Ferrari - Q3 2023
November 2, 2023
Transcript
Operator (participant)
Good day, and thank you for standing by. Welcome to the Ferrari third quarter 2023 results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star one one on your telephone keypad. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Nicoletta Russo, Head of Investor Relations. Please go ahead.
Nicoletta Russo (Head of Investor Relations)
Thank you, Nadia, and welcome to everyone who is joining us. Today, we plan to cover the group's third quarter 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 2 of today's presentation, and the call will be covered by this language. With that said, I'd like to turn the call over to Benedetto.
Benedetto Vigna (CEO)
[Foreign language] and thank you, everyone, for joining us today. Before we begin, I would like to thank all the women and men of Ferrari for their outstanding work, all our clients for their continuous trust in our brand, and all our partners, suppliers, dealers, and sponsors, with whom we have continued to strengthen our relations. In the current macroeconomic context, we are continuing to execute our business plan in line with the trajectory outlined last year during our Capital Markets Day, and third quarter was once again a quarter full of achievements. Three are the key messages we want you to focus on. One, record third quarter financial results, sustaining our greater confidence towards year-end guidance. Two, product and infrastructure development are well on track, in particular, on the electrification side, with the full electric Ferrari in prototype phase and the e-building proceeding as planned.
3, continued strong brand momentum, further fueled by two new model launches, the 296 Challenge and the 499P Modificata, and outstanding event attendance in Italy and in the United States. So let's start with financial results and the business performance of our company. third quarter was a record quarter, with all key metrics showing a double-digit growth versus the previous years. For the first time, the revenues were above EUR 1.5 billion, 24% up versus the prior years, with shipments 9% up. All geographic region grew in the first 9 months. EBITDA, about EUR 600 million, and EBIT, over EUR 420 million, were both up about 40%, driven by product mix and personalization. And last but not least, the industrial free cash flow generation was more than EUR 300 million.
These results are further proof of the strength of our business, and the increased visibility towards the end of the years led us to revise upward the full year outlook. The vitality of our business is also confirmed by the current order book, which remains at highest levels across all geographies and models, covering the entire 2025. And before you ask, I can already tell you that in the next few months, we do not expect the order book to continue to grow since all models are substantially sold out, but one, the Roma Spider. Last week, at the dealer annual meeting, I spent one full day with dealers from all over the world, and I received very positive comments on the market sentiment, and by this, I mean throughout, from products to client interest and to brand experiences.
Again, anticipating one of your questions, I would like to underline that during the dealer annual meeting of last week, I specifically spent time with our dealers in Mainland China, which confirm that the traction of the brand continues to be very strong. We are also making progress on the future product pipeline. All projects are on track as planned, and in particular, I'm excited about the full electric Ferrari, now a prototype in testing mode. I had the pleasure to see and try it, and unfortunately, I cannot tell you more. You have to be patient, and as you know, this is part of the desirability of our brand. I am also very proud of how the e-building is progressing towards the inauguration, expected in June next year, exactly two years later after our Capital Markets Day.
After finishing the walls, we started already to install the equipment to produce the selected strategic components, and by first quarter 2024, we will finalize the assembly line of the electric engine and e-axles. Talking about our product offering, last week, we unveiled two new stunning models, both inspired by our racing D&A. In fact, the recent Finali Mondiali at our Mugello racetrack provided the ideal stage for the unveiling of the latest 2 additions to our portfolio. The first one is the 296 Challenge. It is an ICE car that makes full use of the experience and expertise gained by the company in the field of international GT racing. The result is a car, in several respects, very close to the 296 GT3, which debuted in January 2023. The second is the 499P Modificata.
It is a strictly limited series track cars, and the most high-performance closed-wheel car ever offered for gentleman driver use, and already fully allocated. We are the only brand offering its clients the possibility to drive the newest racing car only six months after the debut on the racetrack in Sebring, inaugurating the new Sport Prototipi Clienti program, which joins the F1 client program. Once again, the Finali Mondiali, the unique reunion of the Ferrari community to celebrate the final events of our client experience on track, so the participation of almost 30,000 motorsport enthusiasts among clients, Tifosi, and employees. And talking about our community, I'm also proud to mention that the Ferrari Gala, which took place in New York in mid-October, this event was an opportunity to highlight our brand's influence on sports cars, on racing, lifestyle, and beyond.
Celebrating also the unique bond and share the values between Ferrari and the U.S., which goes back to the earliest days of our histories in the 1950s and holds strong today. This event was an opportunity to share a series of unique experiences with such a passionate community. During this three-day exhibition, we got opportunity to get 130,000 visitors at New York City's Hudson Yards complex, the one that you are seeing now in your chart. And an exclusive charity auction during the Ferrari Gala, Gala dinner, which raised more than $7 million, and the funds will be devoted to projects supporting education in the community, because we believe that giving back is a moral obligation.
This quarter, we also had many client experiences on road, among which the Ferrari Cavalcade Classiche, and the first Ferrari Legacy Tour, dedicated to the beautiful F40, which saw the participation of 40 owners of F40 from all over the world. Moving to the racing world. In the World Endurance Championship, after the victory at the 24 Hours of Le Mans, the Ferrari 499P confirmed to be competitive with a podium in Italy, a 4th and 5th place in Japan, and we are looking forward to our return to action for the grand finale of the season with the eight hours of Bahrain this coming weekend. In Formula 1, the recent podiums and improvements provide us the boost to prepare ourselves for the next season.
