Q2 2026 Somnigroup International Inc Earnings Call

Speaker #1: Call after today's prepared remarks. We will host a question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand.

Speaker #1: To withdraw your question, press star 1 again. I'll now hand the conference over to Lauren Avritt, Director of Investor Relations—Lauren, go ahead.

Speaker #2: Thank you, Operator. Good morning, 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: The company undertakes no obligation to update any forward-looking statement. 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.somningroup.com and filed with the SEC.

Speaker #2: Our comments will supplement the detailed information provided in the press release. And with that, it's my pleasure to turn the call over to Scott.

Speaker #3: Good morning. And thank you for joining us on our second quarter 2026 earnings call. I'll begin with a review of our quarterly highlights before turning the call over to Bhaskar, who will discuss our financial results and 2026 earnings outlook in greater detail.

Speaker #3: I'll then provide you with a brief update on a proposed legit and flat combination, and then open the call up for questions. We are pleased to deliver a record second quarter in adjusted earnings per share.

Speaker #3: Against a cautious consumer background and ongoing macroeconomic uncertainty, we generated net sales of $1.8 billion, adjusted EBITDA of $297 million, and adjusted EPS of $58 cents, a 9% increase from the prior year.

Speaker #3: These results reflect our brand strength, a diversified global business model, and consistent discipline execution across our operations. This and a market that we believe to be down mid to high single digits over prior years.

Speaker #1: Hello everyone. Thank you for joining us, and welcome to the SOMNIGROUP's second quarter 2026 earnings call. After question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand.

Speaker #3: Turning to our first highlight, Mattress Firm delivered results ahead of the broader U.S. market. Supported by its industry-leading scale, effective marketing strategy, and broad product assortment, this design to meet the wide range of consumer needs.

Speaker #2: Operator. Good morning, 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.

Speaker #2: Operator. Good morning, 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. includes forward-looking statements that are subject to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

Speaker #3: We continue to refine our merchandising assortment at Mattress Firm to better align it with customers' preferences. Following varying encouraging results, from a 3-month pilot program of Kingsdown's products, in 200 Mattress Firm stores, which demonstrated improved performance versus certain other products, we have expanded our relationship with Kingsdown.

Speaker #3: And expect to meaningfully increase the brand's presence across the floor over the next 6 months. The collection is expected to be available in nearly 800 stores nationwide.

Speaker #3: And brings customers luxury traditional inner spring options focused on elevated comfort, premium craftsmanship, and lasting support. Our differentiated sleep expert model supported by ongoing technology investments and a highly trained sales organization continues to resonate with customers.

Speaker #3: Also, we've made steady progress on our store refresh program, on track to be completed in 2027. And on our brand wall program, expected to wrap up this year.

Speaker #3: Both programs are designed to elevate the in-store shopping experience. The improved store environment combined with enhanced product training and new technology are supporting an improved store experience for customers.

Speaker #3: Which we believe over time will drive future sales. Our second highlight is the continued success of our international growth strategy. While the operating environment remains volatile, our international business once again delivered solid results and gained share across many of our key markets.

Speaker #3: Our legacy temper international business again outperformed the broader industry. Benefiting from the strength of the temper brand, ongoing marketing investments, and strong local execution.

Speaker #3: Dreams continued to strengthen its brand assortment, customer engagement, and its best-in-class operating model, while managing through a difficult macro backdrop, a highly promotional competitive landscape, and an ERP implementation that is going well but has created some transitory challenges.

A 9% increase from the prior year.

These results, reflect our brand strength.

The diversified global business model and consistent, disciplined execution across our operations.

Speaker #3: Over the past several years, we've advanced our global vertical integration strategy by expanding company-owned retail footprint through expansion of our own temper retail stores, combined with targeted acquisitions such as Dreams in the UK, Sova in Sweden, and our recently announced acquisition of Danish retailer Sing.

This in a market that we believe to be down mid to high single digits over prior years.

Turning to our first highlight Mattress Firm delivered results ahead of the broader US market.

Supported by its industry-leading, scale.

Effective marketing strategy.

And Broad product. Assortment this designed to meet the wide range of consumer needs.

Speaker #3: Each acquisition's deepens our ability to connect directly with consumers, showcase our brands, and strengthen our market position. Our third highlight is the execution of our new Sterns & Foster product launch, which remains on track and is expected to strengthen our price architecture across the portfolio and drive higher average selling price.

Speaker #3: The refreshed collection features an upgraded cooling system, a more robust micro-coil support layer, and a new approach to hybrid technology. This redesigned positions the brand more distinctly in the premium segment and is designed to expand our footprint.

We continue to refine our merchandising assortment at Mattress Firm to better align it with customers' preferences, following very encouraging results from a 3-month pilot program of Kingstown's products. In 200 Mattress Firm stores, which demonstrated improved performance versus certain other products, we have expanded our relationship with Kingstown, and expect to meaningfully increase the brand's presence across the floor over the next 6 months.

The Collection is expected to be available in nearly 800 stores nationwide.

And brings customers luxury, traditional innerspring options focused on elevated comfort, premium craftsmanship, and lasting support.

Speaker #3: To optimize pricing across our portfolio, we are increasing the entry-level price of Sterns & Foster so that it minimizes the overlap with the high end of our ceiling line.

With customers.

Speaker #3: And we are focusing on the higher end products of Sterns & Foster. We have increased the number of high-end models by over 50% in the new collection.

Also, we've made steady progress on our store refresh program on track to be completed in 2027.

And on our brand wall program expected to wrap up this year.

Speaker #3: Our planned national advertising campaign will highlight the craftsmanship and heritage of Sterns & Foster brand. As the longest tenured Mattress brand in America, while also reinforcing the connection between our advanced materials quality sleep and the overall health and wellness.

Both programs are designed to elevate the in-store shopping experience.

The improved store environment, combined with enhanced product training and new technology, is supporting an improved store experience for customers.

Which we believe over time will drive future sales.

Speaker #3: Our marketing strategy balances investments in broad reach channels with highly targeted digital media. The launch will begin at the end of the third quarter and continue to roll out through the early 2027, mostly expected financial benefit will materialize in 2027.

Our second highlight is the continued success of our International growth strategy.

While the operating environment remains volatile, our international business once again, delivered solid results and gained share across, many of our key markets.

Speaker #3: And beyond. Our fourth highlight is the continued resilience of temper ceiling North America's business despite softness in the broader betting market and supply chain disruptions.

Our Legacy temper international business, again outperformed, the broader industry.

Benefiting from the strength of the Timber brand, ongoing, marketing, Investments, and strong, local execution.

Dreams continued to strengthen its brand, assortment.

Speaker #3: Our investments in high-quality advertising discipline cost management and increased balance of share at Mattress Firm each contributed to another quarter of solid performance. We also benefited from the strength of our manufacturing supply chain operations.

Speaker #3: Which effectively navigated a dynamic global environment. The operational discipline remains an important differentiator of our business and supports our ability to execute during complicated market conditions.

Customer engagement and its best-in-class operating model while managing through a difficult macro backdrop, a highly promotional competitive landscape, and an Erp implementation that is going well, but has created some transitory challenges.

Speaker #3: With that, I'll turn the call over to Bhaskar.

Over the past several years, we've Advanced our Global vertical integration strategy by expanding company-owned. Retail footprint through expansion of our own temporary retail stores. Combined with, targeted Acquisitions such as dreams in the UK.

Speaker #2: Thank you, Scott. In the second quarter of 2026, consolidated sales were a solid 1.8 billion dollars. And adjusted earnings per share was 58 cents, up 9% over prior year.

Sova and Sweden and our recently announced acquisition of Danish retailer scene.

Each acquisition deepens our ability to connect directly with consumers, showcase our brands, and strengthen our market position.

Speaker #2: There are approximately 16 million dollars of pro forma adjustments in the quarter all of which are consistent with the terms of our senior credit facility.

Speaker #2: As a reminder, we have now fully lapped the Mattress Firm acquisition in the first quarter of this year. And we have lapped the related divestitures of Sleep Outfitters and certain Mattress Firm retail locations in May.

Our third highlight is the execution of our new Stearns and Foster product launch, which remains on track and is expected to strengthen our price architecture across the portfolio and drive higher average selling price.

Speaker #2: We will present like-for-like commentary for temper ceiling North America on a standalone basis which will include the intercompany sales to Mattress Firm and adjust for the divestitures.

Refreshed collection features and upgraded cooling systems a more robust micro coil support layer and a new approach to a hybrid technology.

This redesign positions the brand more distinctly in the premium segment and is designed to expand our footprint.

Speaker #2: Now turning to Mattress Firm results. Net sales through Mattress Firm were approximately 922 million dollars in the second quarter and same store sales grew slightly.

To optimize pricing across our portfolio. We are increasing the entry-level price of Stearns and Foster.

So that it minimizes the overlap with the high end of our ceiling.

Speaker #2: Mattress Firm adjusted gross margin decreased 240 basis points to 33.3% driven by product mix, consumer financing costs, investment in Mattress Firm stores, and deleverage.

And we're focusing on the higher end products of stern and Foster.

We have increased the number of high-end models by over 50 percent in the new collection.

Speaker #2: The impact of product mix on gross margin percentage was primarily driven by the increased balance of share of temper ceiling products as temper ceiling supply contract is structured to provide a portion of Mattress Firm economics in the form of cooperative advertising credits.

