[Audio Gap].

in detail results of the second quarter and the first 6 months. .

Thank you, Pasquale, and good morning, good afternoon to everyone. I joined the company last June, and this is my first analyst call. I'm working very closely with Pasquale in the [ governance ], and thank you for the very -- there's a bit of echo, for your very kind word Pasquale..

Okay. Maybe, Kevin, can you mute the microphone of people which were not speaking, because I got a bit of -- okay, excellent. Thank you so much. So I was saying, very happy to be with you. Today, for me, is an important meeting, not only because it's my first analyst call, because I interpret my mission in a sense as a simple mission.

My mission is about creating value for the investor, which I believe today is well represented [ in this audience, as measured ], per share value increase. The other mission is, of course, to satisfy the other shareholder of the company, which I intend to be our final customer. So those are, let's say, my 2 priority, equally important.

And those are based on a reset of our fundamentals, which we are very hard-working with Pasquale..

In terms of numbers, I believe you have seen our second quarter numbers by this time. We continuously reporting strong sales, 76% versus the second quarter of 2020, and 17.7% versus the same period 2019. So growth is back.

It is back, I would say, for the sector because as Pasquale mentioned, the sector is enjoying positive growth, which we start believing can become structural. But it's also very good for us. We believe that in a lot of geographies, including the U.S., we are gaining market share. So we are growing faster than the market..

It is not just about the absolute number of growth, but is the quality of growth. As you might know, if you're following this stock from enough time, the company has taken the decision to growth on 2 main avenues.

One is the branded business, so leveraging the strength of Natuzzi Italia, which is 60 years of heritage, which is entirely manufactured in Italy, and Natuzzi Editions, which is designed in Italy. Its price point is more than foldable price point, and the production takes place where you need to be, so closer to the end market..

So when I say I'm pleased to see the quality of the growth, it's because the branded business represent now 87% versus the total. To me, that is quite an interesting achievement because, as you know, the company started 6 years ago, with a completely different scheme.

It was producing great product at an affordable price point, but which were mostly sold unbranded. So you can imagine a much effort and a much investment. We calculated roughly EUR1 billion investment, went to move from being a manufacturer to being a brand..

The second avenue, which for me is a symptom of improving quality is that retail in those geography where we start having a right team and a right receipt is working well.

For instance, if you look at the U.S., where we have our manager, which is attending this call Jason Camp, that brings 25 years of experience in different company, including Restoration Hardware, who built a strong team around them really with retail competencies.

In this geography, we have our best store, pacing at $4 million sales per year, reporting [ 669% ] sales like-for-like increase versus 2020, and 49% increase versus 2019. So I would say, significant numbers of organic growth, which did not happen by chance. It happened because we have a strong team.

The strong team is implementing a very good merchandising retail strategy. It has launched, and I'm sure Jason could give more color along the way, what is called quick program..

So based on advanced analytics, we read the data of the previous 3 season to understand which are the best product in terms of rotation. And on those products, we take a major risk in terms of stock, so to be able to serve the client with very short-term delivery time, which in this turbulent time of supply chain is really a competitive advantage.

So branded business is going well. Retail is growing well in the geography where we have enough focus of the management team to start playing by the book, what a good retailer should do. And we intend, of course, to deploy this winning receipt to the remaining geography..

So I would say, what I witnessed after 3 months of my joining is a team which has a very clear view of the strategy ahead. The strategy ahead is based on branded business, retail and 3 priority geography, U.S., China and Europe.

I also see, and I'm encouraged by the fact that Pasquale said that this is true not only for me that I just joined since 3 months, but also for him who is in the business in 60 years, I also see an unprecedented level of supply chain disruption. And this happened on the 3 main elements of the entire supply chain.

It happens to the raw material, where we witness a price increase of up 100% versus the beginning of the year. It happens in terms of manufacturing, where we see demand outpacing our ability to fulfill the demand for a very different reason.

And we see this in the shipping, where it's increasing complex to secure a timely shipping of our product with the proper cost of survey. So this is, I would say, keeping us very focused. We are centered on the reduction of backlog because, of course, we want, in these days, our final customer, which trust our brand, not to suffer from this contest..

As you know, it's not just Natuzzi. As you know, it's not just a furniture business, it's the global economy which is facing this global challenge. So we are working very hard on this, but we cannot claim to have the full map to say will be solved for Natuzzi next week.

