Samsonite International S.A.

Thank you very much, operator. Thank you, everyone, for taking the time to join this call.

I’m pleased today to have our CEO, Mr. Kyle Gendreau; and our CFO, Mr.

Reza Taleghani, with us to present our third quarter results. And at the start, Kyle will make a few opening remarks.

Thank you very much.

Okay, great. Thanks, William.

Thanks, everyone, for joining us. And William, you’re turning the pages, right?

Yes.

Okay. Good.

So I am very excited to report strong sales and adjusted EBITDA recovery in Q3. On Page 4.

Q3 sales strongly improved, down 37.6% versus Q3 ‘19, that’s up from 52% in Q2 and as you can see on the table here below and 57% down in Q1 versus ‘19. Equally exciting, we achieved a very positive adjusted EBITDA, $72 million and equally excited, 13% EBITDA margin.

So we’ve moved our EBITDA margins into the teens levels in the quarter. You can see on the chart below, during the quarter, every month was improving.

So July 12.4%, August 12.8%, September 13.8%. And I would tell you, October is even stronger moving into mid-teens level for the month of October.

Our gross margin has improved quite dramatically in Q3. We’re at 55.5% from 52.4% in Q2.

And as many of you know, in Q1, we were still navigating the business pretty heavily and the margin was 48.7. And this is notwithstanding the challenges and we’ll cover in our deck on price increases for raw materials and general costs, including shipping costs, we’re still able to move the margins into historic levels.

And then positive adjusted net income for the quarter, $8.7 million in Q3. This is the first quarter since 2019 that we’re posting positive net income.

We’re very excited about the cash generation in the quarter. Q3, we generated $116 million from a cash burn of $65 million in Q1 and a cash burn of $27 million, and this is really reflecting the strong adjusted EBITDA improvement in our continued tight management on net working capital and a virtual freeze on our CapEx.

So we’re quite excited with the cash generation. That feeds into liquidity.

And in the quarter, we’ve actually increased our liquidity now for the first time at $1.323 million versus just north of $1.1 million at the end of Q2 -- $1.1 billion, I’m sorry. On a sales recovery, I’m on Page 5.

I know the slides turned a little slow. You’ve seen this chart in the quarters that we’ve been reporting.

And from the lows, when we get into this in April, down 80, we’ve really seen a step change in the recovery as we got to June of this year, down 48. And then if you look across the page here, every single month improving down 40.9.

For July, down 36, down 34 for September. And just to sneak peak October, October is down 28.9.

So we are clearly in a zone of recovery, and we’ll cover in the deck a bit more where we’re seeing that, but generally recovering across all regions. I might say just before we change the page.

In the quarter, when we look at the recovery, North America is down 29.9%, really leading the recovery. Europe had a very quick step back to recovery, down 35% in the quarter.

If you remember, they were close to down 70% in Q1 of this year, so really rapid recovery in Europe. And Latin America, down 14.6%.

still down around 50% for Q3. It was down 48.7%, so that’s an improving trend to the prior quarters, but we’ve seen an improving trend with September down around 47% and a very strong October for Asia down 32%.

On Page 6, adjusted EBITDA continued its improving trend, okay? The company achieved, as I said, $72.2 million of EBITDA in Q3.

That’s 13% margin. It’s only 160 basis points lower than Q3 of ‘19 on sales that are close to $360 million lower.

So really dramatic change in our EBITDA margins from Q3 of last -- of 2019 to where we are today, really getting back to almost normal levels on EBITDA. Page 7 really is looking at the travel and what we’re seeing.

And this slide is a global view of international travel and domestic travel and the recovery we’re seeing. And much of the recovery that we’ve been seeing to date has been driven by domestic travel.

And so the red line on this graph, you can really see domestic travel moving into a territory that’s getting very close to run rates in a few months, so we’re running down around 20%. You could see in the month of July, it was down 15%, as Europe really started to move again.

But what’s equally as exciting in this page is when we look at international travel. And you look from June through September, you can really start to see the needle moving.

And there’s still plenty of recovery to go, but we move from this kind of down 80% to 90%, so we’re now getting into down in the 60s, high 60s. And this is with -- before Europe and Latin America really open their borders to travel into the U.S.

or I might say the inverse, the U.S. opening its borders for European travelers, which really just started this past week on November 6.

So I expect this international travel number to continue to improve as we move forward. Just on Slide 9, a deeper look at this international travel, and this is to give you a snapshot by kind of lanes or channels.

And so leading is North America to Latin America. You can see that almost recovered back to historic levels.

This is the yellow line on the page. And then we have travel within Europe.

This is the green line. And you can really see, as we get to June, travel within Europe quite dramatically improving, but still down around 50% to the index of ‘19.

So still funny to go there. The global is the middle with the dotted red, which is just what you saw on the other page, but blended in.

And I think the key takeaway here is the Asia travel either within Asia or in between Europe and Asia and North America and Asia, you can see that’s fairly stuck still. These are the 3 bottom lines.

And so there’s some levels of improvement, but the reality is Asia has more to go for international travel to really start to move again. And then when we look at the market -- some markets that are performing really well on Page 9, this is domestic travel for the U.S.

and domestic travel for China. The red line is the U.S.

And you can see there has been a steady improvement throughout the year. And really as vaccination levels in the middle of the year started to really catch up.

You see the U.S. domestic markets getting really close to historic or prepandemic levels, down around, let’s say, we had a high in July down 7% running around low-teens decline to 2019.

China has been very strong, too. China actually domestically recovered the quickest.

And the dips you’re seeing in China is really around the lockdowns or restrictions that China is waving in and out of. So by design in January of this year, they had restricted travel for Chinese New Year.

And then as we get to the end of the year, we saw some cases coming up and you see a very quick sip in domestic travel, but then it quickly recovers as the restrictions come off. And I think China is in this zone where it will be up and down.

But on a blended base, China’s domestic travel is still running very well and driving much of our Chinese business right now. On Page 10, just another look just so you have a good sense of what we’re seeing.

This is the U.S. domestic travel.

And again, here, you can see the blue line is what 2019 was. And you can see that we’re getting very close to historic domestic travel in the U.S.

I’ve been traveling almost every week in the U.S., and I can tell you the planes are full and the airports of full. And what we’re seeing is the airlines are filling back in their fleets now as they really get moving toward the holidays as well.

So domestic travel really doing quite well in the U.S. market.

To change gears. We’re very excited about what we achieved for gross margins.

So on Page 11. The gross margin in the quarter improved to 55.5%.

And what is important here is it’s improved each quarter, but we’re starting to get back to the levels of gross margin that we’ve historically run. In 2019, full year, we’re at 55.4%.

