Ferrari N.V. (RACE), the esteemed Italian luxury sports car manufacturer, reported a robust third-quarter performance in 2024, demonstrating significant revenue growth and profitability. The company's revenues surged to EUR 1.6 billion, a 7% increase year-over-year, with a substantial net profit of EUR 375 million.
The strong financial results were underpinned by a healthy order intake for the new 12Cilindri coupe Spider and the anticipation for the F80 supercar, limited to 799 units. Ferrari's commitment to sustainability was also underscored by the early closure of its gas-powered generation plant, contributing to its carbon neutrality goals. With a confident outlook for the rest of the year, Ferrari remains optimistic about meeting its 2024 guidance, buoyed by strong market demand and a robust order book.
Key Takeaways
- Ferrari's Q3 revenue increased by 7% to EUR 1.6 billion, with EBIT at EUR 470 million.
- Net profit reached EUR 375 million, while industrial free cash flow stood at over EUR 360 million.
- The 12Cilindri coupe Spider and the upcoming F80 supercar, boasting 1,200 horsepower, have driven strong order intake.
- Ferrari celebrated two F1 championship victories and advanced in its sustainability efforts by shutting down a gas-powered plant early.
- The company remains confident in its full-year guidance, supported by a solid order book and high client engagement.
Company Outlook
- Ferrari is optimistic about meeting its 2024 guidance due to strong order intake and high client attendance at events.
- The F80 supercar is expected to start deliveries in Q4 2025, with a focus on quality of revenue over volume.
- Ferrari aims to achieve a 60% reduction in CO2 emissions by 2030, aligning with its carbon neutrality goals.
Bearish Highlights
- Concerns have been raised about the residual values of certain models, especially in the UK market, necessitating ongoing monitoring.
- A projected sequential decline in EBIT for Q4 is anticipated due to higher operating expenses and inflation.
- SG&A expenses are increasing due to investments in digital infrastructure and may continue to rise.
Bullish Highlights
- The company reported a strong EBITDA margin of 38.8% and an EBIT margin of 28.4%.
- Ferrari's product mix and increased personalization, contributing 20% to total revenues, have offset the impact of lower volumes.
- The Purosangue and Daytona SP3 models significantly supported revenue growth.
Misses
- Industrial free cash flow is expected to decline year-on-year by approximately 36% in Q4, mainly due to increased capital expenditures and higher taxes.
- The company faced a deliberate reduction in unit sales due to ERP system transitions, which temporarily halted production.
Q&A highlights
- Executives addressed the EUR 10 million impact from the F1 provision release and its implications for the business.
- Concerns about potential U.S. tariffs and their effect on the order book were discussed, with the impact remaining uncertain.
- The increase in R&D capitalization was linked to consistent innovation spending and is expected to grow.
In conclusion, Ferrari's Q3 earnings call painted a picture of a company that is navigating economic challenges with strategic focus and operational efficiency. The combination of a strong brand, innovative technology, and commitment to sustainability positions Ferrari well for continued success in the luxury automotive market.
InvestingPro Insights
Ferrari's robust third-quarter performance in 2024 is further supported by key financial metrics and insights from InvestingPro. The company's market capitalization stands at an impressive $78.87 billion, reflecting its strong position in the luxury automotive sector.
InvestingPro data shows that Ferrari's revenue growth remains solid, with a 15.28% increase over the last twelve months as of Q2 2024, aligning with the 7% year-over-year revenue growth reported in Q3. This consistent growth trajectory underscores the company's ability to maintain strong demand for its high-end vehicles, including the new 12Cilindri coupe Spider and the anticipated F80 supercar.
The company's profitability is equally impressive, with a gross profit margin of 49.77% and an operating income margin of 27.38% for the last twelve months. These figures highlight Ferrari's ability to command premium prices and maintain operational efficiency, factors that contribute to its strong financial performance.
An InvestingPro Tip indicates that Ferrari has raised its dividend for 3 consecutive years, which is consistent with the company's reported financial strength and positive outlook. This trend in dividend growth, coupled with a dividend yield of 0.56%, suggests that Ferrari is committed to returning value to shareholders while investing in future growth.
Another relevant InvestingPro Tip reveals that Ferrari operates with a moderate level of debt. This prudent financial management aligns with the company's reported industrial free cash flow of over EUR 360 million, providing flexibility for investments in new models and sustainability initiatives.
For investors seeking a deeper understanding of Ferrari's financial health and future prospects, InvestingPro offers 11 additional tips that could provide valuable insights into the company's investment potential.
