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

Good afternoon, everyone, and welcome to the Ferretti Group First Quarter 2025 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 quarter and discuss the outlook for the future. Before we begin, let me introduce our speakers. Mr. Alberto Galassi, Chief Executive Officer; Mr. Marco Zammarchi, Chief Financial Officer; and myself, Margherita Sacerdoti, Investor Relator. Today's agenda will cover key highlights from the first quarter, 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.

[Foreign Language] Alberto Galassi speaking, CEO of Ferretti Group. [Foreign Language] good morning, actually, good afternoon. Quietly proud, I would say, very proud of presenting to you the best quarter results ever in the history of Ferretti Group. We have sound performances on all the indicators, starting from an incredible record high number of EUR 1.8 billion of order intake -- order backlog. The order backlog is increased by 7.6% versus the first quarter of previous year at EUR 1.769 billion, so nearly EUR 1.8 billion. Order intake grew as well, 1.5% to the number of EUR 271 million compared to EUR 267 million of previous year. And the marginality of the company increased from 15.4% of the first quarter of 2024 to 16% of the first quarter of 2025. The revenues of the company from EUR 313 million to EUR 329 million grew by 5%. And this is an important number because the market growth expectation was at 4.2%. And it's not our number. It's a fact. There's a Phil Draper & Associates Database available at the end of 2024, which is a very reliable and independent source. So two numbers in this page has to be, in my opinion, highlighted more than others. Marginality for sure, but very important and new in the record high order backlog and very, very important, also the revenues, which are higher in growth than the expectation of the market. The dynamics of the business. Well, interesting, we have a lot of signals that can tell us how the situation is all over the world. Never forget the Ferretti Group sells in 71 countries all over the world. So starting from the season in the U.S., we had an interesting and very actually excellent boat show in Palm Beach in the United States from the 19th to the 23rd of March, where we have the growing number of visitors compared to previous year. And also Dubai, so completely two different areas of the world in the same time frame are giving us some indicators. So the indicator is that the U.S. is waking up after being silent during the election time. And Dubai is a very important market. Middle East is becoming a very prominent market for all of us. Now this is also the signal. We received the same signals from Singapore and from Sydney. So again, the market, I would say, at the beginning of the season, is showing different speeds according to different countries. I would say, on the overall, especially for some measures from some kind of boat, there's a lot of interest, which is never slowing down at all, namely from Made-to-measure sold from 24, 27 meters up to 45 meters boats. We keep investing and producing and bringing to the market new models. Riva flagship brand presented the Iseo Super, 7 units sold, and there's an update also Ferretti 940 will be officially presented at the Genoa -- sorry the Venice Boat Show on the 28th of May with 7 units sold and then a product that we never had in the range, the Pershing GTX70 with 1 unit sold. And I can tell you that we delivered a 63-meter (sic) [ 67-meter ] Amor à Vida from -- is a one-off product, of course, built in CRN Superyacht division in Ancona. Other three products we announced and two are a range expansion, we will present in Sarnico, the headquarter, the historical site of Riva on the 27th of June, the Riva 58 Capri and the Ferretti 800 will be presented during the summer. But interesting news is that we are investing now and revamping the brand Itama. Itama is a brand that's been silent with models which we never invested in for about 10 years. And now we see that for this roundabouts, there is interest growing up. Now Itama is representing only 1% of our revenues. With the new range of models, Itama 54 is the first one of the new range of models that will be released in the market in the next 2 years. It will bring us up about 4%. So I'm stepping down for Margherita, he's going to give you some...

There is a video.

Sorry, there is a video, interesting. There's a video of the new Itama and how it fits in the Itama range. [Presentation]

Margherita order backlog and net backlog.

Thank you, Mr. Galassi. So we start with the order backlog and net backlog. As Mr. Galassi mentioned, we reached a new high record number of EUR 1.8 billion in the order backlog. And also the net backlog grew by 1.3% compared to the first quarter of 2024. As of March 31, we already secured 60% of our 2025 guidance considering the first quarter revenues and the current net backlog. And in the first quarter, we collected EUR 271 million of orders that correspond to 48 units. And in the same period, we delivered 31 units. This level of order backlog was reached thanks to the order intake that also grew compared to last quarter of 1.5%. And if we consider the book-to-bill ratio, including and excluding the Composite segment, we're still above 1. As of today, also very important to mention that negotiations are happening and the level of negotiation is comparable to the one of last year, so around EUR 360 million. If we look at the order intake by segment, we can see that the Composite Yacht was nearly flat, slightly down, mainly reflecting a softer U.S. season that we already mentioned in the fourth quarter of last year and it continued in the first quarter of this year because of the economic uncertainty that impacted the small sized yacht segment in America. At the same time, we see an incredible growth of double-digit in Made-to-measure yachts. Also in America, we'll see it later in all geographies. And the weight of Made-to-measure over the order intake, now is about 49% when -- if we look at last year, we see it was 37%. And in 2023, it was 39%. So the weight of Made-to-measure is growing following the strategy of focusing more and more into this segment. The Super Yacht is, of course, especially if we look at just one quarter can be affected by a single order. And in the first quarter of 2024, we had a one-off that, of course, is impacting the comparison with this year. But it's very important to remind you that our Super Yacht is doing very well. We've been adding new orders in the second half of last year growing. So we are filled up until 2029. So we don't have any slot available. If we move into the geographic breakdown, we can see that Europe performed down compared to last year, but this is exactly because of the bespoke that we collected in the first quarter of 2024 that was in Europe. It was a one-off of EUR 64 million. So if we take that out comparing apples with apples, Europe would have performed positively with plus 33% compared to last year. Middle East is also having a tough comparison with last the quarter -- first quarter of last year because the first quarter of 2024 was the best quarter in the region of the entire year. So this year is a bit suffering the comparison. APAC is showing an increase of almost EUR 10 million from EUR 1 million of last year to EUR 11 million of 2025. In the Americas, you can see it's showing a great performance, plus 150% in the Made-to-measure segment. So this is just Made-to-measure. As we said, the Composite Yacht was a bit slow because of the uncertainty because the season is over. So just to remind you, the Composite Yacht is a kind of purchase that clients tend to do in the season. And while Made-to-measure, it's continuing to perform very well. I hand it over to Mr. Galassi.

