points pillows, the bases between bed XXXX kicked prices to global market. of to our needs new final is continue This off successfully and at in mattresses, The mattresses highlight this been ultra-premium rollout legacy designed new strategically also Tempur addressable of that quarter. meeting product optimize innovations new XXXX and Tempur's we all lineup have

lines needs. margins. Tempur transition. updated be We're We streamlined the feel of enhance the process to a our after altering our This will products expect manufacturing overseas team, our to the to drive for to of without enabled old in us and lift the gross to a new has new is both This the our positive transition materially and products heavy new which we construction and profile ability production a driver as products of optimize line, period, plan for unlocking broader of the range we margin line products efficiencies of we future International our confident individual market's price business. adapt manufacturing

the we for staggering launching rollout the off markets. and quarter, customized products our are in over region. of allow the In by new of We XX to these approach first launch lineup temporary the markets we're European kicked new worldwide,

by be completed We third completed the for subsidiary quarter, expect our our to to the be Asia by in and the of for of markets the rollout all year Europe distributors. and third-party end

to be UK, fire rollout XXXX, industry by which some expect for except completed total retardant of end country We the the has specific regulations. the

XXXX. early has first by been reaction to be fully We positive. of UK expect very The lineup the quarter the to floored the new

With that, it turn Bhaskar. over I'll to

Bhaskar Rao

and consolidated you, Thank first $X.XX. of adjusted XXXX, quarter approximately In were earnings share the sales was billion per Scott. $X.X

$XX pro the initiatives. We are forma related adjustments primarily in adjustments credit the of with facility. in to of quarter, cost consistent These terms connection our are exploration all which million acquisition of strategic the have senior incurred of with approximately

decreased North results, by adjusted On margin reported the improved the net and North driven first XX.X%, in to Turning to the basis, X.X% American decreased American X% gross direct X%. sales decreased wholesale channel a quarter. offset partially offset initiatives, product declined North driven expense. launch adjusted improvement XX.X%, operating actions product American the and operational partially to margin gross increased launch by advertising by headwinds margin. and by pricing channel in investments in

a $XX million turning constant X.X% as on basis, headwind Now, but International, exchange unfavorable to quarter in on experienced foreign X.X%, we increased from reported the sales a decreased rates. of currency basis International

though remains seen volatile, we recently Foreign favorably. rates trend have currency

current adjusted contemplates headwind FX EBITDA. year to XXXX expectation slight Our for a both and sales full

offset XX%, actions. by International our gross As product compared to the launch partially margin driven to by prior expense, declined year, pricing

the year, Our with the product prices prices significantly which XX.X%, first advertising inclusive that been we about ease prices In the materials, levels. global commodity We investments decline ahead for margin, in although logistic in the we commodity expectations. two International of Commodities, inflationary industry bedding a quarter, years. have trend agent commodity as XXXX expect throughout in trended than global and gross highly performance. in labor by to initiatives, across raw margin operating and joint and think declined costs driven the venture will to our more largely continue XXXX bit line to could anticipate of continue launch

first and cash invested quarter, million flow investments Indiana. At in facility ahead two the generated net flow of new foam-pouring X.X debt of billion, cash to our We our slightly was quarter range operating times, CapEx, times. of on sheet three target we Crawfordsville, $XX Now, in was and million plant consolidated under moving record approximately to including a $XXX our leverage end the the $X.X items. our credit ratio in and first balance of

track We continue latter of the quarter. its phased opening to in this toward half beginning

the the capacity. we phases while highest quality bring grow in ensure plant will into level We to the of online incremental

to our the approximately of at and driven and record key also in adjusted to products, models Now million previous range primarily of of with launches, communications, impact which spend initiatives, $X.XX of new will sell-in mid-single of our execution and to the $X.XX. of our advertising and discounted result considers million the midpoint floor benefited This be support marketing product Sales of guidance. wraparound Consistent range. to $XX the turning brands in $XXX leading EBITDA to and pricing. digits, we of of we million growth $XXX EEPs by expect investments adjusted as the continue support EPS sales over by XXXX

allocations approximately $X.XX relative of representing to guidance dividend Our fund an facility XXXX. and following includes growth to primarily which quarterly $XX of a Crawfordsville the of XXXX CapEx considers our CapEx XX% of completion of the of capital also in million, increase million $XXX

like a Lastly, I flag would to modeling items. few

expense interest to million, we the full XXXX, of a about tax XX% a XX%, of XXX $XXX expect million million, million $XXX about rate year shares. $XXX to count of of million For share D&A to and diluted $XXX

turn to With that, over will the Scott. back I call

Scott Thompson

acquiring share acquisition Nice aligns our you, the product this with development we've definitive Thank and companies us move we signed to Bhaskar. I'm of retailer. combination advantages, innovation. continued nation's closer Tempur excited specialty retail. largest This to that facilitate morning This agreement to manufacturing enable mattress competitive have capabilities that job. our acquiring integrated Firm, extend Mattress extensive will and a with vertically compliment that strategy consumers announced Sealy's

