Good day, and thank you for standing by. Welcome to the Ferrari 2022 Q1 Results Conference Call. [Operator Instructions]. I would now like to hand over the conference to your first speaker today, Nicoletta Russo. Nicoletta, please go ahead.

Thank you, Stephen, and welcome to everyone who is joining us. Today, we plan to cover the group's Q1 2022 operating results, 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 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.

Nicoletta. Thank you, everyone, for joining us today. I would like to start by thanking all the women, all the men in Ferrari for their passion and dedication, which has been essential to navigate the first months of this year. All of them contributed with their tireless effort in achieving the strong results that we are going to present today. Before addressing our results for the first quarter of '22, I would like to spend a few words on the current international scenario and ongoing conflict in Ukraine. While opening for a rapid return to dialogue and the peaceful resolution, our thoughts and support go out to those affected. Ferrari is playing its small part alongside the institution to bring relief to this situation. In relation to this ongoing crisis and its implication, our supply chain has continued to prove its resilience, guaranteeing a smooth production at our facilities. We have no doubt the current macroeconomic scenario is causing new challenge. However, our team in Ferrari, also with the support of our partners, have been able to manage this situation properly. That said, while we continue to monitor the current scenario on our supply chain, we have not been immune to inflation. However, this is limited to a portion of our cost base. In fact, we have seen some increase in energy and certain raw material cost, mainly aluminum and precious metals. But in light of this, we immediately took 2 actions to preserve our profitability: the first, in fall of last year, we apply a price increase across our current product range; the second, we just set the price positioning of our new models to adequately reflect our estimates on cost inflation. At the beginning of the year, we announced the new organizational structures achieved through both the promotion…

Thank you, Benedetto, and good morning or afternoon to everyone joining us today. Let's start on Page 7 with the highlights of this first quarter, a very strong start, actually, to the year with 2 or even 3-digit growth for all our KPIs. Shipments were 3,251 units, up more than 17% versus prior year. Group net revenues were €1.186 billion, up the same versus prior year. EBITDA reached €423 million, up 12.5% year-over-year with an EBITDA margin of 35.6%. This was lower compared to the extraordinary highs of last year since the exceptionally strong product mix of Q1 '21 in terms of gross margin recovering from 2020, was further emphasized by steel restrained costs. EBIT was €307 million, up 15.4% year-over-year. Net profit came in at €239 million, up 16.4% versus prior year, resulting in a diluted EPS of €1.29 compared to €1.11 in Q1 '21. The industrial free cash flow generation for the quarter was strong at €299 million, supported by the collection of the advances for the Daytona SP3 and the 812 Competizione A. Turning to Page 8. You can see the details of the Q1 shipments. From now on, we will show the breakdown of our shipments into ICEs and hybrids. As we already noted, the previous fleet based on the number of cylinders has become less and less meaningful. The product portfolio in the quarter included 8 thermal engine models and 2 hybrids, representing 83% and 17% of total shipments, respectively. As per our programs, our hybrid offer will be further enriched by the start of deliveries of the 296 GTB in the second quarter, while we continue to serve the impressive order book recorded for all our current range, including certain ICE models whose life cycle has been extended. Deliveries in the quarter were driven…

Thank you, Antonio. We are now ready to start the Q&A session. Stephen, I'll turn the call over to you.

[Operator Instructions]. The first question comes from Giulio Pescatore from BNPP.

The first one on the guidance, one very simple question. Your target range implies an EBIT margin of about 23%, even at the higher end in the next 9 months. Isn't that slightly too conservative despite the higher R&D and weakening mix? And the second question on the Monza. I just want to make sure I understood it correctly, can you confirm that there are no more Monza due for deliveries in Q2, it was completely phased out on Q1? And then the last one on the Purosangue, thanks for the extra color on the engine -- the V12 engine. But can you maybe give us the reasoning behind the decision to launch the Purosangue without a hybrid system, also given that this is a model that we had hoped that would improve your position in China?

Okay. Thank you, Giulio. I start with the second question, and then Antonio will comment on the first one. So the Purosangue will be a naturally aspirated V12, our iconic model. We have been testing different options. But then I think it was clear that to celebrate the blood line of the performance, innovation experience, the V12 and the experience and the product performance. It is able to deliver has been the right solution to push to the market. So there has been a clear result of our testing and also our discussion with the market. For the month, I can reaffirm what Antonio said that we stopped production and the sales of Monza in Q1. For the other part of the question, Antonio, you may help on this direction.

