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Operator: Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Amplifon Third Quarter and 9 Months 2025 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.
Francesca Rambaudi: Thank you. Good afternoon, and welcome to Amplifon's conference call on third quarter and first 9 months 2025 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 Amplifon's website as well as on our 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. With that, I am now pleased to turn the call over to Amplifon, CEO, Enrico Vita.
Enrico Vita: Thank you, Francesca. Good afternoon, everyone, and thank you for joining us once again today. As usual, let's begin with a general overview of the global market performance. Starting with the European markets. In France, the market continued to record solid volume growth, though at a slower pace compared with Q2. Official data indicate a volume growth of around 6%, which we believe reflects the impact of the recent political events you are all aware of. On the other side, on a positive note, Spain and Italy, 2 of our key markets improved versus the second quarter, showing encouraging trends. As we mentioned during our last update, the second quarter was the most affected by the 5 years anniversary of the strict COVID lockdowns in 2020, which had significantly reduced the returning customer base. Germany also delivered a positive performance. Overall, we estimate that the European market growth in Q3 was around 2%, 2.5% in volume terms, less in value because of the category mix in France. Given these dynamics, we expect the gradual recovery in Europe to continue moving forward and particularly in 2026. When we will see the anniversary of the market rebound of 2021, impacting positively on our returning customer base, particularly in Southern Europe. In the U.S., the market growth was around 2% in the third quarter, which is still below historical average. In particular, the private pay channel was more positive, while the insurance channel was around minus 1%. Over the first 9 months, the overall U.S. market was flat as recent uncertainties clearly impacted the consumer behavior, especially in the first quarter, but also and mainly due to the insurance channel decreasing by approximately minus 4% over the period, driven by a reduction in hearing benefits offered by health plans after a strong push in past years. That said, we continue to expect a gradual improvement in the coming months, driven primarily by the Private Pay segment. Moving to APAC. Here, we have yet to see a clear improvement in trends, both markets in Australia and in New Zealand remained in negative territory. All in all, we estimate that the global market grew by around 2% in volume in Q3, and by slightly less than that in value according to market weights. Let's now turn to our performance within this market context. Our sales grew by 2.4% at constant exchange rates, while the appreciation of the euro versus nearly all major currencies in our footprint had an impact of around minus 3%. Organic growth showed a material improvement of 250 basis points versus Q2, returned to positive territory, close to plus 1%, and we believe that we have consistently outperformed across most of our key markets. This growth was mainly driven by EMEA's return to positive organic growth, thanks to a significant improvement in the performance in Southern Europe, Italy, Spain and despite a lower contribution coming from France versus Q2. It is also important to highlight our strong performance in the U.S., in particular with Miracle-Ear’ Direct Retail where we continue to outperform the market. In Australia and New Zealand, too, despite respectively, a flattish and the negative organic growth, we believe we have outperformed both markets. The contribution from M&A activity was plus 1.6%, reflecting here the net effect of the acquisitions and the selective closures carried out as part of our Fit4Growth program. Turning to profitability. Our adjusted EBITDA margin was 19.1%, down 110 basis points year-over-year. This reflects an improving trend compared to Q2 and was primarily driven by lower operating leverage, our continued marketing investments to support our brands and still though to a lesser extent than in Q2, less favorable geographical mix. Finally, we reported an adjusted net profit of approximately EUR 19 million, reflecting the seasonally smallest quarter of the year. Let me now provide a brief update on our Fit4Growth program, which, as you know, aims to deliver a run rate improvement of approximately 150 to 200 basis points in adjusted EBITDA margin by 2027. This program is progressing well and is currently ahead of the initial plan, particularly with regards to the optimization of our store network. We continue to track progress closely and remain fully confident that these actions will position us for the next phase of sustainable growth. With that, I will now hand it over to Gabriele, who will provide more details on our financial results.
