Natuzzi, S.p.A.

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Conference call for the third quarter and first nine months 2024 financial results. As a reminder, interested parties can join the call live via telephone by pressing plus 1-412-717-9633, then pass code 3925-2103-POUND in addition to the link already reminded to join via the webcast. Once again, if you'd like to join via telephone, please press plus 1-412-717-9633, then pass code 39252103-POUND, in addition to the link already provided to join via the 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 provided at that time. Free to queue up for questions. Joining us on today's call are Mr. Antonio Aguile, Notutti's Chief Executive Officer, Mr. Pasquale Notutti, Founder and Executive Chairman of the Board of Directors, Mr. Carlos Silvestri, Chief Financial Officer, Mr. Diego Babo, Chief Retail Officer, and Piero Durenzo, Investor Relations. As a reminder, today's call is being recorded. I'd now like to turn the conference call over to Piero. Please go ahead.

Thank you, Kevin. Good day to everyone. And thank you for joining the Natuzzi conference call for the 2024 third quarter and first nine months. After a brief introduction, we will give room for the 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 on 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, for opening the meeting and thank you, Piero, for reminding our rule of conduit. Good morning for the one joining from Europe and good morning for the one joining from the US and good morning, good afternoon for the one joining from Europe. As usually, I will provide some background to the number that we share with you. Then I will ask Carlo to provide some more specification on the financial performance. And then I will have Diego Babbo to share with us the progress we are doing on the retail front. As you have seen, we closed the first nine months of the year with sales in line with the last year. two hundred forty three million point nine euro. As you know, the sector continues to be facing stronger twins. And most of the companies are listed in our sector reported negative sales versus the previous year. When we look at the people, we can move forward. When we look at the performance of our brand as business this confirmed to be stronger than the average in fact has been growing 6.9 6.3 versus 2023 and 20.8 from 2029. um this is a really um the growth of the us and the growth of brand sales confirm our direction to become a branded retailer When we look at the, let's say, P&L information, it's important that, in reading them, we highlight that there's been, from a P&L perspective, in the first nine months of the year, 4.8 million of one-off severance restructuring costs. In reading the P&L correctly, you need to remember that, according to IFRS rule, Out of those 4.8 million, 4.1 are in the cost of sales. So in reading the margin, you have to remember that they include this one-off restructuring. And 0.7 is accrued in selling and administration expensive because they refer to severance for a quarter of people. The restructuring is the other side of our story. We focus very much on becoming a brand retail company. At the same time, we need to deal with the legacy from the time when Natuzzi had a much stronger industrial footprint because it was operating more in the volume business. In the first nine months, of the year, we let go 538 people, leading to a total reduction since the beginning of 2021 of 1,110 persons, equivalent to 26% of the total workforce. So in a very ethical manner, and I would say quite a way, we let go one fourth of our people uh in a very selective way because this regarded mostly our industrial footprint when we look at the margin the gross margin for the first nine months has been of 35.8 which compared to 35.8 so exactly the same number in 2023 instead in 2019 that we still use as a reference as the sector does to a time not affected from the pre- and post-COVID dynamics, the margin was of 29%. As I mentioned before, 4.1 million of severance had impact on cost of sales. So if we look at the margin excluding the severance cost, the margin for the first nine months of the year would have been of 37.4. Comparing again net of severance, to 36.3 in 2023 and 30 in 2019. So if we compare Apple with Apple, even in a contest where, and we will comment later, the third quarter has been significantly soft for us, we have 7.4 additional potential point of margin versus 2019. This has been achieved by improving the quality of sales because the branded business represents by now 93% and also by the efficiency we mentioned before, they still need to fully deploy their benefit. So moving down on the P&L in the first nine months of 2024, we reported an operating loss of 3.8 million, which compared to an operating loss of 2.2 million in 2023 and operating loss of 19.5 million in 2019. Again, excluding the 4.8 million one-off severance, we would have reported an operating profit of 1.2 million, which would have compared with an operating loss of 0.7 in 2023 and operating loss of 16.1 million in 2019. All these numbers, of course, are Apple with Apple in the sense that we are comparing net of the severance cost that happened