Q4 2019 Earnings Call

[music].

Ladies and gentlemen.

Welcome to the for Robbie fiscal year 2019 results conference call.

During the call all participants will be on they listen only mode.

There will be a presentation followed by a question and answer session. If you wish to ask a question. During this time you need to press star one on your telephone keypad.

I must advise you that the goal is being recorded today on Tuesday, the fourth of February 2020.

How should I had that Pts we got Nickolatos. So please go ahead.

Thank you Jordi and welcome to everyone, who is joining us on today's call wouldn't be offered by the go see always KMI led and group CFO I'm going to pick up it gone all relevant the materials are available in the Investor section of the fibrotic corporate the website at the end up the present they shouldn't we will be available to answer your question.

Before we begin let me remind you that any forward looking statements. We my make during todays call are subject to the risks and uncertainties mentioned in the Safe Harbor statement included on page two of today's presentation and the core would be governing bodies language with that said I like to turn the call over to do we.

Thank you Nicholas.

Good afternoon and morning, everyone.

I would characterize our 2019 performance.

Robust from both quantities I do qualitative perspective.

Our record results, but the targets that were upgraded on the release of our third quarter results.

Some instances we surpassed the.

As we had anticipated how fourth quarter performance was particularly strong across all metrics.

We're very pleased by the advance in our EBITDA margin of 110 basis points.

To a level [noise].

33.7% as well as a minor increase in our EBIT margin. Despite it yet which has anticipated witnessed an adverse product mix and a significant increase in depreciation reflecting our high capital expenditures in both 2018.

And 2019.

The most impressive numerical achievement was our industrial free cash flow, which reached a level of 675 million euros.

While this was clearly flattered by the deposits collected on the sold out Monza, even absent this phenomenon, we exceeded our ambitious expectations.

The numbers that I'm, telling your will show to review with you also visibly reflect the numerous actions and initiatives taken during the year.

To assure our longer term growth to sustain the vibrancy in vitality of our formidable brand, which for the second consecutive year was determined to be the world strongest brand by brand finance This past January as well as to strengthen our organization to enhance.

Our capacity to innovate execute flawlessly and retain our competitive edge over the long term.

The highlight of the yeah. It was undoubtedly the unveiling a five new models, which all gone out and Im enthusiastic response from the market and worldwide to claim for both said design and performance.

While all five her exceptional cost two of them truly stand out as they constitute a departure from us somewhat predictable historical norms.

The SF Ninetys Teradata way beyond that second credible innovative features and performance metrics is our first top of the range series production hybrid.

Our first flagship mid engine model in some time.

And it is priced at a premium to our a 12 offering and accordingly opens a new lucrative segment for us.

Roma, which was fittingly launched in Rome. This past November and recently was selected as the most beautiful supercar of 2019 by an international jewelry opens a new segment for us with the ambition to attract a significant portion of new.

And ultimately loyal customers to the family.

Launching five models in one year as a huge undertaking to do so with such player and success is quite unique and is testament to the talent and capabilities. The lie within this great company at each and every level.

We entered twentytwenty with considerable momentum and exceedingly strong portfolio of multiples planned to be further enriched with two launches. This year and then order book that is as strong as ever in both absolute and relative terms and this.

Despite the fact that we're only opening the Roma order book just now.

There exist however, a number of potential challenges at the macro level the cannot be ignored.

While for the moment the seems to be a willingness to constructively address trade issues at flare up cannot be discounted.

The same goes for consumer sentiment relative to Brexit, the corona virus and as always potential currency volatility.

In addition, there exist the challenge of increased luxury taxes as it's currently threatened in Canada.

In addition, greater China, and Hong Kong in particular will pose a significant challenge at least in the first half, resulting from our decision to accelerate Klein deliveries in 2019.

While we view 2019 is very much a transition year twentytwenty will be a year of consolidation I say this for several reasons.

While we unveiled five key models during the course of 2019 actual in market deliveries for most of those models will occur over the second to third quarter as we ramp up production.

While Roma deliveries a slated to reach clients only in the fourth quarter.

As is always the case, given homologation delays the U.S. market will lag the others in terms of initial deliveries to our customers and this will significantly impact our geographic mix throughout the year.

On the brand diversification from we're busy executing against the plan. We presented to you back in November and as anticipated. This will initially entail a cleanup of our current business and hence lower revenues to build a very solid foundation for future growth.

This year will prove to be quite critical in terms of formula one.

Our ambition remains as always to seek to win and thus we will continue to invest in our infrastructure resources and technological creativity as we continue to develop our twentytwenty car as the season unfolds.

Furthermore, as you are aware the new technical regulations that will come into force in 2021 will entail the development of our very substantially different car.

Which will obviously require additional resources and expenditures already this year.

You will note that we anticipated increase in our capital expenditures this year.

It's reflected in part a shift in timing from 2019 to 2020, the formula one infrastructure I just mentioned.

But also the purchase of tracks of land contiguous to our facilities here in Maryland that out.

This will provide us with the necessary flexibility to retain our competitive advantage over the longer run as we adopt new technology in house, rather than relying heavily on third party supplies.

Well I believed that our record results and countless achievements were quite exceptional the most significant in my opinion relate to our organizational development.

We have strengthened our organization with a development that acquisition of talent to fill the skill gaps that we will need going forward.

While this is reflected in higher cost I'm confident that this action will ultimately generate substantial returns and I'm sure our competitive superiority going forward.

I should add that in 2019, we witnessed heightened companywide focus on sustainability in the broader sense of encompassing all our stakeholders and not limited to those matters solely related to climate change.

We're working diligently to secure a much more complete understanding of our carbon footprint.

Much has been accomplished within our facilities in the past, but more must and will be done. However, an enormous amount of work and actions must be taken upstream and downstream to achieve carbon neutrality over the longer term.

All in all we delivered a rock solid year on virtually all fronts.

I am both 2019, and our guidance for Twentytwenty are well in line and in fact superior to the growth trajectory that we presented in our capital markets day.

It now gives me great pleasure to handover the call to Antonio.

Thank you are doing and good morning, or afternoon to everyone who is joining us today.

Starting on page five as Louis Sad full year 2018 results were strong and all the metrics and met our upward revised guidance.

Our shipments grew 9.5% or by 880 units, mainly driven by that are bus deliveries of the fair value Portofino and da 12 Superfast.

Group net revenues increased 10.1% to 3.8 billion euro.

Adjusted EBIT da increased to a began 269 million euro improving by 155 million euro or 14%.

This included 17 million Euro 40 or impact from the first time adoption of the I thought I 16.

Adjusted EBITDA margin was 33.7% ABT 110 basis points versus prior year Inspite of the brother makes available for most of the year and the operating expense intake by the expansion of our activities.

In Q4, the adjusted EBITDA margin reached a record level of 36%. Thanks to a much richer mix supported by the Ferrari among those few one NSP too.

Adjusted EBIT grew to 970 million euro improving by 92 million euro or 11.2%.

Adjusted diluted EPS was up 9.1% to three point 71 euro benefiting from the pattern box agreement signed last year, but also reflecting the 8 million euro costs of the cash tender offer on part of the euro bonds outstanding.

The latter was executed in last July as part of the liability management exercise aimed at improving and extending our debt maturities profile at present low interest rate, which was then completed with the issuance of I use U.S. private placement of equal in size.

When comparing the quarterly figures, we must me mine mine full it in Q4, 20, Dean where reported an income tax benefit of 4 million Euro as the result of the final determination of the tax rate for the year. This Congress. We then expense of 43 million Euro in Q4 2018.

Industrial free cash flow for the year was 675 million euro representing an increase of 300 million euro nearly doubling versus last year boosted by the advances collected the underwriting among them.

Moving to page six.

Total shipments for 2019 were supported by an 11.2% increasing VA models and up 4.6% increasing btwenty models.

This growth mainly reflected a much higher deliveries of the Ferrari Portofino and da 12, Superfast along with the very first deliveries of the phase three Bhutto and the Ferrari Monza, which essentially started in the last four months of 29 team.

The 488 family record is slightly lower volumes with the 488, GTB and the 488 spider concluding their lifecycle, partially compensated by the four IDH piece that Andy for 88 business by there.

In terms of geographic performance mainland, China, Hong Kong and they won was up 20.3% EMEA grew 15.8% less does that back increased 12%, 1.9% White Americas was down 3.3%.

Such changes in the geographical location the results of the decision to privilege deliveries to China, and Hong Kong and the first ASIL D.

We've also of our policy to manage the product phasing phase out across geographies in relation to waiting lists.

As Lou anticipating his introductory remarks, these uneven development will continuing twentytwenty as the phase of our new models stocked with different timing in each region and the ramp up mainly in the second half of the year.

Turning to page seven you can see here displayed at the group net revenues for 2018, which increased by 8.2% at constant currency that is a 28 Dean exchange rates.

Cars and spare parts revenues were up 13.4% that constant currency.

As explained before the growth reflect the combined impact of the IR volumes the positive contribution from the hotel Ramon Thank you for and all personalization programs.

