Good morning, ladies and gentlemen, and welcome to the Somnigroup Second Quarter 2025 Earnings Call. This call is being recorded on Thursday, August 7, 2025. And I would now like to turn the conference over to Ms. Lauren Avritt with Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for participating in today's call. Joining me today are Scott Thompson, Chairman, President and CEO; and Bhaskar Rao, Executive Vice President and Chief Financial Officer. This call includes forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve uncertainties, and actual results may differ materially due to a variety of factors that could adversely affect the company's business. These factors are discussed in the company's SEC filings, including its annual reports on Form 10-K and quarterly reports on Form 10-Q. Any forward-looking statement speaks only as of the date on which it is made. The company undertakes no obligation to update any forward-looking statements. 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.somnigroup.com and filed with the SEC. Our comments will supplement the detailed information provided in the press release. As a reminder, year-over-year comparisons are impacted by the acquisition of Mattress Firm in the first quarter and the related divestitures of Sleep Outfitters in certain Mattress Firm retail locations in the second quarter. At certain times on the call, we will focus on like-for-like numbers defined as reported numbers adjusted for the acquisition and divestiture impact. We believe this better illustrates underlying business trends. And now with that introduction, it is my pleasure to turn the call over to Scott.

Good morning, and thank you for joining us on our second quarter 2025 earnings call. I'm pleased to report that Somnigroup delivered another quarter of solid performance, driven by disciplined execution and progress in our combination with Mattress Firm. We continue to outperform the market, strengthen our competitive position and deliver value to all of our stakeholders. I will now begin with some highlights from the second quarter, then turn the call over to Bhaskar to review the financial performance in more detail and discuss our 2025 guidance. After that, we'll open the call up for Q&A. In the second quarter of 2025, we are pleased to achieve record net sales and adjusted EBITDA. Net sales were up approximately 53% to $1.9 billion, and adjusted EBITDA was also up approximately 26% to $291 million. Adjusted EPS for the quarter was $0.53. We believe the North American bedding market was down high single digits in the quarter and the international markets in aggregate were down mid-single digits. The quarter started soft but strengthened as we moved throughout the period. Early third quarter like-for-like trends are encouraging with indications of potential solid growth. It's too soon to call a turn in the market we serve, but we are encouraged with what we are experiencing. We'll know more after the third quarter. Our first highlight of the quarter was the market outperformance of Mattress Firm. Mattress Firm reported like-for-like sales down just 1% from the prior period. The team continues to operate with relentless focus on in-store execution to drive performance against a muted U.S. bedding industry. We're executing our new merchandising plan and advertising campaign, leveraging the strength of Mattress Firm's talented people to support our long-term growth. We are thrilled with how Mattress Firm and Tempur Sealy teams are implementing our shared vision, which I will discuss in just a moment. This has been the smoothest combination I've ever experienced in my 40-year career, which only seems fair as it was the longest regulatory approval process imaginable. The second highlight is the progress we've made on our synergy initiatives following the acquisition of Mattress Firm. We're now approximately six months post-closing and have made meaningful progress in driving both sales and cost synergies. Starting with sales. We have refined Mattress Firm's multi-branded merchandising strategy by taking a more holistic approach to product selection and partnering with multiple suppliers who offer high-quality products at competitive price points and who support Mattress Firm's success with their own traffic-driving advertising and differentiated product. We're also pleased with the progress we've made on normalizing our brand's balance of share at Mattress Firm. For 2025, we now expect Tempur Sealy to represent approximately low 50% of Mattress Firm's total sales, up from our initial expectations of high 40%. In total, we expect the balance of share shift from mid-40s in 2024 to low 50s in 2025 to result in a $40 million benefit to 2025 adjusted EBITDA. As we look forward to 2026, we're on track to realize the full benefit of the merchandising changes, which we estimate to be approximately $100 million EBITDA opportunity, phased as an incremental $40 million adjusted EBITDA in 2025 and then another $60 million of adjusted EBITDA in 2026. For estimating purposes, Mattress Firm sales were held flat over the period. The opportunity is expected to grow as the U.S. bedding industry recovers and U.S. Mattress Firm sales increase. The incremental adjusted EBITDA is derived from enhanced economics from third-party suppliers and normalizing our brand's balance of share. Now turning to cost synergies. We're leveraging our expanded scale and vertical integration to drive efficiencies across manufacturing, logistics and sourcing operations. Enhanced visibility into end consumer demand is also enabling us to refine our future product launches and end-of-life planning. We're on track to realize at least $100 million in annual run rate net cost synergies with $15 million expected in 2025 and an additional $50 million in 2026. And finally, an additional $35 million in 2027 with opportunities thereafter. One of the many projects underway is streamlining order fulfillment by utilizing Mattress Firm's robust home delivery network for Tempur Sealy's retail sales. In addition to driving cost efficiencies, we expect this initiative to add value by shortening order to delivery time, enhancing oversight of delivery process, in turn, improving customer outcomes and satisfaction. We've made significant strides on this initiative to date, and we are on track to begin ramping this program in the fourth quarter. We're also optimizing our combined marketing spend to drive growth. On a consolidated basis, Somnigroup is now the largest advertiser in the bedding industry by a factor of two, and we believe we can leverage the combined advertising power to drive demand, benefiting everyone in the bedding industry. There are a couple of ways we're operationalizing this opportunity. We've identified approximately $20 million of marketing efficiencies that we are considering in our cost