in that period. Moving on the financial cost, the total financial cost had been of 7.4, which is a material difference versus 2023, where they were 5.6 and they were somehow in line with 2019, where we reported 7.7. This is a consequence of the fact that, of course, we use, let's say, finance to for our working capital, you know, as a standard way we always have been using to cover the business in a context where the interest rate have been higher than in the past. Even in 2024, we continue investing in line with our priority. In particular, we invested $5.4 million primarily in our factory and $40 in US where we opened a new store in Denver. As I mentioned several times, we are keen to free up resources in divesting from non-strategic assets. We already shared in the last press release that following a very diligent process with our internal committee, we decided as a board and the CEO to sell to the insider shareholders the right point. We received the first installment of 3.8 million for that sale. I'm happy also to report that we entered and signed a contract for a sale on a non-strategic land in Romania, which is nearby to our existing factory, but where we had no plan to do any use for our operation. uh the sales uh that we are looking to complete will be happening in 2025 and we're looking at a value of 2.9 3.1 million euro we already received a first installment as a confirmation by the buyer for also this transaction And these are two already, I would say, almost complete transactions. We continue looking at the way to sell non-strategic assets, which I mentioned before, include also our ternary and other minor assets that we have in our balance sheet. Looking at the cash, The cash position is significantly lower than the opening position. We opened with 33.6 million. At the end of September, we have 17.1. Looking at the way and the main dynamics in the cash, the cash used in operation has been 5.1. Of these, 6 million is to reduce workforce. Again, the way in which for IFRS principle cash use in severance is accounted for is accounted in operating activity. Hence, the difference between the two is positive for 0.9, which is the cash generating by our operation. So the operation would have been generating cash. Cash use in investment activity, as I mentioned, has been 5.4. Cash use in financing activity 7.1, then we have 0.4 given the change in exchange rate, and then we have a positive contribution of 1.5 given the different use of bank overdraft. Cash remain a priority. Of course, in these figures, you don't see the positive impact of the proceeding of a point which happened after September, as well as the one in Romania. We're also reporting a better deal flow in the last 10 weeks, and hence we're continuously monitoring the cash with a weekly currency, both on a 13 weeks and a longer time frame, and we feel no risk on the cash side. The third quarter reflects pretty much the same dynamics in terms of top line, in the sense that we are trading exactly in line with 2023, so 0.1 above last year. Again, brand sales are performing better. What we reported, which we continue monitoring and is already trading up on a better trajectory has been a decline in gross margin, given some specific element in third quarter that our CFO, Carlo Silvestri, will comment later on in this call. This is the LSA specific commentary on figures. Let me give you a bit an update on how myself as a CEO, Pasquale as a CFD chairman, the board and our team is dealing with this phase of the market. We're dealing with it remaining very, very focused on our declared priority, which are not, let's say, in a sense affected by the contest. The first one is retail. Retail continue being an important way for us both in terms of DOS and FOS to improve performances and to improve the brand representation. We have done significant effort in this area, which include an evolved retail format for Natus Italia, new IT tools configurator that help to have a better dialogue with final client and architect, very clear with our mission define project and not selling individual piece of furniture. On this Diego will provide some interesting highlight showing the pace of rollout of those initiatives both in our DOS and our franchisee. Our DOS uh are on a way to become really a living example for the franchisee of what we mean by modern retail and as we really want to show them at best in terms of brand representation and performances during the quarter uh during the first nine months as i mentioned we opened denver Denver has been an opening which took longer than planned, really because we want to make sure that the infrastructure fully embed the latest concept, the latest retail format. Considering the last four opening in 2023 in Denver, we added five new Natus Italiana stores in US. coherently with our commitment to increase the presence of Natuz Italia in US, which we consider one of the highest priority going forward. When we talk about improving the quality of our relationship with client, the other area where we've been focusing on innovation is World sales remain and will continue being an important challenge for us. Instant geography like US structurally is an important way to reach customers