Ferrari N.V. (NYSE:RACE) Q2 2023 Earnings Call Transcript

Ferrari N.V. (NYSE:RACE) Q2 2023 Earnings Call Transcript August 2, 2023 Ferrari N.V. misses on earnings expectations. Reported EPS is $1.45 EPS, expectations were $1.77. Operator: 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 speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I will now like to hand the conference over to your speaker today, Nicoletta Russo, Head of Investor Relations. Please go ahead. Nicoletta Russo: Thank you Roberto, and 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's CEO, Mr. Benedetto Vigna; and Group's CFO, Mr. Antonio PiccaPiccon. All relevant materials are available in the Investors 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 governed by this language. With that said, I'd like to turn the call over to Benedetto.

Photo by M on UnsplashBenedetto Vigna: Gracias, 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 first quarter would not have been possible, gracias. 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 remains stunningly high across all geographies in the full product range thanks to our 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 with the controlled growth trajectory and they are not at all correlated with respective market trends. In the first semesters, our shipments grew by 4% year-over-year with all regions up, 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 in Carbon Neutrality Journey. So now let's start from our exceptional second quarter earnings and I'm very pleased to highlight that the following three key data. Revenues at nearly €1.5 billion, up 14% versus the prior year, even more remarkable in light of shipments substantially flat year-over-year. Adjusted EBITDA is about €590 million with a 40% margin. Industrial free cash flow generation is approximately €140 million. Interesting to note that it took us only six months to surpass the €1 billion EBDA threshold while it took the entire 2017 to pass that same level, a result that everyone at Ferrari contributed to reach. Beyond these strong financial results in the quarter, there were other important milestone which deserved 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 WC with the podium at Leman on the centenary of the world's most famous endurance race. A few days later, we were parade through the streets 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 so important for all of us to celebrate this victory? Because 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 Inspire Franco Champ 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 SF90XX Stradale and Spiders. Derived from SF90, they have more than 1000 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 middle 90s with the F50 supercars. Apart from these unique technical features, I'd 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 the official unveil. The extremely positive reaction to these two launches is the most recent signal to the strong desirability of our brands. Further indicators to that are, firstly, the enthusiastic reception to our exceptional product offering led by the Roma Spiders 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. And last but not least, the impressive attendance level to the World Of Ferrari experiences where as we said during the last Capital Markets Day, we want to focus our attention more and more in the future. Indeed, in the quarter, we organized the 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 gives privileged access to the 24 hours of Le Mans, ease on track facilities and the 499P race team. This is the first time we launched such a club and this successful perception is a confirmation of the goodness of our strategy to enrich the experience we are offering to our clients. And 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 3000 people spanning from clients to fans. I attended it and I could experience personally the desirability of our brands 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 came 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 project 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 three additional steps aiming to reach carbon neutrality by 2030 as we committed during the 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 e-building. We are completing the walls and 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 two years, the entire building will run on renewable energy. Last but not the 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. And now reaching 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 signs to award our vision. Le Mans was the perfect stage for a Ferrari shop in the fan zone. We have an enthusiastic response from client. And in Le Mans, we also recorded an increase in average ticket our corner boutique in Casa Ferrari as we saw in Rome with our Cavalcade clients. Lastly, our museum performed extremely well with a plus 34% year-over-year traffic presence increase in the first six months. And now, I will leave the stage to Antonio to enter into the earnings details. Antonio PiccaPiccon: Thank you, Benedetto, and good morning or afternoon to everyone joining us today. Starting on Page 4, 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. Therefore, 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 few minutes. On Page 5, 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 rebalanced the first semester and in line with our volume, geographic and product mix strategy for the year. Thus, we draw EMEA up double digit versus the prior year while deliveries in America, Mainland China, Hong Kong and Taiwan and 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 812 Competizione were in ramp up phase. The allocations of the Daytona SP3 continued as planned and we commenced the first deliveries of the Purosangue. As we continue to execute on our electrification journey, the hybrid wave on total deliveries has further improved reaching 43% more than double compared to last year. On Page 6, 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 continuing very strong contribution from personalizations and pricing. Personalizations, mainly sustained by carbon look and leverage 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 has a positive impact, mainly following the U.S. 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 €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 €36 million mainly due to higher depreciation and amortization and once again I want to flag it, continued cost inflation partially offset by quarterly specific lower Formula 1 expenses, neither of technology related government incentives. SG&A were negative for €15 million, mainly reflecting the company's digital infrastructure and organizational development as well as marketing activities. Other was positive for €54 million, mainly reflecting the combined effects of higher commercial revenues from better prior year Formula 1 ranking and the lower cost 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 €20 million. Based on the just listed items, we reached an exceptional EBITDA margin of 40%. Excluding the mentioned timing and other positive effect, 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 €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 €198 million in line with our product and infrastructure development, and consistent with the full year target of approximately €850 million. Net industrial debt at the end of June was €331 million higher compared to March 2023, reflecting our capital allocation strategy. We payed €328 million in dividends in line with our increased dividend policy and €83 million of share repurchases in the quarter, €359 million in the 2022 Capital Markets Day. To conclude on Page 9, we upgraded 2023 guidance as thereby described. Business is essentially driven by the trend of personalizations that we are confident will continue stronger than originally anticipated and higher racing revenues from sponsorships and commercial, albeit to a 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'll turn the call over to Nicolette. Thank you. Nicoletta Russo: Thank you, Antonio. Roberto, we are now ready to start the Q&A session. See also 15 Most Popular Deli Meats in the US and 13 Best Electronic Components Stocks to Buy Now.