Full transcript – Ferrari NV (NYSE:RACE) Q3 2024:
Operator: Good day, and thank you for standing by. Welcome to the Ferrari Q3 Results 2024 Conference Call and Webcast. [Operator Instructions] Please note that today's conference is being recorded. I would now like to turn the conference over to your speaker, Nicoletta Russo, Head of Investor Relations. Please go ahead.
Nicoletta Russo: Thank you, Rivia, and welcome to everyone who is joining us. Today, we plan to cover the group's operating results of the third quarter of 2024, and the duration of the call is expected to be around 60 minutes. Today's call will be hosted by the group CEO, Mr. Benedetto Vigna; and Group CFO, Mr. Antonio Picca Piccon. All relevant materials are available in the Investors section of the Ferrari corporate website. At the end of the presentation, we will be available to answer your questions. Before we begin, let me remind you that any forward-looking statements we might make during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement included on Page 2 of today's presentation and the call will be governed by this language. With that said, I'd like to turn the call over to Benedetto.
Benedetto Vigna: Good afternoon, Nicoletta, and thank you, everyone, for joining us today. Before we begin, I would like to extend my gratitude to the incredible team at Ferrari for the hard work and dedication, to all our client connectors for their ongoing trust in our brand and to all our partners, suppliers and dealers for the strong collaborations we have continued to build together. The stability of the Ferrari ecosystem resides on the spirit of cooperation, share the passion and sense of belonging. [Foreign Language]. Thanks to all. We are continuing to execute our business plan in line with our trajectory, and Q3 was once again a quarter reach in achievements and strong financial results. Let's begin with a brief summary of these financial results, and then Antonio will provide all other details. Revenues, EUR 1.6 billion, up 7% versus the previous year, a double-digit growth in profitability, with EBIT at approximately EUR 470 million and EBIT margin of 28.4% sustained by the strength of the product mix and the continuing solid trend of personalization, a remarkable net profit of EUR 375 million and industrial free cash flow generation of more than EUR 360 ] million. Such figures continue to demonstrate strong execution and sustained growth. These results were accompanied by a continuous brand momentum. The order book — our order book has evolved as expected, with the new 12Cilindri coupe Spider guiding the order intake providing us with a remarkable rolling visibility well into 2026. The same positive sentiment has been confirmed by many of our dealers who attended the dealer annual meeting a couple of weeks ago here in Maranello in our new e-building. All our 170-plus dealers from all over the world came to this important event and immediately after it, during the dinner, they reported very favorable feedback across the board from recent product unveiling to customer engagement from a clear, a consistent product and industrial strategy to increase the openness and transparency and, of course, unique brand experiences. In this same location, in the building, during those days, we arranged the bespoke reviews of the new supercars, the F80 for our collectors before displaying it to our broader racing community at Finali Mondiali. This model opens a new chapter in the history of our legendary supercars. The F80 will be produced in a limited run of just 799 examples, which have already been fully allocated to our collectors. It joins iconic 288 GTO launched 40 years ago in 1984, F40, F50 Enzo and LaFerrari showcasing the very pinnacle of technology and performance. The F80 is the most powerful road car ever to come out of the factories gate with a combined maximum power of 1,200 horsepower. It has become the new benchmark for innovation and engineering excellence from the latest generation V6 hybrid powertrain with the introduction of turbo to the 4-wheel driving capability enabled by the electric front axle from the ultralight carbon fiber [indiscernible] with extreme aerodynamic solutions. And here, I would like to praise the entire team here in Ferrari for this incredible master piece, marking the eighth model unveiled Out of the 15, we promised that the 2022 Capital Market Day. So what is most striking about F80? Firstly, it symbolizes our technological evolution, the significant transfer of technology from our racing world to the road. Today, both our Formula 1 and our 499P hypercars and [ Turbo VIC ] ICE engines with a hybrid system. So it was a choice for us to transfer this powerful and advanced architecture into our newly born. Secondly, we are making a clear technology statement. More specifically, I refer to the following 3 key components of our F80, all developed and manufactured in our newly inaugurated building. One, the electric motors, the first to be developed, tested and manufactured entirely by us. Two, high-voltage battery module conceived for very high power density and adopting a patented carbon fiber housing system to save weight. And three, the front axle designed for high efficiency and incorporating 2 electric motors and inverters using silicon carbide transistor and integrated advanced decoding system. What I just mentioned the above underlines the progress that we are making in our electrification journey and our willingness to internalize core components. After the first Hybrid F1 car