That's realizations represented approximately 20% of these revenue line as implanting Dean they were supported by a significant concentration us of shipments of for 88 baseline distressed by either.

All the above was partially offset by priority of shipments of Laferrari Aperta and the Ferrari Jay 50.

And just revenue declined 86 million euro for the year, reflecting lower shipments to Maserati.

Revenues from sponsorship commercial and brand were up 22 million Euro mainly thanks to the contribution of Formula One racing activities.

Currency, including translation and transaction impacts as well as foreign currency hedges at the positive contribution up 64 million euro mainly reflecting the strength of the U.S. dollar.

Moving to page eight which highlights the evolution of the main items of our adjusted EBITDA.

Adjusted EBIT grew by 5.1% at constant currency.

The adjusted EBIT margin at 24.4% them.

Volume was positive my 99 million euro thanks to the increase of our shipments.

Mix price was positive for say 78 million Europe. This performance was primarily attributable to the initial deliveries or the pheromones them and to the penetration of personalization programs.

This was partially offset by a negative arranged product mix as well as by a priority of shipments of Laferrari Aperta and the satellite EG 50.

In that's what our cost and R&D grew 94% me, sorry, 94 million euro mainly due to higher depreciation and amortization as a production lines for the new models started being operated.

Operational startup expenses also in connection with introduction of this new models.

As well as spending on Formula one and product innovation.

As expected DNA and industrial costs slightly carb, our gross margin compared to 2018.

As DNA increased by 20 million euro, reflecting the activity around the new product launches and the company's organizational development.

Other decreased due to lower engine sales to Maserati and other supporting activities.

Actually the degrees in other appear to be higher in Q4 and is due to a variety of unfavorable comparison with Q4 last year for our supporting activities and some relocation from other variances.

The adult on net positive impact of currencies was 50 million euro for the year. This was the net result of more favourable market rates, partially mitigated by the hedges in place.

Turning to page nine industrial free cash flow for the year was 675 million Euro.

Driven up by the industry to be da and the positive impact generated by the collection of advances on the pheromones.

Which amounted to more than 250 million euro in the year.

This was offset mainly by capital expenditures of six 706 million Euro.

Our capital expenditures for planting and Dean who have lower than our initial guidance due to the phasing of some investments between 2019 and Twentytwenty and these obviously push further up our cash flow.

The capitalization ratio was approximately 37% for the year the slightly lower than in 2018.

Net ended after that as of December 31st of 2000, and Dean was 337 million euro compared to 370 million Euro as of December 31st of 20, Dean, including two significant accomplishments slower shut all does such as the initially.

Implementation of our share repurchase program for 387 million Euro and the dividend distribution for 195 million Euro.

Lease liabilities asked there I F 16.

As of the end of December were 60 million Euro.

It's worth noting that it would have been cash positive at that at the end of the year. If we add back the impact from the share repurchase is executed during 2018 and the adoption of the new accounting principles certainly exists.

Let's move onto page then.

With the plan presented at the capital market. They have September 2018, we suggested the twentytwenty checkpoint in our journey to Twentytwenty too.

Our current guidance upgrades now that's checkpoint across all metrics following the momentum our brand is enjoying and grounded on the fundamentals of our business.

The upgraded full year Twentytwenty outlook is as follows.

Net revenues above 4.1 billion euro mainly driven by our new product that will hit the market gradually throughout the year.

Adjusted EBITDA between 1.380 billion and a 1 billion 430 billion Euro.

With percentage margin equal or greater than 34%.

The superior margins delivered by the new range will be slightly with held by our R&D efforts, including to prepare the F. One development in progress and by the continuing investments in the organizational development.

Adjusted EBITDA between 950 million and 1 billion Euro.

We target then EBIT margin of approximately 24%, which also reflects the pace of our DNA.

Adjusted diluted EPS between Threepar 90 entry, but 95 euro per share assuming a tax rate substantially in line with Lincoln and team.

The assumption here is that we keep on enjoying the benefit of the flattened box tax break under the new tightly managing allied slightly reduced.

Industrial free cash flow equal or greater than 400 million euro.

As a rational for this target usually mines in Twentytwenty, the industrial free cash flow will be the Braves or the portion of the cash consideration for deferrari monza to be delivering the or seems already collected and violence in 2018.

In addition, our cash flow is reflect higher capex as already explained by Lee.

We expect such expenditure to amount to not less than 800 million euro so less to recover the 50 million Europe was born on from the original 2018 program and to include an initial step of the infrastructure development plan year in modern Ella.

We are assuming higher tax payments in twentytwenty since we consider the new cash benefit from the pattern box could displayed in three years as provided by low while waiting for during you all of the advance agreement.

Finally, it is worth noting that the guidance for Twentytwenty rests on the assumption that the exchange rate we remain in line with 2019 for our most relevant currencies and encompasses the solid visibility and the full data that we make count on Tuesday at our business.

With that said I'd like to turn the call over to neglect.

Thank you and Tanya that now ready to start the Q any session. Please go ahead.

Thank you very much ladies and gentlemen question. Please.

One.

[music].

We'll take.

Question today from the line of Adam Jonas.

Please go ahead.

Thanks, everybody.

So so literally in the past few months climate change has seemed to emerge as one of the most important areas of focus from investors in many regions and or at least in our discussions Louie what asset managers were talking to its taken a far more aggressive stance on on where they bought on where and how.

Deploy capital and also where they're not deploying capital now I can't think.

Given your experience and the tobacco industry I can't think of anyone better positioned than you Lily and your team to assess this emerging risk and to help ensure that Ferrari.

Kansas iconic status, while creating significant value for shareholders. So my question is.

Could you use this opportunity the first question on the call Im sorry, if it's out of step at the quarter, but I think it's really important and I think you would agree.

Can you just address some of that that key tenants of your strategy to reduce cotwo emissions and am I overstepping. It if I were to suggest.

Oh.

I would like your opinion on considering whether you could the weather Ferrari could tie some that management compensation to C. O two reduction targets as I believe Hey, I believe you think I think it can do a great job doing that that it's well within your wheelhouse and also is the right thing to do and there's an alignment with the with Ferrari with the for our E Bay.

Brandon I think your Ferrari owner community. Thank you.

Thank you Adam you will certainly not overstepping your balance.

It's clearly a very important issue as I mentioned in my opening remarks.

We are very focused across the organization.

And ultimately we do want to reach carbon neutrality.

I think our advantages or who we only make 10000 cars and so therefore that should be possible as you know we're going hybrid.

We're looking at alternative.

Technologies and fuels as well, but more importantly, I think whilst we've made great strides within our own facilities I think it's very important to look at the full carbon footprint and that's exactly what we're doing in terms of going upstream to our suppliers as well as all the way downstream.

But you're right. It requires a significant focus and resources I can assure you that the board is focused on it.

As to whether.

Compensation should be directly linked to that that's clearly a matter for the compensation Committee I think given our plans.

Well, a big part of compensation is linked to innovation and I think.

Getting to carbon neutrality will require innovation, so effectively it's already part of management compensation I Hope I addressed your question.

Thank you Lilly you nailed it.

Thank you.

A question John Murphy from Bank of America. Please go ahead.

Good morning, guys.

Maybe a slightly more mundane question on on the near term I'm just curious it as we look at the 2020.

Outlook. It seems like you know second and third quarters when the bulk of your new models will hit and fourth quarters when the Roma hedged. So it seems like as we look through the course of the year.

It will be more back half loaded just curious if you can kind of talk about the cadence of earnings.

Through the year, what your unit growth estimates are and we as you mentioned, there's a lot.

Swing factors out there that are sort of tough to call right now, but if you were thinking about the major swing factors positively negatively what would you at what would you highlight that is something that could be the once it could be material.

Well.

First of all good morning, John.

Looking at 2020, clearly the warm big positive will be nine months of Monza.

Given that we had one quarter is back in 2019.

And then there are gives and takes a certain models.

Reached their phase out, including the piece star.

And the new models come in as I said.

Usually in the second quarter and that in the third quarter.

Obviously, the scroll down is very important given that its margins.

And now really hits in the second half so yes, you're right.

The second half should be quite strong, especially the fourth quota.

[noise], However, we don't anticipate major shifts.

In the profitability over the year from hotel to quota.

There may be geographic mix changes as we both San Antonio nine mentioned.

But that's more in terms of deliberate management of our waiting lists as well as what we mentioned in terms of the U.S.

Homologation process. It always takes a bit more time for the new products.

Okay. That's helpful. And then just a second question on China, I mean, obviously, there's a lot of concern around what's going on to Corona virus I'm just curious as you think about.

A market there may be shut down or maybe not at four for a couple of months, we'll see how the shows when you think about your order backlog in your exposure to China.

Do you have an order book in your other regions they could absorb potentially down.

Down demand in China for for a period of time.

Well, that's the beauty of this company, we can offset that geographically.

I have said more worried about Hong Kong.

And I am about China.

'cause Hong Kong clearly is a bit of an issue.

And the business there is very soft.

I think in terms of.

The business in China, One star dollar hits the market.

