Natuzzi, S.p.A.

Welcome to the Nutriti S.P.A. 4th Quarter and Full Year 2024 Financial Results Webcast. As a reminder, if you'd like to dial into the conference via telephone, please dial plus 1-412-717-9633, then passcode 39252103. Once again, to dial in via phone, please press plus 1-412-717-9633. 717-9633, then pass code 39252103-POUND, in addition to the link already provided to join via video. At this time, all participants are in a listen-only mode. Following the introduction, we'll conduct a question and answer session. Instructions will be provided at that time. Joining us on today's call are Antonio Aquile, Chief Executive Officer, Pasquale Natuzzi, Chief Executive Chairman, Carlo Silvestri, Chief Financial Officer, Daniele Tranchini, Chief Marketing and Communication Officer, and Piero Di Renzo, Investor Relations. As a reminder, today's call is being recorded. I now turn the conference call 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 2024 fourth quarter and full year financial results. 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 security 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. These 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. Thank you, Piero. It's a pleasure to be again with you and good morning to the people joining from the US and good afternoon for those joining from Europe. We're going to be today discussing the result of the last quarter and the full fiscal year 2024. As usually, we like to provide also context and what we are working on beyond the figure we're going to be sharing. There's a reason why with Pasquale we also decided to invite our chief marketing officer. They will be testifying together with Pasquale the standard that our brand retail journey went up to now. Let me start with the financial part. As you have read by our press, we close the year at €318.8 million, 3% lower than last year. As you know, the market continues being quite volatile and challenging. This is a level of sales which, of course, does not make us satisfied. At the same time, I believe it's a testament that our company is very resilient in light of a very volatile and, through 2024, still a very soft market in most of the geography we operate in. Looking at the share out of the total, which is represented by branded, Out of the 318.8 million, 289 million has been made through our brand. This is definitely part of our vision initiated by our chairman Pasquale of transforming a manufacturer into a brand retailer. This figure compared with 295 in 2023 and 295.9 in 2019. So while we look at 2019 and we continue looking at 2019 as a year of comparison, because it was the last year before this very prolonged a period in which we actually witnessed everything from COVID to wars, to duty war. It's interesting to flesh out that in 2019, our sales were higher, were 387. But when you look at the brand, the sales were pretty much at the same level. This means that we already been working to improve the quality of sales, which then are going to be, which is reflected in margin, which is something we'll comment later on. And in fact, today, branded sales represent roughly 93% versus 80% in 2019. So I hope you appreciate that we increased by almost 13% the quota of revenue that we do through branded business, which is, of course, a more representative way of our value, not only in terms of margin, but a way of expressing the DNA of the company. Another element which goes hand in hand with that is the relevance of the retail, because typically if you are branded, you want to express the DNA and the customer experience in a more controlled environment, being a freestanding store, DOS or franchising or a gallery, which is our way to ensure a presence in a multi-brand retailer. Looking at the direct-to-operated store, in the year we reported 70.1 million, which is up 4% versus 2023 and 18% versus 2019. The growth had been mostly in terms of top line driven by the US, where it is important also to remember we opened an additional store in 2024, in particular in Denver. At the same time, to better interpret those data with a like-for-like approach, it's important to notice that we also close two non-performing stores of Natuzzi Italia, one in Spain and one in Switzerland. And additionally, we close one store not performing of Divani Divani, which I remind you is the brand used to sell Natuzzi edition. how you should interpret this closure in a positive way because the company started retail and this will be something we'll be discussing today 30 years ago so the company and the collection were very different some of the location where we opened initially the stores not only maybe they change location because you know city evolve mall evolves but also because our brand evolved so this is particularly true for natuzzi italia natuzzi italia today is a very different brand than it was 20 years ago so some of the location they don't longer they don't represent any longer our brand and when there an opportunity to exit the contract, the location contract, we take it to then requalify the network. Another important element we keep on very focused through 2024 is continuing our transformation. It's been, I would define it as silent in the sense that luckily no single line of newspapers has been written on this, but very, very pervasive. In 2024, we let go 638 people, roughly out of which in China, where, and I will discuss later, we relocate our production from Shanghai, which was not any longer available. cost-effective, especially for labor, to Qingzhou, which is 300 kilometers south, which offers a better rent and cost condition. In doing so, and again, I think the credit goes very much also to our chairman, which helped really to anticipate some of the things happening outside, we decided not to have any longer the production of Natuzzi edition for North America in China, which was moved in October 2024 to Europe. These We didn't have any anticipation