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

Good afternoon, everyone, and welcome to Ferretti Group First Half 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 quarters and discuss the outlook for the future. Let me begin to introduce our speakers. Mr. Alberto Galassi, Chief Executive Officer; Mr. Marco Zammarchi, our Chief Financial Officer; and myself, Margherita Sacerdoti, Head of Investor Relations and Sustainability. Today's agenda will cover key highlights from the first half, business dynamics, financial results followed by the Q&A session. [Operator Instructions]. With that, let me hand it over to Mr. Galassi to get a start. Mr. Galassi, the floor is yours.

Good morning. Hi, everybody. Alberto Galassi here. Glad to share with you the results of the first half of 2025. To be honest with you, I'm very happy because we are constantly growing in the most of the key indicators of this company. As you can start to stream from the revenues, we grew 1.5%, brand new boats, of course, so EUR 620 million of revenues. EBITDA -- adjusted EBITDA grew like -- by 2.5%. So we are nearly EUR 100 million, EUR 99 million versus the EUR 97 million of the previous year. and the EBITDA margin adjusted from 15.8% of the first half of 2024 to 16% of 2025. Now net backlog is minus EUR 3.2 billion from EUR 786 million to EUR 761 million. We will go back into the details of the backlog composition, but basically, we're talking about 2 made-to-measure yachts switched from June to July. So nothing to be worried about. On the following page, I'll tell you what's going to be the outlook of the next -- of the 2026 -- 2025 and 2026 because the most important boat shows have to happen still. We have the Monaco Preview, the combo show, the Monaco Yacht Show and the one in America and of course, also the one in Hong Kong. Why I'm showing you this picture because we will present 8 brand-new models in that. But it shows me -- it gives me the opportunity to spend a little bit of time to describe what is the current market situation. Current market situation is a market divided in many, many different areas and aspects and segments. There's definitely a market which is suffering, which are the low composite entry-level models, unbranded. There's definitely some shipyards which are suffering, it's a fact. And there's a lot of uncertainty all over the world. That being said, why Ferretti Group is performing, why Ferretti Group is delivering numbers. Why Ferretti Group confirms the guidance this year? Because we do believe that our business model, which is very different, we have -- is based on a few units divided by 7 brands. positioned in the very high-end market level of the industry and sold not to dealers, but through the dealer network in 71 countries in the world makes us very different than others. What we see is the volumes are suffering. If our growth was driven by volumes, we would be suffering today. If our growth was driven by volumes of 1 brand or 2 brands, yes, still the same situation. If our growth was driven and our future is driven by the possibility of selling more units on the low end of the range, well, it's a different planet because what's changing now is the time and the attention. Time between the negotiation and the signing of the contract is longer than expected. I made the example of the 2 made-to-measure yachts that made the difference between one quarter and the other quarter. Please to put things in the context, remember that Ferretti Group is with an average price tag of EUR 6 million and above, including super yachts. And in the made-to-measure, we grew the year to EUR 5.6 million. So there's been a huge growth in the price tag, and Margherita will drive you through that later on. What I'm telling you is that in the month of April, with the tariffs announced, the market completely changed. There was no attention on the possibility of changing the boat or buying a new boat. In the month of May, back to market back to normal. Back month of June, there's been the Iran-Israel war with this effect which never happened before, the bombing of a Gulf country like Q Qatar is an important market. That being said, this company was able to provide the results we're providing you today. So -- and the confidence of the situation of the negotiation with the tariffs to conclude and to finish. And what we are seeing in the month of July in terms of negotiation, we have more than EUR 420 million of negotiations going on, including super yachts. It's a strong signal that we have the possibility to achieve the target definitely and to go on with a good outlook for 2026. But let's put things in the context. The market has changed. The market is difficult. The market is driven by also a lot of pressure on prices by the competitors. We don't have the same financial health that we have and maybe they are driven by the necessity of selling. Ferretti Group has the capacity to leave the negotiation and say, you know what, I'm not selling many owners of this unit. I will sell it elsewhere next week or next month. Back to the business dynamics. Sorry if it took longer than expected, but I thought it was important for you to be aware of the context we are today. we launched that we actually previewed because the big public haven't seen them. Fee new boats, the Riva 100. The Riva Cento is a limited edition to celebrate the 100th unit of this model, which is a 38-foot. We are positioning it at EUR 1.5 million, and we're selling the boat 2 units already been sold before the presentation. Aquariva Special, again, after 300 units of the Aquariva, it started in year 2000, this boat, which is around EUR 600,000, EUR 700,000 each for a 33-foot. We're making the special version and the special version will bring additional 10, 15 years of life to this model. It's with 9 units sold already. Then we presented the Capri, we sold 1 unit. And very interesting, the Dolcevita Super is a 35 meters boat. The 110, we sold in 27 units, around EUR 15 million each. We sold 7 units of the 112 at EUR 17 million each. So this is really an interesting and an important best seller for this company with the best brand in the world. Also Wally, we went into the competition segment after selling 4 wallyrocket51 of more than EUR 4 million each. We presented the racing biggest sister, the wallyrocket71 and we sold one at around EUR 10 million. Then we did an important partnership because, again, we are not aspirational luxury. We are a real luxury here. And we signed with Flexjet, the second biggest fraction ownership and charter operator in the world, American-based company. We signed an agreement to have the R Interiors for 3 Gulfstream 650 and 2 helicopter Sikorsky S-76. Why is this? Because this enables us and them to exchange the client base, to do events together to promote our shippers and our product with the flying -- with customers flying with Flexjet technically for free just to promote our brands and their group. So it's a fantastic opportunity. If you have the patience of a small video that celebrates that event, maybe it's worth to have a look at it. [Presentation]

