Operator: Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Amplifon’s First Quarter 2022 Conference Call. As a reminder, all participants are in listen-only mode. [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 the first quarter 2022 results. Before we start, few logistic comments.

Earlier today, we issued a press release related to our results and this presentation is posted on our website. The call can be accessed also via webcast and dial-in details which are on Amplifon’s website, as well as on our press release. The call can be accessed also via webcast and dial-in details which are on Amplifon’s website as well as on our press release. Please also let me drag your attention that in light of the wind-down of Elite, which was completed in Q4 2021 and treated as discontinued operations following IFRS 5 application, Elite’s P&L is excluded from Q1 2021 comparative period which has been restated as through the line profit from continuing operations. With that, I am now pleased to turn the call over to Amplifon’s CEO, Enrico Vita.

Enrico Vita: Thank you, Francesca. Good afternoon, everyone and thank you for joining us today. Today, I am pleased to comment on another quarter of very strong results, quarter of remarkable results in absolute terms, even more remarkable considering back in January in many markets we still saw some impacts of the last COVID-19 wave of infections, which also protracted through most parts of the quarter in Australia and New Zealand. So, let’s start by going over some of the key numbers and achievements of the quarter. Revenues were up almost a 16% at current exchange rates and 14% at constant exchange rates.

Once again the composition of the growth was very healthy and in fact, the organic growth was close to 9% a value we estimate well above the growth of the markets. Regarding the EBITDA recurring, we delivered around €113 million, and the margin increased by 40 basis points to 22.8%, perfectly in line with our full year targets on profitability. Then, we posted a net profit recurring of €32.8 million, increasing by a remarkable 34% versus 2021. The net financial position was at €868.6 million, slightly reducing versus year end despite the lower seasonality of our business in Q1. Finally, amongst the achievements of the quarter, I would like to mention our third acquisition in China, 20 stores located primarily in the Hubei province.

With this last acquisition, our network is getting sizable and now consists of circa 140 stores. I now hand over to Gabriele to give you more color about our financials. Please Gabriele.
Gabriele Galli : Thank you, Enrico and good afternoon to everybody. Moving to Chart #4, we have a quick look at the Group financial performance in Q1, which as already commented by Enrico, posted an excellent start of the year.

In the quarter, revenues at constant ForEx increased by over 14% versus 2021 with an excellent organic growth at almost 9% and around 5% of M&A contribution, primarily for Bay Audio consolidation. Forex was positive for 1.7%, primarily for U.S. dollar appreciation. EBITDA recurring came in at around €113 million with a margin at 22.8%, up 40 basis points versus 2021. Thanks to the strong revenue performance, coupled with the structural efficiencies and productivity enhancements and scale reach in core countries.

This strong EBITDA increase was achieved even after sizable investments in the business, including marketing and several strategic initiatives ongoing. The outstanding profitability was also reflected at bottom-line level with net profit recurring at around €33 million, up 34% versus Q1 2021. Moving to Slide #5, we have a look at EMEA very strong top-line performance despite the January peak in Covid contagions and the challenging comparison base in France at the end of the quarter. Revenue growth at constant ForEx was around 9% versus 2021 with an excellent and above market organic growth at 8%. M&A contribution was around 1%.

Excellent performance was reported across all markets with Spain, Portugal, UK and The Netherlands growing organically double-digits. Good performance was also recorded in France, despite a more challenging base at the end of the quarter following the regulatory reform introduced last year. EBITDA amounted to around €93.5 million, up 13% versus 2021 with margin at 27.5%, up 90 basis point, thanks to the improved efficiency and the scale reach in core countries. Moving to Chart #6, we have a look at another impressive performance of Americas. Revenue growth was around 23% at constant ForEx with an excellent organic growth at around 20% driven by an outstanding performance in the U.S.

over 3x the market as well as double-digit organic growth in both Canada and Latam. M&A contribution, primarily related to U.S. and Canada was 3% versus 2021. Total ForEx effect was positive for over 7% versus 2021, year-to-date U.S. dollar stronger appreciation.

