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

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Amplifon First Half 2021 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Francesca Rambaudi, Investor Relations Director of Amplifon. Please go ahead, madam.

Thank you. Good afternoon, and welcome to Amplifon's conference call on first half 2021 results. Before we start, few logistic comments. This morning, we issued a press release related to our results, and this presentation is posted on our website in the Investor Relations section. The call can be accessed also via webcast and dial-in details are as well on the website and on the press release. I have to bring your attention to the disclaimer on Slide 2, as some of the statements made during this call may be considered forward-looking statements. Please also let me drive your attention to the fact that this year, we are also reporting 2019 income statement data for greater comparability purpose [indiscernible] relevant impact of the pandemic on 2020 financials. From this quarter, we are also reporting some income statement data without Elite. The commentary will be, therefore, also based on these figures. With that, I am now pleased to turn the call over to our CEO, Enrico Vita.

Thank you, Francesca. Good afternoon, everyone. Welcome to our quarterly conference call for the Q2 results. So today, we have many things to share and discuss with you. First of all, our results for the quarter, by far the best quarter ever in the history of our company. In fact, in comparison with Q2 2019, our revenues increased by circa 20% at constant exchange rates, and the organic component of the growth was truly outstanding, above 15%. This growth was also very well balanced across all the regions and all core market. And once again, I believe that also during this quarter, our revenues have led us to significant market share gains in all major markets. In terms of profitability, we continued to reap the benefits of the huge work done on our cost base since the very early days of the pandemic, making our company even more efficient and leaner than before. The increase in profitability of 180 basis points is even more remarkable in consideration of the significant investments in marketing and also in several key initiatives at corporate level. The cash generation was also super, allowing us to achieve a very healthy net financial position in the region of EUR 620 million. Then on the numbers, 3 very important moves that confirmed and put into practice 3 of our strategic beliefs: The first belief I'm referring to is about the value of market leadership in core markets; the second belief is about the value of business simplification to favor speed and agility of execution; the third and most probably, the most important one, it's about the belief that the direct relationship with the end consumers is what really matters in our sector. And it is under this slide that you should see our acquisition of Bay Audio in Australia that will give us the opportunity to create in combination with Amplifon and tune a fantastic platform to boost growth and profitability and win in that core market. And also our second JV in China, another small, but meaningful step to build a strategic presence in that high potential market. Finally, it is also under this slide that you should see our decision to exit the last wholesale business left within our group, and I'm obviously referring to Elite in the U.S. But to talk about this, we can now move to the following chart, Chart #4. In fact, today, we are announcing our intention to wind down Elite, which clearly has been a very difficult decision. However, a decision forced by several observations [ and pack]. First of all, you know that Elite [ self-hearing aid ] mainly to independent practices, a channel that has been constantly declining, and we continued to decline as a consequence of the consolidation process that has been in place in our industry now for a while. You also know that Elite has been clearly dilutive to our profitability and growth in the recent years. Above all, Elite business model is clearly no longer strategic for us because lack of the direct relationship with the consumers that I mentioned earlier on. I said it has been a difficult decision, but I'm convinced that it has been the right decision for our company because it will allow us to continue and accelerate our journey of transformation in the U.S., focusing all our resources, investments, talents and managerial time on our 2 most potential and successful businesses, Miracle-Ear and Amplifon Hearing Health Care, operating in the 2 fastest-growing channels of the market. I now hand over to Gabriele to give you more details about the implications of these moves on our numbers.

