H1 2019 results confirm 2019 guidance with improved cash flow

Publication date: 
02 Aug 2019

UNVEILING OF FIRST HYBRID SERIES-PRODUCTION SUPERCAR, SF90 STRADALE

  • Total shipments of 2,671 units, up +8.4%
  • Net revenues of Euro 984 million, up +8.6% or +6.8% at constant currency
  • Adj. EBITDAof Euro 314 million, up +8.7% with an EBITDA margin of 32.0%
  • Adj. diluted EPS of Euro 0.96 (+13.9%)
  • Industrial free cash flowgeneration of Euro 139 million, reflecting also the positive cash impact from advances on the Ferrari Monza SP1 and SP2 as well as Patent Box benefit

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Confirming Guidance approaching the high end of the range on all metrics at currently prevailing exchange rates. Increasing industrial free cash flow target: 

  • Net revenues: > Euro 3.5 billion 
  • Adj. EBITDA: Euro 1.2-1.25 billion
  • Adj. EBIT: Euro 0.85-0.9 billion
  • Adj. diluted EPS (1): Euro 3.50-3.70 per share
  • Industrial free cash flow: > Euro 0.55 billion (from ~ Euro 0.45 billion)

Maranello (Italy), August 2, 2019 – Ferrari N.V. (NYSE/MTA: RACE) (“Ferrari” or the “Company”) today announces its consolidated preliminary results(4) for the second quarter and six months ended June 30, 2019.

Shipments(5)(6)

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Shipments totaled 2,671 units in the second quarter 2019, up 208 units or +8.4% vs. prior year. This achievement was driven by a 12.3% increase in sales of our 8 cylinder models (V8), while the 12 cylinder models (V12) decreased by a few units. The  performance was mainly led by robust deliveries of the Ferrari Portofino as well as the 812 Superfast. This was partially offset by lower volume from the 488 family, with the 488 GTB and the 488 Spider approaching the end of their lifecycles, partially offset by the 488 Pista ramp up and the first deliveries of the 488 Pista Spider.

EMEA(6) grew 11.4%, Rest of APAC(6) was up 5.8%, while Mainland China, Hong Kong and Taiwan were up 63.3% and Americas(6) down 5.5%. Geographic mix shifted in favor of Mainland China as a result of the decision to accelerate client deliveries in advance of the early introduction of new emission regulations as was the case in the first quarter and with lower shipments to the U.S. reflecting the above mentioned model phase in and phase out within the 488 family.

Total net revenues

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Net revenues for the second quarter 2019 increased to Euro 984 million, up 8.6% at current currency and up 6.8% at constant currency(1). Revenues in Cars and spare parts(7) (Euro 766 million, +14.4% at current currency or +12.4% at constant currency(1)) were supported by the ramp up of the 488 Pista and the 488 Pista Spider, as well as higher volumes of the Ferrari Portofino and the 812 Superfast, this was partially offset by the prior year shipments of LaFerrari Aperta as well as lower sales of the 488 GTB and the 488 Spider. Revenues growth was also supported by a strong positive contribution from personalization programs along with deliveries of the FXX K EVO. The erosion in Engines(8) revenues (Euro 53 million, -34.8% at current and constant currency(1)) reflected lower shipments to Maserati. Sponsorship, commercial and brand(9) revenues (Euro 131 million, +3.6% at current currency or +2.1% at constant currency(1)) slightly increased due to higher revenues generated by Formula 1 racing activities. Currency, including translation and transaction impacts as well as foreign currency hedges, had a positive impact of Euro 17 million (mainly USD).

Adjusted EBITDA(2) and Adjusted EBIT(2) 

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Q2 2019 Adjusted EBIT(2) was Euro 239 million, +10.1% at current currency or +3.7% at constant currency(1) due to higher volumes (Euro 27 million) and a slight Mix / price variance favorability (Euro 5 million). This performance was attributable to the combined impact of the improved personalization rate and deliveries of the FXX K EVO, which more than offset product mix. Industrial costs / research and development costs increased (Euro 16 million), mainly due to higher operational start up costs due to the introduction of new models as well as higher spending in Formula 1 racing activities. SG&A increased (Euro 6 million) to support the Company’s growth.

The tax rate was reduced to 20% as a result of the previously disclosed advance agreement on the Patent Box.

As a result of the items described above, Adjusted diluted earnings(2) per share for the second quarter reached Euro 0.96, up 13.9% vs. prior year.

