Q1 2020 Earnings Call
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Welcome to <unk> scope needs can be.
Okay.
Again shortly.
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Ladies and gentlemen, thank you.
Right and welcome to get there right.
Well the response and Oh.
Hi, all participants are inhalation oh, the mouth I forgot your presentation, there will be a question and answer session I watch enjoying the company's Sachin you will need the grass Saar in wanting your telephone I must advise you that this conference is being recorded today Wednesday night, when Dave I know like they tend to kind of France, we did.
Great Speaker today, He's nicoletta itself. Thank you. Please go ahead.
Thank you Medea and welcome to I would want to always joining us. So I just got any major today. The team is go not them from different countries. So please forget about any moment upside as during this call today's call would be offset by the group field. We got me laddie angle CFO on thawing, you'll pick up be gone all round about the muddied else out a basketball indeed.
Investor section of the Goodbye to incorporate the website and at the end up at the present day show that we would be available to answer your questions.
Before we begin let me remind you that any forward looking statements. We my made during today's call are subject to the risks and uncertainties mentioned in the Safe Harbor statement included on page two of today's presentation and they call. It would be governed by these language with that said I'd like to turn the call over to Luis Thank you.
Yeah.
Thank you very much the collateral welcome everyone.
They're much trust the you in yours are well and safe.
And that your old taking the necessary precautions to protect yourselves and your loved ones.
I will focus my introductory remarks on the current situation.
And provide you with that's completed picture as possible in these unprecedented and unpredictable times.
All in all I would state upfront that we are in relatively good shape.
Particularly as it relates to our coal business.
And that's the right both to withstand a prolonged downturn.
I also believes that we have taken and are taking the appropriate measures to deal with this crisis in a manner that will ultimately make a stronger.
We've often claimed the while we're not immune to economic or other brutal shocks we are significantly more resilient the most.
This crisis will serve to hopefully on the school this claim.
How faith rests on the strength of our iconic brand equity.
Skills determination and faulty chewed of our organization.
How technological innovation design superiority.
How close in vigorous relationship with us suppliers and the quality about dealer network.
And ultimately the loyalty of our customers, which translates into a strong order book.
Before I touch upon our first quarter results and shed more color on our revised guidance for the.
I will address the key actions we've taken to date the.
The challenges that lie ahead, and the impact that this pandemic is likely to have on our results in twentytwenty.
Our first and foremost priority has been and remains the well being and welfare of our employees.
While full compliance with national or regional prescriptions to combat the spread of this virulent disease has been a key factor in old decisions taken we have gone well beyond the spirit to support and protect what is ultimately our greatest assets.
In spite of the fact that off facilities have ceased production since March 14.
Not a single employee has been has been furloughed all laid off and all have received that full page during this period.
We have provided medical support and assistance to our employees and their families and furnished vital in kind of monetary assistance to the communities in which they reside.
Solidarity and empathy have been guiding principles.
I cannot sufficiently I'd underscore the amount of work that has been accomplished on numerous nonproduction related activities conducted by some money from the safety of that homes, while being mindful of the security of our information and data.
An incredible amount of planning has been dedicated to the safe and disciplined resumption of our manufacturing activities.
The all encompassing program that has been designed in detail is called back on track.
Which is say, which has gained significant national and international coverage.
As an example of a state of the out initiative.
I will not cover the entire plan of action in detail.
But suffice it to say that we now have the capacity to perform 800 voluntary blood test today to cover both our employees and their families.
Should anyone regretfully test positive they will be provided with separate bold and lodging and Oldham medical assistance required.
A specific covered related insurance coverage has also been set up for all employees.
We're also testing a contact tracing system that we intend to develop further.
As of today, the vast majority of employees within our facilities have been voluntarily tested and production ramp up has begun.
And this after an extensive insitu training conducted last week over a three day period on the news safety protocols and procedures.
We are being deliberately cautious and prudent in the scaling up of our capacity to a show both safety and quality.
Furthermore, our ramp up well by necessity have to be aligned with our supply chain.
In spite of the flexible buffer we now have.
Resulting from a conscious decision to increase out but in our inventories of materials and components.
We depend on some 400 direct supplies.
More than two thirds of the total a based in Italy, and many are located in those regions that have been hit the hardest.
Namely lumbar the and Piedmont.
As of last week 190 supplies were operating at various stages of capacity.
With some reporting relatively high levels of absenteeism given the situation.
With very few exceptions, the balance of plant start up the production today.
We have been very carefully monitoring any supplier that may find itself in a per care as financial condition.
To determine any actions that we may take to assist them directly or indirectly.
We have of course conducted the same analysis relative to our dealer network.
And in many instances have extended payment terms to them.
[music] alleviate the financial burden during these difficult times.
As you might imagine the timing of the closure and the opening about dealerships has varied quite extensively from country to country.
Total lockdowns were instituted nationally and as restrictions have gradually being lifted.
This phenomenon clearly adds further complexity to any projection of a full resumption of activity.
Ultimately the geographic mix about deliveries in the months to come.
As we speak more than 50% about dealers closed.
More than that in terms of workshops.
The others will eventually open as national regional state Lockdowns and confinement policies are lifted.
I should also mentioned that the pre owned market, which we monitor closely is essentially shut down with very little to no trading at all.
Our order book, assuming full production capacity extends well beyond 12 months on average and clearly varies according to each model and geography.
Importantly, those models that generates the highest margins have the longest waiting lists.
As of now we have yet to witness any abnormal or untoward cancellations, although several have been incurred primarily in Australia and the United States.
But nothing so far that we would deem to be alarming.
While the history is certainly not this positive it can inform us.
A reading of the level of cancellations during the last financial crisis reveals that the peak of cancellations.
And postponements took several months to affect the order book.
Thus it is still too early to come to any final conclusion.
Nevertheless, this crisis is very different.
