Q3 2024 Ferrari NV Earnings Call
Thank you Lydia and welcome to everyone Who's joining us up do they would plan to cover the groups, but I think it is locked up in the third quarter of 'twenty 'twenty four and the duration of the call is expected to be around 60 minutes today's call would be all set by the group CEO. Mr. Benedictory Nothing group CFO, Mr. Anthony pick up a gun alright live onto my Tee it up.
We are available in the investors section of the society, our corporate website and at the end of the presentation, we will be available to answer your questions.
Before we begin let me remind you that any forward looking statements we might make during today's call are subject to the risks and uncertainties mentioned in the Safe Harbor statement included on page two of today's presentation and the call will be governed anybody's language decide I'd like to turn the call Augusta Benedetto.
That's really cool.
Augusta Benedetto: Thank you everyone for joining us today.
Speaker Change: Before we begin I would like to extend my gratitude to the incredible team at Ferrari for their hard work and dedication to all our client the collectors for their ongoing trust in our brand and to all our partners suppliers and dealers for the strong collaborations we have continued to be able to get the stability.
Augusta Benedetto: Oh, the Ferrari ecosystem resides on the spirit of cooperation shared passion and sense of belonging.
Augusta Benedetto: Thanks to all.
Augusta Benedetto: We are continuing to execute our business plan in line with our trajectory in Q3 was once again a quarter reach and achievement of strong financial results.
Augusta Benedetto: Let's begin with a brief summary of these financial results and then Antonio will provide that.
All the other details.
Revenues $1 6 billion euro up 7% versus the previous years.
Augusta Benedetto: The double digit growth in profitability with EBITDA at approximately 470 million Euro and EBIT margin of 28, 4% sustained by the strength of the product mix and the continuing solid trend of personalization.
Augusta Benedetto: The remarkable net profit of 375 million euro and industrial free cash flow generation or more than <unk>.
Augusta Benedetto: 60 million Euro.
Augusta Benedetto: Such figures continue to demonstrate strong execution and sustained its growth.
Augusta Benedetto: These results were accompanied by a continuous brand momentum the order book, our order book as evolved as expected with the new Dow the Chilean recoup in spite of guiding the order intake providing gas we have a remarkable a rolling visibility well into 2026.
Augusta Benedetto: The same positive sentiment there has been confirmed by many of our peers, who attended dealer annual meeting a couple of weeks ago here in Marinette low in our new E building.
Augusta Benedetto: All of our 170 plus dealers from all over the world.
Augusta Benedetto: So these important events and immediately after it during the day and they reported a very favorable feedback across the border from our recent product unveiling so customer engagement from our clears a consistent product and industrial strategy to increase the openness and transparency and of course unique brand.
Augusta Benedetto: Yes.
Augusta Benedetto: In these same locations in the building during those days, we arrange a bespoke reviews of the new Super cash the safety for our collectors before it is playing to our broader spacing community at T. Nally Mondiale. These.
Augusta Benedetto: These model opens a new chapters in these three of our legendary supercuts.
Augusta Benedetto: Safety will be produced in a limited run of just 799, examples which have already been fully allocated to our collectors at John's they corn acre to 80 acre GTO launched 40 years ago in 1984.
Augusta Benedetto: 40, 50, Enzo and Lafayette, Ravi and showcasing the very pinnacle of technology and performance.
Augusta Benedetto: Safety is the most powerful road cattle ever to come out of the factory gate, we've combined the maximum power or 1200 horsepower. It has become the new benchmark for innovation and engineering excellence from the latest generation of <unk> hybrid powertrain with the introduction of it.
Augusta Benedetto: But to the four wheel drive in capability enabled by the electric front axle from the ultralight carbon fiber chassis to the extreme aerodynamic solutions.
Augusta Benedetto: Here I would like to praise the entire team here in Ferrari for this incredible masterpiece, marking the eighth.
Augusta Benedetto: Model unveiled it out of the 15, we promise it that the 2022 capital market day. So.
Augusta Benedetto: So what is most striking.
Augusta Benedetto: The FHA firstly, it symbolizes our technological evolution the significant transfer of technology from our reaching all the to the road today, both our Formula one and our 49 90 I protest Abdul bogey six IC IC engines, we've been hybrid system. So.
Augusta Benedetto: And I think towards the choice for us to transfer this powerful an advanced architecture into our newly born fading.
Augusta Benedetto: Secondly, we are making a clear technology statement.
Augusta Benedetto: More specifically I refer to the following three key components of our safety all developed and manufactured in our newly inaugurated the building one.
Augusta Benedetto: The electric motors, the first will be developed tested and manufactured internally by us.
Augusta Benedetto: Two zero.
Augusta Benedetto: I've worked with your battery module conceived for very high power density and adopting a patent that carbon fiber housing system.
Augusta Benedetto: Save weight and three the front axle with signage for high efficiency and incorporating two electric motors anywhere using silicon carbide process and integrated advanced coating system.
Augusta Benedetto: What I just mentioned the bonds underlines the progress that we're making in our electrification journey.
Augusta Benedetto: And our willingness to internalize.
Augusta Benedetto: Components.
Augusta Benedetto: After the first hybrid F one car or 2009.
Augusta Benedetto: After that in 2013, an hour six hybrid models F 80 represents a key milestone in our electrification journey.
Augusta Benedetto: And now after I was amazingly beautiful and high performance Karate, let's switch gears to client activities Q3 has been also a quarters, reaching many unique experiences such as.