Gabriele Galli: Thanks, Enrico, and good evening to everybody. Moving to Slide #4, we have a look at our group financial performance in Q3, already summarized by Enrico. Revenues grew 2.4% at constant FX, with organic growth back to positive at circa 1%. Posting a 250 basis point improvement compared to Q2 '25. Despite the reduced growth of the French market, the global market growth is still below historical level and a strong comparison base as in Q3, '24, revenues grew at constant FX by 8% versus Q3 '23. M&A contribution remained sustained at plus 2%, while the network optimization related to Fit4Growth had an impact of around minus 50 basis points due to the carryover from H1 and the further selected closures in U.S., France, Germany, Canada and Australia in Q3, thus leading to M&A and a perimeter change of around 1.6 percentage points. FX was a significant headwind of minus 3.1% due to the appreciation of the euro versus the U.S., Australian and New Zealand dollars, bringing growth at current FX to minus 0.7%. Adjusted EBITDA came in at EUR 107 million, with margin at 19.1%, a decrease of 110 basis point for the lower operating leverage, the higher marketing investments and the dilution from the fast growth of Miracle-Ear Direct Retail. Moving to Slide 5. We have a look at our financial performance in the first 9 months of the year. Revenues were up 1.8% at constant FX versus 9 months '24, with organic performance at minus 0.3%, reflecting the very high comparison base and 1/3 in day less versus last year and the global market demand below historical growth levels. M&A and perimeter change contribution was 2.1% with around 230 locations acquired year-to-date and selected closures following Fit4Growth implementation. FX was a headwind for minus 1.9%, increasing throughout the period. Adjusted EBITDA was EUR 395 million with margin at 22.7%, 90 basis points below prior year, primarily due to lower operating leverage and the fast growth of Miracle-Ear Direct Network in the U.S. Moving to Slide 6. We have a look at EMEA performance. In the quarter, revenue grew at constant FX by 2.3% with organic performance at plus 0.3% with an improvement of 280 basis points compared to Q2 '25. Despite a lower contribution of the French market, which grew around 6% between July and August, while Southern European markets showed a gradual improvement in the quarter. In this context, we posted a strong and above market growth in France and an improved organic performance in both Italy and Spain. M&A and perimeter change was plus 2%, reflecting M&A mainly in France, Germany and Poland and select the closures of nonperforming locations in France and Germany. Adjusted EBITDA was EUR 82.2 million with margin at 23.3%, 70 basis points below Q3 '24 due to lower operating leverage and still less favorable geographic mix, although to a lesser extent. In the 9 months, revenue growth was 1.4%, with organic performance at minus 1% and M&A contribution at plus 2.4%. Adjusted EBITDA was circa EUR 305 million with margin at 27.3%, 80 basis points below last year. Moving to Slide #7. We have a look at the performance in Americas. Revenue growth in the quarter was plus 5.6% at constant FX, while FX headwind was a significant minus 8%. Organic growth was strong and above market at 4.3% despite the very high comparison base, as in Q3 '24, organic growth was plus 12% versus Q3 '23. And the market performance is still below historical levels at circa 2%. M&A and perimeter change was positive for 1.3%, reflecting the acquisitions in the U.S., including the 24 locations acquired in Arizona back in April, and some selected closures of nonperforming locations, both in the U.S. and Canada. Adjusted EBITDA was EUR 25.5 million with margin at 20.7% versus 22.7% last year due to the fastest functional Miracle-Ear Direct Network in the U.S. The integration of the recent acquisitions and the adverse FX translative effect. In the 9 months, revenues were up 4.8% at constant FX, driven by a solid and above market organic growth despite the remarkable '24 comparison base. Adjusted EBITDA was EUR 82.7 million with margin at 22.6%, 170 basis points below prior year for the reasons I just mentioned. Moving to Slide 8. We have a look at Asia Pac performance. In the quarter, revenue performance was minus 1.5% at constant FX, reflecting minus 1.9% organic growth due to the high comparison