And this is the other important aspect we want to share with you in a very transparent manner, as though we should be communication with our trusted adviser and investors..

So let me stop here, because I'm assume you have seen the rest of the press release and will be a better use of your time to address your question rather than continuing on this introduction.

The other element I might want to highlight is that I spent the first week with Pasquale, with whom I'm working extremely closing to align the full team on the future vision for growth. We have been investing a lot of time on creating alignment.

We just end up this weekend, another off-site with the full management team because we believe that this will be people-led growth acceleration plan. And one of the elements beyond creating alignment on the vision and increasing communication within the team..

Another element which I want to actively use to create this alignment, to create a sense of ownership and the management is the incentive system. So we have in place since the beginning of the year an MBO, which is anchored on short-term results.

Our Board gave us just approval to define and fine-tune by the beginning of next year a stock option plan, that will be a standard to a limited number of managers, including myself, with intent of creating a perfect alignment with the shareholder, and also being a long-term retention instrument because it will be with the vesting period relatively long.

Today, we don't have the detail on that because that are being finalized, but the decision by the Board has been taken on a quite a clear journey in terms of timing to complete the stock option plan.

So definitely, I'm sure that in the upcoming next analyst call, we will be able to provide more details on this element, which I believe will be very important to create ownership instincts in the top management..

Okay. Let me stop here. Maybe, Kevin, you want to -- unless Pasquale has another remark, you want maybe to open for questions. You're mute Pasquale.

Can you unmute Pasquale?.

Yes, there you go. .

Antonio, you listed complete issues. So we can certainly listen in our shareholders for their questions. .

[Operator Instructions].

I guess David is trying to come back... .

[Operator Instructions] Our first question today is coming from [ Kyle Travers ]. .

Actually, I do apologize once again. Mr. Kane, you were first. Please go ahead, Mr. Kane. Mr. Kane, perhaps your phone is on mute on your end. .

[Operator Instructions] [ Kyle Travers ], your line is now live. .

I'm unmuted.

Can you guys hear me?.

Yes. I can hear you. Please proceed. .

I appreciate you taking the time. I had some time over the weekend to go through your press release, and appreciate it. So one question I had, in particular, was about your U.S. stores that I think you said are trending at around $4 million, about over 70%, I guess, contribution margins.

And I was curious how many of your stores are headed in that direction? And if you could also remind me just of your total U.S.

store count?.

Sure. Good morning. .

Jason, I guess, that's for you. .

It's Jason. So we have 13 stores in the U.S. And when we look at our top 6 to 7 stores, those are the locations that are pacing in the $4 million range. And generally, those stores were pacing at about $2.5 million in 2019. So they're up in the 70s, plus 70-or-so-percent to 2019. Those top 6 or 7. .

Okay. And I think the other, I guess -- other 6 stores, I guess, can you dig with me for a second.

How long do you think it would take for the other 6 stores to get to the $4 million run rate? When do you see the soonest that could be achieved?.

Sure. The average pace of the 13 stores is $3 million, just to give you like some ability to do the math. And in general, I think, we definitely see a lot of growth beyond this $3 million to $4 million pace.

And we expect and hope that our work in the area of talent, merchandising, marketing, lead time improvement will -- all that work will lift all boats. Generally, it's my experience that your best locations grow faster than the average.

And I hope that generally answers your question, [ Kyle ]?.

It does. I appreciate it. I guess just one other question. This is a little bit broader. And I don't know if you guys might be able to point me in the right direction, but there's some things that are off balance sheet. You bought some land, and you have a JV here in China.

And I guess, I was wondering where I could find, one, the China -- the Kuka information about their operations, and how those are trending? Maybe you guys could just summarize sort of the land opportunity and some of the stuff that maybe not particularly strategic to the longer-term vision, and how much you guys think you could be able to monetize by selling real estate and some of the things that this when you're reading through a press release? So 2 questions there.

.

Antonio, would you like me or would you like you to answer?.

Vittorio, I think, you're best positioned. You should do it. Then I'd do a bit more general comment on capital employment -- capital efficiency, but please comment on land and then Kuka. .

Okay. The program to sell non-core assets is going ahead correctly, as anticipated 1.5 years ago. In July this year, in the first quarter, we sold between the first and second quarter to the company, the foam company, and then we sold 2 lands in Italy. And in July, we just finished and completed the sale of a land in High Point.

