Ferretti S.p.A. (9638) Earnings Call Transcript

Good afternoon, everyone, and welcome to Ferretti Group 2026 First Half Results Conference Call. 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 first half 2026 and discuss the outlook for the future. Before we begin, let me introduce our speakers. Mr. Stassi Anastassov, our Chief Executive Officer; Mr. Marco Zammarchi, our Chief Financial Officer; and myself, Margherita Sacerdoti. Today's agenda will cover key highlights from H1 2026, business dynamics, financial results, followed by a Q&A session. [Operator Instructions] With that, let me hand it over to Mr. Stassi Anastassov to get us started. Mr. Anastassov, the floor is yours.

Thank you, Margherita. Good morning, everyone, and thank you for joining us. The last time I spoke to you, I had been in this business for 2 days. This morning, it is 2 months and 2 weeks. I've spent that time at our shipyards, with our people, with the designers drawing the boats we will launch next, with our dealers and our partners and also with many of our valued owners. These owners have become one of my most important stakeholder groups. The purpose was not to explain the past. The purpose was to understand it and to understand what this company needs in order to deliver a more consistent return to its shareholders. The first half of 2026 was below our own expectations. Order intake, in particular, was not where it needed to be. The Middle East and the wider macroeconomic environment are real, and you have seen them in our release this morning. None of it, however, changes the task. We own 7 of the strongest brands in yachting, and we have to learn to grow share and business and orders behind these in the difficult years as well as the good ones. This is what a superior business model should actually deliver. Marco will take you through the figures. Two of them are worth holding on to. The second quarter was already better than the first and cash built strongly through it, of course, after some dividends. The third is the margin. It demonstrates that despite lower volumes, we have remained disciplined on pricing and on product mix. We have not bought volume with discounts and we will not buy volume with discounts, something that is almost holy to us. Premium brands are not discounted. Now to guidance. We have looked hard at the first half and what is realistic is for the rest of the year. You know how it is, many meetings, multiple scenarios. On paper, our previous guidance is still mathematically feasible. But frankly, I would rather give you what I believe than what I hope for. In my career, I've learned that saying it as it is works better, and it's actually long term, much better than sugar coating it. So we're revising our guidance today. One thing I want you to look at is the shape of the new range because it matters as much as the numbers. It is wide, and it's wider at the top and narrow obviously at the bottom, because the bottom ask for our second half to pretty much do what last year's second half did, a good second half last year. And most of it, a large part of it, I would say, is already sold. It sits in the backlog we hold today. The top depends, however, on new orders we still have to win between now and December. Obviously, I have been told that a narrow range would look more confident. But frankly, I want to be honest with you because we have a long season ahead of us, and we will do our best to deliver and overdeliver. But for now, it's more prudent to keep the range at the top a little bit wider. We're doing what we can on the internal numbers. We're reducing capital expenditure. That is a decision, not a constraint. We're protecting cash and the strength of the balance sheet and neither is being traded against the guidance. Obviously, one of the important things for you to note is that these are forecast changed, but this is not changing our ambition. Internally, we'll continue to manage this business against our original objectives. Our priorities for the second half are specific, deliver every yacht in the September to December program on time, convert opportunities into signed contracts, hold price, generate cash. We're looking at the United States. We're looking at the Middle East. We're reviewing distribution coverage, and we even look at the people required to deliver on those reinforcements. Order intake is the measure that matters most from here. It is what converts into revenue beyond this year. Rebuilding it is the clearest single priority of the second half, and this is where my own time is going to be spent. I do want to spend some time on our business model, and this is, to me, the most important element for you to look at when you review our results and the future. People keep asking me what strategy I'm going to change. My answer is always the same. There is no new invention or an immediate acquisition. I spent my first months here looking for it. What I found is that is a business model that is already superior and one, frankly, I did not invent. 7 unique iconic premium brands, most of our competitors have 1 or maybe 2. 7 amazing shipyards, all in Italy by very strong people, very skilled people that have been there for generations. This capability is not something that anybody can take away over a cycle, and it's not diminished by a forecast revision. We're not revising our franchise. We're not revising our business model. As a matter of fact, we're actually going to strengthen our business model, and we are doing it, and we're going to strengthen our future. Our owners are not buying a product. They are buying the craft that come back and they come back for it. We want and we have the ambition to build the best boats in the world, and we want to continue fueling the best brands in the world in yachting. We need simply to continue building better products, uncompromising quality and execute, execute, execute. We're not complacent and we're not managing this company through a soft market. We're building one that outperforms this market consistently and have turned 7 of the strongest brands in yachting into better return on capital and a better return for every shareholder. So the secret is not the strategy. It is the consistency of the execution behind these brands. Our task is not to predict when uncertainty ends. It is to emerge from this period as a stronger company than the one that we entered it. Markets will recover, credibility, execution and great brands decide who wins when they do. And this is exactly what we and I intend to prove to you. Now I leave you to the numbers man, Mr. Marco.

