Ferrari N.V. (RACE) Q2 2022 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Ferrari 2022 Q2 Results Call and Webcast. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please remember that today's conference is being recorded. I would now like to hand over to your speaker Nicoletta Russo. Please, go ahead.

Thank you and welcome to everyone who's joining us. Today we plan to cover the group's Q2 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 Picca Piccon. All relevant materials are available in the Investors section of the Ferrari corporate website. And at the end of the presentation we will be available to answer your questions. Before we begin, let me remind you that any forward-looking statements we might make during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement included on page two 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.

Thank you, Nicoletta. Thank you, everyone, for joining us today. It was a pleasure to meet many of you in person last June during our Capital Market Day here in Maranello. But before talking about Q2 record results, let's recap the main points of our strategic plan for 2022-2026. We talked about our electrification journey, the product strategy, the industrial strategy, financial targets and our path to carbon neutrality by 2030. And I will address our commitment to preserve and protect our planet later in this speech. Now let's start with our electrification journey. We are very well positioned to tackle the technological transition. Electrification represents for us a great opportunity to address customer needs and to continue to realize unique Ferraris. We are continuously advancing in our electrification journey. We started in 2009, 13 year ago, with our experience in Formula 1, then we transferred to our first hybrid model LaFerrari, a supercar. And more recently, with the launch of full range hybrid models currently in our product portfolio, we extended successfully this technology to higher volume car. Thanks to this expertise, you can breathe really in all our laboratories and additionally followed by our passion, dedication and willingness to push the boundaries farther, we will unveil our first full electric model in 2025, a true Ferrari that will enrich our product range. It will contain several unique features and it will be a sport car as every Ferrari that offers a true Ferrari driving experience. We have also confirmed our product strategy, based on different Ferrari for different Ferrariste, a different Ferrari for different moments. It is built to preserve uniqueness, while satisfying the different customer profiles, from more adrenaline-seeker pilots to more versatile sports car drivers. We have also committed to unveiling 15 new models from 2023 to 2026 to keep our product range up to the level where Ferrari has always been. This will also include the highly awaited new supercar, a master piece of innovation, design and performance. We reiterated our industrial strategy. In doing so, we will continue to progress staying very focused and disciplined in terms of capital expenditures, adopting a make versus partnership approach. Indeed, we will focus on the key differentiating factors and we will invest on the strategic component that we deem relevant to continue to exceed our customers' expectations in terms of performance and driving trials. On this note, we will invest in our infrastructure, expanding our factory with a new paint shop and a new building, where the most advanced technologies in the electrification field will be designed, developed and crafted. For what concerns partnership as it was true in the past, we continue to tailor existing solutions that are available on the market and read them with our own eyes in a way that our cars continue to be unique and authentic. At the Capital Market Day, we also shared with you our financial targets. Built on a solid and comprehensive ground, we target a 9% compounded annual growth rate for our revenues driven by strong product pipeline. We have ambitious goals also for our lifestyle activities where we target to double the 2026 sales compared to pre-pandemic levels focusing on three things: luxury goods, experiential and collectibles. The business plan also entails an 11% compounded annual growth rate of