Natuzzi S.p.A. (NTZ) Earnings Call Transcript & Summary

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Natuzzi 2023 Third Quarter Financial Results Conference Call. As a reminder interested persons can join the conference call by dialing +1 (412) 717-9633, then passcode 392-52103#, in addition to the link already provided to join the video webcast. [Operator Instructions] Joining us today are: Mr. Antonio Achille, Natuzzi's Chief Executive Officer; Mr. Carlo Silvestri, Chief Financial Officer of the Natuzzi Group; Mr. Pasquale Natuzzi, Founder and Executive Chairman; and Mr. Jason Camp, Senior Vice President of Retail for the North American market; and Piero Direnzo, Investor Relations. As a reminder, today's call is being recorded. I'd now like to turn the conference over to Piero. Please go ahead.

Thank you, Kevin, and good day to everyone. Thank you for joining the Natuzzi's conference call for the 2023 third quarter financial results. After a brief introduction, we will give room for a Q&A session. Before proceeding, we would like to advise our listeners that our discussion today could contain certain statements that constitute forward-looking statements under the United States securities laws. Obviously, actual results might differ materially from those in the forward-looking statements because of risks and uncertainties that can affect our results of operations and financial condition. Please refer to our most recent annual report on Form 20-F filing with the SEC for a complete review of those risks. The company assumes no obligation to update or revise any forward-looking matters discussed during today's call. And now I would like to turn the call over to the company's Chief Executive Officer. Please, Antonio.

