Ferrari NV

MIL:RACE

Earnings Call Analysis

Navigating Challenges with Confidence

In 2023, adjusted non-interest expenses are projected to rise by approximately 6%, excluding one-time operational losses. The company experienced an incremental increase in net charge-offs, mainly from a discontinued solar program and lower commercial recoveries. Credit quality is normalizing, and they anticipate the full-year 2023 adjusted net charge-off ratio slightly above 35 basis points. Despite industry-wide challenges such as rising fraud costs, management is doubling down on expense control and expects 2024 expenses to be under the 2023 reported number. The company has adapted to increased fraud costs and plans to implement stronger controls and technology. In terms of capital, Regions maintains a robust position, stressing confidence in their capital strength, even in the face of a potential recession, and signaling the possibility of resuming stock buybacks.

Solid Core Performance and Strategies for Managing Fraud

The company reported a strong core performance with earnings of $465 million and an earnings per share (EPS) of $0.49. Despite unusual items affecting this quarter, including a $53 million loss from a second instance of fraud, the company boasts one of the highest return on average tangible common equity ratios in its peer group, at 21%. Fraud losses are expected to come down significantly to approximately $25 million in the fourth quarter and stabilize around this range in 2024.

Modest Loan Growth and Deposit Mix Shifts

The company anticipates low single-digit loan growth by the end of 2023 and a stable to modestly lower deposit base in the fourth quarter influenced by customers seeking alternative investment channels. Non-interest-bearing (NIB) deposits should level off in the low 30% range, while wealth management and corporate banking platforms will serve off-balance sheet opportunities.

Net Interest Income Projections Amid Interest Rate Adjustments

Net interest income declined by 6.5% in the third quarter due to various factors, including deposit cost normalization. However, an 11% growth in net interest income is projected for 2023, supported by higher market interest rates. Hedging strategies have been implemented to maintain a stable interest income profile through 2025.

Adjusted Non-Interest Income and Expense Trends

Adjusted non-interest income decreased 2% from the prior quarter, impacted by declines in service charges and capital markets. However, the company forecasts a 5% to 6% increase in adjusted total revenue for the full year of 2023. Adjusted non-interest expenses are anticipated to rise approximately 6% for the year, excluding significant operational losses from past quarters.

Credit Quality and Anticipated Charge-offs

The net charge-off ratio increased slightly, and credit performance is normalizing as expected. The company projects a full year 2023 adjusted net charge-off ratio to be just above 35 basis points, excluding the impact of discontinuing a specific lending program at EnerBank.

Capital Deployment and Office Portfolio Management

The company has capitalized well to handle the Basel-III end-game proposal without significant changes to its business model, estimating a need to issue approximately $6 billion of long-term debt over several years. The office portfolio, which includes Class A properties primarily in the Sunbelt, is receiving active management with nearly half of the exposure maturing by the end of 2024, and sponsors are showing strong support through significant contribution to projects.

Focus on Controlling Operational Challenges

The company has faced heightened fraud incidents, which have recently spiked across the industry, but has begun taking strict actions against perpetrators, including criminal charges and imprisonment of fraudsters. New controls and technologies are being implemented to mitigate future risks.

Financial Strategy Looking Forward

Looking ahead, the company plans to resume share repurchases in the near term and will strive to maintain or reduce its 2024 non-interest expense level despite a challenging revenue environment. It is committed to effectively managing expenses and optimizing returns for shareholders.

Earnings Call Transcript 2021-Q3

[Operator]

Good day, and thank you for standing by. Welcome to the Ferrari 2021 Q3 Results Conference Call. [Operator Instructions]

Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Nicoletta Russo. Please go ahead.

[Nicoletta Russo, executive]

Thank you, Sarah, and welcome to everyone who's joining us. Today, we plan to cover our group's Q3 2021 operating results. In light of this, the duration of the call is expected to be around 60 minutes. Today's call will be hosted by the group CEO, Mr. Benedetto Vigna; and Group CFO, Mr. Antonio Picca Piccon. All relevant materials are available in the Investors section of the Ferrari corporate website. And at the end of the presentation, we will be available to answer your questions.

Before we begin, let me remind you that any forward-looking statements we might make during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement included on Page 2 of today's presentation, and the call will be governed by this language.

With that said, I'd like to turn the call over to Mr. Benedetto Vigna.

[Benedetto Vigna, executive]

[Foreign Language], Nicoletta. Thank you so much. And thank you, everyone, for joining us today. First of all, I would like to say that it's a great honor for me to be here today for the first time as Ferrari CEO and even a greater honor to take you through the latest result of this wonderful company.