Well need only focus on the financial markets and the boss fiscal and monetary stimulus in place to determine the distinction.
Possible cancellations are however, only parts of the equation.
The other is the level of all does the there are obtained.
On the one hand, we have arguably the most wide ranging unexciting portfolio, we have ever had.
And on the other.
We've had to cease all the activities aimed at collecting further orders, especially for those muscles presented in 2019, but that have yet to begin to be delivered.
As such the timing of the peak of this crisis has compounded the challenge.
The commercial team has conducted an incredibly detailed analysis of our vulnerabilities and opportunities.
Turning both to order retention and intake.
By country model and down to the ultimate custom.
Our projections for Twentytwenty largely predicated on this rigorous undertaking.
Consistent with the King region of our business model.
To retain a very strong order book and us sustain the exclusivity about brand as each year unfolds.
Formula one is undoubtedly the activity that will adversely affect our results in twentytwenty in the harshest manner.
And also the one that is by far the hardest to predict.
As you know the original calendar provided for 22 races.
The FAA and the Formula One group now predict.
A maximum of 18 races with many without fans.
This clearly implies a drastic reduction in the revenues generated by the commercial rights holders.
As well as sponsorship fees out two primary sources of revenue.
To mitigate this impact at least partially.
The entry into force of the New technical regulations that were originally scheduled for 2021 have now been postpone twentytwenty too.
Furthermore, there has been significant progress on numerous measures to freeze various components and hence reduce costs going forward.
As well as substantial progress on a cost ceiling and its perimeter effective as of Twentytwenty.
[noise], which will hopefully be put to bed in the near future.
It remains our hope that such ceiling will render formula one more economically sustainable so all participants.
While ensuring that it remains the Premier racing championship globally, and the source of significant advances in automotive innovation and technology.
While the Formula one hit to revenues and earnings is not an easy math to digest.
The good news is that the significant losses incurred should be short lived and contained twentytwenty.
We regret fully face a very similar site regarding our brand diversification activities.
We currently anticipate that there will be a significant reduction of our revenues and twentytwenty, reflecting lower royalties, a dramatic reduction and thoughtful about stalls museums and pogs.
And the delay in the new activities that we had planned.
And Tanya will show to review, our first quarter results.
But before doing so I do wish to state that given the circumstances it was quite a robust performance.
But it also provides a glimpse of the coming months.
While total revenues were essentially flat versus the prior year. They mask a relatively strong performance in our Cogs and spare parts.
Which generated a net revenue gain of 7.3%.
5% on a constant currency basis.
This growth was completely offset by lower Formula one brand and Maserati engine revenues.
The coal business drove an EBITDA gain of 5.7%.
Absent the previously disclosed onetime gain related to the favorable reassessment of the legal dispute that flat to up first quarter 2019 earnings.
Having said that we did fall marginally short of our pre Covidien 19 expectations.
Given the suspension of deliveries prior to the quota and.
Importantly, as of the end of the quota we had cash holdings of 880 million euros and as of now we have just doubled available undrawn committed credit lines to totaled 700 million euros, providing us with ample liquid.
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This was a key factor in the decision to dispose our dividend last month of one euro and 13 cents per share, reflecting an outflow of 210 million euros.
This is also very tangible evidence of our confidence in the future.
Turning to our revised guidance for the year you will first note that we have widened the range given the lack of full visibility and the current unpredictability of events.
Our guidance rests on the numerous numerous factors I've already mentioned.
It includes several cost cutting initiatives across the board and the delay in several planned activities as well as a reduction in capital expenditures of some 75 million euros.
We have been extremely judicious in determining which expenditures to called following two key principles.
The first is to retain total flexibility as each month unfolds and the second is not to impair our competitiveness going forward.
While retaining our full responsibilities towards our suppliers, how dealers our clients and from first and foremost our employees.
Our full year guidance in simple terms reflects a very weak second quarter.
In fact, it accounts for the bulk of our Rosen versus our previous guidance.
Indeed at the low end of our EBITDA range. It reflects approach approximately 75% of the erosion versus our prior guidance.
The entire erosion versus the prior year.
At the higher end of the range. The second quartile will account for the entire shortfall relative to both our previous guidance and the prior year.
Such that it assumes a V shaped recovery.
With the second half of the generating an increase in revenues up some 10% and an EBITDA growth of some 15% versus the prior year.
And this despite the challenges we face beyond our core business.
Before I hand over the call to until and Joe I do wish to spend a minute on the vast number of activities. The company has undertaken to help and assist those less fortunate in Italy and within our community.
Much has already been accomplished and more as planned.
Not only to address the short term needs, but to provide genuine assistance that is longer term in nature.
I will not read out the list you see on your screens, but I do wish to highlight two instances that reveal so much about Ferrari.
Several weeks ago, numerous participants of previous additions of our cavalcade events that are highly sought after another reserve from most loyal clients.
Decided to voluntarily contribute to the various community activities that we plan to undertake around marinello and then the Emilio Roman yet region.
Weve calls told them that we would match and he donation received.
So far the combined contribution.
Exceeds 1.5 million euros.
I should note that these clients hail from numerous countries and this show solidarity underscores the level of engagement that our clients have with the Bryant.
Quite unique and my experience.
In March the senior management team decided to voluntarily fogo, 25% of their annual salary to fund our donations to the community.
Each board member also voluntarily agreed to FFO growth all day remaining fees and cash compensation for the year.
This collective show solidarity is not only heart warming, but frankly exemplary.
I'm not note I will now hand, the call love the Toronto.
Thank you are doing and good morning, or afternoon to everyone who is joining us today.
Starting on page nine as Luis said Q1, Twentytwenty resolved represent a good start of the year for our core business.
Partly offset by the performance so full out there and particularly over the formula one activities.
Our shipments.
4.9% or by 128 units.
Mainly driven by the robust deliveries offered before 88 Vista and the for 88 be satisfied or.