So we are moving ahead in the right direction so far. As far as Kuka JV is concerned, you find the profit and loss, a share -- the so-called share of profit of equity method in the fees. It is below the net finance income.

Today, for the first half, they contributed with EUR2 million profit to the Natuzzi consolidated profit and loss, compared with EUR0.9 million in the first semester of 2020. So this morning, I just had a look to the August results. I do confirm they are moving ahead with both brands with retail rollout.

I'm sure that Antonio will elaborate a little bit better than me from a [ qualitative ] point of view. .

No, you did a perfect answer. Just a bit elaborating and linking this back to my opening. If -- as I said, the whole company is working to increase value of the share, the per share. Of course, capital efficiency is an important matter. So we are continuing to explore a way to get light our balance sheet in terms of capital.

And of course, a nonstrategic asset are focus of that effort. We are in advanced discussion to continue that journey. Of course, we want to do it in a proper manner to maximize the current value..

JV China is a bit a different matter. It's more strategic, more structural. But equally, we're exploring and it's more midterm way to make sure that the Natuzzi investor get the full value of what happening there, which is very encouraging because we are growing significantly in terms of numbers of stores.

We are roughly 300 stores there, among the 2 brands. And the performance are doing very well. And our partner in collaboration -- in close collaboration with us is really establishing the dual-brand strategy with Natuzzi Italia being a top luxury brand, positioned very high, and Natuzzi Editions being more affordable.

So if you think about the potential value of this story, China, luxury, fast growth clearly can be significant, and we will continue looking at way to capture more of this value going forward. .

Just from somebody who is new to your story, I think you guys are getting -- for what you will, but I think it would be incredibly helpful for somebody on my side to have a little bit more granularity on what's going on with Kuka, and even the metrics we always look at are sort of sales and EBITDA, we're going to pop a multiple on there, and just to understand what your 49% is worth.

Just so -- a little bit clearer because people that are new to your story, there's obviously no self-coverage here. So it's a little harder to do a full sort of sum of parts here and understand what's completely under here. .

Mr. Kane, your line is now live. Hello, Mr. Kane, you're now at the podium. Please unmute yourself. .

Our next question is coming from Greg Cohen. .

Can you hear me?.

Yes, please proceed. .

Yes, please. .

So congrats on the strong growth in Q2, particularly in the U.S. My first question is, are you seeing these strong trends in written orders continue into Q3? We're almost at the end of Q3 here.

So just was wondering if you can give some color on the trends in sales, whether they're accelerating or staying the same or what you're seeing? If you can provide some guidance on that?.

Yes. Yes, sure. I refer back to the press release because in the intend of providing transparency as suggested by SEC, we also shared information on first 36 weeks written orders. Currently, we are starting week 38. So basically, we're talking about 2 weeks before now, so mid-September.

And written orders are plus 36% versus 2020, and plus 14.5% versus 2019. So the momentum -- positive momentum continued. Now we are [ in month ninth ] of the year, and the consolidated written order at 2 weeks ago were still very positive versus post 2020 and 2019. I hope this address your question.

You see this information in our press release, in first page and also -- yes. .

Yes. That's helpful. I guess my question is in the U.S., in particular, from my perspective, that's our key growth market. So is there any more detail you can give on how the U.S.

is doing in particular over the past couple of months or so?.

Good morning, Greg. I would generally confirm what Antonio shared is that the pace of business that we're seeing into Q3 in a pure dollars perspective is holding through to what we are seeing in the first half. And for the first half of the year, when you kind of double-click down on to just the U.S.A.

in the branded wholesale business or the retail business, right, our growth numbers are somewhere between plus 50% and plus 70%. .

Got it. That's helpful. .

If that's what you're looking on. .

Yes, that's helpful. And I guess as we look forward, can you just kind of give a little bit more color on our store opening plans? I know in previous calls, we had discussed, I think there were 6 or 7 that were going to be open in sort of the near-term time frame.

If you could just kind of give us a little bit more color on the pace of store openings in the U.S., I think that would be helpful. .

Jason, again, that is for you. And again, we don't provide guidance with precise number, but I think we directionally can share what are our -- and of course, depend on real estate opportunity. But Jason, please, you are clearly better entitled than me. .

Sure. When we look at total number of openings, in the region, we expect to have opened four stores between independently owned and stores we operate this year, and 10 stores in '22.