So we’re basically running at the ‘19 levels. As you know, ‘19 had a little bit of strain because of Chinese tariffs that we’ve been navigating through.

2018 was 56.5%. And I can tell you as we’re stepping into October and November, we’re starting to see us getting into that ZIP code as well.

And that’s with the backdrop of some real challenges, and we all are seeing this across the board, across industries, not just our industry. And so we’ve seen product costs increasing driven by higher raw material, labor, general inflation.

We’re dealing with that as well. We’re seeing significant increases in freight.

And though we operate a lot of our business with contracts that are in good positions as businesses are recovering and we’re looking to move products, freight cost is definitely factoring in. And we’re navigating this margin with all of that in hand.

We’re really focused on making sure that we get to margins. And it’s really around working with our suppliers and managing our price positioning to ensure that we’re able to keep margins at historic levels.

Just a few other pressure points. We have seen a small amount of noise on power outages.

We were on a call with some of my Chinese colleagues today. And it tends to be a bit more noise than reality for our industry.

So we are seeing some impacts maybe at the raw material supplier level, but our own core suppliers are not really being disrupted by power outages, but it’s a factor within the cost of materials as well. We are seeing clear shipping delays and port congestions.

It’s impacting the timing of products arriving. It’s not that we’re not getting containers.

We are getting containers. The issue is business is recovering at a little faster clip than what the containers are coming.

And we have a good amount of containers in transit that are really looking to get off the boats into ports and distribute. And it’s primarily impacting our North America market where we’ve seen the fastest recovery.

We’ve seen nonrenewal GSP in the U.S., which has impacted our year-to-date numbers by about $12 million on the margin side. And we do anticipate that will get renewed, but we think it will carry into next year at this point.

And then we’ve seen a weakening dollar that does cause some price increases for vendors that we’re buying in U.S. dollars.

Despite all of these challenges, I think our teams have done an amazing job of managing margin back to the ZIP code. And my expectations is we’ll hold or be slightly better than this as we move into next year on the gross margin side.

What actions have we taken, on Page 12, on this? First of all, we’re leveraging our scale advantage in these amazing long-standing relationships with our suppliers.

We’re working very closely to navigate through all of these challenges with our suppliers, where value and cost engineering are most sensitive price product positions. We’re really focused on what we can do to ensure maintaining price points where we can or offsetting some of the challenges of the cost increases on our products.

planning and purchasing teams are placing strategically longer orders. We’re ordering ahead to get a little bit ahead of the pressures that we’re seeing and ensuring that we have products kind of on the run and locking in existing prices where we can.

And so all of our teams are focused on that. Within our business, we’re prioritizing high-margin products.

As you know, we’ve been working on a SKU rationalization within our business to simplify. But as we’re managing through shipping challenges, we’re making sure that we’re prioritizing our highest-margin products, which are some of our better products and ensuring that all customers receiving orders as quickly as possible.

We’ve expanded nesting and denesting programs to save on container space so that we can maximize what we’re getting in a container when it arrives. Within our own factories, as you know, we’re producing in Hungary and India and Belgium.

And with our own factory, we’ve increased our raw material start. We started that early in the year to ensure we have buffers within our supply on the raw material side.

Inflationary pressures, increased product costs are impacting the whole industry. And we are taking pricing in many of our markets to offset the pressures, and it’s not just us, our entire industry.

And I would say industries in general are doing the same thing to help manage the pressures on the margin side. On Slide 13, this is just a really good snapshot of EBITDA, and it really gives you a picture of what we’ve done during the pandemic here to navigate this business and cash flow.

So the bars are our EBITDA, you can see $72 million in Q3, really a wonderful moment for us. The blue line is our cash flow.

And you can see the correlation of cash flow to EBITDA and you can clearly see that we’re managing very closely EBITDA because we’ve managed all of our other levers from CapEx to cost containment and you really get to a moment where as we got into the second half -- the second quarter, we turned positive. And so for Q2 were $11 million of positive EBITDA, but then a really dramatic improvement in Q3 at $72 million EBITDA and again, $116 million of cash flow in the quarter.

And then on Page 14. All of our brands are performing.

And I think this just gives you a quick snapshot of brands, and I’ve compared it to both last year and to 2019. And you can see versus last year, on average, we’re running pretty close to 100% up year-over-year on brand.

So brand Samsonite at 85%; Tumi, 92%; American Tourister at 111% above. Other brands are only up 31% because we’ve called some other brands here, including taking Speck out as we all know.

Constant currency growth to 19, which is a measure, you can see Samsonite down 39%, performing a bit better, partly due to a product mix. We’re seeing our Tumi North America business really start to move, down 26% year-over-year, and these are year-to-date numbers.

And you can see American Tourister, down 41, another, again, as I said, down 43%. And so all brands are performing in the direction.

These are Q3 numbers, I’m sorry, not year-to-date. While we continue to focus on Page 15, William, and hopefully the pages are keeping up, sorry, I’m talking fast.

We continue to prioritize our ESG program, our responsible journey. This entire organization is very energized and focused on this across the quadrants that you know: innovative products, carbon actions, supply chain and people focus.

Within the year, within the quarter, we’ve launched Magnum Eco, which has had a very successful launch and really engagement from our trade partners and our consumers. As a reminder, this is a fully recycled post-consumer waste bag that’s really quite successful and an amazing bag if you haven’t seen it.

We’ve made strong targets on our D&I journey. We’ve established regional and global D&I teams to really drive our D&I strategy forward across our entire organization, including everybody in our business as far as moving forward and really taking a regional focus because I think regional focus with global direction is how you really make this happen, and so we’re really excited about that.

And just to call out for Gregory, which launched one of the world’s first plus-size backpacks, which has been amazingly received within the outdoor industry and across all of our teams, and we’re quite excited with that, and it’s had very good coverage and consumer feedback. One of the things I’m really excited about in our business as we step into meaningful recovery now.

And I would say we are clearly in a strong recovery mode as we’ll be leading into this recovery with a great assortment of products. As I said on some of our last calls, in the background, we’ve continued to invest in innovation we’ve continued to drive product development.

And so as we come back and travel comes back, we’re launching with amazing products. And these aren’t meant to be anything other than just some examples of really amazing products.

This is LITE-BOX on the top, which is made from our -- using curved material, strongest, lightest, sturdiest case with a really distinctive look, just a great product. We’ve launched products that are incorporating real sustainable content.

We’ve launched a Armage III, which is using Roxkin Recyclex material and it also has an antimicrobial handle that we worked into many of our products as we move forward. And Stackd, which is proving to be a really successful product around the globe, which is made with 100% polycarbonate shell and it fully recycled eco-friendly interior using Recyclex as well.

And these are just a few examples of what we have as we launch into recovery at the back half of this year and step into next year with an amazing assortment of products coming, as you would expect from us. We’ve continued to drive product development.