Before joining this team, I have always had the huge admiration for Ferrari, for its people, its achievement and of course, for its incredible cars and racing expertise, all brought together under a legendary brand that's known and respected all around the world. Now that I am in the prestigious position of being on this side leading this unique company, my admiration is so much greater.

But before we talk about the last quarter, I'd like to share with you a little bit of my experience here in Ferrari during the first weeks since I arrived in Maranello. First and foremost, I've been getting to know our highly motivated and skilled team, and I've been very much impressive by their dedication to every detail, by their knowledge and by their skill, but most of all, by their openness to learning and improving everything we do, every step of the way. They all want to take Ferrari to new, even greater levels.

They have made me feel very much at home from day one. So I'd like to take this opportunity to thank everyone in the company for their warm welcome. We have no doubt we have many exciting and rewarding times ahead of us, in which our opportunities have never been greater. And what convinces me of this, more than ever, are the following 3 key factors that I've seen so clearly expressed by my colleague in my first weeks. I refer to passion, I refer to excellence and I refer to innovation.

First of all, passion. You may have heard this word many times since it is often very used. But I believe here in Ferrari, it finds its true meaning. Everyone who has any connection with Ferrari, whether they be colleague, partners, tifosi, and of course, our customers, all express a sense of belonging, a belief and love for our brand, which is quite unlike anything I have known.

Second, excellence. In Ferrari, we craft timeless icons that are not only beautiful to look at, but also deliver a unique experience. Most of all, they are known for being fun to drive and this is something I can testify to myself.

And third, innovation. And by innovation, I don't just mean the ability to exploit technology to the maximum, but also the way we express visibility through the special collaboration between our teams and the constant drive to perfect what we do and the creative inspiration we bring to our craft. The SF90 Stradale is a testament to this, as are also the SF90 Spider and the 296 GTB, all solid steps ahead in the implementation of our electrification plans that are part of our path towards new technology in the distinctive Ferrari way.

Of course, this relentless dedication to our craft for our customers is also dedicated to our investors who place their trust in us and to you, to all of you who follow us.

Now having shared my initial experience in Ferrari, let's focus on the result of this last quarter. And here, I would like to highlight the following 3 things that are all first; revenues, cash flow and order intake. Revenue first. This is the first time in our history that in Q3, we crossed the EUR 1 billion revenue threshold. Now cash flow. We have delivered the strong Q3 in our history in terms of industrial free cash flow generation. And last but not least, order intake. This is the highest ever quarter of order intake across all models and regions with Mainland China and U.S. being particularly strong.

But how did we achieve all of this? How was it possible? Well, I'd like to point to the following 3 factors. First of all, we have capitalized through focus and discipline on a strong economic climate as evidenced also by the solid performance of our preowned business. Second, we have the most beautiful, most innovative and widest product range in our history. The 296 GTB, with its hybrid V6, which we launched in June has been received with huge enthusiasm with orders flowing in even before customers have had the opportunity to drive the car. And of course, last but not least, we have to thank our incredible customers, both existing and new.

Speaking of our customers, it has been really liberating to be able to start arranging events with them again. In September, in Sicily, I was delighted to attend the 10th anniversary of the Cavalcade, a truly memorable event in every sense. In fact, for the first time, over 120 historic and contemporary Ferraris joined a single parade. If you had been able to join me in Sicily, you would have been surrounded by selection of truly beautiful cars, Ferrari at its finest from the Monza to the Portofino, from the hybrid power of LaFerrari and SF90 Stradale to historic Testarossa and the F50.

But more than anything, this occasion truly emphasized that owning a Ferrari is so much more than just owning a car. It is the experience of being a member of the unique Ferrari family. And so I'm really proud to announce today to all our loyal Ferrari family members that a new surprise is coming soon with the unveiling in the middle of this month of our second Icona model. It will be another very special occasion, just be patient for a few more days.

Now after the Q3 highlights, let's have a quick look together at the future. My first 2 months in Maranello confirmed to me that we are very strongly positioned to capitalize on the many opportunities we have in our hands today and ones that lie ahead of us. I believe Ferrari, as it has always done, will distinguish itself yet again through its creativity and ability to apply and interpret the vast array of future technologies and always with our uncompromising and distinctive style. This will happen while always remaining disciplined in our approach to investment.

To achieve this result, our people are the key. They really are the key. Through our special close collaboration, working with commitment and dedication for a common goal, we will deliver enduring success together. This has been the source of our unique success in the past, and it will also power our future, both within the company and outside the company, working with all of our partners, present and future. This is exactly the kind of innovative and open approach you can expect under my leadership here as demonstrated also by the recent exciting collaboration we announced with LoveFrom.

