Amplifon SpA

MIL:AMP

Earnings Call Transcript 2020-Q3

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Amplifon Third Quarter and 9 Months 2020 Results Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Ms. Francesca Rambaudi, Investor Relations Director of Amplifon. Please go ahead, madam.

[Francesca Rambaudi, executive]

Thank you. Good afternoon, and welcome to Amplifon's Conference Call on Q3 and First 9 Months 2020 Results. Before we start, a few logistic comments. This morning, we issued a press release regarding details on Amplifon's website as well as on our press release. I have to bring your attention to the disclaimer on Slide 2 as some of the statements made during this call may be considered forward-looking statements.

With that, I am now pleased to turn the call over to our CEO, Enrico Vita.

[Enrico Vita, executive]

Thank you, Francesca. Good afternoon, everyone. Welcome to our quarterly conference call. I'm very pleased to present to you today the results of the third quarter of the year, which was one of our best quarters ever in terms of financials. In fact, our revenues in the quarter increased by circa 10% at constant exchange rates, and the organic components of the growth was very strong, one of the best ever, slightly above 8%.

The quick recovery trend that I mentioned during our last call continued also during July, August and September, and this trend was visible in all our core markets. I also believe that also during this quarter, our revenues have been supported by significant market share gains in all major markets.

In terms of profitability, we continued to reap the benefits of the huge work done on our cost base since the very early days of the pandemic, making our company even more efficient and leaner than before. The increase in profitability of more than 300 basis points is even more remarkable in consideration of the fact that we have fully reactivated all the key investments. I'm referring primarily to the marketing investments but not only, I'm referring also to several key initiatives at corporate level.

The cash generation was also very strong, allowing us to achieve a very healthy net financial position in the region of EUR 700 million. All in all, a very strong quarter during which we have not lost sight of our first priority, which was once again to safeguard the health of all our people while continuing to serve safely our customers that needed our services.

I now hand over to Gabriele to give you all the numbers about our financial performance.

[Gabriele Galli, executive]

Thanks, Enrico, and good afternoon, everybody. Moving to Chart #4, we have a look at the group financial performance in Q3 which posted outstanding results with a double-digit top line growth in local currency and an impressive step-up in profitability.

Revenues in local currency increased 10.4% with an excellent organic growth at 8.2%. And M&A contribution at 2.2% and ForEx impact at minus 1.4%. EBITDA came in at EUR 97 million with a margin at 22.7%, up 330 basis point versus previous year, thanks to the strong revenue performance coupled with the structural efficiencies and the productivity enhancements driven by the decisive measure implemented in Q2, the presence of some social tools in some geographies to offset the COVID impact in the quarter and the EUR 2 million income related to concessions obtained in the renegotiation of the lease agreement of our shops. This strong EBITDA increase was achieved even after sizable investments in the business, which included marketing expenses and reactivation of core corporate projects.

Moving to Chart #5, we have a look at the financial performance in the 9 months. Revenues in local currency were down around 15% (sic) [ 14% ], with organic performance at minus 16% due to COVID outbreak; M&A contribution at 1.9%; and ForEx impact at minus 0.5%. EBITDA amounted to EUR 228 million with margin at 21.9%, up 50 basis points versus 9/'19. Despite the heavy impact on COVID on revenues in the period mid-March, June, thanks to the timely and effective cost containment measures. Cash flow indicator also came in very strong in this unprecedented period, thanks to the action implemented to maximize cash generation and protect our net financial position. Free cash flow was up 85% versus previous year, and NFP as of end of September was around EUR 713 million, further improving versus December '19 and June '20, with financial leverage at 1.89.

Moving to Chart #6, we have a look at the EMEA financial performance, which was affected by COVID outbreak since March but recovered strongly from end of April and was back to strong growth since July. In the 9 months, revenues were down around 16% in local currency. EBITDA amounted to EUR 180 million with margin at 24.3%, up 90 basis points versus 2019. The strong recovery was supported by an excellent Q3, which reported a revenue growth of 12% driven by an outstanding organic growth at around 11% and the M&A contribution at 1%. This excellent performance was a generalized trend for all of our core markets with impressive growth especially recorded in Italy, France and Spain. EBITDA in Q3 amounted to EUR 77 million, up over 30% versus previous year and with margin at 25.3%, up 390 basis points versus '19, thanks to higher revenue and improved efficiency and productivity.

