Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Amplifon Q3 and 9 months 2024 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Ms. Francesca Rambaudi, Investor Relations and Sustainability Senior Director of Amplifon. Please go ahead, Madam.
Thank you. Good afternoon and welcome to Amplifon's conference call on third quarter and first nine months of 2024. Before we start, a few logistical 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 two, 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.
Thank you, Francesca. Good afternoon, everyone, and thank you for joining us today for our Q3 results conference call. As always, let's begin commenting on the quarter's results, starting with the top line and the market dynamics. In Europe, our market was still generally flattish, so it did not yet show the progressive normalization we have been expecting for some time now. Although our market is very resilient, certainly more resilient than many others, at this point, we cannot expect it to be totally immune to consumer confidence that has remained low for several months now in different markets, one of which is Germany, the third largest market in the world and the second in Europe after France. In fact, we estimate that in Q3, the market demand was flattish, slightly negative in Germany, and flattish, slightly positive in France.
So here, we can see an improving trend quarter after quarter. Clearly, we need to see this trend continue also in Q4. As you know, we expect the French market to return to significant growth next year. We estimate that all other markets have contributed to a generally flattish market in Europe with plus and minus. On the other hand, the US market was still solid and broadly in line with our expectations, although it slowed down from the double-digit growth of the first quarter to around 5% in the second quarter and around 4% in Q3. As said, this is in line with our expectations, also considering that the US market grew double-digits last year in Q3. Finally, we estimate that Australia and New Zealand altogether were slightly positive in Q3. Hence, we estimate that our reference market grew globally circa 2% in the last quarter.
In this context, also in this quarter, we pursued strong and generally above-market revenue growth. Our sales were up 8% at constant exchange rates, and this is a substantial achievement if considering our geographical mix, which is, as you know, still more skewed towards Europe, and above all, given that we were measuring ourselves against a very, very high comparison base. In fact, last year, our organic growth in Q3 was at the record level of plus 9%. Commenting then on our performance by region, firstly, in terms of sales. In EMEA, our revenue performance was close to 4% despite the flattish market demand I mentioned and the very high comparison base of last year, so also here, we can see an improving trend quarter after quarter, then I'm very satisfied with our growth in the Americas.
In the U.S., we are proceeding at full speed following our strategic priority to transform our network from franchise to direct retail. As you know, thanks to the latest acquisitions, we can count on a direct network of circa 400 stores today. That's 100 shops more since the beginning of the year. Finally, I'm also very happy with our performance in Asia-Pacific, which continues to deliver strong and well above-market organic growth. In addition to our organic growth, I want to highlight the continued acceleration in our M&A activity. In the past nine months, we have invested EUR 184 million, which is EUR 100 million more than last year, which allowed us to achieve the significant milestone of 10,000 points of sale globally, then regarding the recurring EBITDA, we delivered around EUR 150 million with a margin of 20.3%, 40 basis points below last year.
As said earlier, we have made a clear decision to continue to pursue growth as we see a unique opportunity to consolidate our leadership further in this market environment. So in Europe, for example, we invested more in marketing to overcome the lower consumer confidence. At the same time, in France, despite the still soft market, we are now strengthening our audiologist capacity to be ready for next year's expected market growth. In the Americas, we did not slow down at all. On the contrary, we accelerated the transformation of our Miracle-Ear network, which is, as you know, a key pillar of our growth strategy in the U.S. With this, I will hand it over to Gabriele to give you more details about our financials. Please, Gabriele.
Thanks, Enrico, and good afternoon to everybody. Moving to slide number four, we have a look at the group financial performance in Q3, which, as already commented by Enrico, posted a strong revenue growth at 8% at constant effects, with an above-market organic growth at circa 4% despite remarkable comparison base. In fact, in Q3 last year, we posted a record organic growth of 9% versus Q3 2022, a still flattish European market, and a U.S. market growing at a healthy +4%, though at a slower pace than H1. M&A contribution from bolt-on acquisitions, mainly in France, Germany, U.S., and China, was at a remarkable 4.1%, strongly accelerating since the beginning of the year. Effects had a negative impact, accounting for 1.2% due to the appreciation of the U.S. dollar and the Argentine peso, though reducing versus Q2.
