Somnigroup International Inc. (SGI) Earnings Call Transcript & Summary

Good morning, everyone. My name is Curt Nagle. I'm the analyst at Bank of America that covers Tempur Sealy. Welcome, everyone in the room and online. Really pleased today to have Scott Thompson, who is the Chairman and CEO of Tempur. Scott came into the company in 2005 to turn what has been a very successful turnaround. Scott also was in his prior roles, the CEO of Dollar Thrifty and led a turnaround there as well and was the founder of Group 1 Automotive. We also have with us in the audience, Bhaskar Rao, the CFO; and Aubrey Moore; and Lauren Avritt, who help run IR. So I guess, Scott, before we dive into specific questions, I think it would just be helpful perhaps for people who may not be super familiar with the story to, I guess, go through the transformation you guys have been through over the past few years, since you joined the company. And yes, how that positions the company for growth now and over the next few years?

Sure. And thank you, Curt, and thank you for having us at this conference. Look, when I came in, there was two companies that just really kind of merged. There was Tempur, and there was Sealy and the company was having a little bit of indigestion with that merger. -- and was -- had great brands, but wasn't performing probably as well as it should have. So I came in, I got a new team formed. In the last 5 years, the company has grown EPS at a compound annual growth rate of 40%. So we've had a good run, we'll call it, pre-pandemic and continue to have a very good run. What we've done is we've broadened the base of the business. We've gone after some different business. We started the direct business and really pushing online. And now our online business, combined with our own stores represent about 25% of our global revenues. 5 years ago, we were nowhere from a direct business standpoint. We've also gone after the OEM business, and we build beds for other manufacturers, which is -- that's probably about 20% of the market. 5 years ago, we were not in that market. And we're working very hard to get our share of that new market. And that helps spread the fixed cost of building a bed over all of our products gives us more leverage with our suppliers. So we like the OEM business. We've done some acquisitions. We bought Sherwood, which was a small bedding manufacturer to add to the family. And the most recent acquisition was the Dreams acquisition in the U.K., which was a -- is a bedding retailer as we continue to kind of do a slow vertical integration. One thing I would tell you, I think that's been very important to change is we changed the entire compensation system of the executive team and the officers and the leaders of the company so that we're all driven on the same metric. It's generally driven by EBITDA, although we do have some TSR and some ESG factors in there now. But we've got the team aligned with the shareholders, and I think they've been very beneficial. The other thing is we -- look, we like our stock, and we've bought a significant amount of our stock. I think we bought about 30% of the company over the last few years and continue to aggressively buy back the stock because the business has great attributes from a cash flow standpoint. In fact, I think we've bought 4% of the company in the first quarter of this year and signaled that we expect to buy at least 10% of the company this year from a stock buyback standpoint.

Got it. So yes. I mean as you kind of summarized over the past few years, track record has been pretty impressive in terms of the earnings growth, the execution, the share gains, rock-solid balance sheet, all that. Yet multiple is perhaps not as high as it should be, only 8x earnings. I think maybe part of that might be due to perception that for whatever reason, growth isn't sustainable here because of either lapping COVID or the magnitude of the share gains you've had plenty of reasons people try to pick out. So I guess what do you think the market here is missing at this point, particularly for the first time, I think in your tenure, you've given long-term targets double-digit earnings and sales growth. So clearly, you do think it's sustainable. So I guess how would you address that perception of sustainability or just the low multiple at this point?