Thank you, Enrico, and good afternoon to everybody. Moving to Chart 5. We have a look at Elite key financials in the accounting treatment related to its [indiscernible]. In '19, Elite reported revenues of $78 million and an EBITDA margin of around 17%. In 2020, with the pandemic, sales were down to $60 million and EBITDA to around $6 million, representing around 3.5% and 1.5% of group's revenues and EBITDA. Clearly, in the last years, Elite has been dilutive to Amplifon's fast growing and profitable business. The wind down of Elite, which represents a separate major line of business, will be treated as discontinued operations following the IFRS 5 accounting principle. In particular, Elite profit and loss data will be excluded from the group's consolidated profit in loss and the comparison period starting from the date of effective discontinuation. With the result of discontinued operations to be reported in a separate profit and loss line named "net result after discontinued operations". As of today, we expect the potential cost associated to the discontinued operations of Elite to be around EUR 10 million. The vast majority represented by nonmonetary costs, including goodwill write-off. The wind down of Elite business is currently expected to be effective and completed by the end of 2021. Moving to Chart #6. We have a quick look at the group financial performance in Q2, which as already commented by Enrico, posted outstanding results. Since the performance of Q2 2020 was heavily impacted by COVID outbreak, I will comment our results primarily versus 2019, representing a much more meaningful comparable basis. In the quarter, at constant ForEx, revenues increased by around 20% versus '19, with an excellent organic growth at 15%. EBITDA recurring came in at EUR 136 million with a margin at 26.3%, up 180 basis points versus 2019, thanks to the strong revenue performance coupled with the structural efficiencies and productivity enhancement derived by the measures implemented for the pandemic. The strong EBITDA increase was achieved even after sizable investment in the business with marketing investments up by 20% versus '19 and several strategic initiatives ongoing. Let me also draw your attention in this slide on the pro forma figures for the period. Excluding Elite from both Q2 '21 in comparison period, revenues at constant ForEx would have been up 20.9% versus Q2 '19, fueled by an impressive organic growth at plus 16%. EBITDA recurring margin at 26.8%, up 200 basis points versus Q2 '19. Moving to the following chart, we have a look at our financial performance in H1. Revenues at constant ForEx were up over 17% versus '19, with a well above market organic growth at around 12%. M&A contribution at over 5% and ForEx impact at minus 1.8%. EBITDA recurring amounted to EUR 233 million, up around 25% versus '19, with margin at 24.3%, up 180 basis points versus H1 '19. Looking at pro forma figures, excluding Elite, revenues at constant ForEx would have been up 18.6% versus '19, followed by an over 13% organic growth. EBITDA recurring margin at 24.8%, up 200 basis points versus H1 '19. Moving to Slide #8. We have a look at EMEA excellent performance. In Q2, revenue growth was 12.1% at constant ForEx, with a well above market organic growth at 9.5%. M&A contribution was 2.6%. Excellent organic growth was reported in France. Also driven by the recent regulatory change, Spain, Portugal and Belgium. EBITDA amounted to EUR 112 million, up around 32% versus '19, with margin at 26.4%, up 460 basis points versus '19, thanks to improved efficiency and productivity as well as to the outstanding performance of Spain in the operating leverage. In H1, revenue growth was around 11% at constant ForEx, with a strong organic growth of over 8%. EBITDA amounted to EUR 195 million, up 33% versus '19, with margin at 24.3%, up 470 basis points versus '19. Moving to Slide #9. We have a look at Americas really impressive performance in Q2. Revenue growth was around 53% at constant ForEx versus '19, with a stellar organic growth at 39%, thanks to an excellent and well above market performance in the U.S., driven by the outstanding performance of Miracle-Ear. Strong performance was also reported both in Canada and LATAM. M&A contribution was around 14% versus Q2 '19, primarily reflecting the PJC Hearing acquisition. Total FX was negative for over 14% due to the euro appreciation versus dollar and LATAM currencies. EBITDA amounted to EUR 23.5 million with margin at 24.7%, up 90 basis points versus '19. Looking at pro forma figures, excluding Elite, revenues at constant ForEx would have been up by 72%. [ Followed by an ] impressive 54% organic growth around 2.5x. EBITDA recurring margin at 27.8%, up 170 basis points versus '19. Moving to Slide #10. We have a look at Americas performance in each one. Revenues were up by 44% at constant ForEx, driven by an excellent organic growth of around 29%. EBITDA amounted to EUR 40 million with margin at 23.1%, up 100 basis points versus '19. Looking at pro forma figures, excluding Elite, [indiscernible] constant ForEx would have been up by 64% versus '19, followed by an outstanding 44% organic growth. EBITDA recurring margin at 26.2%, up 170 basis points versus '19 and 310 basis points higher than EBITDA, including Elite. Moving to Slide 11. We have a look at APAC performance. In Q2, revenues were up 28% at constant ForEx, driven by an excellent organic growth of around 22%. M&A contribution related to Attune and accounted for around 6.6% versus '19. ForEx was positive as well. In the quarter, Australia, New Zealand and China posted double-digit organic growth versus '19. EBITDA amounted to EUR 18 million with margin at 29.3%, up 80 basis points versus 2019. In H1, revenue were up 23% at constant ForEx, driven by a very strong organic growth of 15%. EBITDA amounted to around EUR 34 million with margin at 29.7%, slightly contracting by 30 basis points versus '19, reflecting the continued strong investment in market in Australia. Moving to Chart 12. Let me spend a few words on another milestone in Amplifon growth story. The acquisition of Bay Audio announced last July 12. Bay Audio represents a truly unique opportunity for us, allowing us to build another company stronghold in Australia, one of our core markets. Bay Audio leverages an innovative retail model based on stores located in [ night ] traffic premier and urban