Thank you for your attention. Now I will leave the stage to Margherita Sacerdoti to go through the composition of the order backlog and net backlog.

As for the order backlog, we can see it was slightly down 3%, mainly because of the very high number of deliveries in the first half and especially in the second quarter, where we delivered 102 yachts. If we look at the net backlog, 35% of the net backlog will become revenues this year. And the coverage of the net backlog at the end of June was 73% of the guidance. So we are on a good track.

One thing I want to jump in. Sorry, Margherita, the difference of between 761 and 786 exactly the 2 made-to-match mentioned before.

Yes. And this difference is visible in the order intake. You can see it's minus 9.2%, but it corresponds to EUR 47 million, which is exactly 2 yachts and super yacht that last year, we had in the pipeline a bespoke of EUR 64 million and 1 branded super yacht. And this year, we have 2 branded super yachts. So the difference is already EUR 30 million plus 2 made-to-measure, and that's the whole difference that we have. And it's mainly a delay because we already signed this agreement. So overall, let's say that being spread out on different segments, the high composite Made-to-measure and branded super yacht is paying off. because every quarter shows different results. But if you look at the results of the first half '24 -- first half '25, you will see that composite is in line. Made-to-measure is slightly down, but it's exactly the 2 yachts that Mr. Galassi was mentioned before. And it's very important to highlight that in the composite world, high composite above 80 feet is becoming more and more important. And in the second quarter, more than half of the orders in composite was above 80 feet. And super yacht, as I said, the difference of the value is not in number of units, but in size of yacht.

If I can guide you through this picture in the context of our industry and considering the size of our boats and the price tag of our boats, these pictures are the same. So as you can see, composite yachts is the same number. The made to measures, 2 boats are missing, signed in July, one in Turkey, one in Italia. And the size of the super yachts was basically last year at 70 meters and 50 meters this year has been 250 meters. That implies the difference. So we're not talking about tens of units, hundreds of units, thousands of units. It's basically one number from 1 day to the first day of the following month can change the picture. But I would say -- and despite the pressure on prices from the competitors, despite the availability list of the boat of the competitors, which is huge in some cases, this is the outcome of Ferretti Group. And to be honest, the business model is not only very resilient, I would say it's very successful.

And just to add something on the quarter, if we think about April, April has been a very difficult month. We collected less than 10 million orders. So everything that we collected in the quarter is basically was collected in 2 months. So it's a very good result considering the international situation, both on tariffs and on tensions in the Middle East. If we move to the geographic breakdown of the order intake, you can see this was, for sure, the quarter of Europe because it's the European season, but also the second quarter performed very well compared to last year. So again, being present in 70 countries allow us to navigate different region at different time. First quarter has been very good in the U.S. with Made-to-measure. The second quarter has been very good in Europe for high composite. Middle East has a very tough comparison with last year, which was the best quarter in the last 3 years. And the U.S., again, had a super yacht last year in the pipeline, which is not present this year. Asia is continuing to grow nicely. So overall, we're very happy with this result. Now I will hand over the microphone to Mr. Zammarchi.

