Ferrari N.V. (RACE) Q1 2020 earnings call dated May. 04, 2020
Corporate Participants:
Nicoletta Russo — Head of Investor Relations
Louis C. Camilleri — Chief Executive Officer
Antonio Picca Piccon — Chief Financial Officer
Analysts:
John Murphy — Bank of America Merrill Lynch — Analyst
Giulio Pescatore — HSBC — Analyst
Martino de Ambroggi — Equita — Analyst
Massimiliano Vecchio — UBI Banca — Analyst
Thomas Besson — Kepler Cheuvreux — Analyst
Susy Tibaldi — UBS — Analyst
Ryan Brinkman — JPMorgan — Analyst
George Galliers — Goldman Sachs — Analyst
Angus Tweedie — Citi — Analyst
Michael Binetti — Credit Suisse — Analyst
Adam Jonas — Morgan Stanley — Analyst
Presentation:
Operator
Ladies and gentlemen, thank you for standing by, and welcome to the Ferrari’s First Quarter 2020 Results Conference Call. [Operator Instructions]. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]. I must advise you that this conference is being recorded today, Monday, 4th of May, 2020.
I would now like to hand the conference over to your first speaker today, Ms. Nicoletta Russo. Thank you, please go ahead.
Nicoletta Russo — Head of Investor Relations
Thank you, Maria, and welcome to everyone who is joining us. As you can imagine, today the team is connected from different countries. So please forgive us any moment of silence during this call.
Today’s call will be hosted by the Group CEO, Louis Camilleri; and Group CFO, 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 Louis. Thank you.
Louis C. Camilleri — Chief Executive Officer
Thank you very much, Nicoletta. Welcome everyone. I very much trust that you and yours are well and safe, and that you are all taking the necessary precautions to protect yourselves and your loved ones.
I will focus my introductory remarks on the current situation, and provide you with as complete a picture as is possible in these unprecedented and unpredictable times. All in all, I would state upfront that we are in relatively good shape, particularly as it relates to our core business. And thus are able to withstand the prolonged downturn.
I also believe that we have taken and are taking the appropriate measures to deal with this crisis in a manner that will ultimately make us stronger. We have often claimed that while we are not immune to economic or other brutal shocks, we are significantly more resilient than most. This crisis will serve to hopefully underscore this claim.
Our faith rests on the strength of our iconic brand equity, the skills, determination and fortitude of our organization, our technological innovation and design superiority, our close and vigorous relationship with our suppliers, and the quality of our dealer network, and ultimately, the loyalty of our customers, which translates into a strong order book.
Before I touch upon our first quarter results and shed more color on our revised guidance for the year, I will address the key actions we have taken to date, the challenges that lie ahead, and the impact that this pandemic is likely to have on our results in 2020. Our first and foremost priority has been and remains the well-being and welfare of our employees.
While full compliance with national or regional prescriptions to combat the spread of this virulent disease has been a key factor in all decisions taken, we have gone well beyond the spirit to support and protect what is ultimately our greatest asset. In spite of the fact that our facilities have ceased production since March 14, not a single employee has been furloughed or laid off and all have received their full pay during this period.
We’ve provided medical support and assistance to our employees and their families and furnished vital, in-kind monetary assistance to the communities in which they reside. Solidarity and empathy have been our guiding principles. I cannot sufficiently underscore the amount of work that has been accomplished on numerous non-production related activities, conducted by so many, from the safety of their homes, while being ever mindful of the security of our information and data.
An incredible amount of planning has been dedicated to the safe and disciplined resumption of our manufacturing activities. The all encompassing program that has been designed and detailed is called Back on Track, which has gained significant national and international coverage as an example of a state of the art initiative.
I will not cover the entire plan of action in detail, but suffice it to say that we now have the capacity to perform 800 voluntary blood tests a day, to cover both our employees and their families. Should anyone regretfully test positive, they will be provided with separate board and lodging, and all the medical assistance required.
A specific COVID-related insurance coverage has also been set out for all employees. We are also testing a contact tracing system that we intend to develop further. As of today, the vast majority of employees within our facilities have been voluntarily tested, and production ramp-up has begun. And this, after an extensive in-situ training conducted last week over a three-day period on the new safety protocols and procedures.
We are being deliberately cautious and prudent in the scaling up of our capacity to assure both safety and quality. Furthermore, our ramp up will by necessity, have to be aligned with our supply chain in spite of the flexible buffer we now have resulting from our conscious decision to increase our — our inventories of materials and components.
We depend on some 400 direct suppliers. More than two-thirds of the total are based in Italy, and many are located in those regions that have been hit the hardest, namely Lombardy and Piedmont.
As of last week, 190 suppliers were operating at various stages of capacity with some reporting relatively high levels of absenteeism given the situation. With very few exceptions, the balance have planned to start up their production today. We have been very carefully monitoring any supplier that may find itself in a precarious financial condition to determine any actions that we may take to assist them directly or indirectly.
We have of course conducted the same analysis relative to our dealer network and in many instances have extended our payment terms to them to alleviate the financial burden during these difficult times. As you may imagine, the timing of the closure and the opening of our dealerships has varied quite extensively from country to country as total lockdowns were instituted nationally, and as restrictions have gradually been lifted. This phenomenon clearly adds further complexity to any projection of a full resumption of activity and ultimately the geographic mix of our deliveries in the months to come.
As we speak, more than 50% of our dealers are closed, more than that in terms of workshops. The others will eventually open as national, regional or state lockdowns and confinement policies are lifted. I should also mention that the pre-owned market which we monitor closely, is essentially shut down with very little to no trading at all.
Our order book, assuming full production capacity, extends well beyond 12 months on average and clearly varies according to each model and geography. Importantly, those models that generate the highest margins have the longest waiting lists. As of now, we have yet to witness any abnormal or untoward cancellations, although several have been incurred primarily in Australia and the United States, but nothing so far that we would deem to be alarming.
While history is certainly not this positive, it can inform us. A reading of the level of cancellations, during the last financial crisis reveals that the peak of cancellations, and postponements took several months to affect the order book, and thus it is still too early to come to any final conclusion.
Nevertheless, this crisis is very different. One need only focus on the financial markets and the vast fiscal and monetary stimulus in place to determine the distinction. Possible cancellations are however only part of the equation. The other is the level of orders that are obtained. On the one hand, we have arguably the most wide-ranging and exciting portfolio we have ever had, and on the other, we’ve had to cease all the activities aimed at collecting further orders, especially for those models presented in 2019, but are yet to begin to be delivered. As such, the timing of the peak of this crisis has compounded the challenge.
