Samsonite International SA (OTCPK:SMSOF) Q3 2022 Earnings Conference Call November 11, 2022 9:00 AM ET
Company Participants
William Yue – Senior Director, IR
Kyle Gendreau – CEO & Executive Director
Reza Taleghani – CFO, EVP & Treasurer
Conference Call Participants
Dustin Wei – Morgan Stanley
Erwan Rambourg – HSBC
Anne Ling – Jefferies
Operator
Good morning, good afternoon and good evening, ladies and gentlemen. Welcome to the Samsonite International 2022 Third Quarter Results Conference Call. Please note that this event is being recorded.
I would now like to hand the conference over to Mr. William Yue, Director of Investor Relations. Thank you. Please go ahead, sir.
William Yue
Thank you very much, and thank you, everyone, for taking the time to join this call. We’re pleased today to have our CEO, Mr. Kyle Gendreau; and our CFO, Mr. Reza Taleghani, with us to go through our third quarter results.
Without further ado, Mr. Gendreau will begin with some opening remarks. Thank you very much.
Kyle Gendreau
Okay. Great. Thanks, William. Thanks, everyone, for joining us morning or evening or wherever you’re — where you’re at.
So I’m starting on Page 5 of my investor deck. Hopefully, it’s coming across the screens. And — it’s a little bit of a different start for me. It’s really a reflection page on kind of the journey we’ve been on, really as we head into the holidays and into ’23 because we’re clearly focused on ’23 now as business is moving.
But really, I wanted to reflect on what we’ve accomplished, and we’re pretty excited and proud of what we’ve been able to accomplish, and you really see the full effects of this as we get into Q3. So starting with our teams are incredibly energized our company progress for the first 3 quarters has been amazing. We’ve navigated over 2 years of disruption caused by pandemic as you’ve all been watching what we’ve been doing. And I think we’ve achieved some amazing accomplishments.
First off, talking about sales growth, we’ve seen sequential improving quarterly sales. Our Q3 constant currency growth are finally positive. We’ll talk through that with a building trend within the quarter. So very, very strong. And back to slightly above 2019 levels and every month continues to hold. Our gross margins have recovered to historic levels. Please remember, probably a little over a year ago, we started to move our margin profile back in the right place. And we’ve accomplished that. We started to show that last quarter even into Q2 of the year. And we’re clearly seeing historic gross margin levels. And I would tell you there’s probably some upside room on margins as Asia continues to recover and we get the mix effect of Asia. So we’re really happy with gross margin.
On the SG&A side, all through pandemic, we’ve been very bold and aggressive on adjusting our cost structure across the business. And these cost savings are really delivering on the adjusted EBITDA margin expansion that we’ve been talking about. You saw it last quarter, but you clearly see it in Q3 as the business continues to recover and improve.
We’re leaning into advertising. We guided that in the last quarter. It really is a moment where we can fuel future growth, and we’re in the right position to do that. And so we’ll talk about more of that in the deck. But you should expect more of that from us, as we really push the business and continue to gain market share as we get to the end of the year and into next year.
We’re generating positive cash flow. And what’s important here is we’re — despite the build in inventory, we’re bringing our inventories back to the right levels, we’re in a wonderful inventory position in Q3. We’re all set for Q4 and for the start of the year. We’re exactly where we should be. But despite all of that growth, our cash flows are positive, and that’s the nature of this business. We can generate cash, and we’ll show you what we’re doing in Q3, where we are year-to-date, which is positive, and we’re really excited about that.
And with this cash flow and just the strength of the business, year-to-date September, we’ve repaid $535 million on our borrowings against our revolver. So we have access to that. Our net debt position at the end of Q3 is only up $93 million to pre-pandemic levels. And I suspect by the time we get to the end of the year, that will be even better. So we’ve navigated the entire pandemic without really impacting our leverage profile as we get to Q3, Q4 and, for sure, into next year.
And we’ve got this rock-solid balance sheet. We’ve got over $1.4 billion of liquidity. And our team is really ready to navigate the rest of the story here and really set Samsonite up for long-term market position gains and really disrupt the market. That’s really where we are now. We’re in a position that we can really lean forward and push this business. And again, it’s all off the back of the work we’ve done very aggressively for the last 2 years.
If I move to the next slide, just a picture on where we’ve come from and where we are. This is going back to Q2 of ’21. And if you go back and look at Q2, even Q3 of ’21, this is a business that was down 52% and then down 37%. Here we are in Q3 of this year with a positive number, positive 0.6%. But when you look at the months, it really shows the regression that continues here.
We’re negative 8.7% in July; Q2 is negative 16%. Here, we are August, plus 4%; September, plus 8%; October is a positive number; November is looking very good. And so the trend has continued and as we step into positive territory. And this is with China still in a moment to recover. So you can get a sense that the rest of the underlying business is really performing.
And if we look at the numbers, and I exclude China from Q3, our sales growth compared to Q3 of ’19 is up 4.2%. And it’s really the first quarter since pandemic that we’re in this positive territory, we’re very excited with an improving trend as we look forward.
Gross margin, as I said, 55% in Q3. That compares to 56.5% in Q2, if you remember in the Q2 earnings, that’s a little bit high because we’re reversing some inventory reserves, more importantly, compared to Q1 of ’21, 54.7%. So we’re up against that. And really, when you compare against ’19, we’re at historic levels on the gross margin side. Really helps the profitability profile of this business to get back to the margins. And as I said on the first slide, I think there’s room to grow as Asia continues to recover.
Our adjusted EBITDA, and this is really an amazing view of what we’ve accomplished for the business, is $134 million or 17% adjusted EBITDA margin for the quarter. And this is with an advertising number that’s approaching 6%. So this is a real EBITDA number with all the actions we’ve taken really starting to show up as the business gets to positive territory to ’19. That’s up from $122 million in Q2, and only $73 million in Q1. So you can see sequentially EBITDA margin and dollars continue to grow the business. And I think importantly, our adjusted EBITDA dollars are higher than what they were in Q3 of 2019. So we now have EBITDA dollars comfortably ahead of 2019 as well.
We had positive adjusted net income. We tend to focus on EBITDA, but we shouldn’t lose sight that net income is important, and it is comfortably positive, $65 million positive income, up from $62 million last year. And Reza will cover more on the P&L as we get into the back of the deck.
And then as I said, cash generation, and this business has a long history of really generating cash. And here we are in Q4, generating — I mean, in Q3, generating $64 million of cash flow despite meaningful increases in inventory that we’ve been building to get the business in the right spot on the inventory side. And our year-to-date cash flow is positive as well, and we’ll cover that a bit later as well.
