Key Insights from The Italian Sea Group Earnings Call

This earnings call transcript reveals a company navigating a complex luxury market with a clear strategy, strong execution, and promising future prospects. Here’s a breakdown of key insights for a value investor, categorized by strengths, weaknesses/risks, and opportunities:

 

Strengths & Positive Signals

• Niche Market Dominance: The Italian Sea Group (TISG) is deliberately focusing on large, fully custom yachts (>60m). This is a high-barrier-to-entry segment with limited competition. Management repeatedly emphasizes the technical difficulty and experience required – a strong moat against new entrants. They are essentially positioning themselves as the “Ferrari” of yacht building.
• Strong Demand & Backlog: Despite global tensions, demand for luxury yachts (especially larger ones) remains robust. A €1.24 billion backlog provides significant revenue visibility. The company is confident in achieving its 2025 guidance and sees potential for further order intake. The fact that they are already ~50% through realizing the 2024 backlog into revenue for 2025 is a positive sign.
• Financial Performance: Revenue grew by 11% YoY, with an impressive EBITDA margin of 17.4%. While net profit was slightly down due to a one-time tax adjustment (explained clearly), the underlying profitability remains strong. The company is focused on maintaining and even increasing margins in 2025.
• Client Relationships & Loyalty: Management highlights deep, long-term relationships with UHNW clients built on trust and personalized service. Zero litigation in recent years speaks to client satisfaction. This is crucial in a luxury goods market where reputation is paramount. The dedication of the founding family (working 6:30 AM – 10 PM daily) reinforces this commitment.
• Strategic Positioning & Market Trends: TISG is benefiting from a shift away from smaller yachts towards larger, custom-built vessels – particularly for charter businesses. This aligns perfectly with their core competency and allows them to avoid the overcrowded lower segments of the market. The projected CAGR of 10-15% in the mega yacht sector supports this trend.
• Solid Cash Flow & Funding: Clients essentially pre-fund a significant portion of yacht construction, providing strong cash flow support. The recent timing issue with client payments is clearly explained and doesn’t appear to be a systemic problem.
• ESG Improvements: An upgrade in ESG rating (BBB to A) demonstrates commitment to sustainability – increasingly important for investors.

 

Weaknesses & Risks:

• Net Financial Position: The current negative net financial position (-€12.5 million) is a slight concern, although explained by timing of client payments. Monitoring this metric will be crucial.
• Reliance on UHNWI Demand: While the growth in UHNWIs is positive, TISG’s business is heavily reliant on this segment. Economic downturns or geopolitical instability impacting wealth could significantly affect demand.
• Patent Box Adjustment: The one-time tax adjustment impacted net profit in 2024. While explained and not expected to recur, it’s important to understand the impact of such adjustments on future earnings.
• Execution Risk with M&A: Management is considering acquisitions, but successful integration and value creation are never guaranteed. The focus should be on strategic fit and synergy realization.
• Competition (Potential): While TISG currently dominates the >60m custom yacht segment, management acknowledges that competitors may attempt to enter this space. Maintaining their technological edge and client relationships will be critical.

 

Opportunities (Where future growth could come from):

• Expanding Perini Brand: The decision to expand the Perini brand into motor yachts is a potentially lucrative move, leveraging its existing reputation for quality and design.
• M&A Synergies: Strategic acquisitions could strengthen TISG’s value chain, enhance customer service, or provide access to new technologies/markets.
• Growth in Emerging Markets: The company sees growth across diverse geographies (North America, Europe, Asia, Middle East, etc.), indicating a diversified revenue base and potential for further expansion.
• Semi-Custom Models: Introducing semi-custom models like the Tecnomar Panorama 50m allows TISG to cater to a broader range of clients while maintaining quality standards.
• Strong Broker Relationships: The Vision Brokers Day suggests a proactive approach to sales and distribution, leveraging key industry relationships.

 

Earnings Call Transcript

Operator:

You can then choose your preferred language. Additionally, please know there will be an opportunity to ask questions at the end of the presentation. In order to do so, please use the raise hand function on your screen or for those styling in, hit star 9 on your keypad. I will now give the same announcement in Italian before we hand over to your host today. Thank you. Before leaving the word to the management team, I remind you that the simultaneous interpretation function is present. Therefore, I kindly ask you to select the interpretation button at the bottom right and select the Italian or English channel according to your preference. There will be a Q&A opportunity at the end of the presentation. If you have any questions, you can use the raise hand function on the screen or for those who are calling us. Please press star 9 on the keypad. Thank you. I would now like to leave the word to Erico Filippi, head of IR. I am pleased right now to leave this picture to Erico Filippi.

