Safilo Group S.p.A.

Good evening and welcome to the Safilo Group third quarter and first nine month 2025 trading update. 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 results 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. Thanks very much. Good evening, everyone, and thank you for joining us today to discuss Safilo's trading update for the third quarter and the first nine months of 2025. Let me start by saying that Q3 was another solid quarter for Safilo. We stayed on course, delivering a consistent performance, marked by steady sales growth at constant exchange rates, further margin improvement, and another round of robust cash flow generation. In a context of persistent macroeconomic uncertainty and tariff pressure, these results give us even greater confidence in our ability to navigate complexity and keep building momentum. We are proving that we continue to grow in a sustainable way even when the environment doesn't make it easy. Let me briefly walk you through the key highlights of the quarter. Despite intensified forex headwinds, penalizing reported sales, we maintained a positive trajectory at constant exchange rates, delivering a resilient plus 2.1%, substantially in line with the performance of the first half, and again supported by the strengths of our contemporary and lifestyle brands and the breadth of our geographical footprint. Originally, the picture remained mixed. In our core markets, Flat sales in North America were offset by high single digits upside in Europe, while in emerging markets, the continued growth in Asia Pacific helped mitigate the softness seen in the rest of the world. From an economic standpoint, our operations continue to face pressures from tariffs, yet the effectiveness of our mitigation actions, together with fireball price mix dynamic, and the gradual normalization of some operating costs allowed us to protect our gross margin and to increase our adjusted EBITDA margin to 10% of sales, 210 basis points higher than last year. And thanks to this strong operating performance and to our tight control over working capital, we delivered another quarter of robust cash generation we brought the free cash flow in the first nine months to around 64 million euros, leading us for the first time in our history to become net debt positive pre-IRSS 16. That's a milestone we are really proud of, and it shows just how far we have come in building a resilient and more agile business model. Michele, over to you to go through our results in more detail.

Thank you, Angelo, and good evening, everyone. Let me start with a quick look at our total sales performance in the third quarter and over the first nine months of the year. At constant exchange rates, Q3 net sales growth was consistent with the pace we recorded in the first half, while reported revenues were more significantly impacted by negative currency movement, particularly the depreciation of the U.S. dollar against the euro, closing down 2.1% at current exchange rates. For the nine-month period, we closed with a total net sales of $758.4 million, up 2.2% at cost of exchange rate, and in line with last year at current exchange rates. Across brands, as Angela highlighted, our contemporary and lifestyle brands continue to grow nicely. We are talking about Carrera, David Beckham, Marc Jacobs, Boss, Carolina Herrera, and now also Kate Spade, while the quarter was still soft for Blender's e-commerce and Smith's poor product in physical stores. By product category, prescription frame continued to show growth across all regions, while sunglasses recorded a nice recovery in Europe. Let me then walk you through our regional performance, starting with Europe. Europe was clearly the bright spot this quarter, with sales up 7.7% at cost and change rates. This acceleration was fueled by two key drivers. First, our prescription frame business strongly outperforming the quarter, in this occasion also supported by a favorable phasing of delivery, which last year had fallen into the fourth quarter. Second, we saw a rebound in sunglass sales, As commented in August, this started to be visible in July, driven by favorable sell-out dynamics, particularly in Italy. Demand remains strong across both independent opticians and retail chains, and we are especially pleased with the continued traction of our UN Safido B2B platform. Its growing adoption is helping us deepen customer engagement and sharpen our commercial execution. Brand momentum was broad-based. Carrera, David Becker, Marc Jacobs, Tommy Figer, Boss, and Carolina Herrera all strengthened their competitive position in the region. Looking at individual markets, France stood out once again as our top performer, driven by an expanding customer base and dynamic commercial and marketing initiatives. Growth was powered not only by our leading international brand, but also by regional successes like Isabel Marant, which continue to resonate strongly with French consumers. In Germany, we maintain solid momentum, particularly among independent opticians and online pure players. And in Eastern Europe, we deliver another strong quarter in Poland and Turkey, which remain our largest market in the region. In the first nine months of the year, sales in Europe were up 3.2% at constant exchange rates. Let's turn to our performance in North America, where the