And just to call opportune, we had a very exciting and successful product launch with a collaboration between Tumi and the Sony. I don’t know if you all have seen the product, but it’s really wonderful, and it had immediate success.

It had immediate pickup from obviously, the media in the press, but our consumers gravitated to this product. And we really very quickly sold through a lot of this product as we launch this thing.

-- it has luggage, it has backpack. It has swings.

It was really a terrific launch and really a testament to the types of collaborations that we can have with brand Tumi. As you know, we have McLaren going, and that’s been a huge success with Tumi as well.

So I’ll come back at the end, Reza will walk through a little more detail on the financial highlights for the quarter.

Thanks very much, Kyle, and we’re on Page 19. So we’re going to start with just the Q3 results.

As Kyle said, very strong results, reporting sales of $557 million in the quarter. Net sales increased almost 83% compared to last year.

Compared to 2019, we’re down 37.6%. That’s an improvement over Q2, where we were down in the 50s, 52.2%.

And if you look at it sequentially, month after month, every month seems to be -- the trend is getting better and better, and that’s continuing into October as well. Meaningful movement in terms of gross margin.

The gross margin percentage is almost in line with where we were in Q3 of 2019. So Q3 of 2019, our gross margin percentage was 55.7%.

We’re reporting 55.5%. And again, I think improvements sequentially quarter after quarter as well.

Just for reference, Q1 of this year, we were 48.7%. It grew to 54.1%, and now we’re at 55.5% in line with prior years.

Adjusted EBITDA, thanks to the cost savings that we’ve been talking about over the past many quarters, the adjusted EBITDA and especially the adjusted EBITDA percentage, adjusted EBITDA of $72 million, but in terms of our EBITDA margin, now we are at 13%. So in the teens, as Kyle noted, that’s an improvement.

In Q2, we were 2.6%. So now we’re at 13%.

And in Q1 of this year, just a couple of quarters ago, we were negative territory. So meaningful improvement over the last few months.

And adjusted net income, I’m very pleased that we’re in positive territory again. So it’s $9 million on the positive.

That’s an improvement from Q2 where we were negative $36 million. So going on to the next slide, just to get into the highlights a little bit deeper.

Obviously, net sales is recovering, particularly driven by North America, Europe and Latin America. Asia is lagging a little bit, and we’ll touch on that in terms of some of the countries that are performing versus not.

And it’s largely driven off the back of vaccination rates and lockdowns and where the travel is open for the various markets. We will get to that in greater detail.

Adjusted EBITDA for the quarter, favorable to the prior year by $123 million. Year-to-date adjusted EBITDA of $55 million as well.

So obviously, this quarter helping us meaningfully recover and get getting us into a strong double-digit territory, which should continue into the next quarter as well, that’s $229 million favorable to the loss that we had year-to-date last year in the same period. So -- and that’s largely driven by the next point, which is those fixed SG&A expenses that we’ve been talking about repeatedly.

Just for the quarter, we were $92 million lower than the same period in 2019, $93 million on a constant currency basis. We’ve been very, very mindful and all of the teams have been contributing to making sure that we preserve all of the cost savings that we had thought to put in place, and that’s continuing in the quarter in the actuals.

Advertising. We’re starting to invest again in advertising.

So advertising for the quarter, $11 million higher than the prior year. This is an area that, as we try to basically drive sales in the back half of the year for holiday and the beginning of next year, you should expect us to increase the advertising levels.

On Page 21, net debt position $1.65 million (sic) $1.65 billion as of September. And as Kyle noted, our liquidity is up to $1.3 billion.

So we have $1.154 million (sic) $1.154 billion of cash and cash equivalents. I’ll cover the balance sheet in greater detail.

But I think it’s -- we feel very, very good about our liquidity position. And we have for the last -- literally going on a year, we’ve always felt pretty good about our liquidity position, but it’s nice to see a building as well.

We did pay down some additional debt. The company paid down $125 million of Term Loan A, $100 million of term loan B2 and $100 million of the RC in the last quarter.

You will recall that we also refinanced the Term Loan B2 debt, which increased basically aided us with our interest expense numbers as well. So $20 million of annualized interest expense cash savings that are coming from that.

As a result of the Speck sale that we announced in the last quarter, we further paid down another $40 million of the revolving credit facility, so we’re continuing to delever. And due to the strong cash generation of $160 million, basically, in terms of our cash burn, it’s turned into a positive cash generation of $116 million.

Year-to-date September 2021 cash generation of $24 million compared to a burn of $357 million same period last year. So obviously, a very meaningful turnaround.

And we have said previously as well, we really do have control around the cash burn levels. And it’s something that we’re still pushing in terms of inventories and other points in terms of trying to make sure we invest in the business.

But given the sales of strong sales that we had, we’re continuing to build cash levels as well. Net working capital as of September, $194 million lower than net working capital last year as well.

That’s obviously working its way into the cash levels. And again, due to the fact that sales are improving as well.

Moving on to the next slide. very, very tight control continues in terms of CapEx and software purchases, a whopping $1.8 million, which is basically nearly frozen.

As we -- again, as we look at Q4, Q1 of next year, we are going to start investing again, given the fact that we’re generating significant amounts of cash, we want to make sure that we look at -- in a very limited way, but continuing to look at what we do on CapEx and some of the store remodels and other things will start to creep in a little bit, but we’re still managing it very tightly. And then we just had a little bit of restructuring charges.

No impairments in the quarter. We had $5.6 million of restructuring charges, mostly related to severance that we had some store closure costs.

and some costs that were incurred due to some profit improvements that we continue to look at as well. So on Page 23, we’re just looking at it broken down by region, Kyle covered this a little bit.

I’ll just go into it a little bit greater depth. Constant currency growth, again, I’m looking at the quarter itself.

So North America, 123.5% in the quarter, very, very meaningful improvement. And then Latin America, 229%.

So those 2 regions are really starting to perform. And Kyle showed it in his travel slides a little bit earlier as well.

Obviously, that corridor has opened up fairly well as well as those domestic markets. We’re starting to see the same thing happen in Europe.

So in the quarter, Europe is up 87.4%. And again, domestic European travel has started.

We are optimistic that as the corridor between Europe and the U.S. has opened up that, that continues into Q4.

Asia still growing, but a laggard, and that’s at 38.2%. And Asia is largely been driven by the Chinese market and the India market has rebounded again as well, but we’re still waiting for some of the other markets such as Japan and South Korea to open up in Asia, and that will hopefully drive us into the back half of the year.

A little bit more detail on Page 24 of the same numbers and to show the progression. Obviously, as you see -- and we wanted to put the October numbers in here as well, just for reference as well.