Augusta Benedetto: Our presence in Pebble Beach, where the T. One Allstate, many classic and new Ferraris.
Augusta Benedetto: The Cavalcade classic, which attracted over 60 historic Ferraris and their owners to Italy for you all.
Augusta Benedetto: Julia region and Slovenia.
Augusta Benedetto: And the legacy tool dedicated to owners of the iconic <unk> 88 in GTO and our first superfast.
Augusta Benedetto: And if not even longer Ali, which saw the participation of more than 35000 in motor sports enthusiasts client's defaults is sponsor suppliers and employees with their friends and families.
Augusta Benedetto: Each event.
Augusta Benedetto: Each event has been a resounding success, bringing together our community to celebrate the Ferrari legacy and extraordinary experiences that define our brand.
Augusta Benedetto: As opportunities for our international community together together offer a unique platform for enthusiasts to immerse themselves in the Ferrari experience.
Augusta Benedetto: They foster connection and create and forgettable memories that resonate with a true sense of the pricing goes a shaved a passion and a strong sense of belonging.
Augusta Benedetto: Can anyone gallium is a good launch pad to our racing and lifestyle world. So let's start with the racing World September 1st is the data that we will always remember because for the first time in Ferrari story, we secured two victories in the two championship WC Nf one in a single day.
Augusta Benedetto: Our victory in Austin came in just a few hours after hour wait at the Grand Prix with this good area for our HB.
Augusta Benedetto: I was in Monza and I can't tell you that you cannot describe those emotions you can only leave them and you will never forget it.
Augusta Benedetto: 101, the recent victories and improvements in Austin, and Mexico City and provided us with the boost we need to continue to fight in the last few races of the championship.
Augusta Benedetto: <unk> with four wells on the ground.
Augusta Benedetto: The road.
Augusta Benedetto: The road to handle Abu Dhabi is that will we will make all we can to to fight until the very last lap.
Augusta Benedetto: The recent racing and sports Cat event, they've also been locations to showcase our renewed lifestyle dimension.
Augusta Benedetto: The main activities, let me highlight our last collection shown during the Milan fashion week and that has been very very well received.
Augusta Benedetto: The strength of our brand is further demonstrated by the record attendance at our museums two months in Q3, both so well.
Augusta Benedetto: 100000 visitors and year to date, we already passed the record of attendees over last year's <unk>.
Augusta Benedetto: Lastly, I want to mention another very important achievement. This quarter actually is a quantum leap toward our carbon neutrality target for 2030, we have switched off our generation plan yearly Madonna alone and we manage it to do this three months earlier than we had previously planned this means.
Augusta Benedetto: We no longer use gas to produce electricity maranello, replacing a significant proportion of our methane gas consumption with renewable energy sources. These really assure us is 60, 60% annual reduction in scope one scope two C O two emissions compared with to the 2021.
Augusta Benedetto: To conclude we are conscious of the macro environment around us and we continue to monitor it very carefully we are all fully committed to execute our strategy with a focus and determination confident in our clients our direction and the opportunities that lie ahead of us.
Augusta Benedetto: And always keeping in mind, the importance to be well grounded and on this note I hand over to Tony to review the Q3 24 financial result Antonio.
Tony: Good afternoon, Victor and good morning, or afternoon to everyone joining us today.
Tony: I'll start on page six with a quick glance at the highlights of the third quarter.
Tony: The quarter posted strong financial results aligned with our targets once again affirming this year's main drivers.
Augusta Benedetto: That makes sense and personalization.
Augusta Benedetto: As previously communicated volumes and mix also reflected our decision to facilitate the company's transition to a new ERP.
Augusta Benedetto: In this respect I want to take this opportunity to extend my thanks to all the colleagues.
Augusta Benedetto: For company with this transition.
Augusta Benedetto: In summary shipments were a few units less than prior year, while revenues were up 7% adjusted EBIT up 10% with a 28, 4% margin adjusted EBITDA increased 7% with a 38.8% margin and such economic results led to a strong investor.
Augusta Benedetto: Our free cash flow generation of more than 360 million Europe.
Augusta Benedetto: Moving to page seven we review our shipments for the third quarter, the poorer sanguine that almost by the end of 296 hundred yes drove the deliveries in the quarter. We also commenced the first deliveries of the X of 90 X X Spider and increased deliveries of DSS ninth.
Augusta Benedetto: <unk> thought about it.
Augusta Benedetto: Allocations of the Daytona SB three grew in the quarter compared to prior year in line with our plans and slightly sequentially lower than in the second quarter.
Augusta Benedetto: Shipments of the API competitor, John a decrease and we're approaching the end of its life cycle, while the a 12 competitor and they're all not phased out.
Augusta Benedetto: As a result of the IBM share reached 55% in line with prior guidance and mainly driven by the 268, yes.
Augusta Benedetto: As usual our protocol locations across the different regions were consistent with the product cycle and the development observed in each respective market.
Augusta Benedetto: On page eight.
Augusta Benedetto: See the net revenues bridge will show, a 7% growth versus prior year at constant currency.
Augusta Benedetto: The increase in cars and spare part was driven by the retail product.
Augusta Benedetto: And country mix as well as higher personalization in.
Augusta Benedetto: In the quarter at personalization, where approximately 20% of total revenues from cars and spare parts significantly supported by the poorer sanguine and debate on SPT.
