Ferretti S.p.A. (F3T1.F) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to the Ferretti Group Full Year 2024 Preliminary Results Webinar. Thank you all for joining us. We appreciate your time and interest in Ferretti Group as we share an overview of our performance over the past year and discuss the outlook for the future. Before we begin, let me introduce our speakers. Mr. Alberto Galassi, our Chief Executive Officer; Mr. Marco Zammarchi, our Chief Financial Officer; and myself, Margherita Sacerdoti, Investor Relations and Sustainability Manager. Today's agenda will cover key highlights from 2024, business dynamics, financial results, followed by a Q&A session. [Operator Instructions]  With that, let me hand it over to Mr. Alberto Galassi to get us started. Mr. Galassi, the floor is yours.

Buongiorno, good morning, everybody. Thank you very much for your attention. So let's go straight to the outperforming numbers of 2024. So proudly to say that the adjusted EBITDA of the company reached the top side of the guidance of EUR 190 million, plus 12.3% versus previous year. And the adjusted EBITDA margin grew up 100 basis points from 15.2% to 16.2%, and it is above the guidance that we gave that was, just to remember, 16%/16.1%. The revenues of the company without preowned, so just brand-new boats, grew by 5.6% to a stunning number of EUR 1.173 billion. So we are at the upper side of the guidance that was from EUR 1.155 billion to EUR 1.180 billion. And the order backlog, I'm very proud to tell you, and I'm very happy and I have to congratulate my team for this is the record-breaking all-time high order backlog at EUR 1.7 billion, that grew 11.6% versus previous year. So I'm very glad to confirm that we are beating our expectations. I'm very glad to tell you that the company is solid and sound, and the most important thing, with a bright future ahead of it. So let's go back to why? Is there a reason why we were that good, and allow me to say, that good? Yes, the reason is given by important differentiation in the market that we have, which are strengths. Number one, we sell in 71 countries. Don't underestimate the power of being so [indiscernible]. We sell in countries where basically none of our competitor is present through 55 dealers and 280 brokers, plus the direct Ferretti Group sales force. So there's a derisking in being so geographically divided and present. The second thing is the strength that we have, the seven brands of Ferretti Group. I remember back in 2019, there was some questioning about you don't have -- don't you have too many brands? Well, I can tell you, thank God that we have those brands, and we are very good in not having them overlapping one with each other because there's a different client that buys a Riva compared to a different client that buys a Wally, compared to the different clients that buys an Itama or Pershing, CRN or Ferretti or a Custom Line. And we are invested a lot. We've been investing a lot in the leading segments, you will go -- we will go into the details, the leading segments and the most profitable segments are the Made-to-Measure segment, let me remind you, from 30 to 43 meters in fiberglass and Composite and the Super Yachts, which is up to 95 meters in aluminum, in alloy -- in aluminum and steel. This increasing presence in the most profitable segments is a strength of Ferretti Group that was absolutely reflected in marginality, in revenues and in profitability. And then as a fallout from having seven brands and a very, very sophisticated sales force through global sales force, we have a very loyal clientele. The repetitive clients, which is an important -- very important number for us, grew from 37% to 44% if you compare 2019 and 2024. So just in general, we had from 131 boats to 153, 70% in total. The new clients from the competitors and the new first owners are very, very good. But look at the number of 42% of cross-selling across the brands. That says that basically 42% of our sales are driven by the presence in seven different brands. Some of the clients, they have more than one boat simultaneously, maybe different locations. Some of the clients they just switch and upgrade. And you will see afterwards in the Super Yachts number of sales, how many clients upgraded from Made-to-Measure to Super Yacht. This is very, very interesting. Now official data that we have from official external validation and opinion makers have a look at Ferretti Group as a market leader in Composite and Made-to-Measure. The two segments, let me remind you, from up to 30 meters and from 30 meters to 43. Now Ferretti Group global yacht market is filled rate per associates. It's not our data, it's not internal data, dated October 2024, are positioning us at 16.5% with basically a market share delta versus 2023 of 1.3% growth and the market share delta versus 2021 of 2.5%. You can see our competitors that we respect, Azimut-Benetti, didn't grow as much. Sanlorenzo didn't grow as much. Princess Yacht and Sunseeker actually left and diminished their positioning versus the previous years. So we are #1 in most profitable segments that we have with 25% of market share in large composite, and large composite is from 20 to 24 meters, basically, to 27 meters from 80 to 99 feet, and 24.7% market share in Made-to-Measure. Let's go back and deep dive in this number. So by definition, by design, by strategy, we are #1 where we want to be #1 in the most profitable segments. So Ferretti Group in the segment from 30 to 59 feet plays with two top brands, Wally and Riva, profitable