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What changed in Ermenegildo Zegna N.V.'s 20-F — 2022 vs 2023

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Paragraph-level year-over-year comparison of Ermenegildo Zegna N.V.'s 2022 and 2023 20-F annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+1095 added−1140 removedSource: 20-F (2024-04-05) vs 20-F (2023-04-06)

Top changes in Ermenegildo Zegna N.V.'s 2023 20-F

1095 paragraphs added · 1140 removed · 333 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

17 edited+193 added−249 removed3 unchanged
Biggest changeFor the years ended December 31, (€ thousands, except percentages) 2022 Percentage of revenues 2021 Percentage of revenues 2020 Percentage of revenues Revenues 1,492,840 100.0 % 1,292,402 100.0 % 1,014,733 100.0 % Other income 13,949 0.9 % 8,260 0.6 % 5,373 0.5 % Cost of raw materials and consumables (311,320) (20.9 %) (309,609) (24.0 %) (250,569) (24.7 %) Purchased, outsourced and other costs (437,928) (29.3 %) (353,629) (27.4 %) (286,926) (28.3 %) Personnel costs (395,087) (26.5 %) (367,762) (28.5 %) (282,659) (27.9 %) Depreciation, amortization and impairment of assets (173,521) (11.6 %) (163,367) (12.6 %) (185,930) (18.3 %) Write downs and other provisions (14) — % (19,487) (1.5 %) (6,178) (0.6 %) Other operating costs (41,142) (2.8 %) (180,836) (14.0 %) (30,399) (3.0 %) Operating Profit/(Loss) 147,777 9.9 % (94,028) (7.3 %) (22,555) (2.2 %) Financial income 13,320 0.9 % 45,889 3.6 % 34,352 3.4 % Financial expenses (54,346) (3.6 %) (43,823) (3.4 %) (48,072) (4.7 %) Foreign exchange (losses)/gains (7,869) (0.5 %) (7,791) (0.6 %) 13,455 1.3 % Result from investments accounted for using the equity method 2,199 0.1 % 2,794 0.2 % (4,205) (0.4 %) Impairments of investments accounted for using the equity method — — % — — % (4,532) (0.4 %) Profit/(Loss) before taxes 101,081 6.8 % (96,959) (7.5 %) (31,557) (3.1 %) Income taxes (35,802) (2.4 %) (30,702) (2.4 %) (14,983) (1.5 %) Profit/(Loss) 65,279 4.4 % (127,661) (9.9 %) (46,540) (4.6 %) For additional information relating to constant currency information, see “
Biggest changeFor the years ended December 31, (€ thousands, except percentages) 2023 Percentage of revenues 2022 Percentage of revenues 2021 Percentage of revenues Revenues 1,904,549 100.0 % 1,492,840 100.0 % 1,292,402 100.0 % Cost of sales (680,235) (35.7 %) (564,832) (37.8 %) (495,702) (38.4 %) Gross profit 1,224,314 64.3 % 928,008 62.2 % 796,700 61.6 % Selling, general and administrative (901,364) (47.3 %) (695,084) (46.6 %) (822,897) (63.7 %) Marketing expenses (114,802) (6.0 %) (85,147) (5.7 %) (67,831) (5.2 %) Operating profit/(loss) 208,148 10.9 % 147,777 9.9 % (94,028) (7.3 %) Financial income 37,282 2.0 % 13,320 0.9 % 45,889 3.6 % Financial expenses (68,121) (3.6 %) (54,346) (3.6 %) (43,823) (3.4 %) Foreign exchange losses (5,262) (0.3 %) (7,869) (0.5 %) (7,791) (0.6 %) Result from investments accounted for using the equity method (2,953) (0.2 %) 2,199 0.1 % 2,794 0.2 % Profit/(Loss) before taxes 169,094 8.9 % 101,081 6.8 % (96,959) (7.5 %) Income taxes (33,433) (1.8 %) (35,802) (2.4 %) (30,702) (2.4 %) Profit/(Loss) 135,661 7.1 % 65,279 4.4 % (127,661) (9.9 %) Revenues The Group generates revenues primarily from the sale of its products and services, as well as from royalties received from third parties and licensees.
Funding strategy With the aim of reducing the cost of financing while continuing to ensure the Group has adequate access to liquidity to meet its financial commitments and guarantee flexibility for its operations and any expansion programs, starting in 2022 the Group has replaced a portion of its 2022 and 2023 debt maturities with new bilateral committed revolving credit facilities that may be drawn down by the Group at any time during the relevant term.
With the aim of reducing the cost of financing while continuing to ensure the Group has adequate access to liquidity to meet its financial commitments and guarantee flexibility for its operations and any expansion programs, starting in 2022 the Group has replaced a portion of its 2022 and 2023 debt maturities with new bilateral committed revolving credit facilities that may be drawn down by the Group at any time during the relevant term.
Zegna recognizes tax expenses in multiple tax jurisdictions based on (i) the estimates of taxable income, (ii) the required reserves for uncertain tax positions, (iii) deductible temporary differences, tax loss carry-forwards and tax credits to the extent that their future offset is probable, (iv) withholding taxes on unremitted earnings, and (v) the way in which Zegna intends to recover or settle the carrying amount of deferred tax assets and liabilities.
The Group recognizes tax expenses in multiple tax jurisdictions based on (i) the estimates of taxable income, (ii) the required reserves for uncertain tax positions, (iii) deductible temporary differences, tax loss carry-forwards and tax credits to the extent that their future offset is probable, (iv) withholding taxes on unremitted earnings, and (v) the way in which the Group intends to recover or settle the carrying amount of deferred tax assets and liabilities.
As a result, Zegna’s overall effective tax rate is affected by the proportion of earnings from the various tax jurisdictions and by the ability to generate sufficient and suitable future taxable profits from which the reversal of any deferred tax assets can be deducted.
As a result, the Group’s overall effective tax rate is affected by the proportion of earnings from the various tax jurisdictions and by the ability to generate sufficient and suitable future taxable profits from which the reversal of any deferred tax assets can be deducted.
At any time, there are multiple tax years that are subject to examinations by various tax authorities. Additionally, Zegna is subject to duties applicable to the importation of our products in various countries in which we operate, which may impact the cost of such products.
At any time, there are multiple tax years that are subject to examinations by various tax authorities. Additionally, the Group is subject to duties applicable to the importation of our products in various countries in which we operate, which may impact the cost of such products.
For additional information see “ —Liquidity and Capital Resources—Net Financial Indebtedness/(Cash Surplus). ” 57 Tax obligations and changes in tax laws, estimates, treaties and regulations Zegna is subject to taxation in Italy, the United States and China, as well as various other jurisdictions, with the applicable tax rates varying by jurisdiction.
For additional information see “ —Liquidity and Capital Resources—Net Financial Indebtedness/(Cash Surplus). ” Tax obligations and changes in tax laws, estimates, treaties and regulations The Group is subject to taxation in Italy, the United States and China, as well as various other jurisdictions, with the applicable tax rates varying by jurisdiction.
Seasonality The luxury apparel market in which Zegna operates is subject to seasonal fluctuations in sales. Zegna’s sales are usually higher in the months of the year in which wholesale customers concentrate their purchases.
Seasonality The luxury apparel market in which the Group operates is subject to seasonal fluctuations in sales. The Group’s sales are usually higher in the months of the year in which wholesale customers concentrate their purchases.
With regards to retail sales at Zegna’s DOSs, sales tend to be higher in the last quarter of the year, driven by the holiday shopping season and in January and February, in correspondence with the Chinese New Year celebrations. However, several events may affect retail sales, including adverse weather conditions or other macroeconomic and external events (including the COVID-19 pandemic).
With regard to retail sales at the Group’s DOS, sales tend to be higher in the last quarter of the year, driven by the holiday shopping season and in January and February, in correspondence with the Chinese New Year celebrations.
Pursuant to such agreements, at the closing of the TFI Acquisition we will enter into the TFI License, whereby TFI (which will then become Zegna’s wholly-owned subsidiary) will act as the licensee of The Estée Lauder Companies for all TOM FORD men’s and women’s fashion as well as accessories and underwear, fine jewelry, childrenswear, textile and home design products, for a term of 20 years, subject to renewal at Zegna’s option for a further 10 years subject to certain minimum performance conditions.
As part of the TFI Acquisition, the Group has become a long-term licensee for all TOM FORD men’s and women’s fashion as well as accessories and underwear, fine jewelry, childrenswear, textile, and home design products for 20 years with an automatic renewal for one further 10 year period subject to certain minimum performance conditions.
Following the escalation of the conflict in Ukraine we immediately suspended production of products for, as well as new order collection from, our Russian franchisees and distributors, and reallocated products to other geographies, primarily in EMEA. It is uncertain whether and when we will resume such production.
As a result of the ongoing conflict in Ukraine and wide-ranging sanctions on certain industries and parties in Russia, from March 2022 we suspended production of products for, as well as new order collection from, our Russian franchisees and distributors, and reallocated products to other geographies, primarily in EMEA.
Operating costs, in contrast, do not generally experience significant seasonal fluctuations, except for certain increases in the months of November and December due to the variable costs associated with sales commissions and leases. As a result of the foregoing, the financial results for interim periods may not be indicative of results for the entire fiscal year.
However, several events may affect retail sales, including adverse weather conditions or other macroeconomic and external events (including the COVID-19 pandemic). Operating costs, in contrast, do not generally experience significant seasonal fluctuations, except for certain increases in the months of November and December due to the variable costs associated with sales commissions and variable leases.
Following an increase in DTC revenues in the Greater China Region in the third quarter of 2022 compared to the third quarter of 2021, driven by a significant increase in e-commerce sales for both the Zegna and Thom Browne segments and the gradual recovery of in-store sales, new COVID-19-related restrictions in October and November and some further unplanned temporary store closures in December 2022 due to a new wave of the virus had a negative effect on sales.
Starting in June and through the third quarter of 2022, DTC revenues in the Greater China Region showed a positive trend compared to the third quarter of 2021 as a result of a significant increase in e-commerce sales for both the Zegna and Thom Browne segments and the gradual recovery of in-store sales.
COVID-19-Related Rent Reductions For the years ended December 31, 2022, 2021 and 2020, Zegna obtained COVID-19 related rent reductions agreed with lessors for €7,194 thousand, €12,877 thousand and €24,931 thousand, respectively, which were accounted for in accordance with amendments to IFRS 16 — Leases (“ IFRS 16 ”) issued by the IASB which exempt lessees from determining whether COVID-19-related rent concessions are lease modifications, thereby providing a practical expedient to immediately recognize the entire economic benefit of such rental discounts in the statement of profit and loss. 58 Results of operations The following is a discussion of Zegna’s results of operations for the year ended December 31, 2022 as compared to the year ended December 31, 2021, and for the year ended December 31, 2021 as compared to the year ended December 31, 2020.
Item 3.D—Risk Factors—Risk factors relating to the Group’s business, strategy and operations—We are subject to risks related to the COVID-19 pandemic or similar public health crises that may materially and adversely affect our business. ” COVID-19-Related Rent Reductions For the years ended December 31, 2022 and 2021, the Group obtained COVID-19 related rent reductions agreed with lessors for €7,194 thousand and €12,877 thousand, respectively, which were accounted for in accordance with amendments to IFRS 16 — Leases (“ IFRS 16 ”) issued by the IASB which exempt lessees from determining whether COVID-19-related rent concessions are lease modifications, thereby providing a practical expedient to immediately recognize the entire economic benefit of such rental discounts in the statement of profit and loss. 56 Funding strategy With the aim of reducing the cost of financing while continuing to ensure the Group has adequate access to liquidity to meet its financial commitments and guarantee flexibility for its operations and any expansion programs, starting in 2022 the Group has replaced a portion of its 2022 and 2023 debt maturities with new bilateral committed revolving credit facilities that may be drawn down by the Group at any time during the relevant term.
On November 15, 2022, Zegna entered into arrangements to acquire the 85% interest in TFI not already owned by the Group (the Group currently owns 15% of TFI), and to enter into a long-term license agreement with The Estée Lauder Companies for all TOM FORD men’s and women’s fashion as well as accessories and underwear, fine jewelry, childrenswear, textile and home design products.
The TFI distribution license agreement ended with the deliveries of the Fall/Winter 2022 collection and the Group expects to commence the TFF License in the second quarter of 2023 for all TOM FORD men’s and women’s fashion as well as accessories and underwear, fine jewelry, childrenswear, textile and home design products.
For additional information relating to the Business Combination and the Warrant Redemption, see Note 1 — General information and Note 43 — Subsequent events to the Consolidated Financial Statements included elsewhere in this annual report on Form 20-F. Impact of the COVID-19 pandemic Zegna’s operations have been, and continue to be, affected by the ongoing outbreak of COVID-19.
For additional information relating to the TFI Acquisition and TFF License, see Note 39 — Business combinations within the Consolidated Financial Statements included elsewhere within this annual report on Form 20-F. 89 Recent Developments See Note 40 — Subsequent events to the Consolidated Financial Statements included elsewhere in this annual report on Form 20-F. C.
See also “ —General economic conditions, macro events and international tourism ” above. 55 The table below sets forth Zegna’s cost of raw materials and consumables for the years ended December 31, 2022, 2021 and 2020.
See also “ —Trends, Uncertainties and Opportunities—Acquisitions. ” 60 Revenues by distribution channel The following table sets forth a breakdown of revenues by distribution channel for the years ended December 31, 2023, 2022 and 2021.
In particular, from mid-March 2022 until the end of May 2022 and again in the fourth quarter of 2022, Zegna closed certain DOSs in the Greater China Region. In addition, DOSs that remained open in the region have been experiencing significantly lower customer traffic.
The Greater China Region was adversely impacted by aforementioned COVID-19-related restrictions in 2022, which resulted in the temporary closure of certain stores and lower customer traffic, primarily from mid-March until the end of May, impacting both ZEGNA and Thom Browne directly operated stores.
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Item 3.D—Risk Factors—Risk factors relating to Zegna’s business, strategy and operations—We could be adversely affected if we are unable to negotiate, maintain or renew our license agreements with high end third party brands. ” In addition to licensed products, we also market certain other Zegna branded products specifically targeted to outlet points of sale.
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As a result of the foregoing, the financial results for interim periods may not be indicative of results for the entire fiscal year.
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As part of the activities of the Zegna Branded Products product line, Zegna has also entered into strategic partnerships for co-branding projects in order to strengthen the link with other luxury brands and mutually enhance the respective brands’ value. The co-branding agreements set forth the terms for the production of certain selected co-branded products and the relevant co-marketing activities.
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Management expects such seasonal trends to continue. 57 Results of operations The following is a discussion of the Group’s results of operations for the year ended December 31, 2023 as compared to the year ended December 31, 2022, and for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
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Co-branded products are sold through our DTC channel or through the monobrand stores and distribution networks of our co-branding partners.
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Starting in 2023, the Group presents the consolidated statement of profit and loss by function, which is most representative of the way the Chief Operating Decision Maker and management view the business, and is consistent with international practice.
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Textile Product Line For the years ended December 31, 2022, 2021 and 2020, the Textile product line generated revenues after eliminations equal to €136,769 thousand, €102,244 thousand and €87,615 thousand, respectively, representing 9.2%, 7.9% and 8.6% of our revenues after eliminations.
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In order to conform to this new presentation, the information for the years ended December 31, 2022 and 2021 has been reclassified compared to what was previously presented by the Group. For additional information see Note 2 — Basis of preparation to the Consolidated Financial Statements included elsewhere within this annual report on Form 20-F.
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The Textile product line is engaged in the design, manufacturing and sale of luxury fabrics under the brands Lanificio Zegna, Dondi, Bonotto, Tessitura di Novara and the recently acquired Tessitura Ubertino and Filati Biagioli Modesto, the latter specialized in the production of cashmere yarns.
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Revenues are recognized net of returns and discounts. In addition to presenting our revenues on a current currency basis, the following analysis of revenues includes the change in revenues (i) on a constant currency basis and (ii) on an organic growth basis, which we refer to as “Constant Currency” and “Organic Growth”, respectively.
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These fabrics are used for the production of Zegna’s products and sold to other global luxury brands and tailors. We believe that the exceptional quality of the textiles used in our garments is one of the principal reasons for the success of Zegna through the years.
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The change in revenues on a constant currency and on an organic basis are non-IFRS measures.
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The activities of the Textile product line are focused on the research and development of excellence in all of our fabrics, in terms of product quality, style, design, and technical features.
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See “ —Non-IFRS Financial Measures ” for additional information relating to these measures and for the reconciliations of revenue growth to organic growth. 2023 compared to 2022 Revenues for the year ended December 31, 2023 amounted to €1,904,549 thousand, an increase of €411,709 thousand or +27.6% (+29.7% at constant currency; +19.3% organic growth) compared to €1,492,840 thousand for the year ended December 31, 2022, driven by double digit growth in the Zegna and Thom Browne segments (including on a constant currency and organic growth basis), as well as the revenues contributed by the Tom Ford Fashion segment following completion of the TFI acquisition on April 28, 2023.
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We sell our fabrics both to other product lines of the Zegna segment or to the Thom Browne segment, and to third party customers, which include other luxury brands, specialized players or tailoring businesses. We regularly take part in textile fairs and exhibitions to market the products of our Textile product line to the industry’s specialized players.
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An analysis of revenues by product line, by distribution channel and by geographical area is provided below. 2022 compared to 2021 Revenues for the year ended December 31, 2022 amounted to €1,492,840 thousand, an increase of €200,438 thousand or +15.5% (+11.0% at constant currency; +10.4% organic growth) compared to €1,292,402 thousand for the year ended December 31, 2021.
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In addition, we have a global network of sales representatives that assist us with the marketing of such products to tailors worldwide. Lanificio Zegna, the Zegna wool mill founded in 1910 in Trivero, Italy, has been the backbone of Zegna’s success and is renowned internationally for its fine textiles.
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Our revenues significantly increased in all major geographic areas with the exception of the Greater China Region, our largest geographical market, which was significantly impacted by COVID-19-related restrictions during the course of 2022, which resulted in the temporary closure of certain stores and lower customer traffic, primarily 58 from mid-March until the end of May, and again during the fourth quarter of the year as a result of additional waves of COVID-19.
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Three generations of the Zegna family have led textile success by carefully balancing science with nature and craftsmanship with technology. As a result, Lanificio Zegna has pioneered sophisticated men’s fabrics that are lighter, smoother, more refined, and with improved performance and functionality.
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Therefore, the discussion below presents our revenues isolating the Greater China Region performance, which we believe is useful to better understand the underlying trend in our revenues for the periods presented.
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Tessitura di Novara (in which we acquired a 100% interest in 2009) is specialized in high quality silk weaving. It is a leading producer of pure silk and other high-end natural fabrics of unparalleled quality, combining artisan skills and innovation. Tessitura di Novara’s production facilities are located in Trivero, Italy.
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Revenues in the Greater China Region for the year ended December 31, 2022 amounted to €494,110 thousand, a decrease of €94,766 thousand or -16.1% (-20.6% at constant currency and organic growth), compared to €588,876 thousand for the year ended December 31, 2021.
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Bonotto (in which we acquired a 60% interest in 2016) is a textile manufacturer based in Molvena, Italy, that was originally founded in 1912. The brand focuses on handcraftsmanship and traditional techniques and is characterized by the 39 creative and experimental dimensions of its fabrics, which take inspiration from the art world.
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Due to a new wave of particularly impactful COVID-19-related restrictions in the Greater China Region in October and November, as well as some further unplanned temporary store closures in December due to a wave of contagion and resulting staff shortages, the Group’s revenues in the fourth quarter of 2022 decreased by approximately 30% compared to the fourth quarter of 2021.
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Bonotto is premised on the philosophy of the “slow factory,” which rejects the concepts of industrial standardization and mass production at low cost, in favor of traditional but innovative production techniques that create exquisite, precious fabrics.
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Revenues in the rest of the world for the year ended December 31, 2022 amounted to €998,730 thousand, an increase of €295,204 thousand or +42.0% (+38.6% at constant currency; +40.1% organic growth), co mpared to €703,526 thousand for the year ended December 31, 2021 .
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Dondi (in which we acquired a 65% interest in 2019) is a leader in manufacturing high-quality jersey fabrics for men and women, all Made in Italy. Dondi’s production cycle covers the phases from fabric design to distribution. Dondi counts among its customers not only Zegna’s companies, but also some of the most prestigious brands in the fashion world.
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This increase was mainly attributable to the United States (+53.5% or +42.1% at constant currency; +39.9% organic growth), driven by DTC sales in both the Zegna and Thom Browne segments, Italy (+41.3% or +41.8% at constant currency; +42.1% organic growth), the UK (+43.2% or +42.2% at constant currency; +51.6% organic growth), Fra nce (+51.0% at current and at c onstant currency; +46.9% organic growth) a nd the United Arab Emirates (+54.6% or +38.4% at constant currency; 39.6% organic growth ), as well as Latin America (+49.7% or +33.4% at constant currency and organic growth) and Japan (+18.0% or +23.7% at constant currency; +24.3% organic growth).
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Dondi’s production facilities are based in Carpi, Italy. Tessitura Ubertino (in which we acquired a 60% interest in June 2021) is a boutique weaving mill based in Pratrivero, Italy.
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The following discussion presents an analysis of revenues by product line, by distribution channel and by geographical area. For further details relating to the revenues of each of the Group’s operating segments, see “— Results by Segment ” below.
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Founded in 1981 by Adalgiso Ubertino, Tessitura Ubertino has been creating premium quality fabrics for women, such as tweed and jacquard, for over 30 years and today it supplies fabrics to major fashion brands.
Added
Revenues by product line The following table sets forth a breakdown of revenues by product line for the years ended December 31, 2023, 2022 and 2021.
Removed
Filati Biagioli Modesto (in which we acquired a 40% interest in July 2021) specializes in the manufacture of carded yarns, integrating the entire process of transformation from fiber to yarn. Founded in the 1960s by Mr.
Added
For the years ended December 31, Increase/(Decrease) (€ thousands, except percentages) 2023 2022 2021 2023 vs 2022 Reported Revenues Constant Currency Organic Growth 2022 vs 2021 Reported Revenues Constant Currency Organic Growth ZEGNA branded products 1,109,491 923,942 847,311 185,549 20.1 % 22.3 % 22.3 % 76,631 9.0 % 4.1 % 4.1 % Thom Browne 378,410 330,014 263,397 48,396 14.7 % 18.0 % 17.5 % 66,617 25.3 % 20.6 % 20.6 % TOM FORD FASHION 235,531 — — 235,531 n.m.(*) n.m. n.m. — — % — % — % Textile 150,986 136,769 102,244 14,217 10.4 % 9.4 % 9.5 % 34,525 33.8 % 35.4 % 32.7 % Third Party Brands 25,343 97,792 74,957 (72,449) (74.1 %) (74.2 %) (17.4 %) 22,835 30.5 % 27.9 % 86.1 % Other 4,788 4,323 4,493 465 10.8 % 11.6 % 15.4 % (170) (3.8 %) (7.5 %) (7.5 %) Total revenues 1,904,549 1,492,840 1,292,402 411,709 27.6 % 29.7 % 19.3 % 200,438 15.5 % 11.0 % 10.4 % _______________________________________ (*) Throughout this document “n.m.” means not meaningful. 2023 compared to 2022 By product line, the increase in revenues was mainly attributable to: (i) an increase in ZEGNA branded products of €185,549 thousand or +20.1% (+22.3% at constant currency and organic growth), primarily driven by the continued positive performance of both luxury leisurewear and footwear, which represented 50% and 13% of revenues from ZEGNA branded products during the year, 59 respectively, as well as our tailoring (“Tailoring”) and made-to-measure (“Made-to-Measure” or “MTM”) businesses; (ii) an increase in Thom Browne of €48,396 thousand or +14.7% (+18.0% at constant currency; +17.5% organic growth), driven by the growth across all lines, in particular womenswear; (iii) revenues of €235,531 thousand from TOM FORD FASHION following completion of the TFI Acquisition on April 28, 2023; and (iv) an increase of €14,217 thousand or +10.4% (+9.4% at constant currency; +9.5% organic growth) in Textile, primarily attributable to double digit growth of the Lanificio Ermenegildo Zegna; partially offset by: (v) a decrease in Third Party Brands of €72,449 thousand or -74.1% (-74.2% at constant currency; -17.4% organic growth), reflecting the end of the previous TFI distribution license agreement for menswear with the deliveries of the Fall/Winter 2022 collection and the start of a supply agreement to act as the exclusive supplier for certain TOM FORD menswear products with the Spring/Summer 2023 collection.
