Ferrari NV (RACE) 2016 Q2 法說會逐字稿

Good day and welcome to the Ferrari 2016 second-quarter results conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Nicoletta Russo, Head of Investor Relations. Please go ahead.

Thank you, Arly, and good day to everyone on the call. There is one topic that we plan to cover today: The Group's second-quarter and first-half 2016 financial results. In light of this, the call is expected to last around 45 minutes. All relevant materials are available on the Ferrari investor relations website.

Today's call will be offered by the Group's Chairman and CEO, Sergio Marchionne; and Alessandro Gili, the Group's Chief Financial Officer. At the end of the presentation, they 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 second-quarter 2016 results presentation, and the call will be governed by this language. With that, I would like to turn the call over to Mr. Marchionne.

Thank you very much. I'm going to be doing the least amount of lifting on this call today. I will get Alessandro to take you through the numbers.

I would just like to make three points, before we start the first one. And then obviously, we will take questions at the end. The first one is, as the headline says, it is a record quarter. I think we are quite satisfied with the progress that we are making with Ferrari, I think we're totally in line with the forecast that we have for this business going forward. We continue to focus on a couple of objectives. One of them obviously is producing and getting to about EUR1 billion worth of EBITDA as quickly as we can, and obviously two, reducing our debt levels as quickly as we can.

I have no negative news to give you about the quarter itself, in the sense that I think the order books are quite strong. They continue to reflect the strength of the brand. But more importantly, I think the strength of the product offering that we have in the marketplace. And so, and the indications that we have given for 2016 are minimum conditions that we think we can get to. We will see at the end of the third quarter how far it will take us.

The third quarter is a bit of an anomalous quarter because of the fact that we have the summer shutdown, although there will be, obviously, a number of products that will be hitting our dealers, and that have been shipped out of here during that period of time. But more important for us is the trajectory that the Company is on, consistent with all of the forecasts that we have given you in the past. And I think that we're looking forward to a phenomenal 2016.

The other thing is -- one of the things that have come up from our discussions in the past has been what happens technically, technologically now for Ferrari going forward? We have spent some pretty intense periods of time here over the last 90 days, to try and delineate the future of Ferrari from a product standpoint. I think we have made great progress in terms of getting our thinking straight about both engine development, the impact of hybrid technology on these cars, the way in which we will be presenting them in terms of architectural choices going forward.

This is ongoing work. It will be the single largest challenge that we have on the GT side of the House. And it is something that we will hopefully be able to talk about -- at least in terms of concept, within 2017, as we celebrate the 70th anniversary of the House. And we will expect there will be some car that will come out of the process there between 2018 and 2019. But I think the important thing is that the next phase of the development of the house is under development, which all indications are that we will continue -- we will be able to continue this process of technological innovation, which has been at the heart of our House here since it was some founded 69 years ago.

I cannot avoid talking about Formula 1. I think it is an issue that has certainly been -- from a journalistic standpoint, it has been front and center, it is a matter of phenomenal attention from both our fans, and internally inside Ferrari. If I told you that I was happy with the development of the Scuderia over the last few months -- and certainly in terms of the 2016 season development, I would be lying. I think there were a number of changes that were made. Some rather senior leadership changes that were made, last week we have made some more in terms of the organizational structure of the Scuderia over the weekend. I think we are in the process now reconstituting the technical team to drive both the completion of the 2016 car and to drive the development of the 2017 vehicle, which as you well know, reflects the change in the rules and the regulations that govern the sport.

Regardless of the amount of work that needs to go on now, in terms of realigning processes and flattening the organization, which is consistent with the management style that I have embraced for a number of years now, I think I can only give you the comfort of telling you that I think we are, as one would expect, we are the repository of a huge amount of talent inside this House. I have found, and I have been speaking to a lot of people, both from the technical side of GT and from the Formula 1 teams, I have found phenomenal talent inside the House. I think it is important for us to leverage their know-how, to leverage that talent pool, and that is what we are doing.

I think that a lot of the aspersions that you see in the press about the quality of our leaders are misplaced. I think the fact that we were in need of a transfusion of intelligence, of technical intelligence from the outside is completely overdone. I think we have made a decision to develop our, both the 2016 and the 2017 car, based on our own skills and our own talents on the inside. We have sufficient depth to accomplish that task.