in several locations. They are very modern and structural partners. And hence, we see this as a strategic channel in the US. But this is also the case in some geography in the rest of Asia Pacific. We have really great partners in Thailand, in other geography in the rest of Asia Pacific. And this is increasingly true also in Europe, where historically we had a strong presence in the Benelux. But now we are getting back in business in some important geography like France and Germany. This is, in a sense, bringing Natuzzi back better because Natuzzi has always been in the wholesale channel, but now, coherently with our, what we internally call, brand retail religion, which is, in essence, the fact we don't want to compromise the experience of the customer, even in wholesale, we invested in Pasquale Natuzzi as being core to that, to reimagine our presence in the wholesale. We came up with this reimagined gallery format, which is a way to improve performance of our partner and to better represent our brand. We also learned from our experience and this format is very modular and very light in terms of investment because clearly a multi-brand partner needs to carefully look at the return of investment. Today later, we will focus with Diego on the retail development. In our next analyst call, we'll invite our head for the wholesale business to do an equivalent presentation for the gallery business. Moving to another new area where we want to, and we are recording very exciting advancement, we want to grow, trade and contract. We issue a specific press release regarding the Natuzzi Harmony House residence, which has been opened in terms of sales and unveiled in Dubai on the 12th of November. I'm very proud of this achievement and I'm sure later Pasquale will also share his view because he was the guest of honor in that event because he certified It testifies several elements. First, it talks about the strength of our brand because the Natuzzi Harmony residents really use the brand of Natuzzi as a way to add value to our real estate development, which happens in one of the most iconic areas of Dubai. Second, because compared to other branded developments, Natuzzi didn't, let's say, only license its name. But it was key in developing the outside architecture and the internal decoration, which fully represent the brand DNA. And really, I would say, stands out from the crowd because this kind of building often seems to be each similar to the other. This one brings a piece of our Mediterranean soul in Dubai and is receiving terrific feedback. The third element, which is very important in this situation, Tuzzi not only provide the full assortment, which is managed directly by us, which clearly include the upholstery, but also dining and bedroom, but also acted as an orchestrator for the remaining furniture, which include fixed furniture, cabinets and kitchens. As you know, because we discussed previously, this is a strategic area. opportunity and for this reason we establish a new division which has clear targets but will act in accordance with the rest of the company leveraging the asset of the rest of the company so will be freedom within a frame in the same that will share all our let's say core business function but will have the freedom in the responsibility to hunt for opportunity On the restructuring, we already tap on before. We mentioned before it's a key area of focus. In these last three months, it happens that we closed as part of our Asian strategy, the Shanghai plant. In China, this plant has been serving the Tutsi for more than 15 years. Shanghai 15 years ago was a very different place than it is today. It was no longer convenient to have a plant in Shanghai, so we moved our production in a city, Qingzhou, which is three hours south of Shanghai, where we have an efficiency improvement of 30%. This plant will progressively focus to serve our domestic market, where, as you know, we operate in partnership with KUKA to a JV where Natuzzi owns the 49%. On the divestment of non-strategic asset already commented this is another let's say avenue we are happy the way we're closing the year because two of the assets which has been for a long time under our radar screen because we decided not to own them any longer, they eventually found a new owner and this will free up cash from our balance sheet. So all in all, it's really a story that continues in a very coherent way. We feel very confident of what we're building, what we're achieving. They kind of Testments we are receiving are multiple, so it's not something which derives just from our judgment. I talk about Dubai. We continue receiving requests for opening a new store. We are just projecting a new store in Wuxi, which is an important city in China. It will be a 650-meter store, which will be entirely designed by us. And, you know, this is one of the many examples where clients seek us for investing in our stores, even in a situation where, as in China, not many brands are investing in your retail. Having said that, I will pass over to Diego. We will share some progress on the retail front before and then Carlo will provide some commentary on the third quarter and nine months gross margin evolution. Please, Diego.

