Welcome to the Natuzzi S.p.A. Fourth Quarter and Full Year 2024 Financial Results Webcast. [Operator Instructions]. Joining us on today's call are Antonio Achille, Chief Executive Officer; Pasquale Natuzzi, Executive Chairman; Carlo Silvestri, Chief Financial Officer; Daniele Tranchini, Chief Marketing and Communications Officer; and Piero Direnzo, Investor Relations. As a reminder, today's call is being recorded. I'd now like to turn the conference call over to Piero. Please go ahead.

Thank you, Kevin, and good day to everyone. Thank you for joining the Natuzzi's conference call for the 2024 Fourth Quarter and Full Year financial results. After a brief introduction, we will give room for the Q&A session. Before proceeding, we would like to advise our listeners that our discussion today could contain certain statements that constitute forward-looking statements under the United States security laws. Obviously, actual results might differ materially from those in the forward-looking statements because of risks and uncertainties that can affect our results of operations and financial condition. Please refer to our most recent annual report on Form 20-F filed with the SEC for a complete review of those risks. The company assumes no obligation to update or revise any forward-looking matters discussed during this call. And now I would like to turn the call over to the company's Chief Executive Officer. Please, Antonio.

Thank you, Kevin. Thank you, Piero. It's a pleasure to be again with you, and good morning to the people joining from U.S. and good afternoon for those joining from Europe. We're going to be today discussing the results of the last quarter and the full fiscal year 2024. As usually, we'd like to provide also context and what we are working on beyond the figure we're going to be sharing. That's the reason why with Pasquale, we also decided to invite our Chief Marketing Officer that will be testifying together with Pasquale, the stand that our brand retail journey went up to now. Let me start with the financials. As you have read by our press, we closed the year at EUR318.8 million, 3% lower than last year. As you know, the market continue being quite volatile and challenging. This is a level of sales, which, of course, does not make us satisfied. At the same time, I believe it is a testament that our company is very resilient in light of a very, very volatile and through 2024, still a very soft market in most of the geography we operate in. Looking at the share out of the total, which is represented by branded out of the EUR 318.8 million, EUR289 million has been made through our brand. This is definitely part of our vision initiated by our Chairman, Pasquale, of transforming a manufacturer into a brand retailer. This figure compared with EUR295 million in 2023 and EUR295.9 million in 2019. So while we look at 2019 and we continue looking at 2019 as a comparable year -- as a year of comparison because it was the last year before this very prolonged period in which we actually witnessed everything from COVID to wars to duty war, it's…

Probably, Antonio, we should first allow the shareholder to ask some question, okay? I mean let's interact in this -- we shouldn't talk always we. I mean, let our shareholders to ask question, all right?

Absolutely. Absolutely. So, Kevin, I would say let's open a first round of discussion. The other point in the agenda, I might cover directly with the help of Pasquale is the work we have done in the commercial side, which I want to share because, of course, I believe you should tell us, but I believe as an investor myself in the company is, okay, you've been working on the margin, but when the revenue will come because now the machine, if you wish, is ready to deliver better results but probably need sales. So I want to tell you what we are working to get sales. But let me stop here for a first round of Q&A.

Thank you. [Operator Instructions] At this point, it appears nobody has any questions at this time.

Okay, so let's complete the presentation, and I'm sure there will be questions at the end. So the aspect I was mentioning, and Pasquale, you jump in any time, but then I will ask, definitely, Daniele to comment, is the transformation in the direction of being a retailer? Do you want to contribute, Pasquale or should I continue as you prefer?

No, no, no, you can continue, Antonio. Don't worry. I'm here just to support you. Don't worry.

Feel free to jump in anytime. So very transparently because we have always been very transparent with you as investors. In 2000, the company decided to become a retailer because they also understood and that was really credit to Pasquale of this lucidity then being a manufacturer out of Italy, being a value manufacturer out of Italy with aero with inflation was not any longer defendable. But they also understood that the story under Natuzzi and the legitimacy to sustain a brand positioning because there was innovation, there was style, there was also this methodological ability to create beauty, which are all elements which are at the core of a brand. And a brand is a retailer by definition. And this vision, in fact, encountered quite a significant success with patent that decide opening stores, but also Natuzzi decided to open stores. But at the time, there was a significant disconnect between that vision and operation because system were not allowed to read data and sell out timely. There were no competencies to manage aspects which are critical for a retailer like merchandising, like customer experience, visual, neither ability to decide and we discussed before about the closing of some store, whether a location was completely appropriate. There was not yet a methodology. So the company, in a sense, had to learn why it was already on flight because stores were opened, expectations were generated, but system were not there. I must say that I'm particularly impressed and you know that my background has been for 25 years in advisory by the speed in which this company has been able to equip itself with tools, competencies and system and people. Under the last 3 years, we create a new division that were not simply existing. We create a customer experience…

Thank you, Antonio. I don't know if I can share my screen just for a few minutes.