Good afternoon. Talking about revenues. As I said before, we are increasing to -- from EUR 61 million to EUR 620 million, so increasing by 1.5%, supported by solid backlog. We want also to highlight the increased weight of the made-to-measure that increased by 8.6% and the super yacht that increased by 26.5%. And this give us a lot of confidence on the future because we are talking about the most profitable segment and so -- some -- we are talking about the segment that are more able more efficient to support the growth in terms of margin. Moving to the EBITDA increase, it was nearly EUR 100 million in terms of result. So an increase of 2.5%, bringing the EBITDA margin growing by 20 basis points to 16%. As I said before, in this macroeconomic scenario with a lot of pressure from our competitors, we are still confident, very, very confident to achieve the guidance of this year in consideration that the product mix is favorable to us. And not only because of that, we want also to be a little bit more aggressive on pricing for the composite in consideration that we have already implemented a cost containment program on fixed cost in order to support the sales department in order to be more competitive versus the other players that we have. In terms of CapEx, as already said in the previous quarterly results, the CapEx cycle is is completely finished or in downside phase. We invested EUR 42 million and -- in -- the biggest portion of the expansion is focus on Ravenna shipyard completion that will have -- that will be completed this year. This saturation rate, the completion rate of the plant is still satisfactory, 85%. Last quarter was 88% because we are continually adjusting our production rate in order to manage properly the working capital. And we do confirm that by year-end, the CapEx will be below EUR 90 million. We could say that we should be in a range of EUR 80 million, EUR 82 million. In terms of cash generation, the net financial position as already predicted is increased over EUR 100 million after paying dividends of nearly EUR 34 million. The net working capital, thanks to the continuous adjustment of production is decreasing to 12.5%, and we expect by year-end to be slightly below 10%. So we have a full control of our working capital. So the company is still very solid in generating cash. As I said before, we are slowing down the CapEx that are not strictly necessary. So we expect to continue to generate cash in the second half of the year. Mr. Galassi final remarks to you.

Well, it's very simple. The market is at 2 speed, as I tried to describe before. So we are positioning in the good side of the 2-speed market. The very entry level, the very low composite, the unbranded, the obscure brands doesn't exist anymore. That market is gone. If you see the numbers of some listed companies which are in that segment, especially in the U.S., they're suffering a lot. We are not there. We are focused on the segment above 24 meters, and we are super, super effective and profitable and successful in the segment that goes above 24 meters with the mid- to measure and the large composite and the super yachts. So that segment has not been affected. To put you in the context, last year, today, we had EUR 270 million of negotiations. Today, we have EUR 420 million of negotiations. Now will all negotiations become orders? No. Because also in Ferretti Group, don't forget, an order is an order when it's not by the dealer, when it's with a down payment and it's nonrefundable. So -- but still, it puts in the context that how delayed the process is a time effect. In the month of April, as I said before, basically, the phone didn't ring. All our clients as wealthy as they were and they are, they were busy protecting, thinking the future of their business globally because the tariffs changed completely the attention spend from buying a boat or changing a boat. Now May was fantastic. June, apart from the timing of the bombing in the Middle East, Iran, Israel and the Gulf, it's picking up. July is a great month so far. And we have the boat shows. So in that position, 2-speed market, we are in the right side of the positioning of the market. Again, what do we do? We sell in 70 more countries and to be honest, supported by our dealers without asking our dealers to put the boats on stock. So if you look at the boat availability, it's very different than some competitors. Of course, it's very easy to have an order book when you sign, but you see the cash. Cash doesn't lie. And we didn't have any cancellation. In order to have a financial position that improved that well as expected, by the way, and predicted in the second quarter, that is driven by the absence of cancellations. The summer season comes, the boats are ready. The clients pay and delivery. And there's not a lot of financing in our industry, definitely not in Ferretti Group. The operational efficiency, Marco described it very, very well. The cash generation is linked to the seasonal deliveries and also to a very careful and attention to costs because we know there's pressure in the market. We know there's pressure from the competitors. Some shipyards are selling discounts. We are selling boats. And in order to compete and to explain the difference between owning a boat and owning a discount and not suffering in a depreciation of the model right after you purchase, thinking you make the deal of your life, you have to be available to discount a little bit more. How do you catch up with that? How do you cover that gap? How do you recover that gap? Well, you have to be very careful in the cost-cutting initiatives that we have in the company. And the CapEx spend is another example. The Ravenna shipyard is going to be fully operational by October. In December, it will completely finished. And that cycle that was extremely expensive and extremely demanding, it what gave us the possibility to manufacture bigger boats in the large composite segment above 24 meters, successful. In the made-to-masure, extremely successful. And in the super yachts, just to tell you, we have nothing available until 2029. So future outlook is very simple. We do believe that the boat show season will give us satisfaction. You know the level of negotiations that we have. It is an easy market. No, nobody said it was easy. But again, we know our clients and they are not aspirational in luxury. So the annual guidance of 2025, if you want to switch the slide, it's confirmed. And we are expecting the revenues to go from EUR 1.2 billion 20 to EUR 1.240 billion. The adjusted EBITDA, did EUR 90 million, nearly EUR 100 million in the first half, so EUR 201 million to EUR 207 million. The EBITDA margin we are expecting to grow also because of the initiatives of controlling our costs internally. And the CapEx way below EUR 90 million, I would say we will have a pleasant surprise in that as well. By the way, the last thing I want to leave you with, with the market which is going through a consolidation and with the difficulties of some positioning of some brands and some shipyards, there are opportunities. And this company has no debt. This company has more than EUR 100 million available in cash in hands after EUR 34 million of dividends. So don't worry about the dividends of next year so far and forever, hopefully. But there are opportunities to catch. And I hope to come back with the news. Thank you so much for your attention. We are here for Q&A.

