Q2 2025 Somnigroup International Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the somni group. Second quarter 2025 earnings call at this time. Alliance are in less than only mood 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.
August 7th 2025, and I would now like to turn the conference over to Miss Lauren Aid with investor relations. Please go ahead.
Thank you, operator. Good morning, everyone. And thank you for participating in today's call.
Joining me today are Scott Thompson chairman president and CEO and Bhaskar bro. Executive, Vice, President and Chief Financial Officer.
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 in actual results and 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 filing including its annual reports on form, 10 K and quarterly reports on form 2.
Any forward-looking statements speaks only as of the date on which it is made.
The company undertakes. No, obligation to update any forward-looking statements.
This morning's commentary will also include non-gaap financial information.
Reconciliations of this non-gaap financial information can be found in the accompanying press release, which has been posted on the company's website at www.com and filed with the FCC.
Our comments will supplement, the detailed information provided in the press release.
As a reminder year-over-year comparisons are impacted by the acquisition of Mattress Firm in the first quarter and their related divers of Sleep Outfitters in certain matches from retail locations in the second quarter.
At certain times on the call, we will focus on like-for-like numbers defined as reported numbers adjusted for the acquisition and divestiture impact.
We believe this letter illustrates underlying business trends.
And now, with that introduction, it is my pleasure to turn the call over to Scott.
Good morning, and thank you for joining us on our second quarter 2025 earnings call.
I'm pleased to report that somni group delivered, another quarter of solid performance.
Today by disciplined execution and progress in our combination with Mattress Firm. We continue to outperform the market.
Strengthen our competitive position and deliver value to all of our stakeholders.
I will now begin with some highlights from the second quarter. Then turn the call over to bobster to review the financial performance in more detail and discuss our 2025 guidance.
After that, we'll open the call up for Q&A.
In the second quarter of 2025, we are pleased to achieve record net sales and adjusted ibida.
Net sales were up approximately 53% to 1.9 billion.
An adjusted, if at all, was also up.
Approximately 26% to 291 million adjusted EPS for the quarter was 53 cents.
We believe that North American betting Market was down, high single digits in the quarter and the international markets in aggregate were down, mid single digits.
Quarter started soft. But strengthened, as we moved throughout the period,
Early third quarter like for like Trends are encouraging with indication of potential solid growth.
It's too soon to call a turn in the market, we serve, but we are encouraged with what we are experiencing, we'll know more after the third quarter.
Our first highlight of the quarter was the market outperformance of Mattress Firm.
Mattress Firm reported like for like sales down just 1% from prior period.
The theme continues to operate with Relentless focus on in-store, execution, to drive performance against a muted, us vetting industry.
We're executing our new merchandising plan and advertising campaigns.
Leveraging strengths of mattress, firms talented, people to support our long-term growth.
We thrilled with how Mattress Firm and temporarily teams are implementing our shared vision.
Which I will discuss in just a moment.
This has been the smoothest combination I've ever experienced in my 40-year career.
Which only seems fair as it was the longest regulatory approval process imaginable.
The second highlight is the progress we've made on our Synergy initiatives following the acquisition matters firm.
We're now approximately 6 months post-closing and a meaningful progress in driving both sales and cost synergies.
Starting with sales, we have refined mattresses from a multi-branded merchandising strategy by taking a more holistic approach to product selection and partnering with multiple suppliers who offer high-quality products at competitive price points.
And differentiated product.
We're also pleased with the progress we've made on normalizing, Our Brands balance of share at Mattress Firm.
for 2025, we now, expect and proceeded to represent approximately low, 50% of massive firm's total sales up from our initial expectations of high 40%,
In total we expect the balance of shares shift.
From mid 400s and 2024 below 50s in 2025, to result in 40 million benefits to 2025 adjusted. If it die
As we look forward to 2026, we're on track to realize the full benefits of the merchandising changes, which we estimate to be approximately 100 million divided by opportunity.
Based as an incremental, 40 million adjusted if it died in 2025.
And then another $60 million of adjusted if it D.E. in 2026.
Estimating purposes measures from sales were held flat over the period. The opportunity is expected to grow as the US betting Industry Recovery and US Mattress. Firm sales increase.