The commercial team has conducted an incredibly detailed analysis of our vulnerabilities and opportunities, pertaining both to order retention and intake by country, model, and down to the ultimate customer. Our projections for 2020 are largely predicated on this rigorous undertaking. Consistent with a key ingredient of our business model to retain a very strong order book and thus sustain the exclusivity of our brand as each year unfolds.
Formula 1 is undoubtedly the activity that will adversely affect our results in 2020 in the harshest manner, and also the one that is by far the hardest to predict. As you know, the original calendar provided for 22 races. The FIA and the Formula 1 Group now predicts a maximum of 18 races with many without fans. This clearly implies a drastic reduction in the revenues that are generated by the commercial rights holder, as well as sponsorship fees, our two primary sources of revenue. To mitigate this impact at least partially, the entry into force of the new technical regulations that were originally scheduled for 2021 have now been postponed to 2022.
Furthermore, there has been significant progress on numerous measures to freeze various components, and hence reduce costs going forward as well as substantial progress on a cost ceiling and its perimeter, effective as of 2021, which will hopefully be put to bed in the near future. It remains our hope that such ceiling will render Formula 1 more economically sustainable for all participants, while ensuring that it remains the premier racing championship globally and the source of significant advances in automotive innovation and technology.
While the Formula 1 hit to revenues and earnings is not an easy matter to digest, the good news is that the significant losses incurred should be short-lived and contained to 2020. We regretfully face a very similar fate regarding our brand diversification activities. We currently anticipate that there will be a significant reduction of our revenues in 2020 reflecting lower royalties, a dramatic reduction in the footfall of our stores, museums, and parks, and the delay in the new activities that we had planned.
Antonio will shortly review our first quarter results, but before doing so, I do wish to state that given the circumstances, it was quite a robust performance, but it also provides a glimpse of the coming months. While total revenues were essentially flat versus the prior year, they mask a relatively strong performance in our cars and spare parts, which generated a net revenue gain of 7.3% and 5% on a constant currency basis. This growth was completely offset by lower Formula 1 brand, and Maserati engine revenues.
The core business drove an EBITDA gain of 5.7%, absent the previously disclosed one-time gain related to the favorable reassessment of a legal dispute that flattered our first quarter 2019 earnings. Having said that, we did fall marginally short of our pre-COVID-19 expectations, given the suspension of deliveries prior to the quarter-end.
Importantly, as of the end of the quarter, we had cash holdings of EUR880 million and as of now, we have just doubled available undrawn committed credit lines to total EUR700 million, providing us with ample liquidity. This was a key factor in the decision to dispose our dividend last month of EUR1.13 per share reflecting an outflow of EUR210 million. This is also very tangible evidence of our confidence in the future.
Turning to our revised guidance for the year, you will first note that we have widened the range given the lack of full visibility and the current unpredictability of events. Our guidance rests on the numerous factors I’ve already mentioned. It includes several cost-cutting initiatives across the board and a delay in several planned activities as well as a reduction in capital expenditures of some EUR75 million. We have been extremely judicious in determining which expenditures to cull following two key principles.
The first is to retain total flexibility as each month unfolds, and the second is not to impair our competitiveness going forward, while retaining our full responsibilities towards our suppliers, our dealers, our clients, and first and foremost, our employees.
Our full-year guidance in simple terms reflects a very weak second quarter. In fact, it accounts for the bulk of our erosion versus our previous guidance. Indeed at the low end of our EBITDA range, it reflects approximately 75% of the erosion versus our prior guidance, and the entire erosion versus the prior year. At the higher end of the range, the second quarter will account for the entire shortfall, relative to both our previous guidance and the prior year. Such that it assumes a V-shaped recovery with the second half of the year generating an increase in revenues of some 10% and an EBITDA growth of some 15% versus the prior year. And this, despite the challenges we faced beyond our core business.
Before I hand over the call to Antonio, I do wish to spend a minute on the vast number of activities that the Company has undertaken to help and assist those less fortunate in Italy and within our community. Much has already been accomplished and more is planned, not only to address the short-term needs, but to provide genuine assistance that is longer-term in nature. I will not read out the list you see on your screens, but I do wish to highlight two instances that reveal so much about Ferrari.
Several weeks ago, numerous participants of previous editions of our cavalcade events that are highly sought after, and are reserved for our most loyal clients decided to voluntarily contribute to the various community activities that we plan to undertake around Maranello and in the Emilia Romagna region. We’ve of course told them that we would match any donation received. So far, the combined contribution exceeds EUR1.5 million. I should note that these clients hail from numerous countries and this show of solidarity underscores the level of engagement that our clients have with the brand; quite unique in my experience.
In March, the senior management team decided to voluntarily forgo 25% of their annual salary to fund our donations to the community. Each Board member also voluntarily agreed to forgo all their remaining fees and cash compensation for the year. This collective show of solidarity is not only heartwarming, but frankly, exemplary.
On that note, I will now hand the call over to Antonio.
Antonio Picca Piccon — Chief Financial Officer
Thank you, Louis, and good morning, or afternoon to everyone who is joining us today. Starting on page 9, as Louis said, Q1 2020 results represent a good start of the year for our core business, just partly offset by the performance of all other and particularly of the Formula 1 activities. Our shipments grew 4.9% or by 128 units, mainly driven by the robust deliveries of the 488 Pista and the 488 Pista Spider.
Group net revenues were almost in line with the prior year to EUR932 million. Adjusted EBITDA increased to EUR317 million improving by EUR6 million or 1.9%. Adjusted EBITDA margin was 34%, up 90 basis points versus prior year. Adjusted EBIT was down EUR12 million to EUR220 million embedding higher D&A. Adjusted diluted EPS was down 5.3% to EUR0.90. Industrial free cash flow for the quarter was EUR73 million. As a reminder, prior year free cash flow was boosted by the collection of the advances for the Ferrari Monza SP1 and SP2 equal to roughly EUR170 million, a portion of which is evidently missing against the deliveries of this year.
