Ferrari NV (RACE) 2023 Q4 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Ferrari 2023 Full Year Results Conference Call and Webcast. (Operator Instructions) Please note that today's conference is being recorded. I would now like to turn the conference over to your speaker, Nicoletta Russo, Head of Investor Relations. Please go ahead.

Thank you and welcome to everyone who is joining us. Today, we plan to cover the group's full year 2023 operating results and 2024 guidance, and the duration of the call is expected to be around 60 minutes. Today's call will be hosted by the Group CEO, Mr. Benedetto Vigna; and Group CFO, Mr. Antonio Picca Piccon. All relevant materials are available in the Investors section of the Ferrari corporate website. 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 said, I'd like to turn the call over to Benedetto.

Grazie, Nicoletta, and thank you, everyone, for joining us today. 2023 will be remembered as a year in which we accomplished many achievements, and we strengthened our brand across each of its 3 souls: racing, sports cars and lifestyle. For this, I would like to thank all the women and men of Ferrari for their outstanding work; all our clients for their continuous trust in our brand; and all our partners, suppliers, dealers and sponsors with whom we have continued to strengthen our relations.

Among the many achievements realized in 2023, I'd like to mention 3: the first, historic victory at Le Mans; the second is the 5 new model launches, further enriching our beautiful product offering, together with a variety of new clients' engagement experiences; and last but not least, the new iconic bag, the Maranello clutch, that stems out of a cooperation between colleagues in Maranello, belongs to sports cars team, and those in Milan of our lifestyle department.

These achievements are reflected in our record full year financial results across all metrics.

So let's start reviewing together a few key numbers of year 2023: revenues were at approximately EUR 6 billion; EBITDA at EUR 2.28 billion, with record yearly EBITDA margin of 38.2%; net profit, first in our history, well over EUR 1 billion threshold, with a remarkable net profit margin of 21%; and industrial free cash flow generation of approximately EUR 930 million, of which about EUR 800 million distributed to shareholders between dividends and share buyback.

And now, after the numbers, let's deep dive into our racing activities.

Winning the 24 Hours of Le Mans was an unforgettable day for our history. I was there, and I will never forget June 11 afternoon because it saw our victorious return to the Top Class of the World Endurance Championship on the centenary of this legendary 24-hour race. The Ferrari 499P's win was a true team effort. Every area of our company worked together to contribute to our Hypercar's success, and I'm really proud of everyone. As we say, we are and we act as One Ferrari.

In Formula 1, we fought till the very last race, even though the last season has been a difficult one, often short on satisfaction. We know we must continue to work tirelessly to return to the level that our tifosi rightly expect of us, and we look forward to it.

The continuous will to progress and strive for excellence in racing and everything we do testify our effort and our willingness to always push the boundaries of technology and innovation audaciously.

And this leads me to the achievements we reached in our sports cars.

In 2023, we unveiled 5 new models out of the 15 models announced at 2022 Capital Markets Day: 3 models for the road, the Roma Spider, the SF90 XX Stradale and SF90 XX Spider, they all raise the bar of technology and design still further to meet and exceed the desires of our clients; and 2 models for the track. During the Finali Mondiali at the Mugello Circuit last quarter, we unveiled the 296 Challenge and the 499P Modificata, both of which will set new benchmarks in track driving thrills for our most passionate tracing clients.

Consistently and coherently, we follow our strategy of "different Ferrari for different moments, and different Ferrari for different ferraristi".

This year, we continued to engage with our clients with many experiences on the road and on the track. I refer to unique and truly engaging occasions such as the Finali Mondiali, our Cavalcades, the Legacy Tours, our Legacy Tours, to mention just a few of them. These are all experiences which continue to bond our community even further and evoke a true sense of belonging. These exclusive events enable our clients, our tifosi and enthusiasts to interact with the brand and live experiences together.

2023 has been a year of learning for our lifestyle activities, which have shown positive indicators, among which improved retail performances, successful activations in conjunction -- and this is really key, in conjunction with racing and brand events and record museums' visitors. In fact, 740,000 brand lovers visited our museums in Maranello and Modena in the year, almost 20% more people than 1 year ago, confirming the strength of the brand and the passion of our community.

