Earnings Call: Q2 2021

Jul 29, 2021

Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Amplifon First Half twenty twenty one Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to Ms. Francesca Ambaudi, Investor Relations Director of Amplifon. Please go ahead, madam. Thank you. Good afternoon, and welcome to Amplifon's conference call on first half twenty twenty one results. Before we start, few logistic comments. This morning, we issued a press release related to our results and this presentation is posted on our website in the Investors Relations section. The call can be accessed also via webcast and dial in details are as well on the website and on the press release. I have to bring your attention to the disclaimer on Slide two as some of the statements made during this call may be considered forward looking statements. Please also let me drive your attention to the fact that this year we are also reporting 2019 income statement data for greater comparability purpose given the impact of the pandemic on 2020 financials. From this quarter, we are also reporting some income statement data without Elite. The commentary will be therefore also based on these figures. With that, I am now pleased to turn the call over to our CEO, Enrico Vita. Thank you, Francesca. Good afternoon, everyone. Welcome to our quarterly conference call for the Q2 results. So today, we have many things to share and discuss with you. First of all, our results for the quarter. By far the best quarter ever in the history of our company. In fact, in comparison with Q2 twenty nineteen, our revenues increased by circa 20% at constant exchange rates and the organic component of the growth was truly outstanding, above 15%. This growth was also very well balanced across all the regions and all core markets. And once again, I believe that also during this quarter, our revenues have led us to significant market share gains in all major markets. In terms of profitability, we continued to reap the benefits of the huge work done on our cost base since the very early days of the pandemic, making our company even more efficient before. The increase in profitability of 180 basis points is even more remarkable in consideration of the significant investments in marketing and also in several key initiatives at corporate level. The cash generation was also superb, allowing us to achieve a very healthy net financial position in the region of $620,000,000 Then on the numbers, three very important moves that confirm and put into practice three of our strategic beliefs. The first belief I'm referring to is about the value of market leadership in core markets. The second belief is about the value of business simplification to favor speed and agility of execution. The third and most probably the most important one is about the belief that the direct relationship with end consumers is what really matters in our sector. And it is under this light that you should see our acquisition of BAE Audio in Australia that will give us the opportunity to create in combination with Amplifon and Atune a fantastic platform to boost growth and profitability and win in that core market. And also our second JV in China, another small but meaningful step to build a strategic presence in that high potential market. Finally, it is also under this slide that you should see our decision to exit the last wholesale business left within our group, and I'm obviously referring to Elite in The U. S. But to talk about this, we can now move to the following chart, Chart four. In fact, today, we are announcing our intention to wind down Elite, which clearly has been a very difficult decision, however, a decision forced by several observations and facts. First of all, you know that Elite sells hearing aids mainly to independent practices, a channel that has been constantly declining, and we continue to decline as a consequence of the consolidation process that has been in place in our industry now for a while. You also know that has been clearly dilutive to our profitability and growth in the recent years. Above all, Elite business model is clearly no longer strategic for us because lacks of the direct relationship with end consumers that I mentioned earlier on. I say that it has been a difficult decision, but I'm convinced that it has been the right decision for our company because it will allow us to continue and accelerate our journey of transformation in The U. S, focusing all our resources, investments, talents and managerial time on our two most potential and successful businesses, Miracle Ear and Amplifonet Ear and Care, operating in the two fastest growing channels of the market. I now hand over to Gabrielle to give you more details about the implications of these moves on our numbers. Thank you, Henrico, and good afternoon to everybody. Moving to Chart five, we have a look at Elite's key financials and the accounting treatment related to its work down. In 