Amplifon S.p.A. (AMP) Earnings Call Transcript

Good evening. This is the Chorus Call Conference Operator. Welcome and thank you for joining the Amplifon third quarter and nine-month 2026 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Francesca Rambaudi, Senior Director and Investor Relations.

Thank you. Good afternoon and welcome to Amplifon's conference calls on third quarter and nine months 2026 results. Before we start, a few logistic comments. Earlier, we issued a press release related to our results, and this presentation is posted on our website in the Investor section. 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 2, as some of the statements made during this poll may be considered forward-looking statements. With that, I am now pleased to turn the call to Amplifon CEO Enrico Vita.

Thank you, Francesca. Good afternoon, everyone, and thank you for joining us. Today I'm very pleased to share our third quarter results, which confirm the continued momentum in our performance we have seen since the beginning of the year. In fact, we delivered very strong results across all key metrics, from organic growth to profitability and cash generation, with solid performance across all three of our regions. As usual, let me begin with a brief overview of the global market environment. This time, more than ever, it is important to emphasize that the available market data reflects sell-in rather than sell-out, and were positively impacted by an unusually concentrated wave of new product launches across manufacturers, which took place almost simultaneously this year in Q3 2026. As a result, it is definitely not easy to assess the underlying market growth, although we believe that the underlying trend continues to be positive. In fact, in the U.S., according to data reported by the HIA, the Manufacturers Association, the market grew by approximately 8% in selling terms, by a very strong private pay segment up around 12%, which more than offset the continued softness in the insurance channel down around 5%. A similar effect from new product launches was also observed in Europe, although to a lesser extent. Nevertheless, we believe that the underlying market demand continues to improve in Europe as well, with growth becoming more balanced across countries compared with last year. In Asia Pacific, based on our estimates, market conditions remain broadly flat in both Australia and New Zealand. Overall, even if it is definitely not easy to assess underlying market growth during the third quarter, we believe it is again showing an improving trend towards the long-awaited return to the structural growth that has historically characterized our industry. Turning to our revenues, we delivered 3.6% organic growth, a particularly good performance considering that we were facing the highest comparison base of the year. Importantly, growth was also well balanced across all three regions. The impact of our Fit for Growth program on revenues during the quarter was approximately 3.9%, mainly reflecting our portfolio optimization initiatives. M&A contributed 0.5%, primarily driven by the carryover effect on Bolt-on acquisitions completed last year. Turning to profitability, we delivered a substantial improvement in all key metrics. With adjusted EBITDA margin that increased by 90 basis points versus last year, driven by operating leverage and the impact of our Fit for Growth program. Importantly, all three regions contributed to this performance, each delivering a good improvement in adjusted EBITDA margin. Even more importantly, I would like to underline our adjusted EBIT margin, where the improvement was even more pronounced, with an expansion of 150 basis points versus last year, reflecting the benefits of Fit for Growth on rents as well as on D&A. Finally, let me highlight our excellent free cash flow generation, which improved by an impressive EUR 46 million, more than doubling compared with the first nine months of 2025. As you can imagine, we are very pleased with these results since they reflect not only the continued positive momentum in global market demand, but even more importantly, the result of all the work our teams have done over the past couple of years. With that, I will now hand over to Gabriele, who will take you through the financial results in more detail.