Clearly, we need to keep improving and recover our technical gap, and thus, on one side, we are strengthening the team under Fred, and on the other side, we are enlarging our racing manufacturing infrastructure, which will grant us higher development, speed, and quality. I saw this facility this morning. We are also pleased with the renewal of the multi-year partnership with Puma, who becomes our Formula 1 premium partner starting from next year. We also strengthened the licensing agreement with Puma for Ferrari-branded products, and they became the suppliers of our racing teams and all other racing activities. Continuing on lifestyle. On top of this partnership I just mentioned with Puma, Ferrari showcased its latest spring-summer 2024 looks during the Milan Fashion Week, a powerful collection perceived from many editors as their absolute favorite so far.
We also continue to strengthen our presence with successful activation in Pebble Beach and in New York brand event, by creating our own pop-up for our clients to increase collection, awareness, and visibility. We registered a record level of visitors in our museum, reaching over 650,000 visitors since the beginning of January, confirming the strength of the brand and the passion of our community. For your reference, in the whole of 2022, we had about 620,000 visitors, so we still have a couple of months to go till the year-end. Before leaving the stage to Antonio, one comment on our important sustainability journey.
While many activities continue to run at factory level to address Scope 1 and Scope 2 emissions, and we are looking carefully at energy efficiency and recycled material use, we are engaging our suppliers, our dealers, to address Scope 3 emissions... Indeed, last week, during our dealer annual meeting, for the first time, we also awarded the most active dealers in reducing their CO2 emissions with the Green Award. We will keep this Green Award also for the years to come, to keep high the attention on this topic that is so important for our company. Then now, I leave the stage to Antonio to enter into the earnings details.
Antonio Picca Piccon (CFO)
Thank you, Benedetto, and good morning or afternoon to everyone joining us today. Starting on page 4, we present the highlights of the third quarter results, a quarter which confirms the positive dynamics shown in the first part of the year, and represents a further improvement compared to the expectations we had. Our strong business performance was sustained by a rich product and country mix, and high personalizations, leading to a remarkable double-digit growth in revenues, profitability, and industrial free cash flow generation. With shipments single digit higher than last year, revenues were up roughly 24%. Adjusted EBITDA increased 37%, with a 38.6% margin. Adjusted EBIT was up 42%, with a 27.4% margin, supporting a strong industrial free cash flow generation of EUR 300 million. On page 5, you can see the details of the third quarter shipments.
In the quarter, we continued to serve the highest order book that Benedetto commented, and we are all very proud of. Backed by the above, shipments in the quarter reflected our volume and product allocation strategy for the year and by geography. Thus, EMEA and Americas were up versus the prior year. Deliveries in Mainland China, Hong Kong, and Taiwan decreased by a few tenths, and rest of APAC was substantially flat year over year. All regions are up in the first nine months, with Americas benefiting from a larger share of allocations year over year and visibly supporting our margins. The increasing shipments were driven by the 296 and the SF90, together with the 812 Competizione Aperta and the Purosangue, which were in their ramp-up phase.
In the quarter, the F8 Spider was approaching the end of its life cycle, and the allocations of the Daytona SP3 continued in line with planning. Lastly, in the quarter, the hybrid weight on total deliveries further improved, reaching 51% and surpassing that of ICE for the first time, as a result of the SF90 and the 296 families' contribution. On page six, you can see the net revenues bridge, posting a strong 26% growth at constant currency. The increase in cars and spare parts was driven by higher volumes, a richer product and country mix, as well as stronger personalizations and pricing. Personalizations further increased in absolute value in the quarter and reached approximately 19% in proportion to revenues from cars and spare parts, mainly driven by paint, liveries, and the use of carbon.
Sponsorship, commercial, and brand reflected higher sponsorships, including Formula 1 and World Endurance Championship racing activities, and higher commercial revenues as a result of the better prior year Formula 1 ranking. Engines revenue declined in line with the reduction of supplies to Maserati, and please note that from first quarter 2024, we'll stop reporting such item in the bridge analysis as a result of the supply agreement coming to its natural end. Currency had a negative net impact, this time mainly reflecting the Chinese yuan and the Japanese yen, and secondarily, the US dollar dynamic. Moving to page 7, the change in adjusted EBIT is explained by the following variances: volume, positive, and reflecting the increase in shipments.
Mix and price, strongly positive for EUR 170 million, thanks to the very favorable mix, both product mix, sustained by the Daytona SP3, the 812 Competizione, and the SF90 families, and country mix, driven by Americas. And obviously, to the increased contribution from personalizations and pricings. Industrial and R&D expenses grew EUR 63 million, mainly due to higher depreciation and amortization, and raw materials and components cost inflation. SG&A was slightly negative for EUR 10 million, mainly reflecting the company's organizational development and digital infrastructure. Other was positive for EUR 17 million, mainly reflecting higher commercial revenues from the better prior year Formula 1 ranking and new sponsorships. The total net impact of currencies was negative for EUR 23 million. With the positive net support of these variances, we reached remarkable EBITDA and EBIT margins that we mentioned.
Turning to page 8, our Industrial Free Cash Flow generation for the quarter was strong at EUR 301 million, reflecting the increased profitability, partially offset by capital expenditure for EUR 205 million, in line with our product and infrastructure development, and consistent with a full-year target of approximately EUR 850 million. An increase in net working capital, which reflects a seasonal decrease of trade payables during the past summer, as a result of our decision to carry higher inventories and accelerate our capital expenditure in the previous months. To be noted that the net contribution from advances collected on our future deliveries, including the start of range models in certain countries, was positive but very limited in the quarter.
