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

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Amplifon Second Quarter 2026 Results Conference Call. [Operator Instructions] 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, madam.

Thank you. Good afternoon, and welcome to Amplifon Conference Call on Second Quarter 2026 Results. 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. The call can be accessed also via webcast and dial-in details are on our website as well as on the press release. I have to bring your attention to the disclaimer on Slide 2. Some of the statements made during this call may be considered forward-looking statements. With that, I'm now pleased to turn the call over to Amplifon's CEO, Enrico Vita.

Thank you, Francesca. Good afternoon, everyone, and thank you for joining us. Today, I'm very pleased to share our second quarter results, which reflects an excellent performance across the board. We delivered our strongest organic growth in the past 2 years, together with a significant improvement in profitability across all 3 of our regions. The most important takeaway from these results for me is that they validate the actions that we have taken and the investments that we have made over the past year. from advertising and communication to our in-store protocols, these initiatives are now translating into stronger performance giving us confidence that the momentum we are building is sustainable. But let me begin with a brief overview of the global market environment. where we are also seeing encouraging developments in some of our key countries. In fact, across Europe, market conditions continue to improve with our core markets, particularly in Southern Europe, showing clear signs of strengthening demand. On the other hand, as expected, the French market is now analyzing against last year, exceptionally strong volume growth following the regulatory reform, resulting in a lower comparative growth rate. In the U.S., the market grew by approximately 1%, supported by a solid private pay segment, up around 4% and which more than offset the continued softness in the insurance channel, down around 4% as well. In APAC based on our estimates, market dynamics improved in Australia, with China also showing the gradually strengthening trends. Overall, we estimate that the global heating car market grew by around 2.53% in unit terms during the second quarter, broadly in line with our expectations. In this backdrop, we outperformed across most of our key markets, with particularly strong performances in the U.S., Italy, Spain, Australia and China. Turning to revenues. We delivered 4.7% organic growth, representing an excellent performance, especially because very well balanced across the 3 regions. The impact of our Fit4Growth program on revenues during the quarter was approximately minus 3.5%, mainly reflecting our portfolio optimization initiatives. M&A contributed 0.5%, primarily driven by the carryover effect of bolt-on acquisitions completed last year. Turning to profitability. We delivered a significant improvement in adjusted EBITDA margin, which increased by 90 basis points versus last year. driven by operating leverage and the continued execution of our Fit4Growth program. Importantly, all 3 regions contributed to this performance, each delivering a very meaningful improvement in adjusted EBITDA margin. The improvement was even more pronounced at the adjusted EBIT level, where margin expanded by 130 basis points versus last year. reflecting the strong operating leverage of the business and the impact of feed for growth. Finally, let me highlight our strong free cash flow generation, which improved by nearly EUR 30 million or plus 70% versus H1 2025. As you can imagine, we are very pleased with these results. They reinforce our confidence that the momentum that we are building is both strong and sustainable, and position us well to deliver on our objectives for the remainder of the year. With that, I will now hand over to Gabriele, who will take you through our results in more detail.