Our planned national advertising campaign will highlight the craftsmanship and heritage of Stearns & Foster, and reinforce the brand as the longest-tenured mattress brand in America.

While also reinforcing the connection between our Advanced Materials quality sleep and the overall health and wellness.

Our marketing strategy, balances Investments.

In broadreach Channels with highly targeted digital media.

Speaker #2: This reduces Mattress Firm's operating expenses but delivers a lower product gross margin percentage versus other products. When looked at on a conforming basis, there is no material impact on operating margin from the product mix change.

The launch will begin at the end of the third quarter and continue to roll out through the early 2027 mostly expected Financial benefit for materialized in 2027.

And Beyond.

Speaker #2: It is just landscaping within the income statements. Mattress Firm adjusted operating margins declined 130 basis points to 6.5% driven by consumer financing costs, the investments in store, and deleverage I mentioned a moment ago.

Our fourth highlight is the continued resilience of temporary, cely, North America's business, despite softness in a broader betting market and supply chain disruptions.

Our investments in high-quality advertising discipline cost management.

Speaker #2: Turning to temper ceiling North America. Sales were flat on a like-for-like basis with like-for-like net sales to the wholesale channel also flat. Our sales with third-party retailers decreased 5% after normalizing floor models.

And increased balance is shared mattress room. Each contributed to another quarter of solid performance. We also benefited from the strength of our manufacturing supply chain operations, which effectively navigated, a dynamic, global environment.

Speaker #2: Representing continued outperformance relative to an industry we believe was down mid to high single digits. Like-for-like net sales to the direct channel decreased 1% in the second quarter.

The operational disciplined remains. An important differentiator of our business, and supports our ability to execute during complicated market conditions with that. I'll turn the call over to boster.

Thank you, Scott.

In the second quarter of 2026 Consolidated, sales were a solid, 1.8 billion dollars.

Speaker #2: North American adjusted gross margins increased a robust 680 basis points to 61.8%. Driven by the achievement of synergies operational efficiencies and mix. Partially offset by commodity cost inflation for four pricing actions.

And adjusted earnings per share with 58 cents up 9% over prior year.

There are approximately 16 million dollars of proforma adjustments in the quarter.

All of which are consistent with the terms of our senior credit facility.

We have now fully lapped, The Mattress, Firm acquisition in the first quarter of this year.

Speaker #2: We achieved 30 million dollars of net benefit from sales and cost synergies in the second quarter. North American adjusted operating margins improved 400 basis points to 26.7% in the quarter.

And we have lap, the related divers of Sleep Outfitters and certain Mattress Firm retail locations in May.

Speaker #2: Driven by the improvement in gross margin partially offset by investments in cooperative advertising as noted a moment ago. Turning to temper ceiling international results.

We will present like-for-like commentary for 10% North America on a standalone basis, which will include the intercompany sales with Mattress Firm, and adjust for the domestic charges.

Now turning to Mattress Firm results.

Speaker #2: International net sales grew 2% on a reported basis and 1% on a constant currency basis. Our legacy international business delivered another strong quarter supported by the continued execution as we broaden our consumer by Scott continued to navigate a difficult environment given a very tough UK market and the recent ERP implementation.

Net sales through Mattress Firm were approximately 922 million in the second quarter, and same store sales grew slightly.

Mattress Firm adjusted gross margin decreased 240 basis points to 33.3%, driven by product mix, consumer financing costs, investments in mattresses from stores, and leverage.

Speaker #2: Our international gross margins declined 80 basis points to 47.4% driven by commodity cost inflation before pricing actions partially offset by operational efficiencies Our international operating margin declined 120 basis points to 12.4% primarily driven by the decline in gross margin.

the impact of product mix on gross margin percentage was primarily driven by The increased balance of share of 10% products.

As temporary Sealy, Supply contract is structured to provide a portion of Mattress Firm economics in the form of Cooperative advertising credits.

This reduces mattress firms operating expenses but delivers a lower product gross margin percentage versus other products.

Speaker #2: Now I'd like to give a brief update on commodity inflation and related pricing actions. We implemented modest pricing actions following the July 4th promotional period to offset higher input and freight costs.

When looked at on a conforming basis, there is no material impact on operating margin from the product mix change.

It is just landscaping within the income statements.

Speaker #2: As we discussed last quarter the timing of the cost increases preceded the implementation of our pricing action. Creating an approximately 10 million dollar one-time headwind to temper ceiling profits in the second quarter.

Mattress Firm adjusted. Operating margins declined. 130 basis points to 6.5%.

Driven by consumer financing costs, the investments in-store, and deleverage I mentioned a moment ago.

Turning to 10% of the North America.

Speaker #2: We expect those impacts to be offset by pricing actions in the second half of the year. I want to point out we grew earnings in the quarter almost 10% while fully absorbing the inflationary environment.

Sales were flat on a like, for like basis.

With like, for like net sales through the wholesale Channel, also flat.

our sales with third-party retailers, decreased 5%, after normalizing for floor models,

Speaker #2: Now moving to SOMNIGROUP's balance sheet and cash flow items. At the end of the second quarter consolidated debt less cash was 4.3 billion dollars and our leverage ratio under our senior credit facility was 2.99 times returning to our target leverage range of 2 to 3 times.

Representing continued outperformance relative to an industry. We believe was down mid to high single digits.

Like for like net sales to the direct channels. Decreased 1% in the second quarter.

North American adjusted, gross. Margins increased, a robust 680 basis points to 61.8%.

Speaker #2: Demonstrating our strong cash flow generation and disciplined capital allocation approach. We also further strengthen our capital structure through the refinancing and upsizing of our credit facility.

Driven by the achievement of synergies, operational efficiencies, and mix.

Partially offset by commodity cost inflation for four pricedale.

Speaker #2: The amended facility extends maturities to 2031 increases liquidity and allowed us to reduce higher cost debt. Lowering future interest expense. Turning to our cash flow performance.

We achieved $30 million of net, benefit from sales and cost synergies in the second quarter.

North American adjusted, operating margins improved, 400 basis points to 26.7% in the quarter.

Speaker #2: In a muted market we delivered record operating cash flow of 236 million dollars and free cash flow of 182 million dollars. We have reduced our net debt by more than 500 million dollars over the trailing 12 months while fully supporting growth initiatives and returning over 160 million dollars to shareholders in the form of dividends and buybacks.

Driven by the improvement in gross margin, partially offset by investments in cooperative advertising, as noted a moment ago.

Turning December the international results.

International, net, sales grew 2%, on a reported basis and 1% on a constant currency basis.

Speaker #2: Now turning to 2026 guidance. As a reminder our guidance considers the elimination of intercompany sales between temper ceiling and Mattress Firm which we expect to represent approximately 24% of global temper ceiling 2026 sales.

Our Legacy international business delivered, another strong quarter supported by the continued execution. As we broaden our consumer reach,

Our Dreams business, as noted by Scott, continues to navigate a difficult environment.

Given a very tough UK Market in the recent Erp implementation.

Speaker #2: Intercompany eliminations in accordance with GAAP will reduce temper ceiling sales but will be margin accretive and neutral to dollars of operating profit. We expect adjusted earnings per share to be between $2.85 and $3.15 for the full year.

Our International gross margins declined 80 basis points to 47.4%, driven by commodity cost inflation before pricing actions, partially offset by operational efficiencies.

Speaker #2: This guidance range contemplates a sales at the midpoint of approximately 7.6 billion dollars after intercompany eliminations. Our annual guidance also reflects our expectation that the global betting industry will be down mid single digits year over year.

Our International operating margin declined 120 basis points to 12.4%, primarily driven by the decline in gross margin.

Now, I'd like to give a brief update on commodity inflation and related pricing actions.

We implemented modest pricing actions following the July 4th promotional period to offset higher input and freight costs.

Speaker #2: Temper ceiling North America like-for-like sales growing low single digits. International business growing low single digits. And like-for-like Mattress Firm sales down slightly. We also expect reported gross margins slightly above 45% driven by 100 basis points of net margin expansion from operational efficiencies including synergies and operating leverage.

as we discussed last quarter, the timing of the cost increases preceded, the implementation of our pricing action,

creating an approximately 10 million 1-time, Edwin temporary profits in the second quarter.

We expect those impacts to be offset by pricing actions in the second half of the year.

Speaker #2: Partially offset by the impact of temper ceiling's pricing action which are intended to neutralize commodity inflation but our margin diluted. Our 2026 outlook also contemplates our assumption for temper ceiling brands and private labels to be in the mid 60s percent of Mattress Firm total sales.

Being the inflationary environment.

Now, moving to Somnigroup's balance sheet and cash flow items.

Speaker #2: This represents an incremental 65 million dollars of adjusted EBITDA benefit for 2026 versus 2025. An approximately 690 million dollars of advertising investment. This all results in an estimated adjusted EBITDA for 2026 of approximately 1.39 billion dollars at the midpoint of our guidance.

At the end of the second quarter consolidated, debt less cash was $4.3 billion, and our leverage ratio under our senior credit facility was 2.99 times, returning to our target leverage range of 2 to 3 times. This demonstrates our strong cash flow generation and disciplined capital allocation approach.

We also further strengthen our capital structure through the refinancing and upsizing of our credit facility.

The amended facility extends maturities to 2031, increases liquidity, and allowed us to reduce higher-cost debt, lowering future interest expense.