EBITDA and a very strong industrial free cash flow generation. We expect to double it versus what we generated over the past five years. Such solid financial profile allows us to keep investing for our future growth, while increasing the shareholders' remuneration with a combination of dividends and share buyback. Dividend payout will be increased to 35% of adjusted net income and a €2 billion share repurchase program already started. How will we make it? As highlighted at the Capital Market Day, all of these will be made possible, thanks to the relentless work of all the women and men in Ferrari, the loyalty of our customers and the teamwork with our partners; industrial, academic and commercial. Moving now to today's agenda. Let me review the second quarter another quarter of records, whose strength led us to upgrade our 2022 guidance on all metrics; number one, record revenues at €1.3 billion, up 25% versus the prior year; number two, record EBITDA at approximately €450 million; number three, record EBIT at approximately €325 million; and number four, in Q2 we reached a new record in terms of net order intake, which is astonishing considering that in the quarter the books were open only on three models of Ferraris from 296 GTB and 296 GTS, the one we announced last April. This strong trend is visible all over the world no specific geographical pattern. On top of these four records, we have another three records we like to highlight. I'd like to start with our Guinness World Records title for the largest LED-illuminated racetrack, awarded for the lighting show at our Fiorano race track. Consisting of more than one million LED points and covering more than 110,000 square meters. And all of that was powered with green energy. Secondly, the lighting show concluded the first edition of the Cavalcade Icona with the participation of 80 Ferrari Monza both SP1 and SP2 coming from more than 20 nations. This event celebrated the 75th anniversary of our company. And last but not least, I also add the pleasure to attend the Cavalcade Riviera in Monaco, which involved 144 Ferrari from over 30 nationalities, a record in the Cavalcade history. Such overwhelming attendance is again a testament to the unforgettable experiences that our customers are willing to chase along with the pleasure and fun of driving that carry the prancing horse name around the globe. On the racing activities, we continue to fight at the top in the Formula 1 and FIA World Endurance Championship where the team is working hard for our return in 2023 in the top class with our hyper car. Two fresh news from the last weekend. We unveiled the Ferrari 296 GT3, our latest V6 that represents the future of the prancing horse in GT racing. And we just won the 24 hours of Spa-Francorchamps Gold Cup with a team of four women. We also presented our journey towards carbon neutrality by 2030. This was a few weeks ago and now we are moving from purpose to actions. Here the four actions we already put in place. One we have committed to set science-based targets in line with 1.5 Celsius degree pathway. Two, we have installed the new 1-megawatt solid oxide fuel cell plant at our Maranello facilities. It provides 5% of the energy required for Ferrari's production activities in Maranello, while reducing fuel consumption and emissions. Compared to combined heat and power cogeneration systems, gas requirements are cut by around 20% with a significant energy savings. Three, we have begun the installation of a new photovoltaic system on the roofs of our Maranello factory buildings, further expanding our independent energy production and reducing our CO2 emission. Once fully operational, the new solar installation will allow us to self-produce 1.7 gigawatt hour per year. And fourth, we've started a partnership with ClimateSeed, an impact-driven company that is helping us support high-quality innovative projects focused on positive climate and social contribution. As a final remark and looking at what's next, for sure, September will be a key month for us with three important events. The Monte Grand Prix where we will fight again at our home, the world premiere of the Purosangue, and the third fashion show at Milan Fashion Week. And now, I will hand over to Antonio who will review the Q2 2022 results.