Thanks, Enrico, and good evening to everybody. Turning to Slide 4. We have a look at our financial performance in Q2 '26. Revenues were up 1.7% at constant effect versus Q2 '25 with a very strong organic growth of 4.7%. I'm glad to say that this growth was well balanced across all regions and outpaced the global [indiscernible] market. The bolt-on M&A made primarily in 2025, contributed to top line growth by 0.5%. Fit4Growth had an impact of minus 3.5%, following the closure of over 200 nonperforming clinics since the launch of the, program, [indiscernible] of which during Q2 this year, the divestiture of the U.K. business in early March and the termination of a managed care agreement in the U.S. from January. FX was a tailwind of 8.5%, mainly driven by the Australian dollar, which was partially offset by the euro appreciation versus the U.S. and the New Zealand dollar. Adjusted EBITDA was EUR 156 million, with the margin improving by 90 basis points compared to Q2 '25. This improvement was driven by the excellent improvement seen across all the regions, also thanks to the strong results of the Fit4Growth program and after ongoing investments to further strengthen the company's distinctive assets. Moving to Slide 5. We have a look at our financial performance in H1 '26. Revenues were up 1.3% at constant FX versus last year with a strong organic growth of 3.5%, significantly accelerating throughout the period. And here again, well balanced across the regions. The bolt-on M&A made Par in 25 contributed to top line growth by 0.8%. Fit4Growth had an impact of minus 3% for the reasons just mentioned. FX was a headwind of 0.9%, even if reverse in Q2. Adjusted EBITDA was EUR 298 million with a 70 basis point margin improvement compared to last year, thanks to improvement in all regions due to Fit4Growth even after ongoing investment in our distinctive assets. Turning to Slide 6, we have a look at [indiscernible] our performance. In the quarter, revenue growth was 2% at constant FX. Thanks to a very strong acceleration in organic growth, which came up 4.5%, also thanks to the excellent performance in Southern Europe and despite the expected normalization of the French market following the annualization of the [indiscernible]. The bolt-on M&A made primarily '25 contributed 0.2% top line growth. Fit4Growth had an impact of minus 2.7% following the closure of around 90 clinics since the launch of the program and the divestiture of the U.K. business in early March. So impacted the entire quarter. FX was a slight tailwind of plus 0.2%. Adjusted EBITDA was EUR 120 million, with margin at 30.7%, 180 basis points above Q2 '25. Thanks to operating leverage and the strong results of Fit4Growth, even after the ongoing investment in our distinctive assets. In H1, revenue growth was 1% at constant FX, with organic performance at plus 2.4%, Fit4Growth at minus 1.9% and M&A at plus 0.5%. Adjusted EBITDA was EUR 237 million, with margin at 30.5%, 140 bps above last year. Moving to Slide 7. We have a look at the performance in Americas. Revenue performance in the quarter was minus 1.3% at constant FX while FX headwind was for 2.1%. Organic growth was a super positive, well above market, 6%, thanks to the strong performance recorded in all the markets and businesses in the region. The bolt-on M&A made primarily in 2025, contributed 1.2% top line growth. Fit4Growth had an impact of minus 8.5% following determination of a managed care agreement in the U.S. on January 1, and the closure of around [indiscernible] since the launch of the program. Adjusted EBITDA was EUR 31.6 million, with margin up 180 basis points to 26.2% versus 24.4% last year. Thanks to operating leverage and the strong results of Fit4Growth. In H1, revenue was flat at constant FX with organic performance at plus 6.3%. And fit for growth at a minus 8% and M&A at plus 1.6%. Adjusted EBITDA was EUR 57 million, with margin of 24.8%, 130 basis points above last year. Moving to Slide 8. We have a look at Asia Pac performance. In the quarter, revenue performance was plus 4.6% at constant FX, driven by a strong organic growth of 4.3%, thanks to the excellent performance of Australia and China. The bolt-on M&A made primarily in 2025, contributed 0.7% top line growth. Fit4Growth as the impact of minus 0.4% following the closure of around 80 clinics since the launch of the program while the closing of the divestiture of the Indian business is expected in Q3. Adjusted EBITDA reached EUR 23.5 million with a margin of 25%, 130 basis points higher than the EUR 23.7 million recorded in Q2 '25, thanks to operating leverage and fit for growth. even after the fast growth in China and the ongoing investments in our core assets. In H1, revenue growth was 4.5% at constant FX, with organic performance at plus 4.6%, Fit4Growth of minus 0.8 and M&A of plus 0.7. Adjusted EBITDA was circa EUR 48 million with margin of 26.3%, 80 basis points above last year. Moving to Slide #9. We appreciate the Q2 income statement. In Q2, total revenues came in at EUR 606 million, with an increase of 2.2% or 1.7% of constant FX versus prior year. Adjusted EBITDA was EUR 156 million, with a margin of 25.8%, 90 basis points above '25, also thanks to the strong results of Fit4Growth. D&A, excluding PPA, were at EUR 64 million, decreasing by around EUR 1 million versus EUR 65 million in Q2 '25. This led the adjusted EBIT to EUR 77 million, with a strong improvement of EUR 11 million or 17% versus last year. Net financial expenses amounted to EUR 15 million, below the EUR 16.3 million in '25. Tax rate decreased slightly year-on-year from 26.2% to 26.1% this year leading to a strong increase of over 17% in adjusted net profit from EUR 48.8 million last year to over EUR 57 million this year. Moving to Slide 10. We see the H1 profit and loss evolution. Total revenues increased by 1.3% at constant exchange rate to EUR 1.19 billion. Adjusted EBITDA was EUR 298 million, with margin of 25.1%, 70 basis points above H1 '25. D&A, excluding PPA, decreased by around EUR 3 million, leading the adjusted EBIT to around EUR 117 million with margin at 14.3%, with an improvement of around 90 basis points versus last year. Net financial expenses decreased by EUR 1.6 million to EUR 29.8 million, leading profit before tax to around EUR 140 million. Trade ended at 27.4%, leading to a strong 12.3% increase in adjusted net profit versus last year from EUR 90 million to EUR 102 million. Moving to Slide 11. We appreciate the cash flow evolution. Adjusted operating cash flow after tax layer after lease liabilities was in the period equal to EUR 114 million versus EUR 105 million last year. Net CapEx decreased by around EUR 19 million to EUR 46 million, also thanks to the Fit4Growth program, leading adjusted free cash flow to EUR 68 million versus EUR 40 million in H1 last year with an outstanding increase of around 70%. In H1 '26, we had net proceeds from divestiture, including the U.K. dilutive business for around EUR 7 million versus cash out for acquisition for EUR 55 million last year. This, together with no share buybacks in the period led the pro forma net cash flow for the period, excluding the net proceed from the ABB completed in May to negative EUR 7 million, with an improvement of over EUR 130 million versus a negative EUR 139 million in H1 2025. Pro forma fee came to EUR 1.049 billion versus EUR 1.045 billion at the end of 2025. Including the EUR 449 million proceeds from the ABB, the net cash flow for the period was positive for EUR 442 million and the MSP was at EUR 600 million. Moving to Slide 12. Revenue to the debt profile trend and the key financial ratios. As mentioned, the net financial debt ended slightly above EUR 1 billion with liquidity accounting for EUR 263 million, short-term debt accounting for around EUR 738 million, and medium long-term debt accounting for around EUR 569 million. Following the IFRS 16 application, lease liabilities were around EUR 484 million, leading the sum of net financial debt and lease liabilities to EUR 1.53 billion. Equity ended around EUR 1.5 billion. Looking at financial ratios, pro forma net debt over EBITDA improved despite of the business seasonality to 1.87x versus 1.92x in December '25, in line with our target to deleverage the company in light of the prospective acquisition of January. Including the proceeds from the ABB, the net debt over EBITDA ratio was 1.07x. To this regard, please let me give you an update on the finance. We have successfully placed a EUR 453 million primary ABB last year. It was the second largest ever primary ABB in Italy in terms of portion of share capital further also including the precommitment from our core shareholder for EUR 130 million. The book was multiple times oversubscribed, thanks to the strong interest from new high-quality international Italian investors as well as substantial support from current shareholders. We have now also signed a EUR 1.35 billion senior loan with 24-month tenure up to June 2028, allowing for high flexibility of execution of the takeout via bond or bank financing. With that, I'm glad to hand over to Enrico for the outlook and final agreements.