Yes. Thanks for reminding me that the multiple is 8, that makes my morning. I'm just teasing you. Look, I mean, first of all, let me kind of bracket that a little bit. Look, I think the team's job is to execute on the plan to drive the business, drive cash flows, put the company in the best competitive position possible and to communicate it to the Street what the hell we're doing. And that's -- that's kind of what we do. And then the Street gets the pleasure of taking that information and pricing us. And we get to look at our price every day in stock market. So I generally don't like whining about stock price because I don't think that's my job and you have to accept what the market gives you. But there is -- at some point, you go like this is just getting kind of weird and stupid. I don't know for sure what they're missing. This -- when I came to this business, it attracted me because of the cash flow attributes, very low maintenance CapEx great cash flow, stable business, bedding and Tempur Sealy is the largest bedding manufacturer in the world by a big, big distance. Tempur is an iconic brand. It's the #2 brand in the United States and the #1 brand Sealy. So we're #1 and #2 in the U.S. Now why the stock is priced like it is? I don't know. I think we probably about the time we really got going and started grabbing market share and starting adding big accounts like Mattress Firm, Badcock, Big Lots, Conn's, as those numbers rolled into our numbers was exactly the same time as COVID took off. And so when you look at our stock and revenues, we look like we're a COVID stock, okay? I mean -- and I understand, look, it looks like it's COVID stock, and then we bought Dreams. But if you dissect it and pull out the numbers, what you'd find is that there's not that much growth that you -- that we captured that didn't -- they weren't directly related to market share gains of new customers or pricing or Dreams, but you have to do a little bit of work. So I think we're just kind of thrown in with the COVID stocks, the lack of a better way of saying it. But look, from our standpoint, I think it's an opportunity, and we're taking that opportunity by buying shares back. And we'll see what the future brings.

Sure. So yes, just I guess staying on the topic of growth over the next few years. How important is international? It's something -- So you mentioned Dreams, a pretty big acquisition. It's something that you guys have been talking and executing more over the past couple of years as you synced up the U.S. market a little bit more, and that's looking pretty good. So I guess relative to your long-term growth targets of double-digit sales? How important is international to that? Where do you see the biggest opportunities and challenges? Where do you see relative share going? And -- yes, how would you fold all that in?

Sure. So I mean for people who aren't that familiar with the story, international, call it, 25%, maybe 30% of the pie, okay? We have a very strong dominant share in North America. But after you get out of North America, our balance of share or market share you want to say it is relatively small. It's generally the Tempur brand primarily. And Tempur internationally is not just priced luxury. It's super high. So in car terms, think of it if you're looking at a Tempur bed, internationally, you're buying a Bentley rather than a Mercedes, okay? So I mean it's up there. Good news is great business, great margins, great cash flows. But at that size -- at that price point, we haven't been able to grow it because that segment is not very big. So in order to get our balance of share or market share growing internationally, we've got a strategy to expand the addressable market and bring another product line in below our flagship stores. And that will about double our addressable market internationally. So that's the first piece you need to understand is we're doing something different internationally to put it on a growth trajectory, where it's been more of a stable cash flow, cash cow kind of thing. Then when you look at it, you got to really kind of separate the world a little bit. Asia versus, we'll call it, everybody else, and that's primarily Europe. Asia is just good, okay? Middle class is growing. People are getting off the floor, buying beds. That's a really strong organic growth long term, and we're doing very well there with the Tempur brand, and we have an Asian joint venture that runs the Sealy operations kind of in that marketplace, which has been highly successful. Then you go over to Europe. Europe, as everybody knows, is a little -- barring even our little events we've had here lately, Europe is always a little bit up and down. But in Europe, we're growing. The Dreams acquisition gives us some retail experience that we may be able to expand into other parts of Europe. And so I would say, yes, I mean, Europe over the next, call it, 3 to 5 years is a major part of our growth initiative and very important to the company.

Got it. So thinking about, I guess, from a product perspective, to be a relatively big year. So we've talked a bit about Tempur introducing a less premium or whatever you want to call it.

Luxury.

Yes. Yes, exactly, to expand market or your market position. In the U.S. you're doing a big launch of Stearns & Foster, which I'm not sure if too many people aren't familiar with it, but it's effectively a premium sub-brand to be, I guess, its own brand or however you want to categorize it, of Sealy. On the earnings call, I think you called out it being $1 billion plus opportunity. I think that implies maybe doubling. I could be off in terms of where it is now. Can we walk through just what the drivers are aside from just the new launch? What's the time frame, how differentiated the product is, all that kind of good stuff?

