Ferrari N.V. (NYSE:RACE) Q4 2023 Earnings Call Transcript

Ferrari N.V. (NYSE:RACE) Q4 2023 Earnings Call Transcript February 1, 2024

Ferrari N.V. beats earnings expectations. Reported EPS is $1.74, expectations were $1.59. Ferrari N.V. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and thank you for standing by. Welcome to the Ferrari 2023 Full Year Results Conference Call and Webcast [Operator Instructions]. Please note that today’s conference is being recorded. I would now like to turn the conference over to your speaker, Nicoletta Russo, Head of Investor Relations. Please go ahead.

Nicoletta Russo: Thank you, and welcome to everyone who is joining us. Today, we plan to cover the Group’s full of 2023 operating results and 2024 guidance, and the duration of the call is expected to be around 60 minutes. Today’s call will be hosted by the Group CEO, Mr. Benedetto Vigna; and Group CFO, Mr. Antonio Picca Piccon. All relevant materials are available in the Investors section of the Ferrari corporate Web site. And at the end of the presentation, we will be available to answer your questions. Before we begin, let me remind you that any forward-looking statements we might make during today’s call are subject to the risks and uncertainties mentioned in the Safe Harbor statements included on Page 2 of today’s presentation, and the call will be governed by this language. With that said, I’d like to turn the call over to Benedetto.

Benedetto Vigna: Gracias, Nicoletta. And thanks everyone for joining us today. 2023 will be remembered as the year in which we accomplished the many achievements and we strengthened our brand across each of its three [stores], racing, sport cars and lifestyles. For this, I would like to thank all the women and men of Ferrari for their outstanding work, all our clients for their continuous trust in our brand, and all our partners, suppliers, dealers and sponsors with whom we have continued to strengthen our relations. Among the many achievements realizing 2023, I like to mention three. The first historic victory at Le Mans. The second is the fund new model launches, further enriching our beautiful product offering together with a variety of new clients, engagement experiences.

And last but not least, the new iconic bag and Maranello clutch that stems out to the cooperation between colleagues in Maranello belongs to sports car team and those in Milan of our lifestyle department. These achievements are reflected in our record full year financial results across all metrics. So let’s start reviewing together a few key numbers of year 2023. Revenues were at approximately EUR6 billion. EBITDA at EUR2.28 billion with record yearly EBITDA margin of 38.2%. Net profit first in our history well over EUR1 billion threshold with a remarkable net profit margin of 21%. And industrial free cash flow generation of approximately EUR930 million on which about EUR800 million distributed to shareholders between dividends and share buyback.

And now after the numbers, let’s deep dive into our racing activities. Winning the 24 hours of Le Mans was an unforgettable day for our history. I was there. They will never forget June 11 afternoon because it saw our victorious return to the top class of the World Endurance Championship on the centenary of this legendary 24 hour race. The Ferrari 499P win was a true team effort. Every area, every area of our company worked together to contribute to our hypercar success. And I am really proud of everyone, as we say we are and we act as one Ferrari. In Formula 1, we fought till the very last race. Even though the last season has been a difficult one often short on satisfaction, we know we must continue to work tirelessly to return to the level that our tifosi rightly expect of us and we look forward to it.

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Q&A Session

The continuous will to progress and strive for excellence in racing and everything we do testify our effort and our willingness to always push the boundaries of technology and innovation audaciously. And this leads me to the achievements we reached in our sports cars. In 2023, we unveiled five new models out of the 15 models announced at 2022 Capital Markets Day. Three models for the road Roma Spider, SF90 XX Stradale and SF90 XX Spider. They all raised the bar of technology and design still further to meet and exceed the desires of our clients. And two models for the track. During the Finali Mondiali at the Mugello Circuit last quarter, we unveiled the 296 Challenge and the 499P Modificata, both of which will set new benchmarks in tracks driving trails of our most passionate racing clients.

Consistently and coherently, we follow our strategy of different Ferrari for different moments and different Ferrari for different Ferrari speed. This year, we continued to engage with our clients with many experience on the road and on the track. I refer to unique and truly engaging location, such as the Finali Mondiali, our Cavalcade, the legacy tools, our legacy tools to mention just a few of them. These are all experiences which continue to bond our community even further and evoke a true sense of belonging. These exclusive events enable our clients, our tifosi and enthusiasts to interact with the brand and live experiences together. 2023 has been a year of learning for our lifestyle activities, which have shown positive indicators among which improved retail performances, successful activation in conjunction, and this is reality, in conjunction with racing and brand events and record museums visitors.

In fact, 740,000 brand lovers visited our museums in Maranello and Modena in the years, almost 20% more people than one year ago, confirming the strength of the brand and the passion of our community. Throughout all the year, throughout 2023, we have also done relevant progresses in our carbon neutrality journey. Indeed, we reduced our Scope 1 and Scope 2 emission by 7% in 2023 and by 16% versus 2021. We built our first prototype engine from recycled aluminum. We also installed solar panels providing an extra 2.4 megawatt peak power compared to last year, and additional 1 megawatt peak power will become available in the coming months from the Renewable Energy Community, the first ever energy community in Italy to be backed by an industrial company for the benefit of its local area.

And this is only one demonstration of the moral obligation we feel to give back to local community. All of these developments, as well as the record result has been possible, thanks to the passion and dedication of all my colleagues here. And through their achievement in line with the company’s strong performance indicators, I’m pleased to announce the yearly competitive award of up to nearly EUR13,500 for our employees. We are also proud to mention the additional four welfare initiatives that we have announced at the last November 13th, a broad based share ownership plan for our 5,000 plus employees, the extension of health checkups, the parenting support as well as the 250 new eyes. On top, we have also received the equal salary certification on a global level for the first time, a result we can all be proud of.

2023 was characterized by global tensions, geopolitical conflicts, supply chain disruption and cost inflation. All challenge we have learned a lot from. Our flexibility, our agility, together with the constant support of our clients and partners, allow us to look at 2024 with confidence. Such confidence also derives from the positive momentum that we continue to experience. Notwithstanding the current challenging macroeconomic environment, the vitality of our business is once again confirmed the by the order book on current models, which remain strong across all geographies and covers the entire 2025. During last month, I’ve been visiting several dealerships in Europe, USA and different countries in Asia, and I can tell you that the traction of our brand is really strong.

You can really [predict] when you meet our clients into the dealership and you see how they interact with our dealers you can easily understand their strong attachment to our brand. Our dealerships are a great point of aggregation for our clients and events organized by our dealers help to give a boost to the spontaneous aggregation of our loyal clients. The residual values remain sound with different dynamics in the region and normalizing from the peaks registered in the post pandemic period when a lack of new product boosted them. The visibility granted by order book give us the confidence to look at the future, but at the same time, we need to keep always four wheels on the ground. Confident community and will to progress has been our and will be our north star during execution of our business plan.

Following an initial phase of our business plan characterized by revenues and profitability expansion, in 2024, we continue to grow our top line, while consolidating percentage margins, which we expect to further expand towards the end of the current business plan. The record result of 2023, the exceptional visibility on our order book and the extraordinary performance of our business allow us to look at the high end of the 2026 target with stronger confidence. But beyond the record numbers what to expect in 2024 from us? In racing, our DNA, we will compete at the top in Formula 1 and Endurance. We have recently confirmed the World Endurance Championship team and in Formula 1, we have reinforced the technical team and expanded the manufacturing area, which is already up and running.