Natuzzi Shareholder Letter and Financial Results 2024 -- First Nine Months and Third Quarter Results

FIRST NINE MONTHS OF 2024: HIGHLIGHTS

   -- 
 TOTAL NET SALES WERE EUR243.9 MILLION, IN LINE WITH THE SAME PERIOD IN 
      2023 (-0.3%). 
 
 
   -- 
 BRANDED SALES WERE EUR221.2 MILLION, UP 0.3% FROM 2023 SAME PERIOD AND 
      UP 3.1% FROM 2019 SAME PERIOD. BRANDED SALES WERE 93.0% OF TOTAL SALES, 
      COMPARED TO 92.6% IN THE SAME PERIOD OF 2023 AND 78.5% IN THE SAME PERIOD 
      OF 2019. 
 
 
   -- 
 DOS SALES WERE EUR57.4 MILLION, UP 6.3% FROM 2023 AND UP 20.8% FROM 
      2019 SAME PERIODS. 2024 GROWTH WAS DRIVEN BY A 22.3% SALES INCREASE FROM 
      DOS IN THE U.S, WHERE WE OPENED 1 ADDITIONAL STORE IN DENVER. DURING THE 
      FIRST 9 MONTHS OF 2024, WE CLOSED TWO NON-PERFORMING NATUZZI ITALIA 
      STORES, ONE IN SPAIN AND ONE IN SWITZERLAND, AS PART OF OUR ONGOING 
      EFFORT TO PROGRESSIVELY IMPROVE THE QUALITY OF OUR RETAIL. 
 
 
   -- 
 AS PART OF OUR TRANSFORMATION, DURING THE FIRST 9 MONTHS OF 2024, WE 
      ACCELERATED OUR RESTRUCTURING WHICH AFFECTED P&L RESULTS WITH (EUR4.8) 
      MILLION OF ONE-OFF SEVERANCE COSTS: 
 - (EUR4.1) MILLION ACCRUED IN COST 
      OF SALES; 
 - (EUR0.7) MILLION ACCRUED IN SELLING AND ADMINISTRATIVE 
      EXPENSES. 
 
   -- 
 DURING THE FIRST 9 MONTHS OF THE YEAR, 538 PERSONS EXITED OUR GROUP. 
      THESE EXITS WERE PARTIALLY OFFSET BY HIRES IN STRATEGIC AREAS SUCH AS 
      RETAIL, MARKETING AND MERCHANDISING. FROM 2021 TO SEPTEMBER 2024, WE HAD 
      A NET REDUCTION OF 1110 PERSONS, EQUIVALENT TO A 26% OF TOTAL. 
 
 
   -- 
 IN THE FIRST NINE MONTHS OF 2024, GROSS MARGIN WAS 35.8%, COMPARED TO 
      35.8% IN THE FIRST NINE MONTHS OF 2023 AND 29.0% IN THE FIRST NINE MONTHS 
      OF 2019. EXCLUDING (EUR4.1) MILLION OF ONE-OFF SEVERANCE COSTS, GROSS 
      MARGIN WOULD HAVE BEEN 37.4%, WHICH COMPARES TO 36.3% IN 2023 FIRST NINE 
      MONTHS AND 30.0% IN 2019 FIRST NINE MONTHS. 
 
 
   -- 
 IN THE FIRST NINE MONTHS OF 2024, WE HAD AN OPERATING LOSS OF (EUR3.6) 
      MILLION, COMPARED TO AN OPERATING LOSS OF (EUR2.2) MILLION IN 2023 FIRST 
      NINE MONTHS AND AN OPERATING LOSS OF (EUR19.5) MILLION 2019 FIRST NINE 
      MONTHS. EXCLUDING (EUR4.8) MILLION OF ONE-OFF SEVERANCE COSTS, WE WOULD 
      HAVE REPORTED AN OPERATING PROFIT OF EUR1.2 MILLION, WHICH COMPARES TO AN 
      OPERATING LOSS OF (EUR0.7) MILLION IN 2023 FIRST NINE MONTHS AND TO AN 
      OPERATING LOSS OF (EUR16.1) MILLION IN 2019 FIRST NINE MONTHS. 
 
 
   -- 
 NET FINANCE COSTS WERE (EUR7.4) MILLION, COMPARED TO (EUR5.6) MILLION 
      IN 2023 AND (EUR7.7) MILLION IN 2019 SAME PERIOD, MAINLY AS A CONSEQUENCE 
      OF HIGHER INTEREST EXPENSES ON LEASE CONTRACTS AND THIRD-PARTY FINANCING, 
      AS WELL AS UNFAVORABLE CURRENCY MOVEMENTS ON TRADE PAYABLES AND 
      RECEIVABLES. 
 
