Good morning, ladies and gentlemen, and welcome to Somnigroup Fourth Quarter 2025 Earnings Call. [Operator Instructions] Following the presentation, we will conduct a question-and-answer session. [Operator Instructions]. I would now like to turn the conference call over to Aubrey Moore, Investor Relations. Please go ahead.

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. 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 on the date on which it is made. The company undertakes no obligation to update any forward-looking statements. This morning's commentary will 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. Finally, before I turn the call over to Scott, I want to take a moment to share that this is my final earnings call in this role. I am transitioning to Somnigroup Vice President, Consumer and Market Intelligence. I'm pleased to say that Lauren, who many of you know well, will be leading Investor Relations going forward. It has been a privilege to work closely with our investor community, and I'm confident Lauren will continue to serve as a strong partner going forward. And with that, it is my pleasure to turn the call over to Scott.

Aubrey, thank you for your outstanding contributions to Investor Relations. Maybe even a bigger thank you for you jumping into your new role at SGI that is important to our future success. Moving on to today's earnings call. Good morning. Thank you for joining us on our fourth quarter and full year 2025 earnings call. I'll begin with highlights for the quarter and full year and then turn the call over to Bhaskar to review our financial performance in more detail and discuss our 2026 guidance and our updated 3-year EPS targets. After that, I'll open the call up for Q&A. In the fourth quarter of 2025, we achieved record net sales and adjusted EBITDA, while our adjusted EPS increased a robust 20%. Year-over-year, net sales were up approximately 55% to $1.9 billion. Adjusted EBITDA was up approximately 59% to $349 million and adjusted EPS was $0.72 per share. This financial performance was particularly notable given it was achieved while the industry is at a record low and underperformed our expectations. 2025 proved to be another challenging year for the bedding industry. We estimate the U.S. industry trend declined mid-single digits in the fourth quarter and full year. The non-U.S. markets we operate in were similarly challenged. After multiple year headwinds, we are confident the bedding industry will normalize to at least historical growth trends in the near future. Our conviction in our industry outlook is supported by our demand-driven innovation, compelling advertising, the industry's pent-up product demand, growing health and wellness trends, consumer confidence and future growth in housing formation. We'll continue to strive to win market share gains, drive cost efficiencies and prudently allocate capital, all to deliver shareholder returns. Before turning the call over to Bhaskar, let me highlight several notable achievements in 2025, which marked a…

Thank you, Scott. In the fourth quarter of 2025, consolidated sales were $1.9 billion and adjusted earnings per share was $0.72, up 20% over the prior year. There are approximately $10 million of pro forma adjustments in the quarter, all of which are consistent with the terms of our senior credit facility. 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 expense to cost of goods sold. We've adjusted prior year Tempur Sealy financial information included in today's earnings release to reflect the change for ease of comparability. As a reminder, year-over-year comparisons are impacted by the acquisition of Mattress Firm in the first quarter of 2025 and the related divestitures of Sleep Outfitters and certain Mattress Firm retail locations in the second quarter of 2025. I will be highlighting like-for-like comparisons defined as reported numbers adjusted for the acquisition and divestiture impacts to normalize for these items in our commentary. Now turning to Mattress Firm results. Net sales through Mattress Firm were approximately $890 million in the fourth quarter and declined 3% on a like-for-like basis. Same-store sales were flattish, outperforming a market we believe declined mid-single digits in the quarter. Mattress Firm's adjusted gross margin was 32.4%, and adjusted operating margin was 5.4%. Turning to Tempur Sealy North American results. Like-for-like net sales through the wholesale channel increased approximately 6% in the fourth quarter, normalizing for the previously disclosed foreclosed distribution. Our sales with third-party retailers were flattish on a like-for-like basis, outperforming the broader industry by a solid margin. Like-for-like net sales through the direct channel declined 7% in the fourth quarter as our direct Tempur stores underperformed our expectations and our e-commerce sales faced difficult comps. North American adjusted gross…

Thank you, Bhaskar, and well done. Now I want to quickly address our proposed acquisition of Leggett & Platt before opening the call up for Q&A. We welcome Leggett & Platt Board's willingness to engage in discussions and conduct customary due diligence, which is currently underway. Somnigroup remains committed to pursuing a transaction that will deliver substantial value to shareholders of both companies. There can be no assurances regarding the completion of a transaction or the terms of any transactions, and we will not be commenting further on this topic. Lastly, I'd like to headline that we will be hosting an Investor Day in New York on March 4. During that day, we expect to share more information on our 3-year EPS target, our strategic vision for Somnigroup, discuss growth initiatives for Tempur Sealy, Mattress Firm and Dreams and provide additional details on our capital allocation strategy. With that, operator, that ends our call. Please open the call up for questions.