Thank you, Benedetto and good morning or afternoon to everyone joining us today. Let's start on page seven with the highlights of the second quarter. Another very strong quarter with double-digit growth and record levels for shipments, revenues, EBITDA, and EBIT. Percentage margins were also in line with our expectations, mainly reflecting the already flagged development of product mix during the course of the year. Shipments were 3,455 units, up 28.7% compared to the prior year. Group net revenues were €1.291 billion, up 24.9%. EBITDA reached €446 million, up 15.5% year-over-year with an EBITDA margin of 34.6%, lower than last year since those extraordinary highs were supported by the strong contribution of the Ferrari Monza. EBIT was €323 million up 17.8%. Net profit came in at €251 million, up 21.6% versus prior year resulting in a diluted EPS of €1.36 compared to €1.11 in Q2 2021. The industrial free cash flow generation for the quarter was €79 million. As already anticipated and in line with the seasonal cadence, the strong operating cash flow of the quarter was partially flattened by tax payments. They were much higher than in Q2 2021 since commensurated the significantly improved income of 2021 compared to 2020. Turning to page eight, you can see the details of the Q2 shipments. The product portfolio in the quarter included seven internal combustion engine models and three hybrid models, including one ICE truck car, representing 83% and 17% of shipments respectively. In the quarter, we were continuing to serve an impressive order book across all our current range and delivery increase in the quarter were mainly driven by the Portofino M and the F8 family, in line with programs. In the quarter, we also commenced the first deliveries of the 296 GTB, while the 812 Competizione was in a ramp-up phase. As already flagged, the Ferrari Monza SP1 and SP2 reached the end of their limited series run in Q1. All geographic regions positively contributed in the quarter, particularly in Mainland China, Hong Kong and Taiwan, stood out with double deliveries compared to prior year, reflecting the strength of the demand. On page nine, you can see the walk of our group net revenues growing 21% at constant currency. Revenues from cars and spare parts were up 21% at constant currency, driven by higher volumes, along with the contribution from personalization. Revenues from personalizations were higher than the prior year, sustained by volume at around 18% in proportion to revenues from cars and spare parts. Engines revenues were down 8%, given the lower shipments to Maserati, whose contract is approaching the expiration in 2023. The increase in sponsorship commercial and lifestyle, up more than 23% at constant currency, was mainly attributable to the better prior year Formula one ranking and the contribution from lifestyle activities, which was partially offset by lower sponsorship. The other revenues increase was mainly related to other supporting activities. In currency, including translation and transaction impact, as well as foreign currency hedges, had a total positive contribution of €41 million, mostly related to the US dollar and the Chinese yuan. As we move to page 10, let me review the change in our EBIT bridge, explained by the following variances. Volume was positive for €90 million, reflecting the shipment increase. Mix price variance as expected and linked to product current was negative for €16 million, mainly due to the softer product mix related to the phaseout of Ferrari Monza and the greater contribution of the Portofino M, partially offset by the positive contribution from personalizations. Industrial and R&D expenses grew €27 million in the quarter, mainly due to higher depreciation and amortization, cost inflation and other one-off operating expenses net. SG&A were negative by €18 million, mainly reflecting communication and marketing activities and corporate events, as well as the support the company's organization development. Other was negative for €9 million. It reflects the improved prior year Formula one ranking and higher contribution from lifestyle activities that were more than offset by lower sponsorship, reduced engine shipments to Maserati, higher costs related to the better Formula one in-season ranking assumption and other miscellaneous expenses. The total net impact of currency was positive for €29 million. As a result of what I just mentioned, EBIT reached a record level of €323 million, up approximately 18% versus the prior year, with an EBIT margin of 25%. Turning to page 11. Our industrial free cash flow generation of the quarter, reflect the strong profitability, which was flattened by €166 million of capital expenditure that are progressing in line with full year guidance. €162 million of cash interest and taxes, mainly reflecting the 2021 tax balance payment linked to the strong 2021 results and the first 2022 tax installment. And a small adverse impact of working capital and other, which was mainly related to the higher inventories in line with the projected volume growth for the year partially offset by the collection of Daytona SP3 advances. In the quarter, the capitalization ratio of our development expenses was approximately 46% slightly increased versus the prior year. Net industrial debt as of the end of June 2022 was €387 million. The increase from the €136 million as of March 2022 is explained by the €250 million dividend distribution and approximately €80 million of share repurchases more than offsetting the positive industrial free cash flow generation in the quarter. However, the overall strong net cash generation of the last 12 months improved the net investor debt position by almost €150 million, compared to June 2021. On page 12, we revised upward our 2022 guidance across all metrics on the back of three main factors that add on to our initial assumptions for the year. First, a stronger business performance with regards to personalization. Second, a tailwind from foreign exchanges net of hedges, mainly given the recent strengthening of the US dollar versus the euro. And third, notwithstanding, the rising inflation in our cost base linked to the current environment that slightly soften our percentage margins. I, obviously, remind you that our guidance still relies on the assumption that trading conditions are not significantly affected by the current complex environment. To conclude, we are very pleased with this quarter of record, which are the results of the unabated passion of each one -- each and everyone here in Ferrari, which demonstrated the robustness of our business model and the success of our product portfolio, and which let us look with great confidence in the rest of the year and our further challenges to come.