of what would happen, but this proved clearly very smart in the light of the evolving tariff because it would have been impossible to serve North America from China. So the new plant in Qingzhou is entirely dedicated to the domestic market, to the China market where we operate with our JV. So looking at the perspective more with three years horizon, which is the horizon I've been having the honor to serve the company, we let go 1,141 people as net reduction, which means that at the same time we hired more than 100 people to reinforce our marketing and retail competencies. Daniele, for instance, is one of those hires. So we reduced by 26%, by one-fourth, by one-fourth, the total account of the company. So quite pervasive. Again, privileging to protect and reinforce, let's call it the new Natuzzi, merchandising, retail, marketing, digital Italy, and reducing the historical large capacity we had in production which was due when the company was a manufacturer in the large volume business. 2024 gross margin closed at 36.3%. Again, I'm proving by two percentage points versus 2023, where it was of 34.3%. So I repeated because I understand it was not very clear. So the margin in 2024 was 36.3 against 34.3 in 2023 and 29.7 in 2019. So versus 2019, we improved the margin of almost 7%. And we continue improving also in two years, which again, I would say they were not definitely easy for many aspects. How does it play in terms of breakeven? It's interesting to notice that, for instance, in 2019, when we had 387 million sales, so roughly 70 million more than we had this year, the company closed with 22.5 million losses, while this year we closed with 70 million less revenue with 6.3 million losses, which, of course, does make us very, very, very unsatisfied, very unhappy. But I think it's testified that the company is lowering the breakeven. And in fact, if we don't consider the restructuring that, according to the FSLA, the operational loss would have been of one million. Clearly, we are not operating with the aspiration of losing. We want to definitely win and be profitable. But I believe it gives you a sense of how the machine now is responding in terms of extracting value from what we do. In terms of net financial cost, there's been pretty much stability. As you know, for the IFRS principle, According to the FRS principle, part of the lease goes under this net financial cost. In particular, we had 0.7 million. They were due to the fact that we increased the number of stores in 2024, which explains the difference in net financial cost. um we continued on the program to divest strategic asset as we've been very transparent the board approved a proposal from the inside shareholder to acquire a high point which has been completed the transaction has been completed in march 2025 i give We give transparency in this press release. Of course, the additional payment, which was reported of 8.3 million euro, is not yet reflected in the net financial position, net cash position of the re-end, because we closed the net cash position on the 31st December 2024, while the transaction was completed in March 2025. So it will be something visible next round. I will not go line by line in commenting the last quarter. The things which I maybe flesh out, they are true. The relocation between plants, so the closing of Shanghai and the transfer of the production for the domestic market to Qingdao, which had, of course, a ramp up, and moving all the Natuzzi Edition collection from North America in the U.S., has been well planned, but of course they are quite a significant move. So operations in the last quarter were not able to fully keep up with the production pace. And in fact, we increased the backlog of 6.4 million in the last quarter that without this change in production should have materialized in terms of sales for the quarter. So last quarter was really affected by that. The other element that may be a flesh out is that the last quarter closed at 38.1 in terms of margin. So again, I would say a nice progression because if we look at just the last quarter, again, it's quite an increase because the last quarter of 2023, the margin was 30%, so 8 percentage points compared to previous year. This, of course, is something we're going to be very disciplined and try to defend and amplify. So this is for, let's say, the financial. And of course, we will be very happy to take more questions. Let me provide some color on what we are working on. In 2044, we worked very hard in the group future because we do believe this group has a strong future. And it's a kind of combination because you need to manage the cost with the microscope, but use the telescope to keep looking at the future, because if you are just too tactical, you don't build the future. You can also die by being too tactical. So we really focus on cost control, but at the same time, maintaining the ability to invest for brand, for retail system. I mentioned already the achievement in terms of margin. This is for us something, of course, important and again is the direction we're going to be continuing. The other aspect I will mention is the hard work, which is not yet, I would say, reflected in sales that has been taken to really transform a company, which for a long part of its history was a manufacturer, to a company that had the vision to become a retailer, but then had to become a retailer in terms of system and competencies. And on this, I would like to call in Pasquale, who is the person which can testify best this journey, because it was his vision and is best able to describe how hard it was with him, also with the new team, to transform a very successful manufacturer in a company that needs to learn a new job. Being a retailer. So I think it would be nice to hear indirectly from him how difficult, but also what has been the important step achieved by the company under this dimension. Pasquale, do you mind sharing your view with the team?