Tempur Tempur the Mattress than their transaction talented second the a for XXXX, look as than operate more has expected to workforce and close partner and of products satisfactory and applicable closing more years, foremost, welcoming valued employees separate once Firm and with business approvals. closed. been organization they forward and Sealy customary to The X,XXX subject to desire. is Firm is brands the continue expected and retail Sealy to is conditions deal a we unit to family First half to XX Mattress customers provide in within to the regulatory and

and strategic on This our released investor transaction release provide transaction can press the be see to Both separate financially. further transaction. found a related as We and being rationale. strategically investor the we webpage. both details morning, presentation attractive this and documents on this These

up call Operator? the with we'll that, for And open questions.

Operator

from Goldman with proceed. Maklari [Operator our is question Please Instructions] Susan first And Sachs.

Susan Maklari

Thank you. morning, Good My everyone. question… first

Scott Thompson

Susan. morning, Good

Susan Maklari

and those the of to offerings product about efforts be are the Good to about and synergies My what is in how need channel conflicts that how appreciating that of the are those but acquisition made some terms through think and you question around that the this do you perhaps some announced with of morning. you some are, logistics of in of thinking of and managing going come this just this morning, adjustments and will deal? types elements there,

Scott Thompson

Wow, in one. job. five questions Great Great question.

Susan Maklari

start. Good

Scott Thompson

of let conflict. channel all, me about First talk

expertise omni-channel -- First been our the of throughout have all, we it to number doing world consider a ability and of of the for years. strategy manage is it one

at look of in acquisition. about in working we been marketplace a for is problems beta we've did six conflict a this doubt is this or Dreams thought at retailer the UK. years, UK and kind Dreams surprised most that And recent has have obviously channel this, in you this If as obviously this with acquisition people been on in not bedding probably a there's anybody in least with transaction. that before We're where the years. I the any have large the maybe test, five

Firm ago, or Mattress little got got the the Sleep going years Bhaskar, move you to be direct there if And stores. in noise of over and Outfitters We've ago, bit I'm to marketplace although our yes, which years and is a we've And what, to stores. five we're in operation, Tempur to competitor a system. in retail the four say used our States,

think a we're how retailer steal anybody, a been our share hasn't I good trying problem. operate once say going we're really retailers from stores not to and that saw I'm it we

have over have and this look, expectations with disadvantage. to we correctly, understanding advertising having it's, us product, the And years discussed and and concept servicing and it's think put a depend at they making that competitive -- not are. large on quality sure customers, quality quality are their service, going I good them our what of of various we Additionally, a various small,

so not long the any support at quality the I'm as right deliver product price channel it. proper And significant as conflict we with expecting around

synergies. and about towards assume kind asked You of I logistics, kind you're moving of

cities thinking companies. they're $XXX both take their off truck, each logistics. paper. large literally put million the take be know, We've another and never warehousing systems The the companies in within take There that's truck, the to wait take would about you have to their on on a other. mean should stuff customer it of we is order, You five And rack, where some product put house. Tempur out put rack for they of Then two of which are look, the truck, kind clean a we up the it of way sit down get it down they the truck, and down We've figure the the off of the from able Firm. and it warehouses very miles our it on get rack, take warehouse. a it it they'd it product, on to and it then Mattress the make how an and from work. just wait to would a it we another a from put for put would it to we the put to it in, would I And logistics. customer's been rack, our take where the plant, truck, take in would get in order then warehouse, would truck, it piece

there's warehousing. in So and synergies we good logistics think

that evident this other be who the to The thing manufacturing house, the of would Tempur side side as on the side not the the people the business in is the aren't be may not and Mattress of house. on

think ordered we're on everybody Sealy. knows to I delivery

from somebody. And make as know manual Sealy what And are order we an call four get it And we these don't generally you so beds to in we're days. until that manufacturing. know, three, going means these operations I'd are

