Good afternoon, this is the conference operator. Welcome, and thank you for joining the F.I.L.A First Quarter 2026 Results Conference Call. All participants are on 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 Mr. Cristian Nicoletti, CFO. Please go ahead, sir.
Ladies and gentlemen, good afternoon. I am Cristian Nicoletti, CFO of F.I.L.A. Group. The group CEO, Massimo Candela, and the group COO, Luca Pelosin, will also participate in today's conference call. Let's start with a brief overview on our financial results for the first quarter of 2026. I would like to underline that Q1 2026, in line with budget expectation, reflects progressive shift in F.I.L.A. business seasonality to meet the quarters of the year. Also considering the consolidation of Seven Group, which has low revenue seasonality and a negative EBITDA contribution in Q1. Reported results also reflect the weakness of the euro versus the USD dollar. On organic basis, excluding the negative tariff impacts, the group EBITDA increased, delivering a very satisfactory level of profitability.
We are pleased with the free cash flow to EBT performance, which excluding the Seven Group cash absorption, stood at negative EUR 40.9 million, improving versus the EUR 55.5 million in Q1 2025. Regarding the net bank debt, the increase at the end of March reflects the full consolidation of Seven Group, its debt and dividend distributed over the last 12 months. Our leverage ratio remains comfortable. I will now draw your attention to slide number eight, where we illustrate the core business sales. In Q1 2026, core business sales, excluding Seven Group, were EUR 120 million, down 7% on comparable FX basis. This primarily reflects a shift of order in Q2 in North America and Europe, the latter influenced by our new commercial strategy.
Central and South America were down 1.7% on comparable FX basis, showing stabilization after a weak H2 2025. Let's move to group profitability on slide nine. Adjusted EBT at EUR 16.7 million includes EUR 3.4 million of negative contribution for Seven Group, in line with Q1 2025, which is characterized by low revenue seasonality in Q1. It's important to underline that adjusted EBITDA, excluding Seven Group in Q1 2026, increased by 3.1% on comparable FX and tariff basis. Margins stood at 16.8%, improving from Q1 2025, driven by ongoing operational efficiency and better sales mix. Please to the slide 11 on adjusted net profit.
In the same way, adjusted net profit excluding Seven Group stood at EUR 7.4 million, improving from EUR 0.9 million in Q1 2025, driven by lower net financial expenses, which mainly reflects a positive financial impact from FX. Let me remind you that the net profit does not include the contribution for DOMS in line Q1 2025. These will be made available once DOMS will have reported Q1 2026 results. On slide 12, we highlight the development of free cash flow. Free cash flow to equity was equal to EUR -56.7 million, in line with Q1 2025, as a result of seasonality of the first quarter. It is worth mentioning that excluding the almost negative EUR 8 million contribution for Seven, free cash flow to equity improved versus previous year, reaffirming F.I.L.A. cash generation capacity. Let's move on slide 13.
As March 2026, the net financial position increased to EUR 252.9 million, increasing by EUR 76.2 million compared to end March 2025. As a result of acquisition of Seven Group, negative EUR 54.9 million of total consideration, Seven Group net debt negative EUR 11.2 million, and dividend distributed for EUR 42 million. In conclusion, the outlook for full year end. We confirm the our guidance provided.
F.I.L.A. expect double digit growth in both revenue and adjusted EBITDA, including the contribution from Seven, alongside positive organic growth. Free cash flow to equity is expected between EUR 40 million and EUR 50 million, with a dividend payout ratio of 20%-40% in ordinary course. Thank you all for your attention. We are now ready to answer your questions.
Thank you. We will now begin the question and answer session. To enter the queue for 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're connecting audio only, please press star and one on your telephone. As a reminder, if you wish to ask a question, please click on the Q&A icon on the left side of your screen or press star and one on your telephone. The first question is from Isacco Brambilla, Mediobanca. Please go ahead.
Hi, good afternoon. Three questions from my side. The first one is on the underlying trends in Europe and the United States. Overall, in terms of demand on the market, what you are seeing beyond the say the shift in the commercial strategy that is impacting the seasonality of your business. Second question is on current trading. If you can comment a bit more on April and beginning of May performance. In the press release you mention orders year- to- date recovering. Just if you can give a bit more color on that.
Last question is on cost inflation, what you are seeing since the Gulf conflict, and which are the levers you can activate to compensate growing pressure on costs?
