Ferrari(RACE) - 2024 Q2 - Quarterly Report

Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a comprehensive analysis of Ferrari's financial performance, liquidity, and capital resources for the reporting period, including key operational highlights and future outlook Financial and Operational Highlights Ferrari reported strong growth in revenue and profit for both the second quarter and first half of 2024, with shipments seeing a modest increase driven by models like the Purosangue, alongside key corporate events including a new €500 million bond issuance, the inauguration of the e-building, and continued share repurchases Financial Highlights (€ million) | | For the three months ended June 30, | For the six months ended June 30, | | :--- | :--- | :--- | :--- | :--- | | | 2024 | 2023 | 2024 | 2023 | | Net revenues | 1,712 | 1,474 | 3,297 | 2,903 | | Operating profit (EBIT) | 511 | 437 | 953 | 822 | | Net profit | 413 | 334 | 765 | 631 | | Diluted EPS (€) | 2.29 | 1.83 | 4.23 | 3.46 | Balance Sheet Highlights (€ million) | | At June 30, 2024 | At December 31, 2023 | | :--- | :--- | :--- | | | | | | Total assets | 8,890 | 8,051 | | Debt | 3,129 | 2,477 | | Total equity | 3,107 | 3,071 | Shipments (Units) | Shipments (Units) | For the six months ended June 30, 2024 | For the six months ended June 30, 2023 | | :--- | :--- | :--- | | Total EMEA | 3,228 | 3,172 | | Total Americas | 1,978 | 1,831 | | Mainland China, Hong Kong and Taiwan | 595 | 735 | | Rest of APAC | 1,243 | 1,221 | | Total | 7,044 | 6,959 | - On May 21, 2024, the company issued a €500 million bond due in 2030 with a 3.625% coupon, intended for general corporate purposes[15] - The new e-building was inaugurated on June 21, 2024, designed for flexible production of cars with internal combustion, hybrid, and electric powertrains, and will also produce strategic electrical components like high-voltage batteries and electric motors[16] - The fourth tranche of the share repurchase program was completed on June 26, 2024, with a fifth tranche of up to €250 million planned from July 1, 2024, to November 26, 2024[17] Results of Operations This section details the financial performance for Q2 and H1 2024 compared to 2023, analyzing revenue, costs, and profitability drivers, with both periods seeing significant revenue and EBIT growth primarily driven by a richer product and country mix and increased personalizations, offsetting negative currency impacts and higher operating costs Q2 2024 Performance vs. Q2 2023 In Q2 2024, net revenues increased by 16.2% to €1,712 million, and EBIT grew by 17.0% to €511 million, fueled by a richer product mix led by the Purosangue and Roma Spider, increased personalizations, and higher volumes, which more than compensated for negative foreign currency impacts and increased SG&A and R&D expenses Q2 Financial Metrics (€M) | Metric | Q2 2024 (€M) | Q2 2023 (€M) | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net revenues | 1,712 | 1,474 | +238 | +16.2% | | Operating profit (EBIT) | 511 | 437 | +74 | +17.0% | | Net profit | 413 | 334 | +79 | +23.6% | | EBIT Margin | 29.9% | 29.7% | +0.2pp | - | - Shipments in Q2 2024 were driven by the Purosangue and the ramp-up of the Roma Spider, with hybrid models constituting 48% of total shipments and ICE models representing 52%[25] - The increase in EBIT was primarily driven by a positive product and country mix (€122 million) and higher volumes (€10 million), partially offset by a negative foreign currency impact (€35 million), increased SG&A costs (€30 million), and higher R&D expenses (€11 million)[36] H1 2024 Performance vs. H1 2023 For the first half of 2024, net revenues rose 13.6% to €3,297 million, and EBIT increased 16.0% to €953 million, with strong performance driven by a favorable product mix, particularly from the Daytona SP3 and 499P Modificata, along with higher contributions from personalizations and a positive country mix led by the Americas, outweighing negative currency effects and planned increases in operating expenses H1 Financial Metrics (€M) | Metric | H1 2024 (€M) | H1 2023 (€M) | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net revenues | 3,297 | 2,903 | +394 | +13.6% | | Operating profit (EBIT) | 953 | 822 | +131 | +16.0% | | Net profit | 765 | 631 | +134 | +21.3% | | EBIT Margin | 28.9% | 28.3% | +0.6pp | - | - Shipments in H1 2024 were driven by the Purosangue, Roma Spider, and 