third quarter was marked by a mixed picture, set against a backdrop of continued volatility and uncertainty in the business environment. Sales were flat at cost of exchange rate, while down 6.6% at current exchange rate, given the stronger depreciation of the dollar. In the sports segment, Smith experienced diverging trend across its two channels. delivering on one side very solid growth in direct consumer business. This was supported by strong demand and effective online engagement. On the other end, sales to physical sport shops were affected by the ongoing normalization of shipment of sport products from China. As we had anticipated in August, these deliveries were to be recovered between the third and the fourth quarter. In August, our wholesale business posted a mid-single-digit increase, thus a very healthy performance, although a bit of a slowdown compared to the second quarter. Positive momentum was driven by solid demand from independent opticians and chains, with Tommy Figer, Mark Jacobs, Boss, Kate Spade, and David Beckham continuing to act as our growth engines. The quarter remained challenging for Blender's e-commerce, which was still affected by intense promotional activity from several players in the value for money segment. Overall, our sales in North America closed the nine-month period up 1.9% at cost of exchange rates. Let me now briefly comment on the performance of our emerging market, starting with Asia-Pacific. In the third quarter, the region sustained its positive momentum with sales up 7.8% at constant and change rates. Growth was primarily driven by our distributor-led market, supported by the strong brand's contribution from Tommy Figer, Boss, and Hugo. Australia stood out with a particularly strong performance fueled by career-ongoing brand building initiatives. including the successful launch of its woman collection earlier this year and by Smith's continued development in the market. Looking at the first nine months, sales in Asia-Pacific were up 12.4% at cost and change rates. Finally, turning to the rest of the world, the third quarter remained challenging, with sales down 13% at cost and change rates. Performance continued to be affected by persistent headwind in India and a difficult market environment for our Middle Eastern distributors. Mexico, on the other hand, demonstrated resilience, supported by positive sales trend to independent opticians. Across the regions, Tommy, Boss, and David Beckham stood out as top performing brands, helping to partially offset the broader market pressures. Over the first nine months of the year, sales in this area were down 6.8% at cost and change rate versus the same period in 2024. Let's now move to our economic performance for the quarter, focusing on the two key indicators we typically comment on during our trading updates. Gross margin showed another improvement in Q3. The impact of our mitigation action against higher tariff pressure became more visible, particularly the price adjustment introduced in early June and the ongoing shift toward out-of-China sourcing. This measure helped us absorb much of the cost inflation and protect profitability. The year-on-year increase in gross margin from 59.1 to 59.7 was then supported by federal price beat dynamics, although to a lesser extent than in Q2, and a more meaningful contribution from foreign exchange. At constant price, gross margin was broadly stable compared to last year's third quarter. Looking at the nine-month period, gross margin rose to 60.6%, up from 59.7%. At the operating level, Q3 marked the most significant step forward. We reached our highest ever adjusted BDA margin for a third quarter at 10% of sales, up 210 basis points from Q3 2024. This result was supported by a gradual normalization of market investment after the peak we saw in the first half, where spending reached nearly 30% of sales. In Q3, marketing expenses declined by roughly 50 basis points year-on-year, Cost optimization also came from lower logistic and IT costs. For the nine-month period, our adjusted BDA margin stood at 11.1%, up from 10% last year. As a reminder, our BDA margin at 12% includes €9.7 million gain from the disposal of Volenti in Q2. Finally, let's look at our financial performance, which continued to strengthen in Q3. We delivered another quarter of strong free cash flow, generating €20.7 million, up from €16.9 million in Q3 last year. This was driven by solid operating performance and disciplined working capital management. Over the first nine months, total free cash flow reached €64.2 million, including €11.9 million from the lengthy disposal. This level of cash generation allows us to continue reducing debt. As of September 30th, net debt decreased to 30.4 million euro, bringing us to a positive net financial position, pre-FRS 16, of 10.7 million euro for the first time in our history. It's also worth noting that these results include the transaction costs for 10.2 million euro related to our share buyback program launched in late June. Since then, we have purchased approximately 7.8 million shares. equal to around 1.9% of our outstanding capital, including shares already held at the same date. Treasury shares represented 4.5% of the company's capital. That concludes our presentation. Thank you all for your attention. We are now happy to take your questions.