That's sort of our, let's call it, 8 store to 12 store range, but -- but we're targeting for 10 for 2022 between both brands and between independently owned and company-operated. .

Got it. And just one last question for me, and then I'll hand it over to the next caller. But could you give an update on some of the other strategies in the U.S.

and globally that we're pursuing, such as e-commerce? And kind of the second ancillary to that would be where we are in the opening of the Mexico plant to service the North American and South American markets?.

So maybe I'll start taking those 2 questions. And maybe, Greg, a further clarification to what Jason said. Again, in terms -- with the spirit of being capital efficient, some of the opening will be done in partnership. It makes sense that we will be majority, partner will be fully running the show, the operation in the store.

But we will also involve a partner to lower the capital need of those opening. So e-commerce in Mexico, e-commerce is on track. So it will start -- it will be a global new platform, merging the existing 46 digital platform that are present in the brand. .

So it will be a global platform for all geography for Natuzzi Italia and Natuzzi Editions. It will start being operational -- the current plan is to start being operational for the brand Natuzzi Italia -- for Natuzzi Italia for the geography U.S. by the end of this year. So this is the plan.

As you can know by the -- by e-commerce, we are pursuing a kind of agile implementation, which means there going to be a press release, which is going to be progressively reached, and we are targeting this year. Mexico is absolute priority. The working is going ahead.

We are now moving a senior team from Natuzzi Italia to Natuzzi headquarter in Mexico to secure a better pace of our implementation. But this is among like the 3 or 4 major priorities for next year. So also there, the objective is to progressively ramp up the production in 2022, and that objective for the time being is confirmed. .

That's incredibly helpful. And just -- I know you've only been here 3 months, but the work you've done so far is very impressive and energizing. And I think shareholders really appreciate your focus on return on invested capital, and a new focus on profitability as well, obviously, as high-quality product.

But personally, I'm very much looking forward to the years to come. And it seems based on current trends, we're set to grow in a very big way and be very, very profitable. So look forward to hearing the update on the next quarter. .

Thank you for your encouragement. And I can share back the consideration that Pasquale and I did. It is that clearly, the company had a very strong instinct for growth. We want to preserve that, but include a more systematic, using from profit generation and value generation.

We are increasingly use as a matter of discussion among our team metrics, which are really focused on incremental cash generation. I think it's good to start with the company, which has strong growth instinct. We now need to take benefit of this moment to reset a bit, machine and the KPI and the culture to be equally focused on value creation. .

[Operator Instructions] Our next question today is coming from Charles McDulin. .

Dave Kanen on Charles McDulin's line.

Are you guys able to hear me?.

Yes. Please go ahead. .

Okay. Sorry about the earlier problems. So in terms of the new store openings, it's encouraging to hear there are 10. Your goal is about 10 for next year.

Looking out 3, 4 years, how many stores do you think you can have in North America? And the reason I'm asking for more color there is your statement that branded and DOS stores contributed 74% gross margin. Obviously, we'd like for that ramp to occur as soon as possible.

So if you can give us a longer-term goal, is that 10 stores per year sustainable? Where are we going to be in 3 or 4 years?.

Jason, why don't you take that one? Then maybe Pasquale and I can give more color. .

Sure. In general, Dave, when you -- when we look at the combined opportunity of both brands, both Italia and Editions, the truth is on a kind of a long-term saturation in the United States and the region, honestly, we could probably have almost 10x the number of stores that we do today. So there's a really long runway.

We're not going to achieve that over 3 to 4 years, but there's a really long runway from a retail growth standpoint. .

And Dave, another comment on that. Everyone, including, as you can imagine, the shareholder, Pasquale and myself are looking with great excitement to what we're achieving in terms of retail performance in the U.S., and we would prioritize any dollar to continue their journey.

At the same time, we need to recognize that opening a store is an investment. And it need to happen in the proper manner. So if you look at what luxury brand do, let's say, personal luxury and fashion luxury brand do. For them, it's like a major investment opening a store.

So they take consideration of the adjacency, they take consideration of the long-term potential. They want to structure very well the niche. .

So we're looking with great excitement at the opportunity, but also in a very informed way. So we will not let, let's say, the wheel of building up a presence, prevailing on rigor or choosing that location.

Example be in New York, we want to do a big location reopening in New York, which, of course, will be important because it's where the company listed, where before Pasquale set up the success of this company, personally starting the relationship with Macy. So it has many meaning, and we want to do it in the proper manner.