EBITDA amounted to €20.7 million with margin at 24.6%, up 40 basis points versus Q1 2021. Moving to Chart#7, we have a look at the APAC performance fostered by Bay Audio consolidation though impacted by the soft market environment. Revenues were up 34% at constant ForEx mainly driven by the significant M&A contribution related to Bay Audio and the Chinese joint venture. Organic growth was positive for 0.5% despite soft reference market due to the peak in COVID-contagions and related impact in Australia, New Zealand and China and the severe floods which impacted Eastern Australia in February. EBITDA reached €19.3 million, an increase of 21.6%, compared to 2021 with margin up 27.1% contracting versus Q1 ‘21 due to the significant investments in marketing in Australia and the lower operating leverage due to lower than expected organic growth.

Moving to Slide #8, we appreciate the Q1 profit and loss. In the quarter, total revenues increased by 15.7% to €496 million, with an excellent strong 8.8% organic growth. The outstanding top line growth, together with the structural efficiencies and the greater scale led the EBITDA recurring margin at 22.8% with an improvement of 40 basis points versus 2021. Recurring EBITDA increased by 17.7%, or €17 million to around €113 million. Reported figures just include around €3 million one-off costs, primarily related to integration costs for Bay Audio and guys.

Net financial expenses accounted to €8.4 million, led profit before taxes to around €47 million from around €35 million in Q1 2021, posting a 32% increase. Tax rate, as usual slightly higher in the first quarter versus the following due to the seasonality posted a 130 basis point reduction versus 2021, leading recurring net profit at around €33 million plus 34% versus Q1 2021. Moving to Slide #9, we appreciate the cash flow evolution. Operating cash flow after lease liability was in the period equal to €74.5 million, posting an improvement of €7 million or 10% versus 2021. Net CapEx increased by €6 million, to €21 million, leading free cash flow to over €53 million, slightly higher than Q1 2021, which was highly a comparative figure.

Net cash-out for M&A was around €24 million driven by bolt-on acquisition, primarily in China, France and Germany. Following the strong buyback of 800,000 shares or €29 million short in the period, net cash flow for the period ended at positive for €0.7 million versus a positive €7.3 million in Q1 2021. NFP ended at €869 million, slightly improving versus year end 2021, even after the strong investments in CapEx, M&A and buybacks. Moving to Chart #10, we have a look at the debt profile and the key financial ratios. As mentioned, the net financial debt closed at €869 million, with liquidity accounting for €292 million, short-term debt accounting for around €150 million and medium long-term debt accounting for around €1 billion.

This confirms the very strong financial profile of the Group with a financial headroom of €550 million including the undrawn revolving credit facilities. Following the IFRS 16 application, lease liabilities amounted to €470 million, leading the sum of net financial debt and lease liability to €1.34 billion. Equity ended up at around €980 million with an increase of over €50 million versus December last year. Looking at financial ratios, net debt over EBITDA ended at 1.64 improving versus December 2021 despite seasonality and after strong investment, and net debt over equity ended at 0.89 versus 0.94 at the end of 2021. I will now hand over to Enrico for the outlook and the closing remarks.

Enrico Vita: Thank you, Gabriele. So, we are at the end of today’s presentation, another strong start to the year. We are extremely satisfied with our performance in Q1 and even of course some degree of uncertainties still persists due to the well-known current geopolitical issues, also in light of our strong Q1 performance, we can today confirm with confidence our guidance for 2022. We are also very confident about our targets for 2023 and the medium term as we are progressing faster in the execution of our strategic plans. With this, I would like to thank you all for your attention and we look forward to taking your questions.

Francesca, over to you.

Francesca Rambaudi: Thanks, Enrico. I kindly ask operator to open the Q&A session. Please kindly limit your questions to maximum two initially in order to give everybody the opportunity to ask questions. Now I turn the call over to Judith in order to open for Q&A.