Group net revenues were almost in line with prior year to 932 million Euro.
Adjusted D.V.D.A. increased to three younger than 17 million euro improving by 6 million euro or 1.9%.
Adjusted EBITDA margin was 34%.
90 basis points versus prior year.
Adjusted EBIT was down 12 million you were up to 220 million Euro embedding higher DNA.
Adjusted diluted EPS was down 5.3% for 90 Euro cents.
Industrial free cash flow for the quarter was 73 million euro.
As a reminder, try your free cash flow was boosted by the collection of the advance is starting to pheromones, a SP, one NSP to equal to or property 170 million Euro portion of which is evidently missing against the deliveries of this year.
Moving to page 10.
You can see the details how Q1 to 220 shipments.
Volume throws despite the lever is being suspended earlier than expected due the carving 19 pandemic.
Nevertheless, total shipments for the quarter increased 4.9% supported by a 507% increase in VA model and a 2.4% increasing between mothers.
This growth mainly reflected the robust deliveries for the 48 piece and the 488, it's the spy there along with the ramp up of the phase three boot on.
This more than offset the four IDH GTB and the 488 spy, there which concluded their lifecycle seem to engineering team.
Deliveries of the pheromones I feel on and it's been do well in line with our expectations.
In terms of geographic performance EMEA grew 25.4%.
Right to have that back increased 23.2%.
Americas was up 4.2% wide mainland, China, Hong Kong, and Taiwan cost at the lower shipments as a consequence of the deliberate anticipation of deliveries in 2019.
For motors unveiling twinkling, Dean Theyll have to be introduced in the market and they will mainly around.
In the second half of the year.
The just ended seven week production suspension lightly postpone the new mothers introduction as follows.
The first deliveries of the faced by that will commence in Q2 Twentytwenty.
Yeah, well GTS will follow at the end of Q2.
Yes have nineteens Teradata upset the Sumner why this or not at all my we'll let the market at the end of the or.
Turning to page 11, you can see are displayed the group net revenues for the first quarter of Twentytwenty.
Which were in line with the prior year, notwithstanding the adverse effect of the reduce formula one racing activities.
Net revenues were down 2.7% at constant currency.
Revenues from cars and spare parts, we do by 5% at constant currency.
The increase was supported by higher volumes.
The positive contribution of the pheromone Glaspey, one NSP too and the personalization programs.
Personalization seemed a quarter represented approximately 20% of does that revenue line.
In line with 29 team. Thanks, a significant concentration of shipments over the four ltacs and the 488 basis by either.
All of that Bob was partially offset by lower face off before 88, GTB and the 488 spy there which concluded their lifecycle tentwenty name team along with lower shipments of the FX X K anvil.
Engines revenue declined 25 million you around in the quarter, reflecting lower shipments to Missouri.
Revenues from sponsorship commercial and brand were down 40 million euro impacted by the spread of the Cogs 19, pandemic, which resulted in fewer formula one races accrued in the quarter as well as reduced in store traffic and museum visa.
Indoors.
Currency, including translation and transaction impact as well as foreign currency hedges at a positive contribution of 18 million euro mainly reflecting the strength of the U.S. dollar.
Moving to page 12, which highlights the evolution of the main items of our adjusted EBIT.
Adjusted EBIT was down 5.2% or 11.9% that constant currency with adjusted EBIT margin at 23.6%.
The value he is mostly due to the Cogs 19 impact on Formula one.
Partially offset by higher volumes and a positive mix price.
More precisely volume was positive and by 12 million Euro thanks to the increase of our shipments.
Mix price was positive for 37 million Euro.
This performance was primarily attributable to the deliveries of the pheromones, a SD Wan NSP too and to the impact of the personalization programs why it was partially offset by lower shipments of the FX effects cable.
Industrial costs, and R&D increased by 15 million euro mainly due to higher depreciation and amortization of fixed assets as the production line for the new model started being authorized isn't.
The food cost self employees pay days of five cents and during the copies 19 suspending productions.
Investments in Formula one racing activities.
As expected the DNA carpet, our EBIT margin compared to Q1 2000 and team.
As DNA increased by 11 million euro due to the annualization of the increasing staffing throughout 2019 and marketing initiatives in the early part of the first quarter of Twentytwenty.
Hi, there was down 52 million zero you to the already mentioned Kabi 19 impact on the Formula One racing calendar lower engines safe to Maserati as well as lower traffic is sort of brands related activities.
Either in Q1 29, Dean included the positive impact of a legal dispute or approximately 10 million euro.
That's all done that positive impact of currency was 9 million euro for the quarter. These worse than that that is out of more favourable market right, partially mitigated by the hedges in place.
Turning to page 13.
That's sort of free cash flow for the quarter was 73 million euro driven up by the industry B D.
Partially offset by capital expenditure or 174 million euro, including the purchase of tracks of land contiguous to our facilities in Manila.
A negative change in working capital you to the seasonal factor of trade payables.
Please remind the prior year was boosted by the collection of data pheromones SP, one NSP to advances.
Net in the third that as of March 31st was 401 million Euro compared to 337 major euro as of December 31st Twentynine team.
As of March and total available liquidity was 1.230 billion euro.
In the month of April we further strengthened our liquidity position with additional committed credit lines of 350 million euro available between the following 18 and 24 month.
And moving to page 14.
As discussed by Louie.
Our revised guidance range society depends on assumptions in respect of developments that are largely unknown and unpredictable as the progression of the pandemic and the constrains he didn't day cannot be easily anticipated.
First of all we have decided not to take into account the risk of a severe second wave of infections. After the present one.
It would've been simply impossible to mother, the impact of for such a new and major disruption.
Secondly, we have simulated the evolution of our order book based on the United The rest of the resilience we observed during the crisis of 2009, and considering all detected differences in terms of product range and potential customers vulnerability and opportunity.
Thirdly.