Throughout all the years -- throughout 2023, we have also done relevant progresses in our carbon-neutrality journey. Indeed, we reduced our Scope 1 and Scope 2 emissions by 7% in 2023 and by 16% versus 2021. We built our first prototype engine from recycled aluminum. We also installed solar panels, providing an extra 2.4-megawatt peak power compared to last year. An additional 1-megawatt peak power will become available in the coming months from the Renewable Energy Community, the first-ever energy community in Italy to be backed by an industrial company for the benefit of its local area.

And this is only one demonstration of the moral obligation we feel to give back to local community.

All of these developments as well as the record results have been possible, thanks to the passion and dedication of all my colleagues. And to reward their achievement, in line with the company's strong performance indicators, I'm pleased to announce the yearly competitive award of up to nearly EUR 13,500 for all our employees.

We are also proud to mention the additional 4 welfare initiatives that we have announced last November 13: a broad-based share ownership plan for our 5,000-plus employees; the extension of health check-ups; the parenting support; as well as the 250 new hires. On top, we have also received the Equal Salary Certification on a global level for the first time, a result we can all be proud of.

2023 was characterized by global tensions, geopolitical conflicts, supply chain disruptions and cost inflation, all challenges we have learned a lot from. Our flexibility, our agility, together with the constant support of our clients and partners, allow us to look at 2024 with confidence. Such confidence also derives from the positive momentum that we continue to experience.

Notwithstanding the current challenging macroeconomic environment, the vitality of our business is once again confirmed by the order book on current models, which remain strong across all geographies and covers the entire 2025.

During last months, I've been visiting several dealerships in Europe, U.S.A., in different countries in Asia, and I can tell you that the traction of our brand is really strong. You can really breathe it. When you meet our clients into the dealership and you see how they interact with our dealers, you can easily understand their strong attachment to our brand. Our dealerships are a great point of aggregation for our clients, and events organized by our dealers help to give a boost to the spontaneous aggregation of our loyal clients.

Residual values remain sound, with different dynamics in the regions and normalizing from the peaks registered in the post-pandemic period when lack of new products boosted them.

The visibility granted by the order book give us the confidence to look at the future but, at the same time, we need to keep always 4 wheels on the ground. Confident humility and will to progress have been, are and will be our North Star during the execution of our business plan.

Following an initial phase of our business plan characterized by revenues and profitability expansion, in 2024, we continue to grow our top line while consolidating percentage margins, which we expect to further expand towards the end of the current business plan.

The record result of 2023, the exceptional visibility on our order book and the extraordinary performance of our business allow us to look at the high end of the 2026 targets with stronger confidence.

But beyond the cold numbers, what to expect in 2024 from us?

In racing, our DNA, we will compete at the top in Formula 1 and Endurance. We have recently confirmed the World Endurance Championship teams. And in Formula 1, we have reinforced the technical team and expanded the manufacturing area, which is already up and running. And, during the last weekend, we won 24 Hours of Daytona in GTD Pro Class with our 296 GT3 car, definitely a great start to the 296's career. On top, we have just announced that we are expanding our presence in the racing world with the intention of setting records also by racing on the seas of the entire world.

In sports cars, we will inaugurate the e-building in June, exactly 2 years later than the last Capital Markets Day. We will further enrich the product offering with 3 new model launches, and we will continue to enhance our client experiences, both on track and on road, not only on brand-new cars, but also taking care of ferraristi owning pre-owned models with tailored events. In our history, we crafted about 250 different models of Ferrari and, for us, they are all equally important. They are all our kids.

In lifestyle, 2024 will be a year of progress, with an array of activities designed to build the scale while elevating and expanding visibility.

Among our priorities, we continue to focus on our carbon-neutrality journey, which is further boosted by the ultimate goal to shut down the trigenerator within the next 18 months.

We look ahead at 2024 with energy, agility and confident humility, but above all, with enthusiasm for the new exciting challenges in front of us.

And now I hand over to Antonio to review the 2023 results and 2024 guidance.

Thank you, Benedetto, and good morning or afternoon to everyone joining us today.

Starting on Page 7, we present the highlights of the results for the entire 2023. As Benedetto just mentioned, 2023 was another record year for our company, with all financial metrics once again growing double-digit and with a significant margin expansion of 3 percentage points at the EBIT level and even more at the EBITDA level.

Even if our 4-year plan from the last Capital Markets Day is rather front-loaded by design, such results went beyond our initial expectations, considering the modest shipments increase and inflation headwind affecting our input costs. A visible real-life application of the obsession to privilege value upon volume and to control allocations to promote exclusivity.