Net industrial debt at the end of September decreased to EUR 233 million, reflecting the solid industrial free cash flow generation in the quarter, partially offset by EUR 194 million of share repurchases. To conclude, on page 9, we upgrade the guidance for the full year on the back of another very positive quarter. third quarter earnings was supported by an extremely favorable product and country mix, and rich with personalizations. In addition, it benefited from timing on costs, mainly related to racing, in a more favorable US dollar dynamics compared to our previous expectations. We expect these positive contributions to be visible also in fourth quarter, despite the planned lower volumes allocation, higher DNA linked to product life cycles, continuing inflationary pressure, as well as the significant seasonal increase in racing expenses.
On one side, for the development costs for the in 2024 Formula 1 car, and on the other, the logistics expenses for the last overseas races for the season. All of the above augurs well for 2024, and we are confident and ready in front of its challenges. As we anticipated during our Capital Markets Day, next year, we expect a normalized revenues growth after the very strong start of the business plan, which we explained front-loaded. That said, we are obviously conscious of the strength of our margins, which is there and in line with our plans. Many thanks for your attention, and let me now turn the call over to Nicoletta.
Nicoletta Russo (Head of Investor Relations)
Thank you, Antonio. Nadia, we are now ready to start the Q&A session. Thank you.
Operator (participant)
Thank you, dear participants. As a reminder, if you wish to ask a question, please press star one one on your telephone keypad and wait for your name to be announced. Now we're going to take our first question. The first question comes from line of Adam Jonas from Morgan Stanley. Your line is open, please ask your question.
Adam Jonas (Managing Director and Head of Global Auto & Shared Mobility Research)
Hi, there was a bit of cutting out there. It's Adam Jonas. Can you hear me?
Antonio Picca Piccon (CFO)
Very well, [Foreign lagunage], Adam.
Adam Jonas (Managing Director and Head of Global Auto & Shared Mobility Research)
Oh,[Foreign language].I'm good. So the comment, first question on your order book, you said that you don't expect the order book to grow, because you're basically sold out. So does this mean that you're only gonna take new orders at a pace that replaces your deliveries, or you, or are you just not taking any new orders? And I'm just curious if this is unprecedented or if you're aware, I know you're relatively new to Ferrari, but whether you're aware of this situation happening before?
Benedetto Vigna (CEO)
No, no, look, thanks for the question, Adam. So, last year, in last years, we had a strong increase of order book. We expect this order book not to grow at the same speed for a couple of reasons. Number one, we are allocating the final tail of Purosangue, so it, it's almost gone, let's say. And we cannot take orders on the, on the Roma Spiders. Clearly, we have the special version, but the special version, let's say, are all allocated, as well as the 499P Modificata. They are all allocated. But, so we, we remain confident about the traction of our, of our, cars. I was with, at Finali Mondiali with many clients. There were 600 clients last weekend, and they all were literally in love with our track cars.
Clearly, the speed of growth of the order book will not be the same as in the past.
Adam Jonas (Managing Director and Head of Global Auto & Shared Mobility Research)
Okay.
Benedetto Vigna (CEO)
We have many things. Let's say we have less models to offer to the clients because they eagerly took everything we offered them. So it's a good challenge for us to keep—to keep, let me say, delighting them with unique cars.
Adam Jonas (Managing Director and Head of Global Auto & Shared Mobility Research)
Thanks, Benedetto. And maybe as a follow-up, can you remind us how that works from, for pricing, the mechanism from the time an order is placed, let's say, at the far end of your order book, late 2025, tell us how, what is the expectation that one of, Ferrari customer would have for the price paid prior to configuring, versus your ability to work with them, including, you know, potentially higher prices? Not, not just because you can, because obviously you, you wanna treat the you want, you want the customer to, promise a value, but just remind us in during times when there's a very, very tight order book and, and it goes very, very long out, how confirm that you don't lock in pricing and kind of historically, how that could move, if you follow the logic of my question?
Benedetto Vigna (CEO)
No, I think I follow. What I want to tell you is that it's true, the order book is pretty long. I have to say that, during last years, we gave a clear priority to all our dealers to engage the client. Also, we've, on one side, experiences, on the other side, is with the pre-owned, with the pre-owned cars. So, I have to say that, and that's what also what I said to the dealer last week, in Florence. I thanked them because they did them what we were committing, what we were asking, them to do. And, in terms of pricing flexibility, like you said, it's always, you have to find the right balance in increasing the price of what is already, contracted versus also not upsetting the client.
I think we have the bond and the, let me say, the link in understanding of the client is such that we can continue to manage it in the same way we did so far. So I do not expect, honestly, big troubles over there, Adam.
Adam Jonas (Managing Director and Head of Global Auto & Shared Mobility Research)
Thanks, Benedetto.
Benedetto Vigna (CEO)
Thank you so much.
Operator (participant)
Thank you. Now, we're going to take our next question. Just give us a moment. The next question comes from the line of Thomas Besson from Kepler Cheuvreux. Your line is open. Please ask the question.
