Natuzzi, S.p.A.

You are now rejoining the main conference.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Natucci 2023 Third Quarter Financial Results Conference Call. As a reminder, interested persons can join live the conference call by dialing plus 412-717-9633, then pass code 392 Once again, to dial in by phone, please dial plus 1-412-717-9633, then pass code 392-521-03-POUND, in addition to the link already provided to join the video webcast. At this time, all participants are in listen-only mode. Following the introduction, we'll conduct a question and answer session. Instructions will be given at that time. Joining us today are Mr. Antonio Achille, Natuzzi's Chief Executive Officer, Mr. Carlos Silvestri, Chief Financial Officer of the Natuzzi Group, Mr. Pasquale Natuzzi, Founder and Executive Chairman, then Mr. Jason Camp, Senior Vice President of Retail for the North American Market, and Piero D'Arenzo, Investor Relations. As a reminder, today's call is being recorded. I'd now like to turn the conference over to Piero. Please go ahead.

Thank you, Kevin, and good day to everyone. Thank you for joining the Natuzzi's conference call for the 2023 third quarter financial results. 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 condition. Please refer to our most recent annual report on Form 20F filed with the SEC for a complete review of those risks. The company assumes no obligation to update or revise any forward-looking matters discussed during this call. And now I would like to turn the call over to the company's chief executive officer. Please, Antonio.

