Good afternoon, this is the conference operator. Welcome, and thank you for joining the FILA Group 9 Month 2025 Results Web Call. All participants are in listen-only mode, and after the presentation, there will be a Q&A session. At this time, I would like to turn the conference over to Massimo Candela, CEO. Please go ahead. Good afternoon, and welcome to FILA Call. The year-to-date results as of the end of September, in absolute value, they are not brilliant. While in relative value, I have to say that we are pretty satisfied with the way we have managed the storm that we have experienced starting February 2025. Unfortunately, we can talk only a little bit about business and a lot about the macroeconomical situation. Let me remind you that when we started the year, we had an exchange rate euro/dollar around 1.03, 1.04. Suddenly, we experienced a strong devaluation of the dollar. Until December, not one single bank was expecting such a devaluation. No need to mention the problem of the tariffs. We will enter into details later. For a company that is exposed, for a group that is exposed for more than 50% of its business in the United States, the way tariffs have been managed, and the unpredictable way, I would add, because every week, every month, the tariffs have changed, has created unbelievable instability in our supply chain. The situation in Mexico. Mexico has been strongly influenced by U.S. trade policy, forcing Mexico to increase substantially the tariffs with the Chinese product, also in our business. This has generated an uncontrolled, unprecedented amount of illegal products. Unfortunately, during our back-to-school, so if you recall, probably you remember that until June, so until the first half, Mexico was running ahead last year. Then the market has been flooded by illegal imports. This situation has been discovered by the government just recently, I would say, during the month of October. Finally, the government is stopping these illegal imports. The damage on the third quarter of a Mexican company has been great. Fortunately, in Europe, the situation is more stable and slightly better than what we were expecting. Last but not least, India just announced an extremely strong first half, because for them, the end of September represents the first half of the year, because they close the balance sheet at the end of March, showing another growth in the magnitude of 25%. Despite this incredible difficult situation, in which, let me remember that all our supply chain has been dismounted and recreated and dismounted again for several times, with the tariffs coming back and forth from Mexico, March, April, and then from India, back and forth, and then up in August to 50%, and then with Canada, back and forth. This situation has generated so far up to EUR 9 million unbudgeted cost. Just this should explain the difference versus the forecast. Tariff means cash, cash deposited in the customs as soon as the product arrives, touches the United States. Also, this explains the magnitude of our cash generation that now still we consider very good, but in the low end of the band that we have anticipated for the year 2025. I'm not hesitant saying that we have done miracles to reach these results. Before moving to numbers, I have to confirm that we have different sources telling us the situation is little by little going back to ordinary course of business. We do expect not in 2025, the last quarter will be in line with the rest of the year. We are quite optimistic for the year 2026, because we see the things little by little going back to a normal situation. I ask Christian to anticipate some of the main numbers of our first nine months, and then I will wait for the questions. Thank you, Christian. Thanks, Massimo. Welcome. Let's start with a brief overview of our main financial KPI for the first nine months of 2025. I will now draw your attention to slide number seven, where we illustrate the core business sales. In the first nine months of 2025, core business sales decreased by 3.6% on comparable forex basis. The main currency effect was due to U.S. dollar and Mexican peso weakness. These results came from lower consumer demand and reduced government funding for schools in the U.S. and U.K. Central and South America posted a decline quickly due to the negative performance in Mexico, which suffered the stronger competition from illegal imported school products, now under further restriction from Mexican authority. In this quarter, the positive news is Europe up 2.4% quarter 2025, with a positive performance in France, which benefited from commercial reorganization. Let's move to Group EBITDA in slide 8. Adjusted EBITDA at EUR 94.2 million, degraded by 4% on comparable forex and tariff basis. That said, it is important to underline, EBITDA margin was broadly in line with 2024 at 24%, supported by ongoing operational efficiencies. On slide 11, we highlight the development of free cash flow. Free cash flow to equity stood at negative EUR 32.3 million versus EUR 0.1 million in nine months 2024. This reflects the working capital assumption, including EUR 8 million of tariff-related effects and EUR 3.1 million for the closure of production site in China. Free cash flow to equity reflects also EUR 12 million of CapEx and EUR 3.9 million negative forex impact. On the other hand, we underline a significant reduction in net interest expenses of EUR 6.2 million, which reflects the net debt reduction and better working capital management. I will take the opportunity to make a couple of