EBITDA recurring came in at EUR 115 million, with a margin at 20.3% due to overall operating leverage and higher marketing investment to overcome market softness in EMEA. The strengthening of audiologist capacity in France to prepare for 2025 expected market growth related to the anniversary of the RAC 0. The dilution effect due to the Miracle-Ear direct retail network accelerated growth in the US, where we acquired 100 stores since January 2024. Looking at our financial performance in the nine months, revenues were up at 8% at constant effects versus nine months 2023, with a strong and above-market organic growth at 4.3% and a remarkable M&A contribution at 3.7%, with circa 370 points of sale acquired year-to-date. FX effects posted a negative contribution of 1.9%, decreasing throughout the period.
EBITDA recurring amounted to EUR 412 million, up around 7% versus nine months 2023, with margin at 23.9%, up 10 basis points versus prior year despite the already mentioned factor. The lower operating leverage and the higher marketing expense investment to overcome the market softness in EMEA, together with the strengthening of audiologist capacity in France to prepare for 2025 expected market growth, and the dilution effect due to the Miracle-Ear direct retail network accelerated growth in the US, where we acquired 100 stores. Moving to chart five, we have a look at EMEA performance. In the quarter, revenue growth at constant effects was around 4% versus Q3 2023, with the organic performance improving across the main countries despite a still flattish market and a challenging comparison base. M&A contribution related to bolt-ons, mainly in France and Germany, was 2.5%.
EBITDA amounted to EUR 82.4 million, with margin at 23.9%, reflecting a lower operating leverage and higher investment marketing to overcome the softness of the market. In particular, in France, we have the country with more affecting EMEA operating leverage, given that on the one side, we were expecting a progressive normalization of the market demand, and on the other, we wanted to strengthen our audiologist capacity to adequately prepare for the 2025 expected strong market demand in light of the RAC0 anniversary. In the nine months, revenue growth was 3.2%, with organic growth at 1.2%, and M&A contribution at 1.9%. EBITDA amounted to EUR 309 million, up 2.9% versus nine months 2023, with margin at 28%, 10 basis points lower than in 2023 for the reasons just mentioned. Moving to slide number six, we have a look at another strong performance of Americas.
Revenue growth in the quarter was 15.3% at current effects, with strong and above-market organic growth across different countries despite a remarkable comparison base, and with both Miracle-Ear and Amplifon Hearing Healthcare posting a strong performance in the US. M&A contribution was over 9%, with acquisitions in Canada, Uruguay, and above all in the US, where we completed since the beginning of the year three sizable acquisitions totaling around 100 shops, thus bringing the Miracle-Ear direct retail network to 400 points of sale. The effects impact was minus 6.3%, mainly due to the depreciation of the Argentine peso easing versus Q1 as a result of the first significant devaluation of the currency in Q3 2023 to 370 pesos per euro from 280 pesos per euro at the end of Q2 2023.
In addition, as you may remember, last year in December, the peso was sharply devalued by the government to 890 pesos per euro from 370 at the end of Q3. Therefore, in Q4, assuming no further significant devaluation by government before year-end, we expect that the forex effect will reverse, being Q4 accounted as the difference between full year and the first nine months of 2024. As a consequence, in Q4, reported sales will accelerate. Effects will reverse to positive, with a negative impact on sales at constant effects and consequently on organic growth. EBITDA amounted to 29.3 million euros, up 9% versus Q3 2023, with margin at 23.2%, down 140 basis points due to the accelerated growth of Miracle-Ear direct retail business in the U.S. and the integration of the circa 100 points of sale acquired since January.
In the nine months, revenue were up 13.8%, driven by a strong organic growth despite the remarkable comparison base. EBITDA amounted to EUR 91 million, up 8.4% versus nine months 2023, with the margin decreasing by 130 basis points for the reasons I just mentioned. Moving to slide seven, we have a look at Asia-Pac performance, where we posted a strong revenue growth despite a remarkable comparison base. In the quarter, revenues were up around 7% at constant effects, driven by a solid and above-market organic growth despite a very challenging comparison base, with Australia posting a strong organic performance. M&A contribution was 3.3%, mainly related to China growing double-digit. Today, in China, we reached over 500 points of sale. In the quarter, effects reversed to positive 1%.
EBITDA reached 25.8 million EUR, increasing by 8.4% compared to 2023, with margin at 26.6%, 10 basis points higher versus Q3 2023, also after the very strong growth of China, where we acquired around 100 stores from January 2024. In nine months, revenue were up almost 10% at constant effects and over 8% at current effects, driven by a strong 6% organic growth and 4% M&A contribution. EBITDA amounted to 73 million EUR, up 9.9% versus nine months 2023, with margin at 26.4%, posting an expansion of 40 basis points even after the very strong growth of China. Moving to slide number eight, we appreciate the Q3 profit and loss. In the quarter, total revenue increased by 6.8% at current effects and 8% at constant effects to 568 million EUR.