Yes. Giulio, the guidance that we provided on EBIT is based on the fact that DNA will accrue over the course of the year, not linearly, but based on the start of production of our new model. So it's basically growing during the course of the year.

Okay. And as follow-up on the guidance, we also saw the U.S. dollar appreciating quite significantly. Is that already reflected in the guidance you have?

Yes. The reason why we have -- we are not basically making significant changes is because, as you know, we are following a foreign exchange hedging policy. So there might be opportunities around that depending on how much remains free from hedging, but we prefer to stay cautious on that because it's unpredictable what happens to the currencies.

And the next question comes from Martino de Ambroggi from Equita.

The first is on -- always on the guidance. If I take your volumes in Q1 and then multiply by 4, which is quite usual, let's say, in normal years in the past, I get something in the region of 13,000 units. So first question, is it reasonable this figure as the underlying volumes in your full year guidance?

Martino, maybe I take this one. As you know, we do not comment on shipments. I think our revenues is really what is driving our results. So we are focusing on that one. We may add that, obviously, due to the significant order book, shipments will remain high over the course of the year, yes.

Okay. The second part of the question, even if it's not 13,000 in any case, it is a significant growth for just one year. And if I remember correctly, your output capacity is 15,000, 16,000. So if you maintain the same pace also knowing that the Purosangue will be all additional we don't know the amount of volumes but will be additional. So probably you have another 2, 3 years' time before needing to either add a shift or add capacity, just to know what you're thinking about it.

It's a good question. Martino, thank you. I think you will have a clear answer to all your deduction, let's say the 16th of June. What I can tell you is that also for all the cars we make, we will keep clear in mind the exclusivity. You remember well, the capacity that we have is in that ballpark. I can tell you that we are not planning investment to take -- to increase that numbers.

Okay. And the last question is a more specific question on prices. During your introduction remarks, you mentioned that you already revised upward prices last year in order to offset raw material and other cost inflation, and you are also revising prices this year. Could you provide us just a rough indication of the amount of price revision?

The price increase that has been already applied is in the range of 2%. This is already, I mean delivered to the market. It's on the process. Some is out already in Q1, some other are coming.

Okay. So I was wrong in understanding there was one last year and another one coming.

No, no, you are right. I mean, there are 2 things. There are the model that have been already -- the old model, let me say, and the new model. The old model is the price increase ballpark I gave you. For the new model, there is a different price increase that is different from the 2%. So you understood well, is we are talking about 2 different things.

And the next question comes from Susy Tibaldi from UBS.

So my first one would be on the demand, which you already indicated it continues to be extremely strong. Your order books are record high, but can you just give us some more comments qualitatively? I mean, are you really not seeing any impact from all the macro pressures that we are seeing? So maybe by geography, is there anything at all that maybe worth flagging? Or is this high-end consumer really spending the same as before or even more? And then my second question would be on China. We saw a strong increase in volumes in China, which is said to be in line with the demand there. I was wondering which models are seeing the most success in China? And when it comes to the Chinese market, is this demand concentrated in few key areas? Or how do you see that will be very interesting to get some color?

Okay. I start from the second, Susy. So in China, we see -- we have a very good traction on the 8 cylinders, ICE and hybrid. So I think this is really a good summary of what we see in China. When it comes instead to the trend of the demand, I mean, clearly, we are watching carefully. We expect a different pattern also because we basically -- most of -- several models are sold out. And I'm talking about the F8 and talking about the Portofino, about 812. So we expect a different pattern also because we deliberately selected to sold out and to terminate some models.

And the next question comes from George Galliers from Goldman Sachs.

The first question is on the Purosangue, again. So I'm very excited to see this, and thank you for the incremental details. When you think about the pricing of the Purosangue and its exclusivity, obviously, if we look at some of the other high-end utility vehicles in the market. We're seeing huge waitlists and cars being sold on very quickly in the secondhand market at very large premiums. So when you think about the pricing of the Purosangue, do you plan to price it at a level where Ferrari is the main beneficiary for the strong demand rather than sellers in the used car market? And are you also taking any additional measures to control which customers are prioritized on the product? The second question I had was just on the deposits. I don't know if you could confirm what percent of deposits on the Competizione A and the Daytona have been taken during the quarter?