 
   -- 
 DURING THE FIRST 9 MONTHS OF 2024, WE INVESTED EUR5.4 MILLION, 
      PRIMARILY TO UPGRADE OUR ITALIAN FACTORIES AND FOR THE DOS LOCATED IN THE 
      U.S. AND ITALY. 
 
 
   -- 
 WE CONTINUE THE DIVESTMENT PROGRAM OF NON-STRATEGIC ASSETS WE 
      ANNOUNCED: 
 - WE RECEIVED $3.8 MILLION IN OCTOBER 2024 AS A FIRST 
      INSTALLMENT FOR THE SALE OF A BUILDING LOCATED IN HIGH POINT, NORTH 
      CAROLINA. 
 - WE SIGNED A PRELIMINARY AGREEMENT FOR THE SALE OF A LAND IN 
      ROMANIA FOR AN EXPECTED PRICE BETWEEN EUR2.9 AND EUR3.1 MILLION. 
 - AS OF 
      SEPTEMBER 30, 2024, WE HELD EUR17.1 MILLION IN CASH, FROM EUR33.6 MILLION 
      AS OF DECEMBER 31, 2023. IN PARTICULAR, THE DIFFERENCE IN CASH IS 
      DETERMINED AS FOLLOWS: 
 

- NET CASH USED IN OPERATING ACTIVITIES (EUR5.1) MILLION. OF THIS, (EUR6.0) MILLION TO REDUCE WORKFORCE;

- NET CASH USED IN INVESTING ACTIVITIES (EUR5.4) MILLION;

- NET CASH USED IN FINANCING ACTIVITIES (EUR7.1) MILLION;

- EFFECT OF MOVEMENTS EXCHANGE RATES ON CASH (EUR0.4) MILLION;

- DIFFERENCE IN BANK-OVERDRAFT REPAYABLE ON DEMAND EUR1.5 MILLION.

3Q 2024: HIGHLIGHTS

   -- 
 TOTAL NET SALES WERE EUR75.0 MILLION, IN LINE WITH 3Q 2023 (+0.1%). 
 
 
   -- 
 BRANDED SALES WERE EUR68.8 MILLION, UP 0.3% FROM 3Q 2023 AND UP 4.6% 
      FROM 3Q 2019. BRANDED SALES WERE 93.7% OF TOTAL SALES, COMPARED TO 93.9% 
      IN 3Q 2023 AND 78.6% IN 3Q 2019. 
 
 
   -- 
 DOS SALES WERE EUR16.8 MILLION, DOWN 1.4% FROM EUR17.1 MILLION IN 3Q 
      2023 AND UP 25.7% FROM EUR13.4 MILLION IN 3Q 2019. 
 
 
   -- 
 AS PART OF OUR TRANSFORMATION, DURING 3Q 2024, WE ACCELERATED OUR 
      RESTRUCTURING WHICH AFFECTED P&L RESULTS WITH (EUR3.4) MILLION OF ONE-OFF 
      SEVERANCE COSTS: 
 - (EUR2.9) MILLION ACCRUED IN COST OF SALES; 
 - 
      (EUR0.5) MILLION ACCRUED IN SELLING AND ADMINISTRATIVE EXPENSES. 
 
   -- 
 IN 3Q 2024, 276 PERSONS EXITED OUR GROUP. THESE EXITS ARE MAINLY DUE TO 
      THE CLOSING OF OUR SHANGHAI PLANT, WHOSE PRODUCTION WAS MOVED TO 
      QUANJIAO. 
 
 
   -- 
 IN 3Q 2024, GROSS MARGIN WAS 31.8%, COMPARED TO 35.4% IN 3Q 2023 AND 
      28.7% IN 3Q 2019. EXCLUDING (EUR2.9) MILLION OF ONE-OFF SEVERANCE COSTS, 
      GROSS MARGIN WOULD HAVE BEEN 35.7%, WHICH COMPARES TO 35.5% IN 3Q 2023 
      AND 30.5% IN 3Q 2019. 
 
 
   -- 
 IN 3Q 2024, WE HAD AN OPERATING LOSS OF (EUR3.8) MILLION, COMPARED TO A 
      LOSS OF (EUR1.4) MILLION IN 3Q 2023 AND A LOSS OF (EUR8.7) MILLION IN 3Q 
      2019. EXCLUDING (EUR3.4) MILLION OF ONE-OFF SEVERANCE COSTS, WE WOULD 
      HAVE REPORTED AN OPERATING LOSS OF (EUR0.4) MILLION, WHICH COMPARES TO AN 
      OPERATING LOSS OF (EUR1.1) MILLION IN 3Q 2023 AND AN OPERATING LOSS OF 
      (EUR6.8) MILLION IN 3Q 2019. 
 