I think it’s important to note that if you’re looking at the North America point, one of the things that we’re seeing is due to the shipping delays, these numbers were probably trending a little bit better than what we were seeing here as well. So we are still getting containers, as Kyle said, but the sales demand is probably surpassing what you’re seeing on the page.

And if we can get some of those containers in a little bit faster, especially for our wholesale customers, those numbers should continue to improve. We’re hoping that gets a little bit better as we go into Q4 and Q1 of next year.

Asia, again, it’s a story of certain countries. So the main drivers, as I just mentioned, are India and China.

Very, very strong performance out of the market. It has really rebounded.

There was a little bit of in the last quarter of a dip again, but then now the market’s opened up and it’s stronger than ever. And the China recovery has been impacted by the travel restrictions.

So depending on what happens at any given point, the market can shut down, trying to manage what happens with the virus and then it can open up again. But again, pretty good results overall in terms of those 2 markets.

And same story with Europe. Europe really is starting to open up.

The travel restrictions are starting to get a little bit better. We have seen in the last couple of weeks, some noise around certain markets in Europe, but they really are managing through it largely.

So if you look at a Russia market, which has performed for us fairly well. Even if you start to see some COVID cases creeping in, it’s shifting into an endemic mentality much more than a pandemic.

So I think we feel pretty good about Europe. And Latin America, on the heels of Chile, specifically, we’re starting to see certain markets in Latin America well in excess of where they were performing in 2019.

So that market is -- even though it moves the needle a little bit less for us on an aggregate basis, really starting to improve. And Brazil is actually working for us very, very well as well.

So certain markets in Latin America driving that all countries performing as we look at October is there. The channel mix is starting to shift more so towards wholesale and retail.

Obviously, at the earlier part of this year when we were looking at -- it was mostly our DTC e-commerce channels. We’re driving a lot of the sales now that we’re having the ability to people moving around our stores to start to open up and that mix is starting to shift.

And the travel/nontravel, obviously, we’re seeing a shift to the travel products as well. We talked about that at the last quarter as well.

in terms of consumer demand. On Page 26, I just wanted to just dissect a little bit the gross margin improvement as to a little bit of a bridge of what it’s coming from.

As you can see, if we’re doing a year-to-date comparison to 2020, we obviously have lower inventory obsolescence provisions that are happening just given what’s happening. We have very clear clean inventory levels now.

And then we have basically making sure that we’re very, very disciplined given the inventory stock levels around making sure that we’re not being too promotional this year. So we’ve cut back significantly on promotional activity.

And we actually have higher sales that are happening as well. The other point of note is that we have passed on price increases, both through the wholesale channel as well as our DTC stores as well and trying to make sure that we manage gross margin very, very carefully, given any sort of inflationary pressures that we may have from freight and others.

Page 27. We have aggressively reduced SG&A.

You’ve heard us say this repeatedly. I think it bears noting just if you look at the bars that what we’ve focused on specifically is that fixed SG&A component.

Obviously, the variable component is going to creep up as sales start to come back. But we’re hyper disciplined around making sure that we maintain our commitments in terms of making sure that fixed SG&A number that we continue to have those run rate savings that we’ve said in excess of $200 million.

As you can do -- if you do the math and just simply multiply what you’re seeing in the quarter, obviously, we’re running well ahead of that. But we do want to make sure that some investments are made into the business as we look at a recovery for the back half of this year but also into next year.

And advertising is the other component of SG&A that you should expect us to start increasing as well. We’ve already started to do some of that in the quarter, but you’re going to see an improved advertising number into Q4 as well.

As we look at the next page, Page 28, just a bridge on adjusted EBITDA. Obviously, the -- if I’m looking at a year-over-year comparison, the largest component of it is the gross profit increase from higher sales.

So we have about $96 million of the improvement in EBITDA coming from the fact that our gross profits improved. The second point of note is $60 million of improvement that comes from the gross profit increase from the higher margin.

So that’s really the gross margin point that we’ve been talking about during the call today. There is obviously an increase in variable SG&A that offsets that just as you have increased sales coming in.

And there is a decrease in terms of advertising. You may recall, if you were looking at 2020 Q1, there was still a fair amount of advertising that was happening at that stage, and then we dialed back the advertising on the back half of the year.

And then decreased fixed SG&A, $85 million of our adjusted EBITDA comes from the fact that we took aggressive cost actions and you’re continuing to see the benefit of that, and you’ll see that going forward as well. On Page 29, very proud of where we are in terms of our cash burn or I should now call it cash generation.

We did -- this is a year-to-date number, but we felt it was important to just break it out quarterly as well. So year-to-date, we are now in positive territory.

So we have generated a cash of the year of $24.2 million year-to-date. That Q3 number of a positive $116 million is obviously more than offsetting the negative cash burn that we had at the beginning part of the year.

Again, it really does bear repeating. We do have control over our cash burn.

And when you’re starting to see a dip in terms of cash burn, it’s because we are actively trying to build inventory levels to try to make sure that we capture sales, and you will see that going forward as well. Page 30, we’ve shown the slide and it just bears repeating again.

You can see as the EBITDA starts to come back, we’re generating a lot more free cash flow as well, and that should help us in terms of cash generation, but also in terms of our liquidity levels. In terms of the balance sheet, really, what I would do, this is showing a comparison between September of last year and September of this year.

But I also thought it might be helpful just to comment on the improvement just over the quarter. So if you’re looking at the balance sheet from June 30 to the last reported balance sheet that we have compared to now, we have a $158 million improvement in net debt just from last quarter.

There’s cash generation that’s happening. We sold Speck.

We basically took the cash that came from the Speck sale and paid down debt with that. So our commitment to delevering is on display here as well.

And cash levels are up $95 million just from June 30 to September 30 and debt levels have improved by about $63 million in that same period as well. So we’re paying down debt, we’re generating cash, and that trend should continue going into the future as well.

Working capital, again, $195 million, almost -- well, $194 million better in terms of net working capital looking at a change year-over-year. And again, in a weak sales environment, we still managed to keep inventories down.

So inventory levels down almost $195 million year-over-year. The teams are hyper, hyper focused in terms of -- first of all, we’ve cleaned out the inventory.

So anything that was nonperforming SKUs that we had, we’ve rationalized some of the SKUs, et cetera. Most of that has happened in the beginning part of this year.

But where we are in terms of inventory levels right now, is it really -- we keep talking about in the last couple of quarters, we’ve mentioned the whole point around trying to invest cash to try to build inventory stock levels. The reality is as soon as the inventory comes in, it’s already out of the warehouse as well.

So there isn’t that much of a restocking that has happened at all yet, largely due to the fact that there’s adequate demand in all of our markets for products and given the slowdown that you see in terms of every category in terms of shipping, the inventory stock levels are continuing to be managed quite tightly, I would say. Finally, on a couple of last slides just on CapEx.

