Ferrari N.V. Common Shares

Good day and thank

you for standing by. Welcome to the Ferrari Q3 results 2024 conference call and webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please note that today's conference is being recorded. I would now like to have the conference of the chief speaker, Nicoletta Russo, head of investor relations. Please go ahead.

Thank you, Razia, and welcome to everyone who is joining us. Today, we plan to cover the group's operating results of the third quarter of 2024 and the duration of the call is expected to be around 60 minutes. Today's call will be hosted by the group CEO, Mr. Benedetto Vigna and group CFO, Mr. Antonio Picca Piccon. All relevant materials are available in the investor section of the Ferrari corporate website. At the end of the presentation, we will be available to answer your questions. Before we begin, let me remind you that any forward-looking statement 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. Before we begin, I would like to extend my gratitude to the incredible team at Ferrari for their hard work and dedication, to all our client and collectors for their ongoing trust in our brand, and to all our partners, suppliers, and dealers for the strong collaborations we have continued to build together. The stability of the Ferrari ecosystem resides on their spirit of cooperation, shared passion, and sense of belonging. Grazie a tutti. Thanks to all. We are continuing to execute our business plan in line with our trajectory. And Q3 was, once again, a quarter rich in achievements and strong financial results. Let's begin with a brief summary of these financial results. And then Antonio will provide all other details. Revenues, 1.6 billion euro, up 7% versus the previous year. A double digit grow in profitability, we've added approximately 470 million euro and debit margin of .4% sustained by the strength of the product mix and the continuing solid trend of personalization. A remarkable net profit of 375 million euro and industrial free cash flow generation of more than 360 million euro. Such figures continue to demonstrate strong execution and sustained growth. These results were accompanied by a continuous brand momentum. The order book, our order book has evolved as expected with the new Dodici Cylindric coupe and spider guiding the order intake, providing us with a remarkable rolling visibility well into 2026. The same positive sentiment has been confirmed by many of our dealers who attended the dealer annual meeting a couple of weeks ago here in Maranello in our new e-building. All our 170 plus dealers from all over the world came to this important event. And immediately after it, during the dinners, they reported a very favorable feedback across the board from recent product unveiling to customer engagement, from a clear, a consistent product and industrial strategy to increased openness and transparency, and of course, unique brand experiences. In this same location, in the e-building, during those days, we arranged the bespoke previews of the new supercars, the F80, for our collectors before displaying it to our broader racing community at Finale Mondiale. This model opens a new chapter in the history of our legendary supercars. The F80 will be produced in a limited run of just 799 examples, which have already been fully allocated to our collectors. It joins the iconic 288 GTO launched 40 years ago in 1984, F40, F50, Enzo and LaFerrari, in showcasing the very pinnacle of technology and performance. The F80 is the most powerful road car ever to come out of the factory's gate with a combined maximum power of 1,200 horsepower. It has become the new benchmark for innovation and engineering excellence from the latest generation V6 hybrid powertrain with the introduction of e-turbo to the four-wheel driving capability enabled by the electric front axle from the ultra-light carbon fiber chassis to the extreme aerodynamic solutions. And here I would like to praise the entire team here in Ferrari for this incredible masterpiece, marking the eighth model unveiled out of the 15 we promised at the 2022 Capital Market Day. So what is most striking about the F80? Firstly, it symbolizes our technological evolution, the significant transfer of technology from our racing world to the road. Today, both our Formula One and our 499P hypercars have turbo V6 IC engines with an hybrid system. So, it was a choice for us to transfer this powerful and advanced architecture into our newly born F80. Secondly, we are making a clear technology statement. More specifically, I refer to the following three key components of our F80, all developed and manufactured in our newly inaugurated building. One, the electric motors, the first to be developed, tested, and manufactured entirely by us. Two, the high voltage battery module conceived for very high power density and adopting a patented carbon fiber housing system to save weight. And three, the front axle, designed for high efficiency and incorporating two electric motors and inverters using silicon carbide transistors and integrated advanced decoupling system. What I just mentioned above underlines the progress that we are making in our electrification journey and our willingness to internalize core components. After the first hybrid F1 car of 2009, the Ferrari of 2013, and our six hybrid motors, F80 represents a key milestone in our electrification journey. And now after our amazingly beautiful and high performance Ferrari, let's switch gears to client activities. Q3 has been also quarter rich in many unique experiences such as our presence in Pebble Beach, where the T1 hosted many classic and new Ferraris, the Cavalcade Classic which attracted over 60 historic Ferraris and their owners to Italy, Friuli, Venice, and Giulia region, and Slovenia, and the Legacy Tour dedicated to owners of the iconic 280 GTO and our first supercar. And the Finale Mondiale, which saw the participation of more than 35,000 motorsport enthusiasts, clients, t-foss, sponsors, suppliers, and employees with their friends and families. Each event has been a resounding success bringing together our community to celebrate the Ferrari legacy and extraordinary experiences that define our brand. These opportunities for our international community together offer a unique platform for enthusiasts to immerse themselves in the Ferrari experience. They foster connection and create unforgettable memories that resonate with the true essence of the Prancing Horse, a shared passion and a strong sense of belonging. A Finale Mondiale is a good launch pad to our racing and lifestyle world. So let's start with the racing world. September 1st is a date that we will always remember because for the first time in Ferrari's history, we secured the two victories in the two championship, WC and F1 in a single day, as our victory in Austin came just a few hours after our win at the Grand Prix with the Scuderia Ferrari HP. I was in Monza and I can tell you that you cannot describe those emotions. You can only live them and you will never forget. In Formula One, the recent victories and improvements in Austin and Mexico City have provided us with the boost we need to continue to fight in the last few races of the championship. Always with the four wheels on the ground. The road till the end of Abu Dhabi is we will make all we can to fight till the very last lap. The recent racing and sport car event have also been occasions to showcase our renewed lifestyle dimension. Among the many activities, let me highlight our last collection shown during the Milan Fashion Week and that has been very, very well received. The strength of our brand is far more demonstrated by the record attendance at our museums. Two months in Q3 both so well above 100,000 visitors and year to date, we already passed the record of attendees of last year. And lastly, I want to mention another very important achievement of this quarter. Actually, it's a quantum leap toward our carbon neutrality target for 2030. We have switched off our three generation plant here in Maranello and we managed to do this three months earlier than we had previously planned. This means we no longer use gas to produce electricity in Maranello, replacing a significant proportion of our methane gas consumption with renewable energy sources. This will ensure us a 60% annual reduction in scope one and scope two CO2 emission compared to the 2021 base years. To conclude, we are conscious of the micro environment around us and we continue to monitor it very carefully. We are all fully committed to execute our strategy with a focus and determination, confident in our clients, our direction and opportunities that lie ahead of us and always keeping in mind the importance to be well grounded. And on this note, I hand over to Antonio to review the Q3-24 financial result. Antonio.