The incremental adjusted AA is derived from enhanced economics from third-party suppliers.
And normalizing Our Brands balance of share.
Now, turning to cost synergies.
We're leveraging our expanded scale and vertical integration to drive efficiencies across manufacturing Logistics.
And sourcing operations.
Enhanced visibility into in consumer demand, is also an enabling us to refine our future product launches and end of life planning.
We're on track to realize. At least 100 million in annual run rate. Net cost synergies with 15 million expected in 2025.
In additional 50 million in 2026.
And 2027 with opportunities thereafter.
One of the many projects underway streamlining order fulfillment by utilizing mattress firm's robust home delivery network.
<unk> retail sales.
In addition to driving cost efficiencies, we expect this initiative to add value by shortening order can wait time.
<unk> oversight of delivery process in turn improving customer outcomes and satisfaction.
We've made significant strides on this initiative to date.
We are on track to begin ramping this program in the fourth quarter.
We're also optimizing our combined marketing spend to drive growth.
On a consolidated basis Omni group is now the largest advertiser in betting industry by a factor of two.
And we believe we can leverage the combined advertising power to drive demand.
Everyone in the bedding industry.
There are a couple of ways, where operation wise in this opportunity.
We've identified approximately $20 million of marketing efficiencies that were considered in our cost target.
The savings results from leveraging our combined scale to drive sourcing favorability.
And improving the efficiency of mattress firm's advertising spend by cutting spending areas of very low returns such as sports sponsorships and non working agency fee.
The $20 million.
<unk> marketing synergies does not include the benefit of any enhanced advertising creative though we continue to believe it's a compelling opportunity.
Additionally, tempur Sealy and mattress firm has historically employed different marketing strategies at times, resulting in mixed messages to the consumer.
As the two largest advertisers in the industry. This was suboptimal.
We can now deliver a high quality messaging that benefits everyone. The combined Shlomi group businesses and.
In the broader U S bedding industry.
A significant enabler of this higher quality messaging will be mattress firm's launch of its all new advertising campaign in the third quarter.
Campaign called sleep easy is designed to help consumers understand the importance of the right matches for achieving quality sleep.
Persuade the consumer to take them.
Next step on their purchase journey.
Showcases.
Several of the most widely experienced an acutely felt sleep disruptors.
And then demonstrates a mattress firm and.
And specific mattress solution. It offers can help.
These shows this is the highest performing campaign mattress firm's recent history across all metrics.
We expect synergies to represent a significant enhancement to some new group's financial and competitive position.
Now that we have more in depth perspective, let's look back at the mattress from transactions and pricing.
Mattress firm stand alone adjusted EBITDA.
These range from approximately $400 million.
$700 million over the last four years.
Averaging approximately $530 million.
Using the average adjusted EBITDA and taking into account known synergies just discussed.
The purchase price at signing of the definitive agreement with about six times adjusted EBITDA.
If you look at the purchase price at closing date, two years later and accounting for the impact of some <unk> group shares appreciation during the period.
It was seven times adjusted EBITDA.
We believe this transaction is a great example of creating value through M&A.
High return on investment Derisking of the business model of significant distribution of risk has been mitigated.
Clearly enhancing our competitive position.
Our third highlight for the quarter is that our international business continues to perform very well.
<unk> robust double digit sales growth and solid margin expansion.
This marks nine consecutive quarters of meaningful sales expansion on a constant currency basis for our legacy international business against the backdrop of industry pressure.
Our latest collection of Tempur products continue to be the primary driver.
With expanded price points broadening our total addressable market.
Further our improved late stage customization manufacturing process has allowed us to seamlessly tailored products to individual markets Chan.
Channels and customers.
We're supporting the new International collection with expanded distribution with broad based investment and advertising aimed at building brand awareness and driving conversion.
To date these investments have increased our share of voice and targeted international markets and we are winning share of consumer mattress searches versus key competitors and our top five markets.
Our U K based bedding retail dreams also delivered strong quarter there.
Continue to execute on initiatives to provide superior product quality and consistency of service.
Resulting in continued market outperformance and record customer satisfaction.
Our fourth highlight with Tempur Sealy, North Americas market performance.