Thomas Besson (Head of Automotive Research)
Thank you very much. It's Thomas. So I have a couple of questions, please. I'd like to start first with the level of your revised 2023 target, when you compare it with 2026 targets you've shown at us at the Investor Day 18 months ago. So clearly you've done better than you were assuming for 2022. You're gonna do a lot better than you were assuming for 2023. So the question is simply, is there a plan at one stage in February or maybe in June next year, when we visit your EV plan to eventually raise the 2026 targets? Or are you gonna leave us with these 2026 targets for longer? That's the first question.
The second, I mean, you have a full, you're fully sold everything you're gonna make until the end of 2025. Can you talk about the impact this has on your residuals on existing vehicles on the road, and share with us the share of used vehicle sales in your car and spare parts revenues, and explain us whether this is going to increase. You plan to control a higher proportion of your used car business in the future or not? Thank you.
Benedetto Vigna (CEO)
I think the first one, Thomas, thanks for the question. We confirm the plan we shared with you one year ago. You have to wait still, let me say a few quarters more than your visit, maybe next June, before we update our plan. So this is, we will not review this before 2025, okay? The year 2025. So we keep, we wanna, we want to do what we committed in front of our shareholder to do in 2022. The second, I will say, I will start, and then Antonio will add as he believes appropriate. It's true that we are sold out. As I said, this is helping a lot on the pre-owned market, and I have to say that we see the pre-owned market pretty healthy.
In some sense, yes, it can help to sell, you know, spare parts, but I would say that the thing that we see is not happening as originally we planned at the beginning of the year. I mean, it's going better than we planned, it is the personalization. The spare part, correct me, Antonio, but it's pretty in line with what we saw, no?
Antonio Picca Piccon (CFO)
Absolutely. Maybe I can comment on this. In terms of pre-owned vehicles that we sell, it's really limited to the cars that we use for our events, for introducing the car per se, but in terms of commercial strategy, so in terms of volume, it is really limited to a small number of pieces every year. In terms of interest for controlling the market, this is not for us, it's obviously for our dealer, and we encourage our dealers to become more and more present in the pre-owned business. That's certainly an area of further potential development for them.
Thomas Besson (Head of Automotive Research)
Thank you very much. Can I maybe have just a quick follow-up? Would it make sense for you, given that you've already sold almost everything you're gonna make, to already start selling the BEV products you plan to show us in 2025 before showing it to customers, or do you want to show it first to customers?
Benedetto Vigna (CEO)
No, no, we will show, we will show the BEV in fourth quarter 2025 as planned. So everyone will see, let me say, in that quarter, apart from the people that are working here, obviously, that time to see, to make it happen. So it's fourth quarter 2025, Thomas.
Thomas Besson (Head of Automotive Research)
Thank you very much.
Benedetto Vigna (CEO)
Thank you.
Thomas Besson (Head of Automotive Research)
Thank you.
Operator (participant)
Thank you. Now, we're going to take our next question. Just a moment. The next question comes to the line of Stephen Reitman from Société Générale. Your line is open. Please ask a question.
Stephen Reitman (Automotive Equity Analyst)
Thank you very much. A question, first of all, on the guidance for 2023. Just a bit of simple math. It seems to be that after a 28% margin, adjusted operating margin in the first nine months of the year, if we take the lower end or the 26.5%, at least 26.5% or more... That suggests that the margin could be as low as 22% in the fourth quarter, which seems very, very low compared to the momentum you've shown, and the kind of maybe the sort of currency-adjusted underlying margin of 29%, 29.4% you showed in the third quarter for FX impacts and hedges. So if you could maybe talk about the headwinds that you're anticipating in the fourth quarter.
Obviously, we know this is a very conservative guidance you always give. My second question is about Formula 1. Could you update us on the status of how you are with - have you fully now replaced all the sponsorship that you lost? Obviously, Mission Winnow and Velas, now do you have a full roster, including your main sponsor? I saw you took on Virtual Gaming World, but does that now mean now that you're fully, your car is fully liveried, and you have everything you need? Thank you.
Benedetto Vigna (CEO)
I take the second one, Stephen. Thanks for the question, and then I will ask Antonio to comment on the first one. So, let me say in this way, in the last three years, we have been able to lower the dependence, sponsorship-wise. We have been able to lower the dependence on, let me say, on a single sponsor, okay? So if in the past, this single sponsor was accounting for more than 60% of revenues, now, if I take the biggest sponsor in our basket, is no more than 13%-14%. So I would say that on the sponsorship-wise, we've been able to enlarge the sponsor base by lowering also the dependence on a big, a big one. So this is the answer to the Formula 1. And then,
Antonio Picca Piccon (CFO)
Yeah.
Benedetto Vigna (CEO)
Antonio.
Antonio Picca Piccon (CFO)
Stefan, hi. I think the reasoning is the one I try and explain in words in, in my speech. If you look at fourth quarter, what is different compared to the previous quarter is, in terms of volumes, lower allocations to the fourth quarter, already designed that way since the beginning of the year. Secondly, we have a specificity in terms of the overall seasonality of the spending, particularly, R&D's expense to the P&L for, for racing. If we normalize for that, even at, in the EBIT margin level, we get much more in line with the rest of the year. In addition, if you go to the EBIT margin level, then you should take into consideration that D&A are gonna grow in the fourth quarter, and this is due to two elements.
One is the start of production of a couple of new models, and the second one is some project that we are gonna start depreciating that are more related to our infrastructural development of the sales.
Stephen Reitman (Automotive Equity Analyst)
Thank you.