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Modesto Biagioli, it carefully selects raw materials (such as cashmere, silk, camel, angora, alpaca, flax and merino wool) that are used for the production of its natural yarns, transformed entirely in Italy and then sold to luxury and fashion brands.
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Following the completion of the TFI Acquisition on April 28, 2023, the revenues from the supply agreement with TFI are reported as intercompany revenues and eliminated from the Group’s consolidated results. 2022 compared to 2021 By product line, the increase in revenues was mainly attributable to: (i) an increase of €76,631 thousand or +9.0% (+4.1% constant currency and organic growth) in ZEGNA branded products, primarily driven by the (a) the continued positive performance of shoes and steady growth in luxury leisurewear, as well as the rebound of our Tailoring and Made-to-Measure business, particularly in the United States and EMEA, as 2021 was impacted by COVID-19-related restrictions, and (b) the effects of price repositioning and price increases as part of the new ZEGNA One Brand strategy starting with the rollout of the Fall/Winter 2022 collection; (ii) an increase of €66,617 thousand or +25.3% (+20.6% constant currency and organic growth) in Thom Browne, reflecting strong wholesale demand and growth across all lines (menswear, womenswear and childrenswear), driven by sales for both our seasonal and our classic collections, as well as the roll out of the TMall platform for e-commerce sales in the Greater China Region (which commenced in the second half of 2021) and the contribution of eleven net DTC store openings (63 DTC stores at December 31, 2022 compared to 52 DTC stores at December 31, 2021), primarily in APAC; (iii) an increase of €34,525 thousand or +33.8% (+35.4% constant currency; +32.7% organic growth) in Textile, primarily attributable to the positive performance of the Lanificio Ermenegildo Zegna, Bonotto and Dondi brands driven by higher orders for the Fall/Winter 2022 and Spring/Summer 2023 collections compared to the previous year’s collections, which were affected by the COVID-19 pandemic, and the impact of Tessitura Ubertino S.r.l., which was acquired in June 2021 and contributed additional revenues of €4,590 thousand in 2022 compared to 2021; and (iv) an increase of €22,835 thousand or +30.5% (+27.9% constant currency; +86.1% organic growth) in Third Party Brands, which benefited from higher orders for the TOM FORD brand for the Spring/Summer 2022 and Fall/Winter 2022 collections, as well as higher orders for the Gucci brand.
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Third Party Brands Product Line For the years ended December 31, 2022, 2021 and 2020, the Third Party Brands product line generated revenues after eliminations equal to €97,792 thousand, €74,957 thousand and €82,273 thousand, respectively, representing 6.6%, 5.8%, and 8.1% of our revenues after eliminations.
Added
The TFI distribution license agreement ended with the deliveries of the Fall/Winter 2022 collection and the Group expects to commence the TFF License in the second quarter of 2023 (subject to antitrust approvals and other customary closing conditions) for all TOM FORD men’s and women’s fashion as well as accessories and underwear, fine jewelry, childrenswear, textile and home design products.
Removed
The Third Party Brands product line is engaged in the manufacturing (and until the Fall Winter 2022 collection also distribution) of menswear under the TOM FORD brand, and the supply of apparel for men to Dunhill and Gucci. Tom Ford .
Added
For the years ended December 31, Increase/(Decrease) (€ thousands, except percentages) 2023 2022 2021 2023 vs 2022 Reported Revenues Constant Currency Organic Growth 2022 vs 2021 Reported Revenues Constant Currency Organic Growth Direct to Consumer (DTC) ZEGNA branded products 945,313 772,505 712,862 172,808 22.4 % 25.4 % 25.4 % 59,643 8.4 % 2.9 % 2.9 % Thom Browne 183,422 145,702 138,567 37,720 25.9 % 34.1 % 19.7 % 7,135 5.1 % (1.5 %) (1.5 %) TOM FORD FASHION 136,291 — — 136,291 n.m. n.m. n.m. n.m. — % — % — % Total Direct to Consumer (DTC) 1,265,026 918,207 851,429 346,819 37.8 % 42.1 % 24.5 % 66,778 7.8 % 2.2 % 2.2 % Wholesale ZEGNA branded products 164,178 151,437 134,449 12,741 8.4 % 7.0 % 7.0 % 16,988 12.6 % 10.6 % 10.6 % Thom Browne 194,988 184,312 124,830 10,676 5.8 % 6.0 % 15.7 % 59,482 47.7 % 46.6 % 46.6 % TOM FORD FASHION 99,240 — — 99,240 n.m. n.m. n.m. — — % — % — % Third Party Brands and Textile 176,329 234,561 177,201 (58,232) (24.8 %) (25.5 %) 5.8 % 57,360 32.4 % 32.2 % 38.6 % Total Wholesale 634,735 570,310 436,480 64,425 11.3 % 10.7 % 9.6 % 133,830 30.7 % 29.4 % 30.8 % Other 4,788 4,323 4,493 465 n.m. n.m. n.m.
Removed
We have acted as an exclusive licensee for the manufacturing and distribution of menswear under the TOM FORD brand since 2004. Starting with the Spring/Summer 2023 collection, we act as an exclusive supplier only for certain TOM FORD products until at least the Fall/Winter 2025 collection.
Added
(170) (3.8 %) (7.5 %) — % Total revenues 1,904,549 1,492,840 1,292,402 411,709 27.6 % 29.7 % 19.3 % 200,438 15.5 % 11.0 % 10.4 % 2023 compared to 2022 By distribution channel, the increase in revenues was mainly attributable to: (i) an increase of €346,819 thousand or 37.8% (+42.1% at constant currency; +24.5% organic growth) in the DTC channel, composed of; (a) an increase in ZEGNA branded products DTC of €172,808 thousand or +22.4% (+25.4% at constant currency and organic growth), driven by double digit growth in all regions and reflecting higher average sales prices and increased store traffic, as well as selected DTC store openings (253 DTC stores at December 31, 2023 compared to 239 DTC stores at December 31, 2022); (b) an increase in Thom Browne DTC of €37,720 thousand or +25.9% (+34.1% at constant currency; +19.7% organic growth), driven by the expansion of the store network through 23 net store openings (86 DTC stores at December 31, 2023 compared to 63 DTC stores at December 31, 2022), mainly in APAC and including the conversion of 17 stores in South Korea from wholesale to DTC following an agreement with the former franchise partner, as well as the performance of existing stores in Japan; and (c) DTC revenues of €136,291 thousand generated by the TOM FORD FASHION DTC network (which consisted of 51 DTC stores at December 31, 2023) following completion of the TFI Acquisition on April 28, 2023; (ii) an increase of €64,425 thousand or +11.3% (+10.7% at constant currency; +9.6% organic growth) in the wholesale channel, mainly due to: (a) an increase of €12,741 thousand or +8.4% (+7.0% at constant currency and organic growth) in ZEGNA branded products driven by positive performance, particularly in EMEA, partially offset by the effects of a planned change in merchandising strategy whereby a portion of the Spring/Summer 2024 deliveries were intentionally shifted from the fourth quarter of 2023 to the first quarter of 2024; 61 (b) an increase of €10,676 thousand or +5.8% (+6.0% at constant currency; +15.7% organic growth) in Thom Browne driven by double digit growth in EMEA, partially offset by lower deliveries to the South Korean market ahead of a change in the business from wholesale to DTC starting in the third quarter of 2023 following an agreement with the former franchise partner; and (c) wholesale revenues of €99,240 thousand from TOM FORD FASHION following completion of the TFI Acquisition on April 28, 2023; partially offset by: (d) a decrease of €58,232 thousand or -24.8% (-25.5% at constant currency; +5.8% organic growth) in Third Party Brands and Textile, driven by (i) lower revenues from Third Party Brands of €72,449 thousand, reflecting the end of the previous TFI distribution license agreement with the deliveries of the Fall/Winter 2022 collection and the start of a supply agreement to act as the exclusive supplier for certain TOM FORD menswear products with the Spring/Summer 2023 collection.
Removed
On November 15, 2022, we announced that the Zegna Group entered into agreements for the TFI Acquisition.
Added
Following the completion of the TFI Acquisition on April 28, 2023, the revenues from the supply agreement with TFI are reported as intercompany revenues and eliminated from the Group’s consolidated results, partially offset by (ii) an increase in Textile revenues of €14,217 thousand, primarily attributable to double digit growth of the Lanificio Ermenegildo Zegna. 2022 compared to 2021 By distribution channel, the increase in revenues was mainly attributable to: (i) an increase of €66,778 thousand or +7.8% (+2.2% at constant currency and organic growth) in the DTC channel, related to: (a) an increase in ZEGNA branded products of €59,643 thousand or +8.4% (+2.9% at constant currency and organic growth), driven by high double digit growth in the United States and EMEA, partially offset by the Greater China Region, which was impacted by COVID-19-related restrictions in 2022 that resulted in the temporary closure of certain stores and lower customer traffic, primarily from mid-March until the end of May and again in the fourth quarter of the year; (b) an increase in Thom Browne branded products of €7,135 thousand or +5.1%, (-1.5% at constant currency and organic growth), driven by high double digit growth in the United States, EMEA and Japan, eleven net DTC store openings (63 DTC stores at December 31, 2022 compared to 52 DTC stores at December 31, 2021), primarily in APAC, and the roll out of the TMall platform for e-commerce sales in the Greater China Region (which commenced in the second half of 2021), partially offset by the aforementioned effects of COVID-19-related restrictions in the Greater China Region; and (ii) an increase of €133,830 thousand or +30.7% (+29.4% at constant currency; +30.8% organic growth) in the wholesale channel, mainly due to: (a) an increase in Thom Browne branded products of €59,482 thousand or +47.7% (+46.6% at constant currency and organic growth) driven by both our seasonal and our classic collections and strong growth across all lines (menswear, womenswear and childrenswear) and major geographical areas; (b) an increase in Third Party Brands and Textile of €57,360 thousand or +32.4% (+32.2% at constant currency; +38.6% organic growth), consisting of an increase of €34,525 thousand or +33.8% (+35.4% at constant currency; +32.7% organic growth) in Textile, primarily attributable to the positive performance of the Lanificio Ermenegildo Zegna, Bonotto and Dondi brands driven by higher orders for the Fall/Winter 2022 and Spring/Summer 2023 collections compared to the previous year’s collections, which were affected by the COVID-19 pandemic, and the impact of Tessitura Ubertino S.r.l., which was acquired in June 2021 and contributed additional revenue of €4.6 million in 2022 compared to 2021, and an increase of €22,835 thousand or +30.5% (+27.9% at constant currency; +86.1% organic growth) in Third Party Brands, which benefited from higher orders for the TOM 62 FORD brand for the Spring/Summer 2022 and Fall/Winter 2022 collections, as well as higher orders for the Gucci brand.
Removed
The TFI Acquisition is subject to antitrust approvals and other customary closing conditions and is expected to close in the second quarter of 2023. Dunhill . We have acted as a manufacturer and supplier of suits, jackets, blazers and formal overcoats under the Dunhill brand since 1998.
Added
(c) an increase in ZEGNA branded products of €16,988 thousand or +12.6% (+10.6% at constant currency and organic growth) driven by growth in the United States and EMEA, partially offset by lower orders for new collections from travel retail customers in the Greater China Region as a result of COVID-19-related store closures and the related build up of their inventory.
Removed
Under the relevant agreement, we are required to comply with the designs and specifications supplied by Alfred Dunhill Ltd., as well as certain other restrictions relating to intellectual property and confidentiality. The agreement with Alfred Dunhill Ltd. does not provide for an express expiration date. Gucci .
Added
The effects from the suspension of production for the Russian market and the closure of stores in Russia following the escalation of the conflict in Ukraine (resulting in lower revenues in Russia of €10,450 thousand) were substantially mitigated from the reallocation of products, primarily in the DTC channel in EMEA.
Removed
We have acted as a manufacturer and supplier of jackets and formal overcoats, slacks and knitwear (both ready-to-wear and made to measure) under the Gucci brand since 1990.
Added
Revenues by geographical area The following table sets forth a breakdown of revenues by geographical area for the years ended December 31, 2023, 2022 and 2021.
Removed
Under the relevant agreement, which was recently renewed, we are required to comply with the designs and specifications supplied by Gucci, as well as certain other restrictions relating to intellectual property, sustainability and confidentiality.
Added
For the years ended December 31, Increase/(Decrease) (€ thousands, except percentages) 2023 2022 2021 2023 vs 2022 Reported Revenues Constant Currency Organic Growth 2022 vs 2021 Reported Revenues Constant Currency Organic Growth EMEA (1) 658,694 520,226 380,325 138,468 26.6 % 27.7 % 18.8 % 139,901 36.8 % 36.2 % 39.3 % of which Italy 281,793 224,342 158,722 57,451 25.6 % 25.6 % 18.4 % 65,620 41.3 % 41.8 % 42.1 % of which UK 70,191 53,970 37,682 16,221 30.1 % 31.7 % 14.7 % 16,288 43.2 % 42.2 % 51.6 % of which UAE 68,729 50,926 32,944 17,803 35.0 % 38.2 % 30.9 % 17,982 54.6 % 38.4 % 39.6 % North America (2) 417,352 294,686 191,283 122,666 41.6 % 40.4 % 11.4 % 103,403 54.1 % 43.2 % 41.4 % of which United States 384,544 270,312 176,059 114,232 42.3 % 40.9 % 10.4 % 94,253 53.5 % 42.1 % 39.9 % Latin America (3) 37,538 29,889 19,971 7,649 25.6 % 16.2 % 16.2 % 9,918 49.7 % 33.4 % 33.4 % APAC (4) 788,007 644,802 696,344 143,205 22.2 % 27.3 % 23.7 % (51,542) (7.4 %) (11.6 %) (11.8 %) of which Greater China Region 595,515 494,110 588,876 101,405 20.5 % 25.7 % 24.2 % (94,766) (16.1 %) (20.6 %) (20.6 %) of which Japan 84,990 65,445 55,479 19,545 29.9 % 39.8 % 28.3 % 9,966 18.0 % 23.7 % 24.3 % Other (5) 2,958 3,237 4,479 (279) (8.6 %) (8.3 %) (25.6 %) (1,242) (27.7 %) (29.6 %) (29.6 %) Total revenues 1,904,549 1,492,840 1,292,402 411,709 27.6 % 29.7 % 19.3 % 200,438 15.5 % 11.0 % 10.4 % ________________________________________ (1) EMEA includes Europe, the Middle East and Africa.
Removed
Gucci has agreed, on a best-effort basis, to place a minimum number of orders for each season for jackets and formal overcoats and granted us exclusivity for made-to-measure products. The agreement with Gucci is set to expire upon completion of the Spring/Summer 2028 collection, unless a renewal is agreed upon between the parties.
Added
(2) North America includes the United States of America and Canada. (3) Latin America includes Mexico, Brazil and other Central and South American countries. (4) APAC includes the Greater China Region, Japan, South Korea, Thailand, Malaysia, Vietnam, Indonesia, Philippines, Australia, New Zealand, India and other Southeast Asian countries .
Removed
Thom Browne Segment For the years ended December 31, 2022, 2021 and 2020, the Thom Browne segment generated revenues after eliminations equal to €330,014 thousand, 263,397 thousand and €179,490 thousand, respectively, representing 22.1%, 20.4% and 17.7% and of our revenues, respectively, after eliminations. Thom Browne is a renowned fast-growing luxury brand focused on high-end menswear, womenswear, accessories and childrenswear.
Added
(5) Other revenues mainly include royalties. 2023 compared to 2022 By geographical area, the increase in revenues was attributable to growth in all regions, including: (i) an increase of €143,205 thousand or +22.2% (+27.3% at constant currency; +23.7% organic growth) in APAC driven by the growth in the Greater China Region, particularly in the ZEGNA DTC channel, the expansion of the Thom Browne store network through 24 net store openings in APAC (70 DTC stores at December 31, 2023 compared to 46 DTC stores at December 31, 2022), including the conversion of 17 stores in South Korea from wholesale to DTC, as well as strong performance of existing Thom Browne stores in Japan.
Removed
The brand was founded by Mr. Thom Browne in 2001 and is based in New York. In 2018, we completed 40 the acquisition of 85% of Thom Browne Inc., the holding company of the Thom Browne business. In June 2021, we acquired an additional 5% equity interest in Thom Browne Inc. Under a put option agreement between Zegna and Mr.
Added
The comparison is also impacted by the adverse effects on revenues in the prior year due to COVID-19-related restrictions in the Greater China Region, which were substantially reversed in 2023; (ii) an increase of €138,468 thousand or +26.6% (+27.7% at constant currency; +18.8% organic growth) in EMEA driven by the ZEGNA DTC channel in Europe and the United Arab Emirates (“UAE”), which benefited from both domestic and tourist customers, as well as an increase in the wholesale channel driven by ZEGNA branded products, Thom Browne and Textile, partially offset by the effects of a planned change in 63 merchandising strategy whereby a portion of the Spring/Summer 2024 deliveries were intentionally shifted from the fourth quarter of 2023 to the first quarter of 2024; (iii) an increase of €122,666 thousand or +41.6% (+40.4% at constant currency; +11.4% organic growth) in North America, driven by the United States, including the contribution of the Tom Ford Fashion segment’s 12 directly operated stores following completion of the TFI Acquisition on April 28, 2023, as well as double-digit revenue growth in the ZEGNA DTC channel, partially offset by the impact of the aforementioned shift in wholesale deliveries, as well as the conversion of the Saks Fifth Avenue store in New York from wholesale to DTC; and (iv) an increase of €7,649 thousand or +25.6% (+16.2% at constant currency and organic growth) in Latin America driven by double-digit growth of the ZEGNA DTC channel in Mexico and Brazil. 2022 compared to 2021 By geographical area, the increase in revenues was mainly related to: (i) an increase of €139,901 thousand or +36.8% (+36.2% at constant currency; +39.3% organic growth) in EMEA, primarily attributable to significant growth in Italy, as well as strong performance in the UK and the Middle East, and driven by ZEGNA branded products in the DTC channel and Thom Browne in both the DTC and wholesale channels, as well as the rebound of our Tailoring and Made-to-Measure business in the Zegna segment following adverse effects in 2021 as a result of COVID-19-related restrictions.
Removed
Thom Browne, Mr. Thom Browne has the right, but not the obligation, to sell to Zegna up to 550.9674 shares of common stock of Thom Browne Inc. (representing the remaining 10% interest in the company held by Mr. Thom Browne) over the period between 2024 and 2030 (subject to potential deferral until 2032).
Added
The effects from the suspension of production for the Russian market and the closure of stores in Russia following the escalation of the conflict in Ukraine were substantially mitigated by the reallocation of products within other EMEA countries; (ii) an increase of €103,403 thousand or +54.1% (+43.2% at constant currency; +41.4% organic growth) in North America, primarily attributable to the United States and driven by (a) DTC sales for both ZEGNA branded products and Thom Browne, (b) the rebound of our Tailoring and Made-to-Measure business in the Zegna segment, (c) higher orders for the TOM FORD brand for the Spring/Summer 2022 and Fall/Winter 2022 collections.
Removed
The Thom Browne business’s growth since the initial acquisition has been remarkable, with revenues increasing from approximately €117 million in 2018 to €330 million in 2022 after eliminations, representing a CAGR of 30%. Each year Thom Browne offers pre-collections and main collections, organized into two seasons (Fall/Winter and Spring/Summer) for each of men, women and children. Mr.
Added
See also “ —Trends, Uncertainties and Opportunities—Acquisitions, ” and (d) positive foreign currency exchange impact due to the strengthening of the U.S.
Removed
Browne started designing clothes for friends and family in the early 2000s, and his popularity as a fashion designer has grown ever since. Thom Browne’s signature line of grey suits redefined the concept of the male silhouette, and his collections lean heavily on two main colors: grey and navy.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

4 edited+77 added−215 removed0 unchanged
Biggest changeIn 2022, adidas commenced an action before the Nuremberg-Furth District Court in Germany against Thom Browne, Inc. and Thom Browne Retail Italy Srl, alleging Thom Browne’s four-bar signature infringed adidas’ three stripe mark. Counsel’s service of the documentation was flawed and formed the basis of default judgments against both Thom Browne, Inc. and Thom Browne Retail Italy Srl.
Biggest changeThe first hearing in the UK is set for July 17, 2024 and trial is expected to conclude during the week of July 24. In addition, in 2022, adidas commenced a lawsuit before the Nuremberg-Furth District Court in Germany against Thom Browne, Inc. and Thom Browne Retail Italy Srl, alleging Thom Browne’s four-bar signature infringed adidas’ three stripe mark.
The case was assigned to a jury trial and on January 12, 2023, the jury found that at no time did Thom Browne, Inc. infringe on any of adidas’ trademarks. Adidas filed a notice of appeal, in pursuance of which Thom Browne, Inc. filed a notice of cross-appeal.
Adidas claims these designs allegedly infringe the three stripe marks of adidas. The case was assigned to a jury trial and on January 12, 2023, the jury found that at no time did Thom Browne, Inc. infringe on any of adidas’s trademarks. Adidas has filed a notice of appeal, following which Thom Browne, Inc. has filed a notice of cross-appeal.
For instance, on June 28, 2021 Adidas AG (“adidas”) commenced an action against Thom Browne, Inc. in the Southern District of New York, for, among others, trademark infringement, unfair competition, dilution and various state claims, in connection with the use of Thom Browne’s five color grosgrain ribbon and the four bars on sleeves and pants on its sporting goods, sportswear and athletic wear, allegedly infringing the three stripe marks of adidas.
On June 28, 2021, adidas filed a lawsuit in the Southern District of New York for, among other things, trademark infringement, unfair competition, dilution and various state claims, in connection with Thom Browne’s five color grosgrain ribbon and the four bands on sleeves and pants on its sporting goods, sportswear and athletic wear.
Meanwhile, Thom Browne, Inc. has also initiated cancellation proceedings against a number of adidas marks registered in the European Union, alleging that the marks lack distinction, as well as in England, on the ground of non-use.
Thom Browne has commenced cancellation proceedings in the European Union as well as in the UK against a number of adidas’ trademarks that could be used to restrain access of Thom Browne Inc.’s products to these markets.
Removed
Item 4.B—Business Overview—Strategy ” If our One Brand strategy proves unsuccessful, our brand positioning may suffer and we may have undertake markdown activities. In addition, as a result of our strategy relating to iconic products, we could become significantly exposed to certain specific products and, should they lose their appeal, it may be difficult to replace the revenues generated therefrom.
Added
Item 4.B—Business Overview ” for a discussion of our sales and distribution channels. Legal Proceedings 128 We are party to civil and administrative proceedings (including tax audits) and to legal actions in the normal course of our business, including with respect to lease agreements, labor matters and intellectual property matters.
