Overlay Shares Small Cap Equity ETF Price & Performance (OVS)

Hello. Good morning to everybody, and thank you for attending this conference relating to the full year '24 results. I will start with a general overview. I think that we had again a very good year. Which has been characterized by a difficult start because of very negative weather condition, which affected has already been reported the first half of the year. And in spite of this we end up with the first half, which has been positive and the second half, which has been very, very strong. Bringing total sales to more than 6% versus last year mostly generated by like for like and merchandising initiatives basically. I want to mention that some of those initiatives [indiscernible] is achieving a material turnover of more than 100,000,000 approximately $120,000,000 Piombo grew by 3%, 4% versus last year and we are introducing new initiative regarding Pyeongbo like Pyeongbo Tech and Pyeongbo Contemporary, which are generating expectations for possible enlargement of the size of PMBOSAY in the next coming quarters. Another issue which has been very positive has been the one dedicated to the younger generation like the Angel. In B Angel, we had an important growth approximately 50% of growth in 'twenty four compared to 2023.

More space, more merchandising and even higher sell through, which means that the initiative is very solid and generating good cash margin. Also Altavir and Utopia are the two initiatives, which the first of them, which started basically in 2024, And Utopia is in the second season. Both these initiatives are generating solid growth and are attracting and this is even more important new customers. People which are looking for more sporty and outdoor garments. And Generation Z with Utopia. Also, it's worth mentioning the continuous support to the growth and to the to the introduction of our brand to new customers generated by the beauty. Department. The beauty department inside the OVS store is becoming an important part of the business, accounting now for more than $100,000,000 The growth in year 2024 has been about 20%. And we expect this growth to continue at high single digit, maybe low double digit growth also in 2025. Thanks to new initiative improvement in the merchandising. This segment is continuously attracting new customers generating also important cross selling opportunity in favor of the women's segment. Which by the way is for the third consequent year the portion of our business which is growing the most.

I want to take opportunity also to mention the result of Lecopane in the beginning of the year 2025 we introduced Lecopen Innovius with this spring summer season, And the initial results are more than encouraging. [indiscernible] very solid and in this moment, we believe that based on the first couple of months of sales, this initiative has been another success [indiscernible] will have the potential to achieve the same sales of Pyongbo Obviously, Pyombo is also dedicated to men. [indiscernible] Le Copern is only women. So basically, we expect that from Lecopane, we can achieve in 2025 probably $40,000,000 sales and in the future even more. Couple of words about international. We decided to mention even in the press release the one small reference to the International activities, which are growing either in term of top line We had approximately plus 15% in the top line entirely generated by like for like. We are cleaning a bit our network and focusing on the most performing store and starting operating in new countries with franchising partner It was mentioned a new agreement that we had with Mexico, a new agreement that we have with Japan, two countries where two of the biggest local players decided to start working with OVS and with some of our brand on the basis of a wholesale basically agreement.

So we don't enter in CapEx or or rent or SG and A risk. And the margin is going to be good. And even in 2025, based on this new agreement, we expect another [indiscernible] 10%, 15% growth in sales and profitability as well. So, in term of initiatives, I think that we continue to demonstrate that we have the power to generate ideas and always or almost always successful [indiscernible] Which are bringing to our brand a new and most enlarged customer base also with more elevated customer profile in term of pro capital spending which is allowing us together with the improvement of the quality of the stores, windows and atmosphere and also most importantly quality of the merchandising we are also continuing elevating our average price and increasing the conversion rate which is a good evidence that independently from market expectation and behaviors. Sometime markets are consumer are maybe concerned like now about the international situation and the uncertainty and [indiscernible] But what we see is that OVS has a destination continues to remain their preferred place where Italian families are deciding to go and this is demonstrated by the very high conversion rate. A couple of words about 15,000,000 in our profit and loss.

A material amount of SG and A about $20,000,000 $25,000,000 has been generated by growth, so new openings. And unfortunately, we have been affected in the last portion of the year by this one off element which we have been forced to report as EBITDA even if it is extraordinary element of EBITDA. Refers to a couple of situation where customers in financial trouble and under the protection of the Composizione Negotiata della Crise for the ones of you who are familiar with the Italia is a kind of Chapter 11. Differently from what had been reported before forced us to a major and higher depreciation of our credit. And another element has been the the change in the tax law regarding the research and development activities, which impacted all the credit generated in the facial industry by these activities, which has been subject to a change in the law which forced all of us to claim and to enter a negotiation with the tax authority because the change in the law has been has forced all of us to change our accounting policies, basically. Our credit versus the state because part of this credit has been not recognized. So this extraordinary impacted by about €5,000,000 in our account.