We are also making excellent progress with our brand diversification strategy to further enhance the vibrancy and vitality of our brand. We have unveiled the first fashion collection. We have renovated our flagship stores in Maranello, Milano and Los Angeles. And we reopened the iconic Cavallino restaurant here next to our home.

We are making important progress also in our motor racing activities. Indeed, just a few weeks ago, in August, our 488 GTE Evo won at Le Mans, a circuit we will return to in '23 to compete at the highest level with our hyper car. In Formula 1, in the most recent races, we have seen some positive signs of progress as well. Competition. Competition on the track has been deep in Ferrari's DNA through our history, so it is today, so it will be in the future.

There are many, many projects under development in our company. But there are 3 areas I would like to highlight today; our brand, our product and carbon neutrality. Our brand, first. Relentlessly, we will continue to nurture and evolve our brand by enhancing an already engaging, immersive and authentic experience for all our customers, current and new ones. Whenever and wherever they get in touch with us, when they drive the cars, attend the Ferrari event or enter our stores in the real world or in the digital dimension, we are fully committed to make this an extraordinary emotional experience. We are fully aware of this enormous responsibility, especially in a world rapidly changing like today.

Now after brand, the product. We will continue the disciplined extension of our product range through the launch of Purosangue which we will unveil next year. We will work to capture all the possibilities offered by technologies in a unique and distinctive way, always preserving our exclusivity and luxury positioning as we have done throughout our history.

And finally, carbon neutrality. We will continue our focused journey towards carbon neutrality by 2030, a key priority for my tenure and for our business. And to be clear, in addition to our electrification journey, we are committed to addressing both direct and indirect emissions with a focus on energy and materials. At our next Capital Market Day, we will provide you with plenty of detail and color about our future plans and the path to delivery. And we look forward to hosting you in Maranello on June 16.

Let me conclude these opening words by again thanking all my Ferrari colleague for their warm welcome and for all their amazing work. I'm deeply honored to be leading them into the next phase of our extraordinary journey. And of course, my thanks go also to our Board and to our Chairman for their support and confidence. And also to you, to all of you, for your precise and dedicated interest in everything we do.

I would now like to hand over to Antonio to present in detail the Q3 '21 earnings.

[Antonio Piccon, executive]

[Foreign Language], Benedetto, and good morning or afternoon to everyone who is joining us today. The warmest welcome to you, Benedetto, also by me and the whole team here and the promise of our tireless commitment to drive Ferrari towards even brighter achievements. We'll be at your side.

Now let's come to our quarter. Starting on Page 4, you can see the highlights of the Q3 2021 earnings. A very solid set of results across all metrics and exceptionally strong on industrial free cash flow generation. Our shipments were 2,750 units, up 18.9% versus the prior year and up 11.2% versus the third quarter of 2019. Group net revenues we EUR 1.053 billion, increased by 18.6% versus prior year and up 15.1% versus 2019, driven mainly by volume and stronger product mix. EBITDA came in at EUR 371 million, up 12.4% versus the third quarter of 2020 and up 19.6% versus Q3 2019.

As already mentioned in previous earnings call, the EBITDA margin decreased compared to H1 '21 level of 37.3% as entry-level models were ramping up as expected and OpEx grew in line with our programs. Compared to Q3 2020, the EBITDA margin was also down since in such quarter of last year the estimates of the F1 sponsorship and commercial revenues were revised upward and the impact of cost containment measures undertaken to react to the pandemic became fully visible.

EBIT was EUR 270 million, up 21.8% versus Q3 2020 and up 19.2% versus Q3 2019. Net profit was EUR 207 million, up 20.8% versus the third quarter of 2020 and up 22.4% versus Q3 2019, resulting in diluted EPS of EUR 1.11, up 20.7% versus prior year.

Industrial free cash flow for the quarter was exceptionally strong at EUR 242 million, supported mainly by the collection of the advances for the 812 Competizione.

Turning to Page 5. You can see the details of the shipments of the third quarter 2021, up 18.9% versus the third quarter of 2020. Sales of 8-cylinder were up 39.4%, while 12-cylinders were down 35.1%, mainly due to the reduced volumes of the 812 Superfast. There are not yet sales for the V6 range represented by the 296 GTB. The shipments of Q3 were driven by the range models in the portfolio with the first deliveries of the SF90 Stradale beginning in the quarter and the Ferrari Portofino M entering the ramp-up phase. Shipments of the Ferrari Monza SP1 and SP2 continued in line with planning.