Antonio Picca Piccon (CFO)
And thanks for compliment on being conservative.
Operator (participant)
Thank you. Now we're going to take our next question. Just give us a moment, and the next question comes to the line of Giulio Pescatore from BNP Paribas. Your line is open, please ask your question.
Giulio Pescatore (Director of Automotive Research)
Hi, thanks for taking my question. First one, I want to come back on a comment made by one of your competitors. I know you don't comment on competitors, but it was striking because they were calling out weakness in luxury car demand, especially in North America. What they said is in very stark contrast with whatever you're saying today. So, I'm not asking you to comment on competition, but just what do you think is making the difference here? Why is your demand so much healthier and resilient than some of your peers? Second one, just a clarification. The track cars you launched, those don't count towards the 15 models expected to be launched by 2026 and the 4 models for this year?
Just a clarification on that. And then last, very last one, the 499P, I mean, can you give us an indication on volumes and price, and when do you expect deliveries to happen? And is there any reason to expect this car to be less profitable than the limited edition ones you have launched in the past? Thank you.
Benedetto Vigna (CEO)
So I start from, so, these two cars, they count in the 15 models, also because, despite the fact that they look like something else, I mean, we had to put a lot of, you know, resources, in engineering, in managing this product, so they count. You know, the 296 Challenge is, only ICE, is not hybrid. Well, but there has been a lot of work done by the, our colleague in engineering in the factory to make it happen. The 499P Modificata, it's a car that comes in few tens of it, and it is a car that, as I said, will offer our gentleman driver the possibility to try the same experience of our, let me say, pilot, that won, a few months ago in Le Mans.
I would say that I want to share with you this comment that I have heard from one gentleman driver last week. I heard in Mugello last week. Now, they were very, very happy to have the possibility to test themselves on a race track with a car that, by the way, does not have even the balance of performance. So if, let's say, our drivers, when they are racing in endurance World Endurance Championship, you know, there is a balance of performance, so you, they cannot go faster than they would like. The gentleman drivers, since it is in its own, it can do even faster, so you can enjoy even more the speed of this car. And then the first question, why? We believe we are resilient.
I would like to answer the question, the answer, sorry, in two parts. I think we are, when we talk about Ferrari car, we are talking about an ultra luxury car that is also addressing maybe a demographic that is different from other brands. The second, I have been in these three years, two years, I have seen and I've met many people that are touching our brand, the Prancing Horse, and I have seen an attachment, a sense of bonding that is really unique. I mean, I was in Mugello last weekend. I was in Pebble Beach, and I can tell you, Guilio, that right after the car was shown, it was fully allocated.
I mean, the car, there was a client close to me, there was a client close to me that started to cry. So, literally. So it's, you know, the bond we have with our customer, I think is something unique, and for which I will never, I will always, let me say, thank them. Clearly, our people are doing their best, but our clients are giving, they're trusting us, and I would always thank them for this kind of trust. So this is, the long answer to your question. We are talking about different kinds of people. We are talking about a kind of unique sense of belonging, sense of bonding of this client to our brand.
Giulio Pescatore (Director of Automotive Research)
Very clear. I hope he didn't start crying because he saw the price tag. But, yeah, thank you. Grazie. Bye-bye.
Benedetto Vigna (CEO)
Oh, no. [Foreign language].
Operator (participant)
Thank you. Now we're going to take our next question. The question comes to line of Monica Bosio from Intesa Sanpaolo.
Monica Bosio (Head of Equity Research)
Hello, can you hear me? Hello?
Operator (participant)
Monica, can you okay, louder. That's better, thanks.
Monica Bosio (Head of Equity Research)
Okay, thank you very much, and thanks for taking my questions. The first one is on the shipment allocation for the next year. I know it, that you cannot disclose it, but, I just was wondering if you are still keen to keep a share towards China in the region of 10% or more. My second question is on potential, is on the SF90 XX. Are you planning, to get some advances, in 2024 from the SF90 XX? And the very last one is, a housekeeping question on the financial charges. Can you, Antonio, explain me better the impact, of the financial charges side, in the third quarter, and an expectation, rough expectation for the full year, please?
Benedetto Vigna (CEO)
Of course. Monica, so, SF90 XX, yes, we'll take advanced payment in 2024. The rest is Antonio.
Antonio Picca Piccon (CFO)
Yeah, absolutely. In China, I think we stick to what we said at the Capital Markets Day. I mean, for us, China is a market around 10% in terms of share of our annual deliveries, 2024.
Monica Bosio (Head of Equity Research)
For next year.
Antonio Picca Piccon (CFO)
Yeah. In terms of the impact of the purchase of the bond, it created a gain on sale, which is simply due by the difference between the pricing of the bond at the time we booked it and the pricing at the time we repurchased it. So it's an EUR 8 million financial income that we booked in third quarter, and which is reducing the financial charges net for the first nine months. As a result, for the rest of the year, we expect to be much lower compared to what we were used to in the previous years. So about half.
Monica Bosio (Head of Equity Research)
Okay.
Antonio Picca Piccon (CFO)
The amount of the
Monica Bosio (Head of Equity Research)
Okay. It's just for the bond. Okay, thank you.
Antonio Picca Piccon (CFO)
Welcome.
Monica Bosio (Head of Equity Research)
Thank you very much.
Operator (participant)
Thank you. Now we're going to take our next question. Just give us a moment. The next question comes to line of Zuzanna Pusz from UBS. Your line is open. Please ask your question.