So I start, George, I take the question on the Purosangue, Antonio will take the first one. So on the Purosangue, I would say that clearly, we have price in mind. We cannot change, unfortunately. But we want to preserve always for -- also for this car, we keep in mind the exclusivity. Exclusivity is one strategic guideline. We push we keep pushing, and we want to make sure that this stays well grounded in the DNA of all the product we developed. So Purosangue will also be considered this dimension of exclusivity. In terms of, as I said, price and the customer base, we have clear ideas. And let's say, we will address properly at the right time. I -- instead for the advanced payment, the other question, Antonio, you may help.

George, the net impact of contribution of the Daytona and the A Competizione is in the region of €80 million. Obviously, this is a net impact, meaning the cash inflow has been higher than that. And half of it is due to the Daytona. And then we have a negative, which is the amount not collected on the Monza because already collected in the previous year. So it's basically a net between €120 million cash in and €30 million less collections on the month. Hope it helps.

And the next question comes from Stephen Reitman from Societe Generale.

I have a couple of questions. First of all, could you give us the number of Monza SP1, SP2s that were sold in this final quarter for this year? Secondly, could you comment a bit about what you said about the order book, you've mentioned very strong orders for the F8, which obviously is in its last -- in its last selling period. When will this be finished relative to the SP being replaced by the 296 GTB and obviously, the GTS? And finally, on sponsorship for the Formula 1 team, I understand obviously you lost your mission we know and has become like a co-sponsor but is no longer the main headline sponsor. Could you comment on what's happening on negotiations for replacing it? And I suspect that given the strong performance of the Formula 1 team, the negotiations are getting easier in terms of finding a main sponsor.

Okay. So I'll start from the sponsors, other way around. So from the sponsor, as we said in the call, we see that we have a wider set of partners that are willing to -- I mean, to work together with us. And this basket of partners. It goes from a technology to banks to also new players of a new economy. So I would say that we see a positive trend over there. And we become more and more appealing as we win more if you can easily understand more and more Grand Prix. So if you want the summary is that it's true that we lost a big sponsor, but it's also true -- I mean the contribution of the big sponsor is not so big like in the past, but it's also true now that we access to a more diversified set of sponsors. Then I comment about the second part, it was the order book. The order book for the 8 cylinders, the sport is rendered the F8 goes till end of next year, but we start to see allready an overlap with the 296 GTB that, as I said before, is -- as the highest ever traction in terms of interest, in terms of order book for -- from the -- from many customers. Just to complete before handing over to Antonio, basically, we have also a strong traction, and we are sold out on the 12-cylinder on 812 basically for additional 2 years. The key point I would like to leave here is that in Q2, we already start to ship the 296 GTB. Antonio, you want to comment?

And the last information was number of Monza sold in Q1, and the number is 40.

All right. And just -- sorry, if I could just put in one final one. Also on the Purosangue, do you envisage that the vehicle will only be powered by V12s? Or do you think that in the future also, it might take alternative different powertrains as well with a low number of cylinders?

We do not comment on this, sorry.

Thank you.

We cannot comment.

Sorry about this, Stephen.

And the next question comes from Thomas Besson from Kepler Cheuvreux.

It's Thomas from Kepler Cheuvreux. I also have a couple of questions, please. Firstly, I would like to confirm that your first quarter was probably the strongest in terms of profitability and free cash flow for the year.

Yes. Yes, Thomas. This has been a record quarter on all key metrics. Yes, you're right, absolute terms.

But it's fair to assume that the next 3 quarters are probably going to be a bit softer because you're still going to benefit from volumes, but less from the mix you had in [indiscernible]?

Yes, this is a fair assumption. This is based on product mix on one end, the fact that we stopped selling the Monza in the end of the first quarter will not have yet the Daytona that is coming in 2023. And also in terms of the cash flow, this is due to the pace of election of the deposit during the course of the year. And obviously, that capital expenditure is growing and not linearly during the course of the year.

Yes. I wanted to get back to Formula 1. If we assume that your current strike continues and that you win the championship, which I think would be great. Could you just remind us what would be the impact on your 2023 accounts broadly speaking because it would be a substantial improvement?

Yes, it will be a positive. I can't quantify that, one, because it's also based on the EBITDA of the overall circles.