Operator: [Operator Instructions] We are now taking the first question. Please stand by. The first question is from Susy Tibaldi from UBS. Please go ahead. Your line is open. Susy Tibaldi: Hi, good afternoon. Thanks for taking my questions. My first one would be on the impact of inflation that you have in, 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 change in the demand patterns that you're seeing. So I just wanted to confirm that and whether you expect for the rest of the year any change at all? And then lastly on your e-building which will open in mid. 24 given that the expectation of the first EV unveil is in 2025, how should we think about the ramp up of this new building? Thank you. Benedetto Vigna: Thank you, Susy. So let's start from the third one. The building it's a--- will be, let me say up and running with all equipment in mid next year in June, exactly 2 years after we added the Capital Market Day here. And [indiscernible] building we 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 other car that are not electric. When it comes to another important [indiscernible] to E-building, let's consider that this will be a building that will use more state-of-the-art equipment, let's say with all the renewable energy and we'll have the flexibility that we need in a company such as such as Ferrari that is, 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 to you last year will be assembled over there. So 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. So here, if you pass by our company you can see the mushroom are getting taller and taller any day. The second point was about the customer, the client behavior. Well, I can tell you that we do not have any change. We don't see any change on the consumer behavior. If I go to see the-- or the [indiscernible] that as I told you very high and it goes well into 2025, Well, I see that the split among the different region of the order book is very good, they are all growing. So we don't see any change. The only thing I can add is that there are some regions like what I mentioned before in Korea, for example, that are growing at a good a pace. But 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 our cars. For the inflation and the price. Antonio Picca Piccon: Yes, actually 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% is an overall impact over the year. And 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: Thanks. And just a quick follow up on the e-building, as you're planning also to assemble some of non-electric car, shall we still think about this 15,000 units during the current plan as a CAP or does the new building give you more flexibility? Benedetto Vigna: 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. And today what the 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, so 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 are let's say help us to go in the direction of the carbon neutrality by 2030. So flexibility is key for us and the use of let me say, state-of-the-art equipment.