base. As in Q3 '24, the growth at constant FX was around plus 7% versus Q3 '23 as well as the negative market development in the region on consumer caution. In this context, our organic performance was negative in New Zealand and flattish in the other countries in the region. M&A and perimeter change was positive for 0.4%, thanks to the acquisitions mainly in China and Australia, which more than offset the exit of the non-core wholesale business in China in Q1 and the selected closure of nonperforming locations in China in Q2 and in Australia in Q3. FX headwind was a significant minus 8%, driven by the depreciation of all the regional currencies versus the euro. Adjusted EBITDA reached EUR 21.4 million, with a margin of 24.3% versus 26.7% in Q3 '24 due to lower operating leverage. In 9 months, '25, both organic performance and perimeter change were flattish, while FX was a headwind for 5.7%. Adjusted EBITDA was EUR 65 million with margin of 25.1%, 140 basis points below 9 months '24, due to lower operating leverage. Moving to Slide #9. We appreciate the Q3 income statement, reflecting the seasonality of our business being the Q3 the smallest quarter of the year. In the quarter, total revenues increased by 2.4% at constant FX to EUR 563 million. Adjusted EBITDA came in at EUR 107 million, with margin at 19.1%, 110 basis points below Q3 '24 for the reasons just mentioned. D&A, excluding PPA, were at EUR 64.6 million versus EUR 62.5 million in '24, increasing around EUR 2 million in light of the investment in the network, digital transformation and innovation. Thus, the less pronounced growth rate compared to the increase recorded in '24 versus '23. This leads the adjusted EBIT to EUR 42.8 million versus EUR 52.1 million last year. Net financial expenses amounted to EUR 16.7 million versus EUR 15.9 million in Q3 '24, primarily due to interest on higher financial debt, including higher interest rates for lease liabilities following the strong M&A and network expansion as well as FX differences. Tax rate posted a 10 basis point reduction versus '24, leading adjusted net profit at around EUR 19 million versus EUR 26 million in Q3 '24, reflecting the higher seasonal weighting of D&A and financial expenses in the smallest quarter of the year. Moving to Slide #10. We see the 9 months profit and loss evolution. Total revenues increased by 1.8% at constant FX to EUR 1.74 billion, adjusted EBITDA was EUR 395 million, with margin at 22.7%, 90 basis points below 9 months '24. D&A, excluding PPA, increased by around EUR 13 million, leading to the adjusted EBIT to around EUR 199 million, with margin at 11.4%. Net financial expenses increased by EUR 44 million to EUR 48 million, leading profit before tax to around EUR 151 million. Tax rate ended up 27.3%, leading adjusted net profit to EUR 110 million versus EUR 134 million last year. Moving to Slide 11. We appreciate the cash flow evolution. Operating cash flow after lease liabilities was in the period equal to EUR 119 million, EUR 31 million below the EUR 150 million achieved in '24, mainly in light of the lower EBITDA contribution, higher rents. Net CapEx decreased by around EUR 9 million to circa EUR 90 million, leading free cash flow to EUR 28.4 million. Net cash out for M&A was EUR 59 million versus the exceptional level of EUR 184 million in the 9 months '24. The cash out for the share buyback program was EUR 108 million. NFP ended slightly over EUR 117 billion after strong investment for over EUR 320 million in CapEx, M&A, dividends and buyback. Moving to Slide 12. We have a look at the debt profile trend and the key financial ratios. As mentioned, the net financial debt ended at EUR 1.17 billion, with liquidity accounting for EUR 240 million, short-term debt accounting for around EUR 300 million and medium long-term debt accounting for around EUR 1.11 billion. Following the IFRS 16 application, lease liability were around EUR 496 million, leading the sum of net financial debt and lease liabilities to EUR 1.67 million. Equity ended at around EUR 970 million, mainly due to share buyback, FX translation differences and dividends. Looking at financial ratios. Net debt over EBITDA ended at 2.09x versus 1.63x at December last year. After the strong investment in CapEx, M&A, share buybacks and dividends. Net debt over equity ended up 1.31x. I will now hand over to Enrico for the outlook and final remarks.