Thank you, Kevin, and thank you, Piero. Good morning, good afternoon to everyone. I hope our audience from the US enjoyed a joyful Thanksgiving last week. So let me briefly illustrate the development of this year, focusing on the third quarter. As you've seen, sales in the third quarter have been significantly below what we reported in the last year, same period, and 15% below what we reported in 2019 that we keep using as a parameter of comparison, given the exceptionality of the last cycles. It's still important to detail the difference between 2022 because 2022 benefited for a significant amount equal to 28.3 million from previous quarter backlog. As you remember, due to the unprecedented spike in demand in the aftermath of the COVID, we struggled, as all the industry did, in fulfilling the demand. And that resulted in a backlog that during 2022 helped us to keep busy the top line. So if we compare 2023 third quarter with let's say a normalized third quarter of 2022, the decrease has been 15%. The component of our business which has been clearly more affected, and I will say that is partially because of some clients leaving us, but is very much consistent with our strategy, is the unbranded component of our business. As a reminder for those participants that might not know in depth Natuzzi, Natuzzi is now a branded retail group, but historically it was also producing unbranded products, so branded products. sub-products which were sold on the floor of large retailers without coming out of the factory with the brand Natuzzi. If we look at the branded company in total, branded and unbranded sales, we closed the third quarter of 2022 at 94% roughly. So I would say almost entirely sales are done under the brand Natuzzi. Whereas if we compare the percentages, to what happened in the third quarter of 2019, it was 78%. So almost an increase of 16% this point. This is, and I will spot some more, a confirmation that despite the unprecedented times we live, we are not deviating from our long-term strategy, which is to become a brand-leading company. Of course, that component of business fully leverage our heritage of 65 years, and it also carry higher marginality. That's the reason why that is the way, the direction in which we want to invest. Another important element I would like to flesh out is that since week 29 of this year, we have witnessed a change in direction in the sense that the weekly order flow, so what we receive in term of fresh order, has been resulted higher than the previous year, 2022. So for 19 weeks in sequence, right now, we are closing week 47, we are reporting order flow, which is above 2022 or previous period. And that interrupted a cycle of 15 months where the fresh order were below the same period of the previous year. I think it's too early to say if that is a structural, let's say, turning point, but I believe it's encouraging to see that now for 19 weeks we are witnessing that. Another element which I believe is important is to testify that the marginality, so our gross margin, has been at 35.4, which is again above the average over the last three years. This comes as a consequence of our restless focus on pricing discipline and cost management, which compensated to a large extent the disadvantage we reported in absorbing the fixed cost with lower volumes, because that's absolutely what happened with our factories. The sum of those, let's say, element of the equation led to a loss, operating loss in the quarter of 1.3 million, which is, of course, not what we wanted to achieve. I believe it's still useful to put it in perspective. For instance, that loss of 1.3 million reported achieving 74.9 million in sales compared with a loss of 8.7 million reported in 2019, but with 88.1 million sales. So that means that in 2019, having 14 million more sales, we were losing 8.7 million. This year, we are losing 1.3 with 14 million less. So I believe that directionally gives you a sense that we are working to strengthen our operating model and to lower our breakeven so that when growth come back and we are likely working for that and have no doubts that it will happen, we will have a better profit on our asset and a better cash conversion. Talking to cash, also this quarter has been positive from the operation. It's been positive by 2.3 million. euro, which compare to a negative cash of 4.2 of previous year. And this again is a proof that our model is resilient even under extreme circumstance like the one we're witnessing. Resilient is in a way self-financing. We will discuss later but we are not deviating from our long-term strategy. And even in this quarter, sorry, yes, even in this quarter, we invested 1.8 million in retail and 1.1 million in restructuring and modernization of our factory, which are basically the long-term priority for us. On one side, enhancing brand retail, on the other side, continuing our restructuring and modernization of our factory. So this is, I will say, the highlight of a quarter where, as everybody in the industry, we are still witnessing a soft demand. I believe the circumstances are very evident. We are, in addition, as you know, unfortunately, which is not only for us but for humankind, We are living this additional humanitarian crisis in the Middle East, which of course does not contribute. So how we are equipping ourselves to make sure that Natuzzi, which has 65 years heritage, that's been through a series of moment of glory, more difficult, can continue and get out of this crisis even stronger. As you can imagine, we're really focusing on ensuring resilience and the strength of our balance sheet and our cost structure. We're continuing on the restructuring front. Since 2021, we reduced our working force by 649 units, which compared, just to give a sense of acceleration, with 577 of the past quarter. So in one quarter, we let go another 72 people. This, I think, is important to notice, the net reduction, because in the meantime, we are strengthening our organization. So we are changing the blood. Just to name the last addiction, we started a collaboration with a gentleman called Brian Weidelich. which come from Michel Gold and Bob Williams, that, as you know, didn't make it through this crisis, but was definitely a very good retailer. And Brian has been managing, for the East Coast, a 90 million business of 14 stores, and is now actively collaborating with our global retail division here in the quarter to keep strengthening our approach to retail. I use this as an example to show that we are working to make our business more efficient, but since we deeply believe in the growth and the strengths of our brands, we are at the same time investing to uplift competencies. The other area where we have not been decelerating has been the retail front. We've been opening since the first nine of the year, 1,900 square meter of, sorry, 1,900 square feet of retail capacity, retail commercial space. I challenge every one of you to find somebody that during a crisis has the courage to keep investing in this dimension, apart of course from players in US that open large boxes, but I'm talking about traditional retail. As you know, North America is still very central to our strategy. In fact, five new stores in the city has been opened or flagship, which means primary location with a surface of 1,000 square feet and above. We inaugurated three new cities. So Atlanta, Houston, and San Diego were not present. We opened a really fantastic store in Manassas. I hope you have a chance to visit it. It's on the Miracle Mile, the one connecting the Hampton, really a flagship. And we relocated our one in Miami stores. In addition, we opened 45 franchising stores. So as I said, focus on cost containment, but at the same time, not the focusing on what should be the platform for accelerating growth in the meantime. Another way we are working to increase our investment capacity is the one of dismissing non-strategic assets. We've been explicit on those intent in our passcodes. We've been further discussing with our board, which gives us the green light to continue some of those discussions, which are really becoming very real. As I mentioned before, and I cannot give you further detail, the non-strategic asset, which we are considering dismissing, including High Point, which is a really iconic location with a fantastic heritage designed by Mario Bellini, which is still one of the most famous and respected architects still living, of 1,200,000 square feet. Other assets that we might consider selling, including our tannery, natco, and some fields we have in the area of Greensboro. So that is an ongoing process where there is active discussion with potential buyers. What we will do? if those proceeding materialize. Again, a very consistent journey. If that proceeding materialize, two main priority, retail in core geography, which means especially North America, and accelerating our restructuring. This has been, again, a discussion with our board and has been really a consensual decision that that should be our priority going forward. In closing, I would like to give you three messages that for me are really the key takeaway of this quarter, but I will say more of this year, which is going to the closing, at least from a solar calendar perspective. So the market is still challenging. That is obvious. I think we should be celebrating our capacity of increasing resilience and managing costs because this has been achieved during a period of unsaturated capacity and we achieve higher marginality, which is not obvious, increasing by some 10 percentage point compared to 2019. The second key message for me is that we are not deviating from our long-term strategy, which is focusing on brand retail and accelerating the restructuring. And the third point, which again, I don't want to overcomment, but is encouraging to notice that from week 29 of this year, we are reporting green numbers versus the same period of 2022. which is, I believe, a question that came often in the previous conversation we had together. So let me stop here for question on this initial part of illustration of third-quarter results. Then with Carl and Pierre, we will provide you some more specific aspect on interesting element of our P&L and balance sheet. But let me stop here for initial Q&A.