Recurring EBITDA came in at EUR 115 million, up 4.8% versus Q3 2023, with margin at 20.3%, a 40 basis point decrease compared to previous year. EBITDA reported was around EUR 114 million, up around EUR 6 million versus 2023 after EUR 1 million one-off cost. D&A, including PPA, grew by EUR 11 million versus last year in light of the significant M&A acceleration and the strong investment in network, IT infrastructure, and innovation, leading the recurring EBIT to EUR 39.5 million versus EUR 45.4 million last year. Net financial expenses amounted to EUR 16 million versus EUR 13 million in Q3 2023, primarily due to the higher net financial debt, including higher lease liabilities following the strong M&A activities and related network expansion, coupled with the increase in market interest rates compared to previous year. Tax rate ended at 27% in line with Q3 2023, leading recurring net profit at EUR 17.5 million.
Moving to slide number nine, we see the nine-month profit and loss evolution. Total revenues increased by 6.1% at current effects and 8% at constant effects to EUR 1.75 billion. Recurring EBITDA increased by 6.9% to EUR 412 million, with margin at 23.6%, up 10 basis points versus last year, thanks to the productivity measures, which more than offset the market softness in Europe and the fast growth of Miracle-Ear direct retail. D&A, including PPA, increased by around EUR 25 million, leading the recurring EBIT to around EUR 192 million in line with last year. Net financial expenses accounted for EUR 43.6 million in light of the previously mentioned reasons, leading profit before tax to around EUR 148 million. Tax rate ended at 27.5%, improving versus nine months 2023, and leading recurring net profit to EUR 107 million, slightly below the EUR 112 million last year.
Net profit, as reported, was EUR 104 million, slightly above the EUR 103 million recorded last year. Moving to slide number 10, we appreciate the cash flow evolution. The operating cash flow after lease liabilities was in the period equal to EUR 150 million versus EUR 169 million strong level achieved in 2023, after higher lease liabilities for the strong network expansion following the accelerated M&A activities, higher financial expenses, and higher seasonal absorption from working capital. Net capex were in line with the previous year at EUR 99 million, leading free cash flow to EUR 50.6 million. Net cash out for M&A was EUR 184 million, more than the double of the EUR 83 million last year, following the significant acceleration of bolt-on M&A, with around 370 shops acquired in the first nine months of 2024, primarily in France, Germany, US, and China.
NFP ended at around EUR 1 billion and 70 million, posting a seasonal increase versus December 2023, after strong investment for around EUR 370 million in Capex, M&A, dividends, and share buyback. Moving to slide 11, we have a look at the debt profile trend and key financial ratios. As mentioned, the net financial debt closed at around EUR 1.07 billion, with liquidity accounting for EUR 168 million, short-term debt accounting for EUR 510 million, and medium and long-term debt accounting for around EUR 727 million. In October, we announced two new sustainability-linked credit facilities for a total amount of EUR 250 million. These credit lines, linked to specific targets of our sustainability plan, allow us to further optimize our financial structure, diversifying our sources of funding and extending the average debt maturity.
Following the IFRS 16 application, lease liabilities amounted to around EUR 510 million, leading the sum of net financial debt and lease liability to EUR 1.58 billion. Equity ended up at around EUR 1.12 billion. Looking at financial ratios, net debt over EBITDA ended at 1.78, slightly increasing versus 1.50 at December last year. After the strong investment plan in Capex, M&A, dividends, and share buyback, net debt over equity ended at 0.96 times. I will now hand over to Enrico for outlook and closing remarks. Thank you, Gabriele. So we are at the last chart of today's presentation, where you can find our key comments regarding the final part of this year. Firstly, we still expect the European market to gradually normalize and, above all, in 2025, return to solid growth, also thanks to the anniversary of the French reform and easier comparison base.
We also expect the U.S. market to continue to grow healthily, in line with our expectations of around 6 plus 6, 7% in 2024. Hence, we see now a global market growing at circa 3% this year. Notwithstanding this market development, which is below our initial expectations and historical levels, we confirm our goal to grow high single-digit at constant exchange rates, thanks to our continued ability to overperform the market and the contribution of bolt-on acquisitions above 3%. Regarding profitability, we now see the EBITDA margin broadly in line with 2023, which is a result of our investments I mentioned earlier, for example, in marketing to respond to the softness of the European market, in strengthening our audiologist capacity in France to get prepared to the next year anniversary of the RAC 0 reform, and the acceleration of the Miracle-Ear transformation in the U.S.