We have considered to alternative scenario for our core business with different speed of recovery of the production loss. During this seven weeks of suspension of about 2000 cars.
One which assumes the tool utilization of all available of flexibility who work in saturday's and shorter some or all the days from now to the end of the year, so as to enable us to recover approximately 50% of volumes lost.
A second one which assumes that the order intake will take time to build up over the coming few months as the restrictions are lifted more slowly.
Other things being equal both alternative Sina is would determine not just our performance in twentytwenty, but would enable us to enter 2021 with a strong order book consistent with our business model.
Finally, we have been cautious with respect to the format of the F. One championship for this year predicting box commercial revenues and sponsorship fees based on the low end of the range of phrase is currently under discussion, which many without fans.
Projections for our brand diversification activities encompass a substantial reduction of turnover from directly operated in the franchise stores and museum.
And to a lower extend from licensing.
Engines.
Aligned to reduce volume targets, we receive from a good idea.
Louie already mentioned that we carefully reviewed all spending items for the rest of the or.
We got this DNA by more than 10% keeping them flat versus the prior year essentially through postponing or shifting towards digital a significant part of our marketing activity to anyway maintained strong invites out of the relationships with our dealers and customers.
Continuing to protect our people.
Bob launches planned for Twentytwenty are confirmed at present.
We prioritize our R&D spending, but capex and opex, including four competing in the new F. One environment.
However, our investment that we deemed important for to continuing success, so somebody and to lay the ground for its future development has been maintained.
As a consequence capital expenditures are projected to be around 750 million euros.
Matt of the already announced purchases of tract of land in Matt and I Love the remaining capex would be slightly lower than in fine tuning team.
With that said our guidance for the year as being revised the saw those.
Net revenues between 3.4, and 3.6 billion Euro.
To reflect that dropping deliveries, which could range from minus 4% to almost minus 15% persistent in 18.
And conservative assumptions in respect of the calendar off the F. One championship the pays oversight of our brand activities and demand for engines for them as adopting.
The actual decision on the size of the volume production to be applied will depend on our assessment of the robustness of the new order flow in the next few months since there is no intention to dilute the positioning of our browser based on an order book shorter than usual.
Adjusted EBITDA between one one or five and 1.2 billion euro.
With percentage margin between 31 and 33%.
In line with our previous resolved respectively of 27, Dean and 2018.
Such reduction in margins all sort of like the consideration the postponement led the postponement of deliveries compared to our plan will be more relevant for the new models yet to be introducing the markets.
Adjusted EBITDA between 600 million Euro to <unk> Euro and 800 million Euro.
We target then EBIT margin between 18 and 22%.
Which reflects the Navy 70 higher pace of our DNA following the IR capex of most recent years.
Adjusted diluted EPS between 2.4, and 3.1 euro per share assuming a tax rate substantially in line with twinkling team at around 20%.
The assumption here is that we keep on enjoying the benefit of the patent box tax break under the new Italian regime advice slightly reduced.
Industrial free cash flow between 100, and 200 million Euro.
With that possibly have you ever bought them from some extended payment terms on trade receivables and capex of around 750 million in Europe.
I'll buy carp compared to our original plans.
I remind you that in Twentytwenty named after free cash flow it deprived of a portion of the cash consideration for the pheromones us to be delivering the or seems already collected in advance in 2019.
And with respect to tax payments, we are cautiously assuming unchanged conditions from our original guidance.
Including the new cash banish fit from the patent box split in three years, that's provided by low.
Please note that said that such figures are predicated upon the assumptions that foreign exchange rate stay where they've been predominantly due in the last month.
It is with U.S. dollar and not weaker than once we won against the euro considering the impact of all ages in place.
This implies a small positive gain versus our prior guidance.
Moving to page 16.
When looking at the yearly results, it's worth reminding our SASSA walk Lou you already mentioned in his speech that is that we're currently as fact that between 75 and <unk> and under the percent of the shortfall versus our EBITDA targets is concentrated in Q2 as they live.
Traded on page 14, new sorry on page 16, and that this will entail a visible rebound in age to following the partial production catch up off the about 2000 cars the loss during the seventh week suspension.
The unsurprisingly weak performance of the second quarter for our core business.
It's mostly the result of the Navy trouble constraints imposed by most countries and a variety of slabs to.
To react to the damage over the pandemic.
But also reflects the consideration.
Our other businesses are equally or even more impacted the seems there overall drop in terms of EBIT da compared to our objectives or compare to Q1 twin Canadian is about six or seven times larger they couldn't than their contribution as targeted or as actually recorded one year ago.
No.
The second half of the or is there for who are we currently pace our ambitions to come back.
In this respect it threats assures they were taking all the up rocket manger and remain flexible enough to adopt our says two unexpected changes.
We are focused more than ever to execute on our recovery plan and keep on putting this phenomena company.
With that said I'd like to turn the call over 20 collector.
Thank you very much on Tanya we have now ready to start the kinase session. Please muddy I hand over to you for the instructions. Thank you.
Thank you ladies and gentlemen.
Next question. Please press star in wanting your telephone.
Oh I Wonder if you wish.
Okay.
Great question comes from the line John Murphy from Bank of America. Please go ahead. Your line is now open.
Hi, Good morning, good afternoon, everybody. It's it's great to hear from from all of you.
Number questions, but but we just wanted to start you know first on how you're managing sort of the makeup of these 2000 units a production you've lost sort of in the downtime.
You've got real discretion, you know given the order backlog as we know it right now as to how.
You know to make up your deliveries overtime and I'm just curious it sounds like you may make up 50% in the second half of this year, but as we think about 2021 and maybe the remainder being made up in 2021 or maybe all of those being made up in 2021, depending on how the world shapes up for.
All of us in the second half the year, just curious who you or would you be willing to have a big spike in what would look like year over year growth and unit volume in 2021.
