AMP Limited

Good afternoon. This is the Corusco Conference Operator. Welcome and thank you for joining the Amplifon third quarter and nine-month 2023 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Ms. Francesca Rambaudi, investor relations and sustainability senior director of Amplifon. Please go ahead, ma'am.

Thank you. Good afternoon and welcome to Amplifon's conference call on third quarter and first nine months. Before we start, a few logistic comments. Earlier today, we issued a press release related to our results, and this presentation is posted on our website in the investors section. Second, the call can be accessed also via webcast, and dial-in details are on Amplifon's website as well as on the press release. I have to bring your attention to the disclaimer on slide two, as some of the statements made during this call may be considered forward-looking statements. With that, I am now pleased to turn the call over to Amplifon CEO, Enrico Vita.

Thank you, Francesca, and good afternoon, everyone, and thank you for joining us today for our Q3 results conference call. As always, let's begin commenting on the quarter's results, starting with the top line. We posted excellent revenue growth of more than 11% at constant exchange rates and close to 6% at current exchange rates, fueled by a very good organic growth at 9%, one of the highest organic growth ever. This performance is particularly remarkable considering we operated in a context of global market demand that is clearly moving at a different speed. In fact, we saw a strong market growth in the US at circa plus 10%, while we estimate that Europe our core market was still slightly negative, circa minus 1, minus 2%. And clearly, this development in Europe was unexpected for us, also considering the easier comparison base to the previous year. Australia and New Zealand combined are in the middle of the two regions, with a slightly positive combined growth of around plus 1, plus 2%. About Europe, we estimated that the key markets like France and Germany were in negative territory. In particular, France, the largest market in Europe, suffered a market decrease versus previous year, close to 10%. With specific reference to France, we believe that this very negative performance was mainly because of the effects of the RAC0 reform back in 2021, early 2022, that distorted the baseline for this year, and also, although to a lesser extent, to the effect of the shift from both GAPs and ENTs being able to prescribe hearing aids to new customers in 2022, to basically only ENTs in 2023. However, We are positive that for both France and Germany, the market demand will normalize and return to positive growth rates during 2024. In such market scenario, we grew very strongly, gaining a significant market share, also thanks to a clear decision that we made, the decision to accelerate investments to gain market share and strengthen our global leadership further. In fact, we are convinced that playing offense is the right choice at such times. And I'm pleased to see that this choice is paying off in terms of sales growth, as you can see from our very strong organic growth, one of the highest ever, as I said earlier on. In such a context, I cannot avoid highlighting once again our performance in Americas, in all geographies, and in particular in the U.S., where our growth, led by Miracolier Direct Network and Amplifon Hearing Healthcare, was again excellent. In the region, we reported growth of almost 25% at constant Forex. At this time, I would like also to highlight the performance in the APAC region, where we grew more than 16% at constant exchange rate, outperforming also here the markets in all key countries. And today, I'm pleased also to share the achievement of an important milestone of our journey in China. At the beginning of October, we have passed the mark of 300 stores. And today, I can also tell you that we are confident we can reach about 400 stores by the end of the year, by January at latest. Let me say that I'm very happy about the work and the execution capabilities of our team in building a very solid and future-proof platform in a country which will represent one of our sources of growth in the medium and long term. Even in EMEA, we grew faster than the market, although it was our lowest growth region, but this only because of the weaker than expected market demand I mentioned earlier. Finally, revenues from M&A continued to develop strongly and according to our plan. In fact, the contribution from acquisition was above 2 percentage points. Commenting about profitability, as said, we have taken a precise decision to invest in two key areas of our business. First of all, and mainly, in our field organization to better serve our customers. You may recall that we discussed about a tight audiologist market in some key countries, in particular in France and Australia. Here we have conducted a comprehensive recruiting plan in a few of these markets, of our markets, to ensure that audiologists are no longer a limitation to our current and future growth. Second, we have continued to invest in Europe, both in marketing and in our brands. which is the most appropriate choice at a time of lower consumer confidence. Clearly, the already mentioned lower growth in EMEA is also affecting our group profitability from a pure geographical viewpoint, being EMEA our most profitable region. With that, I now hand over to Gabriele to give you more details about our region performance. More details.