Let me add something here. The business model of Ferretti Group have been present in 71 countries and not focusing on some markets more than others would never -- I would say, one nation or one country that plays an important role in our revenues and order intake is a very -- it comes and it transforms in a balance. There's always a balance from one market that goes down and one market that goes up. Also in the product range, never underestimated the super power of having seven different brands, not overlapping one with each other. It's difficult to do it, but it pays off because clients are not the same. The age of the clients is not the same. The needs of the clients in different geographic areas are not the same. So having a portfolio of products, which basically can satisfy any kind of demand and having a capillary distribution network in 71 countries, it ends up having a fantastic balancing between countries and regions. And you can see quarter-by-quarter, how I would say, our sustainability, our -- I would say, resilience. And if not, I would say, even our growth is driven by the fact that we are very, very extremely, I would say, well balanced, sorry, Margherita.

Thank you. I'll hand over the microphone to Mr. Marco Zammarchi for the revenues.

Thank you. Good afternoon. Revenues increased by 5% versus prior year, reaching the amount of EUR 329 million. The reason behind it was because of the solid order backlog that we built in the prior year with the contribution of the order that we took in the first quarter of this year and especially in the segment of Made-to-measure and Super Yacht. But especially -- in the following page, we'll see the impact of this revenue more focused on Made-to-measure that led -- give us the increase of 60 basis points. In fact, we are showing -- we are sharing with you a result in terms of EBITDA of EUR 53 million. That is a 16% EBITDA margin versus EUR 48 million of prior year and 15.4%. And the rationale behind this increase is especially driven by product mix. So the biggest contribution of -- bigger sizes are Composite and Made-to-measure that led to this result. And also in terms of net profit, we have the similar trend with a growth of 7.7%. If we move to the CapEx activity, we see that the comparison versus prior year was -- is quite dramatic with EUR 16 million of investment. And equally distributed between new products and expansion and maintenance. And for 2025, what do we expect is to be below EUR 90 million in because -- we have almost completed our CapEx plan. This year, we will complete the investment of Ravenna, EUR 26 million remains to be expanded for a total investment of EUR 150 million -- or EUR 144 million for a company that still have a utilization rate of our production capacity of 90%. So we are happy of this trend that as we said before, in the previous communication, the CapEx plan is finished. And this will contribute a lot to the cash generation of the company. In terms of net financial position, we are still positive. We have, at the end of first quarter, 2025, EUR 55 million in terms of net cash. And on the other hand, the net working capital was increased to 17.5%. The reason behind the growth of net working capital, it was this -- our stock of Composite Yacht already for sales in the Americas. And we already shared with you that the previous season, so the season -- the American season between October and March 2024 was impacted by some political and economic uncertainties. And so that's the reason why it's a temporary delay of the release of capital. Yes, in fact, it's the nature of the business. Just to give you a highlight, if I take into consideration if we are -- we have to follow the cutoff rules. But in the first 10 days of April, we have collected more than EUR 80 million. And if we expand our view to the end of the second quarter of 2025 after the distribution of dividends of above EUR 33 million, we expect it to be in the range between EUR 95 million and EUR 100 million because the seasonality, because of the release of the working capital and so on. So we expect that we go to a more normal, more stable situation in terms of working capital management for the rest of the year. So Mr. Galassi [Foreign Language].

Next I'll give you the guidance -- annual guidance 2025, we expect a sustainable mid range single-digit growth from 4% to 5.7%. So we expect the net revenues to be EUR 1.220 billion, up to EUR 1.240 billion, adjusted EBITDA from EUR 190 million to EUR 201 million, EUR 207 million. So we grew in the high single digits from 5.8% to 8.9%. The EBITDA margin from 16.2% to 16.5%/16.7%, so from 30 basis points to 50 basis points. And the CapEx, which is very important because the cycle of CapEx is nearly finishing in our company from EUR 140 million to EUR 90 million or even less than EUR 90 million. So it's -- again, it's growth. As you can see, the revenues are growing higher than the market, as they say, was around 4.2%, in line with the quarter expectations, the -- for the quarter numbers that we released. We are all here for any questions that you may have.