In fact, we are convinced that these investments are crucial for the profitable growth of our company next year and in the medium term. On this note, we are excited to announce the launch of our new television commercial in Italy and Spain this week. The ad, designed to strengthen our brand positioning and create a lasting emotional impact on our audience, tells an authentic and engaging story that highlights our company's unique expertise and care and connects directly to consumer needs. With a creative concept and top-quality production, we believe this commercial will not only capture attention but also expand our target audience, reinforcing our connection with those we serve and driving positive sales results. The campaign will be conveyed via multi-channel and multi-content media plan, focused on TV and digital, with significant investments.
With this, we thank you for your attention, and we look forward to taking your questions. Francesca, over to you.
Thanks, Enrico. I kindly ask Operator to open today's Q&A session. We kindly ask you to limit your questions to maximum two initially in order to give everybody the opportunity to ask questions. Now I turn the call over to Sabrina in order to open for the Q&A. Thanks.
Thank you. This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. We kindly ask to use handsets when asking questions. The first question is from Hassan Al-Wakil of Barclays. Please go ahead.
Thank you for taking my questions. I have two, please. Firstly, on the reiterated top-line guidance and the increased M&A contribution, combined, they imply a lower organic growth for the year. I appreciate the M&A effect was already above 3% at the Q2 stage, but should we read anything into this? Do you think mid-single-digit organic growth in Q4 is realistic, and do you expect an acceleration into 2025 outside of France? I'm thinking other EMEA and APAC in particular. Secondly, on margins, 2024 looks to be another year of margins not expanding. I appreciate you've done a considerable amount of M&A. I'd love to know what you think the M&A dilution on the margin has been and if you can talk to the confidence you have in margins expanding into next year, even in a scenario where growth doesn't accelerate. Thank you.
Thank you, Hassan, for the two questions. So with regards to our top-line guidance, you are right in the sense that now we see an M&A contribution above 3%. We are at about 3.5%-3.7% year to date. I would say that with regards to organic growth, we will see, also this year, as overperforming the market growth. And this is, in my opinion, the most important point. What I mean is that we have always said that, of course, we can't grow organically irrespective of what the market growth would be. And since this year, we expect the market to grow in the region of about 3%.
Definitely, we see ourselves also this year to overperform the market in line with what has always been our overperformance of 1-2%, which is, in my opinion, a significant achievement, also considering the fact that, as you know very well, our business mix is more skewed towards Europe, which has been the continent, the region most affected by the lower market growth, so to be able, in my opinion, to continue to overperform the market despite the fact that, of course, we have been penalized in a sense by the fact that the European market basically this year will grow by what, 1%, something like that, I think it's a significant achievement. Of course, as I said, we can't think ourselves to be completely immune by the market growth reported in the different continents.
Then, with the second part of your question about our confidence to continue to overperform the market and accelerate the market outside France, yes, of course, this is our goal also for next year. We still expect the European market to improve next year because the fundamentals are there, also excluding the contribution that will come from France, and also because the easier comparison base, because also this year we will see a European market actually to grow less than expected. And therefore, for sure, I think there is some demand which is building somewhere across the different markets. So yes, we should see next year, this is not a guidance, but definitely we should see, we expect the European market next year to grow faster than this year. With regards to our margin ability to expand margins, I'm going to repeat myself.
First of all, this year, unfortunately, we saw the European market to grow much less than expected. We took a conscious decision, actually, to continue to pursue growth as we see a unique opportunity for ourselves to continue to strengthen our competitive position in the market. So we did not slow down, for example, our transformation in the U.S. market. Not at all. Actually, we have accelerated that. Just for your reference, this year we have acquired 100 shops more since January 2024, which is a significant amount of shops. We have also invested in audiologists. We are investing in audiologist capacity in France because we are very conscious of the fact that we will need some more capacity next year, given the expected market growth.
I still remember in 2021, after, I mean, during the growth, during the implementation of the RAC 0 reform, we could grow even more than we did, but we had constraints in terms of audiologist capacity. And this is something that we wanted to get prepared for next year. So we are definitely investing in order to get prepared to next year market growth, which we expect more favorable than this year and also for our future growth, not only in 2025 but also in the medium term.
That's really helpful, Enrico. If I can just follow up on M&A, given such a favorable backdrop and your desire to strengthen your competitive position? Yeah. Should we expect a continuation of this high level of activity next year? China has also been a driver of this expansion. What are you seeing on the ground, given soft consumer sentiment?
What's your midterm ambition in terms of M&A for China? Thank you.