So we're not rushing in doing things which may be good for being reported in an analyst call, but not be as good in 3, 4 years down the road. .

Okay. .

And just to build on that -- Dave, if I could just build on that for a moment. I think one of the most costly mistakes, what a company can make is rushing into locations and leases that are not a locations at a level economics. And so often, when companies get into a very accelerated rollout, I think the wheels come off.

I've actually watched that happen [ on RH] where they're opening 20 stores a year. And then 2 years later, they were nearly in bankruptcy. And they've obviously, right, found their way through that and become a very successful organization.

But I think making sure that in our early years, we're negotiating A locations for each brand at A level financials is honestly one of the most important things we can do, right. But what's the biggest difference between our top 6 to 7 stores and our least successful stores is location.

And once you sign a lease, you're generally locked in for 10 years. So we want to make sure that we do our -- ask enough questions before we get married in all of these, so we know we're happily married. .

Okay. And... .

I appreciate the color. .

Sorry, go ahead. .

I'm sorry, go ahead. .

No. The other element, which I realize we are not ready to do it today, but maybe we'll do it next time. We continue investing in elevating the store experience, especially with recent events for Natuzzi Italia.

We just defined and fine-tuned a very exciting new retail format for Natuzzi Italia, which has been rolled out in Shanghai in China with very great, well, let's say, comments from customer and partner. Maybe next time we're going to be making -- virtually touring the new store, has been developed by an [ artist or ] designer, Fabio Novembre.

He speaks about the DNA of the brand, he speaks about our soul, he's very bright, very innovative..

So for us, as we develop the retail, he's also elevating the retail experience. That will happen to the infrastructure, and I'm talking about the [ retail new ] store. It will happen through the experience.

So we are investing in new training for our sales force with the proper clienteling and proper storytelling, both for final customer and for the architect and designer team. So for us, retail will proceed in 2 way; more opening and better opening. .

Okay. Yes, I appreciate the thoughtful approach to the expansion. That completely makes sense. And it sounds like you're learning from other people's errors. In terms of gross margin, I know that you've seen inflation in raw materials. You passed through about a 15% price increase.

Can you give me the time line on that? What I'm kind of wondering about is on a go-forward basis, are we going to see an expansion in gross profit on a consolidated basis from these cost increases? For example, if they were pass-through in May or June, you did not have the full quarterly benefit, so that's what I'm trying to ascertain if you could speak to that.

Again, the timing, and it's on a go-forward basis. The price increases are going to help improve gross margin. .

David, this is Vittorio. Let me focus on North and Central America first. We did the first price increase by November 2020. Then following the trend in raw materials transportation costs from China, we did a second one in February, but recently, we just adopted another surcharge for transportation cost in September.

This means that in Q4, we will have the full impact of price increases on our profit and loss. And this is just the example of our North America visions, more or less the same in terms of timing for Softaly for the unbranded. For Natuzzi Italia, we had December 2020, July '21, October '21. .

Okay.

So the price increases that we've taken recently are going to have a favorable impact on gross profit going forward?.

Yes. .

So David, yes. But again, I think it's -- for the time being, it's a game of running faster than the bullet, because we don't see yet a decrease in this crisis time. So please, in doing all your math, considering also that.

I believe that one point, that is my personal expectation, so it's not any guidance, at least in raw material, we should see a normalization.

And when that happen, that will be constituting a major advantage for us, because we have increased prices in some geography and some brand up to 30% in 9 months, which I think testify the resilience of our -- and the strengths of our brand.

So if and when raw material price will go down, then is we're going to get a very strong uplift because, of course, we will not lower down our price again..

But in the short term, the combination of us increasing price, and raw material spike is still about all that, still about all. That's important to mention. I don't know, Pasqual, if you want to comment, I think you're noting. Again, I mentioned you'll be 60 years in the market. I'm sure you have more experience than me in judging these trends. .

Listen, you learn very, very fast. All the statements you have made are the good one. Otherwise, I would stop you. .

[indiscernible] stop me from talking, not stopping in sense of firing me, but of course, that must be worthwhile. .

Dave, I will add to the other comments that on a global basis, cost of materials has been significant. In the North America region, specifically, freight is really the most volatile. And what Antonio speaks of outrunning the bullet, freight is really the one we're chasing right now, and we're living in historic times.