Thank you, Kevin, and thank you, Piero. Good morning, good afternoon to everyone. I hope our audience from U.S. enjoyed a joyful Thanksgiving last week. So let me brief illustrate the development of this year, focusing on the third quarter. As you have seen, sales in the third quarter have been significantly below what we reported in the last year same period and 15% below what we reported in 2019 that we keep using as a parameter of comparison, given the seasonality of the last cycle. It's still important to detail the difference between 2022 because 2022 benefited for a significant amount equal to EUR 28.3 million from previous quarter backlog. As you will remember, due to the unprecedented spike in demand in the aftermath of the COVID, we struggled as all the industry did in fulfilling the demand. And that resulted in a backlog that during 2022 helped us to keep busy the top line. So if we compare 2023 third quarter with, let's say, a normalized third quarter of 2022, the decrease has been up 15%. The component of our business, which has been clearly more affected, and I will say that is partially because of some clients leaving us but is very much consistent with our strategy, is the unbranded component of our business. As a reminder for those participants that might not know in depth Natuzzi, Natuzzi is now a branded retail group. But historically, it was also producing unbranded products, so brand -- so product which was sold on the floor of large retailer without coming out of the factory with the brand Natuzzi. If we look at the branded company in total, branded and unbranded sales, we closed the third quarter of 2022 at 94% roughly. So I would say almost entirely sales are done under the brand Natuzzi, whereas if we compare the percentage to what happened in the third quarter of 2019, it was at 78%, so almost an increase of 16 percentage points. This is, and I will spot some more, a confirmation that despite the unprecedented times we live, we are not deviating from our long-term strategy, which is to become a branded retail company. Of course, the component of business fully leverage our heritage of 65 years and also carry higher marginality. That's the reason why that is the way -- the direction in which we want to invest. Another important element I would like to flesh out is that since week 29 of this year, we have witnessed a change in that direction in the sense that the weekly order flow, so what we receive in terms of fresh order, has been resulted higher than the previous year 2022. So for 19 weeks in sequence, right now we are closing week 47, we are reporting order flow which is above 2022 or previous period. And that interrupted a cycle of 15 months where the fresh orders were below the same period of the previous year. I think it's too early to say if that is structural, let's say, turning point. But I believe it's encouraging to see that now for 19 weeks, we are reducing that. Another element, which I believe is important, is to testify that the marginality, so our gross margin, has been at 35.4%, which is again above the average over the last 3 years. This comes as a consequence of our restless focus on pricing discipline and cost management, which compensated to a large extent the disadvantage we reported in absorbing the fixed cost with lower volumes because that's absolutely what happened with our factory. The sum of those, let's say, elements of the equation led to a loss, operating loss in the quarter of EUR 1.3 million. which, of course, not what we wanted to achieve. I believe it's still useful to put it in perspective. For instance, that loss of EUR 1.3 million reported achieving EUR 74.9 million in sales compared with a loss of EUR 8.7 million reported in 2019 but with EUR 88.1 million sales. So that means that in 2019, adding EUR 14 million more sales, we were losing EUR 8.7 million. This year, we are losing EUR 1.3 million with EUR 14 million less. So I believe that directionally give you a sense that we are working to strengthen our operating model and to lower our breakeven so that when growth come back, and we are actively working for that and have no doubts that will happen, we will have a better profit on our asset and a better cash conversion. Talking to cash. Also, this quarter has been positive. From the operation, it has been positive by EUR 2.3 million, which compared to a negative cash of EUR 4.2 million of previous year. And this again is a proof that our model is resilient even under extreme circumstance like the one we're witnessing. Resilient is, in a way, self-financing. We will discuss later, but we are not deviating from our long-term strategy. And even in this quarter -- sorry, yes, even in this quarter, we invested EUR 1.8 million in retail and EUR 1 million in restructuring and modernization of our factory, which are basically the long-term priority for us: on one side, enhancing brand retail; on the other side, continuing our restructuring and modernization of our factory. So this is, I would say, the highlight of a quarter where, as everybody in the industry, we are still witnessing a soft demand. I believe the circumstances are very evident, we are, in addition, as you know, unfortunately, which is not only for us but for humankind, we are living this additional humanitarian crisis in the Middle East, which, of course, does not contribute. So how we are equipping ourselves to make sure that Natuzzi, which has 65 years' heritage that's been through a series of [ monumental ] growing or difficult, can continue and get out of this crisis even stronger? As you can imagine, we're really focusing on ensuring resilience and the strength of our balance sheet and our cost structure. We are continuing on the restructuring front. Since 2021, we reduced our working force by 649 units, which compared, just to give a sense of acceleration, with 577 of the past quarter. So in 1 quarter, we let go another 72 people. This I think is important to notice that our net reduction, because in the meantime, we are strengthening our organization. So we are changing the blood. Just to name the last addition, we started a collaboration with a gentleman called Brian Waidelich, which come from Mitchell Gold + Bob Williams, that didn't make it through this crisis but was definitely a very good retailer. And Brian has been managing for this quarter a $90 million business of 14 stores and is now actively collaborated with our Global Retail Division here in the quarter to keep strengthening our approach with retail. So I use this as an example to ensure that we are working to make our business more efficient. But since we deeply believe in the growth and the strengths of our brands, we are, at the same time, investing to uplift competencies. The other area where we have not been decelerating has been the retail front. So we've been opening since the first 9 of the year, 1.9 million square meter of -- sorry, 1.9 million square feet of retail capacity or retail commercial surface. I challenge every one of you to find somebody that during a crisis has the courage to keep investing in this dimension, apart, of course, from players in U.S. that open large box. But I'm talking about traditional retail. As you know, North America is still very central to our strategy. In fact, five new stores, Natuzzi Italia, has been opened, or flagship, which means primary location with surface of 8,000 square feet and above. We inaugurated three new cities, so Atlanta, Houston and San Diego, where we were not present. We opened a really fantastic store in Manhasset. I hope you have a chance to visit it. It is on the Miracle Mile, the one connecting the Hamptons, with a flagship. And we will locate our [ Miami ] stores. In addition, we opened 45 franchising stores. So as I said, focus on cost containment, but at the same time, not de-focusing on what we should be the platform for accelerating growth in the meantime. Another way we are working to increase our investment capacity is the one of dismissing of strategic asset. We have been explicit on those intent in our past calls. We have been further discussing with our Board, which gives us the green light to continue some of those discussions, which are really becoming real. As I mentioned before, and I cannot give you further detail, the nonstrategic asset, which we are considering, this means including High Point, which is a really iconic location with a fantastic heritage designed by Mario Bellini, which is still one of the most famous and respected architects still living, of 1.2 million square feet. Other assets that we might consider selling, including our tannery, Natco, and some fields that we have in [indiscernible]. So that's our ongoing process where there is active discussion with potential buyers. What we will do if those proceedings materialize? Again, a very consistent journey. If that proceeding materialize, two main priorities: retail in core geography, which means especially North America; and accelerating our restructuring. This has been again a discussion with our Board and has been really a consensual decision that, that should be our priority going forward. In closing, I would like to give you three messages that for me are really the key takeaways of this quarter, but I would say more of this year, which is going to the closing, at least from a solar calendar perspective. So the market is still challenging. That is obvious. I think we should be celebrating our capacity of increasing resilience and managing cost because this has been achieved during a period of unsaturated capacity and we achieved higher marginality, which is not obvious, increasing by some 10 percentage points compared to 2019. The second key message for me is that we are not deviating from our long-term strategy, which is focusing on branded retail and consummating the restructuring. And the third point, which again I don't want to over-comment but is encouraging to notice is that from week 29 of this year, we are reporting green numbers versus the same period 2022, which is, I believe, a question that came often in the previous conversation we had together. So let me stop here for questions on this initial part of illustration of third quarter results. Then with Carlo and Piero, we will provide you some more specific aspect on interesting element of our P&L and balance sheet. But let me stop here for initial Q&A.

