Ferrari NV (RACE) 2020 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Ferrari Second Quarter Results Conference Call. (Operator Instructions)

I must advise you that this conference is being recorded today on the August 3, 2020.

I would now like to hand the conference over to your first speaker today, Nicoletta Russo. Please go ahead, madam.

Thank you, Nadia, and welcome to everyone who is joining us. Today's call will be hosted by the Group's CEO, Louis Camilleri; and Group's CFO, Antonio Picca Piccon.

All relevant materials are available in the Investors Section of the Ferrari corporate website. And at the end of the presentation, we'll 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 Louis.

Thank you, Nicoletta, and welcome, everyone. And thank you for joining us. As we had anticipated during our May 4 earnings call, our second quarter results were weak across all key metrics, but frankly, in line with our expectations. These results clearly reflect the very challenging times that we've all endured in recent months on many levels.

I do wish, however, to salute the resilience, commitment and determination that has been exhibited by all of my colleagues here in Maranello and in our markets. While the headline numbers are clearly not a reflection of what this great company is capable of achieving, one notable metric is that despite everything we had to confront, our core business generated an EBITDA margin of above 30% in the second quarter and above 40% in the first half.

As I previously mentioned, the disruptions caused by the COVID-19 pandemic were in themselves a huge challenge to surmount. But its timing was doubly unfortunate as it engulfed us at a critical time in the delicate industrialization phase of the new models that we presented last year. And in particular, as it relates to the SF90 Stradale, which contains more than 2,000 new components from our supply chain.

While we are confident that deliveries to our clients will begin early in the fourth quarter, the ramp-up in production will inevitably be delayed, which is the predominant reason for the adjustment to the midpoint of our guidance for the full year.

In terms of the overall dynamics and health of the business, these remain as strong as ever. Demand remains vibrant, and our order book is up significantly versus the corresponding prior year period. Allowing for the obvious favorable impact on our order book of the lower deliveries resulting from the more than 7 week production shutdown, it is still up double digits versus last year in absolute terms.

Order cancellations to date are well within historical norms and actually are lower than what we had feared may well have occurred, given our experience during the financial crisis. But we recognize it is still early days.

The preowned market, which was relatively dormant in April and May, is quite active again. And indications are that residual values have remained stable, and in certain instances, have actually risen, in part due to the absence of the sufficient supply of new cars.

Given the strength of our order book, we have given serious consideration to shortening the August factory holiday. However, such an action would seriously hamper our critical preventive maintenance program and delay the installation of some new equipment necessary for our paint shop to accommodate capacity needs. As such, we have decided that such an action would be far from wise.

In addition, given the very challenging circumstances that all have faced, it is our view that everyone, especially those on the production line, needs a break. We will nevertheless add a number of working Saturdays to at least very partially make up for the production shortfall. We're also working tirelessly with our suppliers to strive to accelerate the ramp-up in production of the SF90 Stradale and overcome the issues that I just mentioned. But this will be a very tall order given the complexity of this particular model.

I will now hand over the call to Antonio, who will review our second quarter results and our guidance for the year. Antonio?

Thank you, Louis, and good morning or afternoon to everyone who is joining us today.

Starting on Page 4. As expected, the second quarter of 2020 reflects the consequences of the COVID-19 pandemic, which caused the production and delivery suspension. With 7 weeks unavailable to manufacture and deliver, our shipments in the second quarter nearly halved versus prior year to 1,389 units. Group net revenues were EUR 571 million, posting a 42% decrease compared to prior year. This reflects the just mentioned volume decrease and the anticipated impacts of the pandemic on the Formula 1 Championship, on our other sports and brand-related activities as well as the reduced demand for engines from Maserati.

Adjusted EBIT was EUR 23 million, down more than 90% versus the second quarter of 2019, reflecting the actions taken to contain costs while maintaining a level of investment to support our long-term growth. Adjusted EBITDA was EUR 124 million, with an adjusted EBITDA margin of 21.9%. Our net result for the quarter was also positive, albeit small, with an adjusted net profit of EUR 9 million, resulting in an adjusted diluted EPS of EUR 0.04 versus EUR 0.96 of prior year. On the other hand, industrial free cash flow for the quarter was negative for EUR 158 million, in line with our expectations, essentially due to ongoing investments, inventory buildup and the actions taken to support our distribution network.