Thanks, Enrico, and good afternoon to everybody. Moving to slide number four, we have a look at the group financial performance in Q3, which, as already commented by Enrico, posted an excellent revenue growth at 11.4%, a constant forex, with a record organic growth at 9%, despite a softer than expected European market and one trading day less. Our organic performance was clearly driven by significant share gains and positive pricing development. M&A contribution from Bolton acquisition in France, Germany, U.S., Canada, and China was at a remarkable 2.4%. FX had a significant negative impact accounting for minus 5.7% due to the depreciation of US dollar, Australian dollar and Argentine peso. BIDA recurring came in at 110 million euros with margin at 20.7% versus the extremely challenging comparison base in Q3 2022 which posted, as you may remember, a record profitability with an EBITDA margin of 21.8%. The profitability reduction versus 22 is due to a lower operating leverage in EMEA, due to softer than expected market primarily related to France and Germany, strong investments in audiology's capacity and marketing, as pointed out by Enrico. a less favorable geographic mix, and finally, a negative forex impact. Moving to chart number five, we have a look at our financial performance in the first nine months. Revenues were up around 10% at constant forex, with a very strong and above-market organic growth at 7.6%, an M&A contribution at over 2%, and the negative FX impact at around 3%. EBITDA recurring amounted to 386 million euros, up 4.4% versus 1922, with margin at 23.5%, down 50 basis points versus 22, in light of the previously mentioned reasons. Moving to slide 6, we have a look at EMEA performance. Revenue growth at constant Forex was around 6% versus 22%, with a well-above market organic growth at 5%, driven by share gains and positive pricing development. In a still slightly negative market demand and with a negative impact of one trading day less. M&A contribution in France and Germany was close to 1%. Nibida amounted to 83 million euros, up around 1% versus 22, with margin at 25%, down 110 basis points versus a challenging comparison base last year, which posted the Nibida margin at over 26%. plus 60 basis points versus 21. The result was driven by the reduced operative leverage in a software-designated market while strongly investing in audiology's capacity, especially in France, and the marketing to unlock constraints and take advantage versus other players. In the nine months, revenue growth was circa 5%, with a solid and above-market organic growth at 4%, and around 1% contribution coming from M&A. EBITDA amounted to over 300 million euros, up 3% versus 22%, with margin at 28.1%. Moving to slide 7, we have a look at another outstanding performance of Americas, despite a very challenging 22 comparison base, which posted a revenue growth of 27% versus Q3 2021. Revenue growth was around 25% at constant effects, with an excellent organic growth at over 17%, driven by an outstanding performance in the U.S. of both Miracolier direct retail and Amplifon healing healthcare. M&A contribution, primarily related to U.S. and Canada, was over 7%. Effects had a significant negative impact of 16.6%, driven by the strong euro appreciation versus the US dollar and the very strong devaluation of the Argentine peso. EBITDA amounted to 26.8 million euros, with margin at 24.6% in line versus 2022, also after the strong acceleration of Miracolier retail business. In the 9th month, Revenues were up 22.7% at constant forex, driven by an excellent organic growth of around 16%, despite the 22 very strong comparison days. EBITDA amounted to 84 million euros, up 14.3% versus 22, with margin up 10 basis points at 26.1%. Moving to slide 8, we have a look at Asia Park, where we posted an excellent performance. Revenues were up over 16% at constant forex, mainly driven by an outstanding organic growth at 14%, with all markets of the region performing double digits. M&A contribution was 2.5% related to China expansion plan. FX headwind was strong at minus 12.2%. EBITDA was at 23.8 million euros with margin at 26.5%, up 10 basis points versus 22, even after the very strong China growth. In the nine months, revenue were up over 15% at constant forex and 7.4% at current forex, driven by an excellent organic growth of around 14%. EBITDA amounted to 66.5 million euros, up 6% versus 22, with margin at 26%. with a contraction of 30 basis points due to the one-time cost for the change of leadership in the region in Q2. Moving to slide number nine, finally, let me spend a few words on China, since we have surpassed the 300-plus store, a key milestone in our journey. We have, in fact, entered the fast-growing Chinese market only in 2018. And in just a few years, we have become one of the most important players with over 300 points of sales covering 13 provinces and special municipalities, over 700 employees, of which 600 are hearing care professionals. China represents a very important opportunity for the Amplifon's medium and long-term growth, given the market size and the exceptional growth potential. As a result of our recent and successful acquisition strategy, Amplifon's global network has now reached 9,500 points of sales globally. Moving to the next chart, we appreciated the Q3 profit and loss. As previously mentioned in the quarter, total revenues at constant FX increased by 11.4%, with a record 9% organic and a 2.4% acquisition growth, with the revenues at current FX growing by 5.7% at over 530 million. BIDA recurring came in at 110 million euros with a margin of 20.7% versus 21.8% in 2022 record level when we implemented some cost containment measures related to the non-strategic investments. As previously mentioned, the profitability reflects the lower operating leverage in EMEA and the less favorable geographic mix due to the softer than expected market demand in Europe, coupled with very strong investments in the business. EBITDA reported was around €180 million, after €2 million one-off costs. DNA, including PPA, increased by 4 million versus last year in light of the increased investment in network, IT infrastructure, and innovation, leading the recurring EBIT to 45.4 million versus 49 million in Q3 22. Net financial expenses amounted to 13.2 million versus 8.3 million in Q3 22 due to The increasing interest rate on short-term debt and on the limited portion of long-term facilities at variable rate, since, as you know, most of our long-term debt is at fixed rate. The non-monetary negative impact of inflation accounting on the Argentinian subsidiary. And finally, the higher figurative interest expenses on network leases following the application of IFRS 16. Tax rate posted a 10 bps reduction versus 22, leading recurring net profit at around 23.5 million versus 29.7 million in Q3 2020. Moving to slide 11, we see the nine-month profit and loss evolution. Total revenues increased by 9.7% at constant Forex with an outstanding 7.6% organic component and a 2.1% M&A contribution, and by 6.8% at current Forex to Euro 1,645,000. Recurring EBITDA increased by 4.4% to 386 million euros, with margin at 23.5%, down 50 basis points versus nine months 22 record level for the previously mentioned reasons. DNA, including PPA, increased by around 14 million, leading the recurring EBIT to 193 million euros, with a growth of around a couple of million versus nine months, 22. Net financial expenses accounted for 36.9 million euros in light of the previously mentioned factors, in addition to some FX differences related to swings in North and South America leading profit before tax to around €156 million from €165.7 million in the 9 months 22. Tax rate ended at 27.7%, leading recurring net profit to €113 million versus €120 million last year. Moving to slide number 12, we appreciate the cash flow evolution. Operating cash flow after lease liabilities was in the period equal to €169 million versus €218 million exceptional level achieved in 2022, when the group implemented several actions delivering a considerable improvement of the working capital. Net capex increased significantly by almost 25 million to circa 100 million euros. As mentioned by Enrico, we are in fact strongly investing not only in people and marketing, but also in our network, IT infrastructure, and innovation. After capex, free cash flow amounted to 69 million euros. Net cash out for M&A posted a significant increase as well to 83 million euros versus 52 million last year following the strong acceleration of Bolton M&A with 220 shops acquired in the first nine months of 2023. NFP ended at 918 million euros after remarkable investments for around 250 million in capex, M&A and dividends. Moving to slide 13, we have a look at the debt profile trend and key financial ratios. As mentioned, the net financial debt closed at 918 million euros with liquidity accounting for 200 million short-term debt accounting for €450 million, and the medium-long-term debt accounting for €666 million. Following the IFRS 16 application, lease liabilities amounted to €488 million, leading the sum of the net financial debt and lease liability to €1.4 billion. Equity ended up at around 1.07 billion. Looking at financial ratios, net debt over EBITDA ended at 1.63, slightly increasing versus 1.52 on December last year, after the strong investments in CapEx, M&A, and dividends. Net debt over equity ended at 0.86 times. I would now hand over to Enrico for the outlook and the closing remarks.