probably antonio we should first you know allow the uh shareholder to ask some question okay i mean okay you know interact in this uh uh we shouldn't talk always uh we i mean let us ask absolutely absolutely so okay let's open a first round of discussion

uh the other point in the agenda i i might cover directly or with the help of pasquale is the work we have done in the commercial side which i want to share because of course i believe you should tell us but i believe as an investor myself in the company is okay you've been working on the margin but when the revenue will come because now the machine if you wish is ready to deliver better results but we need sales so i want to tell you what we are working to to get sales But let me stop here for a first round of Q&A.

Thank you. If you'd like to ask a question at this time, please use the ask a question feature on your screen. Once again, anyone who'd like to ask a question at this time, please use the ask a question feature that is on your screen. At this point, it appears nobody has any questions at this time.

OK, so let's complete the presentation, and I'm sure there will be questions at the end. So the aspect I was mentioning, and Pasquale, you jump any time, but then I will ask Daniele to comment, is the transformation in the direction of being a retailer. Do you want to contribute, Pasquale, or should I continue as you prefer?

No, no, no. You can continue, Antonio. Don't worry. I'm here just to support you.

Feel free to jump any time. So very transparently, because you know we are all being very transparent with you as investors. In 2000, the company decided to become a retailer because they also understood, and that was really credit to Pasquale of this lucidity, then being a manufacturer out of Italy, being a value manufacturer out of Italy with Euro, with inflation, was not any longer defendable. But I also understood that the story under Natuzzi had the legitimacy to sustain a brand positioning because there was innovation, there was style, there was also this mythological ability to create beauty, which are all elements which are at the core of a brand. And a brand is a retailer by definition. And this vision, in fact, encountered quite a significant success with Patent and Decide opening stores, but also Natuzzi and Decide opening stores. But at the time, there was a significant disconnect between that vision and operation because systems were not allowed to read data as allowed timely. There were no competencies to manage aspects which are critical for a retailer like merchandising, like customer experience, visual, need their ability to decide, and we discussed before about the closing of some store, whether a location was completely appropriate. There was not yet a methodology. So the company in a sense had to learn why it was already on flight because stores were opened, expectations were generated, but systems were not there. I must say that I'm particularly impressed and you know that my background has been for 25 years in advisory. by the speed in which this company has been able to equip itself with tools, competencies and systems and people. Under the last three years, we created new divisions that were not simply existing. We created a customer experience division with a wonderful gentleman that in one of our calls I will introduce you, Michele Ciani, which is setting Rules are now to create emotion within the store because a store is not like a transaction place. It's a place where you have to create emotion. We now define that every product needs to be launch on the market with an end-to-end marketing approach. And in fact, we abolish the word product and we talk about project, because like in automotive or another sector, or in consumer electronics, when now we define to launch a new project, there is a clear positioning, there is a clear marketing strategy, and there is a clear selling point to the market. And in fact, we defined five major projects, two for Natus Italia and three for Natus Edition, which I'm sure Daniele will comment later, which set the tone, not just for one collection, but for multiple collections. And we also had to develop tools. Merchandising is a very complex matter because you have to imagine that our collection can be customised in many dimensions, size, versatility, fabrics, covering, colours, and every solution targets a specific segment of the market. so when we define what is the deal merchandising for a store is a very complex exercise that typically was taking four five six weeks for an individual store enabling 660 store you can imagine this was becoming a bottleneck as we want to suggest this to the market we don't let the individual partner to decide it we now completed an automation process where process that were possible to complete only in weeks, they are now completed in hours, where our system produces immediately a diagnostic of what needs to be changed in terms of layout and suggests a solution, which then is still refined by us. So I can't detail most of this, but the key message is the company is bridging the gap from a vision to operation. It decided to become a retailer, now it's becoming a retailer. And in saying that, unless Pasquale has an additional comment, I will ask Daniele... to show the new way for instance of interpreting marketing, which is not any longer just brand marketing, because luckily, as you know, Natuzzi is the most renewed brand in US, in Europe, in China. So it's less about brand awareness, it's more to drive traffic in the store. And again, here we did significant advancement in making it measurable and predictable. And I will ask Daniele to share appeal of that.

