Alessandra Jimenez

Alessandra Jimenez asked about the largest synergy opportunity within the Purchasing Power segment, differentiating between benefits expected in the early integration period versus multi-year opportunities. She also inquired about any early reads on the progression of tax returns this year.

Answer

CEO Steve Michaels identified accelerating the growth rate of Purchasing Power as the largest opportunity, focusing on better penetration into existing client partners, adding new partners, and enhancing the direct-to-consumer channel. He also mentioned looking for cost-side improvements, data, and collections. Regarding tax returns, Steve Michaels stated it was too early to tell, with significant activity expected in the next week and the first week of March.

Alessandra Jimenez asked about the largest synergy opportunities within the Purchasing Power segment and how these benefits are expected to impact the P&L during the early integration period versus a multi-year timeframe. She also inquired about any early reads on the progression of tax returns for the current year.

Answer

Steve Michaels, President and Chief Executive Officer, identified accelerating Purchasing Power's growth rate as the largest opportunity, focusing on better penetration into existing client partners, adding new partners, and enhancing the direct-to-consumer channel. He also mentioned looking for cost, data, and collection improvements. Regarding tax returns, Mr. Michaels stated it was too early for definitive reads, with significant activity expected in the coming weeks.

Alessandra Jimenez, on for Bobby Griffin, asked for more detail on the 2025 revenue guidance, specifically the expected full-year GMV drag from the Big Lots bankruptcy. She also inquired about current customer behavior, asking if performance changes were broad-based or concentrated among new, lower-funnel customers.

Answer

CEO Steven Michaels clarified that while the company doesn't guide to full-year GMV, the Q1 impact from Big Lots is estimated to be in the $135 million to $150 million range on an annualized basis. He noted this was a significant change from expectations prior to the liquidation announcement. Michaels also confirmed that performance stress is concentrated at the lower end of the portfolio and within the new customer cohort, which is harder to underwrite than repeat customers, leading to slightly higher delinquencies.

Alessandra Jimenez followed up on the bedding segment, asking if the notable decrease in U.S. Spring volumes in Q4 versus Q3 was primarily due to customer consolidation and for management's view on the industry's performance in 4Q versus 3Q. She then shifted to the Automotive segment, inquiring about customer supply chain disruptions in Q4 and any lingering issues in Q1. Finally, she asked about capital allocation priorities, specifically regarding debt reduction, the 2x leverage target, and whether the focus is on EBITDA growth or building cash balance.

Answer

President of Bedding Products Tyson Hagale confirmed that the primary reason for the delta in U.S. Spring performance was customer consolidation, with the business otherwise performing in line with the market. He noted that Q4 was expected to be down versus Q3 due to normal seasonality and a tough comparison to a strong Q4 in the prior year. President of Specialized Products and Furniture, Flooring and Textile Products Sam Smith explained that Automotive supply chain disruptions in Q4 included issues with a Dutch semiconductor company, an aluminum manufacturer's fire in North America, and specific OEM issues in Europe (cyberattack, inventory overstock). He stated that these Q4 issues are now behind them. CEO Karl G. Glassman reiterated that long-term capital allocation priorities remain organic growth, strategic acquisitions, and shareholder returns, but the near-term goal is to move closer to the 2x leverage target, expecting to be there by the end of the current calendar year.

Alessandra Jimenez asked about the notable decrease in US spring volumes in Q4 versus Q3, specifically if it was driven by customer consolidation or other factors, and the industry's overall performance view. She also inquired about customer supply chain disruptions in the automotive segment during Q4, their impact, and any lingering issues in Q1. Finally, she sought an update on capital allocation priorities, particularly the goal to reach 2x leverage through EBITDA growth or cash balance.

Answer

Tyson Hagale (President of the Bedding Products segment) confirmed that customer consolidation was the primary reason for the US Spring volume delta in Q4 versus Q3, noting normal seasonality and a tough comparison to Q4 2024. Sam Smith (President of the Specialized Products and Furniture, Flooring and Textile Products segments) detailed Q4 auto supply chain disruptions, including a Dutch semiconductor company shutdown, an aluminum manufacturer fire, a European OEM cyberattack, and inventory issues, confirming these are now resolved. Karl G. Glassman (CEO) and Ben Burns (CFO) reiterated long-term capital allocation priorities (organic growth, strategic acquisitions, shareholder returns) but emphasized the near-term goal of reaching the 2x leverage target by the end of 2026, acknowledging Q1 typically uses cash for working capital.

Alessandra Jimenez followed up on capital allocation, asking about Leggett & Platt's long-term leverage targets, further details on capital allocation priorities, and specific areas for potential bolt-on acquisitions, given that long-term debt is well-termed out.

Answer

Ben Burns, EVP and CFO, stated the long-term net debt leverage target is two times. He reiterated that capital allocation will prioritize debt reduction, while also considering small strategic acquisitions, most likely in the textiles business, where they have a successful track record of driving immediate synergies. Share repurchases are also on their mind, though with no specific timetable.

Alessandra Jimenez asked about Leggett & Platt's primary opportunities for organic growth now that the majority of restructuring is nearing completion, assuming a supportive macro environment. She also followed up on capital allocation, seeking clarification on long-term leverage targets, further details on capital allocation priorities, and potential areas for bolt-on acquisitions.

Answer

President and CEO Karl Glassman identified finished bedding, particularly private label work, as the largest long-term growth opportunity. EVP and President of Bedding Products Tyson Hagale noted increased innovation and customer engagement in new product development. EVP, President of Specialized Products and Furniture, Flooring and Textile Products Sam Smith highlighted new products in home furniture and nearshoring opportunities in work furniture. EVP and CFO Ben Burns reiterated the long-term net debt leverage target of 2x, with continued prioritization of debt reduction, and mentioned considering small strategic acquisitions, most likely in the textiles business, and share repurchases.

Alessandra Jimenez of Raymond James & Associates, Inc. asked about the portion of cost of goods sold subject to new tariffs, any planned pricing actions, and the top-line impact from store count rationalization in 2025.

Answer

CFO Francis Lee explained that the largest tariff exposure is from Mexico, which supplies about one-third of materials, and that mitigation plans are in place. CEO Shelly Ibach noted the company will be decisive with pricing but is mindful of the already pressured consumer. Francis Lee added that store closures created a couple of points of top-line pressure in 2024 and the company was pleased with the associated sales transfer rates.