Speaker #2: Regarding capital expenditures we expect 2026 CAPEX of approximately 225 million dollars including CAPEX of 75 million under our Mattress Firm store refreshes and brand wall program.

Turning to our cash flow performance.

In a muted Market, we delivered record. Operating cash flow of 236 million and free cash flow of 182 million.

Speaker #2: We expect our CAPEX to normalize to 200 million dollars in future years. And for at least 50% of our free cash flow in 2026 to go toward quarterly dividends and share repurchases.

We have reduced our net debt by more than 500 million dollars over the trailing. 12 months, while fully supporting growth initiatives and returning over a $160 million dollars to shareholders in the form of dividends and BuyBacks.

Now, turning to 2026 guidance.

Speaker #2: Now I'd like to flag a few modeling items. For the full year 2026 we expect DNA of approximately 310 million dollars. Interest expense of approximately 230 million dollars.

as a reminder, our guidance considers the elimination of intercompany sales between temporary and Mattress Firm

Which we expect to represent approximately 24% of global temporary 2026 sales.

Speaker #2: On a tax rate of 25% with diluted share count of 213 million shares. With that I'll turn the call back over to Scott.

Intercompany eliminations, in accordance with GAAP, will reduce temporary sales but will be margin accretive and neutral to dollars of operating profit.

Speaker #1: Thank you Bhaskar. Well done. In closing our second quarter results reflect the strength and resilience of our business model. The dedication of our teams and the benefit of a disciplined long-term strategy.

We expect adjusted earnings per share to be between 2.85 and $3.15 for the full year.

This guidance range contemplates, a sales at the midpoint of approximately 7.6 billion dollars after intercompany eliminations.

Speaker #1: We continued execute well across our global operations. Driving growth and creating long-term shareholder value. Lastly I'd like to give a brief update on our proposed combination of Leggett and Platt.

Our annual guidance also reflects our expectation that the global betting industry will be down mid-single digits year over year.

In North America, like-for-like sales grew in the low single digits.

Speaker #1: A leading diversified component manufacturer and long-standing supplier to SOMNIGROUP. We have made significant progress towards finalizing the combination. We have received nearly all regulatory approvals required to consummate the transaction.

International business, growing low single digits.

And like for like Mattress Firm sales down slightly.

Speaker #1: And the required Leggett and Platt shareholder vote is scheduled for August 20th. We're expecting to close the transaction before the end of the third quarter.

we also expect reported gross margin slightly above, 45% driven by 100 basis points of net margin expansion from operational efficiencies including synergies and operating Leverage

partially offset by the impact of 10%.

Speaker #1: This timing is considerably ahead of our original expectations. Leggett and Platt will be incorporated into our guidance post-closing. We believe the combination will further strengthen our vertical integration framework and enhance consumer-centric innovation.

Which are intended to neutralize commodity inflation.

But our margin diluted.

Our 2026 Outlook also contemplate.

Speaker #1: It is expected to expand our addressable market embedding and into non-bedding industries. It's going to reduce our financial leverage drive operating cash flow and deliver immediate adjusted EPS accretion before synergies.

our assumption for 10% of the brands and private labels and be in the mid-60s percent of mattress foam, total sales,

This represents an incremental 65 million of adjusted evaa benefits for 2026 versus 2025.

In approximately 690 million dollars of advertising Investments.

Speaker #1: With opportunities for future shareholder value driving synergies across the combined organization. We look forward to welcoming Leggett and Platt into our portfolio of industry leading businesses.

This all results in an estimated adjusted EVA for 2026 of approximately $1.39 billion at the midpoint of our guidance.

regarding Capital expenditures, we expect

Speaker #1: Operator that concludes our call. Open the call up for questions.

Speaker #3: We will now begin the question and answer session. Please limit yourself to one question. And if you have any follow-ups upon being answered please press star one to rejoin the line.

2026 capex of approximately 225 million, including capex of 75 million under our Mattress, Firm store, refreshes and brand wall programs.

We expect our capex to normalize to a million dollars in future years.

Speaker #3: If you'd like to ask a question press star one to raise your hand and to withdraw it press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

And for at least 50% of our free cash flow in 2026, to go toward quarterly, dividends and share repurchases.

Now, I'd like to flag a few modeling items.

Speaker #3: If you are muted locally please remember to unmute your device. Your first question comes from Susan McClary from Goldman Sachs. Your line is go ahead.

for the full year 2026, we expect DNA of approximately 310 million

Interest expense of approximately $230 million.

Speaker #4: Thank you. Good morning everybody. Scott I want to talk about the revision to the guide coming out of the first quarter it felt like you could still hit the higher end of the range that you had set for earnings.

On a tax rate of 25%.

With diluted share count of 213 million shares.

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

Speaker #4: Can you talk about what changed in the quarter that drove the decision to take the numbers down? And how you thought about setting the current range of that 285 to 315?

Thank you, Bhaskar well done.

In closing, our second quarter results reflect the strength and resilience of our business model.

Speaker #4: What's implied in there? And how you got to that?

The dedication of our teams and the benefits of a disciplined long-term strategy.

Speaker #1: Sure Susan. Thank you. Thank you for the question. I mean like anything you start with an estimate and there were puts and takes during the quarter.

Across our Global operations driving growth and creating long-term shareholder value.

Speaker #1: Some were favorable some were unfavorable. If I had to just like point at you know two things that were the largest probably unexpected negatives if we're going to focus on the negatives for a second.

Lastly, I'd like to give a brief update on our proposed combination of legit and Platt. A leading Diversified component manufacturer in long-standing supplier toomi group.

Speaker #1: Obviously the industry trends in the second quarter were not as strong as we expected. We were expecting what Bhaskar.

We have made significant progress towards finalizing the combination.

Speaker #5: Missing a digit.

Speaker #1: Up down down down in which you get.

Speaker #5: Mid to high from an industry standpoint.

We have received nearly all regulatory, approvals, required to compensate, the transaction, and the required legit and Platt. Shareholder vote is scheduled for August 20th.

Speaker #1: So your first thing would be industry and that's generally the US is what we're talking about there. The other thing the UK operation dreams their ERP system was a little rougher than we expected and the UK market was a little more competitive.

We're expecting to close the transaction before the end of the third quarter.

This timing is considerably ahead of our original expectations.

Speaker #1: Those two were the big ones that I would call out. Although there were certainly other some positive some negative. The other thing probably that weighed on us was the Middle East activity.

Legging Platt will be incorporated into our guidance post closing.

Speaker #1: And that we went back in for round two. Which is created you know some additional uncertainty probably from where we were thinking. Those would be the things that I think of Bhaskar.

Speaker #1: Now she asked about in setting the guidance. Why don't you talk about a little bit about that.

Speaker #2: Absolutely. So just to put a you know just to recap again is that going into the quarter we had an expectation from an industry standpoint on a full year basis our expectation is that the industry would be down low single digits.

Speaker #1: Shareholder value, driving synergies across the combined organization. We look forward to welcoming Leggett & Platt into our portfolio of industry-leading businesses. Operator, that concludes our call.

Speaker #2: As we sit here now our expectation is that the industry will be down mid single digits. And what that effectively implies for the rest of the year is with the inclusion of pricing is that what we saw in the second quarter continues.

Speaker #1: Open the call up for questions.

Speaker #2: So at the midpoint of guide it's really how we thought about it is that the current trends or current industry trends continue. And as it relates to the initiatives that we have in place we continue to execute.

Speaker #2: We will now begin the question-and-answer session. Please limit yourself to one question. And if you have any follow-ups upon being answered, please press star 1 to rejoin the line.

Speaker #2: The other item that we did tweak a bit is our assumption around sales synergies. We did take up our expectation based on the report the performance in the first half.

Speaker #2: If you'd like to ask a question, press star 1 to raise your hand. And to withdraw it, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #1: Yeah I think the other thing I probably since you're talking about guide that influenced us as I think about it as you were speaking Bhaskar is if you look at the second quarter the first couple of months were solid.

Speaker #2: If you are muted locally, please remember to unmute your device. Your first question comes from Susan McClary from Goldman Sachs. Your line is ahead.

Speaker #1: And looking well. And then we ran into the July 4th holiday period. And I think it's been well documented but the July 4th holiday period in the US was not robust and was weak.

Speaker #3: Thank you. Good morning, everybody. Scott, I want to talk about the revision to the guide coming out of the first quarter. It felt like you could still hit the higher end of the range that you had set for earnings.

Speaker #1: And that was certainly not expected. The good news is since that holiday period is over and it ended call it July 15th or so the market has kind of rebounded back to the trend line that it was before the thing that we look at we think is probably the best way to look at the US market is mattress firms same store sales because it takes out the inventory fluctuations and order timing that we get over on the 10% side.

Speaker #3: Can you talk about what changed in the quarter that drove the decision to take the numbers down, and how you thought about setting the current range of that 285 to 315?

Speaker #3: What's implied in there? And how you got to that?

Speaker #1: Sure, Susan. Thank you. Thank you for the question. I mean, like anything, you start with an estimate, and there were puts and takes during the quarter.

Speaker #1: Some were favorable, some were unfavorable. If I had to just, like, point at, you know, two things that were the largest probably unexpected negatives, if we're going to focus on the negatives for a second, obviously the industry trends in the second quarter were not as strong as we expected.