That shop or would you more conservatively kind of how about a normal growth rate or a lower growth rate and not try to make up that that unit buying I just trying to understand how you're going to manage this volume growth going going forward in a 2021 will still kind of look like you expect it before plus the catch up.
Well, you just kind of try to keep it what you will you what it was going to be previously in absolute terms.
I understand that.
Oh, Yeah, very clear question I would say John the.
Very much change is as I mentioned in my opening remarks, and I'm, telling you referred to as well.
The key is ultimately a the order book.
So we want to when the year with a very strong order book and that will somehow dictate deliveries in 2020, which in turn.
Basically.
Predicates the range, we have on the low end and the high end.
So.
To have a strong order book has always been a key ingredient business model and growth model.
And therefore, depending on the size of that order books that will dictate the amount of deliveries and 2021.
Clearly, we <unk>, we don't want to waiting lists specifically on certain models. So there's too long.
Especially for those models, and which where we want to attract new customers.
So.
I can't really give you specific answer I don't Wanna Scott the answer.
But it really depends on the order book, we will do our outmost, a if the order book and the level of cancellations are gonna be inline with our expectations.
As Tony mentioned, we can work on Saturdays, we can reduce the summer holiday by week. So we can catch up some of the volume production.
Always with a cautionary eye to us supply chain.
So there are lot of parameters involved in this year.
And ultimately the order book will dictate it very much.
Tempo and cadence about deliveries in 2021.
Exactly.
Yeah, that's helpful and maybe if I could follow up if we think about a month and your higher light vehicles I'm, having a much sticky stickier and stronger order book and I'm just curious if it's in the interim for financial.
Great cash flow build and to some extent smoothing the financials in a.
You know a healthy way does it make sense in the near term is you're going through the weakness in the second quarter and maybe even in a little bit third quarter two pull for some of these deliveries to drive the strain on interest rate of the company I in the near term in a way. They you know you might have a few more deliveries incrementally here in the near term debt.
Otherwise.
Well clearly that's something we look at however, it is somewhat constrained <unk> and if I take the mountains, which is our highest margin model, both CSP woman must be too.
We do have a capacity limitations as you know we put in the new line just for the mountains, though.
We can suddenly increase the production a in a dramatic manner.
Oh are you know.
Not at.
So there is a capacity constraint on my mom's.
On the other high margin causes Antonios had the S. S 90 is only coming after the summer so the impacts relatives to 2020 will be quite limited.
Okay. That's helpful and <unk> and then just second take into account in our guidance.
Yeah. Okay. Thank you and then the acceleration of the brand activities. Obviously, there's a lot of stuff, that's obviously going down here.
Just be a period, where you accelerate some of the rationalization of those activities, where things just don't go back up and you just focus on a narrower narrower sort of higher line higher profit higher brand supporting activity and really take as an opportunity to run that rationalization potentially faster than before.
Well I think we've executed against the strategy quite rapidly.
As you can imagine we do have certain contracts with a certain duration.
So too early terminate.
Necessarily be.
In the best interest of the piano. So we have that constrained to the extent we have opportunities.
To accelerate the termination or without any termination fees, that's certainly something we would follow up.
But I would say the in terms of cleaning up the portfolio. The team has really executed extremely well and very rapidly.
Okay, and then just lastly, real quick on on the share repo program.
Given the sort of suspension here in what metrics are you looking at two to reinstate the share repo program and it seems like it's a bit of an overabundance of caution on the balance sheet. Because you have seem to have tons of room potentially continue to go after it I'm just curious.
When and how you think about that share repo program being reinstated and maybe get more aggressive in the market.
Well there isn't.
And he specific timing time will tell a clearly at the higher.
With the order book strong.
Relatively low level of cancellations and stronger order intake.
That would drive out of cash flow.
The somewhat there is a question as you know on share repurchases in the post Covina 19.
Environment.
With more and more political coals to sort of buying share repurchases. So we've got to keep our eye on that.
But clearly this company will generate excess cash flow and we in one way or another will find the best way.
To get that cash to shareholders.
Great. Thank you very much.
Thank you John.
Thank you. Your next question comes from the line.
HM.
He's asking your question.
Hi, I did want or thinking about taking my question and congratulation on reopening the plant today. So I was that starts with I would like so your question about a your comment on the lack of liquidity in the second the markets I think it's very interesting I mean are you worried about longer longer term implications of this a of these impacts are you seeing.
Any pockets of weakness as I was sort of this oh you think it's just the everything we go back to normal that's the as the dealerships are the open.
Well.
Clearly the market now is essentially dead because there's no trading.
Most of that is because I'm a lot of dealerships are closed.
And.
I think people causes us to.
The pretty young markets for the time being.
If you go back to the financial crises.
There was a reduction in a residual values, but here, we're looking at a very different situation.
So I think we need to wait to see when the market really opens up as to what will happen. We monitor is very closely.
But my sense is.
If and when normality resumes.
The premium market certainly relative to our luxury competitors should continue to be strong.
Okay, Okay, and then second one.
And then the on the on the bottlenecks or at least a level do you expect to see if they've got a problem with the dealers in terms of catching up in your older Oh, that's come in they constrained in terms of Ah you know the profit personalizing, the God I do but even getting getting to the leave the delivery of the goal is there any ah you shouldn't himself how quickly they can.
But up.
No I don't think so I mean, they clearly dependent on our deliveries.
But I think we've done everything to work very closely with them and ultimate clients I mean, there was referenced earlier.
A number of digital activities with ultimate clients and I'm not going on.
Orders are starting to trickle in a week by week they are increasing.
The last week was actually quite favorable.
So things are slowly, but surely coming back.
As I said, the cancellations and not something so far anyway that we would deem alarming, but the cautionary note is that.
When there was the last financial crisis. It took a few months for the cancellations to essentially flow through to the order book.
So we are looking at it very carefully but so far no no red lights are flashing in any real.
Geography.