I look forward to a more successful last portion of the season in 2016. And certainly, a basis on which the 2017 car can start its life in the early part of next year on a much stronger basis than it has today. On that note, I would like to pass it to Alessandro, he will take you through the details, obviously we will be able to answer questions as we go.

Thank you, Mr. Marchionne. Good afternoon everyone. And thank you for listening in on the call.

Moving onto page 3, our shipments grew to 2,214 units, showing an increase of 8%, or 155 units, led by the solid performance of new models, the 488 GTB, 488 Spider, and the F12 Tour de France, partially offset by LaFerrari that finished its limited series run. Group net revenues reached EUR811 million, up 5.9%, or 6.2% at constant currencies. Adjusted EBIT reached EUR156 million, with a margin increase of 310 basis points. Our net profit for the group adjusted for the charges related to the Takata worldwide airbag inflator recalls, was up 35%, to EUR104 million. This is a record quarter in the history of Ferrari.

Finally at the end of June, 2016, our net industrial debt was EUR763 million, better than March, 2016. On July 5, Ferrari unveiled the first images of the open top LaFerrari, the new limited edition special series, whose details will be provided at the Paris International Motor Show later this year. On July 7, Ferrari with Luxottica Group announced the signing of a sponsorship agreement for the Ray-Ban brand to appear on our Formula 1 cars.

And we are confirming our full-year guidance as follows: Shipments at approximately 8,000 units including our supercars. Net revenues greater than EUR3 billion, adjusted EBITDA greater or equal to EUR800 million, and net industrial debt lower or equal to EUR730 million.

Moving onto page 4, we show our operating highlights for the second quarter of 2016. Our shipments reached 2,214 units, showing an increase of 8%, or 155 units, mainly led by V8 models, which were up 16%, thanks to the continued strong sales of the two newly-launched models, the 488 GTB and the 488 Spider.

On the other side, V12 models were down 22%, due to the F12berlinetta being in its fifth year of commercialization and the phase out of the FF and LaFerrari that finished its limited series run. The V12 decrease was partially offset by the F12 Tour de France now reaching global coverage. We remind you that the GTC4Lusso will commence distribution in the third quarter of this year.

Net revenues were up 5.9%, 6.2% at constant currencies, with all revenue lines positively contributing. In particular, cars and spare parts posted an increase of approximately 2%, mainly driven by volumes, along with positive contribution from our personalization programs, partially offset by mix and by lower sales of LaFerrari that finished its limited series run. Our adjusted EBITDA improved by 12%, topping EUR217 million, and the result was primarily driven by higher volumes, followed by a positive contribution from sponsorship, commercial, and brand, as well as other supporting activities.

Adjusted EBIT for the group showed a strong 26% increase, reaching EUR156 million, resulting in a margin expansion of 310 basis points. And the adjusted EBIT improvement benefited from the various variables, and a more detailed explanation will be given when commenting page 7. Both adjusted EBIT and adjusted EBITDA excludes the charges of the EUR10 million due to the worldwide Takata airbag inflator recalls.

Q2 2016 industrial free cash flow generation was primarily driven by a strong increase in cash flow from operating activities, including a positive change in working capital and timing effects of advances on the new open-top LaFerrari, partially offset by CapEx and the first 2016 tax advance.

Let me remind you that Q2 2015 industrial free cash flow included a EUR160 million one-time cash inflow related to the final reimbursement by Maserati of its inventory in China. Excluding that one item, the industrial free cash flow in Q2 2015 would have been EUR173 million. Net industrial debt at June 30, 2016 was reduced to EUR763 million, primarily due to industrial free cash flow generation, partially offset by EUR87 million cash distribution to holders of common shares, and EUR13 million dividends paid to NCI.

Moving to page 5, in terms of geographical distribution, EMEA and greater China enjoyed a sound year-over-year growth, with shipments increasing respectively by approximately 14%, and more than 25%, mainly driven by the 488 family and the F12 Tour de France shipments. America posted a slight improvement, whereas rest of Asia-Pacific remained in line with prior year due to the late arrival of the 488 Spider and the F12 Tour de France.

As a reminder, we are now phasing out the FF, and we will begin shipments of the GTC4Lusso in Q3 2016. In addition to this, the F12berlinetta at its fifth year of commercialization continues to perform better than expected. At the end of June, the region Americas was up approximately 0.5%.