Thank you, Antonio. Good morning, good afternoon to all the attendees. As Antonio was mentioning, as the corporate retail division at Natuzzi, we have spent the last months addressing key goals. We have focused on completing our guidelines, perfecting our model to elevate the customer experience, and most importantly, ensuring a high level of adoption of these guidelines. Our efforts have also included enhancing the performances of those stores through the implementation of the new store concept, as Antonio was mentioning. Let me share with you no more than three slides that could help me to describe better the scenario. As you can see on the left side, some image of the new store concept for Natuzzi Italia, which has been really adopted in nine out of 39 directly over the stores around the world. It was also committed to invest for future upgrade on the remaining stores. This has been done with the goal of creating a more engaging shopping environment to retain customers through a more environmentally sustainable and less expensive store concept, which is also aimed to highlight our brand heritage and root by reminding through materials and colors our Apulian landscape where the company is based. and ultimately to boost sales and revenues through layouts that encourage higher spending. On the left, we've done, you see the other image about Divani & Divani in Italy, where we have done, we have been through the same journey of upgrading eight out of 10 directly over the stores in order to develop a cohesive and distinctive store design that not only refracted brand values, but also set us apart from competitors, considering that we are facing fierce competition in Italy on that. And also, we adopted a set of tools embedded in this concept, aiming to increase the conversion rate, talking about BOP materials, in-store communications, watches, and so on. But it's not only a matter of in-store concept, it's also digital tools. We have invested considerable resources as a company in order to define and implement digital tools through all our network. As you can see on the right, the status is that we have achieved the full completion of all this installation through all our network directly over the stores. We are talking about all the systems that are helping us to utilize real-time traffic measurements to make informed decision and improve store layout and staffing. We are leveraging on a dashboard like Power BI to track key metrics, identify trends, and implement strategic adjustment. We are creating also fully pleasing shopping atmosphere within store music tailored to the brand identity. And recently, we also launched a state-of-the-art room configurator to empower customers to personalize their purchases and leading to increased satisfaction and sales. We think that our initiatives have yielded significant progress in establishing a robust framework. However, It's imperative to bring our FOSS stores to the same level of excellence as our DOS stores in terms of tool adoption and guideline adherence. To achieve this, we are working on integrating the FOSS stores into our system by implementing all the tools that we have developed. In this last slide, I'm just mentioning some of them. As you can see, starting from January 23 up to the end of last quarter, the stores were not completely connected to our system. And now just to mention a couple of this tool, you can see that 283 stores are now fully connected through the order management system, which means that we can measure much better than before their performances. And you can see that more than 100 stores on top of our doors have now a traffic counter installed, which means that we can measure the traffic. By connecting with our system, we ensure the sharing of more informed business choices. And these initiatives are designed to foster a cohesive, high-performing retail environment that aligns our partners and enhance overall operational efficiencies. Our commitment to these objectives underscores our dedication to providing exemplary service and maintaining the highest standards. More available to answer to your question if any in the future.