Again, we mentioned it earlier, very, very tight control. The total year-to-date number for CapEx a whopping $7.8 million.

So as compared to last year, where we were pretty tight on it as well, ground 23. Again, I would just caution that at some stage -- as we look at Q4 and beyond, please expect that we will start to make some investments.

But it just gives you a sense in terms of the ability for us to really control our CapEx and software budget and make sure that we can invest in the business at times that we feel. So with that, let me turn it over back to Kyle to talk about the outlook, and we’ll open it up for questions after that.

Okay. Thanks, Reza.

William, I’m on the outlook page. So we are strongly encouraged by the accelerating improvements in our sales performance, as you know.

And we’re seeing it across all regions. And we’re really pleased with the positive momentum we have on adjusted EBITDA, moving into teens EBITDA margins, generating significant cash flow.

And the way I look at this is with plenty more recovery to come. We’re really getting into momentum here on the recovery side.

And we’re already achieving numbers that I think are impressive in and of themselves. And there’s clearly more to come.

As I mentioned, October looks even better than what we’ve seen for Q3. That said, and I think it’s important, we all know this, the extent and duration of COVID-19 pandemic kind of remains uncertain.

We’re seeing and we’re watching vaccination levels across regions and by country. That’s quite significantly improved over the last several months.

And likely -- but the challenges the pandemic will continue to cause some challenges with travel restrictions coming and going. But I think the share momentum here is moving in the right direction, but we shouldn’t downplay the fact that we’re still navigating through pandemic.

We do expect to see travel recovery continue across all regions for the remainder of the year and into next year. When we -- the travel restrictions lifted between the U.S.

and Europe and I would say Latin America and some countries in Asia, actually, these restrictions will clearly move the needle as we move into November and December and into the first quarter of next year as we construct to move. We’re seeing within Asia, some travel restrictions opening and some channels opening in Asia.

And I think Asia will take a bit longer than what we’re seeing in the U.S. and Europe, but we’re seeing some really good early signs of travel starting to open up not in every country, but between countries, I think, moving in the right direction.

And that will carry into Q1, and I think into Q2 of next year as Asia starts to move again. Our gross margin, as I said, I think will remain under pressure with freight costs and material costs, but we are very focused on delivering on our gross margin.

As you can see, we had a strong Q3. That’s only improved as we stepped into Q4.

So I think we’re in the right place on the margin side. But our teams have a lot of work to do to ensure we maintain that, and so we’re very focused there as well.

We are seeing persistent challenges with shipping and port congestion. We’re not alone here.

The whole world is seeing this. And it can have impact on timing of products and the pace of recovery can be stalled.

We’re seeing some challenges in that within North America, but still performing. Our teams, our sourcing and supply teams have just done an amazing job.

They did an amazing job last year managing inventory down and they’re doing an amazing job working with our wonderful suppliers and the whole structure to ensure that we’re able to continue to deliver products. And I want to be clear, we’re getting our products.

We’re getting products in every single month. We’re getting a meaningful number of containers, 800 to 900 containers globally a month we’re receiving.

The challenge is recovery is happening at a quick pace. And we need a little bit more containers to even be ahead of that.

And so our teams are laser-focused on ensuring we maximize the flow of products to all of our regions. We’re managing the product cost increase, as I say, and pricing to navigate gross margin.

So we’re really focused remaining disciplined on controlling our expenses. And as Reza said, capital expenditures, software investments, we’ve done an amazing job of holding that tight, and we’ll continue to hold for the remainder of this year.

And as Reza says, you should start to see our working capital increasing. That’s a sign of us getting our inventory levels back into the right place as business is recovering.

And we’ll start to make some careful and calculated expenditures on CapEx. But as you can see, we have a clear ability to manage these levers and we’ve done that.

We are managing marketing spends. And as we see markets starting to move, we’re increasing advertising.

So in the U.S. in Europe.

And with Tumi, we’re starting to move forward on advertising, still below historic levels, but where it’s right, we are leaning into advertising. And we believe we have leading brands, coupled with the best teams.

I always try to end on teams, but the teams that we have across this business are the best in this industry, and we are navigating through this, and we have this ongoing commitment to sustainability in our ESG program and innovation, which will help strengthen the long-term market position in this business. And as travel returns to pre-COVID levels, we are really positioned to position this business in the right place, and we’re seeing it right now in front of us in Q3.

And we have significant liquidity, $1.3 billion. I have 0 doubt in our ability to continue to navigate and position this business and really be a stronger company on the other side, which I hope you get a sense and it takes for that as you look at our Q3 numbers as we move into a stronger Q4.

So with that, William, we will gladly take some questions. So I’ll hand it back to you, William.

Great. Thank you very much, Kyle and Reza, for your presentation, and we are now open for Q&A.

So, operator, can you pull in the first -- put through the first caller?

Congratulations to the great results. And so my first question is about the GP margin.

So could you give us more color on the breakdown of the GP margin improvement? Like if we have the 3 percentage points of GP margin improvement on quarter-on-quarter basis, so how much will be the -- sorry, the shipping expense increase impact?

And what is the impact from the -- from outsourcing saving and et cetera? So this is my first question.

My second question is, could you share with us our outlook or expectation on the sales and adjusted EBITDA margin for Q4 and 2022 next year? So my third question is about interest cost.

So are we planning to pay down more debt in the next couple of months? So what is our expectation on the interest cost for the next year?

Why don’t I kick it off and then Kyle can jump in as well. So as it relates to GP margin, largely , your question was really around freight and the supply chain.

So there’s 2 things that are happening in the supply chain. On the 1 hand, the teams are managing products.

So as they look at ordering they’re basically trying to make sure that we manage to a certain price point, but that we still hit our margin profile. So they work with the suppliers to make sure that, that’s happening.

That does not necessarily offset all of the freight costs. So what we’ve done on the -- to the freight offset has been to increase prices.

So if you’re looking at prices throughout all of the regions, the way that we’re managing our GP margin has been really in terms of making sure that we’ve increased the prices to offset that. So if you’re looking at where we are in terms of Q3 specifically, there’s a minimal impact of freight costs to our GP margins because we pass it on to the consumers.

The -- in terms of your second question was, I think, on adjusted EBITDA for the back half of the year, if I recall, our expectation is that the margin should continue to improve as it relates to the adjusted EBITDA margin. The reason for that is we’re still holding on to the cost saves.

And what you saw between Q2 and Q3 of this year is really every incremental dollar of sales, we’re already absorbing our fixed cost structure where we are with this level of sales. But as you get into an environment where we’re down in, call it, the low 30s, high 20s in sales, all of those incremental dollar sales really do flow through to the bottom line.