Okay. Stearns & Foster is a brand that's been in the market for 175 years, which nobody knows about. If you go back and you look at the stats, unaided awareness of like a Sealy brand would be 98%. To put that comparison, Stearns & Foster, would probably be 42%. So it's -- although it's been around forever, has a loyal small following. It's not well known. It's owned by Sealy. So we picked up Stearns & Foster in the Sealy acquisition. And it's been what I'll call an under-loved brand. It is Innerspring, so it's a traditional construction, traditional feel versus Tempur, which is made of Tempur material. And ultimately, we decided not everybody in the world wants to sleep on Tempur. Fabulous bed, great following, but some people want more of a traditional feel. And we looked at Stearns & Foster and said, we need to invest in this brand and we need to move it up. Yes, we think it can be $1 billion or more brand, okay? That is -- that's more than a double, actually, where it sits today. So we have -- we've got new Stearns & Foster beds coming out in the fourth quarter of this year. What we're doing that's different is we're spending real advertising dollars behind the brand, doing national advertising. In fact, we're doing national advertising now for the Sealy product, even though that Sealy -- excuse me, the Stearns product, even though this Stearns & Foster product -- new product didn't come out in the fourth quarter. So we're seeding the market. We've got the retailers excited about this opportunity. And what are we trying to do, okay? If you look in bedding and you want an Innerspring mattress, if you went around to all the stores and you were trying to spend some money or you're a luxury buyer, you can spend a couple of thousand dollars on a queen size Innerspring bed. But to spend more than that to go to the next level, you almost have to go to $10,000, and you have to probably go to one of the super luxury niche brands, okay? There's not a major brand from, call it, $2,000 to $10,000, okay? That's the whole we're trying to work on with Stearns & Foster and so that you can move customers up from a $2,000 Innerspring bed up to maybe a $4,000 Innerspring bed. that creates value for us, okay, because we make more money, okay? That makes -- it creates value for the retailer, okay, because they now have a higher-priced ASP product. So they're excited about it. And quite frankly, it gives the customer a more premium product that really doesn't sit in the marketplace today, right? It sits in the marketplace today, you'd have to go exotic, and it gets real expensive. So we're excited about it. You'll see it's going to be a drag on this year's earnings, which is in the guidance. It will be a benefit to the out years in '22, '23.

Yes. So maybe just kind of thinking about it another way for both Tempur launch and for Stearns & Foster, I mean, of course, the opportunity to take share, maybe some slots, but certainly a trade up category enhancement, all that kind of stuff, demand creation, I think it sounds like it's a big part of...

It is but it also just grows the pie, and I think a more successful strategy is things that grow the entire bedding pie for us and the retailers rather than just fighting about getting some other manufacturers unit across the aisle for us.

Makes sense. So would love to dive a little bit more into DTC. Like you said, this has been a big focus for you, Scott. Was an underutilized channel, I suppose, you started with online and have been moving up into adding a bunch of Tempur stores and gearing up internationally as well. Going forward, how big do you think this could be for the entire company in terms of a specific channel? Where do you think the growth comes? Is it primarily more aligned? Is it more stores? How does that balance out?

Yes. Let me give a little bit of history. We were -- we did not do any significant direct-to-consumer business 5 years ago. There was a little industry called BedInABox that showed up, made a little bit of noise. We learned a little bit. We were a little bit flat-footed. So we learned a little bit. But we learned to do it pretty well. And so we got our own web page of tempur.com, which has been very successful and very profitable. We started opening up our own flagship stores which have been very profitable and very successful in brand enhancing. We were able to purchase a, what I'll call, middle market bed retailer, Sleep Outfitters, that was in financial trouble. So we bought that, turned it around, probably paid maybe 1x maybe. So we got into the traditional market. It's probably 100 store operation, and we've been driving forward on that. Now the execution or the hard part was the channel conflict because you obviously have a lot of other retailers, and we've been able to navigate the channel conflict because we don't try to direct customers to our particular channels, whether it be our own stores or our web page, we just want to be wherever the customer happens to be. And the market's accepted that. The customers accepted that. And so you ask how big can it be? And the way I always answer that question is, I don't know, I think the customer is going to decide. We're not going to decide. I'm not going to try to go steal other people's customers that are retailers, but the way we compete is by quality of service and we aggressively compete on quality of service. Right now, it's close to 25% of the business. It's growing faster than the core business. So I expect that number to continue to increase. But it's -- the customers are going to decide how big it's going to be, but it wouldn't surprise me that in the out years that we don't get closer to 30% or 40% eventually from a direct standpoint. There's just -- there's a lot of efficiencies. It's a very crisp offering and we don't have a lot of distractions in that area.

