De'Longhi S.p.A. (DLG) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call Conference operator. Welcome, and thank you for joining the De'Longhi's First Quarter 2026 Consolidated Results. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Fabio de' Longhi, Chief Executive Officer of De'Longhi. Please go ahead, sir.

Thank you. Good afternoon, ladies and gentlemen, and thank you for joining the De'Longhi Group conference call for our first quarter 2026 results. With me on the call today are Nicola Serafin, Group General Manager; Stefano Biella, CFO; and Samuele Chiodetto Investor Relations Director, M&A Manager. I'm pleased to announce that we have consolidated our recent excellent results with a solid start to the year driven by exceptional momentum in the Professional Division and positive organic growth in the Household segment. Despite the market environment characterized by volatility and geopolitical uncertainty, we remain fully confident in the group's agility and responsiveness, which have allowed us to navigate recent challenges effectively. The resilience is reflected in our consistent track record marked by significant revenue expansion and a steady improvement in profitability. Moreover, over the years, we've been able to further strengthen our global leadership company by successfully capitalizing on the structural growth, premiumization of both the home and professional markets, while simultaneously seizing strategic opportunities in key categories such as nutrition and ironing. Starting with the outlook for the Professional Division, the strategic combination of La Marzocco and Eversys continue to generate exceptional value, they're delivering outstanding performance and increasingly reaffirming the rationale behind the deal. As the market shifts towards premiumization and specialty coffee, our portfolio is perfectly aligned to capture these structural trends. This positioning has enabled the Professional Division to maintain its present momentum, steadily delivering revenue growth in excess of 40% for 3 consecutive quarters, all while sustaining superior profitability. During the quarter, Eversys completed the acquisition of its Dutch distributor, a strategic move designed to elevate service standards and provide an integrated experience for our local partners and customers. This initiative aligns with evolving European coffee landscape, where Eversys and La Marzocco remain key players and where we aim to accelerate regional growth through an expanded direct presence. The Household division delivered positive organic growth for the period, with trends improving after the absorption of excess market inventory during the opening weeks of the year. Excluding January, the division would have achieved a solid mid-single-digit growth at constant exchange rates, driven by positive performance across coffee and nutrition categories. Over recent quarters, the new social media hub has become a strategic pillar of consumer engagement, ensuring maximum impact for all communication initiatives and supporting all marketing activities through an integrated, paid and earned media ecosystem that is driving significant engagement across the entire consumer journey. Our participation in Milan Design Week offered an excellent opportunity to execute this strategy, expanding our reach and deepening the connection between the coffee industry and the world of design and lifestyle. The smallest coffee shop at home in a regional collaboration with miniaturist that Simon Weisse transformed the 5 De'Longhi machines into iconic coffee shops from all around the globe, from Paris to Tokyo. The results of over 1,500 hours of meticulous craftsmanship. This activation captured global attention, turning the miniature coffee pop-up into a viral media moment with a combined reach of over 12 million people. Now let me focus on the results. On the first quarter of 2026, the group growth at constant exchange rates was broad-based across all geographic regions with a significant contribution from the Americas and Asia Pacific. In more details, Europe recorded a 1.4% increase in revenue during the period. The Professional division achieved a double-digit growth, while the Household segment was essentially flat. Within the latter, stronger expansion in markets such as Poland, Benelux and the Iberian Peninsula, offset weakness in some areas such as Germany, which were impacted by the reabsorption of market excess inventory during the period. The EMEA region, Middle East, India and Africa, achieved 4.2% growth at constant exchange rates, driven by significant expansion in the Professional Division. Conversely, the Household division recorded a decline in revenue, weighted down by the market on favorable exchange rate effect and macroeconomic challenges in the Gulf countries. The Americas region recorded 18.2% growth at constant exchange rates, supported by the robust performance of the Professional Division and a mid-single-digit organic growth of the Household segment. Regarding the latter, the excellent performance of the coffee machines more than offset the contraction of the blended market. Finally, the Asia Pacific region achieved an 8.7% increase in revenue despite a significant negative currency impact, plus 17.2% at constant exchange rates. Specifically, the Professional Division delivered an excellent performance across nearly the entire region while the Household segment maintained a growth trend at constant exchange rates, consolidating the strong results of the previous year. The Professional Division demonstrate broad-based growth with a widespread double-digit momentum across our key