Natuzzi, S.p.A.

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Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Natuzzi fourth quarter and full year 2021 financial results conference call. As a reminder, in addition to the link already provided to join via video, interested persons can also join this conference call live via telephone by dialing in the following number, plus one, Thank you for joining us. and instructions will be provided at that time for your queue up for questions. Joining us on today's call are Natuzzi's Chief Executive Officer, Mr. Antonio Achille, the Executive Chairman, Mr. Pasquale Natuzzi, Mr. Jason Camp, President of Natuzzi Americas and Piero Direnzo, Investor Relations. As a reminder, today's call is being recorded. I would now like to turn the conference over to Piero. Please go ahead.

Thank you, Kevin. Good day to everyone. Thank you for joining me in Natuzzi's fourth quarter and full year 2021 Financial Results Conference call. After a brief introduction, we will give room for a 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 securities 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 conditions. Please refer to our most recent annual report on 420F filed with the SEC for a complete review of those reasons. The company assumes no obligation to update or revise any forward-looking matters discussed during these calls. and now I would like to turn the call over to the company's chief executive officer. Please, Antonio.

Thank you, Piero, and good morning, good afternoon to everyone attending. I might briefly recap the key messages from the press release where Pasquale Natuzzi, the executive chairman, and I share our view on the ending of 2021 and fuel light on the fourth quarter. As you have certainly noted from the press release, we end up on a positive note 2021. Top line sales has been 30% above the previous year, 2020, and we exit 2021 stronger than the year before COVID. In terms of top line, we reported a growth of 10.4% versus the 2019. In addition to this, we closed the year with 114.4 million portfolio orders, which is above the last year by some 10 million. So we could have been closing in terms of top line even on a higher number if we didn't face such a strong headwind from supply chain disruptions. 2021 reported also an improvement in gross margin, where we closed at 36%, which is almost 7 points above 2019, where it was 29.7. This, despite the need to overcome a spike in most of the raw material, which sometimes has been double or triple digit in terms of price increase during the year. We ended 2021 with a profit of 4.9 million, which compared to a loss of 10.6 million in 2020 and a loss of 22.5 versus 2019. So we improved in terms of operating profit of 27.4 million versus 2019 and 15.5 million versus 2020. In terms of ABTDA, We close the year with 24.9 million that compare with 12.3 million in 2020 and 1 million in 2019. I often refer, as you could expect, to 2019 because I believe that provides a more solid matrix of comparison because it was not affected by COVID. So, if we look at the PDA, which is clearly an important matrix in terms of value creation, compared to 2019, the company improved by 23.9 million. Also, cash position has been improved. We closed the year with 53.5 million versus 48 in 2020 and 39.8 in 2019. So I would say overall, a year which respects the strong momentum in the market, which also provides some early signs that our strategy of focusing on retail and brand, initiated by Pasquale a decade ago, is start providing some results which are also of satisfaction for potential investors. We do want to provide also some Brief highlight on how the year started. In terms of order flow, the year started quite with a positive trajectory. Order flow, which means the order we receive, not the invoice sales, are up 32% at week 12. And this is also a result of strong momentum we are getting retail in U.S. where Jason will compare it. This is the full year. We are also posting the results for the fourth quarter. We are pretty much in line with the same trajectory with the section of operating profit. At the level of operating profit, we reported operating profit which was positive by 0.6 million, but was lower than what we wanted to achieve, mostly because we suffered from a significant increase in transportation costs, especially towards North America, that we were only partially able to recover from our client invoicing. We reported only in fourth quarter 6.5 million of extraordinary one-off transportation costs versus North America. This is a bit, I would say, the key highlight for the economic performance. Other key messages I would like to share with Pasquale, the board, we continue working on the organizational side. As you remember from our last discussion, We put in place an organization which now is centered on the brand. We now have two divisions, one which is fully responsible for the strategy and the merchandising of Natuzzi Italia, one which is fully responsible for the strategy and the merchandising of Natuzzi Edition. Those divisions are increasingly exchanging view and opinion with the regions, so to come out with the best distribution strategy in each region. In addition, we created a division for furniture. As you might remember, we started a strategy to become a total lifestyle brand. So we want to add to our traditional strengths of a postery a very convincing offering of furniture. For the reason we create a business unit. We have a new manager which is coming next week into the company which is going to be providing a very strong experience in the furniture sector and this is part of the idea of strengthening our leadership team. Other potential information which are worth sharing with you are regarding the evolution we are doing on our manufacturing. The most important achievement where we are very satisfied is the result of the Pilot 4.0. We're in a plant here in Italy. We're testing really state-of-the-art technology coming from the automotive, something I'm not aware is already in place in our industry, which are providing very exciting results. Once it's going to be stabilized, this technology will be the standard base for all our direct factories. Not only in Italy, but in China, in Brazil, in Romania. Two notes on our JV. As you are aware, we are in a JV since 2018 with Coca Furniture for the commercial development of China. In that JV, Natuzzi S.p.A. holds a minority of 49%, hence we don't consolidate line by line. The JV is proceeding very well on all key dimensions. Last year we had 84 point new stores in franchising. We are producing a profit which is more than the double than last year. And the JV sits on a significant cash position that we are discussing how to make available also for the expansion plan of Natuzzi, S.p.A. Other positive highlights that will be subjected to a specific press release We eventually close as planned. I don't venture for the development of the rest of Asia Pacific with a very predominant player in the region. which acquired 20% of Natuzzi Singapore for a correspondent of $5.3 million investment. DellJV will be a platform for the development of the rest of Asia Pacific commercially but also will be the base for strengthening our operation locally. Let me stop here just to provide a bit of an executive summary of what you received to welcome your questions and observations.