Let's dive into the details to try and shed some light on our path forward.

Our strong business performance in 2023 was sustained by 3 main factors: a rich product mix per se, further emphasized by a surprisingly strong personalization uptick, coupled with a favorable country mix.

This led to: revenues up 17%; adjusted EBITDA growing roughly 28.5%, that is EUR 500 million, with a very solid margin standing at 38.2%; adjusted EBIT up approximately 32%, with a yearly record 27.1% margin; net profit of EUR 1.26 billion, leading to an adjusted diluted earnings per share of EUR 6.9 from less than EUR 5.1 last year. Of a particular note was the industrial free cash flow generation, which reached EUR 932 million.

Moving to Page 8, you can see the details of the full year shipments.

In the year, deliveries increased less than 450 units after 2 post-pandemic years of strong double-digit increase.

As usual, geographies reflect our choices of volume and product allocation in the different markets. EMEA and the Americas were up versus prior year, representing more than 70% of our total shipments; Rest of APAC was almost flat at 17%; and Mainland China, Hong Kong and Taiwan reduced their share by few tens of units to 11%, in line with our long-term targets for this area, considering its relative youth and evident dilution impact on our percentage margins.

Shifting to the product. The most significant change in the year was the doubling of the hybrid share to 44% of the total volumes, underpinned by the growth of the SF90 and 296 families.

The highly anticipated Purosangue ramped up during the second half of the year to finally reach its cruising altitude in 2024. The Roma Spider, which was unveiled in the first quarter, already commenced deliveries in the last quarter of 2023.

Special Series, represented by the 812 Competizione family, increased compared to 1 year ago, thanks to the deliveries of the Aperta version, while the Daytona SP3 shipments continued according to our plans, between 30 and 40 units per quarter. Lastly, in the year, the F8 family concluded its lifecycle, while the Portofino M was also approaching its end.

On Page 9, you can see the net revenue bridge posting a robust 17% growth versus prior year, also at constant currency.

The increase in cars and spare parts was evidently the main contributor, driven by the richer mix, personalizations, pricing and slightly higher volumes.

Price increases during the year were differentiated by product and geography, in accordance with the decisions taken in the second half of 2022 to protect our margins from the surge of inflation.

Personalizations continued to strengthen. And in the last quarter, we witnessed a consolidation of the trend registered in the first 9 months. In 2023, personalizations stood at approximately 19% in proportion to revenues from cars and spare parts, mainly driven by paints, liveries and the use of carbon.

Sponsorship, commercial and brand reflected higher sponsorships, including Formula 1 and World Endurance Championship racing activities, higher Formula 1 commercial revenues and the better ranking achieved in 2022 compared to 2021, as well as the growing contribution from lifestyle activities.

Engines revenues declined in line with the reduction of supplies to Maserati, whose contract expired at the end of 2023. Therefore, from the first quarter 2024 onward, any residual contribution from the sales of engines to third parties, whether for sports cars or racing, will be reported in the bar named Other.

Currency had a small negative net impact, mainly reflecting the opposite dynamics of the U.S. dollar, Japanese yen and Chinese yuan.

Moving to Page 10, the change in adjusted EBIT is explained by the following variances:

volume, positive and reflecting the limited increase in shipments;

mix and price, also positive and very strong, for EUR 461 million, thanks to very favorable product mix sustained by the Daytona SP3, the 812 Competizione and the SF90 families;

country mix, driven by the Americas and Mainland China, Hong Kong and Taiwan despite the small decrease in deliveries in the year;

and to the increased contribution from personalizations and pricing.

Industrial and R&D expenses grew EUR 166 million mainly due to higher depreciation and amortization, cost inflation and higher Formula 1 expenses.

SG&A were negative for EUR 43 million, mainly reflecting the continuous development of the company's digital infrastructure and organization. In addition, we kept on adding resources to enhance our brand investments, which encompass all our marketing, lifestyle and other initiatives designed to enhance the brand recognition among clients.

Other was positive for EUR 81 million, combining higher Formula 1 commercial revenues as well as better ranking in 2022 versus 2021, new sponsorships, higher contribution from lifestyle activities and certain releases of provisions already discussed during the year.

The total net impact of currency was positive for EUR 15 million.

With the positive net support of these variances, we reached the yearly records of EBITDA and EBIT margins that we commented.