Speaker #1: And if you look at mattress firms same store sales post the holiday period it's running you know give or take flat. Where during the holiday period it was challenged.

Speaker #1: But it's good it rebounded but it's certainly that holiday period was also notable towards the end of the quarter.

Speaker #1: We were expecting what Bhaskar.

Speaker #4: Missing a digit.

Speaker #1: Up, down, down, down in which you get.

Speaker #4: Mid to high from an industry standpoint.

Speaker #3: Your next question comes from Pedro Gill with Morgan Stanley. Your line is open. Please go ahead.

Speaker #1: So your first thing would be industry, and that's generally the US is what we're talking about there. The other thing the UK operation dreams their ERP system was a little rougher than we expected, and the UK market was a little more competitive.

Speaker #6: Good morning. Thank you for taking my question. Nice job managing through a difficult environment. I'd like to focus on profitability for a moment. You have remarkable margin expansion and temper ceiling North America.

Speaker #1: Those two were the big ones that I would call out, although there were certainly other some positive some negative. The other thing probably that weighed on us was the Middle East activity.

Speaker #6: Could you expand a little bit on what's driving that in terms of manufacturing efficiencies synergies and how you're thinking about that in your guidance for the second half with the additional pricing coming into the mix.

Speaker #1: And that we went back in for round two, which is created, you know, some additional uncertainty. Probably from where we were thinking. Those would be the things that I think of, Bhaskar.

Speaker #6: Thank you.

Speaker #2: Absolutely. And what we our performance in the second quarter was adversely impacted by the commodities ahead of pricing. So we are pleased with our margin performance.

Speaker #1: Now, she asked about in setting the guidance. Why don't you talk about a little bit about that?

Speaker #5: Absolutely. So just to put a, you know, just to recap again, is that going into the quarter, we had an expectation from an industry standpoint on a full-year basis, our expectation is that the industry would be down low single digits as we sit here now.

Speaker #2: So when I think about the key drivers of margin within the second quarter a couple of things really come through. Continued execute against our cost synergy target.

Speaker #2: We realized about 15 million dollars largely as anticipated for the second quarter. And as it relates to the full year is that our expectations remained that we'll continue to drive those cost synergies.

Speaker #5: Our expectation is that the industry will be down mid single digits. And what that effectively implies for the rest of the year is, with the inclusion of pricing, is that what we saw in the second quarter continues.

Speaker #2: On the sales synergy side that is where our balance of sales that mattress firm what percentage that is relative to what they sell is that we exceeded our expectations.

Speaker #5: So, at the midpoint of guidance, really how we thought about it is that the current trends, or current industry trends, continue. And as it relates to the initiatives that we have in place, we continue to execute.

Speaker #2: And we have revised our expectations for the full year based on our based on that performance. And how you see that from and therefore from a gross margin expansion perspective that is also a key driver related to the North America business performance.

Speaker #5: The other item that we did tweak a bit is our assumption around sales synergies. We did take up our expectation based on the report the performance in the first half.

Speaker #2: And then finally I would close with is that the productivity. So productivity is those things outside of mattress firm is just doing more with less.

Speaker #1: Yeah, I think the other thing I'd probably mention, since you're talking about the guide and how it influenced us—as I think about it, as you were speaking, Bhaskar—is if you look at the second quarter, the first couple of months were solid.

Speaker #2: And our operations group the rest as well as the rest of the organization continues to perform very well. So from a margin standpoint is that we had nice very nice expansion.

Speaker #1: And looking well, and then we ran into the July 4th holiday period. And I think it's been well documented, but the July 4th holiday period in the US was not robust and was weak.

Speaker #2: And then when I think about that on the operating line is that we continue to make those investments that are going to drive future growth.

Speaker #2: Whether it be in the form of advertising or supporting the new sorry Stern's line that we have coming out in the back half.

Speaker #1: And that was certainly not expected. The good news is, since that holiday period is over—and it ended, call it July 15th or so—the market has kind of rebounded back to the trend line that it was on before.

Speaker #3: Your next question comes from Rafe Jadrosich with the Bank of America. Your line is open. Please go ahead.

Speaker #7: Hi. Good morning. Thanks for taking my question. Can you talk about just the cadence for the back half for EPS? Like what should we be thinking for 3Q versus 4Q sort of in light of the 3Q to date comments on July 4th?

Speaker #1: The thing that we look at, we think, is probably the best way to look at the US market is mattress firms, same-store sales. Because it takes out the inventory fluctuations and order timing that we get over on the 10% side.

Speaker #1: And if you look at mattress firms, same-store sales, post the holiday period, it's running, you know, give or take flat. Where during the holiday period it was challenged.

Speaker #2: 100%. Good question. So just to get us grounded is that at the midpoint that would imply about a 10% year on year EPS increase.

Speaker #1: But it's good it rebounded, but it's certainly that holiday period was also notable towards the end of the quarter.

Speaker #2: What we've seen in the first half of the year is about a 10% increase. So therefore in the back half that expectation continues. The one thing to be mindful of as you think about phasing between Q3 and Q4 a couple of things.

Speaker #2: Your next question comes from Pedro Gill with Morgan Stanley. Your line is open. Please go ahead.

Speaker #2: Yes Rafe. One should be mindful of what we saw on the 4th of July. However as Scott pointed out things have stabilized since then.

Speaker #6: Hi, good morning. Thank you for taking my question. Nice job managing through a difficult environment. I'd like to focus on profitability for a moment.

Speaker #2: But just as a reminder in the prior year is that the third quarter of 2025 it was on a relative basis it was strong.

Speaker #6: You have remarkable margin expansion in 10% ceiling North America. Could you expand a little bit on what's driving that in terms of manufacturing efficiencies, synergies, and how you're thinking about that in your guidance for the second half, with the additional pricing coming into the mix?

Speaker #2: So when you think about the phasing between Q3 and Q4 we'd expect growth in EPS in both quarters. But more of that in Q4 versus in Q3.

Speaker #6: Thank you.

Speaker #5: Absolutely. And what we our performance in the second quarter was adversely impacted by the commodities ahead of pricing. So we are pleased with our margin performance.

Speaker #3: Your next question comes from Bobby Griffin with Raymond James. Your line is open. Please go ahead.

Speaker #8: Good morning everybody. Thanks for taking the question and congrats on getting the leg it look like the leg it feels getting done ahead of schedule.

Speaker #5: So when I think about the key drivers of margin within the second quarter, a couple of things really come through. Continued execute against our cost synergy target.

Speaker #8: I guess Scott I wanted to double click inside the US industry and kind of get more of your view of what do you think is going on from a demand perspective.

Speaker #5: We realized about 15 million dollars, largely as anticipated for the second quarter. And as it relates to the full year, is that our expectations remained that we'll continue to drive those cost synergies.

Speaker #8: I mean you guys are calling the quarter actually a little slower than 1Q. You know you compare that to some of the residential furniture reports we've seen recently which is admittedly not the same product but correlated.

Speaker #5: On the sales synergy side, that is where our balance of sales that mattress firm what percentage that is relative to what they sell is that we exceeded our expectations.

Speaker #8: And it looks like it's getting a little bit better. So do you think there's a distribution shift that's taking place here that's negative between the marketplaces or outside mattress firm or just any other color on kind of what you think is going on with the demand environment and the fact that it's actually you know getting worse and we're seeing it stabilize in some other areas of related products?

Speaker #5: And we have revised our expectations for the full year based on our based on that performance. And how you see that from and therefore from a gross margin expansion perspective, that is also a key driver related to the North America business performance.

Speaker #5: And then finally, I would close with is that the productivity. So productivity is those things outside of mattress firm. It's just doing more with less.

Speaker #2: Yeah. Great question Bobby. I mean if you you know just kind of talk about the industry in general in the US I think leg it's out today with their numbers.

Speaker #5: And our operations group, the rest as well as the rest of the organization, continues to perform very well. So from a margin standpoint, is it that we had nice very nice expansion.

Speaker #2: And I think they were calling called springs down. Low double digits. So between that and what we see in other things. So I think we've got a pretty good read on the industry numbers.

Speaker #5: And then when I think about that on the operating line, is that we continue to make those investments that are going to drive future growth, whether it be in the form of advertising or supporting the new sorry, Stern's line that we have coming out in the back half.

Speaker #2: Obviously we've had some of our key advertisers have had some restructuring during the period. That's probably not helpful to the industry because their advertising is limited.

Speaker #2: Your next question comes from Rafe DeDrozich with the Bank of America. Your line is open. Please go ahead.

Speaker #2: But as far as relative to furniture and I'm not an expert in the furniture side of the house but at least it's been my experience that we have these periods where for a quarter or two furniture does better than bedding and bedding does better than furniture.

Speaker #7: Hi, good morning. Thanks for taking my question. Can you talk about just the cadence for the back half for EPS? Like what should we be thinking for 3Q versus 4Q, sort of in light of the 3Q to date comments on July 4th?

Speaker #2: And I think that that's all we're experiencing. I don't think there's anything systemic or different going on in bedding process or bedding sales. We're probably creating more pent up demand than we really want to create.

Speaker #5: 100%. Good question. So, just to get us grounded, at the midpoint, that would imply about a 10% year-on-year EPS increase. What we've seen in the first half of the year is about a 10% increase.