Zuzanna Pusz (Managing Director and Head of European Luxury Goods)
Hello, thanks for taking my question. My first one is about inflation, because you again, once again, have been mentioning how inflation has been... It remains a headwind. It's been now, well, 11 months since your price increase earlier in the year. So I was wondering if it's something that you are contemplating for next year, or if you prefer to adjust through the pricing of the new cars, so purely through the mix. Secondly, when we think about your medium-term guidance and what has changed since the Capital Markets Day, I guess on the positive side, we have seen a very resilient demand, better personalization trends, these price increases, while on the negative side, it's been mostly the higher inflation.
Is this the right way to think about, these moving parts, or is there something else we should take into account? And then thirdly, a more technical question, but can you give us some color on why your gross margin was, much weaker in this third quarter, despite the very strong mix? Thank you.
Benedetto Vigna (CEO)
Antonio, you take the question?
Antonio Picca Piccon (CFO)
Yeah, sure. Inflation assumption, We are thinking of price increase next year. I think we do not have just pricing for cars. I mean, our overall revenues are much wider in principle, to the extent needed and subject to the conditions that Benedetto mentioned during his first answer today. I think we remain flexible and look at how costs are proceeding in order to move pricing and eventually take a decision on that going forward. Second, I think you named, you really named which are the main different elements compared to what we had in mind at the Capital Markets Day last year. And so far, I think the overall impact, particularly of personalization and pricing on new model, has more than offset the debt coming from the from cost inflation.
Gross margin weaker, it depends, really, and you should not look at that on a quarterly basis. Overall, the product mix and the country mix during a single quarter make a difference, obviously, together with the level of personalization of the cars entailed. So, take a look at that, but look at that on a wider period of time, and you'll see certainly an improvement, nine months over nine months.
Zuzanna Pusz (Managing Director and Head of European Luxury Goods)
Okay, thanks.
Operator (participant)
Thank you. Now we're going to take our next question. The next question comes from the line of George Galliers from Goldman Sachs. Your line is open. Please ask a question.
George Galliers (Head of European Automotive Investment Research)
Good afternoon, and thank you for taking my questions. The first question I had was just with respect to how to think about mix in 2024. Obviously, a lot of exciting products to come, and you're in the process of ramping the Competizione Aperta and the Purosangue. Is it safe to assume that mix next year should be positive relative to this year, given that product cadence? And the second question I had, Benedetto, if I may, was with respect to the electric Ferrari that you mentioned earlier. Obviously, a very exciting product for Ferrari.
However, a few other luxury premium car makers have noted that at the very top end of their product ranges, the customers, particularly in China, have a strong preference for internal combustion engines, as similar to a watch, they believe the mechanical elements have a higher level of craftsmanship and value compared to electric and digital offerings. To the extent you have discussed the Ferrari EV with certain customers as a project, have you received any similar feedback, or do you believe that whatever car Ferrari produces will have similar level of desirability, irrespective of the power plant that you put in it? Thank you.
Benedetto Vigna (CEO)
So I take the second one. Let me make an introduction, George. I think that, you know, you have to look at the way you use the technology. The technology may be the same, but what is making the difference between one company and others is the way you use the technologies. Today, there are many objects, I don't mention which one, beyond the cars, that are all using the same technology, but at the end of the story, one is more successful than the others. It depends how close, how that product is addressing the real, in that case, needs of the final client. What I can tell you, what I can tell you, and, is one of the question also, you know, I am asking client, what is their feedback when they ask some other electric cars?
Well, it's clear two things: One, we, in our company, did well in 2022 during the Capital Markets Day, to, to tell that we will make the three kind of propulsion, the red, ICE, the blue, the hybrid, and the green. Why? Because we want to leave this freedom to the client. And two, we have clients, and that's what they are telling me, some of them, we will they will not take electric cars. Some others will take both, okay? Some other will get into Ferrari world, Ferrari family, I would like to say, because of electric car. I have in mind three clients, okay, with whom I had a dinner. They were saying, "You know, I'm pushing a lot for sustainability. I'm pushing a lot to my family. I have a company. I created a company in this direction.
For me, the way to get in this beautiful, fantastic family is through the electric Ferrari. I cannot get in without electric Ferrari." So we will have three kind of people, and that's reason why the recent development on technology landscape, I think it's giving, It's a good confirmation of our strategy. And I have to say that if you want the experience I had in other business to manage the technology transition, has been helping and it will help in this direction. The first one, the product mix
Antonio Picca Piccon (CFO)
Yeah, sure. Hi, George. I think it's maybe too early to speak about 2024 in such a detail since we haven't finalized the allocation. But if you ask, if you ask me, we are speeding where we should be, considering the product range that we have, and obviously, assuming same level of personalization, I should bet at least on having the same, similar mix to this year. So not such a jump that we are witnessing in 2023 compared to 2022. We know that last year was mainly a volume year. The product mix this year is much richer. Next year will be, too, but not at the, the same distance as we witnessed from last year to, to this one.
George Galliers (Head of European Automotive Investment Research)
Great. Thank you very much.
Operator (participant)
Thank you. Now we're going to take our next question. Just a moment. The next question comes from the line of Martino De Ambroggi from Equita. Your line is open. Please ask your question.
