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Operator: Thank you for standing by. Welcome to the Natuzzi S.p.A Third Quarter 2025 Financial Results Webcast. As a reminder, anyone who would like to dial in please dial +4 — I’m sorry, +1 (412) 717-9633, then Passcode 39252103#. Once again, if you’d like to be dialed in via the phone, in addition to the link already provided to join via video please dial +1 (412) 717-9633 then Passcode 39252103#. [Operator Instructions] Joining us on today’s call are Pasquale Natuzzi, Executive Chairman, Chief Executive Officer, Ad Interim; Carlo Silvestri, Chief Financial Officer; and Piero Direnzo, Investor Relations. As a reminder, today’s call is being recorded. It’s now my pleasure to turn the call over to Piero. Please go ahead.

Piero Direnzo: Thank you very much, Kevin, and good day to everyone. Thank you for joining the Natuzzi’s conference call for the 2025 3rd quarter 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 securities laws. Obviously, actual results might differ materially from those in the forward-looking statements because of risks and uncertainties that can affect our results of operations and financial condition. Please refer to our most recent annual report on Form 20-F 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, Mr. Natuzzi.

Pasquale Natuzzi: Thank you very much. Good morning, everyone. And thank you for taking part in this quarterly call. To what already communicated in our press release, I would like to add some more details and remarks. While the geopolitical situation has not changed and in some respect, is worsening as a result, consumer confidence remain weak. Despite our investment in marketing, foot traffic in our stores, particularly in the United States and Europe continues to lag while in some cases, we are seeing improvement in conversion rates. These gains are not sufficient to offset the decline in overall traffic. Despite the current challenging business environment, we have improved our gross margin this quarter, surpassing the levels recorded in the first 2 quarters of the year, this achievement was made possible by a more favorable sales mix.

In fact, sales of Natuzzi Italia, which delivered higher margin than other product lines grew by 18% compared to the third quarter of last year. While sales of unbranded products, which are not core to our business decreased by 20%. We intended to continue in this direction, supporting the branded sales that offer higher margin. The closing of the Shanghai factory last year, which enabled us to realize the cost saving on industrial operations in China. However, it is important to note that the improvements in margin remain limited by labor cost in Italy, following the reshoring process from China to Italy, of the Natuzzi Edition production from the North America market, completed in the second half of 2024. Commercial and administrative costs deserves a separate mention, while wages and transportation expenses decreased this quarter, overall SG&A costs remain higher relative to our current revenue base.

Therefore, both myself and the management team remain committed to support the sales while reduced fixed cost at the group level. We certainly continue our discussion with the Italian government, which has recognized the company as an enterprise of strategic relevance for the country. I would like to inform you that next Monday, I will personally be Rome at the relevant Ministry to seek measure aimed to improve quality, reducing transformation costs at our Italian factory and thereby increasing production efficiency. Lastly, we continue to invest the time and resources in participating in international trade events as well as the in-store visual merchandising and external architecture design in order to offer customers an engaging and compelling shopping experience.

Recently, we were in India. And just yesterday, we completed a commercial road show in China, meeting with the leading architectural firms to develop a project similar to the Natuzzi Harmony resident presented in Dubai and Jerusalem. I’m sorry, we are really doing not our best, more than that really to satisfy the expectation of our shareholders and our stakeholders, and we will continue to do so. So if there are any questions, I would be pleased to answer together with Carlo, our CFO. Thank you very much for listening.

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Operator: [Operator Instructions] Our first question today is coming from David Kanen.

David Kanen: Are you guys able to hear me?

Pasquale Natuzzi: Yes.

David Kanen: The first one pertains to your meeting next Monday in Rome with the government. And if you could give us some sense as to the outcome maybe — sometimes we talk in terms of the bear case scenario, the moderate reasonable scenario and then the bull case. What do you expect to come of the meeting? And then on a go-forward basis, what our cost structure will look like given the concessions that we hope to get from labor and so forth?