Because you do get a tax benefit because it's a hybrid product.

That we believe should be doing quite well and the orders are quite strong.

So to answer your question, Yes, I think we can offset.

Weaknesses in China, or if it's for a few months.

Hong Kong will be more of a problem.

But in any event.

The first half for greater China.

A copy of the weak because of the difficulty in terms of comparing to 19.

Where we deliberately pushed our volumes to clients.

Given the situation there.

Okay, and then just just lastly.

You know as far as capacity I mean, we've kind of always had this idea through 2022.

Existing capacity.

In Marin yellow is sufficient to support volume growth, but it sounds like there's more land and capital being put in in play in Marin yellow is this sort of an indication that you might need more lines for final assembly or just any indication that you're getting deeper and deeper into powertrain and other maybe too.

Architecture of the vehicle and potentially in sourcing more and more of the technology think you'll need overtime and trying to just in the incremental capital commitments.

The latter.

I don't think we need further production lines.

Within the foreseeable future, it's more to ensure a technological superiority has the world is changing.

So to give us the space to be able to bring in house.

Certain things that otherwise would be done by our suppliers.

So with that right.

With that Bennett benefit be neutral or be negative to margins as we think about her over time, because you could you could sort of swing that in a number of different directions.

Well to the extent the we meet our objectives of technological superiority, who won't be a net positive.

Okay, great. Thank you very much thank you.

Our next question.

Perky from.

Please go ahead.

Yes. Thank you.

Good afternoon, good morning, everybody.

The first question is on the free cash flow just if you can summarize or all the main a variable so I.

I understand the mone, so as down payments will be softer maybe.

Appeared this year, but the if you can split the.

Capex you already commented the during the speech.

Ducs is a outflows are taken into account a patent books and networking capital up sanction.

Sure. Thank you might be no I think it's as I said I already commented adjusted EBITDA in Capex with respect to de a advances from them on that well. This will be I already commented a while ago that is the bulk of that was collected in 2018 and did exact.

Really reducing the amount of catching on demand that will set the in twentytwenty. So the cash.

That we get when selling these guys will be to use because badly collected in advance.

In times of taxes, we pay a higher taxes compared to 2019.

Benefit of men if it will also from the button box, achieving 40 years from 2015 to 2017.

And working capital, we expect it more or less in line with the with the previous years, So nothing major change.

Sure. Okay. So net working capital slippage and the that Formula one additional left for this year.

Well as youre investing more or how much could we assume nine times are being but for the current year.

And.

Just a follow up on the EBIT bridge for Twentytwenty seems so the mix effect in Q4 was a quite impressive.

I don't know if we should the multiplied it by let's say not maybe by four but these could be a reasonable amount for a in next few quarters.

Taking into account amongst a I suppose it was a major contributor the main contributor for these performance and Justice started.

Good morning.

I would say that no it would definitely be a mistake to multiply.

The fourth quarter and consider as a base going forward.

There are various factors.

Well, two which I think I addressed in my earlier answer.

I think however, there's something that's very important.

Everybody needs to bear in mind.

We have very steadfast in our focus on the long term and nurturing the strengths of our brand.

With us.

We'll be very deliberate.

In guiding the mix and captains.

Of our deliveries.

With a particular focus on our waiting list as well as I mentioned the individual market characteristics.

I think to chase a specific short term number.

Can certainly be counterproductive.

Not in the best interest of the sustained vibrancy of our brand and that's something that we think is very very important.

Ultimately we are ahead of the projections, we provided in our long term plan that we presented at the capital markets day.

And we very much look forward to the full and carefully manage deployment of our portfolio and it's in Richmond going forward.

So I'll be very careful to continually try to push the number up.

Because it's potentially counterproductive to what we're trying to achieve.

Okay, and then the formula wanting but.

Well, we won't disclose a clearly the infrastructure part of it is in the capital expenditure number.

<unk> has to the actual operating expenses.

There is a significant increase because of the reasons I mentioned.

No we won't disclose the number.

Okay. Thank you. Thank you.

Our next question comes from Ryan Brinkman from JP Morgan. Please go ahead.

Hi, great. Thanks for taking my question. Thanks for the comments earlier on capital expenditures in 2020 sounds like there may track above normal included onetime land purchase for low one investment et cetera, 2019 makes it tough compare with customer deposit patent boxes that are but just kind of looking beyond the sort of 2019 to 20 20-F.

Walk you know how should investors think about free cash flow as a percent of EBITDA or net income going forward that that maybe take lower in 2020, but then normalize higher thereafter is there are a conversion ratio of either that your target. Thanks.

Oh, you gave a number in the capital markets day.

In terms of our target into the 22.

And we firmly believe that we can be type number so that should give you a sense.

Okay, Thanks, and just relative to the full year margin outlook are you able to share what level of I Kona or limited edition models are assumed as a percentage of the mix a in that margin outlook.

[noise] colour on the cadence of margin what it 20, sorry.

So we do a question is a contribution of D.A. gone out to that margin.

And just color on yes, yes, and and the overall cadence of margin as well as influenced by that or other.

It's clearly a positive contributor that one.

Taking into account that the number off the kind of that were sold in the last quarter was relatively limited.

And even in that in terms of the Mixi is not just take on is of course is the full range of cars that we sell in the quarter makes a difference.

And so the other two that you should take into consideration or they mention when commenting.

On personalization is the concentration of Beeston specific Mr spiders adulthood.

And when looking at Twentytwenty does do will fade down and the mix we have all.

Thanks.

Thank you.

Yes.

Please go ahead.

Yes. Good afternoon can you hear me [noise].

Yes, we can issue and good afternoon, everyone [laughter] I ever take question the first one that.

On the personalization that definitely.

Hey, Matt 20%.

Usually they pay it's higher than the sports car, if I am not stronger under the concentration up or.

We'll keep the high in that 2020 should we expect the display fabric, we stabilized or maybe we can I feel much further increases.

The second question is on the revenue per month about the obviously in 2019 and not the rattan genes that are down do you still expect that Florida liver down for 2000, then 20 you see.

The better lastly, Ethan Allen, that's about it or not.

Hi, there [laughter] portofino.

Can you give us some more flavor on that they've all my I know and payment volumes you will not tell me that [laughter] consequence of production of the coal mine Pamela addressable markets and think that more of that.

The cast the math, maybe we'd that.

With a capital now we can does for the first time mine that Seratti Ward and then after that the [laughter] cannot keep that so that will change and then more value added product that suggests that what played well. Thank you very much.

Thank you Monika.

So regarding personalization has until you mentioned in his remarks.

You're right it was around 20%, but that was some applied to advise a piece stuff.

Our experience has been a on the special series such as the feedstock personalization goes up.

And as we just mentioned the peacetime phases out in Twentytwenty.

Also because of.

The significant price Oh, Monza, the actual personalization percentage is likely to come down.

So it's a mathematical thing.

So more in line with where we've had historically.

And the 20% base that we had in 29 team.

In terms of the revenues from Maserati.

Oh, we anticipate in 2020 essentially flat based on the orders received to date.

So we don't anticipate a big change there.

2020, okay.

With regard to Roma as I mentioned, we just opened the order book now Youre right in saying that the mogul is destined to bring in new customers to the family, which we hope will become a loyal customers.

You're wrong to assume that is the success to the portofino, it's a different segment.

And that's I think very important.

I think the.

Feedback we've received so far.

Is that there is really strong and vivid in trying to stay in the model.

Oh from existing customers from new customers and also very interesting Lee from customers, who X Ferrari ones.

Who haven't ball to Ferrari for some time and suddenly very interested in this specific bottle.

Anyway as the months.

Evolve or we will be having test drives them presentations in various markets.

But the interest is very very high but as I said deliveries only really starts in the fourth quarter. So it's more of factors, it's kind of impact.

Effect 2021 than 2020.

I Hope I addressed your question, yes, it's very clear. Thank you. Thank you Monika.

Our next question.

Great. Please go ahead.

Good afternoon, just two questions from me plus the I Wonder if you could talk a bit about cash returns given the perhaps slightly lower free cash flow, especially in 2020, and how you're thinking about badge.

And then secondly, just on the some European volumes I can you talk a bit about the competitive dynamics that you've seen in the course of that thank you.

I'll, let until you hit cash returns I'll give you a sense of.

A competitive.

Yeah, I mean like actually turning them into the cash flow expectation for Twentytwenty I already commented that.

There would be to element that ER as quite a bit didn't went went into Anthony deem that will not be repeated one is the collection of the advantages of NIM on that and the other one is the impact of the patent box that was below where in twentytwenty.

Sorry, just.

How do you think about dividends and buybacks in relations to learn free cash flow. That's my question.

On dividends I think the board will take a decision based on the results of this year and on the buyback will keep on applying the policy that we followed so far to proportion I deem you shouldn't size of the share repurchase the to the size of our cash flow. So from six months was excellent I would say going for.

Forward.

I would add though we were very conscious of.

The deposits.

So effectively who share repurchases didn't follow a cat the free cash flow, we had despite weekend half a billion to shareholders over the year.

