Ferrari N.V. (RACE) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. On behalf of Board of our company, I would like to welcome you to Ferrari N.V. Annual General Meeting of Shareholders. Thank you for taking the time to attend. Mr. Benedetto Vigna, CEO, is attending this AGM through videoconference, and Piero Ferrari, our Vice Chairman, following this meeting via webcast together with certain other members of the Board. Here with us, Mr. Carlo Daneo, General Counsel and Secretary of our Board, is appointed as Secretary of this Annual General Meeting of Shareholders. Notarial minutes will be made at this meeting. The civil notary, Mr. Dirk-Jan Smit of Freshfields, Amsterdam is present at this meeting for this purpose, and I thank both of you. The external auditors, Mr. Oscar Jonker, Ernst & Young is present at the meeting. The external auditor, Mr. [indiscernible] is present through video conference. Mr. Antonio Piccon, our financial officer, is following this meeting via webcast. The meeting will be held in English. There are headphones available for simultaneous translation from English into Dutch for those who would like to use them. The Notice for the Meeting was published on the company's website on March 1, 2023. I note that the meeting has been convened in accordance with the legal and statutory requirements. I kindly request the persons present at this meeting to switch off their mobile phones and similar equipment during the meeting and the persons attending via video conference to stay at all times on mute mode, except if and when they're required to speak. The use of audio/video recording devices by shareholders are not allowed. Starting from the day after this meeting, the company will make available on its website the recording of this AGM. In the interest of a smooth course of the meeting, I invite anyone wishing to speak in relation to the item on the agenda to reserve them to speak with the shareholders' assistance they want to specify the issue they wish to discuss. I kindly request those of you who would to address the meeting to use one of the microphones in the meeting room as soon as they have granted permission to address the meeting, just state your name clearly and if applicable, also the name of the personnel company that you're representing. Shareholders who will be called to speak, the microphone must be concise and strictly relevant to the agenda item being discussed. Any speeches which becomes a mere disturbance or interference for the other participants or which are offensive or improper will not be allowed. Since the meeting is held in English, question should be post preferably in English and response will be in English. Question may also be in Dutch, responses will be in English. As Chairman of the meeting, I reserve the right to limit the time that a shareholder addresses the meeting in order to ensure that all shareholders are given a chance to participate in the discussions. As a guideline, I consider appropriate a maximum of 5 minutes for each speaker for each agenda item, during which time any voting declaration should be made. In the interest of an orderly course of proceeding, I reserve the right to deny a shareholder, the right to continue to speak if such a shareholder does not limit its time to approximately 5 minutes or if question's not related to the agenda item being discussed or do not relate to the business of the company. The shareholders have also been given the right to submit written questions regarding the agenda items of this meeting by e-mail until April 2023 at 5 p.m. CST. This e-mail had to include the name, the surname, the number of shares held by the shareholders, the AGM agenda item to which the questions refer and the bank will post a statement of such shareholder record date. The company did not receive any written question before such deadline with respect to any agenda item. Voting by proxy took place until the voting cutoff 7 April '23 by 11 p.m. CST. Voting during this meeting will take place electronically. The voting results will be displayed on the screen upon close on the vote. Those abstains are not calculated as part of the votes cast. The official results will be published on the company's website after the meeting in compliance with the applicable laws and regulations. Agenda items will be discussed in accordance with the order of the agenda of the meeting. Agenda of items will be discussed in sequence. If questions arise in relation to agendas of items, I will postpone such questions for later discussion until I have closed the discussion on the last sub-item of that agenda item unless that question can immediately be answered. Voting on some items will defer until after I have closed the discussion, the last agenda subitem with any last postponed questions. May I ask you please to insert your smart card into your voting device within the chip facing. You will see your name appear on the display. If this is not the case, please raise your hand so that Computershare can assist you. You can keep the smart card inserted in the voting device for the entire duration of the meeting. When you will be requested to vote, you have to press the button of your choice. 1, if you like to vote for, 2 if you like to vote against, 3 if you like to abstain. Please see the voting instruction that have been handed out at the entrance of the meeting room. If you're a holder of special voting shares and should you wish to exercise a split vote and generally should you wish to exercise the split vote on your holdings, please go to the shareholders' assistance table and they will help you to exercise your split vote. The voting device must be returned to Computershare at the entrance of the meeting room whenever you leave temporarily and at the end of the meeting. I would also like to inform you that some journalists are listening from webcast, and I welcome them to our AGM today. It is my pleasure to present to you the company's outstanding financial performance and its main achievements in 2022, results that are even more impressive in the face of the challenges our industry is facing. The automotive sector is at a crossroad. The challenges are many, but so are the opportunities. We have the chance to accelerate Ferrari's ability to lead on the delivery of next-generation technologies at the top end of the luxury industry, and we relish it. In this evolving landscape, I believe that the single quality which will help companies succeed is agility, ability to read events and respond to them with action, to identify priorities and, at the same time, be open to change, to be flexible and adjust quickly. Once again, Ferrari is proving not only its resilience, but also its agility. In the current macroeconomic scenario, the responsiveness of this company and the strength of its business model are making the difference. Let me take this opportunity to thank Benedetto, the leadership team and all our Ferrari employees because it's them who are making this difference a reality. We owe our exceptional financial results to their dedication and commitment, results that last year met and exceeded our guidance and grew double digit across all metrics. We set new records in terms of shipments, revenues and profitability. I also thank them for the constant innovation of our products and processes that continue to offer unique experiences to our customers. Allow me to remind you of some of the main highlights of this extraordinary years across our 3 pillars: racing, sports cars and lifestyle. Let's start racing. We closed the World Endurance Championship season winning both Pilots' and Constructors’ titles, and we unveiled the 296 GT3, the V6 that will replace the outgoing 488 GT3, a car that has delivered over 500 wins and takes its place in history as the most successful racing Ferrari so far. In October, we unveiled the 499P, a Le Mans hypercar. This March, at the 1000 Miles of Sebring, it led Ferrari's return after 50 years to the top class of the FIA World Endurance Championship, and we all eagerly await our return to Limo in June. In Formula 1, the last World Championship saw an improvement in our competitiveness. Nevertheless, our target is, as it always will be, to win the championship. And Fred and all the team at Scuderia are fully focused on achieving this objective. Coming to our sports cars. The launches of 296 GTS and the Purosangue added to the most diverse, complete and internationally acclaimed product portfolio in our history, delivering a record number of orders well into 2024. 2022 was also a significant year for the further development of the electrification of our sports cars, a great opportunity for us going forward. We started our electrification journey in Formula 1 14 years ago, in 2009, and what we learned on track was first adopted in our sports cars in 2013 by the LaFerrari. From there, we further developed our hybrid technology and offering, scaling it. And in the last 4 years, we launched 4 hybrid models, all of which have been met with amazing market traction. From this racing heritage and broad technical reservoir, we're building our first full electric Ferrari, a milestone of our history, which will be unveiled in 2025. Electrification is not the only step which we're taking towards our target of carbon neutrality. By the end of the decade, which is involving not only our colleagues but also our partners and our suppliers for what is more than objective, it is a strong commitment. Within the wider luxury landscape, 2022 was important for the increased expression of our brand into lifestyle, the highlights of which were 2 collections launched at Milan Fashion Week and very encouraging new products like our watch, jumpsuit and the Ferrari handbag. All these are remarkable signals of the vitality of our company. Additionally, among our many ESG achievements and milestones, I am particularly proud of the record levels of training that we have provided to our employees. A total of over 79,000 hours of training were delivered to our employees in 2022, covering many key areas, including digitalization, globalization, sustainability and continuous improvement. This is fundamental to help them achieve their potential at Ferrari. We truly believe that innovation starts with our people. We take our role as an active member of society extremely seriously, and we have continued our contribution to educational initiatives. This is the primary focus of a series of activities, mainly through collaborations with local university and schools that provide the next generation with access to quality education and nurtures the love for learning. For example, in 2022, we have inaugurated e.DO Learning Centre, an innovative educational project borne of the synergy between Ferrari and the local area of Modena. And we have continued to raise more proceeds from the auction held at our most exclusive event, the Calvocade, for this important purpose. In fact, in 2022, we had an unprecedented number of unrivaled client events, another highlight of the past 12 months. Among these free Calvocades and the Finali Mondiali in Imola, that also brought more than 40,000 fans together, where they shared their passion for driving on road and on track. This is, of course, only a short summary of the constant drive for innovation, exclusivity and excellence that has been at the center of Ferrari's activities in 2022. I would like to conclude by thanking you, our valued shareholders, for believing in us, in Ferrari. I now hand over to Benedetto, who will take you through our outstanding results of 2022 and our progress on our pushing the boundaries, which was presented last June in Maranello.