Thank you, Stassi. Good afternoon, everybody. So let me start with the key highlights of the first half. Already Stassi talked about part of them, let me repeat. So order intake reached approximately EUR 341 million, down year-on-year, reflecting a longer decision-making and contractor conversion cycle, particularly in larger yacht. Revenues instead was -- the decline was a little bit softer due to the good backlog that we have. The decline was materially lower than the reduction in order intake. And adjusted EBITDA reached EUR 92.5 million, 15.8%, minus 20 basis points, confirming the group ability to preserve profitability in a lower volume environment. Cash generation was the stronger element of the semester. Net financial position reached approximately EUR 95 million net cash, improving by around EUR 77 million compared with March after EUR 37 million were returned to the shareholders through dividends. Before moving to the commercial result, let me leave the floor to Margherita to share with you some info about new product and boat show.

Thank you, Marco. So first of all, looking in the near future, we are approaching one of the most important periods of the year for our industry. Our private preview in Monaco will officially open the European Boat Show season in September, followed by Cannes Yachting Festival and Monaco Yacht Show. These events represent a key moment to show our latest model, engage with clients and convert the actual commercial pipeline into new orders. So the demand remains healthy, negotiations are progressing, and we believe that the upcoming fall events will be very important to unlock the conversion opportunity that we are seeing right now in the pipeline. Before talking about the new launch, let me just highlight another important milestone that reflects the strength and uniqueness of Riva brand. We opened new Riva lounges in Amalfi and Rovinj, further extending the brand into some of the world's most prestigious destination and creating, again, exclusive spaces where clients can meet and greet and feel at home. Moving to the latest product launch. We can -- this is a new Custom Line Navetta 35. It was launched in this quarter 2026, but it was already presented at the end of 2025. We already sold 4 units, and this confirms the strong appreciation by the clients of this kind of new generation of made-to-measure yachts. We also presented and launched First Itama 70. It's another important milestone in the renewal of the Itama range. It was unveiled at Dusseldorf Boat Show at the beginning of the year, and the model just entered recently the water. This is technology advanced and design advanced and strengthened, again, the Itama competitive brands' positioning over all the other brands in the industry. Moving to Pershing. We launched the first Pershing GTX90. This is the latest model that completes the GTX range and follows the 70 and the 80. It was again unveiled in Dusseldorf and represent, again, an important presence in the range 90, 100 foot, so the large composite, as we call it, and combined still a very high-performance yacht as Pershing is known to be with more comfort as the GTX series is meant to be. Finally, we launched a super yacht in the second quarter 2026, a full bespoke 70 meters in Ancona Super yacht, confirming our strength also in this very important segment where we, just to remind you, produce both bespoke yacht and branded super yacht. Now I hand over the microphone again to Marco that will walk you through the numbers.