of 2009, LaFerrari of 2013 and our 6 hybrid models, F80 represents a key milestone in our electrification journey. And now after hours, amazingly beautiful and high-performance Ferrari, let's switch gears to client activities. Q3 has been also quarter reaching many unique experiences such as our presence in Pebble Beach where the T1 hosted mini classic seated new Ferraris, the [ Cavalilassic ], which attracted over 60 historic Ferraris and their owners to Italy, [indiscernible] region and Slovenia and the legacy tools dedicated to owners of the iconic 288 GTO and our first supercar. And Finali Mondiali, which saw the participation of more than 35,000 motor sports enthusiasts clients de force, sponsored suppliers and employees with their friends and families. Each event — each event has been a resounding success, bringing together our community to celebrate the Ferrari legacy and extraordinary experiences that we find our brand. These opportunities for our international community together offer a unique platform for enthusiasts to immerse themselves in the Ferrari experience. They foster connection and create a forgettable memories that resonate with the true essence of the [ pricing ] horse, a share repression and a strong sense of belonging. And [ Finali Mondiali ] is a good launch pad to our racing and lifestyle world. So let's start with the racing world. September 1 is a date that we will always remember because for the first time in Ferrari's history, we secured 2 victories in the 2 championship, WC and F1 in a single day as our Victory in Austin came just a few hours after our [indiscernible] with the Scuderia Ferrari HP (NYSE:HPQ). I was in Monza and I can tell you that you cannot describe those emotions. You can only leave them, and you will never forget. In Formula 1, the recent victories and the improvements in Austin and Mexico City have provided us with the boost we need to continue to fight in the last few races of the championship, always with the 4 wheels on the ground. The road till the hand of Abu Dhabi is we will make all we can to fight till the very last lap. Recent racing and sports car events, there have also been occasions to showcase our renewed lifestyle dimension. Among the many activities, let me highlight our last collection shown during the Milan Fashion Week, and that has been very, very well received. The strength of our brand is further demonstrated by the record attendance at our museums, 2 months in Q3, both so well above 100,000 visitors and year-to-date, we already passed the record of attendees over last year. And luckily, I want to mention another very important achievement of this quarter. Actually, it's a quantum leap toward our carbon neutrality target for 2030. We have switched off our 3 generation plant here in Maranello. We manage it to do this 3 months earlier than we had previously planned. This means we no longer use gas to produce [ electrical ] Maranello, replacing a significant proportion of our methane gas consumption with renewable energy sources. This will ensure us a 60, 60% annual reduction in Scope 1 and scope 2 CO2 emission compared to the 2021 base years. 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 and always keeping in mind the importance to be well grounded. And on this note, I hand over to Antonio to review the Q3 '24 financial results. Antonio?
Antonio Piccon: [Foreign Language], and good morning or afternoon to everyone joining us today. I start on Page 6 with a quick lands at the highlights of the third quarter. The quarter posted strong financial results aligned with our target once again affirming this year's main drivers, product mix and personalization. As previously communicated, volumes and mix also reflected our decision to facilitate the company's transition to a new ERP. In this respect, I want to take this opportunity to extend my thanks to all the colleagues [indiscernible] support company with this transition. In summary, shipments were 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 industrial free cash flow generation of more than EUR 350 million. Moving to Page 7. We review our shipments for the third quarter. The Purosangue, the Roma Spider and 296 GTS drove the deliveries in the quarter. We also commenced the first deliveries of the SF90 XX Spider and increased deliveries of SF90 XX Stradale. Allocations of the Daytona SP3 grew in the quarter compared to prior year, in line with our plans and slightly sequentially lower than in the second quarter. Shipments of the 812 Competizione A decreased and were approaching the end of its life cycle, while the 812 Competizione and the Roma phase out. As a result, the ivory share reached 55%, in line with product cadence and mainly driven by the tuning GTS. As usual, our product allocations across the different regions were consistent with the product cycle and the developments observed in each respective market. On Page 8, you can see the net revenue bridge, which shows a 7% growth versus prior year at constant currency. The increase in cars and spare parts was driven by the retail product and country mix as well as higher personalization. In the quarter, personalizations were approximately 20% of total revenues from cars and spare parts significantly supported by the Purosangue and the Daytona SP3. Sponsorship, commercial and brand increased, mainly thanks to new sponsorships related to our racing activities and largely driven by the new title sponsor with sponsorship with HP. Currency, net of hedges in place had a negative net impact mainly due to