target. The savings result from leveraging our combined scale to drive sourcing favorability and improving the efficiency of Mattress Firm's advertising spend by cutting spend in areas of very low returns, such as sports sponsorships and non-working agency fees. The $20 million of identified marketing synergies does not include the benefit of any enhanced advertising creative, though we continue to believe it's a compelling opportunity. Additionally, Tempur Sealy and Mattress Firm have historically employed different marketing strategies at times, resulting in mixed messages to the consumer. As the two largest advertisers in the industry, this was suboptimal. We can now deliver high-quality messaging that benefits everyone, the combined Somnigroup businesses and the broader U.S. bedding industry. A significant enabler of this higher-quality messaging will be Mattress Firm's launch of its all-new advertising campaign in the third quarter. The campaign called Sleep Easy is designed to help consumers understand the importance of the right mattress for achieving quality sleep and persuading the consumer to take the next step on their purchase journey. It showcases several of the most widely experienced and acutely felt sleep disruptors and then demonstrates how Mattress Firm and specific mattress solutions it offers can help. Testing shows this is the highest performing campaign in Mattress Firm's recent history across all metrics. We expect synergies to represent a significant enhancement to Somnigroup's financial and competitive position. Now that we have a more in-depth perspective, let's look back at the Mattress Firm transaction's pricing. Mattress Firm's stand-alone adjusted EBITDA has ranged from approximately $400 million to $700 million over the last four years, averaging approximately $530 million. Using the average adjusted EBITDA and taking into account known synergies just discussed, the purchase price at signing of the definitive agreement was about six times adjusted EBITDA. If you look at the purchase price at closing date, two years later and accounting for the impact of Somnigroup's shares appreciation during the period, it was seven times adjusted EBITDA. We believe this transaction is a great example of creating value through M&A. High return on investment, de-risking of the business model of significant distribution risk has been mitigated and clearly enhancing our competitive position. Our third highlight for the quarter is that our international business continues to perform very well, reporting robust double-digit sales growth and solid margin expansion. This marks nine consecutive quarters of meaningful sales expansion on a constant currency basis for our legacy international business against the backdrop of industry pressure. Our latest collection of Tempur products continues to be the primary driver of growth with expanded price points broadening our total addressable market. Further, our improved late-stage customization manufacturing process has allowed us to seamlessly tailor products to individual markets, channels and customers. We're supporting the new international collection with expanded distribution with broad-based investments in advertising aimed at building brand awareness and driving conversion. To date, these investments have increased our share of voice in targeted international markets, and we're winning share of consumer mattress searches versus key competitors in our top five markets. Our U.K.-based bedding retailer Dreams also delivered a strong quarter. They continue to execute on initiatives to provide superior product quality and consistency of service, resulting in continued market outperformance and record customer satisfaction. Our fourth highlight was Tempur Sealy North America's market performance. Like-for-like net sales for our Tempur Sealy North American business unit were down 2% in the quarter, excluding mid-single-digit headwind from foreclosed distribution discussed last quarter. Although the North American business was down slightly, we believe it continued to outperform the market, which we believe was down high single digits. Our North American performance was driven by the successful launch of our all-new Sealy Posturepedic collection, the largest bedding launch in industry history. Remember, Sealy is the number one brand in the U.S. and the world. The team, our suppliers, our third-party retailers did a great job on a very heavy lift. While the launch did take a bit longer to execute than planned, which impacted the first part of the quarter, we exited the second quarter with solid momentum. The launch targets the mid-entry-level segment. This updated collection is the culmination of a multi-year research and development effort. At the core of our innovation is a new patent-pending coil system engineered to deliver enhanced support. In addition to technology advances, we designed the collection with streamlined merchandising, a clear value proposition and a more compelling step-up story to better guide consumers through the product lineup. Retailer feedback on the new product is highly positive, and consumers' initial reviews are strong with an average of 4.9 out of 5 stars across the assortment. We're supporting the launch with a new advertising campaign that began over the Memorial Day holiday. This top-of-funnel initiative is crafted to reinforce the unique value of Sealy Posturepedic and generate excitement around the Sealy brand. The campaign is complemented by enhanced in-store experience, featuring updated retail displays and new sales streaming. Preliminary results of the campaign are strong, as we believe Sealy has more than doubled its share of voice in the market since the launch. In addition to our increased investment, this expansion is also supported by our retailers redirecting dollars from non-branded advertising to Sealy, underscoring the trust retailers have in the new product. Our final highlight is the expanded relationship with Fullpower announced this morning. Fullpower's Sleeptracker-AI technology powers the successful TEMPUR-Ergo Smart Base, which provides personalized sleep analytics and coaching. As part of the expanded collaboration, Tempur Sealy is making a $25 million equity investment in Fullpower to acquire approximately 15.6% ownership stake. In addition, Tempur Sealy and Fullpower have signed a multiyear extension through 2036 with Tempur Sealy's exclusive rights to embed Sleeptracker technology in our products. This strategic investment reflects our deep commitment to innovation and the future of the bedding consumer experience. Extending our relationship with Fullpower, we are not only enhancing our ability to serve consumers through smarter, more tailored solutions, we're reinforcing our position at the forefront of bedding innovation. With that, I'll turn the call over to Bhaskar.