Susy Tibaldi: Perfect. Thank you. Benedetto Vigna: Thank you. Operator: Thank you for your question. We are now taking the next question. Please stand by. The next question is from Giulio Pescatore from BNP Paribas. Please go ahead. Your line is open. Giulio Pescatore: Hi. Thanks for taking my question. The first one for Antonio on the guidance. Why should we expect a decline in margin sequentially in [indiscernible] of about 350 bps compared to the first half? Especially if we consider the model momentum that you have in the second-half with I guess higher around shipments of the Purosangue, higher shipments of the Competizione, higher shipments of the GTS, so, I mean your modern momentum seems to be improving in second-half and you're guiding for a very steep decline in margin. Then the second one on the Purosangue delivery, is it, it feels like 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? And if you could also give us an indication of what percentage 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. And 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're planning to maybe invite us back to Maranello potentially for the unveil of the of the new plant next year for an update on the business plan? Thank you. Antonio Picca Piccon: So the last one, you are invited to come to see the plant, but we will not have the Capital Market Day in June next year. And I'll comment about the, the percentage, okay, the Purosangue sorry, we started to delivers Purosangue in Q2 as planned. So we will have 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. And 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 and but yes and how we Q2, basically performed. I think there are two elements. Q2 was designed to be the stronger quarter of the year. I think we mentioned a couple of times in previous calls and this happened actually and the margin for the quarter was already higher than the guidance for the full year, but 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 come earlier. Some other there were adjustments, unexpected adjustments to our assumption that will not be repeated. And the third element is of course the strong flow of personalization that was also a surprise. And at the same time if we, 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 and then take into consideration also the inflation that is containing 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 levels that we guided at the very beginning of the year. That's why we confirmed 38% because 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: Okay. Thank you. And just following up on that, is it safe to say that the reversal of the bonuses from Formula One which normally happens in Q3 and this time happened in Q2, is it fair to say that it should be around €10 million to €15 million, maybe €20 million? Can give us maybe an order of magnitude on this element? Antonio Picca Piccon: Yes, obviously, hopefully it should not happen not in the second, no in the third quarter or [indiscernible]. But anyway it happened we recognized in the second quarter the fact that we cannot win this year mathematically is impossible. So we basically adjusted our estimate to the assumptions to get second and the impact is approximately €10 million in the quarter. Giulio Pescatore: Perfect. Thank you very much and good luck. Antonio Picca Piccon: Thank you.

Operator: Thank you for your question. We are now taking the next question. And the next question from Monica Bosio from Intesa Sanpaolo. Please go ahead. Your line is open. Monica Bosio: Thank you and 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 does the order book for Puritan stands 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. But 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? And 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: Thank you, Monica. So 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 and I can tell you that it's going very well. We are collecting, let's say, orders for the final phase, okay. So 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 fixed let's say the sales, the shapes of our shipment, let me say to 10%, 10%-11%. And I think this is, I mean we are on track with this plan. And then about the customer, if I understand well, I will repeat what is if you see any change in the customer base pattern, that's what I understood, the customer penetration. Let's say the special series, let me say that we are the SF90XX, both Stradale and Spiders. Let's say we are reflecting if you want the same pattern of the top VIP clients. So 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 client pyramid. So the traction of this car has been very strong. The people, I mean, I attended the couple of session of the presentation of our colleague from engineers and marketers and I can tell you that when the car was unveiled, even without stepping in the car, several people I was with European, I was with Asian, I was with American and Japanese, they all laughed let me say the cars. So 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 car. The carbon look, it's something that we are discovering as an interesting trend definitely. Monica Bosio: Okay, thank you Benedetto, thank you Antonio. Antonio Picca Piccon: Gracias Monica. Operator: Thank you for your question. We are now taking the next question. And the next question is from Henning Cosman from Barclays. Please go ahead. Your line is open. Henning Cosman: Hi. Thank you very much for taking the question. The first one is 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. So when you say solid order book or robust order intake, is that in any way less than you have previously indicated, I thought we had previously talked about record as an attribute or even sold out when discussing individual models. So I just want to make sure we're not missing anything there. If there's anything further you want us to read into the attributes, if you could please let us know? And perhaps another way about asking about the margin trajectory in H2 as a second question, when we talk about personalizations, I appreciate it was a positive surprise and H1 both Q1 and Q2 and Antonio you said it's reflected in the full year guidance increase already, I understand that. But could you please perhaps help us understand if we are now expecting a continuously higher personalization rate, so are we basically now at the new run rate and we are extrapolating that or are your expectations for the second half that it's as low as you had originally expected and you think H1 was more of a one off and we're now dropping back to your original expectations both perhaps for the full year 2023 and beyond if you could? Thank you very much. Benedetto Vigna: Thank you, Henning. I think that, I'll take the first one and Antonio will take the second on the personalization trend and the margin. 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. But this means, for us means that today is bigger than it was. So trust us next year, next quarter, we'll use only one word. The personalization and margin H2, may be before coming to that, I think you asked also about 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. So there are periods of time when we are open for taking order for a number, a larger number of models and some other periods such as today for example where we just have two. So today we have two hybrids and two thermal, we have 296 GTB.