Thanks, Isacco. Massimo Candela speaking. Concerning the first, the first question, as we announced in the previous call, we do see 2026 as a better year compared to 2025. As of now, we confirm. The seasonality is going to impact even more our sales in the future because we have acquired Seven. Seven, 96% of the turnover goes to retailers and F.I.L.A. creating synergies on this is going to have an overlap seasonality. Of course, this year the trend is not yet completely reached, but we will see a full effect in 2027.
In Europe, the market is stable except in Italy that is showing a very, a very weak trend in terms of sales and consumption, I think also affected by the rate of birth. This does not mean that we have a negative view on Italian market because with the synergies with Seven for the moment are giving us lot of satisfaction in light even better than what we expected when we finalized the acquisition. I don't recall exactly the second question. I think you refer a little bit to the sales of the second quarter.
I can confirm that April is showing a complete recovery of the delay we have accumulated in the first quarter and is anticipating a very good second quarter in line with our outlook for the year. For the problem related to Hormuz, yes, we are experiencing some cost inflation. We have decided for the moment to keep prices stable. We are enjoying some improvement in our profitability due to reorganization of the last 12, 18 months. We have launched a lot of new product, very well received in the market. We think in this moment we need to show resilience and I would say kind of aggressive commercial strategy.
This for the moment should not have any impact on our outlook. Of course, if the Hormuz crisis will continue in August, September, we will have to analyze better the consequences. For the moment, we have decided to keep our commercial strategy stable.
Thank you. Thanks.
As a reminder, if you wish to ask a question, please click on the Q&A icon on the left side of your screen or press star and one on your telephone. The next question is from Alessandro Cecchini, EQUITA.
Hello, everybody, thank you for taking my questions. The first one actually is on the North America. I don't know you already discussed about this, but I would like to better understand your view on the current budget school. Last year, we saw due to Trump budget cuts. I would like to understand if it's moving something in the positive, in the positive way. My second question is about Mexico. First quarter, we saw stabilization. Basically asking you if you expect, I mean, to see a, I would say, a recovery on top line to be back on track to previous levels that were pretty good.
And finally, just to better understand this, you saw that the Italian market is sluggish, but you see a better outlook due to your own initiatives. Just to understand, is something more on 2027, or you expect maybe something in the third quarter this year, that is still seasonally important? Thank you.
Ale, thanks. Concerning United States and the federal budget, we have to be more precise. In terms of federal budget, there has not been an improvement for 2026, but at the local state level, they are fulfilling the difference. The problem is that as we are referring to 50 states, we need to analyze state by state. I would say as a general comment, the situation is improving, and this is shown by by our top line sales that are looking positive at least until August. Of course, we need to understand what will happen with inflation and the Hormuz price. As of now, we are definitely matching our best expectation for 2026. For Mexico, more or less the same comment.
The situation is going back to normal. Also in Mexico, we are applying the same strategy that we are applying in Southern Europe, so we're going down to retailers in cooperation with some top wholesalers. We are going to expect a good second quarter thanks to the level order we can see today. In Italy, the full effect of our strategy will be seen in 2027. Unfortunately, we finalized the acquisition sale at the end of January. As of now, we are just smelling a little bit of the synergies. The market is reacting pretty well. We have already announced our strategy. We see already positive impact, but the full impact positive in terms of margin and top line, we are going to see in 2027.
Okay. Thank you.
The next question is from Francesco Taddei, Banca Akros.
Hi, everyone. Thank you for taking my question. I have to first on Seven and DOMS. Could you give us a bit more color on the progress of the partnership and on the medium-term opportunities for cross-selling or distribution of certain products through the DOMS' platform in India? Maybe second one on valuation, considering the current market value of the DOMS stake, relative to F.I.L.A.'s market capitalization. Do you have any reflections on the current conglomerate discount embedded in the stock? Thank you.
In terms of the partnership, I have a very positive feeling on the just born Seven DOMS JV. There is a lot of enthusiasm coming from the CEO of Seven and the CEO of Skido, which is the DOMS controlled company for backpacks. We are already anticipating some new product already in 2027, so we are trying to run as quick as possible. This will be interesting to understand the impact on DOMS. For what DOMS is concerned, I would say the partnership is not at all related to the amount of participation, but they are very much dependent on our know-how, on our, let's say, know-how of the distribution worldwide, innovation of new products, innovation in quality, in design.