Thank you, and I'll be conducting your question and answer session. If you'd like to ask a question, if you're dialed in via phone, please press star one on your telephone keypad. If you're connected via the web, please use the raise your hand function on the left side of your screen. We ask that you please phrase your questions in a soft and slow manner. Once again, please press star one if you'd like to verbally ask a question, or use the raise your hand function to ask a question over the web. And we do ask that you ask your questions in a slow manner. If we do one moment, please. David Kenney, your line should be now live.

Great job in transforming the company. So, first question is in regards to transportation costs, which are up quite a bit. We track a number of companies in the logistics area, and what we're seeing is signs of declines. Could you comment on that, what you're seeing?

So, let me comment first to thank you, Mr. Borda, and David for the appreciation for it. and for the benefit of both, sir, all, sir, the majority and minority. In taking your question on the transportation, let me quickly comment on the fourth quarter events and what we are witnessing here. On the fourth quarter, we have been experimenting a strong spike of transportation, especially towards North America. Our practices are to pass over this cost in the form of freight surcharge in a very transparent manner to our partners. What happened in the fourth quarter is that the speed of the increase of the freight did not allow our system to adjust rapidly enough. But now we have corrected that also to make more automatic some of these, let's say, price adjustments when it comes to freight surcharge. On the commenting on what's happening, we do see a flattening of those costs. The situation remains very fluid because, as all you are aware, not only are we experimenting a significant turbulence, The grant price is more the oil price is more than and the dollars. So the moment we see a plafoning and some geography decrease, but we remain very vigilant because basically we need to witness day by day what's happening. And this is very much a delicate situation because we cannot say that the situation is being stabilized, rather the opposite. I don't know, Pasquale, you've been in the industry for 60 years. I'm sure you've seen more of this turmoil. I don't know if you want to comment on the transportation price as well.

I've never seen in my 60 years experience anything like last year, and obviously even this year. So, I mean, transportation, it's really very complicated, very complicated, because the price, you cannot plan the price, because unless we are willing to pay a very high price and make a contract, but to be honest, In this uncertainty time, we are really, you know, looking almost day by day the business, at least from the transportation cost point of view.