Thank you, Scott. In the second quarter of 2025, consolidated sales were $1.9 billion and adjusted earnings per share was $0.53. There are approximately $47 million of pro forma adjustments in the quarter, all of which are consistent with the terms of our senior credit facility. These adjustments are primarily related to costs incurred in connection with the divestiture and the combination with Mattress Firm. As a reminder, we have aligned accounting for store occupancy costs across Somnigroup, which resulted in Tempur Sealy reclassifying their store occupancy costs from operating expenses to cost of goods sold. We have adjusted prior year Tempur Sealy financial information included in today's earnings release to reflect this change for ease of comparability. I will be highlighting like-for-like comparisons to normalize for these items in my commentary. Now turning to Mattress Firm results. Net sales through Mattress Firm were $949 million in the second quarter. On a like-for-like basis, Mattress Firm sales declined 1% over the prior year. Mattress Firm adjusted gross margin was 35.7% and adjusted operating margin was 7.8%. Turning to Tempur Sealy North American results. Like-for-like sales through the wholesale channel declined approximately 2% in the second quarter, normalizing for the previously discussed foreclosed distribution or 7% without this normalization. Like-for-like net sales to the direct channel declined 4% in the quarter, which excludes the impact of the divestiture. North American adjusted gross margin increased approximately 1,500 basis points to 55%, primarily driven by the elimination of the intercompany sales to Mattress Firm from Tempur Sealy. On a like-for-like basis, North American adjusted gross margins declined 130 basis points versus the prior year, primarily driven by deleverage in four models, partially offset by operational efficiencies. North American adjusted operating margin improved 430 basis points to 22.7%, primarily driven by Mattress Firm intercompany sales elimination. On a like-for-like basis, North American adjusted operating margin declined 240 basis points versus the prior year, primarily driven by the decline in gross margins and investments in advertising to support our Sealy launch. Now turning to Tempur Sealy International results. International net sales grew a robust 15% on a reported basis and 10% on a constant currency basis. Our international gross margin was consistent year-over-year at 48.2%. Our international operating margin improved 110 basis points to 13.6%, primarily driven by operating expense leverage. Last quarter, our Tempur Sealy North American operations announced a 2% price increase to annualized sales to offset the residual expected tariff impact. We believe this price increase is generally lower than what others in the industry have passed through to their customers. This price increase was implemented in July and is successfully offsetting the targeted cost increases. Now moving on to the balance sheet and cash flow items. At the end of the second quarter, consolidated debt less cash was $4.9 billion, and our leverage ratio under our credit facility was 3.6 times. We expect our leverage to be approximately 3.35 times exiting 2025 and to return to our target leverage range of 2 to 3 times in 2026 and for share repurchases to be minimal until then. In the second quarter, we successfully repriced our Term Loan B and paid $100 million of outstanding principal balance. We expect the repricing and prepayment will produce annualized cash interest savings of approximately $5 million with an additional $5 million of savings available once the leverage is below 3 times. In the second quarter, we generated operating cash of $186 million. Before turning to full year guidance, I want to remind you of a few items. Our guidance considers the elimination of intercompany sales between Mattress Firm and Tempur Sealy, which we expect to represent approximately 19% of global Tempur Sealy 2025 sales. Intercompany sales elimination in accordance with GAAP will reduce Tempur Sealy sales but will be margin accretive and neutral to dollars of operating profit. Consistent with the prior quarter, our guidance also reflects the divestiture of Tempur Sealy's Sleep Outfitters retail business as well as 73 Mattress Firm stores in May 2025. Now turning to 2025 guidance. We have raised our adjusted earnings per share to now be in the range of $2.40 to $2.70. This guidance range contemplates a sales midpoint of approximately $7.4 billion after intercompany elimination. This revision maintains our previous outlook for the bedding industry to be down mid-single digits versus the prior year, with trends improving slightly in the second half of 2025. Our guidance also reflects like-for-like Tempur Sealy sales to be down low single digits and reported sales to be impacted by the intercompany elimination I referenced a moment ago. Tempur Sealy North America sales declining mid-single digits on a like-for-like basis, which includes our continued market outperformance against industry pressures and a mid-single-digit headwind from the foreclosed distribution. Our international business growing mid-single digits and high single digits on a constant currency basis, which includes the continued momentum of our omnichannel expansion strategy. And our like-for-like Mattress Firm sales declining low single digits, supported by in-store initiatives to grow average order value and conversion and reflecting the industry pressures. We also expect gross margins to be slightly above 44%. Our outlook also contemplates our updated assumption for Tempur Sealy to be low 50 percentage of Mattress Firm's total sales, up from our initial expectation of a high 40s percentage. This represents a $40 million of EBITDA benefit to 2025 compared to 2024 or a $20 million incremental EBITDA benefit in 2025 relative to prior expectations and $700 million of advertising investment, all of which we expect to result in an adjusted EBITDA of approximately $1.27 billion at the midpoint. Regarding capital expenditures, we expect 2025 CapEx of approximately $200 million, including $25 million of investment to refresh Mattress Firm stores. Over the next three years, we expect to invest a cumulative $150 million to refresh Mattress Firm stores. Lastly, I would like to flag a few modeling items. For the full year 2025, we expect depreciation & amortization of approximately $295 million to $300 million, interest expense of approximately $260 million to $265 million on a tax rate of 25% with a diluted share count of 210 million shares. With that, I'll turn the call back over to Scott.