If I move to Page 7, really a different snapshot. I’m showing both against Q3 of ’21 versus ’22 but also Q3 ’19. And I think there’s a couple of takeaways here. One, the EBITDA margin circled on the bottom. In Q3 of ’19, we were 14.5% EBITDA margin, $133 million of EBITDA. And today, we’re 17% EBITDA margin, $134 million of EBITDA. And this is on sales that are still meaningfully below — $130 million below where we were in 2019.
So those incremental sales continue to come in, you can imagine our ability to deliver on the margin side and versus last year. And again, by Q3 of ’21, we still have plenty of recovery to go, but we had navigated the business to positive EBITDA but only 13%. So we’re now — as revenues continue to grow, really get the margin expansion and leverage against the structure of the business. So we’re tremendously excited about what we’re achieving there.
On Page 8, I just wanted to give you a sense by region. All regions are contributing to the story, and Asia is really starting to move, and I’ll give you some insights there as well. First, North America, you can see North America in Q3, slightly down to 2019, it’s down 0.8%. But if you remember in early discussions, we also streamlined our ebags business and we got rid of third-party brands that we’re selling with ebags. If I adjust ebags out of that number, we’re up 10% in North America, which really matches what we’re seeing in the markets like Europe, for example.
Within Asia, we saw meaningful progress from Q2 to Q3 as Asia really starts to move. I’ve got my next slide, which we’ll give you a little bit deeper dive on Asia. But I think importantly, and it’s in the notes below, if you look at October sales for Asia, net sales growth really improved rapidly from Q3 with net sales growth of 8.5%, if I exclude China. And if I include China, which is still struggling, and October was a tricky month for China, it was down 3.9%. Excluding China, up 8.5%. That means the rest of Asia, without China, is in comfortable positive territory and really continues to carry. And this is with markets like Korea and Japan just starting to move as they’ve kind of changed their travel restriction requirements in the last 60 days. So we’re really excited what we’re seeing in Asia.
Europe continues its amazing trend. You can see the chart. It’s — we don’t need much explaining on the chart. There’s a little bit of currency in those numbers. So it looks like up 10%, up 20%. Turkey has — which has incredible inflation is making those numbers look a little bigger than what they are. But these are comfortably at 5%, 6%, 7% in Q2 and Q3, and that trend continues as we move into Q4.
And then Latin America just continues its [indiscernible] really up comfortably. Again, Argentina, inflation is impacting that. But if I take that out, this is up 21%, taking the currency impacts out. And our Latin American business, almost in every single market really continuing to amaze us every month. And so this really gives you a good picture of where we are. You can see all regions are contributing to the story now and continuing a good trend.
On Slide 9, really, I think it’s important to peel in Asia a little bit, so you have a sense for what’s going on. And so markets like Australia mature, looking like maybe like a U.S. story in many ways, but heavily restrict lockdown in ’21. If you remember, Australia was really restricted still down 70%, 80%. Here we are down 2% in Q3. As we step into October, November, that number continues to look in that zip code improving. Southeast Asia, markets like Singapore, we’re spending a lot of time in Malaysia and Thailand, really starting to move up 15% in Q3 and a really strong trend for Q4 continuing.
India continues to impress us. India is really moving. You can see these numbers up 52%. October is up 57%, just for scale. So the India market continues to move. And then importantly, South Korea — and Japan is not on the page, but I’ll talk about Japan, too, where these were really stuck at down 50%. And then we started to see some easing on travel restrictions. So you saw Q3 down 27%. The month of October is down 4% for Korea. That’s the pace of recovery when things start to move. Japan is a similar story. Q3 was down 33%. October is down 6%. So you really see these markets when they start to move and this pent-up demand for travel really starts to move within these markets, which is why when you look at our overall and I look at off to the side, Asia, excluding China, down 7% for Q3. And as I said, October is up 8.5%. That’s what’s fueling that.
And then China continues to be stuck. We saw in Q2 a pretty dramatic reduction in China because of lockdowns. You see Q3 is negative 34%. So we saw that correct. October is down 46% for us. So China is continuing to move. But we will see. We’ve seen some good news overnight with the China quarantine restrictions slightly adjusting from 7 days to 5 days. I think that’s a good indication that China will start to move. And we’ll talk about that in my concluding comments on where we’re thinking on China. But despite all of that, Asia underlying and overall story is very, very strong.
If I move to Page 10, just on this slide, we’ve shared before and really looking at industry, I think — and we covered this in the last quarter. One of the things that’s really fueling some of the more recent recoveries across the world is this international travel, which has really been moving. The little stutter step in August is tied to effectively China. And so when we look at that number, I might argue that it flattened out a little bit July, August. And I think the rest of that recovery will come when China starts to move. But really dramatic moves in the last 4, 5 months on international travel, which is fueling a lot of growth. You can see domestic travel has continued to improve. It was running down 25%, and now it’s running kind of low teens down for July, August, and so it continues to be a story.
I think the key takeaway from me when I look at this is it’s obviously correlating with our story, but I would also take away there’s plenty of recovery to come still. So when we think about Q4 and particularly Q3 — I mean in 2023, there’s plenty of travel recovery coming. And in our view, in our forward views, I think that continues. I’ll cover that in a second.
And if you go to Page 11, this is total passenger miles or total traveled number, and you can see the APAC number. We covered this again in the last quarter, that’s continued. The little blip that we see in August is again China. But you can really see that APAC is really moving. And the rest of the regions — actually when you look at those numbers closely, are continuing a good trend over the last 4 months.
In Page 12, this is a bit of a view here on overall travel where we’ve been from the ’19 level. So if ’19 is the 100 mark. You can see that even next year, we’ll be slightly below the 2019 mark, but still a meaningful recovery from this year. But the more important piece is the forward view is ’24, ’25. This continues to grow. It’s one of the things I love about the industry we’re in is the propensity in the forward growth on travel is strong. And not only are we saying that, but the industry overviews are all pointing in the right direction for us. So we’re really excited about our position and our ability to grow and gain share over that journey. We are tremendously positioned, which speaks to advertising, which is the next slide.
So as we’ve been able to fix the cost structure of this business, navigate through pandemic, get margin in the right place. we’re back to a position to start to push the business on the advertising side. So as you knew and would expect from us, we pinched during the trough of the pandemic. You can see we started to dial up, and we’re really starting to dial up as we get into Q3. So again, approaching 6% in Q3. In Q4, the number will be 6%, maybe a bit more as we really lean in and push the business and allow the accomplishments of what we’ve done on the cost structure and the margin profile of the business, so we can really lean in on advertising and capture growth and market share gains and all of our teams are focused here. And for next year, and I’ve guided this already in the last call, you should expect something like 6.5% next year, so we can really continue to capture the market share gains.