Grazie, Benedetto and good morning or afternoon to everyone joining us today. I start on page six with a quick glance at the highlights of the third quarter. The quarter posted strong financial results aligned with our target, once again, affirming this year's main drivers, product mix and personalizations. As previously communicated, volumes and mix also reflected our decisions to facilitate the company's transition to a new ERP. In this respect, I want to take this opportunity to extend my thanks to all the colleagues who have been a part of the company with this transition. In summary, shipments were a few units less than prior year while revenues were up 7%, adjusted EBITs up 10% with a .4% margin, adjusted EBITs increased 7% with a .8% margin, and such economic results led to a strong industrial free cash flow generation of more than 360 million euro. Moving to page seven, we review our shipments for the third quarter. The Puro Sangue, the Roma Spider and the 296 GTS drove the deliveries in the quarter. We also commenced the first deliveries of the SF90XX Spider and increased deliveries of the SF90XX Stradale. Allocations of the Daytona SP3 grew in the quarter compared to prior year in line with our plans and slightly sequentially lower than in the second quarter. Shipments of the A12 Competizione A decreased and were approaching the end of its life cycle while the A12 Competizione and the Roma phased out. As a result, the average share reached 55% in line with product cadence and mainly driven by the 296 GTS. As usual, our product allocations across the different regions were consistent with the product cycle and the developments observed in each respective market. On page eight, you can see the Net Revenues Bridge, which shows a 7% growth versus prior year at constant currency. The increasing cars and spare parts was driven by the richer product and country mix, as well as higher personalizations. In the quarter, personalizations were approximately 20% of total revenues from cars and spare parts, significantly supported by the Puro Sangue and the Daytona SP3. Sponsorship commercial and brand increased mainly thanks to new sponsorships related to our racing activities and largely driven by the new title sponsorship with HP. Currency, net of edges in place, had a negative net impact, mainly due to the adverse dynamics of the US dollar and Japanese yen versus the euro. Moving to page nine, the change in adjustability is explained by the following variances. First, volume, slightly negative, reflecting the lower deliveries. Second, mix in price, strongly positive, thanks to the enriched product mix sustained by the Daytona SP3 and the phase of ,499-P Modificata, the increased contribution for personalizations and a positive country mix, mainly supported by Americas. Third, industrial and R&D expenses positively contributed to lower DNA in line with certain models phase out. As the DNA increased and reflected the continuous initiatives in software and digital infrastructure, organizational development, as well as brand investments. Other, had a positive impact of 14 million euro, thanks to the combined effect of new sponsorships and lower costs due to revised Formula One in-season ranking assumptions in line with current constructor standings. Lastly, the total net impact of currency was negative for eight million euro. The EVDA margin was 38.8%, while the EBIT margin reached .4% and benefited from flatish DNA. Turning to page 10, in the third quarter, our industrial frequency generation reached 364 million euro, reflecting the increase in profitability, a positive contribution from networking capital provision and other, primarily driven by the inventory reduction at quarter end, partially offset by increased capital expenditures in line with the pace of development of our product and the new infrastructure in Maranello and largely driven by the new paint shop. Higher taxes due to a different cadence of balance payment. And the end of September, the net industrial debt position was 246 million euro after a share repurchase of 147 million euro. Moving to page 11, thanks to increased visibility, we look at 2024 guidance with increased confidence on all metrics. To conclude, this quarter's strong financial results, the exceptional reception of the new supercar F80, the high client attendance at our events and our fast order intake on the -dodgy-cylinder family along with the strong order book, all reinforce our confidence in executing our future plans with success. These achievements underscore the momentum we are building in our continued commitment to delivering value to our clients and stakeholders. I thank you for your attention and I now turn the call over to Nicoletta.

