Ferrari NV (RACE) 2017 Q3 法說會逐字稿

Good day and welcome to the Ferrari N.V. 2017 Third Quarter Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Nicoletta Russo, Head of IR. Please go ahead.

Thank you, Alison, and welcome to everyone who is joining us. Today's call will be hosted by the group's Chairman and CEO, Sergio Marchionne and Alessandro Gili, group's Chief Financial Officer. All relevant materials are available in the Investors section of the Ferrari 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 2 of today's presentation and the call will be governed by this language.

With that, I'd like to turn the call over to Mr. Gili.

Good afternoon everyone and thanks for listening in on the call. I'm happy once again to report a record third quarter in the history of Ferrari. Revenues were up single digit and drove adjusted EBIT to EUR 202 million, up 17%. We unveiled the Ferrari Portofino at the beginning of September with a spectacular World Premiere in the Portofino Bay. The car was then presented at the Frankfurt Motor Show just a few days later. Deliveries of the Portofino, which already has a robust waiting list will commence in 2018.

During the month of September, we celebrated our 70th anniversary with over 4,000 customers participating in a massive parade which touched several European cities. The parade ended in Maranello, where Ferrari hosted the pinnacle of the celebrations with a weekend full of exclusive events. We revised upward our 2017 outlook now with revenues up at roughly EUR 3.4 billion, adjusted EBITDA at approximately EUR 1 billion, and net industrial debt lower than EUR 500 million.

On Page 4, our shipment reached 2,046 units, up 68 units or 3.4% versus prior year. Results were driven by a 27% increase in V12, thanks to the GTC4Lusso, LaFerrari Aperta and 812 Superfast, which just arrived in EMEA. V8 posted a few units decrease due to the California T phasing out, partially offset by the 488 family and the GTC4Lusso T. In terms of portfolio turnover, the California T and F12berlinetta are phasing out. The newly launched Ferrari Portofino will commence deliveries in 2018 and already has a robust waiting list.

Group net revenues for Q3 2017 were EUR 836 million, up 6.7% or 9.3% at constant currencies, mainly due to USD weakening versus euro. Cars and spare parts leading the way with volume, mix and pricing. This was partially offset by engines due to the termination of the rental agreement with a Formula 1 racing team and slightly lower sales to Maserati due a different production schedule, as well as the deconsolidation of the European Financial Services business since November 2016.

Our adjusted EBITDA improved by 13.2% reaching EUR 266 million and 31.8% margin. This result was primarily driven by higher volumes, better mix, Thanks to LaFerrari Aperta, and pricing. This was partially offset by higher R&D expenses for innovation components and hybrid technology.

Adjusted EBIT for the group showed a 17.3% increase, reaching EUR 202 million, a new company record for third quarter, resulting in a margin expansion of 220 basis points to 24.2%. Adjusted EBIT benefited from a strong adjusted EBITDA.

Industrial free cash flow for the third quarter 2017 was EUR 147 million, driven by strong adjusted EBITDA of EUR 266 million, partially offset by net change in working capital of EUR 34 million, CapEx of EUR 93 million and lack of contribution from advances of LaFerrari Aperta.

Let me kindly remind you that Q4 will bear the second 2017 tax advance payment. Net industrial debt at September 30, 2017 was reduced to EUR 485 million from EUR 653 million at December 31, 2016, thanks to positive industrial free cash flow generation.

Moving to shipments on Page 5. We had a solid performance of the 488 and the GTC4Lusso families as well as LaFerrari Aperta. The 812 Superfast just arrived in EMEA. EMEA expanded by 5.1%, with France and Italy growing at double-digit pace. United Kingdom was up mid-single digits, while Germany was in line with prior year, mainly due to the California T and the F12berlinetta phasing-out. This was partially offset by Middle East down to the reallocation triggered by tough market conditions. Americas showed a 5% increase and rest of Asia Pacific grew 7.1%, with Japan being a relevant contributor. Combined deliveries in China, Hong Kong and Taiwan were down 15.6% due to the slowdown in Hong Kong as the new dealership became fully operational in Q3 2017. As a result of all of the above shipments for the group were up 3.4%.