Yeah. What we made very clear to every business responsible is that safeguarding the margin is the top priority. especially in light of such a strong portfolio order flow and also strong for quarter demand. So every business leader, and of course the U.S. is a very important aspect, has really been incentivized to pass this kind of extra-fresh through charge in a very timely manner. And we're paying a lot of attention to avoid that we have, like last year, surprises when we close the quarter. This is a bit the way we are reacting to the situation that very clearly Pasquale mentioned of a situation outside which still is quite dynamic.

You explained it better than I, Antonio. No, no, Pasquale.

It's true.

Listen, it's also difficult to explain. So try to imagine what is in the reality, okay?

Okay.

Thank you. Once again, if there are any further questions, please press star 1 if you're dialed in via phone or use the raise your hand function on the Q&A side. One moment, please, while we pull for further questions. If there are no further questions at this time, I'll turn the floor back over. Actually, one moment, please. Maybe your line is now live.

Okay, I'm sorry. I had a couple of follow-up questions. I'm not trying to monopolize, but there's a lot on my note sheet here. In regards to your backlog, I noticed that despite the continued acceleration in written orders, it looks like backlog was up about $4 million sequentially, and then in Q1, I know orders were up about 31%. We own another European furniture company based in the UK. About a week ago, they told us their lead times from Asia are down from 20 weeks to 13 weeks, which tells me that we're seeing signs of some resolution in supply chain and bottlenecks in logistics. Can you comment on that as it relates to Natuzzi, and is it reasonable here in the next Thank you for joining us. if you're seeing your lead time start to come down, or if not, when.

So, I think it's also a matter of reading carefully what others announced, because the backlog clearly functions of two elements. How fast, I mean, doing an analogy with a tap of a sink which is full of water, how much water you are able to pull out, which means how fast you are able to accelerate your production, and also how much additional running water gets into the sink. So, for what Natuzzi is concerned, we were extremely surprised positively by the strong start of the year. So the water, the running water, additional running water has been very strong. In terms of additional production, we have a very articulated production footprint. In our view, long term will constitute an advantage. And we were able to catch up quite significantly. Since last week, the China production which is quite important, especially when it comes for Natuzzi edition North America, is closed because of COVID. As you know, as you're probably aware, this is not just Natuzzi, it's a very generic problem. Foxconn, which produces the screen for iPhone, has stopped the production here in Shanghai, stopping the production of iPhone for Apple. So it's not Natuzzi only. So we're working very hard. We just need to recognize the first, which I believe is still a good news for investors. The additional running water doesn't seem to stop, rather the opposite. So we're getting more order every day, at least till wake to 12. Second, despite all our effort, it's really a kind of continuous battle. And for instance, we were not expecting this lockdown in China because of the stringent measures they are taking. It's already the second week that the government is postponing the reopening of the Shanghai area. And for us, there's not immediate solution to that, because even though we explore it, reorganize the supply chain in another district, that could be Vietnam or other districts, is not something you can do overnight. So to your question, Dave, we're really working very hard because that not only will mean additional revenue, but also even more importantly, will mean a better service to our customers and clients because at the moment, For the special order, we have not been able to reduce the timing. So we're working on that. It's not easy in a context where, you know, geographically, there's always something coming up. Like, you know, China we discussed, Romania, the other important plant we have, is suffering because of the Black Sea, given the war, shipping cannot happen, and that was a route for receiving raw material. So I wish I could say the issue is solved. The issue is addressed very seriously, but I could not say it's solved.

Okay. Thank you for that update. And then I noticed that branded product was 88% of revenue in the quarter. And I know branded, you know, traditionally is much higher margin, up around 70%. Do you expect Branded to get over 90% at some point this year? And then the other side of my question is our blended gross margins. With the investments that you're going to be making in technology and automation on the manufacturing side, can you speak to what effect that will have on our gross margins, both the combination of a higher percentage of Branded and will we get above 90% and the implementation of, as you put it, the state-of-the-art manufacturing technology?

