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 of 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 Web site. 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 statements 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.

Gracias, Nicoletta. And thanks everyone for joining us today. 2023 will be remembered as the year in which we accomplished the many achievements and we strengthened our brand across each of its three [stores], racing, sport cars and lifestyles. 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 realizing 2023, I like to mention three. The first historic victory at Le Mans. The second is the fund 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 and Maranello clutch that stems out to the cooperation between colleagues in Maranello belongs to sports car 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 EUR6 billion. EBITDA at EUR2.28 billion with record yearly EBITDA margin of 38.2%. Net profit first in our history well over EUR1 billion threshold with a remarkable net profit margin of 21%. And industrial free cash flow generation of approximately EUR930 million on which about EUR800 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. They 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…

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 four year plan from the last Capital Markets Day is rather front loaded by design, such results went beyond our expectations considering the modest shipments increase and the inflation headwind affecting our input costs, a visible real life application of the obsession to privilege value upon volume and to control our locations 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 three main factors, a rich product mix per se, further emphasized by a surprisingly strong personalization uptick, coupled with a favorable country mix. These led to revenues up 17%, adjusted EBITDA growing roughly 28.5% that is EUR500 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 EUR1,260 million, leading to an adjusted diluted earnings per share of EUR6.9 from less than EUR5.1 last year. Of a particular note was the industrial free cash flow generation which reached EUR932 million. Moving to Page 8. You can see the details of the full year shipment. In the year, deliveries increased less than 450 units after two 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…

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

[Operator Instructions] And the question’s come from the line of John Murphy from Bank of America Securities.

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?

Yes, it's true we doubled our share of hybrid. This testifies 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 that two points. Number one, the profile of the customer using this technology is not so much different from the one using the thermal traditional cars. And number two profit wise we are within 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.

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 at the Red Sea is 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 delivery of cars.

And the question’s come from the line of Michael Binetti from Evercore ISI.

I guess, first off, Antonio, could you give a little context around the guidance for free cash flow lower this year? Is there --- 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 personalization, maybe just a little bit on the strategy there going forward after a really good year on personalization 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?

I will take the second one, the accelerated question, Antonio will elaborate. So yes, the personalization -- I mean, we are a luxury company, of course we have to invest, personalization is an important vector of growth for us. And it offers also an opportunity for pricing out. And we started this year to review the price up in the mid digit area. So percentage is important, yes. Two, we are going to catch the price for this important dimension. The free cash flow, Tony?

I’ll try and explain the three reasons. The first is clerical, we are just paying more taxes. The second one is we are spending more on CapEx and 150 is what we have in mind for the year. And this is just because we have products that are now very close to the launch and number of products. And the third is the revenue cycle, this is just timing basically. There are, I mean, we collected our -- quite a bit in 2022 and 2023. We have kind of net reversal and in addition some new advances collecting in 2024. But the negative -- the impact overall is negative, modestly negative.

And I guess, if I could squeeze one more in here, I guess, with the e-building still on track for midyear. But can you tell us what we'll see early on as far as -- as you guys start to commercialize that? And 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 building. So we are on track. It'll be up and running starting this June. And this will be a place where we will assemble not only electric car. Electric car, as you know, will be ready if we are on track for Q4 2025. So also on the electrification journey, we are fully on track with our plan.

And the question’s come from the line of Susy Tibaldi from UBS.

I have three, 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 Antonio. The demand, overall, the book is pretty strong, it goes well into 2025 [Technical Difficulty] at the end of 2025, in some cases even more. We do not see any negative signal on this topic. We keep, let's say, doing as a planned. Clearly, there is not -- in our client base, there is not an impact in any kind of -- in any respect. And this is if you want more [Multiple Speakers] we have been -- we had the dealer annual meeting end of November, we had also the -- we have been visiting several dealership in USA, in Asia and different countries in Europe and there is really a strong traction toward our brand.

On the margin guidance for 2024, which basically implies flattish margin. I wanted to understand if your core 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'll be quite interesting to understand the dynamics in your various segments.

[Multiple Speakers] the explanation, Susy, I try and explain it. So product mix and personalization are [Technical Difficulty] but we expect the cost base below that to impact us and to flatten the margin. If we wish within the cost of goods sold is just the budget cap on -- which is growing on the F1 racing activities that is growing year-after-year and in the upper side of this year.

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 no significant changes. Usually, Q4 remains slightly softer, particularly in terms of volume allocations. But as of now, nothing to flag.

And the question’s come from the line of Stephen Reitman from Societe Generale.