In the US is in particular, the positive performance was driven by the 488 GTB, the 488 Spider, and the California T, and the F12 Tour de France. Offsetting the F12berlinetta in its fifth year of commercialization and LaFerrari, that finished its limited series run. During 2016, we completed the deliveries of the F60 America, which is a strictly limited edition.

EMEA increased by approximately 14%. The UK, Ferrari's largest market in EMEA, posted shipments in line with previous years, due to the timing of the 488 Spider having just arrived on the market. The region recorded robust deliveries of the 488 GTB and F12 Tour de France, more than offsetting the phase out of the 458 family and the FF. Strong performances were recorded in Italy, plus 23%, and in Germany, plus 26%, thanks to the 488 family and the F12 Tour de France. Other European countries, Africa and Middle East, expanded at double digits.

Greater China increased by more than 25%. China mainland in particular, shipments grew at double-digit rate, thanks to the success of the 488 family and the F12 Tour de France having just arrived on the market. Hong Kong and Taiwan experienced higher volumes, led by both V8 and V12 models, more than offsetting the phase out of the 458 family and the FF.

Rest of Asia-Pacific posted shipments in line with previous year. Japan was unchanged compared to previous year with 488 family and California T offsetting the 458 family phase out. Same trend was noticed on the V12 models, with the F12 Tour de France offsetting the FF phase out.

Australia shipments were affected by timing, with the 488 Spider and the F12 Tour de France having just arrived on the market, and the 488 GTB only partially offsetting the 458 family phase out. And other Asia-Pacific increased double-digit, driven by the V8 models.

Moving to page 6, our net revenues reached in EUR811 million, up 5.9% versus Q2 of last year, with all revenue lines positively contributing. At constant currencies, net revenues would have increased by 6.2%.

Cars and spare parts revenues posted an increase of EUR10 million to EUR589 million, mainly due to higher volumes along with increased positive contribution from our personalization programs. Higher revenues were led by the 488 family, both 488 GTB and 488 Spider, the F12 Tour de France, and the non-registered car FXX K, as well as the limited edition F60 America.

Engine revenues generated EUR71 million, up EUR14 million or 24% versus prior year. The solid growth was mainly due to greater rental revenues from other Formula 1 teams, and please let me remind you that during 2016, the F1 season, we are renting our engines to three teams versus two teams in 2015. Maserati engines and revenues were in line with previous year. Sponsorship commercial and brand rec revenues reached EUR117 million for Q2 2016, with an increase of EUR14 million or 14% compared to prior year, mainly due to better championship ranking, as well as greater sponsorship revenues, and positive contribution from brand related activities.

Moving to page 7, you can see that year-over-year changes in adjusted EBIT main items, volumes were up EUR24 million, thanks to an increase of approximately 230 units, excluding LaFerrari, mainly due to newly launched 488 GTB, 488 Spider and the F12 Tour de France, along with a positive contribution from our personalization programs. Mix was negatively impacted by LaFerrari, that finished its limited series run, and V8 slightly higher compared to the previous year. This was partially offset by deliveries of the non-registered car FXX K and final shipments of the limited edition F60 America.

Industrial cost and R&D cost posted EUR11 million decrease, mainly due to lower G&A for the 458 family and LaFerrari phasing out, coupled with positive contribution from industrial cost savings, partially offset by F1 costs. SG&A costs are in line with prior year as a result of new stores opening, new model launches, and corporate cost offset by lower bad debt in Q2 2015.

Impact of transaction exchange rate net of hedging is positive on margin, due to the US dollar strengthening against euro, only partially offset by weaker GBP. And other was up EUR14 million thanks to sponsorship, commercial and brand, as well as other supporting activities. As a result of all of the above, Q2 2016 adjusted EBIT was up 26% to EUR156 million, and adjusted EBIT margin expanded by 310 basis points, reaching 19.3%. Excluding FX hedges, it would have been 21.5%, versus 20.5%, for prior-year on a comparative basis.

Moving to page 8, net industrial debt at the end of June was equal to EUR763 million, better than March 31, 2016, due to the strong industrial free cash flow generation, which was partially offset by EUR87 million cash distribution to holders of common shares and EUR13 million dividends paid to our NCI. The positive industrial free cash flow generation was primarily attributable to the strong adjusted EBITDA, positive change in net working capital, and timing effect of advances on the new open top LaFerrari. All of that was partially offset by the first 2016 tax advance, and by CapEx. CapEx was EUR90 million, driven by R&D and product investments, in connection with our continuous product range renewal.