Martino De Ambroggi (Senior Financial Analyst)
Thank you very much. Good morning. Good afternoon, everybody. I have one short term and one long term question. The first is on the full year guidance, because you revised upwards by more or less EUR 100 million this year, your EBITDA guidance. And considering the drivers you commented, I don't know if I'm right, but I suppose Formula 1, okay, was positive, but small. Personalization is by far the most important contributor, because in my view, the mix was already predefined at the beginning of the year, so you know exactly more or less what to produce. So am I right in assuming that the personalization is the big difference between the starting guidance and the current one?
And still on the margin is the Purosangue now in ramp-up phase, probably finalize the ramp-up. Should we assume is accretive in terms of margins? And if you have an update on the volumes that you expect. Last time you guided for less than 10% of total. I don't know if there is a more precise indication at this point of the year.
Benedetto Vigna (CEO)
So Martino, I think the second one and the first, Antonio. So, first of all, we said 20% over the years, that's the limit of the Purosangue, no? Yes, we are in ramp-up phase, but we expected that, the margin are in line with the rest of the family. Okay?
Antonio Picca Piccon (CFO)
On the first one, Martino, I think you mentioned personalization is probably the main positive surprise that we had. It's also fair to acknowledge the fact that we have a positive support, also for ID rate compared to our initial expectations. That obviously helped.
Martino De Ambroggi (Senior Financial Analyst)
Okay, so I was referring on the volumes for the current year for the Purosangue, because this year obviously is by far less than 20%. So I remember-
Benedetto Vigna (CEO)
Ah, okay.
Martino De Ambroggi (Senior Financial Analyst)
Maybe I'm wrong.
Benedetto Vigna (CEO)
Okay. Thank you, Martino. I misunderstood, because for the year to come, the limit is 20%. Yeah. This year will be lower because it's ramp up. Yes.
Martino De Ambroggi (Senior Financial Analyst)
Okay. The long-term question is, I know you do not want to comment on your 2026 guidance, but consensus is already in the region of EUR 2.9-3 billion EBITDA. So what are your thoughts about this projection for consensus, both on Bloomberg and both FactSet and I suppose all the providers?
Benedetto Vigna (CEO)
Look, I think I have to, I have to reply in the same way I replied to your colleague. So we will upgrade and review the, the messaging, let's say, the plan, in 2025. I think that now we are fully. I like to say, Martino, that we are four wheels on the ground to make it happen, the plan that we shared with you. So let's keep going with four wheels on the ground.
Martino De Ambroggi (Senior Financial Analyst)
Okay. Thank you, Benedetto.
Benedetto Vigna (CEO)
Thank you, Martino.
Operator (participant)
Thank you. Now we're going to take our next question. The next question comes from the line of Henning Cosman from Barclays. Your line is open. Please ask your question.
Henning Cosman (Head of European Automotive Research)
Yeah. Hi, good afternoon. Thank you for taking my question. I think both have become follow-up questions by now, but I'm going to try and ask anyway. So the first one on the personalization again, I think last time we discussed that you have about three months of visibility, and it's great to see that you've now even drifted to the top end of the usual range of 17%-19%. I believe you said 19% for the third quarter. The question is, how do you see that trending into 2024? I think previously you were expecting this to perhaps even go to the bottom end or outside the bottom end of the range, but the dynamics seem to suggest this is going in the more positive direction, if anything.
So if you could please comment on if you have changed your view as to how you see that develop going forward. And the second question, I guess is again, on the mix. Maybe I can ask a bit more specifically, because we're all, I think, scratching our head about the strength in 2024 when you have the Daytona volumes. Maybe we could start there, if you could say, is it going to be a lot more Daytonas, or will you perhaps continue with the run rate of 30 or so per quarter in 2024 as well, and stretch it over a longer period? Because now with the SF90 XXs and also the 499 Modificatas, the 296 Challenges, it seems there might be a pretty big jump, actually, Antonio, if you allow me, relative to your earlier comment.
Benedetto Vigna (CEO)
Look, we confirm that for the Daytona will be around 30-40 per quarter. So it's exactly in line with what we saw, what we said before. When it comes instead to percentage of personalization, we expect that this 19% of third quarter to be more in the range of 18%.
Antonio Picca Piccon (CFO)
Maybe you recall, I mentioned at that Capital Markets Day that we are planning around 17%, which was the usual run rate. This is actually one of the reasons we have been positively surprised this year. We have seen a stronger penetration of personalization and of rich personalization on the current product range. It is difficult to bet as of now, as the continuation of this trend for the following months, given the reduced visibility that we have. So that's the answer of Benedetto reflects this view.
Benedetto Vigna (CEO)
Yeah, we can also say now that we are preparing, that we want, at the end of the story, is the client, and we are planning for this, let's say 18%.
Antonio Picca Piccon (CFO)
Yeah.
Henning Cosman (Head of European Automotive Research)
Thank you. And just to clarify the 30-40 Daytonas that's also your target run rate for 2024, correct?
Benedetto Vigna (CEO)
Yeah, yeah. That was the answer. Yeah, 30-40 per quarter, also next year.
Henning Cosman (Head of European Automotive Research)
Okay. And some allocation of the Modificata as well already next year, the 499?
Benedetto Vigna (CEO)
Let's say, we'll start, but I don't want to be too much specific on the quarter, but sure. I mean, we will start also... Let's say, we will start also the 499P Modificata.
Henning Cosman (Head of European Automotive Research)
Very helpful. Thank you.
Benedetto Vigna (CEO)
Thank you.