Thanks, Enrico, and good evening to everybody. Turning to slide number 4, we have a look at our financial performance in Q3 2026. Revenues were up 0.2% at constant FX, with a strong organic growth at 3.6%, well balanced across all regions. The Bolt-on M&A, made primarily in 2025, contributed to top line growth by 0.5%. Fit for Growth had an impact of -3.9%, including the divestiture of the U.K. and Indian businesses, the termination of a managed care agreement in the U.S., and the closure of around 230 clinics globally since the launch of the program, of which 30 in Q3 2026. FX was a tailwind of 1.9%, mainly driven by the U.S. and Australian dollars. Adjusted EBITDA was EUR 115 million, with the margin improving by 90 basis points compared to Q3 2025. This result was driven by the excellent improvement seen across all regions, thanks to operating leverage together with the strong results of the Fit for Growth program, after ongoing investment to further strengthen the company's distinctive assets. Moving to slide 5, we have a look at our financial performance in the next nine months. Revenues were up 0.9% at constant FX, with a strong organic growth at 3.5%, significantly accelerating since Q2, and well-balanced across regions. The Bolt-on M&A made primarily in 2025 contributed by 0.7% and the Fit for Growth had an impact of -3.3%. FX was neutral in the nine months, reversing to positive in Q3. Adjusted EBITDA was EUR 413 million with an 80 basis point margin improvement compared to nine months 2025, thanks to a strong performance across all regions driven by operating leverage and Fit for Growth even after ongoing to find investment in our assets. Turning to slide 6, we have a look at the performance. In the quarter, revenue growth was 1% at constant FX, thanks to a strong organic growth, which came in at 3.5%, also thanks to the positive market development and the excellent performance in Southern Europe. The Bolt-on M&A made primarily in 2022 contributed 0.2% to top line growth, while Fit for Growth had an impact of -2.7% following the closure of around 100 clinics since the launch of the program and the divestiture of the U.K. business. FX was a slight tailwind of +0.2%. Adjusted EBITDA was EUR 88 million with margin at 24.7%, 140 basis points above Q3 2025, thanks to operating leverage and the strong result of Fit for Growth. In the nine months revenue growth was 1% at constant FX with organic performance at +2.7%, Fit for Growth at -2.1% and M&A at +0.4% prior to the Finally, for the carryover from 2025 at bottlenecks, adjusted EBITDA was EUR 324 million with margin at 28.7%, 140 basis points above last year. Moving to slide 7, we have a look at the performance in Americas. Revenue performance in the quarter was -3.8% at constant FX, while FX was a tailwind for 2.8%. Organic growth was a solid 3.3% over the highest comparison base of the year. The Bolt-on M&A, which reflected the 2025 M&A carryover and the acquisition closed in August of a franchisee in Louisiana, comprising 40 clinics contributed +1.5% to top line growth. Footfall growth at an impact of -8.6% following determination of a managed care agreement in the U.S. from January 1st and the closure of around 40 clinics since the launch of the program. Adjusted EBITDA was EUR 26 million with margin up 70 basis points to 21.4%, thanks to operating leverage and the strong contribution of Fit for Growth. In the nine months, revenue were flatish at constant FX with organic performance at +5.3%. Fit for Growth at -8.2% and M&A at +1.5%. Adjusted EBITDA was EUR 83 million with margin at 23.6%, 110 basis points above last year. Moving to chart 8, we have a look at the JAPAC performance. Quarter revenue performance was +1.9% at constant FX, driven by a strong organic growth of 4.2%, thanks to the excellent performance of Australia and China. The Bolt-on M&A made primarily in 2025 contributed 0.2% to top-line growth. Growth at an impact of -2.5% following the closure of over 90 clinics since the launch of the program and the divestiture of the dilutive business in India on August 12th. Adjusted EBITDA reached circa EUR 24 million with margin at 24.8%, basis point higher than Q3 2025 thanks to operating leverage and the strong results from Fit for Growth even after the fast growth of China and the ongoing investment in our assets. In the nine months, revenue grew 3.6% at constant FX, with organic performance at 4.4%. PIP for Growth at -1.3% and M&A at +0.5%. Adjusted EBITDA was circa EUR 72 million with margin at 25.8%, 70 basis points above last year. Moving to chart 9, we appreciate the Q3 income statement. In Q3 2023, total revenue came in at EUR 575 million with an increase of 2.1% or 0.2% at constant FX versus prior year. Adjusted EBITDA was EUR 115 million with a margin of 20%, 90 basis points above 2025. Also thanks to the strong results of Fit for Growth. Fit for Growth had also a significant positive impact on D&A, excluding PPA, both in terms of CAPEX and rent, the rights of use depreciation, which posted a reduction of around EUR 2 million versus Q3 2025. The reduction of D&A gave a further boost to adjusted EBIT, which posted an outstanding 22% improvement in absolute value, increasing from EUR 43 million to EUR 52 million, with an even more significant improvement in terms of the percentage ratio to revenues, which increased by 150 basis points. Also thanks to the positive operating leverage. Net financial expenses amounted to circa EUR 16 million, below the EUR 17 million in Q3 last year. Tax rate increases slightly year on year from 26.2% to 26.8%, leading to a very strong 39% increase in adjusted net profit, from EUR 19 million in 2025 to EUR 26.6 million this year. Moving to chart 10, we see the nine-month P&L evolution. Total revenues increased by 1% at cost and exchange rate. Adjusted EBITDA was EUR 413 million with margin at 23.4%, 80 basis points above nine months 2025. D&A, excluding PPA, decreased by around EUR 5 million, leading the adjusted EBIT to EUR 222 million, posting a strong increase of 12% versus last year, with even a more significant improvement in terms of margin, which increased by 120 basis points versus last year, thanks to both operating leverage and the Fit for Growth initiatives. Net financial expenses decreased by EUR 2.6 million to EUR 45 million, leading profit before tax to around EUR 176 million. Tax rate ended at 27.3%, leading to a strong 17% increase in adjusted income. The net profit versus last year from circa EUR 110 million to EUR 128 million this year. Moving to chart 11, we appreciate the cash flow evolution. Adjusted operating cash flow after lease liability was in the period equal to EUR 143 million versus EUR 123 million of last year. Net CAPEX decreased by EUR 26 million to EUR 64 million in the nine months, also following the initiatives implemented within the Fit for Growth program. This led adjusted free cash flow to EUR 79 million versus EUR 33 million last year with an outstanding increase of around 140%, perfectly in line with the path of the leverage that Amplifon undertook after the signing of the potential GN Hearing acquisition. In the nine months 2026, we had net proceeds from divestiture, including the U.K. and Indian businesses, for around EUR 5 million versus a net cash out for acquisition for EUR 59 million last year. This led to a performance net cash flow for the period, excluding the net proceeds from the ABB completed in May to negative EUR 10 million, with an improvement of around EUR 200 million versus a negative EUR 205 million in nine months 2012, when we also add over EUR 100 million cash out for Shell by Bayer. Proforma NFP came to EUR 1.05 billion in line with the end of 2025, despite the negative business seasonality. Including the EUR 448 million net proceeds from the ABB, the net cash flow for the period was positive for EUR 438 million, and the NFP was around EUR 600 million. Moving to slide 12, we have a look at the debt profile, trend, and key financial ratios. As mentioned, the net financial debt ended slightly above EUR 1 billion, with the liquidity accounting for EUR 260 million, short-term debt accounting for around EUR 670 million and medium long-term debt accounting for around EUR 640 million. Following the IFRS 16 application, lease liabilities were around EUR 480 million, leading the sum of net financial debt and lease liabilities to EUR 1.53 billion. Equity ended at around EUR 1.5 billion. Looking at financial ratios, proforma net debt over EBITDA improved despite the business seasonality to 1.85x versus 1.92x in December 2025, in line with our target to deleverage the company in light of the prospective acquisition of GN Hearing. Including the proceeds from ABB, the net debt over EBITDA was 1.06x. With that, I'm glad to hand over to Enrico for the outlook and final remarks.