Moving to Page 6. Third quarter net revenues reached EUR 836 million, up 6.7% versus prior year or 9.3% at constant currencies, mainly due to the USD weakening versus the euro. Cars and spare parts revenues were up 12.7% or EUR 68 million due to higher volumes and positive mix led by the 488 and GTC4Lusso families, as well as the LaFerrari Aperta, along with a greater contribution from our personalization programs and pricing increases. This was partially offset by the non-registered racing car FXX K, which completed its limited series run in 2016.

Engines net revenues posted a slight decrease to EUR 88 million, mostly due to the termination of the rental agreement with a Formula 1 racing team and slightly lower sales to Maserati due to a different production schedule. Sponsorship, commercial and brand net revenues were almost in line with prior year, mostly due to lower 2016 commercial revenues for championship ranking compared to 2015, partially offset by higher sponsorship and brand related revenues. Other revenues were down by EUR 5 million to EUR 19 million, mainly due to the deconsolidation of the European Financial Services business since November 2016.

On Page 7 you can see the year-over-year changes in the main items of the adjusted EBIT. Volume was up EUR 14 million due to an increase of approximately 55 units, excluding LaFerrari Aperta. Thanks to the GTC4Lusso and 488 families, together with positive contributions from our personalization programs. This was partially offset by the California T and the F12berlinetta phasing-out. Mix was positively impacted by LaFerrari Aperta as well as pricing increases and partially offset by the non-registered racing car FXX K completing its limited series run in 2016. Industrial costs and R&D grew EUR 8 million, mostly due to higher R&D expenses to support product range and components innovation mainly for hybrid technology. This was partially offset by lower spending in F1 activities.

SG&A costs were slightly higher than prior year as they were impacted by expenses related to our 70th anniversary celebrations and the approved long-term incentive plan, partially offset by the deconsolidation of the European Financial Services business in November 2016.

Foreign exchange, excluding hedges had a negative impact, mostly due to USD, JPY and GBP depreciation. Other was in line with previous year due to the positive contribution from supporting activities, offset by lower 2016 championship ranking compared to 2015, the termination of the rental agreement with a Formula 1 racing team and the deconsolidation of the European Financial Services business since November 2016. As a result of all of the above, Q3 2017 adjusted EBIT was up 17.3% to EUR 202 million, adjusted EBIT margin expanded by 220 basis points reaching 24.2% or 22.6% without FX hedges, and adjusted EBITDA reached 31.8% margin or 30.4% without FX hedges.

Moving to Page 8. Industrial free cash flow for the quarter was EUR 147 million, driven by strong adjusted EBITDA of EUR 266 million. This was partially offset by net change in working capital of EUR 34 million as a result of decreases in trade payables and due to the seasonality in conjunction with the scheduled shutdown and CapEx of EUR 93 million. Other was positively impacted by accruals and reserves related to deferred compensations as well as provisions, partially offset by the lack of contribution from advances of LaFerrari Aperta. Once again let me remind you that Q4 will bear the second 2017 tax advance payment. Net industrial debt as of September 30, 2017 reached EUR 485 million, thanks to the strong industrial free cash flow generation.

In the following pages, just a quick glance at our client relationship activities. This, as always, is an opportunity for us to continuously engage with all Ferraristi and provide them with unique experiences. This last quarter was particularly rich in events. In addition to the 70th anniversary world tour, the Ferrari Portofino World Premiere and 250 GTO anniversary, the third quarter saw the pinnacle of the 70th anniversary celebrations. Over 4,000 customers and 1,000 cars participated in a massive parade, which touched several European cities on the way to Maranello, where a weekend full of exclusive events ended the celebrations. One of the highlights was a car auction organized in collaboration with RM Sotheby's, where one of a kind LaFerrari Aperta was sold for EUR 8.3 million.