Moving to Page 5. You can see the details of the second quarter 2020 shipments. During the quarter, there was a contraction of volumes as a consequence of the full suspension of our production until May 4 and the only gradual restart of deliveries in conjunction with the sequential dealer network reopening according to local health protocols.

Total shipments for the quarter decreased 48%, with 8 cylinders models down 49.4% and 12 cylinder also down 42.9%. The first few deliveries of the F8 Spider and the 812 GTS commenced in the quarter, while the 488 Pista family approaches the end of its lifecycle.

In terms of geographic performance, EMEA was down 40.9%; Americas declined by 52.6%; shipments to Mainland China, Hong Kong and Taiwan were reduced to a few tens mostly as a consequence of the deliberate anticipation of deliveries in 2019; while deliveries to rest of APAC decreased by 27.9%.

As discussed by Louis, the SF90 Stradale will hit the market at the inception of the fourth quarter as a result of the delays experienced in its industrialization phase due to the shutdown. The Ferrari Roma will follow immediately thereafter.

Finally, we are happy to confirm our 2 unveilings in the second half of 2020.

Turning to Page 6. You can see here displayed the walk of our group net revenues for the second quarter of 2020, severely impacted by the pandemic. Revenues from cars and spare parts were down 42% at constant currency as a result of the lockdown period that led to lower deliveries, which consequently also generated a lower contribution from personalizations, only partially offset by the deliveries of the Ferrari Monza SP1 and SP2.

Despite this, the weight of personalizations grew to almost 22% of cars and spare parts revenues, thanks to the favorable mix of cars sold, namely the 488 Pista family and the Ferrari Monza SP1 and SP2.

Engines revenues declined EUR 33 million in the quarter, reflecting lower shipments to Maserati.

Revenues from sponsorship, commercial and brand were down EUR 48 million, impacted by the spread of the COVID-19 pandemic, which resulted in fewer Formula 1 races related revenues accrued in the quarter as well as reduced in-store traffic and museum visitors.

For the purpose of accruing revenues from Formula 1 in the quarter, our assumptions in respect of the calendar and our sponsorship were essentially unchanged compared to the previous quarter.

Other revenues decreased EUR 16 million, mostly affected by the cancellation of the Moto GP at the Mugello racetrack and reduced other sports-related activities.

Currency, including translation and transaction impact as well as foreign currency hedges had a positive contribution of EUR 8 million, mainly reflecting the strength of the U.S. dollar.

Moving to Page 7, let me review the change in our adjusted EBIT. As anticipated, it fell to EUR 23 million from EUR 239 million in the second quarter of 2019 with:

Volume, which drove an unfavorable variance of EUR 152 million due to deliveries being halved versus prior year as a result of the production and delivery suspension;

Mix/price variance decreased EUR 7 million, primarily as a consequence of the lower total dollar value of personalization programs, following the decrease in shipments, partially offset by the deliveries of the Ferrari Monza SP1 and SP2 - please note that the mix price variance in the EBIT bridge reflects the total decrease of the contribution from personalizations mostly due to volume reduction. This explains why such variance does not reflect the otherwise visible increase in our average selling price, which is entirely due to the weight of the Ferrari Monzas - ;

Industrial costs, research and development costs increased EUR 15 million, mainly reflecting higher depreciation and amortization of fixed assets as the production lines for the new model started being operated, partially offset by the effects of technology incentives recognized in the quarter;

SG&A decreased EUR 9 million, mainly driven by fewer market initiatives in the quarter;

Other was down EUR 58 million due to the already mentioned COVID-19 impact on the Formula 1 racing calendar, lower traffic for brand-related activities, cancellation of the Moto GP at the Mugello racetrack as well as lower engine sales to Maserati.

The total net positive impact of currency was EUR 7 million year-over-year. This was a net result of more favorable market rates, partially mitigated by the hedges in place.

As Louis already mentioned, it is worth noting that even in this challenging quarter, the EBITDA margin of our core business - excluding F1, brand-related activities and engines for Maserati - remains solidly above 30%.