Like for like net sales for our Tempur Sealy North American business unit were down 2% in the quarter, excluding the mid single digit headwind before close distribution discussed last quarter.
Although the North American business was down slightly we believe it continued to outperform the market, which we believe was down high single digits.
North America performance was driven by the successful launch of our all new Sealy posture PD collection, the largest bedding launch an industry history.
Remember Sealy is the number one brand in the U S and the world.
The team our suppliers, our third party retailers did a great job on a very heavy lift.
While the launch did take a bit longer to execute than planned which impacted the first part quarter, we exited the second quarter with solid momentum.
Our launch targets mid entry level segment.
It's updated collection is the culmination of a multi year research and development effort at.
At the core.
Innovation is a new patent pending coil system.
Engineered to deliver enhanced support.
In addition to technology advances, we designed collection streamlined merchandising a clear value proposition and a more compelling step up story to better guide consumers through the product lineup.
Retailer feedback on the new product is highly positive and consumers' initial reviews are strong.
Average of four nine out of five stars across the assortment.
We're supporting the launch with a new advertising campaign.
Again over the Memorial day holiday.
Top of funnel initiatives is crafted to reinforce the unique value of Sealy posture PD and.
And generate excitement around the Sealy brand.
The campaign is complemented by an enhanced in store experience featuring updated retail displays and new sales training.
Preliminary results of the campaign are strong as we believe <unk> has more than doubled its share of voice in the market since the launch in.
In addition to our increased investment. This expansion is also supported by our retailers redirecting dollars from non branded advertising to Sealy underscoring the trust retailers have and the new product.
Our final highlight is the expanded relationship with full power announced this morning.
Oh powers fleet tracker AI technology hours the successful.
Ergo Smart base.
Provides personalized sleep analytics and coaching.
It's part of the expanded collaboration Tempur Sealy is making a $25 million equity investment in full power to acquire approximately 15, 6% ownership stake.
In addition, Tempur Sealy and full power has signed a multiyear extension.
Through 2036 with Tempur Sealy has exclusive rights to embed sleep tracker technology and our products. This.
This strategic investment reflects our deep commitment to innovation.
And the future of betting consumer experience.
Extending our relationship with full power.
Not only enhancing and ability to serve consumers through smarter more tailored solutions were reinforcing our position.
At the forefront in innovation.
With that I'll turn the call over to Bhaskar.
Thank you Scott.
In the second quarter of 2025 consolidated sales were $1 9 billion.
And adjusted earnings per share was <unk> 53.
There are approximately $47 million of pro forma adjustments in the quarter.
All of which are consistent with the terms of our senior credit facility.
These adjustments are primarily related to costs incurred in connection with the divestiture and the combination with mattress firm.
As a reminder, we have aligned accounting for store occupancy costs across semi group.
Which resulted in Tempur Sealy reclassifying their store occupancy cost from operating expenses to cost of goods sold.
We have adjusted prior year Tempur Sealy financial information included in today's earnings release to reflect this change for ease of comparability.
I will be highlighting like for like comparison to normalize for these items in our commentary.
Now turning to mattress firm results.
Net sales through a mattress firm was $949 million in the second quarter.
On a like for like basis mattress firm's sales declined 1% over prior year.
Mattress firm adjusted gross margin was 35, 7%.
Adjusted operating margin for seven 8%.
Turning to Tempur Sealy North American results.
Like for like sales through the wholesale channel declined approximately 2% in the second quarter.
Normalizing for the previously discussed foreclosed distributions.
Four 7% without this normalization.
Like for like net sales to the direct channel declined 4% in the quarter, which excludes the impact of the divestiture.
North American adjusted gross margin increased approximately 500 basis points to 55%.
Primarily driven by the elimination of the intercompany sales to mattress firm.
Daily.
On a like for like basis, North American adjusted gross margins declined 130 basis points versus the prior year, primarily driven by deleverage in store models, partially offset by operational efficiencies.
North American adjusted operating margin improved 430 basis points to 28, 7%, primarily driven by mattress firm intercompany sales eliminations.
On a like for like basis, North American adjusted operating margins declined 240 basis.
Versus the prior year.