So that just continues to improve our adjusted EBITDA margin. What we’ve said previously, I think, holds is that at the back half of the year, we should be expecting us to exit in the mid-teens.

And I think you’re already starting to see that we’re in the low-teens. And so our expectation is by Q4, we will continue to do that.

As it relates to interest costs, the -- we will continue -- it depends on the cash flow generation, probably between now and the end of the year, there won’t be that much additional debt pay down, but we are having a discussion with Kyle and the Board in terms of -- at the beginning of next year. As you know, we’re carrying a significant amount of liquidity and we have prepayable debt.

And so there’s a question around the amount of cash that we have on the balance sheet and the debt. There is a negative carry that comes with that.

So I think that will probably be at the beginning of next year we’ll really readdress that just given the fact that we just repaid close to $400 million just in the last few months. But we will definitely revisit that because I think we feel very good about our overall liquidity levels and our debt levels.

The interest costs are coming down and the $20 million that I alluded to a little bit earlier has to do with the fact that we also repriced our facilities. So that benefit is going to be flowing through, and you’ll see that $20 million benefit through all of next year.

But obviously, we want to try to reduce the aggregate debt levels to get additional interest rate savings as well going into next year. But most likely, that will be a Q1 discussion with us.

Got it. So quick follow-up on the GP margin.

So we mentioned -- so you mean that the price increase will be the main positive factor that offsets the headwind from the raw material cost side, is that correct? So if this is the case, so how much -- or what is the percentage for the price hike?

So the second question is about the adjusted EBITDA margin. So what is our outlook for the next year?

I’ll take both of those. From a -- there’s really many levers we’re pulling on the margin side to manage.

And pricing is one of them. And I would say blended across this business, we’re somewhere in the 10% to 15% price increase range.

Some markets a bit more than others, depending on where they are in the recovery. But across the board, it’s been about that.

The other levers that we have here around promotions. So we -- 1 is -- a big piece of the margin improvement that we’ve seen off of the beginning of the year is less promotional as we’ve worked through inventories and we’re now in a position where our inventories are clean, we don’t need to be promotional.

We have some promotion in holiday, but in a different level than what we’ve had to do or have done in the past -- have to do, but have done. So promotion and pricing are probably the biggest levers.

But you shouldn’t underestimate our ability to work with suppliers and reengineer product. And as we get into next year, a lot of our store will be around what are we doing our suppliers and everything that we do and what we put to the market to minimize the amount of price increase that ends up on our products.

And I think the world is seeing general inflation. We’re trying to manage it as tightly as we can.

So that -- it’s not just a price story. And again, I think with our scale advantage, our ability to manage all of the levers that feed into that or how we can achieve the gross margin.

For next year, I think there are really 2 questions. What do we think the sales outlook will be for next year?

And as you can tell, that’s a bit uncertain with recovery. My general view is our sales for the full year next year will probably be down 15% to 20%.

That’s my best read right now with Asia taking a little bit longer to recover. And I think it will be a building trend.

So as we get to the end of next year, I think you’ll see a business that’s starting to get to historic levels, but I think Q1 and Q2, particularly with Asia’s recovery taking a little bit longer, will hold us to a full year that’s probably down ideally 15% to 20% maybe on the high side. That’s my best look right now.

We’re watching it and the whole world, trying to sort out what that is. But I think we can be in that ZIP code as from the trends that I’m seeing.

From an EBITDA margin perspective, my view for next year is we should be strong mid-teens EBITDA margin. And that’s with bringing advertising back up to historic levels.

So we’re spending advertising today at around 3.5%. And I have a vision to moving advertising back up close to 6% next year and still deliver on a very strong mid-teens margin for the full year and an exit run rate that gets to the levels that I think we should be, which is starting to get north of 15% EBITDA margin on an exit run rate is what I would expect for this business for next year.

And that’s with us getting back to investing and driving the brands with the appropriate amount of advertising. So we’re really excited about it.

We’re clearly seeing that we’ve moved EBITDA margins into a ZIP code. We saw an amazingly strong EBITDA margin in October, and I expect for Q4, it will be strong as well overall and an improving number from what you saw from our Q3, which we are equally as excited.

And this is against a business that’s still down 37% in Q3. Imagine when we start to get close to historic levels, what will flow through to the bottom on the EBITDA side.

So we’re quite excited about the trends that we’re seeing.

First question related to inventory. Just about a year ago, we kind of worried about there are too much inventory in the channel, but now looking at the balance sheet, company’s inventory is probably only 50% of the pre-COVID level.

So how should we think about that? Is that do we have enough inventory for the upcoming holiday season?

And also in the presentation, it says that some of the poor congestion and the delayed shipments continue to next year. So how should we think about the recovery, for example, like first quarter, second quarter for North America?

So that’s kind of the first question. So second question, management mentioned the pricing would not be the only tool to offset a lot of the cost pressure, but just one, if we can share some more details about how much pricing that company has already taken and how much that we can -- company can take further?

If the cost increase will go above our current expectations, like how much leeway that we have? And finally is just the recent trend, like we know October seems to be pretty good how about the initial look into November, especially I think in the U.S., the border just be reopened.

So how -- does management hear something from the airlines about the forward booking, color like indicating the international flights, especially between the Europe and the U.S. has been recovery to actually better than what we expect for the fourth quarter or next year?

Okay. Dustin, I think I captured them all, so -- and Reza read the pipe in if I miss anything.

So on the inventory side, you’re exactly right. A year ago, we were in a different spot.

We were managing inventories down as you would expect us to. And I think we did an amazing job.

Our teams really did an amazing job. And we’re here now.

And I think when you look at inventory, I think it’s important to look at inventory days which are actually running at historic levels, 141 days of inventory. And the challenges as recoveries are picking up, we need to be getting inventories in.

And if it wasn’t for shipping challenges, we would clearly be there. So much of this will be around some of the delays we’re seeing on shipping.

Our teams are very well ordered on inventory. We’ve ordered actually out in many markets, 3, 4 quarters as we lean into getting our inventory positions moving to be in line with the recovery that we’re seeing.

And so my view is, we’re about a month behind on the challenges of shipping and getting inventory here, and so I don’t think it will have a dramatic impact on our numbers. But in North America, we’re seeing our sales could have been better really as we step into the end of Q3 and Q4 because we’re chasing inventory.

It’s not that we don’t have the inventory. It’s just caught up in the congestions of shipping.

Our suppliers are in a really wonderful place. They’re producing.

They’re -- I have no -- you didn’t hear us talk anything about supplier challenges. Our suppliers are in the right place.

There are a little hiccups here and there, but we’re generally in the right place. And I think as the shipping delays catch up, I think you’ll see this so is about.