2019, Elite reported revenues of $78,000,000 and an EBITDA margin of around 17%. In 2020, with the pandemic, sales were down to $60,000,000 and EBITDA to around $6,000,000 representing around 3.51.5% of group's revenues and EBITDA. Clearly, in the last years, Elite has been dilutive to Amplifon fast growing and profitable business. The wind down of Elite, which represents a separate major line of business, will be treated as discontinued operation following the IFRS five accounting principle. In particular, Elite profit and loss data will be excluded from the group's consolidated profit and loss in the comparison periods starting from the date of effective discontinuation, with the result of discontinued operation to be reported in a separate profit and loss line named net result after discontinued operations. As of today, we expect the potential cost associated to the discontinued operations of Elite to be around €10,000,000 The vast majority represented by non monetary cost including goodwill write off. The wind down of Elite business is currently expected to be effective and completed by the end of twenty twenty one. Moving to chart number six, we have a quick look at the group financial performance in Q2, which as already commented by Enrico posted outstanding results. Since the performance of Q2 twenty twenty was heavily impacted by COVID outbreak, I will comment our results primarily versus 2019, representing a much more meaningful comparable basis. In the quarter, at constant ForEx, revenues increased by around 20% versus 2019 with an excellent organic growth at 15%. EBITDA recurring came in at €136,000,000 with a margin at 26.3%, up 180 basis points versus 2019, thanks to the strong revenue performance coupled with the structural efficiencies and productivity enhancement derived by the measures implemented for the pandemic. The strong EBITDA increase was achieved even after sizable investment in the business with marketing investments up by 20% versus 2019 and several strategic initiatives ongoing. Let me also draw your attention in this slide on the pro form a figures for the period. Excluding Elite from both Q2 twenty twenty one in comparison periods, revenues at constant ForEx would have been up 20.9% versus Q2 twenty nineteen, fueled by an impressive organic growth at plus 16%. EBITDA recurring margin up 26.8%, up 200 basis points versus Q2 twenty nineteen. Moving to the following chart, we have a look at our financial performance in H1. Revenues as constant ForEx were up over 17% versus 2019 with a well above market organic growth at around 12%, M and A contribution up over 5% and ForEx impact at minus 1.8%. EBITDA recurring amounted to €233,000,000 up around 25% versus 2019 with margin at 24.3%, up 180 basis points versus H1 twenty nineteen. Looking at pro form a figures excluding Elite, revenues at constant ForEx would have been up 18.6% versus 2019, followed by an over 13% organic growth. EBITDA recurring margin up 24.8%, up 200 basis points versus H1 twenty nineteen. Moving to Slide number eight, we have a look at EMEA excellent performance. In Q2, revenue growth was 12.1% across ForEx with a well above market organic growth at 9.5%. M and A contribution was 2.6%. Excellent organic growth was reported in France, also driven by the recent regulatory change, Spain, Portugal and Belgium. EBITDA amounted to €112,000,000 up around 32% versus 2019 with margin percent, up four sixty basis points versus 2019, thanks to improved efficiency and productivity as well as to the outstanding performance of Spain and operating leverage. In H1, revenue growth was around 11% at constant ForEx with a strong organic growth of over 8%. EBITDA amounted to €195,000,000 up 33% versus twenty nineteen with margin at 24.3%, up four seventy basis points versus 2019. Moving to slide number nine, we have a look at Americas, really impressive performance in Q2. Revenue growth was around 53% at constant ForEx versus 2019 with a stellar organic growth at 39%. Thanks to an excellent and well above market performance in The U. S. Driven by the outstanding performance of Miracolio. Strong performance was also reported both in Canada and LatAm. M and A contribution was around 14% versus Q2 twenty nineteen, primarily reflecting the TJC hearing acquisition. Total FX was negative for over 14% due to the euro appreciation versus dollar and LatAm currencies. EBITDA amounted to €23,500,000 with margin at 24.7%, up 90 basis points versus twenty nineteen. Looking at pro form a figures excluding Elite, revenues at constant ForEx could have been up by 72% followed by an impressive 54% organic growth around 2.5 times EBITDA. EBITDA recurring margin at 27.8%, up 170 basis points versus 2019. Moving to slide number 10, we have a look at Americas performance in H1. Revenues were up by 44% at constant ForEx, driven by an excellent organic growth of around 29%. EBITDA amounted to €40,000,000 with margin at 23.1%, up 100 basis