And to close, on July 5, we unveiled the first images of the new limited edition special series open top LaFerrari, already fully pre-sold. Details will be provided at the Paris International Motor Show later this year. From page 12, we are providing as usual certain slides on our brand activities, as well as the events that Ferrari has organized to engage its customers.

To close, on page 13, we are confirming our 2016 outlook. We expect shipments at approximately 8,000 units including supercars, net revenues greater than EUR3 billion, adjusted EBITDA equal to or greater than EUR800 million, and net industrial debt lower or equal to EUR730 million. Having said that, I'm handing over to Mr. Marchionne for any final remarks.

None. I think we will just take questions.

(Operator Instructions)

John Murphy, Bank of America Merrill Lynch.

Just a first question on the LaFerrari open top or Spider. I'm just curious if you can give us a gauge on timing of launch and possibly the volume targets or limits, if you will.

First production, second half of this year, completion in 2017.

And volume?

No.

Okay. You can't blame me for trying. Just also curious on the order backlog, given all of the unrest and volatility we have seen in the world, Europe and some of the stuff happening here in the US. If anything changed in your order back log, as far as units or mix?

Absolutely nothing. It has been a non-event. Even the Brexit issue, which we watched very, very carefully, has not caused a dent in our numbers.

We're going to have to watch until this things plays out completely. Based on what we know today, there is certainly no significant deterioration, actually there is no deterioration in the order book. And there has been no increase in cancellation orders. There has been no distortion in demand.

Look, it certainly is part of our duty here as we update you quarterly on these numbers, just to give you indications of softening conditions. We don't see any.

It reflects -- I hate to sound like an old lady that keeps on repeating herself. But it reflects the strength of the brand. It is just not -- it hasn't been, in fact we saw this back in 2008 and the 2009 crisis, the fact as long as we are not really severely damaged, even though there was the rest of the so-called auto industry had gone through upheavals. This business that weathered the storm quite well, so that is it.

Okay. And then on personalization in the quarter, obviously that was a positive. I'm curious if you can give us a percentage uptake in pricing.

I know you have talked about that in the past. I'm just curious what the penetration in uptake on price was for personalization in the quarter and where you see that going.

I don't know whether Alessandro is going to tell you that, but I'm going to leave it to him.

I think we have provided it in the past, it is higher than 16%, in contribution to our top line revenues.

And then just lastly Sergio, you mentioned something about hybrid technology a little more clearly than you have in the past, being a little more mainstream in your product line up. Is that the technology you believe we are going to be seeing in the powertrain, sometimes in 2018, 2019, in 2020 for the broader product portfolio for Ferrari?

Absolutely. I don't think it is avoidable. I think that we might as well make it truly Ferrari. That is the whole objective here, is to make it so unique that it cannot be emulated, regardless of what you hear from Elon Musk, whom I love dearly as a friend.

But I think Ferrari needs to put its thumbprint on the technology. That is what it is doing. So stay tuned.

Great, thank you very much.

Martino De Ambroggi, Equita.

Two questions on the guidance. First, actually on the adjusted EBIT bridge for the second quarter. There is variable, defined as other, representing the EUR14 million of improvement in the quarter.

You are specifying now the composition of this variable. But should we expect a similar trend going forward for this item? If it is possible to elaborate a little bit more, first?

Second, adding decapitalization, the balance is a portion of the EUR11 million of improvement in cost of R&D. And the third is on the full-year guidance. Because assuming the floor of your EBITDA guidance, basically, the improvement is EUR50 million. If I remember correctly, EUR50 million is also the ForEx effect that you have for the full year, which is essentially recorded in the second half. Am I right?

Except for the last one, you are correct on the EUR50 million we provided in the past, so it's included in the guidance.

It's mainly or totally in the second half?

It's basically totally in the second half. You have seen the combination of Q1 and Q2 is a flip number.

Okay.

And on other, I think we are including all the other businesses, technically. So sponsorship, commercial, and branch, just to give you some flavor. Obviously, brand revenues are growing, and obviously, there's contribution there in terms of profitability, since we are operating with some new stores, sponsorship is growing higher than last year. We have some new sponsors.