Moving to page 10, you can see the details of Q1 2020 shipments. Volumes rose despite deliveries being suspended earlier than expected due to the COVID-19 pandemic. Nevertheless, total shipments for the quarter increased 4.9%, supported by a 5.7% increase in V8 models and a 2.4% increase in V12 models. This growth mainly reflected the robust deliveries for the 488 Pista and the 488 Pista Spider along with the ramp-up of the F8 Tributo. This more than offset the 488 GTB and the 488 Spider which concluded their lifecycles in 2019. Deliveries of the Ferrari Monza SP1 and SP2 were in line with our expectations.
In terms of geographic performance, EMEA grew 25.4%, the rest of APAC increased 23.2%, Americas was up 4.2%, while Mainland China, Hong Kong, and Taiwan posted lower shipments as a consequence of the deliberate anticipation of deliveries in 2019. Four models unveiled in 2019 still have to be introduced in the market, and they will mainly ramp up in the second half of the year. The just ended seven-week production suspension slightly postponed the new models’ introduction as follows. The first deliveries of the F8 Spider will commence in Q2 2020; the 812 GTS will follow at the end of Q2, the SF90 Stradale after the summer, while the Ferrari Roma will hit the market at the end of the year.
Turning to page 11, you can see we have displayed the Group net revenues for the first quarter of 2020, which were in line with the prior-year, notwithstanding the adverse effect of the reduced Formula 1 racing activities. Net revenues were down 2.7% at constant currency.
Revenues from cars and spare parts grew by 5% at constant currency. The increase was supported by higher volumes, the positive contribution of the Ferrari Monza SP1 and SP2, and the personalization programs. Personalizations in the quarter represented approximately 20% of this revenue line in line with 2019, thanks to the significant concentration of shipments of the 488 Pista and the 488 Pista Spider. All of the above was partially offset by a lower phase of the 488 GTB and the 488 Spider, which concluded their life cycles in 2019 along with lower shipments of the FXX-K EVO.
Engines revenue declined EUR25 million in the quarter, reflecting lower shipments to Maserati. Revenues from sponsorship, commercial, and brand were down EUR40 million impacted by the spread of the COVID-19 pandemic, which resulted in fewer Formula 1 races accrued in the quarter, as well as reduced in-store traffic and museum visitors.
Currency, including translation and transaction impact, as well as foreign currency hedges had a positive contribution of EUR18 million, mainly reflecting the strength of the US dollar. Moving to Page 12, which highlights the evolution of the main items of our adjusted EBIT. Adjusted EBIT was down 5.2% or 11.9% at constant currency, with adjusted EBIT margin at 23.6%. The variance is mostly due to the COVID-19 impact on Formula 1, partially offset by higher volumes and a positive mix/price.
More precisely, volume was positive by EUR12 million, thanks to the increase of our shipments. Mix/price was positive for EUR37 million. This performance was primarily attributable to the deliveries of the Ferrari Monza SP1 and SP2 and to the impact of the personalization programs while it was partially offset by lower shipments of the FXX K EVO.
Industrial costs and R&D increased by EUR15 million mainly due to higher depreciation and amortization of fixed assets as the production line for the new model started being operated, the full cost of employees paid days of absence during the COVID-19 suspending productions, investments in Formula 1 racing activities. As expected, D&A curbed our EBIT margin compared to Q1 2019. SG&A increased by EUR11 million due to the annualization of the increase in staffing throughout 2019, and marketing initiatives in the early part of the first quarter of 2020.
Other was down EUR52 million due to the already mentioned COVID-19 impact on the Formula 1 racing calendar, lower engine sales to Maserati, as well as lower traffic for brand-related activities. Other in Q1 2019 included the positive impact of a legal dispute of approximately EUR10 million. The total net positive impact of currency was EUR9 million for the quarter. This was the net result of more favorable market rate partially mitigated by the hedges in place.
Turning to Page 13, industrial free cash flow for the quarter was EUR73 million, driven up by the industrial EBITDA, partially offset by capital expenditure of EUR174 million including the purchase of tracts of land contiguous to our facilities in Maranello, and negative change in working capital due to the seasonal pattern of trade payables. Please remind that the prior year was boosted by the collection of the Ferrari Monza SP1 and SP2 advances.
Net Industrial Debt as of March 31st, was EUR401 million, compared to EUR337 million as of December 31st, 2019. As of March end, total available liquidity was EUR1,230 million. In the month of April, we further strengthened our liquidity position with additional committed credit lines of EUR350 million available between the following 18 months and 24 months.
Moving to Page 14, as discussed by Louis, our revised guidance range necessarily depends on assumptions in respect of developments that are largely unknown and unpredictable as the progression of the pandemic and the constraints we’ve entailed cannot be easily anticipated. First of all, we have decided not to take into account the risk of a severe second wave of infections after the present one.
It would have been simply impossible to model the impact of such a new and major disruption. Secondly, we have simulated the evolution of our order book based on the analysis of the resilience we observed during the crisis of 2009 and considering all detected differences in terms of product range, and potential customers vulnerability, and opportunity.
Thirdly, we have considered two alternative scenarios for our core business with different speed of recovery of the production loss during these seven weeks of suspension of about 2,000 cars. One, which assumes the full utilization of all available of flexibility, working Saturdays and shorter summer holidays from now to the end of the year, so as to enable us to recover approximately 50% of volumes lost.
A second one which assumes that the order intake will take time to build up over the coming few months as the restrictions are lifted more slowly. Other things being equal, both alternative scenarios would determine not just our performance in 2020, but would enable us to enter 2021 with a strong order book consistent with our business model. Finally, we have been cautious with respect to the format of the F1 championship for this year, predicting both commercial revenues and sponsorship fees based on the low end of the range of races currently under discussion, of which many without fans.
Projections for our brand diversification activities encompass a substantial reduction of turnover from directly operated and franchised stores and museums and to a lower extent, from licensing. Engines are aligned with the reduced volume target we received from Maserati. Louis already mentioned that we carefully reviewed all spending items for the rest of the year. We cut SG&A by more than 10%, keeping them flat versus the prior year, essentially through postponing or shifting towards digital, a significant part of our marketing activity to anyway maintain strong and vital relationships with our dealers and customers, while continuing to protect our people.
Both launches planned for 2020 are confirmed at present. We prioritize our R&D spending both capex and opex including for competing in the new F1 environment. However, all investments that we deem important for the continuing success of Ferrari and to lay the ground for its future development have been maintained. As a consequence, capital expenditures are projected to be around EUR750 million. Net of the already announced purchase of tracts of land in Maranello, the remaining capex would be slightly lower than in 2019.