And just my last 2 slides, and I’ll come at the end, I just wanted — there’s 3 or 4 slides. I would normally have some product pictures. I covered those pretty well last call. This is just some stories on marketing. And I just wanted to share this first page on Page 14. This is a campaign that we’re doing in the U.S. and off to a really amazing start. It’s holiday-focused, amazing products, Elevation Plus on the bottom right, which is a big driver of our business. And really kind of leaning in with this wonderful brand uplifting advertising that we’re really pushing and if you’re online in the U.S., you can’t miss it. And I think that’s really going to drive a good story.
Asia, which has been playing it close to the vest because of recovery. We’re now back to pushing. And so we have this unpack your world campaign across Asia. And really, as Asia travel starts to boom back, we’re out with right messaging. You can see this is very travel-focused. Travel is really moving in Asia. When we look at the mix of our business and what’s moving, the travel category is really moving. And so we’re advertising and messaging across all of our countries at this point within Asia.
And then last 2 slides on Tumi. Tumi has been a real success story within our business. And you can see our ambassadors. We’re really continuing to lean in. We’ve had amazing moments within our markets with Son and Lando. Gracie Abrams and Anthony Ramos continue to be in our mix, and you can’t miss us from an advertising perspective. We’ve reset our website. We relaunched our Tumi website. I mentioned that in the last quarter, and we’ve got terrific campaigns to drive traffic for that brand, really strong brand elevating, terrific relationships with our ambassadors.
And if you go to the next page before I hand to Reza, we moved and opened our new Regent Street store in London for Tumi. This was tremendously successful. The store right out of the gate is a home run. And we had this amazing opening event where Son and Lando, joined us and really ahead of all of our expectations on the buzz and the energy that was at this reopening event. And again, all this feeding into really amazing brand building and sales driving marketing campaigns that we’re now back into a position to really drive growth. And if you think about our journey, we’ve been cautious, but now we’re leaning in. And the lean in really is going to continue to fuel a story for us in Q4 and for sure, in 2023.
So with that, I’ll hand to Reza for some financial updates, and then I’ll come back right at the end.
Reza Taleghani
Thank you so much, Kyle. So we are on Page 19, just to recap the Q3 results highlights overall, really, really great results. So the delivering of $791 million of sales in Q3. The important statistic here is 59.5% increase year-over-year. And importantly, compared to 2019, it’s the first quarter since the pandemic, where we are back up on sales for the entire quarter to 2019 levels.
Gross margin. Maintaining our historical gross margin levels despite the inflationary environment, despite nonrenewal of GSP in the U.S. So we have 55% of gross margin, which is slightly below where we were in Q3 of last year but that’s largely just due to the mix. But we’re remaining very, very disciplined in terms of promotional activity and it’s a large focus for us going into Q4 and into next year as well.
Adjusted EBITDA, we are back to the same levels of 2019. So on this page, rounded, you’re looking at $134 million of — adjusted EBITDA. But importantly, that’s on a significantly lower sales number. So 17% EBITDA margin in the quarter with that $134 million.
And on the net income line, we’re delivering even more net income to 2019. So we’re at $65 million of net income as compared to $62 million of net income in the 2019 period, which again is on the back of all of the SG&A savings that we’ve had and the discipline that we’ve had around the cost structure, but also the sales recovery as well.
So I’ll get into a little bit of greater detail on Slide 20. So again, the net sales performance in Q3 continued the sequential improvement compared to 2019. Just to recap. So Q1 of this year, we were down 25.2%. Q2, it improved to negative 16.1%. And now we’re really happy to say that we’re up 60 basis points to 2019. And hopefully, this trend continues well into next year as well as Q4.
We should also say that the Q3 net sales would have been about 9% higher, if not for the devaluation of a lot of currencies. So one of the things that we probably haven’t spent a lot of time highlighting is if you compare the strength of the U.S. dollar right now, and we obviously report in dollar terms compared to where we are in 2019. There is a meaningful impact and there’s been an impact even since last quarter. So it’s approximately $71 million if you’re comparing Q3 2022 sales on a constant currency basis, is just from that currency impact. Adjusted EBITDA year-over-year has increased by $62 million, from $72 million to $134 million. And importantly, adjusted EBITDA margin of 17% in the quarter.
Going to the next page. Again, gross margin we just talked about. It’s decreased year-over-year by about 50 basis points due primarily just to the mix effect between the brands and the countries and the channels. And this has been offset by lowering our promotional activity and the price increases that we’ve talked about over the last few quarters.
Fixed SG&A expenses, $72 million lower than Q3 2019. Obviously, we’ve talked about our comprehensive cost reduction program. We’re continuing to maintain and we’ll have a few slides in here just to show that we’re very, very disciplined on the cost structure. And we are — as we have indicated on prior calls, we’re investing in advertising in this quarter. We have increased the spend by $23 million to $45 million. So we’re still delivering that 17% EBITDA margin, and despite the increase in advertising back to historical levels and actually it’s going to end up being ahead of historical levels as we go into Q4.
On Slide 22, cash generation of $37 million year-to-date. That is a meaningful number. If you factor in the fact that we’ve built our inventory levels north of $200 million. So we had indicated on many calls this year that we were expecting somewhere between breakeven or even negative cash flow numbers as we build these inventory levels. However, the sales environment and the teams have been able to continue to achieve high cash levels in spite of the fact that we built our inventory by $208 million as compared to December of 2021.
Our net debt position has also improved. We are below $1.4 billion now, so $1.398 billion, and we have $800 million — over $800 million of cash and cash equivalents as well. So the strong balance sheet position and that basically allowed us to make another voluntary debt repayment, so we paid $301 million of voluntary debt repayment. And in aggregate, we paid down $314 million of debt in the quarter as well as we continue to focus on making sure that we get our leverage profile to historical levels, which we are definitely there now. And we did that debt repayment against our revolving credit facility just to make sure that we maintain adequate liquidity. Our liquidity remains very, very strong, over $1.4 billion of liquidity, which includes $643 million of availability under the revolving credit facility.
On Slide 23, Kyle has touched on this, just looking at it by region. I’m really focused on both the Q3 numbers on a constant currency growth perspective versus last year as well as 2019. Looking at it versus last year, North America delivering 39% growth year-over-year; Asia, 66% growth. And if we exclude China, would be north of 100%. Europe, up 85% year-over-year. Latin America, up 56.7%. Importantly, if you’re comparing to 2019, you’re basically seeing the only region that’s really below 2019 levels still is Asia. And that recovery, we anticipate is going to improve as we get into Q4 and next year as well.
On Page 24, looking at the adjusted EBITDA performance year-to-date. Again, the story remains very similar. If you’re looking at North America adjusted EBITDA, $143.3 million, 18.3% margin for our North America business.