Thank you, John, and welcome, everyone, to our Annual General Meeting. During our 76th anniversary year, among the many different moments and milestones that signaled our company's evolution, I would like to highlight the following 3. Firstly, we unveiled 2 exciting models; the 296 GTS in April and the Ferrari Purosangue in September. These models already strengthened an already astonishing product range that both meets and exceeds our clients' demand for design, performance and running trails. Secondly, we presented our strategic plan for '22-'26, setting transparent, concrete and measurable boards. Thirdly, we outlined our journey towards carbon neutrality within 2030 through a scientific and holistic approach. We are clear on our overall carbon footprint, and we have a defined road map moving forward. From a financial perspective, we ended 2022 with a remarkable set of results, setting a new record across all metrics, with EUR 5.1 billion revenues, strong net profit at EUR 939 million, more than EUR 750 million of industrial free cash flow generation. Thanks to these robust performances in 2022, the Board of Directors has recommended to shareholders a dividend distribution of EUR 1.1 per common share, implying an increase of 33% compared to the prior year and corresponding to a total distribution of approximately EUR 329 million, this, alongside our ongoing multiyear share repurchase program. In June, we, with the Ferrari Leadership Team represented our strategic plan during the Capital Markets Day when we laid out our development trajectory to secure our long-term success as world's most distinctive and innovative luxury brand. Our key objective includes launching 15 new models between '23 and '26, our electrification plan and achieving carbon neutrality by 2030. We are building on our strategy of Different Ferrari for different Ferraristi and different Ferrari for different moments in order to satisfy a diverse client profile and we are tailoring our range of products to be unique. From an industrial standpoint, this will be achieved by pushing innovation through our selected partnership whilst we will continue to make our core components in-house, just as Ferrari has always done, such as the electric engine, the battery pack and investors. We also detailed our commitment to reaching carbon neutrality by 2030, and we are also proud to have committed to set science-based targets. The focus is not only the impact of driving our sports cars, but also on our entire supply chain and production facilities. Already in 2022, we completed the several projects, from the new Fuel Cell plant and photovoltaic system at Maranello to the main innovation identified by our colleague such as the adoption of new filters in our foundry, saving more than 250 tons of aluminum per year, and the heat dispersion recovery in our engine testing process. All these initiatives implemented in 2022 led to a reduction of approximately 5% of energy consumption per car. A remarkable result, and I'm proud to underline that no CapEx was required, only brainpower. Additionally, we expect the discussion on E-Fuels at the EU level in a couple of years [indiscernible] and we welcome this decision. As we stated at Capital Markets Day last year, we believe ICE still have a lot to give, and thanks to their higher energy efficiency and E-Fuels together with partners, we will develop solutions that will contribute meaningfully to decrease their CO2 emission. 2022, has been a very strong year, showing high double-digit growth compared to 2021, representing a solid foundation of our new business plan. These record earnings exceeded our latest guidance, thanks to a better business performance, personalization and the tailwind from currencies also in the last part of the year. I would like to highlight 3 most remarkable achievements. EBITDA of EUR 1.773 billion and EBIT of EUR 1.227 billion with margin aligned to guidance, reflecting product mix and the evolution of our DNA. Net profit of EUR 939 million, resulting in a diluted EPS of EUR 5.09. And an industrial free cash flow generation of EUR 758 million, which reflects the strong profitability and the positive contribution from working capital and others, mainly related to the collection of the Daytona SP3 in 812 Competizione [indiscernible] advances. This was partially offset by EUR 806 million of capital expenditures. We leave behind a year characterized by global tensions, geopolitical conflict, supply chain issues and cost inflation. With our people, clients and partners, we have been able to weather through these times, thanks to the collaboration, will to progress, continuous learning, focus and confidence that set us apart. And now, we are ready for 2023. It will represent another significant step of our journey, during which we will continue to execute our strategy with the highest determination. Fourth, are our priorities. We will compete at the top in the different racing championship. We will continue to enhance our client experiences, both on track and on road, enriching them with 4 new model launches, and with the first being the Ferrari Roma Spider that received enthusiastic praises from all over the world. We will broaden the lifestyle client base with a coherent and integrated offering of personal goods and unique experiences, and we will further accelerate the innovation pace with a strong focus on electrification and HMI, as proved by the 4x higher number of patents that we filed in 2022 compared to 2021. We look ahead in 2023 with enthusiasm, energy, agility and confident humility required in these challenging times. And before to conclude, dear shareholders, I would like to thank you for your constant support and direct dialogue. I will now pass over to John to continue the meeting.