Thank you, Gabriele. So we have come to the end of today's presentation. As I mentioned throughout 2025, we executed a series of meaningful initiatives and made a significant and targeted investments aiming at accelerating future revenue growth and structurally improving the profitability. In the first half of 2026, we saw the benefits of this tremendous work carried out by the team and materialize both in terms of organic growth and profitability. Importantly, momentum built progressively throughout the first half with a clear acceleration in the second quarter. Looking ahead to remainder of 2026, we continue to expect a global market demand to grow by around 3%. In this backdrop, we are confident in our ability to continue outperforming in most of our key countries and markets, driving the further market share gains. In fact, the positive momentum we experienced throughout the first half continued into the beginning of the third quarter. As a result, we remain very confident in achieving our goal of an organic revenue growth above 3%, reestablishing a solid and sustainable growth trajectory. At the same time, we remain on track to achieve our profitability target with an expected improvement in adjusted EBITDA margin in the region of 100 basis points. Last but not least, as we continue to progress through the customary regulatory review process, I am pleased to provide a brief update on the proposed acquisition of GN Hearing. 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 while focusing on positioning the combined business to unlock the substantial value creation opportunities we see ahead. The more we advance in our planning and preparation, the more excited that we become of the compelling strategic rationale of the transaction and its ability 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 and beginning on the next phase of our growth journey. With this, Francesca, over to you.

Thanks, Enrico. I kindly ask operator to open today's Q&A session. [Operator Instructions]

[Operator Instructions] First question is from Hassan Al-Wakeel, Barclays.

I have a couple on organic growth and the improvement that you're seeing in the second quarter. Firstly, if you can talk to the strength in the Americas business, particularly given your commentary of 1%, both in the reference market and unpack what is driving share gains to your mind and the softness in the overall market? And then secondly, on EMEA, particularly the Southern European strength that you call out and what you're seeing in some of the other markets? And how you view the trajectory into against tougher comps? And what you put the improvement down to? Is this pent-up demand coming back?