Thank you. Nice job, Bhaskar. In closing, this quarter's performance reflects our successful combination with Mattress Firm and our resilience in a challenging global environment. We are continuing to build a strong company that provides products that improve people's lives, and we're enthusiastic about our future. We strengthened our competitive position across all our domestic and international business units by leveraging the core strength of Somnigroup, our talented people, powerful brands, expansive distribution network, operational agility, robust manufacturing capabilities, and a culture of doing the right thing even when it's hard. That ends our prepared remarks. Operator, you may open the call up for questions.

And your first question comes from the line of Susan Maklari from Goldman Sachs.

My question is on the demand side. In your prepared remarks, you said that the quarter started soft and improved as we moved through the last couple of months, and you're feeling more encouraged going into the third quarter. Can you talk about what has changed in the last couple of months that you think is making the consumer feel a bit better? And what you're watching for from here out to determine how the industry and your sales come together? And perhaps, is there any upside to your expectations that the industry will be down mid-single digits this year?

Thank you, Susan. First, I want to highlight consumer confidence. In our first quarter call, we discussed the weakness in consumer confidence and its impact on our business. Consumer confidence has since stabilized and somewhat improved. Notably, there have been no significant surprises or unusual events coming from Washington, which has helped stabilize consumers. Additionally, I want to mention the Sealy Posturepedic launch, which we have emphasized as the largest launch in bedding history. It required significant effort from the company, retailers, and suppliers. The process took longer as retailers needed to sell off their previous models since we don’t do that ourselves. They managed this challenging transition well. We also launched national advertising for Sealy during this quarter, and it significantly boosted our Sealy numbers. Initially, the launch was slower than anticipated as we worked on product placement, but where the product was launched, we saw strong sales velocity which has continued into the third quarter. In summary, there were no surprises affecting consumer confidence, we’ve seen a slight recovery, and our product innovation and advertising efforts are proving effective.