geographies and primary product categories, recording EUR 139 million of sales, a 40% increase compared to 2025. The premium positioning of Eversys and La Marzocco supported by a robust product portfolio enabled the group to capitalize effectively on the special premiumization trend, meeting the demands of consumers increasingly focused on premium quality. Reflecting this, La Marzocco Consumer segment continues to drive significant expansion. Increased volumes, combined with premium positioning allow the division to protect and strengthen profitability for both brands. The Household Division achieved a turnover of EUR 641 million, representing a slight decline of 2.4% on a reported basis but an increase of 0.8% at constant exchange rates. Home Coffee, recorded low single-digit growth at constant exchange rates, driven by manual machines and espresso products alongside significant expansion in coffee accessories. Nutrition, the low single-digit contraction at constant exchange rates is mainly attributable to destocking activity recorded in January. Net of this effect, the segment showed a positive trend in the subsequent months. Conversely, Kenwood brand kitchen appliances saw a significant acceleration in performance compared to the same period last year. Other categories, the Comfort segment, portable heating and air conditioning recorded mid- to high single-digit growth year-on-year, while Home Care maintained moderate growth at constant exchange rates. The first quarter of 2026 delivered a further improvement in the group margins, driven by volume growth and a favorable sales mix underpinned by the excellent performance of the Professional segment. In details in the quarter, adjusted EBITDA amounted to EUR 126 million or 16.2% of revenues, an improvement of 80 basis points compared to the previous year. This improvement was mainly supported by strong growth of the Professional division, which carries margin above the group average. As for the Household Division, the price/mix contribution was slightly negative due to selective price repositioning aimed at increasing market support, while investment in media and communication remained stable as a percentage of total group sales. During the quarter, we experienced a slightly negative impact from additional tariffs in the U.S. market, approximately EUR 4 million, while we're not in effect during the previous year. As of March 31, 2026, the group net financial position was EUR 721 million, a significant improvement over the EUR 483 million reported in the prior year period. Regarding cash generation, free cash flow before dividends, share buyback and acquisitions was a negative EUR 44 million for the quarter. This was driven by the typical seasonality in net working capital, specifically the restocking of inventory following sales in quarter 4. On a trailing 12-month basis, free cash flow before dividends, share buybacks and acquisitions reached EUR 464 million, a remarkable achievement that allows us to maintain a flexible and attractive capital allocation strategy. In summary, our first quarter results reinforce our long-term trajectory of growth and margin expansion, overcoming market uncertainty. While the geographical landscape requires us to remain vigilant regarding potential inflationary pressures on cost and consumer behavior, underlying business trends have remained resilient over the recent months. And we remain focused on rigorous cost management to navigate these external factors. Regarding the Professional segment, we are leveraging our strong and unique proposition to expand the consumer market and tackle the out-of-home area, achieving above-market results. To drive this performance, we are further strengthening our product portfolio, highlighted by the recent launches of Eversys Plus, which has allowed us to target the convenience store and coffee service segments and the introduction of any new colors in the La Marzocco Home Line, including green, blue and brushed steel. We also continue our extensive communication activities and participation in trade shows and lifestyle events, further strengthening engagement with our community and partners. On the Household front, we're currently benefiting from recent launches such as Eletta will turn in coffee, then large portfolio of Kenwood food preparation and Braun's ironing. We are advancing our new product launches designed to align with evolving consumer desires and investing in strategic marketing campaigns to draw global attention to our brands, supported by an integrated social media strategy. Furthermore, we're driving the group towards a technological frontier by intensifying investment in key strategic projects across various fronts as presented in the business plan. These include operational excellence, where AI-enabled customer service has moved beyond the first two pilot geographies and is now being prepared for a potential extension -- extended rollout. Talent acquisition with a new social officina in London, scaling up our social media capabilities and digital transformation where we completed the implementation of a global sales force e-commerce platform, which is now fully operational across markets. In light of our progressive improvement during the first quarter confirmed by a favorable start to the second quarter and normalization of exchange rates will reaffirm our full year 2026 forecast. We expect revenue growth at a mid-single-digit rate and an adjusted EBITDA in the range of EUR 640 million to EUR 660 million. We now welcome your questions. Thank you.

[Operator Instructions] The first question is from Niccolo Storer of Kepler Cheuvreux.