Thank you, Gabriele, and let's go to the final chart of our presentation. First, let me remark that even if some key European markets like France and Germany currently present some temporary challenges, Please remember that, for example, France accounts for about 25% of the total European market. Our revenue growth in Q3 was very strong, significantly above market, and in line with our total European market. Our revenue growth in Q3 was very strong, significantly above market, and in line with our plans. Looking to Q4, we expect still an healthy market in the US, while we expect the European market still to be somewhat subdued until the end of the year, again mainly due to Germany and, above all, France. However, as said, We believe that there are some contingent and specific reasons for that performance in particular in the French market. And therefore, we expect the market demand in both markets to normalize and return to positive growth rates during 2024. In light of this context, as we approach the year end, today we can give you the following more detailed outlook for 2023. we expect our revenues to develop in line with our plan and the outlook we gave you in early May. Net, of course, the negative currency impact versus the previous currency assumptions, impact that now we can estimate of about 30 million euros on sales. Numbers, this means that we expect revenues in the region of 2.29 billion euros for the year. so corresponding to 2.32 billion euros at previous currency assumptions. This forecast implies for the full year revenue growth at constant exchange rate of circa 11%, of which almost 9% is organic. Let me tell you that I'm very satisfied with this growth, especially considering the weaker than expected market in our core geography, which is Europe. Regarding profitability, because of our accelerated investment, mainly in audiologist capacity, in particular in EMEA, in order to unlock some bottlenecks and support future growth, we now see an EBITDA recurring at circa €550 million, after the negative impact versus the previous assumptions of about 10 million euros, hence corresponding to 560 million euros at the outlook forex. We are very convinced, in fact, we must play offense as we see a concrete opportunity to gain market share and further strengthen our leadership position and also prepare ourselves for a more normalized market development next year. With this, I return the floor to Francesca for the Q&A session. Francesca?