brands, but we don't have a lot of presence in that. From 60 to 79 feet, we have -- we are #1 with 15.3% of the market -- sorry, #2. And we are #1 from 80 to 99 with 25%, and we are #1 ex aequo, above 100 feet with 24.7%, nearly 25%. Now what is important in this market? Look at the consolidation. The top market, five market share players, they have 73.7% in the 80 to 99 feet market, and they have 69% of Made-to-Measure, which is 100 feet and above, 30 meters and above. It's very important. The market consolidation grew 2.5% year-on-year in this segment, Made-to-Measure, 4.3% year-on-year in the other one. It says we are looking -- we are going through a consolidation of the market, and in the consolidation of the market where the clients go to the most known, I would say, and secure and what we would say, most known and famous brands, we are playing #1, very important. Now the business dynamics, it's interesting because we are talking today 28th of February. So we have an outlook. We have an idea. We know exactly how January started. We know exactly how February started. And I can tell you, we're happy about that. Why we can say this? Because we had two important boat shows, one in Miami, very important from the 12th to the 16th of February. And U.S. market recovered after, I would say, six months of being frozen before the American election. We had the Dusseldorf boat show at the beginning of January, very important for Northern Europe. It gives you a flavor of what's going on in Europe. We had the Dubai boat show that just ended last week from the 19th to 23rd, and that's a very important market, Middle East for us. You will see how much we saw. I can tell you after this that we are confident. We are confident because we see the outcome in January and February at the end of last year about the United States. We see the outcome of what the Middle East is giving us, and we can tell you that in Dusseldorf, it has been a good show. So again, let me tell you what we have done in order to achieve these numbers because at the end, it's driven by products. Are we doing the right products? Are we selling them right? Is the market appreciating our effort? Do we have the right brands? Don't forget, in luxury, brand is more important than the product today. And let's have a look at what happened in 2024 with 10 products that we splashed, which 8 of them were brand-new range extension, which means we never had before. Now, the Iseo, we went electric with the most important brand that we have. Riva, we went electric, we sold two units. Let me remind you that for a 27-footer, it's EUR 1 million. And no one can compete with Riva in that. We sold one in Asia and one in America. Pershing range extension, the sport utility yacht, the SUY of the Pershing range, the GTX80 that we launched, we sold four units. And then the best of the best, Custom Line Navetta 38, brand new, the new beginning of the new year of Custom Line displacement yachts. We launched in Venice in May last year. We sold six units of the Navetta 38 and two units of the biggest sister in alloy, which is already Super Yacht, but it's a semi-serial Super Yacht. You remember our strategy maybe of going also not only bespoke and one-offs, but doing the semis-serial product extension, which is Custom Line and Riva and Pershing, you will see that later. We sold two units. Wally, super success presentation of the Wallypower 50, nine units sold. Super successful presentation of the Wally 110 sailboat, one unit sold. We're talking about EUR 16 million for 100 -- nearly EUR 18 million for 110-footer sailboat Wally. And the Wallyrocket, what we call the competition and what we call the equivalent of Corse Clienti if you are a Ferrari driver, what we call Ferrari Challenge, where our owners, they like to speed, they like to race. We are starting up a new segment, never existed before, super performing segment for passionate, and we sold three units of the Wallyrocket51. We will have a championship with that. The INFYNITO. The INFYNITO didn't exist. It's the long-range, low emission new range of models. We sold nine units of the INFYNITO 90 built in brand-new factory of Ravenna, the brand-new shipyard. We sold two units of the INFYNITO 80, and we sold nine units of the 670, which is basically a restyling of an existing boat that brought the numbers of sale of this unit of more than 60 or even up 70. What about 2024? And what about the announced boats of 2024 and what is going to be splashed in 2025? Interesting. We upgraded the line of Riva, the entry level, if we can call an entry level, EUR 500,000 boat, the 27-footer, the Riva Iseo Super. And just because we announced it, seven units went to the market sold. Then our bread and butter, Riva 120 -- Riva 112', sorry, Dolce Riva Super, which is the upgrade and a new generation of the Dolce Riva with more, I would say, market than 20 or 30, I don't even know, units sold. It's five units sold in the market on paper. And the Aquariva Special, which after nearly 300 units of the Aquariva that started back in 2000. We already sold nine units on paper of the boat that will be displayed in the summer in Italia. I will show you a video that gives you why Riva gives you the possibility that no other brand in the industry can give of bringing and connecting tradition and giving you the possibility of providing and offering, I would say, the best verb is offering, to the passionate for more than EUR 1 million, a piece of beauty driven by heritage, tradition, craftsmanship and most important, beauty. [Presentation]