Thanks.

Operator: [Operator Instructions] The first question is from Niccolò Storer with Kepler. Please go ahead.
Niccolò Storer : Good afternoon, everyone.

Enrico Vita: Hi, Niccolo.

Niccolò Storer : I have a few questions if I may. The first one is on – a clarification on your guidance. If you can remind us if it includes or excludes the FX or its contribution that you arguably going to have in this 2022? Second question is on an update on labor cost inflation and product availability. And the last one is a very quick one if you have noticed since the beginning of the change in the mix of your customer meaning returning versus new one. Thank you.

Enrico Vita: Thank you, Niccolo, for the questions. So, with regard to the first one and the guidance of course, our guidance did not include any currency effects, any material currency effects. With regard to the second question about labor cost inflation and product availability, I think we discussed also during our last quarterly call that we are not concerned overall about labor cost inflation in the total P&L of the Group. I also mentioned just a couple of exceptions and I think I mentioned Australia and in France, both markets – in both market we saw some labor cost inflation for different reasons. In Australia mainly because of the fact that as you may recall the Australia market was used to source a number of audiologists from abroad and in particular from India, which was not possible during the last few years because of the fact that the borders were closed and this led to some labor cost inflation for audiologists.

The second exception that I mentioned was related to France. This was more led by the strong exceptional growth of the market last year following the regulatory reform at the beginning of the year. In this case, of course there was a significant demand for audiologists and also this led to some labor cost inflation. Overall, [Indiscernible] to be concerned in the global P&L of the company. With regard to product availability now, I can confirm that we are not experiencing any significant availability issue in terms of products and I do not expect to experience also any product availability issue also in the coming months.

With regard to the third question and for change in the mix between returning customers and new customers, no, nothing really relevant, nothing that comes to my mind. So, don’t think that we have seen anything in terms of change of mix of customers.
Niccolò Storer : Perfect. Thank you very much.

Enrico Vita: Thank you.

Operator: The next question is from Veronika Dubajova with Goldman Sachs. Please go ahead.
Veronika Dubajova : Yes. Hi, good afternoon Enrico and Gabriele and thanks for taking my questions.

Enrico Vita: Hi, Veronika.

Veronika Dubajova : I’ll keep it to two. My first one and apologies if these are a little bit technical, but my first one is just on Americas’ margin and just slightly surprised by the margin that you reported given the very strong cost that you had experienced in the quarter which should have given you little bit more operating leverage with it, so just curious is there a mix issue? Was a there a phasing of expenses issue? Just slightly surprised by where the profitability in Q1 shook out in the Americas and I guess, is this something we should be extrapolating into the remainder of the year or not? That’s my first question. And my second question is on China, and given where we are with lockdowns, just the kind of mark-to-market from you on the type of revenue performance that you saw in March and April, and again your kind of thoughts around when the lockdown might be lifted and to the extent that they persist through the second quarter, what kind of impact should we be modeling on a four year basis from that? Thank you guys.

Enrico Vita: Thank you. Thank you, Veronika for the questions.

So, with regard to the first question, to be honest, I am not quite happy with the margin improvements in Americas, simply because the priority there is low. And you know we want – the Americas is our priority number one in terms of growth. We expect the Americas actually to be the leading region also this year in terms of growth, now we are focusing definitely on growth and delivering some profitability improvements. So, we continue to invest heavily in all the different parts of the business starting from the marketing, continuing with organization in order to drive mainly growth. So, let’s say that this is a kind of a margin improvement that you should also expect going forward, plus and minus is of course, but the priority number one for the Americas is growth and as you can see from our results in the last couple of years, we are constantly outperforming the markets.

Also in this first quarter, our growth was almost three times the growth of the market which is exactly the result that we wanted to achieve in Americas, and in particular of course, in the U.S. With regard to the second question, China, as you know in the total group represent today still a very, very limited part of the business, I would say less or about 1%, it’s impossible really for me to make any prediction about when the restrictions will be lifted in the future, I don’t know to be honest with you. Today we know about Shanghai, we know about Beijing, et cetera, but considering the fact as I was saying still China represents about 1% above our total sales on a yearly basis, you should not expect on the total group P&L any material impacts.
Veronika Dubajova : Got it. Okay.