Turning to Page 8. Industrial free cash flow for the quarter was negative for EUR 158 million, driven by a change in working capital, provisions and other, essentially due to higher inventories and the supportive actions in favor of our dealers, among which temporary extensions of their payment terms and early payout of commercial incentives.

We continue to fuel our long-term product development, investing EUR 133 million. As a reminder, to better interpret the comparison, prior year industrial free cash flow was supported by the collection of the Ferrari Monzas advances.

Net industrial debt as of the end of June was EUR 776 million compared to EUR 401 million as of March-end 2020, also reflecting the EUR 209 million dividend payout.

At the end of the second quarter 2020, total available liquidity, including undrawn committed credit line for EUR 700 million, was EUR 1.812 billion, which compares with approximately EUR 1.250 billion as at last December 31, and slightly less than EUR 1.400 billion 1 year before.

Our solid liquidity position was further strengthened by the proceeds from the recent issuance of EUR 650 million notes due in May 2025 as a result of the decision to early refinance part of the upcoming debt maturities and keep on securing longer-term financing.

Moving to Page 9. As anticipated by Louis, we narrowed our guidance to reflect the visibility we have now and some necessary refinements of the assumptions we outlined at the beginning of May.

We are currently programming our manufacturing capacity for the second half of the year according to a trajectory that will ultimately bring us to catch up around 500 cars out of the approximately 2,000 units lost during the 7 weeks of suspension. This corresponds to an intermediate scenario versus what we presented in May, that implied a recovery of about 1,000 cars for the high range and close to none for the low range.

To do so, we plan to add a number of working Saturdays in H2, while leaving untouched our plant maintenance program during the summer holiday and the activities to prepare our new layout for the paint shop. Since our order book remains very strong, and as of now, is actually further improved versus last year, we also expect that such a decision to contain our manufacturing cadence may provide us with a certain hedge in case the pace of the net order intake is dampened again in fall due to the long tail of the pandemic.

Our product mix is now softer and reflects the delay in the operational start-up process of the SF90 Stradale, determined by the shutdown period.

We kept unchanged our assumptions in respect to the format of the Formula 1 Championship, and the number of races at the low end of the target range as the calendar remains uncertain, with only 13 races confirmed so far.

Projections for our brand activities continue to suffer the substantial reduction of turnover from directly operated and franchise store, museums and licensing, only very partially offset by positive development of the online channel.

Delivery of engines to Maserati reflect their current annual targets.

It remains true that we'll contain our SG&A spending in light of the postponement of our most impactful in-person events together with an effective shift towards digital marketing activities to anyway maintain strong and vital relationships with our dealers and customers through the pandemic.

Our R&D spending, both CapEx and OpEx, including for competing in the new Formula 1 environment, remain unchanged versus what we said in our first quarter earnings call, with a view to protect all the investments that we deem necessary for the continuing success and future development of Ferrari. As a consequence, capital expenditures are confirmed to be around EUR 750 million.

We reaffirm the consideration that this narrowed guidance does not take into account the risk that the global spread of the pandemic leads to new lockdowns and production suspension periods.

However, as we are facing unprecedented times, at Ferrari, we'll never stop caring about our people, dealers, suppliers, business partners and customers, such a chance should occur.

With that said, our guidance for the year has been narrowed as shown on Page 10. Net revenues greater than EUR 3.4 billion, to reflect a drop in deliveries of nearly 9% versus 2019, and conservative assumptions in respect of the calendar of the Formula 1 Championship, the pace of restart of our brand activities and demand for engines from Maserati.

Adjusted EBITDA between EUR 1.075 billion and EUR 1.125 billion, with percentage margin between 31% and 32.5%. The reduction in margins reflect the softer mix due to the delay in the standardization phase of SF90 Stradale.

Adjusted EBIT between EUR 650 million and EUR 700 million. We target an EBIT margin between 18.5% and 20%, which reflect the inevitably higher pace of our D&A, following the CapEx increase of most recent years.

Adjusted diluted EPS between EUR 2.6 and EUR 2.8 per share, assuming a tax rate substantially in line with 2019 at around 20%. As a reminder, the assumption here is that we keep on enjoying the benefit of Patent Box tax break under the new Italian regime, albeit slightly reduced.