Thank you, Dave. This allows me to answer a bit in a structured manner on a question which I believe is very close to you as investors, I mean you generally as investors, which is about margin expansions. So we see three main avenues for margin expansion and you touch upon each of them and I would like to comment. The first one is the brand mix. As you pointed out, we are on a continuous trajectory to increase the relevance of the branded business versus the unbranded. Just to give you that point, Natuzzi Italia has a margin which is 10 point percentage above the unbranded business. So every dollar we move from unbranded to Natuzzi Italia is 10 margin points more. So as you mentioned, we are 88%. We developed a five-year plan and the trend of reinforcing the branded business is central to that. So we expect to continue marginally increasing the relevance of the brand business on the unbranded business. And we also put a cutoff very rigid that we will not accept Any unbranded business that does not match our minimum profitability requirements. So last year we dropped some significant clients because they were not matching our new target for minimum profitability on the unbranded business. So the first avenue for margin expansion is the next. The second one is the retail. And I will ask maybe later to Jason to comment. We're continuously improving retail, especially in North America, and in well-performing stores. The integrated margin means the margin that we do as a manufacturer and the margin that we do as a retailer is north of 70%. So that is also another view to increase marginality, and that is very central to our 5-year business plan. The third level is the one you mentioned, which is about making more efficient, more digital our production. As I mentioned before, we saw through the pilot 4.0 the opportunity to significantly increase the productivity and efficiency of our production. There's also a significant effort that in close agreement with Pasquale, the chairman, we launched to simplify the collection, which is a bit the root cause also for some inefficiency on the supply chain. We state that the combined effect of simplifying the collection and getting a more efficient production will result in gains in productivity which are measured in several percentage points. So these are the three levers we are moving to get to a marginality which will be more satisfactory for any investors in this company. I hope I addressed your question. Maybe as an additional data point, I could ask Jason to comment on the performance of retail in 2021, but maybe also some initial highlight of what's happening in 2022.

Sure, happy to do that. For the first 12 or 13 weeks of the quarter, North American retail had, I think, a very strong showing. The 12 stores on a comp store basis grew about 25% in order flow growth over the year before. And essentially, that puts them basically at a double over 2019. And our top six stores, which we were talking about a $4 million pace last year, are now pacing at five. So we're very pleased with our start and working hard to make sure the rest of the year finishes like it started.

Okay. Thank you for that update and congratulations. So just to finish the question that I had, Antonio, do you expect and Is 2022 for Branded to become greater than 90% of your overall mix, or is that more of a 2023 event?

Antonio, you have a mute. Antonio, you have a mute.

Sorry, guys. Now, as you see, we have basically historically over the last year added one percentage point of Branded business every year. I expect this trend to continue also in 2022, at least.

Okay. Okay. And then the last question, even though I'm pleased to see the JV in Singapore, I'm going to leave that because it looks like it's not an enormous driver yet. So I'm going to leave that for another call or another caller. But could you speak to the China JV? You know, there's an enormous amount of cash there now, and it's performing exceptionally well. When I kind of do my numbers on it, it appears that we have $10 to $12 of value in the China JV, and essentially we're getting our core business, which is a $500 million to $600 million now profitable growing business in transition for free. Can you speak to monetization of that, potentially a spinoff, or ways that for Natuzzi shareholders we can realize some of those exceptional results translated to our stock price?

