Ferrari - Q2 2023

Transcript

Operator (participant)

Good day, and thank you for standing by, and welcome to Ferrari 2023 Q2 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question, you will need to press star one one on your telephone. I will now like to hand the conference over to your speaker today, Nicoletta Russo, Head of Investor Relations. Please go ahead.

Nicoletta Russo (Head of Investor Relations)

Thank you, Roberto. Welcome to everyone who is joining us. Today, we plan to cover the group's Q2 2023 operating results, and the duration of the call is expected to be around 60 minutes. Today's call will be hosted by the Group CEO, Mr. Benedetto Vigna, and Group CFO, Mr. Antonio Picca Piccon. All relevant materials are available in the investor section of the Ferrari corporate website, and at the end of the presentation, we will be available to answer your questions. Before we begin, let me remind you that any forward-looking statements we might make during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement included on page two of today's presentation, and the call will be governed by this language. With that said, I'd like to turn the call over to Benedetto.

Benedetto Vigna (CEO)

Grazie, Nicoletta. Thank you everyone for joining us today. I would like to start by thanking all the women and men at Ferrari for their passion, dedication, and sense of belonging. Without them, without their agility and nimbleness, the exceptional result of the past quarter would not have been possible. Grazie. Definitely, Q2 was a quarter dense of many positive milestones on all fronts. Four are the key messages of this call that Antonio and I intend to pass to you. One, record high exceptional results driven by product mix and personalizations. Stronger than expected personalization led us to increase the full year guidance on all fronts. Two, our order book remained stunning, stunningly high across all geographies and the full product range, thanks to a robust order intake.

Three, the geographical pattern of our shipment in the last quarter, as in all the other quarters, reflects our deliberate allocation plans along the controlled growth trajectory and are not at all correlated with the respective market traction. In the first semester, our shipments grew by 4% year-over-year, with all regions up. A remarkable 14% up of Mainland China, Hong Kong, and Taiwan, a 7% up of the Americas. Four, we are on track with our product strategy and carbon neutrality journey. Now let's start from our exceptional second quarter earnings, and I'm very pleased to highlight the following 3 key data. Revenues at nearly EUR 1.5 billion, up 14% versus the prior years, even more remarkable in light of shipments substantially flat year-over-year. Adjusted EBITDA is about EUR 590 million, with a 40% margin.

Industrial free cash flow generation at approximately EUR 140 million. Interesting to note that it took us only 6 months to surpass the EUR 1 billion EBITDA threshold, while it took the entire 2017 to pass that same level, a result that everyone at Ferrari contributed to reach. Beyond this strong financial result, in the quarter, there were other important milestone which deserve to take the spotlight. Racing world first. Sunday afternoon, June 11, 2023, was an unforgettable day for Ferrari. 58 years after our last participation, we returned to victory in the top class of the WEC, with the podium at Le Mans, on the centenary of the world's most famous endurance race.

A few days later, with a parade through the street of the city here in Maranello and in our factory, we celebrated the victory with the 499P team, all Ferrari colleagues, our partners, and our enlarged community. Why is it important for all of us to celebrate this victory? Once again, it testifies the effort and the willingness to always push the boundaries of technology and innovation. Racing is our heritage, and more than ever, it is a stimulus to further innovate. It's the will to progress that we always need to keep alive. It's the inheritance of our founder that we need to nurture constantly with confident humility. With the same spirit, we started a few months ago, the F1 Championship, but with a competitiveness level below our expectation.

In some recent races, such as the last one of last weekend in Spa-Francorchamps, we saw some sign of improvement. Clearly, we want to keep improving, and we are working day and night to make our cars more competitive. Now, let's talk about sports cars, and in particular, about our newly born special limited series, SF90 XX Stradale and Spider. Derived from SF90, they have more than 1,000 horsepower, are amazingly beautiful, embed the recently patented extra boost vehicle dynamic feature directly derived from Formula 1, and they use radical new aerodynamic solution, including a fixed rear spoiler. The last time we saw it on a Ferrari was in the mid-1990s with the F50 supercars.

Apart from these unique technical features, I also like to underline the strong client traction, and in fact, both of them, both of them were already sold out to our most loyal clients prior to the official unveil. The extremely positive reaction to these two launches is the most recent signal to the strong desirability of our brand. Further indicators to that are, firstly, the enthusiastic reception to our exceptional product offering, led by the Roma Spider and Purosangue, which commenced deliveries in June as planned. Secondly, the very robust order book in all geographies, further consolidating the visibility that we continue to enjoy well into 2025. Thirdly, the overall persisting dynamism of the Ferrari pre-owned market, which translates into sound residual values.