Thanks, Enrico. I kindly ask operator to open today's Q&A session. Please kindly limit your questions to maximum two initially in order to give everybody the opportunity to ask questions. Now I can go over... to open for the Q&A. Thanks.

Thank you. This is the Coruscant Conference Operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one under touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Nicola Storer with Kepler. Please go ahead.

Good afternoon and thanks for taking my two questions. The first one is on current trading and so what are you seeing October so far and in particular on Europe and if you can remind us how was Q4 last year meaning whether the minus 2.5% organic performance will split evenly across months or maybe whether we had particularly week October and the strong December or vice versa or whatever. The second question is on profitability. You basically are driving down expectations for 2023. What should we expect for 2024? It's 2023 level the sort of new base for your standard 40 bps year-on-year improvement, or should we expect further cost carryover from your current initiatives, which could keep also 2024 LDA margin under pressure? Thank you.

Thank you, Nicola, for the two questions. So with regards to the first one, current trading October, I mean, it's going well. Sales revenues are growing pretty strong. I would give you an indication about sales revenues growing between 10% and 50%. which is, of course, good. I don't think that there is a big effect in relation to the comparison base of last year between months. So this is a true performance, which is definitely in line with our plans. And in terms of shape of this kind of revenue growth, I would take as a reference Q3. What I mean is that definitely America is growing faster than the others at constant forex. Also, I would definitely see Asia-Pacific to continue to perform strongly in Q4, and while EMEA growing, I guess, above market, but still being the lowest in terms of revenue growth. With regards to profitability for 2024, of course, I'm not going to give you a precise outlook for next year. But let me say that this year, the kinds of market growth in Europe was, in a way, unexpected to us. In particular, the performance in France of the last month was completely unexpected. As I said during the first part of the presentation, the market in France in Q3 From a selling point of view, it should be in the region of minus 10. From a sell-out, we don't have precise numbers, but it should be more or less in line with that figure. And to be honest with you, this was not expected. Why the French market is so negative? To be honest with you, I think that it's a combination of different things. I don't think that there is an underlying issue in France. Perhaps the reform back in 2021, 2022, in a way has distorted the baseline, and therefore now we see a certain kind of readjustment of the market that led to to this kind of very negative performance, which again, let me stress this, was completely unexpected for us. All this to say that looking at 2024, we expect the market in Europe normalizing, which means to go back to positive healthy growth. We expect definitely therefore to have a much better operating leverage in Europe because of the market going back to the healthy positive growth. So without giving you a guideline for next year, what I can tell you is that I'm positive on profitability improvement for Europe. For next year, first of all, because of I expect a better operating leverage in Europe because of this, let's say, for the market as a consequence of the market normalizing. Also because we have already sustained the investments that we made in particular in the field of operations. and therefore we do not need actually to add more capacity for next year. But I'm also positive because if the market will not develop in line with our expectations, we have already identified efficiency measures on cost and therefore I'm also I'm also positive on that. In addition to that, if it will be necessary, we are also thinking about selective price increases, which also should help profitability improving next year. So, all in all, a long speech to say This second alpha in a way was affected by a lower than expected growth in particular in EMEA and in fact as you can see actually profitability in Q3 was down only in this region. Going forward I'm positive, counting on a more positive market development, a market which is going to normalize but also a more positive also because I think that we know what we have to do if this will not be the case.