comments on our outlook for year-end. Firstly, we expect a free cash flow to equity in the region of EUR 40 million as for year-end. This is remarkable given the continued macroeconomic instability with respect to the currency, tariff, and government fund reduction for the school, especially in the U.S.A., which is expected to recover in 2026. Looking ahead, the new tariff policy in the U.S.A. may represent positive tailwinds thanks to the significant geographical diversification of FILA production footprint and less competition from the other U.S.A. players whose products are mainly made in countries strongly affected by tariff increases. Thank you for your attention, and we are ready to take your questions. Thank you. We will now begin the question and answer session. To enter the Q4 questions, please click on the Q&A icon on the left side of your screen. When announced, please click Continue on the pop-up window. If you are connected in audio only, please press Star and one on your telephone. The first question is from Isacco Brambilla, Mediobanca. Please go ahead. Hi, good afternoon, everybody. I have three questions. Maybe I go one by one so that everything is more clear. First one is on Latin America and Mexico. This year has been challenging. Reading from the press release and from your statement, Massimo, looks like probably the worst is behind, which is the timing we should keep in mind for seeing an improvement in the performance of the region, hopefully coming back to positive growth. Is 2026 already a year in which you see growth from this area? Good afternoon, Isacco. The answer is simple and not simple. I mean, we have now seen that the customs started to completely block the illegal imports, which is creating clearly on the ground, on the floor. We see these products start to end. They are not little by little, they are not anymore available to the final consumer. If government will keep their promises, because we are in regular contact, all the associations represented by all Mexican manufacturers, plus the main distributor in Mexico, have met with the ministry in Mexico. They guaranteed us they will watch carefully the border situation, because this regards many other businesses. As you know, China is flooding the entire world, not only Mexico. This is a problem for Europe and for many other countries. In Mexico, this has become illegal because they do not pay the duty. We think that based on the actual situation, we are going to see a normal 2026, because the effect of this product little by little is going to expire. This is what we see today. We are dealing with Mexico. It is a very interesting country from the business point of view. We talk about 34 million kids entering the school every year. We can see a regular rate of birth, which is very important. The government seems to get along with Trump policies, and Trump has been very clear, if you want to have a trade deal with the United States, you have to stop China entry. Let me remind you that in Mexico, as FILA in Mexico represents, sorry, respects completely the USMCA deal agreement, it is compliant. We do not pay tariffs when we export into the United States. Hopefully, we are not going to experience the same problem that we have experienced in 2025. The expectations for 2026 are positive. Fine. Okay, moving a bit northerner, looking at the U.S., can you give us a sense of how inventories are at your customers and, generally speaking, how the market has taken price increases that you have adopted and, I guess, also some of your competitors in the past month? The inventory is at the lowest historical level, because customers have so much uncertainty that they have so much uncertainty from a different point of view. We are seeing unemployment rate growing. It's unclear the full effect of the inflation and the impact this will have. You know that statistics have not been available in the last 40 plus days due to the shutdown. Many customers, due to unpredictable tariffs, have decided to reduce the investment in our business. The inventory is low. We are receiving in the last, let's say, two weeks, some good news. We have seen that a new trade deal has been signed with China. We have confirmation from official sources that a trade deal with India is ready to be announced, even if it will be effective for the sources I have from February. It will not be immediate. With Mexico, the situation seems stable thanks to the war Mexico is building up against Chinese imports. Last but not least, the school business. If we analyze in detail our business, 100% of the negative numbers we have in the United States, which is something around 8-9% versus last year, 100% is related to school supplies. What happened is that after COVID, the budget for schools has been increased, was more generous. Unfortunately, schools have invested a lot in overhead, in salaries, in consultancies, and so on. This has been suddenly cut overnight by Trump in the months of February and March. The situation has been extremely unstable, while we have clear information that for our product, the situation will go back to normal. Next year, we will see normal consumption, while this cut in budget will be dedicated more to overhead, again, to salaries that were born during the post-COVID period. All in all, plus the normalization with India that for us represents now the most important source of products, and this kind of normalization of tariffs, because you can see, except China, the rest of the world is affected by 15%, more or less, we