Thank you so much. That’s really helpful.

Enrico Vita: Thank you.

Operator: The next question is from Oliver Metzger with Oddo BHF. Please go ahead.

Oliver Metzger: Yeah, good afternoon, gentlemen. Thanks a lot for taking my questions. But first one is your EBITDA margin in EMEA. So it was up 90 BPS this quarter whereas been [Indiscernible] apart from organic growth and that for operating leverage, so would you regard this increase as proxy also for next quarters in EMEA? That’s number one. And number two is about the EBITDA margin decline in Asia Pacific.

You just scratched on the surface on the different factors that you can elaborate more in detail of what was the reason for this strong decline and what – basically which factors draw up and down?

Enrico Vita: Thank you. Thank you for your questions. So, with regard to your first question and this is for maybe the margin of the EMEA region, yes, we expect why on the revenue growth we expect the Americas to be the leading region. On profitability side, we expect the EMEA region to be the leading one. So, EMEA is definitely where we see the biggest potential in terms of EBITDA margin increase also going forward.

With regard to the second question and for the APAC region, well, we estimate that the three, I mean, Australia and New Zealand markets were quite soft in the first quarter, in particular New Zealand was negative in terms of market growth. This because as you – I am sure you know, in New Zealand we had the highest peaks in terms of COVID contagions up to more than 25,000 cases there per day, which is the maximum registered in the New Zealand since the beginning of the COVID. This led to a market very, very – market softness actually. Similar pattern also in Australia with the last wave of COVID contagions during throughout the quarter one. I have also to mention the fact that during quarter one in Australia, we also experienced a number of shops closed because the famous floods in the two regions in Australia, which led to more than 200 working days lost in Australia.

So, it was a quite complex quarter. On the other side, we did not stop investing in marketing actually. In the first quarter, our marketing investments were up versus the previous year a lot more than 50% than the previous year. This was the main reason because of the profitability decrease in the quarter one. Of course, it wouldn’t make any sense for us to stop investing in marketing in – you know, which is our medium and long-term plan in building the most known – the most valuable brand in Australia and wouldn’t make any sense actually to stop investments because of the softness of the market for a few months.

Oliver Metzger: Okay. Thank you. I have one follow-up please regarding Asia Pacific. So, basically one-third of the second quarter is already done. Can you confirm what you see currently in April some recovery or some normalization of Asia Pacific?

Enrico Vita: Well, April in general sense was quite difficult month to read because of the Easter and et cetera, et cetera.

But for sure in Asia Pacific our goal is to continue to grow and to come back to growth for the remainder part of the year. But still some impact in Asia Pacific. We saw some impact in Asia Pacific because in particular of what I was mentioning before regarding the number of the impact of the last wave of COVID-19.

Oliver Metzger: Okay. That’s helpful.

Thank you very much.

Operator: The next question is from Giorgio Tavolini with Intermonte. Please go ahead.
Giorgio Tavolini : Hi, good evening and thanks for taking my questions. I was wondering if you can elaborate more on your performance in the U.S., in particular, if you could provide more update on Miracle-Ear, you are entering the managed care segment and the PJC contribution and Amplifon hearing healthcare.

So, just to have a clear idea of what was the largest contributor to your outstanding performance in that country? And secondly on Australia, I was wondering if you could update more on Bay Audio integration. How it’s progressing? What level of synergies you have achieved so far? Thank you.

Enrico Vita: Thank you. Thank you for your questions, Giorgio.
Giorgio Tavolini : So, with regard to the first question, in America we continue to see strong growth from all the different business units.