So the adjusted EBITDA, if you want to say that once the non recurrent element would be not considered is about hundred million euros We believe that this means that the company has been able to confirm to be a very solid player this market. CapEx has been high compared to our historical level for the last year. In term of extraordinary CapEx because we completed as we announced, the three year program of innovation in several of our technological innovation like the new deposit, the opening in Bari of the center dedicated to rework the [indiscernible] product which are left over. And in order to increase the life cycle of those items with positive aspect also in term of profitability for the following year because thanks to this investment, a high amount of goods of government will be refurbished and reported for the following year as as new. Also, we mentioned the good performance of Stefano in the second part of the year. This is not material in our account because it's remained very small, 28 approximately €25,000,000 turnover for the full year. But it's worth mentioning that after a period of uncertainty or negative performance generated by the collections, which were made by a former manager Now finally, I believe we have found the solution with a new manager in charge of it a new designer And in the second half, Stephaneil sales grew double digit compared to the past.

And also in this first part of the year, Stefano said, are very promising. So that's it for now. And I hand the word [indiscernible] doing it, I remember also that in light of the good net financial position and cash generation, we decided to propose to the shareholder meeting a dividend of 0.11 per share, which means an increase compared to the ordinary dividend of more than 50% and also an increase of 10% compared to the total dividend, which has been distributed the year before. Thank you. And Francesco, I leave the word to you.

Thank you, Stefano.

So I move now to Page five with some further details on the income statement. Most of the comments have already been provided by by Stefan, so I quickly summarize the plus 6% in net sales. The growth of 91 basis points in gross margin that despite the inflationary pressure that led to an EBITDA increasing by $13,000,000 over last year. And with the net result growing couple of million, in this case, penalized by some increase in the tax rate due to some new international regulations that impacted our group. I move to Page six with some more colors of these performance over the quarters. We have already commented over time the first three quarters, just to remember, a good Q1, very weather penalized Q2 with sales growing just 3% but then with a strong Q3, in that case, weather was favorable. And then Q4, that was basically a normal quarter in terms of sales. That unfortunately did not translate in a further increase in EBITDA because all these one off items mentioned by Stefano that is the provision the law on receivable and the adjustment on the fiscal credit happened and took place in Q4. So the $60,000,000 reported is net of this cost that needs to be based on accounting principles reported above EBITDA.

I move to Page seven that provides a breakdown by channel and brands. With all positive figures. So franchising both franchising and direct stores are growing. Both brands of the asset grouping are growing. Particularly OO PIM in the course of 2024 had very strong results, plus 8% in sales that translated into a plus 16% on the business unit EBITDA that now passed also the line of the 10% margin with OVS consolidating a profit an EBITDA margin above 13%. So in line with the best practice of the industry. On Page eight, we start to have a look to all the financial items of the company. In a context, as said, of growing business, we also managed to generate cash out of the working capital. Global €12,000,000 as a combination of flattish trade receivable signed at we have a very strong credit management policies vis a vis all the franchisees and that is a slightly cash generative item. On inventory, compared to last year, we see a EUR25 million increase due to a couple of elements. On one side, the growing of the beauty that requires some stock to be put in the store as a starting stock, especially for the new opening or the new opening within our stores.

And on the other side, we have still alive the issue of the Swiss channel that forces to have a longer shipment time. Last year, it was just taking place. So we were in a sort of ramp up phase. And now we have normalized with about €20,000,000 stock in transit higher than than last year. On Page number on payables, sorry, we said we are benefiting over the growth of the business. Plus 6% and that are more or less EUR24 million and the rest are due to this anticipation of extra purchases on goods. Page nine, we have the view on capital expenditures. That are basically in line with last year, even if, I mean, of course, the topics that we touched during this year changed. Last year, we completed basically the automation of our Continuum Energy Exchange DC. And this year, the main investment was on the innovation center in Bari, where we deal with rework of garments. In terms of IT, we also had during this year the rollout of the new cash system. That easy the interaction with customers and also all the omnichannel activities. And in total, we reached 95%, million like last year and we expect 2025 of course, to reduce this peak of investments.

