Safilo Group S.p.A.

Good evening and welcome to the SAFILO Group 2025 Full Year Results Conference Call. This call may contain forward-looking statements relating 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 Angelo Trocchia, Chief Executive Officer, Michele Melotti, Chief Financial Officer, Barbara Ferrante, Director of Investor Relations. I will now pass the call over to Mr. Angelo Trocchia, Chief Executive Officer. Mr. Trocchia, please go ahead.

Thanks. Good evening. Good evening, everyone, and thank you for joining us today for the SAFILO's full year 2025 results. 2025 was a year in which SAFILO demonstrated its ability to grow and to create value, even in a global environment that remained complex, uncertain, and often volatile. Geopolitical tensions, market fluctuations, forex headwinds, Paris pressures, All of this shaped the context in which we operated. And yet, the strength of our brand portfolio, the breadth of our geographical reach, and our ability to adapt quickly allowed us to deliver another year of resilient sales performance and significant economic and financial progress. I would like to start this presentation by thanking all SAFILA employees for their passion, dedication, and commitment throughout the year, and all our stakeholders for the trust with which you continue to support our journey of sustainable improvement. I will begin with the key highlights of the year. Then I will walk through the performance of our brands and our progress in sustainability. After that, Michele will take you through the financial results in more detail. Let me start with the key highlights of the year. Our net sales performance at constant exchange rate grew pretty steadily throughout the different quarters, finally up 1.8% on a reported basis while the organic increase was of 2.6% when excluding the deconsolidation of lengthy, which we sold in June. In Europe and North America, we delivered positive constant currency growth in each single quarter, and this was driven by the resilience of the prescription-framed business, which kept demand strong in all our core wholesale channels. In both our core regions, the solidity of our business confirmed the quality and the strength of our relationship with customers and the power of a brand portfolio, which is to be able to generate value across multiple markets and distribution channels and appeal to different consumer groups, from our flagship home brand to our leading license. All in all, our top-line performance in 2025 confirmed the quality of the work we have done over the last years to strengthen our brand platform, our distribution model, and our customer reach. On profits and margin, we continue to strengthen our performance. The volatility created by tariffs could have been a major headwind, but our rapid response combining supply chain flexibility with precise commercial actions allowed us to offset the impact over the year. We delivered a further step up in gross margin, reaching approximately 61%, and this improvement flowed through the operating profitability, lifting our adjusted BTDA margin to 10.6% of sales. These results brought our profitability back to the highest level of the past decade, and together with disciplined working capital management helped us to further strengthen our financial profile, boosting cash flow generation to around 68 million euros before the investments and the disinvestment of the year, and reusing the NAPDEP to around 46 million euro after the 18 million euro buyback program we completed in December. As we look at our performance across the year, What really stands out is how our portfolio has evolved into a truly balanced ecosystem between home and licensed brand, between global names and strong regional players, between sunglasses and prescription frames, and across distinct consumer segments, from men to women, from sport to lifestyle. I think this balance is now our greatest strength. allowing us to size opportunities across very different markets, category and consumer behaviors, even when the external environment is volatile. Let me give you a quick overview on some of our core brands or crucial brands in our portfolio. Last year, Iowa by David Beckham continued to deliver exceptional growth, confirming his role as a strategic pillar within our portfolio, and accelerating across all geographies. This momentum was driven by