Safilo Group S.p.A.

Good evening and welcome to the Safilo third quarter and first nine months 2024 trading update. This call may contain forward-looking statements related to future events and operating economic and financial results of the Safilo Group. Such forecasts, due to their nature, imply a component of risk and uncertainty due to the fact that they depend on the occurrence of certain future events and developments. The actual results may therefore vary even significantly to those announced in relation to a multitude of factors. Today's participants are Angelo Trocchia, Chief Executive Officer, Michele Melotti, Chief Financial Officer, and Barbara Ferrante, Director of Investor Relations. I will now pass the call over to Mr. Angelo Trocchia, Chief Executive Officer. Mr. Trocchia, you may begin, sir.

Thanks. Thanks so much. Good evening, good evening everyone, and thank you for joining us today to review Safilo Quarter 3 2024 Trading Update. As expected in the third quarter, we continue to face a complex and volatile market environment, particularly in July and August, where sales performance was impacted by soft reorders of sunglasses and ongoing uncertainties across several key markets. In September, we saw a recovery, particularly in Europe, where the launch of our new collections delivered a promising start in terms of order collection. Despite the headwinds, we maintain our focus on our long-term priorities and I'm very pleased to report that we ensured growth in margin and in cash generations. The quarterly performance showed ongoing soft trend in North America and Asia, while Europe remained more resilient despite the slowdown, which was due to a subdued sunglasses business. As said, throughout the quarter we stayed committed to improving our operational efficiency, which has allowed us to grow our gross margin and deliver an improvement also at operating level. Additionally, our focus on financial discipline allowed us to achieve another period of positive and higher free cash flow thanks to an effective management of our working capital. Let me hand over to Michele, who will take you through our trading updates in more detail.

Thank you, Angelo, and good evening to all of you. Starting from our total net sales performance, revenues in the third quarter were down 3.4% at cost and exchange rates, 4.1% at current exchange rates, following the appreciation of the euro on the US dollar and against other currencies, mainly from emerging countries. This brought our sales performance in the first nine months to minus 2.7% at cost and exchange rates, 3.5% at current rates. As you know, the impact due to Jimmy Choo exit was more moderate in Q3 compared to the previous two quarters. However, it was not insignificant in such a complex business environment. Excluding this headwind, both the quarter and our year-to-date performance were flattish versus the corresponding period of last year. In Q3, looking at our underlining driver, on one side, Carrera, David Beckham, Tommy Fieger and Marc Jacobs kept very solid grow rates, up mid-single to low double digits, benefiting from a favorable product and channel mix. On the other, in eyewear, we saw Polaroid and other brands penalized by their higher exposure to sunglasses. While in the sports segment, Smith's performance remained affected by a highly cautious market environment. Let's now look at what happened in our regions. In the third quarter, Europe was down 1.4% at cost and currency and flattish at current currency, with the performance in the first nine months remaining positive by 2.2% at cost and trade, 1% reported. Excluding Jimmy Choo, the underlying sales performance in Europe saw a slight grow also in Q3, up mid-single digit in the first nine months, proving that the market remained resilient despite a deceleration compared to Q1 and Q2, which was due to the soft sunglass sales over the period. Prescription frames were instead very solid, particularly in France, where independent opticians and chains continued to see a nice growth. Germany and Eastern Europe markets were also ongoing positive drivers, while Italy and Spain were softer. I would name Carrera, Tom Hilfiger, Boss, Carolina Herrera and Isabelle Morin, our solid bestseller in Europe, while Polaroid was on the soft side. As mentioned by Angelo, the exit to the quarter was positive, with September partially offsetting July and August, as the month saw the first delivery of our new autumn-winter collection, marking a promising start to order collection. Moving to North America, excluding Jimmy Choo, the underlying performance of the area remained weak and volatile, down low single digit, with varying trends across product categories and distribution channels. The performance was weighted down by still prudent demand in winter sport equipment, as not only clients but also consumers in the D2C channel maintain a cautious approach to purchases, waiting to understand how the season will kick off. In Iowa, horse's revenues of prescription frame and sunglasses performed reasonably well, maintaining a good recovery path thanks mainly to the growth achieved by Carrera, Boss, David Beckham, Tommy Figer and Mark Jacobs. On the contrary, the exit to the quarter was subdued for sunglasses in the D2C channel, meaning Blenders was in the end soft in the period. As you know, the couple of months ahead of us are pretty crucial for North America, in particular on the D2C front, with the Black Friday and holiday season kicking in. You may remember that last year there was a very strong period for blenders, thanks to the launch of the new partnership with Coach Prime, which this year is in the second round. In sport, Smith instead runs against Easy Comp as the start of the winter season was particularly soft in Q4 last year due to the unfavorable weather condition with no snow. Moving to emerging markets, in Asia, the third quarter was very much a continuation of the second quarter with net sales down 12% at cost and exchange rates, closing the first nine months at minus 7.8%. This was largely due to a slowdown in China. The feedback we received, however, at the Beijing Optical Fair in September was encouraging, which we expect will help drive recovery in the months ahead. Our key positives in Asia were Polaroid and Marc Jacobs, while Carrera continued to make a nice progress in Australia. Sales in our rest of the world were still negative in Q3, but improved compared to the previous quarter, down 1% at cost and exchange rates. with the first nine months at minus 8.1%. It was still a soft quarter for the area, although trend improved compared to the first half of the year, especially in the EMEA markets, driven by Boss, David Beckham, and Tom Hilfiger. Turning to our economic performance, we are pleased to report another solid improvement of our gross margin, which in the quarter increased by 140 basis points, rising to 59.1% of sales, compared to the adjusted level of 57.7% in the third quarter of last year. This was largely driven by the structural efficiency over a new industrial setup and price-mix dynamics, which remain in the period slightly favorable. Thus, our gross margin in the first nine months was solid at 59.7%, confirming an improvement of 120 basis points over the adjusted gross margin of last year. At the operating level, despite the operating leverage stemming from a lower level of revenues, we managed to bring some of the gross margin improvement to our adjusted BDA margin level. In the quarter, selling general and administrative expenses recorded a decrease of 2.8%, primarily driven by the ongoing normalization of IT investments. On the other hand, I would like to highlight that despite the challenges in the top line, We remain committed to supporting our strategic initiatives. Marketing expenses saw a slight decrease versus a year ago, but we continue to support the launch of our new collection and campaigns through quite sustained investment, which we believe will drive long-term growth. In the quarter, our adjusted BDA margin improved by 20 basis points from 7.7% to 7.9%, closing the first nine months with an adjusted BDA margin of 10%. 40 basis points better than in the same period of last year. Finally, on our financial performance, in the third quarter we generated a positive free cash flow of 16.9 million euros. This was largely driven by a tight control over working capital, in particular an effective inventory management, which allowed us to maintain our financial efficiencies despite the market challenges. Therefore, over the first nine months, we almost completely offset the cash absorption recorded in the first half of the year, closing the period just lightly negative by €2.1 million. You will certainly remember that this flow includes the investment made in the second quarter for approximately €35 million to acquire the perpetual license of iWear by David Beckham Brand, while in the first nine months the cash flow from operating activity was positive for approximately €50 million. At the end of September, the Group Net Debt decreased to €96.1 million or €56.6 million pre-FRS16, compared to €100.4 million at the end of June. As you know, our position at the end of September also includes the share buyback program we launched on July 1st, which by the end of the period accounted for around 7.9 million SAFILO Group Order Re-Share equal to approximately 1.9% of the outstanding capital for a total transaction amount of 8.7 million. Thank you all for your attention and I'll now hand over to Angelo.