Okay and what are your one last one the I think more for Antonio I would just wondering if you can shed some more color around the cost of the back on truck program and hobbies, that's what any impact on the on margins and the makes you can quantify or maybe even the reduction on gross margin at the result of all the things you have to put in place to ensure.
I was more a bump up in production.
No not only on so.
Yeah, you enjoy is not materially impacting our margins.
This does contain costs.
Okay.
Thank you very much.
Thank you Julie.
Thank you. Your next question comes from the line My Senior Dan Bergman from Topeka. Please.
<unk>.
Yeah. Good morning, good afternoon, everybody.
Especially on Sunday.
Yeah. Thank you.
With especially them be cancellations.
Because you referred to be pretty good surprises, but could you quantify what was the.
Profit amount of a cancellation you lose Justin figured out what could be the workstation idea.
The crisis session.
Oh I can.
Okay go ahead.
Well the second Gen New York City they.
Just if you can share we'd also.
Quantification of the whole didn't take your today.
Or the change versus last year, just want syndication.
'cause it forms 10-K locally you feel just by both the production the do cities to put show.
This.
The book as strong as it used to be in the past pools audibly 12 18 months.
Ladies and I get all that and so they got should evolve there, which is inevitable I suppose in such a.
Entitlement.
Correct.
I'm <unk> regretfully, I'm not going to quantify either the level of cancellations all the in order intake.
All I would say is that if you look at the low end of the range.
Those are where we have.
Obviously, the high level of cancellations and the lower level of older intakes.
And at the high end of the ranges.
Is possible within this environment.
I think it's very difficult to come.
Today situation to the financial crisis for numerous reasons, which I think.
Referred to in my opening remarks.
One is that the portfolio was completely different.
Martino.
Number of.
Models, what ending their lifecycle.
The launch at the California.
Which obviously helped.
And here, we have a much broader portfolio.
Across the whole board and as I said the.
The muscles that outsize margins have the highest.
Order book.
And sense awesome other other modules at all to less vulnerable.
Oh, So we'll see how things evolves over the next few months.
But I would hate to give you a number just look at the range and that gives you a sensible numbers.
Okay. Thank you and just the pull up Hum that looks at the very strongly in Q1, though how could you manage it for the rest of the yet.
Well as.
Tony I mentioned the mix was very strong driven by moms.
The stuff.
Some items that will be the.
At least.
The second and third quarter Oh in terms of mix as you know we started in the fourth quarter last year. So.
I will equalize itself, but the mix should be favorable in Q2 Q3, driven by the moms.
The remaining.
Oh piece, which is now sold out.
Being sold out for some time, but there's still a deliveries to be made.
And that affects also the personalization.
Okay. Thank you.
Thank you.
Thank you. Your next question comes from the line up.
I know.
Hi.
Please ask your question.
Good afternoon everybody.
I knew you said when youre.
And your remarks.
But obviously find humongous were launched last year and wouldn't be sold these here.
Do you used to small deal will be all those movies. So yes, and this is obviously big difference between within a comedy no way and stuff and nine.
I was wondering to understand I like are you changing your long term.
<unk>, specifically related to dose and then Mogas you can you koby toward.
We continue working to get the repeat her not younger.
Time or delaying or as much as possible into 2021 I was just trying I'm curious to understand I would just changing your launch activity.
Oh, well clearly a the situation has delayed.
A number of activities in terms of the events we have plans.
The the driving events, particularly the presentation specific models to clients.
We intend to.
To resume that a rather fast clip.
Essentially in the second half when things are open.
We've started in those markets that are back on track.
100%.
So the timing was evolved geographically is things open up.
And I'm, telling you mentioned exactly when we still see the first deliveries of the muscle. So we presented in 2019.
I would say on average things have been delayed by three or four months.
And we will try our utmost to catch up.
In terms of Oh.
Order intake and deliveries.
Okay and can you know Suzy Taylor what are your seeing I'm, good crude in China, and again and we can we use it as a guide for what will happen in Europe were U.S. or completely different.
Good ideas in terms of customers and either.
I think first of all you're right. It's it's completely different behavior as you know.
China is a very important market for us going forward.
Especially with regard to the hybrid model, yes, if 90 and hybridization going forward.
All our distributors, a showroom and a workshop so now open or so under person back in business.
We are getting orders.
[noise].
The numbers are rather distorted by the actions we took last year in 2019, given all the uncertainty on the emissions regulations you may recall that we.
Their lives it to clients in the first half a significant amount.
So that comparison will continue to be difficult until the second half.
But we are saying a movement in China, but as we've always said that ultimately the solution to China is hybridization and eventually the poorest sun.
Thank you. Thank you very much.
Thank you.
Thank you.
You can comes from the line.
No.
<unk>.
Thank you very much it still looks a little more skeptical I have two questions. Please.
<unk> could you come back to those supply chain commence you've made a you you mentioned that pool.
The majority of fuel supply those come from the most affected regions you need to reach and Doug are you do a.
Everything you come to work to hook done, but Oh, how much are not included in bigger than what you would.
Be able to catch up between zero and how to fulfill the units.
Last year during a lot don't eat lots if it gives you a large portion of the supply shock.
We're going through.
And the second question May I ask.
Well if you if you want to show about.
The number if you need to do you hope ships, so fall Oh my God between.
Q4 last year and Q1 dishes.
Okay err on the supply chain.
Our range assumes.
Oh, an essential alignment with the supply chain.
We are you can imagine in daily contact with all of them.
They are ramping up a lot of them started today.
Oh, we have witnessed some absenteeism, which means that.
Their ability to get up to full capacity a.
We'll take some time.
But I don't envisage at this stage a huge issues on the supply chain again, if you take the low end in the high end. It gets you a sense so.
Oh, well, we think is likely on the supply chain.
One the one thing we have done is to increase our inventories.
Oh in terms of false materials and components.