Industrial free cash flow between EUR 100 million and EUR 150 million, with a heavier burden from some extended payment terms on trade receivables and CapEx of around EUR 750 million, as mentioned.

Please note that such figures reflect an assumption that foreign exchange rates stay on average where they've been predominantly during the last month. Current volatility is obviously an element to watch out for in the next months.

Finally, on Page 11. It shows that while the first half was heavily affected by the spread of the COVID-19, particularly in Q2, with an adjusted EBITDA for the whole 6-month period almost 30% lower than last year, our narrowed guidance now implies a second half in line or better than in 2019, even if skewed on Q4, with a mid-range full year target just 13% lower.

As we said in May, however, while the overall global environment remains delicate, to say the least, flexibility and adaptability will be the name of the game to surf these exceptional times with a single objective driving our actions, which is nurturing our clients and protecting our business partners so as to come back as strong as ever before.

With that said, I'd like to turn the call over to Nicoletta.

Thank you, Antonio. We are now ready to start the Q&A session. Please, Nadia, go ahead. Hello, Nadia, please, can you kindly open the Q&A session?

(Operator Instructions) The first question comes from the line of John Murphy from Bank of America.

I have a first question, sort of following up, Antonio, on your comments. I think that you said that units would decline about 9% in 2020. So it looks like we're dealing with a base in 2020 of about 9,200, maybe a bit more in shipments. And I'm just curious, as we think about 2021 and 2022, and assuming that there is some normalcy that emerges in the world, how we should think about growth? Is growth that you always manage on a very measured healthy pace? Should it be viewed as coming off that depressed base in 2020? And that we should rethink where 2022 may ultimately land, sort of the prior outlook. Or could you step up to the levels that you were previously looking at delivering and shipping in '21 and '22, which would indicate much higher growth off this very depressed base in 2020? I'm just trying to think theoretically how you are approaching future growth of this depressed base?

Thanks, John. Yes, as Antonio said, was sort of forecasting around 9% volume decline. If you think that where our shutdown was 7 weeks, that's roughly close to 15% of the time. So we are catching up, as we said, with some Saturdays. The order book clearly is very strong. And actually, what's quite heartening is that particularly with the Roma, but also with the F8 Tributo and F8 Spider, the entire family, we have a higher level of new customers relative to their predecessors be it the Portofino, the 488 range essentially at an equal stage in their respective lifecycles since the launch. So that's very encouraging. And this really before we were able to do dynamic activities and test drives. So those are starting in September.

And honestly, June was a pretty strong month in terms of orders, and July was also pretty strong. So yes, you're right. We will keep, if things keep going the way they are and all things being equal, we should end up the year with a strong order book. I think it's a tad early to discuss 2021, John. Clearly, it should be a strong year, driven probably more by supply than demand. But I would hesitate now to give you any sort of sense for 2021, other than, yes, we're working on a weak base and it should be a strong year. Beyond that, I think it would be imprudent of me, given the uncertainties and unpredictability as we've seen in the U.S. with the trajectory of the pandemic. And as you know, the U.S. is our biggest market.

And maybe if I could just follow-up, sort of more philosophically as opposed to exact numbers. As you think about 1, 2, 3 years out as far as your targets and business planning, assuming once again that things kind of return normal, has anything changed in your mindset of where you could be in the out years as far as volumes and financial performance? Because you tend to manage growth in a very measured, healthy way, and I'm just curious if you would allow for as things normal to have a step-up year back to that normalcy. Or have we reset to this lower depressed number from 2020 as the basis year for growth? I guess and that's a philosophical, not an exact number question.

Well, let's stay philosophical then. In terms of the key parameters that we look at is the strength of the order book in terms of its mix, new customers, duration, geographic mix as well and various other factors. And those will really determine what we want to achieve. Clearly, our waiting list is an important parameter, and we would not wish the waiting list to be too far out for fear of losing customers, particularly new customers. So it's something that we have to weigh very carefully. Especially for those products, Roma stands out, where we have pretty big ambitions in terms of attracting new customers. So it's a balancing act, John. But obviously, the starting point is a stronger order book, and I'm quite confident that we will get there, all things being equal. Does that help you?