All geographies contributed positively. As a result, EMEA was up 1.6% compared to our third quarter of 2020 when the region grew by 12.7%. Americas increased 40.1% after losing 34.7% in Q3 '20. Mainland China, Hong Kong and Taiwan doubled, thanks to the arrival of new models, in particular, the Ferrari Roma and SF90 Stradale. Last year, the region had lost 25.2%. Finally, rest of APAC was up 21.1% from being almost flat in Q3 '20.

Moving to Page 6. You can see here displayed the walk of our group net revenues for the third quarter up 20.7% at constant currency. The increase in revenues from cars and spare parts up 23.5% at constant currency was supported by higher volumes and positive product mix along with personalizations. Personalizations were up versus the prior year in absolute terms, sustained by volumes, while in line with historical average in proportion to revenues from cars and spare parts at around 17%.

Engines revenues were up 24.8%. The improvement is related to higher shipments to Maserati; and to a lesser extent, to the rental of engines to other Formula 1 racing teams. The increase in sponsorship, commercial and brand was attributable mainly to brand-related activities. As already mentioned, in Q3 2020, our revenue accrual for F1 sponsorship and commercial was based on full year estimates updated in such quarter and improved compared to first half of 2020.

Currency, including translation and transaction impact as well as foreign currency hedges had a negative contribution of EUR 15 million, mostly related to hedges.

Moving to Page 7. Let me review the change in our EBIT bridge, explained by the following variances. Volume was positive for EUR 39 million, reflecting the shipments increase. Mix/price variance was also positive for EUR 41 million, thanks to the strong contribution of the SF90 family and the Ferrari Monza SP1 and SP2, along with personalizations, partially offset by the Ferrari Roma ramp-up and the reduced contribution of the 812 Superfast.

Industrial and R&D expenses increased EUR 12 million, mainly due to product innovation and start-up costs, including Formula 1. SG&A were negative by EUR 4 million, mainly reflecting communication and marketing activities following the gradual restart of our events. Other decreased mainly due to higher costs related to the assumption of better F1 in-season ranking and nonrecurring charges impacting other supporting activities. The total net impact of currency was negative for EUR 14 million. As a result of what I just mentioned, EBIT reached to EUR 270 million, up 21.10% compared to the prior year and with an EBIT margin of 25.7%.

Turning to Page 8. Industrial free cash flow generation for the quarter was EUR 242 million. This exceptional performance for the quarter led us to beat our full year guidance in 9 months only. Cash flow was mainly sustained by EBITDA and the collection of advances on the 812 Competizione, whose inflow was faster than initially anticipated. The working capital dynamics were also neutral for the quarter, which was unusual compared to our typical seasonality, mainly due to timing of our expenditures. These will be at least partly reabsorbed in Q4.

All of the above was partially offset by EUR 199 million of investments that are progressing in line with plans. The capitalization ratio was approximately 39% for the quarter, decreased versus prior year, essentially due to the increased weight of product innovation activities.

Net industrial debt as of the end of September was EUR 368 million versus EUR 552 million as of the end of June, decreased, thanks to the robust industrial free cash flow generation of the quarter.

On Page 9, we revised upward our 2021 guidance across all metrics on the back of the strong trading performance recorded so far and the confidence on positive development for the core business in the last part of the year, coupled with improved targets for our operating expenditures.

The overall full year contribution of Formula 1 commercial revenues is still uncertain. However, opportunities may arise in addition to this improved outlook. Industrial free cash flow generation is now projected to be greater than EUR 550 million, reflecting improved profitability, saving some CapEx compared to our previous estimates now seeing closer to EUR 750 million and continuing support from net working capital, thanks to the collection of advances on our special series and capital expenditures being weighted over the last months of the year.

Our guidance still relies on the assumption that trading conditions remain unaffected by risk of recrudescence of the COVID-19 pandemic and continued scarcity of electronic components. However, the dynamics of current market demand never so vibrant before support our confidence for the year and well beyond.

With that said, I turn the call over to Nicoletta.

[Nicoletta Russo, executive]

Thank you, Antonio. We are now ready to start the Q&A session. Over to you, Sarah.

[Operator]

[Operator Instructions] We will now take our first question from the line of Thomas Besson at Kepler Cheuvreux.

[Thomas Besson, analyst]

It's Thomas Besson at Kepler Cheuvreux. I have a couple of questions, please.

[Nicoletta Russo, executive]

I'm sorry, Thomas. We have some difficulty hearing you. Could you kindly speak closer to the microphone, please?