Enrico Vita: Thank you, Gabriele. So we have come to the end of today's presentation. And while the global market is still growing below historical levels. We believe that the factors causing this softness peaked in the second quarter. And there are no structural reasons to be anything, but optimistic about the solid growth prospects of our sector. In fact, the third quarter confirmed this improvement in trend across several of our key markets. Looking ahead to the coming months, we expect that the global market demand to continue to gradually normalize. And in fact, in the U.S., the Private Pay segment is expected to remain the main growth driver, supporting a steady recovery of the overall market. In Europe, we anticipate a progressive improvement, supported by sustained volume growth in France, continued a solid performance in Germany and the gradual recovery across the rest of the region, particularly in Italy and Spain as observed in the third quarter. Looking further ahead to 2026, we expect the anniversary effect of the 2021 rebound to positively impact on our returning customer base, particularly in Southern Europe. Moreover, in response to the current global context, we have launched the Fit4Growth, our comprehensive program, which aims to deliver a run rate improvement of approximately 150 to 200 basis points in adjusted EBITDA margin by 2027. The program is progressing decisively and is currently ahead of the initial plan, particularly regarding the network optimization initiative, which will lead to an impact in the year of approximately minus 0.5% on the M&A perimeter change item and consequently on total growth. Based on all these elements and reflecting the impact from the accelerated store closure, we now expect for the full year 2025, revenues at constant ForEx to grow between 2% and 2.5%. Adjusted EBIT margin in the region of 23%. With that, I would like to thank you for your attention, and now we look forward to taking your questions. Francesca, over to you.
Francesca Rambaudi: Thanks, Enrico. I kindly ask operator to open Q&A session. Please kindly limit your questions to maximum 2 initially in order to give everybody the opportunity to ask questions. Now I turn the call over to Alekhya in order to open for the Q&A.
Operator: [Operator Instructions] First question is from Andjela Bozinovic, BNP Paribas.
Andjela Bozinovic: I have -- I'll start with the first one, and then I'll ask the follow-up. First, in France, do you still believe that the market will grow 10% in volumes in 2025? And if not, what are your new assumptions for the growth? And more broadly, do you think that we can see the tailwinds from the reform in 2026 and for how long? And finally, just a comment on your market share in the country.
Enrico Vita: Thank you for your questions. So first of all, with regards to France, as you know, we have seen a very strong growth in terms of volume in Q2. In Q2, we have seen a growth in mid-teens region. In Q3, we have seen a much lower growth in the first month of the quarter, the average was in the region of 6%. And as you can imagine, in our view, there are no other reasons than the political turmoil and all the different events that we have seen occurring in France during the third quarter. So now going to the expectation for the year-end, of course, it's very difficult to predict because for sure, we were also expecting a better French market in the third quarter. We were not expecting all the events that characterized the third quarter. However, what I can tell you is that we are still, of course, very positive. Also in this case, we don't think that this kind of lower growth in Q3 led to some demand which is -- has been canceled. We expect actually this demand to come back in the next month, in the next quarters. What I can tell you is that what we see today in terms of activation is quite a positive activation in October in the region of high single digits. So we have seen some improvement in trend in October. With regards to next year, well, as I said, we don't think that this kind of demand has disappeared, so will be released. And we expect actually the impact of the reform to continue also in 2026. In particular, we expect the effect of the reform to continue at least up to April, May next year. With regard to the different market performance, I must say that in this quarter, I'm happy about our performance in relative terms to our competition. What I mean is that if I take all -- basically all our major markets that we have performed. We think that we have performed better than the market, starting from the U.S. As I mentioned, the U.S. in the third quarter in terms of market, the data say that the market is growing -- has grown in the region of 2%. We have grown more than that especially, particularly in Miracle-Ear Direct Retail. But also if you take Asia Pacific and in particular, if you take, for example, Australia, our market -- our organic growth in Australia was flattish, while the market in Australia was negative in the region of 3.5%. So that we have also there outperformed the market. So I'm pretty confident that in basically all -- also in Italy, our performance has improved significantly, also in Spain with -- in comparison with Q2, also in Spain, our performance has improved significantly. So that I feel pretty good about our performance in comparison with the market growth.
Andjela Bozinovic: Amazing. And just a second one on your margins, given all the moving parts in 2026 and the top line that we discussed and also the Fit4Growth program, how comfortable do you feel about consensus forecasting around 60 basis point margin improvement for next year?