The dividend policy is clear, it's 30% payout ratio and the buybacks.

We'll see as we go alone.

Oh in terms of the the dynamics in the European market.

First of all who are business is extremely strong.

The order book is.

Actually quite phenomenal.

So we're seeing very strong business.

In terms of the actual dynamics in the luxury segment, a we see that some of our competitors.

Our discounting or in certain specific markets.

But nothing.

Two worrying.

Residual values in Europe with the potential exception of the UK.

Remain strong so in terms of the dynamics.

Europe is very strong and we continue to project.

Great business there.

In 2020 and beyond across pretty well every market.

Oh, I'm, particularly strong in UK in Germany, and Italy, as well as Switzerland.

Very clear thank you.

Thank you.

Your next question.

Yes.

Please go ahead.

Good afternoon, everybody community you spoke about launches in 2020, no I know you're on the street eating the that's on your modest but.

Oh pausing a more.

Well it could you said on that point.

<unk>.

Great.

But to me so they will increase.

The same judge.

Increases your it looks like right use your Seo Tunisians can you can you give some more those two models.

[noise] Masimo as you know we are we don't like to talk about.

New models until they are presented.

Oh I can say is that it's not going to affect 2020.

Have they will.

Only reach customers and 2021, so effectively there to zero impact on no twentytwenty.

Numbers, except for the launch expenses.

Okay I imagine that's only have a reserve.

[laughter].

He can you <unk> Morgan.

Well litigation issues discussed in the U.S. <unk> something you the names some because usually you launch a problem in Europe than order after you launches.

U.S. elsewhere.

It is going to change was unexpected from your side.

No no though.

It's within historical norms, but as you said, it's usually three to four months later.

So thats, all I said and you know.

It's a product is going to hit.

In the third quarter in Europe, It alone maybe a in the fourth quarter.

In the U.S., so that affects the geographic mix, but it's within historical norms, we don't see any change to that.

Exactly Massimo absolutely absolutely I'm, sorry to disappoint you on your first question [laughter] gaming floor for sure, but a good try [laughter].

Right.

Our next question.

That's good tool.

<unk>.

Hi, Thank you for taking my question.

One on the under 15 costs you plan to launch until they do a I mean, we have seven left I believe Oh all of those expected to contribute to the things we had to margin or some other contribution beyond that we only started beyond 2022.

It will all contribute to 2022.

Clearly there are some models beyond 2022.

For which we are already investing now.

So some of the costs you see related to those models, but also models.

The we're already working now for beyond 2022.

Okay does that answer your question, yes, sure I'm sure.

And then the second one on the again on them all the pipeline. So all the things we discussed that could pick up the market today I think the main innovation so a though.

Train, a then sung with energy family and and then there was the introduction of obviously a engine or could we see that yeah. What is the time learning.

In the industry.

[laughter] good try Giuliano [laughter], you're gonna have to wait and see [laughter]. Okay.

Maybe 11 left one.

Just on on China, you're building, though the book light and given the situation, though I mean, if you how long do you think is gothic to rebuild and a and get back to normal level of business operations them and do you think you're gonna have to support in the process I mean financially.

Listen I don't have a glass poll to tell you when the issue will be resolved.

I'm not sure anybody can answer that question.

How dealers are actually in pretty good shape. So if necessary, we will help them, but at this point, we don't see a need whatsoever.

Okay. Thank you. Thank you.

Next question.

Yes.

Please go ahead.

Hi, Thanks for taking my question. The first question I had was just on the other line in Q4, you you obviously articulated the in the EBIT bridge lower sales of Materazzi engines played a part but you also referenced other supporting activities could you, perhaps just elaborate on what.

Specifically that was on whether that carried forward to twentytwenty.

Sure.

And I commented that the performance in under the other Guardians in Q4 is not related to a single item, but there's more to I mean to land use all of them forever, but combat is on and what we call they supporting business out of or the ones that we consider another mr. Saturday core and this includes also some and different allocation.

Constant from other vaccines yourselves and things that cannot be allocated.

Under any Elk Hills, Dean other means to them and when we look at the full year picture, though what emerge isn't it the significance of the impact of Maserati and is what we come and get into full year bridge.

Great. Thank you okay.

And then secondly, just on Formula one as we think about the Twentytwenty season, and obviously the big change in rules for Twentytwenty wall.

Will you take a different approach to your expenditure around formula one as the year progressive if on balance a probability you think you either can't be caught midway through the year or it's unlikely you will catch whoever may be in front of you or will you basically treat the season the savings.

Any other season and keep spending up until the point, where mathematically you out to the race or you have one the championship.

We never give up Uh huh.

Our ambition is to win.

And who therefore I don't think we'll pull it off what else apparel.

In terms of Formula one in 2020 or beyond.

Does that answer your question George.

I think not does and the [laughter] the final one which fit simply just around tomorrow and 11. The expansion I think you where you are very clear in your answer earlier, because I just ask what is the present capacity of mine that I think previously missed the Marchioni said.

You could potentially do double the 2016 volume, which would suggest something in the region of 16000 units with two shifts it's that the right way for us to think about it or would that require significant incremental capex.

I think that number that's floated around.

It's 15 not 16.

And that's a number we're comfortable with.

Great. Thank you very much thank you.

<unk>.

Any question.

Question.

Yes.

Yes, good afternoon, I have a question about positioning.

You mentioned the look very good reception you've heard for the EPS of 90, Sturdily, which obviously has created a new price point.

For the products under 30000 euros or so above that of the eight whole superfast.

What do you think what lessons does that give you our confidence that give you about pricing on you'll series calls and you think you can actually makes further increases as you replace the series calls that against the normal traditional 3% to 5% increases you've been doing up until now.

Oh, well clearly it was a very good signal.

However, the complexity of that.

Model.

So do the warranty stock price.

[noise] hockey going forward is to ensure a the we will privilege revenue of volume and that should arms to your question in terms of pricing.

Going back to what I said, it's critical for us.

To really control.

Our volume and the mix of modules.

To ensure that we continue to have the pricing power.

The we have today.

And that's a critical component of our plans going forward.

Yes price is key.

And you mentioned you refer to your order book is phenomenal can you give some idea about the.

About the business you, having some to waiting times, but a little on models, particularly as a bunch of sturdily.

[noise] Oh I don't think we generally give numbers are clearly they vary by market and my model. All I can tell you, particularly on the assets Ninetys traditionally is that the order book is very strong in the waiting list is quite alone.

Getting longer.

Thank you.

Thank you.

Next question.

<unk>.

Please go ahead.

I might've missed a little bit of context earlier, but I was hoping you could give us little context to think through a model a little bit.

You just you just screw your EBIT or 9% ex currency in what you know we talked about his transition year this year.

20 looks like it's about 11% to 12%.

To get so your 2 billion.

Hi end of your range by 2022.

Need an 18% CAGR for the next two years I would've thought coming into the 2020 would be the bigger here and that trajectory just given the high level of our innovation versus last year could you help us think about that dynamic.

<unk> implies a little bit lower of an acceleration this year off the transition.

Last year, and then the bigger growth rates that follow up.

And I guess in a in a related question.

I guess I guess, you've been asked a little bit about formula one in 2020.

Yes.

Biggest cost headwind I mean, I guess in fourth quarter, you had any incremental EBITDA margin at about 74%, which is truly amazing.

If I try annually.

You had a big mix lift in fourth quarter and it looks like.

Yes.

How we're heading into 2020 is very high but the guidance for next year implies incremental EBITDA margins of about 35%.

I'm guessing you told me that one of the biggest cost on a year over year basis. This formula one I'm. Just wondering is that is that something is that is that cost that rolls off as we get into 2021 2020, and that's you know potentially drives that acceleration that seems to be baked in there any any color you can help to just connect what we're hearing today to the longer term model from.

Capital markets day would be helpful.

Okay, Let me try.

Uh-huh. So the starting point is 19 is well ahead of what.

Hello.

Yes.

Sorry that was.

Flashback.

To start with in 2009 team. We were ahead of plan and a will be ahead of plan in Twentytwenty I sat in 2020, it would be a year of consolidation.

Because of the cadence of deliveries of the multiples that we presented in 2019.

IRI mathematically, we should increase by 17.5% CAGR over the next two years.

As I think I said, Oh, yes, I think that's clearly doable given the deployment of the models. The we have presented as well as those that are in the pipeline and the prices and margins associated with those products and that makes the we folk.

Cost.

In terms of Formula one you're right to point out that in 2021, as we mentioned, we'll sort of doubling up because we have to work on a totally brand new car as opposed to developing one further.

So you should assume that in 2021 and thereafter, the formula one cost should come down not least of which because there's a bunch at cap for a big portion of the car itself.

So really it comes down to the full deployment of our product portfolio a mix of portfolio that we forecast. So I hope that answer to your question Michael.

It does very well thank you so much though.

Thank you.

Hi.

Thank you Johnny and thank everyone for joining us today as always day Yakima would be soon available to answer all your follow up question. Thank you.

Yeah.

Joining me.

[music].