[Thomas Besson, analyst]

Yes. Sorry for that, Nicoletta. Is it better now?

[Nicoletta Russo, executive]

Definitely.

[Thomas Besson, analyst]

So it's Thomas at Kepler Cheuvreux. I have a couple of questions. The first one may be quite unusual, but it's the first time we have a chance to speak with you, Benedetto. Could you please tell us about your hiring process and what you believe have been the key qualities you bring in that have made you the one selected to run this company?

[Benedetto Vigna, executive]

Thomas, nice meeting you. Thanks for your question. Pretty interesting. I -- what I believe I can bring in Ferrari is 3 things. I think I can bring the experience that I've been able to navigate in the previous company through times when -- in an environment that is pretty -- I mean, changing pretty fast. So I think this is one thing I can bring.

The second, I have been able and I've been exposed to pretty much international world. So I think this is also another contribution I can bring to the team. And last, I think, is about the leadership style that helped me to drive the team in the previous company to achieve the results that I think you have seen from the other company a few days ago. So these are the 3 things: international experience, leadership style and ability to manage situation in a changing time.

[Thomas Besson, analyst]

Great. My second question is more classic for an earnings call. It will relate to the comments you may eventually make on CapEx for requirements for Ferrari for this year. And I think for the future, you'll probably want to wait until June to give us more details. You've talked about CapEx being essentially in the last month of the year. Can we still expect the previous guidance to hold? Or are you going to be able to spend slightly less than planned for this year?

[Antonio Piccon, executive]

On this year I just explained, we are revising our estimates towards EUR 750 million. And this is just better spending and skewed towards the end of the year with no delays. With respect to the future years, I think it's important that we wait for the call as of the end of this year. We'll provide you with indication on 2022. And then, of course, we'll have the Capital Market Day, and we'll outline the future there.

[Operator]

We will now take our next question from the line of Monica Bosio at Intesa Sanpaolo.

[Monica Bosio, analyst]

And welcome to Benedetto. I have 2 questions. The first one, if you can give us a flavor on the waiting list. And if you had some supply chain problem that could have affected the waiting list. And if yes, if the company is going to implement some action or to revise the general philosophy of the waiting list if they are too long. And the second question is on the order intake. I don't know if you can give us some color, but I would really appreciate some color from a country level standpoint.

[Benedetto Vigna, executive]

Monica, thanks for the warm welcome. I hope to see you also in person maybe here in Maranello. So I will start from the supply chain. The supply chain, I have to say that the team here -- the team in Ferrari with also the support of suppliers have been able to manage properly this situation that many players are facing all over the world. So I have to express really a kind word for the team here and also for the supplier that have been supporting us. This is about the supply chain.

About the net order intake, as I said also in my part, there is -- for sure, there are some -- the new models, like the 296 GTB, for example, that is doing pretty well. That's what I said. But there is also a strong positive trend across all the markets and all the segments. So this is very, very, very positive.

For the waiting list, I don't know, Antonio, if you want to add something, but...

[Antonio Piccon, executive]

Yes. Monica, as usual, we are above 1 year coverage for all models, and some of them are already sold out.

[Monica Bosio, analyst]

Okay. So no problem on the waiting list. As for the supply chain, everything is under control. Is it okay?

[Antonio Piccon, executive]

Yes. This is correct, Monica.

[Operator]

We will now take our next question from the line of Giulio Pescatore at Exane.

[Giulio Pescatore, analyst]

And [indiscernible] Benedetto. The first one, I would like to go back to a comment that was made by your predecessor. I mean he said in the past that he never saw -- he didn't see Ferrari becoming completely electric in the foreseeable future. I know you want to wait for next year for -- to give us more color on this, but maybe can you just express your thinking around the electrification issue?

[Benedetto Vigna, executive]

Giulio, I think that, in general, technologies are needed to address needs of the customer to delight them. What I would like to say is that we, as a company, started our electrification path already a few years ago. It was the case of LaFerrari and then it is the case now with the SF90 Stradale. We will continue. And as our Chairman said in the previous call, we will unveil the full electric car in 2025. And I will be more delighted to show you the full plan when we meet here in 16 of June next year.

[Giulio Pescatore, analyst]

Okay. Fair enough. And just maybe one question on a comment you made. You said that the company will continue to follow a disciplined approach to investments. Can you maybe elaborate a bit on the statement you made.

[Benedetto Vigna, executive]

Yes. I think this is an important point. I -- in all my career, I have always optimized the use of the capital to reach some goal. So I believe that the beauty of our work is to make sure that we reach the goal of optimizing the use of the capital. That's what I did in the previous company. That's what I intend to do here with the team. Capital discipline is very important. Otherwise, let me say it this way, innovation would be too easy if you don't have any boundary constraint.