Thank you for your attention. You can't do this job without passion. And that's what's driving us and driving our clients. The Pershing is the GT -- the range of the sports utility yachts. It will be announced -- actually, we've just promoted the Pershing, presented the Pershing GTX70. You will see it very soon in the water. And Ferretti 940, which is a big boat, more than 27 meters, we sold five units, and it will be presented as well very, very soon. I would step back and give to Margherita that today, proudly, will present. She picked the best numbers, and she will present the order intake and how is it made.

Thank you, Mr. Galassi. So this is our order intake in 2024. As you can see, we grew compared to 2023 of 1.7%. But what is very important to highlight is our Q4 this year, more than EUR 400 million of new orders. This is a very good number compared to the same quarter of 2023. You can see it's plus 64% and gives us a very good visibility for 2025. If we go to the next slide, this is the book-to-bill. This considers only Made-to-Measure and Super Yachts segments because we think that our composite segment, by definition, does not give you visibility over a very long time because we get orders and deliver twice in a year, as you probably know. So we decided to exclude it. If you exclude that, we've been consistently above 1x. But even if you include back the Composite for full year 2024, we'd be around 1x. So this, again, is a demonstration that we have a very good visibility towards future revenues. If we look at the order intake by segment, let me start from the Composite Yacht. You might see that we are still negative. But if we look at the performance quarter-by-quarter, you can see a very big improvement. We started out in the first quarter with minus 39% compared to previous year, moving to a second quarter of minus 37% and then turning into positive in Q3 and in Q4 with plus 4%, which is an outstanding result considering everything that happened this year. If we move to the Made-to-Measure, it's -- go back, please. It's in line with the result of last year. But let me highlight, as Mr. Galassi already mentioned a few times earlier, that many of our repetitive clients, when they change a yacht, as we said many times, they upgrade and they go to a larger size. And in this case, they moved to the Super Yacht. The Super Yacht, flagship Super Yacht. So they moved to the Made-to-Measure in fiberglass to what we call Made-to-Measure in alloy. And this is exactly the result of the long-term strategy that grow to introduce new models in that segment to fill the gap that we used to have between the largest Made-to-Measure, 43 meters, and the bespoke. Usually, it's a big step forward in terms of size, but also in terms of price and deliveries. I don't know if you want to add anything else on this, Mr. Galassi.