Thanks for taking my three questions. The first one is about your guidance. Last time we spoke, you said that your guidance for 2026 did not include any impact from the war in Iran. Now you are confirming basically the numbers but are now this including any impact from the geopolitical chaos we are witnessing? The second question is about margin evolution. I was trying to understand how much of the EBITDA expansion was linked to the professional coffee performance. And in particular, you show in the EBITDA bridge a negative price/mix impact notwithstanding the plus 40 versus plus 1 of professional versus Household. So this probably implies a very negative price/mix on household products, if you can discuss a bit about this. And very last is about the stocking actions that you have mentioned taking place in January. I was wondering if this were basically affecting both the food preparation products and coffee or if they were just limited to food preparation products.

Your question, first one about the guidance, yes, we confirm the guidance. We -- in our guidance, we take into account what's happening in the graph, but we expect a rather quick solution still. I mean we think that if the solution will happen in, let's say, I don't want to say next month, but in the next 2 or 3 months, we are able to confirm our year-end guidance. Obviously, if decision gets worse, then we have to reconsider. But for the moment, we say -- we think that we can confirm guidance as said. The second is -- yes, before moving to the second question, I think that the trends in the underlying business have remained resilient after January. So we -- I say we -- January was a bit tougher. We spoke about overstocking at trade level, in particular, I think that the trend is getting better and also for the household division, in particular, for the Household division. And also April will be positive for the Household division. So we think that we are back on track after a weak January, and we are back on track to meet our year-end goals. With regards to margin, I would say that, yes, the growth in the expansion of margin is thanks to Professional. Margins were a bit weaker on Household. I would say that almost entirely due to the tariffs that were not in place last year in the first quarter and maybe slightly on a slight weakness in January, in particular, on Espresso, which was a bit overstocked. But again, it's back to growth in the following months. And just to summarize what maybe I've already touched on in the first two questions. Stock probably has almost normalized. So now we feel comfortable that selling sell-out will more be aligned in the next months.

The next question is from Isacco Brambilla, Mediobanca.

Two questions on my side, the first one is on Americas under a geographical standpoint, I would say the bright spot of the reporting, could you give us a bit more color on the drivers of the strong organic performance between volumes and prices? Second question is on Household's coffee. We're not used to see flattish trends for this segment. Could you help us better understand the underlying demand trends in fully auto machines and which are the drivers of the, say, temporary slowdown whether this is a theme of timing of product launches, a comparison basis or maybe any sign of down trading by customers you are recording across the market?

Thank you, Isacco, for the question. USA was a strong at Professional, very strong professional. Quite strong coffee for Household and negative, unfortunately, on Nutrition for NutriBullet, which has been obviously offsetting the positives of Household Coffee. I don't know, Nicola, if you want to add maybe some color around the U.S. market, in particular, maybe with coffee and...

The coffee trend overall in the -- also in the U.S. in the beginning of the year, there was a bit of overstock. So the trend also in January was also for the U.S. a bit, let's say, below expectation. But overall, in the quarter, the overall coffee was positive while the situation in Nutrition in the market, in particular in blending for [indiscernible] is still weaker. And obviously, this is a bit of putting in a negative trend overall, the U.S. for the Household slightly negative, while it's super positive for the Professional. But overall, the trend is a bit reversing as we speak. So it's becoming stronger for coffee and its normalizing also in nutrition that current trading. So we have a not positive outlook. Obviously, we are looking and a lot can depend on the next tax policy because as we speak, this is still an element to consider.

So in simple words it was about -- coffee, which was -- which has not grown for the first time in quarter 1, I would say if we exclude January for a moment, February and March were pretty good with a high single-digit growth also for Household coffee. I think that January has been more like a tail to last year, at the end of last year rather than signaling what is the potential trend for 2026. I think [indiscernible], we had a pretty good year and a very strong year-end last year. Black Friday was strong, indicating a strong also maybe end of December. In the end of December, say, sell-out was pretty weak and resulting in higher inventory that we have now managed in January. So I would say that, yes -- visually, yes, there is no growth in coffee. If we go more, we dig in, we understand better the underlying trends with destocking and then, let's say, sell-in, I would say, I feel more comfortable from what I'm seeing in January and February -- sorry, February and March and now also being confirmed by the sales results in April.

Next question is from Andrea Bonfa of Banca Akros.