Turning to Page 11, our industrial free cash flow generation was remarkable in the year, reaching EUR 932 million, reflecting the increased profitability, partially offset by financial charges and taxes, and most of all: (i) capital expenditure for EUR 869 million, increased in line with the pace of development of our products and infrastructure;

(ii) the already flagged significant increase in net working capital, which reflects both the inventory expansion built to protect our delivery plans and the enriched product mix.

Net industrial debt at the end of December improved below the EUR 100 million mark, reflecting the robust industrial free cash flow generation, partially offset by our initiatives to reward shareholders. Dividends and buybacks were worth approximately EUR 800 million altogether, implying a distribution of roughly 85% of the industrial free cash flow generation.

Finally, let's move to Page 12.

Building upon the visibility we enjoy, we outline the guidance for 2024 as a further solid step towards our target for the years to come.

Let me explain the drivers sustaining 2024 along the growth trajectory that we have designed:

On sports cars: product and country mix will be positive and much more relevant than volume, once again, with an increased contribution from the Daytona SP3 and a constant personalization rate.

Commercial revenues from racing in Formula 1 will be affected by the lower ranking achieved in 2023 compared to 2022, despite a higher number of races in the 2024 calendar.

Lifestyle activities will continue to increase their support to the top line, while investing a larger share of resources to speed up the pace of development.

Cost inflation is expected to persist through the supply chain.

And SG&A will increase in line with revenues due to continuing brand investments and digital development.

The above will contribute to the further profitability expansion while we expect inflation, brand and infrastructural expenses as well as increased Formula 1 spending due to the higher budget caps to flatten our percentage margins in line with 2023.

The industrial free cash flow generation will be sustained by our profitability, partially offset by capital expenditure of approximately EUR 950 million, as many projects will enter in their advanced stage of development; a still a negative change in working capital, in its broader meaning, mainly due to lower net advances collected from clients; and increased tax payments, proportional to the growth of our income in 2023.

The underlying assumption on the U.S. dollar exchange rate is that it will fluctuate around 1.1, implying a negative FX impact compared to 2023, including hedges.

That said, we are obviously conscious of the stronger business performance recorded so far, despite the higher cost inflation. Such performance has been driven by the product mix, which will remain rich over the business plan and has been further enhanced by both the actions on pricing and the exceptional demand for personalizations.

For sure, we continue to stay focused on pricing and product enrichment. And reassured by the visibility granted by our order book, we affirm the confidence into the high end of our 2026 targets, as Benedetto just said.

I thank you for your attention, and I'll now turn the call over to Nicoletta.

Thank you, Antonio. We are now ready to open the Q&A session.

(Operator Instructions) We are now going to proceed with our first question, and the questions come from the line of John Murphy from Bank of America Securities.

Hey, good morning. This is John Babcock, actually, on the line for John Murphy. Just quickly, you talked about doubling the hybrid share from 2022 to 2023 from 22% of shipments to 44%. Out of curiosity, do hybrids tend to be favorable for mix? And then also, can you talk about what the customer reception has been to hybrid engines and if this is something they're asking for?

Okay. I will comment about this. Yes, it's true we doubled our share of hybrid. This justifies that we are able, in Ferrari, to use the technology in a way that is unique. Coming back to the specific question, I would say 2 points. Number one, the profile of the customer using this technology is not so much different from the one using a thermal traditional car. And number two, profit-wise, we are saying the same ballpark as all the other cars. For us, each car is a business initiative, and all of them have to deliver according to our standards.

Okay. I appreciate that. And then also, just given what's going on in the Red Sea, could you just quickly discuss if this was creating any challenges for Ferrari?

A challenge in the Red Sea? Basically, we don't see it at all. We double-checked with our suppliers. There is nothing that is impacting us. So no impact on our production or deliver of cars.

Okay. That's great to hear. All right. That's all I have for now. Thank you.

We are now going to proceed with our next question, and the questions come from the line of Michael Binetti from Evercore ISI.

Hey, guys. Congrats on finishing up a terrific year. Thanks for taking our questions here. I guess, first off, could you, Antonio, could you give a little context around the guidance for free cash flow lower this year? I'm wondering if there's an acceleration in some of the development spend? And maybe any delta in the deposits for supercars included in the free cash flow outlook or excluded?

And then on personalizations, maybe just a little bit on the strategy there going forward. After a really good year on personalizations last year, is there an opportunity to take some pricing to help offset some of the cost increases that you're seeing across the business there?