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

Thank you. [Operator Instructions] The first question comes from the line of Adam Jonas from Morgan Stanley. Please ask your question.

Thanks. Hello everybody. Just a couple of questions. First on FX, which is going to be more important over the next couple of quarters given the continued weakness of the euro versus the foreign currency baskets. I was surprised with the conversion of the FX benefit to EBIT versus how it helped revenues. So it helped revenue €49 million helped operating profit €37 million for about 75% conversion. I was a little surprised given your -- what we seem to know about your hedging strategy where you would hedge a pretty clear majority 12 months out and then tailing off from there. So is that normal? Is that kind of impact on top line then following through to EBIT something that's continuing, or was it unusually high conversion this quarter?

Hi, Adam. Antonio speaking. Nothing unusual actually. You should take into consideration that our foreign currency exposure is on revenues and net of cost. And when you look at the impact of foreign exchanges, you should look at the combined impact of what we have as foreign exchange hedges at beginning of our revenues or EBIT bridge and the change in foreign exchange and FX hedges in the last quarter, which is the second before last column. So actually the impact on net revenue is €41 million while the impact on the EBIT is €28 million, so €10 million. I'm not sure whether it's always of that size the difference, but there is always -- because of what I mentioned before meaning we are not just hedging revenues but revenues net of cost. Nothing has changed in terms of our hedging policy. We keep on running usually on a rolling base. And, obviously, the impact that you see in our quarter is the result of the spot rate that we observed during the month, net of the hedges that have been put in place in the previous 12 months, basically accumulated and stratified. Hope it does…

Okay. I appreciate. Thank you. It does. And just one follow-up, please. Ahead of the Purosangue launch confirming that your first deliveries will be in this calendar year, this fiscal year. Anything you want to call out that could get noisy with the launches -- with the launch or other costs related to the launch? Any order of magnitude you wanted to point out that you've embedded in your guide for margin of safety? Thanks.

Adam, it's Benedetto speaking. So the program Purosangue is proceeding as planned. The deliveries will start next year, as we said also at the beginning of the year. And let's say, both on -- from a business point of view and a technical point of view the program is well on track. So, nothing out of, let's say, what we are planning for. So, we are very -- we are very happy to see this finally toward the premier, as I said, in -- to show in world premiere in September.

Thanks.

We are going to proceed with the next question. The next question comes from the line of Susy Tibaldi from UBS. Please ask your question.

Hi. Good afternoon. I have three questions please. So, my first one would be on the volume growth. Again you reached a new record up 29%. And of course, you already explained earlier in the year that it's because you have very long waiting list, also you don't want people to have to wait for years. But then, each quarter you keep telling us, there is a new record, a new record order intake. So this pace of production that we have seen so far this year, is this something that may persist for the rest of the year? So how should we think about the volume growth? That's first question. My second question was on the pricing, because last year, if I remember correctly, around July, you took a small 2% price increase to offset some of the inflation in the cost base. And of course, this year the inflation is higher. So I was wondering if you have done any similar action year-to-date. And thirdly, on the profitability, previously you were guiding to a year where we were going to see a stronger H1 and then getting progressively weaker due to the mix. But now if we look at performance in H1 your EBITDA margin was 35.1% and your new updated guide is for over 35%. So, it sort of implies that perhaps Q2 was actually the low point of the year and margins could improve in the second half. Any comments on this would be very helpful. Thank you.

So, I will take the first two Susy, and the last Antonio will reply. So the volume growth in H2, the volume will be lower than H1. And this, I would say, is a regular pattern. So, nothing strange and again, in line with our original plan. Number two, yes, we put in place some pricing increase, and we will -- they will be visible starting Q1 next year. And for the profitability comment, Antonio, you may explain the pattern that we are seeing.

Yes Susy. I think Q2 -- certainly what we are looking at for the second half is an improvement -- further improvement in terms of margins from personalization, which is stronger than expected. Secondly, what I mentioned before, we already got the benefit from foreign exchange rates in the first half of the year but the hedges that were in place were -- at currency level, it was worse compared to what we are heading to for the second half. In addition, Q2 has been impacted by small one-off operating expenses that overall whether impacted a bit, we do not expect to have them once again in the second half. So net-net, that's the reason why we are looking at the guidance in the direction I explained.

Okay. Thanks.

We’re going to proceed with the next question. The next question comes from Giulio Pescatore from Exane BNP Paribas. Please ask your question.

Hi. Thanks for taking my question. The first one on China I was very impressed with your level of deliveries in the market. Can you maybe elaborate on what drove the increase in the region? The second question on the new GT car. Those are always models that are very difficult to track but anything you could share on pricing timing of launch and contribution to profit implied by the sale of this model would be super useful. And then the third one on energy risk. That's clearly on everybody's mind in the automotive sector. Do you have any way of quantifying the risk of potential energy rationing in Europe, given your concentration of production? And are you taking any measures to potentially offset any impact in as you approach the winter? Thank you.