These always exclude, for the quarter, the new sponsorship agreement with Ray-Ban, which is going to be in Q3 and Q4 obviously. And the other positive impact obviously is related to our engines and that are rented to other Formula 1 teams, and partially to Maserati. It was very small in this quarter.

As well we have some conservation from Ferrari Financial Services activities. So the -- contribution for all of the other activities of the quarter.

Jus t to finish off the discussion on the engine rental business, after months of diatribe and discussion within the F1 Strategy Commission, we now agree that the three major houses, perhaps four if Honda joins the group, will be the main providers of engine solutions to the grid. And so, the future of that business is relatively guaranteed.

Quantums have come down in terms of rental charges for the engines, but I think you will stabilize this pre-opportunistic approach that people have taken, in terms of providing engine solutions. So it will become a stable part of the business going forward, because the commitment to provide engines to the rest of the grid is actually equally shared amongst the engine manufacturers.

And on your last question, Martino, on the D&A, industrial calls to the NR and DR program, because of D&A impact, which is lower this quarter than last year. I think we have commented multiple times that we did a full 458 phase out in LaFerrari, in particular phasing out. Now we are facing the D&A, which is lower than Q2 2015.

So this is not particularly related to R&D capitalized.

No, not technically, not.

Thank you.

Monica Bosio, Banca IMI.

I would have a few questions. The first one is, if you can, can you tell me a little bit more on the American performance, which was slipped. Is it because of the phase out of the limited edition F60 America? Or maybe there was something else -- because I was quite surprised about the American performance, on one side. And I was particularly positively surprised about the greater China.

So I was wondering if you can comment a little bit more. Also on the back of the new annual wealth report from Capgemini, which reported higher from Asia-Pacific than America. It's the first time that I've seen this figure since the last 10 years.

Second question is on customization. If I understood well, customization and personalization are now above 16% top line, is hitting the target for the full year? Or maybe for the full year, it could be higher.

And the long-term my estimated account, 20%. But as things are, I believe that maybe there is room for 25%. Am I right?

And the last question is on the recall on the Takata airbags. Just to check, do you have accounted all of the expected recall costs in the second quarter? Thank you very much.

Let me try and deal with some of your questions, and I'll leave Alessandro to answer the more technical thing about whether we are talking about with CapEx and R&D stuff.

The recall issue, obviously, we have booked everything we know, that needs to be recalled. I think that the notes have been relatively clear about the purpose for the recall. This is a relatively large issue for the wider auto industry. You saw the BMW numbers come out, and they booked a provision today, SCA booked one last week.

It is a process which is unfolding, I think. The provision that we have taken reflects what we know needs to be repaired. And I think we will take it from here. But I'm not aware of any additional charges that need to be taken at this point in time.

And terms of your comments about the high net worth population shifting from the rest of the world or the Americas onto a APAC, I think it was an expected transition. I would just remind you that the wider population of people that are out there -- we only sell 8,000 cars a year. So our ability and our penetration rate into that population is miniscule compared to the size of the population itself. And it is only encouraging to us, in terms of the potential reach of this brand and how quickly we could grow to try to cover this growing population of people who have the means to be able to afford our products.

Your comments about North America -- I'm not surprised that North America has flat lined not moved substantially year-over-year. It is really a question of product flow. Alessandro talked about the fact that the FF has come out, and we've produced the GTC4Lusso.

Beginning in the second semester, you will see numbers restore. There was certainly an expectation that the FF would come out of service within 2016 and that's impacted numbers. The F12, as Alessandro mentioned, is in the fifth year of its life.

These are not surprising developments. I would read nothing into it. As a matter of fact, I can only confirm the strength of the order book in the Americas, simply based on the value of the 488, both the convertible and the hardtop. You will see in America, numbers come out of the US this morning. Although most of the majors were down, the market continues to show significant strength. I'm not worried at all.

Okay, thank you very much.

Thomas Besson, Kepler.

I have three quick questions. The first one, I would like to check with that the CapEx figure for the second quarter was only -- EUR32 million, approximately EUR61 million for depreciation. Is that correct?

You are talking about the gross CapEx for the quarter -- was actually EUR90 million.

Okay. Thank you. Can I check with you, the long-term goal is still 9,000 to 10,000 vehicles, or do you think that there is potentially room at one point to go beyond that?