and of or we work expect them up like workforce. are they and orders we've the to at whipsaw show lots for would days got overtime. There work So some we

only some going Friday and orders, had the could most able in decide hours. orders, work real If there's just because they show also and we up of of don't the course be At of committed had and weekend swings, get we these of we hire a pre-build level we they're workforce it's Some variable. certainty but manufacturing. to plants and and and if distribution, quality involved they work are hours out I at on four afternoon people to work have days enough the overtime to

a also, on here, days savings. a kind sure get improvement issue big there's quality I and to knew have it I So savings It's out. workforce overhead that we We, go going and a for if ahead we significant specific that's could level have orders, the us. we were for build some the of think call and cost little And don't orders, savings. we believe, product bit normal course, would insurance of of we some

obvious the thing thing the be other really, not one is was really the robust. COVID thrilled may of chain world it's think kind I about, that around very really not we're that supply highlighted

Okay?

if robust said. Nobody what stop their down it's reason the and is I the supply very a for you in And what chain think not of it, knows are. bit just little about sure orders

just kind working certainty fortify it chain which think sign fully more supply allow contracts, we'll will have, committed by being synergies. I to I of think and also call will giving the to able everybody's us time. So quite to distribution, able have in And long-term some frankly, being suppliers

ability test durability. it question we've throw core very list The laundry there's springs, we I'll the things of kind that product. of last up, have It your Tempur, is Sealy, here, one the analyze the core to combination is, I of of the does one but other the is, best-in-class is quality sophisticated got first labs think of that foam, a

test we're paying continuously that we're one what be floor sure for. the quality would to their are to that make the that that we products they're And is make help put can getting can are on do thing supposed and so sure we retailer a

product make the Mattress think sharper at will I Firm. that

we'll you hard once good standpoint, the opportunities that's I from the some cost product. for a think do test suspect and the analytics and I find customer, really

Operator

comes James. Griffin proceed. moment you. Raymond question Thank the Bobby One and for Please next our of from it with line

Bobby Griffin

Thanks question. morning, won't be a taking two-part least. five-part, it's but my Bhaskar, question at be for Bobby. it a going Good to Scott and

of accretion Scott, in you the a that, talk timing getting will XXXX sense about timing can some rationale of talk I Bhaskar, Mattress it? concerns. So clear is understand Maybe a And makes or of lot first, of maybe be would there investors there lot then kind the can the Anything economic acquisition it? you and about financial just think but this strategic just helpful. details used it's Firm whether any the XXXX for EBITDA? of that's share analysis, of

Bhaskar Rao

Sure.

me step of second. back Let a kind

sense First always of It's I has I that we at if would made reasons weren't as probably never real right. market say Both of times others, talking was times right. at timing it been timing, chalkboard right, but wasn't strategically the been lot at weren't all, for some you're times about of right, they our on years. seven the something a and mentioned

-- So new we been like or idea. the not it's on it's a a board, new so concept

a of all, been journey. seven-year it's first So

engaged the for Second last they a two put process. the or years company the of Mattress and been dual Okay? we've folks process, ran as Firm all, for with up they sale

price So around hoop some it. years two been for my last exchanging getting we've terminology some the in the around hanging thinking about discovery, data,

get the an in on two some which could HSR FTC we We and us an their XXXX. then October thinking. some access feedback to companies gave of filed of filed The folks, HSR,

agreement, a down the get to And before FTC data both we parties have so some that would definitive would process. on

and also of think -- stuff. kind economic about the you're that of cycle that works talking I kind the through that's but timing, So

been both in want of got be thorough has what and that So to companies would as sure the both review of make companies. everybody to interest the by This best timeframe. a kind long I the

at who just man, you're now is I the is like, interesting, knows guess, Scott, what you're, what economy is everything. okay, Now this looking but and

account, they've we ways at, bedding look the looking years. produced Bhaskar, other I'm where sitting go U.S. and but people think through like we for to but And the are and macro to can lowest the I go you it where we're been I'm betting are and and industry, probably the but there's we disagree, look look at XX for I you I, we units don't, different data sources that. than -- probably not it and agree and more and where about some would look industry, sure the at think when

at the we've that industry. is trough as never unit production numbers seen an So

we'll point that very companies course, out Of trough even at units. these profitable, both are