Last but not least, the impressive attendance level to the world of Ferrari experiences, where, as we said during last Capital Markets Day, we want to focus our attention more and more in the future. Indeed, in the quarter, we organized three highly engaging activities with our community to further strengthen the bonds. The tribute to Le Mans in France, Universo Ferrari in South Korea, and the Cavalcade in Italy. The tribute to Le Mans took place with 40 crews together with Casa Ferrari, a dedicated and exclusive hospitality, which saw over 500 clients, dealers, and partners enjoy the race over the long weekend. It was also the stage for the launch of the Hyperclub. What is it?

It's a three-year program, limited to 100 membership, already sold out, that it gives privileged access to the 24 Hours of Le Mans, its on-track facilities, and the 499P race team. This is the first time we launched such a club, and its successful reception is a confirmation of the goodness of our strategy to enrich the experience we are offering to our clients. Now, Universo Ferrari. Universo Ferrari is an immersive exhibition showcasing the world of Ferrari. In June, beginning of June, we brought Maranello to Seoul. It was the first time it opened its doors in Korea, hosting more than 3,000 people, spanning from clients to fans.

I attended it, and I could experience personally the desirability of our brand in a country where we increased our deliveries three times in the last five years, and where the average age of our client is well below 40 years. For the Cavalcade, instead, approximately under 20 Ferraris come from all over the world to Rome. The event ended with a charity auction for initiatives to educate young people, one of the pillars of Ferrari's ESG activities. All the proceeds from the auction will go to Save the Children to support educational projects in a local school. It's very important for us to thank the local communities that host our events. We also continue tirelessly to improve the efficiency of all our processes.

In Q2, we wanted to play our part in inspiring a wider change with 3 additional steps, aiming to reach carbon neutrality by 2030, as we committed during last Capital Markets Day. The first one is, since May, we have the first engine built from 100% recycled aluminum in our foundry, a prototype that we are currently testing. The second, we are on track with the construction of the building. We are completing the walls, we are ready to start to install the equipment in September to be up and running in June 24th, as committed during the Capital Markets Day of June 2022. In 2 years, the entire building will run on renewable energy. Last but not least, we hosted over 60 sponsors and partners at our first sustainability workshop, a chance to discuss carbon reduction projects, acting as a catalyst for change.

Switching gears to the lifestyle, I'd like to underline that we continued to execute against our strategy with a nimble approach, and we saw encouraging sign toward our vision. Le Mans was the perfect stage for a Ferrari shop in the fan zone, with an enthusiastic response from clients. In Le Mans, we also recorded an increase in average ticket to our corner boutique in Casa Ferrari, as we saw in Rome with our Cavalcade clients. Our museum performed extremely well, with a +34% year-over-year traffic presence increase in the first six months. Now, I will leave the stage to Antonio to enter into the earnings details.

Antonio Picca Piccon (CFO)

Thank you, Benedetto. Good morning or afternoon to everyone joining us today. Starting on page four, we present the highlights of the second quarter results, which show a robust progress of the year. In fact, as we guided last time we spoke, the second quarter of 2023 was very strong, sustained by a continuing remarkable business performance, with a rich product mix and highly personalized products. There were also positive timing effects and other occurrences, which contained our net operating expenses in the quarter and brought to the exceptionally high percentage margins that we report. With shipments basically flat versus the prior year, revenues were up more than 14%, and adjusted EBITDA increased roughly 32%. Adjusted EBITDA and EBIT margins reached 40% and 29.7% respectively, leading to an adjusted net profit margin of 22.7%.

On this basis, we have decided to upgrade our guidance for the year on all metrics, as we'll discuss in a few minutes. On page five, you can see the details of the Q2 2023 shipments. As mentioned by Benedetto, in the quarter, we continued to serve a very high order book, with deliveries which rebalance the first semester and in line with our volume, geographic, and product mix strategy for the year. We draw EMEA up double digits versus the prior year, while deliveries in Americas, Mainland China, Hong Kong and Taiwan, and the rest of APAC ended up being lower compared to Q2 2022. Shipments in the quarter were mainly driven by the 296 GTB, the Roma, and the Portofino M, while the 296 GTS and the 812 Competizione were in ramp-up phase.

The allocations of the Daytona SP3 continued as planned, and we commenced the first days of the Purosangue. As we continue to execute on our electrification journey, the hybrid weight on total deliveries has further improved, reaching 43%, more than double compared to last year. On page six, you can see the walk of our group net revenues, growing 12.8% at constant currency. The growth in cars and spare parts was driven by a richer product mix, sustained by the Daytona SP3 and the 812 Competizione family, as well as a continuing very strong contribution from personalizations and pricing. Personalizations, mainly sustained by carbon look and liveries offering, were widely spread among the portfolio and stood at 18% in proportion to revenues from cars and spare parts.