Thank you, Diego. This, again, is intended to go beyond what is the standard package, which is providing a press release. because we really want you to get to know our management. Diego has been a pillar of the retail transformation we are implementing. He's oversees now the full retail business, which includes for us DOS and franchisee. As we mentioned, franchisee for us are DOS managed by third party, in the sense that we really want the customer to fully have a consistent experience And we also want to help our partner with all the knowledge we have by managing 600 stores. So we really want to integrate them. I will pass over now to Carlo, which will provide some commentary on the third quarter and nine-month evolution of gross margin and profitability that, as you know, remain for us an absolute priority, which we will continue focusing on. So he will explain some of the dynamic reported more recently. Please, Carlo. Carlo, you're on mute.

Can you hear me? Yeah, sorry. So I will give you some insights about the third quarter, starting from our sales. As Antonio did mention, the overall third quarter was affected by a weak business trend during the summer period. But overall, our sales were 0.5 over the third quarter 2023. and with the branded sales that slightly increased in proportion versus 2023. What did change was the mix among our brands with Natuzzi Edition and Divani Divani that compensated the decrease of Natuzzi Italia. This, of course, had also an impact on our capability of absorption of fixed costs. But let's talk about the gross profit of 2024 with the major impact. So first of all, I would like to discuss in detail about the labor cost. If we talk about absolute number, we see an increase of 1.8 million compared to the same period of last year. But as already anticipated, the exit of 2,076 people in China due to the closure of our plant in Shanghai and the move to Qingzhou had an impact direct on our cost of labor because we did pay 2.9 million severances. This, of course, impacted directly in our cost of goods sold. Then what happened in terms of trend, we did also some inventory exit to clear some stock and in terms of decrease of stock since the beginning of the year, we had a positive impact on our cash of 4.8 million. And on top of that, of course, the moving of the production from Shanghai to Pingzhou had some impact in terms of extra cost during the period. but if we exclude as i mentioned before the impact of the severances also for the period the gross margin would have been 35.7 versus the 31.8 reported that would have compared to the 35.5 of last year but most importantly versus 30.5% reported in the third quarter 2019 with an increase on improvement of more than 5 percentage points. Now, talking about the other factor that did impact on our P&L to have a more coherent lecture of our numbers, I will go to the selling expenses. to explain that what we see in our report is a decrease from 21.6 versus 20.3 this year. To better understand our numbers, we need to also consider that this decrease of selling expenses was also due to the portfolio management that we continuously do in our DOS. So in this period, we did close two stores, one in Spain, one in Switzerland, but at the same time, we have the impact of the new opening of last year, the four stores in the U.S., Plus this year, the store in Denver. So we have a less cost but improved portfolio. While on the administrative expenses, the cost of 8.5 million does include a half million cost of redundancy package that we provide to decrease our overwork. force in as I mentioned before Spain and Switzerland so even in this case if we did exclude that we will have a essay saving this all of these to say that if we exclude all these factor in our numbers the operating profit will have been a loss of 400k euro during the period that would have compared to a loss of 1.1 million in the third quarter 2023. Talking about the finance cost, adding just a slightly comment of what Antonio mentioned in his previous comments, the net exchange rate, I would like to underline, is only related to trade receivable and payable. It is not related to the change of our policies in edging from the risk of exchange rates. So just due to the fluctuation of the exchange rate. This is my comments on the third quarter. Now I will leave the floor for questions.

Thank you. We'll now be conducting a question and answer session. You may ask a question at any time by coming into the Ask a Question feature on your screen. Once again, if you'd like to ask a question, you can raise your hand using the Ask a Question feature on your screen. One moment, please. While we pause for questions. We have a question coming from Kirby Neuberger. Your line is now live.

Yes, I don't know if you can speculate on this, but there is talk that the next presidential administration in the United States is going to implement some tariffs. Do you all have a feel for how that might affect you?

Thank you for the question. I will take it. Of course, we have no way to predict what decision the new administration will take, but I can assure you that we are definitely preparing ourselves for dealing in an optimal way with potential evolution of logistic and tariff. Let me elaborate, because I believe this is an intrinsic plus that Natruzzi has, because it doesn't rely on just one source of production, but is establishing multiple areas really to navigate this circumstance. For instance, We are progressively using Vietnam and we have a plan starting for first quarter 2025 to open in Vietnam, really to make sure this is another platform where we can let's say, serve geography like U.S. as we are already doing for large clients. As you know, Vietnam doesn't have any tariff compared to China, to U.S. Producing out of China in terms of net impact of tariff will have a disadvantage with the current duty of 14% point. We have to remind that we also have Italy as a production where we might consider if tariff might become an issue to serve certain geography like North America. So I cannot say where eventually the administration will head to. What I can say is that Natuzzi given its footprint, is equipped to deal, as we did in the past, for instance, where there's been a spike in logistics, to edge this negative phenomenon by moving production from one plant to the other.

Thank you.

Pleasure. Thank you. Next question is coming from David Kane, and your line is now live.

I'm afraid Dave, you're mute, Dave. I still see mute. Kevin, is there any way you can unmute Dave? Okay, now you're on, now you're on.