Thank you, Gabriele. So we have come to the end of today's presentation. As I mentioned earlier, we are very pleased with the improving trend in the market dynamics, but even more so with our own performance, which has allowed us to gain market share in many of our key markets, particularly in Italy, Spain, Australia, and also China. In light of this, and as we are now approaching November, we are in a position to confirm our full year outlook. I'm particularly pleased with our performance on two key dimensions that mattered more than ever as we navigate in a period of a significant transformation. Profitability, particularly at adjusted EBITDA level, and cash generation. Last but not least, I'm pleased to provide a brief update on the proposed acquisition of GN Hearing. First of all, as you might have already seen, in early October we formally filed the transaction with the European competition authorities, following the clearances already obtained in other relevant countries. We expect now to receive the related outcome within the standard review timeframe. In parallel, our integration planning continues to progress very well. Our team is fully mobilized to ensure day 1 readiness in full compliance with all the regulatory requirements. Why focusing on positioning the combined business to unlock the substantial value creation opportunities we see ahead? The farther we progress with our planning and preparations, the more convinced and excited we become about the compelling strategic rationale of this transaction, and its potential to create a significant long-term value for our customers, employees, and shareholders. We therefore look forward with great confidence and enthusiasm to completing the transaction, embarking on the next chapter of our growth journey, which we will be pleased to share with you in greater detail at our Capital Markets Day next spring. Thank you all for your attention. We are now happy to take your questions. With this, Francesca, over to you.