Enrico Vita: Well, we are not guiding for with regards to next year. What I can tell you is that I'm very confident that we have mobilized our organization on the Fit4Growth program. As I said, actually, we are going faster. And most -- and we are also finding a pocket of further efficiencies in all our areas of the business. So today, I feel very confident that the target that we set for run rate impact in terms of profitability, full year 2027 will be achieved.
Operator: Next question is from Hassan Al-Wakeel, Barclays.
Hassan Al-Wakeel: A couple of questions for me, please. Firstly, just on Fit4Growth. Can you talk about the acceleration in the initiative here and where clinic closures have focused? And given these underperforming clinics, what was the margin benefit in the quarter from these exits? And what are your current plans for future clinic closures versus the 100 thus far? And any potential impact on perimeter changes in '26? And then secondly -- do you want to go ahead, Enrico?
Enrico Vita: No, no. Please, go ahead with the second question.
Hassan Al-Wakeel: So then the second question is, if you could please quantify the mix of returning customers in Q3 in Southern European countries, how that compares to Q2 and your expectations of this changing into next year, and how that would translate to growth overall?
Enrico Vita: Thank you, Hassan. So with regards to the first question and the Fit4Growth. As I said, I'm very happy about the kind of execution that our organization is implementing in all the different levers. And I'm very confident that the plan that we shared with you will be delivered according to plan and even faster. In particular, as you said year-to-date, we have already closed 100 shops. We mentioned also last quarter that in terms of location, initial target was to close or to merge around 250 locations, which means more or less 4% of our network, excluding, of course, shop-in-shops and franchisees. This target, I feel very confident that we can definitely achieve it. In terms of -- in terms of FTE, the reduction in terms of the closures of the stores actually led to a reduction in a number of FTE of about 260 FTEs so far. So on this, we are progressing very well. We will not see any impact from these closures in 2025 because also in relation with these closures, there will be some associated costs so that we will see the benefit of these closure starting from 2026. With regards to the second question and the mix of returning customers, as we said during the last quarter, quarter 2 was affected quite significantly from the anniversary of the COVID in quarter 2, 2020, we had a huge drop in sales around 200 -- around minus 50%, in 45%, something like that in Q2 2020. In March 2020, we had minus 90%. So we expect that the impact of this drop in sales on our returning customer base as peaked in Q2. In Q3, Q4, the impact will be much less than -- of course, looking at 2026, we are confident that our customer base will be increasing on the back of the rebound that we had in sales in 2021. So we should see a much larger customer base on our numbers.
Operator: Next question Is from Anchal Verma, JPMorgan.
Anchal Verma: I'll go with the first question is again on France. Just trying to understand what else you've been seeing in France. So the market grew 6% in terms of volume. But can you please give us an idea on what you've seen in terms of pricing in France? And also, are you able to quantify the sales growth in France for you for the quarter? I'll ask that, then I'll go into my second question.
Enrico Vita: Yes. So with regards to France, yes, we estimated that in the third quarter, the growth will be in the region of 6%. In my opinion, of course, this is lower than we expected. But in my opinion, there is not a lot to be worried. What I mean is that, of course, the growth was driven mainly by the anniversary of the RAC 0 reform, which basically gives for free hearing aids. Of course, given all what happened in France in Q3, consumers were a bit worried. But I'm confident that the kind of demand that is underlying the anniversary of the RAC 0 reform has not disappeared. So this will come back sooner rather than later, as I say, that we see some encouraging trends already in October. With regard to price, yes, of course, the average of our sales now as led to an increase of the category one mix. So there was also a negative, let's say, a lower growth in terms of volume. But what is important, in my opinion, also to underline is the fact that also in France according to our number and estimations, we have performed better than the market, thanks to all the work and all the job that we have done in the past.
Anchal Verma: And are you able to quantify the pricing impact at all for France?
Enrico Vita: Well, it will be just a very limited, few percentage points.
Anchal Verma: Perfect. And then the second question was if we can maybe dive a bit deeper into Americas, and how sustainable do you think is the U.S. growth that you saw in Q3 to continue? And then if you could even pull out essentially what you saw in the U.S. specifically in terms of sales growth? And I appreciate it's only been a month into Q4. But are you able to share any color on how the markets develop and whether these Q3 dynamics could continue for the rest of the year?