Removed
Our strategy is premised upon certain assumptions about the global economy and the evolution of demand for luxury goods in various regions of the world in which we operate or seek to operate our competitive position and the ability of our management team to carry out our strategic plan.
Added
Adverse decisions in one or more of these proceedings could require us to pay substantial damages. Litigation is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. An accrual is established in connection with pending or threatened litigation if a loss is probable and a reliable estimate can be made.
Removed
If we fail to implement our strategic plan, if our assumptions prove to be incorrect or if the geopolitical situation triggers an economic crisis or a conflict situation in the regions where we operate, our ability to increase our revenues and profitability could be affected, which could have a material adverse effect on our business, results of operations and financial condition.
Added
For information regarding provisions made for the legal proceedings we are a party to, please refer to Note 30 — Provisions for risks and charges to the Consolidated Financial Statements.
Removed
We are exposed to risks relating to recent and potential future acquisitions, including the TFI Acquisition. Our growth strategy may, from time to time, include acquisitions.
Added
In addition, based on evidence submitted in another trial against Thom Browne Inc., adidas has filed a motion requesting a new trial based on discovery flaws. The appeal from the jury verdict remains pending before the Court of Appeals and the parties have been called for oral argument on April 17, 2024.
Removed
Such acquisitions, including the TFI Acquisition which is expected to close in the second quarter of 2023 subject to antitrust approvals and other customary closing conditions, may cause us to face uncertainties concerning the economic and financial outcomes of such transactions.
Added
The motion for a new trial is pending before the lower court judge who has been notified of the oral argument before the Court of Appeals; we therefore expect a rapid decision on the pending motion to reopen the case.
Removed
With respect to both past and future acquisitions, we may be exposed to liabilities (including tax liabilities) not detected during the due diligence process or not covered by contractual provisions. Furthermore, other assessments of the acquired business made at the time of 13 the initial investment could prove to be incorrect.
Added
Meanwhile, the opposition filed by adidas against several trademarks which Thom Browne Inc. filed for registration in the European Union was denied, except with respect to one mark which has yet to be decided.
Removed
The achievement of the anticipated benefits of an acquisition is subject to a number of uncertainties, including general competitive factors in the marketplace, our ability to integrate the businesses in an efficient and effective manner and establish and implement effective operational principles and procedures.
Added
As a result, adidas has filed counterclaims for infringement of those marks by Thom Browne Inc.’s use of its grosgrain ribbon signature as well as the four bar design. On challenge, adidas has voluntarily cancelled a number of the marks at issue.
Removed
We may also encounter unexpected difficulties and costs if we are unable to retain certain key employees and achieve minimal unplanned attrition, which could increase our hiring and training costs and disrupt our business, or in connection with hiring new senior managers.
Added
Counsel’s service of the documentation was flawed and formed the basis of default judgments against both Thom Browne, Inc. and Thom Browne Retail Italy Srl. Upon discovery of the defaults, Thom Browne obtained the suspension of both judgments.
Removed
The process of coordinating and integrating businesses acquired by Zegna has required and will continue to require significant management and financial resources that may otherwise have been focused on the ordinary course management of our activities.
Added
The parties have submitted their arguments and are now waiting for the judge to decide or for the District Court to assign a trial period. All such proceedings remain pending. Thom Browne intends to vigorously defend its position in all the aforementioned proceedings.
Removed
The integration process also requires the application of financial reporting and management control systems to the acquired companies, as well as the integration of IT systems and the training of new personnel. Each of these needs could require considerable resources from us, entailing significant costs.
Added
On February 17, 2022, the New York Supreme Court in the City of New York issued a judgment dismissing the Group’s claims seeking rescission of a lease of premises in New York City.
Removed
If we incur liabilities as a result of acquisitions and these liabilities exceed the contractual indemnification caps, or if indemnification is not available for any other reason, this could have a material adverse effect.
Added
The trial court found that the lease was still in full force and effect and ordered the Group to pay the amount requested by the landlord as unpaid rent and fees. On March 10, 2022, the landlord filed a complaint requesting the Group to pay the unpaid rent and fees accrued until March 2022.
Removed
Furthermore, we are exposed to the risk that the evaluations and assumptions underlying investment decisions could turn out to be incorrect, which could lead to unexpected difficulties in the process of integrating the acquired assets or companies with our business, or costs and other unforeseen liabilities for Zegna, and we may not obtain the benefits and synergies expected from such transactions.
Added
Following the latest developments, the Company had accrued a provision of €28,254 thousand on its balance sheet at December 31, 2021. On July 13, 2022, the Group and the landlord entered into a settlement agreement, following which the Group made a payment of €25,698 thousand and the remaining provision was reclassified to other current liabilities.
Removed
Any of the above circumstances could have adverse effects on our business, results of operations and financial condition. Acquisitions of new businesses may also expose us to other risks relating specifically to the business being acquired. For example, pursuant to the arrangements governing the TFI Acquisition (and subject to its closing), Mr.
Added
Dividend Policy We aim to grow the Group’s business solidly and steadily, and to create long-term value for our shareholders. Our priority is to invest in the growth of our business while providing return to shareholders.
Removed
Tom Ford, Founder and CEO of Tom Ford International, will continue to serve as the brand’s creative visionary after closing and through the end of 2023. His eventual departure could have a material adverse effect on the TOM FORD fashion business, and therefore on our results of operations and financial condition.
Added
Taking into consideration these priorities, we target a payout ratio of 25% to 30% of the profit attributable to shareholders of the Parent Company, without reducing dividends and at least maintaining or increasing dividends each year.
Removed
We depend on our manufacturing and logistics facilities, which are subject to disruption. We operate manufacturing and logistics facilities in Italy, Switzerland and Turkey and logistics facilities in the People’s Republic of China and the United States.
Added
However, any decision to declare and pay dividends in the future will ultimately be made at the discretion of the Board and will depend on the Group’s results of operations, business conditions, financial conditions, earnings, cash balances, commitments, strategic plans and other factors that the Board may deem relevant at the time it recommends approval of any such dividend, including economic and market conditions. 129 Pursuant to Dutch law and the Articles of Association, the distribution of dividends will take place following the adoption of the annual accounts, from which we will determine whether such distribution is permitted.
Removed
These facilities are subject to operational risks, including mechanical and information technology system failure, work stoppage, civil unrest, increases in transportation costs, natural disasters, fire, government imposed shutdowns and disruption to supplies of raw materials or of commodities such as energy.
Added
We may make distributions to our shareholders, whether from profits or from our freely distributable reserves, only insofar as our shareholders’ equity exceeds the sum of the paid-up and called-up share capital plus any reserves to be maintained by Dutch law or the Articles of Association. The Board may resolve to reserve the profits or part of the profits.
Removed
Any interruption of activity in our manufacturing or logistics facilities due to these or other similar events outside of our control could result in disruption to our operations and a reduction in sales, which could have an adverse effect on our business, results of operations and financial condition.
Added
Any profits remaining after the reservation referred to in the previous sentence by the Board will first be applied to allocate and add to the dividend reserve for each class of Special Voting Shares an amount equal to 1% of the aggregate nominal value of all issued and outstanding Special Voting Shares of that class.
Removed
See “ —We are subject to risks related to the COVID-19 pandemic or similar public health crises that may materially and adversely affect our business.” We are subject to certain risks related to the sale of our products through our DTC channel and in particular our directly operated stores.
Added
The profits remaining after application of the preceding sentence will be at the disposal of the General Meeting, which may resolve to add the remaining profits to the reserves or distribute them to the holders of Ordinary Shares. Distributions of dividends will be made to the Company’s shareholders in proportion to the nominal value of their Ordinary Shares.
Removed
In our distribution model, the DTC channel consists of single branded stores managed directly by us, or DOSs, outlets, concessions within department stores, as well as a directly managed online boutique and other e-commerce platforms through which we sell directly to our customers.
Added
Pursuant to Dutch law and the Articles of Association, the Board or the General Meeting at the proposal of the Board will be allowed to resolve upon interim distributions on Ordinary Shares. For this purpose, the Board must prepare an interim statement of assets and liabilities.
Removed
At December 31, 2022, we operated 239 Zegna DOSs and 63 Thom Browne DOSs (245 Zegna DOSs and 52 Thom Browne DOSs at December 31, 2021). The DTC channel generated revenues of €918.2 million in 2022 (or 62% of our consolidated revenues in such period).
Added
Such interim statement shall show our financial position not earlier than on the first day of the third month before the month in which the resolution to make the interim distribution is announced.
Removed
The risks related to managing currently existing DOSs mainly relate to possible difficulties in renewing the existing lease agreements, an increase in rental charges and a decline in sales. Our DOSs are all located in properties that we lease from third parties.
Added
An interim dividend can only be paid if (i) an interim statement of assets and liabilities is drawn up showing that the funds available for distribution are sufficient, and (ii) our shareholders’ equity exceeds the sum of the paid-up and called-up share capital and any reserves to be maintained by Dutch law or the Articles of Association.
Removed
There is significant competition among retail operators in our industry to obtain commercial spaces in prestigious locations in major cities, towns and resort destinations worldwide.
Added
Interim distributions will be made in cash, in kind or in the form of Ordinary Shares. Since Ermenegildo Zegna N.V. is a holding company and its operations are carried out through its subsidiaries, the Company’s ability to pay dividends will primarily depend on the ability of its subsidiaries to generate earnings and to provide it with the necessary financial resources.
Removed
Accordingly, to renew our lease agreements, we may have to compete with other operators, including those in our same industry, some of which have greater economic and financial resources than ours or otherwise more bargaining power.
Added
In July 2023 the Company made a dividend distribution to the holders of Ordinary Shares of €0.10 per Ordinary Share, corresponding to a total dividend distribution of €25 million.
Removed
If we are unable to renew our lease agreements with economic terms consistent or more beneficial than those currently applicable, or if we are forced to accept rental charges which are substantially higher than the existing ones, this could have a material adverse effect on our business, results of operations and financial condition.
Added
Subject to the finalization and adoption of the annual statutory accounts of the Company, provided that the distribution is permitted under Dutch law, and also subject to the approval of the proposed distribution by the Company’s 2024 annual General Meeting (which is currently expected to be on June 26, 2024), the Company intends to make a dividend distribution to the holders of Ordinary Shares of €0.12 per share, corresponding to a total dividend distribution to shareholders of approximately €30 million.
Removed
Our DOSs have a high level of fixed costs, which affect profits from the retail channel.
Added
B. Significant Changes Except otherwise disclosed within this report, no significant changes have occurred since the date of the Consolidated Financial Statements. 130 ITEM 9 THE OFFER AND LISTING A. Offer and Listing Details The Ordinary Shares are listed on NYSE under the symbol “ZGN.” B. Plan of Distribution Not applicable. C.
Removed
A reduction in sales or a decrease in revenues from the retail channel could, in light of the high level of fixed costs, have a material adverse effect on our business, results of operations and financial condition. 14 We analyze the performance of each of our DOSs and market trends in order to assess whether to open new DOSs (or move DOSs to a different location), renew existing leases, or close DOSs that are underperforming.
Added
Markets See “ —Offer and Listing Details ” above. D. Selling Shareholders Not applicable. E. Dilution Not applicable. F. Expenses of the Issue Not applicable. ITEM 10 ADDITIONAL INFORMATION A. Share Capital Not applicable. B. Memorandum and Articles of Association Corporate Seat and Place of Effective Management The Company is a legal entity organized under the laws of the Netherlands.
Removed
If our analysis is inadequate or based on the wrong assumptions, we could select sub-optimal locations for our stores, or keep or open underperforming stores, which could have a material adverse effect on our business, results of operations and financial condition.
Added
It has its corporate seat ( statutaire zetel ) in Amsterdam, the Netherlands. The address of the Company is Viale Roma 99/100, 13835 Valdilana loc. Trivero, Italy. Since its incorporation the Company has had, and it intends to continue to have, its place of effective management in Italy. The Company is registered with the Dutch Trade Register.
Removed
In the event we decide to close an underperforming DOS, the terms of the lease may not allow us to terminate the lease without significant penalties (such as payment of rent until the expiry of the contractual term).
Added
Share Capital and Form of Shares At December 31, 2023, the Company’s authorized share capital amounted to €18,700,000, divided into 400,000,000 Ordinary Shares, with a nominal value of €0.02 each, 200,000,000 Special Voting Shares A, with a nominal value of €0.02 each, 50,000,000 Special Voting Shares B, with a nominal value of €0.08 each and 15,000,000 Special Voting Shares C, with a nominal value of €0.18 each.
Removed
In addition, although we have adopted internal policies and training initiatives to ensure that the staff in our DOSs operate in a manner consistent with the image and prestige of our brands, there can be no assurance that such staff will abide by such policies or that inappropriate or illicit behavior by certain employees will not occur.
Added
In order to facilitate the Company’s loyalty voting structure, the Articles of Association provide for transitional provisions to increase the authorized share capital when the Board makes the required filings with the Dutch Trade Register. At December 31, 2023 , there were 250,310,263 Ordinary Shares and 154,981,350 Special Voting Shares A issued and outstanding.
Removed
If there is any allegation brought against us as a result of negligence or other impermissible conduct by our DOS staff, we may be exposed to legal or other proceedings or increased public scrutiny, which may result in substantial costs, diversion of resources and management’s attention and potential harm to our reputation.
Added
At December 31, 2023 , 52,394,463 Ordi nary Shares were held by the Company in treasury. 131 All issued and outstanding Ordinary Shares and Special Voting Shares are held in registered form. No share certificates may be issued. All issued Ordinary Shares and Special Voting Shares A have been fully paid up.
Removed
The operations of our retail channel and DOSs are also subject to risks such as information technology system failure, work stoppage, civil unrest, natural disasters, fire and government imposed shutdowns.
Added
Issuance of Shares The Articles of Association provide that Ordinary Shares and Special Voting Shares may be issued or rights to subscribe for shares may be granted pursuant to a resolution adopted by the General Meeting at the proposal of the Board, or alternatively, by the Board if so designated by the General Meeting.
Removed
Any interruption of activity in our retail channel and DOSs due to these or other similar events out of our control could result in disruption to our operations and a reduction in sales, which could have an adverse effect on our business, results of operations and financial condition.
Added
Designation by resolution of the General Meeting cannot be withdrawn unless determined otherwise at the time of designation.
Removed
In the wholesale channel, we are subject to certain risks arising from points of sale operated by third parties, and we are dependent on our local partners to sell our products in certain markets. In the wholesale channel, we sell our products to franchisees, specialty stores, department stores and online retailers.
Added
The scope and duration of the Board’s authority to issue shares or grant rights to subscribe for shares (such as granting stock options) will be determined by a resolution of the General Meeting and relates, at the most, to all unissued shares in the Company’s authorized capital on the date on which the Board resolves to issue shares or grant rights to subscribe for shares.
Removed
For the year ended December 31, 2022, revenues attributable to the wholesale channel for Zegna Branded Products and Thom Browne amounted to €335.7 million (or 22% of our consolidated revenues in the same period).
Added
The duration of this authority may not exceed a period of five years. Designation of the Board as the body authorized to issue shares or grant rights to subscribe for shares may be extended by a resolution of the General Meeting for a period not exceeding five years in each case.
Removed
The loss of existing commercial relationships with our primary wholesale customers, the failure to develop new commercial relationships on economically favorable terms (or at all) or a significant decrease in wholesale channel revenues could have a material adverse effect on our business, results of operation and financial condition.
Added
The maximum number of shares or rights to subscribe for shares that may be issued or granted by the Board is determined at the time of designation by the General Meeting. No resolution of the General Meeting or resolution of the Board is required to issue shares pursuant to the exercise of a previously granted right to subscribe for shares.
Removed
In addition, any failure by retailers not directly operated by us to manage their stores, or by our local partners to act, in a manner consistent with the image and prestige of our brands or in line with any agreed contractual commitments (including in terms of sale prices), or failure by online retailers to comply with consumer protection laws or provide accurate product descriptions, could damage the competitive position and image of our brand, with potential material adverse effects on our business, results of operations and financial condition.
Added
The General Meeting adopted a resolution prior to the Closing pursuant to which the Board is authorized, for a period of five years from the date of the Closing, to issue Ordinary Shares and grant rights to subscribe for Ordinary Shares up to the authorized share capital from time to time.
Removed
See “ —Our business depends on the recognition, integrity and reputation of our brands .” In certain of the geographic markets in which we operate, the distribution of our products is carried out, sometimes exclusively, through franchising agreements with local operators.
Added
Pre-emptive Rights Under Dutch law and the Articles of Association, each shareholder has a pre-emptive right in proportion to the aggregate number of its Ordinary Shares upon the issuance of new Ordinary Shares or the granting of rights to subscribe for Ordinary Shares.
Removed
Although we generally have not experienced significant problems in the past with such wholesale customers, the loss of one or more important commercial relationships with, or the occurrence of material disagreements with, our distribution partners or a failure to renew or develop commercial relationships on economically favorable terms (or at all) with them could have a material adverse effect on our business, results of operations and financial condition.
Added
Exceptions to this pre-emptive right include the issuance of new Ordinary Shares or the granting of rights to subscribe for Ordinary Shares: (i) to employees of the Company or another company of its group; (ii) against payment other than in cash; and (iii) to persons exercising a previously granted right to subscribe for Ordinary Shares.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

20 edited+329 added−182 removed1 unchanged
Biggest changeFor the year ended December 31, (€ thousands, except percentages) 2022 2021 2020 Profit/(Loss) 65,279 (127,661) (46,540) Income taxes 35,802 30,702 14,983 Financial income (13,320) (45,889) (34,352) Financial expenses 54,346 43,823 48,072 Foreign exchange losses/(gains) 7,869 7,791 (13,455) Result from investments accounted for using the equity method (2,199) (2,794) 4,205 Impairments of investments accounted for using the equity method — — 4,532 Legal costs for trademark disputes (1) 7,532 — — Transaction costs related to acquisitions (2) 2,289 — — Severance indemnities and provisions for severance expenses (3) 2,199 8,996 12,308 Costs related to the Business Combination (4) 2,137 205,059 — Net impairment of leased and owned stores (5) 1,639 8,692 19,725 Special donation to the UNHCR (6) 1,000 — — Net (income)/costs related to lease agreements (7) (6,844) 15,512 3,000 Other (8) — 4,884 7,535 Adjusted EBIT 157,729 149,115 20,013 Revenues 1,492,840 1,292,402 1,014,733 Adjusted EBIT Margin (Adjusted EBIT / Revenues) 10.6 % 11.5 % 2.0 % __________________ (1) Relates to legal costs of €7,532 thousand incurred in 2022 by the Thom Browne Segment in connection with a legal dispute between adidas and T hom Browne, primarily in relation to the use of trademarks.
Biggest changeFor the year ended December 31, (€ thousands, except percentages) 2023 2022 2021 Profit/(Loss) 135,661 65,279 (127,661) Income taxes 33,433 35,802 30,702 Financial income (37,282) (13,320) (45,889) Financial expenses 68,121 54,346 43,823 Foreign exchange losses 5,262 7,869 7,791 Result from investments accounted for using the equity method 2,953 (2,199) (2,794) Transaction costs related to acquisitions (1) 6,001 2,289 — Severance indemnities and provisions for severance expenses (2) 4,002 2,199 8,996 Legal costs for trademark dispute (3) 2,168 7,532 — Costs related to the Business Combination (4) 2,140 2,137 205,059 Net impairment of leased and owned stores (5) 1,782 1,639 8,692 Special donations for social responsibility (6) 100 1,000 — Net (income)/costs related to lease agreements (7) (4,129) (6,844) 15,512 Other (8) — — 4,884 Adjusted EBIT 220,212 157,729 149,115 Revenues 1,904,549 1,492,840 1,292,402 Profit/(Loss) Margin (Profit/(Loss) / Revenues) 7.1 % 4.4 % (9.9 %) Adjusted EBIT Margin (Adjusted EBIT / Revenues) 11.6 % 10.6 % 11.5 % __________________ (1) Relates to transaction costs of €6,001 thousand and €2,289 thousand in 2023 and 2022, respectively, primarily for consultancy and legal fees related to the TFI Acquisition and, for 2023 only, also to the acquisition of the Thom Browne business in South Korea and the acquisition of a 25% interest in Norda .
While similar measures are widely used in the industry in which Zegna operates, the financial measures that Zegna uses may not be comparable to other similarly named measures used by other companies nor are they intended to be substitutes for measures of financial performance or financial position as prepared in accordance with IFRS.
While similar measures are widely used in the industry in which the Group operates, the financial measures that the Group uses may not be comparable to other similarly named measures used by other companies nor are they intended to be substitutes for measures of financial performance or financial position as prepared in accordance with IFRS.
Adjusted EBIT Margin is defined as Adjusted EBIT divided by revenues of the applicable period. Zegna’s management uses Adjusted EBIT and Adjusted EBIT Margin for internal reporting to assess performance and as part of the forecasting, budgeting and decision-making processes as they provide additional transparency regarding Zegna’s underlying operating performance.
Adjusted EBIT Margin is defined as Adjusted EBIT divided by revenues of the applicable period. The Group’s management uses Adjusted EBIT and Adjusted EBIT Margin for internal reporting to assess performance and as part of the forecasting, budgeting and decision-making processes as they provide additional transparency regarding the Group’s underlying operating performance.
Zegna’s management believes these non-IFRS financial measures are useful because they exclude items that management believes are not indicative of Zegna’s underlying operating performance and allow management to view operating trends, perform analytical comparisons and benchmark performance between periods and among segments.
The Group’s management believes these non-IFRS financial measures are useful because they exclude items that management believes are not indicative of the Group’s underlying operating performance and allow management to view operating trends, perform analytical comparisons and benchmark performance between periods and among segments.
Zegna’s management also believes that Adjusted EBIT and Adjusted EBIT Margin are useful for investors and analysts to better understand how management assesses Zegna’s underlying operating performance on a consistent basis and to compare Zegna’s performance with that of other companies.
The Group’s management also believes that Adjusted EBIT and Adjusted EBIT Margin are useful for investors and analysts to better understand how management assesses the Group’s underlying operating performance on a consistent basis and to compare the Group’s performance with that of other companies.
Zegna’s management believes that these non-IFRS financial measures provide useful and relevant information regarding Zegna’s financial performance and financial condition, and improve the ability of management and investors to assess and compare the financial performance and financial position of Zegna with those of other companies.
The Group’s management believes that these non-IFRS financial measures provide useful and relevant information regarding the Group’s financial performance and financial condition, and improve the ability of management and investors to assess and compare the financial performance and financial position of the Group with those of other companies.
(2) MEA includes the Middle East, Africa and Turkey. (3) North America includes the United States of America and Canada. (4) Latin America includes Mexico, Brazil and other Central and South American countries. (5) APAC includes the Greater China Region, Japan, South Korea, Thailand, Malaysia, Vietnam, Indonesia, Philippines, Australia, New Zealand, India and other Southeast Asian countries.
(2) North America includes the United States of America and Canada. (3) Latin America includes Mexico, Brazil and other Central and South American countries. (4) APAC includes the Greater China Region, Japan, South Korea, Thailand, Malaysia, Vietnam, Indonesia, Philippines, Australia, New Zealand, India and other Southeast Asian countries .
Accordingly, management believes that Adjusted EBIT and Adjusted EBIT Margin provide useful information to third party stakeholders in understanding and evaluating Zegna’s operating results. 90 The following table presents a reconciliation of Profit/(Loss) to Adjusted EBIT and the calculation of the Adjusted EBIT Margin for the years ended December 31, 2022, 2021 and 2020.