Yes. I think philosophically, that gets me to exactly where I need to go. And then just a second and last question. When you think about your business partners at the moment, being the supply chain and the dealer network, I'm just curious if you can just comment on the state of the supply chain and if there's anything that's really holding you back from that standpoint? And then on the dealer network, if you can just give us a little bit more details about the aid given to dealers in the quarter? Because it sounds like that if aid reverses or normalizes, you could have even seen cash flow close to breakeven in the quarter. I'm just trying to understand those 2 dynamics between the supply chain and the dealer network.

Well, in terms of the supply chain, I think things are going quite well. Clearly, certain things have been delayed, particularly with the SF90 Stradale, which is a very complex beast. You can imagine that we have very strict tolerance levels in terms of the industrialization phase. And therefore, our conformity in terms of high volumes is not easy to achieve. And that's what we're facing today. Other than that, I think the supply chain has to be commended for making huge efforts to meet our requirements. In terms of the dealer network, as we flagged back in May, we said that we would help them in terms of payment terms as well as an acceleration in paying their bonuses. So that's a cash flow hit, but one which I think is wise to do to help support our important dealer network. I would add that in terms of our supply chain, we have increased our inventories, as Antonio said, in terms of raw materials and component, which, again, given the uncertainties is something that's wise, but obviously has hit our cash flow in the second quarter. Does that address your question?

Yes. So if we were to take the increase in inventory because of conservatism with supply chain to help in payment terms to the dealers plus the accelerated bonuses, how much of that would that add up roughly to that EUR 135 million and change in working capital that I believe is on Slide 8, is that the majority of that?

I'm not sure if I can give you the number, but it's a big chunk of it.

Got it. Okay. So industrial free cash flow would have been much closer to breakeven without those changes. Okay. That's very helpful. Thank you so much.

Closer.

The next question comes from the line of Massimo Vecchio from UBI Banca.

Good afternoon, everybody. My main question is, how would you describe the mood of your customers right now? Are they worried? Are they simply postponing purchases? Do you see that as a temporary issue and then anything would be okay. Are they worried about how they could use the cars to go around if stringent lockdowns are in place? I was just trying to understand what your feeling is and what dealers and customers are telling you.

I would say, generally, morale is pretty high, as reflected in the orders and the fact that we're not experiencing significant cancellations. I think there's an element of rewarding oneself at a time of difficulty. And I think from everything I read, people are going to drive their cars more than use public transportation for obvious reasons. So it all sort of fits into the fact that if you take a reward and that people want to enjoy driving, it sort of fits our profile in the sense that we provide the most exciting and fun to drive cars in the world. So all in all, I would say there's a positive sentiment. And I think the reaction to our new models has been very positive, as I mentioned earlier. And the test drives done by the media, both on the SF90 Stradale and the Ferrari Roma as well as the F8 family has been very, very positive.

Okay. Thank you very much. It squares with what I'm viewing from other companies in different segments. It's absolutely coherent. A clarification, Louis, on your opening remarks. You said that the order book is [up] (added by company after the call) double digit. Can you specify a little bit better? Are you referring about the growth year-on-year? Or is that your overall number, the total number?

I'm talking about the absolute number, excluding the effect of the production shutdown. Is that clear?

Yes. Yes, it's clear. Thank you very much, Louis.

The next question comes from the line of George Galliers from Goldman Sachs.

Thank you. Thank you for taking my questions. The first question I was going to ask was just on personalization. You commented on it being part of the reason for the negative mix effect. Could you just remind us, was 2Q '19 an especially strong quarter for personalization relative to the rest of last year? Or was there something specific in terms of vehicle scheduling in the production system or your order book that led to personalization being weaker in this quarter?

Hi George, it's Antonio speaking. If you remember the trend of personalizations last year, actually, the improvement in terms of their weight on revenues started in Q3. So what we see today, as I mentioned in my remarks, is due to the fact that we have a mix that is favorable to personalization and actually, the level of 22% is a way to, revenues for car in part, reflect that. However, when you look to mix and pricing in the EBIT variance, you need to take into account that the whole volume impact is also in that variance. And these more than offset the positive coming from essentially the number of Monza that we sold in the quarter. I hope this clarifies.