Similarly, driven by the decline in gross margin and an investment in advertising to support our Sealy launch.
Now turning to Tempur Sealy International results.
International net sales grew a robust 15% on a reported basis and a 10% on a constant currency basis.
Our international gross margin was consistent year over year at 48, 2%.
Our international operating margin improved 110 basis points to 13, 6%, primarily driven by operating expense leverage.
Last quarter, our Tempur Sealy, North American operations announced a 2% pricing.
Annualized sales to offset the residual expected tariff impact.
We believe this price increase is generally lower than what others in the industry.
Our customers.
This price increase was implemented in July and has successfully offsetting thats targeted cost increases.
Now moving onto the balance sheet and cash flow items.
At the end of the second quarter consolidated debt less cash was $4 9 billion.
Our leverage ratio under our credit facility was three six times.
We expect our leverage to be approximately three three times exiting 2025 and to return to our target leverage range two to three times in 2026.
And for share repurchases to be minimal till then.
In the second quarter, we successfully repriced our term loan b and paid a $100 million of outstanding principal balance.
We expect the repricing and prepayment it will produce annualized cash interest savings of approximately $5 million.
With an additional $5 million of savings available once the leverage is below three times.
In the second quarter, we generated operating cash of $186 million.
Before turning to full year guidance I want to remind you of a few items.
Our guidance considers the elimination of intercompany sale between mattress firm in Tempur Sealy.
Which we expect to represent approximately 19% of global Tempur Sealy late 2025 sales.
Intercompany sales eliminations in accordance with GAAP, we will reduce tempur sealy sales that will be margin accretive and neutral to dollars of operating profit.
Consistent with the prior quarter. Our guidance also reflects the divestiture of Tempur Sealy sleep outfitters retail business as well as 73 mattress firm stores in May 2025.
Now turning to 2025 guidance, we have raised our adjusted earnings per share to now be in the range of $2 40 stats to $2 77.
This guidance range contemplates a sales midpoint of approximately seven 4 billion after intercompany elimination.
This revision maintains our previous outlook for the bedding industry to be down mid single digits versus the prior year.
With trends improving slightly in the second half of 2025.
Our guidance also reflects life for like Tempur Sealy sales to be down low single digits.
Reported sales to be impacted by the intercompany elimination I referenced a moment ago.
Tempur Sealy North America sales declining mid single digits on a like for like basis, which includes our continued market outperformance against industry pressures and a mid single digit headwind from the foreclosed distribution.
Our international business growing mid single digits and high single digits on a constant currency basis, which include the continued momentum of our omni channel expansion strategy.
And our like for like mattress firm sales declining low single digits supported by in store initiatives to grow ALC and conversion.
Reflecting the industry pressures.
We also expect gross margins to be slightly above 44%.
Our outlook also contemplates.
Our updated assumption for Tempur sealy to be low 50 percentage of mattress firm's total sales up from our initial expectation of a high 40 percentage.
This represents $40 million of EBITDA benefit to 2025 compared to 2024.
Or a $20 million incremental EBITDA benefit 25 relative to prior expectations.
And $700 million of advertising investment.
All of which we expect to result in adjusted EBITDA of approximately $1 $2 7 billion.
The mid point.
Regarding capital expenditures.
We expect 2025, capex of approximately $200 million, including $25 million of investment to refresh mattress firm stores.
Over the next three years, we expect to invest a cumulative $150 million to refresh mattress firm stores.
Lastly, I would like to flag a few modeling items.
For the full year 2025, we expect G&A of approximately $295 million to $300 million.
Interest expense of approximately $260 million to $265 million.
On a tax rate of 25%.
With the diluted share count of 210 million shares.
With that I'll turn the call back over to Scott.
Thank you Nestor basket.
In closing this quarters performance reflects our successful combination with mattress firm and our resilience in a challenging global environment.
We are continuing to build a strong company that provides products that improve people's lives.
<unk> got our future.
We strengthened our competitive position across all our domestic and international business units or <unk>.
Average in the core strength with some groups.
Our talented people powerful brands expansive distribution network operational agility robust manufacturing capabilities and our culture, we're doing the right thing even when it's hard.
That ends our prepared remarks, operator, you may open the call up for questions.