[Operator Instructions] And we do have a question coming from Dave Kanen from Kanen Wealth Management.

I appreciate you taking the questions. A follow-up on the statement that you made, your focus is on "accelerating the restructuring" and then building out the North American DOS footprint, which makes perfect sense to me. So my question is in order to fund and accelerate that, what do you think the time frame is of the disposal of some of these non-core assets, in particular High Point?

Thank you, David, for your encouragement words and your specific question. So High Point, we are really being carefully in looking at the market. At the moment, we have an ongoing discussion with a potential buyer. And we are entering into due diligence, which is -- we are close to entering due diligence, which is if we then agree on the terms, then a terminating phase of a potential disposal. So High Point is very concrete, the opportunity. Again, as you know better than me, until you have not signed a piece of paper, both parties can decide that it is not the right moment, the right terms to complete it. But we've been going through the full process, including the approval of our Board for the dismissal because, of course, it is a strategic asset, which needs to be approved by our Board. So internally, we have done our homework. And we are in active discussion for the last part of this potential transaction with a potential buyer. I cannot disclose, of course, the details. But this is the situation. At least on the other asset, there is an active -- I think on the other asset is that we are a bit a step behind. They are, by the way, less meaningful in terms of potential impact. But we are active scouting on the market for potential buyer with appointed adviser for both assets.

Okay. I have several questions, so my apologies in advance for monopolizing. But in terms of the -- you highlighted some of the new stores that were opened, Atlanta, Houston, San Diego, Manhasset. So in the third quarter ended September, how many of these stores did not contribute and -- if any and what -- if you can quantify the revenue that we may pick up in Q4 incrementally? I'm assuming these stores -- the newer stores probably have an average unit volume, $4 million to $5 million. That seems to be the average on the new stores. So if you could give me color there, that would be helpful.

Okay. I will start and then I will ask maybe Jason or Piero to add further details. When we open a new store, there is a very careful process, which include a geo-marketing study to make sure that the catchment area, that the agency in terms of other brands are really what constitute a solid base for operating a store. For us, it's a very strategic decision. And that decision includes our business plan, our 5-year business plan, which should show a breakeven between 14 and 18 months. That is our criteria. Of course, there is always ramp-up phase because it's a new business. Initially, you have not the full benefit of the operation while we have the full impact of the [ operating ] cost. So that's a bit is a principle. So those stores, they are still in this ramp-up phase. But maybe, Jason, you can provide, if you are already raising your hands, otherwise, I'm not [indiscernible] some more precise figures on those five new openings in 2023.