And we will continue to increase our inventories.
To ensure that we have that flexibility.
So.
Not in a nutshell.
We are also monitoring one or two of those suppliers that have issues.
I know you they've had issues Creed Parenthood would just ensuring that.
They will continue.
Yes.
I would say that in terms of personalization.
The one aspect that Oh.
I would probably be a bit more difficult.
But nothing that we count somehow.
[laughter].
Oh or the second one you said [noise].
Terms of units shipped in the mountains.
Roughly a loss loss last quarter of 2019. It was around 40 units and it was about the same in the first quarter.
Thank you rich.
Thank you.
Thank you. Your next question comes from the line.
Bobby.
Okay.
Hi, good afternoon, thank for taking my question.
Good afternoon, Hi, So I'm just to go back on the guidance for Twentytwenty. So of course the lines most significant impact it would be Tianjin and.
Sponsorship for me I want et cetera.
So is it.
Reasonable to assume that's for the full year, we should look at the decline similar to what we have seen in Q1. So its Q1 quite representative of how the year should be at least you can your assumption to get to dissect the guidance.
And secondly related to the Q1 with dogs I was really to be surprised you see that you had a they talk contribution from the mix in your EBIT bridge, how are they looking at them contribution to the revenues. It seems that for discussion spare parts seems to come Ashley some volumes.
And so I was trying to understand the mechanics behind that because clearly last year, you had stumbling support to Pheno and this year based on volumes of specialists. So just trying to understand de France on contribution on the revenue.
There's just the in the EBIT and then one last question on the R&D or think Q1 I think there wasn't maybe you could we'd have an expectation that you know in Q1, you were still spending like a lot of the cost to went ahead and because of course, you know the kind of.
The nation up then opening of the right thing was they asked me units and so how did you managed to actually has the R&D cost down year over year and.
You mean that.
Maybe their adoption for it if we are you even more significant than.
Previously expected thank you.
And Tony what you want to address those questions. Yeah I started from the last two.
In times talking volumes and versus mix.
I think I'm not sure I'll you you made your tax from our revenues bridge the impact all volumes and price mix.
But basically what the EBIT bridge gives you a in the mix price column is the result of rather makes a country mix and price increase year over year.
And clearly deep rising, saying our deliveries of the amount that explains very well to allow the product mix is going to improve on a year over year babies <unk>.
And that's a driver in terms of volumes, we are not growing that much.
You see in terms of shipment of match, we have been growing in terms of delivery. So at constant the contribution margin you shouldn't be an easy computation I guess.
In terms of the R&D there is that calendar effect, even there in the R&D columns first of all you need to take into account that we have both the expand the him and the R&D expenses doing at PNM by deem the formula one activity there one for innovation.
Than we have industrial costs saw there and I'm better off elements and the ones that have a calendar or a season. In fact, if you wish depending on when I called is fundamental one where a portion of discussed also depends on the on the calendar of the raises and isn't that what basically come thing.
Growth when are you everybody or babies.
I do not recall your first question I really would relate to took a full year I can address that yeah. The one in respect of sort of fully or yeah, you're right.
Yeah, and he is not exactly a mathematical computation, but you are not not far from there.
Obviously absent any any news on the development of Formula one during the rest of the here.
Okay, great. Thanks.
Your next question comes from the long of Ryan.
JP Morgan.
<unk>.
Thanks for taking my question you know in the past a you've discussed a your sales increasing over time commensurate with the global increasing high network individuals are you notice so as to preserve exclusivity give any thoughts on how the trend didn't high net worth individual or maybe now different or if there's anything within the trends.
Global wealth that might have a disproportionately impacting your customer base. So for example, the decline in oil and gas wells over the past quarter or.
<unk> relative resilient technology company share anything in particular on the macro wealth side that you're watching or investors might be able to watch for insight into demand.
Ryan.
I mentioned in my opening remarks.
The commercial team.
A phenomenal job.
Uh huh.
Geography is industrial sectors.
And ultimately out customers and clients and.
Participating in industrial sector.
Which in turn gave us a sense of the vulnerabilities as well as a the opportunities. So we've we've we have really drill down a considerably and they've done a phenomenal job.
I know obviously are those clients who are in the sectors that you mentioned the obvious ones that are suffering today and the ones that are doing okay.
That gives you the opportunities as well as the vulnerabilities.
All that is built into the range and dollar volume expectations for the yet to low and high end.
Okay I see there just lastly have you done any dimensioning that you're able to share at least you know to estimate the net financial impact this year from changes the formula one it sounds like you should be able to ratchet down R&D I don't know, maybe yesterday, but not commensurate with the decline and Undershipped commercial brand revenue is that the way to think about AD or can you help us sort of.
Think about the degree to which the lower EBITDA in the updated outlook is driven by changes to the only been dynamic versus.
You know the card impart does not.
If you look at the first quarter is should give sense.
I mean, there is no way, we can offset through cost reductions.
Although we have to reduce cost and formula one, but there's no way, we can offset the hit or to the revenues on a sponsorship fees and especially on the revenues that generated by the commercial rights holders.
So [noise].
Hit the revenue essentially goes down to the bottom line, which some minor upsides.
But it's it's it's a big hit and as I said the good news is its confined to this year hopefully.
Okay helpful. Thank you.
Your next question comes from the line you aren't you down years from Goldman Sachs. Please ask your question.
Yes, Hello, Thanks, taking my grandchildren.
Uh Huh that's question I just had it just at the low end of your guidance. If we went to you but in the second half you see more donlins grade one he then.
It would suggest it will be touch you guy what keeps he will be right either.
EBIT line, it's your expectations.
You bet line.
Oh Q2 will will be very weak as we've said I'm not going to give you specific number but it will be very weak you're right.
Okay, and then with the order book you you've mentioned several times about managing deal with.