points versus 2018. Looking at pro form a figures excluding Elite, operating as a constant ForEx would have been up by 64% versus 2019 followed by an outstanding 44% organic growth. EBITDA recurring margin at 26.2%, up 170 basis points versus twenty nineteen and three ten basis points higher than EBITDA including EBIT. Moving to Slide 11, we have a look at APAC performance. In Q2, revenues were up 28% at constant ForEx, driven by an excellent organic growth of around 22. M and A contribution related to Atune and accounted for around 6.6% versus 2019. ForEx was positive as well. In the quarter, Australia, New Zealand and China posted double digit organic growth versus 2019. EBITDA amounted to €18,000,000 with margin at 29.3, up 80 basis points versus 2019. In H1, revenue were up 23% at constant ForEx driven by a very strong organic growth of 15%. EBITDA amounted to around €34,000,000 with margin at 29.7%, slightly contracting by three basis points versus 2019, reflecting the continued strong investment in marketing in Australia. Moving to chart 12, let me spend a few words on another milestone in Amplifon growth story, the acquisition of Audio announced last July 12. Bay Audio represents a truly unique opportunity for us, allowing us to build another company's stronghold in Australia, One of our core markets. Leodo leverages on innovative retail model based on stores located in high traffic premier and urban shopping malls on a highly recognized brands, thus representing the ideal addition to our existing businesses of both Amplifon and Assure. Similarly to Amplifon, Bei Audio also represents a fantastic story of growth. In the last five years, Bei Audio revenue CAGR has been above 20% despite the impact of the pandemic in 2020 and 2021. In the last financial year, they posted the revenue slightly above 100,000,000 with a strong profitability. Even more significantly, revenues for these financial years free from pandemic are expected to grow by around 30%. As already communicated in terms of timing, we currently expect to close the transaction by the end of this year. Moving to Chart 13, let me also spend a few words on another small, but meaningful recent M and A transaction, our second joint venture in China. This transaction represents another important step in our journey to build a leading position in the strategic Chinese market, which represents a sizable medium term opportunity given the estimated market size and its outstanding growth potential. The joint venture named Soundbridge, of which we control 51%, operates 45 high quality shops located primarily in the Florid Geyard region. This second joint venture perfectly complements our current presence in the Beijing area, thus allowing us to reach a total network of around 100 points of sales and an expected combined turnover run rate for 2021 of around €15,000,000 Moving to slide 14, we appreciate the Q2 profit and loss evolution. Total revenues increased by 17.8% to $519,000,000 with an excellent 15.1% organic growth versus 2019. Considering the pro form a discontinuation of Elite, revenues increased by 19.1% with an organic growth amounting to 15.9%. The structural efficiency and productivity enhancement derived by the measures implemented last year led the EBITDA recurring margin at 26.3% with an improvement of 180 basis points versus Q2 twenty nineteen. Recurring EBITDA increased by 26.5% around €29,000,000 to €136,000,000 Reported figures include around €1,800,000 cost related to the Geis integration and to the redefinition of the corporate structure of Amplifon SPA. Considering the pro form a discontinuation of Elite, EBITDA margin reported an outstanding 26.8% offsetting a growth of 200 basis points versus 2019. Following the strong investment plan during the past quarter, D and A increased by around 7,000,000 leading the current EBIT recurrent EBIT to around €82,000,000 with a growth of 35% or €21,000,000 versus 2019. Net financial expenses accounted for around €7,000,000 leading profit before tax to €76,000,000 from around €55,000,000 in 2019, offsetting a 38% increase. Increase. Tax rate ended at 26.8% leading recurring net profit at over 55,000,000 with a 36% increase versus 2019. Moving to chart 15, we see the H1 profit and loss evolution. Total revenues increased by 15.3% to €960,000,000 with an excellent 11.9% organic growth versus 2019. Considering the pro form a discontinuation of Elite, revenues increased by 16.8% with an organic growth amounting to percent. EBITDA margin ended up at 24.3% with an improvement of 180 basis points versus 2019. Recurring EBITDA increased by 24 to €233,000,000 Reported figures include around €4,300,000 cost related to Geis and to the redefinition of the corporate structure of Amplifon SPA. Considering the pro form a discontinuation of Elite, EBITDA margin reported an outstanding 24.8% posting a growth of 200 basis points versus 2019. D and A increased by around €15,000,000 leading