Hi Michael, I'll take the second one, the FCF-related question, Antonio will elaborate. So yes, the personalizations, I mean, we are a luxury company. Of course, we have to do that. Personalizations is an important vector of growth for us. And it offers also an opportunity for pricing up. And we started this year to review the price up in the mid-digit areas. So personalizations is important, yes; two, we are going to touch the price for this important dimension. The free cash flow, yes, Antonio?

Yes. I'll try and explain the 3 reasons. The first is clerical. We're just paying more taxes. The second one is: we are spending more on CapEx. EUR 950 million is what we have in mind for the year. And this is just because we have products that are now very close to their launch - a number of products. And the third is the deposits cycle. This is just timing basically. I mean, we've collected quite a bit in 2022 and 2023. We have kind of net reversal and, in addition, some new advances collection in 2024. But the impact overall is negative, modestly negative.

Okay, okay. And I guess, if I could squeeze one more in. With, I guess, with the e-building still on track for midyear, Benedetto, can you tell us how, what we'll see early on as far as you guys start to commercialize that? What are some of the first things we'll see from outside of the company as you guys start to look to commercialize that?

This morning, me and Antonio were in the e-building. So we are on track. It will be up and running starting this June. And this will be a place where we will assemble not only electric cars. Electric car, as you know, will be ready and we are on track for Q4 2025. So also in the electrification journey, we are fully on track with our plan.

Thank you, Benedetto.

Thank you, Michael.

We are now going to proceed with our next question, and the questions come from the line of Susy Tibaldi from UBS.

Hello, good afternoon. I have 3, I'll ask one at a time. So first one on the demand. Within the luxury sector, we are seeing some softening of demand, but it appears that the higher end exposed to the wealthier cohort is still doing extremely well. And it seems also from your opening remarks that, based on residual values, some feedback from dealers, you're not really seeing anything. But just to double check, is the economic picture at the moment having any impact at all on the Ferrari customer? Is there any comment, any additional color you can provide?

Look, as we said in the call, myself and also was Antonio, the demand: our order book is very strong. It goes well into 2025, till the end of 2025 and, in some cases, even more. We do not see any negative signal, particular negative signal on this topic. We keep, let's say, doing as planned.

Clearly, in our client base, there is not an impact in any kind, in any respect. So this is, if you want also, I can give you a bit more color. We have been, we had the Dealer Annual Meeting end of November, we have also, we have been visiting several dealerships in U.S.A., in Asia, in different countries in Europe, and there is really a strong traction towards our brand.

Thanks. On the margin guidance for 2024, which basically implies flattish margin, I wanted to understand if your core cars and spare parts business is also seeing flattish margins. Or perhaps that core business is seeing some underlying improvement but then is offset by the dilution of some of the other segments where you are choosing to invest a little bit more? So it would be quite interesting to understand the dynamics in your various segments.

This is for Antonio.

That impacted the explanation, Susy. I'll try and explain it. So our product mix and personalizations are obviously improving but we expect the cost base below that to impact us and to flatten the margins. If we wish, within the cost of goods sold, it is just the budget cap, which is growing - on the F1 racing activities - that is growing year after year and that's biting into the high/upper side of the P&L.

Okay. And the last question, for 2024, when we think about the phasing, is it fair to assume that the year is going to be a little bit more front-end loaded given the mix evolution? Or is it going to be quite similar quarter-on-quarter?

I don't see a significant difference yet. And there might be nuances, but not significant change, no significant changes. Usually, Q4 remains slightly softer, particularly in terms of volume allocations. But as of now, nothing to flag. That's it. I said the fourth quarter, not the first, sorry.

We are now going to proceed with our next question, and the questions come from the line of Stephen Reitman from Societe Generale.

Yes, good afternoon. Again, congratulations for the very strong result. Also, congratulate you also on the quality of the result. We certainly noticed that the positive impact from R&D capitalization was a little bit lower in 2023 than in 2022 or '21. So points to the higher quality there as well, I think.

A question, you mentioned about the Purosangue has now gotten to a cruising speed in terms of production. Does that suggest that we are on track to see that reach the 20% of the sort of annual sales? Because it looks like in 2023, it was only in the hundreds. So there would be a considerable ramp-up. And if you could comment on what the personalization levels are looking like. I imagine that people are paying a lot of money in terms of personalizations in order to secure build slots as well for these in terms of -- to make their orders attractive.