It relates to access to containers, access to railcars, access to trucks and all the prices related. .

Right. .

And maybe just to add some color, which I believe could be relevant for you if you intend to follow the destock and then this company for the midterm. When we look at supply-chain disruption, I believe there will be some effect which are short term, which we need to defend and other which we are more midterm opportunity, in which we need to readjust.

So broad price increase for me is more, let's say, for medium, short term, in the sense, I don't expect that the reservation for this to continue forever. And this -- we are trying to defend by a better raw material sourcing and of course, the price increase that everyone is introducing in the industry..

When it comes to shipping, where just to quote you, we're reporting another cargo shipping from Vietnam, going in 6 months from [ $2,000 to $67,000 ].

I personally believe this will be more structural, which means that, let's say, the global economy, which, in a sense, was using Far East as a factory and selling product with a markup in the rest of the world..

For me, it's something, we don't want to bet on anymore. So we're going to have Natuzzi Italia, which is our luxury brand, which is going to be continue to be manufactured in Italy, where we can leverage an experience of 60 years with some of our more experienced working having 36 years of experience in their hands on how to craft luxury product.

When it comes to Natuzzi Edition, the design will still be full in Italy with internal design team. The production needs to be in a logical place, also from a sustainability standpoint. We don't want to contribute to unsustainable practice..

So we will have Mexico for North and Central America. We'll have our Romanian plant and somewhat selected production in Europe for Europe. And then we have Shanghai, our own plant in Vietnam for China and Asia Pacific. That, for me, makes more sense, it's more sustainable. It will support reducing shipping costs and getting a better service.

So in synthesis, raw material strategy is defending. Shipping, strategy is optimizing long-term supply chain. .

Okay. So you guys kind of beat me to the punch on transportation. That was really my next question. Transportation costs were up 420 basis points. And if you look at the history of that, shipping containers, it's somewhat cyclical. And historically, when they've had large price increases, they've been followed by price decline.

So I would like to believe that over the next 12 to 18 months, we're going to recapture some of those 420 basis points along with the price increases that we've taken that will drive gross margin higher..

So is it -- I know you don't give guidance, but looking out 12 to 24 months as you most likely reclaim some of that 420 basis point increase in transportation, you start to get the benefit of price and declining raw material prices. Being that operating income adjusted for the onetime Canadian issue was about almost $3 million.

Is it possible that we can get to well into a double-digit EBITDA margin? I mean we're at about, pro forma, I think we're at EUR8 million of adjusted EBITDA for the quarter.

Could we get to a 10% or better margin over the next 12 to 24 months?.

So as you correctly said, we don't provide guidance, so I cannot say yes or not. Clearly... .

I mean just because of my experience, I can answer one of the question. .

Absolutely. Please, please. Pasquale, please. .

Yes. Regarding the transportation cost increase, in -- I mean, we export in America, in Italy, for example, since 40 years, and I mean never, never anything like what happened today, I mean, I remember 40 years. Okay. The price increase could be a 10%, 20%, more or less. But here, we are talking about -- we used to pay $2,500, now $10,000, $20,000.

This is speculation situation. It's something that it's -- there is no way to understand why it's happening anything like that..

So it cannot continue to be like that, but that's just my feeling, all right? So never happened before, in 40 years, I can guarantee you. .

Let's discuss the cost of transportation. Regarding supply chain, we are certainly stopping by purchasing, importing components from China. And also on importing from China, we are finalizing, because the cost of component never can justify transportation cost like that. So we are going to review, as Antonio explained, the supply chain.

Whatever we manufacture in Italy, we should try to have a component, raw material, everything as close as we can. And then the same would be in Romania. The same would be in Shanghai and the same would be in Brazil.

So we are going to review the supply chain, the complete supply chain in order to avoid transportation costs and make our company sustainable as [indiscernible], you said okay? So that's what I can say. .

Thank you. .

Okay. So in other words, you have other initiatives to mitigate cost inflation and transportation and raw materials. You're controlling the things that you have control over. That's good to hear. And then I have a question for you, Mr. Natuzzi, on product development.

Today, it seems like you're moving more towards training your sales force in-store where they're more designing a room for a customer as opposed to just taking an order for a product, where I come in looking for a sofa, but taking a more holistic view..