adverse dynamics of the U.S. dollar and Japanese yen versus the euro. Moving to Page 9. The change in adjusted EBIT is explained by the following variances: First, volume slightly negative, reflecting the lower deliveries. Second, mix and price, strongly positive, thanks to the enriched product mix sustained by the Daytona SP3 and the sale of 2, 499P Modificata, the increased contribution for personalization and a positive country mix mainly supported by Americas. Third, industrial and R&D expenses positively contributed to lower D&A in line with certain models phase out. SG&A increased and reflected the continuous initiatives in software and digital infrastructure, organizational development as well as brand investments. Other had a positive impact of EUR 14 million, thanks to the combined effect of new sponsorships and lower costs due to revised Formula 1 in-season ranking assumptions in line with current constructor standings. Lastly, the total net impact of currency was negative for EUR 8 million. The EBITDA margin was 38.8%, while the EBIT margin reached 28.4% and benefited from flattish E&A. Turning to Page 10. In the third quarter, our industrial free cash flow generation reached EUR 364 million, reflecting the increase in profitability, a positive contribution from net working capital provision and other primarily driven by the inventory reduction at quarter end, partially offset by increased capital expenditures in line with the pace of development of our product and the new infrastructure in Maranello and largely driven by the new [indiscernible] shop. Higher taxes due to a different cadence of balanced payments. At the end of September, the industrial debt position was EUR 246 million after share repurchase of EUR 147 million. Moving to Page 11. Thanks to increased visibility. We look at 2024 guidance with increased confidence on all metrics. To conclude, this quarter's strong financial results, the exceptional reception of the new Supercar F80, the high client attendance at our events and our fast order intake on the 12 [indiscernible] family along with a strong order book, all reinforce our confidence in executing our future plans with success. These achievements underscore the momentum we are building and our continued commitment to delivering value to our clients and stakeholders. I thank you for your attention, and I'll now turn the call over to Nicoletta.
Nicoletta Russo: Thank you, Antonio. Ravia. We are now ready to open the Q&A session. Thank you.
Operator: [Operator Instructions] And the questions come from the line of Thomas Besson from Kepler Cheuvreux. Hello, Thomas, you line is open, you may ask your question.
Thomas Besson: Sorry for that. It's Thomas. I have two, please. I'd like to start with the F80. Can you give us an idea what the time line for the first deliveries of this product and over which period or how many quarters do you intend to deliver it, given its substantial price point and likely contribution? That's my first question. And the second question, I'd like to come back on the mix gains in Q3. Could you discuss why it declined sequentially that much? Is it mainly due to sequentially lower internal shipments? Or is there something else that explains relatively low mix gains?
Benedetto Vigna: I'll take the first one. The second, Antonio will be more specific. So F80, we start deliveries Q4 '25, and we will go ahead for 2 to 3 years. So that's about F80 and the number of cars we will ship is 799. The second one about the mix? Yes, Antonio will comment.
Antonio Piccon: The sequential decline is due to the fact that the comparison with last year was based on the fact that both for Daytona SP3 and mix impact on personalization last year was already high in Q3.
Operator: We are now going to proceed with our next question. The questions come from the line of John Murphy from Bank of America.
John Murphy: Just a question as you look at sort of the upcoming product launches. I mean you got the F80, which is very impressive, the [ ailinjury ], I would imagine a successor to the ICONA, the Daytona, the [ Persona ] successor that will come in the next couple of years and the EV hypercar there's a lot at the high end here. It seems like it's very strong and will be well received. I mean how do you think about positioning all of this with your customers? And particularly, the F80 is we kind of look at it sort of somewhere between the ICONA's and the EV hypercar that's coming.
Benedetto Vigna: Look, the supercar, as we said, is coming as the pinnacle of technology and performance. As I said also during a few minutes ago, this represents 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 think that in F80, there are a couple of important messages. One, Ferrari is able to do in hybrid world as well in ICE world continues to be able to make with very high-level performances. Two, the road map — our product road map is such that there is a continuous between continuum between what we were doing in the past and what we are planning in the future. And I would say that this is a unique strength for our company, putting together the traditional innovation. So F80, we are learning something in manufacturing that will be very beneficial also not only for electric car of the future, but also for all other cars. So that is the importance of F80 in our road map.
John Murphy: Ben, maybe just a follow-up. If you think about the EV hypercar or supercar, however you want to use the terminology, will it be positioned above the F80 or adjacent to it or below it as far as?