Operator (participant)
Thank you. Now we're going to take our next question. Just give us a moment. The next question comes from the line of Anthony Dick from ODDO BHF. Your line is open. Please ask your question.
Anthony Dick (Equity Research Analyst)
Yes. Hi. My first question is on the residual values and the pre-owned market, which you've already alluded to. So we've seen a correction in the residual values in the past few months, still above pre-COVID levels, and you described them as healthy, but still trending down a bit. So I know this is an important indicator for you, so I'd be interested in having your view on this and how does it affect your volume strategy going into 2024? Obviously not a topic for the limited series or the Purosangue, but I was wondering if you could comment, for example, on the demand and order momentum for your more accessible models like the Roma Spider.
And then I have a second quick question on the decision to approve the use of cryptocurrency for the purchases of Ferrari cars. So could you maybe provide some color on the extent to which you think this can enlarge your customer base? And also, as a follow-up, these cryptocurrency investors are not always perceived as the most stable customers. So how do you intend on managing this? Do you think it could create more volatility in your residual values? Thank you.
Benedetto Vigna (CEO)
Okay, so for the cryptocurrency, we do not expect this to be to create any volatility because at the end of the story, there will be a conversion 1-1 real time. What I can tell you, and I was discussing with the responsible, the commercial and marketing officer here, we already started to have some clients. And I have to say, not only the people below 35 years old, or the 40, that are taking their own, that are, let's say, they place an order with the cryptocurrency. So it seems to what I think that, I mean, and from the first signal, it is very well appreciated.
So I think it was a good move to allow people to be, let's say, to enter our family or to use, let me say, the cryptocurrency to pay for a Ferrari, because we make easier the process. And they also appreciate the fact that we use the cryptocurrency, that by using a stake, let's say, is pretty much sustainable. Okay? The proof of stake instead of proof of work, it allows to be sustainable. When it comes instead to the pre-owned, well, what I can tell you is two things. One, we did in our history many models, 250 models, if I consider since the beginning. For us, they are all important, the new and the previous one. We have to
the Roma Spiders, the new, the pre-owned, the previous one, well, they are all important for us, and we need, and we will take more and more cares of them. We want to increase the share of the pre-owned cars that go through our official dealers. We want to make sure that the car that go through gray dealers is reducing more and more. And what we are doing with the, the team here on the commercial side is exactly meant to reach this goal. I also have to say, and I want to, to share with you, that when I visited some, dealers, dealerships in the last, quarters, it's becoming more and more frequent that the dealers are having people whose MBO, whose yearly KPI, are based on the number of pre-owned car that they keep purchasing.
So I think there is a, you know, there is even more and more attention also from our dealers, and clearly also from, from us, because we will keep always, the number of car limited. So as I said, a new car we make, as well as the one that, our colleague before have, they have the same dignity, and they must be cared in the same way, like being all children of the same family.
Anthony Dick (Equity Research Analyst)
Thank you.
Operator (participant)
Thank you. Now we're going to take our last question. Just a moment. The last question for today comes from the line of John Murphy from Bank of America. Your line is open. Please ask your question.
John Murphy (Managing Director and Lead US Automotive Analyst)
Good afternoon, everybody. Benedetto, to kind of follow up to that and sort of the follow-up to your backlog being so strong, you think about price and mix, I mean, there's opportunity to manage that, sort of on an interim basis. But over time, do you think you need sort of like the quote-unquote entry-level product like a Roma? I mean, it's a beautiful vehicle, but I mean, would that be the kind of product that might not make it into the product portfolio in the next, you know, 3-5 years? And then a second question, as you see the strength in the used market, is there a possibility to start doing personalization in the used market, maybe around wheels and interiors?
Obviously, you can't do paint there, or maybe you could. That, that could actually augment revenue and, and support residuals further in, in the secondary market?
Benedetto Vigna (CEO)
Thank you, John, for the question. Yes, I start from the second one. Used the market, we see this trend also to do personalization of the pre-owned. They, they may change the rim, they may change something in interiors, but also some client, they want to add, for example, some protective layers on the paint. Last week, I was visiting the location where we apply this protecting layer, and one of these car was exactly a pre-owned car that was where we were applying a protective layer. The second, I believe that the Roma is a good entry model. I think that we don't need it to go lower.
I think that, the strategy for a company like us, that is playing, I would say, in the ultra-luxury space, is such that we need to make our cars always more and more emotional, always more and more unique in terms of performance, in terms of, let me say, astonishing design, and always having in mind the sustainability. I think these are... There are, you know, there are three wheels that they must work in the same way, at the same speed: the driving emotion, the driving thrills, the performance driven by engineering, and the beauty of the car driven by design. These are the three wheels that we'll keep considering, and I think we already have an entry level that is Roma.
John Murphy (Managing Director and Lead US Automotive Analyst)
Okay, great. Thank you very much.
Benedetto Vigna (CEO)
Thank you.
Operator (participant)
Thank you. The speakers are no further questions for today. I would now like to hand the conference over to Benedetto Vigna for any closing remarks.
Benedetto Vigna (CEO)
So thank you all for your time today, and also for your very insightful question. Thanks a lot. The strong third quarter result, and also the desirability of the brand that we've been debating during this one hour, are basically fueling our confidence for the development of the year and also looking forward. So thanks a lot again, and I wish you a good afternoon or morning. Thank you so much.
Operator (participant)
That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.