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 telephone keypad, you'll hear a prompt that Johan has been raised and should you wish to cancel your request. Please press star followed by the two I would like to advice everyone have already made the switch.
One question if anyone have an additional question you can purchase of back in the queue by pressing star. One if you are using a speaker phone. Please lift the handset before pressing Amy.
One moment. Please for your first question.
Thank you and your first question comes from the line of Susan Mcclary from Goldman Sachs. Please go ahead.
Thank you good morning, everyone.
Good morning.
Good morning, Scott My question is on the demand side in your prepared remarks, you said that the quarter started soft and improved as we moved through the last couple of months and Youre feeling more encouraged going into the third quarter can you talk about what has changed in the last couple of months that you think is making the consumer feel of it.
Better and what you're watching for from here out to determine how we how the industry and your sales come together and perhaps is there any upside to your expectations. The industry will be down mid single digits. This year.
Thank you Susan.
First of all I think.
You can go to consumer confidence if you remember in.
In the first quarter conference call, we pointed to talk quite a bit about the weakness in consumer confidence and the correlation to consumer confidence in our business as we think about it and consumer confidence has stabilized and we'll call. It uptick some so I think the first thing I'd point out is the lack of new surprises.
Or something unusual coming out of Washington.
So consumers are kind of stabilized and slightly better I think the next thing I would probably lean on and I can't be precise because I don't have I don't know exactly the mix of it.
Would be the Coa part strategic launch I mean, we've called it out.
Quite a while the size of this launch largest launch embedding history.
Was a huge undertaking.
Both by the company by retailers by some great suppliers took.
Took a little bit longer to get through the system as retailers had to sell off.
The floor models in their back stock.
Don't sweep the floor, so thats <unk>.
Difficult lift for the retailers did a great job and then we launched for the first time national advertising.
On Sealy during the quarter and you could see it in this in the <unk> numbers.
Started a little slower in the quarter than we expected.
Get a little while again get the product place, but boy it was place.
<unk> velocity.
In the Skus and that momentum continued to run into the third quarter as we talked about in our prepared remarks.
So I guess in short just in.
General no surprises nothing weird from consumer competence standpoint, a little bit of a recovery.
<unk> been good product innovation and advertising.
To add on to that is.
At the midpoint, what we're assuming is that call it low or mid single digit from an industry decline standpoint, when you translate that into what it means for Tempur Sealy the way I think about it is EPS nice growth in the back half call. It mid to high single digits and what I would expect is more of that growth from an <unk>.
<unk> coming in the fourth quarter versus the third quarter and that's nothing more than the historic seasonality of mattress firm a little bit more advertising in the third versus versus before so what does all that mean think about EPS in the third quarter in the mid eighty's with the balance coming in in the fourth quarter to get to that midpoint.
$2 55.
Thank you and your next question comes from the line of Bobby Griffin from Raymond James. Please go ahead.
Good morning, Brian. Thanks for taking my question I guess the first question is on the revenue synergies that you guys talked about if I kind of do the quick math I think it implies roughly about a 15% contribution margin on incremental revenue.
Can you unpack that a little bit in a is that accurate and then b. What are the assumptions that you guys think the incremental revenue comes through as a temporary <unk> extends and foster Sealy, our OEM business is to help us tune up our models a little.
Sure when I think about the flow through.
Let's start from the revenue side initially so our previous previous expectation for balance of share was high <unk> call that 49% sitting here today, we are in and around low <unk> call that a few few percentage points increase when you do the math and reverse it reversed and reverse engineer it youre going to get a flow through of somewhere between $30 to 30.
25%, so getting to that incremental $20 million of EBITDA. So just triangulating on what that is versus our midpoint, where we were before in EBITDA versus where we are it's the.
Faster than accepted our expected realization from those revenue synergies is resulting in our in our revenue b as it relates to where it's going to come from.
The flow through is a little bit challenge because youre on the OEM side, obviously as you know Bobby it's not very strong.
On the Tempur Sealy business unit.
But a lot of that growth is going to come through timber.
Which is which is strong at the retailer side of the equation.
At the manufacturing side.
So it's pretty much a blend.
Thank you and your next question comes from the line of Ben <unk> from UBS. Please go ahead.