Augusta Benedetto: Sponsorship commercial and brand increased mainly thanks to the new sponsorship related to our racing activities and largely driven by the new title sponsor with sponsorship with HB.
Augusta Benedetto: Correct net of hedges in place as a negative net impact mainly due to the adverse dynamics of the U S dollar and Japanese yen versus the euro.
Augusta Benedetto: Moving to page nine the change in adjusted EBITDA is explained by the following <unk> first volume slightly negative, reflecting the lower deliveries of <unk>.
Augusta Benedetto: Mix and price strongly positive thanks to the average for the mix of standby days on SB, three and the face off to 499 P. Mod if you've got that.
Augusta Benedetto: The increased contribution for personalization and a positive country mix, mainly supported by the Americas.
Augusta Benedetto: Industrial and R&D expenses positively contributed to lower DNA in line with certain models phase out.
Augusta Benedetto: SG&A increased and reflected the continuous initiatives in software and digital infrastructure organizational development as well as brand investments.
Augusta Benedetto: Other than the positive impact of 14 million euro thanks to the combined effect of new sponsorships and lower costs due to revised formula one season ranking assumptions in line with current constructors standings.
Augusta Benedetto: Lastly, the total net impact of currency was negative four 8 million Europe.
Augusta Benedetto: The EBITDA margin was 38%, while the EBIT margin reached 25, 4% and benefited from flattish DNA.
Augusta Benedetto: Turning to page 10 in the third quarter, our industrial free cash flow generation reached 364 million Europe, reflecting the increase in profitability a positive contribution from networking capital provision another primarily driven by the inventory reduction at quarter end.
Augusta Benedetto: We offset by increased capital expenditures in line with the pace of development of our product.
Augusta Benedetto: And the new infrastructure in Maranello, and largely driven by the new paint shop.
Augusta Benedetto: Higher taxes due to a different cadence of balance payments.
Augusta Benedetto: And the end of September the net industrial debt position was 246 million euro after share repurchase of $147 million.
Augusta Benedetto: Moving to page 11, thanks to increased visibility, we look at 2024 guidance with increased confidence on all metrics.
Augusta Benedetto: To conclude this quarter's strong financial results the exceptional reception of the new Super Carrefour Haiti, the client attendance at our events in our fast order intake on the Douglas Selena the family along with a strong order books, all reinforce our confidence in executing our future plans with success.
Augusta Benedetto: Shipments underscored the momentum we are building and our continued commitment to delivering value to our clients and stakeholders.
Augusta Benedetto: Thank you for your attention and I'll now turn the call over to Nicoletta.
Speaker Change: Thank you Tanya at is here, we are now ready to open the Q&A session. Thank you.
Speaker Change: Thank you as a reminder to ask a question. Please press star one and one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one and one again once again, please press star one and one on your telephone and wait for your name to be announced thank you.
Augusta Benedetto: We are now going to proceed with our first question.
Augusta Benedetto: And the question is come from the line of Thomas Besson from Kepler server. Please ask your question.
Augusta Benedetto: Hello, Thomas Your line is open you may ask your question.
Thomas Besson: Sorry for that.
Thomas Besson: Thanks for taking my question.
Thomas Besson: I have two please.
Thomas Besson: I'd like to start with.
Augusta Benedetto: S E T.
Augusta Benedetto: Can you give us a night.
Augusta Benedetto: The timeline for the first deliveries of this product.
Augusta Benedetto: And over which.
Augusta Benedetto: How many quarters you intend to deleverage given it's substantial.
Augusta Benedetto: Substantial oh price.
Augusta Benedetto: Price point and the like.
Augusta Benedetto: <unk> contribution.
Speaker Change: My first question.
Augusta Benedetto: And the second question.
Speaker Change: To come back on the mix gains in Q3.
Augusta Benedetto: Could you discuss.
Augusta Benedetto: Why it declined sequentially.
Augusta Benedetto: Okay.
Augusta Benedetto: I got much.
Augusta Benedetto: Is it mainly due to sequentially lower Daytona shipments or is there something else that explains it.
Augusta Benedetto: A relatively low mix again, please thank you.
Speaker Change: But then I think in the first one the second Antonio will be more specific so if safety. We started deliveries Q4 25, and we will go ahead for two to three years.
Augusta Benedetto: So that's about the safety and the number of Academy will ship is 799, the second do I think about the mix, yes Antonio will comment.
Augusta Benedetto: Shall decline is due to the fact that the comparison with last year.
Augusta Benedetto: Based on the fact that both product on SB, three and mix impact and personalization last year was already high in Q3.
Speaker Change: Okay. Thank you very much.
Speaker Change: We are now going to proceed with our next question.
Augusta Benedetto: Yeah.
Augusta Benedetto: Okay.
Speaker Change: The question has come from the line of John Murphy from Bank of America. Please ask your question.
John Murphy: Hi, good afternoon everybody.
Augusta Benedetto: Bedroom just a question as you look at sort of the upcoming product.
Augusta Benedetto: March's I mean, you've got the <unk>, which is very impressive that Dr. Rachel injury, I would imagine a successor to the icon.
Augusta Benedetto: The Daytona.
Augusta Benedetto: The per song or a successor that will come the next couple of years in the EV Hypercard Theres a lot at the high end here.
Augusta Benedetto: It seems like it's very strong and will be well received.
Speaker Change: How do you think about positioning all of this with your customers and particularly the <unk> as.