Yes, yes, sure, Daniele. If you go -- maybe, Kevin, you can help but...

[Operator Instructions].

[Foreign Language]. Maybe, it's done? [Foreign Language].

[Foreign Language]. While I try to -- in fact, while I try to get the technology to assist me, let me start by commenting some of the words that somehow I don't seem to be able to...

[Foreign Language]. Sorry, I am switching, I am doing a bit of remote IT support. [Foreign Language]. [Foreign Language], Pasquale, I made point, so there is a bit of additional complexity for not being in the quarter.

Okay. Somehow, it does not allow me to do what I'm trying to do, but never mind. I will...

It may be a firewall issue, sir, I do apologize. I'm not...

Yes, that's all right. Don't worry. Let just give you a few comments to reinforce what Antonio was talking about just now. The challenge that I've taken on as...

Daniele, while you are unable to show the image of the new collection that we launched together with the marketing, let me explain a little bit, okay, the journey that the company is doing in terms of retailer. So let's say, in our history, we have made always a wonderful product. And the consumer loves a Natuzzi product, no question about. And because of that, a lot of entrepreneurs in China, in America, in United Kingdom, in Spain, everywhere, they decided to open a Natuzzi store and show the brand and show the product. Obviously, that doesn't mean to manage retailer because each individual entrepreneur in each individual country, they were managing the brand in their way, okay? We have been grateful to them for believing and trusting in us. But we realize that we need to control our brands. So that's why we have been working on analytics in order to -- first of all, do we clusterize the store? Where we have the store? How many stores have we? Where they're located? Are they appropriately located, yes or not? And then we succeed also to connect with our store in order to control the store traffic, in order to control also the conversion rate, the customer gets in the store, okay? Are we able to convert the visit in sale?

Pasquale, [Foreign Language].

I think he may have frozen. Yes, there we go. It's the connectivity issue.

Okay. Okay, guys, I think this was commenting what pretty much we discussed. Definitely Pasquale will be able to [Foreign Language]. Kevin, again, maybe you want to go around for Q&A, this question.

Will do. [Operator Instructions]. Our first question is coming from George Melas-Kyriazi from MKH Management. George, please proceed. George, unmute your phone. Corey Pinkston, your line is live.

Antonio, do you hear me now?

[Foreign Language].

Yes, okay. I have been disconnected for a little while. I mean, as you know I'm in America. I'm in America, but I'm surprised. I must be more connected than Italy. But anyway. Okay, so go ahead, then.

Gentlemen, can you hear me?

We do.

Yes.

Congratulations on navigating the environment we're in, especially with the manufacturing movements that you made for additions to get it back into Europe and all the rest and all the development of the brand and as you said, project versus product development in the company, which probably is as critical today as it has ever been in light of the current environment. One question, I missed the very beginning of your comments, Antonio. But as it relates to the tariffs, I know we're speculating as to how long, how they're going to be, what they're going to be, et cetera. Based on kind of as you look at the current market, if we assume that there are going to be some kind of increased tariffs in place and maybe you can -- we can speculate on that. As it relates to either pricing of the product to the customer or margin impact, is there any ability to kind of give us some thoughts as to how to think about that? And also, when I don't -- we're not as close to the market as you are. But when Natuzzi is in America, obviously, we can look at the comps that are out there, whether it's RH or others. But you're a very different, I'll say, brand and approach to the market. And so as we think about the fact of the consumer being in very different categories, whether it's a higher-end consumer, medium, kind of higher medium. Can you just give us a little bit of idea as to what you're seeing in the market now, obviously, without trying to give us forecast?

Yes. No, and thank you for being so respectful, Corey, in posing your question. I would compose the answer maybe in 3 parts. So how we plan to react and how we already actually reacted. What we expect that this could be the impact in terms of large distributor and consumer short term, but also, which is the third part, how this position Natuzzi in light of the large competitors in U.S. that you didn't mention explicitly, but we know who they are, it's Restoration Hardware, it's Crate & Barrel, Arhaus, and other company. So how we are reacting? Definitely, this was not something we would have hoped for. That's for sure. I mean we were actually expecting the opposite that at least from U.S., there would have been some signal of stability. But having said that, our platform per se is more equipped to navigate volatility because we are not dependent on third party. We have our own production. And as I mentioned, we have several platforms because we have Italy, which is definitely the place where we produce our high-end branded collection. But we operate also facility across Europe in Romania. In Romania, just to tell you, we have 1 million square feet surface. So it's huge and definitely scalable. We have a production, as I mentioned before, in China. We have a production predominantly outsourcing in Vietnam, and we have production in Brazil and Salvador de Bahia. So this legacy, as you know, is a heavy legacy when you look in our P&L. But in a phase like this, give us flexibility to reorient production where we make sense. I made the example before of Natuzzi Edition for North America being moved to Europe before. And there are other options we are currently considering. So this is…