Moving to Chart 7, we have a look at Americas performance. In the 9 months, revenues were down 12.5% in local currency. EBITDA amounted to EUR 38.7 million with margin at 22.2%, up 20 basis points versus '19. In Q3, revenue growth was 2.8% in local currency, thanks to a strong growth of around 7% in local currency in North America more than offsetting the still negative performance due to the COVID outbreak in Latin America. EBITDA in Q3 amounted to EUR 16 million, with margin at 23%, up 110 basis points versus '19, thanks to higher revenues and greater efficiency and productivity.

Moving to Slide #8, we have a look at Asia Pacific performance, which showed an outstanding operating leverage. In the 9 months, revenues were down 6.1% in local currency. The 9 months top line performance reflects the different timing and impact of the pandemic and related restrictive measure across the region. However, in Q3, all countries except India came back to solid growth. EBITDA in the 9 months amounted to EUR 45 million with a margin of 35.5%, up 5.7 percentage points versus '19. In Q3, revenues were up 15.3% in local currency driven by a solid organic growth of 5.3%. M&A-related to Attune accounted for 10% and ForEx was negative for 2.5%. In the quarter, organic growth in China and New Zealand was double digit, the latter also despite the full lockdown in Auckland. Australia reported a positive organic growth in the quarter as well despite the lockdown in the state of Victoria.

EBITDA in Q3 was EUR 22.5 million, with margin reaching 40.5% in the quarter, posting an improvement of 11 percentage points versus previous year. This impressive expansion in profitability was due to higher structural efficiencies, following the strong measures implemented in Q2 as well as to the positive contribution of around EUR 6 million from social tools introduced in Australia to offset the COVID impact.

Moving to Slide #9, we can appreciate the Q3 profit and loss evolution. Revenues showed an outstanding growth of 10.4% in local currency, mostly driven by a very strong organic growth at 8.2% and reached EUR 428 million versus EUR 393 million last year. The structural efficiencies and productivity enhancements coming from the strong measures implemented during Q2 led to an excellent growth of profitability, up 330 basis points from 19.4% to 22.7%. The absolute EBITDA increased by 27.6% from EUR 76 million to EUR 97 million this year.

Following the important increase of CapEx and acquisition made during the past quarters, D&A increased by around EUR 2 million, leading EBIT to EUR 48 million versus EUR 29 million last year, with a growth of 64%. Net financial expenses increased by EUR 1.3 million to EUR 8.2 million, following the strong program of debt refinancing, which led Amplifon to around EUR 700 million of financial headwind. Tax rate posted 28.2% versus 27.1% last year, leading net profit at EUR 28 million versus EUR 16 million last year, with an increase of around 75%.

Moving to Slide 10, we have a look at profit and loss evolution in the 9 months. Following the negative impact of COVID-19 during Q2, total revenues decreased by 14% (sic) [ 15% ] in local currency to EUR 1.04 billion versus EUR 1.22 billion last year. Despite heavy COVID outbreak in Q2, finally, an effective action on cost led EBITDA margin at 21.9%, up by 50 basis points versus 21.4% last year. Absolute EBITDA was at EUR 228 million, down around EUR 24 million versus last year. D&A increased by around EUR 11 million, leading EBIT to EUR 80 million. Net financial expenses at EUR 22 million versus EUR 20 million last year and tax rate at 28.7% versus 27.9% in '19 led net profit at EUR 41 million versus EUR 76 million last year.

Moving to Chart #11, we can appreciate the cash flow evolution. Operating cash flow was, in the period, equal to around EUR 155 million versus EUR 127 million last year with an improvement of around 22% despite the negative impact of COVID on Q2 revenues. Net CapEx decreased by around EUR 30 million to EUR 28 million, leading free cash flow at EUR 127 million versus EUR 68 million last year, with an outstanding growth of around EUR 60 million or 85% versus '19. M&A activity absorbed around EUR 42 million, mostly driven by the acquisition of Attune at the beginning of the year versus EUR 53 million in '19. Net cash flow was positive for EUR 77 million with an absorption of around EUR 15 million last year, leading net financial position up EUR 713 million versus EUR 857 million at September '19 with an outstanding cash flow generation of around EUR 145 million in the last 12 months.

Moving to Chart 12, we have a look at the debt profile and key financial ratios. As mentioned in the previous chart, net financial debt closed at an excellent level of EUR 713 million with a sequential improvement over the last 4 quarters. Liquidity accounted for positive EUR 460 million, short-term debt for around EUR 50 million and medium long-term debt for around EUR 1.13 billion, proving the very strong financial profile of the group after the completion of their financing program, which resulted in the extension of the maturities by around EUR 270 million as well as in the increase of the amount of committed line by around EUR 350 million, thus allowing us a financial headroom of around EUR 700 million, including cash on balance sheet and undrawn committed revolving facility.