Thank you for listening to our first quarter 2025 presentation. We are now ready to start the Q&A session. We will start by oral questions, moving then to the written question. The first question is from Emanuele Gallazzi from Equita.

Okay. Thank you for the presentation. I actually have three questions. The first one is on the U.S. market. Basically, we have seen a strong demand for Made-to-measure Yacht in the first quarter, while some weak performance for the Composite Yacht. Can you just discuss a little bit more about the current U.S. environment? And how do you see demand in U.S. evolving from now on? The second one is on the -- basically the guidance. If you can just provide, let's say, a sort of indication on the order intake target for 2025? And the last one is on the net working capital. I understand that you expect a normalization from the second quarter. Can you just give us an indication on the target net working capital sales on sales for 2025? So where do you expect to end at this year?

Okay. Let me reply to the first one, and then I'll have Marco replying to the second. U.S. market. U.S. market is The Beatles', you should call it the, Magical Mystery Tour because we had the election last year and we had an incredible division in the market between Composite and Made-to-measure. 49% of our sales in the U.S. has been in that quarter of Made-to-measure. So let me remind from 30 to 45 meters in Composite. And then we had the month of April, with everything, as you can imagine, in the world was frozen, not necessarily because of our industry, let's be honest, because Made-to-measure boats and Super Yachts, they don't have American flag. The delivery happens sometimes, most of the times, if not always in Europe and which are not going to be affected by tariffs, small yachts will, are, but our clients any business in the world has been on standby on hold to understand what is going on in the future. So America didn't make any difference. Actually, on the contrary, we had opportunities for some clients that had the boats already in the U.S. that fearing for tariffs, they went to buy and releasing the stock in the month of April. So we had sales in the month of April in the United States of America. How do I see the market? Much better now. So we had the last quarter froze a little bit by the election timing, then we started very, very well. And then end of March, beginning of April, frozen again because of the tariffs. And then again, picking up in the month of May. So I should be a future teller to tell you exactly how the U.S. market is going to go. The feeling I have talking to the competitors, the feeling I have talking to luxury goods manufacturer in the -- for the U.S., we have a couple of advantages for the U.S. that others don't have. Let's pick the first one. We do import ourselves our boats. So we can leverage on the transfer price of the boats. And if the tariffs will ever apply, we can manage it a bit. We can -- some clients are ready for some top brands to pay an extra in order to have that kind of specific brand and that kind of specific boat. Definitely, if 25% is the beginning of the negotiation was in place for yachting coming from Europe, well, you cannot expect the client to pay 25%. So there are some countermeasures that we do. On the other hand, we do not import anything from the U.S. fundamental. We do import Seakeeper stabilizers, which is a kit that play -- EUR 50,000 EUR 70,000, EUR 100,000 on this -- in the boat, it's nothing. So I am positive. I'm positive because I see that my clients, our clients, U.S. clients, European clients are not anymore fearing the uncertainty, the total darkness of what it looked like in the month of April. Will they have a fallout in the U.S.? I'm expecting it to have it. So month of May, it says -- it's saying, yes, we are recovering in the U.S. as well. Did I reply?

Yes.

Now Marco?

About the guidance on orders, what we expect is to have an order inflow very similar to the prior year. So slightly better in every segment. Maybe we could be a little bit more conservative for Super Yacht because the availability of a slot, so the production capacity. But the trend that we have seen in the first quarter and also, let's say, 1.5 months till today, we give -- it give confidence to us to have this result in mind. So slightly better than prior year achievement. And about the working capital instead, as I said, it was that across the quarter, we are -- there is a little bit of seasonality. What we expect is to continue this seasonality. But to follow the seasonality, but with a different trend. So for example, the Q3, if you see the comparison between second quarter '24 and the second -- and third quarter '24, we have a sharp decrease of liquidity. But in this year, given the stock that we have available, this decrease will be quite less. So in a nutshell, we expect to be at year-end in high single-digit ratio, so below 10%. This is the expectation for 2025. And then we'll work -- we are adjusting our production approach for the composite in order to reduce the absorption of working capital for this kind of production.

The next question is from Niccolo Storer from Kepler.

Again, on your assumptions back in your guidance, you said, Marco, that you expect slightly better intake in any segment and making a couple of calculation. It seems to me that in reality you need very strong growth in Composite segment to get to your guidance. Otherwise, it always going to be difficult to get there. So a comment on that. And maybe are you assuming accelerating the execution on Made-to-measure or Super Yachts to get there? The second question is on the seasonality of the Composite market. I was wondering if what we have seen in 2024 and 2023 can be taken as usual seasonality of that market, meaning a strong Q1, weak Q2 and Q3 and Q4 in between.