Industrial free cash flow(2) for the three months ending on June 30, 2019 was Euro 139 million, driven by the Adjusted EBITDA(2) growth, the positive cash impact generated by the Patent Box benefit, as well as residual collection of initial advances on the Ferrari Monza SP1 and SP2. This was partially offset by capital expenditures of Euro 173 million.

Net Industrial Debt(2)(11) as of June 30, 2019 was Euro 353 million, which compares with Euro 370 million as of December 31, 2018 and with Euro 192 million as of March 31, 2019. The increase versus March 31, 2019 was due to the cash impact of the Euro 195 million dividend distribution(12) and of the Euro 99 million of share repurchases executed in the second quarter of 2019, which more than offset the positive industrial free cash flow. Lease liabilities per IFRS 16 as of June 30, 2019 remained close to stable at Euro 63 million.

Confirming Guidance approaching the high end of the range on all metrics at currently prevailing exchange rates. Increasing industrial free cash flow target:

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Second quarter 2019 highlights

Ferrari’s V8 takes its fourth consecutive International Engine & Powertrain of the Year award

On May 22, 2019 the 21st edition of the International Engine & Powertrain of the Year saw Ferrari triumph again, taking the overall title with its 720-cv, 3.9-litre V8 for the fourth year running, a feat never achieved by any other engine in the history of the awards.

Ferrari SF90 Stradale - the new series-production supercar

On May 29, 2019 Ferrari introduced a new chapter in its history with the introduction of its first series production PHEV (Plug-in Hybrid Electric Vehicle), the SF90 Stradale. The new top of the range model is revolutionary on every level and represents a true paradigm shift delivering unprecedented performance for a new series-production supercar. Statistics such as 1,000 cv, and a weight-to-power ratio of 1.57 kg/cv, and 390 kg of downforce at 250 km/h speak volumes regarding the SF90 Stradale’s characteristics.

Subsequent events:

Completion of the first tranche of the disclosed multi-year share repurchase program and announcement of the second tranche

On July 1, 2019 the Company announced the completion of the Euro 150 million first tranche and the start of a second tranche of Euro 200 million and to be completed by  no later than December 27, 2019.

Under the common share repurchase program, the Company has purchased a further

276,376 common shares for a total consideration of Euro 41 million since June 30,

2019. As a result, as of July 30, 2019 the Company had repurchased 1,520,936 common shares in 2019.

Cash tender offers on certain series of euro notes issued by Ferrari N.V.

On July 4, 2019 Ferrari N.V. announced its intention to purchase its Euro 700,000,000 0.250 per cent. Notes due 16 January 2021 and Euro 500,000,000 1.500 per cent. Notes due 16 March 2023 for cash up to a maximum aggregate nominal amount of Euro 250,000,000 (the “Offer”).

Pursuant to the Offer, on July 12, 2019, the Company increased the maximum aggregate nominal amount to Euro 315,395,000 and accepted for purchase valid tenders for an aggregate nominal amount of Euro 200,000,000 of the 2021 Notes and Euro 115,395,000 of the 2023 Notes. After July 16, 2019 (Settlement Date), nominal amount outstanding is Euro 500,000,000 for the 2021 Notes and Euro 384,605,000 for the 2023 Notes.

Ferrari takes the Red Dot: Best of the Best award for the Monza SP1

On July 8, 2019 the award ceremony of the Red Dot Award: Product Design 2019 took place in Essen, Germany. Ferrari received two prestigious accolades: the Red Dot: Best of the Best award for the Monza SP1 and an honorary recognition for the design team.

Ferrari N.V. taps the US Private Placements market with a EUR 300 million offering  in two tranches of 10 and 12 year maturities

On July 31, 2019, Ferrari N.V. announced it has completed a private placement to certain US institutional investors of EUR 150,000,000 aggregate principal amount of 1.12% senior notes due 2029 and EUR 150,000,000 aggregate principal amount of 1.27% senior notes due 2031.

Capex and R&D

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Non-GAAP financial measures

Operations are monitored through the use of various non-GAAP financial measures that may not be comparable to other similarly titled measures of other companies.

Accordingly, investors and analysts should exercise appropriate caution in comparing these supplemental financial measures to similarly titled financial measures reported by other companies.

We believe that these supplemental financial measures provide comparable measures of financial performance which then facilitate management’s ability to identify operational trends, as well as make decisions regarding future spending, resource allocations and other operational decisions.