[music].

[music].

[music].

Thank you Johnny and welcome to everyone is joining us.

Good day score would be all said by the go see always got me lobby and go see if I'm going to pick up because all run about them at the outset available in the Investor section of the lottery corporate the web site at the end up the present they show we wouldn't be available to answer your question.

Before we begin let me remind you that any forward looking statements. We my made during todays call are subjected to read about third they didnt mentioned in the Safe Harbor statement. They quoted on page two of today's presentation and the core Whoopi Goldberg body language with that said I like to throw a nickel and all of us to do we.

Thank you Nicholas.

Good afternoon and morning, everyone.

I would characterize our 2019 performance.

But from both a quantitative or qualitative perspective.

Our record results met the targets that were upgraded.

The release of our third quarter results, but in some instances we support system.

As we had anticipated Oh fourth quarter performance was particularly strong across all metrics.

We're very pleased by the advances in our EBITDA margin of 110 basis points.

To a level [noise].

A 33.7% as well as a minor increase in our EBIT margin, Despite India, which has anticipated witnessed an adviser product mix and a significant increase in depreciation, reflecting how high capital expenditures in about 2000.

18 2019.

The most impressive numerical achievement was our industrial free cash flow, which reached a level of 675 million euros.

While this was clearly flat to buy the deposit collected on the sold out moms are even absent this phenomenon, we exceeded our ambitious expectations.

The numbers that I'm talking there will show to review with you also visibly reflect the numerous actions and initiatives taken during the year.

To ensure our longer term growth.

To sustain the vibrancy in vitality Obama formidable brand, which for the second consecutive year was determined to be the was strongest brand by brand finance. This past January as well as to strengthen our organization to enhance our capacity to innovate execute.

You'd flawlessly, a retain our competitive advantage over the long term.

The highlight of the yeah. It was undoubtedly the unveiling a five new models, which all gone I didnt, even enthusiastic response from the market and worldwide. The claim for both said design and performance.

Hello, five her exceptional caused two of them truly stand out as they constitute a departure from off somewhat predictable historical norms.

Yes, that's 90 spread all eight beyond that second credible Novadaq features and performance metrics is off top of the range series production the hybrid.

Upsides flagship mid engine module in some time.

And it is priced at a premium to our 812 offering.

Accordingly opens a new lucrative segment for us.

The Romo, which was fittingly launched in Rome. This past November and recently was selected as the most beautiful supercar of 2019 Biden International and jewelry opens a new segment for us with the ambition to attract a significant portion of new.

Ultimately loyal customers to the family.

Launching five models in one year as a huge undertaking to do so with such flare and success is quite unique and is testament to the talent and capabilities. The lie within this great company I think each and every level.

We entered twentytwenty with considerable momentum.

Exceedingly strong portfolio of multiples plan to be further enriched with two launches. This year and then order book that is as strong as that in both absolute and relative times and this despite the fact, the we're only opening the roll my older boat.

Just now.

There exists however, a number of potential challenges at the macro level that cannot be ignored.

Well for the moment that seems to be a willingness to constructively address trade issues of flare up cannot be discounted.

The same goes for consumer sentiment relative to Brexit, the corona virus and as always potential currency volatility.

In addition, there exist the challenge of increased luxury taxes.

This currently threatened thing in Canada.

In addition, greater China, Hong Kong in particular will pose a significant challenge at least in the five top resulting from our decision to accelerate Klein deliveries in 2019.

Well, we view 2019 is very much a transition year twentytwenty will be a year of consolidation I say bids for several reasons.

While we unveiled the five key models during the course of 2019.

Actual end market deliveries for most of those models will occur over the second to third quarter as we ramp up production.

While Roma deliveries a slated to reach clients only in the full quota.

There's always the case given homologation delays the U.S. market will lag the others in terms of initial deliveries to our customers.

This will significantly impact how geographic mix throughout the year.

On the brand diversification from we're busy executing against the plan we presented to you back in November.

And as anticipated.

This will initially hidden tail to clean up about current business and hence lower revenues to build a very solid foundation for future growth.

This year will prove to be quite critical in terms of formula one.

Our ambition remains as always to seek to win and thus we will continue to invest in our infrastructure resources and technological creativity as we continue to develop our twentytwenty car has the season unfolds.

Furthermore, as you are aware that new technical regulations that will come into force in 2021 will entail the development of our very substantially different car.

Which will obviously require additional resources and expenditures already this year.

You will note that we anticipate an increase in our capital expenditures this year.

This reflects in part a shift in timing from 2019 to Twentytwenty the formula one infrastructure I just mentioned.

But also the purchase of tracks of land contiguous to our facilities here in my or no.

This will provide us with the necessary flexibility to retain our competitive advantage over the longer wrong as we adopt new technology in house, rather than relying heavily on third party supplies.

Well I believes that our record results and countless achievements were quite exceptional.

Most significant in my opinion relate to our organizational development.

We have strengthened our organization with a development and acquisition of talent to fill the skill gaps that we will need going forward.

Well this is reflected in higher cost I'm confident that this action will ultimately generate substantial returns I'm not sure how competitive superiority going forward.

Hi should that that in 2019, we witnessed heightened companywide focus on sustainability in the broader sense of encompassing all our stakeholders and not limited to those matters solely related to climate change.

We're working diligently to secure a much more complete understanding of our carbon footprint.

Much has been accomplished within our facilities in the Pos, but mall must and will be done. However, an enormous amount of work and actions must be taken upstream and downstream to achieve CCOP and neutrality over the longer term.

All in all we delivered a rock solid year on virtually all fronts.

I am both 2019, and our guidance for Twentytwenty are well in line and in fact superior to the growth trajectory that we presented in our capital markets day.

And now gives me great pleasure to handover the call to Antonio.

Thank you doing and good morning, or afternoon to everyone. We've joining us today.

Starting on page five as really sad for New York, Lincoln and getting that he's outerwear strong on all the metrics and met our upward revised guidance.

Our shipments grew 9.5% or by eight done but at the 90 units mainly driven by that are bus deliveries of the fed I'd put it to Pheno and da 12 Superfast.

Group net revenues increased 13.1% to 3.8 billion euro.

Adjusted EBIT da increased to a began to under than 69 million Euro.

Improving by 155 million euro or 14%.

This included 17 million Euro 40 or impact from the first time adoption of the I. I thought I'd 16.

Adjusted EBITDA margin was 33.7%.

And then 10 basis points versus prior year Inspite of the brother makes available for most of the year and the <unk> operating expense in days by the expansion of our activities.

Thank you for the adjusted EBITDA margin reached a record level of 36%. Thanks to a much richer mix supported by the fed I'd monetize few one NSP too.

Adjusted EBIT grew to 900, then 17 million euro improving by 92 million euro or 11.2%.

Adjusted diluted DBS was up 9.1% to 3.7 to one euro benefiting from the 510 Bucks agreements signed last year, but also reflecting the eighth medium Europe cost of the cash tender offer on five of the euro bonds outstanding.

A lot there was executed in last July as part of the liability management exercise aimed at improving in extending our debt maturities profile at present low interest rate, which will then completed would be shown itself I use U.S. private placement of equal in size.

When comparing the quarterly figures, we must me my mind bullet in Q4, 20, Dean where departed the income tax benefit of 4 million Euro as that is out of the final determination of the tax rate for the year. This Congress. We then expand so 43 million Euro in Q4 2019.

Instead of free cash flow for the year was 675 million euro representing an increase of 300 million euro nearly doubling versus last year boosted by the advances collected understanding among them.

Moving to page six.

But at a few points for 2019 were supported by an 11.2% increasing VA mall, it does and up 4.6% increasing btwenty motives.

This growth mainly reflected a much higher deliveries of the fed I'd portofino and Yates lot of Superfast along with the very first deliveries of the fate reboot <unk> and the fed writing Monza, which essentially started in the last four months blinking team.

The 488 family record is slightly lower volumes, we differentiate GTB and the 488 spider concluding that life cycle.

Lastly, compensated by the foot Ideate piece that Andy for 88 based us by there.

In terms of geographic performance mainland, China, Hong Kong and they won was up 20.3% EMEA grew 15.8%.

So if I back increased 12%, 1.9% why the Americas was down 3.3%.

Such changes in the geographic location that is out of the decision to privileges deliveries to China, and Hong Kong and the first off of the but also of our policy to manage that brought up phasing phase out across geographies in relation to waiting lists.

As Lou anticipating is that an introductory remarks, these uneven development with continuing twentytwenty as the phase of our new modes of stock with different timing in each region and the ramp up mainly in the second half of the year.

Turning to page seven you can see are displayed at the group and that the revenues for 2018, which increased by 8.2% that cost on currency that these are 28 Dean exchange rates.

Got it and spare parts revenues were up 13.4% that cost on currency.

As explained before the growth reflect the combined impact of the IR volumes the positive contribution from the hotel lobby among thank you for and all that Somebody's addition programs.

That physicians represented approximately 20% of these revenue line as implanting Dean they were supported by a significant concentration of shipments of for 88 be saying this best buy there.