Antonio Picca Piccon: And we do respect your question which is a very important one. Personalization I think I mentioned already on a number of times. On personalization we give the flexibility of our clients to define what they want to have on their car between four and three months before delivery, which gives us visibility which is partial during the course of the year. Based on what 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 during the first half. Okay? But obviously it becomes difficult to project any further and this is one of the reasons why we said this is at the root of the improvement of the guidance that we've just delivered today. Hope this helps. Henning Cosman: Yes, that's great. Thank you very much and looking forward to tomorrow as well. Thank you. Benedetto Vigna: Thank you. Operator: Thank you for your question. We are now taking the next question. And the next question is from Stephen Reitman from Societe Generale. Please go ahead. Your line is open. Stephen Reitman: Thank you. Good afternoon. Question first of all on the personalization, as you reopen the order book for 2026 build slots having closed it earlier this year, when you said that the demand was four to five times higher than you'd be necessitating when you first launched the vehicle. I think the question was asked before, but I didn't quite maybe get the answer for how long is it likely this the order window is going to be open on the 26th 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 it was one of the reasons why the personalization was also going up was because in order to secure even a build slot for Purosangue, it probably makes sense for your customers to order as heavily and 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 specked? Thank you. Benedetto Vigna: Hi Stephen. So you're right at the beginning 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. Then we settled, we organized it also we've always supply chain. So we are planning to take order Purosangue for all 2026. Okay? This is the answer to your first question. Clearly when you have a car with four seats instead of two, you have more option on the personalization to offer to the client. But I can tell you that if I go to see the trend of the personalization across all, let me see the model, all the cars, I mean there is a trend that is touching all our models and this is true across all geographies. I think that the people are considering that we said clearly we do not want to increase a lot device. They are more tailoring the cars like their personal dress. So they're 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 we're 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. So this is where we are, Stephen. Stephen Reitman: Are there limitations in that you have internally in terms of having enough craftsman to fulfill all the desires of the customers? And how important will your new paint shop be when you open that? Benedetto Vigna: No we don't have this limitation. I can tell you that for sure when you talk about the carbon look, the process to make carbon look 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 really strategic relations. So we feel that we are confident that we can address the personalization in the right way. If you want the stress test we did ourselves last year. Overall on the volume increase, it has been very helpful and upholsteries it has been a wise decision. Stephen Reitman: Thank you very much. Benedetto Vigna: Thank you, Steven. Operator: Thank you for your question. We are now taking the next question. Please stand by. And the next question is from Anthony Dick from ODDO BHF. Please go ahead. Your line is open. Anthony Dick: Yes, hi. Thank you for taking my question. My first question was on the EBIT bridge and you have the others bucket at 54 million impact in Q2. So you mentioned some of the drivers and thank you for giving us the F1 provision amounts. But could you possibly provide some further granularity into the other components of that item? And also you know is that 54 million just a non-repeatable impact as you mentioned or is there some that carried through to H2? And also 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 are currently 4th place today. So 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? And then I had a quick second question on the FX impact, which turned negative in the quarter. So I was just wondering if you could provide some further information on how you expect that to evolve considering your hedging policy? And then a very small third one, also I was wondering if you could provide the amounts as Daytona SP3s that you delivered in Q2? Thank you.