Understood. At least at this point, the strategy is mostly focused around Tempur. Talk about, I guess, opportunities for your other brands at this point and anything you're doing over the next couple of years?

Sure. We have, I'll call it, on the shelf, sealy.com DTC strategy and Stearns & Foster DTC strategy. We haven't launched it because up until here recently, we were constrained from a manufacturing standpoint. And it seemed rude to be launching a direct channel when you weren't fully servicing your current customers. Now that, that issue got resolved, you should expect sometime during the year that you'll see a Stearns & Foster push online and/or Sealy. The way we do this is we kind of go slow. We don't go in and buy customers and all that kind of stuff. We let the market decide that's where they want to buy. But you'll at least see one of those brands and maybe both those brands this year from a DTC standpoint.

Got it. So inflation obviously is super topical at the moment, topical for the industry, the bedding industry over the past couple of years for a variety of reasons. Tempur has been a leader in terms of pricing. You've taken at least a few rounds over the past year, mostly around foam and steel and things of that nature, distribution, whole slew of stuff. I think the last round you did take was in January. So with oil, which is an input, right, for foam, highest since 2008. Should we expect another price increase this year? Any pushback from consumers or retailers in your price points? And I guess, how are your competitors behaving in terms of handling these costs?

I mean like -- so I mean the way this industry works, the manufacturer, when they get commodity increases, they pass them on to the retailer who passes them on to the customer. The industry has been very efficient in that process for years, and I think we did 3 price increases last year. You're right, the last price increase was in January, which with that one, we think we fully offset the dollar impact of commodity increases. Now we didn't put margin on top of that impact, but we've offset the cost increases. Those increases went through very smoothly. I would almost say easily. The only thing we usually have to do is show some retailers sometimes what commodities went up and how you compute what the increase is. But very smoothly, the -- our largest competitor has followed the pricing increases or they led one -- actually, they led one of them, which would be Serta Simmons. So up until probably, I don't know, I think on the earnings call, I think I actually said we think we're probably through with price increases for a while. It looked like us, we've captured everything we need to do. And when we capture commodity increases, it's oil, it's labor, it's steel, it's everything that goes up in value. It's not just one thing. Obviously, we've had a little increase in oil since then. And if it sticks, it probably will would be my guess, then we'll have to roll through another price increase. But I don't expect any issues. You asked from a customer standpoint and it does -- or have the price increases impacted demand for the product. Always hard to tell, particularly, but let me tell you what we've looked at and what we do know. First of all, we had -- we grew 30% in the fourth quarter, last quarter we reported. Tempur, very strong. Stearns & Foster 35%. There clearly has not been any impact, I think, on demand at the high end. Like you can't find anything. And I don't see anything in any of the numbers we've seen, it looks like any customers are trading down like they can't afford ex-bed now and they have to trade down. So we're not seeing any trade down. The one area that I can't say, okay, there's no impact because if you look at the low end of bedding, where there used to be maybe a $4.99 bed in the market, you can't find a $4.99 bed in the market. It's now $6.99. I mean it just doesn't exist. And at the same time, the low end has been relatively weak. So I don't know if that's a pricing issue, whether that's a stimulus cheques have been pulled out of the system and you got a tough comp, but the only place if there's any impact, it's been at the low end. The good news is we don't make much money at the low end. It covers a little bit of fixed cost. It's just not where -- it's not where you make much money. But the low end has been a little bit soft.

Yes. I think you said 10% to 15% of sales and something south of that in terms of earnings, maybe?

Yes, the margin profile difference between, we'll call it, a Sealy low end bed and a Tempur bed. If you go talk to your -- if you go out the retail and ask them, all they need to do is sell 1 Tempur bed. They're happy for the day. You can't sell enough Sealy beds to matter.