Understood. That's very helpful. And then second question, just on Formula 1. I believe your Chairman in an interview with Gazzetta dello Sport, and apologies for my pronunciation, but I believe he gave an interview where he suggested it would be difficult for Ferrari to return to winning ways before 2022. I was just wondering if you could help give us some indication on the P&L impact for this year and next year relative to 2019 from Formula 1, when you factor in all of the different parts, both in terms of the revenue implications and the costs and the employee bonuses. Is it a headwind in the millions, tens of millions or several tens of millions or higher? Would you be able to provide some insight there?

Thank you George. So listen, the starting point is that there's no denying that we're facing a very difficult season with a car that lacks performance on several levels. Our competitors, and Mercedes in particular, are incredibly strong and hats off to them. I can assure you that the team is working day and night to improve the car, and that somehow addresses the cost impact. Although, we have to recognize that many elements have been frozen by the regulators, and the regulations that were put in place, given the economic uncertainty resulting from the COVID-19 pandemic, I believe we have a very strong talent pool, which we will continue to strengthen and I have every confidence in Mattia and his team going forward. As John Elkann said, it will take time, but the focus and determination to meet our ambitions remains intact. To your question, Formula 1 this year will be, in terms of the P&L, the biggest hit we face because of the reduction in the revenues we receive from the commercial rights holder as well as reductions in sponsorships given the reduction in races. So it's clearly in the high tens of millions in terms of the hit. We'll see in terms of next year, it should be better because hopefully, by next year, we'll be back to a full race schedule, and we will get the necessary revenues in terms of sponsorship and from the commercial rights. So it's a bit difficult to compare '20 to '21. But definitely in 2020, it is a very sizable hit as we had anticipated in early May. Does that address your question?

That's very helpful. Thank you very much.

The next question comes from the line of Michael Binetti from Crédit Suisse.

Hey, guys. Good afternoon. Thanks for taking our question and congrats on making it through a very tough quarter there. Let me follow-up on one of the earlier questions and maybe in a little bit of a different way. Unlike a lot of the companies that we watch, you're maintaining a very high level of CapEx investment, which I think is a fairly important differentiator for you. As you look at the next few years, the investment plan that underlies the 2022 plan that you laid out at the Capital Markets Day. What's your confidence that you can continue to make all those investments close to the schedule that you had thought versus areas that might be on a different schedule now? And I guess, like a sub-question would be, one of the big initiatives was to get the entirety of the fleet up to 60% hybrid, but a lot of that is some of the very newest technology and part of the line has proven more complex. This year with the SF90 Stradale being pushed out. Now you have 2 more launches coming this year. I'd have to guess the fleet needs to start moving towards more hybrid. Maybe you could just help us reconcile some of the investments behind those things?

Well, the first point is that, as Antonio said, we're retaining flexibility and adaptability. Back in early May, we said that some models and some investments were delayed by about 3 months and others possibly by 9 months. Again, depending on the cadence of our deliveries and how things were working out in the market. So we want to continue to invest. You have mentioned what is necessary going forward. The SF90 Stradale is really our first range hybrid, and we're taking learnings from that. It's clearly not going to be the only one. In terms of the models that we had said in our Capital Markets Day, we're still very much on track, some may be rather delayed. But next year, we have some exciting models that will be presented, which should help in terms of the latter half of '21 and obviously, for 2022. So things are slightly delayed, but the plan remains intact and we're very focused on continuing our investments to make sure that we remain competitive and meet our targets.

And I'll just ask because it was such a focus and an exciting part of the Analyst Day, but does that include the schedule for the Purosangue being the same as it was at that time?

Correct.

Okay. And then I guess just one last one for me, maybe a better question for Antonio. You mentioned keeping an eye on currency trends and I think you referenced the guidance is based on the average over the past months. But if the euro versus the key currencies, like the dollar, stay where they're at today, is there additional headwinds to the back half that we should think about?

So, as you know, we follow an hedging policy on a 12-month rolling basis. The impact would be mitigated by the hedges in place but, of course, we need to be careful where the exchange rates go for the future months, even beyond the second half of 2020. We prepared this narrowed guidance based on the average of this last 30 days, whereby a significant move in the U.S. dollar versus the Euro has been witnessed. Obviously, we'll monitor that carefully because the impact may be significant.