Giovanni Costantino — CEO:

Good afternoon everyone. Thank you all for attending this meeting. I’d like to provide a quick review of the main results from this very important financial year. As you all know, due to global geopolitical events and ongoing conflicts, 2024 was a very tense year. Despite the challenges, we’ve managed to stay strong.

I want to thank the entire team at The Italian Sea Group. Thanks to their efforts, we achieved the results we expected — specifically, 405 million euros in revenue.

We analyzed the global markets, targeting our key clients — ultra-high-net-worth individuals. Despite global tensions, the data we’ve seen is exciting. We’ve observed growth across North America, Europe, Asia, the Middle East, Africa, Latin America, and Australia. Growth among UHNWIs globally is projected to increase by around 30% by 2028. This aligns perfectly with our strategy and confirms the soundness of our market positioning.

Let me reiterate our strategy. Our focus remains on consolidating our presence in the segment of yachts over 60 meters — fully custom-made, with an emphasis on exclusivity and uniqueness. Our client base values this. Our positioning is technically challenging — that’s why many other European players aim for smaller yachts and mass production. They often say that building large custom yachts is too risky or unprofitable — but our results prove the contrary.

Our business model is based on two pillars: the financial strength and resilience of our clients, and the deep heritage and expertise required to build large yachts. It’s not enough to just set up production — you need a long history, precision, and consistent excellence. That’s what we’ve built over time.

Given the current market trends, particularly the collapse of the segment under 35 meters, some players may try to move into our segment. We’re not concerned. You can’t just start building an 80-meter yacht — it takes at least 10 years of experience and demonstrated capability.

Globally, there are many UHNWIs — those with net worths above $500 million — and this opens significant opportunities for us. However, today’s world tensions also affect the relationship between client and builder. These clients don’t want to feel unease or pressure. It’s vital that our relationships remain calm and built on trust.

What we’re seeing is a very strong market recovery — as strong as post-COVID levels. This is thanks to our product positioning. Larger yachts — over 30 meters — are in greater demand, while the lower segments are overcrowded. In the 30–60 meter range, there are many players, but very few can build over 60 meters like we do.

Another key data point is the growth of the global yacht sector: 7.74 billion euros in turnover. We expect a CAGR of 10–15% through 2027. Most investments are now in mega yachts for the charter business. In our current portfolio, we have four orders for yachts over 70 meters.

Today’s UHNW clients want exclusivity and uniqueness — not just in the product but also in the purchase experience. In this respect, we are industry leaders. We created this approach within our business model. Like luxury fashion or jewelry, our sector demands attention to detail and client experience. We offer security, trust, and a sense of belonging to a family that leads the project with competence.

My son and I are completely devoted to the company — from 6:30 AM to 10:00 PM, every day. This full-time dedication is perceived by our clients, and they reward us with their loyalty and orders. We have excellent relationships with our global clients, and we haven’t had any litigation in years.

Now, let’s look at the financial results. Revenues reached 404 million euros — up 11% compared to 2023. Some might note a slight shortfall of a couple million compared to forecasts, but this is a strong result, especially considering the global economic situation.

EBITDA was 69.7 million euros — a 13.5% increase year-over-year, with a 17.4% margin. Our order book stands at 1.24 billion euros. Investments amounted to 9 million euros. Our net financial position is -12.5 million euros — but that’s due to timing. Around 17–18 million euros from clients came just after the closing date, so they weren’t counted in 2024. Otherwise, the position would have looked better.

Dividends amount to 13 million euros. Ongoing negotiations are worth several hundred million euros, which gives us confidence in our 2025 outlook — projected revenues between 410 and 413 million euros. This is a realistic target, reflecting our solid order portfolio.

In 2024, we avoided accepting unrealistic price offers from clients trying to exploit market softness. We maintained our standards and are now finalizing significant contracts. Some are already signed or at the final stage.