consistently strong product performance and by the way in which the brand was brought to life at the retail level through premium and immersive activations. The year was also marked by the opening of the first DBI-aware monobrand store in Mykonos, a high-impact showcase raising the brand's visibility among an international luxury audience. and a powerful campaign shot in Morocco that delivered remarkable traction, especially across social platforms. Its expansion in the United States accelerated meaningful in 2025, supported by the first exclusive brand event in New York. Of course, David's driving global relevance across fashion, sport, and entertainment continues to reinforce the authenticity and aspirational peer of the brand. In North America, blenders face a challenging year, mainly to the highly promotional environment affecting the value for money e-commerce sector. However, it is very important that brand retains a strong connection with younger consumers. And throughout the year, we continue to strengthen its commercial fundamentals supporting a real omni-channel strategy designed to expand the reach of the brand and align with evolving consumer shopping behavior. This work was also linked by a go-to-market extension in the wholesale sport channel with very encouraging results, which is a clear sign that the brand has its own appeal and unique propositions. If we go to Polaroid, despite a softer sunglass season in parts of Europe, continue to benefit from its broad consumer appeal and strong brand recognition. Importantly, we took a meaningful step forward by becoming the official eyewear partner of the ATP Tour, a global thought platform that placed Polaroid in the center of some of the world's most prestigious tennis tournaments. This partnership brings significant opportunity for visibility, engagement, and connection with the younger audience. If we talk about Carrera, Carrera delivered another outstanding year, growing solidly across all the key markets. The blend of this iconic sun and optical collection continue to perform exceptionally well, and the brand expansion in the women's segment is bringing fresh energy and attracting new consumers. Our spring-summer campaign, shot in New York City, reinforced Carrera's aspirational positioning, while the renewal of our partnership with Ducati conferred a strong affinity between performance, design, and style that defined this brand. And how we cannot talk about Smith. Smith hosted another year of healthy growth, driven above all by the strength of its direct-to-consumer business, which remains the primary engine behind the brand's success. Even in a softer brick-and-mortar environment, Smith preserved its leadership in U.S. winter sports, thanks to its deep roots in performance optics and its strong ties with outdoor communities. In Europe, the new commercial setup introduced back in 2024 began to gain traction, helping the brand extend its reach and recognition. But it's not only a home brand. Let's talk about the world of the license. And here, it's important to acknowledge that last year, we continued to drive a dynamic management of our licensed brand, taking further steps to reinforce its long-term solidity and strategic coherence. During the year, we renewed our partnership with dSquare, Under Armour, Carolina Herrera, and Pierre Cardin. strengthen the visibility and stability of a licensed portfolio that is now secured at around 95% through 2030. And last year, we also continue to elevate our women offering, signing a 10-year agreement with Victoria Brigham, a brand that brings depth of our presence in the aspirational women's segment and fits perfectly with the strategic direction of our portfolio. Alongside these moves, 2025 was also a year of meaningful progress in sustainability. We continue to advance in a desired way along our emission reduction roadmap in line with the targets validated by science-based targets initiative. One milestone we are particularly proud of is having reached 100% renewable electricity across all our operations, a clear and tangible step for in-building an increasingly virtuous business model. Our progress was also recognized by GDP, with Sapphira entering the leadership list with an A-minus rating, an acknowledgement of the transparency, rigor, and continuity that guide our sustainability work. With that, I will hand over to Michele.