All of that Bob was partially upset by priority of shipments of last Saturday, a bath and body Jay 50.

Engines revenue declined 86 million euro four dia, reflecting lower shipments to make that I'd.

Revenues from sponsorship commercial and brand went up 22 million euro mainly thanks to the contribution of Formula One racing activities.

Got it assay, including translation and transaction impacts as well as foreign currency hedges at the positive contribution up 64 million euro mainly reflecting the strength of the U.S. dollar.

Moving to page eight which highlights the evolution of the main items of all of our adjusted EBITDA.

Adjusted EBIT grew by 5.1% that constant currency with adjusted EBIT margin at 24.4% them.

Volume was positive my 99 million euro thanks to the increase of how our shipments.

Mix price was positive for say 78 million Europe. This performance was primarily attributable to the initial deliveries, though the pheromones that entered the penetration up personalization programs.

This was partially offset by a negative events product mix as well as by a priority as shipments of Laferrari Aperta and the fed Allied energy 15.

In that start costs and R&D, you, 94% me, sorry, 94 million euro mainly due to higher depreciation and amortization as a production lines for the new models and started being operated.

Operationally startup expenses all its in connection with the introduction of these new models.

As well as spending on Formula one and product innovation.

As expected DNA and after that costs slightly carb, our gross margin compared to 2018.

As DNA increased by 20 million euro, reflecting the activity around the new product launches and the company's organizational development.

Either decreased due to lower engine sales to my that I'd and other supporting activities.

Actually the degrees in either appear to be higher in Q4 and is due to a variety of unfavorable comparison with Q4 last year for our supporting activities and some reallocation from other variances.

The adult on net positive impact of currencies was 50 million euro for the year.

It is what the Netherlands out of more favourable market rates, partially mitigated by de hedges in place.

Turning to page nine enough that our free cash flow for the year was 675 million Euro.

Going up and by the indefinitely BDCA and the positive impact generated by the collection of advances on the Friday, Monza, which amounted to more than 250 million euros during the year.

This was offset mainly by capital expenditure of six seven under then 6 million Euro.

Our capital expenditure for Clinton, and Dean will have lower than our initial guidance due to the phasing of some investments between 2018 and Twentytwenty and these are going to be pushed farther up our cash flow.

The capitalization ratio was approximately 37% for the year slightly lower than in 2018.

Net ended after that as of December 31st.

Glenn can and Dean was 337 million euro compared to 370 million Euro as of December 31st of 2018, including two significant accomplishments blow our share all does such as the initial implementation of our share repurchase program for 387 million Euro and the dividend.

Distribution for 195 million Euro.

Ladies liabilities asked there I thought I 16.

As of the end of December where 60 million Euro.

It's worth noting that it would have been cash positive.

End of the year, if we add back the impact from the share repurchases executed during 2019 and get the option of the new accounting principles for Davis.

Let's move onto page then.

With the plan presented at the capital market. They have September 2018, we suggested the Twentytwenty check volume in our journey to Twentytwenty too.

Our current guidance upgrades now that checkpoint across all the metrics following the momentum our brand is enjoying and grounded on the fundamentals of our business.

The upgraded full year Twentytwenty outlook is as follows.

Net revenues above 4.1 billion euro mainly driven by our new product that will hit the market gradually throughout the year.

Adjusted EBITDA between 1 billion 300.

An 80 million and a 1 billion for other than 30 billion Europe.

With percentage margin equal or greater than 34%.

Disappear margins delivered by the new range will be slightly without by our R&D efforts, including two prepared yet one developments in progress and by the continuing investments in the organizational development.

Adjusted EBITDA between 950 million and 1 billion Euro.

We target then EBIT margin of approximately 24%, which all sort of flat the pace of our DNA.

Adjusted diluted EPS between Threepar 90 entry by 95, Europe, a fair assuming a tax rate substantially in line with 2017.

Yes, I'm trying to areas that we keep on enjoying the benefit of the five inbox tax break under the new tightly managing a light slightly reduced.

In that sort of free cash flow equal or greater than 400 million Europe.

As that actually not for this target do you sort of in mind in Twentytwenty, the investor free cash flow will be the pays off of a portion of the cash consideration for deferred I'd monza to be delivering the seems already collected in advancing 2019.

In addition, our cash flow is reflect higher capex as already explained by the way.

We expect such expand the total amount to an up less than 800 million euro swept to recover the 50 million Europe was born on from the original 2018 program and to include an initial step of the infrastructure development plan year in modern Ella.

We're also assuming higher tax payments in Twentytwenty since we consider the new cash benefit from the pattern box could displayed in three years as provided by low while waiting for doing you all of the advance agreement.

Finally, it is worth noting that the guidance for Twentytwenty right on the assumption that the exchange rate we remain in line with 2019 for our most relevant currencies and encompasses the solid visibility and the full data that we make count on Dusty our business.

With that said I'd like to turn the call Bettany collector.

Thank you Antonio that now ready to start the Q any session. Please go ahead.

Thank you very much ladies and gentlemen.

Please.

One telephone.

We'll take questions today from the line of Adam Jonas.

Please go ahead.

Thanks, everybody.

So so literally in the past few months climate change has seemed to emerge as one of the most important areas of focus for investors in many regions and at least in our discussions Louie what asset managers were talking to and taking a far more aggressive stance on on where they bought on where and how.

Deploy capital and also where they're not deploying capital now I can't think.

Given your experience and the tobacco industry I can't think of anyone better positioned than new Lily and your team to assess this emerging risk and to help ensure that Ferrari.

Change this iconic status, while creating significant value for shareholders. So my question is.

Could you use this opportunity the first question on the call Im sorry, if that a step on the quarter, but I think it's really important I think you would agree.

Can you just address some of that key tenants of your strategy to reduce cotwo emissions and my overstepping. It if I were to suggest.

Oh.

I would like your opinion on considering whether you could whether Ferrari could tie some that management compensation to Seo to reduction targets as I believe Hey, I believe you think I think you can do a great job doing that.

That is well within your wheelhouse and also is the right thing to do and as an alignment with the with Ferrari with the Ferrari brand and I think your Ferrari owner community. Thank you.

Thank you Adam you will certainly not Overstepping York bonds.

It's clearly a very important issue as I mentioned in my opening remarks.

We are very focused across the organization.

Okay, and ultimately we do want to reach carbon neutrality.

I think our advantages, we only make 10000 cars.

So therefore that should be possible as you know we're going hybrid.

Looking at alternative.

Technologies and fuels as well, but more importantly, I think whilst we've made great strides within our own facilities I think it's very important to look at the full carbon footprint.

That's exactly what we're doing in terms of going upstream to suppliers as well as all the way downstream.

But you're right. It requires a significant focus and resources I can assure you that the board is focused on it.

As to whether.

Compensation should be directly linked to that that's clearly a matter for the compensation Committee.

Thing given our plans.

A big part of compensation is linked to innovation.

I think.

Getting to cover neutrality will require innovation, so effectively it's already part of management compensation I Hope I addressed your question.

Thank you lose you nailed it.

In Q.

We will now take on that question.

From Bank of America. Please go ahead.

Good morning, guys.

Maybe a slightly more mundane question on on on the near term I'm just curious as we look at the 2020.

Outlook, it seems like second and third quarters, when the bulk of your new models will hit and fourth quarters when the roaming hedge so it seems like as we look through the course of the year.

Yes, there will be more back half loaded just curious if you can kind of talk about the cadence of earnings.

Through the year, what your unit growth estimates are and we as you mentioned, there's a lot.

Swing factors out there that are sort of tough to call right now, but if you were to think about the major swing factors positively negatively what would yet what would you highlight something that can be the ones that can be material.

Well.

First of all good morning, John.

Looking at 2020, clearly the one big positive will be nine months of Monza.

Given that we add one quarter is back in 2019.

And then there are gives and takes a certain models.

Reach their phase out including the piece.

In the new models come in as I said.

Usually in the second quarter and that in the third quarter.

Overseas does traditionally is very important given its margins.

And that really hits in the second half so yes, you're right.

The second half should be quite strong, especially the fourth quota.

However, we don't anticipate major shifts.

In the profitability over the year from order to quota.

There may be geographic mix changes as we both on Tony and I mentioned.

But that's more in terms of deliberate management of our waiting lists as well as what we mentioned in terms of the us.

Homologation process. It always takes a bit more time for the new products.

Okay. That's helpful. And then just a second question on China, I mean, obviously, there's a lot of concern around what's going on to Corona virus I'm just curious as you think about.

A market there may be shut down or maybe not for for a couple months, we'll see how the shows when you think about your order backlog in your exposure to China.

You have an order booking your other regions they could absorb potentially down.

Down demand in China for for a period of time.

Well, that's the beauty of this company, we can offset that geographically.

I have more worried about Hong Kong.

And I am about China.

'cause Hong Kong clearly is a bit of an issue.

And business there is very soft.

I think in terms of.

The business in China, when SCRA dollar hits the market.

Because you do get a tax benefit because it's a hybrid product.