Thank you, ladies and gentlemen. We will now begin the question-and-answer session. [Operator Instructions] Your first question is from Susan Maklari from Goldman Sachs, Canada.

My question is around the outlook for demand. Can you talk a bit about the state of the consumer, how you're thinking about the shape of demand as we come into 2026? And how you're thinking of the drivers and the potential for out or underperformance relative to the guide for Tempur North America sales to be up low single digits on a like-for-like basis?

Sure, Susan. Thank you for the question. I mean, first thing in demand, I'd say our estimates are for $3, $3.40 for 2026. One of the foundations of it is, it's basically a flat market. We didn't call a turn in there. And if we had, obviously, the flow-through on that guidance would be significant. But we thought considering the fourth quarter came in a little light from an industry standpoint from our expectations that probably flat was the right way to go into the year. And then we'll see how demand develops. If you're talking about -- what are we thinking about, fourth quarter, again, came in a little bit less from an industry standpoint than we expected. And if you look at the start of the first quarter, it's kind of a tale of 2 cities. If you look at the pre-President's Day holiday period, call it, January 1 to, I don't know, February 10 or so, we had tough weather, and I hate talking about weather, obviously, but if you talk about short period, you always have to think about it. And there was tough weather in the U.S. And the way I always look at that is I look at lost days and if you look at Mattress Firm, we had 5,000 days of store losses that were incremental to last year. So to be clear, that's not like rain or something. That means the weather was so bad, the store didn't open. So we lost 5,000 days of sales during that period off of a possibility of 90,000 days. So it's about a 6% headwind incrementally in store closings. So as you would expect during that period, Mattress Firm's same-store sales were slightly down. But then as soon as you get into the President Holiday period, which we'll call that February 11 forward, sales have been very robust. And when I say very robust, I mean double digits robust, driven by strong AOV, driven by Tempur, clearly, a customer that's in the market wanting to buy. And the result is, looking at U.S. Mattress Firm sales because that's kind of the best index for consumers and it has real-time data is now we're running positive same-store sales at Mattress Firm to start the quarter. So when I look at it, it looks like a bedding market and a consumer that wants the market to grow. And we've got to get out of our way, whether it be some drama in Washington or whether it be an unusually strong storm slows you down a little bit. But it does feel like it's a market that's poised for growth.

And if I could add on to that, then the way to think about the quarter when you put all that together is from a first quarter sales standpoint, we would expect something in and around positive 14% or a little over $1.8 billion with EPS growing in and around 20%.

Your next question is from Bobby Griffin from Raymond James.

Aubrey, congrats on the new position. It's been great working with you over the last few years. I guess, Bhaskar and Scott, for my question, I wanted to maybe unpack the guide a little bit. And Bhaskar, can you help us and just kind of clean up some things in the model in terms of like what's left on the customer transition as well as -- I know we have the wraparound benefit of Mattress Firm and some of the divestitures. And I guess I'm asking in the context if I take the cost synergies, the EBITDA benefit from the floor shift as well as our guess of what the 1 month of Mattress Firm is, we can walk our way pretty close to the midpoint just on those. So is there anything I'm missing on an offset? Or is the way to view that more just conservative in the model? Like I just want to make sure we're thinking about all the parts the right way?

Sure. Let me give it a try and then you can follow up as necessary. So when I think about this fundamentally it's all based on an industry that's flat to slightly up. On top of that, what we have is share gains in all of our geos. So internationally growing high single and in North America, call it that mid-single. And that would get you, let's call it, in and around $7.9 billion. When you go forward from a gross profit standpoint, let's talk about the stub period. So the stub period, you're correct, is about 1 month shy relative to prior year and call that in and around, call it, $280 or so million net. When you think about from a profitability standpoint is we're going to continue to support those brands. We called out about $720 million of advertising to continue to support from a launch standpoint. What's embedded in there is very nice gross profit improvement, let's call it, about 100 basis points on a year-over-year perspective. And the principal drivers of that is a couple of things. One is productivity through the plants. And on top of that would be the synergies that we've identified. And as noted in the prepared material, we've taken that number up about 25 basis points -- sorry, $25 million on a year-over-year basis. There is a bit of a headwind associated with, let's call it, commodities that would offset from a gross profit standpoint. But if you add all those pieces up, I think fundamentally, the foundation being industry, market share gains and margin expansion, it gets you to in and around the midpoint.