shopping malls, on a highly recognized brand, thus representing the ideal addition to our existing businesses of both Amplifon and Attune. Similarly to Amplifon, Bay Audio also represents a fantastic story of growth. In the last 5 years, Bay Audio revenue CAGR has been above 20%, despite the impact of the pandemic in 2020 and '21. In the last financial year, they posted the revenue slightly above AUD 100 million with a strong profitability. Even more significantly, revenues for these financial years, free from pandemic, are expected to grow by around 30%. As already communicated in terms of timing, we currently expect to close the transaction by the end of this year. Moving to Chart 13. Let me also spend a few words on another small, but meaningful recent M&A transaction, our second joint venture in China. This transaction represents another important step in our journey to build a leading position in the strategic Chinese market, which represents a sizable medium-term opportunity, given the estimated market size and its outstanding growth potential. The joint venture named Sound Bridge, of which we control 51%, operated fully high-quality shops located primarily in the [indiscernible] Zhejiang region. The second joint venture perfectly complements our current presence in the Beijing area, thus allowing us to reach a total network of around 100 points of sales and an expected combined turnover run rate for 2021 of around EUR 15 million. Moving to Slide 14. We appreciate the Q2 profit and loss evolution. Total revenues increased by 17.8% to EUR 519 million, with an excellent 15.1% organic growth versus '19. Considering the pro forma discontinuation of Elite, revenues increased by 19.1% with an organic growth amounting to 15.9%. The structural efficiency and productivity enhancement derived by the measures implemented last year led the EBITDA recurring margin at 26.3% with an improvement of 180 basis points versus Q2 '19. Recurring EBITDA increased by 26.5%, around EUR 29 million to EUR 136 million. Reported figures include around EUR 1.8 million cost related to the GAES integration and to the redefinition of the corporate structure of Amplifon S.p.A. Considering the pro forma discontinuation of Elite, EBITDA margin reported an outstanding 26.8%, posting a growth of 200 basis points versus '19. Following the strong investment plan during the past quarter, D&A increased by around EUR 7 million, leading the current recurring EBIT to around EUR 82 million, with a growth of 35% or EUR 21 million versus '19. Net financial expenses accounted for around EUR 7 million, leading profit before tax to EUR 76 million from around EUR 55 million in '19, posting a 38% increase. Tax rate ended at 26.8%, leading recurring net profit at over EUR 55 million with a 36% increase versus '19. Moving to Chart 15. We see the H1 profit and loss evolution. Total revenues increased by 15.2% to EUR 960 million, with an excellent 11.9% organic growth versus '19. Considering the pro forma discontinuation of Elite, revenues increased by 16.8% with an organic growth amounting to 13%. EBITDA margin ended up at 24.3%, with an improvement of 180 basis points versus '19. Recurring EBITDA increased by 24.7% to EUR 233 million. Reported figures include around EUR 4.3 million costs related to GAES and redefinition of the corporate structure of Amplifon S.p.A. Considering the pro forma discontinuation of Elite, EBITDA margin reported an outstanding 24.8%, posting a growth of 200 basis points versus '19. D&A increased by around [ EUR 15 million ], leading recurring EBIT to around EUR 126 million with a growth of 32% or EUR 30 million versus '19. Net financial expenses accounted for around EUR 40 million, leading profit before tax to EUR 112 million from around EUR 83 million in H1, posting therefore a 35.5% increase versus '19. Tax rate ended at 28.1%, leading net profit at over EUR 80 million with an increase of 35% versus '19. Moving to Chart 16. We appreciate the cash flow evolution. Operating cash flow after lease liabilities was in the period equal to around EUR 155 million, posting an improvement of EUR 61 million or 65% versus 2020, which reflected the action implemented in Q2 last year to mitigate the COVID impact. The comparison versus H1 '19 shows an outstanding improvement of EUR 55 million, leading to a performance more than doubled versus next year. Net CapEx increased by around EUR 50 million to around EUR 36 million, leading free cash flow at EUR 119 million versus EUR 72 million last year with a growth of EUR 47 million or around 65% versus previous year, versus H1 '19, the improvement of free cash flow is over 100%. Net cash out for M&A was EUR 43 million, driven by bolt-on acquisition in EMEA versus EUR 42 million [ in '20 ]. The sum of the share buyback program and the dividend distribution amounted to EUR 63 million, leading net cash flow for the period to over [ EUR 30 million ] versus EUR 23 million in H1 2020. NFP ended at EUR 620 million with an improvement of around EUR 145 million versus H1 2020. Moving to Chart 17. We have a look at the debt profile trend and the key financial ratios. As mentioned in the previous chart, the net financial debt closed at EUR 620 million with liquidity accounting for positive EUR 470 million. Short-term debt accounting for around EUR 120 million and medium long-term debt accounting for around EUR 970 million. This confirmed the very strong financial profile of the group with over EUR 730 million financial headroom, including undrawn RCF following the continuous NFP improvement and the completion of the refinancing program executed last year. Following IFRS 16 application, lease liabilities amounted to EUR 426 million, leading the sum of net financial debt and lease liabilities to EUR 1.05 billion. Equity ended up at EUR 833 million, with an increase of around EUR 30 million versus December last year. Looking at financial ratios, net debt over EBITDA ended up at 1.23 with a further reduction versus December '20 by around 40 basis points, representing the best result after the completion of the successful GAES acquisition. Net debt over equity ended at 0.74, posting a reduction versus 0.80 at the end of 2020. The inclusion of the price that Amplifon will pay at the moment of the [indiscernible] closing could lead the pro forma leverage at 1.84, well below 2.0. I would now hand over to Enrico for 2021 outlook.