For sure. So let me go back to -- spend a little bit of time on capital allocation. So on the call, as you mentioned, at least 10% of shares this year, 4% already taken out as of the call. Current leverage is below your 2x to 3x target, right, cash flow good. I mean, just sort of bluntly should we expect you to be more aggressive and emphasize the plus on 10, right, given the multiples and all that? Or would you pause because of X macro factors of uncertainty?

Yes. So great question, and I'll try not to be too wordy, but I think I've got to frame it up a little bit. The company used to run a lot higher leverage. We brought the leverage down for a lot of different reasons, but we think the business should run between 2 and 3x from a leverage standpoint. Then like we said, we don't really know what the leverage that -- let's take it down because I've never been through a pandemic before. So we've been running under 2 for quite a while, actually. And what we told the market was, look, when the pandemic cleans up, we'll get back into, we'll call it, 2, 3, our target, probably at the lower end of 2. I think we ended the year, like at 1.8%, if remember correctly. So that's -- you have to kind of understand the leverage piece. So we're trying to get back into low 2s because we think the pandemic is declining, as we'll say. So the way the capital allocation works is we generate a lot of free cash flow, which you can see. The business gets the first call on the cash. If the business has project with a high rate of return, they get it. The good news, bad news or however you want to say this, the business doesn't need that much cash, okay? They have a few projects. We are building a new Tempur plant. So we're running a little hotter on CapEx, but we still have a lot of free cash. So then it goes to do you do an acquisition or you do a stock buyback? Because I've got to do something. Otherwise, I delever at an incredibly quick rate, and I'm not going to hit my leverage targets, which I just told you about, right? So then we look at our acquisition pipeline and we talked to a lot of people. Our position is if it's in bedding and it's in the world, we like to talk to you, okay? And we do. And if one of those deals makes and it's highly accretive and better than buying our stock back, we'll go that direction. And if not, we're going to buy our stock back. So if you kind of run through all that math, the answer to your question is, look, we feel really good that you're going to get at least 10% and then it could be more than that if there's no acquisitions and it's going to be more than that to the extent probably that the stock is down because it makes the acquisitions that we make -- the stock is always used as the hurdle rate on acquisitions. And when the hurdle rate gets so damn low, you're going to end up obviously probably leaning more into stock repurchase. So it's kind of a long-winded answer, but it depends on lots of factors. The other thing I would say to understand what the way we think about it, is we don't want to do kind of one quarter by stock back and not be in the marketplace. We want to be in the marketplace every quarter. So we do try to spread it out throughout the year but be opportunistic at times.

Just a quick point of clarification. In terms of the 10% and then potential acquisitions, right? That's...

Yes. Yes.

Okay. Yes. Understood. And then maybe just a quick -- a few quick comments on, I guess, the framework for acquisitions. You made a couple over the past -- a few over the past few years, usually a pretty low multiples, usually as a means to enhance the business or things it just makes sense to buy for whatever reason. I guess going forward, I guess potentially, where do you see the biggest opportunities, either from a capacity or capability or a regional standpoint? And would you consider buying another brand just as -- just another question to throw out there? Or do you feel you're pretty filled in at this point?

Yes. A couple of comments on acquisitions. One, you're right. If you were to go through and think it's like 5 or 6 acquisitions look at the multiples there, they're incredibly low, especially after synergies, and we're a relatively conservative group when it comes to acquisitions. And we don't really know how to price concepts. The cash is going to come in the future. So potentially be more grounded on like what are we really buying. So I think you should expect that probably will continue to be low multiple. Then look, one of the quick criteria is if we buy something, can we run it better than the people we're buying it from? And if we can't, we don't really want it. So you have to be able to say you're going to execute and run it better and you have to have like real synergies that you can touch and feel that are almost kind of immediate. And when you kind of put that framework in place, and you think about the bedding business, it could be a supplier. It could be a retailer. It's a pretty -- it's a big universe in the world. They're generally smaller deals, to be frankly honest. But anything that we think when we buy it enhances our competitive position in the world, we look at it. And we probably -- I don't know, Bhaskar is here, we probably -- I don't know we'd probably look at 8 deals a year. We might do 1. But most of the time, we can find a business that meets all the criteria that I just talked about, and then we get down to pricing and we have this pricing issue. We don't feel like we have to do anything. I mean, we don't feel like we've got a gun to our head. There is no acquisition budget that says you've got to hit this acquisition budget. So there's no pressure on the acquisition team because I don't want pressure on them. And then we kind of price the deal and then we kind of sit and wait and wait and see how that business performs and how their pricing expectations change, and sometimes it takes a while. I think it took a solid 4 years to buy Dreams. And the only issue was we were working on price. But again, we don't feel like we have to do anything. But we really think this is a business with our cash flows, our supply contracts and our relationships that we should be able to buy some stuff and add value to the industry.