Jason, if you could help on that. Just, I'd like to know of the new stores, how many of them did not contribute in Q3? Just so I could model going forward what the incrementality is, if anything?

Sure. So it's, I think, first, important to remember that these stores are all largely based on a special order and import model. So in our -- there's definitely a timing difference between what we would call written orders into our factory versus delivered revenue, which really begins to flow on a kind of more regular and normal basis, 4 to 5 months into the opening of the store based on our import model outside of any locally stocked product that we feature in our quick time assortment. So for all of these recent openings, I think it's -- as you're thinking about your models, you should really be thinking about early '24 to more materially impact our North American revenues.

Okay. So those five stores, that was very helpful, Jason. So in your clarification, what you're saying is you're taking written orders right now, but they don't show up in revenue until 5 or 6 months later when product is shipped. Could you give us -- that's very helpful. Could you give us a flavor for -- or to quantify the written orders that you're seeing at the new stores and if they're performing up to your plan?

Sure. I would say that when I step back and the real estate [indiscernible] the store design against, let's say, a lot of our legacy locations, I think we're very proud of the work. As Antonio was mentioning, even on the written side, when we enter a new market, we're hiring largely a new team. And we're definitely seeing that our stores ramp to fully mature. And typically, year 2 is stronger than year 1, both historically and what we've seen over the last couple of years. So we haven't really been disclosing individual store volumes. And I'm not sure that I'm prepared to do that today. But I think we believe we've built great additions to the U.S. fleet here.

Okay. Well, that's -- it's helpful to just understand the cadence of revenue recognition and that we have a nice opportunity in front of us. And then if I could pivot to a question for Silvestri, I see -- I guess, the encouraging -- a bright spot here is on such soft revenue, the operating loss was quite small. And it appears you've done a great job of driving down selling expense and administrative expenses a little bit. Could you give me, Silvestri, a sense if and when revenues do increase, let's say, theoretically, we increase revenues by $15 million back to $90 million, okay, how much would selling expense go up? How much is variable, if you could help me understand that up to $21.6 million? So on the next $15 million, how much does selling expense increase?

Okay. So regarding the cost discipline, if we increase the volume, let's say, that our numbers already show as of today, all the fixed part, including in our selling and administrative expenses, so if we increase on the same basis in terms of network, the sales, it will only go up by all the variable part related to the rent and the sales commissions and the transportation costs. So let's say they could go up by 20% of it, around that range.

So selling expense would increase about 20% if we had a $15 million increase in revenue?

Yes, because...

And administrative expense should remain flat?

Correct.

Okay, that's helpful. So I mean, it shows that when you get that flow-through on revenue, there's quite a bit of leverage in the financial model to generate profit. Okay. And then the last question, Antonio, if -- you called out specifically that written orders have flipped to positive versus the last 15 months. Could you give us -- without being completely granular, could you be -- give us a little more color on what that improvement looks like in terms of percentage or magnitude?

So it's single digit, stronger if we look across the branded versus the unbranded, it's single digit, but it's consistent. And geography-wise, I would say, more recently, U.S. has been more dynamic. The other geography, which has been -- but that is not reason because they have been more resilient during the year, are being an emerging market of Central and South America. This also gives me an opportunity, which goes beyond your question, Dave, to comment a bit on China. China, as you know, is going through a very different [ parting ] when it comes to consumer product before the COVID. I would say not only the furniture, but I would say all the branded, even high end and luxury, they are being very, let's say, gloomy this year. And we have been also affected. The thing is important changes that we are increasingly working as an integrated company. As you know, we have the minority. So this led to a creation of an autonomous organization historically, which now has been more and more integrated in the way we're working and the way we operate retail brand and merchandising choices. So we feel good about the direction that with our partner, we are giving to the business. And hopefully, that will be also translating in a positive outcome from that geography that is still witnessing a very, very, very conservative consumer after the pandemic.

