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

Good morning, everyone. Welcome to Ferretti Group 9 Months 2026 Results Conference Call, and thank you for joining us today and for continued interest in Ferretti Group. My name is Elisabetta Cugnasca, and I am Head of Investor Relations and Stability at Ferretti Group. Let me introduce today's speaker, Mr. Stassi Anastassov, our Chief Executive Officer; Mr. Marco Zammarchi, our Chief Financial Officer. Today's presentation will cover the key business highlights and financial results and will be followed by a Q&A session. [Operator Instructions] Before handing over to our speaker, I would like to remind you 2 points. As usual, you must draw your attention to the disclaimer slide inserted in the annex part of the presentation that I hope you were able to download from our website. Second, we kindly ask members of the press to join today conference call in listen-only mode. With that, we can begin today's presentation. I will now hand over to our Chief Executive Officer, Stassi Anastassov.

Good morning, everyone. We are beautiful Fort Lauderdale. If my voice breaks up, it's because I'm just coming out of a little flu session, but I had a doctor that told me I'll be totally perfect today at 6:55 a.m. and it's 7:01 here in the U.S. So let's see how it goes. The most important message from our 9-month results. You have a few points on the screen, but let me give you my take on those. Ferretti is regaining momentum. I saw that firsthand having attended every single boat show over the past 3 months and now for [indiscernible]. Our brands are demonstrating their strength. Our commercial recovery is progressing, and we have a clear plan to translate that momentum into stronger and more profitable growth. Our third quarter results demonstrate what Ferretti is capable of delivering. Order intake grew by 6.6% and revenue increased by 13.6% even against a strong third quarter last year. This is after a 5.6% revenue decline in the first half. So we have recovered broadly to the same revenue level as last year after the first 9 months. This, of course, allows us and gives us confidence to confirm our full year revenue guidance. This is meaningful progress in context, in context of what everybody were talking about, about economy, customers, issues, disputes, et cetera, et cetera. And I want to recognize the commitment of our people across the group for making it happen. At the same time, we have further work to do on profitability. I'm not shying away from the profit numbers, going down from 16% to 14.7% compared to last year is not what I wanted, not what none of us feel good about and clearly not something that we wanted, which is to revise our full year guidance to EUR 174 million to EUR 185 million. But we got some bad surprises. Bad news is we were surprised. Good news is I see them much more as one-offs than something structurally wrong with the business. We have a clear understanding of the drivers and our priorities to turn the recovery in growth into recovery in profitability. We're already taking action on pricing, product mix, efficiency of our operations and the way we execute. Looking across our businesses, there are several encouraging signs. The composite orders increased by 28%. This reflects the strength of our product portfolio, brands and recent launches. In Europe, the region where I feel we've been the least affected with any economics. Order intake grew by 23% on a like-for-like basis. This is really a powerful demonstration of our brands. People love our brands. Next time, let's please have a meeting at one of our boat shows. Our organization commercially is firing on all cylinders to deliver these boat shows and the results proved it, and we're looking forward to also great boat shows here in Fort Lauderdale. We want, of course, to replicate that success across all the markets. As I mentioned, we're in Fort Lauderdale and Americas and Middle East are real opportunities that we must fix. Order intake is down approximately 40%. The challenges are different. They are 2 very different regions. Some of them like in the Middle East are geopolitical uncertainty and those delays and affects consumer decisions. In the Americas, frankly, we have a lot of self-cooked problems there that we're in the process of fixing in terms of our strength of commercial organization, execution and overall reach of the growing number of billionaires that this country is delivering every week. We're addressing the Americas forcefully with new programs. We're addressing the Americas with discussions and ways to increase our footprint in this country, and we're going to see the results coming later on because a recovery doesn't happen overnight, and none of us is going to come with promises for something that we're not confident about. In Super Yachts, we have not had an order, and this is one of the big disappointments over the first 9 months. It would have been easy to have a couple of hundred million of Super Yacht orders to be in our balance sheet, but what is good is that we have many very interesting and advanced discussions in that segment. Overall, we currently have about 680 million of active negotiations in our group. These, of course, represent opportunities, not yet orders, but they demonstrate the potential ahead of us. And our priority is clear: convert this potential into profitable business. And this brings me to the bigger picture. We're not simply working to improve 1 quarter or 1 year. This will be wrong for me, for us and the wrong message to really deliver, put our stops in and try to avoid something that we know we want to fix in a more structural way. We are transforming Ferretti, strengthening our products, our design, our portfolio bringing more ownable innovation in-house, not outsourced, quality being fixed, manufacturing being made more efficient and a significant improvement of our owner experience and organization. As I said before, the best way to deliver new sales is to delight our current customers, our current owners, and we have significant work that is in progress in those areas. Our ambition is to create a company whose operational and financial performance consistently matches the great quality of its brand and the outstanding quality of its people. So my message is -- we are confident, we have a great company. We are confident we have great plans ahead across all vectors of performance. We're determined, we're acting and we're not complacent. Our revenue recovery is progressing. Our opportunities are now to make sure that our profits progress the same way. We know what we need to improve, and we're building on our strengths and fixing our challenges to create the foundation of a much stronger Ferretti, much happier organization, happier shareholders and also happier analysts. Marco, can you build on this, please?