Enrico Vita: Yes. Let's say that with the quarter 3, we had a clear consolidation of 2 different trends. One trend is related to the insurance channel. The insurance channel was in the 9 months negative by about 4%. This because of the reduction in coverage on hearing benefits from insurances after a very strong push in the last years. So our view is that the insurance channel, of course, will be the channel growing the most -- the least also in the future. And we expect that some of the clients will migrate from the insurance channel to the private channel. The picture on the private channel is more positive, both in the quarter 3 and also in the year-to-date because in the quarter 3 and in the year-to-date, the growth of the private channel was more positive, more in the region of 2%. So when we look at the total U.S. market being flat in the 9 months, this flattish performance was mainly driven by the insurance channel, whilst the private channel, which is the channel in which, of course, we are focusing the most, it's more strategic for us, performed better. With the Q3, I think that we had a clear consolidation of this kind of trend.
Operator: Next question is from Veronika Dubajova, Citi.
Veronika Dubajova: I'm going to go a little bit bigger picture. And I guess -- I know I ask you this question every quarter, but I'm going to ask you again. We are now in year 3/4 of subdued global market growth. I know that at times, there have been valid explanations for specific softness in select regions. But this now feels a pretty persistent headwind. And I'm just curious sort of if you are at all entertaining that maybe there is a structural change that could be driving this slower market outlook, maybe penetration has reached a certain level, which is still high, maybe consumers are just changing their replacement behavior. Just curious if you see anything at all that could explain that because obviously, it's curious where we've been here for a while now.
Enrico Vita: Yes. Well, let me answer in this way, Veronika. I think that in order to, of course, I mean, I don't think that there is only one explanation. But let's take the U.S. which is, by the way, the biggest market in the world, representing about 40-plus percent of the total market. So in my opinion, is very meaningful as an example. In the U.S., we had plus 10% in 2023. We had plus 6% to 7% in 2024. And then all of a sudden, starting from Q1, we had minus 5%, plus 3%, plus 2%. In my opinion, if there was anything structural you don't have this kind of, let's say, steps, this kind of big swings in terms of market growth. Up to December, in the last quarter of last year, we had a market growing by 6%, 7%. First quarter of 2025, we had minus 5. No structural trends can make this change up and so fast in my opinion. In my opinion, there is an element which is related to consumers, which are definitely more cautious, which are concerned about the external environment and which maybe the purchase power has reduced because of the inflation. And therefore, they are postponing their decision to acquire a hearing aid or a new hearing aid or maybe they are postponing their decision to renew their hearing aid. This is the best picture that I can give you, then we can speculate on many different things. I don't think that there is anything structural also because it is true that penetration has increased, but I'm confident also that it will continue to increase, given the awareness on wellness increasing, given the technology, which is making hearing aids always more discrete, more performing, aging population is still there. So I'm pretty confident that there are no meaningful structural changes that can drive such kind of performance. For example, in the U.S. -- I think the U.S. because, in my opinion, is the biggest market and is the one that can give us some explanation given the fact that the swing in terms of grown has been pretty massive.
Veronika Dubajova: And then maybe just sticking with the U.S. theme, obviously, you've touched upon this change in the commercial market when it comes to Private Pay and insurance. Can you just maybe remind us for your own business, what your exposure to managed care is, how profitable that is? And so how should we think about the impact of the structurally slower growing managed care market as it translates to your business?
Enrico Vita: Yes. With regards to managed care, this is a very good question because now we are also reflecting on the prospect of growth of the managed care now because we don't see actually, the managed care to continue to grow at the same pace that we had -- that we saw in the past because many insurances have decided actually to scale back their hearing benefits in their France. So we do not expect the channel to continue to grow faster. We expect the market now to stabilize at the current level, so that we expect some of the customers migrating from the insurance channel to the private channel.
Veronika Dubajova: So your view would sort of be it kind of -- the overall market growth is unchanged, but the mix changes. And from your perspective, just remind us how big managed care is for you and whether it has an average or below average margins in North America?
Enrico Vita: Less than 20% of the U.S.