With that said, our guidance for the year has been revised as follows. Net revenues between EUR3.4 billion and EUR3.6 billion, to reflect the drop in deliveries, which could range from minus 4% to almost minus 15% versus 2019, and conservative assumptions in respect of the calendar of the F1 Championship, the pace of restart of our brand activities, and demand for engines from Maserati. The actual decision on the size of the volume reduction to be applied will depend on our assessment of the robustness of the new order flow in the next few months, since there is no intention to dilute the positioning of our products based on an order book shorter than usual.
Adjusted EBITDA between EUR1.05 billion and EUR1.20 billion with percentage margin between 31% and 33% in line with our previous results respectively of 2017 and 2018. Such reduction in margins also reflect the consideration, the postponement — that the postponement of deliveries compared to our plans will be more relevant for the new models yet to be introduced in the market. Adjusted EBIT between EUR600 million and EUR800 million. We target an EBIT margin between 18% and 22%, which reflects the inevitably higher pace of our D&A following the higher capex of most recent years.
Adjusted diluted EPS between EUR2.4 per share and EUR3.1 per share assuming a tax rate substantially in line with 2019 at around 20%. The assumption here is that we keep on enjoying the benefit of the Patent Box tax break under the new Italian regime, albeit slightly reduced. Industrial free cash flow between EUR100 million and EUR200 million with a possibly heavier burden from some extended payment terms on trade receivables and capex of around EUR750 million, albeit [Phonetic] curved compared to our original plans.
I remind you that in 2020, the industrial free cash flow is the price of a portion of the cash consideration for the Ferrari Monzas to be delivered in the year since already collected in advance in 2019.
And with respect to tax payments, we are cautiously assuming unchanged conditions from our original guidance including the new cash benefit from the Patent Box split in three years as provided by law. Please note that such figures are predicated upon the assumption that foreign exchange rates stay where they have been predominantly during the last month. That is, with U.S. dollar not weaker than EUR1.1 against the euro considering the impact of all hedges in place. This implies a small positive gain versus our prior guidance.
Moving to Page 16, when looking at the yearly results, it’s worth reminding ourselves what Louis already mentioned in his speech, that is, that we are currently expect that between 75% and 100% of the shortfall versus our EBITDA target is concentrated in Q2 as illustrated on Page 14, I’m sorry — on Page 16 and that this will entail a visible rebound in H2 following the partial production catch-up of the about 2,000 cars loss during the seven-week suspension.
The unsurprisingly weak performance of the second quarter for our car business is mostly the result of the inevitable constraints imposed by most countries and at various levels to react to the damage of the pandemic, but also reflects the consideration that our other businesses are equally or even more impacted since their overall drop in terms of EBITDA compared to our objectives or compared to Q1 2019 is about six times or seven times larger than [Phonetic] their contribution as targeted or as actually recorded one year ago.
The second half of the year is therefore where we currently place [Phonetic] our ambitions to come back. In this respect, if rests assured, then we are taking all the appropriate measures and remain flexible enough to adapt ourselves to unexpected changes. We are focused more than ever to execute on our recovery plan and keep on nurturing this phenomenal Company.
With that said, I’d like to turn the call over to Nicoletta.
Nicoletta Russo — Head of Investor Relations
Thank you very much, Antonio. We are now ready to start the Q&A session. Please Maria, I hand over to you for the instruction. Thank you.
Questions and Answers:
Operator
Thank you. [Operator Instructions]. Thank you. Your first question comes from the line of John Murphy from Bank of America. Please go ahead. Your line is now open.
John Murphy — Bank of America Merrill Lynch — Analyst
Good morning and good afternoon everybody. It’s great to hear from all of you. I have a number of questions, but Louis just wanted to start first on how you’re managing sort of the makeup of these 2,000 units of production you lost sort of in the downtime.
You’ve got real discretion given the order backlog as we know it right now as to how to make up the deliveries over time. And I’m just curious, it sounds like you may make up 50% in the second half of this year. But as we think about 2021, and maybe the remainder being made up in 2021 or maybe all of those being made up in 2021 depending on how the world shapes up for all of us in the second half of the year, just curious, could you, or would you be willing to have a big spike in what would look like year-over-year growth in unit volume in 2021 to catch up.
Or would you more conservatively kind of have a normal growth rate or a lower growth rate and not try to make up that unit volume. I’m just trying to understand how you’re going to manage this volume growth going forward, and if 2021 will still kind of look like you expected it before, plus the catch-up or will you just kind of try to keep it at you look — what it was going to be previously in absolute terms? You understand that.
Louis C. Camilleri — Chief Executive Officer
Yeah. Very clear question. I would say, John, that very much hinges as I mentioned in my opening remarks and Antonio referred to as well, the key is ultimately the order book. So we want to end the year with a very strong order book and that will somehow dictate the deliveries in 2020, which in turn basically predicates the range we have on the low end and the high end.
So to have a strong order book has always been a key ingredient of our business model and growth model and therefore depending on the size of that order book that will dictate the amount of deliveries in 2021. Clearly, we don’t want a waiting list specifically on certain models that is too long, especially for those models in which we want to attract new customers.
So I can’t really give you a specific answer, I don’t want to scurt the answer, but it really depends on the order book. We will do our utmost if the order book and the level of cancellations are going to be in line with our expectations. As Antonio mentioned, we can work on Saturdays, we can reduce the summer holiday by a week. So we can catch up some of the volume production, always with a cautionary eye to supply chain.
So there are a lot of parameters involved in this year, and ultimately the order book will dictate very much the tempo and cadence of our deliveries in 2021. Is that clear?
John Murphy — Bank of America Merrill Lynch — Analyst
Yeah. That’s helpful. And maybe if I could follow-up. If we think about the Monza and your higher lined vehicles, having a much sticky, stickier and stronger order book, I’m just curious if, in the interim, for financial strengths, cash flow build, and to some extent smoothing of financials in a healthy way, does it make sense in the near-term as you’re going through the weakness in the second quarter and maybe even in — a little bit in the third quarter to pull forward some of these deliveries to drive the strength — the financial strength of the Company in the near-term in a way that you might have a few more deliveries incrementally here in the near-term than you would have otherwise?
