I thought I would share a few thoughts on the upcoming Q3 earnings expectations ahead of the upcoming releases. More in-depth analysis will follow post the earnings calls. Also, I have a few new observations on GMA & Praga that I thought would be worthy of sharing after recent discussions with both.
Q3 Earning Call Season
Aston Martin Lagonda
Q3 Earnings call season kicks off on Nov 1st when Aston Martin releases their Q3 results. At the beginning of 2023, AML was promising strong 2nd half growth along with positive free cash flow (FCF). Given FCF was a -£218 mil. in the 1st half, turning that into a positive number would be a monumental achievement. In terms of growth, the numbers do look very ambitious. Taking into account that the Americas are AML’s largest region at 48% of wholesales and I’ve been led to believe that AML is again looking for a new President for the Region, it doesn’t bode well. This level of turnover at a very senior level is normally not a sign that the business is booming. Both of the last two incumbents lasted less than a year in the role, giving the position a similar level of stability to the US Speaker of the House, UK Prime Minister, Trump lead defense attorney, or spouse to Henry VIII. As a benchmark, the Regional President for Ferrari North America has been in position for 6 years. I will be also interested to see if this is the quarter that Stroll finally drops the claim that AML only builds cars to order as the rather larger mountain of DBXs sitting at US dealership would appear to indicate that really isn’t the case.
Ferrari will be reporting their Q3 earnings on Nov 2nd. In Q2, Ferrari raised its Guidance for 2023 on the back of a strong product mix and increased personalization. With both 296 GTS & Purosangue deliveries ramping up in the 2nd half of 2023, the increased guidance looks quite achievable. From what I have heard, so far the increase in interest rates has had little to no effect on the order book which still stretches well into the future.
McLaren is the last of the three to report Q3 earnings but will not do so until Nov 29th. I expect volumes to be soft on the back of the announcement in July that North American Artura deliveries had been temporarily slowed for enhanced quality control. From what I understand, the slow down has now been lifted. With the Artura volumes increasing and 750S deliveries starting, I expect Q4 will be closer to what we can expect in terms of McLaren’s quarterly run rate going forward. Hopefully there will also be additional news on the recapitalization shortly.
Gordon Murray Automotive (GMA)
I recently had the opportunity to spend a bit of time with a couple of the key GMA Team Members and take a look at the T.50 in detail. In a word, the T.50 is truly spectacular. The craftsmanship, packaging, and attention to detail is extraordinary. In a world where cars have become consistently bigger and heavier, the T.50 is a throwback. Its compact, light, and just looks agile. The focus on weight savings is borderline psychotic and the results are hugely impressive. No detail is too small to be challenged and improved upon. The fact that it comes with a manual 6 speed gearbox and naturally aspirated V12 engine just make it that much more desirable. Production has now officially started on the T.50 and the first customer delivery happened recently in Monterey with more to follow in November. That makes it basically 3 years from the model’s first unveiling to first delivery. GMA have provided public progress updates frequently, opened their factory doors to leading journalists, run the cars at major events without any issues, and been quite conservative when it comes to their performance claims. Talking to a few of GMA’s depositors, they all seem very happy with the process and feel as if they have been kept closely in the loop in terms of the T.50s development. Using Dario Franchitti as a spokesman and development driver has worked brilliantly as he’s not only engaging and charismatic, but also brings another level of credibility to the endeavor.
GMAs second model, the T.33, sold out instantly and most of the 100 units of the third model, the T.33 Spider already have homes. Both appear to be on track in terms of development. GMA is in the process of building a new Headquarters and Production facility in the UK with Phase 1 completed a year ago. The T.50 is being built at GMA’s current location with the T.33 and future models to be produced at the new site. The T.50 will be imported into the US under “Show & Display” rules for which GMA already has approval. Both the T.33 models will be fully homologated.
In terms of what then comes next for GMA, they are incredibly tight lipped. The only piece of information I was able to pry out was future models will likely also be based on the Cosworth V12.
I sat down recently to discuss the Bohema and its development with Praga’s head of Sales and Marketing. Like GMA, Praga is making good, consistent progress on delivering its first hypercar, the Praga Bohema. The Bohema is based on an all new carbon fiber tub and is powered by a Nissan supplied 3.8-liter twin-turbo V-6 producing 700 bhp. Dry weight is 2164 lbs which makes a few of its competitors look quite tubby. Praga recently showed the Bohema at the Goodwood Festival of Speed and at a few other private supercar events in the UK & EU including most recently at the Red Bull Ring. The fact that Praga has done not only passenger rides for depositors but also successfully completed a series of press test drives shows the huge amount of confidence Praga has in the Bohema.
The production run is limited to 89 units over a four year period at about €1.36 million each. Customer deliveries are on target to start in early 2024. Of the 89 cars, it’s expected that 24 cars will go to UK/Europe; 26 to The Americas; 24 to Asia/Pacific and 15 to Middle East/Africa. The Bohema is already road legal in the UK and is due to receive certification in the EU shortly. US imports are expected to be done under “Show & Display”. If all goes well, hopefully we will see Praga and the Bohema in Monterey next August.
In terms of Q3 earnings, I doubt there will be any major surprises. The numbers I am most interested in seeing are AML’s Free Cash Flow, Ferrari’s Revenue Growth, & McLaren’s Wholesales. GMA and Praga are making great progress on getting cars into customers hands. Both of these are led by highly successful teams with extensive backgrounds in racing, deep connections in the industry, & decades of experience in the supercar arena. They both have a very clear idea of the experience they are looking to deliver and a single minded focus on achieving that goal, and it shows.
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