Speaker Change: As we kind of look at it sort of somewhere between the iconic in the EV hypercard that thats coming.
Speaker Change: As part of the question.
Speaker Change: Look at the Super Cara as we said these are coming as the pinnacle of technology and performance.
Speaker Change: As I said also during a few minutes ago.
Speaker Change: This is represent an important step in our electrification journey because it shows how this company Ferrari can manage some key components for the electric vehicle so I.
Speaker Change: We're seeing that in <unk>.
Speaker Change: There are a couple of important messages one so that is able to do in hybrid world as well in IC walk is continues to be able to make with very high level performances too.
Speaker Change: The road map our product roadmap is such that there is a continuous mitre continuum between what we're doing in the past and what we're planning in the future and I would say that is a unique strength for our company putting together the traditional innovation so.
Speaker Change: We are learning something in manufacturing that will be very beneficial also not only for electric out of the futures, but also for all other ethics all other cash.
Speaker Change: So that is.
Speaker Change: The importance of safety in our in our roadmap.
Speaker Change: But maybe just a further if you think about the EV Hypercard Supercars. However, you want to use the terminology will it be positioned above the FAA or adjacent to it or below it as far as.
Speaker Change: I am very curious I would be in your shoes I would be equally curious.
Speaker Change: You know we are a luxury company and we want to keep it the secrets in this era, we did a little bit for the future, let's say Q3, we already do that.
Speaker Change: So, let's wait a little bit John I understand you, but let's wait a little bit Okay. We love product just one follow up is there the potential there is a hyper focus right now in this quarter about volume declining a lot of concerns in the luxury market.
John Murphy: All of this great product coming but is it possible that you run this company with little to no volume growth and drive mix in scarcity to be even more Ferrari like Detroit that would drive profits and margins higher in the future as opposed to needing volume growth I mean, I think there is a real concern in the short run here around that the volume decline.
Speaker Change: This is a good question I will take both points number one I would like to remember to you and everyone that this is a company that is putting together two important dimension one is luxury and one is technology.
Speaker Change: And the second important point is that we always said, we gave priority to the quality of revenues not the quantity and this is also the way you have to read that the evolution of our business plan.
John Murphy: We don't want to push too much on the topline, but we want and we always as we always did and do we plan to do we want to give priority to the quality of the P&L.
Speaker Change: Perfect. Thank you very much.
Speaker Change: Thank you John.
Speaker Change: We are now going to proceed with our next question.
Speaker Change: And the question comes from the line of George Kelly is from Goldman Sachs. Please ask your question.
George Kelly: Yes, good afternoon, and thank you for taking my questions.
George Kelly: First question I wanted to ask was just with respect to the guidance. Obviously, you stated that youre increasingly confident tenants.
Speaker Change: But at the low end and I'm sure, you'll do better than the low end.
John Murphy: The implied EBIT for Q4 would be about 400 million lower sequentially. In Q3 could you just walk us through a few of the puts and takes as we think about the evolution of Q4 relative to Q3.
Speaker Change: The second question I had was with respect to some of that residual value developments, we're seeing in SaaS and used markets. I think it's quite notable low mileage relatively young <unk> hundred 96 sales are actually trading at lower values than all the attributes of those with higher mileage.
Speaker Change: Why do you think that is and is that leading you to reconsider it to your pricing strategy or power trading strategy as we go forward. Thank you.
Speaker Change: So I think the second one no residual values in the first one and Tony will elaborate I would like to make to clarify a few things here about the residual value. Okay. First of all of the dynamics are not the same in all the countries you are right there is.
Speaker Change: One country U K that is a little bit softer, but this is not true for other countries. What I can tell you that we keep monitoring what is happening on the residual value and we noticed that.
Speaker Change: Let me say when there is a degree of personalization, a little bit too high well clear of the following.
Speaker Change: The buyer is not in some cases not willing to buy for personalization that please a lot the first about yes.
John Murphy: That said I think.
John Murphy: The two things you have to keep in mind the number one and the pattern is not the same all over the world and two it depends a little bit on the degree of personalization that is first of all yes put on the Ferrari and answer the second one is not willing to pay for something even not choose.
John Murphy: So this is about the residual value, yes, I think on the one I GA on the guidance. Please not disregard. The fact that the guidance uses the greater than language that is opened up for them.
John Murphy: In Q4, we had anyway planning higher deliveries of the data on ISP III compared to prior year, but sequentially lower than the previous quarters.
Speaker Change: In Q4, we have incremental opex, particularly related to operating activities and lifestyle and we are encompassing the expectation of persisting inflation and incremental D&A related to digital initiatives and lifestyle.
Speaker Change: So these are the main drivers for Q4, even if you look at that at the floor of the guidance and but please do not disregard the language that we use on purpose.
Speaker Change: Understood. Thank you.
John Murphy: Okay.
Speaker Change: We are now going to proceed with our next question.
Speaker Change: The question has come from the line of Adam Jonas from Morgan Stanley. Please ask your question.
Adam Jonas: Hi, good afternoon, everybody I'm going to follow up on the <unk>.
Speaker Change: Implied <unk> guide, but for industrial free cash flow, where Youre language says up to.
Speaker Change: $950 million, which would imply.
Speaker Change: If I use 950, a fourth quarter year on year decline of industrial free cash flow of about 36%. So in addition to the factors you already mentioned driving EBIT for the fourth quarter.