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

As a reminder to ask a question, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Once again, please press star one and one on your telephone and wait for your name to be announced. Thank you. We are now going to proceed with our first question and the questions come from the line of Thomas Persson

from Kepler Schifrup is asked a question. Hello, Thomas, your line is open. You may ask your question.

Sorry for that. It's

Thomas. Thanks for taking my question. I'll have two, please. I'd like to start with the F80. Can you give us an idea of the timeline for the first deliveries of this product and over which time period or how many quarters you intend to deliver it given its substantial price point and likely contribution? That's my first question. And the second question, I'd like to come back on the mixed gains in Q3. Could you discuss why it declined sequentially that much? Is it mainly due to sequentially lower data management or is there something else that explains the relatively low mixed gains? Thank you.

Thomas, take the first one. The second, Antonio, will be more specific. So F80, we start deliveries Q4-25, and we will go ahead for two to three years. So that's about F80. And the number of car we will ship is 799. The second one about the mix,

Antonio will comment. The sequential decline is due to the fact that the comparison with last year was based on the fact that both Ford Daytona SP3 and mid-impact and personalization last year was already high in Q3.

Okay,

thank you very much.

We are now going to proceed with our next question. The questions come from the line of John Murphy from Bank of America. Please ask a question.

Good afternoon, everybody. Just a question as you look at sort of the upcoming product launches. I mean, you got the F80, which is, you're very impressive, the Dolce & Gioia, the F80 is the first F80 in the century. I would imagine a successor to the Icona, the Daytona, the Porosango, a successor that will come in the next couple of years, and the EV hypercar. There's a lot at the high end here. It seems like it's very strong and will be well received. I mean, how do you think about positioning all this with your customers, and particularly the F80 as we kind of look at it, sort of somewhere between the Iconas and the EV hypercar that's coming?