think that we will go back to normal course of business. Thus, we are positive for 2026. Okay, perfect. Last question. Last question is on India. Last week, you were anticipating some interesting projects also on the seven side, on the future seven side of the business. In the meanwhile, we have seen some articles out on speculating a bit on the future of FILA and DOMS. Generally speaking, just wanted to hear your thoughts on the, say, partnership between the two companies and the structures of the two listed vehicles. Yeah. Yeah, I also read the article because I was not involved. I think that the timing, it's really a bit nonsense, because just a couple of days before, we announced a very important project in India with the agreement of DOMS, so of the CEO of DOMS. We all consider the JV in India for backpacks and for wallets extremely promising. The market is strongly growing. It's strongly demanding backpack. We are going to come in the market in the same way we came with DOMS, so with innovative range, innovative material, innovative design, innovative patents. We are all extremely positive in the future results of DOMS seven combination in India. In order to give you a more precise answer, DOMS for FILA is an asset. The family that represents 44% in DOMS and myself, that I represent 40% interest in FILA and a little bit more in voting rights. We have a very industrial soul. We always act with medium-long-term strategies. The moment in which we see the strategy to lose ground for whatever reason, of course, we will enjoy and we will liquidate DOMS participation. As of now, I think the news that came out are a counter sense, because we just announced a new joint venture with really great hopes of being successful. We are just enjoying, because if it's true what we read on the newspaper, that the new tariff agreement between the U.S.A. and India will be 15%, this will make India extremely competitive against China, which will allow us to become more aggressive in the U.S. market. I think that to dispose the share of DOMS is a counter sense. The day that the strategy will not be any more consistent, for sure, we will dispose the share of DOMS. Thanks, Massimo. The next question is from Nicolas Sorer of Kepler. Please go ahead. Good afternoon. Thanks for taking my questions. The first one is on cost savings measures that you've been implementing. I see that EBITDA margin in both the U.S. and Europe has remained overall stable in Q3 in particular. Focusing on Q3, if you can explain which actions you have undertaken or if you have had any other sort of tailwinds supporting margin stability. The second one is on what to expect in Q4, in particular for North America in relation to pricing. Are we going to see price increases to counter tariffs? Are we going to see any impact from shutdown on demand? Looking ahead to 2026, did I understand well that you are expecting a cut to federal budget to shift from, let's say, stationery items to other items? You can have more, let's say, or people could have more funds available to purchase your products. Last question is on below EBIT items, in particular, all the financial costs that we see between EBIT and price-to-cost profit. The implied figure for Q3 is extremely low. If my math is right, we are talking about EUR 3 million versus cumulated EUR 25 million in H1. If you can detail a little bit more on how this number comes out, putting together all the different items which are forming it, so interest expenses, the contribution from DOMS, effects, and whatever is in this line. Thank you. Luca, can you answer question number one, please? Christian? Plan of reorganizations within the group. In this period of time, we have closed already some plans and downsized others. These are the major projects that we accomplished to have a slimmer group in terms of structure, in terms of fixed cost. In addition, there are many other minor projects both in terms of reorganization or in terms of OPEX cost reduction. You can see in this first nine months, CapEx were being higher compared to last year. There are parts of the CapEx which are related to machine or tool dumping. Others are intended to insert some production or to have more efficient machines to have a lower cost. It is a combination between extraordinary reorganization and ongoing projects to finish, because it is a never-ending story to have as low as possible help the EBITDA margin to stay at the level we targeted. Nicolas, thanks for your question related to financial impact. Okay. As you see it correctly, the main items that impacted this line are dividend of DOMS that happened in Q3 and that do not appear in the before closing. The FAEs are stable. The net amount in Q2 is more or less the same in Q3. Actually, we have not an impact. We have an increase of the net results of DOMS, roughly for EUR 500,000, more or less. The lower impact of the interest between Q3 and Q2. The other one, the positive interest on deposit of USC. They are the main effect that realized these good results for our net financial expense in Q3. As you are not. How was it? was it? Sorry. How big was the dividend from DOMS? EUR 500,000. 