Safilo Group S.p.A.

Good evening and welcome to the Safilo Group Full Year 2024 Financial Results. This call may contain forward-looking statements related to future events and operating economic and financial results for 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 result may therefore vary even significantly to those announced in relation to a multitude of factors. Today's participants are Mr. Angelo Trocchia, Chief Executive Officer, Mr. Michele Melotti, Chief Financial Officer, and Ms. 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. Good evening, everyone, and thank you for joining us today to discuss Safilo's full year 2024 performance. As we all know, 2024 was a year shaped by economic uncertainty, geopolitical tensions, and shifting consumer behaviors. The Iowa sector was not immune to these challenges, as market conditions weighed on demand across different regions. Despite this, we proved our resilience and flexibility, successfully navigating market headwinds and consolidating our competitive edge. We achieved this by leveraging dynamic brand portfolio management, making targeted investments, and maintaining a steadfast dedication to the quality of services, both for our customers and consumers. Today, I will walk you through our key business highlights, followed by an update on our sustainability progress. then leaving Michele to guide you through the details on our sales, economic, and financial performance for the full year. Turning now to the highlights for 2024, let's start with our top-line performance. Our total sales declined by 2.3% at constant exchange rates. a result that reflects the combination of still unfavorable market dynamics in North America and the impact of concluding the Jimmy Choo license, two headwinds which were mitigated by the continued positive performance of Europe. If we exclude the effect of the license phase-out, our sales trend was slightly positive, thanks to the combination of our key growth drivers, in particular Carrera, David Baker, Tommy Figer, and Carolina Rivera. Now, while the revenue environment remained challenging, we saw clear progress on our profitability metrics, driven by the improvement of the gross margin, which reached nearly 60% of sales. reflecting the increased efficiency of our industrial footprint and an effective pricing strategy. From a financial perspective, we also demonstrate solid cash generation. We declare cash flow from operating activities which exceed €70 million. This allows us to support key investments, namely the acquisition of the perpetual license for the eyewear by David Beckham, a strategic move that significantly strengthens our home brand portfolio, which as a result now represents approximately 60% of the total revenue. Last year, we also substantially completed the long-term stabilization of our licensed portfolio. This involved the early renewal of Boss & Hugo and Marc Jacobs, alongside the continuation of our important partnership with Moschino, Missoni, and Levi's. Building on this momentum, at the beginning of this year, we successfully renewed Under Armour and D-Squared. As a result of all this work, we have now secured roughly 80% of our licensed portfolio through 2030 and 2031. Building on these business highlights, I would now like to focus on the performance of our key home brands. which continue to be a central pillar of our strategy, demonstrating both resilience and growth potential despite a market environment that remains challenging. On one hand, we saw strong headwinds driven by successful distribution expansion, solid consumer demand for optical frames, and brand equity reinforcement in key markets. On the other, we faced headwinds from weather-related impacts on sunglasses, a soft sport business environment, and more cautious wholesale purchasing trends. Let's talk about Carrera. Carrera was a standout. We saw double-digit growth in both Europe and North America, and it's exciting to say that the U.S. is now Carrera's number one market, a testament to its growing global appeal. What's really resonating is the Carrera Women collection. It's been incredibly successful, and we have seen strong performance across both optical and SAR categories. And, of course, I want to advise the Carrera Ducati collection. It has continued to perform very well. We have seen strong interest from the sport and fashion forward consumers. The quality of the collection and the brand recognition has been a winning combination, demonstrating the brand's versatility and strength in diverse market segments. If we move to Polaroid, Polaroid faced a bit of a challenge with the sun season in Europe delayed by adverse weather conditions in May and June, which impacted early summer sales. Despite the challenges, Polaroid managed to close the year with only a marginal slowdown thanks to a strong recover in the fourth quarter. This rebound was mainly driven by the optical business, but sunglasses were also moderately positive, signaling improving momentum heading into the new year. Last year, Blender had a very challenging quarter four, largely due to a tough comparison with the same year of 2023. which had been boosted by the success of its first collection in collaboration with Coach Prime. On the other hand, in 2024, Blenders continued to expand its wholesale network as we kept progressing with the brand's omni-channel strategy. Recently, we have observed intensified price competition in Blenders' market segment, prompting us to react more swiftly. Let's talk about Smith. Smith also experienced its specific headwinds, impacted