I think we will stick to the forecast that we have given you in the past. There is no momentous change. I think we need to grow this brand. In total consistent parallel fashion with the growth of the market.

Let's not aspire to be something that we have never been. We just won't.

I go back to what Monica mentioned earlier in her remarks. The potentially available population of customers to Ferrari, is a growing population. And it is global. I think that we have the global footprint in terms of distribution to service that customer base. I think that is important for us to move forward. I think it is a key element in the development of our portfolio.

I think we need to be able to treat these products to relevant market conditions. I think we have done a number of things here, and you will see, hopefully as we keep revealing these products, that we have understood that requirement. And I think you will see numbers growing accordingly.

Somebody asked the question, and the consistent question is -- what are we doing on pricing? I think the short answer is that we are doing everything we can. And we have started moving price on some of our vehicles now.

We have done it in an intelligent way, to make sure we give advanced warning to our customers. So it will some time to work its way through. The pricing actions are in place and we will continue to take them as we see opportunity arise.

Thank you very much.

Ryan Brinkman, JPMorgan.

I'm looking at SG&A, in Q2, it was flat. You discussed some moving pieces in the footnotes on page 7, store openings, model launches, corporate costs this year, bad debt last year. How would you say SG&A is tracking on an underlying basis.

And generally, when you strip away some of these more one-time items, do you expect SG&A leverage on higher shipments going forward? Or should it move more in conjunction with volume?

As an absolute number you won't, with leverage as a percentage of total revenue you will. It will take some time as we grow the base.

This is not a high spending environment, to be honest. I'm still using chairs from 1952 in my office. It's not as if -- we're treating our customers much better then we are treating ourselves to be honest.

Great, thank you. And just last question. Cadence of engine volume, how might that progress throughout the year as the Levante is launching? Thanks.

Look, we have had to put on an additional shift to try and deal with the demand. So the indications from the Levante are quite good. When I spoke to the other side of myself, and I checked the order book on Levante, the Levante order book was quite strong.

I think we're waiting for US introduction to happen in the third quarter of this year. So I think it will be fine. And I think, to the extent that we have added on the third shift here is because of the fact that we see this as being a permanent condition.

Massimo Vecchio, Mediobanca.

My first question is a follow-up on Brexit. The fact that Aston Martin and Maclaren are UK-based. Do you see it as an issue in terms of pricing for your segment? Or the elasticity of your customer base is such that it's not a problem for you?

No.

Okay. Second question is on the guidance. Can you share with us a little bit of granularity, how much conservatism is in the guidance? And how much is probably global risk raising worldwide, or any other factor which we are not seeing?

Mr. Vecchio, I have already gone beyond my normal level of conservatism. I told you that we consider this to be minimum points. If I had a better view, I would have given it to you. Wait until the year unfolds.

Okay, got it. The last question, tax cash out, how can we expect the total number in 2016 and the timing of that, because this is a bit confusing.

You need to consider in the second half, I think we have commented in the past, we will have the second advance on taxes, as well as the payment on the balance of 2015 taxes. Therefore, the free cash flow generation is going to be in line with the guidance that we provided of the net industrial debt. And the second half obviously will have a positive contribution on free cash.

Alessandro has beaten this horse dead into the ground over and over again, because 2016 is an anomalous year. It's a catch-up of 2015 and a clean out of 2016. Once we go through this year, I think we're getting into a regular cycle, and you won't have a problem understanding the cash flow. It is a transition year.

It will be entirely in the third quarter, or you're able to split in some way on the fourth?

The payment of the taxes will be mostly fourth quarter.

Fourth quarter. All right. Thank you very much.

George Galliers, Evercore.

My question was with regards to special models. Clearly, in the wake of the LaFerrari Open, and I think also in Venice, those attending were shown a plan for another 350 special models around the 70th anniversary. Did you see any saturation point with regard to special models? Do you think the strength of the Ferrari brand is so much that for example, you could produce and sell 1,000 every year without any kind of saturation of the market?

I think 1,000 every year is an absolute exaggeration. I think it actually is contrary to the notion of a special series. I can only tell you that -- if I had to appease all the customers who had written to me on both LaFerrari and the open edition of LaFerrari, the one that's going to be unveiled in the fall auto show, then I think you would be -- we would be well above any of the numbers that we have talked about as being a limited edition.