Accordingly, management believes that Adjusted EBIT and Adjusted EBIT Margin provide useful information to third party stakeholders in understanding and evaluating the Group’s operating results. 91 The following table presents a reconciliation of Profit/(Loss) to Adjusted EBIT and the calculation of the Profit/(Loss) Margin and the Adjusted EBIT Margin for the years ended December 31, 2023, 2022 and 2021.
Adjusted EBIT and Adjusted EBIT Margin Adjusted EBIT is defined as profit or loss before income taxes plus financial income, financial expenses, foreign exchange losses/(gains) and the result from investments accounted for using the equity method, adjusted for income and costs which are significant in nature and that management considers not reflective of underlying operating activities, including, for one or all of the periods presented and as further described below, legal costs for trademark disputes, transaction costs related to acquisitions, severance indemnities and provisions for severance expenses, costs related to the Business Combination, net impairment of leased and owned stores, a special donation to the UNHCR, net (income)/costs related to lease agreements and certain other items.
Adjusted EBIT and Adjusted EBIT Margin Adjusted EBIT is defined as profit or loss before income taxes plus financial income, financial expenses, foreign exchange losses and the result from investments accounted for using the equity method, adjusted for income and costs which are significant in nature and that management considers not reflective of underlying operating activitie s, including, for one or all of the periods presented and as further described below, transaction costs related to acquisitions, severance indemnities and provisions for severance expenses, legal costs for trademark dispute, costs related to the Business Combination, net impairment of leased and owned stores, special donations for social responsibility, net (income)/costs related to lease agreements and certain other items.
An explanation of the relevance of each of the non-IFRS financial measures, a reconciliation of the non-IFRS financial measures to the most directly comparable measures calculated and presented in accordance with IFRS and a discussion of their limitations are set out below.
A definition, explanation of relevance and a reconciliation of each non-IFRS financial measure to the most directly comparable measure calculated and presented in accordance with IFRS are set out below.
Critical Accounting Estimates Please refer to Note 3 — Summary of significant accounting policies — Use of estimates to the Consolidated Financial Statements included elsewhere in this document for information relating to the critical accounting estimates applicable to Zegna. 89 Non-IFRS Financial Measures Zegna’s management monitors and evaluates operating and financial performance using several non-IFRS financial measures including: adjusted earnings before interest and taxes (“ Adjusted EBIT ”), Adjusted EBIT Margin, adjusted earnings before interest, taxes, depreciation and amortization (“ Adjusted EBITDA ”), Adjusted Profit/(Loss), Adjusted Basic Earnings per Share and Adjusted Diluted Earnings per Share, Net Financial Indebtedness/(Cash Surplus), Trade Working Capital and revenues on a constant currency basis.
Critical Accounting Estimates Please refer to Note 4 — Key sources of estimation uncertainty, use of estimates and critical accounting judgments — Use of estimates to the Consolidated Financial Statements included elsewhere in this document for information relating to the critical accounting estimates applicable to the Group. 90 Non-IFRS Financial Measures The Group’s management monitors and evaluates operating and financial performance using several non-IFRS financial measures including: adjusted earnings before interest and taxes (“Adjusted EBIT”), Adjusted EBIT Margin, adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), Adjusted Profit, Adjusted Basic Earnings per Share and Adjusted Diluted Earnings per Share, Net Financial Indebtedness/(Cash Surplus), Trade Working Capital, Free Cash Flow, revenues on a constant currency basis (Constant Currency) and revenues on an organic growth basis (Organic Growth).
Zegna’s management believes this non-IFRS financial measure aids management, investors and analysts to analyze Zegna’s financial position and financial resources available, and to compare Zegna’s financial position and financial resources available with that of other companies.
The Group’s management believes this non-IFRS financial measure aids management, investors and analysts to analyze the Group’s financial position and financial resources available, and to compare the Group’s financial position and financial resources available with that of other companies. 99 The following table sets forth the calculation of Net Financial Indebtedness/(Cash Surplus) at December 31, 2023 and 2022.
Net Financial Indebtedness/(Cash Surplus) is a non-IFRS financial measure. See “ —Non-IFRS Financial Measures” for important information relating to non-IFRS financial measures. Zegna’s management believes that Net Financial Indebtedness/(Cash Surplus) is useful to monitor the level of net liquidity and financial resources available to Zegna.
The Group’s management believes that Net Financial Indebtedness/(Cash Surplus) is useful to monitor the level of net liquidity and financial resources available to the Group.
The increase in other operating costs was primarily due to €152,869 thousand related to the Business Combination, including (i) €114,963 thousand relating to share-based payments for listing services recognized as the excess of the fair value of Zegna ordinary shares issued as part of the Business Combination and the fair value of IIAC’s identifiable net assets acquired, and (ii) €37,906 thousand for the issuance of 5,031,250 Zegna ordinary shares to the holders of IIAC class B shares to be held in escrow, as part of the Business Combination.
Costs related to the Business Combination in 2021 include: (a) €114,963 thousand relating to share-based payments for listing services recognized as the excess of the fair value of the Company Ordinary Shares issued as part of the Business Combination and the fair value of IIAC’s identifiable net assets acquired.
The release of these shares from escrow is subject to attainment of certain targets within a seven-year period.
(b) €37,906 thousand for the issuance of 5,031,250 the Company Ordinary Shares to the holders of Class B Shares to be held in escrow. The release of these shares from escrow is subject to achievement of certain targets within a seven-year period.
Contractual Obligations For information on our significant contractual commitments at December 31, 2022 and 2021, see Note 30 — Borrowings and Note 38 — Qualitative and quantitative information on financial risks to the Consolidated Financial Statements included elsewhere in this annual report on Form 20-F. 85 Net Financial Indebtedness/(Cash Surplus) Net Financial Indebtedness/(Cash Surplus) is defined as the sum of financial borrowings (current and non-current), derivative financial instrument liabilities, loans and certain other financial liabilities (recorded within other non-current financial liabilities in the consolidated statement of financial position), net of cash and cash equivalents, derivative financial instrument assets, securities and financial receivables (recorded within other current financial assets in the consolidated statement of financial position).
Net Financial Indebtedness/(Cash Surplus) Net Financial Indebtedness/(Cash Surplus) is defined as the sum of financial borrowings (current and non-current) and derivative financial instrument liabilities, net of cash and cash equivalents, derivative financial instrument assets, securities and financial receivables (recorded within other current financial assets in the consolidated statement of financial position).
The lines were undrawn at December 31, 2022. For additional information see Note 30 — Borrowings to the Consolidated Financial Statements included elsewhere in this annual report on Form 20-F.
For additional information on related party transactions see Note 36 — Related party transactions to the Consolidated Financial Statements included elsewhere in this annual report on Form 20-F. C. Interests of Experts and Counsel Not applicable. ITEM 8 FINANCIAL INFORMATION A.
Research and Development, Patents and Licenses Please refer to “ Item 4.B—Business Overview—Research and Development. ” D. Trend Information Please refer to “ Item 5.A—Operating Results—Trends, Uncertainties and Opportunities. ” E.
Item 5.A—Operating Results—Trends, Uncertainties and Opportunities. ” E.
In particular, write downs and other provisions in 2021 included (i) a provision of €12,192 thousand as a result of an unfavorable judgment handed down against the Group in respect of a legal claim related to a lease agreement in the United States (of which €950 thousand was released in 2022) and (ii) €6,006 thousand related to losses incurred by Agnona subsequent to the Group’s sale of a majority stake in Agnona in January 2021, for which the Group was required to compensate the company in 2021 accordance with the terms of the related sale agreement. 2021 compared to 2020 Write downs and other provisions for the year ended December 31, 2021 amounted to €19,487 thousand, an increase of €13,309 thousand compared to €6,178 thousand for the year ended December 31, 2020.
(8) Other adjustments in 2021 include €6,006 thousand related to losses incurred by Agnona subsequent to the Group’s sale of a majority stake in Agnona in January 2021, for which the Group was required to compensate the company in accordance with the terms of the related sale agreement, as well as €144 thousand relating to the write down of the Group’s remaining 30% stake in Agnona, partially offset by other income of €1,266 thousand relating to the sale of rights to build or develop airspace above a building in the United States.
The following table sets forth the calculation of Net Financial Indebtedness/(Cash Surplus) at December 31, 2022 and 2021: At December 31, (€ thousands) 2022 2021 Non-current borrowings 184,880 471,646 Current borrowings 286,175 157,292 Derivative financial instruments — Liabilities 2,362 14,138 Other non-current financial liabilities (1) — 7,976 Total borrowings, other financial liabilities and derivatives 473,417 651,052 Cash and cash equivalents (254,321) (459,791) Derivative financial instruments — Assets (22,454) (1,786) Other current financial assets (2) (318,795) (334,244) Total cash and cash equivalents, other current financial assets and derivatives (595,570) (795,821) Net Financial Indebtedness/(Cash Surplus) (122,153) (144,769) __________________ (1) Primarily relates to loans from a related party that were outstanding at December 31, 2021 and fully repaid in the first half of 2022.
At December 31, (€ thousands) 2023 2022 Non-current borrowings 113,285 184,880 Current borrowings 289,337 286,175 Derivative financial instruments — Liabilities 897 2,362 Total borrowings, other financial liabilities and derivatives 403,519 473,417 Cash and cash equivalents (296,279) (254,321) Derivative financial instruments — Assets (11,110) (22,454) Other current financial assets (1) (85,320) (318,795) Total cash and cash equivalents, other current financial assets and derivatives (392,709) (595,570) Net Financial Indebtedness/(Cash Surplus) 10,810 (122,153) __________________ (1) I ncludes (i) the Group’s investments in securities amo unting to €85,320 thousand and €316,595 thousand at December 31, 2023 and 2022 , respectively, and (ii) a financial receivable from Filati Biagioli Modesto S.p.A., an associated company of the Group, of €2,200 thousand at December 31, 2022.
Removed
Item 5.E—Critical Accounting Measures—Constant Currency Information. ” Revenues Zegna generates revenues primarily from the sale of its products and services, as well as from royalties received from third parties and licensees.
Added
These amounts are recorded within “selling, general and administrative expenses” in the consolidated statement of profit and loss. (2) Relates to severance indemnities of €4,002 thousand, €2,199 thousand and €8,996 thousand in 2023, 2022 and 2021, respectively. These amounts are recorded within “selling, general and administrative expenses” in the consolidated statement of profit and loss.
Removed
Revenues are recognized net of returns and discounts. 2022 compared to 2021 Revenues for the year ended December 31, 2022 amounted to €1,492,840 thousand, an increase of €200,438 thousand (+15.5% or +11.0% at constant currency) compared to €1,292,402 thousand for the year ended December 31, 2021.
Added
(3) Relates to legal costs of €2,168 thousand and €7,532 thousand in 2023 and 2022, respectively, in connection with a legal dispute between adidas and Thom Browne, primarily in relation to the use of trademarks. For additional information see “ Item 8—Financial Information—Legal Proceedings ”.
Removed
Our revenues significantly increased in all major geographic areas with the exception of the Greater China Region, our largest geographical market, which was significantly impacted by COVID-19-related restrictions during the course of 2022, which resulted in the temporary closure of certain stores and lower customer traffic, primarily from mid-March until the end of May, and again during the fourth quarter of the year as a result of additional waves of COVID-19.
Added
These amounts are recorded within “selling, general and administrative expenses” in the consolidated statement of profit and loss.
Removed
Therefore, the discussion below presents our revenues isolating the Greater China Region performance, which we believe is useful to better understand the underlying trend in our revenues for the periods presented.
Added
(4) Costs related to the Business Combination of €2,140 thousand and €2,137 thousand in 2023 and 2022, respectively, relate to the grant of equity awards to management in 2021 with vesting subject to the public listing of the Company’s shares and certain other performance and/or service conditions.
Removed
Revenues in the Greater China Region for the year ended December 31, 2022 amounted to €494,110 thousand, a decrease of €94,766 thousand (-16.1% or -20.6% at constant currency), compared to €588,876 thousand for the year ended December 31, 2021.
Added
(c) €34,092 thousand for transaction costs related to the Business Combination incurred by the Group , including costs for bank services, legal advisors and other consultancy fees. (d) €10,916 thousand for the Zegna family’s grant of a one-time €1,500 gift to each employee of the Group as result of the Company’s listing on NYSE completed on December 20, 2021.
Removed
The Greater China Region was adversely impacted by aforementioned COVID-19-related restrictions in 2022, which resulted in the temporary closure of certain stores and lower customer traffic, primarily from mid-March until the end of May, impacting both Zegna and Thom Browne directly operated stores.
Added
(e) €5,380 thousand relating to grant of performance share units, which each represent the right to receive one ordinary share of the Company , to the Group’s Chief Executive Officer, other directors of the Group , key executives with strategic responsibilities and other employees of the Group, all subject to certain vesting conditions. 92 (f) €1,236 thousand related to the fair value of private warrants issued, pursuant to the Business Combination, to certain non-executive directors of the Group .
Removed
Starting in June and through the third quarter of 2022, DTC revenues in the Greater China Region showed a positive trend compared to the third quarter of 2021 as a result of a significant increase in e-commerce sales for both the Zegna and Thom Browne segments and the gradual 59 recovery of in-store sales.
Added
(g) €566 thousand related to the write-off of non-refundable prepaid premiums for directors’ and officers’ insurance.
Removed
Due to a new wave of particularly impactful COVID-19-related restrictions in the Greater China Region in October and November, as well as some further unplanned temporary store closures in December due to a wave of contagion and resulting staff shortages, the Group’s revenues in the fourth quarter of 2022 decreased by approximately 30% compared to the fourth quarter of 2021.
Added
These amounts are recorded within (i) “selling, general and administrative expenses” for €2,034 thousand, €2,099 thousand and €200,961 thousand in 2023, 2022 and 2021, respectively, (ii) “cost of sales” for €106 thousand, €38 thousand and €4,086 thousand in 2023, 2022 and 2021, respectively, and (iii) “marketing expenses” for €12 thousand in 2021.
Removed
Revenues in the rest of the world for the year ended December 31, 2022 amounted to €998,730 thousand, an increase of €295,204 thousand (+42.0% or +38.6% at constant currency), compared to €703,526 thousand for the year ended December 31, 2021.
Added
(5) Net impairment of leased and owned stores for 2023, 2022, 2021 includes (i) impairment of €832 thousand, €2,369 thousand and €6,486 thousand related to right-of-use assets, respectively, (ii) impairment of €915 thousand, reversals of impairment of €756 thousand and impairment of €2,167 thousand related to property, plant and equipment, respectively, and (iii) impairment of €35 thousand, €26 thousand and €39 thousand related to intangible assets, respectively.
Removed
This increase was mainly attributable to the United States (+53.5% or +42.1% at constant currency), driven by DTC sales in both the Zegna and Thom Browne segments, Italy (+41.3% or +41.8% at constant currency), the UK (+43.2% or +42.2% at constant currency), France (+51.0% at current and at constant currency) and the United Arab Emirates (+54.6% or +38.4% at constant currency), as well as Latin America (+49.7% or +33.4% at constant currency) and Japan (+18.0% or 23.7% at constant currency).
Added
These amounts are recorded within “selling, general and administrative expenses” in the consolidated statement of profit and loss. (6) Relates to donations to support initiatives related to humanitarian emergencies in Turkey in 2023 (€100 thousand) and in Ukraine in 2022 (€1,000 thousand). These amounts are recorded within “selling, general and administrative expenses” in the consolidated statement of profit and loss.
Removed
As a result of the ongoing conflict in Ukraine and wide-ranging sanctions on certain industries and parties in Russia, from March 2022 we suspended production of products for, as well as new order collection from, our Russian franchisees and distributors, and reallocated products to other geographies, primarily in EMEA. 2021 compared to 2020 Revenues for the year ended December 31, 2021 amounted to €1,292,402 thousand, an increase of €277,669 thousand (+27.4% or +27.3% at constant currency) compared to €1,014,733 thousand for the year ended December 31, 2020.
Added
(7) Net (income)/costs related to lease agreements include: (a) in 2023: €4,129 thousand for the derecognition of lease liabilities following a change in terms of a lease agreement in Hong Kong; (b) in 2022: (i) proceeds of €6,500 thousand received from new tenants in order for the Group to withdraw from existing lease agreements of commercial properties and (ii) €950 thousand for reversals of previously recognized provisions in respect of a legal claim related to a lease agreement in the US, partially offset by (ii) €606 thousand for losses related to a sublease agreement in the US; (c) in 2021: (i) €12,192 thousand of provisions relating to a lease agreement in the US following an unfavorable legal claim judgment against the Group, (ii) €1,492 thousand of legal expenses related to a lease agreement in Italy and (iii) €1,829 thousand in accrued property taxes related to a lease agreement in the UK.
Removed
See the following sections for a discussion of Zegna’s revenues in 2021 compared to 2020. Revenues by product line The following table sets forth a breakdown of revenues by product line for the years ended December 31, 2022, 2021 and 2020.
Added
These amounts are recorded within “selling, general and administrative expenses” in the consolidated statement of profit and loss.
Removed
For the years ended December 31, Increase/(Decrease) (€ thousands, except percentages) 2022 2021 2020 2022 vs 2021 % % at constant currency 2021 vs 2020 % % at constant currency Zegna branded products 923,942 847,311 636,478 76,631 9.0 % 4.1 % 210,833 33.1 % 32.9 % Thom Browne 330,014 263,397 179,490 66,617 25.3 % 20.6 % 83,907 46.7 % 46.4 % Textile 136,769 102,244 87,615 34,525 33.8 % 35.4 % 14,629 16.7 % 17.0 % Third Party Brands 97,792 74,957 82,273 22,835 30.5 % 27.9 % (7,316) (8.9 %) (7.5 %) Other 4,323 4,493 28,877 (170) (3.8 %) (7.5 %) (24,384) (84.4 %) (84.4 %) Total revenues 1,492,840 1,292,402 1,014,733 200,438 15.5 % 11.0 % 277,669 27.4 % 27.3 % 2022 compared to 2021 By product line, the increase in revenues was mainly attributable to: (i) an increase of €76,631 thousand (+9.0% or +4.1% at constant currency) in Zegna branded products, primarily driven by the (a) the continued positive performance of shoes and steady growth in luxury leisurewear, as well as the rebound of our tailoring (“Tailoring”) and made-to-measure (“Made-to-Measure”) business, particularly in the United States and EMEA, as 2021 was impacted by COVID-19-related restrictions, and (b) the effects of price repositioning and price increases as part of the new Zegna One Brand strategy starting with the rollout of the Fall/Winter 2022 collection; (ii) an increase of €66,617 thousand (+25.3% or +20.6% at constant currency) in Thom Browne, reflecting strong wholesale demand and growth across all lines (menswear, womenswear and childrenswear), driven by sales for both our seasonal and our classic collections, as well as the roll out of the TMall platform for e-commerce sales in the Greater China Region (which commenced in the second half of 2021) and the contribution of eleven net DTC store openings (63 DTC stores at December 31, 2022 compared to 52 DTC stores at December 31, 2021), primarily in APAC; 60 (iii) an increase of €34,525 thousand (+33.8% or +35.4% at constant currency) in Textile, primarily attributable to the positive performance of the Lanificio Ermenegildo Zegna, Bonotto and Dondi brands driven by higher orders for the Fall/Winter 2022 and Spring/Summer 2023 collections compared to the previous year’s collections, which were affected by the COVID-19 pandemic, and the impact of Tessitura Ubertino S.r.l., which was acquired in June 2021 and contributed additional revenues of €4,590 thousand in 2022 compared to 2021; and (iv) an increase of €22,835 thousand (+30.5% or +27.9% at constant currency) in Third Party Brands, which benefited from higher orders for the TOM FORD brand for the Spring/Summer 2022 and Fall/Winter 2022 collections, as well as higher orders for the Gucci brand.
Added
These amounts are recorded within “selling, general and administrative expenses” in the consolidated statement of profit and loss.
Removed
The TFI distribution license agreement ended with the deliveries of the Fall/Winter 2022 collection and the Group expects to commence the TFI License in the second quarter of 2023 (subject to antitrust approvals and other customary closing conditions) for all TOM FORD men’s and women’s fashion as well as accessories and underwear, fine jewelry, childrenswear, textile and home design products.
Added
Adjusted EBITDA Adjusted EBITDA is defined as profit or loss before income taxes plus financial income, financial expenses, foreign exchange losses, depreciation, amortization and impairment of assets and the result from investments accounted for using the equity method, adjusted for income and costs which are significant in nature and that management considers not reflective of underlying operating activities, including, for one or all of the periods presented and as further described below, transaction costs related to acquisitions, severance indemnities and provisions for severance expenses, legal costs for trademark dispute, costs related to the Business Combination, special donations for social responsibility, net (income)/costs related to lease agreements and certain other items.
Removed
See also “ —Trends, Uncertainties and Opportunities—Acquisitions. ” 2021 compared to 2020 By product line, the increase in revenues was mainly related to: (i) an increase of €210,833 thousand (+33.1% or +32.9% at constant currency) in Zegna branded products, attributable to sales growth in all categories and primarily in luxury leisurewear and shoes as well as higher volumes in 2021 as 2020 was more severely impacted by temporary store closures as a result of COVID-19 restrictions; and (ii) an increase of €83,907 thousand (+46.7% or +46.4% at constant currency) in Thom Browne, reflecting higher revenues in all product lines in both menswear and womenswear categories, and the introduction of a new kidswear line during the year; and (iii) an increase of €14,629 thousand (+16.7% or 17.0% at constant currency) in Textile; partially offset by: (iv) a decrease of €7,316 thousand (-8.9% or -7.5% at constant currency) in Third Party Brands and a decrease of €24,384 thousand (-84.4% or -84.4% at constant currency) in Other, which included revenues of €12,389 thousand in 2020 related to the Agnona business, which was sold in January 2021. 61 Revenues by sales channel The following table sets forth a breakdown of revenues by sales channel for the years ended December 31, 2022, 2021 and 2020.
Added
The Group’s management uses Adjusted EBITDA to understand and evaluate the Group’s underlying operating performance. The Group’s management believes this non-IFRS financial measure is useful because it excludes items that management believes are not indicative of the Group’s underlying operating performance and allows management to view operating trends, perform analytical comparisons and benchmark performance between periods.