Brilliant, thank you.

The next question is from Hassan Al-Waqil with Barclays. Please go ahead.

Hi, thank you for taking my questions. I have two, please. Firstly, on EMEA growth in Q3, And should we expect a more normal 2024? And at a group level, is it plausible to see group growth at or above the market expectation of 6% in 2024 to your mind? And then secondly, following up on profitability, could you talk about the investment that you're making to drive sales, which is clearly working? Is this combined with a sluggish Europe YQ4 implied margins down 140 basis points year over year? after margin contraction in Q3, or is there anything else? And how should we think about this level of investment in 2024? And what about other key cost buckets, such as salaries, and whether pricing could offset salary increases again next year? Thank you.

Thank you for the question. Long question, so if I forget... To answer some part of it, please tell me. But let me say that, yes, we are very well. We are, let's say, relatively happy with the growth of the Iberia region in Q3 because definitely we have grown above the market, which was, as we said, somewhat subdued, in particular because of the effect of France, which accounts for about 25% of the total European market. And also Germany, we estimated that was slightly negative, and Germany accounts for about 20% of the total European market. So almost 50% of the total European market was negative. of course, led to an estimation of the total European market to be slightly negative overall. And as I said, it is, in a way, I mean, it was a surprise for us because also the easier comparison base with last year. With regard to our performance in EMEA in Q4, what we expect, we expect to continue to grow, to grow healthily. Although, of course, we were even... let's say, forecasting for higher growth, in particular, for example, in France. And for this, let's say, forecast about the growth in France, we have taken a decision also at the beginning of the year actually to increase the capacity of audiologists. I think that in the past we mentioned many times that audiologist capacity in France, but also in Australia, but in particular in France after the reform which of course increased the market significantly was an issue and therefore we have taken the decision actually to increase our capacity in terms of field personnel, in terms of investment in our organization in order to better serve our customers and in order to release some constraints that we had. So we expect that this kind of investment actually will give us some benefit going forward, in particular in 2024, when we expect the market actually to grow back to positive growth. What will be the estimation, the forecast for the total market growth in 2024? Very difficult to say, but I expect that some of these distorting effects would no longer be there, and therefore we expect the market to go back to the usual growth rate. And as you know, our goal is irrespective of what will be the growth of the market is always to grow above the market growth. I hope that I have touched all the points. And then on profitability for Q4. Yeah, please remind me the question.

Yeah, so the question was just around Q4 margins that are implied being down 140 basis points after contraction in Q3, and if that's driven mainly by investments in EMEA and whether there's anything else, and how we should think about this level of investment going into 2024 and other key cost buckets such as salaries and whether pricing will be an offset.

Yeah, absolutely. I mean, in terms of development for Q3, I think that given also the kind of outlook, the precise outlook that we gave you, you can make all the math, but yes, let's say that in Q4 we will have a similar trend than in Q3. As I said before, looking at the profitability for next year, I'm positive. I'm positive in EMEA as well. I'm positive because we expect the market normalizing and therefore we expect better operating leverage in consideration of the fact that we don't need anymore to increase capacity for next year because we have already in place and we have already, let's say, made this investment this year. But as I said also earlier on, I'm positive about profitability because in case this expected growth will not normalize, as usual, we have proactively identified some cost efficiency measures and also we are also ready to implement selective price increases in order to to have a positive impact on profitability.