The next question is from Rafe Jadrosich from Bank of America.

You have Victoria Piskarev on for Rafe Jadrosich. I was wondering if you could talk a little bit more about the elasticity of demand? And how did price increases impact your volumes?

Yes. We took quite a bit of price over the last couple of years. And I can't really see any significant impact from a volume standpoint. This is an industry that has always been very efficient in passing actual cost, commodity cost increases through the channel, and it looks like it has continued to do that.

The next question is from Dan Silverstein from UBS.

Maybe just to build on Bobby's question. If we kind of expand that out to the 2028 target, is the raise there just the additional synergies? Or has anything else changed on kind of the outlook on the pace of an industry recovery or Somnigroup's growth against that industry?

Great question. Some of it is synergies and the success that we've achieved in synergies, plus what we see going into the funnel from a synergy standpoint, primarily in the area of logistics and advertising. The other probably big driver would be when we look at our relative competitive position, and it's a little early in the reporting quarter to have all the numbers and have the industry fully analyzed. But we think we took a major step forward from a competitiveness in everywhere we look. I'd highlight that we're growing in all of our geos, and those are in markets that we believe had a tough fourth quarter. So again, I guess it's confidence in our competitive position and synergies are the main drivers. And if the industry turns in '26, which we did not embed in our guidance, our guidance range would be light. Now to wrap around the perspective of $515 million, what we're excited about is the ability to take it up in light of an industry in 2025 that did not achieve what we thought it would be when the original $485 million was put out there. So we did have some wins, as Scott said, competitive positioning, revenue synergies, cost synergies, et cetera, that allowed us to take the number to $515 million. And then at the conference in New York here in a few weeks, we'll give you more detail in the buildup to that $515 million, I think which will give you more confidence that, that raise was appropriate.

The next question is from Peter Keith from Piper Sandler.

Congrats to Aubrey and to Lauren. I wanted to just ask about the lack of product launches in the first half. With the gross margin guide of 100 basis points, could we see a little bit of excess gross margin expansion in the first half with no product launches and then the opposite of that in the second half? And then, Scott, also product launches usually are a big sales driver. So you're anticipating gaining market share in Tempur North America. I guess can you walk us through the rationale on that because product launches usually are a nice sales accelerant?

Yes. A lot in that question, and I'll start with it and Bhaskar, you can clean me up. When you do a product launch, yes, you do get more sales, but those sales are obviously a much lower profit margin, closer more to breakeven. So it's kind of a mixed bag. If you look at what's in the marketplace, we've got great products in the marketplace, Sealy Posturepedic launch, the Tempur stuff, we do have a small launch later in the year, Stearns & Foster. But from a competitive standpoint, we feel very good about the launches. So I think we're well positioned to continue to take share of what we've got in the market back with advertising. You want to talk to the gross margin?

Absolutely. Peter, good question. So when I think about the full year, if I were to step back on the sales and, let's call it, the EBIT or the fall-through line, it is effectively a push, but there is some first half, back half phasing. So think about it as a sales headwind in the first half, call it, about $20 million or so and effectively reversing in the back half. And from a margin standpoint, you are correct. There is the -- if you look at it in isolation, the gross profit will be impacted more so in the first half of the year versus the back half of the year. However, we are also, again, as we announced the synergy opportunity and the productivity is that, that as the year progresses, is those things will progress as well. But fundamentally, when you look at the 4 models in and of itself, yes, first half, back half impact. Net full year, basically nothing.

Your next question is from Brad Thomas from KeyBanc Capital Markets.

The question is about the changes at Mattress Firm from a consumer and an operational perspective. Scott, it does seem like even with same-store sales having slowed a bit in the fourth quarter that that's more a function of the industry and that Mattress Firm is still really outperforming. But I was hoping you could just comment a little bit on how you measure that the new lineup is resonating with the consumer and then how we should think about kind of the pace of change that we're putting in place? And then maybe just finally, any more details that you could share on the timing of Purple, Kingsdown, some of the other changes that you're doing here this year?

