Italian supercar maker Ferrari N.V. (RACE 1.72%) said on Jan. 31 that its adjusted earnings before interest, tax, depreciation, and amortization (adjusted EBITDA) rose 7.5% in 2018, to 1.11 billion euros ($1.28 billion), on a 10% increase in sales and a strong result for its most profitable models. 

The result was in line with analysts' expectations. 

For the fourth quarter of 2018, Ferrari's adjusted EBITDA was 274 million euros, up 6% from the year-ago period. 

A red 2019 Ferrari 812 Superfast, a two-seat front-engined exotic sports car, at speed on a race track.

Strong demand for the V12-powered 812 Superfast helped boost Ferrari's margin in 2018. Image source: Ferrari N.V.

Ferrari earnings: The raw numbers

Note that Ferrari reports its results in euros. As of Dec. 31, 2018, 1 euro = about $1.15. 

Metric Q4 2018 Change vs. Q4 2017 Full-Year 2018 Change vs. 2017


845 million euros 1% 3.42 billion euros 0.1%
Vehicles shipped 2,398 19% 9,251 10.2%
Adjusted EBITDA 274 million euros 6% 1.114 billion euros 7.5%
Adjusted EBIT (earnings before interest and tax) 195 million euros 1% 825 million euros 6%
Adjusted EBIT margin 23.1% no change 24.1% 1.4 ppts
Net income 191 million euros 40% 787 million euros 46%
Industrial free cash flow 117 million euros 900% 405 million euros 23.5%

Data source: Ferrari N.V. "Adjusted" figures exclude special items, specifically a charge of about 1 million euros related to the Takata airbag inflator recalls taken in the fourth quarter of 2018. Ferrari had no special items in 2017. "Industrial free cash flow" is cash flow related to Ferrari's core auto manufacturing business; it excludes cash flow related to its financial services arm. "Ppts" = percentage points.

Ferrari's "net industrial debt," or debt in excess of its cash balance and receivables, totaled 340 million euros at the end of 2018, down from 473 million euros at the end of 2017.

Ferrari's 2018 in a nutshell

Ferrari's model range can be bewildering to the casual observer, but for investors, its models can be divided into two groups: those with 8-cylinder engines, and those with 12-cylinder engines. In addition to its regular production models, Ferrari occasionally builds very-high-priced limited-edition cars for favored clients; those typically have 12-cylinder engines. 

The thing to remember is that 12-cylinder Ferraris are higher-priced and more profitable than their 8-cylinder counterparts. 

The story in 2018 is that sales were strong around the world, and the mix of sales shifted somewhat toward 12-cylinder models. Overall shipments were up 10.2%; 12-cylinder sales rose 19.6%, while 8-cylinder sales rose 7.3%. Demand for Ferrari's 12-cylinder 812 Superfast continued to be very strong, and early sales of the new V8-powered Portofino convertible, introduced in the first quarter of 2018, were robust. 

In addition to sales of its road cars, Ferrari also generates revenue from the sale of engines to its former sister brand, Maserati, as well as from payments by sponsors of its Formula 1 racing team. Overall results were mixed: The gains in revenue from improved road-car sales, and from higher payments by race-team sponsors, were nearly offset by a significant decline in sales of engines to Maserati, and by unfavorable exchange-rate effects. 

A white Ferrari Portofino, a two-seat front-engined convertible sports car, parked by the ocean.

The V8-powered Portfolio was designed to attract new customers to Ferrari. It has done well since its introduction in the spring of 2018. Image source: Ferrari N.V.

Looking ahead: Ferrari's 2019 guidance

Ferrari expects further incremental growth in earnings in 2019. 

Metric 2019 Guidance 2018 Actual
Revenue More than 3.5 billion euros 3.4 billion euros
Adjusted EBITDA  Between 1.2 billion euros and 1.25 billion euros 1.1 billion euros
Adjusted EBITDA margin Around 34% 32.6%
Adjusted EBIT  Between 850 million euros and 900 million euros 825 million euros
Adjusted EBIT margin Around 24.5% 24.1%
Adjusted earnings per share Between 3.50 euros and 3.70 euros 3.40 euros
Industrial free cash flow Around 450 million euros 400 million euros

Data source: Ferrari N.V.

In addition to the 2019 guidance, CEO Louis Camilleri confirmed the three "mid-term" goals for Ferrari's finances that he outlined at the company's Capital Markets Day last September. By 2022, Ferrari still expects adjusted EBITDA of 2 billion euros and industrial free cash flow of 1.2 billion euros by 2022, and that its net industrial debt will hit zero no later than 2021. 

Camilleri also said that Ferrari plans to introduce five new models in 2019.

Check out the latest Ferrari earnings call transcript.