Speaker Change: Antonio could you comment on maybe your outlook for change of working capital or Capex that might be driving that type of year on year decline in free cash flow and I have a follow up.
Speaker Change: Thank you Adam for this question I think it's important that we comment.
Antonio: I think I flagged already in the past few quarters. This is a year will be particularly strong in terms of capital expenditure and I also said that the spending is more linear compared to what we would have previously used to and this is because essentially because our expenditure 40 infrastructural development, including the building in the first part of the.
Speaker Change: A year and then the new paint shop.
Speaker Change: From the second quarter on.
Speaker Change: He is going to have an impact. So this is biting into the cash flow.
Speaker Change: <unk> for the full year and the second element is I believe that in the foundations I do not expect working capital to.
Speaker Change: Generating significantly while we obviously have higher taxes and in consideration of the IRS. A result that we expect to achieve.
Speaker Change: These types.
Speaker Change: Antonio Thank you and just as a follow up on the SG&A increased two times faster than revenue this quarter.
Speaker Change: And then you highlighted some of the reasons, including.
Speaker Change: The digital journey ERP integration et cetera, just any any outlook on on forward SG&A of how how much farther this.
Speaker Change: We have temporarily temporary bulge in SG&A, which kind of reversed a multi year decline of SG&A as a percentage of sales how much longer that might continue if you want to describe that in either dollar terms or percentage terms.
Speaker Change: No the dairy herd element, which is the structural and the fact that with the current accounting principle expenditure for digital infrastructure, particularly for US software and when he is cloud is going to be expensed in the P&L directly. So this is a change that occurred a couple of years ago already and as we grow in this respect we adapt.
Speaker Change: <unk>, our digital infrastructure is going to be in addition to the to the SG&A spending that we're used to.
Speaker Change: Does that makes sense.
Speaker Change: Thanks, Antonio and good afternoon.
Thomas Besson: Okay got it.
Speaker Change: We're not going to proceed with our next question.
Speaker Change: And the question is come from the line of Bonnie Cabo Seo from Intesa Sanpaolo. Please ask your question.
Speaker Change: Hi, Yes, good afternoon, and thanks for taking my question. The first one is on the S. E T. How you're going to collect advances on that.
Speaker Change: Super and EPS when do you expect to account.
Speaker Change: Then.
Thomas Besson: My second question is on the <unk>.
Thomas Besson: Amortization rate, which was 20%.
Thomas Besson: Quota.
Thomas Besson: Just curious what is the average pricing.
Thomas Besson: Embedded in your personalization compare that to the PUC.
Thomas Besson: And third question is on the shipments that obviously you can allocate these shipments as we shot it said that he brought to strategy in China shipments decreased a lot, but I know that you <unk>.
Thomas Besson: Below the 10%, but that I'm just wondering if you can give us a flavor.
Thomas Besson: And on the consumer.
Thomas Besson: And ingo on their willingness willingness to buy cheap.
Thomas Besson: China as of now if you can give any color could be very helpful. Thank you.
Thomas Besson: Okay. So I wouldn't think of the 31 also because I was in China.
Thomas Besson: Our CECO and Antonio will navigate us through two other question.
Speaker Change: First of all I'd like to I appreciate that when you underline the deliberate objective that we are using in our presentation, that's very very important.
Thomas Besson: And then coming specifically more to China, I think we have two different.
Thomas Besson: I met at.
Thomas Besson: All the five.
Speaker Change: The owners of the dealerships that we have in China and I can tell you that.
Thomas Besson: Let's say in China.
Thomas Besson: They agree that the growing China Ferrari must be done in the right way with the right space in the sense of that the strategy. We highlighted of staying below 10% is the right one because they need to get acquainted with our brand they do not see any particular name.
Thomas Besson: The negative seasonality because of the order book is still around the five five quarters.
Thomas Besson: We have some areas that are a little bit stronger than others.
Thomas Besson: I can tell you that.
Thomas Besson: In that region that is reported as a greater China, we have some different dynamics one.
Thomas Besson: Going a little bit down that is China.
Thomas Besson: One is going up that is Taiwan.
Thomas Besson: So if you see we have two different <unk>.
Thomas Besson: Different pattern over there, but clearly I mean, we are.
Thomas Besson: We see a traction of some model in China.
Thomas Besson: And we have it too to make sure that we provide to the Chinese market also the caps that are more fitting waiver there.
Thomas Besson: Let's say the tax a fraction over this because the 12 cylinders is not so well.
Thomas Besson: Not so cheap in China, it can cost up to three times, what the decline that we'll pay in Europe.
Thomas Besson: Yes. So this is about China.
Thomas Besson: First the two and Monica.
Speaker Change: Yeah, so on the DSO.
Speaker Change: We'll collect advances on the FAA and this will start in 2025.
Speaker Change: On personalization, 20% in Q3, the average price increase of personalization that we applied for <unk>. It was in line with inflation.
Speaker Change: Oh, Okay. Thank you very much. Thank you. Thank you Antonio.
Antonio: Youre welcome John.
Thomas Besson: Hello.
Speaker Change: We are not going to proceed with our next question.
Thomas Besson: Okay.
Speaker Change: And the question comes from the line of Michael Binetti from Evercore. Please ask your question.
Michael Binetti: Hey, guys. Good morning, Thanks for taking my question.
Michael Binetti: I guess with Daytona moving into the later part of its lifecycle over the next few quarters, if I if I assume.