Thank you for the questions. So we -- of course, we are very pleased with our organic growth, which was very strong in all the 3 regions. Starting with your question about Americas and the U.S. what we have seen with regards to the market growth in the U.S. is a market going at 2 different speeds. What I mean is that the market overall was up about 1%, but we also saw a very solid growth in the private market, which grew by more than 4%. As you know, the private market is very important for us. And why on the other side, we saw an insurance market down by a similar amount by about 4%. So what is, in my opinion, encouraging about the market growth in the U.S. is the fact that we saw a solid growth in the private channel. Also, what I would like to mention is that Q2 of last year was the strongest of 2025. And therefore, the comparison base was the most challenging for the U.S. market. With regards to our performance, I'm very pleased with our growth -- organic growth in the U.S. we outperformed clearly the market in all the 3 business units, starting from the franchise direct retail, but also in the managed care business unit. We also posted a very good growth in LatAm. But in general, I would say that I'm very pleased by the work done by the team there because we delivered strong growth across all the different businesses. With regards to Southern -- with regards to Europe and your question about Southern Europe, I would say this today -- I mean, this year, we see a more normalized mix of markets. As you may recall, last year, the growth of the European market, especially in unit terms was driven mainly by France, whilst we mentioned a few times the softness in Southern Europe. This year, we see a more balanced growth. So South Europe, Italy, Spain, Portugal performing in a solid way. We see France instead coming back to normal level, let me say that clearly, since we are anniversaring the strong growth of last year. Now we see France coming back to a normalized level of market demand. So let me say that we see this year a more normal -- more normalized market development across all the different markets in Europe. I'm very pleased also about our performance in Europe because we have outperformed the market almost everywhere. And of course, this is something very, very important to us.

Next question is from Veronika Dubajova, Citi.

This is [ Gabriella ] on Francesca. I'm going to keep it to 2, please. One, I just wanted to see if you felt there was any impact from the weather either towards the tail end of Q2 or if you're seeing any disruption related to the third quarter that we should be sort of thinking about as we look at the comps, look at the momentum, if there is anything there that is worrying you on that front. And then looking at the full year guidance on the EBITDA margin, you've delivered 80 basis points of margin improvement in the first half of the year presumably as we move into the back half of the year. Obviously, we have more acceleration from Fit4Growth from some of the divestitures. Just curious what your confidence is in the 100 basis points and whether there might be some room for upside surprise relative to that as we progress through the rest of the year.

Thank you, Veronika. So yes, the weather, we saw some impact from the weather, in particular, in the last 10 days of June. And in particular, I would say, in countries like France and Germany. So let me say that our performance could be even better if we did not experience this kind of phenomena, which unfortunately, I think we must get to used to. So yes, definitely, we saw some impact, but -- and therefore, the results could have been even better, but I think that at the end of the day, we managed it well. And of course, we are very satisfied about the overall growth. With regards to the second question and for EBITDA margin outlook. It is -- I think it's important to underline and highlight 2 things. The first one is that we will have a more favorable comparison and this definitely will help. Also, for once, let me also underline our performance at EBIT level, which was very, very strong basis points better than last year, which is also a reflection of operating leverage, of course, but it's also the result of our fit-for-growth program because as you know, also has effects of the closure of nonperforming stores, we are also making savings and events, which are definitely helping the EBITDA margin. So also, we are very pleased about what is coming from Fit4Growth below EBITDA margin because also we are saving on rents, and this will end has already delivered an impact on EBIT margin.

That's very clear, Enrico. Do you think you can quantify the weather impact or it's very hard to do at this stage if you're willing to put a number on it?

Is very difficult. It's very difficult. The impact that we saw was more in France and Germany than in South Europe because South Europe last year was exactly the same. So let's say, we were anniversarying the heat wave of last year, whilst it was particularly, I would say, different and harsh in France and Germany. So there, the impact was bigger.

Next question is from Andjela Bozinovic, BNP Paribas.

I also have 2. The first one is on the guidance. I was wondering, after the 2 quarters in, can you quantify a bit more your guidance on the organic growth part? What does the above 3% market growth mean, just having in mind what you have delivered in the past 2 quarters? And the second one is on your comment on the current trading. Can you give us a bit more detail what are you seeing in different regions and if the Q3 is acceleration versus Q2?

Thank you. Thank you for the questions. So with regards to our guidance regarding organic growth. Today, we stick to what we said in -- after the Q1 results, which means that we are envisaging an organic growth above 3%. Clearly, as of today, we are ahead of that because in the first half, we delivered 3.5%. So there is the opportunity, of course, to do well in terms of organic growth. Now we are in the third quarter. We have started well. There are some months still ahead of us. September is a big month. But let me say that definitely we are very confident in our ability to deliver this organic growth above 3%. Let us finish third quarter before giving you a more, let's say, precise indication about that, but we feel very, very, very confident on organic growth. With regards to current trading, we saw the momentum that we saw in Q2 to continue in -- also in this beginning of Q3. So -- and this is, of course, very encouraging. I can't give you a target for Q3, of course. But I think that the kind of trend that we are seeing is confirming that all the actions, initiatives or sometimes even painful initiatives that we had to take last year are delivering what they were supposed to deliver, and this makes us very confident also in our confidence for the entire 2026.