Speaker #2: But no I mean and I think the other thing other trend that is very evident every quarter and continues to get probably larger every quarter is that the large retailers are clearly taking share from the smaller retailers.

Speaker #5: So, expectation continues. The one thing to be mindful of as you think about phasing between Q3 and Q4—a couple of things. Yes, Rafe, we should be mindful of what we saw on the 4th of July.

Speaker #2: We see that in our orders and there is a shift from distribution from that standpoint. Our own temper stores are certainly doing better. They're comping up.

Speaker #5: However, as Scott pointed out, things have stabilized since then. But just as a reminder, in the prior year, is that the third quarter of 2025, it was on a relative basis.

Speaker #2: They were up almost 3% in the second quarter. When we look at online and our online business was much improved from the first quarter.

Speaker #5: It was strong. So when you think about the phasing between Q3 and Q4, we'd expect growth in EPS in both quarters, but more of that in Q4 versus in Q3.

Speaker #2: But still slightly negative I remember correctly Bosker.

Speaker #1: That's correct.

Speaker #2: And then when we do our channel checks to call it web based sellers it is clearly the web side of the industry has been challenged.

Speaker #2: Your next question comes from Bobby Griffin with Raymond James. Your line is open. Please go ahead.

Speaker #7: Good morning, everybody. Thanks for taking the question. And congrats on getting the leg it look like the leg it deals getting done ahead of schedule.

Speaker #2: And I think the brick and mortar side of the house has done better. And that would include throwing in the big online companies too.

Speaker #7: I guess, Scott, I wanted to double click inside the US industry and kind of get more of your view of what do you think is going on from a demand perspective?

Speaker #2: So we're not seeing we're seeing more of a move I think to brick and mortar and a little bit away from web compared to like three years ago.

Speaker #7: I mean, you guys are calling the quarter actually a little slower than 1Q. You know, you compare that to some of the residential furniture reports we've seen recently, which is admittedly not the same product, but correlated.

Speaker #2: Those would be the primary trends that I can think of from a distribution standpoint.

Speaker #7: And it looks like it's getting a little bit better. So do you think there's a distribution shift that's taking place here that's negative between the marketplaces or outside mattress firm or just any other color on kind of what you think is going on with the demand environment and the fact that it's actually getting worse and we're seeing it stabilize in some other areas of related products?

Speaker #3: Your next question comes from Keith Hughes with Truist. Your line is open. Please go ahead.

Speaker #2: Keith if you're speaking we can't hear you. Might be the easiest question I've gotten all day.

Speaker #5: Can you hear me now? Hello?

Speaker #2: We can.

Speaker #5: We can hear you now. Okay.

Speaker #5: Yeah, good question, Bobby. I mean, you know, just kind of talk about the industry in general, the US. I think leg it's out today with their numbers.

Speaker #2: Yeah we can hear you.

Speaker #5: I'm not sure what happened. Let me start again. I'll ask you a harder question. Do commodity the commodity costs you refer to 10 million I think that was temper ceiling numbers.

Speaker #5: And I think they were calling called springs down. Low double digits. So between that and what we see in other things. So I think we've got a pretty good read on the industry numbers.

Speaker #5: Pretty small number compared to what's been going on in petrochemical markets. If you could just talk is that a net number with productivity other offsets and what do you expect to be facing in the second half of the year on that topic?

Speaker #5: Obviously, we've had some of our key advertisers have had some restructuring during the period. That's probably not helpful to the industry because their advertising has been limited.

Speaker #2: Absolutely. So what I would tell so the 10 million is the impact as a result of the Middle Eastern crisis. So let me put a finer point on that.

Speaker #2: Coming into the year we had an expectation about commodities perhaps a little bit of a headwind for us. However as a result of the Middle Eastern crisis as well as some supply disruption around Lyondell et cetera is that the industry not only us the industry faced the inflationary environment.

Speaker #5: But as far as relative to furniture, and I'm not an expert in the furniture side of the house, but at least it's been my experience that we have these periods where for a quarter or two furniture does better than bedding and bedding does better than furniture.

Speaker #2: The industry as well as us we put some pricing out there. And our pricing went in after the Fourth of July promotional period. So therefore in the second quarter we had a transitory impact where we faced a headwind of about 10 million dollars.

Speaker #5: And I think that that's all we're experiencing. I don't think there's anything systemic or different going on in bedding process or bedding sales. We're probably creating more pent-up demand than we really want to create.

Speaker #2: And then just as a reminder from a pricing standpoint we put enough price in there to make up for the 10 million dollars in the back half of the year and that's still our expectation that that will happen.

Speaker #5: But no, I mean, and I think the other thing, other trend that is very evident every quarter and continues to get probably larger every quarter is that the large retailers are clearly in our orders.

Speaker #2: As it relates to commodities just overall is that things have moved around a bit. Some things have come in. Let's say MDI TDI perhaps a little bit but then we see some pressures in other areas largely speaking is that what we anticipated call it around 90 million dollars of annualized inflation that's what we saw coming into the quarter.

Speaker #5: And there is a shift from distribution from that standpoint. Our own temper stores are certainly doing better. They're comping up. They were up almost 3% in the second quarter.

Speaker #2: That's where we sit today. Again puts and takes within that portfolio but largely consistent.

Speaker #3: Your next question comes from Peter Keith with Piper Sandler. Your line is open. Please go ahead.

Speaker #5: When we look at online, and our online business was much improved from the first quarter. But still slightly negative. I remember correctly, Bhaskar.

Speaker #5: Oh thank you. And good morning. On the industry backdrop I was wondering too if you think there's any dynamics from a K-shaped economy it's kind of caught my attention.

Speaker #3: That's correct.

Speaker #5: And then when we do our channel checks, to call it web-based sellers, it is clearly the website of the industry has been challenged. And I think the brick and mortar side of the house has done better.

Speaker #5: I think you said it at a mixed benefit to temper ceiling North America and then also higher financing costs for mattress firms. So both of those would indicate maybe some strength in temper so what do you see in high end versus low end overall?

Speaker #5: And that would include throwing in the big online companies too. So we're not seeing we're seeing more of a move I think the brick and mortar and a little bit away from web compared to like three years ago.

Speaker #2: Sure. There's no question there's a K. Entry level bedding has been the hardest hit. By far and luxury bedding we'll call it has been very resilient and at times strong.

Speaker #5: Those would be the primary trends that I can think of from a distribution standpoint.

Speaker #2: Your next question comes from Keith Hughes with Truist. Your line is open. Please go ahead.

Speaker #2: The financing cost and we don't take credit risk but if in the mattress firm organization we do pay for the 0% financing. And it has gone up because we're selling more higher in beds.

Speaker #5: Keith, if you're speaking, we can't hear you. Might be the easiest question I've gotten all day.

Speaker #2: And interest rates have ticked up some during the year where we expected them to tick down. So there's no question that the and not just us but all the bedding retailers are living off of ASP.

Speaker #7: Can you hear me now? Hello?

Speaker #5: We can. Yeah, we can hear you.

Speaker #7: I'm not sure what happened. Let me start again. I'll ask you a harder question. The commodity costs you refer to 10 million. I believe that was temper ceiling numbers.

Speaker #2: Improved higher end product and we're seeing the upper end customer showing up not being particularly price sensitive closing rates are strong. But the entry level is definitely challenged.

Speaker #7: Pretty small number compared to what's been going on in petrochemical markets. If you could just talk, is that a net number with productivity or other offsets?

Speaker #7: And what do you expect to be facing in the second half of the year on that topic?

Speaker #5: Absolutely. So what I would tell so the 10 million, is the impact as a result of the Middle Eastern crisis. So let me put a finer point on that.

Speaker #3: Your next question comes from Michael Lasser with UBS. Your line is open. Please go ahead.

Speaker #5: Coming into the year, we had an expectation about commodities, perhaps a little bit of a headwind for us. However, as a result of the Middle Eastern crisis, as well as some supply disruption around Lyondell, et cetera, is that the industry not only us, the industry faced the inflationary environment.

Speaker #5: Good morning. Thank you so much for taking my question. As you bring together all of the various pieces of the bedding preeminent bedding player around the world are you seeing more risk at least in the short term from two areas.

Speaker #5: The industry as well as us, we put some pricing out there. And our pricing went in after the Fourth of July promotional period. So therefore, in the second quarter, we had a transitory impact where we faced a headwind of about 10 million dollars.

Speaker #5: One that third party sellers of temper ceiling products are pulling back and that is exacerbating some of the sales challenges in addition to the industry.

Speaker #5: And then just as a reminder from a pricing standpoint, we put enough price in there to make up for the 10 million dollars in the back half of the year.

Speaker #5: And two given the complexity of the business that it's just becoming a little bit more difficult to manage as evidenced by some of the ERP interruptions that we're experiencing in the UK.

Speaker #5: And that's still our expectation that that will happen. As it relates to commodities, just overall, is that things have moved around a bit. Some things have come in.

Speaker #5: Let's say MDI, TDI, perhaps a little bit. But then we see some pressures in other areas, largely speaking, is that what we anticipated, call it around 90 million dollars of annualized inflation that's what we saw coming into the quarter.

Speaker #5: And how does that influence how you think about the back half and into 2027 from an earnings power standpoint for the business. Thank you so much.

Speaker #5: That's where we sit today. Again, puts and takes within that portfolio. But largely consistent.