Sponsorship, commercial, and brand reflected the better prior year Formula 1 ranking, new sponsorships, and the contribution from lifestyle activities, mainly led by entertainment and retail. Engines revenues declined in line with the reduction of supplies to Maserati as the agreement gets closer to its maturity. Currency had a positive impact, mainly following the US dollar dynamics. Moving to page 7, the change in adjusted EBIT is explained by the following variances: volume, flat, and reflecting the quarterly allocations plan. Mix and price, strongly positive for EUR 94 million, driven by the richer product mix, sustained by the Daytona SP3 and the 812 Competizione, and the SF90 families, the increased contribution from personalizations and pricing. Industrial and R&D expenses grew EUR 36 million, mainly due to higher depreciation and amortization.

Once again, I want to flag it, continuing cost inflation, partially offset by quarter-specific lower Formula 1 expenses, net of technology-related government incentives. SG&A were negative for EUR 13 million, mainly reflecting the company's digital infrastructure and organizational development, as well as marketing activities. Other was positive for EUR 54 million, mainly reflecting the combined effect of higher commercial revenues from better prior year Formula 1 ranking and the lower costs due to the revised Formula 1 in-season ranking assumptions, new sponsorships, higher contribution from lifestyle activities, and a positive adjustment to car environmental provisions due to more favorable market conditions. The total net impact of currency was positive for EUR 20 million. Based on the just listed items, we reached an exceptional EBITDA margin of 40%.

Excluding the mentioned timing and other positive effects, the EBITDA margin in the quarter would have been anyhow the highest of the year and slightly above our full year guidance. Turning to page 8, our industrial free cash flow generation for the quarter was solid at EUR 138 million, reflecting the increased profitability, partially offset by a negative change in working capital provisions and other, mainly linked to the increased inventory value, both in relation to the yearly production planning and to the richer product mix. As flagged in the previous quarter, our inventories will remain high throughout the year to preserve our agility to manage the still complex dynamics of our supply chain. Capital expenditure for EUR 198 million, in line with our product and infrastructure development, and consistent with a full year target of approximately EUR 850 million.

Net industrial debt at the end of June was EUR 331 million, higher compared to March 2023, reflecting our capital allocation strategy. We paid EUR 328 million in dividends, in line with our increased dividend policy, and EUR 83 million of share purchases in the quarter. EUR 359 million since the 2022 Capital Markets Day. To conclude, on page nine, we upgrade the 2023 guidance as thereby described. This is essentially driven by the trend of personalization, that we are confident will continue stronger than originally anticipated, and higher racing revenues from sponsorships and commercial, albeit to a lesser, lesser extent.

We consider all of this net of the inflationary pressure that I mentioned also for the quarter, and which leads us to confirm our percentage margins for the full year. The very robust results we presented today, together with the continuous strong momentum we are enjoying, truly give us further confidence in the execution of our business plan. With that said, I turn the call over to Nicoletta. Thank you.

Nicoletta Russo (Head of Investor Relations)

Thank you, Antonio. Roberto, we are now ready to start the Q&A session.

Operator (participant)

Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star one one on your telephone. We are now taking the first question. Please stand by. The first question from Susy Tibaldi from UBS. Please go ahead, your line is open.

Susy Tibaldi (Executive Director, European Luxury and Sporting Goods Equity Research)

Hi, good afternoon, and thanks for taking my questions. My first one would be on the impact of inflation that you have mentioned a few times. Would you be able to give us a quantitative indication on of how much this is weighing on your OpEx or profitability? And also, are you planning to make any price adjustments to offset this? Secondly, in the first few months of the year, have you observed any.

I mean, so far, any change in the way your consumers and prospective consumers behave? It sounds like there hasn't been really any, any change in the demand patterns that you're seeing. So I just wanted to, to confirm that, and whether you expect for the rest of the year, any change at all. Then lastly, on your e-building, which will open in mid-2024, given that the expectation of the first EV unveil is in 2025, how should we think about the ramp-up of this new e-building? Thank you.

Benedetto Vigna (CEO)

Thank you, Susie. Let's start from the third one. The e-building will be, let me say, up and running with all equipment in mid-next year, in June, exactly two years after we had the Capital Markets Day here. This will be a building that will develop strategic component for the electric cars, but also will guarantee us the flexibility to assemble cars that are not only electric. In fact, we will start also to assemble over there, cars that are not electric.

When it comes to another important dimension to e-building, let's consider that this will be a building that will use more state-of-the-art equipment, but up, let's say, with all the renewable energy, and will have the flexibility that we need in a company such as, such as Ferrari, that is, you know, always pushing for uniqueness and desirability. Another important point for the part of your question is that we are on track because we will unveil our electric Ferrari in Q4, end of 2025, and some component, as we said, as we said to you last year, will be assembled over there. The team, I think, did a great job because we are completely on track, and the last year, for some component, like the cement, the concrete, or whatever, it was not easy.