Following IFRS 16 application, lease liability amounted to EUR 420 million, leading the sum of net financial debt and lease liability to EUR 1.13 billion versus EUR 1.21 billion last year. Equity ended up at EUR 727 million with an increase of EUR 30 million versus December '19. Looking at financial ratios, net debt over EBITDA ended up at 1.89x, the best result achieved after the completion of the successful GAES acquisition. And net debt over equity at 0.98x, posting a significant reduction versus 1.13x at the end of '19.

I would now hand over to Enrico for 2020 outlook.

[Enrico Vita, executive]

Thank you, Gabriele. So some key messages to conclude our presentation for today. During the last quarter, the speed of recovery was certainly beyond our expectations. Clearly, the current rise in coronavirus cases somehow limits the visibility about the next month. However, October is confirming a strong trend in sales and appointments so that we are currently trading, once again, well above previous year with no meaningful impact on our business.

Going forward, it's obvious that our performance in November and December will depend on the level of the restrictive measures that will be adopted by the local authorities. However, our experience during the first wave of the pandemic is that only very severe measures that limit completely, or almost completely, the mobility of the population might have an impact on our business in the short term. So that if such extreme measures are not going to be taken or widely taken, of course, we remain positive about this final part of the year as well as for the medium and long term. But I'm sure that you will agree with me that these are things which are out of our control.

With this, I leave back the floor to Francesca.

[Francesca Morichini, executive]

Thanks, Enrico. [Operator Instructions] Now I turn the call over to Ariana in order to open the Q&A session.

[Operator]

We will now begin the question-and-answer session. [Operator Instructions] The first question is from Niccolò Storer with Kepler.

[Niccolò Guido Storer, analyst]

Two questions, the first one is on the monthly trend of revenues increase in Q3, if you can give us a little bit of visibility on what happened in July and August and September on a separated basis. And the second one on EBITDA expansion. I guess that beyond your 330 basis point expansion, you had a volume effect, some tail of cost saving from Q2 and some permanent cost savings. So if you can help us understanding how to allocate this cost into the brilliant performance. And related to that, I saw that corporate costs, for instance, have increased a lot in the quarter to EUR 18 million impact on EBITDA. And also, so if you can comment on this jump.

[Enrico Vita, executive]

Thank you, Niccolò, for the questions. So with regards to the first one, usually, you know that we are not disclosing the exact monthly sales. But in this case, I think that it is important to give you some flavor of the monthly trend. So what I can tell you is that July was very strong. August was a bit lower in terms of growth versus previous year. But then in September, we had also a very strong growth. So September, in terms of growth, was higher than August. I also mentioned during the presentation that also October is trading very well so far. So also October is confirming the kind of recovery trend that we have experienced during Q3.

With regards to the EBITDA expansion, I would ask Gabriele to tell you something. But with regards to corporate costs, I wanted just to mention the fact that, as you can imagine, we put on hold many different projects during Q2 for obvious reasons. And as promised, we have already started to reactivate many of those projects. So part of it, certainly, is related to the fact that we have restarted some key initiatives that are important, of course, for the future. But I would ask Gabriele to give you more details about EBITDA expansion.

[Gabriele Galli, executive]

Absolutely. So as you, Niccolò, were mentioning, there were many factors behind our EBITDA expansion. Some of them, of course, are positive but also some other, such as the one Enrico was describing, reducing, so offsetting a little bit the overperformance in the EBITDA, such as the product reintroduction that increased the corporate cost from EUR 12 million to EUR 18 million. So starting from some particular component, during my speech, I was mentioning the EUR 2 million of related rent cost, and this is basically the final tranche of the EUR 7 million we posted in Q2 due to the renegotiation of suspension of rent in the period affected by COVID. Another item I was mentioning was around the EUR 6 million contribution of social tool in Australia, which gave a particular boost, of course, to profitability of the region, increasing by around 11 percentage point. But please keep in mind that this kind of costs were, I mean, recognized by the government in front of a severe COVID impact. As we have been describing, state of Victoria has been closed for a while, as well we had some sort of lock down measure in Auckland.