recurring EBIT to around 126,000,000 with a growth of 32% or EUR 30,000,000 versus 2019. Net financial expenses accounted for around EUR 40,000,000, leading profit before tax to EUR 112,000,000 from around EUR 83,000,000 in H1, posting therefore a 35.5% increase versus 2019. Tax rate ended at 28.1% leading net profit at over €80,000,000 with an increase of 35% versus 2019. Moving to chart 16, we appreciate the cash flow evolution. Operating cash flow after lease liabilities was in the period equal to around €155,000,000 posting an improvement of €61,000,000 or 65% versus 2020, which reflected the action implemented in Q2 last year to mitigate the COVID impact. Impact. The comparison versus H1 twenty nineteen shows an outstanding improvement of €55,000,000 leading to a performance more than doubled versus 2019. Net CapEx increased by around €15,000,000 to around €36,000,000 leading free cash flow at €119,000,000 versus €72,000,000 last year with a growth of €47,000,000 or around 65% versus previous year. Versus H1 twenty nineteen, the improvement of free cash flow is over 100%. Net cash out for M and A was €43,000,000 driven by bolt on acquisition in EMEA versus €42,000,000 in 2020. The sum of the share buyback program and the dividend distribution amounted to €63,000,000 leading net cash flow for the period to over €30,000,000 versus €23,000,000 in H1 twenty twenty. NFP ended at €620,000,000 with an improvement of around €145,000,000 versus H1 twenty twenty. Moving to chart 17, we have a look at the debt profile trend and the key financial ratios. As mentioned in the previous chart, the net financial debt closed at €620,000,000 with the liquidity accounting for positive €470,000,000 short term debt accounting for around 120,000,000 and medium long term debt accounting for around €970,000,000 This confirmed a very strong financial profile of the group with over €730,000,000 financial headroom including undrawn RCF following the continuous NFT improvement and the completion of the refinancing program executed last year. Following IFRS 16 application, lease liabilities amounted to €426,000,000 leading the sum of net financial liabilities to €1,050,000,000 Equity ended up at €833,000,000 with an increase of around €30,000,000 versus December. Looking at financial ratios, net debt over EBITDA ended up at €1.23 with a further reduction versus December 2020 by around 40 basis points, representing the best result after the completion of the successful Gaels acquisition. Net debt over equity ended at 0.74 posting a reduction versus 0.8 at the end of twenty twenty. The inclusion of the price that Amplifon will pay at the moment of the Baiojo closing could lead the pro form a leverage at 1.84, well below two point zero. I would now hand over to Enrico for 2021 outlook. Thank you, Gabrielle. So to conclude, some key messages and our outlook for 2021. First of all, let me say that we are very happy about the progress we are making on our strategic journey. The acquisition of Bay Audio in Australia represents another key milestone in the history of our company, and we are all excited about the tremendous new opportunity that this acquisition will create to drive growth in the Australian market. Then our second JV in China. Here we are building our success of tomorrow, leveraging on the clear drivers supporting the future growth of these markets. Finally, we are obviously extremely happy about our results of the second quarter, without a doubt a truly outstanding quarter. It is also because of these results that today we are also very pleased to be in the position to materially upgrade on the same consolidation basis our guidance for 2021. In fact, with regards to revenues, we increased our guidance to reflect the higher organic growth to €1,990,000,000 versus the previous €1,930,000,000 Then, of course, in the light of the decision to discontinue ELITE, 2021 sales for the full year, excluding ELITE, will be in the region of €1,930,000,000 Of course, I need also to highlight that given the still uncertain situation with regards to the COVID pandemic, I need again to stress that this guidance is valid under the assumption of no further material impact of the COVID nineteen pandemic in the second half of the year. But also at the same time, I need also to highlight that this guidance, it is not including any contribution from the consolidation of Bay Audio since we expect the closing to happen at a certain point during Q4. Moreover, with regards to profitability, we are also increasing our guidance in terms of profitability. And now we expect to achieve a remarkable recurring EBITDA margin in the region of 24.8. To conclude, I can also tell you that July is going to be strong, very strong. So I can say that so far so very good. With this, I leave back the floor to Francesca. Thanks, Henrico. Before I turn the call to the operator in order to open up for the Q and A session, please let me remind you that