Benedetto Vigna: The question, other questions are for me. Okay let's start from the last one. I think in terms of the Daytona, we are about around 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 chart. In terms of the reconciliation between what we have in other and what we have in terms of the revenues 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 raising revenues. We have obviously the part of the portion which is related to ranking our positioning in the F1 Championship, and 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 10 million in the quarter. So this should basically allow you a full reconciliation between what you would expect from our revenues and what you have in the EBIT, in other EBIT column. And then you asked about the impact from possibly becoming hopefully unlikely for rather than second and the impact is lower compared to what we have from the first to the second. Anthony Dick: Okay, perfect, thank you very much. Benedetto Vigna: Welcome. Operator: Thank you for your questions. We are now taking the next question. And the next question is from Philippe Houchois from Jefferies. Please go ahead. Your line is open. Philippe Houchois: Yes, thank you and good afternoon and thanks. Thank you very much for your explanation about when you say every quarter you're surprised by personalization, I understand that people know just what they want in their cars in the first few months of before the delivery, so that is helpful. Now 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. And I'm just wondering, do you think there's scope for another big racing event or whether endurance races could be repeated like four times a year instead of an annual event, something that would create a business 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 and whether maybe you'd even take the lead and try to organize bigger events and that would be a bigger part of your business model? Thank you. Benedetto Vigna: Yes, I'll take this question. So when it comes to racing today, let's say we have, I would say three areas 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 relationship management like the [indiscernible], the challenge, the Finale Mondiali, well these are the areas where we are focused today where we intend to be focused also for the future. So 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 Championship in the beginning so 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 client. That's where we are. Philip: Yes. Benedetto Vigna: Thank you, Philip. Operator: Thank you for your question. We're now taking the next question. And the next question is from Tommy Narayan from RBC CM. Please go ahead. Your line is open. Tom Narayan: Hi, thanks for taking the question. A quick clarification on the e-building. So that will 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 understand it will be also be used for ICE cars as well, but just curious if I could just understand that better? And then on Purosangue, it would be helpful to just understand some of the customer demographics, the take rate there, is it a percentage of buyers perhaps that are new to Ferrari? Presumably this is like a very different customer subset. Just curious now that you've seen some of the deliveries who really is taking these? And then lastly, the SF90 Stradale uses a custom YASA motor, I believe. We learned recently from a luxury car maker, recently announcing to be using powertrain electric components from a pure play EV maker. Just curious as to what went into your selection of YASA and if you consider other providers here and does this necessarily indicate how you think about your future EV aspirations? Thanks.

Benedetto Vigna: Good question. Thank you, Tom. So I start from the first one, the story of e-building and I understand that you want some clarification. So, let's remember June 2022, we said we are going to be ready for the building in June 2024 and that too will happen. In June 2024, we’ll start to produce something in this line that is different from electric cars. Then end of 2025 we will have in the e-building, we will announce electric cars and clearly the day after -- the year after we will have the electric car getting out of that buildings. So this is the schedule and that's 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 us to develop strategic component for our electric cars. The second about the Purosangue demographics, well 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 name of the Ferrarista, we will have a name of a Ferrarista and then but most of the time the user will be the partners, the women, because I told those in the previous call when we attended the event of launch of Purosangue in September, very often the people were asking if they could get two because for sure one and only one would have been used by the partners. The third one is about SF90XX. Well, when you talk about electric cars for sure there are three important blocks, one is the battery, one is the engine and then there is another block which 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 they work together that are -- that work to 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 our new kind of electronics. Tom Narayan: Okay, got it. Thanks. Benedetto Vigna: Thank you. Operator: Thank you for your question. We are now taking the next question. And the next question from George Galliers from GS. Please go ahead. Your line is open. George Galliers: 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 for special series, would you consider having more than one special series in production at the same time, at the moment it feels like you’ve introduced 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? So 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: Okay, so, for the special serious 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, seen about the 812 Competizione and the SF90 XX Stradale, but the superposition is very minimal. Okay? They are pretty much let's say evenly distributed. And then there is the other question, was on the Daytona and the number of units for the quarter compared to the year, I think we can assume they were evenly distributed throughout the quarters. Operator: Thank you for your question. George Galliers: Thank you. Benedetto Vigna: Thank you, George. Operator: We are now taking the next question. And the next question is from Martino De Ambroggi from Equita. Please go ahead. Your line is open. Martino De Ambroggi: Thank you. Yes. Thank you. Good afternoon, good morning, everybody. The first question is a general question on the hybrid because you are now in the region of 40% of volumes in hybrid. So, 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? And 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 next year? Benedetto Vigna: 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. And 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. But this is always our goal for a number of reasons. First, because it allows us to serve our clients the best possible way, secondly, because it allows us to manage the product development and manufacturing activities in a balanced way and ultimately because also the [ph] profitability would move gradually up along with the development of the product range of [indiscernible] Martino De Ambroggi: Okay, thank you. Operator: Thank you for your questions. We are now running out of time, so we won't take any further questions and I would like to hand the conference to Benedetto for closing remarks. Please go ahead. Benedetto Vigna: Thank you all. Thank you for your time and also for your questions. The second quarter of 23 really represents another important milestone for our company we went to podium at Le Mans, the enthusiastic reception of both for the SF90XX Stradale Spider and the incredible level of attendance to our client events. And this is also fueling our confidence for the development of this years. And now I would like to wish you a good afternoon, good morning and thank you also for your attention. Thank you. Operator: This concludes the conference for today. Thank you for participating. You may all disconnect.

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