No, thank you very much. It really does. And part of the thesis that as shareholders is being a little bit smaller than the competition, being in a different segment than the competition to a certain extent. As we look at it, which is you're across the board. But I think the flexibility you have on the supply chain gives us a lot of comfort. And hopefully, as you said, we get to some type of resolution sooner rather than later. But thank you very much, Antonio.

And if any of you who sit in the U.S. can help, we will be very grateful to each of you. Okay. Next.

It appears there are no further questions at this time. But if you do want to ask a question, please use the Ask a Question feature on your screen, okay?

So Kevin, in transparency, I received some questions by e-mail, which is a bit atypical because -- so I don't know, Piero, if you do receive questions by e-mail.

Just received a list of requests from a guy who is not in the position to participate in the call.

So this gentleman, Garrett Larson is not in the call.

Yes, yes.

I'll make sure we can address it offline. Okay. Any other question?

It appears there are no further questions at this time.

So, Pasquale, it looks like your line has been stabilized. [Foreign Language].

Okay. But again, yes, today, if we should look at the positive side of our company today is that we are in the position to analyze and make diagnosis why the store in Sarasota is making money? What they make a special? Why the store in United Kingdom probably is not making money? What's the reason? So low traffic, it's conversion rate is the problem. The issue is the ticket, which product are we selling? Which product are we not selling? Today, we are in the position in a very fast way to do diagnosis on each model everywhere in the world, each store in the world we have and basic [Technical Difficulty].

It appears the WiFi froze.

[Foreign Language].

[Foreign Language]. I am connected again, Antonio because I don't know.

You are. You are. You can give it another try. I hope this time is going to be more stable.

I'm sorry because communication is not really the good one that should be. But anyway, I was saying that while we are in the position with our system to analyze and make diagnosis on the performance of each individual store that allow us to define action plan through changing product is not performing with a new product that could perform based on our know-how, knowledge and also supported with the marketing. That's what we have been doing in 2024, preparing how can we -- because we have a store. We have a store in China. We have a store in America. We have a store in Europe. We have a store in Middle East. We have a store in everywhere. We need to increase the sales. And in order to do that, we feel very confident that with the new collection that we developed in 2024, wherever we have done already, the launch of the new collection supported by really an effective and very good marketing support are performing very well. So that's our challenge this year is just to improve consumer confidence in each geography, in each store, and we have all the tools to do that. I mean, so that's what I can say that I'm confident that despite the geopolitical situation, what -- I mean, production, we are -- production-wise, we are very well, let's say, organized because the factory in Brazil, the factory in Romania, the factory in Italy, the factory in China, the factory also in Vietnam. I mean, even regarding the duty, the tariff doesn't concern us really very much. Our challenge is primarily how we should improve the sales in each individual store and geography. We have the new collection that we developed for Natuzzi Italia, but also for Natuzzi Edition. And we have all the marketing plan. We have made a huge investment in order to support geography and the individual store or group of store like we did in Florida, for example. We have been doing -- launching comfortness collection in Florida, but also in Georgia and also in Texas. And we have -- I mean, we are getting -- the traffic is increasing, absolutely. We are getting a lot of contact. So that's what I can say regarding the marketing department and the product development market company has been doing in order to overcome this situation that no question about it is not an easy situation. We see also other peers how they are performing. So that's the reality.

Thank you, Pasquale. And this time, line supported the speech. Thank you for closing in a very positive and optimistic way, and it's an optimism that comes from hard work, not just from hope. Kevin, I believe unless there are question, we are complete for the section.

We do have one question from George Melas-Kyriazi.

Can you hear me?

We got you my friend, there you go.

Great. Okay. Well, it's actually quite -- it's interesting. I think Pasquale answered a lot of the questions that I had. So I appreciate that, Pasquale. But it was about the tools, the tools and the system to really in that transition into retail. And I think you mentioned, Pasquale, that you have sort of all the tools. And I just want to go over that one more time. Are there certain things that you feel are missing that you still need to add to your capability, primarily in terms of system in order to -- and then the second question is with this analytical ability to really look at products across so many stores. What have you learned so far? What is it -- is it that -- how does that impact the way you think about the collection?