Yeah. Well, it's early to say, I mean, if this kind of positive market environment in terms of M&A will continue also next year. For sure, our appetite to continue to grow, coupling organic growth with M&A, is definitely there and will continue to be so also next year. Now, it's difficult to say if it will be above our historical level, which is the case of this year, or below, which was the case, for example, in 2021 or in 2022. With regards to China, I think that we are proceeding in the right direction. What I mean is that we did not go for large acquisitions.
We thought that large acquisitions in China were too risky, also from a management point of view, because in order to manage efficiently large networks widespread across a large geography is something that we saw as risky. So we will continue with our policy, let's say, of piecemeal acquisitions in, let's say, defined regions and cities where we think that it would be appropriate for us to grow market share. Thank you very much. Thank you.
The next question is from Niccolò Storer of Kepler Cheuvreux. Please go ahead. Yeah.
Thank you. Thank you for taking my questions. The first one is on EMEA growth. Still, towards the end of September, you were talking about expectation for 1-2% growth for the year. Now you say 1%, but still in the nine months, we were stuck at zero.
So do you really have evidence that in Q4 we are going to get this implied acceleration, or is it just, I mean, some wishful thinking, and in reality, we are to remain on the flattish side? The second one is on the U.S., and in particular, if you can isolate which was the growth of the U.S. alone, so Americas less all the Latin American markets, less hyperinflation accounting, etc. And related to that, I see that clearly you have had some margin dilution in the Americas. You blamed the M&A. Is it fair to say that without M&A, so keeping the mix direct franchising stable margin would have grown over the nine months or not? If you can elaborate a bit on that. Thank you.
Thank you, Nicola, for your questions. So with regards to the first question, of course, we hope that we are not just doing some wishful thinking about the end of the year with regards to the market growth. Definitely, you may recall that in Q1, we saw a positive market development in Europe. Then in Q3, we saw a flattish market demand. Then in Q2, a flattish market demand. Then in Q3, again, a flattish market demand. So the assumption here is that, as I said also during the comments to my presentation, is that there are no structural reasons why the European market should not come back to growth.
So we are not planning for anything significant above last year, also for Q4 in the European market, but we think that the market growth should, in a way, normalize in Q4, in Q1, and then overall, I mean, in 2025, also thanks to the contribution from France, because we should not forget that the main negative contribution to the flattish market demand in Europe was coming from France, which has been negative also in Q1, Q2. Now in Q2 was flattish, now it's slightly positive. We need to see this trend to continue also in Q4, but definitely in 2025, the French market should give a significant contribution to the growth of the total market and definitely not to be anymore a drag negative, let's say, to give a negative contribution to the total growth of the European market.
With regards to the second question and therefore our performance in the Americas, what I can tell you is that from one side in the US, we continued to grow faster than the market. The reported numbers from HIA with regards to US related to Q3 actually were in the region of +4-5%, and we have continued to outperform the market in the US, which is, again, in my opinion, a good confirmation of the fact that our strategy is delivering definitely good growth. With regards to the last part of your question and therefore our profitability without M&A, yes, definitely, I mean, the main negative contribution to the profitability decrease in the Americas was absolutely coming from the transformation of the Miracle-Ear network from franchise to direct retail.
Also, let's not forget. I like to underline the fact that this year we have acquired more than 100 stores, and therefore there is also some time required in order to integrate them to boost their performance and to increase their performance. Let's not forget that very often our franchisees are family-owned companies, so we need some time actually to bring all the acquisitions to the level that we want. Perfect. Thank you. Thank you.
The next question is from Julien Ouaddour of Bank of America. Please go ahead.
Thank you very much. Good afternoon, everyone. The first one on EMEA market again. France and Germany roughly neutralized them in Q3, so let's say sort of flattish growth. You said the overall European market was also flattish, which means all the countries are under pressure as well.
I mean, could you maybe talk about, let's say, different markets such as Spain, Italy, just to have a sense on where we stand for these ones? My second question is, let's say, on technology. So one of the manufacturers makes a lot of noise at the moment with a new AI deep neural network technology. Could it be an opportunity for you to integrate this technology to your white label brand, which ultimately, I guess, could drive, let's say, customers' interest, but also improve your mix given the highest selling price category? And the third one is just, I mean, sorry, I have to ask it, but usually right comment about the momentum in the first month of the quarter, not this time.
So I mean, is it because you want to keep a kind of good surprise for the full year results in March, or I mean, could you just comment about it? Thank you.