Thanks, Enrico. I kindly ask the operator to open today's Q&A session. I kindly ask everyone to limit their participation to a maximum of two questions to ensure that all participants have the opportunity to engage. In the interest of time, please keep to a single question format so that all analysts have a fair chance to ask their questions. Thanks a lot. I leave it to Anissa.

[Operator Instructions] The first question is from Hassan Al-Wakeel from Barclays. Please go ahead.

Good evening. So firstly, if you could please talk through your assessment of market growth in Q3 2026 by region and how you reconcile your growth with peer commentary of 6% to 7% market growth in the third quarter. I think, Enrico, you highlighted share gains in Italy, Spain, China, Australia, where do you think you could be losing share? Or do you think this is distorted by product launches? And if so, do you think this could be a pull forward of demand? And then secondly, looking into 2027, particularly around margins and the progress you've seen this year, how should we be thinking about the balance between pricing, operating leverage, productivity and cost inflation as it relates to your confidence of this margin progression continuing? Thank you.

Thank you, Hassan, for your questions. So with regards to Q3 2026 market growth, as I said, at the beginning, it is not easy at all at this time actually to understand what is the real underlying market growth because of the several product launches that we have seen in the market in Q3. You know that this year we had a very peculiar situation where many of the leading manufacturers have launched their new product platforms in Q3, and definitely this had a significant impact in terms of reported numbers. And I would mention first of all, of course, the U.S. The U.S., the reported numbers from HIA, the Manufacturers Association, is a growth of the market of about 8% with the +12% in the private pay segment and the -5% in the insurance segment. So there is clearly an effect driven by the product launch on the private pay segment, which is not really realistic to think that the group by 12% coming from an average of growth, which was much, much below than that. So I think that in order to have a proper assessment of the market growth of the U.S. and partly also from regarding other markets in Europe, for example, I think that we needed to see at least the data related to six months and in particular I would say to the second half of the year. So it is very difficult really to reconcile these numbers. That's why we are very cautious to say a precise number of the estimated underlying market growth, but on a qualitative basis of what the, what we feel is that the positive momentum that we have experienced since the beginning of the year is continuing also in Q3. With regards to market share, we feel like we have grown share in some of the markets. Key countries for our business. I mentioned Italy, I mentioned Spain, I mentioned Australia because in Australia and New Zealand, we had quite a strong performance in the market that still was flattish in the quarter. We feel, and I say feel because again we are not 100% sure about the underlying markets, we feel like we had a most probably a performance in line in France. Most probably we did not perform in line with the market in Germany, although in Germany there is not only the distortion related in terms of market growth related to to the product launches, but there is also a reconciliation because of the acquisition of the month of Kinar last year so it is really very difficult to understand what is the underlying market in the U.S. I would say it's a question mark. We'll see, we'll see the numbers of on a six-month basis. But again, for me, one thing that I would like to highlight is the fact that in some of the countries, in particular, we mentioned in the past, Spain, Italy, et cetera, which are very important for us, we perform at very, very, very well. Strongly. With regards to 2027 margins, of course today we are not guiding, we cannot guide you on that. As I mentioned, we are planning to have our Capital Markets Day next year during spring. What I can tell you is that in terms of inflation, we don't see major headwinds so far, and we do not expect major headwinds.