by lower winter pre-order and the soft summer bike business, reflecting broader challenges in the sport and the outdoor sector. However, its direct-to-consumer challenge remained robust, and we saw a strong Q4 rebound, driven by a positive start of the 2025 ski season. So also in Smith's case, we had a moderate overall slowdown due to this market fluctuation. But the brand continued to reinforce his strong competitive position. And to finish, let's talk about the VBECA. The VBECA, which had another phenomenal year. We achieved high double-digit growth across Europe, North America, and Middle East, driven by strategic distribution expansions. It's been great to see the brand benefit from a real well-balanced product mix with both optical and some collections contributing significantly to its success. Before handing over to Michele, I would like to brief you also on our sustainability journey, as 2024 was a year of significant progress on this front. One of our biggest achievements was further reducing our environmental impact. By the end of the year, 95% of our electricity consumption was covered by renewable sources, up from 90% in 2023. This milestone helped us achieve a 90% reduction compared to 2023 in Scope 1 and Scope 2 emissions. At the same time, we made important advancements in sustainable products. Last year, the share of new collections made by recycled or bio-based materials increased to 23%, up from 70% in 2023. And for some of our brands, this percentage was even higher, over 90% for Polaroid and more than 40% for Bose. Tommy's figure and relax. These results, together with upstream live chain improvement initiatives, helped reduce scope-free emissions by 5% compared to 2023. Behind environmental impact, we remain strongly committed to social responsibility. We marked 20 years of partnership with Special Olympics, a collaboration that we have now extended through 2027, reaffirming our commitment and dedication to inclusion, accessibility, and eye health. And Polaroid participation in the global Love Your Eyes campaign, promoted by the International Agency for the Prevention of Blindness, is another example of our role in advancing vision care and accessibility. We know there is still more to do, and as we move forward, we will continue embedding sustainability into everything we do. And now, I would like to hand it over to Michele.

Thank you, Angelo, and good evening to all of you. Let's take a closer look at our sales performance for 2024. We closed the year with a total net sales of €993.2 million, down 3.1% at current exchange rate and 2.3% at cost of exchange rate compared to 2023. In Q4, sales performance improved compared to the previous quarter of the year, recording a contraction of 1.6% at current exchange rate and 1.1% at constant exchange rate. As highlighted by Angelo, our full-year revenue performance was slightly positive, excluding Jimmy Choo, while it was positive by almost 2% in Q4. Our underlying sales performance reflected a mix of dynamics across different market and product categories. Europe remains our strongest performing region with independent opticians and chains proving to be our most resilient sales channel. Within our product portfolio, prescription frames continue to outperform sunglasses, affecting steady positive consumer demand for optical products across all regions. Our online business remains solid, around 16% of sales, driven by two diverging trends. On one side, we saw particularly strong performance from Smith Directing Consumer Channel, while Blender faced a softer year due to the tough comp that I just discussed. Looking at our European performance, we closed the year with sales up 1.6% at cost of exchange rate after recording a flat performance in Q4. Excluding the impact of the Jimmy Choo phase-out, full-year sales in Europe grew mid-single-digit, with Q4 up around 3%. France was one of our best-performing markets, supported by an expanding commercial network and strong demand for prescription-free. The Italian market was moderately positive, while Eastern European markets posted strong results, in particular Poland and Turkey. Last year, Germany was also an important positive driver for us, benefiting from the growth of the internet peer-to-peer clients. The market decelerated in Q4 as the business environment became more uncertain. A key driver of our success in Europe was the continued expansion of our UN Sub-Silo B2B platform, which has now been adopted by more than 28,000 clients, helping us to improve efficiency and strengthen relationships with our partners. Among our brands, Carrera and David Beckham delivered the strongest growth, while among our licensed brands, Carolina Herrera and B-Squared led the way, along with the successful launch of Vitro eyewear collections. Turning to North America, sales were down 5.2% at cost as a change rate, with a similar trend in Q4 contracting by 4.6%. Excluding Jimmy Choo, North America remained slightly negative, penalized by an election year and the climate of uncertainty that affected business and consumer confidence. We already commented on how, throughout most of the year, we faced an unfavorable sport business environment, which impacted mid-performance. As you may remember, last year we had... A delayed start to the 2024 ski season, which limited restocking. Then the spring-summer season saw the bike segment still somehow overstock at retail level. On the other front, sunglasses remained largely weak due to cautious purchase behavior from the wholesale channel, while prescription fame continued to show solid