Very helpful. If I can just follow up, you talked quite a bit about reform in France impacting the numbers. How are you thinking about potential risks from the Italian Competition Authority probe, be it positive or negative?

Well, very, very, very difficult to say also because we are at a very, very early stage. So don't ask me what is the outcome that I envisage because, to be honest, I don't know. What I can tell you is that this kind of investigation can have very different outcomes. The outcome of the investigation from the French authority back in 2016 at the end of the day, found that the market was actually functioning pretty well, competition was there, and actually that kind of investigation also led to the RAC 0 reform, which, as you know, actually increased significantly the size of the market. So it can be also a positive outcome. But really, I don't have any kind of concrete element to guess what it can be at this stage. Perfect. Thank you. Thank you.

The next question is from Veronica Dubajova with Citi. Please go ahead.

Yes, hey, Enrico, and hey, Gabriele, and Francesca as well. Thank you for taking my questions. I have two, please, and then a clarification if that's okay. But I just want to understand, Enrico, Gabriela, these investments that you're making, I mean, they seem to be depressing the fourth quarter margin in particular much more than they have depressed the other three quarters of the year. Should we look at the fourth quarter margin as the starting point for 2024 or Or is there something unusual about the phasing here? I'm just trying to understand your message here. If you're hiring people and that's what's depressing the Q4 margin, presumably we should build from the fourth quarter margin when we think about 2024. So if you can kind of talk to that, that would be very helpful. My second question is just on, I think just to push you a little bit more, I think Hassan touched upon this, but your expectations for wage growth. in 2024. Obviously, 2023 is slightly unusual in terms of wage inflation, but if you could kind of comment on what you're thinking for 2024 at this point in time, that would be great. And then, apologies, I'm going to sneak in a third one, which is just a clarification, I think. Enrico, you commented, said October is going well, and you talked about a 10% to 15% revenue growth. I want to

just confirm that that's a global number and that it's in local currencies or was that with regards to a specific region thank you yeah absolutely so I will start with the last one which is more quick to answer and no I was referring as usual about group growth at constant forex that was the kind of indication that I gave you With regards instead to the first question and in particular about the investments that we are making, as I said, I think that I was quite clear on saying that the kind of impact on profitability that we have seen in Q3 and Q4 actually was in a way unexpected. because actually we were expecting a much better market growth. I think that we discussed also in the past about the fact that in Q3, Q4, second half, we were expecting an easier comparison base, which did not materialize from a market growth in particular in Europe, but in particular on a couple of countries. key markets like France and Germany, and France being double-digit down, to be honest with you, was totally, totally unexpected. And this, of course, had some effect of digit down, to be honest with you. to be honest with you, was totally, totally unexpected. And this, of course, had some effect on the operating leverage of the region, in particular of those two markets, and therefore on the profitability of the region and therefore on the profitability of the group. Going to the second, to about... what should we take as a base for next year profitability outlook i would say that of course now we we we have seen that the market actually is not growing as expected and although we expect actually the european market to normalize in 2024 as i said It is very strange, I mean, having the French market being down a double digit. In my opinion, the main reason for that is just about the market normalizing after a huge growth in 2021 and 2022. So, in theory, we should see in 2024, actually, In 2024, actually, we should see the market to normalize, to go back to positive growth. And also, this will also bring better operating leverage in Europe, in consideration also of the fact that we have made these investments, which are also positive. taking us in a position where we are ready actually to sustain further growth without any additional investment. But in general terms, as I said before, I'm positive about the profitability of 2024 because we are also working in order to be prepared in advance in case this growth will not normalize. With regard to the second question and therefore wage growth for 2024, I do not expect the same kind of growth that we had this year. You may recall that historically we had wage growth in the region of 2-3% this year. we have actually implemented a wage growth which was double than that, so 5-6%. Our forecast for next year is not of that magnitude like this year, so it's much less than that. So this should not be a concern for next year.