And let us to move to Page 13 where we revised upward our 2017 outlook as follows. Net revenues at roughly EUR 3.4 billion, up from greater than EUR 3.3 billion, adjusted EBITDA is approximately EUR 1 billion, up from greater than EUR 950 million and net industrial debt now lower than EUR 500 million, down from roughly EUR 500 million. And with that, I'd like to turn the call over to Nicoletta.

Thank you, Alessandro. We are now ready to start the Q&A session. Thank you.

(Operator Instructions) We will take our first question from Monica Bosio from Banca IMI.

Yes, thanks for taking my questions. Actually I have a few questions. The first one, if you can please comment on the pricing, the net pricing effect in the third quarter and what did you expect in term of outlook for 2018, given also the impact of the Superfast? Are you hearing me well? Hello?

Yes, we are. You can go ahead. Thank you.

Okay. Thank you. And the second question is did you expect some release of provisions related to the Formula 1 at the end of the fourth quarter? And then the last question is on the EBITDA margin. Even accounting for the impact of the hedging policies, the EBITDA margin is well on track to exceed -- is exceeding the 30% and this is well on track to further rise. Just my feeling, is there any reason that might prevent to replicate these figures going forward and even improving? And my final question is don't you believe that your full year 2017 guidance, which are basically aligned to the consensus, might be revealed a little bit too conservative?

I am going to deal with the last 2 questions and I'll give it to Alessandro to give you the -- answer the rest. There is no use -- I mean, I think we said there's an EBITDA margin target. So there is an intermediate step, the numbers that we've talked about, what you have seen in the third quarter and what we're giving you as forecast for the year is in line with this. We owe you another story. And I mentioned this surely in the last couple of times we talked on the call. We do owe you a 5-year plan. And I think that hopefully when we get together sometime in the early part of 2018, you'll be able to tell that the EBITDA generation on a margin basis for this business is capable of significant expansion. I think it's no use me threatening you with numbers. I must prefer to see you -- to see you and then talk to you about the portfolio development and what I think we can do. Obviously, we're satisfied with where we have taken the business so far. I think we need to -- we need to take a very hard look at this to see what more we can get out of the system given the relative success that we've had with even this volume of 8,400 vehicles for the year. So I just ask patience that we'll come back to you when we deal with the 5-year plan.

Okay.

So on your questions on pricing, is impacting positively the quarter. Mostly in line with what we mentioned already in Q2, so -- considering the impact on cars and parts is approximately 1%. The 812 Superfast, as we said, has just arrived in EMEA. Therefore you are not seeing for the moment a relevant impact from that perspective. It's going to be much more visible as the rollout of the shipments will be completed on a global basis. In terms of F1, we had already adjusted some of the assumptions at the end of the quarter. So the effect is embedded in our numbers for the projection for the full year. And I believe the last question was on FX. As you see from the adjusted EBIT, the USD weakening is already visible, still partially offset considering the complete full metric with hedges. Clearly, as the FX and the euro-dollar is still weakening, we are not expecting to have a similar positive impact going forward since the exchange rate is clearly worse than the past.

Yes. Just a final check. Are you saying that your new targets are already partially factoring some release of provisions? Did I understand well or --?

No, I think what Mr. Gili was saying is that, the account till the end of September and the forecast for the year allow for the proper recording of Formula 1 cost without further adjustments.

Okay. Clear.

That's the first picture. I just want to go back to something that Mr. Gili said about exchange rate. We can spend a lot of time here hypothesizing about what happens to euro-dollar, what happens in various exchange rates against the euro. I think one of the things that Ferrari has to resolve, and it has to be resolved relatively quickly, is that given the scarcity with which it is managing supply, it is in a position now to look at its pricing mechanisms in euros and not necessarily be driven by foreign currency considerations. I think one of the most disturbing things about these presentations is having to deal with this understanding about the foreign exchange hedges and how it reconciles from one period to another. The thing that is much more structural of a Ferrari is the annuity nature of its earnings in Euro. I think we need to protect that basis. I think we need to be unimpacted by foreign exchange fluctuations. And I think the big task that we have here, together with our commercial organization is to drive their pricing mechanism to the field. And we intend to do that hopefully within the next 6 months.