Again congratulations for the very strong result, also congratulate you also the quality of the result. And we certainly noticed the positive impact from R&D capitalization was considerably lower in 2023 than in 2022 or ‘21. So points to a 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 100, so that’d sort of ramp up. And if you’d comment on what the personalization levels looking like. I imagine that people are paying a lot of money in terms of personalizations in order to secure bill 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 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 it from the third quarter in 2023, but we actually saw quite a big drop in 2020 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 for your extrapolation that we'll pass toward the team that made it possible. Coming back to the story of Purosangue. In 2023, we shipped a few hundreds Purosangue. In 2024, we'll be at increasing speed that it is 20% of the total. So basically -- I mean, 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 then [Technical Difficulty] I mean, mathematically, even if Benedetto is in competition…

Yes, we are not that much. No, look, the story of Purosangue personalization, Steven, clearly, the Purosangue offers a lot of degree of the personalization. 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 personalization that the car is offering to all the client. The second question was about China. Well, China for us, I would like to say that there are three words about China. The number one for us is a young market. Young market it means that the client -- let's say, the number of car that we shipped with this market is not so big. To me the market is very young and we have to let it grow with the right speed to avoid, let me say, indigestion, [undigestion]. 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 few tens of units that since the market is smaller, it may look a few percent over this. 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. This is what we have done in other countries and this is what we intend to do also in China.

And the question’s come from the line of Tom Narayan from RBC Capital Markets.

Question on the strong plug in hybrid performance. Just curious if you could extrapolate that for the eventual BEVs, full electric, you plan to sell. Is there really a translation there to say that consumer demand for the 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 client, director [indiscernible] to 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 client that will take ICE and hybrid as today. We will have client that will get in our family only because we have the electric cars. So I believe that we see very often that -- the answer is that, you know, I need [Technical Difficulty] because I need to go in places not be allowed by recollection. So I think any combination of these three colors, the red, the blue and the green is going to be possible. And I don't think that the hybrid car is an extrapolation. The only thing we take as a lesson is that -- I mean, looking at what happened at the end of 2023 that if there is always a way to use the 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 a breakfast with a client that was skeptical about the hybrid and then he went to try it and he booked the hybrid, and this is pretty common. So this is a confirmation that our strategy to keep alive the three colors, the red, the blue and the green is the right one.

And my follow up, with 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?

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 really happening, is already started to happen since a while. So this is important. This is the key message we pass on the Capital Markets Day two years ago. We are already on the electrification journey since a few years.

And the question’s come from the line of Thomas Besson from Kepler Cheuvreux. We are now going to proceed with our next question. And the question’s come from the line of Henning Cosman from Barclays.

Interesting that you emphasizing price and personalization 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 personalization specifically? If you could just confirm that. And if you would, also…

Confirm…

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 personalization. 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 personalization. If 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 three 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, you confirmed again in the opening remarks 30 to 40 per quarter. I believe you've sold around 150 so far out of the 600. So that would imply you still have 12 more quarters to sell worth of Daytona, that 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 life cycle.

Personalization, Daytona for Antonio. I take the ASP. So as I told you, the answer to the first question, yes, it's confirm. We increase the price of the personalization exactly like you understood. When it comes to the price of the cars, don't forget that last year through all the year, we've 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. You already executed and we have to be respectful of our clients. While for personalization, in Daytona, Antonio, you can…

On personalization, you got me right. Meaning, in 2023, we are almost at 19% and 2024 is based on an assumption that we’d maintain more rest of that rate, visibility as of now is in that direction. And the last question on Daytona, yes, you are right, we expect to grow there to move from 30, 40 to approximately 60 third quarter and next year.

The question’s come from the line of Monica Bosio from Intesa Sanpaolo.

The first one is on the EBITDA margin that you guided flat this year for 2024. I understood that this is due to a cost base related to the production of more complex product. 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 -- it 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 growth rate for 2024? And third question is on your advances from SF90 XX and the 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.

Antonio will take one and three, and then I will reply to your number two.

It's not due to just higher cost base at all or related to -- it’s not related to the additional complexity of the production. I mentioned basically three elements. One, cost inflation. Cost inflation is still there. It includes cost of labor. We have an agreement in place with the trade unions for an increase year-over-year of 4%, which is embedded in these last function. But even component, and generally speaking, the change that is still embedded 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 a complexity. The second one are expenses for brand development, including lifestyle, of course, we are investing to grow the businesses [Technical Difficulty]. And also our digital infrastructure, 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 [binding] both cost of goods sold and R&D expense 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 around the various teams to index spending to inflation. So year-over-year, it's gone negatively. And in terms of your last question on the advantage on the SF90, yes, we are collectively -- we'll not disclosed yet which are the target. 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, three important things. Number one, we improved the retail performances, because there is more traction towards our collection. Two, we saw there is, I mean, 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 were 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 an 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.

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?

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

And the question’s come from the line of George Galliers from Goldman Sachs.

Obviously, one of the standouts of 2023 was the very strong price/mix. And we look at your five year plan, you were targeting around EUR700 million improvement in EBIT from price/mix by 2026. We're only two 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 personalization 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 EUR700 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?

I take the second one and the first one, I will ask Antonio to refine. So you remember very well during Capital Markets Day, we clearly said we leveraged 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 a simple characterization. So we are doing lot 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 USA and also in Europe. I can mention the one that we publicly released, [indiscernible] 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 [Technical Difficulty] of 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 meeting with them. We are at on our side, they are also happy on their side. So Antonio, you further…

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 personalization 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 personalization 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 personalization? If the trend continued 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.

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 question. The stronger 2023 results basically are a result of our strong brand desirability and also the confidence that we are having on this year 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.