Here, if you pass by our company, you can see the mushroom getting taller and taller any, any day. The second point was about the customer, the client behaviors. Well, I can tell you that we do not have any change, we don't see any change on the consumer behaviors. If I go to see the order show component, as I told you, very, very high, and goes well into 2025, well, I see that the split among the different regions of the order book is very good.

They are all, they are all growing. We don't see any change. The only thing I can add is that there are some region, like what I mentioned before in Korea, for example, that are growing at a good at good pace. All the client in all the region are, let me say, do not show any change in their, I would say, in their pattern to order the our our cash. For the inflation and the price-

Antonio Picca Piccon (CFO)

Yeah, thank you, thanks for the question. I think what we are assuming here is to be in line with the general economy, so between 4% and 5% as an overall impact over the year. With respect to price increase, obviously, we are mindful, and willing to protect, our margins, and that's what we keep on doing. Obviously, at the same time, we have a strong order book, so we need to manage it very carefully and basically preserve it while maintaining a clear and fair relationship with our clients.

Susy Tibaldi (Executive Director, European Luxury and Sporting Goods Equity Research)

Thanks. Just a quick follow-up on the, on the e-building, as you're planning also to assemble some of non-electric car, shall we still think about these 15,000 units, during the current plan as a cap, or does the new building give you more flexibility?

Benedetto Vigna (CEO)

I understand there is a lot of curiosity on these numbers. What I can tell you is that we will always sell one car less than the market demand. Today, what the e-building will do for us is two things. Number one, to guarantee us more flexibility so we can accommodate more, let me say, freedom in the personalization we offer to our clients. This is the flexibility. The second is about having a process that is more sustainable, a manufacturing process that is more sustainable because we are using state-of-the-art equipment that let's say, help us to go in the direction of the carbon neutrality by 2030. Flexibility is key for us and use of, let me say, state-of-the-art equipment.

Susy Tibaldi (Executive Director, European Luxury and Sporting Goods Equity Research)

Perfect. Thank you.

Benedetto Vigna (CEO)

Thank you.

Operator (participant)

Thank you for your question. We are now taking the next question. Please stand by. The next question from Giulio Pescatore, from BNP Paribas. Please go ahead. Your line is open.

Giulio Pescatore (Executive Director)

Hi, thanks for taking my question. The first one for Antonio on the guidance. Why should we expect a decline in margin sequentially in H2 of about 350 basis points compared to the first half, especially if we consider the model momentum that you have in the second half with, I guess, higher shipments of the Purosangue, higher shipments of the Competizione A, higher ships and shipments of the GTS? I mean, your model momentum seems to be improving in second half, and you're guiding for a very steep decline in margin. The second one on the Purosangue deliveries, it, it feels like deliveries, deliveries in the second quarter weren't very elevated. Can you maybe confirm or give us an indication of where you stand in terms of the ramp-up?

If you could also give us an indication of what 100% of the full-year shipments roughly will be made up of the Purosangue this year. Sorry, the last question on the margins. In Q2, you were not far from 30% on the EBIT level. I mean, that's the upper end of your 2026 targets. While I know that it's just one quarter and we shouldn't extrapolate, that's what you're going to tell me, but I was wondering if you are planning to maybe invite us back to Maranello, potentially for the unveil of the new plant next year for an update on the business plan. Thank you.

Benedetto Vigna (CEO)

The last one, you are invited to come to see the plant, but we will not have the Capital Markets Day in June next year. I'll comment about the percentage. The Purosangue, sorry, we started to deliver Purosangue in Q2 as planned, we will have a ramp up basically in the second half of the year. I can tell you that the volume of the Purosangue this year will be below 10% in terms of the annual production volume.

Antonio Picca Piccon (CFO)

With respect to your first question, Giulio, thanks for that. I'll try and explain through the review of the slide, how we see the rest of the year, but yeah, how we Q2, basically performed. I think very well, and Q2 was designed to be the stronger quarter of the year. I think we mentioned a couple of time in previous calls. This happened, actually, and the margin for that quarter was already higher than the guidance for the full year. It, it was enhanced by a couple of elements. One, some timing effects, meaning positives that were already in our numbers, expected for Q3, and that happened to, to come earlier. Some other, there were adjustments, unexpected adjustments to our assumption that will not be repeated.

The third element is, of course, the strong flow of personalization. That was also a surprise. At the same time, if I take out the timing impact and the, let me call it, non-repeatable element, and I look at the second part of the year, I think the Take into consideration also the inflation that is continuing stronger than we would have expected, honestly, in our original numbers. It's difficult for us to guide you to a level of margins that is strongly above the level that we guided at the very beginning of the year. That's why we confirmed 38%. Obviously, the cost base is higher because of the inflation, and that's basically taking a part of the positive impact from the additional revenues from personalization responses.

