The retail hearing care market is expected to grow over the medium/long-term, consistent with the aging of the population and the increased penetration of hearing solutions in the market thanks to the consumer’s increased healthcare awareness. This market is also still noticeably fragmented, but there has been some consolidation due to the vertical integration of hearing aid manufacturers and the expansion of market players (including Amplifon).  It is possible, therefore, that competition could increase in the next few years.

The Amplifon Group’s main competitors are the specialty retailers, which include the manufacturers of downstream integrated hearing aids, and non-specialty retailers (like optical chains, pharmacies and big box stores) which are generally low-cost providers currently found mainly in Australia, the Netherlands, USA, France and New Zealand.

It is possible, therefore, that these players will continue to pursue a strategy focused on expansion which could potentially erode market share and margins, as well as increase competition in the recruiting and retention of hearing aid specialists, as well as qualified store personnel. The expansion of these players is also affected to changes in the sector’s regulatory framework.

Consequently, the Amplifon Group has focused its strategy on strong brand recognition, providing high quality service, as well as on the deep understanding of the consumer, developed thanks to the unparalleled quantity and quality of the data Amplifon possesses and uses to better serve its customers by leveraging on a very unique and innovative customer experience. Toward this end, the Group uses sales protocols focused on excellence in customer service (Amplifon 360) and an increasingly customer-centric approach which enhances the Amplifon Product Experience (APE), proposing Amplifon brand products and a multichannel ecosystem based on which the first point of contact is through the app. 

Amplifon operates in a medical sector which is regulated differently in the different countries where the Group is present.  The areas which are the most relevant for Amplifon relate to: i) coverage by national health agencies or insurance companies; ii) the sale and distribution of hearing aids and, more specifically, the requisites and qualifications of the professionals who may select, apply and sell hearing solutions; iii) technical aspects of the hearing aids.  A change in regulations (for example, in reimbursement conditions, in the scope of and access to public insurance, in the role of the ENT doctors and, above all, the hearing aid specialists, in the qualifications needed to sell hearing aids and related services) could have a direct, even significant, impact on the markets and, consequently, on performance.  

With regard, specifically, to the changes in the qualifications needed to sell hearing aids, in 2017 a law, the “Over the Counter Hearing Aid Act”, annexed to a law on medical devices (Medical Device User Fee Amendments) and included in the FDA Reauthorization Act based on which the  Food and Drug Administration (FDA) was charged with defining and regulating this new category of hearing aids within the next three years was passed in the United States.  This law creates a separate category of hearing aids allowed be sold over-the-counter (OTC) to adults over the age of 18 with mild to moderate hearing loss without first consulting a hearing aid specialist.  In October 2021 the Food and Drug Administration (FDA) published the law it proposed to use to regulate the way in which this product category should be introduced with regard, specifically, to technical specifications and the performance of these devices, labeling and classification, as well as consumer protection policies (refunds and returns). The law proposed was then subject to an open review by the various stakeholders. The final legislation will be published and is expected to take effect not before the second half of 2022.  While to date the most plausible scenario is that, because of the difference in service and the consumers involved (with mild to moderate hearing loss versus the Group’s current core customers which suffer from moderate to severe hearing loss), the introduction of the OTC devices will have a limited impact on the business, though an increase in competition and the arrival of new players cannot be excluded. At the same time, however, the uniqueness of Amplifon’s products and services could be prove to be advantageous.  Lastly, in addition to regulating the sale of OTC devices, the law proposed by the FDA would treat the other hearing aids as “prescription hearing aids” which must be prescribed by a doctor, audiologist or other authorized hearing specialist which validates the important role that licensed professionals have in helping consumers find safe and effective hearing solutions. 

With regard to insurance coverage, while today in the United States only certain services are reimbursed (excluding hearing aids), the possibility of providing full coverage of hearing solutions under Medicare-Part B (public health insurance for beneficiaries over 65) is being considered.  A first draft of the proposed legislation was presented to the house in November 2021.

In general, Amplifon has adopted a series of measures which ensure the ability to react to any regulatory changes in a timely manner by constantly monitoring the regulatory issues in the countries where it is present and preparing the action plans that might be needed. 

Beginning in March 2020, as the respiratory condition SARS-CoV-2 and the relative Covid-19 pathology spread, the Group immediately adopted a timely plan of action in order to safeguard the health and safety of its people and customers. These actions allowed the Company, including in 2021 which was affected by subsequent waves of Covid-19, to continue to protect the health and safety of all its people and, at the same time, guarantee continuous customer support and service thanks to rigorous operating protocols designed to provide maximum safety in its stores.  Remote working was used when necessary, including through rotations, and social distance was maintained for all back-office personnel.