Thomas Besson: Make some assumptions around how many units left to sell and generally spread those out now that now that the units are starting to decelerate on a quarter over quarter basis, as we look out past the end of this year into the first half of next year Youll have Daytona as a lower impact to the all important average selling.
Thomas Besson: Price per car before you start to shift the F. In the fourth quarter I'm wondering how you would tell us to think that you guys will strategically approach fighting that sale.
Thomas Besson: Revenues per car compression in the first half of next year.
Thomas Besson: Those dynamics and then but in general as you move more into electrification and the eventual full electric vehicle next year, how do you see the margins on an expanding portfolio of electrified cars influencing some of the historical targets, you've given us like the 40% EBITDA margin you laid out at the 2026 capital markets day.
Speaker Change: Thank you Michael I think in the second the first one Antonio so.
Thomas Besson: Look.
Antonio: We have been doing what we said since the beginning we intend in our plan call it electrification hybridization.
Thomas Besson: Bastian engine is in line with our with our plan so.
Thomas Besson: You can you can use a different objective but that.
Thomas Besson: What we're doing is in line with our plan.
Thomas Besson: On the first one youre right the Daytona is going to decelerate.
Thomas Besson: Say the third quarter of next year more or less at what we could expect as of now.
Thomas Besson: In terms of development of the mix, though it also depends on the range guys in the space that we had in Q3 <unk> seen a few initial units of the excess of SF 90 Xx.
Thomas Besson: Starting this withdrawal and the <unk> will be added to the panel. So all of that all of the mix will be less dependent on the Daytona and a bit more.
Thomas Besson: Diversified in terms of the product offering.
Speaker Change: Okay. Thanks, a lot.
Speaker Change: Welcome. Thank you.
Speaker Change: We are not going to proceed with our next question.
Speaker Change: Another question comes from the line of Tom Narayan from RBC. Please ask your question.
Tom Narayan: Alright, thanks for taking the question.
Tom Narayan: First one is just a housekeeping one the ERP volume impacts just confirming that was pretty much done in Q3 and what happened in Q4, and then did you guys disclose how many data owners were delivered in Q3 and then my second question is a follow up to George's question on residual values.
Speaker Change: The one that comes up a lot is is <unk>, obviously, it's probably too early to tell but the fear here. Obviously is that it's a very different type of vehicle.
Thomas Besson: May be used for different purposes, more kind of utility as opposed to.
Thomas Besson: What other priorities are used for so that potentially could impact the residual value I'm sure. It's something you've considered just love to hear any thoughts you have on how you plan to maintain their residual value peer subway. Thank you.
Speaker Change: Gentlemen, thank you I think one and three and then Tony will take the second so ERP transition has been concluded. So there is no impact in that in Q4.
Thomas Besson: And by the way you may remember that in the previous call Antonio said that we anticipated some shipment just to make sure that the transition would there have been a little smoother. This was done always within the three months of Q3.
Thomas Besson: When it comes to the residual value if I take the poorer Sanger your observation is right.
Thomas Besson: Debt.
Thomas Besson: What we see is that some clients that are using the put aside where more than other cash.
Thomas Besson: I think that.
Thomas Besson: This is sitting also we have if you want the original position in the car the waiver to allow the people to enjoy more of the car together with more friends with the family. So we do not have yet a lot of data coming from the client, but we expect to see a little bit.
Thomas Besson: <unk> increased the mileage of the put us anywhere.
Thomas Besson: On the other side, we see that.
Thomas Besson: Demand on the policy language is very very strong keeps very strong.
Thomas Besson: And I can tell you that we receive at more or less data request.
Thomas Besson: Oh people from all over the world that want to have fun with our products and with the.
Thomas Besson: Second on this.
Thomas Besson: I think the only one remaining is the ELD mandate on tier three tier units less than the previous quarter.
Thomas Besson: So around 70, but that is not read this.
Thomas Besson: The specific number that matters as I said it all depends also on the mix in Q3 was particularly heavy in terms of the.
Thomas Besson: Entry level as of our.
Thomas Besson: Branch cars.
Speaker Change: Okay. Thank you.
Thomas Besson: What.
Speaker Change: We're not going to proceed with our next question.
Speaker Change: And it comes from the line of Henry Kaufman from Barclays. Please ask your question.
Henry Kaufman: Good afternoon, Thank you very much.
Henry Kaufman: That's the first one for Antonio I'm still trying to reconcile until near that.
Henry Kaufman: Deliberately software language with respect to the third quarter.
Thomas Besson: I think but by more.
Thomas Besson: Being a pretty strong quarter.
Thomas Besson: In terms of margin in terms of mix.
Thomas Besson: So.
Speaker Change: I suppose I'm trying to get to what that implies for Q4 I mean, some of my colleagues have asked this already.
Thomas Besson: But.
Thomas Besson: Any more color you can give us on did it actually get.
Thomas Besson: Better than you expect.
Thomas Besson: It does still determine the soft quarter in your opinion I'm still a little bit confused but ended up as weak as you thought it would be or if it actually turned out to be better.
Thomas Besson: If you can give us any just on this one then I don't know if you have either or maybe even the trend in the table of the question.
Speaker Change: I started explaining already in Q2 that in terms of unit three would have been software softer.
Thomas Besson: And this is because with ERP you basically remain with your production and delivery stopped for some weeks.
Thomas Besson: It's all in order to ease the transition we decided to set a time units more than in the previous quarter and some less in Q3 does it matter overall honestly no. Obviously we are in is also the mix.