Thanks, Michele. Thank you, Angelo, and good evening to everyone. Let me walk through our sales, economic, and financial performance in some more detail. We closed 2025 with net sales of 983.4 million euros, as highlighted, up 1.8% at cost and rate, and 2.6% organically. At current rate, revenue decreased by 1% due to the persistent weakening of the U.S. dollar. In the fourth quarter, net sales were 225 million euros, up 0.4% at constant rate and 1.9% organically, while the higher depreciation of the dollar against the euro weighted more on the reported performance, down 4.6% at current rates. Our organic growth this year was fueled, as said, by the strong performance of our flagship brands Carrera, Smith, and David Beckham, and by the solid mid-to-high single-digit increases across our core licenses. Tommy Feger, Marc Jacobs, Boss, Kate Spade, and Carolina Herrera. By channel, the wholesale business delivered mid-single-digit growth, supported by both independent opticians and retail chains. Online remained stable at around 16% of sales, with strong performance from the sport direct-to-consumer channel and European internet pure players. Turning to our regional performance, in Europe sales for the year were up 2.7% at cost and exchange rate and 2.3% at current rates compared to 2024. In the fourth quarter, sales in Europe were up 0.7% at cost and exchange rates, flat at current rates. And considering the headwind we had in the period, lower volume from front of supply business, the deconsolidation of limited and the phasing of sun delivery that were pulled forward into the third quarter, this was a resilient outcome. Both in Q4 and for the full year, Europe delivered a solid organic performance with mid-single digit growth driven above all by the prescription frame across all our key markets. France was once again our most dynamic market supported by a broader commercial footprint and consistently strong demand. Turkey and Poland also stood out, recording very robust growth and ranking among our fastest-growing countries. Growth was growth-based across the portfolio with particularly strong momentum in our contemporary lifestyle trend. The only softer spot was Polaroid, which saw a modest decline due to a less favorable sunglass season in a few markets. Across the region, we kept strengthening our consumer base, and a key lever here was, again, the UN staff field of B2B platform, which continued to gain traction and help us improve service level while deepening longstanding relationship with independent opticians. Its growing adoption really showed the trust we have built over time and our commitment to providing customers with digital tools that makes their day-to-day work easier and the overall purchasing experience better. Despite the uncertainty and volatility that characterized the market environment, the North America business actually performed better than expected, with positive cost and currency growth coming through consistently across all four quarters. Sales for the year were up 1.8% at cost and exchange rates, while at current rates, revenues declined 2.6% due to a 4.4 depreciation of the U.S. dollar. In the fourth quarter, sales increased 1.5% at constant rate and were down 7% at current rates. In North America, the year was really underpinned by a solid wholesale performance. The channel grew mid-single digit in every quarter with strong momentum coming in particular from Dominic Figer, Hugo Boss, Mark Jacobs, Iwer by David Beckham, and Kate Spade. We continue to strengthen the position with our key customers across the market. By product, the story was similar to what we saw as work. Growth was driven by prescription frame, while sunglasses as a tough time at the enterprise level where the environment remained highly promotional. This continued to weight on Blender's e-commerce business, even if in the second half of the year was less challenging than the first six months. In sport, we deliver a positive performance, thanks above all to the strong expansion of this direct-to-consumer channel, which now accounts for around 40% of the brand sales. On the other side, brick-and-mortar sporting goods stores were softer in the second and third quarter, following our decision to temporarily limit import of winter products from China, which delayed some deliveries. Most of those volumes were recovered in the fourth quarter, helping sales to physical retail stores to turn positive towards the end of the year. In emerging markets, conditions remained more challenging and business performance was less homogeneous. In Asia and Pacific, the solid recovery that drove much of the year was tempered toward the end by a more uncertain and cautious environment. The fourth quarter saw, in fact, a normalization with revenues down 11.5% at cost and rates. Overall sales for the year were up 4.8% at cost and change rates. Growth came mainly from our distributor-led market and from the double-digit upside in Australia, where Carrera really played its part, supported by the brand-building activity we roll out in the country and by the great reception of the women's collection. And I would also mention town in figure, which performed particularly well and continued to gain traction across the region. Turning to the rest of the world, sales for the year were down 4.5% at constant rates, 10% at current rates. In the fourth quarter, we finally started to see some sign of recovery in a few countries across the region, which allowed the area to return to growth, up 3.9% at constant rates. helping soften what had otherwise been a more challenging pattern through the rest of the year. Performance