Well, John, I think the question. Look, the supercar, as we said, is coming as the pinnacle of technology and performance. As I said also during a few minutes ago, this is a representative important step in our electrification journey, because it shows how this company, Ferrari, can manage some key components for the electric vehicle. So I think that in F80, there are a couple of important messages. One, Ferrari is able to do in hybrid world, as well in ICE world, it continues to be able to make you with very high level performances. Two, the roadmap, our product roadmap, is such that there is a continuous continuum between what we were doing in the past and what we are planning in the future. And I would say that this is unique strength for our company putting together the tradition and innovation. So F80, we are learning something in manufacturing that will be very beneficial also, not only for electric car of the future, but also for all other cars. So that is the importance of F80 in our roadmap.

But maybe just a thought, if you think about the EV hypercar or supercar, however you wanna use the terminology, will it be positioned above the F80 or adjacent to it, or below it as far as

right now? I am very curious. I would be in your shoes, I would be equally curious, but we are a luxury company and we want to keep the secrets and the serability a little bit for the future. Let's say, Q3, we already did F80. So let's wait a little bit, John. I understand you, but let's wait a little bit.

Okay, we love product. Just one follow-up. Is there the potential, there's a hyper focus right now in this quarter about volume declining, a lot of concerns in the luxury market, looking at all this great product coming. Benedetto, is it possible that you run this company with little to no volume growth and drive mix and scarcity to be even more Ferrari-like that would drive profits and margins higher in the future as opposed to needing volume growth? I mean, I think there's this real concern in the short run here around the volume decline.

This is a good question. I will take both points. Number one, I would like to remember to you and everyone that this is a company that is putting together two important dimensions. One is luxury and one is technology. And the second important point is that we always said we give a priority to the quality of revenues, not to the quantity. And this is also the way you have to read the evolution of our business plan. We don't want to push too much on the top line, but we want, and we always, as we always did and we plan to do, we want to give priority to the quality of the P&L.

Perfect, thank you very much.

Thank you, John.

We are now going to proceed with our next question. And the questions come from the line of George Calias from Goldman Sachs. Please ask your question.

Yeah, good afternoon and thank you for taking my questions. The first question I wanted to ask was just with respect to the guidance. Obviously you stated that you're increasingly confident in it, but at the low end, and I'm sure you'll do better than the low end, the implied EBIT for Q4 would be about 400 million, so lower sequentially than Q3. Could you just walk us through a few of the puts and takes as we think about the evolution of Q4 relative to Q3? The second question I had was with respect to some of the residual value developments we're seeing in certain used markets. I think it's quite notable that low mileage, relatively young 296s are actually trading at lower values than older FH Rebutas with higher mileage. Why do you think that is, and is that leading you to reconsider at all your pricing strategy or power exchange strategy as we go forward? Thank you.

I think the second one on residual values and the first one, Antonio, will elaborate. I would like to clarify a few things here about the residual value. First of all, the dynamics are not the same in all the countries. You are right, there is one country, UK, that is a little bit softer, but this is not true for other countries. What I can tell you that we keep monitoring what is happening on the residual value and we notice that, let me say, when there is a degree of personalization that is a little bit too high, well, clear the following buyer is not, in some cases, not willing to buy for personalization that pleased a lot the first buyers. So that's, I think, the two things you have to keep in mind. Number one, the pattern is not the same all over the world and two, it depends a little bit on the degree of personalization that the first buyers put on the Ferrari and that the second one is not willing to pay for something you did not choose. So this is about the residual value. The second one is

- Hi, Giorgio, on the guidance, please do not disregard the fact that the guidance uses the greater than language, that is, is open upward, okay? Then in Q4, we are anyway planning higher deliveries of the Daytona SP3 compared to prior year, but sequentially lower than the previous quarter. While in Q4, we have incremental OPEC, particularly related to racing activities and lifestyle and we are encompassing the expectation of persisting inflation and incremental DNA related to digital initiatives and lifestyle. So these are the main drivers for Q4, even if you look at that at the floor of the guidance end. But please do not disregard the language that we use on purpose.