No, thank you. Thank you for your questions, actually. So with regards to the first question, therefore the EMEA market. First of all, you need to appreciate that the French and the German market together account for more than 60%-65% of the total European market. So it is clear that if these two numbers that we see and that we estimate for France, as I said, is something above 0%, the market demand in France is something below 0%. So if you combine the two, which, as I said, is almost 60%-65% of the total market in Europe, of course, I'm not including NHS, which is not in our reference market.
Basically, it is impossible for the European market actually to be very positive or to be very negative. In fact, as I said also during the presentation, we see actually a more scattered performance from other markets with some reporting good growth, some reporting less good growth with no clear pattern. With regards to the second question and therefore innovation, yes, of course. I mean, we welcome innovations. We need innovations, of course, in order to actually, first of all, to improve our mix. On the other side, we need innovation in order to convince customers that maybe bought devices four, five years ago to buy a new one because they can definitely see a better performance, new features, and so on and so forth. So we definitely welcome any manufacturer that is able to introduce to the market new products and new innovations.
With regards to the last question about the momentum in the beginning of Q4, I would refrain to make any comment simply because we have seen in the first nine months that the market showed some volatility. So I don't want to give maybe information that can be different next month, etc., etc. So I prefer actually now not to give you anything special unless we see, again, something special. But we prefer. Perfect. Yeah. Thank you. No,
no. I fully understand. If I can just quickly follow up on, let's say, on the second question. So I mean, would you say that you may be in discussion just to integrate this kind of technology in your product, but it's not the case yet?
No, no, no. Of course. I mean, as you know, in general terms, we are all happy when manufacturers introduce innovations, and of course, we will adopt that, I mean, as soon as available.
Perfect. Thank you very much.
Thank you.
The next question is from Shubhangi Gupta of HSBC. Please go ahead.
Hi. Thanks for taking my question. So my question is on North America. What are your expectations for growth from the North American market given that going into Q4 we would be having tough comps? And then again, with the launch of Apple's hearing aid tech in its AirPods, so what do you think is the impact on the hearing aids in general for you?
Thank you. Thank you for your questions. With regards to the expected market growth for the U.S., year to date, nine months, the U.S. market, these are publicly available numbers, basically grew perfectly in line with our expectation, initial expectation of plus something in between plus 6% and 7%. And this is our forecast also for the full year. We expect a similar trend more or less also for Q4. With regards to the second question, therefore the Apple functionalities that have been added to their AirPods Pro 2, I do not expect any meaningful impact on our industry, on our business, simply because they are targeting a completely different consumer segment. So they are targeting more mild losses, which is not our core consumer segment. And in addition to that, you know that basically we do not sell devices.
We are providing our customers value-added services, which are different from which have a completely different proposition from OTC devices.
Thank you.
The next question is from John Nguyen of Citi. Please go ahead.
Hi. Good afternoon. My question is around the French anniversary, the French reform anniversary. Given that you have started work on adding capacity, are you more or less confident at this point in time around the sort of market growth assumption for next year? I think at Q2 you John Nguyen of Citi. Please go ahead.
As I said also during my presentation, actually, we are doing well because we are very mindful of the fact that in 2021, while from one side we were very happy about the market growth, on the other side, we felt like we did not exploit in full the growth of the market. So this time because of the constraints that we had in terms of capacity, so this time we wanted to prepare ourselves in this regard, so both in terms of capacity, but also in terms of preparing for lead generation, as you mentioned. With regards to the growth that we expect from the market next year, yes, I mean, our assumption is that the market should grow on a full year basis, something above 10%.
Now it's very difficult to say if it is 10% or if it is 15% or whatever, but definitely we should see market growth in the full year. Let me underline that because we expect actually the anniversary to kick in starting from Q2, May, June next year. So we expect a double-digit growth April, May, June next year. So from Q2, we expect we should see a double-digit growth for the full year.
Thank you. And if I could just follow on this, some manufacturers were quite shy away from assuming or estimating a market growth rate for next year because they mentioned factors such as potential leakage of people who may not be wearing hearing aids and only bought them because they were free. Is there something that you have already included in your assumption for the market growth?
Absolutely. Yes. Of course, behind our estimation as well as, I guess, everyone's estimations, there are a number of different assumptions. We have tried to be balanced on our assumptions, and of course, I hope that we are right, but we'll see if we are right or not, but yes, of course, we have taken into consideration many different assumptions, including the one that you mentioned. Thank you.
The next question is from Domenico Ghilotti of Equita. Please go ahead.
Good afternoon. Two questions. The first is on the marketing investments. So if you can give us a sense of how much are you investing this year more than compared to last year? And maybe in particular, you are mentioning Italy and Spain.