Gracias, Benedetto. I will now address the formal business of the meeting, where we discuss on the resolutions set out in the agenda for the meeting and display the relevant voting results received by proxy ahead of the meeting. The information relating to the attendance list and the information regarding the number of votes that may be cast at this meeting are the following: As the record date of this Annual General Meeting, the company had a total number of 257,270,611 issued shares and a total number of 245,022,869 voting shares. No vote can be cast on shares held by the company or any of the subsidiaries. According to the attendance list, 209,194,671 outstanding shares equal to 85.38% of all outstanding shares in the capital of the company are present or represented at this meeting. The total number of voting rights at this meeting amount to 209,194,671. In total, 209,193,300 votes have been cast by the use of electronic means of communication prior to the meeting. These voting instructions have been processed by entering the voting instruction for each individual agenda item into the electronic voting system. Votes already cast by use of electronic means will be included in voting results. I now turn to agenda item 2. The annual report for 2022 was made available on the company's website and at the company's office from March 3, 2023, the day on which the Notice for the Meeting was published. I will now spend a few moments providing a brief summary and explanation of all 6 agenda subitems. So the first to agenda are discussion items only. In line with the legislations in the Netherlands, the shareholders were asked for an advisory vote on the further agenda subitem. The last [ 3 ] agenda subitems of this agenda item 2 are voting items. So item 2a is report of the Board of Directors for the financial year 2022; b, policy on additions to reserves and on dividends; c, Remuneration Reports; d, Adoption of the 2022 Annual Accounts; e, determination and distribution of dividend; f, granting of discharge to the directors in respect of the performance of their duties. Shareholders who have reserved time to intervene are now invited to speak. I have no shareholders, which means that we can go to the vote. We need to vote for c. We need to vote for d after. And we need to vote for e. So let's start by c. [Voting]