Speaker #2: Well good. I've got one really easy question and one really hard question out of you. Look the easy question is impact on sales from third parties.

Speaker #2: Your next question comes from Peter Keith with Piper Sandler. Your line is open. Please go ahead.

Speaker #2: No we're not seeing any significant impact or pullback on sales of what we call the other other retailers. Generally what you're focusing on is that when we say that is the US other retailers other than mattress firm we were down 5% which is give or take what we were down in the first quarter.

Speaker #7: Oh, thank you, and good morning. On the industry backdrop, I was wondering, too, if you think there are any dynamics from a K-shaped economy. It's kind of caught my attention.

Speaker #7: I think you said it at a mixed benefit to temper ceiling North America. And then also higher financing costs for mattress firms. So both of those would indicate maybe some strength in temper so what are you seeing high end versus low end overall?

Speaker #2: That is slightly less than we believe the industry was down. So I think from the way we would look at it we would say we incrementally actually took some share in the other other.

Speaker #2: You have to be a little careful when we talk other other because that is generally smaller retailers. So there's also a share shift going between smaller retailers and larger ones.

Speaker #5: Sure. There's no question there's a K. Entry-level bedding has been the hardest hit by far. And luxury bedding, we'll call it, has been very resilient and at times strong.

Speaker #2: But no we're not seeing any impact in that area. The second question as to complexity first of all the opportunity creation that we get when we're as we grow I think you'll see over the next few years the synergies are significant and the innovation will be significant.

Speaker #5: The financing cost and we don't take credit risk, but in the mattress firm organization, we do pay for the 0% financing. And it has gone up because we're selling more higher in beds.

Speaker #2: But you asked about complication is it harder. All that oh without question. I mean everybody is working harder. We have added some complexity. To the business.

Speaker #5: And interest rates have ticked up some during the year where we expected them to. Down. So there's no question that the and not just us, but all the bedding retailers are living off of ASP.

Speaker #2: You mentioned ERP and the ERP dreams thing we work through that's not really a factor. That's simply a company that needed to upgrade their systems.

Speaker #5: Improved higher-end product. And we're seeing the upper-end customer showing up, not being particularly price sensitive, closing rates are strong. But the entry level is definitely challenged.

Speaker #2: And we work through it. In the legate transaction we'll have some complications. But we'll also have greater opportunities from that acquisition. So I mean you see it in the margin profile.

Speaker #2: And that's just getting started. We haven't even begun to realize the synergies from the logistics savings the distribution savings that we'll have. And you can see that we've been able to do some things with people like Kingsdown at mattress firm and of course we own a little bit of Kingsdown too.

Speaker #2: Your next question comes from Michael Lasser with UBS. Your line is open. Please go ahead.

Speaker #7: Good morning. Thank you so much for taking my question. As you bring together all of the various pieces of the bedding preeminent bedding player around the world, are you seeing more risk, at least in the short term, from two areas.

Speaker #2: That is something that unique and we have some interesting plans for legate and some of the bedding assets of legate that we think more than offset the complexity.

Speaker #7: One, that third-party sellers of temper ceiling products are pulling back and that is exacerbating some of the sales challenges. In addition to the industry, and two, given the complexity of the business, that that it's just becoming a little bit more difficult to manage as evidenced by some of the ERP interruptions that we're experiencing in the UK.

Speaker #2: But yes it is more complex and we have spent time internally delegating authority and responsibilities to key players so that we can continue to be on top of the business and continue to grow.

Speaker #2: Just a finer point on the ERP and we put it in place in dreams like with all things. When you put something new in there are some transitory issues in the grand scheme of things they are taking orders.

Speaker #7: And how does that influence how you think about the back half and into 2027 from an earnings power standpoint for the business? Thank you so much.

Speaker #2: They are shipping etc. But there is some first time through and some distraction as it relates to the new system. But the system just want to reiterate the system is functioning.

Speaker #5: Well, good. I got one really easy question and one really hard question out of you. Look, the easy question is impact on sales from third parties.

Speaker #2: We're just working through it. And that at most that's maybe another one quarter. I don't think that's going to be that's not a big issue going forward from my perspective.

Speaker #5: No, we're not seeing any significant impact or pullback on sales of what we call the other other retailers. Generally, what you're focusing on is that when we say that is the US other retailers other than mattress firm.

Speaker #2: I think it was just a little choppy that considering the market was a little choppy at the same time for this quarter.

Speaker #3: Your next question comes from Brad Thomas with KeyBank Capital Markets. Your line is open. Please go ahead.

Speaker #5: We were down 5%, which is give or take what we were down in the first quarter. That is slightly less than we believe the industry was down.

Speaker #5: Good morning. Thanks for taking the question. I wanted to ask about the multiyear financial outlook that when you presented it called for about a 24% CAGR to 2028.

Speaker #5: So, I think from the way we would look at it, we would say we incrementally actually took some share in the 'other other.' You have to be a little careful when you talk 'other other,' because that is generally smaller retailers.

Speaker #5: I know that a part of that comes from industry growth. And so I was hoping you could just share your latest thoughts on what you think the underlying growth can be if the industry stays stagnant for a couple more years.

Speaker #5: So there's also a share shift going between smaller retailers and larger ones. But no, we're not seeing any impact in that area. The second question as to complexity, first of all, the opportunity creation that we get when we're as we grow, I think you'll see over the next few years, the synergies are significant and the innovation will be significant.

Speaker #5: And then I know we have to hold off another quarter here. Or at least a few more months on how legate may weave into it.

Speaker #5: But is it fair to presume that perhaps that underlying growth rate should get at least a few points better once the legate deal closes.

Speaker #5: Thank you.

Speaker #2: Okay. Great question. I'm going to talk but I'm not going to update our perspective. So to be clear. But I can talk about it because I don't think we're really ready to.

Speaker #5: But you asked about complication. Is it harder? All that. Oh, without question. I mean, everybody is working harder. We have added some complexity. To the business.

Speaker #2: But it's a good question and actually I'm glad you asked it. Obviously with any estimate it has assumptions in it. And since we did we'll call it the 515.

Speaker #5: You mentioned ERP and the ERP dreams thing we work through. That's not really a factor. That's simply a company that needed to upgrade their systems.

Speaker #2: The 515 some of those assumptions are probably going to change whenever we update it. It would not be a surprise to me that if we when we update it we will lower the industry growth rate during that period which all that really means is there's more pent up demand.

Speaker #5: And we work through it. In the legate transaction, we'll have some we'll have some complications. But we'll also have greater opportunities from that acquisition.

Speaker #2: It means the outer years outside of 515 will probably be more robust. Okay. So that's probably we'll call that a headwind. There's also if you look through that perspective and look at our current margin profile our margins are significantly better that's in that profile.

Speaker #5: So, I mean, you see it in the margin profile, and that's just getting started. We haven't even begun to realize the synergies from the logistics savings, the distribution savings, that we'll have.

Speaker #5: And you can see that we've been able to do some things with people like Kingsdown at mattress firm. And of course, we own a little bit of Kingsdown too.

Speaker #2: And I would be surprised if we update that our margins in that profile aren't stronger. We'll call that a good guy in our terminology.

Speaker #5: That is something that unique and we have some interesting plans for legate and some of the bedding assets of legate that we think more than offset the complexity.

Speaker #2: And then in that perspective we basically I don't believe got any significant EPS growth from capital allocation if I remember correctly Bhaskar Rao.

Speaker #5: But yes, it is more complex and we have spent time internally delegating authority and responsibilities to key players so that we can continue to be on top of the business and continue to grow.

Speaker #5: Not overly significant.

Speaker #2: And I think clearly from our recent capital allocation activity both with our small acquisition in Europe and legate thing you can see there's enormous upside as we deploy capital at a high rate of return.

Speaker #5: Just a finer point on the ERP and we put it in place in dreams like with all things. When you put something new in, there are some transitory issues in the grand scheme of things.

Speaker #2: So when you mix all that together I have no idea what that number looks like having done it. But there are puts and takes in it.

Speaker #5: They are taking orders. They are shipping, etc. But there is some first time through and some distraction as it relates to the new system.

Speaker #2: And if I'm what I feel today is I would say we're still in the game. On the 515 plan. And looking forward to updating you with the when we do the year end numbers.

Speaker #5: But the system just want to reiterate, the system is functioning. We're just working through it. And that at most that's maybe another one quarter.

Speaker #5: I don't think that's going to be that's not a big issue going forward from my perspective. I think it was just a little choppy that considering the market was a little choppy at the same time for this quarter.

Speaker #3: Your next question comes from Philip Blee with William Blair. Your line is open. Please go ahead.

Speaker #2: Your next question comes from Brad Thomas with KeyBank Capital Markets. Your line is open. Please go ahead.

Speaker #1: Good morning. Scott Bhaskar. Thanks for the question. At your investor day in March you laid out quite a few initiatives that were not included in your synergy targets.

Speaker #7: Good morning. Thanks for taking the question. I wanted to ask about the multi-year financial outlook that when you presented it called for about a 24% CAGR to 2028.

Speaker #1: I believe logistics consolidation was one. Real estate optimization. Some of your efforts to revamp the mattress firm marketing campaigns. Or a few others. Can you just give us an update on these and then when we could start to expect maybe some sort of quantification there?