We expect an EBITDA margin of 17.5–18% in 2025, thanks to our focus on margins. Looking at our market positioning — we’re at the top of the luxury segment, right alongside Ferrari. Both are Italian brands founded by passionate, committed individuals.

Regarding stock performance: since August 2021, our stock is up 48%, compared to the luxury index at 26%. We rank fourth among luxury brands — above most indices, including FTSE Italia Star and FTSE All Share. Shareholders followed market trends, though I believe we deserved even higher returns.

Globally, in the custom yacht segment above 55 meters, we now rank second, with 1,356 meters under construction. The top competitor is at 1,525 meters, including a 165-meter yacht they’re building for themselves. Excluding that, we could be tied for first place.

Here’s a photo of the latest 78-meter yacht launched on December 22. Let’s review some other launches from 2024:

– Admiral 55m launched a month ago
– Perini Navi 59m motor yacht launched a month ago
– Perini Navi 58m launched three weeks ago
– Admiral 72m by Giorgio Armani, launching April 23
– Tecnomar Panorama 50m, our first semi-custom in aluminum — we don’t work with fiberglass, in line with our sustainability values
– Perini Navi 60m for Oracle’s CEO, launched last week, to be delivered by June
– Picchiotti 24m to be launched in May
– Perini Navi 56m ketch to be launched by year-end

This is a very intense year, with many launches, all leading up to our most important event — the Monaco Yacht Show, where we’ll showcase five yachts:

– Admiral by Giorgio Armani, 72m
– Admiral 78m launched on December 22
– Admiral 55m
– Perini Navi 60m for Oracle
– Picchiotti Gentleman 24m
– Plus, our iconic Lamborghini yacht

We are active in all markets with leading brokers. One week ago, we hosted our first Vision Brokers Day with 60 top brokers from around the world. They visited our shipyards, saw our processes, and experienced the quality first-hand. They gave us excellent feedback.

Thank you for your attention. I now give the floor to Mr. Filippi, who will update us on our environmental initiatives.

Erico Filippi — Head of IR:

I’ll summarize some key ESG highlights. Although this is not the easiest sector to be sustainable in, we’ve made significant progress in 2024. Our ESG rating was upgraded from BBB to A. We’ve improved gender equality, supply chain management, and neutralized Scope 1 and 2 emissions.

This year, we’ll publish our first sustainability report in compliance with CSRD regulation. It will include key findings from our double materiality analysis, and it will feed into our updated ESG plan, which will be refined in the coming months.

Now I’ll hand it over to our CFO, Marco Carniani, for a further breakdown of our 2024 financial results.

Marco Carniani — CFO:

Good evening everyone, welcome. Let’s have a look at the figures of The Italian Sea Group.

Going back to the introduction by our CEO, let’s start with the revenues for 2024 — we had an increase of 11% compared to the same period in the financial year 2023. EBITDA grew from 61.9 million in 2023 to 70.3 million in 2024, marking the highest EBITDA margin we’ve ever recorded: 17.4%.

Net profit slightly decreased compared to last year — despite the strong growth — due to a revision of the tax benefits under the Patent Box regime. From 2019 to 2023, we focused this benefit on the know-how asset. Following regulatory procedures, we underwent a self-liquidation process, and in cooperation with Agenzia delle Entrate (the Italian Revenue Agency), we reviewed the benefits.

After identifying the facilitated assets that triggered the Patent Box advantage, we accounted for the period 2019 to 2023. This also led to a non-monetary effect — the adjustment in the deferred taxes linked to those tax benefits.

As mentioned earlier, our Net Financial Position moved from +1.5 million to -12.5 million. This shift is due to well-known timing dynamics — primarily large client payments that occurred shortly after year-end.

Looking at the revenue breakdown by division — we see a clear increase in the Shipbuilding segment. Growth came especially from the Americas and Europe. Over 50% of our revenues are concentrated in yachts over 50 meters — this remains our core business. There’s steady progress in our Work In Progress (WIP), with a focus on larger dimensions and the introduction of semi-custom models.

Let’s now talk about Refit. Refit revenues are in line with last year. We’ve optimized our shipyard production capabilities, keeping our focus on large dimensions. This enabled us to hit a record EBITDA level — 70 million euros — and an EBITDA margin of 17.4%. This result stems from our close control of operating costs, the internalization of supply chain activities, and an optimal product mix.

We’re always aiming to grow yacht sales, especially considering our strong market positioning.