Could you, perhaps just give some insight into when you manage yet are you thinking about hates alluded at a company level that they Youre High school production are you thinking about it in terms of managing the eight to the <unk> production.
Well, what do you think about it on a on the model line like that.
All of the above.
I mean installed one simple rule.
George I mean, we take a holistic view of the whole order book.
Oh, I can add geographic mix to that.
Model makes so obviously and the waiting lists.
Strengths of the order book for each specific model and each specific geography, so it's a rather complex equation.
But one that I think the team has dealt with very well.
And clearly we'll continue to do so.
But there isn't just one simple formula is how to we will we look at the order book, how we treat it.
Understood.
And then won one final question if I may you Didnt mention the potential for the softer they working.
In the second half that the yet to catch up it if it seemed appropriate can you just kind of with bought in htwo, bringing on incremental work it would need with me training and associated costs or itself today working something you could manage with your with your existing employees.
This ER the latter we managed with existing having said that you know the last couple of years, we have hired and trained in number of people.
And especially the production team has done a phenomenal job.
Had a transferring those employees, though we're focused on the Maserati engines back to a coal Ferrari business. So that included that entails quite a lot of training and absorption and co business.
So that given the Maserati engine business will continue apace.
Great. Thank you.
Thank you.
Your next question comes from the line I'm gay community.
He's asking.
Taking my questions I'm like you will sit for the extra color on my fault I just couldn't WASC on Formula One have you views on the potential revenue who are in the mix I'm thinking about 2020 won't change to tool.
As a result of what has happened and secondly, just thinking about the older but could you perhaps discuss how you think deposit smart move given it sounds like it's more production issue them and good morning. Thank you.
Our current thinking he is a [noise].
In terms of revenues.
Oh, though it's somewhat unpredictable by in 2021, they should come back certainly in terms of the races.
Which is a big pop part of it.
I know obviously also in terms of sponsoring we know that the Formula One group.
Has worked a lot on trying to attract new sponsors have to see this situation was delayed certain things, but hopefully by 2021 that will come back. So at this stage, we don't really foresee a major a reduction Oh continues.
Option in commercial rights holders.
Revenues.
In terms of Formula one for next year, all things being equal.
The second question related to deposits I think.
Well, that's the main changes I'm, telling you highlighted in terms of the deposits was really moms.
Which flat to 2019 considerably.
I know obviously some of the sales with the moms at today.
A lot king the deposit that we received in 2019.
With regard to all the other cars or we don't foresee any changes.
In terms of the policies Oh, we have in place with a dealer deposits primarily.
I don't if that answers your question.
He touched upon your question.
That's.
Helpful. Thank you.
Thank you.
Thank you. Your next question comes from the right Michael.
Right It's me.
Your question.
Hey, guys. Let me let me. Thank you quickly for all the help here, we're not a lot of companies try to give any guidance a very very appreciative of all that detail here on the outlook for the year.
Just two quick ones. There you know I want to know it I think you had one or two.
Presentations of new cars plan for 2020, and I apologize I missed it but is there any delay in the launching of those new cars or is that still the right way to think about this year I was curious if they get here a little more detail on the cancellations you mentioned in Australia in the U.S. I know you said nothing alarming I was just curious why you called out those two markets at all and then.
Most importantly, I want to ask you about a comment on slides for about Reprioritizing projects and ensuring long term success I know, it's too early to have ultimate clarity on 2020.
I'm, assuming there's also reduced visibility on the longer term plan you talk to it the capital markets day.
But I know it's complex plan they can best be projects each year like Formula one this year in two.
2020, I think is going to be a big ramp in person investments.
As you think about the targets for 2022 can you speak to what you think you need to do the realign the phasing of those investment projects.
And then if any of those projects could extend beyond 2022, given the disruption this year.
Oh I'll try [laughter].
[laughter].
First of all.
The two new models.
Oh I still slated for presentation in 2020.
Clearly a few months later than we had originally anticipated, but they will still be presented this year so that that remains.
And activity.
We will see.
But clearly as you as you can realize that presentation.
Those models.
They really only started being delivered in 2021.
With regard to United States in Australia.
We specifically mentioned I specific pension the United States in Australia, because that's where we saw a little bit more cancellations and elsewhere.
The only reason I said, Australia, and the United States.
Just to give you a sense that this was not a very wide geographic.
The thing that was happening it was sort of contained at this stage anyway to those two markets, but again, they one very alarming.
But it was to give you a bit more color as to the cancellations.
In terms of Repro repro, right [laughter] changing the priorities.
Of our projects.
Clearly with a reduction in the capital expenditures that Antonio mentioned.
And some cost reductions we have delayed a certain multiples.
And the investments behind them. However, we have retained total flexibility to sort of switch back on depending on how things evolve but at this stage we felt it was prudent.
To delay was.
We felt could be delayed.
A bit between three and nine months, which obviously will have an impact longer time, but we've been very careful are asked to ensuring that whatever is delayed will not adversely affect our competitiveness.
Or our ability to grow.
So I can't really go into detail module by module, but some will be delayed others will be on time.
Okay. Thank you so much.
Thank you.
Thank you I'm sorry last question comes from the line.
Somebody please ask your question.
Hey, Adam Jonas.
I would hope everyone well and thanks for the call.
And I do offer my desk sympathies to accomplish the for our extended again your family's itself.
Thank you are adamant about having difficulty hearing you.
Oh.
Is this a little better.
That's a huge echo.
Go Oh, sorry slowly because there's a huge echo.
Well take it offline I won't ask the question.
I have a good to everybody.
Okay sorry.
Thank you.
Are there any further questions.
All right there I know, it's like a question at this time.
Mm Hmm.
Thank you.
Thank you letter yeah, and thank everyone, who has joined US today, yes deal would it be soon available to answer your question, So and that we all wish you a lovely about stuff today, but I.
Thank you everyone. That's been there I'm quite frankly, they can get all perplexing to me all Omar.
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