 
   -- 
 NET FINANCE COSTS WERE (EUR3.3) MILLION, COMPARED TO NET FINANCE COSTS 
      OF (EUR1.4) MILLION IN 3Q 2023 AND (EUR3.1) MILLION IN 3Q 2019, MAINLY AS 
      A CONSEQUENCE OF HIGHER INTEREST EXPENSES ON LEASE CONTRACTS AND 
      THIRD-PARTY FINANCING, AS WELL AS UNFAVORABLE CURRENCY MOVEMENTS ON TRADE 
      PAYABLES AND RECEIVABLES. 
 
 
   -- 
 DURING 3Q 2024, WE INVESTED EUR1.7 MILLION, PRIMARILY TO UPGRADE OUR 
      ITALIAN FACTORIES AND FOR THE DOS LOCATED IN THE U.S. AND ITALY. 
 

***

SANTERAMO IN COLLE, Bari, Italy--(BUSINESS WIRE)--December 12, 2024-- 

Natuzzi S.p.A. $(NTZ)$ ("we", "Natuzzi" or the "Company" and, together with its subsidiaries, the "Group"), one of the most renowned brands in the production and distribution of design and luxury furniture, today reported its unaudited financial information for the first nine months and third quarter ended September 30, 2024.

Pasquale Natuzzi, Executive Chairman of the Group, commented: "We are living in a dual-speed reality. On one hand, our performance reflects the ongoing challenges posed by the persistent economic crisis. On the other hand, we are seeing growing evidence of the strength of our long-term Brand/Retail project, which continues to gain momentum, paving the conditions to capture the full potential of our Brands.

On November 12, I had the privilege of inaugurating the Natuzzi Harmony Residences, a 110,000-square-feet, 9-floor building with 50 apartments, located in a prestigious area in Dubai. For the first time, we have led the whole architectural and creative direction both for the exterior and interior design, resulting in a project which is a living tribute to our Brand DNA. This initiative is a clear testament that our Brand enjoys global recognition and that we completed our evolution into a lifestyle brand.

We also continue to innovate and lead where our brand has its origins. In October, at the High Point Market, we unveiled our 'Re-imagined Gallery' concept -- an innovative format designed to strengthen the coherence of the Natuzzi brand representation and improve commercial performance with our distribution partners. The 'Re-imagined Gallery' has since become our global standard for the brand's presence in multi-brand retailers. Along with our global retail format, it ensures consistent brand representation across markets and channels. Thanks to these efforts, we are increasingly presenting our collection in a unified and inspiring way across our 678 stores and 628 galleries worldwide.

These results testify that Natuzzi is one of the few global design and high-end furniture brands. They also reinforce my belief that, moving forward, the positive impact of our strategic initiatives will effectively counterbalance market headwinds, positioning us for a prosperous future."

Antonio Achille, CEO of the Group, commented: "Our sales during the first nine months of 2024 have been in line with the previous year, despite challenging conditions that continued to impact not only the furnishings sector but also the broader durable and consumer goods industries.

This was achieved, despite a soft third quarter, which was significantly below the year's average, thereby affecting deliveries in August and September.

In this regard, we need to remember the cycle of our business innovation. For instance, the merchandising and retail initiatives for Natuzzi Italia, introduced during April's Milan Design Week, reached the market only by late September. This was reflected in Natuzzi Italia's delivered sales for the first nine months, which were 0.9% lower compared to the same period in 2023. Natuzzi Italia performance improved in the last two months, effectively closing the gap with 2023 levels. Looking ahead, the focus for Natuzzi Italia will remain on the consistent rollout of the Brand/Retail/Marketing strategy, with a particular emphasis on priority markets, such as U.S., China, UK, Spain and Italy.

Natuzzi Editions, distributed in Italy under the "Divani&Divani by Natuzzi" brand, has reported overall revenue slightly up compared to the previous year (+1.1%). We are actively engaging customers through targeted global initiatives, such as the "Re-imagined gallery" project, aimed at building a stronger foundation to reinforce this positive momentum.

We remain confident that our brands and retail strategy are poised for significant growth and remain committed to executing the Company's long-term plan:

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December 12, 2024 17:27 ET (22:27 GMT)