Fabio, congratulations again for the results. Some of my questions have actually been answered. Maybe if I can start in to further begin on the Professional coffee performance. It seems that you mentioned double-digit growth in Europe, but looking at the 40%, does it take that most of the growth was from the U.S. or the rest of the world? If you can elaborate on that. And if you also can comment on the training environment in this very precise moment from a geographical standpoint. We -- I presume that the Gulf countries are negative, if you can elaborate more on the macro region. Thank you very much.

Yes. Okay. Professional actually was strong with the growth in Europe also around 30% with MEA above close to 50% in the Americas in the area of just below 40%. So I would say that the Professional division performance has been really super strong across all regions across all brands and also strong in traditional bar equipment and home consumer equipment. So second question is about the impact of the war -- second part of the question. Yes, probably MEA, now we need to consider that will be slower in the next months. But again, as I said, the region is about 6%, but more specifically, the Gulf countries represent only 3% of the total sales for the group.

And if I may, a follow-up question on the Professional, can you comment on the performance between overseas and La Marzocco? Was it more one of the two? Or were they almost [indiscernible] from this standpoint?

This year, I would say that both performed extremely well, both. So they're pretty, pretty aligned. Maybe -- I would say maybe Eversys is a bit stronger. Maybe you -- we have to also recall that last year -- I mean, two years ago, it was a weaker year for Eversys and the first quarter of last year was still -- was improving, but still below expected results. This year, so probably Eversys had a better performance also because it has an easier comparison versus La Marzocco, which has been expanding sales more consistently across the years and the quarters since, say, the business combination.

The next question is from Alessandro Cecchini, Equita.

The first one actually is on the consumer business of La Marzocco. So in my idea, it's roughly 30%, maybe I am wrong, but it could be, I guess, 30% of La Marzocco sales more or less. So going forward, so not just this year, do you have maybe internal plans so -- which can be the size of this business can double, can trouble. So just to understand your internal expectation for this part of the business that is pretty new for La Marzocco, but is extremely supportive. This is my first question. My second question is instead about M&A. You know that you are -- I mean excluding any kind of consideration for your internal Professional business. But looking around, you see other opportunities in the Professional business, also given the sizable cash that you have in your balance sheet? My third question is you said about the product launches in Household Coffee, if you see an acceleration over the coming quarters? Finally, it's a small part of the business, but over the last two years was very negative. And at least in Italy, it seems sunny. So probably if you can elaborate a little bit more on the air conditioning business that was, I mean, for two years, very negative. And so this year, probably you have the restocking effect.

Yes. Okay. Thank you, Alessandro. First question on consumer. Long term, I believe that consumer for La Marzocco should become more relevant, more important and the largest part of the business. At the moment, as you are correct in referring to is 30% is more or less 1/3 of the La Marzocco business is home consumer. I was expecting a stronger also growth for this year in consumer machines at La Marzocco, which is happening, which is happening. But also professional is so strong that for probably this year, let's say, the percentage of, say, the incidence of consumer on total La Marzocco sales won't change just because it's an exceptional performance also within the bar equipment. But then in the long run, I expect that the bar equipment should normalize and progressively with La Marzocco becoming more visible to consumers, the marketing initiatives, the events, the social media campaigns and activities will support a strong acceleration of Household -- La Marzocco, which is already happening, but will be more visible and will probably -- the trend -- let's say, the trend will rebalance, let's say, the weight of home on total La Marzocco sales in going in the direction that we were hoping where Home becomes more relevant than Professional. Having said so, M&A, yes, professional, there are some areas where we can perform M&A. Our priority probably will go now to see if there is an opportunity to buy out the minorities. I think that this is probably an area where we feel more comfortable with the performance of professional. And we know well the companies. The companies are doing extremely well. So probably this is an area where we can start focusing more. And obviously looking into other alternatives in professional. There are product segments where we are not present at the moment, which are potential for us. And the third area where we are looking at is geographic expansion. Probably at the moment, the U.S. market is very difficult because of the tariffs and all the complexity that has been caused by the tariffs and the pressure on margin. But this might result in opportunities that we want to look very serious. So I would say 3 areas: minorities, either acquisition in professional and North America, again, in household more specifically. With regard to household coffee and new products, we have a number of new products. And Nicola, maybe you can want to handle and talk about what are the innovation for the year.