Pasquale Natuzzi: We are working on restructuring plan and one of the main action that we need to do for that is to rationalize our factory here in Italy. In Italy, we have 6 factories and one logistic center. We plan to reduce the production in 3 factory instead of 6. In order to do that, we need to move people from one city to another city, but in the same region, we are not — the city — the plan are not so far one to the other. So — but we need to move people from one factory to another factory. And that requires, let’s say, an agreement from the government and the union also to let us do that, okay? That’s one. Number two, as everyone knows that we have today in Italy, 1,350 workers, but we need 750, 800 people. The other people, we need now to — I don’t know exactly the english word, but we need to use some help from the government that provide to use 800 people instead of 1,350.

We call [Foreign Language] in Italian. Carlo can you help me with the appropriate word probably?

Carlo Silvestri: I start from here. So David, if I can add on top of Mr. Natuzzi, we have like we need to tool different level of measures, what is called a kind of furlough, right, to keep on going. But I will be, let’s say, more strategic in this situation. Our target is to have, let’s say, when you talk about time frame, it’s to have a negotiation based on some terms that need to be deployed within next year and then a more medium-term plan to achieve what we discussed last time in terms of financial sustainability. So it’s a double layer negotiation.

David Kanen: I see. And is your goal, assuming you can get these concessions and rightsize the workforce, do you anticipate at the current levels of revenue that we would actually be profitable and stop burning cash because obviously, it’s unsustainable to continue burning cash.

Carlo Silvestri: Let’s say that the target is always to have a — to be profitable around, let’s say, what we discussed also in the other call, EUR 28 million, EUR 29 million per month. So — and it means that’s the target. So always going through some different tools because like here, we are discussing about the measures that involve the workforce. Then we are talking about marginality. That means it implies a review of the price list when our strategic positioning allow this and then also to look into our retail network, rationalizing it. So with through all these different measures, David, with those numbers that I mentioned before in terms of monthly turnover, we will not burn cash, but we will create positive cash flow.

David Kanen: And as I indicated to you on a go-forward basis, if you can achieve these concessions and we can achieve profitability, we would certainly be interested in putting more money in perhaps through a pipe transaction to support the company and help you grow and thrive well into the future. We believe in the brand and we believe there’s a lot of potential given the right conditions.

Pasquale Natuzzi: Consumer confidence will make the difference, David. I mean, because unlikely the traffic is — I mean, it’s reducing unbelievable. I mean, unlikely consumers are not getting in the store despite the marketing investment that we are doing and the new product, wonderful new product. Unlikely, I mean, so — but our — but anyway, despite that, despite of the consumer confidence, we cannot guarantee what will happen from the geopolitical situation and give, again, confidence to the consumer that the life will improve. We are certainly committed to work on cost reduction, no question about it. We should reduce cost, and we are very much — and we should improve the margin also. So improve the margin by our price list because our brand has a good recognition.

We should reduce the cost, improve the margin and improve the sales a little bit if then the consumer confidence. But we are confident that we can achieve better sales next year compared with 2025. And consequently, if we are — I mean, if we are lucky and capable to achieve that, we will deliver good profit to our shareholders. So that’s our challenge certainly.

Operator: [Operator Instructions] We do have a follow-up from David Kane.

David Kanen: So if you could give us an update on the commercial division that PJ has been spearheading. There are companies that exclusively in that sector, the commercial sector that is doing more revenues than us as a combined entity, meaning $0.5 billion. So I see this as a huge opportunity, and I think we have the right product and the brand to succeed there. Can you give me a sense as to the progress that we’ve made since last quarter and you know — I’m sure you see the pipeline of opportunities that you’re bidding on. How big of an opportunity do you think this could be next year 2026.