Okay. On that topic, I'm cheating a little bit, I guess, I'm asking more questions. But this was on my list, cash in China. How much is in the JV right now? And what is our flexibility or optionality in accessing some of that cash?

So on the cash, I need to refer to Piero. Technically, I know the figure, but I want to be sure that technically, we can refer to it before the 20-F. I suspect we cannot disclose it now, right?

You're right, you're right, Antonio. We cannot disclose also because they are a listed company, so we cannot disclose.

Okay. So I cannot disclose the figure. They have been, since the beginning of the year, increasing the cash. Of course, it's below what we report in previous year, because as I mentioned a few times, the balance between liquidity and fixed asset has been moving more in direction of fixed assets because they invested in inventory at [ Natuzzi Italia ], which we are now managing. But the group has been accruing cash. And again, I, unfortunately, cannot give you the figure because of respect of our, let's say -- or also both partners being listed. The other question -- the other aspect is easier to answer. So the distribution of cash or dividend can happen in a form of capital reduction or dividend. Both need to be authorized by the unanimity of the Board members, which are five, three being appointed by the majority shareholder, KUKA, and two being appointed by Natuzzi and being our Executive Chairman, Mr. Pasquale Natuzzi and myself. So both the cash -- so both options to, let's say, reduce cash, which is capital reduction and dividend, need to be approved by unanimity by the Board of the JV.

Okay. And then a quick strategic question, and maybe this falls into Jason's domain, but I would like to get your thoughts on this, Antonio. When I visit your stores, it seems like you're very focused on the living room, that particular space within the home. And when I go to competitors, I see that they have a broader appeal of the dining room, the bedroom as well as the living room. And so I guess, the silver lining is this probably is a large opportunity for you. Could you talk in terms of the focus there? I know you're focused on building out the North American footprint. But are you also focused -- do you have your team focused on building and designing high-quality, desirable Natuzzi product that goes into these other rooms so that longer term, our average unit volumes could be double or even triple where we are now?

No, David, you are really spot on. And I believe the answer here needs to be specific for Natuzzi Italia and Natuzzi Editions. On Natuzzi Italia, we're really going in the direction of having a lifestyle presentation in the store with a total living. As you, of course, know, the heritage and the strength of Natuzzi is in the living room, in the upholstery, where Mr. Pasquale Natuzzi is not really saying it, but it's the market saying that has been a genius, inventing a new category of product, which combines harmony and emotion. And we want to preserve that. But as you mentioned, as we're entering retail, we want this retail to occupy different rooms. So we are working definitely on the bedroom, where again technically, it's somehow closer to the upholstery, especially for the upholstered bedroom. Because technically, they are not far away in material. And in fact, some of that production happens in our factory. So the bedroom is another room we want to occupy. Another room we want to occupy is the dining room, where instead, of course, materials and technology -- and technicalities of production are different. And in fact, we design internally everything. But we do strategic partnership for the production. And increasingly, we want also to have, let's say, legitimacies in accessories, lighting really because of two needs. One is to present in the store a full immersive experience of the brand and to experience that the retail needs to be experiential. And so you need to have a full enough of accessory and furniture. The second is to increase the average order ticket. And in fact, that is the direction in most geographies. And I must admit and be transparent that we see -- we do still see a significant opportunity in improving our furnishing because it's a recent, let's say, direction. So we are still working to improve the furnishing offering for Natuzzi Italia. This is clearly part of the short-term objective to fully leverage our strengths of the brand and to fully leverage the investment that we have in retail.

[Operator Instructions] We do have a question from Steve Emerson from Emerson Investment Group.

Could you talk about some of your objectives next year, some of the metrics you hope to be at? And also, what percent of your revenues in the U.S. are now met with fairly quick or domestic inventory?