We would rather consider the value of the participation, strategic, but in line of our financial stability and in case, in the future, F.I.L.A. will need to dispose some of the shares, in order to, maybe make some M&A strategy, let's say that, we will be free to take our own decision without having any impact, on DOMS, relationship for the future.
Okay, thank you.
Okay.
The next question is from Niccolò Storer, Kepler. Mr. Storer, your line is open.
Hello? Hello? Hello?
Yes.
[Non-English content] Massimo. Good afternoon.
[Non-English content] Niccolò.
I have a question. Maybe I missed it because I connected just five minutes ago. The question is about the performance in Europe. I understand the change in strategy, but of the - 10%, let's say, before Seven consolidation, how much of the performance was linked to what you say in the press release, which is basically some weakness in the market? How much is linked on the other end to your strategy to go direct to retailers and then having some delays? How much of this turnover lost, which is about EUR 8 million, is going to be recovered in Q2 or Q3?
Thanks, Niccol ò . As of now, we think that in Q2 we are going to recover everything because 100% of the delay is related to our strategy and a bit some important customer in Central Europe that has postponed order to April and May for their own decision. Of course, we need to understand. From one side, the message is positive because you are going to see in the second quarter a very nice recovery. Already in April, I don't know if Cristian already gave you the figures. In consolidated numbers, I know, we went from -7% at the end of March, +8% at the end of April. A dramatic change.
Of course, the impact of Hormuz case, if the situation will be solved, we have to analyze more in September. When the school will open and the sell-out has to be measured carefully. As of now, we do expect the customer trust a lot on us. We see a very nice trend, very well received of our new products. We do expect a very good second quarter.
The Massimo, the 8% of April you mentioned is just for April or is?
No, no.
Cumulated?
Year-on-year cumulated. This give you the magnitude of the improvement, starting in the second quarter.
Including Seven or not?
Including Seven.
Okay.
Cristian, can you please confirm? I don't like to make mistakes.
Of course, Massimo, I confirm that April to year- to- date 2026, the revenues, including Seven of, and FX comparable, were up 8% versus the same period of 2025.
Thank you.
Thank you.
Okay.
For any further questions, please click on the Q&A icon on the left side of your screen or press star and one on your telephone.
Come on, wait. Come on.
Gentlemen, there are no more questions registered at this time. Excuse me, there is one more question, follow-up from Isacco Brambilla, Mediobanca.
Yes. Hi. A very quick follow-up on Seven seasonality. We are not yet familiar with this. Should we expect EBITDA and free cash flow generation of Seven to be even more skewed to second and third quarter, in particular, than the rest of the group? Should we expect that, roughly speaking, EUR 14 million EBITDA we have as a base for Seven to basically come exclusively in second and third quarter? Or, is there a tail also in the final quarter of the year to keep in mind?
Yes. Yes, Isacco, you are right. Maybe we was not clear at the time of the acquisition. Seven makes 96% of their turnover with the retailers, mass, food, and drug. Really their seasonality is fully concentrated in second and third quarter with very small activity in fourth quarter and in the first quarter of the year. Even more with a even higher peak than F.I.L.A. Group, for the simple reason that we sell consumable products, so we have a kind of regular purchase or regular needs of our product while they sell backpacks and trays for pencils and fiber pens. Generally speaking, the consumer buy once per year, and really the purchases are concentrated during the back to school.
Their seasonality is even higher than our.
Thanks, Massimo
Gentlemen, there are no more questions registered at this time. Oh, excuse me, there is one more question from Alessandro Cecchini, EQUITA.
Hello. Sorry for this last mile question. Just, maybe I didn't understand correctly. In the first quarter, you had organic, I mean, performance, excluding forex, excluding Seven, that was a - 7%. Including April, year -to- date, which kind of , because a + 8% is of course including Seven. I would like just to match Apple with Apple, - 7% organic, how much is with the performance of April.
Cristian, can you please explain better the top line EBITDA? Thank you.
Related to, of course, Alessandro, thanks for your question. Of course, Alessandro, speaking about revenue, no?
Yeah, yeah.
The up, of course, the up 80% is related to -2.4% on first quarter 2026. Relating the results excluding Seven on FX comparable were flat year- to- date, showing a full recovery the first quarter, considering that the first quarter we are negative for 7%.
Okay. Very clear. Thank you.
Okay. Bye for now.
At the moment, we don't have any other questions. I'll turn the call back to you for any closing remarks.
I thank everyone for attending this call, and I think we are going to meet soon. Thank you. Thank you, everyone.
Bye.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your devices. Thank you.