And so everything included, it was a positive -- I cannot define one-off, but a positive item, but this item was in light of the lower revenues due to restriction in their income. All in all, this kind of performance, including some positive to offset some particular COVID restriction but also considering the over-expenditure we had to reactivate the project cost that Enrico was mentioning, all in all, I believe that the 330 basis point EBITDA improvement fairly represent the kind of structural improvement we achieved after the implementation of the measures that we implemented during Q2. And maybe not at this level, I was commenting during the previous conference call that the level of reinvesting -- reinvestment in marketing and in other project may vary in the future, but this represents a good situation of structural improvement we have been able to achieve during the 3 months of Q3. So this is the first signal of the productivity and EBITDA margin improvement that we will see from now on.

[Niccolò Guido Storer, analyst]

And maybe related to that, can you comment on marketing expenses? You said before that you reactivated marketing investments. But should we think about a return to previous year levels? Or something above previous year levels?

[Gabriele Galli, executive]

No, marketing expenses in Q3 were above previous year level.

[Operator]

The next question is from Lisa Clive with Bernstein.

[Lisa Clive, analyst]

A few -- two questions, please. Number one, what proportion of your patients coming into the store in the past 3 months do you think were actually spurred by the COVID-19 pandemic? There's been a lot of discussion around whether people wearing masks had made patients come to recognize that their hearing is very poor. Do you think this is actually a tailwind? Or is most of the patients just sort of what you would typically see? And then second question, there's a number of new product launches from the manufacturers, Phonak Paradise, ReSound One, how quickly do you generally get access to these 2 technologies? And have you started using either of those yet?

[Enrico Vita, executive]

Yes. Thank you for the questions. So if I understood correctly, the first question is with regards to people coming into our stores, realizing that because of the wide usage of the masks, they have realized maybe more than in the past about their hearing problems. For sure, there is an element of that. What I mean is that we believe that masks are making it more difficult for people with some sort of hearing loss to hear well and maybe they have understood that they needed to adopt some kind of remedy, some kind of solution in order to overcome that. To quantify how much the number of patients that are coming to our stores because of that is extremely difficult. But it is something that is certainly real. With regards to the second question and, therefore, the new product launches, from ReSound One and the other manufacturers, we are in the phase of testing those new products, and we will introduce as soon as we will end our test. So pretty, pretty soon. That's it.

[Operator]

The next question is from Aisyah Noor with Morgan Stanley.

[Aisyah Noor, analyst]

I have 2, please. The first is on your run rate. Appreciate comments around October being above prior year levels, but could you provide a bit more granularity on the growth trends by region? Are all regions growing above prior year levels? Or are you beginning to see a slowdown in markets that recovered earlier, like France and Germany? The second question is on your growth rate in EMEA, obviously, strong at 10.8% and well above your peers. Could you quantify how much of that was down to underlying market growth? And how much was market share gain?

[Enrico Vita, executive]

Thank you. Thank you for the questions. So with regards to the first part of the question, so if in October, we have seen the same kind of growth across the different regions, I would say, definitely, yes. We are growing in all the 3 regions, and we are also growing quite strongly in almost all the key core markets. Very few exceptions. Fortunately, these exceptions are not really very meaningful for our company. The only few exceptions that I would mention are related to the U.K., which is still suffering. And the other exception is related to South America. So Latin America, which is, again, suffering quite a lot. But you know very well that both businesses combined, for us, actually do not account for more than 2%, 3% on total on total revenues.

With regards to the second part of the question, so the EMEA region, yes, we believe that there is certainly a component related to us gaining market share. Our estimation about the market growth in the second quarter in the EMEA region is that the market was positive but certainly not at the 10% growth that we posted on our organic growth performance. So it's always quite difficult to say how much is underlying market, how much is market share growth. I would say that the market grew some percentage points, a single, of course, percentage point. So all the rest, low single digit, I would say. So all the rest is a market share gain.

[Operator]

The next question is from Catherine Tennyson with Bank of America.

[Catherine Tennyson, analyst]

I have 2 quick ones. My first one, we've seen customers starting to return again after lockdown. Are you seeing how COVID changed customer behavior? Have you perhaps seen shorter lead times in your stores or lower levels of hearing aid returns prior -- relative to prior to lockdown? And secondly, if we could just sort of touch on M&A, with a pretty strong cash position and business recovering very well. Just remind us again what regions or countries do you feel are most attractive when it comes to looking at independent stores or assets that are up for grabs.