trough So we've and the industry it would of so. like bedding quarters for been last bouncing it appear to the or us, bottom around three the the feels it's

of looks this leg that, doesn't look a recovery, and but around and It can clearly or has shown bottom. talk it's question another we falling just it like not another lot is one, about it bouncing the like

price look, you want in decide, you do closing the wait to very point, different we while. There's then this take feel to to kind you And shoots pricing a green you week. transact There's different is going that be do we under market. that. confident So And at We're our top or and see that there's, of things. that, next not environment. that or good feel want to a on this pretty and lay of fundamentally deal ability about basis, a those a

at you're XX to right now. when and price XX normalized So the real not tomorrow. It's looking you're months economy to find trying is that really from the earnings

effectively So good there it think the the And it, we but We're quite maybe feel we're a few be that about of we affect bouncing quarters? little future. company more and in frankly, roll buying Yes, doesn't in is, us. kind bottom there next the the rock around could point, pretty If now. plus at so.

I answered think of I that. So kind

Bhaskar Rao

so. think I

now. accretion about are question things and we're your are that be post to bit is when year So so acquisition, today the year where where between those and where a going there we when a mentioned, you Scott we from time all one think or about of

the So we months. the about to gave the and XX think XXX last is way XXX that

standpoint, call happens to other about is, the accretion continued rock then to we anticipate get way a targeting let's see it we'd so the And a a some again, But you targeting would incremental of then. that after happen could $X.XX think full that lots between perspective, about And rate from growth EPS. macro whatever a perspective, the, what that, or of and side when get roll couple of of I Firm the from from between $X.XX then is, I years a uncertainty a from Mattress we would somewhere synergies, perspective. and now So run to out anticipate $X. think with

Operator

Thank comes for question, Sandler. our you. Keith with moment One next proceed. that Please from Piper Peter

Scott Thompson

Peter. Hi

Peter Keith

after Thanks. Good seeing morning. deal years Congrats on work. big the seven of

Scott Thompson

appreciate I Yes. it.

Peter Keith

been how you've any sure with been it able or not approval gained I'm ask preliminary opinion any FTC much sounds months. I acquisition? on getting that answer be to but have question, there of you'll for number a want the Has or like to post you look could this because this insights all engaged how

Scott Thompson

we preliminary none with early them. I we say it's sense but didn't We've kind look moved litigation. Those which through we able first, days. process wouldn't forward traditional obviously, it's and that would information, ultimately, a But either them. the Sure. talented working engaged been us would in to I to think have job, forward women, folks surprising. innings, with or of clear the some if But very have and of be we all early men given mean, particularly was

Operator

our question, Please for Curtis that of moment comes Nagle One next proceed. Bank with America. Thank from you.

Curtis Nagle

Great.

one break stands just just as little And question the now. I'll bit. question on a the it with maybe So business

terms I just how continue about forward particularly you guys I and and go the And how thinking model quick get curious that of in hit just to a this much follow-up or guess? -- Bhaskar, internationally, now, guess, to some could and if models we back you normal, now shipping do just Just correct Firm, I how of for of have much time a in to template catch-up margin? first to kind terms gross headwind then Dreams of expand, with talk it's mean, over of,

Scott Thompson

we are bedding the last Yes. world, some retailers now I'll country. specialty two flipping other is in the few the smaller take one We pages, transactions. could the do great unique maybe There's are don't but only these, got lion's sitting there Bhaskar the two time -- we hand is be when strategically lines the think want have be it -- up about. right, that we'd or may But in some right would them. would is that to one, best. again, we've do these but countries, we'd look relatively and in large and two to at that pretty There these every market, certainly three the There's share. in price a and deals for not really look,

Bhaskar Rao

a From basis pleased was that about XX with think I when overall, is perspective margin you gross a point decline. performance year-over-year, the

all is in what However, some the of did growth. out, pointed you floor face again, future -- headwinds, have from driving a that we model launch perspective, as

backlog. perspective, relates as bit specifically, headwind, points into basis call again, a carry it the a XXX a XXXX is out I on to that we So about did operations, a global would of of

needs. we did So meeting prioritize our customers'

an backlog. clearing overtime So we associated incurred with out that incremental

on question, perspective, global about to had a basis And points of XXX launch then headwind. the we going

is the of how model earnings I'd the go continued is once the as at So through is again, through that what or launch that the there the I it we business power very get that improvement look floor as side attractive. is, operations, of well