Giulio Pescatore (Executive Director)

Okay, thank you. Just following up on that, is it fair to say that the reversal of the bonuses from Formula 1, which normally happens in Q3 and this time happened in Q2, is it fair to say that it should be around EUR 10 million, EUR 15 million, maybe EUR 20 million? Can you give us maybe an order of magnitude on, on this element?

Benedetto Vigna (CEO)

Yes, obviously, hopefully, it should not happen, not in the second, nor in the third quarter or ever. Anyway, it happened. We recognized in the second quarter the fact that we cannot win this year, mathematically is impossible. We basically adjusted our estimate to the assumption to get second, and the impact is approximately EUR 10 million in the quarter.

Stephen Reitman (Automotive Equity Analyst)

Perfect. Thank you very much, and good luck.

Benedetto Vigna (CEO)

Thank you.

Operator (participant)

Thank you for your question. We are now taking the next question. The next question from Monica Bosio from Intesa Sanpaolo. Please go ahead. Your line is open.

Monica Bosio (Head Equity Research)

Thank you, good afternoon. I have two questions. The first one is on Purosangue. You opened the order book for 2026. I was wondering if you can give us some flavor on how it's going, and how long that the order book for Purosangue extends now? The second question, I have three, actually. The second is on China. I perfectly understand that the distribution of the shipments for the quarter do not reflect the trend of the demand. I remember that in the first quarter, you told us that by year-end, shipments in China will not be in excess of 10%. Is it right? Can you confirm also in this occasion? The third one is on the new special series.

I was wondering if you can give us a flavor on the breakdown of the customers by regions, if there is a specific concentration in one region or in another, and if you think, that, the new special series will carry a higher weight of personalization or not, specifically as for the carbon component. Thank you very much.

Benedetto Vigna (CEO)

Thank you, Monica. Let's start from the first one, the story of the Purosangue. As we told you last time in May, we reopened the orders for 2026, I can tell you that it's going very well. We are collecting, let's say, orders for the final tail, okay? Here, it's, the car continues to have a very, very strong traction. The second one was about China shipment. You remember very well, we said that we deliberately fix, let's say, the, the sales, the shapes of our, our shipment, let me say, to 10%, 10%-11%. I think, this is. I mean, we are on track with this, with this plan. About the customer, now, if, if I understand well, I will repeat. What is, if you see any change in the, in the customer base pattern, that's what I understood, the customer concentration?

Monica Bosio (Head Equity Research)

Yeah, more or less. Yes.

Benedetto Vigna (CEO)

Let's say, the, the special series, let me say that we are, the SF90 XX, both, Stradale and, and Spiders. Let's say we are reflecting, if you want, the same pattern of the top and VIP clients. There are some regions, clearly, that do not have yet too many clients, that do not have a big allocation. Because remember that the special series is reserved to the top part of our, of our, client pyramid, let's say. The, the traction of this car has been very strong.

The people, I attended a couple of session of the presentation of our colleague from engineers, the marketers. I can tell you that when the car was unveiled, even without stepping in the car, the several people, I was with European, I was with Asian, I was with American and Japanese, they all loved, let me say, the cars. When it comes to the story of personalization, it's what Antonio, what I said during this our introduction. We see this trend that is better than expected. The people are, let's say, more and more happy to add personalization to the cars. The carbon look, it's something that we are discovering as an interesting trend, definitely.

Monica Bosio (Head Equity Research)

Okay. Thank you, Benedetto. Thank you.

Benedetto Vigna (CEO)

Grazie, Monica.

Operator (participant)

Thank you for your question. We are now taking the next question. The next question from Henning Cosman from Barclays. Please go ahead. Your line is open.

Henning Cosman (European Head of Automotive Research, EU OEMs and Future Mobility)

Hi, thank you very much for taking the question. The first one's on the order book. I just want to make sure I'm not missing something or reading too much or too little into the attributes you're using for your order book and order intake. When you say solid order book or robust order intake, is that in any way less than you have previously indicated? I, I thought we had previously talked about record as an attribute or even sold out when discussing individual models. I just want to make sure we're not missing anything there. If, if there's anything further you want us to, to, to read into the attributes, if you could please let us know.

And perhaps another way about asking about the, the margin trajectory in H2 as a second question, when we talk about personalizations, I appreciate it was a positive surprise in H1, both Q1 and Q2. Antonio Picca Piccon, you said it's reflected in the full year guidance increase already. I understand that, could you please, perhaps help us understand if we are now expecting a continuously higher personalization rate? Are we basically now at the new run rate, and we are extrapolating that? Are your expectations for the second half, that it's as low as you had originally expected, and, and you think H1 was more of a one-off, and, and we're now dropping back to your original expectations, both perhaps for, for the full year 2023 and beyond, if you could? Thank you very much.