Good morning, everyone. We'll move on to the financial results. So let me start with an overall picture of the company. And let me repeat a couple of concept already expressed by Stassi, but I believe they are quite important to understand the current environment where the company operates. And the first one is regarding the order intake of the last quarter because the third quarter marked a clear improvement in commercial momentum. Order intake returned to grow, increasing by 6.6% and also revenue grew by 13.6%. This recovery also translated into greater visibility. Net backlog stabilized during the quarter. 2026 revenue coverage is now above 85% and approximately EUR 400 million of secured revenues extend beyond 2026. Taken together, these elements support our decision to confirm full year revenue guidance. Let us now look at what drove this improvement, starting with performances by segment. As you can appreciate from this slide, the recovery was primarily driven by composite, where order intake increased by 28% over the first 9 months, supported by the strong reception of both new and existing models. ITAMA is a clear example of the potential created by a successful brand relaunch with the new ITAMA 70 and ITAMA 18 contributed to renewed commercial momentum. Made-to-measure and Superyacht remain weaker, reflecting longer and more complex negotiation cycle in the current environment. By the way, at the end of September, we have approximately EUR 680 million of negotiation underway with the majority concentrated in the higher-end segment. And among them, we have nonrefundable LOI that are in progress to be finalized in the current quarter. While this negotiation is not reflected in the order intake, they provide a meaningful indication of the underlying commercial activity and the future order generation potential. Let us now look at what this recovery developed across our key geography. One of the strength of our business is its geographic diversification, which help us balance different market dynamics across the region. For example, Europe returned to growth, supported by the strong performance of the composite during the summer and the boat show season. Given its scale within the group, Europe was the largest contributor to the improvement in order intake during the quarter. Asia Pacific continued its consistent growth path and now represent approximately 8% of group order intake, returning to a level broadly in line with where it was around 3 years ago. [indiscernible], as we mentioned before, remain affected by geopolitical uncertainty and longer negotiation processes. Instead in the Americas, we are approaching the beginning of the U.S. boating season, traditionally the most important commercial period for the region. This renewed commercial momentum is also beginning to translate into a more positive backlog trend. So Net backlog increased slightly during the quarter, but the most important message is the change that we are seeing beneath the total number. If you look carefully at the breakdown, you see different messages. Composite backlog returned to strong growth in absolute term, reaching level we have not seen for approximately 10 quarters and marking a clear change in trend after almost a year of contraction. At the same time, Made-to-Measure and super yacht continue to provide significant medium- and long-term visibility. As discussed earlier, the majority of our ongoing negotiation are concentrated in this segment and on converted into order, they typically remain in backlog for a much longer period. Taken together, this element give us increasing confidence that the recent stabilization of the net backlog can develop into a more positive trend. The improvement in commercial momentum is already reflected, as we mentioned before, in our revenue performances. In fact, the 9 months revenues reached EUR 889 million, broadly in line with the prior year. And the strong summer performances allowed us to substantially close the gap accumulated during the first half. Europe and Asia Pacific were the main contributor to growth, while EMEA remained affected by the factor already discussed. Overall, the revenue outlook remains solid and supported the decision to confirm the full year revenue guidance. Let me now turn to the evolution of the adjusted EBITDA. Now in this slide, we decided to provide the full visibility of what happened during the last -- in the first 9 months of this year because we believe it's good for everyone to understand what is the rationale behind most of them are temporary one and so on. So let me illustrate a little bit what's happened. So as we said, the adjusted EBITDA declined from EUR 141.7 million to EUR 130.6 million with a margin decrease from 16% to 14.7%. And this deterioration reflects a combination of factors. First, a less favorable sales mix, reflecting the temporary lower contribution from the Made-to-Measure segment during this period. Second, some of our vertically integrated activities were affected by some temporary operational issue during this period, resulting in additional cost and delays. Third, increased competitiveness pressure across the industry, which result in a more challenging pricing and discounting environment. Fourth, we highlight the short-term economic impact of a long-term initiative designed to strengthen our competitive position and customer experience. Finally, higher revenues during the summer improved fixed cost absorption and partially reduce the pressure experienced during the first half, although not enough to offset them completely. While profitability remain our main area of focus, the group continued to maintain a disciplined approach to investment and a solid financial profile. During the first 9 months, CapEx declined by about 30% compared with the prior year. This reflects the benefit of the significant production capacity investments completed in the recent years. The group now is benefiting from a production platform operating at close to 80% utilization, excluding the Super Yacht division. This is explained the lower level of expansion CapEx compared with the prior year. We continue to invest in a selective way in product development and innovation with R&D remaining the main focus of investment. In fact, you see that more than 60% of our CapEx are in this area. A specific highlight on the Superyacht division because it is already operating at a significantly higher utilization level. And we think that we may require additional investment to support future growth in line we have already communicated in yesterday's press release. This disciplined approach to investment is also reflected in our financial position and working capital evolution. The group closed September with a solid net financial position of approximately EUR 42 million despite the normal seasonal increase in working capital. The higher working capital absorption mainly reflect 2 factors. In one hand, the normal seasonality ahead of the U.S. boating season. And on the other hand, the lower contractual advances from M-to-measure and Superyacht project. In other words, the company and in general, the industry received a lot of boost in terms of cash generation when they get the order because many of the orders are according to our production approach, we are not starting producing until the order is arrived. So that means that when we get an order, we have a big impact on our net financial position. So it's something linked to this current slowdown in the order intake in this segment. The second one, and we wanted to highlight at this point is that the value of the finished yacht and the unit under construction on speculation decreased compared with prior year. That means that we are quite -- we are managing in a quite efficient way the inventories. So the increase in working capital is mainly driven by this business mix and the different profile of customer advance rather than higher inventory. Overall, our financial position remains solid and provide the group with significant financial flexibility. With all this background, let me now turn on to our updated 2026 guidance. Based on the performance of the first 9 months and the improvement in commercial activity during the third quarter, we confirm our full year revenue guidance. At the same time, we are revising our profitability guidance to reflect the margin performance seen year-to-date. The revised range provides a more realistic view of the expected full year outcome. And more importantly, the factor behind the margin deterioration that we share with the financial community are clearly identified and actions are already underway. Our focus is on the areas that we can directly influence. So pricing discipline, product competitiveness, performance of our vertically integrated activities, strategic partnership with the supplier, product development and operational execution. Our objective is straightforward, stop the deterioration and progressively rebuild profitability while preserving at the same moment, the commercial momentum achieved in this very good third quarter. With what, let me hand over to Stassi for some additional consideration. And we will discuss the strategic priority and the opportunity for the group.