Operator

our Thank proceed. question next you. with little Maheswari moment UBS. Please that comes A Atul from for

Atul Maheswari

And expected based what are less are from a biggest to few today, risks there you any pitfalls? question. if likely are synergies a biggest my And than another now, way, is the Good to the today on some of avoid that? if working this or morning. based like what actively what cause what revenue those what know Scott, question most years that taking would are what lot be you the know? ask I Thanks exists of like for risk you transaction, dis-synergies, this on if the

Scott Thompson

I think outside question. that, the Great in are be looks by I'll is Where factors like months But far, macroeconomic. it's look, people, cycle the largest. cycle, would call Look, probably the risk our control the what XX the Yes. After of now. biggest culture. what we from

can you to with study As kind checkered. acquisitions people, usually know, do history the you has it Generally, of of be if things. culture, structure, those

still, vertical people of horizontals is and of We're kind people I still have they just and to clean that of as work is all we're This Dreams losing issues about, for their remember, issues, an to acquisitions complicated because talking The you through. doing as Again, example, need job use structure a aren't stuff. and as of have very this it lots you still get. vertical. that so synergies a integration. kind integration you a But some vertical that who because was

But companies like can think years I other Bhaskar, any throughout other that, big work to organization, got the together. We risks the than together that's night think at XX any you companies. interfacing that you with have these up remember, daily of for keeping you worked

think having a I we run. is a other well. manufacturing know standpoint the clearly great each We're Sealy Tempur in -- from U.S.

well. very doing is product New

fastest-growing Stearns Tempur & in the brand is States. Foster well. doing is major probably United the

and been continue sent Mattress material manufacturing from very of out, and Firm a you market. the would up bit base. there's Mattress some you has So share, eating that a had to expect -- strong Firm good And market study we we're outperform coming if them to we

mind said. what can't I than just think other comes that of I anything to So

Bhaskar Rao

things Tempur, on specifically, when say sleep what complicated. always I at Scott, nothing's sleep synergy are then so mean, the about night. think you I would easy, ever number, always well And I is I

companies, available to just about million talk is that billion. you are $X in $X think perspective, when the $XXX about COGS we're what between two put on about talking billion. And However, it let's the that

-- there's enough easy et it but cetera, it So not get and like it manageable. again, I'm saying makes seems it's it's go that

Scott Thompson

Yes.

Let me at some synergies, least give you we're on on same page. all so the thoughts

buy asset I you that point, they so are $XXX But undue I people successful and think, million, number, so you when same think when some bought. and take the buy risk is especially the energized conservative. a I business, they think synergies a break on great focused very the business, at

is like coming done Sealy the team synergies, kind the Tempur we've on and do with. that we going to over team agree implementing the worth of Bhaskar cost And to that's to out, acquisitions forward management absolute so make and number, all that we'll big be as have and slow a on the the how sure what's pointed on that work But not potentials it. number

Operator

Thank next moment our for proceed. you. with that One Please Seth Wedbush Basham Securities. comes question from

Seth Basham

a and revolving first, time prior Thanks on questions. to the lot line. My of plus again is very terms deal. of a long good line around close, But a time is question the morning. in some the year Congrats

concessions You to talking expecting the the that mentioned going to asset base? are that current with but you're you're have make FTC, there continue changes to any to

paper what bit the a in synergies you of And to. of higher in on $XXX terms then dollar different, little put you is you synergies, talked materially secondly, and the million about talked when cost than synergies

So there? are or revenue some of are upside more you you Thanks. seeing synergies expecting just signs

Scott Thompson

Okay.

those. through So let me work

the make that financials. to look impact Obviously, we something future talking would the then look, of we That's at. happy we would we're see And transaction We'll stores. FTC. some how include may FTC the with open. that We're consider that doing all, would that consider things divesting of it. the First would

So FTC. we're do you options because to go all to yes, that's what you consider when going the

on side? move looking not we're floor. On the revenue mean floor Not the we really, are the side, the to change revenue I or considering significantly synergies

floor. own we the them We've our and let numbers. If did the you not decision what our the manufactured hold I'll look push at their onto for retailers previous call acquisitions, products accountable merchandising

if look increase, BOS floor go back to generally Now you yes. our and

just we're work As products. quality quality of that of not of But baking our this a and revenue acquisition because some retailing the naturally through then huge no, of in sure, synergies. the products we're we amount