Thank you very much. The next question is from Veronika Dubajova from Citi. Please go ahead.

Hi, good afternoon. Just kind of clicking on the Americas margin in particular, I'm a little bit surprised by the magnitude of the sequential step down there and also pretty limited year-on-year improvement, which stands in stark contrast to what we saw in Q2. Just wondering if you can comment on are there any moving parts related to the acquisition that are maybe depressing the margin, or is there anything you'd call out? On the Americas margin. And then sticking to the margin theme, if that's all right. If I look at the guidance for the full year, at this point in time, it implies a margin improvement in excess of 150 basis points in the fourth quarter on my math, maybe I did it incorrectly, but that's where I get to. So Enrico and Gabriele, can you maybe talk to your degree of confidence in that margin improvement in the fourth quarter? What's going to drive it? How much visibility you have on it to give us some comfort around the full year margin progression as well? Thank you so much.

Absolutely. So with regards to Americas margin, of course, there is, well, first of all, we increased our profitability by 70 basis points, which is not significant. Not too bad, I would say. Then of course there is a correlation between organic growth, that this quarter was lower than the past quarter, and profitability, I would also add the fact that this in this quarter we also completed an acquisition for the 40 stores, that for sure did not help to improve the profitability. But in general terms, let me say that the main point about Americas is related to the correlation between organic growth and profitability. With regards instead the second the second question and therefore our full year guidance, of course today we confirm our outlook in terms of profitability to be in the region of 100 basis points. Of course we we appreciated that also we needed to deliver a good improvement in terms of profitability in Q4. Q4 is, you know, as you know, is the biggest quarter of the year, but for I mean the goal is to be in the region of 100% as per as for our outlook already. Already published.

Enrico, is there anything specific that the fourth quarter depends on? Is it just execution on the top line or any particular region where you need to see inflection?

Yes, no, well, I think that I think that it will of course the organic growth. It will also depend from the continuation of the effect of our Fit for Growth program, which is going according to plan. One thing that I would like to highlight, Veronika, is also the fact that we are working also a lot I mean down to the P&L. What I mean is that if you look at our improvement in terms of EBIT margin, we delivered a very strong improvement already in Q3. In Q3, the improvement in EBIT margin was a 150 basis point, which in my opinion is a very strong performance. Because we have to take into account that the Fit for Growth also had an impact on rents, which now according to the new IFRS are below the EBITDA margin. But of course, their profitability at EBIT level. As well, also, we are, as you know, on a path of D&A reduction. Thanks to two things. One, we have completed some of the very important very capital intensive investments in IT, etc. that now have been completed, but also we have reduced our CAPEX. So we are also enjoying a reduction in terms of D&A, which at the end of the day is delivering, let me say, a very strong the margin improvement of 150 basis points in Q3, which is very important, as well as, of course, now we are focusing a lot on this, as well as, as you can see, we are focusing also a lot on cash generation, which was part of particularly strong in the quarter. And of course, we are focusing a lot, even more than ever, let me say, even more than ever, because of course we wanted to continue our deleverage path in consideration of the potential acquisition of GN Hearing.

Thank you. Thank you. The next question is from Andjela Bozinovic from BNP Paribas. Please go ahead.