[Enrico Vita, executive]

Sure. Thank you. Thank you for the questions. So about customer behaviors, no, actually, we have not seen significant changes in customer behavior. Actually, in terms of pricing, if I have to mention something, I would say that in the very recent months, we were able, actually, through mix, through also the further rollout of the Amplifon Product Experience, we were able actually to further increase our average selling price in many markets. So I cannot recognize any kind of significant change in customer behavior. In terms of the second part of the question, M&A, so we confirm that at the moment, the most -- I mean our focus in terms of bolt-on acquisitions remain Europe and, in particular, Germany and France are the countries where we are reactivating our activities in terms of M&A in the short term.

[Catherine Tennyson, analyst]

That's helpful. And if I could just squeeze in a quick one. You mentioned earlier the Amplifon own brand product. Prior to COVID, you gave us helpful data on your penetration there in your Italian stores. Do you have that for, say, Europe and then the U.S.?

[Enrico Vita, executive]

Yes. Well -- yes, well in reality, we are experiencing the same kind of pattern in every single market in which we have launched the Amplifon Product Experience. Of course, I'm always talking about the private markets, so after Italy, France, Germany, the Netherlands and all the others. I can also mention the last one where we have launched the Amplifon Product Experience, which was the U.K. just a few weeks ago. And the kind of increase in penetration that we have seen is exactly the same of Italy. And today, month to date, October, if I recall correctly, the penetration of the Amplifon Product Experience in the U.K. is in the region of 75%. So basically, all our sales are going to be under the new Amplifon Product Experience umbrella very, very soon.

[Operator]

Your next question is from Veronika Dubajova with Goldman Sachs.

[Veronika Dubajova, analyst]

I will keep it to 2 on fairly predictable topics, I think. One, I just want to clarify and recall your comments on October because, obviously, it sounds like the growth wasn't similar throughout the third quarter. If you look at your October growth rate, for the group as a whole or if you want to comment geography by geography, is it similar to the Q3 growth rate? Or is it slightly lower given that you had such a strong July? I think it's quite hard for us to see, and I've seen a lot of different data points about July being very strong in certain markets, so if you could just help clarify that, that would be super helpful.

And then my second question is actually about the margin picture, thinking about 2021. And Gabriele, I think if I strip out the EUR 8 million of rent and furlough payments, it sort of looks like a year-on-year margin improvement of about 100 basis points in the third quarter. Is that something that we should carry through into 2021? Is that the kind of structural number that we should be thinking about? And I guess given that you did have the furlough benefits in 2020, just a question for me, is there a risk actually that 2021 margin is sort of flattish versus 2020 because you have some of these onetime benefits that will unwind out of the base? If you could speak to both, that would be great.

[Enrico Vita, executive]

Yes. So I will answer to the first part of the question. Thank you, by the way and I will leave to Gabriele the second part. So with regards to the first part, so far, October is trading very well. And in terms of growth rate, we are at a similar level to Q3. When I say similar, I don't say the exact level but not far from what we have delivered in Q3. So of course, we are very happy about how trading is going so far. With regards to the second part, Gabriele, maybe you wanted to add something?

[Gabriele Galli, executive]

Absolutely. So I mean we had, for sure, as you were mentioning, this EUR 6 million social contribution in Australia and the EUR 2 million COVID-related rent saving in the quarter. Adding up these 2 items, we can achieve, say, a couple of percentage points of profitability. But I was mentioning during the answer to Niccolò, the COVID contribution was in front of some weeks of closure of our shops, so we couldn't simply deduct to calculate -- deduct the contribution to calculate a normalized profitability. And on top of that, as we have been describing, our corporate cost went up by something which was extraordinary in order to reactivate some projects that we stopped during Q2. So on the one hand, I can agree with you, we can deduct the EUR 8 million to calculate a normalized profitability. But on the other hand, we should add up a significant portion of the cost increase we had on the corporate cost plus, say, the sales we lost in Australia.

All in all, I'm much more positive about our underlying evolution of EBITDA than the calculation you were making of 100 basis point. Again, what we can deliver is much higher compared to this 100 basis point and we can decide whether to overinvest a little bit or a little less in the business. But all in all, what we will be delivering at the end is going to be higher than this 100 basis point, for sure. Also, Veronika, there are many items. We had also some COVID-related costs, as you can imagine. We have masks, we have all this kind of stuff in our P&L which, today, are affecting, and probably will be affecting, Q4, Q1 '21, Q1 '22. But I mean in the long run, these COVID -- these other COVID related cost sooner or later are going to be reduced significantly. So just to conclude, the profitability we delivered this quarter also after -- I mean cutting out some, say, one-off benefit but also cutting down the one-off over-investment, I believe, is something that really shows all the effort we did during Q2 in terms of building up a P&L, which is structurally much more efficient than the P&L we had before the COVID.