Removed
For the years ended December 31, Increase/(Decrease) (€ thousands, except percentages) 2022 2021 2020 2022 vs 2021 % % at constant currency 2021 vs 2020 % % at constant currency Direct to Consumer (DTC) - Zegna branded products 772,505 712,862 527,972 59,643 8.4 % 2.9 % 184,890 35.0 % 34.3 % Direct to Consumer (DTC) - Thom Browne branded products 145,702 138,567 85,268 7,135 5.1 % (1.5 %) 53,299 62.5 % 61.3 % Total Direct to Customer (DTC) 918,207 851,429 613,240 66,778 7.8 % 2.2 % 238,189 38.8 % 38.0 % Wholesale Zegna branded products 151,437 134,449 108,506 16,988 12.6 % 10.6 % 25,943 23.9 % 25.9 % Wholesale Thom Browne branded products 184,312 124,830 94,222 59,482 47.7 % 46.6 % 30,608 32.5 % 32.8 % Wholesale Third Party Brands and Textile 234,561 177,201 169,888 57,360 32.4 % 32.2 % 7,313 4.3 % 5.1 % Total Wholesale 570,310 436,480 372,616 133,830 30.7 % 29.4 % 63,864 17.1 % 18.2 % Other 4,323 4,493 28,877 (170) (3.8 %) (7.5 %) (24,384) (84.4 %) (84.4 %) Total revenues 1,492,840 1,292,402 1,014,733 200,438 15.5 % 11.0 % 277,669 27.4 % 27.3 % 2022 compared to 2021 By sales channel, the increase in revenues was mainly attributable to: (i) an increase of €66,778 thousand (+7.8% or +2.2% at constant currency) in the DTC channel, related to: (a) Zegna branded products (+€59,643 thousand, +8.4% or +2.9% at constant currency), driven by high double digit growth in the United States and EMEA, partially offset by the Greater China Region, which was impacted by COVID-19-related restrictions in 2022 that resulted in the temporary closure of certain stores and lower customer traffic, primarily from mid-March until the end of May and again in the fourth quarter of the year; (b) Thom Browne branded products (€7,135 thousand, +5.1%, -1.5% at constant currency), driven by high double digit growth in the United States, EMEA and Japan, eleven net DTC store openings (63 DTC stores at December 31, 2022 compared to 52 DTC stores at December 31, 2021), primarily in APAC, and the roll out of the TMall platform for e-commerce sales in the Greater China Region (which commenced in the second half of 2021), partially offset by the aforementioned effects of COVID-19-related restrictions in the Greater China Region; and (ii) an increase of €133,830 thousand (+30.7% or +29.4% at constant currency) in the Wholesale channel, mainly due to: (a) Thom Browne branded products (€59,482 thousand, +47.7% or +46.6% at constant currency) driven by both our seasonal and our classic collections and strong growth across all lines (menswear, womenswear and childrenswear) and major geographical areas; (b) Third Party Brands and Textile (€57,360 thousand, +32.4% or +32.2% at constant currency), consisting of an increase of €34,525 thousand (+33.8% or +35.4% at constant currency) in Textile, primarily attributable to the positive performance of the Lanificio Ermenegildo Zegna, Bonotto and 62 Dondi brands driven by higher orders for the Fall/Winter 2022 and Spring/Summer 2023 collections compared to the previous year’s collections, which were affected by the COVID-19 pandemic, and the impact of Tessitura Ubertino S.r.l., which was acquired in June 2021 and contributed additional revenue of €4.6 million in 2022 compared to 2021, and an increase of €22,835 thousand (+30.5% or +27.9% at constant currency) in Third Party Brands, which benefited from higher orders for the TOM FORD brand for the Spring/Summer 2022 and Fall/Winter 2022 collections, as well as higher orders for the Gucci brand.
Added
The Group’s management also believes that Adjusted EBITDA is useful for investors and analysts to better understand how management assesses the Group’s underlying operating performance on a consistent basis and to compare the Group’s performance with that of other companies.
Removed
(c) Zegna branded products (€16,988 thousand, +12.6% or +10.6% at constant currency) driven by growth in the United States and EMEA, partially offset by lower orders for new collections from travel retail customers in the Greater China Region as a result of COVID-19-related store closures and the related build up of their inventory.
Added
Accordingly, management believes that Adjusted EBITDA provides useful information to third party stakeholders in understanding and evaluating the Group’s operating result. 93 The following table presents a reconciliation of Profit/(Loss) to Adjusted EBITDA for the years ended December 31, 2023, 2022 and 2021.
Removed
The effects from the suspension of production for the Russian market and the closure of stores in Russia following the escalation of the conflict in Ukraine (resulting in lower revenues in Russia of €10,450 thousand) were substantially mitigated from the reallocation of products, primarily in the DTC channel in EMEA. 2021 compared to 2020 By sales channel, the increase in revenues was mainly related to: (i) an increase of €238,189 thousand (+38.8% or +38.0% at constant currency) in the DTC channel consisting of a €184,890 thousand increase in Zegna branded products, driven by higher volumes, primarily in in the United States, EMEA and the Greater China Region, while revenues declined in other APAC markets which were negatively affected by COVID-19 restrictions and due to the conversion of 17 DOSs in South Korea to franchising in January 2021, and a €53,299 thousand increase in Thom Browne, which experienced growth in all product lines and geographies, and benefited from the opening of fourteen new stores in 2021; and (ii) an increase of €63,864 thousand (+17.1% or +18.2% at constant currency) in the Wholesale channel driven by Thom Browne branded products, mainly in EMEA and APAC, and Zegna branded products, mainly in North America and APAC, as well as the recovery of the Textile product line, especially in the second half of 2021, as order intake in 2020 was adversely affected by the COVID-19 pandemic.
Added
For the year ended December 31, (€ thousands) 2023 2022 2021 Profit/(Loss) 135,661 65,279 (127,661) Income taxes 33,433 35,802 30,702 Financial income (37,282) (13,320) (45,889) Financial expenses 68,121 54,346 43,823 Foreign exchange losses 5,262 7,869 7,791 Depreciation, amortization and impairment of assets 194,952 173,521 163,367 Result from investments accounted for using the equity method 2,953 (2,199) (2,794) Transaction costs related to acquisitions (1) 6,001 2,289 — Severance indemnities and provisions for severance expenses (2) 4,002 2,199 8,996 Legal costs for trademark dispute (3) 2,168 7,532 — Costs related to the Business Combination (4) 2,140 2,137 205,059 Special donations for social responsibility (5) 100 1,000 — Net (income)/costs related to lease agreements (6) (4,129) (6,844) 15,512 Other (7) — — 4,884 Adjusted EBITDA 413,382 329,611 303,790 __________________ (1) Relates to transaction costs of €6,001 thousand and €2,289 thousand in 2023 and 2022, respectively, primarily for consultancy and legal fees related to the TFI Acquisition and, for 2023 only, also to the acquisition of the Thom Browne business in South Korea and the acquisition of a 25% interest in Norda .
Removed
Revenues by geographical area The following table sets forth a breakdown of revenues by geographical area for the years ended December 31, 2022, 2021 and 2020.
Added
(2) Re lates to severance indemnities of €4,002 thousand, €2,199 thousand and €8,996 thousand in 2023, 2022 and 2021, respectively. (3) Relates to legal costs of €2,168 thousand and €7,532 thousand in 2023 and 2022, respectively, in connection with a legal dispute between adidas and Thom Browne, primarily in relation to the use of trademarks.
Removed
For the years ended December 31, Increase/(Decrease) (€ thousands, except percentages) 2022 2021 2020 2022 vs 2021 % % at constant currency 2021 vs 2020 % % at constant currency EMEA (1) 520,226 380,325 315,879 139,901 36.8 % 36.2 % 64,446 20.4 % 20.8 % of which Italy 224,342 158,722 121,202 65,620 41.3 % 41.8 % 37,520 31.0 % 30.8 % of which UK 53,970 37,682 32,985 16,288 43.2 % 42.2 % 4,697 14.2 % 14.0 % of which MEA (2) 69,046 44,236 24,268 24,810 56.1 % 49.6 % 19,968 82.3 % 92.0 % North America (3) 294,686 191,283 131,049 103,403 54.1 % 43.2 % 60,234 46.0 % 50.9 % of which United States 270,312 176,059 114,818 94,253 53.5 % 42.1 % 61,241 53.3 % 59.4 % Latin America (4) 29,889 19,971 12,915 9,918 49.7 % 33.4 % 7,056 54.6 % 57.4 % APAC (5) 644,802 696,344 551,650 (51,542) (7.4 %) (11.6 %) 144,694 26.2 % 25.0 % of which Greater China Region 494,110 588,876 438,193 (94,766) (16.1 %) (20.6 %) 150,683 34.4 % 31.8 % of which Japan 65,445 55,479 61,523 9,966 18.0 % 23.7 % (6,044) (9.8 %) (5.6 %) Other (6) 3,237 4,479 3,240 (1,242) n.m. n.m. 1,239 38.2 % 40.1 % Total revenues 1,492,840 1,292,402 1,014,733 200,438 15.5 % 11.0 % 277,669 27.4 % 27.3 % 63 _________________ (1) EMEA includes Europe, the Middle East and Africa.
Added
For additional information see “ Item 8—Financial Information—Legal Proceedings ”. (4) Costs related to the Business Combination of €2,140 thousand and €2,137 thousand in 2023 and 2022, respectively, relate to the grant of equity awards to management in 2021 with vesting subject to the public listing of the Company’s shares and certain other performance and/or service conditions.
Removed
(6) Other revenues mainly include royalties. 2022 compared to 2021 By geographical area, the increase in revenues was mainly related to: (i) an increase of €139,901 thousand (+36.8% or +36.2% at constant currency) in EMEA, primarily attributable to significant growth in Italy, as well as strong performance in the UK and the Middle East, and driven by Zegna branded products in the DTC channel and Thom Browne in both the DTC and Wholesale channels, as well as the rebound of our Tailoring and Made-to-Measure business in the Zegna Segment following adverse effects in 2021 as a result of COVID-19-related restrictions.
Added
Costs related to the Business Combination in 2021 include: (a) €114,963 thousand relating to share-based payments for listing services recognized as the excess of the fair value of the Company Ordinary Shares issued as part of the Business Combination and the fair value of IIAC’s identifiable net assets acquired.
Removed
The effects from the suspension of production for the Russian market and the closure of stores in Russia following the escalation of the conflict in Ukraine were substantially mitigated by the reallocation of products within other EMEA countries; (ii) an increase of €103,403 thousand (+54.1% or +43.2% at constant currency) in North America, primarily attributable to the United States and driven by (a) DTC sales for both Zegna branded products and Thom Browne, (b) the rebound of our Tailoring and Made-to-Measure business in the Zegna Segment, (c) higher orders for the TOM FORD brand for the Spring/Summer 2022 and Fall/Winter 2022 collections.
Added
(b) €37,906 thousand for the issuance of 5,031,250 the Company Ordinary Shares to the holders of Class B Shares to be held in escrow. The release of these shares from escrow is subject to achievement of certain targets within a seven-year period.
Removed
The TFI distribution license agreement ended with the deliveries of the Fall/Winter 2022 collection and the Group expects to commence the TFI License in the second quarter of 2023 for all TOM FORD men’s and women’s fashion as well as accessories and underwear, fine jewelry, childrenswear, textile and home design products.
Added
(c) €34,092 thousand for transaction costs related to the Business Combination incurred by the Group , including costs for bank services, legal advisors and other consultancy fees. (d) €10,916 thousand for the Zegna family’s grant of a one-time €1,500 gift to each employee of the Group as result of the Company’s listing on NYSE completed on December 20, 2021.
Removed
See also “ —Trends, Uncertainties and Opportunities—Acquisitions, ” and (d) positive foreign currency exchange impact due to the strengthening of the U.S.
Added
(e) €5,380 thousand relating to grant of performance share units, which each represent the right to receive one ordinary share of the Company , to the Group’s Chief Executive Officer, other directors of the Group , key executives with strategic responsibilities and other employees of the Group, all subject to certain vesting conditions.
Removed
Dollar compared to the Euro, and (iii) an increase of €9,918 thousand (+49.7% or +33.4% at constant currency) in Latin America driven by DTC sales of Zegna-branded products in Mexico and Brazil, as well as positive foreign currency exchange impact; partially offset by: (iv) a decrease of €51,542 thousand (-7.4% or -11.6% at constant currency) in APAC, mainly attributable to the temporary closure of stores and lower customer traffic in the Greater China Region, primarily from mid-March 2022 until the end of May 2022, impacting both Zegna and Thom Browne directly operated stores.
Added
(f) €1,236 thousand related to the fair value of private warrants issued, pursuant to the Business Combination, to certain non-executive directors of the Group . (g) €566 thousand related to the write-off of non-refundable prepaid premiums for directors’ and officers’ insurance.
Removed
Starting in June 2022 and through the third quarter of 2022 DTC revenues in the Greater China Region showed a positive trend compared to the third quarter of 2021 as a result of a significant increase in e-commerce sales for both the Zegna and Thom Browne segments and the gradual recovery of in-store sales.
Added
(5) Relates to donations to support initiatives related to humanitarian emergencies in Turkey in 2023 (€100 thousand) and in Ukraine in 2022 (€1,000 thousand).
Removed
Due to a new wave of particularly impactful COVID-19-related restrictions in the Greater China Region in October and November, as well as some further unplanned temporary store closures in December due to a wave of contagion and resulting staff shortages, the Group’s revenues in the fourth quarter of 2022 decreased by approximately 30% compared to the fourth quarter of 2021.
Added
(6) Net (income)/costs related to lease agreements include: 94 (a) in 2023: €4,129 thousand for the derecognition of lease liabilities following a change in terms of a lease agreement in Hong Kong; (b) in 2022: (i) proceeds of €6,500 thousand received from new tenants in order for the Group to withdraw from existing lease agreements of commercial properties and (ii) €950 thousand for reversals of previously recognized provisions in respect of a legal claim related to a lease agreement in the US, partially offset by (ii) €606 thousand for losses related to a sublease agreement in the US; (c) in 2021: (i) €12,192 thousand of provisions relating to a lease agreement in the US following an unfavorable legal claim judgment against the Group, (ii) €1,492 thousand of legal expenses related to a lease agreement in Italy and (iii) €1,829 thousand in accrued property taxes related to a lease agreement in the UK.
Removed
These adverse effects were partially offset by double digit growth in Japan and South Korea. 2021 compared to 2020 By geographical area, the increase in revenues was mainly related to: (i) an increase of €144,694 thousand (+26.2% or +25.0% at constant currency) in APAC mainly due to higher local consumption in the Greater China Region driven by restrictions on international travel, as well as the opening of ten new Thom Browne stores in 2021; 64 (ii) an increase of €64,446 thousand (+20.4% or +20.8% at constant currency) in EMEA driven by significant growth in the Thom Browne Wholesale channel, as well as the DTC channel, which was impacted by the COVID-19 pandemic in 2020, especially in the UAE; and (iii) an increase of €60,234 thousand (+46.0% or +50.9% at constant currency) in North America driven by the recovery of the DTC channel following the reversal of COVID-19 restrictions.
Added
(7) Other adjustments in 2021 include €6,006 thousand related to losses incurred by Agnona subsequent to the Group’s sale of a majority stake in Agnona in January 2021, for which the Group was required to compensate the company in accordance with the terms of the related sale agreement, as well as €144 thousand relating to the write down of the Group’s remaining 30% stake in Agnona, partially offset by other income of €1,266 thousand relating to the sale of rights to build or develop airspace above a building in the United States.
Removed
For further details on revenues with respect to each of Zegna’s two operating segments for the year ended December 31, 2022 compared to the year ended December 31, 2021, and for the year ended December 31, 2021 compared to the year ended December 31, 2020, see “ —Results by Segment ” below.
Added
Adjusted Profit Adjusted Profit is defined as Profit/(Loss) adjusted for income and costs (net of related tax effects) which are significant in nature and that management considers not reflective of underlying activities, including, for one or all of the periods presented and as further described below, transaction costs related to acquisitions, severance indemnities and provisions for severance expenses, legal costs for trademark dispute, costs related to the Business Combination, net impairment of leased and owned stores, special donations for social responsibility, net (income)/costs related to lease agreements, gains on the Thom Browne option realized in connection with exercise of the option and certain other items, as well as the tax effects of the adjusting items.
Removed
Other income Other income mainly includes income from the sale of advertising materials, tax refund commissions and other miscellaneous income. The following table sets forth other income for the years ended December 31, 2022, 2021 and 2020.
Added
The Group’s management uses Adjusted Profit to understand and evaluate the Group’s underlying performance. The Group’s management believes this non-IFRS financial measure is useful because it excludes items that management believes are not indicative of the Group’s underlying performance and allows management to view performance trends, perform analytical comparisons and benchmark performance between periods.

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Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

277 edited+41 added−35 removed170 unchanged
Biggest changeWe incurred the following fees from the Deloitte Entities for professional services for the years ended December 31, 2022 and 2021, respectively: For the years ended December 31, (€ thousands) 2022 2021 Audit fees (1) 4,428 8,214 Audit-related fees 122 195 Tax fees 190 412 All other fees 22 154 Total 4,762 8,975 (1) The Audit fees in 2021 include (i) the PCAOB audit for the years ended December 31, 2020, 2019 and 2018 for €4,900 thousand in connection with the preparation of the consolidated financial statements as of and for the three years in the period ended December 31, 2020 for the purpose of Zegna’s Registration Statement on Form F-4 filed in connection with the Business Combination and (ii) the PCAOB audit for the year ended December 31, 2021. • Audit fees are the aggregate fees charged by the Deloitte Entities for the audit of our annual consolidated financial statements, the review of our interim consolidated financial statements and attestation services that are provided in connection with statutory and regulatory filings or engagements. • Audit-related fees are the aggregate fees charged by the Deloitte Entities for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” This category comprises fees for agreed upon procedures engagements and other attestation services subject to regulatory requirements.
Biggest changeWe incurred the following fees from the Deloitte Entities for professional services for the years ended December 31, 2023 and 2022, respectively: For the years ended December 31, (€ thousands) 2023 2022 Audit fees (1) 5,972 4,428 Audit-related fees 127 122 Tax fees 356 190 All other fees 28 22 Total 6,483 4,762 • Audit fees are the aggregate fees charged by the Deloitte Entities for the audit of our annual consolidated financial statements, the review of our interim consolidated financial statements and attestation services that are provided in connection with statutory and regulatory filings or engagements. • Audit-related fees are the aggregate fees charged by the Deloitte Entities for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” This category comprises fees for agreed upon procedures engagements and other attestation services subject to regulatory requirements. • Tax fees are the aggregate fees charged by the Deloitte Entities for services related to tax compliance, tax advice and tax planning. • All other fees are the aggregate fees charged by the Deloitte Entities for non-audit services rendered which are not listed above.
Holder that owns (or is deemed to own) shares in a PFIC during any taxable year of the U.S. Holder, may be required to file an IRS Form 8621 (whether or not a QEF or mark-to-market election is made) and to provide such other information as may be required by the U.S. Department of the Treasury.
Holder. A U.S. Holder that owns (or is deemed to own) shares in a PFIC during any taxable year of the U.S. Holder, may be required to file an IRS Form 8621 (whether or not a QEF or mark-to-market election is made) and to provide such other information as may be required by the U.S. Department of the Treasury.
Under Article 27-bis of Decree 600, which implemented in Italy the Directive 435/90/EEC of July 23, 1990, then recast in EU Directive 2011/96 of November 30, 2011 (the “ Parent-Subsidiary Directive ”), a company is entitled to a full refund of the withholding tax levied on the dividends if it (a) has one of the legal forms provided for in the appendix to the Parent-Subsidiary Directive, (b) is resident for tax purposes in an EU Member State without being considered to be resident outside the EU according to a double tax treaty signed with a non-EU country, (c) is subject in the country of residence to one of the taxes indicated in the appendix to the Parent Subsidiary Directive with no possibility of benefiting from optional or exemption regimes that have no territorial or time limitations, and (d) directly holds Ordinary Shares that represent an interest in the issued and outstanding capital of Zegna of no less than 10% for an uninterrupted period of at least one year.
Under Article 27-bis of Decree 600, which implemented in Italy the Directive 435/90/EEC of July 23, 1990, then recast in EU Directive 2011/96 of November 30, 2011 (the “ Parent-Subsidiary Directive ”), a company is entitled to a full refund of the withholding tax levied on the dividends if it (a) has one of the legal forms provided for in the appendix to the Parent-Subsidiary Directive, (b) is resident for tax purposes in an EU Member State without being considered to be resident outside the EU according to a double tax treaty signed with a non-EU country, (c) is subject in the country of residence to one of the taxes indicated in the appendix to the Parent Subsidiary Directive with no possibility of benefiting from optional or exemption regimes that have no territorial or time limitations, and (d) directly holds Ordinary Shares that represent an interest in the issued and outstanding capital of the Company of no less than 10% for an uninterrupted period of at least one year.
Subject to certain exceptions, transfers of assets and rights (including the Ordinary Shares, the Warrants and the Zegna Special Voting Shares) on death or by gift are generally subject to inheritance and gift tax as follows: • at a rate of 4% in case of transfers made to the spouse or relatives in direct line, on the portion of the global net value of the transferred assets, if any, exceeding, for each beneficiary, €1,000,000.00. • at a rate of 6% in case of transfers made to relatives up to the fourth degree or relatives-in-law up to the third degree on the entire value of the transferred assets (in the case of transfers to brothers or sisters, the 6% rate is applicable only on the portion of the global net value of the transferred assets, if any, exceeding, for each beneficiary, €100,000.00). • at a rate of 8% in any other case. • If the transfer is made in favor of persons with severe disabilities, the tax applies on the value exceeding €1,500,000.00 at the rates illustrated above, depending on the type of relationship existing between the deceased or donor and the beneficiary.
Subject to certain exceptions, transfers of assets and rights (including the Ordinary Shares, the Warrants and the Special Voting Shares) on death or by gift are generally subject to inheritance and gift tax as follows: • at a rate of 4% in case of transfers made to the spouse or relatives in direct line, on the portion of the global net value of the transferred assets, if any, exceeding, for each beneficiary, €1,000,000.00. • at a rate of 6% in case of transfers made to relatives up to the fourth degree or relatives-in-law up to the third degree on the entire value of the transferred assets (in the case of transfers to brothers or sisters, the 6% rate is applicable only on the portion of the global net value of the transferred assets, if any, exceeding, for each beneficiary, €100,000.00). • at a rate of 8% in any other case. • If the transfer is made in favor of persons with severe disabilities, the tax applies on the value exceeding €1,500,000.00 at the rates illustrated above, depending on the type of relationship existing between the deceased or donor and the beneficiary.
Certain Reporting Obligations for Italian Resident Holders Under Law Decree No. 167 of June 28, 1990, individuals, non-business entities and non-business partnerships that are resident in Italy for tax purposes and, during the fiscal year, hold financial assets abroad (including, possibly, the Ordinary Shares, the Warrants and the Zegna Special Voting Shares) must, in certain circumstances, disclose these financial assets to the Italian tax authorities in their income tax return (or if the income tax return is not due, in a proper form that must be filed within the same term as prescribed for the annual income tax return), regardless of the value of such assets (save for deposits or bank accounts having an aggregate value not exceeding €15,000.00 throughout the year).
Certain Reporting Obligations for Italian Resident Holders Under Law Decree No. 167 of June 28, 1990, individuals, non-business entities and non-business partnerships that are resident in Italy for tax purposes and, during the fiscal year, hold financial assets abroad (including, possibly, the Ordinary Shares, the Warrants and the Special Voting Shares) must, in certain circumstances, disclose these financial assets to the Italian tax authorities in their income tax return (or if the income tax return is not due, in a proper form that must be filed within the same term as prescribed for the annual income tax return), regardless of the value of such assets (save for deposits or bank accounts having an aggregate value not exceeding €15,000.00 throughout the year).
For social security entities pursuant to Legislative Decree No. 509 of June 30, 1994 and Legislative Decree No. 103 of February 10, 1996, subject to certain conditions (including minimum holding period requirement) and limitations, dividends and other income from the Ordinary Shares that do not represent a Qualified Holding may be excluded from the taxable base if the social security entity earmarks the Ordinary Shares as eligible investment under Article 1(89) of Finance Act 2017 (as subsequently amended) to the extent, however, that investment in the Ordinary Shares (and other qualifying 152 shares or units in undertakings for collective investment investing mainly in qualifying shares) represent no more than 10% of the gross asset value of the social security entity of the previous year.
For social security entities pursuant to Legislative Decree No. 509 of June 30, 1994 and Legislative Decree No. 103 of February 10, 1996, subject to certain conditions (including minimum holding period requirement) and limitations, dividends and other income from the Ordinary Shares that do not represent a Qualified Holding may be excluded from the taxable base if the social security entity earmarks the Ordinary Shares as eligible investment under Article 1(89) of Finance Act 2017 (as subsequently amended) to the extent, however, that investment in the Ordinary Shares (and other qualifying shares or units in undertakings for collective investment investing mainly in qualifying shares) represent no more than 10% of the gross asset value of the social security entity of the previous year.