Benedetto Vigna: I am very curious. I would be in your shoes, I would be equally curious. But we are a luxury company, and we want to keep the secret in the [ variability ] a little bit for the future. Let's say, Q3, we already did the F80. So let's wait a little bit, John. I understand you, but let's wait a little bit.
John Murphy: Okay. We love product. Just one follow-up. Is there the potential — there's a hyper focus right now in this quarter about volume declining, a lot of concerns in the luxury market. Looking at all this great product coming, but is it possible that you run this company with little to no volume growth and drive mix in [ Sricity ] to be even more Ferrari-like that would drive profits and margins higher in the future as opposed to needing volume growth? I mean I think there's this real concern in the short run here around the volume decline.
Benedetto Vigna: 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 dimensions. One is luxury and one is technology. And the second important point is that we always said we give a priority to the quality of revenues, not to the quantity. And this is also the way you have to read the evolution of our business plan. We don't want to push too much on the top line, but we won't and we always — as we always did and we plan to do, we want to give priority to the quality of the P&L.
Operator: We are now going to proceed with our next question. And the questions come from the line of George Galliers from Goldman Sachs.
George Galliers-Pratt: The first question I wanted to ask was just with respect to the guidance. Obviously, you stated that you're increasingly confident in it, but at the low end, and I'm sure you'll do better than the low end. The implied EBIT for Q4 would be about 400 million, so lower sequentially than 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? The second question I had was with respect to some of the residual value developments we're seeing in certain used markets. I think it's quite notable that low mileage relatively young 296s are actually trading at lower values than older [ FH tributes ] with higher mileage. Why do you think that is? And is that leading you to reconsider at all your pricing strategy or power strain strategy as we go forward.
Benedetto Vigna: So I take the second one on residual values and the first one, Antonio will elaborate. I would like to make — to clarify a few things here about residual value, okay? First of all, the dynamics are not the same in all the countries. You are right. There is 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 residual value. And we noticed that — let me say, when there is a degree of personalization that little bit too high. Well, the clear, the following buyer is not — in some cases, not willing to buy for personalization that please a lot the first buyers. So that's — I think the two things you have to keep in mind. Number one, the pattern is not the same all over the world. And two, it depends a little bit on the degree of personalization that the first buyers put on the Ferrari. And that the second one is not willing to pay for something you do not choose. So this is about residual value. Yes, the second one is.
Antonio Piccon: George, on the guidance, please not disregard the fact that the guidance uses the greater than language that is open upward, okay. Then in Q4, we are anyway planning higher deliveries of the Daytona SP3 compared to prior year, but sequentially lower than the previous quarters. While in Q4, we have incremental OpEx, particularly related to the rising activities and lifestyle and we are encompassing the expectation of persisting inflation and incremental D&A related to digital initiatives and life. So these are the main drivers for Q4. Even if you look at that, at the floor of the guidance end. But please do not disregard the language that we use on purpose.
Operator: We are now going to proceed with our next question. The questions come from the line of Adam Jonas from Morgan Stanley (NYSE:MS).
Adam Jonas: I want to follow up on the implied 4Q guide, but for industrial free cash flow, where your language says up to 950 million, which would imply 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. Didn't — Antonio, could you comment on maybe your outlook for a 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.
Antonio Piccon: Thank you, Adam, for this question. I think it's important to comment. The — I think I said already in the past few quarters this year will be particularly strong in terms of capital expenditure. And I also said that the spending is more linear compared to what we were previously used to. And this is essentially because our expenditure for the infrastructural development, including the rebuilding in the first part of the year and then the new [indiscernible] from the second quarter on is going to have an impact. So this is biting into the cash flow for the full year. The second element is obviously that in these conditions, I do not expect working capital to help generating significantly while we obviously have higher taxes in consideration of the higher results that we expect to achieve. Hope this helps.
Adam Jonas: It does Antonio. And just as a follow-up on SG&A, increased 2x faster than revenue this quarter. Again, you highlighted some of the reasons including the digital journey, ERP integration, et cetera. I just — any outlook on forward SG&A of how much further this temporarily — is this a temporary bulge in SG&A, which kind of reversed a multiyear decline in 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?
Antonio Piccon: No, there is an element, which is structural. The fact that with current accounting principle expenditure for digital infrastructure, particularly for software. And when we use cloud, it's going to be expensed to the P&L directly. So this is a change that occurred a couple of years ago already. And as we grow in this respect, with updating our digital infrastructure is going to be an addition to the SG&A spending that we are used to. Does that make sense?