Good. The vote is closed, and the shareholders expressed a positive advice with respect to c. So we'll now proceed with d. [Voting]

We have a positive vote for d. And so we can now proceed with e. [Voting]

So we have a positive vote on e. And the final one on f. [Voting]

We have a positive vote on that. I thank you very much. Now we move to agenda item 3. Agenda item 3 is the appointment of the executive directors and nonexecutive directors which will follow a similar procedure. We start with our Executive Directors, and I will hand it over for the first proposal to Carlo.

Thank you, Chairman. Under the agenda subitem 3a, I invite to vote on the reappointment of John Elkann as Executive Director. Okay. Voting system has been activated. Please cast the vote by pressing the bottom of your choice according to the voting instructions shown on the screen. [Voting]

Now the vote is closed. Established the proposal has been approved, and John Elkann has been reappointed as an Executive Director, his term expiring at the end of the Annual General Meeting of Shareholders to be held in 2024. I will now pass back to our Chairman, John, to deal with the remaining items. Thank you.

Thank you very much for having appointed me. I would like now to proceed with the other reappointments, and I will start with Benedetto Vigna appointment 3b. [Voting]

Thank you, and congratulations to Benedetto for your appointment. We will now proceed with the appointment of nonexecutive directors and Piero Ferrari, 3c. [Voting]

Thank you. Piero, you are reappointed. We now will proceed with the reappointment of Delphine Arnault, 3d. [Voting]

We have a reappointment. We will now proceed with the reappointment of Francesca Bellettini, 3e. [Voting]