No disclosure requirements exist for financial assets (including, possibly, the Ordinary Shares, the Warrants and the Zegna Special Voting Shares) under management or administration entrusted to Italian resident intermediaries (Italian banks, broker-dealers (“ SIM ”), fiduciary companies or other professional intermediaries as indicated under Article 1 of Law Decree No. 167 of June 28, 1990) and for contracts concluded through their intervention, provided that the cash flows and the income derived from such assets and contracts have been subjected to Italian withholding tax or substitute tax by such intermediaries.
No disclosure requirements exist for financial assets (including, possibly, the Ordinary Shares, the Warrants and the Special Voting Shares) under management or administration entrusted to Italian resident intermediaries (Italian banks, broker-dealers (“ SIM ”), fiduciary companies or other professional intermediaries as indicated under Article 1 of Law Decree No. 167 of June 28, 1990) and for contracts concluded through their intervention, provided that the cash flows and the income derived from such assets and contracts have been subjected to Italian withholding tax or substitute tax by such intermediaries.
Within five months after the end of each financial year, which period may be extended with five months upon a resolution of the Zegna General Meeting on grounds of special circumstances, the Zegna Board will prepare and publish the annual accounts, consisting of a balance sheet, a profit and loss account and explanatory notes and which must be accompanied by a management report and auditor’s report, alongside any other information that would need to be made public in accordance with the applicable provisions of law and the requirements of the NYSE.
Within five months after the end of each financial year, which period may be extended with five months upon a resolution of the General Meeting on grounds of special circumstances, the Board will prepare and publish the annual accounts, consisting of a balance sheet, a profit and loss account and explanatory notes and which must be accompanied by a management report and auditor’s report, alongside any other information that would need to be made public in accordance with the applicable provisions of law and the requirements of the NYSE.
Inheritance and Gift Tax Subject to certain exceptions, Italian inheritance and gift tax is generally payable on transfers of assets and rights (including, possibly, the Ordinary Shares, the Warrants and the Zegna Special Voting Shares) (i) by reason of death or gift by Italian resident persons (or other transfers for no consideration and the creation of liens on such assets for a specific purpose), even if the transferred assets are held outside Italy, and (ii) by reason of death or gift by non-Italian resident persons, but limited to transferred assets held in Italy.
Inheritance and Gift Tax Subject to certain exceptions, Italian inheritance and gift tax is generally payable on transfers of assets and rights (including, possibly, the Ordinary Shares, the Warrants and the Special Voting Shares) (i) by reason of death or gift by Italian resident persons (or other transfers for no consideration and the creation of liens on such assets for a specific purpose), even if the transferred assets are held outside Italy, and (ii) by reason of death or gift by non-Italian resident persons, but limited to transferred assets held in Italy.
Shareholders Agreement Concurrently with the Closing, Zegna, Monterubello, Ermenegildo Zegna and the IIAC Sponsor entered into the Shareholders Agreement, pursuant to which, among other things, for so long as the Sponsor Group satisfies the Minimum Holding Requirement, (i) the parties thereto will, and will cause their respective controlled affiliates to, exercise their rights and powers such that the Sponsor Nominee will only be (a) suspended as a Zegna Director if so requested in writing by the IIAC Sponsor unless the Zegna Board reasonably determined that not suspending the Sponsor Nominee would be in breach of the Zegna Board’s fiduciary duties and (b) dismissed as a Zegna Director if so requested in writing by the IIAC Sponsor or in the case of fraud or willful misconduct in the performance of the Sponsor Nominee’s office as a Zegna Non-Executive Director, (ii) Zegna will offer the Sponsor Nominee the opportunity to be proposed to the Zegna Board for appointment to serve on the Audit Committee and/or the Compensation Committee and (iii) the IIAC Sponsor will have the right to participate in certain capital raises of Zegna on the terms and subject to the exceptions contained in the Shareholders Agreement.
Shareholders Agreement Concurrently with the Closing, the Company, Monterubello, Ermenegildo (Gildo) Zegna and the IIAC Sponsor entered into the Shareholders Agreement, pursuant to which, among other things, for so long as the Sponsor Group satisfies the Minimum Holding Requirement, (i) the parties thereto will, and will cause their respective controlled affiliates to, exercise their rights and powers such that the Sponsor Nominee will only be (a) suspended as a Director if so requested in writing by the IIAC Sponsor unless the Board reasonably determined that not suspending the Sponsor Nominee would be in breach of the Board’s fiduciary duties and (b) dismissed as a Director if so requested in writing by the IIAC Sponsor or in the case of fraud or willful misconduct in the performance of the Sponsor Nominee’s office as a Non-Executive Director, (ii) the Company will offer the Sponsor Nominee the opportunity to be proposed to the Board for appointment to serve on the Audit Committee and/or the Compensation Committee and (iii) the IIAC Sponsor will have the right to participate in certain capital raises of the Company on the terms and subject to the exceptions contained in the Shareholders Agreement.
In particular, no shareholder will be allowed to, directly or indirectly: (a) sell, dispose of, trade or transfer any Zegna Special Voting Shares or otherwise grant any right or interest in any Zegna Special Voting Share, other than as permitted pursuant to the Zegna Articles of Association or the Terms and Conditions of the Zegna Special Voting Shares; or (b) establish or permit to establish any pledge, lien, fixed or floating charge or other encumbrance over any Zegna Special Voting Share or any interest in any Zegna Special Voting Share.
In particular, no shareholder will be allowed to, directly or indirectly: (a) sell, dispose of, trade or transfer any Special Voting Shares or otherwise grant any right or interest in any Special Voting Share, other than as permitted pursuant to the Articles of Association or the Terms and Conditions of the Special Voting Shares; or (b) establish or permit to establish any pledge, lien, fixed or floating charge or other encumbrance over any Special Voting Share or any interest in any Special Voting Share.
Tax Code does not require the recognition of income in respect of a redemption premium if the redemption premium does not exceed a de minimis amount and, even if the amounts transferred to 144 the special voting shares dividend reserve that are not paid out as dividends are considered redemption premium, the amount of the redemption premium is likely to be “de minimis” as such term is used in the applicable Treasury Regulations.
Tax Code does not require the recognition of income in respect of a redemption premium if the redemption premium does not exceed a de minimis amount and, even if the amounts transferred to the special voting shares dividend reserve that are not paid out as dividends are considered redemption premium, the amount of the redemption premium is likely to be “de minimis” as such term is used in the applicable Treasury Regulations.
Amendments to the Zegna Articles of Association A resolution of the Zegna General Meeting to amend the Zegna Articles of Association may only be adopted by the Zegna General Meeting at the proposal of the Zegna Board, which proposal requires the affirmative vote of the Sponsor Nominee if any amendment adversely affects the rights of the IIAC Sponsor specifically, as described under “— Affirmative Vote of the Sponsor Nominee .” A resolution regarding the amendment of the Zegna Articles of Association will require a simple majority of the votes cast.
Amendments to the Articles of Association A resolution of the General Meeting to amend the Articles of Association may only be adopted by the General Meeting at the proposal of the Board, which proposal requires the affirmative vote of the Sponsor Nominee if any amendment adversely affects the rights of the IIAC Sponsor specifically, as described under “— Affirmative Vote of the Sponsor Nominee .” A resolution regarding the amendment of the Articles of Association will require a simple majority of the votes cast.
Pursuant to this policy, which is designed to ensure that such engagements do not impair the independence of our independent registered public accounting firm, the Audit Committee reviews and pre-approves(if appropriate) specific audit and non-audit 170 services in the categories Audit Services, Audit-Related Services, Tax Services, and any other services that may be performed by our independent registered public accounting firm.
Pursuant to this policy, which is designed to ensure that such engagements do not impair the independence of our independent registered public accounting firm, the Audit Committee reviews and pre-approves(if appropriate) specific audit and non-audit services in the categories Audit Services, Audit-Related Services, Tax Services, and any other services that may be performed by our independent registered public accounting firm.
In addition, if shareholders request a change to the composition of the Zegna Board or of corresponding provisions in the Zegna Articles of Association, and in the case of an unsolicited public offer, a statutory response time may be invoked by the Zegna Board pursuant to Dutch law, being a period of, depending on the circumstances, no more than 250 days.
In addition, if shareholders request a change to the composition of the Board or of corresponding provisions in the Articles of Association, and in the case of an unsolicited public offer, a statutory response time may be invoked by the Board pursuant to Dutch law, being a period of, depending on the circumstances, no more than 250 days.
Holders must have owned such shares for over 46 days during the 91-day period beginning on the date which is 45 days before the ex-dividend date. The Code also provides a dividends-received deduction for a dividend received from a “specified 10-percent owned foreign corporation” by a U.S. corporation that is a “10 percent U.S.
Holders must have owned such shares for over 46 days during the 91-day period beginning on the date which is 45 days before the ex-dividend date. The U.S. Tax Code also provides a dividends-received deduction for a dividend received from a “specified 10-percent owned foreign corporation” by a U.S. corporation that is a “10 percent U.S.
This summary does not purport to be a comprehensive description of every aspect of Italian taxation that may be relevant in the hands of a particular holder of the Ordinary Shares and/or the Warrants, and, if applicable, Zegna Special Voting Shares, who may be subject to special treatment under the applicable law, nor does this summary intend to be applicable in all respects to all categories of holders of the Ordinary Shares, Zegna Special Voting Shares and/or Warrants.
This summary does not purport to be a comprehensive description of every aspect of Italian taxation that may be relevant in the hands of a particular holder of the Ordinary Shares and/or the Warrants, and, if applicable, Special Voting Shares, who may be subject to special treatment under the applicable law, nor does this summary intend to be applicable in all respects to all categories of holders of the Ordinary Shares, Special Voting Shares and/or Warrants.
All Zegna Directors are jointly and severally liable for failure of one or more co-directors. An individual Zegna Director will only be exempt from liability if he or she proves that he or she cannot be held culpable for the mismanagement and that he or she has not been negligent in seeking to prevent the consequences of the mismanagement.
All Directors are jointly and severally liable for failure of one or more co-directors. An individual Director will only be exempt from liability if he or she proves that he or she cannot be held culpable for the mismanagement and that he or she has not been negligent in seeking to prevent the consequences of the mismanagement.
The Zegna Special Voting Shares are not listed and are transferable only in very limited circumstances (including, among other things, transfers to certain affiliates or to relatives through succession, donation or other transfers, provided that the corresponding Ordinary Shares registered in the Loyalty Register are also transferred to such party, or transfers with the approval of the Zegna Board).
The Special Voting Shares are not listed and are transferable only in very limited circumstances (including, among other things, transfers to certain affiliates or to relatives through succession, donation or other transfers, provided that the corresponding Ordinary Shares registered in the Loyalty Register are also transferred to such party, or transfers with the approval of the Board).
Holder’s basis in its Zegna Special Voting Shares, which should equal the amount that was included in income upon receipt. Such loss would be a capital loss and would be a long- term capital loss if a U.S. Holder has held its Zegna Special Voting Shares for more than one year. It is also possible that a U.S.
Holder’s basis in its Special Voting Shares, which should equal the amount that was included in income upon receipt. Such loss would be a capital loss and would be a long- term capital loss if a U.S. Holder has held its Special Voting Shares for more than one year. It is also possible that a U.S.
Pursuant to the Zegna Articles of Association, Zegna is required to indemnify any and all of the Zegna Directors, officers, former Zegna Directors, former officers and any person who may have served at its request as a director or officer of a subsidiary of Zegna, who were or are made a party or are threatened to be made a party or are involved in, any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative or investigative (each, a “Proceeding”), or any appeal in such a Proceeding or any inquiry or investigation that could lead to such a Proceeding against any and all liabilities, damages, documented expenses (including attorney’s fees), financial effects of judgments, fines, penalties (including excise and similar taxes and punitive damages) and amounts paid in settlement in connection with such Proceeding by any of them.
Pursuant to the Articles of Association, the Company is required to indemnify any and all of the Directors, officers, former Directors, former officers and any person who may have served at its request as a director or officer of a subsidiary of the Company, who were or are made a party or are threatened to be made a party or are involved in, any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative or investigative (each, a “Proceeding”), or any appeal in such a Proceeding or any inquiry or investigation that could lead to such a Proceeding against any and all liabilities, damages, documented expenses (including attorney’s fees), financial effects of judgments, fines, penalties (including excise and similar taxes and punitive damages) and amounts paid in settlement in connection with such Proceeding by any of them.
The purpose of the loyalty voting structure is to grant long-term shareholders extra voting rights by means of granting Zegna Special Voting Shares, without entitling such shareholders to any economic rights, other than those pertaining to the Ordinary Shares. However, under Dutch law, the Zegna Special Voting Shares cannot be totally excluded from economic entitlements.
The purpose of the loyalty voting structure is to grant long-term shareholders extra voting rights by means of granting Special Voting Shares, without entitling such shareholders to any economic rights, other than those pertaining to the Ordinary Shares. However, under Dutch law, the Special Voting Shares cannot be totally excluded from economic entitlements.
Additional extraordinary Zegna General Meetings may also be held whenever considered appropriate by the Zegna Board. Pursuant to Dutch law, one or more shareholders, who solely or jointly represent at least 10% of the issued and outstanding share capital, may request the Zegna Board to convene a Zegna General Meeting.
Additional extraordinary General Meetings may also be held whenever considered appropriate by the Board. Pursuant to Dutch law, one or more shareholders, who solely or jointly represent at least 10% of the issued and outstanding share capital, may request the Board to convene a General Meeting.
If the Zegna Board has not taken the steps necessary to ensure that a Zegna General Meeting is held within the relevant statutory period after the request, the requesting person(s) may, at his/her/their request, be authorized by a court in preliminary relief proceedings to convene a Zegna General Meeting.
If the Board has not taken the steps necessary to ensure that a General Meeting is held within the relevant statutory period after the request, the requesting person(s) may, at his/her/their request, be authorized by a court in preliminary relief proceedings to convene a General Meeting.
As this is a general summary, holders of the Ordinary Shares, Zegna Special Voting Shares and/or the Warrants should consult their own tax advisors as to the Italian or other tax consequences connected with the acquisition, ownership and transfer of the Ordinary Shares, Zegna Special Voting Shares and/or the Warrants, including, in particular, the application to their particular situations of the tax considerations discussed below.
As this is a general summary, holders of the Ordinary Shares, Special Voting Shares and/or the Warrants should consult their own tax advisors as to the Italian or other tax consequences connected with the acquisition, ownership and transfer of the Ordinary Shares, Special Voting Shares and/or the Warrants, including, in particular, the application to their particular situations of the tax considerations discussed below.
This requirement must be met at the time when the capital gain is realized, without interruption, since the beginning of the holding of the Ordinary Shares or, if the 156 shares are held since more than five years and the disposal is made in favor of entities not belonging to the sale group of the seller, from at least the beginning of the fifth tax period preceding the one in which the gain is realized; and (iv) the participated entity carries out a commercial business activity according to the definition set forth in Article 55 CITA; however, this requirement is not relevant for shareholdings in companies whose securities are traded on regulated markets (as for the Ordinary Shares).
This requirement must be met at the time when the capital gain is realized, without interruption, since the beginning of the holding of the Ordinary Shares or, if the shares are held since more than five years and the disposal is made in favor of entities not belonging to the sale group of the seller, from at least the beginning of the fifth tax period preceding the one in which the gain is realized; and 162 (iv) the participated entity carries out a commercial business activity according to the definition set forth in Article 55 CITA; however, this requirement is not relevant for shareholdings in companies whose securities are traded on regulated markets (as for the Ordinary Shares).
Any distribution out of a special voting shares dividend reserve or the partial or full release of any such reserve will require a prior proposal from the Zegna Board and a resolution of the meeting of holders of the relevant class of Zegna Special Voting Shares, and will be made exclusively to the holders of the relevant class of Zegna Special Voting Shares in proportion to the aggregate nominal value of the relevant class of their Zegna Special Voting Shares.
Any distribution out of a special voting shares dividend reserve or the partial or full release of any such reserve will require a prior proposal from the Board and a resolution of the meeting of holders of the relevant class of Special Voting Shares, and will be made exclusively to the holders of the relevant class of Special Voting Shares in proportion to the aggregate nominal value of the relevant class of their Special Voting Shares.
Zegna General Meetings Zegna General Meetings will be held in Amsterdam, Haarlemmermeer (which includes Schiphol Airport), The Hague or Rotterdam, the Netherlands. The annual Zegna General Meeting shall be held no later than six months after the end of the financial year on the date and at the place mentioned in the convocation notice.
General Meetings General Meetings will be held in Amsterdam, Haarlemmermeer (which includes Schiphol Airport), The Hague or Rotterdam, the Netherlands. The annual General Meeting shall be held no later than six months after the end of the financial year on the date and at the place mentioned in the convocation notice.
In addition, the agenda shall include such items as have been included therein by the Zegna Board. One or more of shareholders, alone or together, representing at least 3% of the issued and outstanding share capital may also request to include items in the agenda of a Zegna General Meeting.
In addition, the agenda shall include such items as have been included therein by the Board. One or more of shareholders, alone or together, representing at least 3% of the issued and outstanding share capital may also request to include items in the agenda of a General Meeting.
Any decrease in value of the managed assets accrued at year end may be carried forward and offset against any increase in value of the managed assets accrued in any of the four following tax years. Under this regime, the holder is not required to report capital gains in the annual income tax return.
Any decrease in value of the managed assets accrued at year end may be carried forward and offset 161 against any increase in value of the managed assets accrued in any of the four following tax years. Under this regime, the holder is not required to report capital gains in the annual income tax return.
Loyalty Voting Program and Zegna Special Voting Shares Loyalty Voting Program NO STATUTORY, JUDICIAL OR ADMINISTRATIVE AUTHORITY DIRECTLY DISCUSSES HOW THE RECEIPT, OWNERSHIP OR DISPOSITION OF ZEGNA SPECIAL VOTING SHARES SHOULD BE TREATED FOR U.S. FEDERAL INCOME TAX PURPOSES AND AS A RESULT, THE U.S. FEDERAL INCOME TAX CONSEQUENCES ARE UNCERTAIN. ACCORDINGLY, U.S.
Loyalty Voting Program and Special Voting Shares Loyalty Voting Program NO STATUTORY, JUDICIAL OR ADMINISTRATIVE AUTHORITY DIRECTLY DISCUSSES HOW THE RECEIPT, OWNERSHIP OR DISPOSITION OF SPECIAL VOTING SHARES SHOULD BE TREATED FOR U.S. FEDERAL INCOME TAX PURPOSES AND AS A RESULT, THE U.S. FEDERAL INCOME TAX CONSEQUENCES ARE UNCERTAIN. ACCORDINGLY, U.S.
The Zegna Board may in its discretion grant one of the Zegna Non-Executive Directors the title Vice Chairman and may grant such additional titles the Zegna Board deems appropriate to any Zegna Director. The Zegna Board determines which Zegna Non-Executive Director will act as Lead Non-Executive Director and chair ( voorzitter ) as referred to under Dutch law.
The Board may in its discretion grant one of the Non-Executive Directors the title Vice Chairman and may grant such additional titles the Board deems appropriate to any Director. The Board determines which Non-Executive Director will act as Lead Non-Executive Director and chair ( voorzitter ) as referred to under Dutch law.
Euro received on the sale or other disposition of an Ordinary Share or Warrant generally will have a tax basis equal to its U.S. dollar value as determined pursuant to the rules above. Any gain or loss recognized by a U.S.
Euro received on the sale or other disposition of an Ordinary Share or Warrant 146 generally will have a tax basis equal to its U.S. dollar value as determined pursuant to the rules above. Any gain or loss recognized by a U.S.
Capital losses may be carried forward and offset against capital gains realized within the same relationship of deposit in the same tax year or in the following tax years up to the fourth. Capital losses 155 realized on transfers of Non-Qualified Holdings before 2019 should be allowed to offset capital gains realized on Transfers of Qualified Holdings as of 2019.
Capital losses may be carried forward and offset against capital gains realized within the same relationship of deposit in the same tax year or in the following tax years up to the fourth. Capital losses realized on transfers of Non-Qualified Holdings before 2019 should be allowed to offset capital gains realized on Transfers of Qualified Holdings as of 2019.
Holders, subject to certain exceptions (including, but not limited to, dividends treated as investment income for purposes of investment interest deduction limitations), dividends generally will be eligible for treatment as “qualified dividend income” and taxed at the lower applicable long-term capital gains rate only if, among others: (i) Ordinary Shares are readily tradable on an established securities market in the United States or Zegna is eligible for benefits under an applicable tax treaty with the United States; (ii) Zegna is not treated as a PFIC with respect to such U.S.
Holders, subject to certain exceptions (including, but not limited to, dividends treated as investment income for purposes of investment interest deduction limitations), dividends generally will be eligible for treatment as “qualified dividend income” and taxed at the lower applicable long-term capital gains rate only if, among others: (i) Ordinary Shares are readily tradable on an established securities market in the United States or the Company is eligible for benefits under an applicable tax treaty with the United States; (ii) the Company is not treated as a PFIC with respect to such U.S.
Board Regulations Pursuant to the Zegna Articles of Association, the Zegna Board has adopted regulations dealing with its internal organization, the manner in which decisions are taken, the place and manner in which meetings are held, the composition, the duties and organization of committees of the Zegna Board and any other matters concerning the Zegna Board, Zegna Directors and committees established by the Zegna Board.
Board Regulations Pursuant to the Articles of Association, the Board has adopted regulations dealing with its internal organization, the manner in which decisions are taken, the place and manner in which meetings are held, the composition, the duties and organization of committees of the Board and any other matters concerning the Board, Directors and committees established by the Board.
The option right is granted to the SVS Foundation for an unlimited period and is intended to ensure that holders of eligible Ordinary Shares in the future will receive their Zegna Special Voting Shares without requiring a resolution from the Zegna General Meeting.
The option right is granted to the SVS Foundation for an unlimited period and is intended to ensure that holders of eligible Ordinary Shares in the future will receive their Special Voting Shares without requiring a resolution from the General Meeting.
Holders because, among other things, (i) the Zegna Special Voting Shares are not redeemable on a specific date and a U.S. Holder is only entitled to receive amounts in respect of the Zegna Special Voting Shares upon liquidation, and (ii) Section 305 of the U.S.
Holders because, among other things, (i) the Special Voting Shares are not redeemable on a specific date and a U.S. Holder is only entitled to receive amounts in respect of the Special Voting Shares upon liquidation, and (ii) Section 305 of the U.S.
Holder to United States taxation on a net income basis, or if the non-U.S. Holder is an individual present in the United States for 183 or more days in the taxable year of the sale and certain other conditions exist. 145 Corporate non-U.S.
Holder to United States taxation on a net income basis, or if the non-U.S. Holder is an individual present in the United States for 183 or more days in the taxable year of the sale and certain other conditions exist. Corporate non-U.S.
Nomination and Appointment Zegna Directors are appointed by the Zegna General Meeting on a binding nomination by the Zegna Board, provided that one Zegna Non-Executive Director is appointed on a binding nomination by the IIAC Sponsor if at the time of the convocation of the relevant Zegna General Meeting the Sponsor Group satisfies the Minimum Holding Requirement.
Nomination and Appointment Directors are appointed by the General Meeting on a binding nomination by the Board, provided that one Non-Executive Director is appointed on a binding nomination by the IIAC Sponsor if at the time of the convocation of the relevant General Meeting the Sponsor Group satisfies the Minimum Holding Requirement.