Adam Jonas: Thanks Antonio.
Operator: We are now going to proceed with our next question. And the questions come from [ Zalando ] Monica Bosio from Intesa Saopaulo.
Monica Bosio: The first one is on the F80. Are you going to collect advances on the supercar, and if yes, when do you expect to account them? My second question is on the personalization rate, which was at 20% in the third quarter. I'm just curious, what is the average price increase embedded in your personalization compared to the previous year? And the third question is on the shipments. Obviously, you can allocate the shipments as you wish. It's a deliberate strategy. In China, shipments decreased a lot. I know that if it's below the 10%. But I'm just wondering if you can give us a flavor on the consumer lending or on the willingness to buy in China as of now. If you can give us any color or it could be the very helpful.
Benedetto Vigna: Okay. So I will take the third one, also because I was in China a few hours ago. And Antonio will navigate you through two other questions. First of all, I'd like to — I appreciate when you underline the liberate objective that we are using in our presentation, that's very, very important. Then coming specifically more to China, I think we have 2 different — we — I met all the 5 owners of the dealership that we have in China. And I can tell you that, let's say, in China, they agree that the growth in China of Ferrari must be done in the right way with the right pace in the sense 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 negative signal because the order book is still around 5 quarters. We have some areas that are a little bit stronger than others. I can tell you that in that region that is reported as Greater China, we have some different dynamics. One, it's going a little bit down, it is China. The other one is going up, that is the one. So if you see, we have different pattern over there. But clearly, I mean, we are — we see a traction of some model in China. And we have to make sure that we provide to the Chinese market, also the cars that are more fitting with their, let's say, the tax structure over there because the 12 Cylinders is not so well — it's a little bit not so cheap in China. It can cost up to 3x what the client will pay in Europe. So this is about China. The first 2 Antonio, F80.
Antonio Piccon: Monica. Yes. So on the F80 yes, we'll collect advances on the F80 and this will start in 2025. On personalization, 20% in Q3, the average price increase of personalizations that we applied for this year was in line with the inflation [indiscernible].
Operator: We are now going to proceed with our next question. And the questions come from the line of Michael Binetti from Evercore.
Michael Binetti: I guess with Daytona moving into the later part of its life cycle over the next few quarters, if I assume, make some assumptions around how many units left to sell and generally spread those out 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, you'll have Daytona as a lower impact the all-important average selling price per car before you start to shift the F80 in the fourth quarter. I'm wondering how you would tell us to think that you guys will strategically approach fighting that net revenues per car compression in the first half of next year with those dynamics. And then the 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.
Benedetto Vigna: I'll take the second, the first one, Antonio. So look, what we have been doing what we said since the beginning, we intend in our plan call it electrification, [ acidization ], combustion engine is in line with our plan. So you can use different objectives, but what we are doing is in line with our plan.
Antonio Piccon: On the first one, you're right. The Daytona is going to decelerate until, say, the third quarter of next year, more less than what we could expect as of now. In terms of development of mix, though, it also depends on the range cars and the specials that we have. In Q3, you've seen a few initial units of the excess [ FX ] starting. This will grow and [indiscernible] will be added to the [indiscernible]. So overall, the mix will be less dependent on the Daytona and a bit more diversified in terms of the product offering.
Operator: We are now going to proceed with our next question. And the questions come from the line of Tom Narayan from RBC.
Gautam Narayan: The first one is just keeping one. The ERP volume impacts, just confirming that was pretty much done in Q3 and won't happen in Q4. And then did you guys disclose how many Daytona's were delivered in Q3? And then my second question is a follow-up to George's question on residual values. The one that comes up a lot is Purosangue. Obviously, it's probably too early to tell. But the fear here, obviously, is that it's a very different type of vehicle. May be used for different purposes, more kind of utility as opposed to what other Ferrari's are used for. So that potentially could impact the residual value. I'm sure it's something you'd consider. Just love to hear any thoughts you have on how you plan to maintain the residual value of Purosangue?
Benedetto Vigna: Tom, thank you. I take 1 and 3, and Antonio will take the second. So ERP transition has been concluded. So there is no impact in Q4. And by the way, you may remember that in the previous call, Antonio said that we anticipated some shipments just to make sure that the transition would have been a little — I mean [indiscernible]. This was done always within the 3 months of Q3. When it comes to residual value, if I take the Purosangue observation is right. That what we see is that some clients are using the Purosangue with more than other cash. And I think that this is sitting also with, if you want, the regional position of the car 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 more increased mileage of the Purosangue. On the other side, we see that the demand on the Purosangue is very, very strong, keeps very strong. And I can tell you that we receive more or less a daily request of people from all over the world that want to have fun with our Purosangue. The second is.
