Natuzzi SpA Q3 2021 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: David Kanen - Kanen Wealth Management LLC - Analyst : Good morning. It's Dave Kanen. I'm working on Charles' laptop. Can you guys hear me?

Question: David Kanen - Kanen Wealth Management LLC - Analyst : Okay. So first question is, I see that backlog was up $21 million sequentially from Q2 to Q3. Can you approximate or quantify how much of that backlog is high-margin branded products?

Question: David Kanen - Kanen Wealth Management LLC - Analyst : Okay.

Question: David Kanen - Kanen Wealth Management LLC - Analyst : Okay. That makes sense. And then when I look at the quarter on the surface, it looks like revenues were down versus the second quarter, but then when I look at written orders, they actually accelerated from Q2 to Q3. And then the backlog had a huge jump by EUR21 million. So, my question is, how much revenue do you think was lost due to the two-week shutdown for the factory during August? How much was -- I guess the two issues would be supply chain and then the two-week holiday in Europe, how much of that was supply chain? How much of it was two-week holiday?

Question: David Kanen - Kanen Wealth Management LLC - Analyst : Okay. So, I mean, I'm going to look at it in a simplistic way. I'm not sure where you're completely understanding what I'm saying. We lost in the quarter at least 14 production days from the shutdown in Europe for the holiday. If I look at your total revenue and I just divide it by the number of days in the quarter, it's about $20 million. However, to be fair, not all of your production is in Europe. So it's somewhere, and my guess is $10 million to $20 million for the 14 lost days of production. Is there a way that you could quantify that for me or give me a little more detail?

Question: David Kanen - Kanen Wealth Management LLC - Analyst : Okay. Let me move on to my next question. Do you see that -- do you see starting in Q4, you guys working down backlog and revenues increasing? Assuming written orders remain at the same robust pace, are you going start working down that backlog and delivering product output at a faster pace in Q4 and in 2022?

Question: David Kanen - Kanen Wealth Management LLC - Analyst : Okay. And then, in term of the strategy for growth in North America that you've articulated previously to open approximately 10 stores per year for branded product, which will positively affect overall margin, do you believe that, with the changes and plans you put into effect in Q3, that you'll be able to meet that additional demand with output?

Question: David Kanen - Kanen Wealth Management LLC - Analyst : Okay. My question is, with the changes that you've put into effect, let's say each store contributes approximately another EUR4 million in revenue, can you meet that demand right now?

Question: David Kanen - Kanen Wealth Management LLC - Analyst : Okay. And then my last question --

Question: David Kanen - Kanen Wealth Management LLC - Analyst : Yes. In general, can you meet that capacity?

Question: David Kanen - Kanen Wealth Management LLC - Analyst : Okay. And then just last question and then I'll turn it over to any of the other callers. I don't want to monopolize. But your Kuka JV from your original monetization of that where you sold a little over 50% for EUR65 million, it's grown considerably. Could you give us an update on that? Is there -- as a shareholder, I would love to see you monetize that and help unlock the value for Natuzzi shareholders. Can you give us an update on how it's doing? And if you're open to exploring alternatives or if you've already engaged?

Question: David Kanen - Kanen Wealth Management LLC - Analyst : Thank you.

Question: David Kanen - Kanen Wealth Management LLC - Analyst : Thank you.

Question: Robert Marcin - Penn Capital - Analyst : Hello, gentlemen. Robert Marcin from Penn Capital. Congratulations on navigating a very difficult period with COVID in this explosive recovery I'm looking at a lot of talent on this screen right now. And yet -- and I'm looking at a great product with a phenomenal brand name. And yet, the only thing that's consistent has been the lack of profitability of the business. It's been good times or bad, high rates or low rates, good economy or bad, the company has been consistently unprofitable. So we hope things are going to change. And could you potentially give us a set of revenue and margin targets for the intermediate term that management would be held accountable for and that shareholders can use as a benchmark to set a price target on the business, should these be achieved? Thank you.

Question: Robert Marcin - Penn Capital - Analyst : Thank you very much. I will interject, Antonio, that one-quarter or one-year outlook is guidance. And many companies do not provide short-term guidance because of the moving parts, but they do on their website for the presentation with financial intermediate or longer-term financial targets. They are two very different things, sir.

Question: Robert Marcin - Penn Capital - Analyst : When in the business -- pardon me. When the business is up and running well and humming, I think it would behoove the Board and management to put something like that out.

Question: Greg Cohen - Rambleside Real Estate Capital - Analyst : Hey, guys. Can you hear me?

Question: Greg Cohen - Rambleside Real Estate Capital - Analyst : Hi. My question is around e-commerce. It looks like it was recently launched. Can you guys give some color on how large that opportunity can be? And what, if anything, we're doing to promote it? Thank you.