Page number 10, provides the view on the cash flow. Cash flow that is increasing by €5,000,000 versus last year. As a combination of 13,000,000 higher EBITDA And working capital still cash positive and in line with previous year. Like the investments that were substantial. And the fact that we during the 2024, we terminated our tax credit related to the past year losses, related losses. So we had a strong increase in the tax payment also with a double effect of the first year in which we recover a due vis a vis the government. The element I would like also to highlight is that single year cash flows can somehow be impacted by extraordinary elements like payments arriving or paid one day or the day after. But over three years, we are now in front of a row of over $60,000,000 cash generation that totals about $200,000,000 So a view that provides solid feeling on the cash generation capacity of this company. Page 11, what have we done with this cash generated? Basically, we gave it all to our shareholders. Either by direct dividend distribution that increased over time by $11,000,000 in 2022 to $25,000,000 in 2024 and with an increase in buyback.

As anticipated by Stefano, this year, based on the results we expect to further increase the dividend distribution to $0.11 per share. And we are also proposing to the shareholder meeting to go ahead with the buyback plan in order with $10,000,000 for the coming months. Page number 12 is provides a view on the net financial position. That is basically stable given the fact that we are distributing all the cash generated. With a leverage ratio between 0.76%, 0.8%. So basically, a super safe number that even over the taking the average over the last twelve months is one 0.3 in a situation of normal business. Page 14, we move to the future. And with a couple of one dedicated slide that we thought was necessary to comment the storm that affected the markets over the last ten days is the tariffs, the DATSE. Of U. S. Of course, we are worried in general about how such a relevant topic was dealt with and forth, back and forth. But in general, we see for OVS positive elements. The first one that we already recorded is the improvement of the value of euro vis a vis the dollar And this allowed also to fill one of the gaps that we still had two months ago that was how to cover SpringSummer 'twenty six because at that time, euro dollar was 1.03, 1.04.

And now we are managing to cover it with, let me say, a standard value of €1.1 plus in terms of coverage. The other is depending on how this saga will end, but most probably, there will be some reduction in import from the Far East to U. S, and this will free up capacity, production capacity in those countries to the benefit of negotiation with suppliers. So both these two items, we think, have a positive element vis a vis OVS. So in general, on Page 15, the expectation for 2025 are of continuing in the growth, first of all, in the business related items that are they are appreciation of our collections, as said by Stefan we launched with a very successful plan, the Le d'Alene brand. And all the other elements are moving well. So we expect a '25 growing both in terms of BTDA and cash generation vis a vis 2024. The initial month of this year were affected a little bit by the weather. So we and we are comparing, as said, with excellent result in 2024. So we are managing to keep basically this result And we hope, of course, in a rebound of the weather in May, June that are the focus month for our business.

And last year were very negative. So we expect an improvement in that moment. That's it. So I will say I leave to the Q and A session and give back the word to the operator. Thank you.

Thank you. This is the conference operator. We will now begin the question and session. The first question is from Luca Cinni Baroni of One Investments. Mr. Baroni, your line is open. Mister Baroni, maybe your telephone is on mute. The next question is from Daniela Librandi of Stifel.

Yes. Good morning, Thanks for taking my question and congrats for the results. Two questions and follow ups. I'll start with follow-up. First one is you can give us an idea of what is the the tax rate guidance for this year? Second follow-up on Stefano. You mentioned double digit growth in H2. I remember H1 was minus eight Q3 plus 5%. So I would say there has been there was an acceleration in Q4, just checking on this. And the two questions are, the first one on gross margin. What should we expect for 2025 in terms of gross margins gains as we are seeing energy costs decreasing. The U. S. Dollar is weakening, which should be helpful for your sourcing. And and also a potential resolution of the conflict in the Red Sea could actually push freight rates down. Just want to check this with you. And last question on gold Point, if you can give us an update on the numbers last year. The strategy you wish to implement here, the cost of the option and the potential synergies you can extract as basically market is not factoring anything there yet. And at some point later this year, I guess, September, we have to adjust the numbers.

So thanks for for for the answers. So the tax rate going forward, should be around 26%. Of course, we are working on some potential benefit coming from the Italian legislation supporting some investment, especially in the South Of Italy or in the IP transformation like in and the so called test. If all these measures will be on our tax rate. It will go down about around 24%. But for the time being, 26% is what we have in our plan. Okay. On the question relating the gross margin 25 I expect that as a balance between different elements the gross margin might remain more or less stable. After a couple of year of price increases, which we have been able to pass to our customers also thanks to the improvements that we made in our store and in our [indiscernible] We decided for year 2025 to keep prices more or less stable. And the dollar that you correctly mentioned will be an advantage mostly on 2026. Sourcing because the recent weakening of the dollar is enabling us to start buying dollars for SpringSummer twenty six. At a much favorable rate compared to this year and last year. But on the other side, most of the sourcing for year 2025 as usual, has been hedged So we have a very small advantage, almost immaterial compared to 2024 in year 'twenty five.