Louis C. Camilleri — Chief Executive Officer
Well, clearly that’s something we look at. However, it is somewhat constrained, i.e., if I take the Monza which is our highest margin model both the SP1 and SP2, we do have a capacity limitation. As you know, we put in a new line just for the Monza. We can’t suddenly increase the production in a dramatic manner, or even in an added manner. So there is a capacity constraint on the Monza. On the other high margin cars, as Antonio said, the SF90 is only coming after the summer. So the impacts relative to 2020 will be quite limited.
John Murphy — Bank of America Merrill Lynch — Analyst
Okay. That’s helpful. And then just second… [Speech Overlap]
Louis C. Camilleri — Chief Executive Officer
And that [Speech Overlap] take in account in our guidance.
John Murphy — Bank of America Merrill Lynch — Analyst
Yeah. Okay, thank you. And then the acceleration of the brand activities. Obviously, there is a lot of stuff that’s obviously gone down here, could this be a period where you accelerate some of the rationalizations of those activities where things just don’t go back up and you just focus on a narrower sort of higher line, higher profit, higher brand supporting activity and really take this as an opportunity to run that rationalization potentially faster than before?
Louis C. Camilleri — Chief Executive Officer
Well, I think we’ve executed against the strategy quite rapidly. As you can imagine, we do have certain contracts with a certain duration. So to early terminate would not necessarily be in the best interest of the P&L. So we have that constraint to the extent that we have opportunities to accelerate the termination without any termination fees, that’s certainly something we would follow up. But I would say that in terms of cleaning up the portfolio, the team has really executed extremely well and very rapidly.
John Murphy — Bank of America Merrill Lynch — Analyst
Okay. And then just lastly real quick on the share repo program, given the sort of suspension here. What metrics are you looking at to reinstate the share repo program, and it seems like it’s a bit of an overabundance of caution on the balance sheet because you have — seem to have tons of room potentially continue to go after it. Just curious, when and how you think about that share repo program being reinstated and maybe get more aggressive in the market?
Louis C. Camilleri — Chief Executive Officer
Well, there isn’t any specific timing, time will tell clearly at the higher [Technical Issues] range with the order book strong, a relatively low level of cancellations and strong order intake, that would drive our cash flow, the — somewhat there is a question, as you know on share repurchases in the post COVID-19 environment with more and more political calls to sort of ban share repurchases. So we’ve got to keep our eye on that.
But clearly, this Company will generate excess cash flow and we in one way or another will find the best way to get that cash to shareholders.
John Murphy — Bank of America Merrill Lynch — Analyst
Great. Thank you very much.
Louis C. Camilleri — Chief Executive Officer
Thank you, John.
Operator
Thank you. Your next question comes from the line of Giulio Pescatore from HSBC. Please ask your question.
Giulio Pescatore — HSBC — Analyst
Hi everyone, thank you for taking my question.
Louis C. Camilleri — Chief Executive Officer
Hi, Giulio.
Giulio Pescatore — HSBC — Analyst
And congratulation on reopening the plant today. So I was — so to start with, I would like to ask a question about your comment on the lack of liquidity in the second-hand markets. I think it’s very interesting, I mean, are you worried about longer-term implications of this impact? Are you seeing any pockets of weakness as a result of this? Or you think it’s just a — everything will go back to normal as the dealerships reopen?
Louis C. Camilleri — Chief Executive Officer
Well, clearly the market now is essentially dead, because there’s no trading. Most of that is because, you know, a lot of the dealerships are closed, and I think people are cautious as to the pre-owned market for the time being. If you go back to the financial crisis, there was a reduction in residual values, but here, we’re looking at a very different situation.
So I think we need to wait to see when the market really opens up as to what will happen. We monitor it very closely, but my sense is, if and when normality resumes, the pre-owned market certainly relative to our luxury competitors should continue to be strong.
Giulio Pescatore — HSBC — Analyst
Okay, very clear. And then a second one if I can, then on the bottlenecks at the dealer level, do you expect to see — is there a problem with the dealers in terms of catching up with new orders as these orders come in, are their constraint in terms of the process of personalizing the car and even getting the delivery of the car? Is there any issue in terms of how quickly they can scale back up?
Louis C. Camilleri — Chief Executive Officer
No, I don’t think so. I mean, they’re clearly dependent on our deliveries. But I think we’ve done everything to work very closely with them and ultimate clients. I mean, there was a reference earlier to a number of digital activities with ultimate clients and that’s going on. Orders are starting to trickle in, week by week they are increasing. The last week was actually quite favorable. So things are slowly, but surely coming back. And as I said, the cancellations are not something so far anyway that we would deem alarming. But the cautionary note is that, when there was the last financial crisis, it took a few months for the cancellations to essentially flow through to the order book. So we are looking at it very carefully, but so far, no — no red lights are flashing in any real geography.
Giulio Pescatore — HSBC — Analyst
Okay. And maybe one last one, I think more for Antonio. I was just wondering if you can share some more color around the cost of the Back on Track program? And how big is that of an impact on margins? And maybe if you can quantify maybe even the reduction on gross margin as a result of all the things you have to put in place to ensure a smooth ramp up in production?
Louis C. Camilleri — Chief Executive Officer
Giulio, Antonio will answer.
Antonio Picca Piccon — Chief Financial Officer
Yeah. Giulio, it’s not materially impacting our margins. It’s a self-contained cost.
Giulio Pescatore — HSBC — Analyst
Okay. Okay, thank you very much.
Louis C. Camilleri — Chief Executive Officer
Thank you, Giulio.
Operator
Thank you. Your next question comes from the line of Martino De Ambroggi from Equita. Please ask your question.
Martino de Ambroggi — Equita — Analyst
Yeah. Good morning, good afternoon everybody.
Louis C. Camilleri — Chief Executive Officer
Good afternoon, Martino.
Martino de Ambroggi — Equita — Analyst
Yeah. Thank you. The first question is on the cancellations, because you referred to the previous crisis, but could you quantify what was the rough amount of cancellation and delays, just to figure out what could be the worst-case scenario in the crisis scenario?
And the second…[Speech Overlap] Yeah?
Louis C. Camilleri — Chief Executive Officer
Okay, go ahead.
Martino de Ambroggi — Equita — Analyst
No, the second was on the order intake. Just if you could share with us quantification of the order intake year-to-date or the change versus last year, just a rough indication, because if I understand correctly, if you adjust downward the production this year is to preserve the — this — the order book as strong as it used to be in the past.