The next question comes from George Galliers from Evercore.

The first question is just around the LaFerrari Aperta. Clearly it's likely to leave a hole in your earnings in 2018 given its high ARPU and presumably exceptional margins. I think in the past you said that this should be built by increased shipments on the Superfast and then the other new models, including the Portofino and GTC4Lusso variant. Are you confident that the volume and earnings from these products will be sufficient to fill the gap?

Yes, the answer is yes.

Okay, and then secondly just on Formula 1. I mean, I guess, during the first half of the season it all looked so good and it looked like you could comfortably end up winners. It has eluded you. I guess the question I have is, one, where do you think it went wrong? Is this the drivers, the car, the team management or just bad luck? And secondly, from a P&L perspective, are we talking millions, tens of millions, or hundreds of millions the difference between coming second rather than first?

The easy answer is it's in the tens of millions. And the answer to your broader question as to what went wrong with Formula 1, I don't believe in bad luck. Ultimately, it's a reflection on the way in which we manage these businesses. It was the combination of, especially in the second half of the season, between technical issues and driver error or driver misjudgment. And so, I mean as we got close to the end of the season, we now got 2 races left to complete. As you well know it's impossible and it was almost an impossible task in the last race on Sunday to think that we could recover at least the driver side. I think we have learned a lot. I think it's a painful way of learning. And I think the second half revealed some structural weaknesses in the manner in which we were managing this business, which are going to get rectified and hopefully 2018 will be a much better season. I remind everybody who ask me this question, and I am probably the most critical all the way in which we manage our F1 activities, that if I had asked anybody at this time last year as to how well we would have done in '17, I could have not -- I couldn't have gotten a buyer for the idea that we have been that far advanced in the first half for the season. So we have done well, given our starting point. We were unable to finish the task. It's a 2018 objective now. We regret not having done better. The car is there. It is in my view probably the best car on the track today.

Well I look forward to seeing a lot of podiums initiatives next year again.

The next question comes from Martino De Ambroggi from Equita.

The first question is on the Q4 implicit performance that you have in your guidance. Just to understand what are main reasons justifying an EBITDA margin which is 4 percentage point lower than in Q3. It's just a matter of mix or there is a ForEx negative impact? So this is the first question. The second is on the Asia, China, Hong Kong, Taiwan and so on were down in Q3. So I was wondering if you could spend with us a few words on the visibility on the Chinese portfolio and any updates on the patent box?

Just to deal with the issue of the forecast. I'm not going to reconcile Q4 for you. I think, you take the forecast for the year as the minimum achievable set of returns. We will deliver whatever best Q4 we can going forward. We're not going to sit over here and do the differences between 9 months and 12 months, we're going to spend the whole day doing this. Take guidance for what it is. It is conservative, it's achievable and deliverable and we'll leave it at that. The APAC story which Alessandro talked about, there is one issue which has impacted APAC and that's the Hong Kong situation. We now have selected a permanent solution to the distribution in Hong Kong after a period of vacuum of deliveries into the customer base. That's the reason why Q3 looks as weak as it does. I think we'll see a recovery of the position, including product flow starting in Q4, the numbers should improve. And I'll leave it to you to talk about it.

Yes, then the patent box, we've started officially the process with the tax authorities. Clearly we are at the initial stage in terms of analysis of our position. So we are not expecting anything in the next weeks. But certainly the process is in -- now is in -- on track.

And we should be in a position to deliver the benefits because it was designed -- we are designed to accomplish the same set of objectives that they have. So hopefully we'll get it done.