Are you going to be increasing the number of SKUs in product development to further increase the penetration that you have with that customer in co-designing a room as opposed to just selling them a product? And if you can give any color there of some of the -- if you are, what would some of those product categories and SKUs be?.

I believe we have a product and color enough, okay? We need just now to focus on selling. I mean our total merchandising today -- the merchandising we have today for Natuzzi Italia, but even for Natuzzi Edition. But talking about Natuzzi Italia, can, I mean, support the lifestyle brand.

So in other words, we are in the position to decorate an entire home for very demanding people in terms of style, or combination. I mean investment on product development must be reduced because we need more to training people in the store and work on retailer merchandising. So that's the next sequential months' challenge of the management. .

I see. So you have enough SKUs to meet the customer. .

Yes. .

Which is what you're saying. And then just last question. I don't want to monopolize.

In terms of e-commerce, when is your launch? And if you can provide any color around that and expectations of shareholders that we should have?.

But's that's all... .

Yes, maybe -- I think, David, maybe you were -- you had some problem with the camera and -- I don't mind... .

Sorry. .

No, no problem, but don't mind to summarize. So we are targeting end of the year for a global launch of a new information and branding platform for Natuzzi Edition, Natuzzi Italia globally. You will be substituting the existing 46 platform exist in each different market. The platform will be also transactional for U.S.

Natuzzi Italia, which will be the first market we will be launching e-commerce..

So we are targeting end of the year. Of course, we are rushing a bit, so we will not release the commerce unless it's reasonably stabilizing solid. But for the time being, the plan of U.S. Natuzzi Italia by the end of the year is confirmed..

And sorry, maybe I considered obvious, but this is not is obvious. One of the area where we're going to have a discontinuity is the marketing, which will be moving radically to digital, and we will be mostly about customer activation rather than then building.

Natuzzi enjoy a terrific brand awareness in most of the geography where we want to grow, including U.S., where it's #1 in terms of European furniture brand. So the communication would be predominantly in the form of customer activation, it will be more strategical..

On average, a consumer search for 23 days a product before buying it in furniture. We want to be very visible in that journey, which happens a lot also on digital. On average, there are, in U.S., 8-digit touch point being social media or being the site of the common company, and we want to do a leapfrog in our ability to be present an influence data.

We have a manager, Jay, who has extensive knowledge in U.S. on digital marketing, who is working closely with our reporter to accelerate that process. .

Okay. That's very helpful. Congratulations and good luck in the upcoming year. .

[Operator Instructions] Our next question today is coming from [ Stanford Wyatt ]. .

I appreciate and I'll echo one of the previous callers said that all the additional detail in the press release was really helpful and the focus on the return on capital and some of the other changes you made have been great.

And just to circle back on one of the previous questions, I'd love to hear -- I know you're not giving guidance, but just on the long-term EBITDA margin potential. In this quarter. I thought the EBITDA margins were pretty strong, considering all the headwinds with transportation and supply chain costs.

But I'd love to get just any thoughts on over the long term what the EBITDA margins could get to. And then, I've got one more question after that. .

So maybe a more strategic consideration where -- I used the word strategic not to be blurry, but to refer more to the midterm. So we claim and we aspire to -- that we want to be a brand company and at least for Natuzzi Italia to be a luxury vertically integrated company.

So if you look at those -- the benchmark in those industry, they all clearly have double-digit EBITDA. That's for sure.

So when we say we aspire to that sector, it doesn't mean that we are part of the sector just because we use that word -- we will use that word in our press release, but we could aspire to the economics and the multiples of that the industry. That is the kind of mid-term strategic answer.

More short term, when I say we want to rebalance our supply chain, I firmly believe the only sustainable company will succeed, also from an investor perspective, but there is terrific volume -- values, sorry, terrific value to do so..

If you think that currently, the production from China and U.S. is paying 25% of tariffs.

If you think that, that production need to pay the shipping cost we mentioned, you can imagine if we move it to U.S., where there is 0 tariff, so from 25% to 0% and where production can travel on truck on wheels rather than shipping, what could be the impact on margin.

So by doing logical things like Pasquale said, reducing the complexity our collection by reviewing our supply chain, by increasing the efficiency of retail as we demonstrated to be able to do in U.S., we expect that our journey towards becoming a brand and luxury company will not just be a statement, will be reflected in the EBITDA, EBIT and return on capital employee metrics.

.