If a number of Ordinary Shares have been registered in the Loyalty Register for an uninterrupted period of two years in the name of the same shareholder, such shares become eligible to receive Zegna Special Voting Shares A. The relevant shareholder will receive one Zegna Special Voting Share A per eligible Ordinary Share.
If a number of Ordinary Shares have been registered in the Loyalty Register for an uninterrupted period of two years in the name of the same shareholder, such shares become eligible to receive Special Voting Shares A. The relevant shareholder will receive one Special Voting Share A per eligible Ordinary Share.
Pursuant to Dutch law, when determining the extent to which shareholders vote, are present or represented, or the extent to which the share capital is present or represented, no account shall be taken of shares in respect of which the law or the Zegna Articles of Association provide that no votes may be cast.
Pursuant to Dutch law, when determining the extent to which shareholders vote, are present or represented, or the extent to which the share capital is present or represented, no account shall be taken of shares in respect of which the law or the Articles of Association provide that no votes may be cast.
A foreign (i.e., non-U.S.) corporation will be classified as a PFIC for U.S. federal income tax purposes if either (i) at least 75% of its gross income in a taxable year, including its pro rata share of the gross income of any corporation in which it is considered to own at least 25% of the shares by value and any partnership in which Zegna owns more than 25% by value, is passive income or (ii) at least 50% of its assets in a taxable year (ordinarily determined based on fair market value and averaged quarterly over the year), including its pro rata share of the assets of any corporation in which it is considered to own at least 25% of the shares by value and any partnership in which Zegna owns more than 25% by value, are held for the production of, or produce, passive income.
A foreign (i.e., non-U.S.) corporation will be classified as a PFIC for U.S. federal income tax purposes if either (i) at least 75% of its gross income in a taxable year, including its pro rata share of the gross income of any corporation in which it is considered to own at least 25% of the shares by value and any partnership in which the Company owns more than 25% by value, is passive income or (ii) at least 50% of its assets in a taxable year (ordinarily determined based on fair market value and averaged quarterly over the year), including its pro rata share of the assets of any corporation in which it is considered to own at least 25% of the shares by value and any partnership in which the Company owns more than 25% by value, are held for the production of, or produce, passive income.
Disposition of Zegna Special Voting Shares The tax treatment of a U.S. Holder that has its Zegna Special Voting Shares redeemed for zero consideration after removing its common shares from the Loyalty Register is unclear. It is possible that a U.S. Holder would recognize a loss to the extent of the U.S.
Disposition of Special Voting Shares The tax treatment of a U.S. Holder that has its Special Voting Shares redeemed for zero consideration after removing its common shares from the Loyalty Register is unclear. It is possible that a U.S. Holder would recognize a loss to the extent of the U.S.
However, because the determination of the fair market value of the Zegna Special Voting Shares is not governed by any guidance that directly addresses such a situation and is unclear, the Italian tax authorities could assert that the value of the Zegna Special Voting Shares as determined by us is incorrect.
However, because the determination of the fair market value of the Special Voting Shares is not governed by any guidance that directly addresses such a situation and is unclear, the Italian tax authorities could assert that the value of the Special Voting Shares as determined by us is incorrect.
Moreover, Article 1(95) of Finance Act 2017 (as amended by Finance Act 2019) provides for an exemption from withholding taxation on dividends if a pension fund set up in an EU Member State or an EEA State holds shares in an Italian resident corporation (such as Zegna) for at least 5 years and only to the extent of dividends from investments in qualifying shares (or units in undertakings for collective investment investing mainly in qualifying shares) that represent no more than 10% of the gross asset value of the pension fund of the previous year.
Moreover, Article 1(95) of Finance Act 2017 (as amended by Finance Act 2019) provides for an exemption from withholding taxation on dividends if a pension fund set up in an EU Member State or an EEA State holds shares in an Italian resident corporation (such as the Company) for at least 5 years and only to the extent of dividends from investments in qualifying shares (or units in undertakings for collective investment investing mainly in qualifying shares) that represent no more than 10% of the gross asset value of the pension fund of the previous year.
Each class of Zegna Special Voting Shares will entitle the relevant holders to the following number of votes, in addition to the voting rights attached to each Ordinary Share: • each Zegna Special Voting Share A will entitle its holder with one extra vote; • each Zegna Special Voting Share B will entitle its holder with four extra votes; and • each Zegna Special Voting Share C will entitle its holder with nine extra votes.
Each class of Special Voting Shares will entitle the relevant holders to the following number of votes, in addition to the voting rights attached to each Ordinary Share: • each Special Voting Share A will entitle its holder with one extra vote; • each Special Voting Share B will entitle its holder with four extra votes; and • each Special Voting Share C will entitle its holder with nine extra votes.
Requests must be made in writing and received by the Zegna Board at least 60 days before the day of the meeting. No resolutions shall be adopted on items other than those which have been included in the agenda.
Requests must be made in writing and received by the Board at least 60 days before the day of the meeting. No resolutions shall be adopted on items other than those which have been included in the agenda.
Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Ordinary Shares and Warrants Subject to the PFIC rules discussed below under the heading “— Passive Foreign Investment Company Rules, ” upon any sale, exchange or other taxable disposition of Ordinary Shares or Warrants, a U.S.
Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Ordinary Shares and Warrants Subject to the PFIC rules discussed below under the heading “— Passive Foreign Investment Company (“PFIC”) Rules, ” upon any sale, exchange or other taxable disposition of Ordinary Shares or Warrants, a U.S.
Holder’s holding period for Ordinary Shares received upon exercise of the of a Warrant will begin on the date following the date of exercise (or possibly the date of exercise) of the Warrant and will not include the period during 141 which the U.S. Holder held the Warrant (or any IIAC Warrant exchanged therefor).
Holder’s holding period for Ordinary Shares received upon exercise of the of a Warrant will begin on the date following the date of exercise (or possibly the date of exercise) of the Warrant and will not include the period during which the U.S. Holder held the Warrant (or any IIAC Warrant exchanged therefor).
Persons exempt from IRES and persons outside the scope of IRES Dividends paid to Italian resident persons that are exempt from IRES are generally subject to 26% tax withheld at source. No Italian tax is instead withheld at source on dividends paid to persons that are outside the scope of IRES (esclusi) under Article 74(1) CITA.
Persons exempt from IRES and persons outside the scope of IRES 158 Dividends paid to Italian resident persons that are exempt from IRES are generally subject to 26% tax withheld at source. No Italian tax is instead withheld at source on dividends paid to persons that are outside the scope of IRES (esclusi) under Article 74(1) CITA.
Non-Dutch Resident Corporate Entities A Non-Dutch Resident Corporate Entity will not be subject to any Dutch taxes on income or capital gains derived from the acquisition, holding or transfer of the Zegna Shares and/or Warrants unless: (i) the Non-Dutch Resident Corporate Entity derives profits from an enterprise, which is fully or partly carried on through a permanent establishment ( vaste inrichting ) or a permanent representative ( vaste vertegenwoordiger ) in the Netherlands to which the Zegna Shares are attributable; or (ii) the Non-Dutch Resident Corporate Entity is entitled to a share—other than by way of securities—in the profits of an enterprise or a co-entitlement to the net worth of an enterprise, which is effectively managed in the Netherlands and to which the Zegna Shares and/or Warrants are attributable.
Non-Dutch Resident Corporate Entities A Non-Dutch Resident Corporate Entity will not be subject to any Dutch taxes on income or capital gains derived from the acquisition, holding or transfer of the Company Shares and/or Warrants unless: (i) the Non-Dutch Resident Corporate Entity derives profits from an enterprise, which is fully or partly carried on through a permanent establishment ( vaste inrichting ) or a permanent representative ( vaste vertegenwoordiger ) in the Netherlands to which the Company Shares are attributable; or (ii) the Non-Dutch Resident Corporate Entity is entitled to a share—other than by way of securities—in the profits of an enterprise or a co-entitlement to the net worth of an enterprise, which is effectively managed in the Netherlands and to which the Company Shares and/or Warrants are attributable.
Because the Zegna Special Voting Shares are not admitted to listing and are transferable only in very limited circumstances (including, among other things, transfers to certain affiliates or to relatives through succession, donation or other transfers, provided that the corresponding Ordinary Shares registered in the Loyalty Register are also transferred to such party, or transfers with the approval of the Zegna Board) and their limited economic rights can be enjoyed only at the time of the liquidation of Zegna, we believe and intend to take the position that the fair market value of each Zegna Special Voting Share is minimal.
Because the Special Voting Shares are not admitted to listing and are transferable only in very limited circumstances (including, among other things, transfers to certain affiliates or to relatives through succession, donation or other transfers, provided that the corresponding Ordinary Shares registered in the Loyalty Register are also transferred to such party, or transfers with the approval of the Board) and their limited economic rights can be enjoyed only at the time of the liquidation of the Company, we believe and intend to take the position that the fair market value of each Special Voting Share is minimal.
From the moment of such a request, the holder of the Ordinary Shares registered in the Loyalty Register will be considered to have waived his or her rights to cast any votes associated with the Zegna Special Voting Shares to be de-registered from the Loyalty Register.
From the moment of such a request, the holder of the Ordinary Shares registered in the Loyalty Register will be considered to have waived his or her rights to cast any votes associated with the Special Voting Shares to be de-registered from the Loyalty Register.
Holder may avoid the adverse PFIC tax consequences described above in respect of Ordinary Shares (but not Warrants) by making and maintaining a timely and valid Qualified Electing Fund (“QEF”) election (if eligible to do so) to include in income its pro rata share of Zegna’s net capital gains (as long-term capital gain) and other earnings and profits (as ordinary income), on a current basis, in each case whether or not distributed, in the first taxable year of the U.S.
Holder may avoid the adverse PFIC tax consequences described above in respect of Ordinary Shares (but not Warrants) by making and maintaining a timely and valid Qualified Electing Fund (“QEF”) election (if eligible to do so) to include in income its pro rata share of the Company’s net capital gains (as long-term capital gain) and other earnings and profits (as ordinary income), on a current basis, in each case whether or not distributed, in the first taxable year of the U.S.
Holders are urged to consult their tax advisors regarding the availability and tax consequences of a mark-to-market election with respect to Ordinary Shares under their particular circumstances. Notwithstanding any PFIC election made by a U.S.
Holders are urged to consult their tax advisors regarding the availability and tax consequences of a mark-to-market election with respect to Ordinary Shares under their particular circumstances. 148 Notwithstanding any PFIC election made by a U.S.
Material Italian Tax Considerations – Ordinary Shares and Warrants Taxation in Italy The information set out below is a general summary of the material Italian tax consequences connected with the acquisition, ownership and transfer of the Ordinary Shares and/or the Warrants and, if applicable, Zegna Special Voting Shares.
Material Italian Tax Considerations – Ordinary Shares and Warrants Taxation in Italy The information set out below is a general summary of the material Italian tax consequences connected with the acquisition, ownership and transfer of the Ordinary Shares and/or the Warrants and, if applicable, Special Voting Shares.
The Zegna Executive Directors will timely provide the Zegna Non-Executive Directors with the information they need to carry out their duties. The Zegna Board may allocate its duties and powers among the Zegna Directors and the committees of the Zegna Board in or in accordance with the Zegna Board Regulations or otherwise in writing.
The Executive Directors will timely provide the Non-Executive Directors with the information they need to carry out their duties. The Board may allocate its duties and powers among the Directors and the committees of the Board in or in accordance with the Board Regulations or otherwise in writing.
Holder would not be allowed to recognize a loss upon the redemption of its Zegna Special Voting Shares and instead a U.S. Holder should increase the basis in its Ordinary Shares by an amount equal to the basis in its Zegna Special Voting Shares. Such basis increase in a U.S.
Holder would not be allowed to recognize a loss upon the redemption of its Special Voting Shares and instead a U.S. Holder should increase the basis in its Ordinary Shares by an amount equal to the basis in its Special Voting Shares. Such basis increase in a U.S.
Under the Agreement between the European Community and the Swiss Confederation providing for measures equivalent to those laid down in Council Directive 2003/48/EC on taxation of savings income in the form of interest payments, the withholding tax refund / exemption regime described above also applies to dividends paid to a company that 154 (a) is resident for tax purposes in Switzerland without being considered to be resident outside Switzerland according to a double tax treaty signed with a non-EU country, (b) is a limited company, (c) is subject to Swiss corporate tax without being exempted or benefiting from preferential tax regimes, and (d) directly holds Ordinary Shares that represent an interest in Zegna’s issued and outstanding capital of no less than 25% for an uninterrupted period of at least two years.
Under the Agreement between the European Community and the Swiss Confederation providing for measures equivalent to those laid down in Council Directive 2003/48/EC on taxation of savings income in the form of interest payments, the withholding tax refund / exemption regime described above also applies to dividends paid to a company that (a) is resident for tax purposes in Switzerland without being considered to be resident outside Switzerland according to a double tax treaty signed with a non-EU country, (b) is a limited company, (c) is subject to Swiss corporate tax without being exempted or benefiting from preferential tax regimes, and (d) directly holds Ordinary Shares that represent an interest in the Company’s issued and outstanding capital of no less than 25% for an uninterrupted period of at least two years.
If the Zegna Board is unable to adopt a resolution as a result of all Zegna Directors being unable to participate in the deliberations and decision-making process due to a conflict of interest, the resolution may nevertheless be adopted by the Zegna Board.
If the Board is unable to adopt a resolution as a result of all Directors being unable to participate in the deliberations and decision-making process due to a conflict of interest, the resolution may nevertheless be adopted by the Board.
The powers to vote upon the distribution from the special voting shares dividend reserve and the cancellation of all issued Zegna Special Voting Shares of a specific class are the only powers that are granted to the meeting of holders of Zegna Special Voting Shares of the relevant class pursuant to Zegna Articles of Association.
The powers to vote upon the distribution from the special voting shares dividend reserve and the cancellation of all issued Special Voting Shares of a specific class are the only powers that are granted to the meeting of holders of Special Voting Shares of the relevant class pursuant to Articles of Association.
Zegna will under no circumstances be obligated to effect (i) more than 3 underwritten offerings in the aggregate in respect of all registrable securities held by the Zegna Initial Shareholders or (ii) more than 3 underwritten offerings in the aggregate in respect of all registrable securities held by the IIAC Initial Shareholders.
The Company will under no circumstances be obligated to effect (i) more than 3 underwritten offerings in the aggregate in respect of all registrable securities held by the Zegna Initial Shareholders or (ii) more than 3 underwritten offerings in the aggregate in respect of all registrable securities held by the IIAC Initial Shareholders.
Amongst others it does not describe any Dutch tax considerations or consequences that may be relevant where a holder of Zegna Shares and/or Warrants: (i) is an individual and the holder’s income or capital gains derived from the Zegna Shares and/or Warrants are attributable to employment activities, the income from which is taxable in the Netherlands; (ii) has a substantial interest ( aanmerkelijk belang ) or a fictitious substantial interest ( fictief aanmerkelijk belang ) in Zegna within the meaning of chapter 4 of the Dutch Income Tax Act 2001 ( Wet inkomstenbelasting 2001 ) (the “ITA”).
Amongst others it does not describe any Dutch tax considerations or consequences that may be relevant where a holder of the Company Shares and/or Warrants: (i) is an individual and the holder’s income or capital gains derived from the Company Shares and/or Warrants are attributable to employment activities, the income from which is taxable in the Netherlands; (ii) has a substantial interest ( aanmerkelijk belang ) or a fictitious substantial interest ( fictief aanmerkelijk belang ) in the Company within the meaning of chapter 4 of the Dutch Income Tax Act 2001 ( Wet inkomstenbelasting 2001 ) (the “ITA”).
Notwithstanding the above, no indemnification will be made (i) in respect of any claim, issue or matter as to which any of the above-mentioned indemnified persons will be adjudged in a final and non-appealable decision to be liable for gross negligence or willful misconduct in the performance of such person’s duty to Zegna or (ii) to the extent that the costs or the capital losses of the above-mentioned indemnified persons are paid by another party or covered by an insurance policy and the insurer has paid out these costs or capital losses.
Notwithstanding the above, no indemnification will be made (i) in respect of any claim, issue or matter as to which any of the above-mentioned indemnified persons will be adjudged in a final and non-appealable decision to be liable for gross negligence or willful misconduct in the performance of such person’s duty to the Company or (ii) to the extent that the costs or the capital losses of the above-mentioned indemnified persons are paid by another party or covered by an insurance policy and the insurer has paid out these costs or capital losses.
For so long as the Sponsor Group satisfies the Minimum Holding Requirement and subject to the conditions contained in the Shareholders Agreement, Zegna will also (i) consult with the IIAC Sponsor and solicit and consider its views in good faith before (a) entering into any major, transformative acquisition involving a merger with a similarly situated fashion or luxury goods company or (b) determining to pay an extraordinary cash dividend, and (ii) provide access to senior representatives of the IIAC Sponsor to interact with (a) the Chief Financial Officer and Chief Operating Officer of Zegna monthly and (b) the Chief Executive Officer of Zegna quarterly, in each case to ask questions about the affairs of Zegna, provided that, in each case, neither Zegna nor its senior representatives shall be under any obligation to disclose any confidential or non-public information.
For so long as the Sponsor Group satisfies the Minimum Holding Requirement and subject to the conditions contained in the Shareholders Agreement, the Company will also (i) consult with the IIAC Sponsor and solicit and consider its views in good faith before (a) entering into any major, transformative acquisition involving a merger with a similarly situated fashion or luxury goods company or (b) determining to pay an extraordinary cash dividend, and (ii) provide access to senior representatives of the IIAC Sponsor to interact with (a) the Chief Financial Officer and Chief Operating Officer of the Company monthly and (b) the Chief Executive Officer of the Company quarterly, in each case to ask questions about the affairs of the Company, provided that, in each case, neither the Company nor its senior representatives shall be under any obligation to disclose any confidential or non-public information. 143 C.
Dutch Resident Individuals not engaged or deemed to be engaged in an enterprise or in miscellaneous activities Generally, the Zegna Shares and/or Warrants held by a Dutch Resident Individual who is not engaged or deemed to be engaged in an enterprise or in miscellaneous activities, or who is so engaged or deemed to be engaged but the Zegna Shares and/or Warrants are not attributable to that enterprise or miscellaneous activities, will be subject to an annual income tax imposed on a fictitious yield on the fair market value of the Zegna Shares and/or Warrants on January 1 of each calendar year under the regime for savings and investments ( inkomen uit sparen en beleggen ).
Dutch Resident Individuals not engaged or deemed to be engaged in an enterprise or in miscellaneous activities Generally, the Company Shares and/or Warrants held by a Dutch Resident Individual who is not engaged or deemed to be engaged in an enterprise or in miscellaneous activities, or who is so engaged or deemed to be engaged but the Company Shares and/or Warrants are not attributable to that enterprise or miscellaneous activities, will be subject to an annual income tax imposed on a fictitious yield on the fair market value of the Company Shares and/or Warrants on January 1 of each calendar year under the regime for savings and investments ( inkomen uit sparen en beleggen ).
Taxation of Capital Gains The tax regime summarized in this subsection “— Taxation of Capital Gains ” applies only to classes of holders of Ordinary Shares and, if applicable, Zegna Special Voting Shares that are described here below.
Taxation of Capital Gains The tax regime summarized in this subsection “— Taxation of Capital Gains ” applies only to classes of holders of Ordinary Shares and, if applicable, Special Voting Shares that are described here below.
The material weaknesses cannot be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. 166 D.
The material weaknesses cannot be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. D.
Holders are urged to consult their tax advisors regarding the effect, if any, of these rules on the ownership and disposition of Ordinary Shares. Non-U.S. Holders Dividends Dividends on Ordinary Shares paid to a non-U.S.
Holders are urged to consult their tax advisors regarding the effect, if any, of these rules on the ownership and disposition of Ordinary Shares. 150 Non-U.S. Holders Dividends Dividends on Ordinary Shares paid to a non-U.S.
Taxation of Dividends The tax regime summarized in this subsection “— Taxation of Dividends ” applies only to classes of holders of the Ordinary Shares and, if applicable, of the Zegna Special Voting Shares that are described here below.
Taxation of Dividends The tax regime summarized in this subsection “— Taxation of Dividends ” applies only to classes of holders of the Ordinary Shares and, if applicable, of the Special Voting Shares that are described here below.
Zegna will use commercially reasonable efforts to keep the registration statement effective until the earliest of: (i) the third anniversary of the Closing; (ii) the date the subscribers cease to hold any shares issued pursuant to the PIPE Subscription Agreements (the “ registrable shares ”); or (iii) the date all registrable shares may be sold by the subscribers under Rule 144 within 90 days without the public information, volume or manner of sale limitations of such rule.
The Company will use commercially reasonable efforts to keep the registration statement effective until the earliest of: (i) the third anniversary of the Closing; (ii) the date the subscribers cease to hold any shares issued pursuant to the PIPE Subscription Agreements (the “ registrable shares ”); or (iii) the date all registrable shares may be sold by the subscribers under Rule 144 within 90 days without the public information, volume or manner of sale limitations of such rule.
The IIAC Sponsor’s right to make a nomination for one Zegna Non-Executive Director will lapse with immediate effect if the Sponsor Group fails to satisfy the Minimum Holding Requirement, provided that if such failure is not caused by a sale or transfer of Ordinary Shares by any member of the Sponsor Group, the IIAC Sponsor’s nomination right will lapse if such failure continues for a period of 20 trading days from the date on which any member of the Sponsor Group had knowledge of such failure.
The IIAC Sponsor’s right to make a nomination for Non-Executive Director will lapse with immediate effect if the Sponsor Group fails to satisfy the Minimum Holding Requirement, provided that if such failure is not caused by a sale or transfer of Ordinary Shares by any member of the Sponsor Group, the IIAC Sponsor’s nomination right will lapse if such failure continues for a period of 20 trading days from the date on which any member of the Sponsor Group had knowledge of such failure.
Pursuant to the FRSA, the AFM has an independent right to (i) request an explanation from Zegna regarding the application of the applicable financial reporting standards and thereafter (ii) make informal arrangements with Zegna that must be observed in the future or make a notification to Zegna that its financial reports do not meet the applicable financial reporting standards, which notification may be accompanied by a recommendation to Zegna to issue a press release on the subject matter.
Pursuant to the FRSA, the AFM has an independent right to (i) request an explanation from the Company regarding the application of the applicable financial reporting standards and thereafter (ii) make informal arrangements with the Company that must be observed in the future or make a notification to the Company that its financial reports do not meet the applicable financial reporting standards, which notification may be accompanied by a recommendation to the Company to issue a press release on the subject matter.
HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISOR AS TO THE TAX CONSEQUENCES OF THE RECEIPT, OWNERSHIP AND DISPOSITION OF ZEGNA SPECIAL VOTING SHARES. Receipt of Zegna Special Voting Shares The tax consequences of the receipt by a U.S. Holder of Zegna Special Voting Shares is unclear.
HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISOR AS TO THE TAX CONSEQUENCES OF THE RECEIPT, OWNERSHIP AND DISPOSITION OF SPECIAL VOTING SHARES. Receipt of Special Voting Shares The tax consequences of the receipt by a U.S. Holder of Special Voting Shares is unclear.
HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS IN RESPECT OF THE CONSEQUENCES OF ACQUIRING, OWNING, AND DISPOSING OF ZEGNA SPECIAL VOTING SHARES. Additional Reporting Requirements Certain U.S.
HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS IN RESPECT OF THE CONSEQUENCES OF ACQUIRING, OWNING, AND DISPOSING OF SPECIAL VOTING SHARES. Additional Reporting Requirements Certain U.S.
The nomination of the Sponsor Nominee by the IIAC Sponsor is subject to the approval of the Zegna Board in its discretion if he or she has not previously served as Zegna Director.