The next question comes from the line of Adam Jonas from Morgan Stanley.

Thanks, everybody. Hey, Louis, how are you? Excellent execution, as noted by earlier participants on the call. I have a question as I'd normally ask about climate change, which I think we agree is, if it's not the number 1 driver of your business over the next decade, it's pretty damn close. Maybe it is the top one. But as you kind of get closer to the industrial strategy, really moving into addressing that while just being so true to the brand and the product and bringing amazing experiences and products to customers. How are you thinking about the type of talent and people that you have in your organization as you move to things like e-mobility and software and away from some of the traditional hardware? Do you have who you need and how are you faring and getting the top talent from all going to places like Tesla? That's my first question. And then I had a follow-up.

Okay. Well, climate change clearly is an area of focus. A lot of the work has been done because you've got to start with the old carbon footprint. A lot of work has been to determine the actual footprint from cradle to grave, although in terms of Ferrari, there isn't really a grave. And we've done a lot of work, and we're now focusing on what we can do to reduce that carbon footprint and ultimately to become neutral because I think that would be a huge positive for the company and for our clients. So it is a big focus. In terms of the actual talent pool, in terms of software, we have increased our talent in terms of software dynamics. We work very closely with key partners. And I think we're in relatively good shape in terms of that. In terms of e-mobility per se, that's not something that really fits with Ferrari. It will be adapted to teaching people how to drive a Ferrari appropriately. But it is clearly an area of focus. And as the quarters unfold, I think we'll be in a position to say a lot more about that.

Absolutely. Yes, I appreciate the answer. Just the follow-up is: when I've asked you about competencies and electrification and software and connectivity and safety, I think you'd left us with the impression that Ferrari really would like to do a lot themselves as you've traditionally done, where you can, where appropriate, keep things in house. Not everything, but main elements that really, really define the experience and the product. So as this unfolds, can investors anticipate that maybe Ferrari has an opportunity to buy in some technology that it currently does not have, kind of like a capitalized R&D purchase, like acqui-hire or that nature or is the approach really do it organically from within? I appreciate that.

It's predominantly organic. And clearly, as we mentioned, we are buying quite a lot of land. So we are going to favor make versus buy. And clearly, various elements and components we hope to be making it internally to keep our competitive advantage. Does that address your question?

Very clear.

I would add that it's in line with the previous question, which was the investments that we're making longer term.

We're taking our next question from Monica Bosio from Intesa Sanpaolo.

Good afternoon. Just please, can you explain, again, sorry about this, the decision why you have decided to recover just 500 units instead of 1,000 units as your order book is strong and there is a way to do something more, maybe not 1,000, but something more than 500. Just a color on this. Thank you.

Thank you, Monica. We've looked at it hard. Essentially, it's 2 reasons. Back in May, we thought that it was possible to add one week in August, which would have helped considerably in terms of catching up the volume. However, we decided that given the need to do the very critical maintenance as well as the fact that we need to add some equipment in various departments, but primarily in the paint shop to meet our quality and capacity needs, we decided that we would continue the break in August as it was originally scheduled. I think also that in recognition of the welfare and well-being of our employees, if you think of what they have to do on the production line, wearing masks and all the constraints that they face, they really need a break. So in keeping with that priority, we felt that it was very important to give them that break.

Is that clear, Monica?

Okay. It's fair enough. Just a follow-up on 2021, which is well settled to show, in my view, a strong growth. Also in terms of personalization, they were 22% if we exclude the lower personalization from the lower volumes. Do you think it will be reasonable to keep this pace, this level of personalization going ahead? Or maybe it could be more reasonable at 20%, 21%?

Hi Monica, Antonio answering. Our weight of personalization on revenues is pretty much depending on the mix of product that we sell. So Q2 was particularly high basically because the volumes were relatively low, and we had a relatively high impact of the Monzas. Going forward, I would not bet on this remaining as high as it has been in Q2 for the good reason that, as I said, it has been particularly impacted by the volumes that we had: that on the one hand, reduced the total [personalizations] (added by company after the call) volumes, on the other inflated their percentage weight.

The next question comes from the line of Martino De Ambroggi from Equita.