So probably 12, 18 months deliveries and either [Phonetic] there is a reduction in orders, which is inevitable, I suppose in such an environment.
Louis C. Camilleri — Chief Executive Officer
Correct. I’m not — regretfully, I’m not going to quantify either the level of cancellations or the order intake. All I would say is that, if you look at the low end of the range, those where we have, obviously, the higher level of cancellations and the lower level of order intakes. And at the high end of the range is what we feel is possible within this environment.
I think it’s very difficult to compare today’s situation to the financial crisis for numerous reasons which I think I referred to in my opening remarks. But one is that the portfolio was completely different, Martino, I mean, a number of our models were ending their lifecycle, there was the launch of the California which obviously helped, and here, we have a much broader portfolio across the whole board.
And as I said, the models that have the highest margins have the highest order book. And in our sense, are the models that are the less vulnerable.
So we’ll see how things evolve over the next few months, but I would hate to give you a number, just look at the range and that gives you a sense of the numbers.
Martino de Ambroggi — Equita — Analyst
Okay. Thank you. Fine. Just a follow-up on the mix effect, very strong in Q1, how could you manage it for the rest of the year?
Louis C. Camilleri — Chief Executive Officer
Well, as Antonio mentioned, the mix was very strong driven by Monza as well as the Pista. So Monza will be there at least the second and third quarter in terms of mix, as you know, we started in the fourth quarter of last year. So that will equalize itself, but the mix should be favorable in Q2 and Q3 driven by the Monza and the remaining volume of the Pista, which is now sold out, well has been sold out for some time, but there is still deliveries to be made. And that affects also the personalization.
Martino de Ambroggi — Equita — Analyst
Okay, thank you.
Louis C. Camilleri — Chief Executive Officer
Thank you.
Operator
Thank you. Your next question comes from the line of Massimiliano Vecchio from UBI Banca. Please ask your question.
Massimiliano Vecchio — UBI Banca — Analyst
Good afternoon, everybody.
Louis C. Camilleri — Chief Executive Officer
Good afternoon.
Massimiliano Vecchio — UBI Banca — Analyst
Louis, you said in your remarks that obviously five new models were launched last year, and will be sold this year, and two new series models will be sold this year. And this is obviously a big difference within now and 2009. I was wondering to understand how are you changing your launch and commercial activities specifically related to those seven models in the new COVID world? Will you be concentrating on the activities, I don’t know, during the summer time or you will be delaying as much as possible into 2021? I was just trying — curious to understand how it is changing your launch activities.
Louis C. Camilleri — Chief Executive Officer
Well, clearly the situation has delayed a number of activities in terms of the events we had planned. The driving events, particularly, the presentation of the specific models to clients. We intend to resume that at a rather fast clip essentially in the second half when things are open. And we’ve started in those markets that are back on track at 100%. So the timing will evolve geographically as things open up and Antonio mentioned exactly when we foresee the first deliveries of the models that we presented in 2019.
I would say, on average, things have been delayed by three months or four months, and we will try our utmost to catch up in terms of order intake and deliveries.
Massimiliano Vecchio — UBI Banca — Analyst
Okay. And can you also detail what you’re seeing on that front in China? And can we use it as a guide for what will happen in Europe or US or are completely different behaviors in terms of customers and dealers?
Louis C. Camilleri — Chief Executive Officer
I think, first of all, you’re right. It’s a completely different behavior. As you know, China is a very important market for us going forward especially with regard to the hybrid model, the SF90, and hybridization going forward. All our distributors’ showroom and workshops are now open. So 100% we’re back in business. We are getting orders. The numbers are rather distorted by the actions we took last year in 2019, given all the uncertainty on the emissions, regulations.
You may recall that we delivered to clients in the first half a significant amount. So that comparison will continue to be difficult until the second half. But we are seeing movement in China, but as we’ve always said that ultimately, the solution to China is hybridization and eventually the Purosangue.
Massimiliano Vecchio — UBI Banca — Analyst
Okay. Thank you. Thank you very much.
Louis C. Camilleri — Chief Executive Officer
Thank you.
Operator
Thank you. Your next question comes from the line of Thomas Besson from Kepler. Please ask your question.
Thomas Besson — Kepler Cheuvreux — Analyst
Thank you very much. It’s Thomas Besson with Kepler Cheuvreux. I have two questions please. First, could you come back to the supply chain comments you’ve made? I mean you mentioned that a majority of your suppliers come from the most affected regions in Italy, and that you do everything you can to help them. But how much is that included in the guidance that you would be able to capture between zero and half of the units lost in — during the lockdown? Well, is that effectively a large portion of the supply shock you’re going through? And the second question, may I ask, I don’t know if you want to share that, but, the number of units you have shipped so far of Monza between Q4 last year and Q1 this year, please?
Louis C. Camilleri — Chief Executive Officer
Okay. On the supply chain, the — our range sort of assumes an essential alignment with the supply chain. We are, you can imagine in daily contact with all of them, they are ramping up, a lot of them started today, we have witnessed some absenteeism, which means that their ability to get up to full capacity will take some time. But I don’t envisage at this stage, huge issues on the supply chain.
Again, if you take the low-end and the high-end, it gives you a sense of what we think is likely on the supply chain. The one thing we have done is to increase our inventories in terms of both materials and components and we will continue to increase our inventories to ensure that we have that flexibility. So that in a nutshell, we are also monitoring one or two of those suppliers that have issues, they are not new, they’ve had issues pre-COVID, we’re just ensuring that they will continue to produce.
I would say that in terms of personalization, that’s the one aspect that will probably be a bit more difficult, but nothing that we can’t surmount. The second one, you said in terms of units shipped of the Monza, roughly last — the last quarter of 2019, was around 40 units and it was about the same in the first quarter.
Thomas Besson — Kepler Cheuvreux — Analyst
Thank you very much.
Louis C. Camilleri — Chief Executive Officer
Thank you.
Operator
Thank you. Your next question comes from the line of Susy Tibaldi from UBS. Please ask your question.
Susy Tibaldi — UBS — Analyst
Hi, good afternoon. Thanks for taking my question.
Louis C. Camilleri — Chief Executive Officer
Good afternoon.