And secondly, if you could comment on China. You did mention that you are strategically looking at that market in terms of also managing it in terms of the margin implication on sales in China. But I think there was an expectation that sales were going to maybe increase a little bit in the fourth quarter because they'd be deferred from the third quarter in 2023, but we actually saw quite a big drop in the fourth quarter. So I'm just wondering if you could say are there any issues about sort of like the demand in that market as well?

Thank you, Stephen. Thank you also for your the congratulations that we will pass to all the team that made it possible. Coming back to the story of the Purosangue, in 2023, we shipped a few hundreds Purosangue. In 2024, we will be at a cruising speed, that is 20% of the total. So basically, your assumption, your calculation are pretty in line with our plan.

The personalization...

But if I may, Benedetto, just to complete on that. I wouldn't focus on 20% of each single year. We said 20% of the yearly sales on average when we communicated around the Capital Markets Day. So, don't take us as mathematically driven, even if Benedetto is a mathematician.

Yes, we are not that much. A physicist, not a mathematician.

Apologies Benedetto.

No, look, the story of Purosangue's personalizations, Stephen, clearly, the Purosangue offers a lot of degree of personalizations. We see clients that are looking at the rims, the liveries, the painting, the roof. So there are some opportunities over there. And last year, we have been working a lot to strengthen our supply chain for all the personalizations that the car is offering to the client.

The second question was about China. Well, China, for us, I would like to say that there are 3 words about China. The number one, for us, it's a young market. Young market, it means that the number of cars that we shipped to this market is not so many. It means, the market is very young. We have to let it to grow with the right speed to avoid, let me say, indigestions, okay?

The second, it's a niche market, still. Because if you make the math, we are talking about 1,200 cars. It is written in the chart. We have slightly decreased this year, but we are talking about a decrease in the range of a few tens of units that since the market is small, it may look a few percent over there.

And then the number three, we said since the beginning that we will keep China, let's say, around 10% because it is not margin-accretive. But again, it's important that in each country, as our history testifies, we let grow the attachment to the brand with the right speed. Because if you grow too fast, the clients don't get used to what is Ferrari, which is what we've done in all other countries, and this is what we intend to do also in China.

Thank you.

Thank you.

We are now going to proceed with our next question, and the questions come from the line of Tom Narayan from RBC Capital Markets.

Yes. Thanks for taking the question. A question on the strong plug-in hybrid performance. Just curious if you could extrapolate that for the eventual BEVs, full electric that you plan to sell. Is there really a translation there to say that consumer demand with plug-in hybrids could potentially mean that this cohort would be interested in full electrics? Or are those buying the plug-in hybrids just across the board, similar to your existing portfolio of customers?

Look, we posed ourselves many times this question. We've been talking to our clients, direct or indirect, and into the dealers. I don't think there is any extrapolation possible in this respect. I believe that we will have clients that will only take the "red" car, the ICE. We'll have a client that will take ICE and hybrid, as today. We will have clients that will get in our family only because we have the electric car.

So I believe that, you know, we see very often that the answer is that I need electric cars because I need to go in a place they'll not be allowed by regulations. So I think any combination of these 3 colors, red, the blue and the green, is going to be possible. And I don't think that the hybrid cars is an extrapolation.

The only thing we take as a lesson is that, I mean looking at what happened in 2023, that there is always a way to use technology in a unique way, in the Ferrari way, that also client skeptical at the beginning of hybrid turned to the hybrid. This is the point.

I remember once, I had breakfast with a client that was skeptical about the hybrid. And then he went to try it, and he bought the hybrid. And this is pretty common. So this is a confirmation that our strategy to keep alive the 3 colors, the red, the blue and the green, is the right one.

Okay, thank you. And my follow-up, obviously, everyone really interested in your guys' electrification journey that will happen. Just curious if we can expect Capital Markets events for investors, and for ourselves as well, coming up this year potentially or next year?

Well, this year, for sure, not. We are working for next year. But not for sure for this year. Only one point, the electrification journey, not "will happening". It already started to happen since a while. So this is important. So this is the key message we passed on the Capital Markets Day 2 years ago. We are already on the electrification journey since a few years.

Understood, thank you.

We are now going to proceed with our next question, and the questions come from the line of Thomas Besson from Kepler Cheuvreux.