Very last on the FXX K Evo. I don't know if you are willing to share with us the price we already saw it on press resources but the volumes and if it's all included in next year figures?

It's not in this quarter. That's all I'll tell you. I think it will get delivered between the end of this year and next year. The price is what you saw in the press.

And volumes, if I may?

It's a limited number, barely double digits.

The next question comes from John Murphy from Bank of America.

Just a follow-up question on mix. I mean I think there's a lot of skeptics out there on mix turning negative in 2018, but an optimist might argue that with the Portofino and the Superfast and maybe a few Apartas that slipped into 2018 as opposed to 2017, mix could not just fill the gap but potentially be positive in 2018. Is that too optimistic a view of things or is that a realistic view?

It is not overly optimistic.

Okay. That's incredibly helpful. Then a second question. As we think about what might come in this 5-year plan, I think there's a lot of speculation that form factors may change dramatically on your -- some of your vehicles and that volume might go up dramatically. As you think about those 2 factors, how do you decide what kind of form factors and how far to push the volume? Is this sort of your general market studies or you are actually talking directly to your customers so you know directly what your customers want, so you're addressing their needs as opposed to speculating what the market can absorb?

Now look -- I mean one of the benefits and you've seen this from the presentation, I mean, the level of the relationship between us and a customer base is something which is - I'll tell you I've been in this business for long time -- this type of relationship is enviable, it's not common. And I think of all the knowledge that we have built about the future product portfolio of the cars is based on years of relatively intense dialog with them about what they want Ferrari to be, what we can provide with them -- provide them in terms of technical solution to these objectives. This is not necessarily common knowledge but we do have sort of previews of any of these major cars with a select group of customers. We bring them in way ahead of commercial launch. And I think we use that information that we gather from these exchanges to form a relatively clear view as to what the market is expecting and potentially support in terms of purchasing pattern. So this is not pie in the sky. I don't buy IHS studies to try and determine what the next Ferrari car will be. We had run clinics even in terms of the style with our customers to try and find out whether they would react positively to things that we're proposing to launch. So there is a much higher level of comfort. I think in terms of the projections that we are putting together for the 5-year plan that we normally would see in connection with anything. So I am -- I feel relatively comfortable that if we put the numbers down, it's based on solid consumer data.

That's incredibly helpful. When we think about the hybrid R&D costs and sort of the step-up there, are those largely baked into your R&D costs as we're looking at them right now or could there be, as we get closer to launch, a real step-up to get this out there and commercialized or are we seeing the costs in the numbers already?

No, I think you are going to see part of the cost filtered through in 2018. That's probably the biggest challenge that we've got coming forward in 2018. Because the problem is that the base that we're creating for this hybrid is across the whole range. So it's not just a one-time one-car event issue. So I think the seriousness with which we're approaching this from a R&D standpoint is crucial. So you will see a ramp-up. We will make it back in terms of margins. That worries me -- doesn't worry me about the actual performance in '18. But the CapEx will be, in my view, probably abnormal given what we've been lately.

Then just lastly on wait list. Are we still looking at around 1 year plus in general, any updates just plus or minus on wait list?

Yes. I mean, now there is probably more than a year now given the way in which the 812 is shaping up and the Portofino is shaping up. We're working our way up after the finish of the 488 now. We've got a bit more to run. We'll see much more once the next cycle starts, but I think the product pipeline is full and I think that the waiting time is still well in excess of 12 months across the major pieces.

Next question comes from Adam Jonas from Morgan Stanley.

A couple of questions for Sergio. On the utility vehicle that you've kind of alluded you've run internally and of course at the clinics. Has the feedback been kind of unanimous enthusiasm or kind of how controversial or contested has been the concept and/or your design philosophy on this?

I think that based on what we've seen the support -- you asked me the last time we talked as to whether the board has seen it, the board has now seen it, And we have run it through customers. I think the reception has been quite good. It's early days. I think it needs to be refined further. We'll continue to do more -- more work on this. But I think the initial reaction, Adam, based on what I know today the project is a go.