500,000. For you. Okay. Thank you. Okay. Concerning question number two, Nicolas. Let me repeat. As per our sources, the trade deal with India is a deal done. It is just a matter of time. We are building up our budget based on a 15% tariff. If we put together the situation with Mexico, with India, and with China for 2026 in North America, we are not going to increase prices, which is good news. Our supply chain shows once more to be extremely efficient. Concerning 2025, in order to partially compensate the tariffs, we have increased prices. We have announced the prices as of month of July, but those price increases took into effect around the month of September. The year has a limited positive effect. This allows you to understand how we have been able to keep in percentage the EBITDA, which I think has been a tremendous achievement with this instability, with this weak dollar, and with these tariffs in place. For 2026, we do not expect price increase. Last part of your question, what do we expect from the fourth quarter? We do not expect anything special. As of now, the year is going towards the end in a very normal way. I do not expect any surprise compared to the actual nine months. It is a very normal fourth quarter. Okay. Thank you. The next question is from Alessandro Cecchini of Equita. Thank you. Thank you to everybody. My first question, actually, it's still on the North American market. It seems to me that you are performing over the year well in terms of school products like pencils, like these products, but probably construction paper is not so great this year. What I would like to understand is, by assuming 15% of tariff in the U.S., I would like to understand what is your strategy in terms of maybe new products in the market in the U.S., new categories. In order to revamp the business and maybe to add some new merchandise, some new stuff in order to, I mean, to prop up, to support top-line growth in 2026. If you can elaborate a little bit more on this, this is my first question. Thank you. Thank you, Alessandro. The problem of being an entrepreneur with a president like Trump is that, unfortunately, the way he managed the trade deal created, unfortunately, so much instability that it's difficult to perform business. In this case, I have to tell you that 2026, as every year since the beginning of stationery business, you finalize the great majority of the agreement with customers during the month of September. The shelf is mainly decided by customers during the month of September, where the situation was 100% tariffs with China and 50% tariffs with India. What we did, and I was trying to explain to you why we were under serious difficulties, is that we have submerged Mexico with new products, with working capital, with new machines in order to offset the 100% from China and the 50% from India. We have not budgeted almost anything from India because we could not bet and then work with negative margins with India. We have postponed to 2027 the launch of DOMS range that looks very promising, but with 15% very promising, but with 50% cannot be sold in a profitable way. While all our supply chain branded FILA or Dixon, does not matter, United States is Dixon, the supply chain will restart work as soon as we are going to have confirmation that the tariffs will go back to 50%. Again, we know for sure that the deal is done, but it will not be in place until February. This is the reason why we took the decision to calculate our cost based on the trade agreement found, but we cannot launch new products. We cannot launch DOMS range because there is no visibility on the future with this president. I was mentioning the problem of Mexico because the absorption we are having in working capital is because we are moving raw material, working process, carbon boxes, and machines around the world depending on the announcement of one tariff or the other tariff. As we have a peak season that starts from the end of April and ends by the end of June, the time that we have available is very limited. We need to take a decision now because December will be already too late. As of now, we have some certainty related to China tariffs. We have some certainty related to Mexican tariffs. In India, we are going to stop, except we have parked some product in Canada waiting for new tariffs from India. We are going to keep off the production in India until the announcement of the new tariff. 2026, we cannot expect a strong growth in top line, except that school will go back to normal business. Retailer, even this year, has given us a very good contribution, Amazon too. We go back to a normal year, waiting 2027 for a stronger growth due to new product introduction. Okay. Many thanks. Actually, maybe I didn't understand well the move between stationery to other stuff in terms of budget cuts. Can you maybe rephrase it a little bit on this? Yeah. Okay. Yeah. It works like this. After COVID, there was a very generous budget for school, you probably recall. The reason mainly was that for COVID, there was a school shutdown for almost 12 months, if not more. This has accrued extra budget for the schools. The schools, with this extra budget, start spending a lot. From statistics we have available, they spent a lot with salaries and with consultancies and with overhead. With this cut, of course, they could not switch off all these contracts, all these salaries. Schools have to adapt their spending to the new budget. This has hurt heavily our range of products dedicated to school. You were mentioning construction paper. It is correct. This temporarily has impacted our range of product until schools will adjust their spending. We know from the information we get from teachers, from school suppliers, the situation will go back to normal for our product in 2026. As of now, they had to adjust their cost structure to the new budget. This, unfortunately, happened with the decision