Just to add on to that is at the midpoint, what we're assuming is that, call it, low or mid-single-digit from an industry decline standpoint. When you translate that into what it means for Tempur Sealy, the way I think about it is EPS, nice growth in the back half, call it, mid- to high single digits. And what I would expect is more of that growth from an EPS coming in the fourth quarter versus the third quarter. And that's nothing more than the historic seasonality of Mattress Firm, a little bit more advertising in the third versus the fourth. So what does all that mean? Think about EPS in the third quarter in the mid-80s with the balance coming in the fourth quarter to get to that midpoint of $2.55.

And your next question comes from the line of Bobby Griffin from Raymond James.

I guess the first question is on the revenue synergies that you guys talked about. If I kind of do the quick math, I think it implies roughly about a 15% contribution margin on the incremental revenue. So can you unpack that a little bit? And a, is that accurate? And then b, what is the assumptions that you guys think the incremental revenue comes through? Is it Tempur-Pedic, Stearns & Foster, Sealy or OEM business? Just to help us tune up our models a little.

Sure. When I think about the flow-through, let's start from the revenue side initially. So our previous expectation for balance of share was high 40s, call that 49%. I was sitting here today, we're in and around low 50s, call that a few percentage points increase. When you do the math and reverse engineer it, you're going to get a flow-through of somewhere between 30% to 35%. So getting to that incremental $20 million of EBITDA. So just triangulating on what that is versus our midpoint where we were before in EBITDA versus where we are, it's the faster than accepted or expected realization from those revenue synergies is resulting in our revenue beat. As it relates to where it's going to come from...

I mean the flow-through is a little bit challenged because if you're on the OEM side. Obviously, as you know, Bobby, it's not very strong on the Tempur Sealy business unit. But a lot of that flow-through is going to come through Tempur, which is strong at the retailer side of the equation and at the manufacturing side. So it's pretty much a blend.

And your next question comes from the line of Dan Silverstein from UBS.

Maybe just to dovetail on Bobby's question. So if you're adding the sales synergies and now it sounds like $20 million of potential marketing synergies, why wouldn't this support a higher long-term earnings target relative to the $4.85 goal? Just wondering if anything has changed in terms of other drivers of the business or cadence of how you get there?

Sure. That's a great question. Let's take a step back. The three-year perspective we’ve shared reflects an estimation of the industry's potential growth based on historical data. We don’t really consider it as guidance; rather, it's a calculation of how the business model functions, and with those assumptions, it seems reasonable. Our intention is to update that annually to account for the changes happening in the world. From a company-specific standpoint, the performance of the combined entities is exceeding our revenue synergy expectations. You saw some of that in the second quarter, and you'll see much more in the third quarter. This leads us to believe it will positively influence our long-term performance outlook. However, the industry turnaround we anticipated when we made this projection hasn't occurred as quickly in the last couple of quarters, which may act as a slight headwind. Other changes also exist, but we haven't worked through these adjustments in each quarter against our prior outlook. We'll make those updates at the end of the year, and we expect both positive and negative influences. Nonetheless, the revenue synergies will definitely add to our outlook. That said, there are also some opposing factors to consider, and we will provide an update at the year's end.

And your next question comes from the line of Brad Thomas from KeyBanc Capital Markets.

Congrats on the good start here with Mattress Firm. My question was around your relationship with non-Mattress Firm retailers. And Scott, I was hoping you could just talk a little bit more about what you're seeing in terms of sales trends within your different brands, how slot count is holding up? And just more broadly, that relationship with the non-Mattress Firm retailers as you all now own this number one retailer in the segment?

Sure. Our net slot in the second quarter with third-party retailers is net up from the same period last year. If I look at the top five retailers and I look at our business with the top five retailers, it has grown and has increased quicker or yes, I guess, quicker is a good word than the market share. So I would say that those two stats would be the first things that I would lean into. I would say that the Sealy product has done very, very well with third-party retailers, and it continues to be business as normal. And normal is with great product, advertising, sales support to logistics, where we help third-party retailers drive their business, which is our business plan, we're getting great reception.

And your next question comes from the line of Peter Keith from Piper Sandler.

Thinking about the sales mix between Tempur and Sealy, I'm wondering if you are experiencing or could start to experience some mix pressure on your gross margin, if the strength in Sealy would push Sealy sales growth ahead of Tempur-Pedic growth. And on a related note, one thing we are hearing in the retail channel is that the high end of the Sealy line is so good that it's actually cannibalizing the low end of the Tempur line. So maybe you could comment on that potential as well.