Okay. So regarding the tools that we have today, we believe we have done really something which we should be proud of because to be based in Italy and manage a store in America and in China, in South America and in Mexico or in all Europe, Middle East and Africa, I mean, has been not an easy exercise. But today, we are in the position to analyze and do diagnosis why we are not performing well or why -- or what we need to perform better in terms of -- probably we need to do training to the people because the conversion rate is very low. So then we know that our human resource management will provide for training, for example, for the people in the store. If there are some product because we have living room in different style and function in our store. We have a dining, we have a bedding. I mean, our product proposition to decorate a home, and we have a different product in our store. But we need to understand which product is performing and which one is not performing and what we do, how fast can we replace and improve the merchandising in the store. That's very important in order to monitor the sales by square foot. It's very important because the lease, the people, the cost of the store is very high. So we need really to be careful and act very fast in order to improve the sales by square foot. So that's one of the challenge. Product-wise, we believe that based on our 66 years experience and the people that we have in our company because we have been based always in the same territory. We haven't changed. In our industry, company, they move from one country to another country, from one region to another region. And they never put together the management that should be able really to manage the brand in the appropriate way. Regarding that, we are very proud because we have people in Apulia working with us, very talented people. We have the people, we have the production. We have the store everywhere in the world. We need to improve how to manage and how to improve the sales in our store. We created the tools. We have the product, we have the collection. We have the marketing. and we are confident despite whatever will happen in the world because we don't know. I mean the war in Ukraine, what will happen. The war in the Middle East, what will happen? Who knows? I mean, there are uncertainty in all the way around. But even though we are confident, motivate and we work very hard in order to overcome this challenging period. I mean, that's what I can say.

Great. I appreciate that very much. And maybe a question for Antonio, as my last question. Do you sort of have a line of sight to profitability, what it takes to get to profitability? Of course, I think the real big factor is what Pasquale was talking about increasing revenue and increasing revenue per store. But maybe can you talk a little bit about that? And maybe also about is there any expansion in the U.S., any retail expansion in the U.S. in '25 or '26 that you're looking at?

Our priority now is to improve our organic growth. We have the store. We are committed to make the store more profitable. That will be our today and tomorrow challenge. Antonio want to say and you have mute, Antonio.

Yes, I agree with, of course, with Pasquale because those decisions are always taken in Symphony. I think given the current market and given how much headroom we have, we believe that organic growth is a reasonable way for at least the remaining '25. We opened in U.S., as you know, 5 new Natuzzi Edition -- Natuzzi Italia store over the last 12 months. Each of them is a baby, they now need to be cured and let grow in the proper way. On your -- the other question, Georgia, in reality, if you look at the company has invested a lot in this journey, more than EUR1 billion because if you look over the last 15 years, the last years were from, let's say, the only years from a reported year where we had a positive EBIT were 2021 and 2022. And so reflecting on what could be a threshold for -- with the current model to be at breakeven is clearly much, much lower than it used to be. We saw that in 2019 with EUR390 million sales, the company lost EUR22 million. I believe now, and Carlo can correct me if I'm not right, I have not done sophisticated modeling, but I believe if we are in the range of EUR340 million, we are profitable. And we -- with a bit more than that, we definitely produce positive cash flow. So I think the level at which the company can be breakeven has been seriously reduced if we keep protecting our marginality. So if we go back to the revenue the company was able, and I believe is still able to express with 660 stores and with 400 gallery, that should be a proof of the equation we have been hardly working on, that should be translating in profitability.

Thank you.

No, my pleasure, George. And thank you for your continuous trust in our company. End of Q&A:

And Antonio, it appears there are no further questions at this time.

Okay. Then if this is, let's say, the last question, I take the opportunity to thank Pasquale, Daniele, Carlo and Piero for being us today and supporting the conversation. But in particular, thanks everyone of you, which has been joining this conversation. The message I would like to convey is that, of course, this is not the easiest time for a brand retail company, but we are very convinced on what we are doing, and we are believing we are building a model that can be delivering results. I welcome as typically happen also follow-up question. I'm sure that between myself, Piero and Carlo will be able to address them even beyond this conference call. Thank you so much, and wish you a great end of the week. If you happen to be around High Point, please stop at our building. There will be a great opportunity to interact with Pasquale with our team and to see our collection. This year, I stayed in a quarter to be focused on a few things that need to be closed, but there will be definitely a lot of colleagues that can be sharing with you the excitement of the new collection in High Point.

I extend and I confirm the invitation. I would be pleased to have anyone of you to visit us here. Thank you.

Thank you so much, Kevin. You can close.

[Operator Closing Remarks].