Thank you for listening to our first half 2025 presentation. We are now ready to start the Q&A session. We will start with live question and later move on to the written question. The first question is from Adrien Duverger from Goldman Sachs. Adrien, you can mute yourself.

I have 2 questions, please. So the first one is about tariffs and the sentiment in the U.S. market. So how do you feel about the news that we had this week on tariff side? And also, what are you seeing from the client side, given more certainty, is it reopening more sales discussions? And the second question is probably one for Marco on the margin side. So your guidance is unchanged. For the first half, I think the margin is 16.0%. So I was wondering if you could help us with the building blocks and what you see that gives you confidence to reach that 16.5% adjusted EBITDA margin guidance.

Okay. Thank you for the question. The tariffs. Month of April was a nightmare. Month of April, it was a nightmare, not because tariffs are impacting our industry or Ferretti Group in particular, because anything bigger than made-to-measure or super yachts is not having an American flag at all. So -- and the companies that own the ships, it could be based everywhere, but in the United States. So that is not a problem. The delivery happens in the Mediterranean. On the smaller boats, they have the American flag, but we do control our import and export in the United States. We have our own subsidiaries, Ferretti Group of America. And so we can control the cost, we can control how to mitigate the tariffs. So we went from 16 165% in what is being called universal tariffs one day, and it was an addition of 10%. So we were at 11.65%. Now we are currently living with 11.65%. And if the agreement of 15% is an agreement that we can manage. And I give you one data. I make an example. If you consider that the 23% more or less of our revenues are in the Americas and in the U.S., well, we are talking about -- and the revenues arising from the compass and the lower compos around 40% of that. We're talking about the 9% in the overall. So if you put it in the context, it's not a problem. I make a couple of examples. I asked the commercial team to give me some data of very successful units and how many we sold in the U.S. on the history of the units. To make an example with the RIVA, we sold the RIVA 100 and Corsaro, we sold 21 units and 2 in the U.S. We sold 17 units of the 102 and 3 in the U.S. We sold the Navetta 33, 27 units, 4 in the U.S. So U.S. is important, but it's not the key market also because -- and even if these ships won't have an American flat. So tariffs is not a problem. The problem is the attention spend, the 5 basic obstacles on any sale is no need, no money, no rush, no trust and no hurry. So is there a hurry to change the boat? Is there a need to change the boat? It's a pleasure. It's an emotional thing, which pleases yourself and the lifestyle. We're not selling boats since a long time. We're selling lifestyle here. Especially in Ferretti Group, we are do selling lifestyle. So if you're focused on importing cars in the U.S. and you're an American client and you have the tariffs from Japan day to night, 75%. Will you pay attention to the fact that you're negotiating the new boat? No. You will defer that topic to a better moment. That's exactly what happened in the month of April. That's exactly why we are seeing negotiations that were delayed before. And so are we worried on tariffs? If 15% is the outcome, the answer is not because we can play with 15%. We can live with 15%. Did I answer?

Yes, very.