Asia still has some room to run. So if you’re looking at that $122 million number and that historical gross EBITDA margin level still hasn’t been achieved. So as we think about next year, this is where we think that there is going to be — even if there’s inflationary pressures, even if there’s consumer demand pressures in certain regions, there’s a lot of room for Asia to get back to historical levels, but we still are very optimistic for all of the regions. And Europe, delivering 18% margins with $89.2 million year-to-date of EBITDA. And Latin America, truly remarkable if you consider it to historical levels, $18.8 million of EBITDA delivered year-to-date and approaching 15% margins.
We put a couple of bridges on the next couple of slides. So on Page 25, we just wanted to isolate just to make it clear, this impact of currency that we talked about as well as just looking at the net sales and where they’re coming from. Again, we’re bridging from year-to-date period of September 2021 last year to the current year-to-date number. Again, as you can see, nearly $136 million of just currency impacts from last year to now, just on the strength of dollar improving. Obviously, you’re well aware that we disclosed the and the impact of suspending the Russia operations.
We also just showed the effect of just the lockdowns that we have had on our China business as well from April onwards, about $32 million of impact there. And then how all of the regions are basically contributing to the improvement sequentially year-over-year. So almost $1 billion of improvement, 68.3% being delivered from all the regions to offset those pressures.
If we look at mix on Page 26, between the wholesale and retail channels, all of the channels are performing. But what we’re highlighting here is our retail stores now that there’s greater store openings throughout some of the regions, especially with Asia. The retail footprint is delivering 77.7% constant currency growth year-over-year. Obviously, the wholesale channel remains strong as well with 70.7%. And e-commerce continues to do well, 38% growth in that channel as well.
The other point of note on this page is really if you look at it, it is really being driven by travel demand right now, so looking at the year-to-date numbers, travel product is up 93.6%. And we do expect that to continue into next year. We have not seen any slowdown, and we expect it to continue into Q4 and next year as well.
On Page 27, this fixed SG&A point, we have talked about this every single quarter, and it is very important to us to maintain cost discipline. So what you’re seeing here is year-to-date as compared to 2019, I’m going to just focus on that really big green bar on the right-hand side of the page, our fixed SG&A has improved by $206 million just compared to 2019 year-to-date. That’s not even including that we have one more quarter to go. And obviously, the variable SG&A has improved as well, but that’s just on the fact that there’s lower sales that are happening there. So we have offset all of the pressures that we have from the gross profit decline and then some, and we’re continuing to invest in advertising as [indiscernible] comes in as well.
Just another view of it on Slide 28 as well. Looking at it as a percentage of sales, in year-to-date period of September 2019, we had $746 million of SG&A — of fixed SG&A, which was 27.9% of sales. That has been reduced now to $512 million, which is 24.8% as a percentage of sales. And obviously, as we add incremental sales, we do expect that operating leverage to flow through to the bottom line as well and which is why we’re very disciplined on maintaining this cost structure.
On Slide 29, this is something that we’re incredibly proud of. And again, it’s been a wonderful improvement. If you think about where we’ve come from over 18 months ago. It’s great to sit here and be able to say that year-to-date, we’re delivering $37.3 million of positive year-to-date cash flow. The number that I really want to just laser focus on is looking at that Q3 number specifically. With significant inventory build in the quarter, we still generated almost $64 million of cash, nearly double what we did in the last quarter. That is a meaningful number. And as you know, as we get to the back half of the year, we want to make sure that we have really good inventory levels to be able to make sure that we hit the holiday season. I think we feel really good about those levels, and we’ll see that on the net working capital side that’s coming up.
On Page 30, the balance sheet. We feel very, very good about our overall balance sheet and the strength of the position that we’re in. Obviously, we’re continuing to delever. That’s an indication of how we feel about the business and how — where we stand maintaining significant liquidity levels of almost $1.5 billion, net debt continuing to improve. All of our metrics, our net leverage ratio that we report to our banks this quarter is actually below 3x leverage again. So again, really happy in terms of what’s been happening with the delevering profile of the business as EBITDA comes back and we repay debt.
On Page 31, looking at working capital. Again, this is this point on inventory. If we’re looking at the year-over-year improvement in inventory, we have increased inventories by $224 million, something that we have been very, very focused on with the supply teams. I think we feel very happy about how the number of inventory days. So we’re at 165 versus 138 at the end of the year. And our net working capital days are up to 52. Again, we are going to be focused on our working capital efficiency going into next year as well. But right now, it is incredibly important to us to make sure that we have adequate stock that we’re back to historical levels in terms of inventory so that we don’t miss sales going into the back half of the year and into the first half of next year.
And again, this is highlighted again on Page 32, just to give you the progression of how it’s . So we’re sitting here at $556.7 million. That compares, if you’re going back to 2019 levels, in Q3 of 2019, we have $622.9 million. So we’re still below the inventory levels that we used to have back in 2019. So we do still have some work to do. Very importantly, we’ve had a very focused SKU reduction program. And so the quality of the inventory, I think, is much better than it was in 2019 as well. So I think we feel very good about where we stand in terms of both the quality as well as how the supply teams have been able to get us this level of inventory despite shipping delays and trying to get factories up and running full speed.
Given where we stand in terms of the financials, we feel very good about trying to start to invest in our CapEx again. So we’ve increased some of the CapEx spend in sort of refurbishing some of our store fleet. We started to invest in R&D and product supply as well in our factories. So we had the $33.3 million of total CapEx year-to-date. It’s still a relatively low number as you compare it to our historical levels that typically would run around $100 million — north of $100 million. But we do expect that we’ll start to invest in CapEx in the back half of the year and the beginning half of next year as well to continue to maintain the store presence that we want.
So with that, I’ll turn it back to Kyle to talk about the outlook, and then we’ll open it up for questions.
Kyle Gendreau
Okay. Thanks, Reza. Hopefully, you can tell we’re pretty excited about our numbers and where we are as a company. So just a few comments. I think as travel continues to rebound and my forward view is it will. We are really fundamentally well positioned to deliver on market share gain to deliver meaningful operating margin expansion, as you’ve seen show up in Q3.
And you can see it in our year-to-date numbers, we’ll be ahead of the full year numbers that we had set for ourselves as a goal and continues to be really a terrific story. We’re very laser focused as a team, and I’m confident our teams can do this. We’re showing you against historic challenges on product costs and shipping costs and some of that’s correcting now. But against all those challenges, we’ve been able to deliver historic margins.
And so as some of those things correct, we’re still in this wonderful position on the margin side. And really, that focus on gross margin has always been core to who we are as kind of running our businesses around the globe. And our teams are really managing that perfectly despite the pressures we’ve seen. And so — and again, I think there’s a little bit of upside on the margin as Asia continues to move.