The challenge we’re having Dustin is what’s the timing on that? The whole world is trying to sort out when does this correct?

And there’s plenty of indications, let’s say, it takes all of next year to recover, I think it will show recovery in Q1 and clearly into Q2, where we’ll get ourselves back into a position where we’re not missing any of the opportunities. And again, the opportunity is aren’t big enough.

You’re going to still continue to see an improving trend Q1, Q2. I think North America will continue to improve.

We saw a very strong start to Q4 with North America. November looks very strong.

And so I think going to be fine, it’s like a pendulum swing for our sourcing and supply team. We went from trench in to bring it in, and we’re very actively bringing it in.

And we’re well ordered a add on inventory across all regions. And we’re allowing everybody to kind of lean into this to make sure we’re in the right place.

So I think we’ll be fine, and the noise you’re seeing is the noise that everybody is seeing on the challenges around shipping logistics. -- pricing is really a function of what we can do to manage margins, looking both at what’s happening now.

I gave you an indication of where we are now on price increases. Could dive more as we move into next year?

There could be. We’re watching to see what the shipping cost does.

I think we factored in the raw material increases as best we can. There’s general inflation in the marketplace.

So we’re watching that as well. I think the key here is our entire industry is in the exact same spot.

So I think you will see an industry that’s moving. But again, it’s not just our industry, I think generally, inflation is moving.

It’s catching the attention of everybody right now. And we’ll be managing this as closely as we can.

I think scale advantage, we shouldn’t lose sight of the fact that our ability to work with our suppliers in engineered products and manage everything we can to manage kind of pricing and margin and what products we put in the floor at what price point are what we’re really good at. This is the scale that we have against a fleet of brands and products across our brands, ranges of products within each brand that we can manage this very carefully.

And we’re not -- we’re focused on that equally as we are with the challenges on shipping and logistics. And so you should expect -- and we have a long history of actually managing this business in that kind of pressure point.

And we do a really good job at it. So I think we will manage margins right in that zone using all of the tools that we can to do that.

Early read for November is it looks consistent with October. And my sense is there’s pockets of upside.

There’s some pockets of challenge. We’ve seen a little bit of noise within certain countries within Europe, as Reza indicated.

But on balance, it’s moving forward, I think this travel to these channels opening up to the U.S. from Europe and Latin America and even some countries within Asia, it’s an early read, it was just this past Monday that, that opened up.

But you’re exactly right. The forward bookings are very high.

When I talk to Fabio and read the excitement of our European team. Forward bookings are high.

Airlines are opening fleets and moving. Caught the media’s attention last week.

I quite enjoyed the article in British Air and Virgin taking off at the exact same time from Heathrow on Monday. There is real pent-up demand on travel.

And I think that will play into November. It will play into December.

I think the holidays are coming. There’s a lot of folks that want to get together for the holidays.

So I think that’s going to fuel a good story as we move into the end of the quarter and into next year.

It’s very good to hear. Just to follow up on the GP margin.

So I think you just sort of set a target for next year EBITDA margin like north of 50%. But for GP margin, should we still assume around like 55% to 54% GP margin given...

I would assume $55, Dustin, but I think there’s going to be plenty of pressures. I think 55% to 56% is the range that will be.

We’ll be very focused on kind of holding the levels that we are now. My own models when we look at it is a little bit higher, but I think there’s enough pressures out there that ZIP Code is the right place to be.

And I want to clarify, I think we’ll be mid-teens for the full year, I think we can have a really good exit run rate that can be a little bit north of that for next year. But for the full year, remember, we’ve got a first half that’s still recovering.

But I’ll tell you, we saw a really wonderful number for October. It looks like it will carry into November.

So we’re very comfortable in this mid-teen zone where we are now, and we’ll get to that same level for the full year next year. With really that stepping up, if you think about it, we’ll bring advertising up 200 to 300 basis points in next year’s numbers as we feed the brands on the recovery.

So...

Dustin, I think, again, we’re trying to be conservative. I’m sure you can appreciate that as well.

So just we are seeing those GP margin levels today. But again, as we’ve said, there’s definitely pressures there, and it takes a lot of work from the teams in order to be able to manage to that margin level.

So we’re erring on the side of conservatism there. The good news is we more than offset it on the cost increases on SG&A.

So as we look at the EBITDA margin line, we feel that we can offset any sort of pressures that may happen on GP margin there anyways to get to those EBITDA margin levels.

My question is on the outlook for year 2022. We just mentioned about the 10% to 15% decline versus year 2019.

So I think like this guidance is better or you have less this guidance versus like a year ago? And a year ago, I remember you also mentioned about like year 2023, you expect that sales will be more or less back to the year 2019’s level.

So in that case, do you think that for year 2023, we should -- we can be a bit more optimistic for that?

I think if you -- I think exit run rate next year, we can start to be close to historic levels. That’s my best read now.

As you can imagine, it’s hard to predict that, right? And so -- and I tend to be a conservative guy.

So for me to be giving you that guidance, it’s probably the more optimistic side of my view. You also have to remember, we’ve adjusted our business a little bit, right?

So our business has changed a bit. We sold Speck.

That will be a piece of that when we look forward. We’ve closed some retail stores.

Now that -- I’m not so worried about that because that volume will fine. But there is kind of a step change in the retail footprint.

We’ll start to open some stores next year, but in a very limited way because I don’t think it’s the right time to lean forward on that. There’s plenty of recovery just naturally happening, so.

And one of the wildcards is what does the first half look like? I think the prediction piece is a little harder on the first half with Ages recovery and when do we start to see channels in Asia really start to move, which will have a big impact on what is the second half of the year look like.

I think there could be moments where the second half of the year can be higher than ‘19. But I’m not -- we’re not working that into our models because there’s enough uncertainty here.

We didn’t talk a lot about it on this call, but the reality is you look at vaccination levels and the continued improvement of vaccination levels globally, you look at new tools in the fight on COVID with pills that can help treat people fairly quickly. None of that’s actually worked into the story yet as far as getting those pills approved, how does that work through those that is easier to transport around the world and get more global access to it.

I think that will have an impact. But we need to see that play out, which is why I said there’s still plenty of uncertainty in the numbers.

We tend to operate conservatively to make sure that we’re taking actions on the cost side to manage this business so that we’re overachieving on the profit side. Could there be some upside?

For sure. Would I model it in, I would just -- I would -- I tend to be a little more cautious, which is why I gave a range.

And the range I gave for the full year is kind of down 15% to 20%, not 10% to 15%. So I think that’s my kind of cautious view, but it could be better.

We’re just not -- we don’t have enough visibility yet. We consciously are stalling the finalization of our budget for next year.