So gentlemen, before to go in the detail of the order intake by segment, by geography and so on, we appreciate that the first half performance reflect a slower conversion environment. The impact was primarily concentrated in larger contract where negotiation and decision-making cycles are structurally longer and became more selective. Geopolitical uncertainty in MEA and greater customer caution in other markets also contributed to longer signing time lines. So we -- on the other hand, the current level of negotiation remain significant in line with last year figure, more than EUR 400 million and broadly distributed across geographical areas. This provide a relevant pool of commercial opportunities, although the timing of conversion remains difficult to predict. Our focus is, therefore, on advancing this opportunity while maintaining pricing discipline and protecting the quality of the order book in view of the boat show season that will start soon. Now talking about the segments. The order intake by segment, the performance was not uniform across the portfolio. Composite grew year-on-year, supported by seasonal demand in Europe ahead of the summer season and by some recent product launches. Made-to-measure instead was affected by 2 factors: a particularly strong comparison base in MEA region last year and slower contract conversion in the current period due to regional tensions. Instead, in Super yacht, negotiations remain at a very good level. However, order intake is also affected by the scarcity and available production slot as the waiting list still extended towards the end of 2029. Let me be -- let me elaborate a little bit more about Super yacht. For example, we are -- you know that we are very, very rigid applying some order or some rule about order intake. For example, in H2, we had some negotiations at a very advanced level. We received -- we signed some LOI secured by non-refundable deposit. We are talking about hundreds of millions, but technically speaking, it's not an order. So we prefer to be consistent with our policy and not to show something that we will disclose in Q3. Instead, by geography, the first half reflected different dynamics among -- across the region. Europe remained an important contributor to order intake, although its year-on-year performance was affected by a demanding comparison base, which includes 2 Super yacht orders recorded in the first half of 2025. MEA instead was mainly affected by local geopolitical tension. We delayed the finalization of some contract. AMAS reflected a more cautious customer approach with longer decision-making and signing time lines. However, the performance improved during the second quarter compared to Q1. APAC instead is a good surprise, continue to make a positive contribution. Now the weight is 12%, and we are quite happy of it. So let's move to the backlog. The backlog remains an important stabilizing factor for our business. The order backlog stood at approximately EUR 1,455 million at the end of June, broadly stable year-on-year following the delivery executed during the period. And the net backlog was lower, reflecting the softer recent order intake and reduced the Super yacht component. For this reason, I want to share with you some more data about it. However, the portion of the net backlog allocated to 2026 is higher than at the same date last year. So considering revenues already delivered in the first half net backlog scheduled for the remainder of the year, approximately EUR 900 million of 2026 revenues are already secured. Let's move to the net backlog breakdown because it explains a lot about the dynamics of this company. So the backlog evolution needed to be read together with the order intake dynamics discussed before. Looking across the portfolio, the most significant change versus last year is concentrated in Super yacht with the dynamics that I shared with you a few minutes ago. So we know that in this segment, the current order intake is influenced not only by the conversion time, but also the limited availability of production slot. As I told you, there is some LOI signed already, and we are confident to announce it in Q3. And if you look at the other 2 segments, you see that the net backlog is practically stable versus prior year with a slight increase for both of the 2 segments. So it's the first time that we share with you this kind of breakdown, but to provide you the confidence that we have in our business and give us the confidence to achieve what we declare as guidance in the rest of the year. If we move to the revenue by segment, the existing backlog, as I said before, mitigated the impact of the first half order intake. The revenue reached approximately EUR 586 million and declined more moderately than order intake supported by the order collect in previous period. Made-to-measure remained stable year-on-year and instead Composites and Super yachts were lower. So practically, is what we said, this reflects a different timing between commercial activity that come first and financial performance as change in order intake affected the backlog first, while existing backlog continue to sustain near-term revenues. In terms of profitability, the group continued to preserve solid margin profile. Adjusted EBITDA was EUR 92.5 million compared with EUR 99.1 million in the first half of 2025. The margin was affected by lower fixed cost absorption, reflecting the lower activity of the period. And in addition, the commercial environment remained very competitive with pricing pressure no longer limited to smaller players, but increasingly visible across a broader portion of the market, including larger competitors. Operating discipline and the backlog mix limited the impact on the profitability. On the CapEx side, the CapEx remains selective and aligned with the group strategic priority. In the first half, CapEx amounted to approximately EUR 31 million and was primarily allocated to new product development. Capital allocation, in fact, continue to focus on product innovation and portfolio renewal. More broadly, the main capacity expansion cycle is carried out in the recent year is now substantially completed with a utilization rate of our shipyard producing fiber glass box at over 80%. So we believe we have to -- we confirm that the CapEx cycle, at least for the production facility at the moment is stopped. That's the reason, the background, the rationale behind the decision to lower the CapEx forecast for 2026. In terms of cash flow and net financial position, cash generation was one of the strongest elements of the first half, in line with our business, if you compare Q1 '25 and Q2 '25 with what we have is the same dynamics. The net financial position, as I said, was approximately EUR 95 million net of cash in June, improving by EUR 77 million compared with March. The improvement was driven by the seasonal release of net working capital associated with deliveries and by the reduction of composite inventory ahead of the summer season. Approximately EUR 37 million were returned to the shareholders through dividends during the period. And the first half cash performance reinforced the group financial flexibility and provided a solid foundation for the operating strategic priority. Two more words about net working capital. You see we are back to the seasonal range. Last year was 17.5% now we are slightly less than 15%. So we are in the range that we have in mind that is between 10% and 15%. For sure, we recovered from the unexpected slowdown of sales in Q1, but the company was quite good in reacting promptly and be back on the right track of cash generation. So I believe I'll conclude my presentation. Now is the time to share with you the annual guidance in detail. As we mentioned before, we revised the net revenues. Even if we are secured for EUR 900 million already secured, we revised in the range between EUR 1,200 million and EUR 1,240 million with an EBITDA margin between 15.5% and 15.9%. CapEx lower by EUR 10 million, just postponing some decisions that are not necessary anymore. I believe there's time for Q&A. I leave the floor to Margherita or to Stassi if he wants to add something more. If not, let's go.