We are now going to proceed with our next question, and the questions come from the line of Henning Cosman from Barclays.

Yeah, hi. Good afternoon. Thank you very much for taking the question. Interesting that you're emphasizing price and personalizations so much. I'm not sure I understood you correctly, Benedetto. Did you say you would raise price in the mid-single-digit percentage range on personalizations specifically? If you could just confirm that. And if you would also...

Confirmed. Yes.

Yes, right. And on pricing, in general, are you willing to make some comments there? I think we recently talked a bit about the commercial opportunities on pricing in general, not just on the personalizations. I know there's always the balance, of course, not upsetting your loyal customers who've been waiting for so long. But then again, you have opportunities because the order book is so long already, and you're virtually sold out. If you could update us on the commercial pricing opportunities there.

And then second question on personalizations. As I understood Antonio correctly, the exit rate of 2023 was 19%. If I'm not mistaken, you're guiding 18% for 2024. You typically have 3 months of visibility. So I was just wondering how it's trending into Q1, where, I believe, you have some degree of visibility already. Is it in line with the 18%? Or is it still on the level of the exit rate, if that's not too precise?

And then finally, third question on the Daytona. Antonio confirmed again in the opening remarks, 30 to 40 per quarter. I believe you sold around 150 so far out of the 600. So that would imply you still have 12 more quarters to sell worth of Daytonas. That seems pretty long. So I'm wondering if you would accelerate the Daytona volumes at some point so that it doesn't become such a long lifecycle.

Thank you. Personalizations, Daytona for Antonio. I take the ASP. So as I told you, the answer to the first question, yes, it's confirmed. We increased the price of the personalizations exactly like you understood. When it comes to the price of the car, don't forget that last year, throughout the year, we have been increasing the price. And it's also important that we consider that, on the other side, there is a client that has been, let me say, looking at Ferrari, and we have to behave properly when it comes to the pricing increase. We already executed, and we have to be respectful of our clients. While for personalizations and Daytona, Antonio, you can...

Sure. On personalizations, you got me right, meaning, in 2023, we were almost at 19%. And 2024 is based on an assumption that we'll maintain more or less that rate. Visibility, as of now, is in that direction. And the last question on Daytona, yes, you're right. We expect to grow there to move from 30-40 to approximately 60 per quarter next year.

Very good. Thank you so much.

You're welcome.

We are now going to proceed with our next question, and the questions come from Monica Bosio from Intesa Sanpaolo.

Good afternoon. I hope you can hear me. And thanks for taking my questions. The first one is on the EBITDA margin that you guided flattish for 2024. I understood that it is due to a cost base related to the production of more complex products. I can imagine that there is also a weight of the cost of labor. So I'm just wondering if you can give us some indication, what is the weight of the cost of labor on this flattish guidance? Any info could be useful for us.

The second question is on the lifestyle. In the preliminary remarks, Benedetto anticipated that you're expecting an increase in the lifestyle revenues. Can you please help us to figure out a growth rate for 2024?

And third question is on the advances from SF90 XX and Spider. I remember that in the last call, you said that you are going to collect advances on the car. I'm wondering if you can give us any indication on the amount and on the time frame across the year.

Thank you, Monica. Antonio will take 1 and 3, and then I will reply to your number 2.

Yes, apologies. I thought you would start. Anyway, on EBITDA margin, it's not due to the higher cost base actually or, better, it is not related to the additional complexity of the production. I mentioned basically 3 elements. One, cost inflation. Cost inflation is still there. It includes cost of labor. We have an agreement in place with trade unions for an increase year-over-year of 4%, which is embedded in these assumptions.

But even components and, generally speaking, its supply chain that is still embedding in current pricing the impact of the inflation, that has been going through the economy in the last 12 months. So that is an element, it's not the complexity.

The second one are expenses for brand development, including lifestyle, of course. We are investing to grow the business, that is impacting. And also, our digital infrastructure. Obviously, we are growing and we need to grow even in that respect, including a significant rejuvenation of what we currently use.

And the last element, which is biting into both cost of goods sold and R&D expenses in the P&L, are the expenses for the Formula 1. Since the budget cap, which was originally meant to decrease over time, is actually growing since it has been agreed among the various teams to index spending to inflation. So year-over-year, it's going negatively, okay?

Okay.

And in terms of your last question on the advances on the SF90, yes, we are collecting, we have not disclosed yet which are the targets. I just said year-over-year take into consideration that the difference will be negative, so 2024 smaller than 2023.