Yes. In terms of products, definitely in coffee, we have an unprecedented pipeline of new launches for the year. We have 4 new model of fully automatics. One is just came in the market. It was launched in April that is our premium model Ultra metal -- and then we have 3 launches that will happen across the next month. It will be Magnifica Duo, Rivelia starting, a second model of the Ultra range. And more is coming also in the first half of next year. Definitely, we have a robust pipeline, probably one of the strongest ever. That is backed also from a couple of new launches also in the range of bean-to-cup more traditional machine. We have La Specialista Duo that we launched across the summer. And we have another compact solution of bean that will come by late this year, early next year. About the air conditioning trend, obviously, we need to acknowledge that air conditioning in this moment is more or less 3% of our business. But definitely, we have a favorable outlook with definitely the last 2 years has been the worst year probably ever for the category. So we have expectation for a double-digit growth of the category, but we need also to knowledge that is on the base of 3% of impact in our total revenue.

Yes, because we have decided that we want to limit the risk in air conditioning. So we consider this segment as segment as we want to maintain and improve, but never have an excess risk on the growth, which may result in negative years or inventory buildup if the market will not absorb the product.

As we speak, obviously, we do not have a sales potential higher than the stock that we have already own at this point of time. By the way, the presales of it has been, let's say, good with a good trend. As we speak, Europe is a bit chilled cooled down. So this is not definite February. Let's see how it will be June.

Okay. Finally, if I may, on Eversys, probably is my perception, but just asking, it seems to me that the growth of the business is also due to an enlargement of the customer base probably to bigger change to a new league. I mean, for overseas that probably was not the case last year or two years ago. So just to know if is also this part of the game, so to have also an additional client base that is more change, so a larger business.

Well, the growth of Eversys is coming from expansion of our Chinese business, particularly with the high-end stores where equipment with high productivity is required. New customers in Europe, in both in, let's say, food chains or coffee chains, the Blank Street coffee in London or in Europe or in North America. We are now also expanding to also convenience stores. We were already present in convenience store when 7-Eleven in the past, but now we are expanding with a very important customer across Europe. And then also the new products, which are Legacy Plus. These products are more, let's say, designed for the OCS and these convenience stores. So we expect also this product to help keep growing in this segment. And then obviously, we are doing very well in America with more chains. I would say that we were sort of new kid in the block. I mean, the company was founded about 12 years ago. It was very small when we acquired the first stake and is starting now to be more visible. And therefore, we are winning new customers, thanks to the successful deployment in key customers and the great delivery in terms of quality in the cup and the robustness and let's say, also the service capabilities, thanks to our connectivity, which are also fundamental in order to keep down the servicing cost and the maintenance cost for the companies.

Next question is from [ Luca Orsini, Orsa ].

Just have a couple of question. The first one is on the price/mix going forward, just thinking about this year, do you expect the price/mix to remain negative throughout the year? Or do you think that there will be an improvement in the price mix effect? And if yes or no, also why, of course, which is as important as the answer. And the second thing, you're talking about acquisition in Professional Coffee. Are you more looking in the area of the -- in the La Marzocco camp or you're more looking in the camp of the fully automatic Eversys to expand? Which range do you think deserves to be expanded with another brand and another company?

The first question -- sorry, first question is price/mix and Nicola may be -- but my feeling is that maybe we will continue to see promotional initiatives in key moments of the year. But I think that mix will be positive. So I expect maybe more pressure in certain time of the year, but we think -- I think that we will continue to grow faster with the fully automates with our coffee machines with good mix, also Braun, certain, Ironing systems, maybe will be a bit sharper in certain time of the year in the very promotional times. But in general, I don't see a negative trend on price/mix or just no...

We have an outlook with a positive category mix, so fully outdoor and coffee and also kitchen machine, as we speak, has been pretty brown. So we have a category brown also with Ironing. So we have a positive category mix. And also within the category, the launches that I've mentioned before are all launches that are going in the upper quartile of our range. So this is where we are pushing to bring a positive mix and also pricing -- a bit of pricing ability. Said that the competitive landscape and the promotional windows in the market are definitely expanding. When we're speaking of Prime Day, it is not anymore Prime Day of Amazon is becoming a retailer and an industry Prime Day. So there is a bit of trade-off on this. But we are acting with countermeasures in terms of category mix and product within the category to have a favorable mix to offset this pricing effect. That is more specific on for the same SKUs.