Tempur Sealy International, Inc.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Temporary Sealy Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the opening remarks, there will be a question-and-answer session. To ask a question, you will need to press star then 1 on your telephone keypad. If you require any further assistance, please press star then 0. At this time, I would like to turn the conference over to Ms. Aubrey Moore. Thank you. Ma'am, please begin.

Thank you, Operator. Good morning, everyone, and thank you for participating in today's call. Joining me in our Lexington headquarters are Scott Thompson, Chairman, President and CEO, and Bhaskar Rao, Executive Vice President and Chief Financial Officer. After prepared remarks, we will open the call for Q&A. Forward-looking statements that we make during this call are made pursuant to the Safe Harbor Revisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that these forward-looking statements, including the company's expectations regarding sales, earnings, net income, and adjusted EBITDA, and the anticipated performance of 2020 and subsequent periods involve uncertainties. Actual results may differ due to a variety of factors that could adversely affect the company's business. The factors that could cause actual results to differ materially from those identified include economic, regulatory, competitive, operating, and other factors discussed in the press release issued today. These factors are also discussed in the company's SEC filings, included but not limited to annual reports on Form 10-K and the company's quarterly reports on Form 10-Q under the headings Special Note Regarding Forward-Looking Statements and or Risk Factors. Any forward-looking statement speaks only as on the date 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. The press release contains reconciliations of this non-GAAP financial information to the most directly comparable GAAP information, except as otherwise discussed in the press release, as well as information regarding the methodology used in our constant currency presentation. We have posted the press release on the company's investor website at investor.tempersealy.com and have also filed it with the SEC. Our comments will supplement the detailed information provided in the press release. And now, without introduction, it's my pleasure to turn the call over to Scott.

Thank you, Aubrey. Good morning, and thank you for joining us on our 2020 Third Quarter Earnings Call. Our thoughts continue to be with those around the world whose lives have been impacted by the global health crisis. I'm proud of the team's success in providing employees and customers a safe environment while dealing with and mitigating an array of complex issues caused by the global health crisis. I'll begin the call with an overview of the quarter with some highlights. Then Bhaskar will review our record quarterly financial performance in more detail. Finally, I'll conclude with our thoughts on long-term capital allocation. The quarter was very strong. In the third quarter, global net sales grew a record 38% year over year, despite the material impact of supply chain constraints on our operations. Our results reflect the continuation of a solid broad-based industry trends and our worldwide leadership position. The third quarter sales growth of 38% exceeded our internal target, primarily driven by an overperformance of Tempur-Pedic in the U.S., and a quicker-than-anticipated recovery in our international operations. Sales would have been higher in the quarter if not for the continued supply chain constraints impacting Sealy and Sherwood in North America. Today, the industry, and specifically Tempur-Sealy, are squarely in the middle of people rethinking their priorities in life. One impact of COVID-19 has been people's increased focus on their health and wellness, while simultaneously spending a greater amount of time at home. We believe this focus on health, wellness, and quality of life is going to remain a priority for consumers in the future, and that our products will continue to resonate with those seeking quality sleep as part of their overall wellness plan. COVID-19 has caused so many disruptions and noise in our day-to-day lives, but sometimes it's hard to see some shifts in the market. Let me take a step back. The domestic betting industry is in the healthiest position I've seen. It is now structured for sustained profitable growth. The days of uneconomical retail store expansion is behind us. The number of retail doors have been rationalized. improving average sales and profit per store. The days of significant unfair dumping of overseas product in the market is also behind the industry. We expect new anti-dumping actions to reduce the number of mattresses coming in from overseas and benefiting domestic manufacturers. The days of new startups focused on uneconomical land graphs have been mitigated, and their strategies have moved to becoming profitable entities. At the same time, legacy retailers and manufacturers have become skilled in producing profitable internet sales. These dynamics, in addition to worldwide consumers focused on the category, provide an attractive backdrop for our business. It's important to remember that we entered the year in the strongest competitive position in our history. having made significant investments in our brands, products, people, and manufacturing operations. As a result, we reported record sales and earnings in the fourth quarter of 2019 and the first quarter of 2020, the two quarters prior to the pandemic. Although we are certainly benefiting from the current market trends, the lion's share of our performance is from our market position, investments, and our long-term strategies. As we all know, consumers' buying habits and expectations are evolving. For a brand to be relevant today, consumers expect that the brand will have an integrated omnichannel presence. One of our long-term initiatives is to optimize our powerful omnidistribution platform and be wherever consumers want to shop. Our execution on this initiative has positioned us well to meet their expectations. We believe our dedicated network of third-party retailers is key to our distribution footprint and will continue to be an area of growth going forward. At the same time, we've been focused on building our own direct-to-consumer channel. Tempur-Pedic was the original direct-to-consumer bedding company, and today we continue to expand both online and with high-end brick-and-mortar retail stores. The trend towards online purchases accelerated during the pandemic, And we believe that consumers will continue to lean in digitally to digital channels. Our direct channel web sales grew over 100 percent in the quarter, while driving higher EBITDA margin in an already very profitable distribution channel. Our robust sales trends include over 200 percent growth on our compressed betting offering, which compares favorably with others in the industry. We've also built out our network of high-end Tempur-Pedic retail stores that offer consumers a differentiated, low-pressure sales experience and serve as a brand halo in the market where they operate, elevating our brand throughout the entire market. We've opened six new stores in the third quarter and expect to have over 75 stores by the end of 2020. Our most recent opening was our Manhattan flagship, our 71st location, and it's located in the Bloomberg building. Turning to the third quarter profitability, adjusted EBITDA was a record $279 million, almost double that of the prior year, making this quarter the most profitable quarter in the company's history. We realized outstanding free cash flow generation, resulting in a record low leverage ratio of 1.9 times adjusted EBITDA, The company has grown trailing 12-month adjusted EBITDA for seven quarters in a row and achieved trailing 12-month adjusted EBITDA of $694 million this quarter, a 47% increase over prior years. This performance triggered our long-term aspirational incentive comp plan, which applies to approximately 150 of the company's leaders. The aspirational plan was put in place five years ago to motivate the company's leaders to drive the business towards meaningful growth during a challenging period in the industry. With that, I'll turn it over to Bhaskar to walk you through the financial results in more detail.