What I can tell you is a number that says by itself that the strategy was right. Some clients, the Riva 130' client or the Navetta Custom Line 38 or 42 or 33 or 37 or even the big Pershing, not necessarily they want to wait three, four years to get the Super Yacht bespoke size-wise, 70, 80, 90 meters with an important price sometimes, definitely exceeding EUR 100 million. But they upgraded to our strategy of Riva semi-custom in alloy Riva 50, we sold three units, Riva 54, I can tell you right now, we sold four and one of them in last week, or the Pershing 140, if you refer to Pershing or the Custom Line of Navetta 50 that you've seen -- sorry, 50 meters that you've seen before. So very proud to say that, that means that from 43, which is the threshold of our fiberglass Made-to-Measure line business, you exceed when you go to 50 meters, you're already in the Super Yacht. So technically, we didn't lose any. They upgraded is a very good sign.

If we move to order intake by geography, we can see that Europe and the Middle East are core growing, especially the Middle East. And AMAS has been impacted by the year of U.S. election, as we already mentioned in the previous quarter. We already see a good way out already from the end of December and in January 2025. We see the market very active. And there is a good potential also coming from the possible restoration of the tax cut and Jobs Act that President Trump mentioned many times during his campaign to allow 100% of your deductibility in three years, but we expect that not immediately, but probably in the upcoming months. Moving to the backlog. You can see that, as already mentioned, we reached an all-time high, both in order backlog and in net backlog. And we have a very good visibility towards 2025 and beyond. If we compare this number to the same number of last year, we had a 2024 net backlog of 69% and 31% beyond 2024, which means now that we -- because we have larger segment yacht in our backlog, our visibility is longer than it was one year ago. Another very important data is our average ticket. We stand at EUR 6 million, including Super Yacht. It's plus 31% when compared to last year. And if we exclude Super Yacht, we stand at EUR 4.6 million, that is plus 14% compared to last year. So this also depends on the positioning that is a result of the strategy and pricing. I will hand over the microphone to Mr. Zammarchi now.

So as a result, as a consequence of the good order intake, these are the revenues that, as we said, are increasing 5.6% versus prior year, and we are exceeding the term of the market. We highlighted that the market grew 4.4%, and we achieved 5.6%. And regarding the distribution about -- across the quarters, we can see that they are quite the same quite among -- across the quarters. So that means that we have a very limited seasonality because being present in every market, geographical market, this is a good advantage for us. And being focused on just on the last quarter, we have seen that we achieved 11.2% better than the same period of prior year. If we analyze the same revenues in terms of segment, as a consequence of the order intake, we achieved a 13.6% better than the prior year in Composite Yacht, thanks to the backlog that we had. And instead for Made-to-Measure almost stable after the very big result of prior year and also due to the limited capacity that we have that we are solving with the construction of the new Ravenna shipyard. And instead, Super Yacht is continuing to increase. Now it's almost 13% of the total of our revenues with a potential growth to up to 20% in the next years. And by geography, again, Europe and Middle East, are -- continue to increase, and they are able to more than compensate the shortfall that we have seen in Asia Pacific and in the Americas. But as Mr. Galassi said, now after the few weeks that you -- the first weeks of 2025, we are quite confident that America can recover more and more in this year. About profitability, instead, we -- as we announced, we reached EUR 190 million of adjusted EBITDA with a growth of 100 basis points in terms of profitability, so more than 200 basis points in just two years. And what are the rationale behind this growth? We prepared a slide on it. And so the breakdown of this 100 basis points is due to three different rationale. The first and the most important one is the commercial one. That means that now in 2024, more and more customers ask for optional on their boats, on their boats, on their product. And that now is roughly 25% of the total price. And you know that usually the marginality associated to the optional is quite better than the standard boat. So this is the main benefit that we recorded in 2024. The other two rationale is coming from the strategic positioning being more and more positioned in the larger boat. And still, we have a benefit from the economy of scale and purchasing and fixed cost absorption. CapEx, this year, is we have spent slightly less than prior year, EUR 141 million. But what is very, very important to highlight that is the majority of the expansion CapEx, EUR 109 million was designated, was addressed to the completion of the new shipyard in Ravenna. And the Ravenna shipyard is already operational. We are operating 18 station out of total 36. And with -- in a context where the total utilization rate of our shipyard is currently at 93%, so it's an investment that we need to continue to grow. And what is also important is that we have seen that after this investment made in 2024, we see that in 2025, the CapEx plan is nearly normalized. So we expect something similar to 2022, so roughly EUR 100 million. About Ravenna, okay, we have seen and also we go to the net financial position. Net financial position of the company at the year-end, it was over EUR 125 million that -- and on top of that, we have an availability of more than EUR 160 million of credit line not utilized. And instead, we had the net working capital that grew up to 10.6%. So let me elaborate a little bit more about this figure. First of all, it's something that we consider temporary because, one, during the year, we have seen a slowdown of the market performance in the Americas. So we stopped production for new boat for the Americas. But usually, the process to complete a boat is eight, nine months. So what's happened that at the end of 2024, we have a lot, something more finished product than expected at the beginning. For sure, this is something that we can consider not a positive, not for 2024, but we consider is a very good opportunity on 2025.  Just to give you very brief number, very quick number. In the first two months of 2024 -- 2025, we have already sold more than EUR 30 million of boats already sitting in our inventory. So it could be a very good opportunity. In fact, as we mentioned in this slide, we are projecting for Q1 2025 that usually is a month -- is a quarter where we see some cash absorption in set of normalization. So we don't see absorption of cash in Q1 2025. That means that we are taking advantage of the stock that we have built up in 2024. So leave it with Mr. Galassi for the final remarks before the Q&A.