The nomination of the Sponsor Nominee by the IIAC Sponsor is subject to the approval of the Board in its discretion if he or she has not previously served as Director.
The SVS Foundation is only allowed to exercise the option right to facilitate the loyalty voting structure set forth in the Zegna Articles of Association and the Terms and Conditions of the Zegna Special Voting Shares.
The SVS Foundation is only allowed to exercise the option right to facilitate the loyalty voting structure set forth in the Articles of Association and the Terms and Conditions of the Special Voting Shares.
Meetings of Holders of Shares of a Specific Class Meetings of holders of shares of a specific class will be held whenever the Zegna Board calls such meetings. Meetings of holders of shares of a specific class may be convened no later than on the sixth day before the day of such meeting.
Meetings of Holders of Shares of a Specific Class Meetings of holders of shares of a specific class will be held whenever the Board calls such meetings. Meetings of holders of shares of a specific class may be convened no later than on the sixth day before the day of such meeting.
Ownership of Zegna Special Voting Shares Holders of the Zegna Special Voting Shares should not have to recognize income in respect of any amount transferred to the Zegna Special Voting Shares dividend reserve, but not paid out as dividends, in respect of the Zegna Special Voting Shares.
Ownership of Special Voting Shares Holders of the Special Voting Shares should not have to recognize income in respect of any amount transferred to the Special Voting Shares dividend reserve, but not paid out as dividends, in respect of the Special Voting Shares.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

15 edited+122 added−126 removed4 unchanged
Biggest changeIf we are unable to remediate these material weaknesses or otherwise fail to maintain an effective system of internal controls, this could result in material misstatements in our consolidated financial statements and a failure to comply with applicable laws and regulations, which may adversely affect our business and the price of our securities.
Biggest changeIf we are unable to remediate these material weaknesses or otherwise fail to maintain an effective system of internal controls, this could result in material misstatements in our consolidated financial statements and a failure to comply with applicable laws and regulations, which may adversely affect our business and the price of our securities. 27 In connection with our preparation and the audit of our consolidated financial statements at December 31, 2023 and 2022, and for each of the three years in the period ended December 31, 2023 (included elsewhere in this report), we identified material weaknesses in our internal control over financial reporting.
The rights of the shareholders of Zegna may be different from the rights of shareholders of companies governed by the laws of U.S. jurisdictions. Zegna is a Dutch public company with limited liability ( naamloze vennootschap ). Its corporate affairs are governed by the Zegna Articles of Association, the Zegna Board Regulations and Dutch law.
The rights of the shareholders of the Company may be different from the rights of shareholders of companies governed by the laws of U.S. jurisdictions. the Company is a Dutch public company with limited liability ( naamloze vennootschap ). Its corporate affairs are governed by the Articles of Association, the Board Regulations and Dutch law.
Zegna is a “foreign private issuer” under the rules and regulations of the SEC and, thus, is exempt from a number of rules under the Exchange Act and permitted to file less information with the SEC than a company incorporated in the United States.
The Company is a “foreign private issuer” under the rules and regulations of the SEC and, thus, is exempt from a number of rules under the Exchange Act and permitted to file less information with the SEC than a company incorporated in the United States.
The responsibilities of the Zegna Executive Directors and Zegna Non-Executive Directors may be different from the rights and obligations of board members in companies governed by the laws of U.S. jurisdictions.
The responsibilities of the Executive Directors and Non-Executive Directors may be different from the rights and obligations of board members in companies governed by the laws of U.S. jurisdictions.
Moreover, Zegna is not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act, nor required to comply with Regulation FD, which restricts the selective disclosure of material information.
Moreover, the Company is not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act, nor required to comply with Regulation FD, which restricts the selective disclosure of material information.
In addition, the loyalty voting program established by the Zegna Articles of Association may make it more difficult for a third party to acquire, or attempt to acquire, control of Zegna, even if a change of control were considered favorably by shareholders holding a majority of Ordinary Shares.
In addition, the loyalty voting program established by the Articles of Association may make it more difficult for a third party to acquire, or attempt to acquire, control of the Company, even if a change of control were considered favorably by shareholders holding a majority of Ordinary Shares.
As a “foreign private issuer” Zegna is exempt from rules under the Exchange Act, that impose certain disclosure and procedural requirements for proxy solicitations under Section 14 of the Exchange Act.
As a “foreign private issuer” the Company is exempt from rules under the Exchange Act, that impose certain disclosure and procedural requirements for proxy solicitations under Section 14 of the Exchange Act.
Monterubello and other shareholders participating in the loyalty voting program may have the power effectively to prevent or delay change of control or other transactions that may otherwise benefit Zegna’s shareholders, which may also prevent or discourage shareholder initiatives aimed at changing Zegna’s management or strategy or otherwise exerting influence over Zegna.
Monterubello and other shareholders participating in the loyalty voting program may have the power effectively to prevent or delay change of control or other transactions that may otherwise benefit the Company’s shareholders, which may also prevent or discourage shareholder initiatives aimed at changing the Company’s management or strategy or otherwise exerting influence over the Company.
In the performance of its duties, the Zegna Board is required by Dutch law to consider Zegna’s interests and the interests of its shareholders, employees and other stakeholders, in all cases with due observation of the principles of reasonableness and fairness.
In the performance of its duties, the Board is required by Dutch law to consider the Company’s interests and the interests of its shareholders, employees and other stakeholders, in all cases with due observation of the principles of reasonableness and fairness.
Accordingly, there may be less publicly available information concerning Zegna than there is for U.S. public companies. We have identified material weaknesses in our internal control over financial reporting.
Accordingly, there may be less publicly available information concerning the Company than there is for U.S. public companies. We have identified material weaknesses in our internal control over financial reporting.
The rights of Zegna’s shareholders and the responsibilities of members of the Zegna Board may be different from the rights of shareholders and the responsibilities of members of board of directors of companies governed by the laws of other jurisdictions including the United States.
The rights of the Company’s shareholders and the responsibilities of members of the Board may be different from the rights of shareholders and the responsibilities of members of board of directors of companies governed by the laws of other jurisdictions including the United States.
As a result of Monturubello’s ownership and the loyalty voting program, a relatively large proportion of the voting power in Zegna could be concentrated in a relatively small number of shareholders who would have significant influence over Zegna.
As a result of Monterubello’s ownership and the loyalty voting program, a relatively large proportion of the voting power in the Company could be concentrated in a relatively small number of shareholders who would have significant influence over the Company.
Item 7.A—Major Shareholders. ” As a result, Monterubello is able to influence our management and affairs and control the outcome of matters submitted to our shareholder meetings for approval, including the election of directors and any sale, merger, consolidation, or sale of all or substantially all of our assets.
As a result, Monterubello is able to influence our management and affairs and control the outcome of matters submitted to our shareholder meetings for approval, including the election of directors and any sale, merger, consolidation, or sale of all or substantially all of our assets.
In addition, Monterubello will exercise its voting power in its own interest, which may not be in line or even be in conflict with the interests of the remaining shareholders. 26 We incurred and will incur significant costs in connection with the Business Combination.
In addition, Monterubello will exercise its voting power in its own interest, which may not be in line or even be in conflict with the interests of the remaining shareholders. The Company is a Dutch public company with limited liability, and its shareholders may have rights different to those of shareholders of companies organized in the United States.
As a result of the material weaknesses in our internal controls over financial reporting, our management concluded that as of December 31, 2022, our disclosure controls and procedures and our internal control over financial reporting were not effective. To address the material weaknesses identified we plan to continue remediation actions.
We had also previously identified certain material weaknesses in our internal control over financial reporting as of December 31, 2022, certain of which we have been able to remedy during the course of 2023.
Removed
We have incurred and expect to incur significant costs in connection with consummation of the Business Combination and the transition to becoming a public company. These costs may have an adverse impact on our results of operations.
Added
Item 7.B—Related Party Transactions. ” We believe that the terms and conditions of our transactions with related parties are at arm’s length and on commercial terms that are normal in the respective markets, considering the characteristics of the goods or services involved.
Removed
We cannot provide assurance that the benefits of the Business Combination will offset the incremental transaction costs in the near term, if at all. Zegna is a Dutch public company with limited liability, and its shareholders may have rights different to those of shareholders of companies organized in the United States.
Added
However, there can be no assurance that if such transactions had been concluded between or with third parties, such parties would have negotiated or entered into agreements or carried out such transactions under the same or substantially similar terms and conditions.
Removed
In connection with our preparation and the audit of our consolidated financial statements at December 31, 2022 and 2021, and for each of the three years in the period ended December 31, 2022 (included elsewhere in this report), we identified material weaknesses in our internal control over financial reporting.
Added
In addition, there is no assurance that we will be able to renew these agreements at the end of their term at the same terms and conditions. We are exposed to currency related risks. We operate in numerous markets worldwide and are exposed to market risks stemming from fluctuations in currency exchange rates.
Removed
As of December 31, 2022 we identified material weaknesses primarily relating to the following areas: (i) resources hired in the accounting department with appropriate experience in IFRS and SEC reporting were not in place for a sufficient period of time to operate the control activities; (ii) inadequate and untimely implementation of operating effectiveness of control activities, including management review controls, across substantially all financial statement account balances and disclosures; (iii) general information technology controls related to users’ access management, segregation of duties and change management; (iv) the inability to generate and provide quality information and communication necessary to support the functioning of internal control; and (v) untimely performance of control testing and the evaluation and communication of internal control deficiencies to those parties responsible for taking corrective action, including senior management and the Zegna Board in a timely manner to allow for remediation. 27 The material weaknesses described above could result in a misstatement of our accounts or disclosures, which may result in a material misstatement in our annual or interim consolidated financial statements.
Added
In particular, changes in exchange rates between the Euro and the main foreign currencies in which we operate affect our revenues and results of operations.
Removed
During the year ended December 31, 2022 we expanded our finance, accounting, compliance, and IT teams, including hiring several additional individuals with the IFRS technical accounting and finance skills and experience, and we engaged external consultants with extensive expertise in internal control and SEC matters to assist management in implementing its internal control framework, performing a gap analysis and designing enhanced business and IT processes and controls.
Added
The exposure to currency risk is mainly linked to the differences in geographic distribution of our sourcing and manufacturing activities from those in our commercial activities, as a result of which our cash flows from sales are denominated in currencies different from those related to purchases or production activities.
Removed
Management’s remediation plan to address the material weaknesses existing as of December 31, 2022 includes: (i) allowing the aforementioned resources with IFRS and SEC reporting experience to implement or operate the newly designed controls over a sufficient period of time; (ii) continuing to enhance and expand across the organization the implementation of the general information technology processes and controls, including implementing segregation of duties within the IT environment and (iii) continuing the monitoring of our system of internal control to timely communicate internal control deficiencies to those parties responsible for taking corrective action.
Added
In particular, we incur a large portion of our capital and operating expenses in Euro while we receive the majority of our revenues in currencies other than Euro (mainly in Chinese Renminbi, U.S. Dollars, Japanese Yen, Hong Kong Dollars and British Pound). Therefore, our results may be adversely affected if these currencies depreciate against the Euro.
Removed
Our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. We cannot provide assurance as to when we will be able to complete full remediation or if we will be able to avoid the identification of additional material weaknesses in the future.
Added
Such risk is heightened given the extended time period between the moment when the sale prices of a collection are set and the moment when revenues are converted into Euro, which may extend up to 18 months.
Removed
In addition, the process of assessing the effectiveness of our internal control over financial reporting may require the investment of significant time and resources, including by members of our senior management. As a result, this process may divert internal resources and take a substantial amount of time and effort to complete.
Added
In addition, foreign exchange fluctuations might also negatively affect the relative purchasing power of our clients, which could also have an adverse effect on our results of operations.
Removed
If we are unable to remediate the material weaknesses we have identified, or if we identify additional material weaknesses in the future or otherwise fail to develop and maintain an effective system of internal controls, we may not be able to produce timely and accurate consolidated financial statements, which may subject us to adverse regulatory consequences and adversely affect investor confidence in us and, as a result, the price of our securities and our ability to access the capital markets and other forms of financing in the future.
Added
See “Item 5.A—Operating Results—Trends, Uncertainties and Opportunities. ” The year ended December 31, 2023 was characterized by high volatility in exchange rates especially for Chinese Renminbi (going from 7.358 Chinese Renminbi for 1 Euro at December 31, 2022 to 7.851 at December 31, 2023) and Japanese Yen (going from 140.660 Japanese Yen for 1 Euro at December 31, 2022 to 156.330 at December 31, 2023) which recorded a strong devaluation against the Euro compared to the levels at the end of 2022.
Removed
Zegna’s ability to pay dividends may be limited and the level of future dividends is subject to change. Payment of dividends on Zegna’s shares in the future will be subject to business conditions, financial conditions, earnings, cash balances, commitments, strategic plans and other factors that the Zegna Board may deem relevant at the time it recommends approval of the dividend.
Added
The U.S. Dollar also depreciated against the Euro compared to the 2022 year-end level (going from 1.067 U.S. Dollars for 1 Euro at December 31, 2022 to 1.105 at December 31, 2023). An appreciation of the U.S.
Removed
Any dividend policy, once adopted, will be subject to change based on changes in statutory requirements, market trends, strategic developments, capital requirements and a number of other factors.
Added
Dollar against the Euro may adversely affect our results of operations due to certain significant liabilities on our Consolidated Statement of Financial Position which are originally denominated in U.S. Dollars. 19 In particular, we recognize a financial liability corresponding to the present value of the exercise price in U.S.
Removed
In addition, under the Zegna Articles of Association and Dutch law, dividends may be declared on the Ordinary Shares only if the amount of equity exceeds the paid up and called up capital plus the reserves that have to be maintained pursuant to Dutch law or the Zegna Articles of Association.
Added
Dollars of the put option granted to the non-controlling interest in our investment in the Thom Browne Group, which is remeasured at fair value at the end of each period. The remeasurement of the liability at each reporting date is recognized through profit or loss based on the latest available information.
Removed
Further, even if Zegna is permitted under the Zegna Articles of Association and Dutch law to pay cash dividends on its shares, it may not have sufficient cash to pay dividends in cash on its shares. Zegna is a holding company and its operations are carried out through its subsidiaries.
Added
For additional information refer to Note 28 — Other current and non-current financial liabilities to the Consolidated Financial Statements included elsewhere in this document. Any appreciation or depreciation in the U.S. Dollar against the Euro results in a corresponding unrealized loss or gain in the Consolidated Statement of Profit and Loss foreign exchange line item. In 2023, the U.S.
Removed
As a result, Zegna’s ability to pay dividends will primarily depend on the ability of its subsidiaries to generate earnings and to provide Zegna with the necessary financial resources. It may be difficult to enforce U.S. judgments against us.
Added
Dollar depreciation against the Euro resulted in an unrealized gain of €5.4 million for the year ended December 31, 2023. Exchange rate fluctuation may also adversely affect our competitive position as compared to other operators in the luxury goods market, who may incur costs in other currencies with more favorable exchange rates relative to the currencies of our principal markets.
Removed
Zegna is a company incorporated under the laws of the Netherlands, and a substantial portion of its assets are outside of the United States. Most of our directors and senior management and independent auditors are resident outside the United States, and all or a substantial portion of their respective assets may be located outside the United States.
Added
In the Zegna segment and the Tom Ford Fashion segment, we seek to manage risks associated with fluctuations in currency through financial hedging instruments, mainly forward contracts for the sale of foreign currencies. For the Thom Browne segment, we are taking steps that will gradually lead to the adoption of similar policies.
Removed
As a result, it may be difficult for U.S. investors to effect service of process within the United States upon these persons. It may also be difficult for U.S. investors to enforce within the United States judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.
Added
However, there can be no assurance that we will be able to hedge currency related risks successfully, and our business, results of operations and financial condition could nevertheless be adversely affected by fluctuations in market rates, particularly if such fluctuations are extended over time.
Removed
In addition, there is uncertainty as to whether the courts outside the United States would recognize or enforce judgments of U.S. courts obtained against us or our directors and officers predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.
Added
In addition, because the Euro is the functional currency used in our consolidated financial statements, fluctuations in exchange rates used to translate figures in our subsidiaries’ financial statements that were originally expressed in a foreign currency could have a significant impact on results, net financial indebtedness, and consolidated net shareholders’ equity as expressed in Euro in our consolidated financial statements.
Removed
Therefore, it may be difficult to enforce U.S. judgments against us, our directors and officers and independent auditors. 28 ITEM 4 INFORMATION ON THE COMPANY A. History and Development of the Company Ermenegildo Zegna N.V. is a Dutch public limited liability company ( naamloze vennootschap ) and is the parent company of the Zegna Group.
Added
We are exposed to risks relating to fluctuations in interest rates and other market risks. We have entered into Euro-denominated financing agreements and revolving credit facilities providing for a floating interest rate. As of December 31, 2023, floating rate loans represented approximately 71% of our total borrowings, for a financed amount of approximately €284.6 million.
Removed
It is named after our founder Ermenegildo Zegna (the grandfather of our Chief Executive Officer), who started his business in the Northern Italian town of Trivero in 1910 with the dream of creating the most beautiful and luxurious fabrics in the world.
Added
In addition, the Group also had undrawn Euro-denominated revolving, floating rate credit facilities for €295.0 million at December 31, 2023.
Removed
Ermenegildo Zegna N.V. results from the cross-border conversion whereby, on December 17, 2021, Ermenegildo Zegna Holditalia S.p.A., an Italian joint stock company ( società per azioni ), transferred its legal seat from Italy to the Netherlands and amended its articles of association.
Added
Although we have entered into derivative financial instruments to hedge part of our exposure to interest rate risk, an increase in interest rates during the term of such financing agreements, which would result in higher interest payments thereunder, could have a material adverse effect on our business, results of operations and financial condition.
Removed
Born as a wool mill, the company sourced the best quality natural fibers directly from their countries of origin, imported them to Italy to be expertly woven, and subsequently exported these luxury fabrics worldwide.
Added
In addition an increase in the interest rate in different countries could have a material impact on the hedging cost related to derivatives instruments to hedge our exposure in foreign currencies.
Removed
In the late 1920s, the wool mill employed more than 700 workers, growing to more than 1,000 workers in the late 1940s and today the Zegna Group employs over 6,000 people.
Added
See “ — We are exposed to currency related risks. ” As of December 31, 2023, we had approximately €85.3 million of other current financial assets invested in listed and unlisted financial instruments. We do not enter into investments for trading or speculative purposes.
Removed
Our founder’s vision, which continues to inspire and guide our business today, was that product quality can only flourish when there is a culture of beauty that must also respect the environment and the well-being of local communities.
Added
The primary objective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing risk of loss.
Removed
With that goal in mind, our founder built facilities including a swimming pool, a school, a hospital and a road in order to enrich the lives of people in his town.
Added
In connection with our investment activities, we may be exposed to market risk, i.e. the risk of loss related to changes in market prices, volatility, counterparty and liquidity of financial instruments, which could have a material adverse effect on our business, results of operations and financial condition.
Removed
He also launched an extensive reforestation project in the hills surrounding the Lanificio wool mill, which expanded over the course of the years and is now known as “Oasi Zegna.” In the mid-1960s under the guidance of Ermenegildo’s sons Aldo and Angelo, the label expanded its business to ready-made suits and established new plants and distribution networks abroad.
Added
Risk factors relating to the industry in which the Group operates The markets in which we operate are highly competitive. The markets for our products are characterized by high levels of competition and the presence of a number of established operators and new entrants, some of which have significant financial resources or well-known and fashionable brands.
Removed
In 1968, the first factory producing sleeve-units and trousers was opened in Novara, Italy, followed by factory openings in Spain, Greece, and Switzerland.
Added
To succeed, we must interpret and anticipate the tastes, preferences and lifestyles of our customers and anticipate changes in those tastes, preferences and lifestyles, as well as identify fashion and luxury market trends, while producing high quality, desirable luxury products.
Removed
In 1972, Zegna launched its made-to-measure service called “Su Misura.” Sales and marketing departments were also established in France, Germany, the United Kingdom and the United States in order to expand Zegna’s international presence and Zegna’s brand internationalization strategy continued with the opening of Zegna’s first boutique in Paris (1980), followed by boutiques in Milan (1985), London (1987), Tokyo (1989), Beijing (1991) and Hong Kong (1993), making Ermenegildo Zegna one of the first luxury brands to establish a presence in Greater China.
Added
Our competitors may be more successful in interpreting market trends or may be able to produce their products at lower costs.
Removed
The Company was incorporated as an Italian joint stock company (with the name Ermenegildo Zegna Holditalia S.p.A.) in 1984, being the conversion of a limited partnership called Ermenegildo Zegna e Figli S.a.s. Between 1979 and the 1990s, the third generation of the Zegna family entered the business.
Added
In particular, our larger competitors may be better equipped to changing conditions that affect the competitive market, including transformation in the customer experience supply chain operations and the use of new digital technologies and artificial intelligence in the business, heightening customer expectations. In addition, newer entrants may be viewed as more desirable by fashion-conscious consumers.
Removed
In 1998, Angelo’s son, Ermenegildo “Gildo” Zegna, and Aldo’s son, Paolo, became the co-Chief Executive Officers. In 2006, Ermenegildo “Gildo” Zegna became the sole Chief Executive Office and Paolo Zegna was elected Chairman. Under their leadership, Zegna began a strategy of brand extension, both organically and through strategic acquisitions, as well as full verticalization of its supply chain.
Added
Our failure to compete effectively in our chosen 20 markets, including through a failure to identify and respond to new and changing trends and consumer preferences, or through a failure to successfully invest in innovative initiatives, could have a material adverse effect on our business, results of operations and financial condition.
Removed
Over the years, the Group acquired equity interests in a number of specialized textiles manufacturers as illustrated in the image below, thus creating its “Made in Italy Luxury Textiles Platform” and enhancing control over its textile supply chain (the percentages indicated in the image refer to the equity interests acquired). 29 The Made in Italy Luxury Textiles Platform Acquisitions Zegna’s expansion continued in 2018 with the acquisition of an 85% interest in Thom Browne, a leading and fast-growing luxury brand focused on high-end menswear and womenswear that was founded by Mr.
Added
Global economic conditions and macro events may adversely affect us. Our sales volumes and revenues may be affected by overall general economic conditions within the different countries in which we operate.
Removed
Thom Browne in 2021 and is based in New York. Zegna subsequently acquired an additional 5% interest in Thom Browne in June 2021. On July 18, 2021, Zegna entered into the Business Combination Agreement and certain ancillary agreements.
Added
Deteriorating general economic conditions may affect disposable incomes and reduce consumer wealth impacting client demand, particularly for luxury goods, which may negatively impact our profitability and put downward pressure on our prices and volumes.
Removed
Also on July 18, 2021, the PIPE Investors that had chosen to participate in the PIPE Financing delivered executed PIPE Subscription Agreements to Zegna and IIAC. The Business Combination was consummated on December 17, 2021. On December 20, 2021, our Ordinary Shares started trading on NYSE.
Added
Furthermore, during recessionary periods, social acceptability of luxury purchases may decrease and higher taxes may be more likely to be imposed on certain luxury goods including our products, which may affect our sales. We sell our products throughout the world. In particular, we conduct our business in EMEA, North and Latin America and APAC.
Removed
See “— The Business Combination. ” On November 15, 2022, we entered into arrangements to acquire the 85% interest not already owned by us in Tom Ford International (“TFI”), and to enter into a long-term license agreement (the “TFI License”) with The Estée Lauder Companies (together, the “TFI Acquisition”) for all TOM FORD men’s and women’s fashion as well as accessories and underwear, fine jewelry, childrenswear, textile and home design products.

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