Okay. Thank you, Steve, and nice to reconnect with you. So let me start. I will answer specific to your question, but let me start answering to a question which is a bit a different time frame, which is where we see Natuzzi. Because I believe that under this difficult market condition, every one of us has the natural tendency to focus more on the problem and the issue and to forget the dream, the part of the dream. So I will answer first there and then I go back to next year. So the dream is to bring Natuzzi where it should be and deserve to be. Let's remember that according to independent survey, which means we are not doing those, Natuzzi as a brand awareness among international brand is positioned first in U.S. market, first in U.K., first in Spain, second in China. So that's to say the strength of the brand. And clearly, the brand is much larger than today's revenue. So our ambition is simply to bring the revenue where the brand is. Imagine what would be in terms of investment into the work, build this brand. And there is, by the way, a second element, which you cannot buy, which is the heritage. This is a company where the Chairman has founded this company 65 years ago. Again, this position, Natuzzi in the bucket of if we do an analogy with the fashion of Armani or Versace, so a company which really have created a market. So that is the dream and the vision. So let's go back now talking more specifically on next year and U.S. quick time portion of sales. Next year, we are finalizing the budget. It's always that in circumstances where the market, still for everyone, and I believe you read the press release of our peers, is not providing obvious sign of recovery. We are building a business case, which privilege resilience and solidity of our fundamentals. Having said that, we are prioritizing investment in the direction I mentioned before, which is retail and restructuring. If, as we discussed before, some of those nonrecurring sales of strategic asset happen, that will provide a strong acceleration. Otherwise, we will be quite prudent in the first part of the year in terms of new investment in retail to wait and see what is the development of the year. So that is how we are entering next year. So in terms of KPI, we were still monitoring the KPI that certified that we're moving in the right direction long term, which means sales of branded product versus total sales, sales of product in retail channel versus sales in wholesale, marginality, number of recurring customer, average order ticket, so KPI that testify we are moving in the right direction from a P&L and an equity perspective. In terms of accelerating investment, I suggested our Board to be doing a budget which is relatively prudent in terms of new investment in the first part of the year, ready to accelerate if the condition allow it or if any of the nonrecurrent asset transaction materialize, just to give you, I will say, an answer of next year but putting the perspective more a mid-term journey. On the specific question on quick program or, let's say, stock inventory, Jason, maybe you want to take it.

Happy to attempt to answer your question, Steve. And to make sure I got it right, so from, let's say, the retail side of the business, when I combine both brands, I would estimate that a little over 20% of our written orders come from sales that are already available in the U.S., quick time, a floor model change, what have you. And then about 75% are special ordered today on the retail side. I would say on the wholesale side of the business, the -- our retailers are ordering a much larger percent, let's say, from us directly. But they're -- but they often provide their own stock investments. Our largest customers build their own stock. And so I would guess that the stock to special order ratio on the wholesale side of the business for their customers is maybe 60% stock, 40% special order from a blend standpoint, if I had to guess. Mr. Natuzzi, it sounds like you think that's reasonably close, but -- so I hope that answers your question.

I was looking for more concrete metrics, like how many U.S. Natuzzi stores do you expect to build next year, et cetera?

So Steve, as I said, I cannot give you a figure because it depends on how the year will develop. So let's say, say at High Point, High Point is -- I don't give a precise figure, but it's above the book value, which is $10 million. Let's assume we sell it significantly above the number. As I said, it would be primarily reinvested in the stores. In U.S., an average stores net of capital contribution by the landlord is around $800,000. So you can imagine that, that can provide a significant acceleration, a turbo boost. If we need to self-financing those openings, needing a part, a way to increase our capital available, apart from selling nonstrategic assets, of course, the speed of development is lower. In terms of full potential, again we have a number in our plan. But since we can't disclose the plan, I will use analogy from the other competitors. I think the company which is closer to us in terms of not necessarily operating model but positioning and being international is Roche Bobois. Roche Bobois, which is similar in terms of price positioning, actually on both Natuzzi Italia, has 40 stores, above 40 stores in U.S. So I think there's space definitely for us to more than double the presence of Natuzzi Italia store in U.S. The speed we arrive to that number depends on our ability to invest but also in the fact that we don't want to open store we are not eventually happy by, as the implicit question of Dave mentioned before. So we're really focusing very much also on organic growth to make sure that every store is really supported. So I know it's maybe a long answer. But to shorten it, I cannot give you a number for next year. Our long-term perspective is to open maybe around 8 to 10 stores per year in North America. But this is not, let's say, confirmed for 2024 because of what I mentioned before, because we need to do a budget, which is at least in the first part of the year, particularly cautious.