Thank you, Antonio. I don't know if I can share my screen just for a few minutes. Yeah, you should. If you go.

Maybe, Kevin, you can help, but... You should be able to hover your mouse over the platform and there should be a share screen button on the bottom. Yeah.

CC while I try to in fact, while I try to get the technology to assist me, let me start by commenting some of the words that somehow I don't seem to be able to.

I apologize, it says you're sharing your screen now. I just don't see anything being shared. By the way, Pasquale, in a point, so there is a bit of additional complexity for not being in the quarter.

Okay, somehow it does not allow me to do what I'm trying to do, but never mind.

It may be a firewall issue, sir. I do apologize.

Yeah, it's all right. Don't worry. Let me just give you a few comments to reinforce what Antonio was talking about just now.

the challenge that I've taken on as... Daniele, while you are unable to show the image of the new collection that we launched together with the marketing, let me explain a little bit, okay, the journey that the company is doing in terms of retailer. um so let's say in in our history we have made always a wonderful product and um you know the consumer loves natucci products no question about and because of that a lot of entrepreneurs in china in america in united kingdom in spain everywhere they decided to open a natucci store and show the brand and show the product But obviously, that doesn't mean to manage retailers, because each individual entrepreneur in each individual country, they were managing the brand in their way, okay? We have been grateful to them for believing and trusting in us. But we realize that, you know, we need to control our brands. So that's why we have been working on analytics in order, you know, to, first of all, we clusterize the store. Where we have the store? How many stores have we? Where are located? Are they appropriately located? Yes or not? And then we succeed also to connect with our stores. in order to control the store traffic, in order to control also the conversion rate. The customer gets in the store. Okay, are we able to convert the visit in the cell?

He may have frozen. Yeah, there we go. It's a connectivity issue.

Okay, okay. Guys, I think this was commenting what pretty much we discussed. Definitely Pasquale will be able to... Pasquale, se è bloccata l'immagine, forse non so se la vostra linea è molto stabile. Se è bloccata, se è caduta la linea. Prego, completa. No. Pasquale e Daniele, avete dei problemi di linea. Adesso direi a questo punto di aprire le domande. Kevin, again, maybe you want to do a round for Q&A on this question. Will do.

If anyone would like to ask a question at this time, please use the ask a question feature on your screen to be placed into question queue. Once again, if you'd like to ask a question at this time, please use the ask a question feature on your screen. Our first question is coming from George Malasky. from MKH Management. Your line is now live. George, please proceed. Hello, George. Unmute your phone. Corey Pinkston, your line is now live.

Antonio, do you hear me now?

I've been disconnected for a little while.

Yes. As you know, I'm in America. I'm in America. But I'm surprised. I must be more connected than when I'm in Italy. But anyway. Okay, so go ahead then.

Corey Pinkston, your line is live.

Good afternoon, gentlemen. Can you hear me?

We do. Yes.

I agree. Congratulations on navigating the environment we're in, especially with the manufacturing movements that you made for additions to get it back into Europe and all the rest and all the development of the brand. And as you said, project versus product development in the company, which probably is as critical today as it has ever been in light of the current environment. One question, I missed the very beginning of your comments, Antonio, but as it relates to the tariffs, I know we're speculating as to how long, how they're going to be, what they're going to be, et cetera. Based on kind of as you look at the current market, if we assume that there are going to be some kind of increased tariffs in place, and maybe we can speculate on that, as it relates to either pricing of the product to the customer or margin impact, is there any ability to kind of give us some thoughts as to how to think about that? And also, we're not as close to the market as you are, but when Natuzzi is in America, obviously we can look at the comps that are out there, whether it's RH or others, but you're a very different, I'll say, brand and approach to the market. And so as we think about the fact of the consumer being in very different categories, whether it's a higher-end consumer, medium, kind of higher medium. Can you just give us a little bit of idea as to what you're seeing in the market now, obviously without trying to give us forecasts?