I have noticed, certainly in terms of your approach that we have taken, we have noticed no level of saturation or discomfort with the numbers that we have pointed out. We are still -- and the cars are completely sold out. They were sold out on an unseen basis for the customers. I don't know how to describe this to you. These are cars that are selling, just on the inkling of the fact that they exist.

And so I certainly do not want to change the dynamic. To the extent that I keep on going back to, I'm making Monica famous here, with the extent that we go back to those high net individual discussion. Obviously, we will cater and cater to that population, to reflect the population. One of the things we cannot do is change the uniqueness of those products, and the scarcity associated with them.

For those of you who are interested, it was interesting article and again, I'm the wrong guy to talk about this. I was fascinated by the [Atomis Marken Bank], and there was an interesting article showing up, I think it was in The Economist, on a couple of weeks ago on the economics of the bank. And fundamentally, once those things happen, one, they're very difficult to replicate.

Secondly, you have to be very, very faithful to the principles that govern distribution. So you just cannot fall in love with the notion of making more money off a limited run, that will kill you in the long term. We are not going to change that dynamic.

And related to this, given the huge excess demand, when you come to price these cars, how do you think about that? Do you look to maximize profit? Do you look to respect your customers at what you think is an appropriate level? Or do you have internal gross margin targets that you apply versus the actual cost to build them?

A combination of all of those things.

Okay. And finally, with regards to the quarter, in the revenue bridge, you reported EUR14 million improvement, and you mention specifically with regards to championship ranking in Formula 1. Can you just clarify which season that relates to? And in terms of, from a cash perspective, what is the seasonality with respect to payments from Formula 1, which you receive, both television and also for championship position.

There is no television. So it is 2015. The revenue that was recorded in 2016, I have to rely on Alessandro to tell you the timing. I don't know what the timing is.

The timing is pretty straightforward. Distributed over the quarters. No particular timing.

It is quarterly distribution, evenly split over the quarters?

Yes. Just to make your life even more -- to create more angst in your life, we need to rank second to cause the dislocation in that revenue stream for 2017. So we are working our butts off to make sure that happens. So as soon as we hang up, I can go fix that problem.

Good luck with that. Thanks.

Adam Jonas, Morgan Stanley.

This is [Neil Meadow] on for Adam Jonas. Can you explain to us the historical rationale behind the typical five-year product cycle for your non-limited-edition models? Sergio and Alessandro, both of you have noted on the last couple calls that certain models -- mainly the F12berlinetta have had a harder time competing in the marketplace late in their cycle, in their fifth year of commercialization. So aside from just introducing special edition versions like the F12tdf, how feasible or unfeasible is it to accelerate a model's product cycle, when there are signs out there that the order book may be thinning out? Thanks.

Are you parading as Adam?

I am. He is actually in Spain right now.

Send Adam my compliments on his travel schedule.

I definitely will.

To answer your question, I don't think the F12 -- I think you need to be very careful about why the order book is thinning out. The only reason why -- there is a tradition in this house to rejuvenate the product portfolio over a cycle, and if people know there is a new F12 coming in some form, they will obviously wait, and that is why the book thins out, it's not something endemic to the car.

As a matter of fact, we have seen -- over the last 90 days, we have seen an improvement in the order intake on F12s. Notwithstanding the fact that over some period of time, we will be replacing that car. And that is not far off, the replacement cycle.

But the market knows, and our the customer base and the people that deal with our products know, that eventually these products will be rejuvenated. And when that happens, they will buy the new one.

By the way, in terms of coming up with a tdf, the tour de France, it is indicative of the expression -- the highest level of technology at the end of the series. We have done this with the 599 GTO, we've done it now with the F12tdf. So get used to this. We will continue to do this, because it allows us to experiment with technology in limited series.

A lot of the technology ended up being mainstay in the GTC4Lusso. That is how we run this business. So get used to it.

Thank you.

And the 488 -- when it comes at the end of the cycle. Anything else I can do for you? Whoever you are?

No, thank you.

As there are no further questions in the queue, I would like to hand the call back to Ms. Nicoletta Russo for any additional or closing remarks.

Thank you everyone for joining us in today's conference call. The IR is now available for any follow-up you may have. We wish you a lovely day. Goodbye.

That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.