[Giulio Pescatore, analyst]

Okay. And maybe one last one on more short term. If you think about the new Icona you're presenting in mid-November, should the deposit for this model follow the same pattern that the deposit for the [indiscernible] that follow, so very strong inflows in maybe Q1, Q2 next year.

[Antonio Piccon, executive]

Giulio, Antonio speaking. Yes, we expect it to follow a similar path. It will not impact 2021 though, will start from 2022.

[Operator]

We will now take our next question from the line of Susy Tibaldi at UBS.

[Susy Tibaldi, analyst]

Good to hear from you, Benedetto. So one question to just go back to the waiting list, I wanted to ask what's your view -- your personal view on retaining the exclusivity of the brand. And at the same time, you have this order book that continue to expand, and you will eventually reach a point where consumers either have to wait too long or you'll be in a position to choose either to prioritize the price. So maybe increase the price mix a little bit more aggressively or having to increase the volume production. So in a philosophical way, like what's your view on this scenario, which obviously is not a good place to be in, but it would be interesting to see how you approach this.

[Benedetto Vigna, executive]

Susy, clearly, I mean, the waiting list, as Antonio said, is a good position. And I think that's also already what we started. There is a way to manage it properly, playing with the price. And in fact, we already started to increase the price, so that we can manage it properly, this situation. But we have also to say that usually, what we see and -- is that customers that want Ferrari, they also are willing to wait a little bit because when you drive a Ferrari, you don't drive a car, you drive a Ferrari car. And I think the unique experience you get over there are memorable. So on one side, we are increasing price. On the other side, we believe that the Ferrari experience so that the people are going to stay and willing to wait.

[Susy Tibaldi, analyst]

Understood. And in terms of the full year guidance that you updated today, if we look at what this implies for the fourth quarter in terms of EBITDA, is only as low to mid-single-digit increase year-over-year. And given all the strength that you're seeing in the order book and the great lineup that you have, it does feel a little bit conservative. And I wanted to check if there is any operational reason for it or if it's your way of managing the business, the growth?

[Antonio Piccon, executive]

Still Antonio answering. Susy, I think I made a comment in my speech already in the previous 2 calls. We have 2 elements that are impacting the end of the year. One is mix, which is a bit less strong compared to the first 9 months and the previous half, particularly. The second one is OpEx that are growing and a bit unusually compared to the previous year, and it is also in relation with F1. To the opposite, we see opportunities related to an uncertain element, which are revenues from the F1 commercial right holders that we do not put into the numbers. So the result is what we outline now as a guidance.

[Operator]

We will now take our next question from the line of Michael Binetti at Credit Suisse.

[Michael Binetti, analyst]

Benedetto, let me add my welcome to you. Very, very forward to working with you on the story here over the next few years. I know there's a lot of questions on guidance and everything today. But just backing up very simply, what do you think is the EV opportunity for a pinnacle luxury car company over the next 5 to 10 years? And then on Formula 1, since the business is -- has a lot of overlap there, they've been very clear in the direction of their future power units. Sustainable fuels and hybrid engines, they've talked about in the media quite a lot. How do you see the historical strategy for Ferrari of transferring Formula 1 technology into new road cars evolving over the next 5 to 10 years?

[Benedetto Vigna, executive]

Michael, so I would start to talk about your first question, how do you see the EV opportunity? I would turn this in how do you see the opportunity that new technologies offer to us because I believe -- and I don't want to repeat myself, but it's really a profound belief I have. I believe that the technologies are really a way to make some unique, distinctive products that delight the customers. So now we are talking about different propulsion schemes that are using, let's say, electrical engine. And this is something for sure is an opportunity for us. And that's the reason why we have been sharing with you partially, not in detail -- not yet in detail, our electrification plan.

What I would like also to say is that when -- under the same umbrella, you have also the possibility to take technologies that are made for racing. I think there is a unique opportunity in this sense. And I have to say that in these 2 months, I have gone -- I spent some time with the colleague in the laboratories, and I have seen really something interesting, really something interesting. I'm sorry I cannot say too much, but 16 of June, we will provide more color on this, Michael.

[Michael Binetti, analyst]

And I guess let me ask you, what would you say to those in the financial markets early on since we still have ways to go until June that are concerned about a small company's ability to pivot to technologies that have required a lot of investment in other areas like electric vehicle and other nonpetro-engine technologies, and the levels of investment it might take for a small car company like this to capitalize on those opportunities.