We are working at inflation and recessionary concerns. I think that will have impacts around the world. But our view, along with kind of general market sentiment is that travel recovery will continue. And the long-term growth prospects for our business are very, very strong. And so we’re watching all these things, we’re paying attention to concerns. But I think still the pent-up demand and the buildup and the rest of the recovery on actual travel will continue to fuel a good story for us as we get into ’23.
We’re watching China very closely. As you can imagine, it’s hard to predict. A lot of folks are trying to anticipate when China starts to move. As I said earlier, there was some early indications of some positive steps in the right way. Our view is we’ll see some improvements in Q4. But as we get into ’23, particularly as we get into Q2, I think we will see some improvements as we think about modeling out our year for next year. We’ve got a cautious story for China, but improving trend really from Q3, Q2 forward, which I think makes some sense.
But excluding China, the pace of recovery in Asia, and really pay attention to that, it’s quite dramatic. The Q3 numbers are really very strong, our October number at plus 8% — 8.5%, excluding China, really tells the story of rest of Asia starting to move. We’re very excited, and our teams are very excited for that as well.
We are increasing our investment in marketing. You saw it in Q3, you’ll clearly see it in Q4. It will give us real competitive strength as we get into ’23 and really allow ourselves to not only capitalize on travel recovery, but really continue to gain market share, which we’ve been seeing all this year. We’ll clearly see that very strongly next year. And the teams are highly energized to be able to spend at those levels to really move the needle.
With that said, and with the gross margin story, we’ll continue to be very disciplined on expense management. As Reza was just covering, we’ve really accomplished a lot on the SG&A side, particularly on the fixed cost side. A large part of that will carry into Q4 and clearly into next year. And we, as our teams work together and as I message with our teams, we’ll continue to be very disciplined. We will make selective investments in core strategic functions. We are going to support growth. We’re going to be putting all the right spend in the right places, but under a very disciplined lens that Reza and I plan to continue to manage the business with.
Our teams are highly energized. Reza and I are traveling almost every week, somewhere in the world. And we’re working together across all of our offices, and we’re getting back together as team members, both within countries and within regions. And I can’t thank our team enough. A lot of them have probably dialed into this call. So thank you, everyone. Because it really is what’s driving the success of what we’re doing. We are sitting here with the best teams in the industry, all very much intact and highly energized. And you shouldn’t underestimate what that means when you’ve got a business in the right place. So I greatly appreciate it for everybody on the call.
We have this ongoing commitment to sustainability. There’s not a lot in this deck, but you’ll hear more [indiscernible] when we get to the year-end. We continue to push an amazing sustainability story. We continue to push innovation. We have amazing products that we talked about on the last call, that will continue. You will see amazing products launching next year that incorporates sustainability. We’re making progress on all of our sustainability goals, and you’ll hear more of that as well as we get into our ESG report. And I really think that strengthens our long-term market position. And we’re really set up again with energy to really drive this business forward.
And then lastly, the balance sheet is amazing. I think when we went into pandemic, we ended up with about $1.5 billion of liquidity as things were starting to kind of really unfold. The reality is we’re at the same number today, $1.5 billion of liquidity. We’ve navigated. I would say, the full effects of the pandemic, we’re coming out strong. We’re generating cash. We’re really in a position to continue to delever the business. And the balance sheet is good as could imagine. And I think in today’s world, there’s not a lot of companies that can talk about this tremendous balance sheet strength that we have and we’re sitting with it and which is really allowing us to make the right decisions to push the business forward.
So with that, William, I’m very happy to take questions.
Question-and-Answer Session
A – William Yue
Thank you very much, Kyle and Reza, for your comments. And I will now go to our questions. First one coming from Dustin Wei of Morgan Stanley.
Operator
[Operator Instructions]. And the first question comes from Dustin.
Dustin Wei
Start off from the short-term sort of . So looking at the slide, the October sales trend, slightly lower for U.S. and Europe versus the — in October versus the quarter. But it looks like there’s a good improvement in Asia. So should we sort of assume that October trend is like a low single digit, but November is sort of stronger than like August, September?
Kyle Gendreau
It’s — there’s some timing going on. So October is a little lower. If I — I’m not going to tell you the November number because we’re early, but the November number for the U.S. will be dramatically higher. If you can imagine our wholesale customers are buying in, in waves. So it’s a risk of looking at one month. So the North America business, November numbers are I would label incredible, and it’s really some timing of buying.
Europe is a similar story. We had a price increase that went in. And so September was a little higher in Europe because we had a price increase go in, in October. So the September number was quite strong. October is a little cooler. November is looking just fine for Europe.
So it’s really just some timing noises within our wholesale customers that are causing Europe and U.S. to look like that. And so again, November is looking quite promising in those markets as well.
The Europe story — I mean, the Asia story is you really peel out China. It’s quite dramatic. And I covered like a market like Korea and Japan just to give you some indication how quickly they move. There’s nothing that indicates for me with rest of Asia that — excluding China, that it doesn’t just continue because there are still a few steps behind the rest of the world. I might say, look at kind of the U.S., Europe, Latin America story and think about Asia being maybe 4, 5 months behind that, but rapidly accelerating. And I think that’s what you’ll see, Dustin, as we get into really end of this year and for sure into the start of next year.
Dustin Wei
Second one is on the gross margin. So because I think the stronger dollar will usually lead to the stronger gross margin, but the timing will be delayed. So are you going to look at a stronger sort of GP margin, a little bit counter the seasonality in the holiday season for the fourth quarter and even sort of higher gross margin for next year?
Kyle Gendreau
Yes. It’s — so it doesn’t quite work its way in that fast, right? So we’re off with our suppliers kind of managing that. But if you can imagine, you have an inventory position. We’ve been able to rebuild our inventory position. So I think we’ll get those benefits. So I think they’ll be helpful as we get into end of Q2, Q3 and Q4, there’s been real dramatic reductions in freight costs. So we’re navigating all of that, as you can imagine. We contract freight. So again, it’s not immediate, and the goods we have aren’t there. But it really sets us up and where our teams are really doing a good job of making sure we grab those, but they don’t really show up until you get to the moment you’re selling those goods in a way.
So it’s everything we’re chasing. I think it helps me take a longer-term view on margin. It’s not necessarily a Q4, Q1 view on margin. But as we get to the back half of the year, I think they can be really helpful. That, coupled with Asia mix and Asia becoming a bigger piece of the mix — and Asia historically has a bigger gross margin, which is why I can kind of lean forward a bit and say, we’re feeling really good about our gross margin position.
I wouldn’t go model some tremendous growth in gross margin, though, Dustin. I think our ability to kind of manage in a zone and have some comfort in our ability to deliver is the way to think about it.