If you have any questions at this time, please raise your hand by using the Ask a Question feature on your screen. And we do have a question coming from David Kanin from Kanin Wealth Management. David, your line is now live.

Hi, good morning, guys. Appreciate you taking the questions. A follow-up on the statement that you made, your focus is on, quote, accelerating the restructuring and then building out the North American DOS footprint, which makes perfect sense to me. So my question is, in order to fund and accelerate that, what do you think the timeframe is of the disposal of some of these non-core assets, in particular High Point?

Thank you, David, for your encouragement words and your specific question. So I point that we are really being careful in looking at the market. At the moment, we have ongoing discussion with a potential buyer, and we are entering into due diligence, which is, we are close to entering due diligence, which is, you know, if we then agree on the terms, the terminating phase of a potential disposal. So my point is very concrete. The opportunity, again, as you know better than me, until you have not signed a piece of paper, both parties can decide that it is not the right moment or right terms to complete it. But we've been going through the full process, including the approval of our board for the dismissal because, of course, it's a strategic asset which needs to be approved by our board. So internally, we've done our and we are in an active discussion for the last part of this potential transaction with a potential buyer. I cannot disclose, of course, details, but this is the situation. I think on the other asset, we are a bit a step behind. They are, by the way, less meaningful in terms of potential impact. but we are active, you know, scouting on the market for potential buyer with appointed advisor for both assets.

Okay. I have several questions. So my apologies in advance for monopolizing. But in terms of the, you highlighted some of the new stores that were open, Atlanta, Houston, San Diego, Manhasset. So in the third quarter, and it's September, how many of these stores did not contribute, if any, and what, if you can quantify the revenue that we may pick up in Q4? incrementally i'm assuming these stores you know the newer stores probably have an average unit volume uh four to five million dollars that seems to be the average on the new stores uh so if you could give me color there that would be helpful okay i i will start and then i i will ask maybe jason or pierrot to add favor details when we open a new store there is a very careful process

which include a job marketing study to make sure that the catchment area, the agency, in terms of other brands, are really what constitute a solid base for operating a store. For us, it's a very strategic decision. And that strategic decision includes a business plan, a five-year business plan, which should show a breakeven between four, 14 and 18 months that is our you know criteria of course there is always a ramp up phase because as in any business initially you know you have not the full benefit of the operation while you have the full impact of having a team on a course so that's a bit as a principle so those store they are still in this ramp up phase but maybe just you can provide if you have already ready your hands otherwise I'm not some more precise figures on those five new openings in 2023.

Jason, if you could help on that. I'd like to know of the new stores, how many of them did not contribute in Q3? Just so I could model going forward what the incrementality is, if anything.