[Benedetto Vigna, executive]

I would say only one thing, Michael. I would say that the solution is to go through partnership. We have -- on one side it's true, we are small. On the other side, it's also true that we have a strong brand on -- in general, and this is also what I did in the other company. I think it's important to leverage at best the partnership. So it's important that you select the areas where you want to excel. And on the others, you work with partners. This is what I believe is important for financial market to keep in mind. Clearly, if you want to do everything by yourself, it's going to be a challenge. You have to select what you do by yourself and what you do with partners. That's the answer, Michael.

[Operator]

We will now take our next question from the line of Philippe Houchois at Jefferies.

[Nicoletta Russo, executive]

Philippe, we cannot hear you. Maybe you are muted.

[Philippe Houchois, analyst]

Are you hearing me? Do you hear me now?

[Nicoletta Russo, executive]

Now we can.

[Philippe Houchois, analyst]

Right. Apologies for that. And welcome to you, Benedetto. Look forward to hearing what you tell us in June. I have 2 questions. And maybe one, Antonio can help, is that there's a discussion around China and this [ posterity ] politics. And every car maker, expensive cars or cheap cars, tells me no problem. I know you had record deliveries in China again. But do you see on the ground any risk to your business plan in China -- not selling cars, but maybe the upside you're expecting in China over the next few years to be reduced as a result of this shift in politics.

And the second question for you, Benedetto, maybe is on kind of building a bit on what Thomas asked at the beginning, in your selection process and what your road map, your brief is from John Elkann at Ferrari. I look back at Ferrari, it's the ultimate compounding business. And your predecessor always talked about being custodians of the brand. And I'm just wondering, in your discussion with John, how much of your job is to be a custodian and how much of it is to be a disruptor within the limits, of course, of the fact you need to keep building on the history. But I'm trying to kind of understand your road map and how much of a [indiscernible] might expect from you at Ferrari.

[Benedetto Vigna, executive]

Okay. I'll take this one, Philippe. I'll take the last one. And then for China, Antonio will reply. So I'd like to say the following. My leadership style has been always, I would say, on the transformational side, with a strong focus on the result. I think that being a custodian of the brand and being, let me say, innovator on the product side are strictly linked. If you want -- as I said in my opening, if you want to develop and if you want to evolve the brand itself over the time, you have to -- if you want to be a true guardian of the brand, then you have to follow to adapt the product, to keep it unique to go through innovation. So I think that the 2 dimensions go hand in hand. And again, to be custodian of the brand, the guardian of the brand, you have to read, to interpret the technologies, the offer of the technology in a unique, distinctive way like Ferrari does.

Antonio, if you want to comment about...

[Antonio Piccon, executive]

Philippe, on China, for the time being, the order intake is surprisingly strong. Looking to the future, I think back in 2018, the Capital Market Day, we stated we are not betting on a significant change in or significant development there. So at least for the time being and comparing with our targets, whatever happens, there should not be a material drag. And all what could come from China compared to what we are used to should be a positive, if there is an upside.

[Operator]

We will now take our next question from the line of George Galliers at Goldman Sachs.

[George Galliers-Pratt, analyst]

And Benedetto, welcome from me as well. I just wanted to come back to the unveiling for this year and also as we complete this 5-year business plan. At the beginning of the year, you mentioned there would be 3 unveilings in 2021. And at Q2, you said you have brought 3 new models to the market during the quarter with the 296, the 812 Competizione and the 812 Competizione Aperta. So I'm just trying to understand if it was always planned to unveil the next generation Icona this year or whether there's been a pull forward? And also with respect to the 15 new launches between 2019 and 2022, is that still very much what you plan or could that now be '23? On the same path, you also back at the 2018 planning stage said that you expected your hybrid mix for next year to be around 60%. Is that still your best estimate or are we looking at something lower than that given the products you've presently launched?

[Benedetto Vigna, executive]

Okay. Coming to the first question is, did you plan for this launch of Icona. I think here, the answer is very simple. We planned in -- I mean, we decided during the year to launch the Icona in November mostly because we saw a strong willingness and need. I would say the customers were so eager to get a new Icona. So we felt the responsibility in front of them to satisfy, to accommodate their request. So this is why we pushed, we anticipated, I would say, this fourth launch. This is about it.

Coming to the percentage split by propulsion, I would avoid to give any split how much is hybrid, how much is ICE. What I can tell you is that we are proceeding according to the plan, while for the future, for the year to come, we will present a very clear path forward with all the color and detail during our next Capital Market Day.

[Operator]

We will now take our next question from the line of Martino De Ambroggi at Equita SIM.