Yes. That's great. And just a follow-up on that. I see you guys also look like spent $800,000 this quarter to reduce the redundancy of your Italian factories. I'm just kind of curious along those lines if there's more opportunity there and what the potential is. .

This is -- and I will call maybe Pasquale to comment. That is, of course, a legacy from our past. The company used to be completely dependent and relying on Italian production for every part of its business.

Of course, going forward, as Natuzzi Italia will continue growing, there will be still a logic for that because Natuzzi Italia needs to be produced in Italy because being made in Italy is part of the DNA of the brand.

But for the rest of the business, as I said before, the fact of being sustainable, being closer to the market will not require Natuzzi Italia to be produced in Italy. .

So we started with the help of the new HR director, a discussion before summer, which now is accelerating to find a sustainable solution on that front. Sustainable because that is part of the philosophy of the company and Pasquale. Sustainable also because you cannot proceed unilaterally. In Italy, the workforce environment is quite rigid.

So you need to find a solution, which encountered sustain of the workers, the trade unions and the government. We are quite advanced on that front. If that happens we'll be -- I would say, an additional significant step in terms of having the supply chain how we want to have it and also in terms of releasing marginality. .

But I'm sure, Pasquale, you want to add color because I know this has been a battle. You fight over time. And by the way, interesting to know because we did it in a silent way or at least not we did, the company did it.

But over the last decade, already more than 1,500 employee -- worker left the company in a very, let's say, not dramatic way, not dramatically, but please, Pasquale, maybe you want to comment on the topic of restructuring. .

Antonio, help me to understand a little bit more. I mean you described the fact that we manufacture Natuala in Natuzzi Italia in Italy and the reason why. And then, I mean, in order to make sustainable production and delivery and supply chain, we already have a plant in Brazil. We have a plant in China.

We have a plant in Romania, and we are going now to organized reduction in Mexico. I mean you described it very well. I don't know, probably... .

Okay. Then, that should be fine. Okay. If you do have nothing to add, that's fine. That's fine, Pasquale. .

Yes, Okay. .

Okay. And then just my second question, also great to see the alignment and I mentioned of your stock, compensation plan, stock option plan that starts next year. And I think at the end of your prepared remarks, you mentioned [ NBO ] or some -- it sounds like you might already own some stock, but any more detail on what that is.

I wasn't sure what that was referring to.

And then also just on the option plan, I guess why wait until next year? I mean you guys are working on a lot of good stuff and why not incentivize the management team right now? Or I guess just any details on what that -- are you getting granted the options now and invest next year? Is that what that means? Or any further detail would be helpful. .

So thank you for also this comment. Let me take it maybe one step back. So when I joined Natuzzi is because I believe this company -- and this is my belief, again, no guidelines, my belief. This company has a terrific upside potential, okay? And I believe there are the conditions to achieve it. And I hope that working hard we're going to achieve it.

So -- and I think one point will share detailed information. My best company, my best salary, is roughly 1/3 of my last employment as Senior Partner and Global Leader Luxury in McKinsey or the potential upside will happen only and if there will be an upside for you as shareholders and it will happen in a form of a stock option plan. .

There won't be the deal we're discussing with the, let's say, Board is not that's going to be granted. It's going to be stock option. There will be a strike price, which is, in my case, predetermined as the 30 days before my joining. So of course, that will be pushing me to incremental value creation.

So -- and it's really to double and triple the company value to make this mean -- I would say, first of all, a successful journey personally and professionally, but also financially. So that is a bit of the economics of the stock option plan for me. But again, we are finalizing this.

It will be in place, we believe, by the end of the year, beginning of next year for myself and the key management team. .

Yes. That's great to hear. Well, yes, it sounds like so the strike price will be the 30 days before you joined. So you obviously... .

Yes, that's the surprise. .

Yes, you're incentivized now and going forward, and it sounds like a great opportunity and love to see that alignment as a shareholder. Thanks a lot for your time, and keep up the great work. .

[Operator Instructions] If there are no further questions at this time, I'd like to turn the floor back over for Piero. .

Thank you, Kevin. We have no further questions. So therefore, this concludes the conference call today. Thank you all for participating the event. And do not hesitate to reach out to me for any questions you may have. Have a nice day. Thank you. .

Thank you. That does conclude today's program. You may now disconnect, and have a wonderful day. We thank you for your participation today. .

Thank you. Bye-bye. Bye-bye..