Just reminding you that we are very proud of the data of 2024, especially the EBITDA margin above guidance, 16.2%, 100 basis points. I'm super proud because it gives a serenity and visibility of the order backlog, which is a very solid and sound order backlog of EUR 1.7 billion. So the final remarks are very simple in my opinion. Today is the 28th of February. What do you see about the first quarter? I have a positive feeling about the first quarter, also in the U.S. And as Marco said, what usually used to be a very weak month for our industry in general, with seasonality, which is in our business model nearly disappeared, I can tell you that we are selling boats in the U.S. after the election, selling boats in the U.S. after the boat show. And the boats are already there, which basically for us is cash, so not only revenues. So on the overall, the picture is a good picture. It's a fantastic picture for '24, but with a picture of growth in 2025. At least these are the signals coming from three different boat shows, three different regions of the world, Dusseldorf, Germany, so Northern Europe, Middle East, Dubai and United States in -- sorry, Miami. That's basically it. We are here for any kind of questions you may have.

Thank you for listening to our full year 2024 presentation. We are now ready for the Q&A session. We will start by oral questions and later move on to the written question. Well, I'll start from the first written question in the meantime from Giuseppe Grimaldi. First question, what is your feeling around the intake development this year?

In terms of position or geography or both?

I think in general, the order intake.

In general, well, as I just said, what we can see, what's happening as we speak is that the American market has given good results. So don't forget, it's been nearly frozen for some kind of yachts for a long time. Forget about the Super Yachts, but it's been frozen for the Composite, people on hold. One of the biggest enemies that we have in our industry is basically uncertainty. When something is not going to happen or you don't know whether it's going to happen or what is going to be the outcome of that fact going to happen, well, people may wait, simply wait and wait can be skipping a quarter, wait could be deferring some results. I can tell you that what we have seen actually, and we are already at the end of February, is positive, generally speaking, positive. What is not giving any good sign is China, but sales are coming from Thailand. Well, will Thailand be able to replace Greater China? No. But there's a lot of compensation coming from other areas, including the Middle East. So there's a positive in terms of [indiscernible] still Made-to-Measure on lookout, but also Composite has given us some good results. And regional, if you take it with the just exclusion of Mainland China, I would say very positive everywhere.