No, thank you, Dave. That is clearly a very central topic. It's part of the board discussion and the discussion we are having daily with the executive chairman. You are very right. China, which I think is a very positive news for everyone, is on a terrific trajectory in terms of growth. We discussed the clear plan and they expect actually to accelerate the growth. Now we need to see in the short term how the COVID will affect 2022. But on the long term, there is a lot of confidence to delivery. Currently, the GV has some 62 million euro, which would be roughly 67 million dollar in cash. which roughly is 30% of the total revenue of the JV, which is really a level of cash when assessed to the need of the company. Also because the future business plan expects to increase the level of cash, not to decrease it. So the question how to do a better valorization of debt for the benefit of Natuzzi, S.p.A. shareholder is very central. We do see two avenues to that. which I would say can be sequential. The first one is to reduce the level of cash through a capital reduction so that that cash can be utilized for the purpose and the priority of Natuzzi, S.p.A., which include the opening more store, accelerating the factory restructuring. That is something we've been discussing and discussing with the board. As you could expect, is a matter which is more reserved, so we need to find an agreement with our counterpart. It's been done a first proposal. We're still iterating on that level of discussion. Then I believe what you said could be definitely a good option to do a separate IPO. We put this idea on the table to our partner that, as you know, is a listed company, KUKA. and they are open to explore that dynamically. That is not something that will happen this year, but it's something definitely, that could be definitely an ambition. I know, and maybe I will ask Pasquale to comment because he actually initiated this JV, that Pasquale is equally excited by me by the idea to list a company in China separately in a market where there is higher multiple where we can bring a story of a brand company from Europe growing double digit in top line and margin and also having a predominant role in this part of the business. That for me would be a very natural and great scenario for capturing value of the JV. I don't know Pasquale if you want to add any color on this.

You cover everything, Antonio.

Thank you, Pasquale. But, Dave, I want to reassure you and the other investors that we are not sleeping over the matter. It's clear, and I know you are quite seasoned enough about the dynamic with China, that when you are a minority, the speed of the execution of some of these deals depends on how fast you can reach an agreement with your counterpart. So it's not totally in our control.

Okay. Thank you, guys. Good luck, and I look forward to speaking with you next quarter.

Thank you so much. Thank you. Thank you. Thank you.

Our next question today is coming from George Malas from MKH Management. Your line is now live. Hello, George. Your line is now live. Perhaps your phone is on mute.

Okay, I'm sorry. Okay, here I am. Congratulations on the transformation of the business. It's remarkable, and thank you for the high level of reporting about all the different parts of the business. I think you're really trying to educate us on the business, and I appreciate that every time. Two quick questions. One of them is on the manufacturing in North America, in Mexico. Maybe trying to see if there's any progress there. And also, Jason, maybe on the U.S. retail, congratulations for a great 2021. Maybe give us a little bit some of your plans in 22 and 23.

Okay, George, I might start on Mexico, and then... I leave Jason to comment on retails. So we have very much looking into Mexico. You need to recognize that Natuzzi is a company with 60 years of history. So when you take a decision on direct investment, he's looking at this through cycles, okay, to make sure that those are opportunities for the investors, not just next three months, but next 30 years, especially when it comes about direct investment. Why I'm saying this? Because Mexico, if you factor in today the extraordinary logistic cost from Asia, will come as a no-brainer. But if you need to look cross-cycle, you need to understand which is the intrinsic opportunity of Mexico beyond the potential differential with shipping costs. This consideration leads us to be quite cautious. about Mexico, but determinate. Determinate because, as we speak, we have started a production in outsourcing with a leading player, FooMaster, which is a listed Danish company operating in the Monterey area, for a subset of products which are Natuzzi Edition Quick Program, which are products which are highly rotating with our partner. We are testing these with 12 top partners, so that we make sure that this is not only matching our quality standards where we invest a lot of time, but it's also commercially viable. If that works, that quick program will be extended to a larger number of clients in North America, and this will cut radically the logistic time from 16 weeks to four or five weeks. In moving from this to a direct investment, We want to make sure that our experience in this outsourcing confirms us that our investment is viable also for the long term. So when it comes to outsourcing, we are fully committed. We are operational as we speak with our clients. When we come to direct investment, we want to have confirmation also to this direct experience that investment is financially viable not only in this cycle, where it definitely will be because of benefit of lower transport costs, but also in a longer time cycle, given all the other elements, especially the differential in cost of goods. This, I mean, long story to say, outsourcing we are active, is starting, would be a great benefit, has been presented in high point, extremely well received by the client, direct production, we are continuously exploring, we are open, but we are not starting any direct investment yet. If Giorgio does address your question, I may be pass over to Jason to comment or retail.