as indicated in today's press release, we will hold our twenty twenty one Capital Market Markets Day on September 13. The CMD will be held virtually and the agenda as well as the webcast details will be published on our website closer to the date of the event. Finally, for the Q and A session, please kindly limit your questions to maximum initially in order to give everybody the opportunity to ask questions. Now I turn the call over to the operator in order to open the Q and A. Thank you. Excuse me, this is the Chorus Call conference operator. We will now begin the question and answer session. The first question is from Niccolo Stora with Kepler. Please go ahead. Good afternoon, everybody. Two questions. The first one on your new guidance updated guidance. So basically, a few months ago, your guidance was implying a deceleration in the remaining part of the year, this time it seems that you're expecting a continuation of H1 trend into the second part of the year in spite of a tougher comparison compared to the second part of 2019. So the question is what led you to change your mind on that? What are you seeing? Which are the signals that you're getting from the markets? And the second one is on Elite. So if you can elaborate a bit, first of all, on the reason behind the sharp decline in revenues and profitability over the past few years that probably goes beyond COVID. Why winding down the operation and not selling them? And the last, if this move could have some indirect impact on your Managed Care business? Thank you. Thank you, Nicolas, for your questions. Very clear. So with regards to the first question and therefore the increase in the guidance, you are absolutely right. Now we are more positive than we were just a few months ago about this second half despite of the higher comparison base with 2019. And the reason why we are more positive is because we see in basically many markets a recovery which is stronger than maybe we were expecting some months ago. And on top of that, let me say that we are extremely pleased about our ability to overperform the market growth. Just to highlight the most clear example about this, just look at our performance in The U. S, which is in my opinion really truly, truly outstanding and well above the growth of the market. So it's a combination of a market, which is definitely positive, but also we are more positive in general because of our ability to over perform also the market from a performance point of view. This, as I said, it is particularly true if you look at the numbers in The U. S, but let me also add that I'm extremely happy about the performance in all the three regions. I'm extremely happy about the performance basically in all the different markets. I think that now the different operations are really performing very well and above the market growth. With regards to the second question and therefore why we have decided actually discontinue Elite. Clearly, Elite was a unicum in our group. Elite was the only wholesale business. Elite in particular was not responding to what we believe is the clear value in the value chain in our sector, which is about the direct relationship with end consumers, which is basically what we do in all the rest of our group. Elito was a wholesale business with, I would say, limited possibility to differentiate from others wholesalers. And also which is also our view on the market, which is served by Elite, is the independent channel. We have always said that we see this channel actually contracting and declining over time, which is exactly what is happening and what has happened and that may be accelerated even more during the pandemic. The fact that Elite is also dilutive to our numbers both in terms of growth and also in terms of profitability, I think is a consequence of all what I've said. And as I said also during my initial speech, I personally believe in the big value not only of the direct relationship with end consumers, but I also believe a lot in the value of simplification of the business model, which the business model in The U. S, which will allow us to focus all our investments in the two channels, which will be definitely the most the fastest growing channels also in the future. We could keep a little, but I think that would not be the right decision for the company because in this way we are able to unleash the potential of the other two channels even more than in the past. Thank you. The next question is from Veronika Dubajova with Goldman Sachs. Please go ahead. Hi, good afternoon, and we took Gabriela in. Thank you for taking my questions. I will keep it to two and apologies, they're both a little bit short term. Just one, want to understand a little bit better the cadence of growth through the quarter. Obviously, there's quite a lot of noise, would love to sort of know the exit growth rate that you saw at the end of the quarter and maybe where which region you saw the most significant