Thank you for taking my questions. I apologize, sir.

It seems like you're having some connectivity issues, David. I do apologize, sir. Please rejoin, David. Just give me the message that you're having a little Wi-Fi issue on your end. Stand by. In the meantime, if you'd like to join the queue. There you go, David. Please go ahead, sir.

You need to mute, Dave? Are you guys able to hear me?

No, I can't. Please go ahead, David.

No, yes. Okay.

well first of all thank you for taking the time to answer my questions i have a few and then i'll go back into queue to allow other people to post questions um the first one uh antonio is you you reference uh order flow improvements in q4 uh subsequent to quarter and q3 could you just comment on that a little bit uh we heard the same thing from rh and their call So if you could just give us a little color of what you're seeing.

Sure. So since week 40, which means the last 10 weeks, we are reporting an interesting positive trend versus the previous weeks. I will not over-speculate on that, as we didn't do in our press release, because the situation outside still remains, let's say, at least volatile, not to say fragile. But as a matter of fact, the last 10 weeks systematically reported a better performance than the previous one. um as you know we're still hoping we discuss about you know potential evolution of the new administration in tariff we're still waiting and hoping that there will be specific measures more referred to the real estate of furniture industry because clearly one of the trigger point that we are still hoping to see in 2025 is a steep inversion in the interest rate Talking about China, China is implementing a stimulus package which has some specific facility also for the furniture. And in fact, in China as well, we are reporting in the last weeks a better inflow of orders. So, Dave, I will not over-stipulate, but I thought it was important as we share very transparently dead wings to also share this initial green spore that we're witnessing.

Okay. Thank you for that. The second question is, you called out specifically the move from Shanghai south and that there was an approximate 30% savings. Can you just remind us of the timeframe? When was that done? And when we will see the impact of that in the P&L?

So the official closing of Shanghai was end of September. And that's the reason why we're discussing it during this conversation on the first nine months, which means that we close our factory. We let go the workers. The Quinjao factory was already operational with few lines, now is ramping up capacity. The figures I was referring in terms of potential improvement, normally we see that a factory takes 12 months to reach a full efficiency. So we should see that materializing during 2025.

okay do you expect so what is the impact that you expect uh on production from china in terms of cost of goods or gross margin how many if you could quantify for us what is the improvement that you expect year over year specifically on that geography to gross margin are we talking 100 basis points 200 300 you can give us a little more color i'd appreciate that yeah yeah yeah

So I do understand that you want to model the different variables. I cannot be extremely precise because when we look to the transformation cost, it's not only the cost of labor and the rents that, of course, are more in our control, but it's also the cost of material and other factors. but I believe even the latest estimate we have done, we're talking about between 200 and 300 business point, two, three percent improvement.

Okay, thank you. I appreciate that. And then you spoke again about this new commercial division, in particular Dubai. Could you extrapolate for us over the next year or two, What do you think the size of that opportunity is? You know, this seems like it's potentially incremental to us. So if you could quantify on an annual basis what your internal goals are for this division.

So here I will directionally and transparently tell what we are doing. As you know, we don't provide specific guidance going forward. in total as part of our business. So the division has been very recently established. It's really reporting encouraging wins and it will be asked later to our president to share what has been his experience of being in Dubai in November. We have definitely a bold ambition. We have developed a five-year business plan for the division, which is looking to, as you said, build incremental business on the contract. The trade, which is another corporate business, which will be developed by this division is already, will be accounted in there. Dave, there is a bit of rebound. If you, Kevin, why I reply? Can you unmute the? Yes.

I was at the podium. I could not control his microphone. I'm sorry. If you could self-mute, David, while General is speaking, that'd be great.