And how controversial was it when you presented it to the board?

It wasn't because it is a Ferrari.

Just a follow-up. The 5-year Capital Markets Day, in terms of clues you've given leading up to involves new segments, new markets, new tech, new strategies for the brand. Is there -- and again I don't want to front-run that event in early 2018, but is it reasonable for us at least at this point to think , more thinking about forecast going out for 5 years? Many of us are giving you credit for the big growth on the top line and taking the interest in, going after the new segments. But is it unreasonable that as we execute such strategies that there could be maybe back-end loading in terms of the reward or some of the earlier years require bit upfront pain in order to achieve that level of growth and sustainability?

I think there may be an asynchronous CapEx and volume build but not enough to classify this as a back-ended or something that's loaded on the back end. I think you are going to see a gradual delivery of the volumes through the period. I think obviously the last year of the plan will show -- will show the full range of completion and by definition it stands out. But fundamentally you will see this improvement on a very gradual basis across the forecast period.

The next question comes from Stephen Reitman from Societe Generale.

I have 2 questions. First of all, on your comment that you think you can offset the ending of Aperta sales in 2018 with volume and Superfast and the Portofino. Are we looking at a very substantial ramp in terms of production or sales compared to the increase that we're seeing in 2017 the 400-odd units that you are predicting? And my second question --

No, the answer is no, Stephen. I think we need to be careful. We have not unveiled the whole product range for 2018. I think we've talked about things that are obvious, the Portofino launch. After a glorious introduction by Alessandro I felt I should be on a beach instead of being in this room. But it was a very nice launch and we have launched the 812 Superfast in a similar fashion. There's other stuff coming which is typical of Ferrari. It will only be visible when we launch. And so they will impact on 2018 performance and it will change the financial dynamics of the business.

And secondly on the comment in the revenue bridge about the sales of engines. And you referenced a slightly low sales of Maserati due to a different production schedule. Can you elaborate on that, please?

I think the Maserati is calling off engines of Ferrari on a different schedule because of the ramp up that it's had in the Levante. And it's something that we're getting adjusted to. So we just need to get synchronized, it's that simple. It's not -- there is nothing that nefarious about the way in which it got done. The sequencing of engine delivery is different because production has changed at Maserati.

The next question comes from Philippe Houchois from Jefferies.

I just have 2 questions. The first one, detailed one, back on the patent box discussion. Can you confirm if you applied for the treatment before the end of '16 so that it includes '15, let us say, fiscal year?

Yes, we did.

And the second question is more strategic. As you kind of put together your plans for the next 5 years, Porsche, and I appreciate you said before, this is not the same level of price point, et cetera, but Porsche nevertheless has announced a program called Passport where you pay a fee and you can have access to different vehicles at different points depending on your need. Is that a form of, I don't want to call it car sharing, but is that form of business model somewhat applicable to Ferrari or is it totally off?

It's applicable to some other brand that I am involved in. I think Maserati could benefit from that, but I doubt very much that Ferrari can play that role. Look let's be clear on one thing, one of the great things about investing in one of our vehicles is value retention and the fact that there is a secondary market which is active, which is quite supportive of the investment cycle. I think things that -- the Porsche program that you described is absolutely contrary to that process. So it doesn't fit our bill, but I think probably Maserati and Alfa could look at those on a realistic way.

But on that point, maybe if I can follow up, as you grow the business and including utility vehicle, those arguably are vehicles that are probably going to be used more than your average sports car. How do you approach the value retention that you mentioned. I assume the more you drive, the more it depreciates.