growth, supporting the brand with greater exposure to this category. As a matter of fact, Carrera, David Beckham, Tommy Fieger, and Margecos performed well, supported by strong collection, a favorable product mix, and expanded distribution. Q4 was mainly affected by the drop in sales of blenders and by the still subdued sunglass business in the wholesale channel, which nevertheless showed signs of improvement towards the end of the year. As said, on a positive note, Smith continued to progress in its D2C channel and saw a recovery in physical stores, supported by a strong start to the 2025 ski season and a favorable comparison base. In other Pacific regions, full year sales declined by 21% at cost exchange rate, recovering most of the drop accumulated during the first nine months, thanks to a strong rebound of plus 12.9% recorded in Q4. China was a standout performer, continuing to gain traction as one of our key growth markets. The strong reception of our collection at major optical fairs in Shanghai and Beijing helped to stimulate demand and reinforce our brand positioning. In China, Polaroid, Tommy's Figure, and Ports were the brand driving our growth in the region. By contrast, in the Southeast, Asia distributor sales contracted over the first nine months of the year, affecting the overall performance. Finally, Q4 rebound was driven by China, which regained speed after its temporary slowdown in Q3, and by a nice recovery of Southeast distributor. In the rest of the world region, the year closed with a decline of 5.9% at cost of exchange rate, showing a mixed trend across market and regions. In Latin America, target retail was a weak spot, affecting overall sales. However, Brazil showed sign of recovery in Q4, held by more stable domestic demand. Last year, sales in the Middle East grew, driven by the positive progress by Carrera, Tommy Hitzinger, and David Beckham, while India saw some deceleration after a period of strong growth in 2023. Q4 saw some recovery, with sales up 2.4% at cost as an exchange rate, while the currency environment was particularly unfavorable with the significant weakening of the Mexican peso and the Brazilian Lira, which affected the overall large-run performance at current exchange rate. Turning to our economic performance, in 2024 we made another significant progress in improving our gross margin. For the full year, gross margin reached 59.7% of sales, an improvement of 250 basis points compared to the reported gross margin in 2023, a year impacted by the restructuring of the Italian footprint, while the improvement stood at 100 basis points compared to the 2023 margin adjusted for related restructuring costs. Throughout the year, the key drivers of our gross margin improvement were the increased efficiency of the supply chain following the restructuring of the Italian footprint we completed in Q4 2023, along with a positive pricing effect. Sales mix was instead an end in the year, affected by the diluted impact of ESOP's business, while in Q4 we had an unfavorable channel mix due to the lower contribution of blender D2C channel and higher contribution of sports shop. For this reason, our Q4 gross margin at 59.5%, stable compared to Q4 2023 adjusted margin, was a very solid result. At the operating level, our adjusted BDA reached €93 million, up 1% compared to the adjusted BDA in 2023, while the margin improved by 40 basis points to 9.4%. reflecting our decision approach to cost management with partially counter sales pressure on the operating leverage and some persistent cost inflation. A key factor behind this was the normalization of IT investment following elevated spending in 2022 and 2023 to accelerate our digital transformation. On the other hand, last year we continued to strongly support marketing investment, which remained high and heavily digital-oriented. In Q4, our adjusted BDA margin also saw an uplift at 7.5% of sales, marking the strongest progress versus the previous year, with a 60 basis point improvement, driven by disciplined spending on selling expenses and improved operating leverage. Moving to our adjusted net result, we closed the year with 34.2 million euros from 14 in 2023. Excluding the effect of the valuation of the optional liability on minority interest, our adjusted net performance improved by approximately 17%, also supported by the 15% decline of net financial charges, which reflected lower interest rates and a reduction in gross debt. Finally, looking at our cash flow and at that position, 2024 confirmed our financial solidity and ability to generate cash. In Q4, free cash flow reached 18.9 million euros versus 13.3 million in Q4 2023, bringing the free cash flow for the year to 16.7 million euros. This was characterized on the one hand by the significant improvement in cash flow from operating activities, which totaled 76.2 million euros, reflecting our good economic result and an efficient networking capital management primarily driven by the reduction of inventories. On the other hand, cash flow for investment grew to 48.9 million euros from 8.6 million, mainly due to the investment to acquire the perpetual license for hours by the rebecca. Last year, despite the acquisition of the perpetual license and the completion of our share buyback program for 11.8 million euros, we managed to maintain our net debt stable at 82.7 million euros, while declining by around 3 million euros pre-IFRS 16. Our financial leverage remains healthy at 0.48 times, ensuring we have the flexibility to continue investing in our growth priorities. With that, I lend back to Angelo.