Okay. But would you say at least, it would be a substantial double-digit medium figure for your '23 EBITDA if you manage to win the championship? Or is it too much?

I prefer not to quantify. Let's assume it's an improvement anyway, which is -- I mean perhaps not material in our numbers, but still a significant one.

Last quick one, please. You mentioned in your prepared comments that the preowned business was very strong. Could you remind us where we can see that in your accounts, please?

Well, actually, you don't see this on our numbers or you would see it marginally in our financial services business, but really marginally. I think what we -- the reason why we monitor it, though, is because it's very relevant to support the order intake, obviously, in the interest of a number of customers.

And the next question comes from Gabriel Adler from Citi.

There are 2 questions left from my side. Just coming back to free cash flow, you're very clearly running ahead of the run rate implied by the guidance. It was about €600 million. So could you provide some more color, please, on your expectations of working capital and CapEx through the year and the ramp that you expect to see that? And then secondly, on volumes. I appreciate that you don't specifically guide on this, but I think previously, you've commented that the first half should be stronger than the second. Could you confirm whether that's still your expectation for the year?

Yes. Sure, Gabriel. I think the first question in terms of cash flow, in terms of capital expenditure that is basically the main negative starting from the EBITDA. We expect it to annually grow up to approximately €800 million, overall figure. The pace of development, though, is not leaner during the course of the year. It's more exponential. That adds, of course, in terms of working capital around year-end. So we expect also working capital, including deposits to be a positive in the year. And the guidance, the overall guidance is for not less than €600 million, overall, industrial free cash flow. The second question, forgive me is on volumes, whether H1 is better than H2? I would say not necessarily. It's more in terms of quality because of Q1 that includes the sales of the Monza.

And the next question comes from Gianluca Bertuzzo, Intermonte.

I have two questions on the Purosangue, if I may. First one, if we look at some of your peers in the luxury industry, they faced cannibalization of the GT models after the launch of their SUV. Do you think this is a risk also for Ferrari as GT models represents almost 1/3 of your shipments? And the second one, do you have a certain threshold beyond which you will not go for the SUV in terms of volume compared to your total shipments?

I start from the second one. Gianluca. We will -- as I said, we will stick to exclusivity also for the Purosangue. Yes, clearly, we are -- we have numbers clear in mind in terms of ratio to total numbers that we want to make as Purosangue. Then coming to the second question, I think that different Ferrari for different ferrarista or different Ferrari for different moments is a strategy where you can read the answer to the first question. So we have been -- we are on the market different models. This has been proving a successful strategy, and we don't see this risk over cannibalization.

And the last question for the moment comes from Evan Silverberg from Morgan Stanley.

It's Adam Jonas from Morgan Stanley. Can you hear me?

Yes, we can.

Okay. Great. So remind us of the technical production capacity for the entire company, body shop, paint shop, post Purosangue. You referred to it earlier, but I didn't hear the exact number or range of units.

15,000. Adam, 15,000.

Yes.

And just as a follow-up, the 250 new hires in Maranello and Modena, you referred to vertical integration of handcrafted components, that's a lot of employment, that's 5% of your company non-insignificant. Can you tell us what kind of components and technologies that these talented and very lucky individuals will be working on?

I know you are curious and you would like to have an answer. I think that we will have the pleasure to meet in person in a few weeks, and we will tell you exactly what we want to do, which are the strategic component we want to do in-house. So bear with me if I ask you a little bit more patient. But I read all your reports, I see. But allow us to wait still a few weeks, then we meet and will explain, and we'll show you with a clear presentation, I think the strategic part that we want to make here.

I am showing no further questions at this time. I would now like to turn the conference back to Benedetto. Thank you very much. Please go ahead.

So I think I want to thank all of you for your time, for your attention this afternoon and for all your questions. And also, believe me, this will be the last time I ask you to be patient to have a lot of answers because the next time we'll be in person, and I will -- together with the team, we will reply all the questions. So the first quarter, really, of this, we just closed, represent another strong start. The metric, as you have seen, are very good in all respect. And the next -- in the Capital Market Day, we really want to outline our strategy for the year to come, and we will take all your questions. And I really am very much looking forward to seeing you here in June in Maranello. So thank you again. Good afternoon, and hope to see you soon. Bye-bye.

Thank you very much, Mr. Vigna. This now concludes the conference call. Thank you for participating. You may now disconnect.