Sorry. Just to make sure the answer is clear to you and to the other. Step by step. So we have established this new division. The business will be incremental? Absolutely, yes. We're looking at a different channel because here we are serving not final customer or architect or designer, but we're doing material partnership with real estate developer, with hotel, potential with, you know, landlord from airport, hospital. So the space is really huge. We believe that we're bringing really differential capability because we don't only bring the brand, We don't only bring a superior product, but I'm really amazed by the transformation to the architectural project that our team of designer has been able to achieve. So I'm very, very optimistic and confident. We developed a five-year business plan, including top-line cost to support this division. I will not be able to disclose number because we don't give, let's say... guidance but at the end of the period the support is supposed to support quite significantly our business with incremental business if we look at the other company that started this business italian company before us i will name some but you know just illustratively like multini and others they are doing a significant proportion of their business in content business For us, it will not be the same percentage because here we're talking, in the case of Molteni, with 30, 40, 50% of the business, almost the majority, because we have 680 stores. So the contract will be an overdrive on top, but I'm optimistic and we're really equipping this division to do a material contribution on our revenue. okay thank you so material means at least an eight figure number uh which would be this measure is measuring not one million but this measure in the next unit in the n20 million it's kind of ballpark measure at steady state okay okay excellent that's exciting and then uh just one more question before i'm sorry the other element i want to mention one of the parameters we set ourselves is that this division will be margin accruative so given the bar or what we're doing the bar for division is to be margin accruative also because we have a direct channel of the leadership with the uh developer so there's no intermediary there's no real estate to be paid for dots so the target for this division is to be margin accruative versus the average okay

Thank you for sharing that. That's helpful and exciting. And then last question before I go back into Q, you called out in the prepared remarks that Without the restructuring charge on an operating basis, we were profitable, I believe, 1.3 million on 75 million in revenue, which is incredible. And I appreciate you guys, your hard work in terms of right-sizing the business and taking costs out. So on a go-forward basis, is it safe to say with the cost savings that we have that above 75 million, 80 million, 85 million, et cetera, that on an operating basis, we should sustain profitability?

I mean, you have done the math correctly. We significantly lower our break-even. We used to be north of 100 million. When we started, the break-even was in the range of $100 million, $110 per quarter. Now the break-even is the part where you correctly mentioned. So, of course, once you pay the fixed cost, the incremental business will have a much higher ABTDI and cash conversion. So everything which is on top of the figure you mentioned, you should consider with higher contribution in terms of cash generation and marginality. So I don't want to over-promise anything. I'm just saying if we achieve, as I'm confident at one point we will achieve, the revenue per quarter that we were used to have and that our retail and contract division will deserve, the conversion to cash would be very noticeable.

okay well we look forward to you get getting back to 100 million a quarter because it looks like the profitability will be profound so good luck to you guys uh have a wonderful holiday season and uh you know i look forward to our next conversation thank you so much dave um kevin any other question in the queue

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Thank you, everyone. I will leave the final remark to Pasquale, which is a fantastic partner in this adventure because really is supporting the integrity of the business, of the brand, while really supporting us to evolve it. So I will leave the final remark to Pasquale. Also, I'm sure he will be happy to share his festivities. Greetings to all of you. I personally thank you for being committed to us. We're working very seriously. Be confident that everyone personally in our team is really highly committed to achieve the result that this company deserves and our investors deserve. Please, Pasquale.

Thanks, Antonio. First of all, thanks to you and Diego and Carlo for the presentation, which has been very, very, very clear. Obviously, I'm always together with you guys, together with you, you know, facing all the challenges. I'm very much confident, obviously, about the future of the company, despite the challenging situation, economic situation that is around the world. we have been really investing a lot of money and time this year in improving our retailer system division our wholesale division digitalizing i mean all the system with the crm um we created the new product a new marketing plan that is uh achieving a very good result wherever the product has been delivered. So again, I can just say I'm confident that despite the challenging environment everywhere in the world, we are confident that considering our plan, our program, We will improve our business, no question about it. I want to just, obviously, I'm lucky to have a good management team. This is very, very important. And obviously, I also take the opportunity to say thank you very much to our shareholders that still gave us confidence for what we are doing. and we will do our best to satisfy their expectations. Thanks to everyone. Happy season, Merry Christmas and a wonderful New Year for everyone. Thank you.

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

Thank you, everybody.