Yes, but it's exactly why I think that we're talking if there is -- and we're speculating because we haven't announced this, but if we're talking about an expansion of volumes must be done outside of the traditional categories that are currently covered by Ferrari, because although I think we play -- when you buy a California -- I was going to call it the California. If you buy a Portofino today or you buy a GTC4 you're buying a higher mileage vehicle anyway by definition. The expansion into additional, sort of, car areas would imply that we would even go beyond the expectations on mileage of the 2 cars that I just mentioned. That requires a complete different treatment, both at dealer level and in terms of value retention expectations. And so the market -- I think the brand is capable of covering the uniqueness and the exclusivity of a group of vehicles and it's capable of handling ancillary vehicles that effectively complement that position on the side without necessarily having both the extreme exclusivity and value retention attributes, so what has constituted Ferrari up to now. And that's really the thing that we need to walk very, very carefully because it impacts on pricing, it impacts on penetration of the market. We cannot -- we could just not flood. I mean, somebody -- you made a reference to Porsche earlier. There is absolutely no way that this house could even remotely envision mass production numbers similar to what Porsche is producing today. It just -- it would be outright nonsense. So even though we would be putting in more miles on these vehicles, the volumes of cars available in the marketplace will be severely restricted. So the dynamics are going to change anyway. So let's wait until we get together at the beginning of 2018 and we will take you through all this.

The next question comes from Lello Della Ragione with Intermonte.

I have 3 questions. The first one regards to the FXX K EVO, the one you mentioned before volume, sales and price. I was wondering if this car carries advance payment or not so if we should have an impact on the fourth quarter results or not? The other one regards to ForEx. The strategy that you are going to implement in six months time, I am just wondering if is it correct to assume that we will have, in any case, 1 year or whatever the waiting list, the length of the waiting list gap between the implementation with the strategy and the real impact on the P&L at this time?

Yes, look, let's see all that when we talk at the end of the year. I think there's no doubt that we need to protect clients who are committed. I think that we have a structured issue that we need to answer about how we run this business. And that has been my fixation since I've started looking at this about 24 months ago. It is -- for a business that produces goods in such limited number and for such exclusive customers, it is impossible for us to bear the risk of ForEx fluctuations. It is not in our -- it's not part of the business model. So it needs to be eliminated. As we work our way to that state, there may be an adjustment period but we're working towards that end.

So on the FXX K, that is not going impact Q4 in terms of advances.

And the last one, just -- I mean, you made the comment on the outlook on the revision but you're making tentative use of roughly above and below. So I was just wondering if you can explain what you mean by roughly. You explained that this is just the minimum level that you intend to achieve. But you use roughly in several occasions. So I was wondering if that means plus 2.5, plus 5, plus 10 or whatever?

Guidance is guidance. I can't tell you it's wrong by a half. It's guidance. It's the minimum deliverable set of numbers that we think Ferrari will deliver, take it at that face value. By the way -- Mr. Della Ragione, the last thing I want to do is to tell you how to do your business. But if you add up the 9 months then you look at the forecast, you take the difference, run the fourth quarter, benchmark it against prior quarter's performance and find out whether it's reasonable or not and then make whatever adjustments you think you need to make.

I was just referring to some of your northcompetitors, let's say German one, they use the same kind of science, but they mean number. That's why I was asking. Thank you for the explanation by the way.

That's one of the few advantages of being Italian.

The next question comes from Ryan Brinkman from JPMorgan.

You talked earlier about the cadence of the spending on R&D associated with the hybrid strategy. Can you remind us of the aim of that strategy again? Is it to enhance the fuel efficiency and the emissions of those vehicles or like the performance of those vehicles, to make them even more powerful like the LaFerrari Aperta?

Both. Both. It will be both.

And as a follow-up to that, I would just say that a couple of years ago it was considered sacrilegious to talk about a Ferrari sport utility vehicle. Now it's like an enthusiastic discussion. Also I think historically it would have been sacrilegious to talk about a Ferrari without an internal combustion engine. But do you think there is a day when having that discussion would not be deemed sacrilegious and over what period of time do you think it would be reasonable to think that?

I don't think it's sacrilegious, it will probably -- if in fact it happens, it will happen after this product cycle is launched, so at the end of the 5-year cycle that we're talking about.