Very clear. And Enrico, it's fair to say you'd expect the wage growth to be less than 5 to 6, but more than 2 to 3, or you think we can get back all the way to the 2 to 3 for next year?

I would say in the region of 3% is something that is a fair assumption.

Okay. Excellent. Thank you, guys. I have more, but I'll jump back into the queue and squeeze in at the end if I can.

Thank you.

The next question is from Hugo Solveig with BNP Paribas. Please go ahead.

Hi, hello. Thanks for taking my question. I have two. First, on the U.S., can you help us? Hello, can you hear me? Yes. Yeah, okay, cool. Can you help us on the U.S. to unpack the growth between retail, Miracle Year, and managed care? That would be very helpful. Second, just to clarify, so the current investment, should that help you or not to sustain a single-digit growth if market normalizes next year, and if not, You mentioned some cost-efficiency measures and price increase. Could you help us understand where those cost-efficiency measures could come from and the magnitude of the price increase? And I'll have one follow-up after. Thank you.

Thank you. Thank you for the question. So with regards to our performance in the Americas in general, I can tell you that all geographies actually performed very well. Even Canada, but also Latin America and also the U.S. actually performed very well. In the U.S., you are right, the best performance actually was delivered by Amplifon and Healing Healthcare, where we are growing very fast also. thanks to an insurance market which is growing faster than the total market, so we are leveraging on that. But let me also say and let me also add that we are extremely happy about our growth in our directly operated store network. I'm super happy about the strategic decision that we have taken some time ago. I think that the results are definitely very strong, and I can confirm also that we want to continue actually to increase our presence in terms of direct retail, which has, as we discussed many times, many different benefits. including, of course, the direct relationship with the end customer, including, of course, more revenues and EBITDA in absolute terms. Let me also remind that as a percentage, of course, direct retail is lower than franchise. But as you have seen also from our T3 results, we have been able actually also to offset that. In fact, the profitability of the region was in line with that. With regard to the current investments, as I said, we have made these investments in particular in number of people. So a number of audiologists in our organization, I would recall that audiologists in particular in some markets like France, like Australia, in a lesser extent also in Germany, actually in the past were a constraint to our growth. So at the beginning of the year, actually, we have taken the decision to to launch a comprehensive recruiting plan on that, which in my opinion I do not regret at all. I think that it was actually the very right decision to do in order also to be ready for the growth of the market that in my opinion will continue. will come back as soon as, in particular, some relevant markets will normalize. With regards to our growth for next year, again, I'm not going to give you today a guidance, but what you should expect definitely is us to continue to grow faster than the market, as it was the case in the past. With regards then to the final question, we want to be also ready in case this kind of growth of the market will not materialize and what I can tell you is that from one side we are ready to implement some selective price increase. We do not need to do the same kind of price increase in terms of magnitude of this year but perhaps 1-2% is something that in case we need we can definitely implement also next year and in terms of cost measures we have already started to identify a number of cost initiatives in order to reduce costs in the non-strategic part of the business in case we need to do so. So let me say that, as I said before, actually, we are quite confident that we have already identified all the different initiatives and measures in case the market will not come back to the usual growth rate.

Thank you. I'll get back in the queue.

Particularly in Europe.

The next question is from Domenico Gilotti with Equita. Please go ahead.

Good afternoon to everybody. Two questions. The first is on, well, you were commenting on EMEA and the opportunity to recover some profitability in 2024. And looking at the other two regions, the limited operating leverage region, sounds a bit more structural, so the switch to retail and push on retail and China. And so if you can give us some color on this topic, too, it would be great. And the second question is on the EMEA profitability for Q3 in particular. So if I understand properly, it was really concentrated, I'd say, on some specific markets. So you mentioned France, a little bit Germany. while profitability on the other countries in the region were much less affected. Is it so?