Sure. So it's I think first important to remember that these stores are all largely based on a special order and important model. So there's definitely a timing difference between what we call written orders into our factory versus delivered revenue, which really begins to flow on a kind of more regular and normal basis. um you know four to five months into the opening of the store based on our our import model outside of any you know locally stocked product that we we feature in our quick time assortment so um for for all of these recent openings i think it's you know as you're thinking about your models you should really be thinking about early 24 to more materially impact our North American revenues.

Okay, so those five stores, that was very helpful, Jason. So in your clarification, what you're saying is you're taking written orders right now, but they don't show up in revenue until five or six months later when product is shipped. uh could you give us that's very helpful could you give us a flavor uh for or you know to quantify uh the written orders that you're seeing at the new stores and if they're performing up to your plan sure i would say that that um you know when i when i step back and the real estate talent the door design um

you know, against, let's say, a lot of our legacy locations, you know, I think we're very proud of the work. As Antonia was mentioning, even on the written side, you know, when we enter a new market, we're in, you know, we're hiring largely a new team and we're definitely seeing, you know, that our stores ramp, you know, ramp to fully mature and typically, you year two is stronger than year one um both historically and and what we've seen over the last couple of years so um you know we we haven't really been disclosing individual store volumes um and uh i'm not sure that i'm prepared to do that today but but i think you know we believe we've built great additions to the us fleet here

Okay. Well, it's helpful to just understand the cadence of revenue recognition and, you know, that we have a nice opportunity in front of us. And then if I could pivot to a question for Silvestri. I see, I guess the encouraging or bright spot here is on such soft revenue, the operating loss was quite small. And it appears you've done a great job of driving down selling expense and administrative expenses a little bit. Could you give me, Silvestri, a sense if and when revenues do increase? Let's say, theoretically, we increase revenues by $15 million back to $90 million. Okay. Okay. how much would selling expense go up? How much is variable, if you could help me understand that, of the 21.6 million? So on the next 15 million, how much does selling expense increase?

Okay, so regarding the cost discipline, if we increase the volume, let's say that our numbers increase, already show as of today, all the fixed part, including in our selling and administrative expenses. So if we increase on the same basis in terms of network, the sales, it will only go up by all the variable part related to the rent and the sales commissions and the transportation costs. So let's say they could go up by 20% of it around that range.

so selling expense would increase about 20 percent if we had a 15 million dollar increase in revenue yeah because like an administrative administrative expense should remain flat correct okay that's helpful so i mean it shows that you know when you get that uh flow through on revenue. There's quite a bit of leverage in the financial model to generate profit. And then the last question, Antonio, if you called out specifically that written orders have flipped to positive versus the last 15 months, could you give us, without being completely granular, could you give us a little more color on what that improvement looks like in terms of percentage or magnitude?

So it's a single digit, stronger if you look at the branded versus the unbranded, it's single digit, but it's consistent. And geography-wise, I would say more recently, US has been more dynamic. The other geography, which has been, but that is not, recently because they've been more resilient during the year, are being emerging market central in South America. This also maybe give me an opportunity, which goes beyond your question, Dave, to comment a bit on China. China, as you know, is going to a very different paradigm when it comes to consumer product than before the COVID. i would say not only the furniture but i would say all the branded even high-end and luxury they are being very let's say gloomy this year we have been also affected the thing is important change is that we are increasingly working as an integrated company as you know we have the minority so this led to a creation of an autonomous organization historically, which now has been more and more integrated in the way of working and in the way we operate retail, brand and merchandising choices. So we feel good about the direction that with our partner we're giving to the business and hopefully that will be also translating in a positive outcome from the geography that is still you know, witnessing a very, very, very conservative consumer after the pandemic.

Okay. On that topic, I'm cheating a little bit. I guess I'm asking more questions, but this was on my list. Cash in China. How much is in the JV right now? And what is our flexibility or optionality in accessing some of that cash?

So on the cash, I need to refer to Piero if technically, I know the figure, but I want to be sure that technically we can refer to it before the 20F. I suspect we cannot disclose it now, right?