Thank you, Gabriele. So to conclude, some key messages and our outlook for 2021. First of all, let me say that we are very happy about the progress we are making on our strategic journey. The acquisition of Bay Audio in Australia represents another key milestone in the history of our company, and we are all excited about the tremendous new opportunity that this acquisition will create to drive growth in the Australian market. Then our second JV in China. Here, we are building our success of tomorrow, leveraging on the clear drivers supporting the future growth of these markets. Finally, we are obviously extremely happy about our results of the second quarter, without a doubt a truly outstanding quarter. It is also because of these results that today, we are also very pleased to be in the position to materially upgrade on the same consolidation basis, our guidance for 2021. In fact, with regards to revenues, we increased our guidance to reflect the higher organic growth to EUR 1.99 billion versus the previous EUR 1.93 billion. Then, of course, in the light of the decision to discontinue Elite, 2021 sales for the full year, excluding Elite, will be in the region of EUR 1.93 billion. Of course, I need also to highlight that given the still uncertain situation with regards to the COVID pandemic, I need, again, to stress that this guidance is valid under the assumption of no further material impact of the COVID-19 pandemic in the second half of the year. But also at the same time, I need also to highlight that this guidance, it is not including any contribution from the consolidation of Bay Audio since we expect the closing to happen at a certain point during Q4. Moreover, with regards to profitability, we are also increasing our guidance in terms of profitability, and now we expect to achieve a remarkable recurring EBITDA margin in the region of 24.8. To conclude, I can also tell you that July is going to be strong, very strong. So I can say that so far so very good. With this, I leave back the floor to Francesca.