Susy Tibaldi — UBS — Analyst
Good afternoon. Hi. So on just to go back on the guidance for 2020, so of course the lines more significantly impacted will be the engines and the sponsorship Formula 1, etc. So is it reasonable to assume that for the full year we should look at a decline similar to what we have seen in Q1, so is Q1 quite representative of how the year should be at least in your assumptions to get to this sort of guidance?
Secondly, related to the Q1 results, I was a little bit surprised to see that you had a very strong contribution from the mix in your EBIT bridge, however, looking at the contribution to the revenues, it seems that for the cars and spare parts, it seems to come fully from volumes. So I was trying to understand the mechanics behind that? Because clearly last year you had strong volumes of Portofino, and this year, very strong volumes of specials. So just trying to understand this difference on contribution on the revenues versus the EBIT?
And then one last question on the R&D, also in Q1. I think there was maybe a little bit of an expectation that in Q1, you were still spending like a lot of the costs still went ahead, because, of course, the cancellation of the opening of the racing was very last minute. And so how did you manage to actually have the R&D costs down year-over-year? And does it mean that’s maybe the reduction for the full year is even more significant than previously expected?
Thank you.
Louis C. Camilleri — Chief Executive Officer
Antonio, do you want to address those questions?
Antonio Picca Piccon — Chief Financial Officer
Yeah. I’ll start from the — the last two. In terms of volumes and — versus mix, I think I’m not sure how you may detect from our revenues bridge the impact of volumes and price mix. But basically, what the EBIT bridge gives you in the mix price column, is the result of product mix, country mix and price increase year-over-year. And clearly, the presence in our deliveries of the Monza explains very well how the product mix is going to improve on a year-over-year basis. And that’s a driver.
In terms of volumes, we are not growing that much. You see, in terms of shipment how much we have been growing in terms of delivery. So at constant contribution margin, it should be an easy computation, I guess.
In terms of the R&D, there is a calendar effect even there in the R&D column. First of all, you need to take into account that we have both the expense — the R&D expenses to net P&L by the Formula 1 activity. The one for innovation, then we have industrial costs. So there are a number of elements. The one that have a calendar or a seasonal effect, if you wish, depending on how you want to call, it’s Formula 1, where a portion of this cost also depends on the calendar of the races, and that’s what basically contained the growth on a year-over-year basis. I do not recall your first question.
Louis C. Camilleri — Chief Executive Officer
I think it was related to the full year, I can address that.
Antonio Picca Piccon — Chief Financial Officer
Yeah. The one in respect of the full year, you’re right. Yeah, you know, it’s not exactly a mathematical computation. But you are not far from there. Obviously, absent any news on the development of Formula 1 during the rest of the year.
Susy Tibaldi — UBS — Analyst
Okay, great, thanks.
Operator
Thank you. Your next question comes from the line of Ryan Brinkman from JPMorgan. Please ask your question.
Ryan Brinkman — JPMorgan — Analyst
Thanks for taking my question. In the past, you’ve discussed your sales increasing over time commensurate with the global increase in high net worth individuals, so as to preserve exclusivity. Do you have any thoughts on how the trend in high net worth individuals may be now different or if there is anything within the trend in global wealth that might have a disproportionate impact in your customer base? So for example, the decline in oil and gas wealth over the past quarter or the relative resilience in technology company shares? Anything in particular on the macro wealth side that you’re watching or investors might be able to watch for insight into demand?
Louis C. Camilleri — Chief Executive Officer
Ryan, as I mentioned in my opening remarks, the commercial team did a phenomenal job at analyzing geographies, industrial sectors, and ultimately, our customers and clients and who is participating in what industrial sector, which in turn gave us a sense of the vulnerabilities as well as the opportunities. So we have really drilled down considerably and they’ve done a phenomenal job. And obviously, those clients who are in the sectors that you’ve mentioned the obvious ones that are suffering today and the ones that are doing okay, that gives you the opportunities as well as the vulnerabilities. So all that is built into the range and our volume expectations for the year, the low-end and the high-end.
Ryan Brinkman — JPMorgan — Analyst
Okay. I see. And then just lastly, have you done any dimensioning that you’re able to share at least to estimate the net financial impact this year from changes to Formula 1? It sounds like you should be able to ratchet down R&D, I don’t know maybe SG&A, but not commensurate with the decline in sponsorship, commercial brand revenue, is that the way to think about it? Or can you help us sort of think about the degree to which the lower EBITDA and the updated outlook is driven by changes to the Formula 1 dynamic versus the car and parts business?
Louis C. Camilleri — Chief Executive Officer
If you look at that first quarter, it should give you a sense — I mean, there is no way we can offset through cost reductions, although, we have reduced cost in Formula 1, but there is no way we can offset the hit to the revenues on sponsorship fees and especially on the revenues that generated by the commercial rights holder. So the hit to revenue essentially goes down to the bottom line with some minor offsets, but it’s a big hit. And as I said, the good news is it’s confined to this year, hopefully.
Ryan Brinkman — JPMorgan — Analyst
Okay, helpful. Thank you.
Operator
Thank you. Your next question comes from the line of George Galliers from Goldman Sachs. Please ask your question.
George Galliers — Goldman Sachs — Analyst
Yeah, hello and thanks for taking my question.
Louis C. Camilleri — Chief Executive Officer
Hello, George.
George Galliers — Goldman Sachs — Analyst
The first question I just had is, just at the low end of your guidance. If we were to assume that in the second half, you see small earnings growth of 1% to 2%. It would suggest it will be touch and go whether Q2 will be breakeven at the EBIT line, is your expectation for Q2 to be profitable at the EBIT line?
Louis C. Camilleri — Chief Executive Officer
Q2 will be very weak, as we’ve said, I’m not going to give you a specific number but it will be very weak. You’re right.
George Galliers — Goldman Sachs — Analyst
Okay. And then, with respect to the order back, you’ve mentioned several times about managing the order book. Could you perhaps just give us some insight into when you manage it are you thinking about total orders at a Company level versus your total production? Are you thinking about it in terms of managing V8 orders to V8 production and similar to V12 or do you think about it on a model line status?
Louis C. Camilleri — Chief Executive Officer
All of the above. I mean, it’s not one simple rule George. I mean, we take a holistic view of the whole order book. I can add geographic mix to that, and model mix. So obviously — and the waiting list, our strength of the order book for each specific model and each specific geography. So it’s a rather complex equation. But one that I think the team has dealt with very well, and clearly, will continue to do so.