Understood, thank you.

We are now going to proceed with our next question.

The questions come from the line of Adam Jonas from Morgan Stanley, please ask a question.

Hi, good afternoon, everybody. I'm gonna follow up on the implied 4Q guide, but for industrial free cash flow, where your language says up to 950 million, which would imply if I use 950, a fourth quarter year on year decline of industrial free cash flow of about 36%. So in addition to the factors you already mentioned, driving EBIT for the fourth quarter, Antonio, could you comment on maybe your outlook for a change of working capital or CAPEX that might be driving that type of year on year decline in free cash flow? And I have a follow up.

Thank you, Adam, for this question. I think it's important to comment. I think I've said already in the past few quarters, this year will be particularly strong in terms of capital expenditure. And I also said that the spending is more linear compared to what we were previously used to. And this is essentially because our expenditure for the infrastructural development, including the E-building in the first part of the year, and then the new paint shop from the second quarter on is gonna have an impact. So this is biting into the cash flow for the full year. The second element is obviously that in this condition, so I do not expect working capital to help generating significantly while we obviously have higher taxes in consideration of the higher results that we expect to achieve. Hope this helps.

It does, Antonio, thank you. And just as a follow up on SG&A increased two times faster than revenue this quarter. Again, you highlighted some of the reasons including the digital journey, ERP integration, et cetera. I just, any outlook on forward SG&A of how much farther this temporarily bulge in SG&A, which kind of reversed a multi-year decline at SG&A's percentage of sales. How much longer that might continue if you wanna describe that in either dollar terms or percentage terms.

Thanks. No, there is an element which is structural. The fact that we the current accounting principles, expenditure for digital infrastructure, particularly for software, and when we use cloud, it's gonna be expensed to the P&L directly. So this is a change that occurred a couple of years ago already. And as we grow in this respect with updating our digital infrastructure, it is gonna be an addition to the SG&A spending that we are used

to. Does it make sense? Thanks, Antonio, grazie. Prego.

We are now going to proceed with our next question. And the questions come from Alana Munica Bosio from Intesa, San Paolo. Please ask your question.

Yes, good afternoon, and thanks for taking my question. The first one is on the F80. Are you going to collect advances on the supercar? And if yes, when do you expect to account them? My second question is on the personalization rate, which was at 20% in the third quarter. I'm just curious, what is the average pricing increase embedded in your personalization compared to the previous years? And the third question is on the shipments. Obviously, you can allocate the shipments as you wish. It's a deliberate strategy. In China, shipments decreased a lot. I know that you keep it below the 10%, but I'm just wondering if you can give us a flavor on the consumer spending or on the willingness to buy in China as of now. If you can give us any color, it could be very helpful. Thank you.

Okay, so I will take the third one also because I was in China until a few hours ago. And Antonio will navigate you through to other questions. First of all, I appreciate when you underline the deliberate objective that we are using in our presentation. That's very, very important. Then coming specifically more to China, I think we have two different, I met all the five owners of the dealership that we have in China. And I can tell you that, let's say in China, they agree that the growing China Ferrari must be done in the right way with the right pace, in the sense that the strategy we highlighted of staying below 10% is the right one because they need to get acquainted with our brand. They do not see any particular negative signal because the order book is still around five quarters. We have some areas that are a little bit stronger than others. I can tell you that in that region that is reported as greater China, we have some different dynamics. One is going a little bit down, that is China. The other one is going up, that is Taiwan. So if you see, we have two different pattern over there. But clearly, I mean, we see attraction of some model in China, and we have to make sure that we provide to the Chinese market also the cars that are more fitting with the tax structure over there. Because the 12 cylinders is not so well, it's a little bit not so cheap in China. It can cost up to three times what the client will pay in Europe.

Yes, so this is about

China. The first two, Antonio F80. Monica,

yes, on the F80, yes, we'll collect advances on the F80, and this will start in 2025. On personalization, 20% in Q3. The average price increase of personalizations that we applied for this year was in line with inflation.

That's the exact. Okay, thank you very much. Thank you, Benedetto, and thank you, Antonio.

You're welcome, ciao, Monica.