Okay. Giulio this is Benedetto. This is a good question about the China. As we told also in the previous call, we had a strong net order intake in China. Today, if you remember the chart of Antonio was talking about in terms of shipment at 10% of overall versus the previous year was 6%. Yes, we had a long – big growth but this growth if you see in – has been pretty much the same all over the places. So as I said, no particular – specific geographical pattern here clearly you see bigger in percentage because in the previous year was smaller. Then you asked about the pricing, the GT3 if I understood well. The GT3 pricing?

Yes. Yes.

Okay. So remember that GT3 is a car is for the track. It's not a road car. So it's important for sure it helps on the top line and on the bottom line of the company, but is mostly meant to enhance the experience and to enrich the experience of our customers. And this is the car – the GT3 is coming from the 296, the road car 296 and it will replace the one that is running today on the racetrack the 488. But as I said, we have to look at this car more in terms of rich and full experience we are providing to our customers. Talking about the energy risk, I would like Antonio to be more precise here.

Sure, Giulio. I think in the numbers that we reported there is clearly an impact from energy cost inflation. We are not immune to that even if we try and be opportunistic and buy in advance what we are – depending on our needs for the future months. Obviously, since we are in the market and we believe we are sufficiently agile, we are reacting to what we see in terms of cost and therefore adjusting our offer even in terms of pricing going forward.

Okay. But I was more worried actually about the supply of energy. Are you taking any actions to potentially offset lower supply with energy?

Sorry. I didn't get that. No. So far we haven't seen any specific concern in that respect.

Okay.

We are going to proceed with the next question. The next question come from Michael Binetti from Credit Suisse. Please ask your question.

Hey, guys. Congrats on a great quarter. Thanks for taking our questions here. I guess the – as we look at the performance in this quarter, the level of cars that you're producing and it looks like you're on a run rate to produce 13,000 to 14,000 cars here. You've been very clear this year, would be high unit volumes and some mix headwinds and we've seen that in the numbers. But we've had years like this sort of transitioned from high-volume years into supercar years just like apparition in the past but we haven't seen units go negative after a year like this. And that makes some sense. You have capacity to build at this level. But as we look at next year, if you're producing at this rate and the mix of cars shifts positively is roll out Daytona and even Purosangue, I mean do you do we expect lower volumes next year? And I guess the spirit of what I'm asking is your guidance this year now at the high end is €1.73 billion. That's just 4% below the €1.8 billion to €2 billion target of EBITDA that we have for next year. So when we see operating at these levels it's in 2Q it's hard for us to understand how to crosswalk to a much slower EBITDA growth rate baked into some of the out-year guidance that we have.

So Michael, I think the key word I used at Capital Market Day was always uniqueness and let's say distinctive cost. What I can tell you is that the increase of volume that you see 2022 over 2021 is not going to be the same increase of volume for the year to come. This does not depend. We will lower. It just means that the year-over-year growth will be slower than this year 2022 over 2021. This is the answer to your question if I understood well.

It is. I guess that the question if we take some of this capacity you have to produce 3450 units in a quarter and if some of those weren't Portofinos, but were instead Daytona is at 10x the price it makes it hard for us to understand the low end of the guidance next year based on what we have this year.

It's true, but you also to consider that the cars are not all the same. I mean this morning, I was in the line with the team. And it's not the same amount of work time that you need to produce the same object -- different object, different cars. So there is some dependence also what is the Ferrari the colleague are working on. So you cannot extrapolate and make an equation, let's say we will adjust one variable.

Okay. I guess -- how -- I guess you raised the year I suspect a lot of it was on FX. You raised the year on EBIT. I guess with the majority of your costs are in euros, but the revenues from a broad basket currencies that are largely favorable to the guidance. Can you help me understand that did you tweak anything lower on the profitability for the underlying business excluding currency for the year? And I know you have a very disciplined financial process and you have good visibility into your targets for the current year. Have you taken any actions to push any profitability out to next year to add a margin of safety at this point given how favorable FX is?

Antonio, can you take it?

Yeah, sure. No. I mean we're obviously -- we have based our -- we are basing our activity on planning and planning depends on one end on our order book. And secondly, of course, our production capacity. And we played it carefully, since we know we have at this time an order book that covers more than a year longer than that. So what we are basically giving as a guidance is based on what we planned and the quality of the mix that we aimed at producing.

Okay. Thanks again.