Benedetto Vigna (CEO)

Thank you, Henning. I think that, I think the first one, and Antonio will take a second on the personalization trend and the margin. I, I like your question when you say solid or robust. Well, for us, solid or robust means that the order book of this quarter is higher than the previous quarter. It's a good point. We'll make sure that in the next call, we'll have only one name, one adjective. This means, for us, means that today is bigger than it was. Trust us, next year, next quarter, we'll use only one word. The personalization and margin is-

Antonio Picca Piccon (CFO)

Maybe before coming to that, I think you asked also about the, the order intake. Be mindful that this depends also on the number of models that are available for order, so they may change from month to month. There are periods in time when we're open for taking order for a number, a larger number of model, and some other period, such as today, for example, where we just have two.

Benedetto Vigna (CEO)

We are adding the two.

Antonio Picca Piccon (CFO)

Exactly.

Benedetto Vigna (CEO)

Today we have two hybrid and two thermal. We have 296 GTS, GTB.

Antonio Picca Piccon (CFO)

Yeah. With respect to your question, which is a very important one, personalization, I think I mentioned already a number of times, on personalization, we give the flexibility to our clients to define what they want to have on their car, between four and three months before delivery, which gives us a visibility, which is partial during the course of the year. Based on what we, we know today, I think we are confident that for the rest of 2023, we will remain in line with the flow that we have seen in, in during the first half, okay? Obviously, it becomes difficult to project any further. This is maybe one of the reasons why we said this is at the root of the improvement of the guidance that we have just delivered today. Hope this helps.

Henning Cosman (European Head of Automotive Research, EU OEMs and Future Mobility)

Yeah, that's great. Thank you very much. Looking forward to tomorrow as well. Thank you.

Benedetto Vigna (CEO)

Thank you.

Operator (participant)

Thank you for your question. We are now taking the next question. The next question from Stephen Reitman from Societe Generale. Please go ahead. Your line is open.

Stephen Reitman (Automotive Equity Analyst)

Thank you. Good afternoon. Question, first of all, on the Purosangue. As you said, you reopened the order book for 2026 build slots, having closed it earlier this year, when you said that the demand was 4 to 5 times higher than you'd been anticipating when you first launched the vehicle. I think the question was asked before, but I didn't quite maybe get the answer. How long is it likely this, the order window is gonna be open on the 2026 build slots, or are you already looking at 2027 build slots as well? You also mentioned on the personalization that it was spread across the models.

It would seem to me that was one of the reasons why the personalization was also going up, was because in order to secure even a build slot for a Purosangue, it probably makes sense for your customers to order as, as heavily personalized as possible in order to increase the attractiveness and to make them a more desirable customer than a vehicle that is maybe less heavily specced. Thank you.

Benedetto Vigna (CEO)

Hi, Stephen. You are right. At the beginning, we, we had to stop the order, taking order of Purosangue because the speed of order intake was four or five times higher than we planned. We settled, we had to reorganize it also with all the supply chain. We are planning to take order on Purosangue for all 2026. This is the answer to your first question. Clearly, when you have a car with four seats, instead of two, you, you have more option on the personalization to offer to the client. I can tell you that, if I go to see the trend of the personalization across all, let me see, the models, all the cars, I mean, there is a trend that is touching all our model, and this is true across all geographies.

I think that the people, considering that, we said it clearly, we do not want to increase a lot the volume. They are more, you know, tailoring the cars like their personal dress, so they are putting a lot of features. Carbon look is one of these deliveries. The Scudetto, I think it is... There are a lot of features that in the past, the client were not looking at so much. This is what we see. This is what we see. It can be also reflected in really, we see it in Europe, we see in Asia, we see in U.S. That's where we are, Stephen.

Stephen Reitman (Automotive Equity Analyst)

Are there limitations that you have internally in terms of having enough craftsmen to, to fulfill all the desires of the customers? How important will your new paint shop be when you open that?

Benedetto Vigna (CEO)

No, we don't have this limitation. I can tell you that, for sure, when you talk about, you know, the carbon fiber, the process to make carbon fiber component is very much, let's say, hand crafted, but we have a solid supply chain over there with different suppliers, with whom we have a really strategic relation. We feel that we, we are confident that we can address the personalization in the right way. If you want, the, the stress test we did ourselves last years, overall, on the volume increase, it has been very helpful and a posteriori, it has been a wise decision.

Stephen Reitman (Automotive Equity Analyst)

Thank you very much.

Benedetto Vigna (CEO)

Thank you, Stephen.

Operator (participant)

Thank you for your question. We are now taking the next question. Please stand by. The next question from Anthony Dic from ODDO BHF. Please go ahead. Your line is open.

Anthony Dick (Equity Research Analyst of Automotive)

Yes. Hi, thank you for taking my question. My first question was on the EBIT bridge. You have the others bucket at EUR 54 million impact in Q2. You mentioned some of the drivers, and thank you for giving us the F1 provision amounts. Can you possibly provide some further granularity into the other components of that item? You know, is that EUR 54 million just a non-repeatable impact, as you mentioned, or is there some that carried through to H2? In terms of the F1 provision in particular, I think I heard that you are now basing your assumptions on a second place in the constructors ranking. You're currently fourth place today.