We are now going to proceed with our next question. And the questions come from the line of Michael Binetti from EverCorp, he's asked a question.

Hey guys, good morning, thanks for taking our question. I guess with the Daytona moving into the later part of its life cycle over the next few quarters, if I assume, make some assumptions around how many units left to sell and generally spread those out, now that the units are starting to decelerate on a quarter over quarter basis, as we look out past the end of this year into the first half of next year, you'll have Daytona as a lower impact to the all-important average selling price per car before you start to shift the F80 in the fourth quarter. I'm wondering how you would tell us to think that you guys will strategically approach fighting that revenues per car compression in the first half of next year with those dynamics. And then, Benedetto, as you move more into electrification and the eventual full electric vehicle next year, how do you see the margins on an expanding portfolio of electrified cars influencing some of the historical targets you've given us, like the 40% EBITDA margin you laid out at the 2026 Capital Markets Day?

Thank you, Michael. I take the second, the first one, Antonio. So look, we have been doing what we said since the beginning. We intend in our plan, quality electrification, hybridization, combustion engine is in line with our plan. So you can use different objectives, but what we are doing is in line with our plan.

On the first one, you're right. The Daytona is gonna decelerate until, say, the third quarter of next year. That's what we could expect as of now. In terms of development of the mix, though, it also depends on the range cars and the specials that we have. In Q3, you've seen a few initial units of the XS, SF90XX starting. This will grow and the 12-cylinder will be added to the panel. So overall, the mix will be less dependent on the Daytona and a bit more diversified in terms of the product offering.

Okay, thanks a lot. Welcome. Thank you.

We are now going to proceed with our next question. And the questions come from the line of Tom Narayan from ROBC. Please ask your question.

Thanks for taking the question. The first one is just a housekeeping one, the ERP volume impacts. Just confirming that was pretty much done in Q3 and won't happen in Q4. And then did you guys disclose how many Daytonas were delivered in Q3? And then my second question is a follow-up to George's question on residual values. The one that comes up a lot is pure sangue. Obviously, it's probably too early to tell, but the fear here obviously is that it's a very different type of vehicle, maybe used for different purposes, more kind of utility as opposed to what other Ferraris are used for. So that potentially could impact the residual value. I'm sure it's something you've considered. Just love to hear any thoughts you have on how you plan to maintain the residual value of pure sangue.

Thank you. Tom, thank you. I take one and three and Antonio will take the second. So ERP transition has been concluded. So there is no impact in Q4. And by the way, you may remember that in the previous call, Antonio said that we anticipated some shipment just to make sure that the transition would have been a little, I mean, smoother. This was done always within the three months of Q3. When it comes to the residual value, if I take the pure sangue, your observation is right. That what we see is that some clients are using the pure sangue more than other cars. And I think that this is fitting also with, if you want the original position of the car, to allow the people to enjoy more the car together with more friends, with the family. So we do not have yet a lot of data coming from the client, but we expect to see a little bit more increased mileage of the pure sangue. On the other side, we see that the demand on the pure sangue is very, very strong, keeps very strong. And I can tell you that we receive more or less daily request of people from all over the world that want to have fun with our pure sangue. The second is Antonio. Yeah,

I think the only one remaining is the how many Daytona in Q3. Few units less than the previous quarter. So around 70, but I mean, it's not really the specific number that matters, as I said. It all depends also on the mix. And Q3 was particularly heavy in terms of the entry levels of our range cars.

Thank you. Welcome.

We are now going to proceed with our next question. And it comes from the line of Henning Kostman from Barclays. Please ask your question.

Good afternoon. Thank you very much. Perhaps the first one for Antonio. I'm still trying to reconcile Antonio that deliberately softer language with respect to the third quarter. I think by and large it's been a pretty strong quarter in terms of margin, in terms of mix. So, you know, I suppose I'm trying to get to what that implies for Q4. I mean, some of my colleagues have asked this already. But, you know, any more color you can give us on did it actually get better than you expect? Does this still determine a soft quarter in your opinion? I'm still a little bit confused. It ended up as weak as you thought it would be or if it actually turned out to be better.