Thanks, Enrico. Before I turn the call to the operator in order to open up for the Q&A session, please let me remind you that as indicated in today's press release, we will hold our 2021 Capital Markets Day on September 13. The CMD will be held virtually and the agenda as well as the details will be published on our website closer to the date of the event. [Operator Instructions]. Now I turn the call over to the operator in order to open the Q&A. Thank you.

[Operator Instructions] The first question is from Niccolò Storer with Kepler.

Two questions. The first one on your new guidance, updated guidance. So basically, while a few months ago, your guidance was implying a deceleration in the remaining part of the year. This time, it seems that you're expecting a continuation of H1 trend into the second part of the year, in spite of a tougher comparison, compared to the second part of 2019. So the question is, what led you to change your mind on that? What are you seeing? Which are the signals that you are getting from the market? And the second one is on Elite. So if you can elaborate a bit, first of all, on the reason behind the sharp decline in revenues and profitability over the past few years that probably goes beyond COVID. Why winding down the operation and not selling them? And the last, if this move could have some indirect impact on your managed care business.

Thank you, Niccolò, for your questions, very clear. So with regards to the first question, and therefore, the increase in the guidance, you are absolutely right. Now we are more positive than we were just a few months ago about this second half, despite of the higher comparison base with 2019. And the reason why we are more positive is because we see in, basically, many markets, recovery, which is stronger than maybe we were expecting some months ago. And on top of that, let me say that we are extremely pleased about our ability to overperform the market growth. Just to highlight the most clear example about this, just look at our performance in the U.S. which is, in my opinion, really truly, truly outstanding and well above the growth of the market. So it's a combination of a market which is definitely positive, but also we are more positive in general because of our ability to overperform also the market from a performance point of view. This -- as I said, it is particularly true if you look at the numbers in the U.S., but let me also add that I'm extremely happy about the performance in all the 3 regions. I'm extremely happy about the performance basically in all the different markets. I think that now the different operations are really performing very well and above the market growth. With regards to the second question and therefore, why we have decided actually to discontinue Elite. Clearly, Elite was an Unicom in our group. Elite was the only wholesale business. Elite, in particular, was not responding to what we believe is the clear value in our -- in the value chain in our sector, which is about the direct relationship within the consumers, which is basically what we do in all the rest of our group. Elite was a wholesale business with, I would say, limited possibility to differentiate from other wholesalers. And also, which is also our view on the market, which is served by Elite, which is the independent channel. We have always said that we see this channel actually contracting and declining over time, which is exactly what is happening and what has happened and that may be accelerated even more during the pandemic. The fact that Elite is also dilutive to our numbers, both in terms of growth and also in terms of profitability, I think is a consequence of all what I've said. And as I said also during my initial speech, I personally believe in the big value, not only of the direct relationship with end consumers, but I also believe a lot in the value of simplification of the business model, which -- the business model in the U.S., which will allow us to focus all our resources, all our investments in the 2 channels, which will be definitely the most, the fastest-growing channels also in the future. We could keep Elite, but I think that, that would not be the right decision for the company because in this way, we are able to unleash the potential of the other 2 channels even more than in the past.

The next question is from Veronika Dubajova with Goldman Sachs.

I will keep it to two and apologies. They're both a little bit short term, but just one, wanted to understand a little bit better the cadence of growth through the quarter. Obviously, there's quite a lot of noise, but would love to, sort of, know the exit growth rate that you saw at the end of the quarter? And maybe where -- which region you saw the most significant acceleration in as you move through the quarter? And then my second question is, just looking at the third quarter and in particular, looking at the European growth rate, obviously. It's a pretty tough comparison. Q3 last year in Europe was actually a pretty strong quarter for the industry and for yourself. Just kind of curious, your degree of confidence in your ability to deliver the, sort of, mid- to high-single-digit growth rate that we're used to in that region. And just broadly how you're thinking about phasing of growth in Q3 versus Q4?

Thank you, Veronika. And also, I needed to give you the credit about one question that you asked me a few quarters ago when you asked me, why you are not discontinuing Elite. So I have to say that you got to the point maybe earlier than others. But anyway, make to -- coming back to your question. So with regards to the trend during Q2, I have to say that it was more an even trend. So not a clear acceleration from April to June. All the 3 months were very strong. And as I also said during my speech, we see this trend actually to continue through July, which, as you know, it's an important month for us. And as I also said, we see this kind of trend basically in all of the key markets, in all the 3 regions. And I need also -- I would like also to stress the fact that we believe that we are now performing much better than the average of the market. So there is definitely an element of performance which is also supporting our revenue growth. With regards to the second question and therefore, about Q3, Q4, in particular with regards to Europe, we are clearly very confident that we can continue to grow in Europe. We see encouraging performance in, also here, in all the main markets. So we are very positive. Also July, also in Europe was strong. So definitely, we feel quite confident about our guidance for the full year and therefore, the guidance for the second half. Of course, I need -- and again, to highlight the fact that we are not envisaging and not including at this stage in this guidance on one side, any major disruption coming from COVID -- I also hope that there would be not. But also on the other side, a potential upside would be about the consolidation of Bay Audio at a certain point during Q4, which is not included in this guidance.

The next question is from Aisyah Noor with Morgan Stanley.

My first question was on the EMEA business. What was the contribution from the front health reforms in the quarter? Or in other words, excluding that benefit, what would your growth in EMEA be? And I'll leave it there.