Next question is from Julien Ouaddour, Bank of America.

I have a couple as well. The first one is on inflation. I mean I was just wondering what is the scenario for inflation in 2H and for 2027? I know that in the past, you've been, let's say, strictly not impacted by that on a pure cost inflation for the COGS. But I mean, what about rents? What about salaries? And I mean, what have you baked basically in your base case? So that's the first question. And the second one is what feedback are you receiving from independent wholesale customers of GN Hearing about being supplied by a manufacturer like potentially in the future owned by the largest global retail comps. So just wondering if you already have a sense about what the customers think. And if I can try as well, how do you just quantify the mix of GN Hearing, which is tied to these independent clinics and any risk for that?

Sorry, the mix of the GN Hearing related to what?

Like the independent clinics like everything, which is not, I mean, tied to a large group.

Okay. No. Well, this second question, Julien, I can't give you an answer, what I mean is that we are still in the process between signing and closing, of course, and I can't really give this kind of information for now. But of course, I will be very happy to deep dive as soon as we get to the closing. But as we said many times, we expect by the year-end, and this is as of today confirmed. With regards instead to into the question regarding inflation, we do not expect this time impact -- material impact from inflation for sure, not on direct procurement, not even from indirect not from rent. So not even something particular in terms of labor costs. So I would say that so far, we are not concerned about inflation pressures.

Next question is from Oliver Metzger, ODDO BHF.

First question is on Fit4Growth and also the magnitude for the next quarters. So you mentioned Q3 India closure will come. So where do we stand with regards to the Fit4Growth headwind? And to which extent it will intensify? Second quarter is about your performance in China, which you described as pretty strong. So that's in contrast to all the comments we heard over last quarter where China was a very tough environment. So do you see now with Q2 a fundamental return to better? Or is it just like driven by low base, et cetera?

So I will start with the second one. So with regards to China, I think that we are performing extremely well there. We have grown in a very, very solid way. I think that organic growth in China was high single digit for the quarter. So a very strong performance in China. We are very happy. I think that the team there is working very well. I assume in China, it's very difficult to estimate the market. So we assume that also the market is showing improve the trend. But again, this is really according to our estimates. With regards instead to the first question, so Fit4Growth, yes, of course, first of all, we are very happy about our execution of all the initiatives that you know very well. They are going even ahead of our plan. We have also announced the divestiture from India. So the impact of fiscal growth will be a bit more, I would say, but this is, of course, a positive news. It will be more or less in the region of 3%, 3.5%, more towards the 3.5%, I would say. But of course, this is something that it's positive. It's demonstrating also our ability to deliver the initiatives that we indicated in our Fit4Growth program.

Next question is from Martinien Rula, Jefferies.

It's Martinien from Jefferies. I would ask 2. Amazing. First one, and first of all, congrats on the print. I would appreciate to push you a bit further on the margin guide, especially. I would love to hear your feedback on the rationale for not, let's say, probably having trimmed up the margin guide, given you've already delivered an impressive 90 bps margin improvement in H1, while arguably the H2 margin comp is easier and that you will have also the Fit4Growth contribution likely to be ramping up further? And the second question, we could tackle that one after that will relate basically to the performance you've made and where you've gained the most share and so on.

The most -- sorry, again.

For the second one, sorry, it's about the organic sales growth performance that you've made. You've commented on having gained share almost across the board with the only exception of some European markets, I'd like to have some feedback on that, please?

Okay. Well, with regards, yes, to -- with regards to the second question, so our market share gains. We are confident also because we have posted a very strong organic growth. We have -- we are very confident that we have gained market share in the markets that I mentioned earlier on, so including the U.S., in Europe, Italy, Spain, definitely, we have grown share. In Asia Pacific, definitely, we did a fantastic performance also in Australia, and we are confident that we have we have grown share. With regards to the other 2 main markets in Europe, it's difficult to say about France because France now is a market that is not very easy to predict and we do not have the final numbers for Q2. In France, I would say that most probably we have performed in line with the market not losing, not gaining share. Also, with regards to the other markets, so Germany, maybe there we have performed slightly below our estimates regarding the market, but nothing that is of concern for us, sometimes.

Next question is from David Adlington, JPMorgan.