Sure. I mean, first of all, the Tempur brand was the strongest brand in the second quarter, just to kind of put a base. On a go-forward basis, which is what your question is, I think it is possible that the Sealy brand will grow faster than the Tempur brand for a couple of quarters. And it would be a slight headwind to the gross margin.

That in and of itself. That is correct.

Incrementally EBITDA, but the margin percentage, you might get a little bit of pressure.

One just has to be mindful when you're thinking about gross profit is that foreclosed distribution. So when you put all that together, the current expectation is that mix will be favorable. However, in and of itself, if Sealy versus Tempur, there would be a little bit of a headwind.

Yes, I believe Sealy will likely experience faster growth than Tempur for a few quarters. Sealy is performing very well. We have worked hard to elevate the Sealy Posturepedic brand positioning, which benefits us, the retailers, and the customers. I don't think there's any overlap affecting Tempur, as those products occupy distinct positions. However, there is some cannibalization occurring between Stearns & Foster and Sealy Posturepedic, which was by design and anticipated. This overlap exists because both are spring beds. Until we launch the new Sealy-Stearns line, some overlap is greater than desired in the long term. Once the new Stearns line is introduced, we will likely enhance its positioning and resolve this issue. Overall, this cannibalization was planned and is relatively minor, while Tempur continues to perform well.

And your last question comes from Rafe Jadrosich from Bank of America.

You have Victoria Fisgrev on for Rafe Jadrosich. My question is more on the tariff side on your investor presentation. What are some of the components of your exposure, whether that's more steel versus fabric? And what are some of the mitigating actions you're taking?

Sure. Good question. What I would say is, largely speaking, versus where we were in the first quarter, our tariff thinking really hasn't changed. There have been some moving pieces as it relates to the government, but how it impacts the SGI group, not a big driver. When I double tap into that and think about where it's coming from, again, consistent with the first quarter, yes, steel, the steel aluminum, how that impacts the Tempur Sealy or the SGI family is associated with adjustables primarily. So when I think about the big items, it's really the steel, specifically the adjustables, a little bit on the textiles because there's a big drop-off when you think about the Pareto of where this exposure is coming from. However, the next item below that would be associated with the textile, and that's principally a USMCA issue between whatever NAFTA has called out.

I think just in summary, maybe, not just Tempur Sealy, SGI, Mattress Firm, the whole industry has been able to, one, kind of move some supplier stuff around, find some cost savings and then pass on just a small amount of price increase to pretty well mitigate the known tariff exposure we're working with today.

And we now have additional questions in the queue. Your next question comes from the line of Brad Thomas from KeyBanc Capital Markets.

Scott, I wanted to ask about product innovation and particularly with the news of the partnership and investments in Fullpower and again, now being even more vertically integrated in the U.S. How should we think about the pace of innovation and how you all may innovate differently, if at all, from a product standpoint?

Thank you for the question. You are correct that one of the benefits of merging with Mattress Firm is the opportunity to align our technology for future innovations. Mattress Firm had been pursuing a different technology strategy, while we have been focused on our own strategy that utilizes Fullpower. The idea of a situation where a retail sales associate at Mattress Firm or another retailer has to explain various apps for different beds seemed quite problematic to me. The merger enables us to unify our technology platform, which will enhance innovation while also reducing the risks involved, as we already have a proven distribution method. This means that when we create new products, we have a reliable outlet that is large enough to support the technology and ensure the economics are viable. I believe that merging with Mattress Firm provides significant opportunities for future innovations that will enhance the sleep experience.

And your next question comes from Bobby Griffin from Raymond James.

Bhaskar, I just wanted one quick model follow-up on one of your comments. The down 2% wholesale like-for-like that you gave us ex the distribution change for an OEM customer, does that also neutralize for all the moving parts with floor samples? I know the timing this year in 2Q was different than the timing last year when you guys shipped different products, especially given the size of the Sealy launch. So just trying to get a clean way that you and the team are looking at it.

No, it does not. When you think about the floor model headwind in the second quarter, think about on the EBITDA line, something around $8 or so million. And on top line, think about it at $15 million.

Thank you. And that ends our question-and-answer session. I will now hand the call back over to Mr. Scott Thompson for any closing remarks.

Thank you, operator. To our over 20,000 associates around the world, thank you for what you do every day to make the company you for your confidence in the company's leadership and its Board of Directors. This ends our call today, operator. Thank you.

This concludes today's call. Thank you for participating. You may all disconnect.