I mean, hypothetically, if you were to maintain that 4th place position, should we expect the similar magnitude of provision reversal at a later point in the year? Then I had a quick 2nd question on the FX impact, which turned negative in the quarter. I was just wondering if you could provide some further information on how you expect that to evolve, considering your hedging policy. Then a very small 3rd one also, I was wondering if you could provide the amounts of Daytona SP3s that you delivered in Q2. Thank you.

Antonio Picca Piccon (CFO)

The question, all the question are for me.

Anthony Dick (Equity Research Analyst of Automotive)

Yes.

Antonio Picca Piccon (CFO)

Okay, let's start from the last one. I think in terms of the Daytona, we are about 30 units in the quarter. The effects, don't be mistaken, it's actually positive, the overall impact, which is the sum up of the impact of the edges of last year and the negatives in terms of the exchange rate. So it's the second and the second before last column in the EBIT chart. In terms of the reconciliation between what we have in other and what we have in, in terms of the revenues from, from, let me say, items that are different from cars, parts, and engines. I think it's important that I explain. In other, we have all the positives that come from the racing revenues.

We have obviously the, the, the part, the portion, which is related to ranking, our positioning in the F1 Championship. Then we have the, let me call, no repeatable items. In this quarter, of really no repeatable, I think we have the downward adjustment of the provisions for the carbon emissions, which is about EUR 10 million in the quarter. So this so basically allows you a full reconciliation between what you would expect from our revenues and what you have in the EBIT, in other EBIT column. Then you ask about the impact from possibly becoming, hopefully unlikely, fourth rather than second. The impact is, is, a lower, is lower compared to what we have from the first to the second. Okay, perfect. Thank you very much.

Welcome.

Operator (participant)

Thank you for your question. We are now taking the next question. The next question from Philippe Houchois from Jefferies. Please go ahead. Your line is open.

Philippe Houchois (Managing Director)

Yes, thank you, and good afternoon. Thank you very much for your explanation about when you say every quarter, you're surprised by personalization. I understand that people, you know, adjust what they want on their cars in the first few months before the delivery. That was very helpful. Most of my questions were asked, and I was wondering, though, about racing. You did very well in the Le Mans 24 hour races this year. I'm just wondering, do you think there's scope for another big racing event, or whether, you know, endurance races could be repeated, like, 4 times a year instead of an annual event?

Something that would create a business, you know, similar or kind of same spirit as what we've seen in F1, because there's been an amazing revival of F1, and there's no reason why there's no scope for other races. Whether maybe you even take the lead and try to organize bigger events, and that would be a, a bigger part of your, of your business model. Thank you.

Benedetto Vigna (CEO)

Yeah, I take this question. When it comes to racing today, let's say we have, I would say, three area of focus. One is F1, the second is what is the endurance, and where Le Mans belongs to, and the third one is more on the customer, customer relationship management, like the Corse Clienti, the, the, the challenge, the Finali Mondiali. Well, these are the areas where we are focused today and where we intend to be focused also for the future. Today we want to be...

When we say that one of the values of our company is heritage and innovation, when you know that Ferrari has been starting a lot with the endurance championships since the beginning, we are present over there, and we are present in Formula 1, and we want to offer this kind of unique experience on the track also to our clients. That's where we are. Thank you, Philippe.

Operator (participant)

Thank you for your question. We're now taking the next question. The next question from Tom Narayan from RBCCM. Please go ahead. Your line is open.

Tom Narayan (Lead Equity Analyst and Managing Director)

Hi, thanks for taking the question. A quick clarification on the e-building. That'll be ready in 2024, but I guess the first full electric Ferrari won't be introduced until the end of 2025. Just curious, maybe why that gap? I, I understand it'll be also be used for, for ICE cars as well, but just curious if I could just understand that better. Then on Purosangue, it would be helpful to just understand some of the customer demographics, the take rate there. Is it, you know, is there a % of buyers perhaps that are new to Ferrari? You know, presumably this is a very different customer subset. Just curious now that you've seen some of the deliveries, you know, who really is taking these?

Then, lastly, the, you know, the SF90 Stradale uses a custom YASA motor, I believe. You know, we learned recently from a luxury car maker, recently announcing it'd be using powertrain electric components from a pure play EV maker. Just curious as to, you know, what went into your selection of YASA, and if you, if you consider other providers here, and does this necessarily indicate how you think about your future EV aspirations? Thanks.