Thomas Besson: In order to have in the quarter are sufficiently strong overall revenue and margin perspective.
Thomas Besson: It was just flag because if you look at the units you see that those are lower than last year, but the units are in no.
Thomas Besson: In.
Thomas Besson: No way related to demand or whatever that is either S comments.
Thomas Besson: Okay deliberate decision.
Speaker Change: Okay. Thank you and maybe one for <unk>.
Speaker Change: Both of you, but just because it's been a data set it in his opening remarks that you are executing in line with the trajectory now finished the first time, we have the opportunity to speak to you again after the F 80 release at least compared to my expectations, the economics seem to be even stronger and obviously $26.
Speaker Change: Going to be yes.
Speaker Change: Already take a lot of advantage of that vehicle. So.
Speaker Change: The context of this.
Thomas Besson: Targets in 'twenty, four we already being in the <unk>.
Thomas Besson: And of the 26 range.
Thomas Besson: Just sort of.
Thomas Besson: Put a bit more color around that again to what extent that is now in fact, well ahead of the plan trajectory.
Thomas Besson: Or.
Thomas Besson: And what where you would say this is still in line with.
Thomas Besson: At what point, you may be considering to update us around these things. Thank you.
Speaker Change: Okay. Thank you. Thank you Andy it's a good question and yes for sure. The let me say when we did the capital market day.
Thomas Besson: June 22, we were not expecting such high level of personalization, especially on something the Caribbean.
Thomas Besson: The caliber finish that was that is this.
Thomas Besson: Highly appreciated by the client on one side and also let me say a good good personalization option for us to sell so in that sense. If you want but the big difference between what we planned and what we have seen is one now for us to give a <unk>.
Thomas Besson: Longer term a long term view of where the company is heading in the next few years will age through next year, we will have the capital market day, and we will update all of you.
Thomas Besson: But clearly.
Thomas Besson: You hear me one way of thinking of the team as well as the client because.
Thomas Besson: All this has been possible thanks to the personalization.
Thomas Besson: That the clients have been willing to take from us.
Thomas Besson: Thank you Bob.
Speaker Change: Thank you Annie.
Speaker Change: We are not going to proceed with our next question.
Speaker Change: Two questions come from the line of Steven <unk> from Bernstein. Please ask your question.
Speaker Change: Hi, yes. Good afternoon. Thank you very much.
Speaker Change: A question about some of the FHA somewhat special color that you can do.
Speaker Change: We went on the 17th of October.
Speaker Change: We've heard that some demand for the FHA.
Thomas Besson: Three times the level.
Speaker Change: Youre actually going to be delivering very strong demand from your best customers.
Thomas Besson: Satisfy a set number of them.
Thomas Besson: We also know that with the.
Thomas Besson: <unk>.
Thomas Besson: The factory the idea was not to increase the absolute level of production capacity. It will give you more flexibility and this strikes me that the timescale producing FMC is going to be quite quite quite small in two two and a bit years maybe.
Thomas Besson: To deliver similar question on costs.
Thomas Besson: Doesn't he built can give you is it because the building. It gives you more flexibility to do these kind of complex calls and wanted to say about you believe you can think of economy vehicles like this in the future. My second question is about the battery warranty that you are going to be that youre introducing on the on the hybrids plug in hybrids and obviously these will update us on what the take up has been on this.
Thomas Besson: <unk> has already been rolled out thank you very much.
Speaker Change: Thank you Stephen Bennett I would think of it two points so their safety.
Thomas Besson: As I said is an important milestone for our electrification journey because for the first time in our history, we are going to do internally or some component for all our electrification journey as of today. If you look at our hybrid cost where we are buying from outside that some components while for RFID the key component that the.
Thomas Besson: So the motors as well as the battery will be done in our building and the building you said it well is not meant to increase the capacity by six <unk> to increase the technology flexibility because we want to leave the ultimate choice. So the modernization of the proportion to the client.
Thomas Besson: So I think this is very very important. This is it goes hand in hand, with our strategy to push to keep alive. The three platform the IC the hybrid and to add.
Thomas Besson: Electric because you know its different for US is not electric transition for US is electric addition, we want to add also the electric platform and the building is the tool that will allow us to masters to give this flexibility and to leave the ultimate choice to our clients. So this is about.
Thomas Besson: Let's say the FASB.
Thomas Besson: Our electrification journey.
Thomas Besson: The second question was about the battery warranty well.
Thomas Besson: We can tell in this way that the.
Thomas Besson: People are always worried about something they don't know and the battery is something thats, usually people don't know yet with the same level of depth like any other component of the cash we wanted and we work with these <unk>.
Thomas Besson: Warranty that we started in July we want to give the peace of mind to the client.
Thomas Besson: It's still a little bit too early to see how many people are activating it but I can tell you that the people that are taking it and that was with people in China as well as people in them in U S. In Pebble beach or during last week trip. They all appreciated the fact that we give them the peace of mind and.
Thomas Besson: We take care of the battery that's a key point because the battery start to become something that more and more clients start to know and the.
Thomas Besson: I think this was a good a good.
Thomas Besson: They appreciate because we listen to them.
Thomas Besson: So this is good but we cannot provide you more data in the next quarters.
Thomas Besson: Okay.
Speaker Change: Thank you.
Speaker Change: Thank you Steven.
Thomas Besson: We're not going to proceed with our next question.