Yes, thank you.

Good morning, happy to do it. So if I understand sort of the bent of your question, I think maybe your question is about the pace of our retail store count growth in the U.S. You know, as we mentioned, we've got 12 Natuzzi Italia stores that we manage ourselves and consolidate the full retail sales and P&L in the U.S., and those Thank you for joining us. Natuzzi Additions and Natuzzi Italia and as we have shared we plan to open about 10 stores a year for the next three to five years and we are on track to do that this year and this summer we'll plan to do a dedicated press release about are our store openings and some of those specific locations that you'll see pop up around the country in Q3 and Q4. We did open two Natuzzi edition stores in the first quarter, one in the Dallas metro area and one in the Palm Springs area. So I hope that answers your question, Giorgio.

Maybe Jason, again, we are not in the business of advertising, but we have weekly Retail meeting where every country presents a bit the retail dynamics. We had one which was last Friday and it was quite encouraged by seeing that what we call projects, which are situations where a client comes to our store and we don't sell them a poster piece, a sofa, but we sell them a solution for the house, are becoming more and more a regular way for us to do business. and Michel Greener, which is our retail manager for North America, presented two projects which are above $800 each. So where the average order ticket in that circumstance has been at $100. So the client entry was $100,000. So we have now an average order value for Natuzzi Italia which is $8,500 and growing. But we're in a situation where we're selling a solution, not a piece of furniture, and that's, of course, a very interesting avenue to grow the profitability of a store. Maybe, Jason, you want to comment? I mean, I already did it a bit, but maybe you want to add some color on these if you feel like.

No, listen, I mean, a big part of our strategy to build our strength and our reputation is and to bring our brand to life in a way that feels inspiring is to make sure that we build the talent in the stores and our showrooms that can design full rooms and in some cases full homes for people and help build that loyalty and build our average order size. So that's are definitely a big part of our strategy.

But at the same time, your other distribution channels keep growing as well. So you are maintaining those and also growing those to some extent. And because, for example, if I look at galleries, galleries was 157 million rows in 21 and 2019 was 137. So with some nice growth, it's sort of across the portfolio of distribution channels. Can you comment on that?

So, George, if you look at the data we published, Presently, so the way to retail, where for us retail, we take a bit of customer's perspective, and we include DOS, direct operator store, and franchising, because in fact, our franchising is very strictly managed. They operate on our IT system. The choice of merchandising are taken by Natuzzi S.p.A., so from a customer's perspective, it's still retail. The weight of that part of business increased in 2021 was 49.2 versus 43 in 2019. So we increased six percentage points of that part of business. When you look at the world sale, which includes The rest of the business has been stable in 2021 versus 2019. But since the overall business increased, the relevance of the wholesale channel in percentage point decreased. So there is clearly a movement towards FOS and DOS. Gallery, a well-executed gallery, is a bit in between because for us it's okay. So what we don't want to have is a poor presentation of the brand. But a good and executed gallery is actually something very favorable to us. So when we talk about wholesale, we think about a kind of life cycle where we want to elevate the quality of distribution from just the product, what we call slot business. So the clients buy from us three models and basically expose them in a floor together with other suppliers. We want to move from that to gallery because gallery already presents the assortment in the way that we want and the customer experience we want to have. And from gallery, we want to elevate to FOX. So in an ideal world, we will have just retail and good executed galleries for the branded business. The unbranded will be always following a slot dynamics because those by definition are large clients like Macy's or others where the gallery will never be applicable. We do continue increasing the weight of retail. I don't know how you cross the data, but the weight of retail is increasing. We don't discriminate galleries because gallery for us is good. What we want to reduce is the weight of branded product Sold as Lot, which means models, individual models together with other brands in a setting where the customer does not perceive the richness of the retail experience and the brand experience of Natuzzi.

Okay, that's very helpful. Thank you very much.

No, my pleasure, Giorgio. Thank you so much for the trust in our company.