That we believe should be doing quite well the order is quite strong.

So to answer your question, Yes, I think we can offset.

Weakness in China, or if it's for a few months.

Hong Kong will be more of a problem.

But in any event.

The first half for greater China.

It will be a bit week because of the difficulty in terms of comparing to 19.

Where we delivered the pushed.

Volumes to clients.

Given the situation that.

Okay, and then just just lastly.

As far as capacity I mean, we've kind of always had this idea through 2022.

Existing capacity.

In marinello is sufficient to support volume growth, but it sounds like there's more land and capital being put in in play in Marin yellow is this sort of an indication that you might need more lines for final assembly or just any indication that you're getting deeper and deeper into powertrain and other maybe then.

Architecture, the vehicle and potentially in sourcing more and more than technology think you'll need overtime as trying understand the incremental capital commitments.

The Alaska.

Hi, I don't think we need so the production lines.

Within the foreseeable future, it's more to ensure our technological superiority has the world is changing.

So to give us the space to be able to bring in house.

Certain things that otherwise would be done by our suppliers.

With that right.

With that Bennett benefit be neutral or be negative to margins that we think about or over time, because you could you could sort of swing that in a number of different directions.

Well to the extent the remains down our objectives of technological superiority, who won't be a net positive.

Okay, great. Thank you very much thank you.

Our next question.

Bulky from Equita.

Head.

Yes. Thank you.

Good afternoon, good morning, everybody.

First question is on the free cash flow just if you can summarize.

All the main variables.

I understand the Mone says.

Down payments will be softer maybe.

Appeared this year, but the if you can split the.

Capex you already commented the during the speech.

Next is a outflows are taken into account.

But then books and networking capital up sanction.

Sure. Thank you might be enough.

I think as I said I already commented adjusted EBITDA in Capex with respect to de a advances from them on that well. This will be I already commented a while ago that the bulk of that was collected in 2019 and did is actually.

Reducing the amount of caching on the among that we've said in twentytwenty. So the cash that we get when selling these guys will be reduced because partly collected in advance and in terms of taxes, we pay a higher taxes compared to 2019, which benefit those men. If you will also.

From the button box, achieving 40 years from 2015 to 2017.

And working capital, we expected more or less into line with the with the previous years, so not the major change.

Okay, so networking capital slippage.

And.

Formula one additional lift for this year.

Because you are investing more.

How much could we assume nine times are being but for the current year.

And.

Just a follow up on the EBIT reached four Twentytwenty seems so that mix effect in Q4 was quite impressive.

I don't really if we should the multiplied it by let's say not maybe by four but this could be.

Reasonable.

The amount for the next few quarters.

Taking into account that month I suppose was.

Made sure contributes are the main contributor for these performance and just the started.

[music].

Good morning I.

I would say that no it would definitely be.

Stake to multiply.

The fourth quarter and consider as a base going forward.

There are various factors.

Most of which I think I addressed in my earlier answer.

I think however, there is something that's very important.

Everybody needs to bear in mind.

We have very steadfast in our focus on the long term and nurturing the strength of our brand.

With us.

We will be very deliberate in.

In guiding the mix and cadence.

How about deliveries.

With a particular focus on our waiting list as well as I mentioned the individual market characteristics.

I think just to chase a specific short term number.

I can certainly be counterproductive.

Not in the best interest to.

The sustained vibrancy of our brand and that's something we think is very very important.

Ultimately we are ahead of the projections, we provided in our long term plan that we presented at the capital markets day, and we very much look forward to the full and carefully manage deployment of our portfolio and it's in Richmond going forward.

So it'd be very careful to continually try to push the number up.

Because it's potentially counterproductive to what we're trying to achieve.

Okay and from what I want him but.

Well, we won this close a clearly the infrastructure part of it is in the capital expenditure number.

Has to the actual operating expenses.

There is a significant increase because of the reasons I mentioned.

But we won't disclose the number.

Okay. Thank you. Thank you.

Our next question comes from Ryan Brinkman from JP Morgan. Please go ahead.

Hi, great. Thanks for taking my question. Thanks for the comments earlier on capital expenditures in 2020. It sounds like there may track above normal included onetime land purchase for low one investment et cetera, 2019 makes it tough compare with customer deposit patent box et cetera, but just kind of looking beyond that sort of 2019 to 20 20-F.

Walk you know how should investors think about free cash flow as a percent of EBITDA or net income going forward that that maybe pick lower in 2020, but then normalize higher thereafter is there are a conversion ratio of either that your target. Thanks.

Oh, you gave a number in the capital markets day.

In terms of our target into the 22.

And.

We firmly believe that we can be type number.

That should give you a sense.

Okay, Thanks, and just relative to the full year margin outlook are you able to share what level of I Kona or limited edition models are assumed as a percentage of the mix.

In that margin outlook.

Hi colour on the cadence of margin when 20, sorry.

Yes.

So Steve do a question is a contribution of da gone after that margin.

And just color on yes, yes, and the overall cadence of margin as well as influenced by that or other.

Well, it's clearly a positive contributor that one.

Taking into account that the number off the kind of that were sold in the last quarter was relatively limited.

And he started.

In terms of the Mixi is not just take on is of course is the full range of car that we sell in the quarter makes a difference.

And so the other two that you should take into consideration that they mention when commenting.

On personalization is the concentration of piece then space that despite the bulk so.

And when looking at Twentytwenty do Sue will fade down and the mix we have all.

Thank you.

Yes.

Thank you.

Thanks.

Thanks.

Please go ahead.

Yes, good death and on can you hear me.

Yes, we can issue and good afternoon, everyone.

Yes, good question.

The first one.

Yes.

On the personalization that debris okay.

Matt 20%.

Usually they're very high yield on the fourth quarter, you if I am not stronger.

Under the concentration now or will.

With that keep the high unmet styles and when should we expect the sweet fab, we stabbing light or maybe we can I feel much further increases.

The second question is on.

Revenue fell or might that be obviously in 2019 and not the rock and Jane said that down do you still expect that does little down for 2000, then 20 feet.

The better lastly, you thought on that.

Matt.

Hi.

Okay. That's it.

Thanks, Rob Portofino.

Can you give us some more flavor on that level Omar I know and payment volume. If you will know that made that.

The consequence of the introduction of the coal mine Pamela addressable market.

Most of that.

Repeat customers, maybe we'd the.

With a customer Chen does for the first time mine, that's the riding board and then.

The.

Cannot keep that so that will change based on an more value added product that suggests some more playbook. Thank you very much.

Thank you Monika.

So regarding personalization.

As until you mentioned in his remarks.

You're right it was around 20%, but that was somewhat flat to advise a piece stuff.

Our experience has been.

On the special series such as the.

Feedstock personalization goes up.

And as we just mentioned the peace phase.

Phases out in Twentytwenty.

Also because of.

The significant price Oh, Monza, the actual posts monetization percentage is likely to come down.

So a mathematical thing.

So more in line with where we've had historically.

And the 20% base that we had in 29 team.

In terms of the revenues from Maserati.

Oh, we anticipate in 2020 essentially flat based on the orders received to date.

So we don't anticipate a big change that.

2020.

With regard to Roma.

As I mentioned, we just opened the order book now Youre right in saying that.

The mogul is destined to bring in new customers to the family, which we hope will become loyal customers.

You are wrong to assume that is the success to the portofino.

It's a different segment.

And that taking very important I.

I think the.

The feedback we've received so far.

Is that there is really strong vivid interest in the model.

Oh from existing customers from new customers.

And also very interesting Lee from customers, who X Ferrari ones.

Andrew I haven't ball to Ferrari for some time and suddenly very interested in this specific bottle.

Anyway as the months.

Evolve.

We will be having test drive some presentations in various markets.

But the interest is very very high but as I said deliveries only really stopped in the fourth quarter. So it's more of factor this kind of impact.

2021 2020.

I hope I address your questions Yeah, it's very clear thank you.

In Q Monika.

Our next question is from.

Great. Please go ahead.

Hi, Good afternoon, just two questions from me.

Firstly I wonder if you could talk a bit about cash returns given the perhaps slightly lower free cash flow what spacing in 2020, and how youre thinking about that.

And then secondly, just on the strong European volumes can you talk a bit about the competitive dynamics that you've seen in the fourth quarter that thank you.

I'll, let us talk to kind of short tons I'll give you a sense of.

A competitive.

Yeah like extra turning them into the cash flow expectation for Twentytwenty I already commented that.

There would be to adamant that as quite a bit in 20 went into Anthony deem that will not be repeated one is the collection of the advances on the among that and the other one is the impact of the baton box that was below where in twentytwenty.

Sorry, just on that how do you think about dividends and buybacks in relationship to love recapture that was my question.

On dividends I think the board will take a decision based on the results of this year and on the buyback will keep on applying the policy that we followed so far.

To proportion I'd you should the size of the share repurchase the to the size of our cash flow. So from six months with six funds I would say going forward.

I would add though we were very conscious of.

The deposits.

So effectively share repurchases didn't follow a cat the free cash flow we had.

Despite we gave half a billion to shareholders over the year.