Good morning, and thanks for taking my question, maybe just to dovetail on Bobby's question.
We're adding the sales synergies and now it sounds like $20 million of potential marketing synergies.
It wouldn't support a higher long term earnings target relative to the $4 85 call. Just wondering if anything has changed in terms of other drivers of the business or cadence of how you get there. Thank you sure sure.
Sure Great question.
Step back I mean, the <unk>.
Three year perspective, we put in the market as a perspective that as an embedded.
Estimation of what the industry could grow at based on historical term, we don't really think of a quarter's guidance. It's more of a have a computation of the business model works, but it's reasonable.
With those assumptions and our thinking as we probably would update that annually.
With all of the changes that go on in the war in the World.
There is no question that.
From a company specific standpoint, and the performance of the combination of the two companies.
Is performing ahead of our expectations from a revenue synergy standpoint, and those economics, you see a little bit in the second quarter Youll see a lot more of it in the third quarter and it's very logical to assume that that would be positive to the perspective that we put out.
On the long term performance of the company at the same time the underlying industry perspective was put out we were expecting the industry to probably turnaround a little faster than.
And then it has last couple of quarters, and so that would probably be a little bit of a headwind.
Other changes here and there.
We haven't tried to take the the changes.
Each quarter, and then apply it to the perspective that we put out there we're going to update that at the end of the year and there will be puts and takes.
On that but Theres no question.
The revenue synergies would be net additive to the perspective.
We put it out but again there is also.
There is another step forward in the other way, but we will update that at the end of the year.
Yeah.
Thank you once again should you have a question. Please press star followed by one on your telephone keypad and if anyone have any additional question you can put yourself back in the queue by pressing star one and.
And your next question comes from the line of Brad Thomas from Keybanc Capital markets. Please go ahead.
Good morning, and congrats on the good start here with mattress firm.
My question was around your relationship with non mattress firm retailers and Scott I was hoping you could just talk a little bit more about what youre seeing in terms of sales trends within your different brands.
Slot count is holding up and just more broadly that relationship with the non mattress firm retailers.
As you all know.
Number one retailer on the segments.
Sure.
Our net slots in the second quarter with third party retailers is net up.
From the same period last year.
If I look at the top five.
Retailers and I look at our business with the top five retailers. It is grown and has increased quicker or are.
Got it quicker is a good word than the market share.
So I would say those two stats would be the first things that I would I would lean into.
I would say that.
The Sealy product.
He has done very very well.
With third party retailers.
And continues to be business as normal and normal is with great product advertising.
Sales support to logistics.
We help third party retailers to drive their business, which is our business plan.
We're getting we're getting great reception.
Thank you once again that is star and wanted to ask a question and your next question comes from the line of Peter Keith from Piper Sandler. Please go ahead.
Hi, Thank you good morning, everyone.
Thinking about the sales mix between Tempur and Sealy I'm wondering if you.
You are experiencing it could start to experience some mixed pressure on your gross margin side.
The strength in Sealy.
Push Sealy sales growth ahead of Tempur pedic growth.
And on a related note one thing we are hearing the retail channel is at the high end of the Assembly line is so good.
It's actually cannibalizing the low end of the copper lines, if maybe you could comment on that potential as well.
Sure I mean.
First of all even the Tempur brand was the strongest brand in the second quarter just to kind of.
10% based on a go forward basis is what your question is I think it is possible that the sealy brand will grow faster.
The Tempur brand FERC for a couple of quarters.
And it would it would be a slight headwind to the gross margin that in and of itself that is correct incremental EBITDA, but the margin percentage correct would you might get a little bit of pressure. One just has to be mindful when youre thinking about gross profit is that foreclosed distribution. So when you put all that together the current expectation is that that mix will be.
Favorable however.
And of itself, the sealy versus risk tempur there'll be a little bit of a headwind in fact, it probably would expect probably see we will grow faster than the tempur.
A couple of quarters, yes, I mean, it's doing very well on the high end of CBOE as you probably know we worked very hard very hard to position the <unk> brand will call it up a notch.
From a positioning standpoint.
Which is good for us good for the retailers good for the customer.