So I'm trying to understand if the effort that you are doing now, that you are on air, can translate into sales already in Q4 or if we have to wait for, let's say, early next year for having the results flowing into the top line. And the second question is on China. You were mentioning the double-digit performance, but if I'm not wrong, it was, let's say, including M&A. So I'm trying to understand if there you see how do you see the organic trend in the Chinese region?
Yep. Thank you for your question. So with regards to marketing, you may recall that our plan basically was to grow our marketing investments in line with sales. Now we are some points above that.
And we are doing this from one side because we need to offset the lower consumer confidence that we see in some markets, like for example, Germany or France that I mentioned also earlier. On the other side, we are also, as you also rightly mentioned, we are also investing in order to launch new campaigns. And by the way, I invite all of you to click on the presentation to have a preview of our actual campaign that now is live in Italy and Spain. We expect, of course, these campaigns not to have an immediate impact. This is not the assumption, but of course, we expect to have some positive impact going forward in the next month. And we'll see that. I will definitely be able to report to you about the success of the campaign, which we are very excited at the year-end conference call.
Sorry, maybe just a follow-up. Could you roll out clearly if it is successful, you can say plan to roll out also France and Germany and other markets, I presume?
Yeah, but it will depend from our relative market position. What I mean is that we think that this is something that could work very well, of course, in the markets where we are leaders, where our brand is already very well established. Maybe for markets with less brand awareness or less brand equity, we might need something different. But in general terms, we want to see the platform, let me say, to work here in Italy and Spain before, of course, launching it and rolling out in other markets. With regards to China, so in terms of total growth, we continue to grow very fast.
Of course, in terms of organic growth, we have seen in Q3 a slowdown in comparison with Q2, but we are still happy about our trajectory of growth in China. And we expect actually this, I mean, to improve apart, I mean, apart from the short-term issues of the Chinese economy. Definitely, as you know, we see a clear trend in terms of long-term trends like demographic, like penetration supporting the market growth in the future. So China definitely is confirmed to be as a key driver of our growth in the medium and long term. Thank you.
The next question is from David Adlington of J.P. Morgan. Please go ahead.
Thank you. Most of my questions have been asked, but maybe just one on free cash flow, which is down about 30% in the first nine months in large part due to working capital. I just wondered if you could think or talk through how you expect that to evolve through the rest of this year and particularly into next year and whether we could expect an improvement. Thank you.
Yep. Thank you for your question. And maybe Gabriele, you wanted to answer to this question.
Absolutely. Absolutely. So first of all, we have to take into consideration that our business, as many others, is seasonal. So I mean, we posted an absorption of working capital this year larger compared to the absorption of last year. But I mean, last year we had still in place several actions delivering some improvement.
So I mean, the comparison is putting together a year with a normal trend where there is some seasonal absorption with a year where in 2023 we went on implementing some action, which led us to, I mean, significant improvement in terms of overall absorption of working capital. Moving forward, of course, we have, I mean, for the remaining part of the year, the seasonal release from now to December. And then for next year, I mean, if the market is going to improve in terms of demand, we see some possible improvement also in terms of accounts receivable. Of course, when demand is not super high, in some way you should give some concession to cash. So I'm positive in light of the possible positive development of the market next year here in EMEA. Thanks. Thank you.
The next question is from Hugo Soltys of BNP Paribas. Please go ahead.
Hi. Thanks for taking my questions. I have two, please. One quick clarification on the renewals in France in 2025. You mentioned French market expected to grow low double digits at least. What does it mean exactly in terms of renewal rate? Is it 10%, 20%, 30%, 40%, 50%? That would be helpful to have a bit more detail on this front. And second, if I remember well, back in H2 2023, you increased audiologist capacity in anticipation of a market acceleration, which turned out to be probably softer than what you expected. This year again, you're increasing it mostly for the French renewals in anticipation of next year. So my question is, given all this available audiologist capacity, do you see a risk that you won't be able to leverage the business and expand margin next year if actually market growth does not pick up meaningfully?
And I guess what's the level of organic growth required to leverage the business going forward? Thank you. Thank you. Thank you for your question. So with regards to our assumption for next year, you are right. I mean, we expect the market to grow double digits. Then, as I said before, this double I'm not able to be very honest with you to qualify more about what double digit means, if it is low, if it is mid-teens, etc., etc., because this will depend a lot, of course, from the parameters that you have mentioned, including, of course, repurchase rate. So on this, we have made our assumption, which we think it's not an over-optimistic assumption. It's not a very pessimistic one, but we are pretty confident that we should see meaningful growth from the French market next year.