Thank you. Good morning. Good afternoon, everybody. The first question is on the EBIT bridge referring to the price/mix. How will it evolve in the second half? And what has changed taking into account the SF90 Stradale delay? And what's the visibility for next year on price/mix based on the order backlog, which is building up with a vibrant demand, as you mentioned?

Hi Martino, this is Antonio. Looking forward, we expect a positive from the SF90 Stradale hitting the market. So particularly Q4 and next year.

And this is supported by the order backlog apart from the SF90 Stradale?

Yes. Yes, it's definitely supported by the order book, where I think we said it back in May, the higher-margin products and those that generally have higher personalization levels are the ones with the highest waiting lists. Does that help you?

Yes. Yes. And on Formula 1, one more question. Am I right in assuming that your guidance factors in 18 races for the current year?

No, it's less than that.

And is there an official figure? Or...

So far, the official calendar is 13 races. We will see what F1 and FIA does in terms of announcing further races. But today, it's only 13 that takes us through the end of September, early October.

Okay. So this is the assumption underlying your guidance.

No, but somewhere in the middle.

Okay. Okay. And sponsorship, commercial and brands in the second half could be just slightly higher on what you recorded in the first half?

No, because essentially, we accrue [revenues from F1] (added by company after the call) based on the number of races we anticipate for the year. So the hit on our commercial revenues and sponsorship will be there.

The next question comes from the line of Thomas Besson from Kepler Cheuvreux.

I have 2 quick question, please. Can you comment on the 2 portions of the business we haven't discussed yet, which namely would be spare parts and engines? And just discuss how specifically the spare parts business developed? Whether you've managed to eventually help your customers and whether this is impacting at all the margins on a quarterly basis when it moves? And just remind us the trajectory to lower levels for engines and the impacts it has?

In terms of the engines, it's just a reflection of the orders we receive from Maserati. So there was a significant decline, and we'll see what happens in the second half.

In terms of spare parts, it's sort of holding up. In fact, whilst the service centers were open, a number of clients sent in their cars to be serviced. So spare parts is certainly not a hindrance to our P&L, if I can put it that way.

Okay. Very clear. Can I ask maybe a candid question? Looking at competition, it seems that you're gaining share substantially even with the numbers you find weak. I mean, how much of that trend, how long can that last? Do you think we're going to see other luxury cars than Ferraris still in 5 years' time? Or you're going to have taken the entire market?

I don't have a crystal ball. I think we clearly have competitive advantages. I'm encouraged that some of our competitors are focusing on price rather than volume, which clearly is good for us. But we like strong competition, keeps us on our toes.

Okay. I have a last one, if I may squeeze it. You sometimes give us the number of Monza, you managed to ship in the quarter. Can you share that number with us for Q2 versus Q1? And whether you've been able to privilege that vehicle eventually versus others in the quarter?

Yes, you asked me the same question in the first quarter. So first quarter was around 40. Second quarter was just less than 30.

The next question comes from the line of Stephen Reitman from Societe Generale.

I think probably the most positive things coming out of this call has clearly been the strength of your order book, which was, I guess, the questions we were asked most about since first quarter. Could you comment really on the waiting times? And I think you mentioned before that the SF90 Stradale, a couple of calls ago, you said it had about an 18-month waiting time, given the delay as well. What has been the development there? And also, on the other models as well?

I can't give you a specific number, but it's significantly higher than the 18 months that we had mentioned. So clearly, we need to ramp up production to bring that down because it's reached a level that, in our eyes, is a bit too high.

And you mentioned as well that residual values are now affirming as the retail points reopen. Can you give us some kind of idea of the cadence of the movement?

It varies by markets. In most instances, it's quite stable. Again, varies by market, by model, age, et cetera. But apples-to-apples, it's up single digits in many places.

There are no further questions at this time. And I would like to hand over to Nicoletta Russo for closing remarks. Please go ahead.

Thank you, Nadia. And thank you, everyone, who have joined us today. The IR team will be soon available to answer any follow-up you may have. Thank you, everyone, and we wish you a lovely rest of the day. Bye-bye.

Good bye, everyone. Have a pleasant summer.

That does conclude our conference for today. Thank you for participating. You may all disconnect. Have a nice day. Dear speakers, please stand by.