So that we give all of our teams enough time to see what recovery looks like November, December, even into January before we really settle down so we can see the continued momentum. From where I sit today, momentum looks like it’s going to continue across all regions.

That’s my best view. Forward bookings, airlines, our business, what we’re seeing in trends all is moving in the right direction, but getting the exact numbers are hard to give you on a call like this.

Yes, fair enough. But just wanted to get a little bit more idea in terms of like year 2022.

In your assumption, are you factoring in China, like opening up, like having international travel? I mean the question is like what is the -- I mean, China is not opening up like good enough...

I’ll give you my China story, okay? I think -- because I think China is -- yes, we touched it quickly, but our China business is performing very well right now.

It’s having some ups and downs as the travel restrictions come in and out. But on balance, we’re down around high 20s for China for this year.

It’s probably 1 of the markets that’s performing the best because domestic travel is moving within China. And that’s driving a huge piece of that business.

So let’s say we’re down high 20s. My view is that the China borders potentially have some room for some movement at the end of Q2, but most likely Q3.

So we’re factoring in, in our -- when we look at forward, a China international travel that stays heavily restricted for much of next year. But China domestically is performing so well that we’re feeling good with our numbers, even with China performing at the level it’s performing right now.

And the real kind of movement for Asia with the uncertainty is how to big markets like Japan and Korea start to open. And they’re all signaling the openings and they’re getting to vaccination levels that are very high.

And in Australia and how do they start to move? We’re seeing some channels within Asia opening now, so you can get in and out for.

What the question is, so what does that look like at the end of Q1, at the end of Q2? My general view is other than China, by the time you get into Q2, much of the rest of Asia starts to move.

And as you saw Europe move -- once they start to move, you need a quarter and a half or so before they really start to get into a good territory.

To have the step change that it gets you back to the 2019 levels overall is Asian tourists going to Europe, Asian tourists coming to the U.S., and that’s where we’re being cautious right now. So the numbers we’re talking about, we’re not expecting that to happen until the back half of next year at the earliest.

Right.

Sorry. My question has been answered, but very big congratulations on the very good results.

Thanks.

Thank you very much.

Thank you very much.

I have 2 quick ones and a much broader one. So the 2 quick ones, first on the store count.

If you can give us an update of where you are? I think Kyle, you said you might be starting to open a few physical stores next year.

So I’m just wondering where the store count will go? Are you happy with where you’re at today?

And where does it go to over the next 12 months? The second quick question is on FX.

I’m just wondering with the strength of the dollar today, when does that start to hit? How do the mechanics work there?

And the third and much more broad question is around how you think about your portfolio, i.e., do you -- are you committed to all the brands you have today? And then on the other side, because you still have a world that’s reopening, and yes, probably Chinese travel will only start late ‘22, early ‘23 at best.

Is this not the window to actually look at potentially adding to your portfolio? I know we’re just getting out of this, but at the same time, that window might pass.

So how do you think about your portfolio?

Erwan, why don’t I start with the first 2, and then I’ll turn it over to Kyle. Store counts, you’re absolutely correct, we are starting to open stores, but our net store count at the end of the quarter was down to -- was actually down from the last quarter.

So we were at 1,016, if memory serves. I was actually flipping here to find exactly what it was.

But I’m pretty sure we were at 1,016 stores which is down from the 1,100 we ended just shy of 1,100. I think we have 1,096 or 1,097 at the end of December of last year.

We are definitely opening stores. The types of stores that we’re opening are like Tumi in China, as an example.

We’ve opened up a bunch of Tumi stores in China. That’s continuing.

But we also had, as part of our SG&A savings, a whole bunch that were slated to close over the course of the year. So the ones that are closing.

So the net number is still coming down because we had the nonperforming ones that we were still unwinding. So as we go into next year, you should expect that store count to start to increase.

It’s not materially, but just it should be higher than the levels that we are right now. And again, selectively in markets that make sense.

FX, so far, we’re managing it through. So as the FOB prices come in, we’re basically factoring that into our price increases to make sure that gets passed on to the end consumer, whether it’s through DTC channels or wholesale.

It’s something that we monitor. And obviously, our suppliers work with us on that as well because their cost structure materially changes depending on what happens there.

So the net-net of it is it hasn’t had a material impact for us.

I was reading an Outlook on FX this morning actually, Erwan, and it has the dollar strengthening next year, which is a good thing for us. So that will be a positive as the many markets are buying in dollars.

So today, FX -- the U.S. dollar strength has been a little bit of a challenge on pricing, but it will be a benefit for us as we move into next year.

Erwan, I actually found my red cheat-sheet and I’m happy to report that my numbers were right. 1,096 stores at the end of December 1,027 stores at the end of June and 1,016 as of 9/30 is the total store count.

And obviously, the majority are Samsonite. It’s roughly 1/3 Tumi and 2/3 Samsonite.

Yes. And just for scale for next year, I think if we had 15 or 20 store openings, that’s the kind of magnitude.

It’s not a big number next year. As far as portfolio, I am very happy with where we are in our portfolio.

We’ve done a lot of work in the last 18 months on rationalizing our SKUs, focused on our brands, rationalizing brands to put them in the right profit profile, maybe even adjusting or rightsizing them so that they’re producing profit, but in the right -- with the right mix of products. And so I think our portfolio is fine.

We’ve got some small players like an eBags or Hartman that are just well placed in playing a game. They’re not the biggest businesses for us, but they’re not distracting and they’re filling a spot.

We sold Speck. I think that was the right thing to do in the midst of pandemic.

I think it’s a great brand. But for our portfolio, it wasn’t the right thing and so we did that.

So we have no intentions of shifting any of our portfolios. The reason I want to get back to advertising levels is some of our brands we need to feed.

And so our core 3 brands really drive most of our business. And they all need to be fed the right way.

And so we’re leaning in on that. I totally agree with you on the portfolio.

This isn’t the worst time to think about things. As you can imagine, we’ve had inbounds to us.

But for me, I think we listen, which is what we’re always doing. But I’d rather get this business on the right footing, comfortably past our debt covenants as we shift back from kind of assisted covenants to kind of live covenants, which we get to in the back half of the year.

But we’re always listening. And if the right things come along as we get to the back half of the year, you should assume we do it.

I don’t think it’s the right moment now for us, to be totally frank. I think we got enough around us.

We’ve got enough really exciting momentum with our core brands, but that’s where we should focus. But if anything comes our way, we do always take a listen.

And I think as we get into the end of this year into next year, I think that will be a moment where we can lean forward a little bit more, and we’ll be cautious up to that.

Great. Thank you very much, operator.

And thank you very much, everyone, for attending the call, and thanks to Kyle and Reza for the presentation. And with that, we will complete the call.

Thank you.

Thank you.