Second question from Giuseppe Grimaldi is, do you think the temporary working capital buildup gets back to normal in 2025?

Yes. As we said, we -- our intention, given the stock that we built up at the end of 2024 will be utilized in 2025 to feed the customer request. And so we expect again to be in our normal range between zero or slightly negative and slightly positive. So between minus 5% and 5% at the end of 2025.

Third question from Mr. Grimaldi. Any update on the M&A pipeline?

2025, it's a year where what we have seen is that some shipyards are selling discounts in 2024, no more selling boats. I can tell you that some shipyards out of Europe are struggling because we know the market. We can see our competitors. We can see the offering that some ships are doing, and we know the cost of building boats. So which means, in our opinion, there are going to be opportunities. As I said last year, 2025 will be a year where I'm expecting Ferretti Group to move with something important. And I confirm that I think in 2025, we will have an important opportunity to grab.

Last question from Mr. Grimaldi. Do you see opportunities for further expanding of FSD business in this geopolitical backdrop?

Well, it's interesting that the Italian government today announced that they will invest in defense 2.5% of GDP, which never happened in the history. And it's very interesting to check that the government of the United Arab Emirates signed this week on Monday, EUR 40 billion of agreements -- or sorry, $40 billion of agreements with Italy and the President Sheikh Mohammed Zayed in Roma. Most of it is energy, but it's also defense. I see a potential in that. Whether we want to be in that is a different thing because let's see what -- we are more for agency, we're more for patrolling. We're definitely not for combat.

Okay. Now let me call the other questions with the hand raised. First question from Mr. Adrien Duverger from Goldman Sachs.

So my first question would be on the Ravenna shipyard. If you could please comment a bit more. So you said you have 18 out of 35 of the post working. What is your expectation for when the shipyard will be fully operational? That would be the first question. And the second one would be on how you're seeing and how you're thinking about pricing this year with, number one, the price increases on the models you already have and maybe then on continuing to release new models at more expensive prices and your view on the impact of discounting and incentives for clients in 2024 and what you think for 2025?

About Ravenna, we believe to complete the investment by half of 2025. As we said, at the moment, we are working in 18 -- 18 stations are already operational out of 36. We are very close to complete all the CapEx. And as we said, this will be the house of Ferretti Yacht, the new models, especially the line INFYNITO. And also, we have moved all the big Wally from the other plants to this one. So this is something -- it's our answer to the overall capacity that now is still at 93%. So this is something that we expected. Since we made the investment, we needed capacity. So this is a good answer that we need to continue to grow.

Do you want to say something on prices or I reply on prices? Okay. Yes, about prices, there's good news in prices and the bad news in prices. The good news is that the supply chain now is normal. So there's basically no increase or very minimum increase in the supply cost. The supply chain went completely, I would say, crazy in the past two, three years. One of the biggest after COVID, one of the biggest things to manage was the supply chain, the supplier cost. And we were able to secure that because we have long-term agreements with the major suppliers. So that thing is over and is off the equation. Of course, some shipyards are discounting, discounting, discounting. So how do you differentiate yourself? It's not price. You have to be -- you have to -- what we sell is brand, what we sell is beauty, what we sell is service, what we sell is family membership to events, being them -- what is the offering, what we can offer them, no other shipyard can offer because we have so many different brands with so many different products. And I'm glad to see also the competitors that are buying brands now because they realize that otherwise they don't grow, and they will not grow. so prices, of course, every year, we increase prices. And we are not discounting that much. Sometimes we prefer to leave the table of the negotiation, compromising instead of compromising our marginality. Do I see 2025 complicated?  Well, it's been -- '24 has been complicated. '23 has been complicated. It's always you have to provide something different. There's a reason why we invest so much in brand-new models. There's a reason why our offering continuously changes. You cannot compete with yourself. You need to compete with something new. And this is exactly what Ferretti Group is doing.