Moving on to CAPEX — our investment plan has allowed us to expand our production capacity. Investments in 2024 totaled 9 million euros. Key areas included:

– Steelworks
– Interior business units
– Extension of commercial offices at the Marina di Carrara headquarters
– Reduction of investment in La Spezia as that phase winds down

Let’s now consider our backlog visibility. The total order book stands at 1.241 billion euros gross. It’s well diversified across global regions, showing how The Italian Sea Group reaches UHNWIs all over the world.

Admiral is our flagship brand — it represents our top-tier offer. But we also focus on all our other brands to ensure a wide, complete, and competitive offering.

Looking ahead to 2025:

– Projected revenues between 410 and 430 million euros
– Target EBITDA margin of 17.5–18% — a further increase
– Planned dividend distribution in the range of 40% to 60% of profits
– Potential for new acquisitions to further leverage growth — especially as our net financial position is currently neutral

Thank you.

Operator:

I would like to thank you all for your attendance. I’ll now open the floor for the Q&A session. Thank you to the management team. As a reminder, if you would like to ask a question, please use the raise-hand function on your screen. For those dialing in, press *9 on your keypad. Once your name is announced, please remember to unmute your line and state your company name before asking your question.

The first question today comes from Francesco Brilli. Francesco, the floor is yours. I see that you’re currently muted—please unmute your line.

Francesco Brilli — Analyst:

Yes, should I pose the question in English or Italian?

Operator:

You may ask your question in the language of your choice—Italian via the Italian channel, or English via the English channel. Thank you.

Francesco Brilli — Analyst:

Thank you for taking my question. I have three.

The first is more general: can you give us an update on the current negotiations and what order intake you foresee over the next few months? What’s the expected timing and structure of those deals? Also, is the order backlog in line with the 2025 guidance, and do you foresee a significant order intake during the year?

Second, regarding the net financial position expected at the end of 2025—could you provide more clarity on whether tax components are included and if there are other variables from 2024 that should be factored in?

Third, still on the NFP and considering your interest in M&A activities, where in the value chain will you be focusing your acquisition efforts?

Giovanni Costantino — Founder and CEO:

Thank you, Mr. Brilli, for your thoughtful questions. I’ll address the first and third, and then hand it over to our CFO for the financials.

On current negotiations: they began last year, and as you know, large yachts require extended negotiation timelines—up to a year. We currently have around 20 negotiations at an advanced stage, ranging from 40 meters (like our newest semi-custom line, the first of which was sold last year) to over 100 meters. These negotiations collectively represent close to €1 billion in potential value.

We’ve already signed a few letters of intent. One major deal will be approved by the Board of Directors on Monday. I am confident we will close around 50% of these negotiations in the near term.

Regarding M&A: since the beginning of the year, we’ve been evaluating two to three acquisition opportunities. These align with both our product specificity and our goal of expanding customer-centric services. This supports our luxury positioning and deepens the relationship between our shipyards and our clientele.

Now, I’ll turn it over to our CFO, Marco Carnelli, for insights on the net financial position.

Marco Carnelli — CFO:

Thank you. Regarding the net financial position: in 2024, we saw a positive working capital dynamic, a shift after years of negative trends. Over the past three years, the year-end NFP has fluctuated between slightly positive and slightly negative, largely tied to WIP.

Although we had significant deliveries early in 2024, which required substantial cash outflows, there were no issues. We expect a similar situation in 2025, with a stable NFP by year-end.

Order intake also helps fund production. Customers essentially pre-fund their yachts, which has a major impact on our cash availability. The NFP includes grants, financing, tax-related funds, and recoveries.

On the patent box: the impact was resolved in January, so it will no longer affect us. The 2025 guidance—€410 to €430 million in revenues—excludes growth from acquisitions. Any revenues from M&A activity will be in addition to the current guidance.

Operator:

Thank you, Francesco Brilli. Next, we have a question from Nicola Storer. Nicola, the floor is yours.

Nicola Storer:

Thank you. Regarding your 2024 backlog—can you share how it’s expected to be executed over 2024 and 2025? Is it roughly 50/50 between the two years, or should we expect a different split?

Giovanni Costantino — Founder and CEO:

It’s actually a bit different. The new orders for 2024 won’t amount to €200 million. It’ll be a bit less, and the remaining portion will be spread across multiple years, as is typical in our business. Still, we expect to meet our 2025 revenue guidance with incoming orders this year.