The dividend policy is clear, it's 30% payout ratio and the buybacks.

We'll see as we go alone.

In terms of the dynamics in the European market.

First of all our business is extremely strong.

On the order book is.

Actually quite phenomenal.

So we're seeing very strong business.

In terms of.

The actual dynamics in the luxury segment.

We see that some of our competitors.

Our discounting.

In certain specific markets.

But nothing.

Two warring.

Residual values in Europe with.

10 show exception of the UK.

Remains strong so in terms of the dynamics.

Europe is very strong we continue to project.

Great business there.

2020, and beyond across pretty well every market.

Particularly strong in UK, and Germany, and Italy, as well as Switzerland.

Alright. Thank you. Thank you.

Our next question is from customers that shift.

Please go ahead.

Good afternoon everybody.

I mean, you spoke about two launches in 2020.

I know you're on the street eating.

New models.

Oh pausing <unk> Morgan.

Could you tell them that point.

The mold does that.

In a creeping back some weeks.

Please.

The same.

They will.

Youre lets say reviews youre.

Fieldwood Nations can you can you give some more inform those two models.

Masimo as you know we are worried I would like to talk about.

New models until they are presented.

Oh I can say is that it's not going to affect 2020.

They will.

Only reach customers and 2021.

Actively to add to the euro impact on the Twentytwenty.

Numbers, except for the launch expenses.

Okay.

You mentioned that so I have a reserve.

[laughter] the can you <unk> Morgan.

More litigation issues discussed in the U.S.

Something new.

I mean, some because usually you launch a problem in Europe than order after you launch.

Us elsewhere.

It is going to change.

As expected from your side.

No no though.

It's within historical norms.

As you said, it's usually three to four months later.

So thats all I said.

And.

If the product is going to it.

And the third quarter in Europe, It alone a baby.

In the fourth quarter.

In the U.S., so that affects the geographic mix.

It's within historical norms, we don't see any change to that.

Exactly Massimo absolutely absolutely I'm, sorry to disappoint you on your first question.

For for sure, but a good try.

That's right.

Our next question.

Yes.

Total HSBC.

Hi, Thank you for taking my question. The first one on the on the 15 costs you plan to launch until they do.

I mean, we have seven left I believe all of those expected to contribute to the things we had to margin or some other contribution beyond that we only started beyond 2022.

It will all contribute to 20 to 22.

Clearly there are some models beyond 2022.

Which we are already investing now.

So some of the costs you see related to those models, but also models.

We're already working now for beyond 2022.

Okay does that answer your question, yes, sure I'm sure.

And then the second one on the again on them all the pipeline. So all the things we discussed that did pick up the market today I think the main innovation. So a the hybrid power train then that we're talking with energy family.

And then there was the introduction of obviously a engine.

We see that what is the dining.

The India.

Yeah.

Good try generally, though [laughter] youre going to have to wait and see [laughter].

[laughter].

Okay.

Maybe last one last one.

Just on on China.

You are building buildable quite and given the situation, though I mean, if you how long do you think is gothic to rebuild and a and get back to normal level of business operations on and do you think you're gonna have to support.

Process I mean financially.

Oh listen I don't have a glass fall to tell your when the issue will be resolved.

Not sure anybody can answer that question.

Hi dealers are actually in pretty good shape.

So if necessary, we will help them, but at this point, we don't see a need whatsoever.

Okay. Thank you. Thank you.

Next question.

Not yet Goldman Sachs.

Go ahead.

Hi, Thanks for taking my question. The first question I had was just from the other line in Q4.

Yeah, you, obviously articulated the EBIT bridge lower sales of Materazzi engines played a part but you also referenced other supporting activities could you perhaps just elaborate.

And what specifically that was on whether that carried forward to twentytwenty.

Sure.

I commented that the performance in under the other variants in Q4 is not related to a single item, but there's more to a mutual annual result on favorable combat is on and what we called the supporting business out of or the ones that we consider another and it's a Saturday core and it includes also some and different I location.

Constant from other vaccines, you sold and things that cannot be allocated.

Under any Elk Hills Dean other Instagram.

When we look at the full year picture, though what the images and ended the significance of the impact of Maserati and is what we commented in the full year bridge.

Great. Thank you okay.

And then secondly, just on Formula one.

Think about the Twentytwenty season, and obviously the big change in rules the Twentytwenty wall.

Will you take a difference approach to your expenditure around formula one as the year progressive if on balance a probability you think you can't be courts midway through the year or it's unlikely you will catch whoever may be in front of you or will you basically treat the season the savings.

Any of the season and keep spending up until the point, where mathematically you out to the race or you have one the championship.

We never give up Uh huh.

And our ambition is to win.

And who therefore I don't see quote puts how Philadelphia pedal.

In terms of Formula one in 2020 or beyond.

Does that answer your question George I.

I think that does.

The final while it was fit simply just around Martin 11. The expansion I think you have you ever I care and Youre on so early up because I just ask what is the president capacity of mine that I think previously missed Marchioni said that you could potentially do double the 20.

16 volume, which would suggest something in the region of 16000 units with two shifts it's that the right way for us to think about it or would that require significant incremental capex.

I think that number that's floated around.

His 15 Noksixty.

Knutsen number what comfortable with.

Great. Thank you very much thank you.

Any question.

Question.

Right.

Please go ahead.

Yes, good afternoon, I have a question about positioning.

You mentioned the look very good reception you've had it for the EPS of 90, Sturdily, which obviously has created a new price point.

For the products hundred 30000 euros, or so above that of the Batesville superfast.

What do you think what lessons does that give you all have confidence that give you about pricing on you'll series calls and you think you can actually makes further increases as you replace the series calls the against the normal traditional 3% to 5% increases you've been doing up until now.

Oh, well clearly it was a very good signal.

However, the complexity of that.

Model.

So do the warranty stock price.

[noise] hockey going forward is to ensure.

We will privilege revenue volume and that should arms to your question in terms of pricing.

Going back to what I said.

It's critical for us.

To really control.

Our volume and the mix of modules.

To ensure that we continue to have the pricing power.

We have today.

And that's a critical component of our plans going forward.

Yes price is key.

And you mentioned you refer to your order book is phenomenal.

Can you give some idea belt the about the business you have in some to waiting times that a little more.

Models, particularly this at lunch yesterday.

Uh Huh I don't think we generally give numbers.

Clearly they vary by market and.

Bimiodal all I can tell you, particularly on the asset 90 Star Dalai is.

The order book is very strong and the waiting list is quite alone and getting longer.

Thank you. Thank you.

Next question.

Please go ahead.

Okay.

I might've missed a little bit of context earlier, but I was hoping you could give us a little context to think through our model a little bit.

You just you just grew your EBIT or 9% ex currency in what we talked about as transition year. This year guidance for 2020 looks like it's about 11% to 12%.

To get so your 2 billion.

Hi end of your range by 2022.

Need an 18% CAGR for the next two years and I would've thought coming into 2020 would be the bigger year and that trajectory just given the high level of our innovation.

As last year could you help us think about that dynamic.

On an impressive implies a little bit lower of an acceleration this year off the transition.

Last year, and then the bigger growth rates that follow up.

And I guess in a in a related question.

I guess I guess, you've been asked a little bit about formula one in 2020.

Yes.

Biggest cost headwind I mean, I guess in fourth quarter, you had any incremental EBITDA margin.

At about 74%, which is truly amazing.

If I triangulate.

He had a big mix lift in fourth quarter and it looks like profit growth.

How are heading into 2020 is very high but the guidance for next year implies incremental EBITDA margins of about 35%.

I'm guessing you told me that one of the biggest costs on a year over year basis as Formula. One Im just wondering is that is that some is that is that cost that rolls off as we get into 2021 2020 and thats.

Potentially drives that acceleration that seems to be baked in there any any color you can help to just connect what we're hearing today to the longer term model from the capital markets day will be helpful.

Okay, Let me try.

So the starting point is 19 is well ahead of what.

Hello.

Yes.

Sorry that was.

Flashback could.

To start with in 2009 team. We were ahead of plan and we'll be ahead of plan in Twentytwenty I said in 2020, it would be a year of consolidation.

Because of the captains all of our deliveries of the modules that we presented in 2019.

You are right mathematically, we should increase by 17% CAGR over the next two years.

And as I think I said, yes, I think thats clearly doable given.

The deployment of the models. The we have presented as well as those that are in the pipeline and the prices and margins associated with those products and the mix that we forecast.

In terms of Formula one you're right to point out that in 2021 as we mentioned.

We'll sort of doubling up because we have to work on a totally brand new car as opposed to developing one further.

So you should assume that in 2021 and thereafter, the formula one cost should come down not least of which because a budget cap for a big portion.

Of the car itself.

So.

Really it comes down to the full deployment of our product portfolio.

And the mix of portfolio that we focused on child that answer to your question Michael.

That's very well. Thank you so much though thank you.

Hi.

Thank you Jonathan thank everyone for joining us today as on Wednesday, Yakima would be suing available to answer all your follow up question. Thank you.