of the Trump administration in March when he suddenly cut $11 billion of funding. Unfortunately, they needed time to adjust their cost structure. This has temporarily impacted our year 2025. Very, very clear. Another question is about still your relationship with DOMS. I presume that the Bloomberg article was, in some cases, misleading. Are you potentially open to see maybe DOMS shareholders to be part of your group? In order to, I will say, to further strengthen the cooperation between you and DOMS. You have a stake of 26% in DOMS, but I mean, DOMS has not a stake in FILA. It could be an opportunity in the future to strengthen the relationship. Just thinking about this option. Yeah. This question is interesting. I think you are right because I fully respect what Bloomberg has written because, of course, it's meaningful when you have such a great value. It's normal to analyze different options. The facts are that, number one, in the Trump administration, in the future, if there is an interest of an American company in an Indian company or vice versa, there will be an exemption from tariffs. In this moment, only FILA is invested in DOMS, but the United States and India have no cross-participation. This is one element that can influence extraordinary decisions. Number two, DOMS owes to FILA 90% of their export and owes to FILA also what is considered an extremely interesting project with the seven. They explained to me that they definitely want to reinforce the strategic alliance between FILA and DOMS and not to be limited only to the 26%. This opened many scenarios. Frankly speaking, when the newspaper, the company you mentioned, was saying that we were selling DOMS stake, frankly speaking, as of now, it is not absolutely an option, while it is definitely an option, the reinforcement of the relationship, the strategic relationship between the two companies, I underline, also influenced by this new trend, this new, let's say, decision taken by the Trump administration that when there is an interest of an American company with India, there will be exemption in tariffs. There are many moving parts, and what I can tell you is that our Indian partner is happy to consider different options. Okay. Just to understand on this point, so basically, American company is Dixon. So basically, if DOMS has a stake indirectly in FILA, but indirectly to Dixon, they don't pay tariffs. Is something that I understood correctly, or am I missing? No, no. You understood correctly. The problem is that we are working with lawyers. Again, with the Trump administration, nothing is completely clear, but what is happening is that in other businesses, there are American companies. There is one example that you know perfectly: Apple and their phones. They produce in India, and they are exempted. Based on this example, he cannot make a law for Apple. Based on this example, with our lawyer, we are working to understand under what conditions he is exempted from tariffs in the United States. Indirectly via FILA, yes, maybe. Directly DOMS investing in Dixon, maybe. There are several points that are under analysis. As I wanted to respond to your question, the answer is yes. We are studying different scenarios to increase the strategic participation between FILA and DOMS. It does not matter what direction. Okay. It's very clear. And my last is on Europe that, I mean, your performance, organic performance in the third quarter was, I mean, considered the environment very good with plus 2.4%. Last year in the fourth quarter was very weak Europe. So you consider that this kind of trend is sustainable, I mean, also given the easier comparison that you have in the last quarter in Europe? I have to tell you that Europe is doing okay, and this trend continues. We are a little bit more relaxed since we have seen Europe responding pretty well to our new commercial approach. Last but not least, the acquisition of Seven is in Europe. It will have a positive impact in Europe. With all the negative points, we can discuss for hours about Europe. At least stability is kind of a warranty that we have. Seven will add our strength in this new commercial approach. To answer your question, yes, we do expect Europe with a fair, good fourth quarter. Okay. Thank you. Thank you, Mass. The next question is from Niccolò Beretta Zanoni of Banca Akros. Hello. Good evening. Thank you for taking my question. I have just a follow-up on 2026, and you've been very clear in terms of volume, but what can we expect in terms of margin and did I can say? Thank you. In terms of margin, as Massimo said, thanks to our supply chain and the geographical position of the different plants, we have been able to keep already the cost under control for 2025. He already announced low price increases with the very financial results also for 2026. The expectation is to have a stability in margin unless volumes will grow as we are not planning the way. In this case, the overhead assumption will be better and margin will be better. In terms of outlook, we have to say at the moment we have not built the budget for next year. We are just talking about macroeconomical forecasts, but we do expect stability on the margin as well. Thank you. Gentlemen, there are no more questions registered at this time. I'll turn the call back to you for any closing remarks. Hey. Thanks, everybody, for attending this call. Being a Friday, enjoy the weekend. See you next time. Thanks to all. Thank you. Thanks. Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your devices. Thank you.