Thank you. Our next question is coming from Robert Marson from Penn Capital. Your line is now live.

Thanks, guys. Could you comment on how the U.S. store openings went last year and whether we hit our target or not?

So last year was really a year where we got one store open last year, Natuzzi Italia store with a great partner in the Dallas market. I can comfortably and confidently say that store is performing above our model of expectations. And then the momentum really builds for this year from an opening standpoint.

The question is this. Really what I was trying to get at was did store openings spill over from last year into this year? And is that 10-unit number realistic? Or is it a combination of two years and need to be adjusted going forward?

I think it's fair to say that we had intended to open a few more stores last year than we did. I think we now have the team, the broker network, to run at the pace that we've set for this group.

Okay. Thank you. The shareholders look forward to those 70% gross margins passing through the income statement as quickly as possible. And my second question is on margins in general. The last time I was on this call, I asked if you guys would consider giving us something in an intermediate term margin target. I looked last quarter just so we could sort of have some kind of sense of when the business is running very well globally and we're out of pandemics and wars and oil shocks and all that kind of stuff, what kind of operating margins the company might achieve. on even a range of revenues three to five years out. Some companies do that intermediate term thing just to sort of show off what they believe their true earnings power is when things are fixed. So it's not this quarter, it's not this year, it's not 10 years out, not five years out like a Chinese plan, but it's sort of a three to four year kind of situation. So last quarter, restoration hardware generated 17.5% after-tax margins, and Bassett Furniture generated 3.6% after-tax profit margins. That's what we have to work with in the U.S. as comps. I would assume you're going to be closer to the former than the latter when this business is humming, but can you sort of give us any sense of where you would want to be on an operating or net margin target three or four years down the road?

So I perfectly remember your question. and I completely understand your, you say, appetite for this kind of information. Let us be very transparent. So we approved in our board basically four weeks ago a five-year plan, which is the trajectory Pasquale, myself and the full team is committed on. And that, of course, is fully detailed, not only in strategy, but in numbers of P&L perspective for the next five years. So we do have an internal expectation, an internal objective, which is based on growing significantly the top line, so double-digit growth over the next five years, and reaching a margin which, as you said, is more position on the high digit rather than the low digit. That is definitely our objective. In terms of being more explicit on providing guidance, we have not come with a final conclusion. As you see, the world around us, it is not just because of bad will, but the world around us remains very uncertain. If we had to provide the guidance on this year, that would be extremely difficult because, I mean, we started the year in a phenomenal way. Now we are in Europe. and It's Contaminating Not on Europe Award. We have China, which is going to lockdown. So providing guidance can be powerful, but also misleading. And we want to do it when we feel we are pointing the investor exactly in the right direction. So be reassured we have a plan. Be reassured the plan is based on Top line growth, significant growth based on transforming the company, continue transforming the company in brand retail and getting margin which are aligned to the peers, the European peers in the brand business we operate in. So this is a bit the direction. In providing the precise number, let us further consider that. We are hearing that this could be beneficial for you, so we take very seriously this request and we will come back in the next call with a decision on that.

Thank you very much. At least we have a five-year plan that entails significant growth and significant margins improvement. And I would hope that the board was intelligent enough to include significant compensation bonuses for senior management should they achieve that plan. If the shareholders make money, I hope the management team participates with equity participation. Thank you.

Thank you. Thank you.

Thank you. As a reminder, if you'd like to ask a question today, you could use the raise your hand feature over the web, or you could press star 1 to verbally ask a question if you're dialed in over the phone. One moment, please, while we poll for further questions. Once again, you could use the raise your hand feature, or you could press star 1 to be placed into question queue. If there are no further questions at this time, I'll turn the floor back over to management for any further closing comments.

Thank you, Kevin. It seems there are no further questions at the moment, so we can conclude the conference call right now. Thank you, everybody, for joining the call, and should you have any further questions or doubts, please reach me out with a mail or a call. Thank you all, guys. Bye-bye.

Thank you. That does conclude today's conference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.