If I can just on this one, then I don't know if you have other but maybe you try and clean the table of the question. I started explaining already in Q2 that in terms of unit Q3 would have been softer. And this is because with ERP you basically remain with your production and delivery stopped for some weeks. So in order to ease the transition, we decided to sell some few units more in the previous quarter and some less in Q3. Does it matter overall? Honestly, no. Obviously we arrange also the mix in order to have the quarter sufficiently strong overall from a revenue and margin perspective. It was just flagged because if you look at the units you see that those are lower than last year. But the units are in no way related to demand or whatever that is rather as common in theory. Deliberate decision.

Okay, thank you. And maybe one for Benedetto or perhaps both of you but just because Benedetto said it in his opening remarks that you are executing in line with the trajectory. Now, I think it's the first time we have the opportunity to speak to you again after the F80 release and at least compared to my expectations the economics seem to be even stronger and obviously 26 is going to be a year where you already take a lot of advantage of that vehicle. So in the context of the targets and 24 already being in the and at the end of the 26 range, you sort of put a bit more color around that again to what extent that is now in fact well ahead of the planned trajectory or in what way you would say this is still in line with the trajectory or at what point you may be considering to update us around these things. Thank you.

Thank you. Thank you, Henning. It's a good question. Yes, for sure. Let me say when we did the capital market day in June 22, we were not expecting such high level of personalization especially on something the carbon finish that is highly appreciated by the client on one side and also let me say a good personalization option for us to sell. So in that sense, if you want the bigger difference between what we planned and what we have seen is this one. Now for us to give a longer term, a long term view of where the company is heading in the next years. Well, H2 next year, we will have the capital market day and we will update all of you. But clearly, you know, you hear me always thanking the team as well as the client because all this has been possible thanks to the personalization that the client has been willing to take from us. Thank you, Bob. Thank you, Henning.

We are now going to proceed with our next question. The questions come from the line of Stephen Ritman from Bernstein. Please ask your question.

Yes, good afternoon. Thank you very much. I have a question about the F80 and some like special cars that you can do. We heard that when on the 17th of October, we heard that demand for the F80 had been about three times the level that you're actually going to be delivering. So very strong demand from your best customers and you can only satisfy a certain number of them. We also know that with the eFactory, the idea is not to increase the absolute level of production capacity, but give you more flexibility. And it strikes me that the time scale that you're producing the F80 is going to be quite small in two and a bit years maybe to deliver 799 cars. Does the eBuilding give you, is it because the building gives you more flexibility to do these kind of complex cars? And what does that say about your ability to make other kind of vehicles like this in the future? My second question is about the battery warranty that you're introducing on the hybrids, plug-in hybrids and obviously the BEV as well. Can you update us on what the take-up has been on this so far? Has it really been rolled out? Thank you very much.

Thank you, Stephen. Benedetta, I will take the two points. So the F80, as I said, is an important milestone for our electrification journey because for the first time in our history, we are going to do internal work with some components for all our electrification journey. As of today, if you look at our hybrid cars, well, we are buying from outside some components, while for F80, the key component, the axle, the motors, as well as the battery will be done in our eBuilding. And the eBuilding, you said it well, is not meant to increase the capacity, but it is meant to increase the technology flexibility because we want to leave the ultimate choice of the motorization, of the propulsion to the client. So I think this is very, very important. This goes hand in hand with our strategy to push, to keep alive the three platforms, the ICE, the hybrid, and to add the electric because you know, Stephen, for us it's not the electric transition. For us it's the electric addition. We want to add also the electric platform. And the eBuilding is the tool that will allow us, to masters, to give this flexibility and to leave the ultimate choice to our client. So this is about, let's say, the F80 and about our electrification journey. The second question was about the battery warranty. Well, we can tell you in this way that the people are always worried about something they don't know. And the battery is something that usually people don't know yet with the same level of depth like any other component of the car. We wanted, and we want, with this warranty that we started in July, we want to give the peace of mind to the client. It's still a little bit too early to see how many people are activating it, but I can tell you that the people that are taking it, and that was with people in China as well as people in the US, in Pebble Beach or during last week trip, they all appreciated the fact that we give them the peace of mind and we take care of the battery. That's a key point because the battery start to become something that, you know, more and more clients start to know. And I think this was a good, they appreciate because we listen to them. So this is good, but we can provide you more data in the next quarters. Thank you. Thank you, Stephen.