In we're not. fact, think really I not, baking don't any in. we're We're

Bhaskar Rao

for thanks Seth, follow-up. the

that me up Let little a bit. clean

with out think let's a et then run color $XXX So previously out that that a synergies that's couple double and let's synergies, when What assume so, we've what was, in year, to or a about just of call years giving was million about it cetera, low I think indicated rate you digits. accretive on of and normal year and same economy, the continues We at call you'd has X% believe grow Firm step if Mattress market X% historically back we growing captured growth, if industry and let's would to see continues Firm that some and the you you is it, thereafter, last continue. to look then that that so would from expect to growth. Mattress that or years, meaning continue over XX share;

they the market. So of would grow ahead

margin growth my with synergies. those some on put You high-end to number. improved I That's flow-through it, got how

Operator

comes for Markets. from proceed. One next Thank our Thomas KeyBanc that Brad Capital question you. Please with moment

Brad Thomas

America question business come me wanted congratulations well. the for weakness my could start the deal focused the were quarter, let trends my XQ through was in talk and March. XQ little about heard thanks current maybe announcement early Hi, I to just on but and you and a in you And taking outlook to I to for what XQ. then North more hoping, strong We've through a year. the seeing this back on as Scott, and bit add the some about

you color in were made more point course, where happening in seeing. any units, a as relatively of comment is, still you and terms of think -- what about you employment economy been they then that's about Just an getting this we And year, bottom, consumer the but healthy a credit. hopefully to on

wondering risk…? just And on latest so thinking downside potential your

Scott Thompson

Sure.

important the kind much leveled business there's just holiday all, more back couple traditional where we'll of become call they of during, were First that One it, of we've points. more era, COVID have throughout periods a moved is no the to question month. out seasonality where than

way moved valleys. and So pretty pretty peaks That's bigger well we've pre-COVID the industry the back taller well was you to have that. and

bit start period. kind out it little robust year, a make you a the Again, So slowed in fair in holiday during -- probably start all it's first down pretty the of quarter. the

Second second quarter sales they're us be which for very that like order growing strong – looks a deliveries good positive standpoint. they're a and started conviction will quarter shipments, out us, gives from it started have

the start are be second on, the we same about pretty at feeling we're share concerns good. But looking we'll and of quarter. feel good we say feel the what's all the spend, the their consumers the of How much we hold okay, in? long We have accounts So the about, the unemployment, all start can at might of the of macro? good state savings read. second quarter, are stuff what's the you they How things blah, blah, blah, that same

it's weakness of bedding, in the i.e., entry-level is Looks very continue between to see high-end the clear stuff, can strong. retailers who and where money, people rest us. employment entry-level make a buy Unemployment real we on be entry-level and the see okay you to than holding like our the they there's of where the bedding. separation is bedding the And kind the bedding, you well, focus who products bedding it, looks entry-level

that. is to earnings watch that our So and we'll The news impactful earnings. that not good retailers'

Operator

our proceed. Robert Thank from you. One question moment Please comes next Partners. that Drbul with for Guggenheim

Robert Drbul

Hi, you. the testing good on within been could morning value the customer you're tougher channel transaction. just trends some of bit on opportunity in of focus trends, a and I bit some with doing talk follow, some you've what there? congrats just on a little just more If the and can about Brad Thank new the seeing recent little down the you

Scott Thompson

Yes.

testing expecting large in they outperformed customers But well. a to I what are about where stores, So run product of and the put is, we've big -- can has to years. We've and think in here our the products tested, box last we've take new product few That's that out, done shortly. the XXX every say I situation very to in at replaced XXX Sealy got out another -- we go would we've Sealy other gone some retailer. had product product stores

entry-level tough particular in what in doing And so market we're that well is market. a relatively

and some but we the Stearns a to competitors, at incrementally going Foster distribution us product And just not north retailers. entry continue we that for incremental be because from to sign, very is Stearns pick for think, slots, and I we level, those are mention good all no, -- the So that's should up XX%. a up all of bring is powerful up are & that and

Operator

line proceed. moment Champine One question, comes for our next of Thank that with you. the Loop Please Capital. from Laura

Scott Thompson

morning. Good

Operator

take I the mute button. May your next sir? question, check Laura,

Scott Thompson

her answered question clearly I Yes, earlier.