No, I'm sure that the Q&A will -- I think we're ready for Q&A.

Okay. Let's go for Q&A.

Yes. Thank you for listening to our first half 2026 results presentation. We are now ready for Q&A session. We will start with live question and later on to the written question. The first question is from Adrien Duverger from Goldman Sachs.

So my first question would be on the U.S. market. Could you please comment on what you have seen throughout the first half? It seems that the second quarter has improved quite substantially in terms of order intake. Is that something that you see and expect continuing into the second half? My second question would be on the new guidance and particularly regarding the adjusted EBITDA guidance. Are the lower numbers simply a reflection of a weaker top line expectation? Or is there something else embedded in your expectations? And my last question would be on your CapEx guidance. So you mentioned that you wanted to protect the cash position and the balance sheet and you are postponing some investments. Could you please give us a bit more color? And also, are you -- is it a matter of delaying until you have, I suppose, a better idea of the strategy that you want to implement going forward?

Thanks. I will answer the first and leave the second to Marco. On the U.S., great question. I just spent 2 hours with our responsible for the U.S., Mr. Meletti. And we do see improvements, but not at the level that would make me happy. And what I mean by this is that sometimes you see improvements that are based on the market, based on somebody very smart in sales or in -- that are delivering better results. But what I think that we need in the U.S. is to rethink how we're organized, our product portfolio, which models we will push harder, what specific innovation would we need there to unlock that market. And also, another simple area, how do we actually reach the untapped potential of U.S.-based billionaires that are growing due to the so-called tech AI boom and where are these people? Are they in Florida? Are they in Silicon Valley? Are they in the New York area? And this is really a much more, I would say, a structural improvement in the U.S. that I will be looking for in the future versus a more opportunistic improvement and market-based improvement of the U.S. So I'm not ready to speak to you about all the structural improvements yet, but there is going to be more to come about how we're going to make sure that the U.S. becomes a significantly larger contributor to our business versus what it is today. Marco?

Sure. About the guidance, the revised guidance on EBITDA, as we said, we have to take into consideration 2 major factors that we see. The first one is less efficient fixed cost absorption. So we -- in other words, we put in place as normal some cost containment measures, but they are not enough to recover in efficiently or perfectly the reduction of the revenues. And the second impact, as I mentioned before, we see that in the market there is some price pressure this year. The new is that it's not coming only from a smaller competitor, but also the larger one. So we are projecting -- as Stassi said, we are not intention to sell in discount. But in some cases, we have to take into consideration not to lose every opportunity in the market. This is simply the rationale behind the revision of the EBITDA margin. And about CapEx, no, there is no any major changes. It was seen that some -- we made some postponement of some industrial facility expansion that are not needed anymore because, as I said before, we have a utilization rate of our shipyard at 80%. So we are quite happy to postpone to next year or when the necessity will come out. On the other hand, we are looking for opportunities for the Super yachts division because the slot are just 6 production slot and the production capacity is filled up at 100%. But nothing that will be reflected in CapEx in the short term. I hope it's clear, Adrien.

Second question is from Emanuele Gallazzi from Equita.

Hope you can hear me.

Yes.