You're right. You're right. We cannot disclose also because they're a listed company. So we cannot disclose.

So I cannot disclose the figure. They have been, since the beginning of the year, increasing the cash. Of course, it's below what we reported in the previous year because, as I mentioned a few times, the balance between liquidity and fixed assets has been moving more in the direction of fixed assets because they invested in inventory, especially in the Citalia, which we are now managing. but the group has been accruing cash. And again, fortunately give you the figure because of respect of our, let's say, of the rules of both patterns being listed.

Okay.

The other question, the other aspect, in fact, instead is easier to answer. So the distribution of cash or dividend is, can happen in a form of capital reduction or dividend. Both need to be authorized by the anonymity of the board members, which are five, three being appointed by the majority shareholder KUKA and two being appointed by Natuzzi and being our executive chairman, Mr. Pasquale Natuzzi and myself. So both cash So both options to, let's say, reduce cash, which is capital reduction and dividend, need to be approved by anonymity by the board of the GV.

Okay. And then a quick strategic question, and maybe this falls into Jason's domain, but I would like to get your thoughts on this. Antonio, when I visit your stores, it seems like you're very focused on the living room, that particular space within the home. And when I go to competitors, I see that they have a broader appeal, the dining room, the bedroom, as well as the living room. And so I guess... The silver lining is this probably is a large opportunity for you. Could you talk in terms of the focus there? I know you're focused on building out, you know, the North American footprint, but are you also focused, do you have your team focused on building and designing high-quality, desirable Natucci product that goes into these other rooms so that longer term, our average unit volumes could be double or even triple where we are now. Thanks.

No, Dave, you're really spot on. And I believe the answer here needs to be specific for Natuzzi Italia and Natuzzi Edition. On Natuzzi Italia, we're really going in the direction of having a lifestyle presentation in the store with a total living. As you, of course, know, the heritage and the strengths of Natuzzi is in the living room, in the upholstery where Mr. Pasquale Natuzzi, and it's not me saying it, but it's the market, saying that it's been a genius inventing a new category of product which combines, you know, harmony and motion. And we want to preserve that. But as you mentioned, as we're entering retail, we want this retail to occupy different rooms. So we're working definitely on the bedroom, where, again, technically it's somehow closer to the upholstery, especially for the upholstered bedroom, because technically they are not far away in terms of material. And in fact, some of that production happened in our factory. So the bedroom is another room we want to occupy. Another room we want to occupy is the dining room, where instead, of course, materials and technicalities of production are different. And in fact, we design internally everything, but we do strategic partnership for the production. And increasingly, we want also to have, let's say, a legitimacy in accessories, lighting, really because of two needs. One is to present in the store a full immersive experience of the brand and to experience that the retail need to be experiential. And so you need to have a full lineup of accessory, and furniture. The second is to increase the average order ticket. And in fact, that is direction in most geography. I must admit and be transparent that we do still see a significant opportunity in improving our furnishing because it's a recent, let's say, direction. So we are still working to improve the furnishing, offering for Natus Italia. This is clearly part of the short-term objective to fully leverage our strengths of the brand and to fully leverage the investment that we have in retail. Okay, guys, thank you.

My apologies to anyone that's waiting in queue for monopolizing the call. But thank you, guys. If I have anything to follow up with, I'll just pose another question. Thank you. Thank you, Dave.

As a reminder, to be placed into question queue, you may click the Raise Your Hand feature on your screen. We do have a question from Steve Emerson from Emerson Investment Group. Your line is now live.

Thank you for taking Hold on. Let me hit video. Can you hear me?

We hear you perfectly.

We don't see you, but we hear you perfectly. Antonio, thank you very much. I met with you at the LOD micro conference last year.

I do remember, Steve. Nice to see you again.

Could you talk about some of your objectives next year, some of the metrics you hope to be at. And also, what percent of your revenues in the US are now met with fairly quick or domestic inventory?