So Monica, for the lifestyle, let's say, 2023, 3 important things. Number one, we improved the retail performances because there is more traction towards our collection. Two, we saw there is a strong,--a successful activation when you have event in conjunction with our racing and brand event. And three, we had record museum visitors, around 750,000, which is a lot.

In 2024, if I have to define it, I define it as a year of progress because we have a list of activities that are aiming to build the scale and also to expand the network and, let me say, our network, while, if you want, we elevate the visibility of our brand. So it's a year where we are aiming to grow as well. And also, in this respect, we are in line with what we declared in June 2022 with our target to double this activity, the revenues of this activity, by 2026.

Okay. Very helpful. If I can add just a follow-up on the country mix. You said that the country mix will keep positive in 2024. I'm just wondering if it will be similar to the one seen in full year 2023.

Yes. I'd say, as of now, I wouldn't consider country mix being an additional positive in 2024. So it's more or less flattish.

Okay. Thank you.

Grazie.

We are now going to proceed with our next question, and the questions come from the line of George Galliers from Goldman Sachs.

Yeah. Good afternoon, and thank you for taking my questions. Obviously, one of the standouts of 2023 was the very strong price/mix. And if we look at your 5-year plan, you were targeting around a EUR 700 million improvement in EBIT from price/mix by 2026. We're only 2 years into the plan, and you've delivered close to 65% of that target. Obviously, on this call, you've been mentioning new initiatives around personalizations and pricing, and there are clearly still several important new launches to come. So is it fair to say there is a decent amount of upside to that original EUR 700 million that you flagged back at the CMD?

Second question was also relating to something you talked about at the CMD, which was how you were going to leverage partnerships to co-develop best-in-class solutions with respect to electrification. I was wondering if you could give us some insights into how those partnerships have evolved. Have there been any unanticipated challenges? And conversely, have there been any areas where your partners have really surprised you positively? And if yes, would you be able to give us any small examples or snippets?

Thank you, George. I'll take the second one, and the first one, I will ask Antonio to reply. So you remember very well, during Capital Markets Day, we clearly said we leverage the partnership for electrification, but also for other technologies. Because don't forget that we are making luxury cars and there is much more than simple electrification. We are doing lots of innovation also on hybrid cars, on thermal cars.

So having said that, we are having a positive surprise on the willingness of the partners to work with us. We have partners in different places going from new generation materials to new generation, let me say, advanced electronics to advanced display. And we are having, as I said, we are very positively surprised by all our partners. And we are working with partners in Asia, in U.S.A. and also in Europe.

I can mention the one -- that the 11th of April -- the one that we publicly released on the 11th of April was with Samsung for the next-generation cars. But there is another one I cannot mention. I can tell you that we are working also on the way material for the cars are realized. Because, as we said multiple times, carbon, the sustainability for us is important. We want to be carbon-neutral by end of this decade.

And we realized that to achieve our goal to go, to proceed along our way, we need to work with partners that are also involved in the material preparation. So very positive surprise across the globe, very happy both because I have regular meetings with them. We are happy on our side. They are also happy on their side. So Antonio, you for the mix.

Sure. On strong price/mix, I mean, if we compare with our assumption in the Capital Markets Day, you are right, we have been doing better. And I think we've flagged a number of times this year that personalizations particularly surprised us in terms of their strength. However, it's fair to say that even the cost base has been much higher than we would have expected. The positive, of course, is the fact that the improvement from personalizations and pricing has been such that allowed us to more than offset the impact of inflation.

Now if we look forward, is there an opportunity for an upside on personalizations? If the trend continues the way we have seen, potentially, yes, in terms of revenues. Whether this will flow through the P&L, it will very much depend on what happens to the cost base, exactly parallel with what happened in 2023.

Great. Thank you.

Due to time constraint and to keep the conference within the hour, we now end the question-and-answer session. I will now hand back to Mr. Benedetto Vigna, CEO, for closing remarks. Thank you.

Thank you. Thanks all of you for your time today and also for your questions. The strong 2023 result basically are the result of our strong brand desirability. And also, the confidence that we are having on this year and forward is thanks to the traction that our products have with all our clients. I wish you a good afternoon. And I thank you, together with all the Ferrari team here, for your attention and for your interest in our brand. Thank you so much.

Thank you, ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you, and have a good day.