Speaker #7: I know that a part of that comes from industry growth. And so I was hoping you could just share your latest thoughts on what you think the underlying growth can be if the industry stays stagnant for a couple more years.

Speaker #1: Thanks.

Speaker #2: Sure. And help me out Bhaskar if I miss any of them. Mattress firm marketing strategy plan is well underway. Based on the share gains that we talked about earlier it looks like it's been successful.

Speaker #7: And then I know we have to hold off another quarter here. Or at least a few more months on how legate may weave into it.

Speaker #7: But is it fair to presume that perhaps that underlying growth rate should get at least a few points better once the Legate deal closes?

Speaker #2: But I also don't think that's a journey that's ever over. And there's still work to be done and we'll continue to get better and better.

Speaker #7: Thank you.

Speaker #5: Okay. Great question. I'm going to talk, but I'm not going to update our perspective. So to be clear, but I can talk about it because I don't think we're really ready to.

Speaker #2: And I think you'll see some leverage we'll call it in '27. But we have fixed the problem that was there. And got a creative in the marketplace that we're proud of.

Speaker #5: But it's a good question and actually I'm glad you asked it. Obviously, with any estimate, it has assumptions in it. And since we did, we'll call it the 515.

Speaker #2: And again I think the share gains support that. But we can get better. Logistics is being worked on by a large group. We'll probably be in a position to put some numbers and meet around it probably on the year end call is based on what the chart I've seen.

Speaker #5: The 515—some of those assumptions are probably going to change. Whenever we update it, it would not be a surprise to me that, if we—when we update it, we will lower the industry growth rate during that period, which all that really means is there's more pent-up demand.

Speaker #5: It means the outer years outside of 515 will probably be more robust. Okay. So that's probably we'll call that a headwind. There's also if you look through that perspective, and look at our current margin profile, our margins are significantly better that's in that profile.

Speaker #2: It's going well. And legate is additive to that process. Additive being positive. And they'll have to work through that. But that's that will also be a synergy on that side.

Speaker #2: Real estate one takes a little longer. We're getting some benefits minor and those will come over the next couple of years. And again some of the real estate is dependent on how the logistics plan comes together.

Speaker #5: And I would be surprised if when we update that our margins in that profile aren't stronger. We'll call that a good guy in our terminology.

Speaker #5: And then in that perspective, we basically I don't believe got any significant EPS growth from capital allocation, if I remember correctly, Bhaskar, right?

Speaker #2: As to where your DCs are and other things. So that's the logistics. Any other ones big pots you can think of?

Speaker #7: Not overly significant.

Speaker #5: No. I think that's right. I mean it is fair to say that those items that we identified as opportunities remain as opportunities. And very excited as we get in and out of this year to update the numbers around what those could be.

Speaker #5: And I think clearly from our recent capital allocation activity, both with our small acquisition in Europe and legate thing, you can see there's enormous upside as we deploy capital at a high rate of return.

Speaker #2: Yeah. I think the other thing that's not probably I don't remember if we talked about it in New York or not. I think we continue to study mattress firms real estate strategy.

Speaker #5: So when you mix all that together, I have no idea what that number looks like having done it. But there are puts and takes in it.

Speaker #2: And I expect that we'll be back in store growth mode. Here pretty soon. And as the economics of new stores is more compelling now that the balance of share has normalized and flipped compared to what it was going in.

Speaker #5: And if I'm what I feel today is I would say we're still in the game. On the 515 plan. And looking forward to updating you at the when we do the year-end numbers.

Speaker #2: It will not go back to what I call rapid growth. But I would expect going forward net new stores at mattress firm. There's some holes in the marketplace that we need to fill in.

Speaker #2: Your next question comes from Philip Blee with William Blair. Your line is open. Please go ahead.

Speaker #6: Good morning, Scott Bhaskar. Thanks for the question. At your investor day in March, you laid out quite a few initiatives that were not included in your synergy targets.

Speaker #3: Your next question comes from Jeff Lick with Stevens. Your line is open. Please go ahead.

Speaker #6: I believe logistics consolidation was one, real estate optimization, some of your efforts to revamp the mattress for marketing campaigns. Or a few others. Can you just give us an update on these and then when we could start to expect maybe some sort of quantification there?

Speaker #1: Good morning. Thanks for taking my question and nice job in a difficult environment. As I was wondering if you could maybe drill down a little more on the weakness in Fourth of July obviously this business is a big event business.

Speaker #6: Thanks.

Speaker #5: Sure. And help me out, Bhaskar, if I'm missing you. Mattress firm marketing strategy plan is well underway. Based on the share gains that we talked about earlier, it looks like it's been successful.

Speaker #1: If I recall President's Day was pretty good memorial day was pretty good. I'm just wondering your thoughts on any extraordinary circumstances about Fourth of July we're hearing the World Cup did have an impact because it was a pretty big event.

Speaker #5: But I also don't think that's a journey that's ever over. And there's still work to be done and we'll continue to get better and better.

Speaker #1: And obviously there was also some calendar shift issues. I'm just wondering if that had any impact in your view or any other granularity? And then also just as it relates to what I would call the mass affluent and maybe we'll create a new term called the E shaped economy.

Speaker #5: And I think you'll see some leverage, we'll call it, in '27. But we have fixed the problem that was there, and got a creative in the marketplace that we're proud of.

Speaker #1: You get the super high net worth the mass affluent. And then kind of the lower income. I mean Scott in your old world the car business we're seeing sales of kind of the mass affluent the mid level luxury car.

Speaker #5: And again, I think the share gains support that. But we can get better. Logistics is being worked on by a large group. We'll probably be in a position to put some numbers and meet around it probably on the year-end call is based on what the chart I've seen.

Speaker #1: It's been a week for a while. And I'm wondering if that maybe is a negative impact on your business as well.

Speaker #2: Okay. Great job getting lots of questions in there. All good ones. So I mean look sometimes holidays hit sometimes they don't. You're right. The most recent President's Day was a very solid holiday.

Speaker #5: It's going well. And legate is additive to that process, additive being positive. And they'll have to work through that. But that's that will also be a synergy on that side.

Speaker #2: And then July Fourth was kind of a dud. So you get those things. And then like all retailers you go back and go huh wonder why.

Speaker #5: The real estate one takes a little longer. We're getting some benefits, minor. And those will come over the next couple of years. And again, some of the real estate is dependent on how the logistics plan comes together.

Speaker #2: And I'm glad you used World Cup because we couldn't prove it which kind of think it too. So maybe it was World Cup. Maybe it was the heat dome.

Speaker #2: Or maybe it's the way the holidays felt. So but I think it was just one of those holidays that didn't hit. I don't think it was anything significant turning point.

Speaker #5: As to where your DCs are and other things. So that's the logistics. Any other ones big pots?

Speaker #2: It just didn't work. President's Day the year before was at 25 was really weak. So you get these. And clearly the third quarter is all about Labor Day.

Speaker #7: I think that's right. I mean, it is fair to say that those items that we identified as opportunities remain as opportunities. And very excited as we get in and out of this year to update the numbers around what those could be.

Speaker #2: So we're working through that. On your E shape which that's a new one for me. I was ready for K. Hadn't thought about E.

Speaker #5: And I think the other thing that's not probably I don't remember if we talked about it in New York or not. I think we continue to study mattress firms real estate strategy.

Speaker #2: I'm going to say no. It really is more K. Because if I look through the sales Bhaskar if you look at Philippe Bastropedic what I think of is mid higher mid market sales have been good.

Speaker #5: And I expect that we'll be back in store growth mode. Here pretty soon. And as the economics of new stores is more compelling now as the balance of share has normalized and flipped compared to what it was going in, it will not go back to what I call rapid growth.

Speaker #2: So I don't think in the mid section we've really felt it that much. But clearly entry level maybe a little higher than entry level.

Speaker #5: But I would expect going forward net new stores at mattress firm. There's some holes in the marketplace that we need to fill in.

Speaker #2: But not mid to luxury which has been strong.

Speaker #5: That's right.

Speaker #3: Your next question comes from Marius Morar with Zelman. Your line is open. Please go ahead.

Speaker #2: Your next question comes from Jeff Lick with Stevens. Your line is open. Please go ahead.

Speaker #4: Good morning. Thank you for taking my question. Just wanted to follow up on the shift from e-commerce to brick and mortar that you alluded to earlier.

Speaker #6: Good morning. Thanks for taking my question and nice job in a difficult environment. As I was wondering if you could maybe drill down a little more on the weakness in 4th of July.

Speaker #4: Is that a function of the K shaped economy? Does that still hold that comparable price points? Or set differently have we reached a natural limit to what e-commerce can do in the mattress category?

Speaker #6: Obviously, this business is a big event business. If I recall, President's Day was pretty good Memorial Day was pretty good. I'm just wondering your thoughts on any extraordinary circumstances about 4th of July.

Speaker #4: Thank you.

Speaker #2: Yeah. I'm not smart enough to know but I have an opinion. So first of all I'd say the last part we've gotten to more of a natural size of e-commerce betting difficult product by online can't feel it all that kind of stuff.

Speaker #6: We're hearing the World Cup did have an impact because it was a pretty big event. And obviously, there was also some calendar shift issues.

Speaker #6: I'm just wondering if that had any impact in your view or any other granularity? And then also just as it relates to what I would call the mass affluent and maybe we'll create a new term called the E-shaped economy.