And of course, the other element of uncertainty that we do not usually know in advance is the level of the ancillary profitability, let me call it like this meaning, how much of personalization each car we carry on that as you see is part of our revised guidance.

Okay. Okay. Thanks a lot guys. Appreciate it.

The next question comes from the line of Monica Bosio from Intesa Sanpaolo. Please ask your question.

Good afternoon. Actually, most of my questions have been already answered, but just one left. Two months passed from the Capital Market Day and we had the chance to have a glimpse of the Purosangue. I was wondering I'm not sure if you can tell us you can tell us, if there is any country where Purosangue is receiving a higher-than-average interest? So any flavor on this would be appreciated. Thank you.

Thanks for your question, Monica. We see a well spread -- let me say strong interest in Purosangue from owners of different countries. So as I said before for the net order intake, I think we are not able to see any particular geographical pattern. So the Purosangue seems to be equally attractive for different owners family members all over the globe.

Okay. And there is no -- any difference? Is there any difference in terms of gender age or whatever?

I can tell you. We look at the age distribution and it pretty covers the same age distribution that we have in average for all the products -- for all the cars that we sell. So we don't see any sign that is -- any signal let me say that brings us to make a special conclusion for the time being. Maybe for the next call or two calls from now, we see some signal and we will be glad – more than glad to share with you, Monica.

Thank you very much, Benedetto

We are going to proceed with the next question. The next question comes from the line of George Galliers from Goldman Sachs. Please ask your question.

Hi. Thank you everyone for taking my question. The first question, I had was just on the Daytona, and the production ramp. It seems that, there are at least two cars maybe a few more presently being used by the press and appearing in social media. Can you confirm are these preproduction cars or are they part of the 599 total? And can you remind us, when the first customer shipment is expected to begin? Secondly, just following on from Giulio's questions around gas. Can you remind us what percentage of the energy supply in Maranello comes from gas? And are there any activities such as paint shop that have a 100% dependability on gas? Finally, just with respect to Formula 1, I understand championship points do you still have implications for revenues and per your own press release post Hungary you did describe in that press release the Hungarian performance is disappointing. There have now been a few races where you haven't converted qualifying performance into rates results. Are there any steps you can take at a management level to address this? Thank you.

So let's start from Daytona, okay? So, Daytona the shipment will start in Q1. The one that you see on social media, this is the preproduction. Some of those cars will – may be solved at a later stage. This is usual process. But let me say that, Daytona shipment will start the next year. The second was about the percentage of energy that depends on gas. Today, I would say that, the biggest – let's say most of the energy is coming from gas, because don't forget we have the three generators. So we are feeding gas in it to create also the electricity that we need. What I can tell you that, this year we reduced a little bit the usage of – this year 2022 we reduced the usage of gas in favor of electricity. And I can also tell you proudly that, thanks to the innovation of the team all over the industrial operation, we have been able to reduce the energy – necessary energy per car by 3% and we aim to continue to reduce this up to year-end by 5%. And then the last question about Formula one, and the performances over the last weekend. As I said also to the Capital Market Day Formula 1, it's in our DNA. Formula one means for us that we have to pay attention to all the details. It's also a way that, when there is – it's also a continuous occasion to learn and we keep fighting for the winning of the Formula one championship.

Great. Good luck with that and thank you.

Thank you.

We are going to proceed with the next question. The next question come from the line of Stephen Reitman from SGCIB. Please ask your question.

Yeah. Stephen, Societe Generale. I have three questions. First of all, you mentioned the record order book. So congratulations on that. Could you comment on whether you're seeing any cancellations and where they might be geographically regarding sort of like the confidence of customers? Secondly, I know that, obviously residual values the resale of the cars is responsibility of digital dealers, but obviously you track that very closely. Could you give us some insights into what's happening by region on regional values of Ferraris? And thirdly, on sponsorship, could you update us on how things are looking in terms of getting a main sponsor for the Formula one team absent Mission Winnow taking more juniors status on the sponsorship? Thank you very much.