Yeah, no, and thank you for being so respectful, Corinne, in posing your question. I would compose the answer maybe in three parts. So how we plan to react and how we really actually reacted. What we expect, this could be the impact in terms of large distributor and consumer short-term, but also, which is the third part, how this position would see in light of the large competitors in the U.S. that you didn't mention explicitly, but we know which they are. It's Restoration Hardware, it's Crate & Barrel, Our House, and other companies. So how we are reacting? Definitely, this was not something we would have hoped for. That's for sure. I mean, we were actually expecting the opposite, that at least from US, there would have been some signal of stability. But having said that, our platform, per se, is more equipped to navigate volatility because we're not depending on third party. We have our own production. And as I mentioned, we have several platforms because we have Italy, which is... You know, definitely the place where we produce our high-end branded collection, but we operate also facility across Europe in Romania. In Romania, just to tell you, we have 1 million square feet surface, so it's huge, definitely scalable. We have a production, as I mentioned before, in China. We have a production, predominantly in outsourcing, in Vietnam, and we have a production in Brazil, in Salvador de Bahia. So this legacy, as you know, is a heavy legacy when you look in our P&L. But in a phase like this, give us flexibility to reorient production where it makes sense. I made the example before of Natuzzi Edition for North America being moved to Europe before. And there are other options we are currently considering. So this is from an industrial, let's say, footprint. Then, in terms of protecting our marginality, of course, if we are, as you know, there's been a 90-day procrastination, but even in those 90 days, there's been a 10% applied. Of course, we had to protect our margin in this period. So we had discussion with our partner to do a fair test. sharing of these to protect our marginality, even for the order they were taken before the tariff entering place. So we've been very careful in protecting our marginality with something which does not depend on us. It's a very similar situation like in 21, when we had a spike in freight, and we had to protect ourselves by introducing, in a very transparent manner, freight surcharge, which is not caused by our avidity, but is simply a consequence of decision taken somewhere else. So this is how we are acting. So long story short, we have multiple production flights that provide flexibility. We are protecting the marginality, introducing the equivalent of free surcharge, let's call it duty-free surcharge, to protect the sales that go to North America. Of course, the other geographies have not been impacted. What do we see? We see that this is creating uncertainty. And uncertainty does not help the business. So we have definitely seen a more selective approach from the large distributors and consumer after all this story started. Also because I believe the level of unpredictability of the setting is what is preventing from doing business. You have to imagine yourself being a large distributor in U.S. and not knowing what's going to happen to China, to Vietnam, to Europe in terms of tariffs that can help us win from zero to 125. In absence of clarity, you, of course, don't take a huge investment decision. How does position this Natuzzi versus the competitor work? Having said that, we don't see this as a positive for the industry. I mean, we don't, let's say, celebrate when other companies have issues. But clearly, if a company is being entirely set up to source a product from Far East, being China, or as typically happened lately, Vietnam, And this might be a very, very strong factor for them because recreating a supply chain in our sector doesn't take days. And if the tariff after these 90 days are confirmed, I honestly would not be in there. I mean, my seat and our seat is not easy, but I wouldn't like to be in their seat because what you do, if overnight you have the sourcing where you source 85% of your product, they have a duty of 120 or 46%. I think this would be, of course, a strong discontinuity for the market. And in this context, Natuzzi might have some advantage from a competitive standpoint. Corey, did this relatively long and unstructured answer address your short and effective question or not?

No, thank you very much. It really does. And part of the thesis as shareholders is being a little bit smaller than the competition, being in a different segment. than the competition to a certain extent as we look at it, which is you're across the board. But I think the flexibility you have on the supply chain, you know, gives us a lot of comfort. And hopefully, as you said, we get to some type of resolution sooner rather than later. But thank you very much, Antonio.

And if any of you who sit in the U.S. can help, we will be very grateful to each of you. Okay. Next.

It appears there are no further questions at this time, but if you do want to ask a question, please use the ask a question feature on your screen, okay?