But there isn’t just one simple formula as how do we look at the order book or how we treat it.
George Galliers — Goldman Sachs — Analyst
Understood. And then one final question if I may. You did mention the potential for Saturday working in the second half of the year to catch up if it seemed appropriate. Can you just confirm would that involve bringing on incremental workers that would need training and associated costs or is Saturday working something you could manage with your existing employee base?
Louis C. Camilleri — Chief Executive Officer
The latter, we’ll manage it with existing. Having said that, over the last couple of years, we have hired and trained a number of people and especially the production team has done a phenomenal job at [Phonetic] transferring those employees that were focused on the Maserati engines back to our core Ferrari business. So that include — that entails quite a lot of training and absorption in the core business. So that given the Maserati engine business will continue at pace.
George Galliers — Goldman Sachs — Analyst
Great, thank you.
Louis C. Camilleri — Chief Executive Officer
Thank you.
Operator
Thank you. Your next question comes from the line of Angus Tweedie from Citi. Please ask your question.
Angus Tweedie — Citi — Analyst
[Speech Overlap] taking my questions. Thank you also for the extra color on F1. I was going to ask on Formula 1, have your views on the potential revenue pool in the midterm, thinking about 2021 changed at all as a result of what’s happened. And then secondly, just thinking about the order book. Could you perhaps discuss how you think deposits might move given it sounds like it’s more production issue at the moment than demand? Thank you.
Louis C. Camilleri — Chief Executive Officer
Our current thinking is that in terms of revenues. Although it’s somewhat unpredictable, in 2021 they should come back certainly in terms of the races, which was a big part of it, and obviously also in terms of sponsoring. We know that the Formula 1 Group has worked a lot on trying to attract new sponsors. Obviously, this situation has delayed certain things, but hopefully by 2021 that will come back. So at this stage, we don’t really foresee a major reduction — continued reduction in commercial rights holder revenues in terms of Formula 1 for next year, all things being equal.
The second question related to deposits, I think. Well, the main changes Antonio highlighted in terms of the deposits was really Monza, which flattered 2019 considerably, and obviously, some of the sales of the Monza today are lacking the deposit that we received in 2019. With regard to all the other cars, we don’t foresee any changes in terms of the policy so — we have in place with dealer deposits primarily. I don’t know if that answers your question or that even touched upon your question.
Angus Tweedie — Citi — Analyst
No, that’s very helpful. Thank you.
Louis C. Camilleri — Chief Executive Officer
Thank you.
Operator
Thank you. Your next question comes from the line of Michael Binetti from Credit Suisse. Please ask your question.
Michael Binetti — Credit Suisse — Analyst
Hey, guys. Let me thank you quickly for all the help. We haven’t had a lot of companies try to give any guidance. So very appreciative of all the detail here and the outlook for the year. Just two quick ones there. I want to know if — I think you had one or two presentations on new cars planned for 2020, and I apologize if I missed it, but is there any delay in the launching of those new cars, or is that still the right way to think about this year? I was curious if I could hear a little more detail on the cancellations you mentioned in Australia and the US. I know you said nothing alarming. I was just curious why you called out those two markets at all.
And then most importantly, I want to ask you about a comment on slide 4 about re-prioritizing projects and ensuring long-term success. I know it’s too early to have ultimate clarity on 2020. I’m assuming there’s also reduced visibility on the longer-term plan you talked to at the Capital Markets Day, but I know it’s a complex plan, big investment projects each year like Formula 1 this year and then 2020, I think was going to be a big ramp in Purosangue investments.
As you think about the targets for 2022, can you speak to what you think you need to do to realign the phasing of those investment projects? And then if any of those projects could extend beyond 2022, given the disruption this year?
Louis C. Camilleri — Chief Executive Officer
I’ll try. First of all, the two new models are still slated for presentation in 2020, clearly a few months later than we had originally anticipated. But they will still be presented this year. So that remains an activity that we foresee. But clearly, as you can realize the presentation of those models, they really only started being delivered in 2021.
With regard to the United States and Australia, we specifically mentioned, I specifically mentioned the United States and Australia, because that’s where we saw a little bit more cancellations and elsewhere. And the only reason I said Australia and the United States was to give you a sense that this was not a very wide geographic thing that was happening. It was sort of contained at this stage anyway to those two markets. But again, they weren’t very alarming. But it was to give you a bit more color as to the cancellations.
In terms of — changing the priorities of our projects, clearly, with the reduction in the capital expenditures that Antonio mentioned, and some cost reductions, we have delayed certain models and the investments behind them. However, we have retained total flexibility to sort of switchback on depending on how things evolve. But at this stage, we felt it was prudent to delay what we felt could be delayed between three months and nine months, which obviously will have an impact longer-term. But we’ve been very careful as to ensuring that whatever is delayed will not adversely affect our competitiveness or our ability to grow.
So I can’t really go into detail model by model, but some will be delayed, others will be on time.
Michael Binetti — Credit Suisse — Analyst
Okay, thank you so much.
Louis C. Camilleri — Chief Executive Officer
Thank you.
Operator
Thank you. And your last question comes from the line of Billy from Morgan Stanley. Please ask your question.
Adam Jonas — Morgan Stanley — Analyst
Hey, it’s Adam Jonas in place of Billy. I hope everyone is well and thanks for the call. And I do offer my best sympathies to the Ferrari community and your families as well.
Louis C. Camilleri — Chief Executive Officer
Thank you, Adam. Adam, we’re having difficulty hearing you.
Adam Jonas — Morgan Stanley — Analyst
Is this a little better?
Louis C. Camilleri — Chief Executive Officer
There’s a huge echo. Go ahead. Speak very slowly, because there’s a huge echo.
Adam Jonas — Morgan Stanley — Analyst
We’ll take it offline, I want to ask the question. Have a good day everybody.
Louis C. Camilleri — Chief Executive Officer
Okay, sorry. Thank you. Are there any further questions?
Operator
All right. There is no further question at this time. Please continue, Nicoletta. Thank you.
Nicoletta Russo — Head of Investor Relations
Thank you, Maria, and thank you, everyone, who has joined us today. The IR team will be soon available to answer your questions. And we all wish you a lovely rest of the day. Bye-bye.
Louis C. Camilleri — Chief Executive Officer
Thank you, everyone.
Operator
[Operator Closing Remarks].