Veronika Dubajova: Okay. And profitability-wise?
Enrico Vita: Well, you're asking too -- no, we don't provide this by...
Operator: Next question is from Domenico Ghilotti, Equita.
Domenico Ghilotti: I have 2 questions. The first is on the American market. So in particular, on the profitability because you are still largely down year-on-year despite a lower M&A contribution and quite interesting growth performance. You were mentioning the DOS contribution. So can you give us a sense of what -- if you are seeing an improvement in profitability at the channel level, at the U.S. level, and if you see some kind of stabilization approaching on profitability for the U.S. market? The second is on Italy, Spain, you had been flagging an improvement. I don't understand if still negative, but improving compared to Q2, that was a bit surprise. And if you have been able to better understand what happened there. And so if you see the situation in Italy, Spain, just related to heat wave, as you mentioned or something more?
Enrico Vita: Yes. So with regards to the profitability of the U.S., the profitability of the U.S. has been affected mainly by on one side, the lower operating leverage because, of course, we had definitely a much higher growth -- organic growth than the market, but of course, we were expecting a better market than the 2%. But it is also due to the impact related to the growth of the direct retail in the U.S. also because direct retail in terms of growth has been the driver of the growth of the overall U.S. So let's say, that the lower channel in terms of profitability is the one, which is growing the less -- the least -- the most within the U.S. Then with regards the Italian and the Spanish market, both the markets, in particular, the Italian one in Q2 was pretty negative. Now we are back to a flattish performance in particular in Spain, while in Italy was slightly negative, but significantly improving versus Q2, just to be sure I'm speaking about market. In terms of our performance, there was a massive improvement in terms of performance in Spain and also a very important improvement in performance also in Italy.
Operator: Next question is from Andjela Bozinovic, BNP Paribas.
Andjela Bozinovic: I just wanted to ask about APAC. And if you can give us any details on the dynamics that you're seeing in Australia and China in particular, because I understand these 2 markets are the biggest in APAC. And do you foresee any change in market dynamics going forward because the market has been subdued for quite some time.
Enrico Vita: Yes. No. Unfortunately, the Australian market was negative in quarter 3, low single digit, while actually the second largest market for us is New Zealand, which was negative by mid-single digit. Both, in this case, no structural reason can determine such kind of negative performance than just consumer caution and consumer confidence. In both markets, we believe that we have done better than the market. I feel pretty good about that. I think that in Australia, we are gaining share. So I think that our performance in relative terms was above the market. With regards to China, the Chinese market was flattish basically stabilized finally. And also there our performance was pretty good in terms of market share.
Operator: Next question is from Julien Ouaddour, Bank of America.
Julien Ouaddour: So I had a couple as well. The first one is on '26. I mean, have you done any math around like the renewal tailwind from the 2021 patients, which may return next year, like in particular for Spain and Italy. I mean should we expect these markets maybe to grow single digit, double digits? So any color here would be super helpful? And second question is on Chinese manufacturers, we went to the UIH Congress a couple of weeks ago and we met with United Imaging who basically said they're going to have products in the U.S. and Europe in '26. So I was just wondering if you review these kind of products, if you think of maybe using them also for Europe or the U.S.? And could it be a driver for the gross margin over the midterm?
Enrico Vita: Thank you. So with regards to the first question, at the moment, we don't provide any indication about the positive effects that we might have resulting from the anniversary of the significant growth in the market in 2021. But as I said, on a qualitative basis, we expect that our customer base in 2021, in particular, in 2 of our key markets like Italy, Spain will be supporting the continued improvement of these 2 markets, but also in Portugal, for example. With regards to the second question, of course, we are always monitoring any kind of manufacturer in the hearing space. At the moment, we have no plans with regards to Chinese manufacturers.
Julien Ouaddour: Maybe the other way of asking this question, I mean, have you reviewed their products, which I think is only available in China right now? And just what do you think overall about this product if you have.
Enrico Vita: Yes, yes, of course, we have seen their products, but I think that still our sourcing strategy will be focusing on, let's say, the main 5 ones. Of course, they will improve over time. But for the time being, we are very focused on our supplier base.