All the advantages will be taken and we are buying dollar now to the advantage of the 2026. Other aspect, as you correctly mentioned, mentioned, might generate advantages. Like like the shipment cost But in this moment, with a huge turmoil that we see in the market, it's difficult to incorporate those kind of benefit in our assumptions. On the other side, we must be also conscious that the market this year might require some further markdown in case in case the customers would be reluctant to spend. So we don't know what will happen in the consumer feeling We don't have evidence in this moment of negative aspect, which are impacting our customer base. We believe again that if there will be a continuation, if I may say, of the down trading trend, which is affecting the market, OVS will be properly positioned to take advantage of it like we are doing now. But I prefer to remain flattish in my expectation of gross margin this year. And we are working in order to have 2026 with a further improvement in gross margin not because of a further price increase, but because of a lower cost of goods mostly thanks to the two elements, which has been mentioned, dollar and and this is going to be very important.

The present situation of high custom duty are creating a sort of strong reaction in the Far East suppliers. And we are receiving continuous requests from vendors to meet and to start discussing prosecution of our orders for 2026 and in exchange of this they are ready to give us a better condition because, as Francesco mentioned, they are concerned because one portion of their production capacity will be void next year due to reduction of sales in The United States. This is already happening. This is not a speculation or something This is happening because the orders from our competitor, which are operating in The United States, like Gap or Abercrombie, are basically strongly reduced or in a steep standing position waiting for news from the Custom Duty side, which apparently will not be good for them. So difficult to give you a more precise guidance. But as Francisco said, we believe that the success of some project like the growth of Beauty, the growth of the Angel, the growth of other element, we generate a positive effect by default. In the like for like sales. The gross margin will be more or less stable. And also, we started an important activity of cost cutting.

This is not because we are scary. But because we believe that given the international turmoil it is appropriate for us to try to make some saving in our SG and A structure, which we generate some million of in year 'twenty five compared to year 'twenty four. So all in all, that's why we are confident that year 2025 would be another year where top line and EBITDA grow. We have some negative element again like the cost of labor in increase. You might remember that the national labor contract 4C a three year distribution of the cost increases. So the first year has been '24 The second year is 25%. And in lower extent, will impact also 2026. Stefanielle. Stefanielle, in the second half grew by 25% So that's why after the first half double digit negative, we end up with a positive like for like. And in the first part of the year, [indiscernible] the sales are increasing again like for like compared to the year before. Golden Point, still soon to draw conclusion on the impact on our sales and profitability. All in all, the results of of Golden Point in year 2024 has been $7,000,000 lower than our expectation and this is this generated in our negotiation with the owners.

The decision to change our agreement regarding the sequence of options. So basically, we are reducing by this amount the cost of the second call option and also the first option that we expect to exercise within July instead of being paid to the present shareholder will be injected in the company. So basically 50% of this price will be to the advantage of our stake. From the industrial point of view, everything is moving in the right direction. We started We we didn't have time basically to to to activate initiatives at the merchandising level because of the seasonality of this business, which [indiscernible] as you know, months in advance before generating new product and introducing those products the store. But the first signals are very good For instance, I can tell you that the segment of Nightwear where we are very strong and they were very weak has been as demonstrated to be a big opportunity because in the last part of the year, 2024, we had the opportunity to introduce part of this segment moving some of our products from our dedicated store changing the label to Golden Point and the increase of sales has been immediate and very material.

So this means that from this category in year 2025, we will see an important sales growth. Same it happened to the fitness line, We have a fitness line in OVS and we introduced in the second part of last year, very successful Some of those items has been given to Golden Point as a pilot and the sell through has been super strong. So they went out of stock in few weeks. So it is clear to us that the stores are reacting to every new good idea and good segment of product that we will generate. One other information, we in the first two months of the year, we started converting better to say refurbishing, according a new image some stores of Golden Point and even without completely new merchandising, which will be visible in the second part of year 2025, The stores which have been refurbished are increasing sales by about 15% compared to similar store in the same geographic area, which has not been referred So all good signals. I hope to have answer to your question completely.

Yes. The next question is from Domenico Gilotti of Equita.

Good morning. My first question, if you can give us a sense of what was the performance compared to the market. So if you have a sense of your market share performance in 2024. And any change in the competitive landscape The second question is on the CapEx. Well, in general, the CapEx level for this year, but more in particular, we should expect maybe also the mix in CapEx changing a little bit, so more dedicated to store openings and store refurbishment or, say, the same compared to last year? And the third, you were mentioning in the press release also the opportunity to to push the beauty also through dedicated mono brand stores? If you can elaborate on this initiative also. Thanks. Thank you, Domenico. And your first question, regarding the market, I can tell you that in year '24, in the last quarter, market has been reported by Citanisse negative by minus 2% and total year the market has been positive by 0.7%. Those figures are according to Citadel's Our performance has been plus 3.7 sorry, our performance like for like has been 3.7 I see and in total we achieved a 6% increase. So basically we one year again we overcome the market performance.