OK. Thank you, Steve, and nice to reconnect with you. So let me start. I will answer specifically to your question, but let me start answering to a question which is a bit of a different time frame, which is where we see Natuzzi midterm. Because I believe that under this difficult market condition, every one of us has the natural tendency to focus more on the problem and the issue, and to forget the dream, the part of the dream. So I will answer first there, and then I go back to next year. So the dream is to bring Natuzzi where it should be and it deserves to be. Let's remember that according to independent survey, which means we're not doing those, Natuzzi has a brand awareness among international brands that position it first in the U.S. market First in UK, first in Spain, second in China. So that's to say the strengths of the brand. Clearly the brand is much larger than today's revenue. So our ambition is simply to bring the revenue where the brand is. Imagine what would be in terms of investment in today's work, build this brand. And there is, by the way, a second element which you cannot buy, which is the heritage. This is a company where The chairman has founded this company 65 years ago. Again, this position, a tooth in the bucket of, you know, if I do an analogy with the fashion, Varmani or Versace, so a company which really have created a market. So that is the dream and the vision. So let's go back now, talking more specifically on next year and U.S. quick time portion of sales. Next year, we are finalizing the budget. It's obvious that in circumstances where the market still for everyone, and I believe you read the press list of our peers, is not providing obvious sign of recovery, we are building a business case which privilege resilience and solidity of our fundamentals. Having said that, we are prioritizing investment in the direction I mentioned before, which is retail and restructuring. If, as we discussed before, some of those non-recurrent sales of a strategic asset happen, that will provide a stronger acceleration. Otherwise, we'll be quite prudent in the first part of the year in terms of new investment in retail to wait and see what is the, you know, development of the year. So that is how we are entering next year. So in terms of KPI, we were still monitoring the KPI that certified that we're moving in the right direction long term, which means sales of branded product versus total sales, sales of product in retail channel versus sales in wholesale, marginality, number of recurring customer, average order ticket. So KPI that testify we are moving in the right direction from a P&L and equity perspective. In term of accelerating investment, I suggested our board to be doing a budget which is relatively prudent in term of new investment in the first part of the year, ready to accelerate if the condition allows it, or if any of the non-recurrent asset transactions materialize. That's to give you, I would say, an answer on next year, but put it in the perspective of more of a midterm journey. On a specific question on a quick program or, let's say, stock inventory, Jason, maybe you want to take it.

Happy to attempt to answer your question, Steve, and make sure I got it right. So from, let's say, the retail side of the business, when I combine both brands, I would estimate that a little over 20% of our written orders come from sales that are already available in the US. quick time, a floor model change, what have you, and that about 75% are special ordered today. On the retail side, I would say on the wholesale side of the business, our retailers are are ordering a much larger percent, let's say from us directly, but they often provide their own stock investments. Our largest customers build their own stock. And so I would guess that the stock to special order ratio on the wholesale side of the business for their customers is maybe 60% stock, 40% special order from a blend standpoint, if I had to guess. Mr. Notizzi, it sounds like you think that's reasonably close. So I hope that answers your question.

Thank you. I was looking for more concrete metrics, like how many... u.s natuzzi stores um do you expect to build next year um etc so steve as i said i cannot give you a figure because depend on how the year will develop so let's say we say high point high point is uh you know

I don't give a precise figure, but it's above the book value, which is 10 million. Now, let's assume we sell it. It's significantly above the number. As I said, it would be primarily reinvested in stores. In U.S., an average store's net of capital contribution by the landlord is around 800K. So you can imagine that that can provide a significant acceleration, a turbo boost. If we need to self-finance those openings, leaving apart a way to increase our capital available, apart from selling strategic assets, of course, the speed of development is lower. In terms of full potential, again, we have a number in our plan, but since we disclosed the plan, I will use analogy from maybe other competitors. I think the company which is closer to us in terms of not necessarily operating model, but positioning and being international as Roche-Boubois. Roche-Boubois, which is similar in terms of price positioning, actually above Natuzzi Italia, has 40 stores, about 40 stores in the US. So I think there is space definitely for us to more than double the presence of Natuzzi Italia stores in the US. The speed we arrive to that number depends on our ability to invest, but also in the fact that we don't want to open a store we are not eventually happy by, as the implicit question of Dave mentioned before. So we're really focusing very much also on organic growth to make sure that every store is really supported. So I know it's going to be a long quest, long answer, but to shorten it, I cannot give you a number for next year. Our long-term perspective is to open around 8-10 stores per year in North America, but this is not a second firm for 2024 because of what I mentioned before, because we need to do a budget which is, at least in the first part of the year, particularly cautious.