[Enrico Vita, executive]

I just realized, Veronika, that I did not answer just the part of your first question about October and if we see similar trend across the 3 regions, and the answer is yes, of course, with very small differences, but all the 3 regions are performing in a similar way.

[Veronika Dubajova, analyst]

Understood. Now I was just going to ask a quick follow-up to my margin question, if that's okay because I think, Enrico, you quoted in an Italian paper earlier this week talking about investments into digitalization and sort of making quite a lot of hires on that front. And I don't know if you're able to quantify how significant that is and to what extent that might be something we should consider as we think about 2021. That's my final question.

[Enrico Vita, executive]

No, there is nothing which is going to be different from what we have done so far in terms of investments. I mean when I mentioned about the fact that we have -- we are certainly investing quite significant amounts on our digital initiatives, this is something that has started, as you know, not just now but already a few years ago. So you should not expect any impact at all from an increase on investments on that.

[Operator]

The next question is from Domenico Ghilotti with Equita.

[Domenico Ghilotti, analyst]

Two questions from my side. The first is a follow-up on Q4 outlook. First of all, I'd like to understand if the level of bookings for October is above previous year levels as well so similar to the top line, or if you are seeing some -- maybe some slowdown on that. And trying to understand if -- let's assume that prudently at this point, if there is a flat organic performance in terms of sale, I'm trying to understand if your operating margin can improve anyway, thanks to the tailwind coming from the cost actions. Second question is on small M&A. You sounded very confident in the previous call in early September to have something, let's say, very, very close, so probably for Q4 already. Is it changing, this statement, due to the current situation? Are you a bit more reluctant to go for M&A at this point?

[Enrico Vita, executive]

Yes. Thank you, Domenico, for the questions. So with regards to the second part of the question, no, no, we are -- I confirm what I said during on the last conference call. So we now have reactivated our activities in terms of bolt-on M&A. And for sure, during this quarter, we will complete some acquisitions. So everything is confirmed and we didn't change our plans at all in this respect. With regards to the quarter 4 outlook, as I said also during the presentation, so far, everything is going quite well both in terms of sales but also in terms of appointments. What I also wanted to say that we have been able actually to operate quite well when there were still some measures in place in the past. What I say is that, of course, we cannot forecast for governments to take a very severe measures, let's say, limiting completely the mobility of the people. This is a completely different story. But as you know, this is something that, at the moment, we can't and I think nobody can really forecast this kind of actions from the different governments.

[Domenico Ghilotti, analyst]

And on the operating leverage?

[Enrico Vita, executive]

Yes. On this, I will ask Gabriele to answer.

[Gabriele Galli, executive]

Yes. I mean as I was commenting during the answer to Veronika's question, I think that most of what you are seeing today in our P&L is structural. So the structural -- what we achieved during the Q2 was, I mean, of course, much stronger than this because we could have access to social tool across the globe. We did some intense renegotiation of every contract. And all the, say, one-off item have been reflected in the Q2 P&L, apart the couple of million of COVID-related saving in the rent, which were, I mean, given from the landlord for Q3. All the rest you can see here is very much pretty structural in the sense that the EUR 6 million of saving in Australia, thanks to social tool, again, was strongly offset by the closure of the shops. So if you exclude the 2 items, profitability wouldn't be very, very different from that.

And also, if you take the part of profit -- higher profitability achieved from the EUR 6 million, also excluding the sales, we have been reinvesting very much in corporate, as I was mentioning, to reactivate the project. So I wouldn't give a guidance of 330 basis points for the future. Of course, 330 basis point is quite an excellent result. But I think that structural improvement will give not significantly different result from this 300 basis point that we are posting today.

[Operator]

Your next question is from Kit Lee with Jefferies.

[Nyeok Lee, analyst]

I have 2 questions, please. Just firstly, on the sales mix between new and existing customers in 3Q, can you just talk about the trend there, whether that was back to normalization? And also, Enrico, do you think there is still some kind of demand in the market which is not coming back today? And then my second question is just a clarification on the margin outlook for 2021. Is that more than 100 bps of margin expansion in 2021 over 2020? So you have 300 bps of expansion in 2020 and potentially more than 100 bps in 2021 over 2020 as well?