Certain totals in the tables included in this document may not add due to rounding.

Total Net Revenues, EBITDA, Adj. EBITDA, EBIT and Adj. EBIT at constant currency eliminate the effects of changes in foreign currency (transaction and translation) and of foreign currency hedges.

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EBITDA is defined as net profit before income tax expense, net financial expenses and depreciation and amortization.

Adjusted EBITDA is defined as EBITDA as adjusted for certain income and costs which are significant in nature, expected to occur infrequently, and that management considers not reflective of ongoing operational activities.

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Adjusted Earnings Before Interest and Taxes (“Adjusted EBIT”) represents EBIT as adjusted for certain income and costs which are significant in nature, expected to occur infrequently, and that management considers not reflective of ongoing operational activities.

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Adjusted net profit represents net profit as adjusted for certain income and costs (net of tax effect) which are significant in nature, expected to occur infrequently, and that management considers not reflective of ongoing operational activities.

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Adjusted EPS represents EPS as adjusted for certain income and costs (net of tax effect) which are significant in nature, expected to occur infrequently, and that management considers not reflective of ongoing operational activities.

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Basic and diluted EPS(14)

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Net Industrial Debt, defined as total Debt less Cash and cash equivalents (Net Debt), further adjusted to exclude the debt and cash and cash equivalents related to our financial services activities (Net Debt of Financial Services Activities).

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Free Cash Flow and Free Cash Flow from Industrial Activities are two of management’s primary key performance indicators to measure the Group’s performance. Free Cash Flow is defined as cash flows from operating activities less investments in property, plant and equipment and intangible assets. Free Cash Flow from Industrial Activities is defined as Free Cash Flow adjusted to exclude the operating cash flow from our financial services activities (Free Cash Flow from Financial Services Activities).

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On August 2, 2019, at 3.00 p.m. CEST, management will hold a conference call to present the Q2 2019 results to financial analysts and institutional investors. The call can be followed live and a recording will subsequently be available on the Group website http://corporate.ferrari.com/en/investors. The supporting document will be made available on the website prior to the call.

1 The constant currency presentation eliminates the effects of changes in foreign currency (transaction and translation) and of foreign currency hedges

2 Refer to specific note on non-GAAP financial measures

3 Calculated using the weighted average diluted number of shares for 2018

4 These results have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and IFRS as endorsed by the European Union

5 Excluding the XX Programme, racing cars, Fuori Serie, one-off and pre-owned cars 

6 EMEA includes: Italy, UK, Germany, Switzerland, France, Middle East (includes the United Arab Emirates, Saudi Arabia, Bahrain, Lebanon, Qatar, Oman and Kuwait) and Rest of EMEA (includes Africa and the other European markets not separately identified); Americas includes: United States of America, Canada, Mexico, the Caribbean and Central and South America; Rest of APAC mainly includes: Japan, Australia, Singapore, Indonesia, South Korea, Thailand and Malaysia

7 Includes the net revenues generated from shipments of our cars, including any personalization revenue generated on these cars and sales of spare parts

8 Includes the net revenues generated from the sale of engines to Maserati and the revenues generated from the rental of engines to other Formula 1 racing teams

9 Includes the net revenues earned by our Formula 1 racing team through sponsorship agreements and our share of the Formula 1 World Championship commercial revenues and net revenues generated through the Ferrari brand, including merchandising, licensing and royalty income

10 Primarily includes interest income generated by our financial services activities and net revenues from the management of the Mugello racetrack

11 Net Industrial Debt redefined as Net Debt less Net Debt of Financial Services Activities

12 Including Euro 12 million of quick refund to shareholders due to eligibility for withholding exemption, which will be paid in Q3 2019

13 Capitalized as intangible assets

14 For the three and six months ended June 30, 2019 and 2018 the weighted average number of shares for diluted earnings per share was increased to take into consideration the theoretical effect of the potential common shares that would be issued under the Company’s equity incentive plans (assuming 100 percent of the related awards vested)

15  Free cash flow from industrial activities for the three and six months ended June 30, 2019 includes Euro 12 million of quick refund to shareholders due to eligibility for withholding exemption, which will be paid in Q3 2019. Free cash flow from industrial activities for the three and six months ended June 30, 2018 includes Euro 5 million of quick refund to shareholders due to eligibility for withholding exemption, which was paid in Q3 2018

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