Pasquale Natuzzi: To be honest, it’s not easy to forecast, but I can tell you that we are making huge investment in order to increase the trade contract business. Certainly, we signed — I mean last November, no last November, November 2024, we did — we launched the first Natuzzi Harmony residence. We designed the building with 50 apartments, we designed the furniture, everything. People are purchasing Natuzzi apartment in Dubai. As far — we already are in the process to sign the second contract with the same dealer, the same developer in Dubai and we signed another contract already in Jerusalem, where — and we designed the building, we designed the apartment, we designed common baths everything. Again, Natuzzi residence proves the value of the Natuzzi brand, okay?

They are paying just royalty, $1.2 million, $1.3 million, just to use the name. And then obviously, they are going to pay the furniture, the cost of the furniture. Now just because we believe in this new business to leverage our brand awareness. This year, we attended an exhibition in Riyadh, Saudi Arabia, an exhibition in Dubai this year, 2025, 2 times in Mumbai in India, September and November. December — last December, a few weeks ago, we were in Miami, Miami Design Week another huge event to meet architect designers. And then we just finished last week. My son has done a roadshow in China for 1 week meeting the biggest firm architecture firm to engage them and do a project for them. There is a long list of projects that we are discussing.

David Kanen: So I mean I see that you’re working very hard and I appreciate that. But if you can give us some sense as to the magnitude of the opportunity. I’m sure you have an internal goal for 2026. Again, kind of the bear case, the base case and the bull case. Can you give us a sense as to what that opportunity is?

Carlo Silvestri: David, I’ll — thank you very much for your question. First of all, because I’ll allow us to give you more color about what we are doing. So we are treating the Contract Trade Division as a start-up, right? Because in this phase, as Mr. Natuzzi was mentioning, we are doing a lot of bidding, right? But we don’t have yet statistics on the success rate, okay? Because we are, let’s say, providing and exposing our capabilities in a lot of road show, and we are receiving a lot of positive feedback from the market. And now we are going into the bidding phase that is taking us some time to understand the real potential. In order to play conservative for 2026, we do not have a very aggressive plan because we don’t want — we want — we are considering it as a cherry on the cake on our numbers.

So the magnitude of the business that we forecast for 2026 it will be between EUR 5 million and EUR 10 million. But then it’s an exponential business once you start deploying all the projects. So just to be fair, is a cherry on the cake, we are not very aggressive on that, just to close the topic. I hope I do — I did answer to your question.

David Kanen: Yes. No, I appreciate that. And then I guess one more question. You had indicated — you had implied in the prepared remarks in the press release that you’re in the final rounds of a CEO selection, if I’m interpreting correctly. Any additional color you can give there? How many candidates would you say it’s been narrowed down to? Do you have — is it 2? Is it 5? Is it 10? And what do you think the time frame is for a decision to be made?

Pasquale Natuzzi: The decision will be made based on the lack of meeting the appropriate person to cover the position. I’m using my weekend time because unlikely to interview people during the working day is very difficult. So I’m using Saturday and Sunday interviewing people. And it’s my — to be honest, absolutely, we are going forward. We hope to give a good news in a very short period of time.

David Kanen: That’s really all I have. I’d like to wish you and your team, a wonderful holiday and Merry Christmas. I know that you have the real Saint Nicholas is right there in Bari. So I hope you bring some good gifts.

Pasquale Natuzzi: Thank you.

Carlo Silvestri: Thank you very much and happy holidays.

Pasquale Natuzzi: No other question?

Operator: At this time, it appears there are no further questions. I’m going to turn the floor back over to management for any further or closing comments.

Carlo Silvestri: [Foreign Language] So thank you very much. If there is no other further questions, we are always available to be reached out for any clarification you may need on our results and performance also in the next days. So thank you very much for your kind attention from all of us.

Pasquale Natuzzi: Thank you. [Foreign Language] Thank you very much again.

Operator: That does conclude today’s webcast. You may disconnect your lines, and have a wonderful day. We thank you for your participation today.

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