Okay, Stephen. So, yes, record orders net order intake, and also the cancellations are very, very low. And nothing, let me say out of the regular pattern. And we do not see also here – sorry, if I repeat myself, we don't see any geographical patterns. We keep watching with a lot of attention, as you can imagine all this data we keep analyzing. But we don't see any, geographical pattern that we can share with you. Clearly, if there is any pattern we would be more than glad to share in the next calls. But today, we don't see anything strange under the sun. The second, was about the residual values. And also a year for the residual values, consider that if you want to buy a Ferrari and you go to a dealer, you just can buy three of them. Ferrari, the 296 GTB, 296 GTS. And this helps a lot to keep the residual values. In some cases, we see also a positive trend in the residual values. So this is -- let me see also here -- we see this as a constant, all over the places for different model of our Ferrari. Number three, was the sponsorship. I would define this year, as the year where we have been diversifying a lot, our sponsorship base. If you see also in our Formula one cars, you see a lot of different companies different brands. And this has been possible to new sponsor for example, in the logistics like CEVA, in the technology like Velas. So the sponsorship trend, you can refer to the chart, that was showing Antonio before. It was the chart number nine, where basically you have seen also a positive trend. So I would say, that we see a strong interest from several partners to partner with us, both on a commercial and on technical side.

Thank you, Benedetto.

We are going to proceed with the next question. The next question come from the line of Charles Coldicott from Redburn. Please ask your question.

Hi. Thanks for taking my questions. So my first on the stronger impact from personalization, are there any particular models driving that? Are you doing anything new, to encourage people to spec up their vehicles at all? And maybe could you give us the percentage of revenues, that personalization makes up? I think it was 17% in Q1, if I remember correctly. And secondly on the order intake, as you mentioned, the records despite only having the book open for three models. So I guess, I was wondering in a typical year, if you have seven or eight GTM Sports vehicles in the range, how many would you have the books open for in terms of order intake? And then thirdly, Benedetto, you mentioned the BEV in 2025. I know you guys -- you don't want to talk about it too much, or give too many details away at this stage. But should we expect that to be a limited addition, sort of hyper car, or is that going to be part of the core sports car range? Thank you.

I'll start from the last one, and then I'll leave the first Antonio, to you the personalization. So I think Charles, I fully understand your curiosity and I would like to share and to satisfy it. But it's a little bit, too early. We are three years ahead. I am trying with the team, some unique authentic features we want to put in the car. So allow me to not be very specific in these answers. I'm asking -- I'm telling you, that really we want to make something unique and authentic like, I said during the Capital Market Day, looking at all the dimension from the uniqueness of the way the people will drive the car, to the way the people will fill the cars. So this is about the electric car, we will unveil in 2025. And then it was -- the second question about the net order intake, and it was specifically about the three models only, I think that -- let me say, we started detail this evolution of net order intake, over the past years. And I have to say really, that this quarter record, I think it may depend from different things. I think one key factor is -- over the years, we enriched the experience, we largely experience that we are able to provide to our owners, to our customer base Ferrari owners. I mean, I've been attending this to Cavalcade -- Cavalcade Icona and Cavalcade Riviera. And really you see the way and how much they like the experience we are bringing to them. So, apart from let me say, the other external factors, if I have to pick one factor, which is explaining this good NOI, net order intake is that the experience that we are able to provide and this merit goes to all the colleagues that made it possible. It's something that explains this strong NOI in -- record NOI in Q2. For the personalization, Antonio you may.

Yes. Charles, I mentioned the fact personalization in the quarter was approximately 18% of total revenues on cars and spare parts. And with respect to your question, whether this is due to any specific model, the answer is no. As you've listened, this quarter is mainly a quarter of range cars particularly strong on V8 models and even on that the personalization range has been higher. So, when looking forward, we are extrapolating on this basis based on what we see in our current order portfolio.

Okay. Thank you.

We’re going to proceed with the next question. The next question comes from the line of Tom Narayan from RBC. Please ask your question.

Hi. Yes. Tom Narayan of RBC. Thanks for taking my question. I have three. A follow-up on the nat gas rationing topic. Could you talk about supply chain vulnerability? So in the event, there's less availability of plastics for instance, do you keep an inventory of components that might absorb this event or maybe are you buying ahead of this? Next, there appears to be an increasing interest in Formula 1 in the US, partly thanks to a Netflix show. The US are already a big market for you guys, but could you discuss any knock-on benefits this could have on your business perhaps beyond just car sales? And then you did make some comments on the prepared commentary about preferring build versus buy. Regarding software we have seen how this has been somewhat problematic with some big auto companies of late trying to do software in-house. Could you comment on your willingness to partner with software providers as opposed to perhaps trying to growing it by yourself? Thanks.