296 GTS, with hybrid models accounting for 47% of total shipments and ICE models making up the remaining 53%[49] - The increase in EBIT was mainly due to a positive product and country mix (€245 million), which was partially offset by negative foreign currency impacts (€58 million), increased SG&A costs (€40 million), and higher R&D expenses (€28 million)[60][62] Liquidity and Capital Resources The company details its liquidity management, cash flow generation, and capital investment strategy, with cash flow from operations increasing significantly in H1 2024 and capital expenditures also rising, reflecting investments in product innovation and infrastructure like the new e-building, maintaining strong liquidity through robust cash generation and available credit facilities Cash Flows For H1 2024, cash from operating activities was €820 million, up from €688 million in H1 2023, driven by higher net profit, while cash used in investing increased to €462 million from €347 million due to higher capital expenditures, and cash used in financing activities decreased substantially to €150 million from €613 million, as proceeds from a new bond issuance largely offset dividend payments and share repurchases Cash Flow Summary (€ million) | Cash Flow (€ million) | For the six months ended June 30, 2024 | For the six months ended June 30, 2023 | | :--- | :--- | :--- | | Cash flows from operating activities | 820 | 688 | | Cash flows used in investing activities | (462) | (347) | | Cash flows used in financing activities | (150) | (613) | | Total change in cash and cash equivalents | 210 | (279) | - The decrease in cash used in financing activities was primarily due to €496 million in proceeds from a new bond issuance, which partially offset €414 million in dividend payments and €284 million in share repurchases[82][84] Capital Expenditures Capital expenditures in H1 2024 increased to €527 million from €369 million in H1 2023, reflecting intensified investment in intangible assets for future models (€246 million) and in property, plant, and equipment (€281 million), particularly for the new e-building, paint shop, and production lines to support future growth and technological advancements Capital Expenditures (€ million) | Capital Expenditures (€ million) | For the six months ended June 30, 2024 | For the six months ended June 30, 2023 | | :--- | :--- | :--- | | Total intangible assets | 246 | 233 | | Total property, plant and equipment | 281 | 136 | | Total capital expenditures | 527 | 369 | - Significant investments in property, plant, and equipment were directed towards the new e-building (inaugurated June 2024), car and engine production lines, and the new paint shop[94] - Contractual commitments for the purchase of property, plant and equipment increased significantly to €426 million at June 30, 2024, from €115 million at December 31, 2023, reflecting a period of structurally higher capital spending[95] Non-GAAP Financial Measures This section defines and reconciles non-GAAP measures like EBITDA, Adjusted EBIT, Net Debt, and Free Cash Flow, which management uses to assess performance, noting that for the periods presented, there were no adjustments, meaning the adjusted figures were equal to their IFRS counterparts, with the company's Net Industrial Debt increasing while Industrial Free Cash Flow also grew Reconciliation to EBITDA (€ million) | Reconciliation to EBITDA (€ million) | For the three months ended June 30, | For the six months ended June 30, | | :--- | :--- | :--- | :--- | :--- | | | 2024 | 2023 | 2024 | 2023 | | Net profit | 413 | 334 | 765 | 631 | | (+) Income tax expense | 98 | 94 | 186 | 178 | | (+) Financial expenses, net | — | 9 | 2 | 13 | | Operating profit (EBIT) | 511 | 437 | 953 | 822 | | (+) Amortization and depreciation | 158 | 152 | 321 | 304 | | EBITDA | 669 | 589 | 1,274 | 1,126 | Net Debt Calculation (€ million) | Net Debt Calculation (€ million) | At June 30, 2024 | At December 31, 2023 | | :--- | :--- | :--- | | Total debt | (3,129) | (2,477) | | Cash and cash equivalents | 1,332 | 1,122 | | Net (Debt)/Cash | (1,797) | (1,355) | | Net (Debt)/Cash of Financial Services | (1,356) | (1,256) | | Net Industrial (Debt)/Cash | (441) | (99) | Free Cash Flow (€ million) | Free Cash Flow (€ million) | For the six months ended June 30, 2024 | For the six months ended June 30, 2023 | | :--- | :--- | :--- | | Cash flows