Thank you, Marco. I want to take this slide myself because having been there every day with our salespeople, with brokers, with agents, with owners. And remember, this was my first boat show season. I am blown away by the power of our brands. And you should have been there, and I hope that we can arrange a conference next time, next year, you will be very welcome because the stands were full, the interest for our business, for our brands, all our 7 brands actually because I'm also, obviously, with my background, looking at do we have too many brands, too few brands, et cetera. And I was frustrated I didn't see any huge opportunities because the interest was as big for Itama that had a wonderful sales season as it was for Riva that has always been our most prestigious brands. And when you look at these levels of growth, on one hand, I'm happy about the 23% growth and the revenue driving nicely towards delivering our forecast. The one number I'm not happy about is 58% share of group orders because this leads me to the other slide, the Americas. I have never been in a company where the U.S. has not been at least 40% of the global business. And I'm struggling to understand why the Americas should not be much stronger, much bigger. And this is why we're here. And the minute we finish our call, we have very important meetings with external partners, really focusing on what we can do in terms of driving our brands, making them stronger here, increasing our footprint, but don't think that it's only about sales. There are areas that we internally need to do better. We cannot sell Italian brands and force them on to American habits. We need to sell amazing Italian brands that are perfect for the way Americans want to use their yachts and their specific ways of enjoying time with their families. So there is some work to be done also internally to make our great brands even more attractive and better for this region. Super Yachts division, you will be surprised when I tell you that this is one of my most, most positive impressions. We have been -- I have been personally with the team involved in multiple discussions, some very early, some more advanced. Even some we were expecting to potentially announce something earlier than we can. But this is -- the number of 0 is grossly misleading relative to what I believe we can achieve and what we will achieve. And you'd be surprised if I say that here again, the brands are the power to some extent, to the super decision division. People come to me and ask me, "Hey, can you do something like Reo?an you do one of these 80 meters or 88 even, somebody asked. So the brands we have, oh, Wally, somebody come in and say, well, this is amazing, but why don't you have a 50-, 60-meter Wy? -- we should talk that next time, and I would love to have the opportunity to host you in Ancona where we can present to you what we're doing on Super yachts. But there is a reason why, if you move to the next slide, we're looking at securing not only being able to move to 100 meters from our current limitations, but also we're in pretty advanced negotiations to increase our overall capacity of super yachts. So the 0 is today, the ambition is much, much bigger than that. Now lastly, when I said that we're rebuilding Ferretti, it's not because Ferretti is a bad business. It's because Ferretti is a good business, but it's not yet the best business in [indiscernible]. And it probably never be because no company is ever the best. That's why many of you may have read in academia, the book that's called good to great. And that's what we always will have with every company, with every business. But the important is not to come with slogan. It is really to sharpen the saw on every area that can actually affect our current business and the returning customers. We're moving into much more brand-focused operation where we'll have people that live and die with the success of each brand. We are expanding and refining our dealer operations across the world, now focusing on the U.S. We're expanding great relationships with brokers. And I have to admit, we have been less broker focused than many of our competitors. We will have dedicated programs with leadership reporting straight into me on each region, and each region will have its own specific agenda and will have its own specific organization to deliver the results. We actually completed our Board meeting that we held here in Fort Lauderdale and a big part of the agenda was our Americas general manager presenting to the team. And this is the type of things we are going to do much more often, putting people on the spot, showing what they are doing, showing what the opportunities are and importantly, coming forward with what they need to make their regions grow faster. I did exactly the same thing last week in Hong Kong with our APAC leader that also didn't do that before, but will now report straight into me. We're reworking our supply network design. We're looking at efficiencies. I mentioned to you one of the disappointments around profits. There was a very bad surprise with one of our internal suppliers, and we discovered things we couldn't not flow down into the profits, and we are fixing that decisively. And lastly, no business is better than its organization. We are putting in place great talent development programs to enhance the performance. This goes down all the way to the artisans building and polishing our boats. We're even working with the authorities to support and strengthen artisans in Italy because we want to have the best artisans working for us and not for anybody else. And we need to invest and make sure that we can develop these people. So there will be much more to come because we're not talking about improving the company. We're actually doing it. We are addressing each of these elements one by one to make sure we have the best brands, best technologies and happiest owners. So I'm very convinced that we're on the right path. Thank you.

Thanks to you, Mr. I now -- thanks also to you for listening to our 9 months 2026 results conference presentation. We are now ready for the Q&A session. We will start with live questions and later move on to the written question.

The first question came from Emanuele Gallazzi from Equita.

I actually have 2 questions. I will focus on the commercial strategy, which seems to me let's say, material change versus your previous approach? And in particular, starting from the pricing, can you quantify the average discount rate currently offered to customers, I presume the composite segment versus perhaps last year or versus the level assumed in your initial budget for 2026? And still on the commercial strategy on the extension of the warranty period by 1 additional year -- can you quantify the expected incremental cash cost or the impact on EBITDA on a full year basis from these commercial initiatives? And the last one is on the guidance. Can you help us understanding the moving parts as there is just 1 quarter left and there is still a difference between the lower and upper part of the guidance, just to understand the moving parts there. And if you can an indication on the net working capital of sales expectation for the end of the year?

Okay. Many questions. Remind me if I missed one, okay? Commercial strategy. my please, let's not read too much in the tea leaves. We're talking about EUR 2 million against the EUR 324 million order intake. And we're not talking about changing commercial structure, increasing discounts, et cetera, et cetera. We're talking -- that's why I said that the impact on the margin that you see is much more of a one-off nature and much easier to fix than you would expect. It's about EUR 2 million. There were some opportunistic opportunities that we did not want to give up, and that's the impact. But the answer is there is no change in commercial strategy nor is there any plan to go and start giving discounts to take every order and to meet competitive pricing. As a matter of fact, we yesterday said no to a deal based on a very, I would say, modest need to go down in price. And we said, no, we're not going to do that on our brand because that's not the game we want to be in. On the impact of the 1-year theoretic quality promise, I have to say Marco and I had a long discussion, actually several discussions, Marco, correct, going back and forth. So this slide has had that impact in, and we have the same variation of the slide without that impact because this is a bit of a funny money. Nothing has really happened. It's an accounting principle of a potential increase based on a 3-year promise because it's going from 1 year -- not from 2 years to 3 years and what potentially do we need to, from an accounting correct standpoint, put into our profits already today. So this is something that has not actually happened, but it's also something that we're totally committed to eliminate because we're working on further improvements of quality. And when I say further improvements of the quality, I'm actually talking about our suppliers because the majority of the warranty actually affects the supplier base we have that are delivering to us. And we are working very diligently with all our suppliers and the majority are jumping on the boat with us on increasing their warranties. So I don't believe that you're going to see this -- any impact of this long term. What was the third question?

Guidance... And the gap between the lower and the upper part of the guidance and if possible indication on net working capital on sales by the end of the year.

Okay. The guidance, first of all, we have the third quarter -- the rationale behind the third quarter result is taking into consideration some factors that we already taken into account for the full year estimation. In other words, we -- some operational issue that we described has been already factorized in our number. We believe that if we simply maintain the path that we have had in the first 9 months, which we are quite confident to stay in this range between 14.5% and 14.9%. So it's just the reflection of what we experienced now. We don't see any reason to modify the impact of discounting. Sales mix, as we mentioned before, it was the temporary absence of made-to-measure and given the significant number of negotiation in place, we believe that can be restored. So taking into consideration all the factors, we bring the confidence to stay in this range. In terms of net working capital, you know that the fourth quarter is quarter where usually we generate cash. This industry generate cash. According to our estimation, we should be in a range of EUR 60 million, EUR 65 million. And the impact on the net working capital will be more or less of the same magnitude because as I mentioned before, what we miss in our net working capital is the contribution from the contractual advances. The management of the stock has improved versus prior year, and I believe it will be -- continue to be under control. I don't know, Emmanuel, if everything is clear.

The next question came from Adrien Duverger of Goldman Sachs.

My first question would be on the performance by production type. If you could please help us in understanding the performance of each of the different ones. So what has supported the return to growth of the Composite segment? And conversely, what could explain the slowdown? Is it mainly the regional split as in the U.S. and the Middle East are slowing down? And finally, for Superiors, do I understand correctly that the clients are a bit less prompt to act because of the waiting times on manufacturing them? And my second question would be on your EBITDA guidance. I understood the different moving parts with the product mix and the additional warranty as well as the operational efficiencies. But if you could please expand on the impact of discounting in the market and how you are thinking about incentives for clients?

Okay. The performances. First of all, the performance amongst the various segments. What we'd like to highlight, we have not to blame the Composite segment. We are quite happy of what's happened in the Composite segment. and because it was really an exceptional quarter for the order intake. And you know that the conversion of the order of the composite into revenues is quite quick. So we see immediate effect. What we are really missing in our order intake is it was the measure that is the segment -- the most profitable segment in the industry. So we believe that this is the rationale behind the 40 basis points that we highlight as one of the cause behind the guidance revision.

But if I may, why the negative is the relative -- the so-called the hit because of the profitability. I mean just read this, we went from EUR 118 million to EUR 187 million. And this is where you read in the power of the brands because these are branded superior products. People come to buy Viva, Worley, Pershing, Itama. And I don't have the competitive figures, but I really do not think that anybody can boast to have had in that segment such a growth. And it could have been a great -- even greater quarter by having been able to book one of our discussions we have on the larger yachts. But let's not miss what really happened here. We really crashed it on our ability to drive forward our brands and to drive the demand for what Ferretti stands for. Now we need to make sure we can move that love for those brands and showing that we can even translate those strengths into made-to-measure and even superior, as I mentioned in my opening, behind our brands. That is a significant, in my view, competitive edge that we have that very few people can boast with. Please continue, Marco.

Then we -- the second part of your question was about the Superyacht division order intake. Yes, it's correct. The waiting time is still affecting -- it was affecting the order intake because, for example, a few days ago, one 80 meters left the shed, but from next week, this shed will be occupied again by another super yacht that was under construction. So that means that we are at full capacity. So on top of the construction time that is over 24 months for the branded Superyacht till 5 years for the full Custom 1, we have to add something. But we are also working on increasing the production capacity. And we have a lot of negotiation that we hope to finalize in the next -- by the year-end, also because a couple of them are under a nonrefundable LOI. And in terms of guidance, if I'm not wrong, you were asking about discounting. I believe we -- Stassi has answered before about discounting. So we -- for clarity, we prefer to provide the full picture of the variances amongst last year and this year. But the 20 basis points in terms of competitive dynamics is about EUR 2 million roughly, something slight less. And so if in our business to provide EUR 20 million to get the good achievement of order intake in the last quarter is something that we can live with. For sure, we are not ready to sell the bot at whatever this price because we believe on the power of our brands. So it's something that we wanted to highlight because the market in this moment is quite aggressive. And we have to react in order to maintain our market shares.

Was this okay? Do you have any followup.