Okay. Did you say eight or...

8 to 10. No, no, no, 8 to 10.

8 to 10, got it. And to follow up David Kanen's question, what percent of your revenue is living room? And what's your objective in terms of percent nonliving room?

For North America or more in general?

North America.

Okay. I'm checking it right now on our system to be more specific.

I know the numbers for North America, if it's something we'd like to share, Antonio.

You have for Natuzzi Italia or for brand? I was looking actually by brand. You have it by brand?

Yes.

If you have it, you go ahead. I also have it, but you go ahead. You go ahead, Jason.

Okay. When we look at product that's oriented towards the living spaces number for Natuzzi Italia, it's about 80% of our total. And for Natuzzi Editions, it's north of 90%.

And your objective?

I mean, if I see -- I mean, we're going to be always skewed to upholstery because the market is skewed to upholstery. In the market, 60% is upholstery, normal sales. I believe for Natuzzi that it will be always stronger. I think a good analogy maybe is China, where the team push harder especially on Natuzzi Editions and is more 70-30. So I think the long-term objective can be 60-40, 70-30. I don't know, Pasquale, if you agree, you have been in this industry. But I believe the remaining 60% to 70% upholstery is how the market is done and also equivalent with our heritage. I don't see higher percentage of non-upholstery in our stores. But interesting enough, just again because we have -- I'm looking on my phone, where our system allow to look in real time any possible close-up data, which made my life, I must say, quite easy at least on this, it's really a dream to look at all the data. Let me turn to something just to answer specifically to that question. If I look at, let's say, last year, which is, of course, a close year, so I don't do any privileged information, and I look at globally, global market -- hold on, one second.

[Operator Instructions]

So the non-upholstery has been growing 3x more than the upholstery, just to give you -- of course, from a smaller base, but just to give you a sense of acceleration of the non-upholstery. And as I said before, we are not yet satisfied with what we express or what we call global merchandising platform, which means the complete assortment, which includes upholstery, dining, bedroom and accessories. So I believe that is still an area of opportunity.

We do have a follow-up from David Kanen.

Yes, on -- you guys used to give a backlog number. I know it was more relevant when we had the supply chain issues during COVID. But what was our backlog as of September 30? And how does that compare with June 30?

The backlog is at a physiological level. If you cover the data, you're already -- you're free to disclose it. Otherwise, we can do it as a follow-up. It is at a physiological level. Of course, the backlog, let me pause there.

Sorry, it's EUR 54 million.

EUR 54 million.

The backlog is EUR 54 million as of September 30. And what was it as of June 30?

June 30, let me -- but it's the same at the beginning of the year. But let me check it if June -- let me check...

David, we can check it but directionally tell you it won't be different because we reached what we call physiological level of backlog, which means the amount of backlog we need to have to do a proper planning of our factory, which normally is done 3, 4 weeks in advance because of all the different materials and the capacity we need to book. So we're at the physiological level, which if you want to see the positive side of it means that our time to delivery for even special order has come back to what we could be, which is more responsive to the demand of customer, apart from some geographies, where like rest of Asia Pacific, still the logistics is very much impacted.

In June, it was EUR 56 million, by the way, so...

Yes, so it is. We are at, what you call, the physiological level.

So it was -- okay, so it was about EUR 56 million in June, so it's about the same?

Yes.

Yes.

We have reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments. And if there are no further comments at this time, I'd like to conclude today's teleconference, and thank you all for joining us today. You may now disconnect and enjoy the rest of your day. We do thank you for your participation today.

Thank you, everyone.

Thank you.

Thank you.