I think it's I don't think it's cannibalizing anything from temper those are really unique positions and unique fields.
And those products I do think that there is some cannibalization.
Going on between Stearns, <unk> Foster and Sealy past repeat it and thats, but thats by design. It was planned but there is some because both of those are spurring beds and.
And until we get the new Sealy Sealy Stearns.
<unk> why now.
Little more overlap. There then it's probably need long term, but when the new Stearns line comes up we'll.
Probably move it up a little bit.
And fix that problem, but but net net that was a planned cannibalization and again, it's what I would consider to be minor.
And tempers doing well.
Thank you and your last question comes from the line of phrase Joe STICH from Bank of America. Please go ahead.
Hi, you have Victoria Pittsburgh answer recap research, thanks for taking our questions.
My question is more on the tariff side on your Investor presentation.
What are some of the components of your exposure, whether that's more steel versus fabric.
Some of them mitigate it.
Actually I think okay. Thank you.
Sure. Good question, what I would say is largely speaking versus where we were in the first quarter. Our tariffs thinking really hasnt changed there has been moves some moving pieces as it relates to the government about how it impacts the SGI group not a not a big driver when I double tap into that and think about where it's coming from again consistent with the first.
<unk>, yes steel.
The steel aluminum how that impacts the tempur sealy or the SDI family is associated with adjustables, primarily so when I think about the big items. It's really this deal specifically the adjustables a little bit on the textiles, because theres a big drop off when you when you think about the paredo.
Where this exposure is coming from.
However, the next item below that would be associated with the textile and thats, principally a U S MCA issue between.
Whatever NAFTA has called out.
I think and just in summary.
Just.
<unk>.
Tempur Sealy STI and mattress firm.
The whole industry has been able to one kind of move some supplier stuff around find some cost savings.
And then pass on just a small amount of price increase.
Pretty well mitigate the known tariff exposure, we're working with today.
Thank you and we now have additional questions in the queue. Your next question comes from the line of Brad Thomas from Keybanc Capital markets. Please go ahead.
Okay.
Hi, Thanks for taking a follow up.
Scott I wanted to ask about product innovation.
And particularly with the news of the partnership and investments in full power and again now being even more vertically integrated in the U S.
How should we think about the pace of innovation and how you all may innovate differently, if at all from a product standpoint.
Thank you for the question.
You are right one of the one of the advantages combining with mattress firm is to align on technology for future innovation.
Mattress firm was going down a different path from a technology standpoint, and a different technology strategy and then of course, we have our technology strategy leveraging for power and quite frankly, the thought of one day in the future going to mattress firm or any other retailer.
And the RSA explaining to you here's one apathy by this bad here's another app, if you buy that bid and trying to explain multiple technologies.
To me it sounded like a disaster on the floor and so the combination allows us to streamline under one technology platform that will accelerate.
Innovation and also de risk the innovation, because we have known distribution.
So when we developed something we know we have a home for it.
A home Thats large enough to drive that technology to make the economics work. So I do think the combination of mattress firm was an unlock.
What I'll call future innovation.
It will be more complex and change change your sleeping experience.
Thank you and your next question comes from the line of Bob Mcmahon from Raymond James. Please go ahead.
Hey, guys, Hey, Bob can I just wanted to one quick model follow up on one of your comments.
<unk> to down 2% wholesale like for like that you gave us ex the distribution change for an OEM customer does that often neutralized for all the moving parts with floor samples I know the timing this year and <unk> is different than the timing last year. When you guys ship different products, especially given the size of the Sealy launch. So just trying to get a clean way that you have.
And the team are looking at it.
It does not when you think about the floor what'll headwind in the second quarter think about on the on the EBITDA line something around eight or so million dollars and our top line and think about about $15 million.
Thank you and that answer a question and answer session I will now.
Ill hand, the call back to Mr. Scott Thompson for any closing remarks.
Thank you operator.
Through our over 20000 associates around the world. Thank you what you do every day to make the company successful.
Our retail partners. Thank you for your outstanding representation of our brands and our shareholders and lenders. Thank you for your confidence in the company's leadership and its board of directors.
This ends our call today operator, thank you.
This concludes today's call. Thank you for participating you may all disconnect.
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