In the first month of this year, we are again outperforming the market, which started negative with minus 1% more or less. Minus 0.7% in February and minus 1.2 in March and we are performing better than the market again. In terms of competitive landscape, not special to mention. If not that Benetton is really deciding to disappear. From the market. They are closing stores. We are benefiting from this trend because we are opening stores that were formerly managed by Benetton Partners, for instance, in a pool region, which is in the South Of Italy, We are about to open about 10 stores, small or mid size with the former Benetton partner and those store we became Golden Point, became Stefanielle and this is really an opportunity. From a more general point of view, Inditex is still doing well. [indiscernible] mostly all of their format not increasing number of stores, but performing well in our opinion. Primark is on his market positioning continuously growing and performing well Pepco seems to have some trouble They grew very much, but they are now delivering quality in the proper way. And all the others are suffering. The mid market is suffering hugely.

And the performance of Stefanielle is particularly encouraging given that in the bridge and premium part of the market, most of the players are really suffering. And this is again a confirmation of the right positioning where OVS expense because we are really attracting a big amount of those customer buying PYOMBO and now also buying Elecopel. CapEx question, the mix is changing. Because the reduction of CapEx is mostly related to the [indiscernible] Which has been accomplished. So basically, the new operating CapEx dedicated CapEx and refurbishing dedicated CapEx will remain more or less the same but because the total amount we reduced the mix is changing in favor of revenue generating CapEx. On the beauty, beauty is really I think, the most important project that we have been able to create and generate in the last five years. Sales density of beauty in our stores is much higher than the apparel, which is normal. 6,000, 7,000 per square meter sales with slightly lower margin means that the GMROI or the gross margin per square meter of beauty is almost double compared to the margin generated by the apparel So beauty is used for not only to attract new customer in OVS stores, generating cross selling, but also to generate absolute EBITDA per square meter.

Regarding your question about the opening of stand alone stores, I'm happy to say that in Pavia, we opened last week our second pilot and the result are even better than the Ferrara first pilot. In the first six months, Ferrara is generating a 20%, 30 sales higher compared to our budget. And the store, we expect that we'd achieve $1,000,000 sales. The store is a 90 square meter store, so more than €10,000 per square meter. It will be a very profitable store. In Pavia, the start has been even higher. So the first day doesn't mean anything special, but there were people queuing, waiting for the opening of the store. And we are achieving sales in absolute value in the first days, which are comparable to full format of the S. A. Store 5x bigger. So very good start. And now we decided to enter in the second phase of our pilot, but it's not that much a pilot anymore. It will became a development plan I think that we opened this year we will open this year between ten and twenty beauty store. We are looking for locations now [indiscernible] this business is very promising.

Thank you. The next question is from Andrea Bounfah, Bank of Hello. Good morning to everybody. My question is related to the month of May and June. Stefano, assuming that weather normalized, how much sales would you recover compared with last year in terms of absolute number? How we talking of €40,000,000 more, euros 30,000,000, euros 50,000,000? Just to have an idea. Thank you very much. Well, when I think and my team is thinking, I touch wood. So because we are talking about something which is not dependent from our power. It will be a material number, maybe 30,000,000 could be achieved. Also because as of now, weather continues to be very negative You are in Italy. You know that today is cold, it's raining, etcetera. So we believe that most of the sales [indiscernible] start of the real spring sales period still has to come. So I expect a strong rebound because our assortment is well in place. We have no delay this year, while last year we suffered some delay. In the arrival of merchandising. So could be 30%, could be even more. Very much will depend from weather. If weather will change as apparently will happen in ten days from now, We start mirroring the worst days of last year because as of last year, as of today, sales were very good and weather was positive.

From mid April, weather changed drastically And so we have easy comparison starting from next week. Basically. So let's cross finger €30,000,000 minimum [indiscernible] increase compared to last year. Thank you very much. One thing maybe I will say because I think that we missed mentioning one element We told you that during 2025, CapEx will be reduced We didn't tell We didn't give you a guidance. We believe that at least $10,000,000 less CapEx will be done in year 2020 if not '15 Thank you for attending this call. And I wish you a nice Easter period. Good. Have a nice day. Ciao.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect