Sanlorenzo S.p.A. (SL) Earnings Call Transcript & Summary

Good afternoon to everybody. Thanks for being here with us. And as always, I will pass the floor to Attilio, which is our CFO, to present the Q1 '25 number.

Perfect. Thank you, Massimo, and welcome to everyone. So we can start directly with the highlights for Q1 2025. The first quarter show the Sanlorenzo Group continues its expansion with a growth in line with our guidance 2025. Performance and results are once again direct consequence of the unique Sanlorenzo business model and top and positioning brand. Now we can analyze the figure and in particular, net revenue in new yachts grew 9.6% at EUR 213.5 million, led by the excellent performance by Superyacht Division and contribution from Nautor Swan and great result of the American region and Europe. EBITDA increased 8.5% year-on-year at EUR 37 million and EBIT margin is 17.3% with not relevant dilution considering Nautor Swan consolidation. EBITDA benefit once again by effect of price and product mix at gross margin level. EBIT at EUR 27.8 million increased 4.2%, considering Nautor Swan consolidation and the last significant investments. Group net profit grew up 80% year-on-year with a total amount of EUR 21.2 million with a margin of 10% on net revenue new yachts, double digit. The organic investments at EUR 5.8 million, mainly related to the increase in product development and industrial capacity, new industrial capacity with reduced incidence on net revenue new yachts at 2.7%. And then the net financial position at EUR 28.1 million net debt end of March 2025 with a temporary cash absorption of EUR 57.2 million from last December, considering the seasonality of the working capital typical of the first quarter of the year and also the extraordinary cash flows linked to the buyback program and the acquisition for a total of EUR 4.5 million. Then we can analyze more in detail top line. The quarterly revenue evolution shows consistency versus 2025 guidance with a sustainable growth of 9.6% and we have a strong performance by Superyacht division, plus 10.4% year-on-year, driven by the Steel line increasingly appreciated for the innovative content. And then the Yacht division generated approx 50% of the total revenue down compared to the previous Q1 2024, mainly due to product mix and softer demand dynamics for models below 30 meters. Bluegame generated around EUR 20 million revenues, minus 5.6% year-on-year, confirming strong resilience of the peculiar challenging segment of yachts below 24 meters. Then Nautor Swan division reported net revenue in yachts of EUR 23.8 million in the first quarter, in line with the expectation and with the planned integration and business development process. The breakdown by geography confirms the expansion of the market in the America region, plus 40.6% year-on-year after strong order intake in the last quarters and positive contacts from the Palm Beach boat shows. Now Americas is 20.6% of total revenues, of which just 8% linked to U.S. customers and below 5% for 30 meters products. Also considering that the attribution to the region is linked to the UBO of each contract. Europe grew up 8.8% year-on-year, considering the wide local customer baseline. And then APAC region posted a slight increase, showing the first positive signals of dynamism, while Middle East decreased particularly minus 25.1% in reasons of solid deliveries concentrated in Q4 2024. About profitability, EBITDA margin grew by 8.5% year-on-year, reached the 17.3% of net revenue new yachts considering the marginality, continued expansion ex Swan and the negligible margin dilution about 20 basis points after consolidation impact for the full quarter Nautor Swan. EBIT increased plus 4.2% year-on-year on EBIT margin decrease of 60 basis points at 12.6%, considering higher D&A incidence of Nautor Swan due to smaller scale and legacy investment for the division. The group net profit grew up 80% at 10% on net revenue new yachts with a positive effect of tax benefit and despite higher financial cost from acquisition financing. About backlog, the evolution of the top line is driven by the solid backlog that reached, you can see the level of EUR 1.2 billion last March 2025 that confirm a dynamic market, especially above 30 meters and significant is order intake in Q1 2025, EUR 178 million, plus 6% compared with the first quarter 2024 and considering the typical seasonality of the business when Q1 is a quarter with a low orders collection. Furthermore, backlog is very consistent on high quality in consideration that it is sold 89% to final customer, thanks to the unique Sanlorenzo business model. The solid backlog gives to the group an extraordinary visibility for the future in terms of result with a portion of EUR 700 million related to 2025, representing around 71% coverage net revenue new yachts of the midpoint guidance 2025, consistent with the coverage of 72% in the first quarter 2024. In addition, we have around EUR 500 million related to 2026 and beyond. So a very important visibility. Analyzing the backlog by division, the waiting lists are well filled in all business units, and we sold delivery up to 2026, 2027, 2028, respectively, for the Bluegame, Yacht and Superyacht divisions. And also for the new Swan division, the sold deliveries are up to 2027. And all the divisions have high percentage of yachts sold to final customer, 100% for Superyacht and Swan, 72% for the Yacht division and 53% for Bluegame division, remarkable indicator considering the market segment below 24 meter. About the net backlog approx EUR 1 billion end of March 2025. After the normalization phase of the order intake, the visibility level remained high and it is not particularly affected by current cyclicality of below 24 meters yachts. In fact, after the recessional post-pandemic phase, the historical net backlog quarterly evolution shows for Q1 2025 a coverage order of 1x the full year 2025 revenues. And this level is well above Q1 2019 coverage of 0.8x and above the typical pre-COVID coverage in the range of 0.8 to 0.9x. Then about the evolution of the net working capital and net financial position are -- that are absolutely strictly linked to the trend and reflects the usual seasonality of Q1 business. In particular, the net working capital end of March 2025 is EUR 119.5 million positive especially considering the normal seasonal cash absorption of Q1 as the similar evolution you can see for Q1 2024 before the Mediterranean deliveries phase peak in the summer season. And in addition, the support in terms of inventory buildup to the new direct-distribution in APAC region and also expansion in direct-distribution in Europe and Americas. Therefore, the net debt end of March 2025 of EUR 28.1 million reflects the seasonality of the net working capital and in addition, extraordinary cash out of EUR 4.5 million related to the buyback program of EUR 3.7 million and the purchase of the stake 60% of AF Arturo Foresti, a strategic supplier for electrical systems for EUR 0.8. Therefore, additional EUR 3.7 million are returned to the shareholders considering extraordinary buyback in Q1 2025. The reported net debt end of March 2025 includes IFRS 16 net liabilities for EUR 24.1 million versus EUR 25.5 million of 31st December 2024. About CapEx, continued the organic investment program that reached the amount of EUR 5.8 million end of March 2025, more than 90% related to expansion, new product capacity and development dedicated to all the divisions. The incidence of organic CapEx on net revenue new yachts has decreased to 2.7% was 3.5% in Q1 2024. Overall, the net investments are EUR 6.6 million, considering change in perimeter at EUR 0.8 million referred to the AF Arturo Foresti acquisition just before mentioned. So considering the solid Q1 2025 result and considering also the visibility from the backlog we have just seen, the 2025 guidance is confirmed without any change. This is possible considering the strength of the unique Sanlorenzo business model and the top end positioning of the brand. So we have analyzed all the financial results, and I leave the floor to Massimo to continue with the business update.

Thank you, Attilio. Now briefly some summary of the activity of the last year or the month. You can see quickly the Superyacht award winner to Explorer 500 Sanlorenzo yacht. And then we show you a picture of the Wind Labyrinth by Piero Lissoni at the Milan Design Week. That is a contribute from Sanlorenzo to Swan but also to sustainability. We wanted to combine the 2 points together. It was a success with more than 300 people coming for the party. Well, this is, again, our message to the market of having reached a fantastic agreement with American Magic. You can see the yacht is in construction -- sorry, the plant is in construction. We do expect to have the plant finished by the end of the year, beginning of '26 and to be able to start full production by the third or fourth quarter of '26. But what is very important today, we got the message that the next American cup will be played in Napoli. And this is, for sure, a very good news. You can see what is happening in the tennis in Italy, thanks to Mr. Sinner who is a champion. We do expect that Swan business will be boosted and we will investigate with our partners from American Magic if there is any chance to have a partnership on the American Cup as well, considering that they will play in Napoli in Italy. Next is, as we said already, we are designing the new office in Newport in combination with Edmiston and Bruce Brakenhoff, which used to sell Perini boats for 30 years in America. That is the style of the first, let's call it, Swan alloy is a Maxi of 43 meter. And aside of the big and important collaboration with Edmiston, which is one of the best brokerage house in the world, we like to show you a couple of pictures where you can see that we are ready to launch the 128 feet Maxi in carbon in Sweden on the left. And on the side, you have the picture of the carbon mast, which is 60 meter, which is going to be on top of the boat. I'd like to show you that because it is a message to the market that, okay, we are starting a new division in the alloy business from 43 to 60, 65 meter. We do expect to have between EUR 50 million and EUR 60 million new revenue in the next 2 years, but we are coming from the biggest one built in Finland, which is very close to the alloy line because the 40 meter in carbon you see is a reality, is a picture of the boat ready to be launched. The boat will be presented at the Monaco show in September '25. Well, very quickly, the methanol situation in spite of the strategy and policy of the new President of United States is growing and growing and growing. There is more and more people who believe in the next future development of methanol. And we remember you that with the 50 STEEL, we had the first fuel cell boat delivered in 2024. And then we are building the second, the 50 X-SPACE, which will be the first Bi-fuel engine, both methanol and fuel, which will be in the water by the end of '27. So we are continuing steady, pioneering the market from the point of view of sustainability, and we will have the second 50 meter on the water with the first pair of Bi-fuel engine. Going on, this is just a point which we like very much, which is probably the top message we give to the market related to our special business model. You see the scarcity, which is one of the most important upselling feature for luxury. From 2018, even before our IPO, we had 41 boats in construction. Then little by little, we moved to 37, 55, 61. Then from '21 to '24, we moved from 61 to 69. But the increase of revenue related to Sanlorenzo is up to EUR 800 million. So 70 boat -- around 70 boat with EUR 800 million revenue is a key element of the success of our company, both for revenue, for profitability, but mainly to be resilient to the eventual bad cycle. Why? Well, you see on the right, our average net revenue per boat is EUR 11.6 million. That means we are totally out of the market, which is more competitive and is related to people who rely in the bonus and salary every year. Our customer comes from a very rich family for 2, 3 generations, and they do not need to have a good business here in order to decide to buy the boat. Important, you can see the proven growth and margin resilience over the cycle, little by little after 2018. Well, first, you have a confirmation of the company being resilient because in the bad time between 2008 and 2014, we have been always around 10% in our EBITDA margin. And then from 2018, little by little, but constantly growing year after year in our EBITDA margin up to EUR 1 billion revenue expectation. You see the reduction from 19% to 18.8% that is a very, very small reduction considering that 2025 is the first year where we consolidate 12 months of Swan business. And then you know that Swan is diluting a little bit our EBITDA margin now, but we do expect it will grow and improve in the near future. Okay. Now I think we can pass the floor to you for any eventual possible question, and we are ready to reply.

Niccolo Storer from Kepler. I have 3. The first one is the usual one on the evolution of your business in April, which has been a very erratic month and first days of May when things appear to have come down a bit. The second question is on the exceptionally low tax rate you had, if you can comment about the tax benefit you mentioned. The third one on your EBITDA margin. This time, you are not commenting the adjusted EBITDA margin. If I look at adjusted EBITDA margin, you are basically on par with last year. I suspect that the missing dilution for Swan is the result of EBITDA from refitting activity at Swan, which is not in your revenues. Is this true? And do you have big seasonality in this business of Swan refit, which is concentrating revenues and profitability in the first quarter?

Well, first, I have to underline -- thank you, Niccolo. First, I have to underline that our numbers are not adjusted. They are fixed. Since two years, we decided not to declare adjusted EBITDA, adjusted EBIT and whatever. It is a fixed number that we expect and then we declare after we finish the quarter and we give you the number. Second, the evolution, I would say that April until middle of May, we are at the middle of the second quarter. And I can confirm to you that we already sold 2/3 of the value of 2024. So we do expect the second quarter with a better result in respect of the second quarter of 2024. Then, of course, everything is related to the future declaration of Mr. Trump. And if he is, let's say, following what the world is expecting considering what has been declaring in the last 30 days, we do expect to improve the situation of the H1 in respect of 2024. Regarding the tax rate, I think I will move to the expert in the matter, which is Attilio.

Sure. Thank you, Massimo. Yes, Niccolo, about the taxes, consider you are right, consider that we have quite important reduction in terms of incidents and this is linked to the patent box. We started with this Italian tax benefit last 2024, just the beginning of the impact. And now especially in this year, we have a very important effect is between EUR 2 million and EUR 3 million, the impact in Q1 2025. And consider that this is linked this benefit to the EBIT generated by the company's know-how and for Sanlorenzo you know we have very important heritage starting from 1958 for this important know-how level.

And can you quantify the impact you expect for the full year and if any, also beyond 2025 from patent box?

Yes. In this moment, we are in the last phase to define the exact impact with the tax authorities. So we can consider to have an increase for Q2 2025, but we have to have the definitive documents by the authorities.

Regarding the third point I think...

I can take it, Niccolò. Well, consider just to give you some statistics that the refit business of Nautor Swan, so what is called Nautor Swan Global Service accounts for less than 15% of the Nautor Swan business, which in turn is about 10% at group level. So we're talking about less than 1.5% of the group revenues. So in terms of marginality accretion, it's substantially relevant.

Oriana Cardani, Intesa Sanpaolo. 3 questions. The first one is a clarification on your reaction to U.S. ties. Have you decided to increase prices in North America or considering that the export trade is low, will not increase prices? My second question is on the order intake in the first quarter. Can you give us an idea on the weight of Yacht and Superyacht on total order intake and the weight of America? And my third question is about CapEx. Given the uncertainty, macroeconomic uncertainty, are you considering postponing or reducing the scope of some projects?

Sorry, I had the microphone stopped. So I repeat, we are not increasing the price yet because we want to wait the final solution about tariff. Remember, America is not building any boat in competition with Sanlorenzo, maybe some boats in competition with Bluegame, but as you know, it's less than 10% of our business. We discussed it with Pietro Berardi, which is the of CEO of Sanlorenzo of America and some other important broker in America. And we think we will be able to increase our price list up to 10%, maybe something between 10% and 15% in case the tariff will be above that level. So we are pretty sure to be able to discharge to the market at least 2/3 of the eventual risk. The remaining 1/3 will be splitted between Sanlorenzo, the mother company and our distributor company, which is owned 100% by us, which is Sanlorenzo of America. But if you go to the picture of our market, you can see that for the first quarter of '25, 20% was our share to Americas. Americas means Canada, United States, Central and South America. Out of that, only 8% is related to the U.S. citizens. And inside of the 8%, 5% is below 30 meter. So the situation anyhow is not really affecting us. Therefore, this is one of the main reasons we confirm the guidance regardless of what will happen. So we feel pretty much strong related to the risk of tariff. Regarding the CapEx, and then I leave the matter to the specification of the order intake to Attilio. Regarding the CapEx, as you saw, we are investing a bit less money than expected for the quarter. This is not being a project of reducing the CapEx yet, but we are not pushing the CapEx too much, expecting to see what the market is. As always, we are very prudent. So in case a big problem comes to the market, we are ready to reduce importantly the CapEx. If you see on the guidance on 2020, the year of COVID, you see that we reduced from an average of EUR 50 million to EUR 30 million pretty quickly. So this is something that we can repeat in case we have any kind of troubles for 2025, which, by the way, we do not expect. Regarding order intake detail?

Yes. In terms of order intakes, consider Oriana that for the Yacht division, we are in the region of around EUR 70 million. And considering the Superyacht division, we are in the region of EUR 80 million.

And just a follow-up, the weight of America in the order intake, is it possible?

Yes, consider that we are consistent with the revenues indicated in the chart...

Look, I'd just like to tell you what happened. We signed a letter of intent during the Miami show, which was the middle of February. And then the customer, which is one of our old-time customer, he bought 3 Sanlorenzo. He ordered the biggest composite Sanlorenzo boat, the SD132. And then he called us and say, look, gentlemen, let us -- let me have some time to understand what the President of United States is deciding. He waited until the end of March when Mr. Trump declared the situation of the 25% tariff to Europe. And the same day, he transferred the deposit to us. I explained that to you because the uncertainty of our customer sometimes is worse than a bad message, which is 25% tariff to Europe. People like certainty. And we think that in the next month, sooner or later, Mr. Trump and the American government will stop to play about these numbers and fix this uncertainty. So our worst period, I think, is back at the beginning of the quarter of the first quarter. We do expect week after week to have a more stable market and then to collect more order and to put back the business in normality, in certainty.

We have a question on the same topic pretty much that we see from the chat. So Mr. [indiscernible] is asking if you can give a broader color on what we expect in the coming months from all the geographies where we are present...

Well, we -- I can tell you there is a good news after, I would say, a couple of years where the German and the French market has been pretty light. In the last Palma boat show, in Palma there is a lot of Germans and British customer living there with villa and whatever. The Palma Boat show was pretty much -- it is in the middle of April, 23, 24 of April, just after Easter. It was quite successful because we found back again a lot of Germans, a lot of British customers negotiating, seriously willing to buy boats. We closed a couple of deals. I think that the new government in Germany is giving a good push to that market and then probably the expectation of a lot of money to be spent in the military goods and the declaration of the government to increase spending up to EUR 500 billion in Germany is also showing to the ultra-high net worth individual in Germany that they have a good expectation for the '25, '26 and so they go back to buy boat. So we do expect Europe to be stronger than last year. Asia Pacific in the last quarter, we sold the same amount of boat in 1 quarter that we sold in 2024. So we do expect good numbers and good market in Asia Pacific. Probably America will be the market that we really don't know the situation because it is not only a matter of tariff, I think that the uncertainty created by the President of U.S. is now putting the American economy in, let's say, waiting situation. You see that the Bank of America is not reducing the interest rate because there is a lot of uncertainty on the situation. So we have to see probably in the next 2, 3 months to have a better and more clear situation. But what is confident for us is Middle East, Far East and Europe, we feel it pretty strong, pretty good.

We don't have any more questions in the chat. So Mr. Perotti, if you would like to do a conclusion.

Well, we thank you very much. We're very happy for the Q1 number. I think at the end of the year 2024, you probably remember our expectation for '25 was quite an important improvement of the business after 2024 very difficult year. And then with the starting of the new government in America, there was some uncertainty that has been influencing the market, but we are very happy that the numbers at the end of the first quarter was very good, more than what we expected in the middle of January and middle of February. We think that the worst is back. So the future should be little by little better. That is the overall idea of our expectation of the business we are living day after day. Thank you very much for your time and to follow our company always. Bye-bye.

Thank you.