Just 2 questions from my side. One is a follow-up on the pricing pressure and on what you Marco said about the pricing pressure. I just would like to understand if it is something that you are also seeing on the Made-to-measure segment. And basically, if you have seen, let's say, an increase in the price pressure through the year. The second one is still on the Made-to-measure. You are mentioning longer negotiation in the current environment. Can you just elaborate a little bit more on this? What are your clients asking at this stage? Is it just a matter of pricing, let's say, or you can tell us? And let's say, -- the last one is on the order intake in July. If you can just provide any sort of details on July trend and inflection point in your market?

Let me start again. On the pricing pressure, this is really one of the areas that I'm paying particular attention to. And the way I look at it is relatively simple. Yes, we have pricing pressure. No, not in Made-to-measure, more in the so-called middle range of our offering. And one of the things that I am reviewing every day and in the design reviews with the product teams is we don't want to be willing to use the argument of pricing pressure ever again because we have 7 brands, 7 unique brands. And if you want a Rolex, you buy Rolex, if you want to buy a Patek Philippe, you buy Patek Philippe and you don't buy a Hublot because it's cheaper. So it's very important for us to be very clear about what each brand stands for to be even more dogmatic on design language and premiumness and quality so that we don't need to be in a situation where we still are today where people are actually, in some cases, substituting some of our brands with a competitive brand that is being sold significantly cheaper. So no Made-to-measure and more to come to make us even less, call it, affected by competitive discounting.

Emanuele, I believe that Stassi has clarified the point one and partially also your second question. Longer negotiation came out from the point that we said before, we are not selling discount. We are not -- and so we have to spend more time to convince about the quality or the allure of our product. So it takes long time. There are some other competitors that are offering the product lowering their price. So it takes more time to convince them. But we are still confident and very confident of the quality of our product. So it's a matter of timing. You know better than me that providing this kind take seconds to recover from this -- from the discount given, it takes years. So we don't want to run any risk. And the last question was about July order intake. July is not concluded because hopefully, I'm still expecting something today, but it was not bad. I would say good. We are over EUR 50 million order collected in this month that usually is not a brilliant one, but it's a very good sign for us. So quite happy of this news.

Now a question from Natasha Brilliant from UBS.

I've got 3. The first question is you talked about some of the changes you're looking at in the U.S. specifically. But as you look at the whole group overall and the whole portfolio of brands, the whole business, do you think it's the right mix? Do you think it's the right setup for your customers? And internally, do you think the right sort of incentivization structures are in place? That's the first question. Second question is, does the current environment change your capital allocation priorities at all? Perhaps you could just give us an update on your latest thoughts there? And then my last question is, I believe there was a court hearing on July the 23rd with the challenge launched by KKCG. If you can give us any comments on the outcome of that or any other color, that would be very helpful.

Let me start by the first one. The strategy that this company has been pursuing or I call it the business model is incredibly powerful. And obviously, this was invented already by Norberto Ferretti. Multi-superior brands all with their own equity, all with their own leadership. They even in the beginning, had their own CEOs or general managers or I don't remember exactly in Italian, how they used to call them. This is the most classical successful way to manage a luxury business, whether that's some of the high luxury competitors or even a company like Procter & Gamble. Ultimately, that model requires an amazingly disciplined execution around the brands when it comes to the gates required to get a new model out, the design language, the consistency, the quality and so on. And my job is not to change that model. We're pretty much where we are with the 7 brands. We could be 8, we could be 6. We really need to become -- for example, you have not been told anything about brands in this presentation. It's all Composites here, CRN, Made-to-measure. We have not talked brands. We've shown you a lot of beautiful pictures. And in the future, I would be looking at brand performance, portfolio performance by brand, including how do we actually grow each of the brands with accountability for the different brands. So clearly, that's what you may call it a change because maybe it's a change against the way we've been presenting ourselves more recently. But I don't really think that this is a real change against the way this company was thought about and created in the first. So that is, call it, what I call delivering a better execution against the business model we already have. Geographically, I'm a great believer in feed the big first. So clearly, regions like making sure we continue to be strong in Europe, making sure we have a real business model that is structurally going to make some changes in the way we do business in the U.S. and securing that when the uncertainty in the Middle East eases, that we'll be the first group to be there as an option for the many buyers and future owners of the group. So this is my thinking on the model. Will there be any changes in prioritization? I'll be guided by shareholder return and return on capital, of course. There may be some internal reshuffling, but that is the way I look at the business model today and what we're doing and we will be doing for the future as well. Marco?

I believe that you have answered.

Have I answered?