Speaker Change: Our question comes from the line of Anthony take from Adobe Head, Jeff. Please ask your question.
Anthony: Yes, hi, thanks for taking the questions just some follow ups on that.
Thomas Besson: Shipments in the mix.
Thomas Besson: No shipments is not.
Thomas Besson: The main criteria, but still.
Thomas Besson: Still with all the impacts in Q3, the ERP the factory shutdowns in the summer is it fair to assume that shipments should go up in Q4 as Q3, the kind of new normal here.
Thomas Besson: And then on the mix you.
Thomas Besson: You mentioned the lower mix on the series called here in Q3 with with more entry models. How do you think about this for Q4 and also how long do you think about Daytona SB three deliveries.
Thomas Besson: In Q4 should we still remain above the 60.
Thomas Besson: Run rate oil.
Thomas Besson: Normalizing from next quarter and then maybe just the last one on China.
Thomas Besson: Obviously, the market is a bit different here.
Speaker Change: I was just wondering if the current level of volumes for you.
Speaker Change: Is acceptable in China do you think you know supply and demand are well adjusted for you or could you see further downside in the quarters to come thank you.
Speaker Change: I think the third one Anthony I'll leave the first and the second on the two Antonio I believe that the level of volumes. It is acceptable okay.
Speaker Change: <unk>.
Speaker Change: Yes.
Speaker Change: Let's say this is something that.
Speaker Change: We have been discussing in detail with the dealers. So we don't see any any strange pattern over to this for the future.
Speaker Change: Well on Q1, and one and we expect Q4 to four units.
Thomas Besson: Q4 units delivered to be higher than last year, and most likely lower than the previous quarter of this year and in Q4 Daytona deliveries those will be lower in line with what we commented about in aggregate.
Thomas Besson: In our previous.
Thomas Besson: Answer given to one of your colleagues.
Speaker Change: Thank you it will be anyway higher than last year.
Thomas Besson: The Daytona.
Speaker Change: Yes.
Speaker Change: We are now going to proceed with our next question.
Speaker Change: And our question comes from the line of Michael Tyndall from HSBC. Please ask your question.
Michael Tyndall: Yeah, Hi, there. Thanks for taking my question just two if I may.
Michael Tyndall: The first one is just related to the F. One provision release I was just wondering if you could give us some context around the scale of that just trying to understand what it means for the underlying business and then the second one is a little bit more longer term.
Michael Tyndall: <unk> when you did the new ERP system. There was a cost benefit analysis can you talk a bit about the benefits.
Michael Tyndall: I'm wondering perhaps what it means for working capital and what.
Michael Tyndall: What's the positive side of this ERP story. Thanks.
Speaker Change: I think the signal one in the first four F. One and Tony will give an asset well.
Michael Tyndall: I think.
Michael Tyndall: We added two ERP system in the company.
Michael Tyndall: And when you add the two passenger data from the production sorry from sales to production than it was a little bit too much.
Speaker Change: And the workloads, so we will fight for them for sure some efficiencies.
Speaker Change: In that.
Speaker Change: In SGA because believe me there were two system not talking the same language. So we expect some efficiencies and one of the reason why we took.
Speaker Change: Some weeks several weeks to fix that is because really we were talking about two different generation of ERP with two different languages.
Speaker Change: And the second question.
Speaker Change: Formula one provisioning is around 10 million the impact is not huge.
Speaker Change: Okay, great. Thank you very much.
Speaker Change: Okay.
Speaker Change: Thank you we are not going to proceed with our last question.
Speaker Change: I have a question coming from the line of Daniel Schwartz from Stifel. Please ask your question.
Daniel Schwartz: Okay. Thank you very much for taking my question.
Daniel Schwartz: One is one potential tariffs.
Speaker Change: If the U S, which and posted 20% import tariff and client already ordered <unk> assumes a 20% would be need to be fully paid by the customers.
Speaker Change: I guess, I guess thats difficult to say, but do you expect any impact on the order book, maybe you're prepared to relocate some products to other regions.
Speaker Change: The second question is on R&D accounting.
Speaker Change: So in Q3 amortization declined and capitalization increased positive impact on earnings.
Speaker Change: Based on your launch schedule, you expect this to reverse or to continue in coming quarters.
Speaker Change: Maybe my first.
Speaker Change: First one is still difficult to say it depends on the dimension of the tariff increase or whether there is an impact on the order book and how this can be shared among the various parties in the in the game on the capitalization of a capitalization rate increase I think we commented already several times this very much depends on the fab.
Speaker Change: That the expenses for innovation in Formula one rather flattish during the year with some seasonality in in specific quarters.
Speaker Change: While most of the expenditure now is on development of new products or is quite normal that we have a capitalization rate that is going to grow.
Speaker Change: Does it help.
Speaker Change: Yes. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you we will now end the question and answer session here I will now hand back to <unk> for closing remarks.
Speaker Change: Thank you for your time today and those also for all your questions. These are strong Q3 result, and continuous progress in our journey provide us with further confidence for the development of the year and the futures. If you areas I would invite you to take the cake of for Antonia birthday.
Speaker Change: On the cake is greater and a greater than.
Speaker Change: And then I wish you a good afternoon and good morning, and thanks again for your understanding.
Speaker Change: Exactly.
Speaker Change: Okay.
Speaker Change: This concludes today's conference call. Thank you all for participating you may now disconnect your lines. Thank you.
Speaker Change: Okay.
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Speaker Change: Okay.
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