acceleration in as you move through the quarter? And then my second question is just looking at the third quarter and in particular looking at the European growth rate, obviously, it's a pretty tough comparison. Q3 last year in Europe was actually a pretty strong quarter for the industry and for yourselves. Just kind of curious your degree of confidence in your ability to deliver the sort of mid to high single digit growth rate that we're used to in that region. And just broadly, how you're thinking about phasing of growth in Q3 versus Q4? Thanks so much. Thank you. Thank you, Veronika. And also, I needed to give you the credit about some questions that you asked me a few quarters ago when you asked me why you are not discontinuing Elite. So I have to say that you got to the point maybe earlier than others. But anyway, coming back to your question. So with regards to the trend during Q2, I have to say that it was more an even trend, so not a clear acceleration from April to June. All the three months were very strong. And as I also said during my speech, we see this trend actually to continue through July, which as you know, it's an important month for us. And as I also said, we see this kind of trend basically in all of the key markets in all the three regions. And I need also I would like also to stress the fact that we believe that we are now performing much better than the average of the market. So there is definitely an element of performance, which is also supporting our revenue growth. With regards to the second question and therefore about the Q3, Q4, in particular with regards to Europe, we are clearly very, very confident that we can continue to grow in Europe. We see encouraging performance in also here in all the main markets. So we are very positive. Also July also in Europe was strong. So definitely, we feel quite confident about our guidance for the full year and for the guidance for the second half. Of course, I need again to highlight the fact that we are not envisaging and not including at this stage in this guidance. On one side any major disruption coming from COVID, I hope that there would be not. But also on the other side, a potential upside would be about the consolidation of Bay Audio at a certain point during Q4, which is not included in this guidance. Understood. Thank you so much. I'll go back into the queue. Thank you. The next question is from Ayesha Noor with Morgan Stanley. My first question was on the EMEA business. What was the contribution from the France health reforms in the quarter? Or in other words, excluding that benefit, what would your growth in EMEA be? And I'll leave it there. Yes. Well, of course, France continued to perform very strongly also in Q2 because of the effect of reform that took place in France. But anyway, also excluding France, our performance was very positive. I would say mid in the region of mid single digit for sure. So France was definitely a strong contributor to the growth, but also all the other markets performed very well. Okay. And if I could just quickly follow-up on EMEA. Your own brand product line in Spain, is this still on track to launch in the second half? And if so, do you have a date in mind? Yes, yes, absolutely. We are perfectly in launch. We have just launched the Amplifon products experience in Portugal. And I have to say that perhaps it has been the best launch in so far because the penetration increased from zero to almost 85%, ninety % really, not anymore in months, but in weeks. Then with regards to Spain, we are perfectly on track. And this is one of the major launches in the group and this will happen in Q4, October, November. Great. Thank you. The next question is from Keith Lee with Jefferies. Please go ahead. Thank you guys for taking my question. My first one is just on the market trends. You mentioned July is still very strong. But what are your thoughts about August and maybe September as well, just given that because some companies talk about people taking holidays or vacations and they want to take a break. Did you see that happening in August or September? And what do you think about the run rate maybe in those two months versus July, please? And my second question is just on China. I think you've done two JVs now in the region. Do you still have more JVs in the pipeline? Or would it be more organic development from here? Thank you. Thank you. Well, so with regards to the first question and therefore, let's say, the trend in Q3, yes, I confirm that July is going to be very strong, let me say, continuation of what we have experienced in Q2. We expect also the same trend throughout all the quarters. So we do not see any change in August or September. With regards to China, for sure, we will accelerate on our greenfield expansion. Of course, we are also looking for further targets, but I need to highlight that these targets are not big targets. You should expect more JVs with companies of