So with regards with our ability, actually, and to our plan to increase our capacity, of course, we are working not only in terms of number of audiologists. We are also working in terms of training, in terms of many other things, of course. So the capacity in terms of number of audiologists is one of the key things that we are doing. Clearly, in a market like the one of this year, which has been basically zero or slightly negative, this is something that has reduced our operating leverage in the EMEA region. And France has been one of the actually has been the market in which we have, let's say, had a lower profitability than expected because the market actually did not grow as expected. But in general terms, I see very difficult next year French market to not grow substantially.
The next question, please.
The next question is from Niels Granholm-Leth of Carnegie. Please go ahead.
Good afternoon, and thank you for taking my questions. Now, with your activities in China, I'm sure that you have come across some of the Chinese hearing aid manufacturers. Would you consider to take in one of these suppliers in your Chinese operations or even in your European operations? And would you think that there would be substantial cost savings for you to bring in one of the Chinese manufacturers of hearing aids into your stores? My second question would be about the US weather situation. Do you have any stores that would be closed for the remainder of the year because of the storms that we have seen recently? Thank you. Yeah.
With regards to the first question and therefore the Chinese manufacturers, we do not see at the moment Chinese manufacturers to be able to provide us what we require, which is, first of all, high-performing devices, high-quality devices. This is not, I mean, this is not in our plan as of today. For the future, I don't know. I mean, as you know very well, we are committed to provide our customers the best technologies, the best products, quality products, etc., etc. So we will see in the future if any manufacturers coming from China will be able actually to provide all of this. Then, with regards to your question about hurricanes, well, unfortunately, I think that the U.S. has been hit by many different hurricanes.
One in September, so in Q3, that was the Hurricane Helene, if I'm right, which hit Florida and southeastern U.S. states during the 25th and 30th of September. Yes, during that period, during that time, we had some stores closed on one day. I think, out of my memory, around 50 stores closed for one or two days. Then, yes, we also had the Hurricane Milton in October. Also, in this case, we had some stores closed for some days. Yeah. Of course, I can't provide you any quantification, but let's say that as of today, all the stores are back to normal operations.
Thank you. Maybe last question. Last? We had Robert also in queue, and then we will close. Thanks. Last question, please. The last question is from Robert Davies of Morgan Stanley. Please go ahead. Yes.
Thanks for taking my questions.
The first one I have is just around the margin trajectory for the company. If I look back over the last five years, you've been sort of within that sort of 24%-25% band. How should we think about that margin band kind of going forward if you're continuing with the level of M&A in the U.S., you're continuing with sort of the higher level of spend from marketing and even some of these additional costs ahead of the French reform? Is there any sort of scope for that to go up, or are you sort of comfortable in that 24%-25% band, and it's really sort of pushing on the growth side that's more of a focus view? And I guess tied into that, could you quantify how much sort of upfront costs you've loaded in preparing for this French reform?
Because I know you called it out as one of the sort of drags on the lower margin for the year. Thank you. Thank you. Thank you for your questions. So with regards to our margin development, let me underline one point, which is about the fact that the main reason for our margin-related development is related to the growth of the European market. That is by far the most important reason for our margin development in the last two or three years because let's not forget the fact that basically now we see a flattish market demand in Europe for three years in a row. I mean, this year, 2024, 2023, and 2022.
So let me say that at the end of the day, I think that we have done a decent job in terms of margin development in consideration of the fact that Europe did not grow as expected, did not grow as, I mean, at the historical levels. And I think we all know the reasons which are related also to the economic situation in Europe, etc. Let me say that, of course, I'm positive that in the future we can reestablish a positive trajectory on the back of the fact that from one side, the fundamentals of the markets are definitely still there.
On the other side, definitely we expect a market, a much more positive market next year, I mean, at least because of the very positive contribution from the French market, which, on the contrary, was the main negative contribution to the growth of the European market in 2022 and in 2023. Let's not forget that the French market actually has become, after the French reform, the biggest market in Europe and the second largest market in the world after the U.S. With regards to the quantification, I can't give you a number as of today. But of course, as I said, we do not want, I mean, if we were just looking for efficiency, given the market development, maybe we should have reduced our number of audiologists. We thought that would have been a stupid thing in consideration of how we see the market growing next year. Understood. Okay.
Thank you very much. Thank you, everyone. Thank you. Thank you.
Thank you, everybody. And I kindly ask Operator to disconnect. Thanks.
Thank you. Bye. Bye.
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