Operator

All line the our question right. of moment please, William And will next from of with Bank one Please proceed. America. Reuter come,

William Reuter

have Hi, one. I only

fact speak question have historically, had You that provided Firm, outlook for their And numbers more you LTM relative Mattress this could they you the be much you cost I in their to sure up the light to EBITDA if the that that that variable bit a information where stack your a have to structure. little I'm fixed fixed have had a I the wondering to wondering provided was is for if cost own year. was could point. how they this such you extent structure of and at costs the

Scott Thompson

future, Sure. We've the which tested comfortable got the both stress under our numbers various management's with. their We've projection we're scenarios. of and numbers

comment. to think -- But might was stress you give variable as Why you the the because think analysis to is. actually, comment worked not testing, surprised before the XX%, said, we would your what it details. interesting about Bhaskar, impactful of it's and we go our cost you it, cost, through the cost as yes, XX? the when are you was as thing made fixed work I did have But fixed I through I part don't it we

Bhaskar Rao

mover, XX%, we you call When XX-XX now. XX%, it let's think were about needle historically the

So effectively. Mattress about profitable dramatically Mattress remained XX% XX% their a stores Firm think variable, managed fixed costs variable. improved done their footprint, in process When a, has done it's is from and bankruptcy those very fixed, you has coming that out Firm what they've

nature it not the consolidated look our at variable of when does much. So a from totality business change you that standpoint, fixed

Scott Thompson

pop thing the is the other scenario, through distribution. beneficial other we thing immediately in over it as but is think certainty doesn't you downturn, play that pick I up downturn the worked have if The that originally, years, didn't this a thing really about you to

little your downturn, important a there's actually if change bit than more actual variable. so even And of distribution certain product maybe of having and a in fixed is

would it cost. So than it kind in But it's any to a variables downturn don't think total, all be think of go it's I in through about without the when on Mattress yes, Firm with I Mattress it it downturn. when I harder of standpoint, Firm more a through a go to think think total fixed through I financial of slightly --

Bhaskar Rao

year. when second half items gave was only as the second in contemplated our the of this year investor about will that to we half year it presentation in is of leverage not be so but be to transaction next the of the expectation One is complete, that way this complete mentioned, a think also we --

about you thinking it, about we're somewhere that [ph] when leverage would let's X.X profile think in and So be X.X. time, call point way it, it between, at that the

Operator

Please our And from of question JPMorgan. proceed. with comes you. line Carla Casella next the Thank

Carla Casella

or you with closer? out you're Is cash, going to that that there to wait going something you until you Hi, sooner do deal comfortable the fund secured than could rather get you later mentioned financing. is What financing? we something need see with and unsecured hurdles see before just you're

Scott Thompson

here reason fairly but work it. a to in, to closer not mean it don't on wait I We might got early, can very I be any opportunistic time large probably We either. we've there'd end we and would be think the be do until period

were up, not, we a wait tendency to do a it soften market the earlier. if If to little we while. can So have

Operator

Thank you. proceed. question from line Matuszewski with our And final the Please Jonathan comes of Jefferies.

Jonathan Matuszewski

my add on I'll question the future store and congratulations. morning the of just good base. Great, My is

there's mattress firms guess So X,XXX I today.

concessions about Scott, As under we'll your ownership? you much. that, the is the how divestitures. months, unit think FTC any the like hear regarding when maybe from of next to couple go-forward so growth over Thanks chain you mentioned, Added do

Scott Thompson

to our stores. we'll plan, say probably are in as -- thinking their important but I team initial would still about their for be current Yes. listen business still there drive too Look, more detail will the to is many them we'll it reaction management

becomes expect store are where would over the base to it number as than there important how come stores are. the more to I rather down time actually So total and many

opposed a expect a in, the So will kind the still to there's more bit. quite a I stores. to stores it's continue might move few of would down as around just quite that numbers locations, trickle of bit but stores, fill number but to of little closing better absolute unit be moving there to around to But opportunity

see you'll number So I sides, total both activity down but think some. on

Operator

And the will back comments. with Scott any Thompson final turn you. call to that, I Thank for

Scott Thompson

what around company our To thank the To employees over do to operator. for you thank every XX,XXX our world, the your partners, successful. retail day you you make you, Thank for you, lenders, our team of the representation of To This in confidence shareholders, Tempur your brands. thank ends operator. Directors. Board you for its our Thank outstanding Sealy's leadership today. call and

Operator

you, Thank may everybody and you now disconnect.

Tempur Sealy International (TPX) 9 May 232023 Q1 Earnings call transcript