Operator: Next question is from Oliver Metzger, ODDO.
Oliver Metzger: One is also a follow-up on China. So you already made a comment versus your performance versus the market. But given -- there seems to be a more profound weakness of the market compared to some years ago. So do you still see for the Chinese market, some return to, let's say, the old high single-digit, low teens performance for the overall market, or do you think that fundamentals have changed that it's just for a Western company, not possible to achieve this growth anymore. Second question is about your general view on pricing. We also heard some comments over the last week about there was some increasing down-trading towards lower-priced hearing aids, meaning from premium to business, business to basically reported. Potentially, you can share your experience from that what you see regarding that?
Enrico Vita: Yes. Well, thank you for the questions. So with regards to the Chinese market, I think that our sector in China in the last couple of years, has suffered from the same reasons of many other sectors, which is about a slowdown in the economy, consumer confidence, et cetera. In terms of fundamentals, the fundamentals, in our opinion, are definitely still there. I mean the aging of population is a big wave that is coming that the people aged 65-plus will increase in the next 10 years by more than 100 million people so which means that there will be some very, very important aging trend supporting the growth of the market which remains definitely a strategic market for us. In terms of the second question and about pricing and down trading, what we -- I can tell you what we are working on more than, let's say, reducing price or something like that. Now we wanted to maybe offer more flexible payments to our clients may be offering financing at better terms, et cetera, et cetera because clearly, in a moment in which consumer confidence is lower, I think that these kind of things can definitely help them to take a decision.
Francesca Rambaudi: One last question, please operator.
Operator: The final question is from Domenico Ghilotti, Equita.
Domenico Ghilotti: Very quickly. On the marketing investments, if you can give us a sense of what has been so far compared to last year or particularly in Q3. And last on the free cash flow generation. I was surprised to see some significant absorption from working capital, so higher than last year. So any specific reason for that?
Enrico Vita: Yes. Thank you, Domenico. So with regards to the marketing investments in Q3 we have accelerated on our marketing investments. Our marketing investments grew a bit more than in the first 6 months. In the first 6 months, our marketing investments more or less grew in line with our revenues, so while -- now we have taken the decision that in a moment like this, I think that we must leverage on our leading position in the market. We wanted to invest more than the others. We wanted to convince customers about Amplifon, we want to continue to strengthen our brands, et cetera, et cetera. So in Q3, we have over invested versus the first half of the year.
Domenico Ghilotti: Have you seen also better traction, sorry, so better traction...
Enrico Vita: Of course, I mean, if you -- since you are in Italy, you have seen that we have been very present in TV. We have been very present in radio. We have been very present in digital, et cetera, et cetera. So of course, these are investments, which, of course, we believe will deliver good return on the investment and will deliver sales. Clearly, it's not something that you invest today, you see the next day. But for sure, for sure, we want to really stick to our strategy of investing on our brands, on our stores, et cetera, et cetera. With regards to the second question on the free cash flow, I will leave to Gabriele.
Gabriele Galli: The most important component of the underperformance in terms of free cash flow Domenico and operating cash flow was clearly driven more by the economic performance than [indiscernible]. If you look at the EBITDA we lost something in the range of EUR 16 million. If you look at the financial expenses, we are higher by around EUR 5 million. This includes also the IFRS 16. And then to the EBITDA, you have to adopt the higher rent cash out. So adding up these 3 components, you sum up around EUR 30 million, which we are behind in terms of operating cash flow.
Domenico Ghilotti: On working capital, nothing to mention.
Gabriele Galli: Nothing capital -- working capital, nothing to mention. I mean moving forward, you can see some ups and downs, of course, I mean, we worked a lot in the past in order to optimize. So maybe that one year, you compare with another year where, I mean, you had improvement in payable, receivable, inventory, but this quarter -- particularly, this quarter, the most important component are the economic one.
Francesca Rambaudi: Thank you.
Enrico Vita: Thank you, everyone.
Francesca Rambaudi: This concludes our call. Thank you for interest and attendance, and I kindly ask operator to disconnect. Thank you.
Enrico Vita: Thank you, bye.
Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.