Antonio Piccon: Yes, I think the only one remaining is the [indiscernible] Daytona in Q3, 2 units less in the previous quarter. so around 70, but I mean it's not the specific number that matters, as I said, it all depends also on the mix and Q3 was particularly heavy in terms of the entry levels of our range cars.
Operator: We are now going to proceed with our next question. And it comes from the line of Henning Cosman from Barclays (LON:BARC).
Henning Cosman: Perhaps the first one for Antonio. I'm still trying to reconcile Antonio that's deliberately softer language with respect to the third quarter. I think by it's been a pretty strong quarter in terms of margin, in terms of mix. So I suppose I'm trying to get to what that implies for Q4. I mean some of my colleagues have asked this already, but any more color you can give us on did it actually better than you expect? Does this still determine a 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?
Antonio Piccon: If I can, just on this one, and I don't know if you have other, but maybe you [indiscernible] the table of the question. I started explaining already in Q2 that in terms of unit Q3 would have been software. And this is because with ERP, you basically remain with your production and delivery stopped for some weeks. So in order to ease the transition, we decided to sell some units more in the previous quarter and some less in Q3. Does it matter overall? Honestly, no. Obviously, we are in also the mix in order to have the quarter sufficiently strong overall from a revenue and margin perspective. It was just flagged because if you look at the units, you see that those are lower than last year. But the units are in no way related to demand or whatever that is rather as common in few reports, okay? So a deliberate decision.
Henning Cosman: Okay. And maybe one for Benedetto perhaps both of you, but just because Benedetto said it in his opening remarks, that you are executing in line with the trajectory. Now I think it's the first time we have the opportunity to speak to you again after the F80 release and at least compared to my expectations, the economics seem to be even stronger and obviously, '26 is going to be a year where you already take a lot of advantage of that vehicle. So in the context of the targets and '24 already being in the end of the '26 range, is sort of put a bit more color around that, again, to what extent that is now, in fact, well ahead of planned trajectory? Or in what way you would say this is still in line with factory or at what point you may be considering to update us around these things?
Benedetto Vigna: Thank you, Henning. It's a good question. Yes, for sure, let me say, when we did the Capital Market Day in June 22, we were not expecting such high level of personalization, especially on something, the carbon finish that was — that is, let's say, high appreciated by the client on one side and also, let me say, a good personalization option for us to sell. So in that sense, if you want, the bigger difference between what we planned and what we have seen is this one. Now for us, to give a longer-term — a long-term view of where the company is heading in the next years. Well, H2 next year, we will have the Capital Market Day, and we will update all of you. But clearly, you hear me always thanking the team as well as the client because all this has been possible, thanks to the personalization that the clients have been willing to take from us.
Operator: We are now going to proceed with our next question. The questions come from the line of Stephen Reitman from Bernstein.
Stephen Reitman: A question about the F80 and sort of like the special cars that you can do. We heard that when — on the 17th of October, we heard that demand for the F80 have been about 3x the level that you're actually going to be delivering. So strong demand from your best customers and you can only satisfy a certain number of them. We also know that with the factory. The idea is not to increase the absolute level of production capacity, but give you more flexibility. And it strikes me that the timescale that you're producing F80 is going to be quite small in to bit years maybe to deliver 799 cars. Does the building give you — is it because the building gives you more flexibility to do these kind of complex cars and what does that say about your ability to make other kind of vehicles like this in the future? My second question is about the battery warranty that you're going to be — that you're introducing on the hybrids, plug-in hypers and obviously the BEV as well. Can you update us on what the take-up has been on this so far? Has it already been rolled out?
Antonio Piccon: Thank you, Stephen. Benedetto, I will take the 2 points. So F80, as I said, is an important milestone for our electrification journey because for the first time in our history, we are going to do internal — some component for all our electrification journey. As of today, if you look at our hybrid cash, where we are buying from outside, some components while for F80, the key component, the axle, the motors as well as the battery will be done in our e-building. In the e-building, you said it well, is not meant to increase the capacity but it is meant to increase the technology flexibility because we want to leave the ultimate choice of the motorization of the profession to the client. So I think this is very important. This goes end in end with our strategy to push to keep alive the 3 platforms, the ICE, the hybrid and to add the electric. Because Stephen, for us, it's not electric transition, for us, it's electric addition we want to add also the electric platform. And the e-building is the tool that will allow us to master to give this flexibility and to leave the ultimate choice to our clients. So this is about, let's say, the F80 and about our electrification journey. The second question was about the battery warranty. Well, we can tell you in this way that the people are always worried about something I don't know. And the battery is something that usually people don't know yet with the same level of death like any other component of the cash. We wanted and with this warranty that we started in July, we want to give the peace of mind to the client. 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, there was with people in China as well as people 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 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 I think this was a good — they appreciate because they — we listen to them. So this is good. But we can provide more data in the next quarters.