from operating activities | 820 | 688 | | Investments in PP&E, intangible assets | (463) | (348) | | Free Cash Flow | 357 | 340 | | Free Cash Flow from Industrial Activities | 416 | 386 | 2024 Outlook Ferrari has revised its full-year 2024 guidance upward, citing a positive product and country mix along with stronger personalizations, now anticipating higher net revenues, adjusted EBIT, and adjusted diluted EPS than previously forecasted, while maintaining robust Industrial Free Cash Flow generation - Key assumptions for the revised 2024 guidance include: - Positive product and country mix with stronger personalizations - Persistent cost inflation - Continuous brand investments and higher racing expenses - Robust Industrial Free Cash Flow generation, despite increased capital expenditures and taxes[141] 2024 Guidance (€ Billion, unless stated) | 2024 Guidance (€ Billion, unless stated) | Previous 2024 Guidance | Upward Revised 2024 Guidance | | :--- | :--- | :--- | | NET REVENUES | >6.4 | >6.55 | | ADJ. EBIT | ≥1.77 (≥27%) | ≥1.82 (≥27.5%) | | ADJ. DILUTED EPS (€) | ≥7.50 | ≥7.90 | | ADJ. EBITDA | ≥2.45 (≥38%) | ≥2.50 (≥38%) | | INDUSTRIAL FCF | >0.9 | Up to 0.95 | Semi-Annual Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited core financial statements for the three and six months ended June 30, 2024, including the Income Statement, Statement of Comprehensive Income, Statement of Financial Position, Statement of Cash Flows, and Statement of Changes in Equity, prepared in compliance with IAS 34 Semi-Annual Consolidated Income Statement The income statement reports the Group's revenues, expenses, and profit over the reporting periods, with Ferrari achieving a net profit of €765.5 million for the six months ended June 30, 2024, a significant increase from the €631.3 million reported for the same period in 2023 Income Statement Summary (€ thousand) | (€ thousand) | For the six months ended June 30, 2024 | For the six months ended June 30, 2023 | | :--- | :--- | :--- | | Net revenues | 3,296,688 | 2,902,714 | | Operating profit (EBIT) | 953,200 | 821,926 | | Net profit | 765,496 | 631,308 | Semi-Annual Consolidated Statement of Financial Position The statement of financial position presents the company's assets, liabilities, and equity at the end of the reporting period, with total assets growing to €8.89 billion from €8.05 billion at December 31, 2023, and total equity increasing to €3.11 billion as of June 30, 2024 Statement of Financial Position Summary (€ thousand) | (€ thousand) | At June 30, 2024 | At December 31, 2023 | | :--- | :--- | :--- | | Total non-current assets | 4,299,620 | 4,065,305 | | Total current assets | 4,589,951 | 3,986,007 | | Total assets | 8,889,571 | 8,051,312 | | Total equity | 3,106,879 | 3,070,622 | | Total equity and liabilities | 8,889,571 | 8,051,312 | Semi-Annual Consolidated Statement of Cash Flows This statement details the cash inflows and outflows from operating, investing, and financing activities, showing that for the first six months of 2024, the Group generated €820.4 million from operating activities and saw a net increase in cash and cash equivalents of €210.2 million, bringing the ending balance to €1.33 billion Cash Flow Statement Summary (€ thousand) | (€ thousand) | For the six months ended June 30, 2024 | For the six months ended June 30, 2023 | | :--- | :--- | :--- | | Total cash flows from operating activities | 820,416 | 688,015 | | Total cash flows used in investing activities | (462,352) | (347,240) | | Total cash flows used in financing activities | (149,642) | (612,514) | | Total change in cash and cash equivalents | 210,150 | (278,460) | | Cash and cash equivalents at end of the period | 1,332,131 | 1,110,441 | Notes to the Semi-Annual Condensed Consolidated Financial Statements This section provides detailed disclosures supporting the primary financial statements, covering key accounting policies, segment information, debt structure, equity changes, share-based compensation, related-party transactions, and other significant financial items for a comprehensive understanding of the Group's financial position and performance Note 6: Net Revenues This note provides a breakdown of net revenues by category, showing that for the first six months of 2024, Cars and spare parts remained the primary revenue source at €2.86 billion, demonstrating strong growth from the prior year, while