Yes. Well, of course, France continued to perform very strongly also in Q2 because of the effect of the reform that took place in France. But anyway, also excluding France, our performance was very positive. I would say, mid -- in the region of mid-single digit for sure. So France was definitely a strong contributor to the growth, but also all the other market performed very well.

Okay. And if I could just quickly follow-up on EMEA. Your own brand product line in Spain, is this still on track to launch in the second half? And if so, do you have a date in mind?

Yes. Yes. Absolutely. We are perfectly in launch. We have just launched the Amplifon product experience in Portugal. And I have to say that perhaps, it has been the best launch in -- so far because they -- penetration increased from 0 to almost 85%, 90%, really, not anymore in months, but in weeks. Then with regards to Spain, we are perfectly on track, and this is one of the major launches in the group, and this will happen in Q4, October, November.

The next question is from Kit Lee with Jefferies.

My first one is just on the market trends. You mentioned July is still very strong. But what are your thoughts about August and maybe September as well, just given that because some companies talk about people taking holidays or vacations and they do want to take a break. Do you see that happening in August or September? And what do you think about the run rate maybe in those 2 months versus July, please? And my second question is just on China. I think you've done 2 JVs now in the region. Do you still have more JVs in the pipeline? Or would it be more organic development from here?

Well, so with regards to the first question, and therefore, let's say, the trend in Q3. Yes, I confirm that July is going to be very strong. Let me say, continuation of what we have experienced in Q2. We expect also the same trend throughout all of the quarter. So we do not see any change in August or September. With regards to China, for sure, we will accelerate on our greenfield expansion. Of course, we can -- we are also looking for further targets, but I need to highlight that these targets are not big targets. You should expect more JVs with companies of the same size of what we have done so far. Anyway, with regards to China, we will also give you some more details during our Capital Markets Day in September.

That's good. And I guess, if you were to think about the region on a 3-year view. I appreciate you might want to wait until the Capital Markets Day, but should we be thinking about 400, 500 stores in 3 years' time, that kind of magnitude? Any color that you're willing to give at this stage?

Well, as I said, China will be one of the topics that we will touch on our Capital Markets Day. So I prefer to maybe wait until then to give you more info.

The next question is from Julien Ouaddour with Exane BNP Paribas.

So can you maybe elaborate on your , I would say, very strong performance in the U.S. this quarter. I think that the reference market was up 20% versus 2019. You almost, like, doubled it, so yes. And also what's your view for the market for the coming quarters? And should we expect a similar momentum? And then my second question was on China, but you seem to prefer to wait until the Capital Markets Day. But it was just if you can confirm that your ambition is still to grow China, I would say, around 10% of group sales over the mid- to long-term. So that's all.

Thank you, Julien, for the questions. So with regards to Americas. Yes, I can confirm that selling figures. I need always to clarify that are telling us that the market grew in the region of 20%. We clearly outperformed the market, and we are extremely happy about that. The outperformance of the market from a pure organic viewpoint, in my view, coming from all the work that we have done in the recent years, in the recent months, which in my opinion, will be also accelerated by the decision that we have taken today about Elite. Elite, at the end of the day, was also a distraction for our management. And the decision that we have taken today will allow us to further accelerate our growth. With regards to the U.S., what I can tell you is that on top of the contribution of the consolidation of PJC, we are also enjoying a very strong growth coming -- organic growth coming from PJC. So we are extremely happy about this acquisition. We are extremely happy about how PJC now, which is part of the corporate retail network, is performing. All in all, let me say that in the U.S., now everything is working pretty well, and I expect us to continue to outperform the market also in the near future. With regard to China, yes, the ambition is always the same, for sure. As I said, I think also many times that this is a medium-term project, will be a balanced mix of new openings and the 4 greenfield operations, but also small deals. As I say, there are no big targets in these markets, and therefore, it will be, let me say, a long journey, but I think a very important journey for our group.

The next question is from Domenico Ghilotti with Equita.

Two questions. The first is related to the guidance. In particular, if I look at the first semester, excluding Elite, you are already at 24.8 EBITDA margin. So you are implying the same level of profitability, despite the typical seasonality. And also in your sales guidance, there is clearly a second half that is stronger than Q1. So I -- could you elaborate on the reason why second half profitability should be really similar to the first semester? And second is on the decision to terminate Elite. Do you have any structural negative from the volumes that you are losing?