So, Kevin, in transparency, I received some questions by email, which is a bit atypical because, so I don't know, Pierre, if you do receive questions by email.

Just received a list of requests from a guy who is not in the position to participate in the call.

Ah, so this gentleman, Garrett Larson, is not on the call. Okay, so we can address it offline. Okay, okay, okay. Any other questions?

It appears there are no further questions at this time.

Pasquale, it looks like your line has been stabilized. Your line seems to be normalized. Do you want to try to resume the discussion where it was introduced? I lost the questions because you were disconnected. Do you want to try to resume where you were stopped?

Okay, but again, yes, today, if we should look at the positive side, okay, of our company today, is that we are in the position to analyze and make diagnosis why the store in Sarasota is making money, what they make special. Why the store in the United Kingdom probably is not making money? What's the reason? It's low traffic. It's conversion rates is the problem. The issue is the ticket. Which product are we selling? Which product are we not selling? Today we are in the position in a very fast way to do diagnosis. on each model everywhere in the world, each store in the world we have, and basically... It appears the Wi-Fi froze.

I'm connected again, Antonio, because I don't know.

You are? You are? You can give it another try. I hope this time it's going to be a bit more stable.

So I'm sorry because, you know, communication is not really the good one that it should be. But anyway, I was saying that while we are in the position with our system to analyze and make a diagnosis on the performance of each individual store, that allow us to define action plan through Changing. Products is not performing with a new product that could perform based on our know-how, knowledge, and also supported with the marketing. That's what we've been doing in 2024, preparing. How can we, because we have the store. We have a store in China, we have a store in America, we have a store in Europe, we have a store in the Middle East, we have a store in everywhere. We need to increase the sales. And in order to do that, we feel very confident that with the new that we developed in 2024, wherever we have done already, the launch of the new collection, supported by really an effective and very good marketing support, are performing very well. So that's our challenge this year, is just to improve the consumer confidence in each geography, in each store, and we have all the tools to do that. I mean, so that's what I can say, that I'm confident that despite the geopolitical situation, what, I mean... Production-wise, we are very well, let's say, organized because of the factory in Brazil, the factory in Romania, the factory in Italy, the factory in China, the factory also in Vietnam. I mean, even regarding the duty, the tariff doesn't concern us really very much. Our challenge is primarily how we should improve the sales in each individual store and geography. We have the new collection that we developed for Natus Italia, but also for Natus Edition. We have an old marketing plan. We've made a huge investment in order, you know, to support geography and the individual store or group of store, like we did in Florida, for example. We have been doing, you know, launching a comfortiness collection in... in florida but also in georgia and also in texas and we have i mean we are getting you know the traffic is increasing absolutely we are getting a lot of contact so that's what i can say regarding you know the uh the marketing department and the product development market uh uh uh company has been doing, you know, in order to overcome this situation that no question about, it's not an easy situation. We see also other peers how they are performing. So that's the reality.

Thank you, Pasquale, and this timeline supports this speech. Thank you for closing in a very positive and optimistic way, and it's an optimism that comes from hard work, not just from hope. Kevin, I believe, unless there are questions, we are complete for the session.

We do have one question from George. Okay. Okay, I'm going to join him right through. Okay, George, your line is now live, sir. George, please unmute your phone. We got you, my friend. There you go.

Okay, great, great. Okay. Well, it's actually quite interesting. I think Pasquale answered a lot of the questions that I had, so I appreciate that, Pasquale. But it was about the tools, the tools in the system to really, in that transition, into retail. And I think you mentioned, Pasquale, that you have sort of all the tools. And I just want to go over that one more time. Are there certain things that you feel are missing that you still need to add to your capability, primarily in terms of system in order to... And then the second question is with this analytical ability to really look at products across so many jobs, so many stores, What have you learned so far? How does that impact the way you think about the collection?