Okay, did you say 8-10? 8-10.

No, no, no, no. 8 to 10. Got it. 8 to 10.

Got it. And to follow up David Kanin's question, what percent of your revenue is living room and what do you owe to, what's your objective in terms of percent non-living room?

For North America or more in general?

North America.

Okay. I'm checking by now on our system to be specific.

I mean, I know the numbers for North America if it's something we'd like to share, Antonio.

I was looking actually by brand. Do you have it by brand?

I, yes.

If you have it, you go ahead. I also have it, but you go ahead. You go ahead, Jason.

Okay. When we look at product that's oriented towards the living spaces number for Natuzzi Italia, it's about 80% of our total. And for Natuzzi editions, it's north of 90%.

And your objective is? I mean, if I see, I mean, we're going to be always skewed to a poster because the market is skewed to a poster. In the market, 60% is a poster in normal sales, no? I believe for Natuzzi that it will be always stronger. I think a good analogy maybe is China, where the team push harder, especially on a sedition, and it's more 70-30. So I think the long-term objective can be, you know, 60-40, 70-30. I don't know, Pasquale, if you agree. I mean, you've been... this industry but i believe that remaining 60 60 to 70 upholstery is how the market is done and also equivalent with our heritage i don't see higher percentage unknown upholstery in our stores thank you very much pleasure pleasure but you know interesting enough just again because we have i'm looking on my phone where our system allowed to look in real time any possible cross-off data, which made my life, I must say, quite easy, at least on this. It's really a dream to look at all the data. Let me tell you something, just to answer specifically to that question. If I look, let's say, last year, which is, of course, a close year, so I don't do any privileged information, and I look globally, not by market, Hold on one second.

In the meantime, Antonio, I'll just remind everyone, if you want to ask a question today, please click on the raise your hand feature on your screen. Just a reminder, if you'd like to ask a question today, please click the raise your hand feature on your screen, okay? Okay.

So the non-upholstery has been growing three times more than the upholstery, just to give you, of course, from a smaller base, but just to give you a sense of acceleration of the non-upholstery. And as I said before, we are not yet satisfied with what we express or what we call global merchandising platforms. which means the complete assortment, which include the hostry, dining, bedroom, and accessories. So I believe that is still an area of opportunity.

We do have a follow-up from David Keenan. David, your line is on live.

Hi, guys. Yeah, you guys used to give a backlog number. I know it was more relevant when we had the supply chain issues during COVID. But what was our backlog as of September 30th, and how does that compare with June 30th?

The backlog is at the physiological level. If you can't have the data, you're free to disclose it, otherwise we can do it as a follow-up. It's at the physiological level, of course. The backlog was... Sorry, Peter.

It's 54 million.

54. The backlog is... 54 million as of September 30th. And what was it as of June 30th?

June 30th, but it's the same as beginning of the year. But let me check it.

David, we can check it, but direction of the tail won't be different because we reach what we call physiological level of backlog, which means the amount of we need to have to do a proper planning of our factory, which normally is done three, four weeks in advance because of all the different material and the capacity we need to book. So we're at the physiological level, which if you want to see the positive side of it, means that our time to delivery for even special order has gone back to what it needs to be, which is more responsive to the demand of customer, apart from some geography issues where like rest of the pacific still the you know logistic has a is a very much impact in june was 56 by the way so yeah so is what we call physiological level so it was okay so it was about 56 million in june so it's about the same yeah yeah okay thanks guys

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