Nicola Storer:

So, just to confirm, you expect to realize more than half of the backlog in 2024?

Giovanni Costantino — Founder and CEO:

Yes, that’s correct.

Operator:

Thank you. Next, we have a question from Franco.

Analyst:

Good afternoon. My first question is about the U.S. tariffs and retaliatory measures by other countries. How are these trade measures impacting your business?

Marco Carnelli — CFO:

At the moment, there’s no impact. We’re in a global environment with evolving trade dynamics, but we haven’t seen any tangible risks. Even if there were a slight cost increase, it’s unlikely that a high-net-worth individual would reconsider their purchase.

Analyst:

So, no impact from recent U.S. announcements?

Giovanni Costantino — Founder and CEO:

That’s correct—no current impact whatsoever.

Analyst:

Thank you. One more: can we get details on 2024 deliveries and how much of the net backlog is tied to 2025?

Giovanni Costantino — Founder and CEO:

Sure. In 2024, we delivered yachts of 66 and 78 meters. For 2025, we’ll deliver another 78-meter Admiral, a second 55-meter Admiral, a 59-meter from Perini Navi, and two 58-meter and 72-meter yachts—one of which is the Admiral George Romani. At year-end, we’ll deliver the 50-meter Panorama Admiral and the 60-meter Perini Navi sailboat, plus a 24-meter Picotti yacht.

One more Perini Navi vessel will launch at the end of 2025 and deliver in 2026. It’s going to be a very busy year.

Operator:

Thank you. Our next question is from Noeli Mendez (via chat): how far along are negotiations to sustain guidance for 2025? And given there’s no three-year guidance this time, is medium-term visibility reduced? Are you preparing acquisitions to stimulate growth using net cash?

Giovanni Costantino — Founder and CEO:

Great question. We pursue acquisitions not just for revenue growth, but to reinforce our luxury identity and customer relationships. This also stimulates cash flow and revenue indirectly.

On new orders: many negotiations are ongoing. Some will close shortly, others after the Monte Carlo Boat Show in October/November. We continue to build commercial momentum.

Operator:

Next, a question from Mattias Paladino. Please go ahead.

Mattias Paladino:

Thanks. First, about the patent box—can you confirm the value of the re-determined tax benefit? I believe it’s around €26 million. Second, regarding CapEx, are you investing in new shipyards or infrastructure?

Giovanni Costantino — Founder and CEO:

On CapEx: we expect to spend under €5 million to complete our office extension. It’s not urgent; we may delay to 2026 depending on operational needs.

As for the patent box: from 2019 to 2023, we recovered about €5 million. We project around €4 million in 2025. These are deferred taxes, not cash. Our effective tax rate will be 26%—down from the standard 27.9%. This benefit is confirmed with the Agenzia delle Entrate.

Operator:

Thank you, Mattias. Our next question is from Francesco Carloni. Francesco, please unmute and go ahead.

Francesco Carloni:

Thank you. Two questions: are you negotiating the sale of Perini-branded sailboats? I noticed you have two Perini motor yachts scheduled for 2025. Is this a rebranding shift?

Giovanni Costantino — Founder and CEO:

Yes, great observation. This year we have three Perini deliveries—one 60-meter sailing ketch and two motor yachts (58m and 59m). These motor yachts were already partially built under the previous ownership before we acquired the Perini assets.

We decided to continue this direction, and after assessing the market for sailboats, we chose to expand Perini’s range into motor yachts as well.

Next month, at the Monte Carlo Boat Show, we’ll unveil a new Perini motor yacht line—ranging from 35 to 65 meters. These will have the soul of sailboats but with motor propulsion: aluminum for smaller hulls, steel for larger ones. Fewer decks, simple yet elegant—a motor sailor without the mast. We believe it will be a hit.

Operator:

We currently have no further questions. I’ll now return the floor to the management team for closing remarks.

Giovanni Costantino — Founder and CEO:

Thank you all for attending. We had a great turnout, and we appreciate your interest. Wishing you all the best—see you next time in what promises to be an exciting year. Thank you and goodbye!

 

---

Disclaimer

Please be aware that the transcribtion might not be perfect and some minor mistakes might be present.