Okay. With regards to this second question, not at all, not at all. At the end of the day, I need also to -- Elite was a wholesale business, and therefore, also, let's say, in direct competition with the job of the manufacturers. So at the end of the day, it was not really synergy also from purchasing point of view. So no, I do not expect any kind of negative impact from that also in consideration of the very high growth that we are delivering in consideration of the fact that now we have also additional volumes coming from Bay. So no, not at all. Actually, I think that also in this respect, the decision will give us benefits rather than negative. With regards to the profitability, there is no particular reasons. At the end of the day, what I mean is that we will continue -- also actually, we want also to accelerate our investments, in particular in this second half. We think that there is a clear opportunity at this stage to further push and consolidate the market. And therefore, we will go for that.

So you are implying additional spending compared to the first semester?

Yes. Well, for sure, we will continue to invest. There will be some investments more in terms in particular of marketing also some key initiatives. But let me say that we are super happy about our objective for this year in terms of profitability, 24.8% EBITDA margin. It is something that just a few months ago or a few years ago, we could not even imagine. So we are very happy.

Now also maybe looking at the full year, Domenico, Elite was diluting our business by around 20 basis points full year. So I know that in the 6 months, it was a little bit more. But on average, it's 20 basis points. So if you look at our previous guidance, 24.5, 24.7. At the end, it was -- the average is 24.6. So the 20 basis points more are reflected in the [ enrollment ]. And then of course, what Enrico said about our, I mean, ability to invest more in order to get more is something pretty constant. As we always say, of course, thanks to scale and other aspects, we can have higher profitability, but investment, of course, are key in order to enlarge the competitive gap versus the other players.

The next question is from Oliver Metzger with Commerzbank.

The first one is just on marketing expenses. Where you are right now with regard to on the level where you want to be? And the second one is on the recent executive order in U.S. on the hearing aids [ diversification ]. So it's still a limited amount of information. So question to you, do you have any idea how FDA thinks with regards to maximum amplification for these OTC devices? Do you have any insight, any idea on that?

Yes. Thank you, Oliver, for your questions. So I will start with the second one about if we know anything about which will be the draft regulation from the FDA. And the answer is, no. Of course, FDA is doing their job. FDA is doing their job, and we just -- we are just confident that for sure what will be the final provision will be in the interest of a safe and efficacy of the solution in the interest of the consumers. But no, no further information at all. With regards to our marketing expenses, we have increased our marketing expenses versus '19 in the region of 20%, which is in line with the increase over the past years. So this is the trend also that you should expect also going forward.

The next question is from Michael Hannig with Stifel Europe.

I have 2, please. First of all, it's related to Elite. What was the reasoning behind the decision to just close the Elite hearing business down and just not sell it or try to monetize the assets? And the second one is a quick add on the French reimbursement scheme. Do you see the positive development to continue into July? Or do you expect it to be mainly limited to H1 with the normalization in H2?

Yes. So with regards to the second question, so the French reform. With this, we still see a very strong trend also in July. Of course, our assumption is that the kind of growth that we have experienced in the first half will not continue at the same pace in the second half. But for sure, we are still -- also still very positive about the growth of the market in the second half because of the change in regulation and report. With regards instead to the first part of the question and therefore, why we did not consider a sales process. We have reviewed all the possible internal and external options, including the option of sales. This alternatives did not materialize because we did not see enough interest from potential parties interested in acquiring the business. So at the end of the day, we thought that the best option was, [ they went down ].

[Operator Instructions] The next question is a follow-up from Domenico Ghilotti with Equita.

Yes. I have, let's say, a broad question on, say, the 2022 outlook in the sense that how do you see the trends that we have seen, for example, the very, very strong growth in North America, both for the market and for you, the contribution from the French regulation? So as a particularly challenging, so how this is affecting your ability to grow at the usual rate entering into 2022?

Well, let's say that definitely, there are some positive effect supporting the performance in this 2021. But we have also to consider that in 2021, the pandemic was not over. It's not over yet, actually, and we still see time to time some sporadic lockdowns in Australia. We see some slowdown in that market or in another market, et cetera, et cetera. So still, despite of what you mentioned, we are also positive about the next year. But let me ask you to wait until September at our Capital Markets Day to give you some more granularity about how we see the next future.

[Operator Instructions] Gentlemen, there are no more questions registered at this time.

Thank you. So many thanks to all of you for taking part in our call. This concludes today's call, and we kindly ask the operator to disconnect. Thank you. Bye-bye.

Thank you.

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