[Martino De Ambroggi, analyst]

Also from my side, welcome Benedetto. And the first question is for you. So what you're feeling, your opinion, what is the maximum level of volumes in order to preserve the exclusivity of Ferrari? And the second -- because I heard a lot of opportunities around, I agree, but what are the main risks you perceive apart from capital spending -- CapEx spending, which is, for sure, a big issue going forward. And the last question is on the down payment. Just to know what's your assumption in the current free cash flow guidance for the current year concerning the down payment for the 812 Competizione? And could the down payment become a habit for more models or what you used to have in the past, so also for midrange instead of just super luxury cars?

[Benedetto Vigna, executive]

So Martino, I will leave the down payment on this to Antonio, and I will comment later about the volumes and opportunity risk.

[Antonio Piccon, executive]

Very quickly, the down payments on the 812 Competizione are close to what we expected for the year. And as I said, they came in faster than we anticipated. Close to 80% of the total working capital positive change in Q3 was due to the advances on the 812 Competizione. We remain with a bit for Q4.

As to whether this may become usual for the future, still early days to say. So far, it has been for some special series, and it was significant, as you witnessed, for the Icona and is now visible for the 812. We are obviously, from time to time, reviewing our policy in respect of collections from our customers and dealers. So we'll get back to that in the future.

[Benedetto Vigna, executive]

So coming back to your question, the volume and opportunities. For the volumes, I would like to underline again, Martino, that we are -- we have been and we will be profit-driven, not volume-driven. Clearly, I mean, we will continue to make unique -- to develop unique and distinctive Ferrari in a way that we can justify and we can also have a clear path forward. When it comes to opportunity risk, yes, I said several times in the opening speech that I see a lot of opportunities, opportunities that would depend on different technologies. And I really believe it.

Clearly, when you have opportunities, there also some risk. But I would say that this is the beauty when you are on the leading edge to do something unique, something new. And this also -- there is a way, let me say, to manage some risk because you can, let's say -- or through partnership, as I said before, or also avoiding to go along multiple paths, okay? So the risk -- managing risk when you have different opportunities, I would say, is an art that you learn just by doing. And I think here, I can contribute with my personal experience and with the -- all the experience the team has.

[Operator]

We will now take our next question from the line of Stephen Reitman at Societe Generale.

[Stephen Reitman, analyst]

And also welcome, Benedetto. I have 2 questions. I guess, first of all, Benedetto, given your background, what is your assessment of the technical competence of Ferrari in technology, electronics and the like, that obviously you are very well versed in.

And my second question regards the issue of the 812 Superfast. You mentioned that the V12 mix was down because of lower sales of 812 Superfast. Does that reflect life cycle? I mean, obviously, you launched the Competizione version? Or is it also maybe switching over some customers to the SF90 family?

[Benedetto Vigna, executive]

Thank you, Stephen. I'll take the first part. I would like to share -- to reply this question sharing my experience here that is more -- I think it's much -- giving much more color than, let's say, just sentences. I have -- clearly, one of the first laboratory I've seen with the technical team has been the laboratory where new innovations are used. And I have to say that maybe the best adjective I can use is to say that I've been impressed by the knowledge the team has on the technical side, but also, as I said before, by the passion to make things happen and also by the excellence and the way they want to push ahead the things.

I can tell you that, as you can imagine, I have pretty deep network in this field. And I remember some practical cases where I was opening some channel late in the evening and the day after in the morning, they were -- the team was already on top of it and was able to keep the discussion with this top leader I put in touch with at a very high level. So the competence assessment that I have with this team is very high because of what they know, but also because of the passion and the excellence they want to push. So it's very positive, Stephen.

[Antonio Piccon, executive]

On your question in respect of the 812 Superfast, the -- your assumption is correct. We're approaching the end of life cycle, not yet there, but volumes are clearly going down in line with our plans for that model.

[Nicoletta Russo, executive]

Thank you, Sarah. I think now this ends our questions. And I'll now hand over to Benedetto for his final remarks. Thank you very much.

[Benedetto Vigna, executive]

So thank you. Thank all of you for all your time, for all your questions, really appreciate, and also for your warm welcome. Let me just close by repeating again the words I used in my opening speech that is passion, excellence and innovation, every day and in everything we do, this is Ferrari, nothing less than that. I believe that when you will come here, you will really breathe Ferrari. And I look forward in future to many more occasions to talk with you and also to meet and to share our progress, to get your questions and for you to experience in person what we are creating here. Good afternoon, everyone, and thank you, again.

[Operator]

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