in the area was held back by a slowdown in India and by lower sales to distributors in the Middle East, where rising geopolitical tension and more cautious sports-changing behavior created a volatile demand environment. Latin America showed a mixed picture. Mexico held up well, supported by the strength of Carrera and Carolina Herrera and by more stable consumer spending. while Brazil slowed down, reflecting weaker demand and a distribution environment that remained less dynamic. Let me now move to our economic performance, starting with gross profit and margin. Despite the significant tariff pressure we faced during the year, we reacted quickly and effectively. The combination of targeted price adjustment in North America and increased sourcing outside China allow us to progressively reduce the impact, and by the fourth quarter, we have fully neutralized it. For the full year, gross profit reached 599.3 million euro, up 1.1%, and our gross margin increased by 120 basis points to 60.9% of sales. In the fourth quarter, gross profit came in slightly below last year, but gross margin expanded significantly, rising to 61.9%. This reflected the same positive drive that we have seen earlier in the year. A several price and mix effect, the reduced weight of lower margin activity, such as the product supply business, and the deconsolidation of lengthy. We have also continued to benefit from lower obsolescence thanks to better forecasting, better planning, and lower inventory levels. Finally, at the gross margin level, it is worth noting that while the weakening of the dollar had a negative impact on our revenues, it provided a tailwind of 50 to 60 basis points on gross margin, given the share of our supply chain that is dollar denominated. Moving down the P&L, in 2025, we achieved our goal of converting the improvement in gross margin into a solid operating performance, even while keeping investment on our own brand, etc., at a sustained level to support their development. Adjusted BDA for the year reached 104.2 million euro, up 12% versus 2024, and the adjusted BDA margin increased by 120 basis points from 9.4% to 10.6% of sales. The fourth quarter conferred this trend. Adjusted BDA was up 12.3% year-on-year, with margin improving 130 basis points from 7.5% to 8.8%. For the year, selling and marketing expenses ended the year down 3.5%, largely due to the reduction in logistic costs supported by further efficiency across our distribution processes. The strong increase in marketing and advertising investment we recorded in the first semester gradually normalized as we moved through the year, allowing the incidental sales to realign with last year's level around 12.7%. General administrative expenses increased by 4.3%, driven by higher IT investment, mainly in software as a service solution that supports front-end initiative for the sales force, along with an increase in provision for doubtful accounts in few emerging markets where uncertainty remained higher. Below the operating line, our financial performance also benefited from a sharp reduction in financial charges, which were nearly halved compared to 2024 from €16.3 million to €8.3 million. This reflected both our lower level of net debt and a more favorable trend in exchange rate differences. As a result, adjusted net profit reached 44.6 million euro, up 30.4% versus 2024. So overall, it was a year which stronger margin, disciplined cost management, and healthier financial structure all came together to drive a clear improvement in the bottom line. To wrap up our review of 2025, let me turn to cash flow and net debt. In 2025, our strong economic performance combined with disciplined and effective working capital management allow us to generate €65 million of free cash flow, a sharp increase versus the €16.7 million recorded in 2024. This really underlines our ability to deliver solid cash generation even in a challenging market environment. The year started on a very positive note. In the first half, we generated €43.5 million of free cash flow, supported by the robust operating results and steady working capital management, particularly on inventories, following our decision to limit product imports from China in a high-tariff context. We also benefited from a roughly €12 million proceeds from the sales of Lentis subsidiary in the second quarter. Momentum continued into the third quarter with an additional €20.7 million of free cash flow. In the fourth quarter, we saw an outflow of €9 million, entirely explained by our €25 million investment to purchase a 25% stake in InSpex. Excluding this investment, underlying cash generation in the quarter remained clearly positive at around €16 million. As Angelo underlined at the beginning, net of this purchase and the disposal of Lenti free cash flow for 2025 reached 68.1 million euro, a level that clearly demonstrates the strong cash generation capability of the group. These results stand well above the 47.8 million euro generated in 2024 before the investment in the David Beckham perpetual license. Finally, after accounting for the 18 million euro share buyback program, which together with the share already had brought us to total 5.6% of Sapphire share capital, our year-end net debt decreased significantly to 46.1 million euro, compared with 82.7 million euro at the end of 2024. If we look at the metrics prior for S16, our net debt stood at 6.6 million euro, reflecting an even stronger improvement in the group's underlining financial position and further confirming the solidity of our balance sheet as we exited the year. With that, I'll hand it back to Angelo for his closing remarks.