[Enrico Vita, executive]

Right. So thank you for the question, first of all. And with regards to the first part of the question in terms of sales mix, in the last months, the sales mix between returning customers and new customers has come back almost to the previous -- to the pre-COVID levels, also this in the light of the fact that we have reactivated our marketing investments. As I said, during Q3, actually, our marketing investments were slightly above previous year levels. So in terms of mix, we have reestablished similar mix to previous year. In terms of pent-up demand, yes, for sure, there is an element of growth of the market because of the pent-up demand of the second quarter. To quantify this, we have tried -- we have made a lot of different simulations, et cetera, but it's extremely, extremely difficult. What I can tell you is that for sure, we expect some impacts not only to continue in -- during the remainder part of this year, but we expect also some impact also during next year.

With regards to the second part of the question, so the margin 2021 versus '20, for sure, yes, I mean in consideration of all the different actions that we have taken in order on costs in order to make our company more efficient, also in order -- also in consideration of all the different actions that we have taken in order to increase the productivity also in the store network, et cetera, for sure, we expect the margin at '21 to be above margin at '20. But at the moment, we are not giving precise guidance, of course.

[Operator]

The next question is from Oliver Metzger with Commerzbank.

[Oliver Metzger, analyst]

Most are answered, but 2 quick ones. The first on M&A activity, have you seen any changes of price tax if you acquire audiologists? Or has the crisis changed anything? The second question is more about the whole discussion we had about remote fitting over the last 9 months. At the beginning of the pandemic, there were some more discussions. Right now, it seems to be calmer. Do you think has anything regarding the distribution of hearing aid changed? Or is it just back to normality, back to the traditional distribution?

[Enrico Vita, executive]

Yes. So with regards to the -- thank you for the questions. With regards to the first part of the question and, therefore, about the price that we see in the market to acquire smaller targets, let me say that, for sure, we see more appetite from independent providers to sell their operations than before. In terms of pricing, I think it's a bit too early to say if multiples have gone down or will go down. When there is more of a rush, usually, you will see also lower prices. But I think that is a bit too early to draw a conclusion on that. With regards to remote care, remote fitting, remote fine-tuning, actually, even during the deepest phase of the lockdown during Q2, we did not see a huge increase in terms of this kind of services. So I wouldn't say that we are back to normal because, at the end of the day, there was not a significant adoption of this kind of channels also during the first wave of the pandemic.

[Operator]

Next question is from Giorgio Tavolini from Intermonte.

[Giorgio Tavolini, analyst]

You said that in APAC, you are experiencing double-digit growth in China. What are your expectations for the coming months since China is expected to be the fastest-growing region in 2021? So last year, you had a EUR 6 million to EUR 7 million revenues in China, how much should we expect for this year? And do you expect any bolt-on M&A activity beyond Germany and France in China? The second question is on the OTC product in the U.S. market. What are your latest update from -- particularly from the FDA? If I remind -- if I remember correctly, they indicated that they expect to announce some clearing in autumn. Could you remind what are the next dates? And what is the process now?

[Enrico Vita, executive]

Thank you. Thank you for the questions. So with regards to the first part of the question and, therefore, with regards to China, China is a small operation, of course, for us at the moment. You mentioned EUR 6 million as last year revenues. China is growing double digit, it's growing very well. And apparently, in China, the virus does not exist anymore, so business and also life is back to normal 100%. So we are growing. We are growing very rapidly, which is also comforting us on our plans to expand further our presence in China. We are also working on possible other targets. In terms of size, though, you know that in China, there are no very large retailers, so our bolt -- our acquisition strategy in China will be mainly through small bolt-on acquisitions. And of course, we are working on some potential targets already. With regards to the last part of the question and, therefore, OTC, there are no news at all, actually. And given the current circumstances, actually, we do not expect FDA at this stage to issue their draft regulation within this year. So most probably, it will be at a certain stage next year.

[Operator]

The next question is a follow-up from Niccolò Storer with Kepler.

[Niccolò Guido Storer, analyst]

Yes, just a very brief clarification. I was rereading my notes and I wrote that August was down versus previous year. And I was wondering if I was wrong in writing that and this is just down versus the growth rate posted in July.

[Enrico Vita, executive]

Absolutely. Maybe I was not very clear, but yes -- no, August was not down versus previous year. The growth rate of August was lower than the one of July, but was anyway positive, very positive actually versus previous year. Sorry, if I confused you.