Thank you, Tom. I'll start from the last one build versus buy, what I say, build versus partnership. I would like to say in this way. As I said also Capital Market Day, we do not intend to do for example the FOS, the Ferrari Operating System. We do not intend to put a lot of money, a lot of people on software where there are partners that we can work with to make something unique and authentic. Clearly, we have the competencies to make it, let me say, unique. And also here, there are different kind of software. I would like to make a difference. There is the performance software, where we are very strong. And if we are able to make the car that we make is because a lot of engineers here understand how to use component on the market with unique software that enhance the performances of the cars. Now when it comes you said to other software. Well, there are two big classes if you want. The software for autonomous drive; and this is something where, let me say in this way, big OEM have to put a lot of resources and this is an advantage for us, because we do not want an autonomous Ferrari. We don't want the PC or the microchip, let me say, to be pleased about riding a Ferrari. The second is that is more about user interface. Well over there, we will leverage the best also the things the software and we will customize in a way that is always unique and authentic. This is about, let me say, the software and what we do internally and what we partner with other companies. Then it was second question. Yes, Formula 1 is growing -- the interest of Formula 1 in US is growing a lot. We are doing pretty well in Americas. You see that the shipments were more than 30% in Q2. There is -- we don't know if the signal is more correlation or causation between the two. But I can tell you that the two signals are pointing in the right direction, strong interest in F1, strong I mean interest from new customers in US. Then the first one, the more operational one, on the supply chain. Here we experienced some minor readjustment of production, but we are proceeding as we planned at the beginning of the year, we factored in some, let me say, potential bottlenecks, but thanks to the support of the partners. Thanks also to the greater job done by the supply chain and the manufacturing of the colleagues here. We have been able to stick to the plan and to absorb in an agile way the problems that you may have in the daily operations.

Okay. Thank you.

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

Good afternoon. I just have two follow-up questions at this point. First on the record order book. I was just curious, if you can give us, sort of, a length of time that you expect that or you predict that at -- I mean traditionally you thought around 18 months plus or minus, but it sounds as like significantly longer than that. So are we at 24 months plus? And just curious how you're managing that order book? I mean there's always a lot of demand for Ferraris. So obviously you make it traditionally very difficult to get on that order book. So what is loosening up here? And how is that being managed? And then just the second question is on foreign exchange. I mean, obviously, you're hedging in the capital markets and with banks. But is there an opportunity given the sophistication level of your customers to potentially pass-through some of these swings in foreign exchange with them directly as they enter the order book so that you might not be able to -- you might have to be charged so much by banks or have the fluctuation and be a lot more fluid?

So John, I'll take the first one. I can tell you that order book what I can tell you is -- also what I said in the previous call is well beyond 2023. For the first question and the hedging and FX, Antonio you can comment.

Yes, John. Our partner and the ones we invoice to the dealers we already explored in the past the opportunity of using different models and pass on the foreign exchange risk to partners or even beyond that. But ultimately we -- I think, we concluded the way we have proceeded currently is the most efficient one and certainly even the cleanest from our perspective.

Antonio maybe just can you tell us what the cost of hedging is for you?

The cost of a hedging you mean? So you can read in...

Yes, the direct cost.

Yes. You can read in the financial charges line. It's -- I mean you can see the difference between interest rate and cost of hedging.

Okay. All right. Thank you very much.

It's made on a rolling basis. And, of course, it depends on the interest rate differentials from time-to-time.

Thank you.

You’re welcome.

Due to time constraints, we will now end the question-and-answer session. I would now like to hand back the call to Mr. Benedetto Vigna, please go ahead for final remarks.

Thank you. Thank you all of you for your time today and also for all your interesting questions. The second quarter of 2022 clearly marks another set of strong results with double-digit growth and record levels for revenues and profitability. And such strong financial profile allow us to look at 2022 and beyond with great confidence. Good afternoon, everyone. Good morning and thanks again for your attention and [Foreign Language].

As for today, thank you for participating. Thank you for participating. You may now disconnect your lines.