the same size of what we have done so far. Anyway, with regards to China, we will also give you some more days during our Capital Markets Day in September. That's good. And I guess if you were to think about the region on the three year view, I appreciate you might want to wait until the Capital Markets Day, but should we be thinking about 400, five hundred stores in three years' time, that kind of magnitude? Any color that you're willing to give at this stage? Well, as I say, China will be one of the topics that we will touch on our Capital Markets Day, so I prefer to maybe wait until the best to give you more info. All right. Understood. Thank you. Thank you. Thank you for your questions. The next question is from Julien Wadour with Exane BNP Paribas. Please go ahead. Yes. Hi, good afternoon. Thank you for taking my question. So can you maybe elaborate on your, I would say, very strong performance in The U. S. This quarter? I think that the reference market was up 20% versus 2019. You almost like doubled it. So yes, and also what's your view for the markets for the coming quarters? And should we expect a similar momentum? And then my second question was on China, but you seem to confirm maybe to wait until the Capital Market Day. But it was just if you can confirm that you that your ambition is still to grow China, I would say, around 10% of group sales over the mid- to long term? So that's all. Thank you. Thank you, Julian, for the questions. So with regards to Americas, yes, I can confirm that selling figures, I need always to clarify that, are telling us that the market grew in the region of 20%. We clearly outperformed the market, and we are extremely happy about that. The outperformance of the market from a pure organic viewpoint is, in my view, coming from all the work that we have done in the recent years, in the recent months, which in my opinion will be also accelerated by the decision that we have taken today about Elite. Elite at the end of the day was also a distraction for our management. And the decision that we have taken today will allow us to further accelerate our growth. With regards to The U. S, what I can tell you is that on top of the contribution of the consolidation of PJC, we are also enjoying a very strong growth coming organic growth coming from PJC. So we are extremely happy about this acquisition. We are extremely happy about how PJC now, which is part of the corporate retail network is performing. All in all, let me say that in The U. S. Now everything is working pretty well. And I expect us to continue to outperform the market also in the near future. With regard to China, yes, the ambition is always the same for sure. As I said, I think also many times that this is a medium term project, will be a balanced mix of new openings and therefore greenfield operations, but also small deals. As I say, there are no big targets in these markets. And therefore, it will be, let me say, a long journey, but I think a very important journey for our growth. Thank you very much. The next question is from Domenico Ghilotti with Equita. Please go ahead. Good afternoon. Two questions. The first is related to the guidance. In particular, if I look at the first semester excluding Elite, you are already at 24.8 EBITDA margin. So you are implying, say, the same level of profitability despite, say, typical seasonality and also in your sales guidance, there is clearly, a second half that is stronger than Q1. So I could you elaborate on the reason why second half profitability should be really similar to the first semester? And second is on the decision to terminate Elite. Do you have any structural negative from the volumes that you are losing? Okay. With regards to the second question, not at all. Not at all at the end of the day. I need also to Elite it was is a wholesale business. And therefore, also, let's say, in direct competition with the job of the manufacturers. So at the end of the day, it was not really very synergy also from a purchasing point of view. So no, I do not expect any kind of negative impact from that also in consideration of the very high growth that we are delivering in consideration of the fact that now we have also additional volumes coming from Bay. So not at all. Actually, I think that also in this respect, the decision will give us benefits rather negative. With regards to the profitability, there is no particular reasons at the end of the day. What I mean is that we will continue also actually, we want also to accelerate our investments in particular in this second half. We think that there is a clear opportunity at this stage to further push and consolidate the market and therefore we will go for that. So you are implying additional so additional spending compared to the first semester? Yes. Well, for sure, we will continue to invest. There will be some investments more in terms in particular of marketing also some key initiatives. But let me say that we are super happy about our objective for this year in terms of profitability. 