Operator: We are now going to proceed with our next question. The questions come from the line of Anthony Dick from ODDO BHF.
Anthony Dick: So just some follow-ups on the shipments and the mix. I know shipment is not the main criteria, but 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? Or is Q2 at the kind of new normal here? And then on the mix, you mentioned the lower mix on the Series Cars [indiscernible] with more entry models. How do you think about this for Q4? And also, how do you think about data owner [ SB3 ] deliveries in Q4, should we still remain above the 60 unit run rate? Or is that normalizing from next quarter? And then maybe just the last one on China. So obviously, the market is a bit different here. I was just wondering if the current level of volumes for you is acceptable in China? Do you think supply and demand are well adjusted for you? Or could you see further downside in the quarters to come?
Benedetto Vigna: I take the third one, Anthony, I'll leave the first and the second to Antonio. I believe that the level of volumes, it is acceptable, okay? And let's say, this is something that we've been discussing in detail with the dealers. So we don't see any strange pattern over there for the future?
Antonio Piccon: On Q1, When we expect Q4 — Q4 units delivered to be higher than last year and most likely lower than the previous quarter of this year. And on Q4, the Daytona deliveries, those will be lower, in line with what we commented about in the previous answer given to one of your colleagues. Will be anyway higher than last year to Daytona.
Operator: We are now going to proceed with our next question. And the questions come from the line of Michael Tyndall from HSBC.
Michael Tyndall: Just two, if I may. The first one is just related to the F1 provision release. I just wonder if you can 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. I'm guessing when you did the new ERP system, there was a cost benefit analysis. Can you talk a bit about the benefits? I mean, I'm wondering perhaps what it means for working capital and what's the positive side of this ERP story?
Benedetto Vigna: I take the second one and the first for F1 Antonio will give an answer. Well, I think, Michael, we had a true ERP system in the company. And when you had to pass the data from production — sorry, from sales to production, there was a little bit too much and the workload. So we will find for sure, some efficiencies in SG&A because, believe me, there were 2 systems, not talking the same language. So we expect some efficiencies. And one of the reasons why it took some weeks, several weeks to fix it is because, really, we were talking about 2 different generation of ERP with 2 different languages. The second question so the question is.
Antonio Piccon: Formula 1 on provisioning. It's around EUR 10 million, the impact. So it's not huge.
Operator: We are now going to proceed with our last question. And the questions come from the line of Daniel Schwarz from Stifel.
Daniel Schwarz: One is on potential tariffs. If the U.S. would impose a 20% import tariff and the client already out the car, I assume the 20% would be need to be fully paid by the customers. I guess — I guess that's difficult to say, but do you expect any impact on the order book? Maybe you're prepared to reallocate some products to other regions. And the second question is on R&D accounting. So in Q3, amortization declined and capitalization increased with a positive impact on earnings. Based on your launch schedule, you expect this to reverse or to continue in coming quarters?
Antonio Piccon: The first one is still difficult to say. [indiscernible] on the dimension of the tariff increase, whether it's an impact on the order book now and how this can be shared among the various parties in the in the game. On the capitalization rate increase, I think we commented already several times. This very much depends on the fact that expenses for innovation in Formula 1 are rather flattish during the year with some seasonality in specific quarters. And while most of our the expenditure now is on development of new products. So it's quite normal that we have a capitalization rate that is going to grow. Does it help?
Daniel Schwarz: Yes. Yes. Thank you.
Operator: We will now end the question-and-answer session here. I will now hand back to Benedetto Vigna for closing remarks.
Benedetto Vigna: Thank you for your time today and also for all your questions. This strong Q3 result and the continuous progress in our journey, provide us with further confidence for the development of the years and the futures. If you were here, I would invite you to take the cake of for Antonio birthday. On the cake, it's written greater than. And then I wish you a good afternoon, good morning, and thanks again for your attention.
Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.
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