Dustin Wei
Great. And can you comment on the price increase that you did to Europe, last year third quarter you sort of raised the prices for the whole group by high single digit, 10%, but were you able to quantify the price hike at the moment?
Kyle Gendreau
Well, price hike sounds so negative. We’ve adjusted pricing to make sure that we’re hanging on to the margin. It was, I think, around 5%, Dustin. So it’s really some fine-tuning. Again, these teams are really focused on not expanding margins because of price increases, but maintaining margins in the right zip code. And so it wasn’t such a dramatic increase, whereas last year, we were really correcting for some of the challenges. So…
Reza Taleghani
And it obviously varies by brand and by product line, et cetera, as well. So…
Dustin Wei
The 5% for Europe or for sort of the [indiscernible]?
Kyle Gendreau
Yes. Yes.
Reza Taleghani
Approximately depending on how you look at it, blended, but — yes.
Dustin Wei
Okay. Okay. And I guess the last question is regarding the inventory. So — now the inventory is still lower than 2019’s level, but is sort of kind of getting there. And I still recall that back in 2019, actually, management was looking to train the inventory in 2019 because that was a little too high. So what kind of the right size for inventory, if you sort of look at your business fourth quarter or next year? And also how to sort of control any in place to make sure that the wholesalers are not getting too excited and order too many inventory and sort of clog the channel? And you also mentioned that the inventory quality is better than 2019. And could you provide more details?
Kyle Gendreau
Well, we’ve covered the inventory quality before. We’ve dramatically reduced SKUs in this business. In some cases, 30% reductions in SKUs, maybe more, as we’ve just kind of cleaned during the pandemic and a lot of companies were doing that. So the quality of inventory is we’re carrying the right products at the right place. I think our year-end inventory number is going to be around $600 million, just to give you a sense.
But that’s — when you look at inventory, that’s on a forward growth trajectory. It’s hard to look at days of inventory because they’re often like backward looking. So I think we are really well positioned with exactly the right inventory to capture next year quite well, and we’re coming it right now quite well. So I think it’s in the right place.
I think from a zip code perspective, keep a $600 million number in mind. And what you’ll see is inventory efficiency as the sales continue to grow, and we kind of maintain at that level, I think we’ll be fine. There are a few spots where maybe even a little heavier than what you might normally want to be for inventory. But what I say to the team is that I’d rather be there than be on the other side and chasing, particularly as there’s such a good runway in front of us.
So I think we’re — and I’ve said it to my sourcing teams, we are in as good a position as you could ever imagine. That chart that Reza showed on the journey we took with inventory, it’s really quite amazing what this organization was able to do to adjust inventory levels down as we navigated pandemic.
We’re also cleaning inventories. And now that we’re moving, we’re building inventory back for all of the right products that really position the business to gain market share and not miss on sales.
So — and as far as wholesale customers go, if you’re paying attention to the world, I’ll North America, for example, our wholesale customers not in our category, but in their overall inventory position have a little bit of a challenge. And so when you read about the wholesales in the U.S. inventory levels generally are a little bit high from where they would like to be. That’s actually having an impact of our ability to sell in. So like that lumpy sell-in that I was talking about for North America and October looked a little lower, but then November is going to be quite strong. It’s us being able to get these wholesales to take inventories in because they’re managing their overall inventories.
And so the channels aren’t filled. If anything, the channels are exactly where they be. And when you look at these sales numbers, the sell-through of our products is just as strong as our sell-in. So we’re not seeing any clogged pipes in the system from an inventory perspective. So I think it’s very, very strong, Dustin, it’s in such a perfect place. If anything, as things open up within some of our wholesales, I think the numbers can be even a little bit better.
Operator
Our next question comes from Erwan Rambourg with HSBC.
Erwan Rambourg
Just three questions. So on the sequential improvement in terms of sales growth, so from memory, down 16% in Q2, up slightly in Q3. I understand there’s a lot of volatility between October and November with delayed purchases. But what do you think we can hope for in terms of Q3 — Q4, sorry, sequential improvement on Q3? Could it be mid-single digit, high single digit, even low double-digit growth relative to ’19? And then do you have initial thoughts in terms of the magnitude of growth you can hope for, for next year?
And then maybe secondly, if you look at the split between brick-and-mortar basically benefiting from the world reopening. I know you restructured your store fleet a lot under COVID. But with consumers going back in brick-and-mortar stores, how do you think about capturing that? Do you actually need potentially to open more stores? Or will you just feed into the like-for-like generated uptick?
And then lastly, I just wanted to make sure I understood correctly the sort of puts and takes and the way you think about gross margin for next year. Obviously, some pretty big FX impacts. At the same time you have the support of Asia kicking in, hopefully. You mentioned a reduction in the freight cost, which is not immediate, but it actually can help. Should we have in mind the sort of mid-50s as still the sort of benchmark for what you can hope for next year?
Kyle Gendreau
Yes. Yes. Okay. Plenty there. So on a sales growth perspective, I think kind of with and without China matters. I think Q4 trend will be probably mid-single digit with kind of China bouncing around a little. China in October was negative 46% and so it kind of factors into the numbers.
But I think comfortably a mid-single-digit and — against 2019, and I think that’s what I’d be modeling. And so we’re pretty cautious guys there, Erwan, as you know it. So maybe a little room to run there. But there’s also this wholesale dynamic that I was just saying were these ups and downs. And so depending on what goes into kind of November, December can make that number a little higher or a little lower on the wholesale side. But all, I think, very good.
Our outlook for next year, just in broad strokes, guys, is it’s probably up around 10% to ’19, and that’s kind of our cautious view with the China story, that — it’s cautious, but recovering as we get into Q2, Q3, Q4. But I might be modeling a 10% to ’19 kind of growth, which is around 20%, 25% growth off of this year, which for this year is a pretty good story. And so that’s what we’re thinking on revenue growth. As you know, we always have an ambition to beating that. So we’ll be pushing ourselves to be ahead of that. But I think that’s what we — you should be thinking from a forward view on revenue growth.
As far as stores go, I’m glad you bring it up because one of the things — we really adjusted the store fleet during pandemic. And when you look at these numbers, and we’re talking about growth numbers, this is all happening against the store fleet, that’s — Reza, help me with the number down.
Reza Taleghani
So remember, in Q3, we have 965 stores. Just for reference, if you go back even December of 2021, that’s after we shut the stores, we were at 1,005. So we have some work to do there as a — rebuilding.
Kyle Gendreau
But we don’t need to rebuild a lot of stores. My point was we’re delivering these sales numbers with a fleet that’s smaller, okay? We will start to open stores — we have started to open stores. So we’re — even in this year, we’re opening stores. It will be in the right markets, the right place. I think Tumi has a lot of runway to go on store openings, particularly in Europe and Asia. Will get back going as China starts to move again, you’ll see more there. But we’ll have a disciplined approach. I think we’ll fundamentally be a smaller fleet. You won’t see us rush to back to where we were, but we’ll make the right decisions.