Sure. So I mean, to summarize the question, Scott, can you tell me everything you know about Mattress Firm? Just kidding. Look, from everything we see, Mattress Firm continues to take share both in the fourth quarter and the start of the first quarter. So I would say that's evidence of resonating with customers. As far as performance, you're seeing share growth in we'll call it the family brands, the Tempur Sealy brands, particularly Tempur. You're seeing growth in Kingsdown, which is doing a great job for us. And you're seeing growth in Purple and there's some -- there's a test going on in Kingsdown, considering expanding it. And then the new Purple high-end bed will be hitting the floor at Mattress Firm, I think, late first quarter. We get a lot of feedback from our RSAs. And I think the merchandising changes have been well received, both in-store and with consumers. And Nektar is doing well. I forgot to mention, Nektar has been doing well on the floor. So overall, I couldn't be happier with our merchandising changes, both the way they've been executed, the pace they've been executed and how the market has received them.

Your next question is from Jeff Lick from Stephens.

Aubrey and Lauren, congrats on the new roles. And Scott, nice to reconnect with you. It's been a long time. Question is, Scott, I was wondering, now that you've had Mattress Firm pretty much for an entire year, you had mentioned on your prepared remarks about some marketing step-up from some of your partners. Just curious how you're seeing -- I know this is a little sensitive, but just owning Mattress Firm, the competitive dynamics or the strategic dynamics, any thoughts there on how that kind of meshes with your original expectations when you bought it?

Yes. A couple of things. Great question and good to hear from you. I guess starting with the advertising, we completely changed the advertising message and the approach. It's kind of -- it's built in a way that there's a Mattress Firm message and then you can kind of plug in branded product into the ad and get a 1-2 punch. Obviously, we're doing that with the family brands, the Tempur, Sealy, Stearns & Foster. But we're also doing it with other brands, third-party brands. And that's been effective. In fact, it's been so effective that other manufacturers are giving us incremental support, incremental outside of, we'll call it, normal support to take some positions in those ads. Because they're seeing when they do, it drives traffic not only on the mattress firm floor, but it also drives their brand at other third-party retailers. So it's become a very effective way for them to get to market. And so I couldn't be happier with the way that program has worked. And I think the third-party manufacturers who participated in it are happy with that, too. As it relates to, I'll call it, channel dynamics or those kind of things, we have a term called Other Other, because it's a short way to say, how are the other retailers doing in the U.S. that are not Mattress Firm and how are the sales of Tempur Sealy products. We call it Other Other. And if you look at Other Other, our Other Other sales, we think that they are outperforming the general market. So we think we're taking share in the Other Other area, too. And so I'm not seeing any significant channel conflict. I think everybody understands that the advertising we're doing is helping drive product, not just at our retail stores, but throughout the industry and found good support. It's probably gone better than I probably initially thought. I wasn't too worried about it, but you got to work through it. Now I think the Mattress Firm acquisition, if you take the price, you take the performance, you take the synergies that have been realized, I think we would say that it's been very good from our standpoint.

Your next question is from Bobby Griffin from Raymond James.

Scott, I just -- we spent a lot of time on North America, but honestly, international just continues to be a bright spot there with robust kind of constant currency growth on top of a really good quarter last year. I understand you guys did a lot of work on the product portfolio, but help us understand like how much is new door growth versus how much is throughput or slot velocity? And then when we think about the opportunity in international, like do you still see a robust amount of new door potential? Or is it more just continuing the velocity? Just help us think about the sustainability of what is turning into a nice bright spot in the story?

Yes. I mean great call out. International has been growing for a couple of years, very strong, again, and not a great market, which is particularly impressive. As you know, from an international standpoint, we don't have a large balance of share internationally. So it is a long-term growth trajectory that we are very bullish on. Bhaskar, do you know the split between new distribution and velocity because we're getting both internationally?

Absolutely. So when you think about the growth over the last couple of years, it's been principally at its existing distribution. And what existing distribution looks like is perhaps a few more slots in stores that we're in, but really improving the velocity per slot on where we're at. And really, what that does is that we have to prove ourselves in the international market. As Scott said, we have relatively low share relative to the U.S., also a very difficult execution. The borders, they're not states, they're countries. So it's a tougher slug. So the key there is making sure you have the right product, advertise ahead of that, to educate the retailers and the consumers, therefore, you get the incremental slots within the store, prove yourself in those stores and then get into new distribution. So when I think about the next leg of growth internationally, continue to do what we're doing, but also expand the distribution outside of our historic footprint.

There are no further questions at this time. I will now hand the call back over to Scott Thompson for the closing remarks.

Thank you, operator. To our 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. 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. Thank you.

Thank you, ladies and gentlemen. The conference has now ended. Thank you all for joining. You may now disconnect your lines.