Speaker #2: I think we have reached some of that. I think that's in there. I think the second factor is AI. And the way the search engines optimize and go get words.

Speaker #6: You get the super high net worth, the mass affluent. And then kind of the lower income. I mean, Scott, in your old world, the car business, we're seeing sales of kind of the mass affluent, the mid-level luxury cars.

Speaker #2: I think all retailers are working through the changes we'll call it I'm going to call it from Google search to AI. That's probably not technically correct.

Speaker #6: if that maybe is a negative impact on your business as well.

Speaker #2: But I think you know what I mean. And we're still working through that. It's very apparent to me that larger organizations are going to be benefited from that move.

Speaker #5: Okay. Great job getting lots of questions in there. All good ones. So I mean, look, sometimes holidays hit, sometimes they don't. You're right. The most recent President's Day was a very solid holiday.

Speaker #2: To the way search engines scrape in my terminology. For the web. But it is a journey. And it's going to take a while. It's going to take a little bit of capital.

Speaker #5: And then July 4th was kind of a dud. So you get those things. And then all retailers, you go back and go, huh, wonder why.

Speaker #2: To work through that. And then the third impact I think is people have stopped being dumb. And just chase sales. With extremely low prices.

Speaker #5: And I'm glad you used World Cup because we couldn't prove it, which kind of think it too. So maybe it was World Cup. Maybe it was the heat dome.

Speaker #5: All of that. And maybe it's the way the holidays felt. So but I think it was just one of those holidays that didn't hit.

Speaker #2: And have gotten more sophisticated about thinking about well how much money am I making on this transaction. And did I use up in my terminology an up which is a customer in the marketplace wanting to buy the product.

Speaker #5: I don't think it was anything significant turning point. It just didn't work. President's Day, the year before, was at 25, was really weak. So you get these.

Speaker #2: I use up an up selling them a bed on the web and not make any money. And if I didn't do that they might show up at my store where I'm going to have a more reasonable transaction.

Speaker #5: And clearly, the third quarter is all about Labor Day. So we're working through that. On your E-shape, which that's a new one for me.

Speaker #2: So I think all retailers not just us but have gotten smarter about not just throwing stuff on the web so you can have a big top line.

Speaker #5: I was ready for K, hadn't thought about E. I'm going to say no. It really is more K. Because if I look through the sales Bhaskar, if you look at Seeley Posterpedic, what I think of is mid-Mart, higher mid-market, sales have been good.

Speaker #2: Sales number. And we certainly have done that. And I think that's been healthy for the business. So that's pushed sales trend down some. But not necessarily been as impactful on profitability.

Speaker #5: So I don't think in the mid-section we've really felt it that much. But clearly, entry level, maybe a little higher than entry level. But not mid to luxury, which has been strong.

Speaker #3: Your next question comes from William Reuter with Bank of America. Your line is open. Please go ahead.

Speaker #4: Hi. I'll keep it to one and hopefully it's simple. After the Leggett and Platt acquisition closes assuming everything continues to go along the path that it currently is.

Speaker #7: That's right.

Speaker #2: Your next question comes from Marius Morar with Zelman. Your line is open. Please go ahead.

Speaker #4: Do you feel like you were at a point where you're comfortable with your business mix and vertical integration? Or do you still see assets across the globe somewhere that you would like to have on your wish list and that will continue to see future M&A?

Speaker #6: Good morning. Thank you for taking my question. Just wanted to follow up on the shift from e-commerce to brick and mortar that you alluded to earlier.

Speaker #6: Is that a function of the K-shaped economy? Does that still hold that comparable price points? Or set differently, have we reached a natural limit to what e-commerce can do in the mattress category?

Speaker #2: Thank you. First thing I should give our good friends at Leggett a kind of a call out on their quarter. They reported they had a very solid quarter in a tough market.

Speaker #2: And grew EPS significantly. So a call out to the Leggett team. From that standpoint. As far as our future capital allocation and we said this I don't know for eight years.

Speaker #6: Thank you.

Speaker #5: Yeah. I'm not smart enough to know. But I have an opinion. So first of all, I'd say the last part, we've gotten to more of a natural size of e-commerce betting difficult product by online, can't feel it, all that kind of stuff.

Speaker #2: We're constantly talking to people all around the world. Some retailers. Some supply people. And at times we've priced things and sometimes they sit for years.

Speaker #5: I think we have reached some of that. I think that's in there. I think the second factor is AI. And the way the search engines optimize and go get words.

Speaker #2: Before the teams get together and can get agreement on price. It's always price. I mean it's pretty easy strategically to look at companies and for the target and for us to see the benefits the synergies get to know each other culturally.

Speaker #5: I think all retailers are working through the changes we'll call it. I'm going to call it from Google search to AI. That's probably not technically correct.

Speaker #5: But I think you know what I mean. And we're still working through that. It's very apparent to me that larger organizations are going to be benefited from that move.

Speaker #2: Kind of the process we go through. And then you get into price. So there's some of that that's always in the marketplace. We may never do another deal.

Speaker #5: To the way search engines scrape in my terminology. For the web. But it is a journey. And it's going to take a while. It's going to take a little bit of capital.

Speaker #2: Or we may do some more deals in the future. There's nothing out there that is as large as mattress firm or as large as Leggett.

Speaker #5: To work through that. And then the third impact, I think, is people have stopped being dumb. And just chase sales. With extremely low prices.

Speaker #2: But there are other assets in the world that I think would be positive both for the target and for us. And we'll continue to work with them.

Speaker #5: And have gotten more sophisticated about thinking about, well, how much money am I making on this transaction? And did I use up in my terminology an up, which is a customer in the marketplace wanting to buy the product.

Speaker #2: And we'll see if we get a fit. To the extent that we can't get it priced right we'll be very disciplined and we're fine not ever buying anything else.

Speaker #5: I use up an up, selling them a bed on the web and not make any money? And if I didn't do that, they might show up at my store where I'm going to have a more reasonable transaction.

Speaker #2: And as we generate significant cash flow we'll clearly be very aggressive in buying our stock as we get down from the leverage standpoint. With one we'll call it footnote.

Speaker #5: So I think all retailers, not just us, but have gotten smarter about not just throwing stuff on the web so you can have a big top line sales number.

Speaker #2: There's always an eye to uncertainty. And the world primarily the Middle East. We'll keep an eye on that. Because at times when the world's uncertain capital is very valuable.

Speaker #5: And we certainly have done that. And I think that's been healthy for the business. So that's pushed sales trend down some. But not necessarily been as impactful on profitability.

Speaker #2: And so we'll keep an eye on it. But we feel very good about getting back in the range. From a standpoint.

Speaker #2: Your next question comes from William Reuter with Bank of America. Your line is open. Please go ahead.

Speaker #3: There are no further questions at this time. I'll now turn the call back to Scott Thompson CEO for closing remarks.

Speaker #6: Hi. I'll keep it to one. And hopefully, it's simple. After the Leggett and Platt acquisition closes, assuming everything continues to go along the path that it currently is, do you feel like you were at a point where you're comfortable with your business mix and vertical integration?

Speaker #2: Thank you operator. To our over 20,000 associates around the world thank you for what you do every day to make the company successful. To our retail partners thank you for your outstanding representation of our brands.

Speaker #2: To our shareholders and lenders thank you for your confidence in the company's leadership and its board of directors. This ends the call today operator.

Speaker #6: Or do you still see assets across the globe somewhere that you would like to have on your wish list and that will continue to see future M&A?

Speaker #5: Thank you. First thing, I should give our good friends at Leggett kind of a call out on their quarter. They reported they had a very solid quarter in a tough market.

Speaker #5: And grew EPS significantly. So a call out to the Leggett team. From that standpoint, as far as our future capital allocation, we said this, I don't know, for eight years.

Speaker #5: We're constantly talking to people all around the world. Some retailers, some supply people. And at times, we've priced things and sometimes they sit for years.

Speaker #5: Before the teams get together and can get agreement on price. It's always price. I mean, it's pretty easy strategically to look at companies and for the target and for us to see the benefits, the synergies, get to know each other, culturally, kind of the process we go through.

Speaker #5: And then you get into price. So there's some of that that's always in the marketplace. We may never do another deal. Or we may do some more deals in the future.

Speaker #5: There's nothing out there that is as large as mattress firm or as large as Leggett. But there are other assets in the world that I think would be positive both for the target and for us.

Speaker #5: And we'll continue to work with them. And we'll see if we get a fit. To the extent that we can't get it priced right, we'll be very disciplined.

Speaker #5: And we're fine not ever buying anything else. And as we generate significant cash flow, we'll clearly be very aggressive in buying our stock as we get down from the leverage standpoint.

Speaker #5: With one we'll call it footnote, there's always an eye to uncertainty in the world, primarily the Middle East. We'll keep an eye on that because at times when the world's uncertain, capital is very valuable.

Speaker #5: And so we'll keep an eye on it. But we feel very good about getting back in the range. From anybody's standpoint.

Speaker #2: There are no further questions at this time. I'll now turn the call back to Scott Thompson, CEO, for closing remarks.

Speaker #5: Thank you, operator. To our over 20,000 associates around the world, thank you for what you do every day to make the company successful. To our retail partners, thank you for your outstanding representation of our brands.

Speaker #5: To our shareholders and lenders, thank you for your confidence in the company's leadership and its board of directors. This ends the call today, operator.