24.8% EBITDA margin, it is something that just a few months ago or a few years ago, we could not even imagine. So we are very Now also maybe looking at the full year Domenico, Elite was diluting our business by around 20 basis points for the year. So I know that in the six months, it was a little bit more, but on average, it's 20 basis points. So if you look at our previous guidance, 24.5%, twenty four point seven %, at the end, it was the average is 24.6%. So the 20 basis points more are reflected in the improvement. And then, of course, what Henrico said about our, I mean, ability to invest more in order to get more is something pretty tough. And as we always say, of course, thanks to scale and other aspects, can have higher profitability, but investment, of course, are key in order to enlarge the competitive gap versus the other player. Okay, thanks. Thank you. The next question is from Oliver Metzger with Commerzbank. Please go ahead. Hi. Good afternoon, everybody. Thanks a lot for taking my Good afternoon. First one is just on a very quick one on marketing expenses. Where you are right now with regards on the level of where you want to be? And the second one is on the recent executive order in U. S. On the hearing aids liberalization. So it's still a limited amount of information. So question to you. Do you have any idea how FDA thinks with regards to maximum amplification for these OTC devices? Do you have any insight, any idea on that? Thank you. Yes. Thank you, Oliver, for your questions. So I will start with the second one about if we know anything about which will be the draft regulation from the FDA. And the answer is no. Of course, FDA is doing their job. FDA is doing their job and we just we are just confident that for sure what will be the final provision will be in the interest of safe and efficacy of the solution in the interest of and the consumers. But no further information at all. With regards to our marketing expenses, we have increased our marketing expenses versus 2019 in the region of 20%, which is in line with the increase of the past years. So this is the trend also that you should expect also going forward. Okay, great. Thank you very much. The next question is from Michael Hanig with Stifel. I have two, please. The first one is related to Elite. What was the reasoning behind the decision to just close the Elite Hearing business down and just not sell it or try to monetize the assets? And the second one is a quick add on on the French reimbursement scheme. Do you see the positive development to continue into July? Or do you expect it to be mainly limited to H 1 with the normalization in H2? Yes. So with regards to the second question, so the French reform, with this we still see a very strong trend also in July. Of course, our assumption is that the kind of growth that we have experienced in the half will not continue at the same pace in the second half. But for sure we are still also still very positive about the growth of the market in the second half because of the change in regulation and the reform. With regards instead to the first part of the question and therefore why we did not consider a sales process, we have reviewed all the possible internal and external options, including option of sales. These alternatives did not materialize because we did not see enough interest from potential parties interested in acquiring the business. So at the end of the day, we thought that the best option was the one down. Okay. Thank you. The next question is a follow-up from Domenico Gilotti with Equita. Please go ahead. Yes. I have, let's say, broad question on, say, the 2022 outlook. In the sense that how do you see the trends that we have seen, for example, the very, very strong growth in North America, both for the market and for you, the contribution from the France regulation. So as a particularly challenging, so how this is affecting your ability to grow at the usual rate entering into 2022? Well, let's say that definitely there are some positive effects supporting the performance in this in 2021. But we have also to consider that in 2021, the pandemic was not over. It's not over yet actually. And we still see time to time some sporadic lockdowns. In Australia, we see some slowdown in that market or in another market, etcetera, etcetera. So still despite of what you mentioned, we are also positive about next year. But let me ask you to wait until September at our Capital Markets Day to give you some more granularity about how we see the next future. Okay. Okay. Thank you. Thank you. Thank you, Thomas. Gentlemen, there are no more questions registered at this time. Thank you. So many thanks to all of you for taking part in our call. This concludes today's call, and we kindly ask the operator to disconnect. Thank you. Bye bye. Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.