What’s clear is we don’t need to open a bunch of stores to deliver on our sales story. We have to make the right store openings. This is a business that can manage retail. We have 1,000 stores basically. We will open the right stores in the right place, even pre-pandemic. If you remember, I was adjusting that we make the right decisions on stores and our teams are thinking about that. But we’re back to assessing stores in opening stores.
You will see stores open next year but in a magnitude that will be dramatically different than where we were before. And again, the most powerful piece is we’re capturing these sales. If you think about our structure, we’re capturing the sales digitally. We’re capturing our wholesale, we’re capturing stores. The right markets for the right brands, there’s more opportunity to open stores as things really recover and we will do that.
And the world is kind of reassessing what retail is and where retail sits today. So our teams are doing really a lot of amazing work on where are those stores sitting in the future retail landscape versus where they were or are today. I think that’s even evolving as well. But we’ll open stores, but in a very careful and calculated way.
Reza Taleghani
I think, if you’re looking at next year, year-over-year CapEx, that’s the point that when I was on the CapEx slide I just want to make sure that we’re clear on was, like don’t expect the CapEx to stay at the same levels we’ve had for now because as we’re starting to go into next year, we’re going to start to invest again. But again, in historical terms to the point that Kyle is making, it’s not like we’re going back to 1,200 stores. You’re going to see some stores coming in, but it’s still going to be meaningfully lower than anything that we were historically.
Kyle Gendreau
The other thing we’re doing just on the store from February on the call, you’ll see CapEx come in on refreshing our stores. So if you can imagine during pandemic, where we just shut the CapEx valve off and it was totally buying, we have some pent-up need to refresh stores. And what we see, typically, when we refresh the store, you get a 20% to 30% bump in the store’s performance. And so we’re talking about some fairly meaningful refreshing of stores across the globe. It won’t be a huge CapEx number but enough that will make a difference. That will fuel sales growth for us as well because these refreshed stores really do deliver when you put a bit of CapEx and kind of glossy them up again. And — so that’s coming. You’ll see that in next year’s numbers as well.
As far as the gross margin, you should assume that we will be slightly better than what we’re running now, Erwan, because you’ll get mix effect. Okay? Our ability to deliver on this margin, I’m feeling pretty confident about. The real wildcard for gross margin next year is what happens in the competitive landscape and does it become more promotional, what happens with discounting and how do we navigate and how does the industry navigate that. And so I think we have upside in things that we’re managing that will probably be a little bit offset by when the world starts to move again in this promotion and discount, which again, it’s been lower historically. We’re doing it, we’re back to it, but at a much more rational and disciplined way.
And so I think with the upside we’re seeing that will help us offset some of that, which will allow us to deliver a margin that’s right in the same zip code. And again, take Asia and take China move, which has historically a higher margin, you’ll step up from where we are today. But being the zip code of where we’re running today across each of the individual .
Reza Taleghani
And just on that point, just to add one point. If you go back a couple of quarters, there were some questions that some of you had asked around the inflationary pressures, on raw materials, on gross margin, et cetera. That’s not really the concern. So if you’re looking at next year, I think just overall, the supply team is managing the FOB prices pretty well.
And to the question that Dustin had raised, currency helps with that as you’re getting, especially into the back half of the year and getting orders, et cetera. It’s just really what’s going to happen to the overall economic environment and promotion. But having said that, we’ve been pretty darn disciplined about it. And so I think that’s going to continue into [indiscernible]. It should get sequentially better even year-over-year.
William Yue
Kyle and Reza, we have a few questions from investors online. The first one is, can we comment — can you comment on the performance of — on Tumi, Samsonite and American Tourister? And in relation to that, how do we see the competitive landscape? Where are our competitors are — where do you think our competitors are today vis-a-vis versus Tumi, Samsonite and [indiscernible] Tumi, Samsonite and American Tourister? And what do we see in terms of our prospects for market share gains?
Reza Taleghani
Okay. So let’s start with overall brand performance. All of the brands are performing is the bottom line. The main question mark around all of the brands is really inventory. So if you’re thinking about the Tumi performance this year, it would have been even better, but as soon as stock would come in, it would go out the door. So one of the reasons we’ve been pushing this whole inventory point is to make sure that, that doesn’t happen going forward.
So American Tourister performance, if you’re just looking at the sales numbers for American Tourister, especially in Europe because we had really good stock levels, it performed as a percentage better. And American Tourister is the main brand we have in India. And India has been absolutely on fire. So if you’re looking at the brand performance, American Tourister has been performing. And when we get into this channel mix, this brand mix point around gross margin, that’s part of the reason that you’re seeing the gross margin slightly lower than otherwise because obviously, Tumi and Samsonite have higher gross margin profiles than American Tourister. So it’s partially driven by inventory in the countries where the demand is coming from.
If you’re looking at the competitive environment, and we’ve said this previously, we feel really, really good about the competitive environment. If you think about the higher end, you have Rimowa. Rimowa strategy in terms of taking Rimowa even further higher in terms of price point has opened up some white space for Tumi to be able to increase price, but also to increase distribution. So as Rimowa goes greater into DTC and they open up their own stores, there are some wholesale doors that have opened up, which have allowed Tumi to basically go in. So that increases the distribution of Tumi. It increases the area for Tumi to try to be able to compete at the higher end as well and increase price. So that’s been a net positive to us. If you’re looking at the other brands, there’s obviously always other DTC brands that are out there. The Internet-only brands, et cetera, the in North America, July in Asia, et cetera.
At the end of the day, we are much, much larger than all of those other ones, and we feel really good about both our distribution as well as our product strategy. We didn’t spend a lot of time in this presentation on it, but the innovation that we’ve done on the product side has basically allowed us to compete extremely well against everybody within the industry with a really strong sustainability story as well, and the distribution is just wider for us. So if you’re thinking about even those other kind of DTC-only brands, et cetera, we’re competing very strongly against those as well.
And we feel really good that if anything, thanks to the fact that we have this really strong fortress balance sheet, we’ve been able to invest in innovation and in stock levels and to be able to basically take share. So I think the net-net of it is, we feel very good in terms of where it is — where we stand overall from a competitive standpoint.
Kyle Gendreau
Yes. I think our — and we didn’t cover it in this deck, but our product positioning, as Reza was saying, and our continued delivery of new products during pandemic, and where we’re sitting, I remember at the last quarter call, I was describing it is in the very best position I can even imagine on the product side across all of our brands, which is really fueling against the competitive landscape that’s been a little bit flat.