Got it. Before we go into maybe some questions from the audience, would love to talk about some, I guess, near-term questions and expectations for the year. So 4Q, 30% growth, right, incredibly solid revenue growth, you have strong margins. Sales do come in a little lighter than expected, attributed to choppiness in the market and a little bit of mismatch in terms of selling and sell out. However, for this year, you guided to 15% to 20% growth, which was above Street expectations, market off to a little bit of a slow start as of at least January. What gives the confidence that this is achievable? And then yes, just any building blocks or just how to think about -- yes, the buildup to 20% potentially?

Look, we -- I mean, the most recent data point you have is really the holiday weekend President's Day, very strong for the industry. Our stores were up 20% in our Tempur stores and our Sleep Outfitters store. So the most recent holiday period, which is where you sell most of the beds, really good performance. As you said, a little slower start in January and February, which is built into the guidance. When you look at this current year, look, we've got the tailwind of Dreams because we didn't have it for the full year, call that single-digit growth just added Dreams to us. You've got another increment of single-digit growth, call it, just price increases because we rose -- we increased the prices last year. We'll get the full benefit this year. So you've got some pricing benefit in there. you've got opening of our own Tempur stores that you're going to have in there. And then we think the industry overall grow some. Robust? No. But I think the unit growth, it's kind of people are in the industry are kind of talking about, call it, 0% to 4% unit growth. And then you're going to have some price growth on top of that, that we've talked about. And when you kind of add that it looks pretty good. Now we're focused on the U.S. consumer because that's really the heart of the profitability. And when we look at the U.S. consumer and our customer where we make money, good net worth, they're in good shape. The U.S. economy looks okay to us. It may be different 3 months from now. But I mean, when we look at it, it looks like it's a growing economy. And so I think we're in good shape on the guidance. I think the other thing that I would kind of throw in there is from a competitive position, you've got to go look at the competitors in the marketplace and how they're doing. And I think you would come to the conclusion that from a competitive position, our competitive position continues to strengthen. So that makes us a little bit, we'll call it, better than the industry, whatever you think the industry perspective is.

Understood. And then just from a perspective of your product launches, is that more of a tailwind for '23? How do we think about it for this year?

Yes, 2 major launches, both of them are not what I would call normal launches. We refresh products normally. And these are both different than that. These are bigger launches and more important launches than our normal launches because we're trying to do something different. First, when I talk Stearns & Foster, I talked about that. We're trying to take that brand, upscale and really grow it. That comes in the fourth quarter. So you're not going to get much benefit. This year, in fact, it's a drag as we pre-advertise for it. Then the other big launch is the Tempur launch I talked about, which is, again, is not just refreshing Tempur product, it's also trying to expand the addressable market internationally. And again, we're spending a bunch of money. That will launch, maybe it's the second quarter, maybe it's the third quarter. We're watching the events in Europe closely, and we may delay it a quarter or 2 depending on what goes on in Europe. Quite frankly, if we delay it, it would probably be a positive to this year's EPS but it would delay the benefits, but those benefits for both those launches will really be next year.