Sponsorship, commercial and brand revenues also increased, reaching €313 million Revenues by Category (€ thousand) | Revenues by Category (€ thousand) | For the six months ended June 30, 2024 | For the six months ended June 30, 2023 | | :--- | :--- | :--- | | Cars and spare parts | 2,855,841 | 2,499,458 | | Sponsorship, commercial and brand | 312,635 | 277,226 | | Other | 128,212 | 126,030 | | Total net revenues | 3,296,688 | 2,902,714 | Note 20: Equity This note details changes in the company's share capital and treasury shares, indicating that during the first six months of 2024, the company repurchased 725,422 common shares under its buyback program for a total consideration of €283.8 million, and as of June 30, 2024, held 5.51% of its total issued share capital in treasury Change in Outstanding Common Shares | Change in Outstanding Common Shares | Number of Shares | | :--- | :--- | | Balance at December 31, 2023 | 180,418,090 | | Shares repurchased under program | (725,422) | | Shares assigned under equity plans | 41,790 | | Other changes | 23,375 | | Balance at June 30, 2024 | 179,757,833 | Note 21: Share-Based Compensation This note describes the company's various equity incentive plans, including a new Equity Incentive Plan for 2024-2026 that granted approximately 40,885 PSUs and 15,401 RSUs, with total share-based compensation expense for the first half of 2024 amounting to €12.3 million - A new Equity Incentive Plan 2024-2026 was approved and implemented, covering performance and service periods from 2024 to 2026[223] Share-Based Compensation Expense (€ thousand) | Share-Based Compensation Expense (€ thousand) | For the six months ended June 30, 2024 | For the six months ended June 30, 2023 | | :--- | :--- | :--- | | Total share-based compensation expense | 12,318 | 11,483 | Note 23: Debt Total debt increased to €3.13 billion as of June 30, 2024, from €2.48 billion at year-end 2023, primarily driven by the issuance of a new €500 million bond in May 2024, with the Group's debt portfolio consisting of bonds and notes, asset-backed financing, bank borrowings, and lease liabilities, while maintaining €550 million in undrawn committed credit lines Debt Composition (€ thousand) | Debt Composition (€ thousand) | At June 30, 2024 | At December 31, 2023 | | :--- | :--- | :--- | | Bonds and notes | 1,399,307 | 903,673 | | Asset-backed financing (Securitizations) | 1,269,089 | 1,166,473 | | Borrowings from banks | 302,597 | 290,930 | | Lease liabilities | 125,995 | 73,047 | | Other debt | 32,128 | 43,063 | | Total debt | 3,129,116 | 2,477,186 | - On May 21, 2024, the company issued a €500 million bond due in 2030 with a 3.625% coupon, which was admitted to trading on Euronext Dublin[248] - As of June 30, 2024, the Group had €550 million in available and undrawn committed credit lines with maturities ranging from 2025 to 2026[259] Note 27: Related Party Transactions This note details transactions with related parties, primarily the Stellantis Group and Exor Group, with key commercial transactions in H1 2024 including residual engine sales to Maserati following the contract's expiration in December 2023, technical cooperation with Stellantis, and sponsorship revenue from Iveco Group - Transactions with related parties are conducted on normal commercial terms, with key relationships including Stellantis Group (technical cooperation, engine sales to Maserati) and Exor Group (sponsorships)[276][277] Transactions with Related Parties (€ thousand) | Transactions with Related Parties (€ thousand) | For the six months ended June 30, 2024 | | :--- | :--- | | | Net revenues | Costs | | Stellantis Group companies | 8,332 | 2,767 | | Exor Group companies | 40 | 1,022 | | Other related parties | 1,761 | 7,219 | Note 30: Subsequent Events After the reporting period, Ferrari N.V. was admitted to the Italian Revenue Agency's cooperative compliance program, effective from 2023, and the company continued its share buyback program, purchasing an additional 159,077 common shares for €61.7 million between July 1 and July 29, 2024 - Ferrari N.V. has been admitted to the cooperative compliance program by the Italian Revenue Agency, effective as of 2023, strengthening its relationship with Italian tax authorities[300] - Under its share repurchase program, the company bought an additional 159,077 common shares for €61.7 million between July 1, 2024, and July 29, 2024[301]