We performed very well in Miracle-Ear both in the franchising part of the business, but also in our direct operated store network side. So, and also Amplifon hearing healthcare reported quite strong growth. So, I wouldn’t mention one business unit performing better than the others. We have experienced quite strong growth across all the business. With regard to the second question and for – can you please remind me the second question?
Giorgio Tavolini : Yeah, it was about Bay Audio integration and the synergies.

Enrico Vita: Alright. Okay, sorry. Yes, with regard to the second question and for Bay Audio, Bay Audio was impacted likewise Amplifon from the environment that I described before. However, I can tell you that in terms of synergies, we are performing very well. We have already reduced and some costs leveraging on the global procurement operations.

So, I can definitely confirm the synergies that we have already declared for Bay Audio this year.
Giorgio Tavolini : Thank you. Just for a clarification, I was wondering on the managed care in the U.S., if you are seeing any – let’s say any change in the attitude by your competitor like Demant or if you are seeing some competitors reducing disposure. So, you can benefit from this strategic changes from your competitors. Thank you.

Enrico Vita: I am not able to comment on that. We saw definitely strong performance from Amplifon. I think it’s very difficult to say, so this is because of a different approach from many of our competitors to be honest.
Giorgio Tavolini : Fair enough. Thank you.

Enrico Vita: Thank you.

Operator: [Operator Instructions] The next question is a follow-up from Veronika Dubajova with Goldman Sachs. Please go ahead.
Veronika Dubajova : Yes, hi. Thanks for squeezing me in at the end.

Just I was wondering, Enrico, if you can comment a little bit on the M&A environment that you are seeing out there in terms of asset availability, prices and degree of competition. We’ve obviously seen a couple transactions in the U.S. in particular very recently and I’d just love to get your thoughts on what’s the environment like on the ground? Thanks.

Enrico Vita: Thank you, Veronika. To be honest, we have not seen a significant change in terms of environment for – related to the targets that we are pursuing.

We have seen, of course, different deals and some we were interested and some we were not actually, but I can tell you that I feel good, I feel very confident with the same kind of financials that we have been used in the last few years. So, I do not see anything really changing in such a way that I need to report to you. We continue definitely to make the M&A part of our strategy and I feel very confident that we will continue to have a significant contribution as we had in the past from acquisitions.
Veronika Dubajova : Understood. Thank you.

Operator: The next question is from Alessandro Cecchini with Equita. Please go ahead.

Alessandro Cecchini: Hello everybody and thank you for taking my question. So, I would like to have a more color on the U.S. market at the moment.

So, after the first quarter if I remember correctly, so last year you had a very, very strong second quarter. So I would like to understand the current environment you are seeing in the U.S. markets? Thank you.

Enrico Vita: Absolutely. Thank you.

Thank you for the question. Well, you are absolutely right. And I would comment about the U.S., but it’s what I am going to make is a comment which is also valid for our – at the Group’s level. If you recall last year, we had a very, very strong Q2 in the U.S., as far as I remember our growth in the U.S. last year was over 50%, 55%, something like that.

So, clearly, and the reason for this kind of performance last year was the fact that after the Q1, there was, let’s say the release of a big part of the pent-up demand from all the previous quarters and for also – we performed once again much better than the market but also the market was quite strong last year. Also Q3 in the U.S. was quite strong, very strong actually. And then, we saw a more normalized growth in Q4. This is valid for the U.S.

but in general terms it’s valid for with regards the global operations to the total Group.

Alessandro Cecchini: Okay. Thank you.

Enrico Vita: Thank you.

Operator: [Operator Instructions] Ms.

Rambaudi, there are no more questions registered at this time. End of Q&A

Enrico Vita: Thank you.

Francesca Rambaudi: Thank you. So I think we can close the call. Thanks, everybody, for your interest and attendance, and I think we can close the call.

Thank you Judith.

Enrico Vita: Thank you. Thank you, everyone and see you soon.

Gabriele Galli: Thank you.

Operator: Ladies and gentlemen, thank you for joining.

The conference is now over and you may disconnect your telephones.