The next question comes from Max Warburton from Bernstein.

Wonder if I could just come back to F1 again, it seems topical this week. Firstly, my understanding is Liberty is about to set out its plan for the future of F1 and I think the main team meeting is next week. Are we going to hear anything out of that early on that would give us any guide as to what the revenue share arrangement is going to look like for Ferrari after 2020?

I've done it Max. But just let me make a couple of comments about this so that we don't -- we have every intent -- Liberty has a got a couple of good intentions in all of this, one of which is to reduce the cost of execution for the team, which I think is good. A couple of things we don't necessarily agree with one of which is the fact that somehow so the powertrain uniqueness is not going to be sort of one of those -- one of the drivers of distinctiveness in the participants line-up, right. I think that's something that Ferrari cannot, I mean, it would not countenance this going forward. It is raising -- the fact that we're now -- that we appear to be somewhat at odds in terms of the strategic development of this thing and that we see the sport in 2021 taking on a different air, is going to force some decisions on the part of Ferrari and I understand that Liberty may have taken these into account in coming up with their views. But I think you need to be absolutely clear that unless we find a set of circumstances the result of which are beneficial to the maintenance of the brand in the marketplace and to the strengthening of the unique position for Ferrari, Ferrari will not play. And that has got the whole part of positive implications apart from the cost relief on the structure of Ferrari, which is not inconsequential. But it does open up a whole part of alternatives about what else Ferrari could be doing with itself going forward and beyond that date. I don't want to prejudge any of this. We will be walking into this meeting next Tuesday with the best of intentions, we'll see where it takes us.

I imagine those discussions could get quite heated. Is it credible to threaten to leave the sport from a cost point view? I mean if you wish to leave would you lose less because the business is losing money at the moment or would you actually lose more given all the people and assets tied up in it?

Oh, hell, it will be totally beneficial to the P&L. And we will be celebrating here until the cows come home.

I mean, you clearly think it's important to the brand, but there's 70 years of equity in Ferrari, 5 years out of the sport, is anyone going to notice?

Well, Max what I do know is that it's been part of our DNA since the day we were born. So, I mean, it's not as if we can define ourselves differently. But if we change the sandbox to the point where it becomes an unrecognizable sandbox, I don't want to play anymore. I don't want to play in NASCAR globally, I just don't.

How would you feel personally about being the Ferrari CEO, that took the company out of F1?

Like a million bucks because I'll be working on an alternative strategy to try and replace it. A more rational one too.

I mean, last question on this and it sort of fits into the previous ones. Given the limited financial importance of F1 overall to all the companies that you run (inaudible), do you personally spend too much time in F1?

Oh, hell no, hell no. I mean we have competent people, at least in my view they are competent. You may not -- they may not be competent if you judge the fact that we haven't won the championship this year. But having said this, I think we've gone a long way from we were in '16. But I don't. And by the way I don't attend all the meetings. I mean, I am attending those meetings on strategy because it's important because it matters a lot to this business. The financial implications of the wrong choice for the moment going forward are pretty significant to Ferrari.

Fascinating and good luck on Tuesday.

We'll take our last question from Gabriele Gambarova from Banca Akros.

The first one is on the weight of personalization during Q3?

Same as prior quarter, 17% on total net revenues.

And a related question on this. Do you think that the 70th anniversary had the positive impact on that number and that we might see it coming down next year or it is not relevant?

We are not expecting that to be negative in any case which is still part of the DNA of how we do car -- every car is personalized.

And the second question was on LaFerrari Aperta. If it is possible to have an update, I don't know 100% good job of shipment of completion of that -- this model, and if it will spill over to 2018?

There are some residual spillover in '18, but it's not significant.

As there are no further questions in the queue, that will conclude today's Q&A session and I'd now like to turn the call back to Ms. Russo for any additional or closing remarks.

Thank you everyone for joining us today. Please note that the IR team will be soon available for any follow-up you may have. Thank you.

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