Hi, good evening. It's Andjela from BNP. Good evening. So first maybe to push a bit more on the market growth. I appreciate it's difficult to distinguish between the selling and sell out because of the launches, but you are still guiding on the market growth of 3% and other manufacturers are more or less guiding for around 4% to 5% so low end of the structural growth and that is coming after a very strong nine months so far. So I was just wondering if you could give us the building blocks to your 3% and also to your assumption of outgrowing this this reference market for the guide. So there will be the first question. The second question is, I just wanted to confirm because in your press release you just say that you have grown above the reference market in Americas. Is that like only for nine months or you can't comment on your performance versus the market in Americas for Q3? Thank you.

Yes, with regards to the second question, I can answer immediately that of course we were making reference to the nine months. With regards to Q3, I must admit that it's really very difficult to say which was the underlying market growth. Of course, we think that the market growth was the trend of the market was positive. Then to say if it was the underlying 3%, 4%, or 5%, or 2%. So it's really impossible this time because, as I said, if you look at the private pay market, which was up 12%, I hardly believe that this was not driven significantly by the selling activities from the manufacturers in relation with the launch. The launches, as you know, WSA, GN, Demant, everyone basically launched their new product platforms in Q3. So that is clearly, and also if you dig even more on that +12%, you see also that there is, there was a significant, even higher growth in the big chains, big retailers. So there is clear, a very, very significant effect. So I don't want to really to say something that I'm not 100% sure in terms of underlying growth. But also if you look at, if you take these numbers and if you take the nine months in America, for example, we have performed better than the market. So with regards then to the comments from the peers, I can't really, I can't really, I can't really comment because, you know, they are commenting Celine, and of course, there are all these effects which are affecting the Celine market.

The next question is from Juliana from Bank of America.

Perfect. Good evening. The first one is, just from what I'm hearing, it appears that you may have already started adjusting the procurement arrangements in favor of GN. Could you just comment on whether if that's the case and whether you're already seeing any associated margin benefits? So that would be the first one. I'm going to just ask if you've already started to move your procurement towards GN, I mean, even more, and if you had any margin tailwind from that in 2016.

Sorry, sorry, sorry, sorry. I'm not sure that I got your question. Can you please say again? All right.

And the second question, and I mean, again, sorry for pushing on this kind of market and growth, but it seems that, at least to me, the industry growth appears increasingly concentrated among a handful of manufacturers with strong innovation. And I mean, based on the recent momentum, it doesn't seem GN to be fully participated in it. So question is, is that a fair assessment for you? I'm just wondering if it can have an impact on the growth from your own white-level brand performance today and maybe next year. What specifically can you change following the integration to fix that? Thank you very much.

Okay. Thank you for the questions. I hope that they have got all of them. So with regards to GST, the data. So, we have been, let's say, in sourcing of products. Because as you know, until the closing, GN and Amplifon are two separate companies. And we are still waiting for the approval from antitrust authorities. So far, we have not changed anything in our procurement process, let's say, arrangements and the policies. Of course, we have started to plan for it for starting from next year. What I mean is that we are now working on the planning of the integration or after the closing. But this is something that has not occurred yet. Then with regards to the performance of GN, I wouldn't comment at all because, of course, this is not in our domain. In our, let's say, possibility to make any comment on this. Then I don't know if you had some other points that you wanted to ask?

Yeah, no, I mean just on the signal question, that was more, I mean, we see that some specific products or some from some specific manufacturers seems to perform a little bit better. I'm just wondering if when you will have GN fully integrated and I mean having their products on your white label brand, etc., do you expect this trend to continue or do you have any fixed terms, like short-term solution to fix that?

No, well, of course, as you know, I mean, in terms of plans, our intention is to enhance the performance not only of GN but of the group, including Amplifon, of course. So when we are working on all the components, planning, working on the planning of all the initiatives in order to boost the performance of what will be once completed the closing the new group. But at the moment I cannot comment on this. Perfect, thank you.

The next question is from Anchal Verma from J.P. Morgan.