Okay, so regarding the tools that we have today, we believe we have done really something, you know, which we should be proud of. Because, you know, to be based in Italy and manage a store in America and in China, in South America and in Mexico or in all Europe, Middle East and Africa, I mean, has been not an easy exercise. But today we are in the position to analyze and do diagnosis why we are not performing well or why or what we need to perform better in terms of probably we need to do training to the people because the conversion rate is very low. So then we know that our human resource management will provide for training, for example, for the people in the store. If there are some products, because we have a living room, a different style and function in our store. We have a dining, we have a bedding. I mean, our product proposition. to decorate the home and we have a different product in our store, but we need to understand which product is performing and which one is not performing and what we do. How fast can we replace and improve the merchandising in the store? That's very important. in order to monitor the sales by square foot. It's very important because, you know, the lease, the people, the cost of the store is very high. So we need really to be careful and act very fast in order to improve the sales by square foot. So that's one of the challenges. Product-wise, we believe that based on our 66 years experience and the people that we have in our company, because we have been based always in the same territory, we haven't changed. In our industry, you know, companies, they move from one country to another country, from one region to another region. And they never put together the management that should be able really to manage the brand in the appropriate way. Regarding that, we are very proud because we have people in Apulia working with us, very talented people. We have the people, we have the production, we have the store everywhere in the world. We need to improve how to manage and how to improve the sales in our store. We created the tools, we have the product, we have the collection, we have the marketing. We are confident despite whatever will happen in the world because we don't know. I mean, the war in Ukraine, what will happen? The war in the Middle East, what will happen? Who knows? I mean, you know, there are uncertainty in all the way around. But even though we are confident, motivated, and we work very hard in order to overcome this challenging period. I mean, that's what I can say.

Great, I appreciate that very much. And maybe a question for Antonio is my last question. Do you sort of have a line of sight to profitability, what it takes to get to profitability? Of course, I think the real big factor is what Pasquale was talking about, increasing revenue and increasing revenue per store. But maybe can you talk a little bit about that and maybe also about is there any expansion in the US, any retail expansion in the US in 25 or 26 that you're looking at?

Our priority now is to... to improve our organic growth. We have the store. We are committed to make the store more profitable. That will be our today and tomorrow challenge.

Antonio, I agree, of course, with Pasquale, because those decisions are always taken in a symphony. I think given the current market and given how much headroom we have, I would believe that organic growth is a reasonable way for at least the remaining 25%. We opened in the U.S., as you know, five units of sedition, Naturs Italia store over the last 12 months. Each of them is a baby. They now need to be cured and let it grow in the proper way. On the other question, George, in reality, if you look at the company, it has invested a lot in this journey, more than $1 billion, because if you look over the last 15 years, the last years were from, let's say, the only years from a reported year where we had a positive 2021-2022 and so you're reflecting on what could be a threshold for with the current model to be at breakeven is clearly much much lower than it used to be we saw that in 2019 with 390 million sales the company lost 22 million I believe now, and Carlo can correct me if I'm not right, I've not done sophisticated modeling, but I believe if we're on the range of 340 million, we are profitable. And with a bit more than that, we definitely produce positive cash flow. So I think the level at which the company can be breakeven has been seriously reduced. if we keep protecting our marginality. So if we go back to the revenue the company was able, and I believe it's still able to express with 660 stores and 400 galleries, there should be approval of the equation we have been hardly working on. There should be translating profitability. Thank you. My pleasure, Giorgio, and thank you for your continuous trust in our company. Thank you, Giorgio.

And Antonio and Piero, there are no further questions at this time.

Okay, then, if this is, let's say, the last question, I take the opportunity to thank Pasquale, Daniele, Carlo, and Piero for being with us today and supporting the conversation. But... I particularly thanks everyone of you which has been joining this conversation. The message I would like to convey is that, of course, this is not the easiest time for a brand retail company, but we're very convinced on what we are doing and we're believing we're building a model that can be delivering results. I welcome, as typically happens, also follow-up questions. I'm sure that between myself, Pierre and Carlo, we'll be able to address them even beyond this conference call. Thank you so much and wish you a great end of the week. If you happen to be around this point, please stop. at our building there will be a great opportunity to interact with pasquale with our team and to see our collection this year i i stayed in a court to be focused on a few things that need to be closed but there will be definitely a lot of colleagues that can be sharing with you the excitement of the new collection in a point i extend and i confirmed the invitation i would be pleased to have anyone

of you, you know, to visit us here. Thank you.

Thank you so much, Kevin. You can close. Thank you.

That's all for today's webcast. Let me just connect the line at this time and have a wonderful day. We thank you for your participation today, everyone.