Benedetto Vigna (CEO)

Good question. Thank you, Tom. I start from the first one, the story of e-building, and I understand that, that you want some clarification. Let's remember, June 2022, we said we are gonna be ready for the e-building in June 2024, and that will happen. In June 2024, we'll start to produce something in this line that is different from electric cars. End of 2025, we will have in the building. we'll announce the electric cars, and clearly, the day after the, the year after, we will have the electric car getting out of that building. This is the, the schedule, and that's the reason why I insisted a lot on an e-building that is, on one side, flexible, because it allows to build different kind of cars.

On the other side, by using renewable energy, fully renewable energy, it allows to develop strategic component for our electric cars. The second about Purosangue demographics. Well, the, the demographics of the Purosangue is not so much different from the overall demographics. What I can tell you is that very often we will see behind the, the name of the Ferrarista, we will have a name of a, a Ferrarista, a man, but most of the time, the user will be the partners, the, the, the women. Because, what I told us in the previous call, when, we attended the, the event of launch of Purosangue in September, very often the people were asking if they could get one, because for sure, one and only one would have been used by the, by the partners.

The third one is about SF90 XX. Well, when you talk about an electric cars, for sure, you know, there are three important blocks. One is the battery, one is the engine, and then there is another block that is very important, is the power electronics in the middle. It's not one alone that is making the difference, it's the interplay of these three elements, the way, the way they work together, that, are, that work, that make a difference. In the future, as we said in Capital Markets Day, we will have also our own electric engine, F1 derived, that will be used together with a new kind of electronics.

Tom Narayan (Lead Equity Analyst and Managing Director)

Okay, got it. Thanks.

Benedetto Vigna (CEO)

Thank you.

Operator (participant)

Thank you for your question. We are now taking the next question. The next question from George Galliers from GS. Please go ahead. Your line is open.

George Galliers (Head of European Automotive Research)

Great, thank you, and thank you for taking my questions. I had two questions really. The first one was just on special series. Given the very strong demand you always see to special series, would you consider having more than one special series in production at the same time? At the moment, it, it feels like you introduce them sequentially, but presumably they would be equally special if you had a special series variant of the SF90 and the 296 in production at the same time, given they are two different models. That was the first question. The second one was whether you could just clarify where you are in terms of Daytona shipments out of the total units that you plan to deliver, are you roughly 30% through, 50% through, or any color there would be much appreciated.

Thank you.

Benedetto Vigna (CEO)

Okay. For the special series, we do not-- we limit, all of the superposition between special series. There is some special series superposition sometimes between the tail of production of the previous one and the ramp up of the following one. Think about 812 Competizione and the SF90 XX Stradale. The superposition is very, is very minimal. Okay?

Antonio Picca Piccon (CFO)

They are pretty much, let's say, evenly distributed. Then there is, the, the other question was on the Daytona, the number of units for the quarter compared to the year. I think we can assume they were even, evenly distributed throughout the quarters.

Operator (participant)

Thank you for your question.

Antonio Picca Piccon (CFO)

Thank you, George.

Operator (participant)

We are now taking the next question. The next question from Martino De Ambroggi from Equita. Please go ahead. Your line is open.

Martino De Ambroggi (Managing Director and Senior Equity Analyst)

Thank you. Yep, thank you. Good afternoon, good morning, everybody. My first question is a general question on the hybrid, because, you are now in the region of 40% of volumes in hybrid. I know a lot depends on the mix of specific models and so on, but, is there any big difference between ICE and hybrid profitability, trying to explain a trend, today and maybe also going forward? The second question is on the price mix. This year, for sure, very strong. What's the speed that you see and we should imagine for, for next year?

Antonio Picca Piccon (CFO)

Okay, I take it, Martino. I think it's important that we explain that you should not consider different margin for different power units. The way we look at the at our product range and its profitability, is very much based on the positioning of each single car, irrespective of the power unit that it carries. With respect to the development of the mix, I think we said at the Capital Markets Day, we are aiming at having a very balanced product mix over the next four years.

This is always our, our goal, for a number of reasons. First, because it allows us to serve our clients the best possible way. Secondly, because it allow us to manage the product development and manufacturing activities in a balanced way. Ultimately, because also the profitability would move gradually up along with the development of the product range. Hope this helps.

Martino De Ambroggi (Managing Director and Senior Equity Analyst)

Okay, thank you.

Operator (participant)

Thank you for your question. We are now running out of time, so we won't take any further question, and I would like to hand the conference to Benedetto for closing remarks. Please go ahead.

Antonio Picca Piccon (CFO)

Thank you, all. Thank you for your time, and also for all your questions. The second quarter of 2023 really represents another important milestone for our company. With the podium at Le Mans, the enthusiastic reception of both the SF90 XX Stradale and Spider, and the incredible level of attendance to our client events. This is also fueling our confidence for the development of these years. Now I would like to wish you a good afternoon, good morning, and thank you also for your attention. Thank you.

Operator (participant)

Let's conclude the conference for today. Thank you for participating. You may hold disconnect.