So we haven’t seen a lot of product introduction. We’ve seen — and we know this through our kind of relationship with suppliers, we’re in a much better position from a supply perspective. And we’ve been gaining share in our view is I think we’ll continue to gain share. It’s not that we’ve seen a dramatic falloff in the competitive landscape, but we’ve seen a dramatic fall up in the strength of our competitors against our strength, which I’m pretty excited about is our ability to continue to push this business.
Reza Taleghani
And William, I’m sure one of the questions that comes up regarding that is just the percentage mix of it. Obviously, Samsonite between our normal Samsonite and Red Label ends up being the majority of our sales even this year. So if we’re looking at it year-to-date, roughly half of the sales are being driven by Samsonite. But the next in line would be Tumi and then American Tourister would be third with that. And then obviously, there’s the other brands as well. But just to be clear on it, in terms of if you’re looking at the blend of the different brands, Samsonite is a brand that’s delivering the majority of the sales right now despite the inventory points for that rate.
William Yue
Great. Thank you, Reza and Kyle. And operator, over to you again.
Operator
[Operator Instructions]. And our next question comes from Anne Ling with Jefferies.
Anne Ling
So regarding — just a follow-up regarding the price hike. You just mentioned about the 5% increase for Europe. Is there any other like price adjustment that you have planned for rest of the market for 4Q? That’s my first question.
And my second question is on the debt repayment. I understand that we have to accelerate our debt repayment and we also have this adjusted EBITDA ratio — net debt to adjusted EBITDA ratio, which is around like 2x being our target. Given the fact that the interest rate has been on the right. Do we have any plan to like adjust any of the guidance or target? Although I understand that you also have some interest rate swap as well. So that’s my second question in terms of your target debt level or the coverage ratio.
And my third question is on the operating margin. Now that for the past couple of quarters, we have pretty good adjusted EBITDA margin at around like 17%, 18%. Do you think that our 15% to 16% target for the full year, do you think that it is a bit on the — there is some upside risk? And last year, we had a 19% for 4Q. I understand that there’s some inventory [indiscernible] and all that. So what is your take regarding your operating margin moving forward?
Kyle Gendreau
I love that you labeled upside as risk. That’s a good way to describe it. Risk on maybe overachieving the model, but it’s — I think, we’ll clearly be in the higher end of the range we’ve set. We’re almost there now year-to-date, let alone the quarter, which is very strong. I did say we’ll spend some on advertising, and so we’re going to put some of that into Q4 as well. But we’ll still be in that zip code. We should achieve full year EBITDA margin in the high end of that 15% to 16%, i.e 16% or maybe a tad bit better for the full year. You can see it almost in our year-to-date numbers as well. So — and that’s with advertising working in. So it’s a really good place to be.
As far as — I’ll do the price piece. I think on balance, we’re generally — and again, I don’t like the word hike because hike has the wrong connotation. We’re using pricing to make sure we maintain margins. That’s what you’re seeing now. It’s really some fine-tuning. We might have a little bit of an increase in pockets within Asia because we’re fine-tuning the gross margin. As we look at next year, I think we have some assumptions around the start of the year as we just watch what’s going on. We’re also kind of taking on board currency benefits and shipping benefits and how do we navigate all of that.
But we’re beyond the moment of these kind of big steps that were happening in 2021. And I might say in ’21 really and maybe the beginning of ’22. You’ll really just see fine-tuning now from pricing, and I think that’s the way to think about it. So you won’t see any sort of dramatic changes there.
And then on the debt side, Reza?
Reza Taleghani
Yes. So the first thing is the target for us is actually not below 3. That’s just where we stand right now. So we’ve always said that we’ve historically been in the 2. And when I say 2, it’s usually less than 2.5. It’s somewhere between 2, 2.5 turns of leverage is where we normally operate. That is definitely our intention. You’re absolutely right that interest rates, absolute interest rates have gone up. I’ll tell you that we’re approximately around 43%, 45% fixed just between the Eurobonds that we have and the hedges that we have.
And — yes, one of the reasons we’ve been doing these debt repayments is exactly the point that you just raised because as absolute interest rates go up, we want to maintain to get some interest rate savings and apply the cash to repay the debt. And that’s what we will do.
The great thing about our balance sheet, though, is very early on right before the pandemic, we reset the entire balance sheet. So if you look at the maturities of all of our debt, everything goes out to 2025, 2026. We will address that at some stage probably over the course of next year, just to re-extend the maturities. But the point that I’m raising is, given the timing of when we extended the maturities, we also had the benefit of basically locking in historically low margins. So even though the floating rate component of the debt may be increasing. The margin on top of that is really low. So like if we were to redo that debt today, that should be 1 point, 1.5 points higher in terms of where it is. So we do get that benefit of having a balance sheet that was put in place very early on and going out.
So — yes, obviously, every company is faced with the same interest rate environment. There’s some pressures around that. We’re managing that by basically applying some of the excess cash that we have to repay debt, and we’re going to continue to do that.
Kyle Gendreau
If you imagine during the pandemic, we were holding cash, and a lot of that was my doings, to really just make sure really in the troughs of — end of ’20 and ’21 that we’re in the right place. What you’re clearly seeing is that we’re, one, we’re generating cash, but two, we’re putting it back because the reality is our confident levels are really, really high. And so Reza and I have had [indiscernible] holding cash and repaying debt. And my sense is we’re signaling here, you’ll continue to see that continue as we move into the end of this year and into next year as well. So we’re really fundamentally in a perfect spot.
And the repayments we’ve made to date have been against revolvers, so it doesn’t change our liquidity. It’s all available. And revolver has a floating component to it. So it’s the right pieces of debt to be repaying. So as that continues, and we’re almost repaying our revolver, that continues the fixed portion of our debt gets better. So we’re really in a good fixed portion of that position here as we’re in a higher rate environment, we’re sitting in a really good position from a debt perspective, probably better than most.
William Yue
Great. Thank you, Reza and Kyle, for the presentation and the remarks. Before we go, any closing remarks from you, Kyle?
Kyle Gendreau
No, I think if anything, hopefully, you can read our excitement, right? We’re really excited. Our teams are very excited. And there’s plenty of uncertainty in the world today, but we’re pretty confident with what we’re managing in the space that we’re in, that our good story will continue. And I think I’ve said it maybe at the last call, but I think 2023, it can be — it will be one of the best years this company has posted, and we’re pretty excited about it. So that’s it, and thank you for joining the call.
William Yue
Thank you. Thank you very much, everyone, for joining the call. Thank you, Kyle and Reza, for the comments and presentation.
Kyle Gendreau
Okay. Thanks, everyone. See you.
Operator
Thank you. Thank you for your participation. This concludes the conference. Goodbye.
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