Ermenegildo Zegna N.V. Ordinary Shares

Good afternoon, good morning everyone. Thank you for joining the Emena Gildo Zania Group FY 2025 Financial Results Call. Please note that today's material and presentation are available under the zaniagroup.com website. Joining us today, the Zania Group leadership team, including Gildo Zania, the Group Executive Chairman, and Gianluca Tagliabue, Group CEO. Before we begin, we need to point out that the team will make certain forward-looking statements during the call. The group actual results may be materially different from those expressed or implied by these forward-looking statements. Also, these statements are subject to a number of risks and uncertainties, including those described in our SEC filings. Please refer to the forward-looking statements cautionary statement included at page two of today's presentation. I'll now hand over to Gildo Zenia.

Good morning and good afternoon, everyone. Thank you for joining today's call. on our group fiscal year 2025 results. Before we run through our performance, I wanted to take a moment to express our deep appreciation to our colleagues in the Middle East for their dedication, professionalism, and commitment during this complex period. On behalf of the group and of the GEAM family, I want to affirm our support for them and for all our friends and partners across the region. The Middle East remains an important region for our group, and although in the short term we are adjusting our activities to reflect the situation, we expect the region to continue to play an important role in our business over the longer term, in particular thanks to the resilience of our customer. Let me now turn to the business update, starting with the recent Tom Ford fashion show, which, as you know, has taken place earlier this month. Eider Ackermann's third runway show, presented in Paris on March 4th, has been widely acclaimed. Eider has further demonstrated his ability to interpret the brand's codes and DNA in a way that is unique, contemporary, and deeply personal. The selective elegance of Tom Ford, his craftsmanship and tailoring heritage, and his iconic leather pieces are imagined with modernity were all powerfully affirmed in his collection. which also added innovative mid-wear garments. I found the whole collection very confident and consistent in one word, very strong. And I want to extend my applause to Ida and to the entire team who worked alongside him to bring these shows to life. We all know that fashion shows are important, but they only translate into results when they are supported by strong production, commercial, and marketing execution. We're confident that Eladio Garza and the Tom Ford fashion management team Supported by and the whole group are working to build on this success. I was also very pleased to see the promising start of recently launched Tom Brown sneaker in collaboration with ASICS. First presented during the fall winter 26 fashion shows, the brand hosted in San Francisco ahead of the Super Bowl. These limited sneakers were officially launched worldwide on March 2nd. The launch was supported by several high visibility pop-up events. including at Selfridges in London, Eastern Tokyo, and Plaza 66 in Shanghai. The collaboration is achieving strong resonance ahead of our expectations, not only in terms of social media visibility, but more importantly, of revenues. This collaboration will be a way for the brand to attract and retain new customers. Sam Laban and his team are focusing on these critical KPIs. aiming not only to ensure the commercial success of the collaboration, but also to drive meaningful acquisition of new customers. There is a journey our clients, especially these new clients, should undertake. Jersey and even more so, Knitwear, are important, a second purchase for them. I'm also excited that in June, Tom Brown will show Milan during the Menswear Fashion Week for the first time. Moving to Zegna, as you know, at the beginning of this year, Zegna presented its For Winter 26th show in Milan titled A Family Closet. The idea behind this collection was simple but deeply rooted in our history. Clothes are never just garments. They carry memories. They move across generations, preserving experience and stories over time. This concept of memory as living legacy continues to inform many of the initiatives we are developing across the world. Finally, looking ahead, Zegna will present its... In March, we introduced Memory, a fragrance collection that translates moment from the founder life into scent. Rather than being conceived as a traditional perfume launch, Memory distills more than a center of Zegna history. Into six chapters is rooted in a place, gestures, or object from the Zegna daily world. The collection is currently available in a selected Zegna location with a progressive global rollout continuing through 26. Beyond this launch, we are also very proud that Zegna has been announced as the main sponsor of the Italian Pavilion at the 61st International Art Exhibition, La Biennale di Venezia 26, one of the most important platforms for contemporary art worldwide. The Italian Pavilion will present Conte Con Tutto, a project by artist Chiara Camoni, curated by Cecilia Canziani, with whom we have developed a meaningful dialogue over the past decade. This initiative, alongside our global partnership with Art Basel, reflects how Zegna and Chris operate not only as a luxury brand, but as a cultural platform connecting fashion, contemporary art and landscape, continuing a vision that has been part of the company since our founder first imagined Ozzy Genia. Finally, looking ahead, Genia will present its spring and summer 2017 fashion show in Los Angeles by creative director Alessandro Sartori, together with the launch of Villa Genia LA. Following the experience that we created in Dubai last June, Los Angeles will allow us to showcase our collection within one of the most dynamic markets of our group. The city resonates not only as a global fashion hub, but also as a cultural capital with influence extend far beyond its border. Together, this initiative reflects Zenia's long-term vision, building a brand that moves seamlessly between fashion, culture, and landscape, while remaining deeply rooted in the values of its founder. And now, let me hand over to Gianluca. Thank you.