Not particularly big and nothing obviously embedded in terms of new customer growth or slots or anything like that, that's all -- that's not in there? Okay. That makes sense. And then, yes, I mean, kind of along that, as you talked about, these are different launches and the strategy around marketing is also different, at least as I understand it. So record year spend this year after a record year last year, right? It seems obviously be working in terms of your revenue growth over the past couple of years. Can you talk about, I guess, aside from just the dollar amount, what is different? What gives the confidence to really make these commitments early on and so far ahead of the launches?

Sure. A couple. I mean when we look to total advertising spend, make sure you -- when you look at the total dollars compared to last year, you realize Dreams is in there for the full year this year. So a lot of that average and the advertising increase is because of the Dreams acquisition. But we're going to increase advertising on top of that. As I said, we've got Stearns & Foster already growing at 35%. When you look at our competition, they are not in the position to do what we're doing. And we think this is a great time to really go after a share and, quite frankly, it's been working. So we're going to keep pushing it. I would hesitate with your words locked in. I would say that the business is very flexible, and if you go back and look at like when the virus hit, 75% of our costs are variable. So if we have to pivot because the world is a little different than we thought it was, we can pivot fairly quickly and advertising can be changed. But right now, as I've said before, we've got the business positioned to be on the offense. And that's what we see and that's what we'll be on. But as far as a business model standpoint, it's a business that flexes quite frankly, fairly easily.

Maybe just I'll pause here for a minute and open it up to any questions from the audience if there are any.

I was wondering if you could talk about what the innovation curve looks like for Tempur Sealy over the next 5 years. You have this Sleeptracker and Smart Base product. How are you thinking about growing the attach rate on that? And like what's the role of those products in the future? How do you view it?

Sure. Great question. This business is driven by innovation. We got a couple of -- obviously, we've got the new Stearns & Foster beds coming out, and we would tell you the feels are innovative and the cooling is innovative, the new Tempur beds internationally at those price points are innovative. But your main focus was on Sleeptracker and some of the technology side of the equation. We have a product in the marketplace, a Sleeptracker Smart Base that monitors your sleep from a health standpoint, takes that data, sends it up to the cloud. Cloud processes it and then sends you individual coaching down to an app on your phone so that you can monitor your sleep, from a health and wellness standpoint. It has been highly successful. It has been more successful than I thought when we launched it. Retailers love it, and the attach rate is actually pretty good. I think what you're going to see over time as customers not just us, but there's some other companies in the industry that are also kind of pushing, we'll call it, that part of the technology. And I think that's going to become more table stakes and you're going to see better and hopefully, prices come down a little bit on some of the cost of that. But these technologies really are getting very good at monitoring people's health and wellness and customers are receptive to it. But there's going to be continued changes in that area, none of which I'm going to talk about on an open mic because I've got a few competitors that are also chasing that particular vector. But I will tell you, the other big benefit for it is it's exciting, and when you advertise it, it helps drive traffic and people's interest in bedding. So even the people that don't actually buy the product, it has been a very good product for people who want to come in and look at and talk about it, make bedding a little more exciting than it would be otherwise.

Quick time for maybe just one more. I haven't touched on supply chain. It sounds like things are in a lot better shape than they were from, say, a quarter ago or even before that. I guess, in terms of any remaining bottlenecks, where does that stand? And where are you from a capacity standpoint?

Sure. Thanks for the question. The great news is I didn't have to talk about the supply chain, the entire time here today because the supply chain has gotten a lot better and I would almost call it normal at this point. Now we always have to remember the bedding supply chain is relatively built up by smaller companies. So something could change. But right now, we feel good about springs. Leggett's done a great job. We feel good about chemicals. Pricing is still a little high, but they're available. We are -- from a capacity standpoint, our order delivery times are back in line with what is tradition as is the industry. So as we sit here today, supply chain feels good, and we're ready for the busy season. The one watch out is Eastern Europe. Eastern Europe, there's a lot of covers and textiles that get made over in Poland and in Eastern Europe. All those plants are operating and supplies are coming out of that area. But obviously, with the news in that area, we're watching that area. But right now, everything is a go.

With that, I think we'll conclude. Scott, thank you very much for your time, and I'm going to participate in the audience and have a great rest of the day.

Thank you very much for having me.