We are now going to proceed with our next question. The questions come from the line of Anthony Dick from Adobe HS. Please ask your question.

Yes, hi, thanks for taking the questions. So just some follow-ups on the shipments and the mix. I know shipment is not the main criteria, but still with all the impacts in Q3, the ERP, the factory shutdowns in the summer, is it fair to assume that shipments should go up in Q4, or is Q3 the kind of new normal here? And then on the mix, you mentioned the lower mix on the series cars in Q3 with more entry models. How do you think about this for Q4? And also, how do you think about Daytona SB3 deliveries in Q4? Should we still remain above the 60 unit run rate, or is that normalizing from next quarter? And then maybe just the last one on China. So obviously the market is a bit different here. I was just wondering if the current level of volumes for you is acceptable in China. Do you think supply and demand are well adjusted for you, or could you see further downside in the courses to come? Thank you.

I think the third one, Anthony, I leave the first and the second to Antonio. I believe that the level of volumes, it is acceptable. And let's say this is something that we've been discussing in detail with the dealer. So we don't see any strange pattern over there for the future.

On Q1, we expect Q4 units delivered to be higher than last year, and most likely lower than the previous quarter of this year. And on Q4, Daytona deliveries, those will be lower in line with what we commented about in a previous answer

given to one of your colleagues. Thank you. Will be anyway higher than last year. The Daytona.

We are now going to proceed with our next question.

And the questions come from the line over Michael Tindall from HSBC. Please ask your question.

Yeah, hi there. Thanks for taking my question. Just two, if I may. The first one just related to the F1 provision release. I just wonder if you can give us some context around the scale of that, just trying to understand what it means for the underlying business. And then the second one is a little bit more longer term. I'm guessing when you did the new ERP system, there was a cost-benefit analysis. Can you talk a bit about the benefits? I mean, I'm wondering perhaps what it means for working capital and what's the positive side of this ERP story? Thanks.

I think the second one and the first for F1, Antonio, will give an answer. Well, I think, you know, Michael, we had two ERP systems in the company and when you had to pass the data from sales to production, there was a little bit too much, you know, end the workload. So we will find for sure some efficiencies in SGA because believe me, there were two systems not talking the same language. So we expect some efficiencies. And one of the reasons why it took some weeks, several weeks to fix it is because really we were talking about two different generations of ERP with two different languages. The second question is... The F1

provision is around 10 million a day impact, so it's not huge. Okay, brilliant. Thank you very much.

Welcome.

Thank you. We are now going to proceed with our last question. The questions come from the line of Daniel Schwartz from Stifl. Please ask your question.

Thank you very much for taking my question. One is on potential tariffs. If the US would impose a 20% import tariff and the client already ordered the car, I assume the 20% would need to be fully paid by the customers. I guess that's difficult to say, but do you expect any impact on the order book? Maybe you're prepared to reallocate some products to other regions. And the second question is on R&D accounting. Q3 amortization declined and capitalization increased with a positive impact on earnings. Based on your launch schedule, do you expect this to reverse or to continue in coming quarters?

The first one is still difficult to say. It depends on the dimension of the tariff increase, whether there is an impact on the order book or not, and how this can be shared among the various parties in the game. On the capitalization rate increase, I think we commented already several times, this very much depends on the fact that expenses for innovation and Formula 1 are rather flat during the year, with some seasonality in specific quarters. And while most of our expenditure now is on development of new products, it's quite normal that we have a capitalization rate that is going to grow.

Does

it help?

Yeah, thank you.

Thank you. Thank you. We will now end the question and answer session here. I will now hand back to Benedetto Vignia for closing remarks.

Thank you for your time today and also for all your questions. These strong Q3 results and the continuous progress in our journey provide us with further confidence for the development of the years and the future. If you were here, I would invite you to take the cake for Antonio's birthday. On the cake it's written greater than. And then I wish you a good afternoon, a good morning, and thanks again for your attention.

Thank you.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.