Thank you, Gildo. Good morning, good afternoon to all of you. Let's move to page seven of the presentation where you find full year 25 results he highlights. The revenues for full year 25 have already been disclosed early February, and we confirmed them at 1,917,000,000 minus 1.5% year-over-year on a reported basis and plus 1.1 in an organic base. In 25, the group reached a 67.5% gross margin and adjusted EBITDA of 163, which does include 10 million of provisions related to losses on trade receivables for Sachs Global Chapter 11 Procedure. Without this 10 million debt provision, the adjusted EBIT would have been 173 million euro. The group also reached 109 million of profit, up 20% from 91 million last year. More at the end of the year, the group had net cash surplus of 52 million euro. Let's move to the following pages to comment more on these results. Page eight. In full year 25, gross profit rose by 90 basis points to 67.5, driven mostly by channel mix. With DTC that reached 82% of branded revenues versus 78% last year. And as you know, DTC gross margin is higher than the wholesale one. Moving to SG&A. SG&A in full year 25 reached 1 billion 34 million euro. with 53.9% incidence on revenues compared to 51.8% last year. This increase in the SG&A incidence is linked to the following factors. The investments in talent, systems, and organization across different functions and brands, looking at the long-term vision for each of the brands. Store network expansions, in particular for Thom Browne and Tom Ford. it has been impacted by the negative operating leverage caused by the streamline of the wholesale at Thom Browne. This SG&A line of $1.34 billion includes also 10 million provisions related to the losses on trade receivables owed by Sachs Global. Moving to the marketing expenses, in 2025, they were $121 million equal to 6.3% of revenues in line with the prior year and our indications of a fair mid-term marketing on revenues incidence of around 6%. Let's move to page 9, where we report the adjusted EBIT of the group and by segment. As always, this is the main performance metric used by the management to analyze the performance of the business at group and at segment level, and you can find the reconciliations in the appendix. to the analysis by segment, Zegna segment, which includes the brand Zegna brand, the textile division and third party brands business generated an adjusted EBIT 197 million euro and the margin of 14.4% versus 13.9 last year. This result in EBIT reflects and includes 3 million of provisions in relation to SACS global because these provisions are not in the adjustments, are affecting the adjusted EBIT, without which the adjusted EBIT for the Xenia segment would have been 200 million with 14.7% margin. Thom Browne's segment has been the most hit by the reduction in revenues driven by the wholesale streamline and achieved 1 million of adjusted EBIT. This performance includes 2 million euro provisions in relation to SACS. Tom Ford fashion segment reported a loss at adjusted EBIT level for $16 million generated in H1, while in the second half of the last year, Tom Ford fashion recorded a positive adjusted EBIT performance. Full year 25 results for Tom Ford include $5 million of provisions in relation to Sachs Global. On the positive side, corporate costs decreased, mostly due to lower insurance costs. Moving to page 10, you can see here summarized our reported income statement. A brief comment on taxes. As you see, the effective tax rate decreased to 22% compared to 30 last year due to non-taxable income in 25 related to the remeasurement of put option liabilities mainly the one on the remaining 8% stake on Tom Brown. As a result of the above, we reported group profit in full year 25 at 109.5, up 20% versus 90.9 million euro in 2024. Based on this result and in line with our dividend policy, the board of directors proposed a dividend distribution of 12 cents of euro per ordinary shares Francesco D' Which equals to a total dividend distribution of approximately 32 million euro let's now move to page 11 where we comment on capex and trade working capital. Francesco D' cash out for capex in 2025 reached 103 million 5.4% on revenues of which about 60% are related to stone network. and the remaining 40 to investment in production, including the shoe factory we are building close to Parma and in Haiti. As we have already anticipated, 2026 is going to be an important year in terms of CAPEX, since the investments are related to the new shoe factory in Parma, which will be completed by this year. And for this reason, we expect CAPEX in 2026 to be closer to the 10 to the 7% mark. Trade working capital reached $408 million at the end of December 25, equal to 21.3% of revenues compared to 460 and 23.6% of revenues at the end of 2024. This was the effect of an improved inventory management, control of trade receivables, and forex input. Looking at free cash flow at page 12, let me highlight that the group generated 82 million of positive free cash flow compared to 10 in the prior year. This despite the already mentioned capex of 103 million paid and 150 million for lease liabilities and right of use assets. Finally, on page 13, you can see that thanks to the positive free cash flow and the inflow from the sale of treasury shares to Temasek for 170 million euro. The group reported at the end of December a positive cash surplus of 52 million euro versus a 94 million of net financial indebtedness at the end of 2024. Let me conclude again with a brief comment on the impacts of the current situation in the Middle East. As you know, Middle East is a relevant region for our group and for the Zegna brand in particular. Revenues for the region represent a mid-high single-digit share for the group's total. All our stores in the area are open and operating. At this stage, it is difficult to fairly assess the potential input of this conflict on 2026 results, as it will largely depend on the duration and possible implications for the global economic outlook. As our executive chairman also said, we continue to work toward delivering our 2027 targets, knowing that the overall outlook has become increasingly uncertain due to these factors. Now to Paola for your questions.