[Operator]

[Operator Instructions] Next question is the follow-up from Domenico Ghilotti with Equita.

[Domenico Ghilotti, analyst]

Just a follow-up or clarification, basically, on your comments on the limited visibility in case of severe restriction. So when you refer to severe restriction, if I understood properly, you are saying -- so they are imposing strict limitation to mobility or even, clearly, shop closure but not, let's say, just curfew or...

[Enrico Vita, executive]

No, no. This is -- thank you for the question because I think that this is a very important one. When I say very severe measures, I say people is not allowed to go out of their homes. In this case, of course, I think our business, as any business in the world, will be affected. In the current scenarios, so with the current measures that have been already taken from different government, like the Italian one, like the French one, like the German one, like the Spanish one, we are doing well and we can manage the business. But of course, if in Italy, tomorrow, they say people is not allowed to get out of their home as they did certain points in March, April, that is a completely different story, of course.

[Operator]

The next question is the follow-up from Veronika Dubajova with Goldman Sachs.

[Veronika Dubajova, analyst]

Yes. Sorry, just a follow-up on a similar theme. I'm just really confused, I mean given the performance that you've seen in October and the normalization of customer mix, et cetera, I'm really surprised you feel uncomfortable at this stage with providing guidance for what is effectively 2 months remaining of the year. So just kind of trying to understand...

[Enrico Vita, executive]

The point, Veronika, is very simple, given the current scenario, would you be able to exclude for sure a scenario where people will not be allowed to get out of their homes, likewise, it was in March, April? Personally, I cannot exclude. I don't have any visibility on that, of course. So that's -- it's something that, at the moment, you know very well -- I mean I think that yesterday, there was a record number of new cases in the world with almost 0.5 million new cases just in one day. So the point is that if things remain as of today, as I also tried to say during my part of the presentation, we remain confident also on the back of -- of the fact that the business as of today is going well. If things -- I mean 10 days ago, we were very ready to give you a guidance and to -- also to give you more visibility. But I think that you know very well that in the last 10 days, there was -- there has been a significant increase in number of cases worldwide.

You know very well that this is something which is very difficult to predict for the future. So what we are seeing here is that -- and let me know if I'm not clear. If things remain like they are today, let me say, we are very positive, and we are also comforted by the fact that, as of today, the business is going well. If things get much worse than today, we don't know. But I think that nobody can say that things will remain like today or will get worse or will get better. Better is actually very difficult. But -- so that's why we don't want to give guidance in a situation where the external scenario is very uncertain. And I'm sure that you will agree with me on that. But to summarize, if things remain, as of today, we are very positive and very confident because this is what we see in these days in terms of continued growth of our business. If things get significantly worse, then it is a completely different story.

[Veronika Dubajova, analyst]

And then we -- I guess, I mean, I was actually going to ask a slightly different question. Just thinking about the consumer behavior here because I appreciate you're kind of saying, during the first lockdown, really, a lot of it was driven by the fact that people couldn't leave their homes, and I don't think anyone that's sitting here is suggesting that we'll see a similar November or December as we saw April. But I guess what's your degree of confidence that folks will continue to be comfortable going to the audiologists in the same way that they have been up until now if we continue to see these headlines that are suggesting big case growth numbers every day? I guess that's what I'm trying to sensitize a little bit.

[Enrico Vita, executive]

It's not -- this is not the point. What I mean is that I'm comfortable that if there were -- if there will be not, as I said, severe restrictions to the mobility of the people -- so if people -- if it is not going to be the case that people is not allowed to get out of their home, then I feel comfortable because also during -- I mean during the last few days, there were a lot of different news, certainly negative news, et cetera, et cetera, and the business continued to perform well. But what I'm saying is that if in the future, in the coming weeks, some governments will say in order to stop the rise in -- rise of infections, we have to oblige people to stay in their home and not going out, then, of course, we will be in a different situation. But please tell me if I was not clear because, as I said, if things remain as of today, I don't think that our business is going to be affected by any means because -- I mean we have demonstrated also in the recent weeks, in the recent days, that the current situation is not affecting our business. If things get very worse then, of course, as any business, we could be affected. This is what I meant.

[Operator]

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

[Francesca Rambaudi, executive]

Thank you. So many thanks to you all for taking part to our call. This concludes today's call. Thank you once again for your interest and attendance. We kindly ask Ariana to disconnect.

[Operator]

Thank you ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephone. Thank you.