It is absolutely so. It is absolutely so. In particular, let me say that France, in terms of profitability, was the main offender. What I mean is that the profitability in France unfortunately dropped because of what I was saying before. But again, for sure, I mean, I've never seen the market dropping 10% for any reason rather than comparison-based. So I think that I expect actually the market in France to come back to a more normalized level. I think that... the reform as is in the case of many businesses where there are some sort of, let me say, incentives, the market actually to the profitability of EMEA. Therefore, in 2024, definitely I expect the EMEA to improve profitability for all, I mean, this improvement coming from all what I said before about better operating leverage, but also cost initiatives, but also in case we need also some selective price increase. As well as I expect the profitability of the other two regions to improve next year despite of the fact that, as you said, we have some combined effect from one side, let's say, the improvements that we make in the business. On the other side, we have to recall the fact that in the U.S., the direct retail has a lower percentage profitability. The fact that it's growing very fast is in a way affecting the percentage profitability, but I'm super, super happy about the kind of growth that we are delivering in the U.S. In Asia Pacific, I think that also in Asia Pacific, we have room for growth in terms of overall profitability, but you are also right about the fact that clearly China is growing very fast. This has some effect, but also here, I'm extremely happy about the growth that we are delivering in China. I think that having reached or let's say reaching 400 stores by the end of the year is a very remarkable achievement in consideration of the fact that we entered China back in just five years ago. Today China has a profitability which is in the region of 15%, 20% at the EBITDA level, which is great, in my opinion. So definitely this is something that I don't want to stop at all. Actually, we want to continue to accelerate, but we have to find also ways in order to improve the profitability. And we have confidence on that, to improve the profitability of the region, even if China is growing so fast.

Okay, thank you. Just a comment on the German market, if I may, Joe, because you were mentioning one of the weaknesses in Europe was the German market. Any reason for the weakness?

Yeah, also in Germany we believe that there might be some contingent reasons for this kind of weakness. In particular, The renegotiations between very important insurance in Germany with the German Healing Care Professional Association has led this important insurance to introduce a lump fee for customers not replacing the eating aid after six years and made actually the process a bit more difficult than in the past, this could be also one of the reasons why there was a certain slowdown in the German market. But this is also a very specific reason. Again, also here we expect the market actually to go back to positive growth rates going forward. Thank you.

Thank you. If we can have one last question from the next panelist, and then we can close the call.

The last question is from Susanna Ludwig with Bernstein. Please go ahead.

Good afternoon, and thanks for taking my questions. I have two, please. So I guess first, on your investments in audiologist capacity, can you confirm this is primarily investments in new audiologists, or does it also include raising compensation for existing audiologists to help prevent churn? And I guess on that front, maybe for context, can you just share what typical audiologist annual turnover is? And then I guess my second question is just on Europe. Outside of France and Germany, can you maybe talk a little bit about performance in the more self-pay markets like Spain and Italy and How did they perform in the quarter, and are you seeing any improvements?

Yeah, absolutely. I can confirm we made the investment with regards to salaries at the beginning of the year, but that was absolutely planned, so no issue on that. I can confirm that the biggest part of the investment was made in terms of, let's say, recruiting new audiologists. Also audiology, we discussed in the past, in particular in some key markets like France, Germany or Australia in particular. Actually, it's actually a scarce resource and therefore we wanted to pursue a quite comprehensive recruiting process. in order to, let's say, remove some of the constraints to our growth. And I can tell you that the number of people that we have taken on board is quite significant. However, we believe that it's absolutely the right choice also looking at next year, also in consideration of the fact that most of the cases, they are not, let's say, plug and play. What I mean is that we hire, then we need to train, and then they need some months in order to be productive as, let's say, the rest of our workforce. So, yes, the vast majority... No, actually, I can confirm that the investment made is... basically all in new audiologies. With regard to the second question about Europe, we see a positive trend, although a bit lower than the historical growth rate also in some other geographies, but I can tell you that we performed very well both in Italy and Spain, so no issue there.

Okay, so just to clarify, I guess in those markets, if it's a little bit below the normal, are you talking sort of 3% type growth in Spain and Italy in the quarter from a market perspective?

Yes, definitely was positive, not negative. Now it's difficult to say if it was one, two, or three, but definitely made the market to be positive.

Okay, great. So low single digits. Thanks. Thank you.

Thank you, everyone. Thank you. Thank you.

Bye-bye. Bye. Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.