In 2021, thanks to the gradual vaccine roll-outs, the restrictive measures adopted by the authorities in the Countries in which the Group operates were less severe than in 2020 and more geographically confined.  More specifically, in 2021 the lockdown measures affected – to varying degrees – many European countries in the first quarter, Australia and New Zealand in the second half of the year, and the Netherlands and Belgium in the fourth quarter. This, along with the benefits stemming from the actions successfully implemented by the Company in 2020 relative to cost containment, cash flow maximization and further strengthening the financial structure, allowed the Group to successfully navigate the 2021 pandemic situation and record excellent results.  In fact, despite the persistence of the pandemic, not only did Amplifon report revenues that were 29.6% higher than in 2020 and 17.2% higher than in 2019, which confirms the valid fundamentals of the market and the unchanged consumer behavior, the Company also posted high profitability with a recurring  EBITDA margin that was 190 basis points higher than in 2019, coming in at 24.8%. Lastly, in 2021 the Company also continued with the successful implementation of several strategic initiatives: it completed the roll-out of the Amplifon Product Experience – which includes Amplifon brand products and the Amplifon app – in Belgium, Portugal, New Zealand and Spain; it continued with the consolidation process, consistent with the strategy to further strengthen the position in core markets, with the important acquisition of Bay Audio in Australia and the second  joint venture in China, as well as other piecemeal acquisitions in Germany, France and the United States; and lastly, the Company exited the wholesale business with the closure of Elite in the United States, consistent with the Group’s strategy to focus on the customer and provide the best customer proposition to the end consumer directly.

Currently it is, however, not possible to predict the duration of the pandemic, nor how it will evolve going forward, and it is, therefore, not possible to predict the effect that the continuation of the pandemic will have on global and domestic economic activities, as well as on the Group’s business. We also cannot exclude that if the global market conditions should deteriorate, resulting in, for example, a prolonged recession in Europe and the United States, or worldwide, due to COVID-19, the economic and financial situation of the Group could be compromised even though Amplifon operates in a market sector that is typically less sensitive to fluctuations in the economic cycle, including in moments of crises or economic uncertainty. 

The development of an alternative to the hearing aid as a remedy for hearing loss (e.g., surgical techniques, new technologies or pharmaceuticals) would have a significant impact, but the risk is considered remote and is monitored constantly.

The Group also continues to invest in resources dedicated to the development of new technologies in order to anticipate and respond to any changes in the business. 

Amplifon is characterized by the quality of customer service, both in the sales process and through the continuous support provided during the entire life cycle of the hearing aid. The personalization of the device itself is performed through the analysis of the specific needs of the customer, combining the technical aspect with the relational one, in order to be able to provide the best possible service and, at the same time, constitute a strong element of differentiation.

In order to monitor and increase customer service and satisfaction, the Group invests significant resources in the development of its own product line and digital technologies, like the Amplifon App, as well as in redefining its customers’ hearing care experience through Ampli-care with a view to maintaining enduring relationships with its customers while also providing a better customer experience both inside and outside the Company’s stores,  from the first contact through after-sales services.

In order to achieve its medium/long-term goal for growth, the Group must be able to attract, develop and retain the best talent in, above all, the key managerial positions and qualified store personnel, including internationally.

Amplifon strives to be the “employer of choice” and is investing heavily in both the development of a unique and innovative Employer Branding, as well as in talents through specific recruiting initiatives and professional development programs designed to ensure the access to core competencies.

Therefore, the Company has developed and maintains structured channels which facilitate the recruiting of talents who possess specific expertise (for example, data scientists, digital economy and artificial intelligence experts).

With specific reference to the attractiveness and retention objectives of the qualified store personnel, the current environment, affected by growing competition and the persistence of the Covid-19 pandemic, could impact the recruiting and retention of qualified store personnel.  Toward this end partnerships are maintained with universities and great attention is paid to continuous, high quality training and professional development.  Lastly, “ad hoc” compensation mechanisms and incentives are used when assessing performance.

In order to guarantee success in the medium/long-term, global, local and divisional talent mapping and succession planning are carried out regularly. Amplifon is also committed to analyzing and anticipating future needs for key roles, including with a view to the growth of the business and changes in core markets. 

The level of efficiency achieved by the Company in relation to these elements is monitored constantly by evaluating KPIs related to succession planning, recruiting and retention. 

The growing use of technology, the accelerated shift toward digitalization, as well as the introduction of remote working, including in light of the persistence of the Covid-19 pandemic, increases the Company’s exposure to different types of internal and external IT risks.  These include, more specifically, the increase of cyber-attacks which can target the Group or third parties and which pose a constant threat.

Amplfion monitors potential threats every day and works to prevent, as well as minimize, the impact that these attacks could have.

Activities are carried out and updated constantly which strive to:

• guarantee business continuity;
• prevent the loss of data and information;
• prevent financial losses.

These activities include, among others, (i) implementing processes and systems which strengthen the IT infrastructure (Multi-factor authentication systems, anti- phishing systems, blocked access to suspect websites, network protection); (ii) continuous updating of the Business Continuity and Disaster Recovery plans; (iii) cyber security training for Company personnel; (iv) stipulation of specific insurance policies; (v) data encryption.

Lastly, the possibility that personal data is not processed in accordance with the law, including as a result of data breaches and attacks, could lead to possible sanctions by the privacy authorities.

The Group is committed to maintaining adequate safety standards, duly protecting data and other proprietary information, in order to guarantee compliance with laws relating to confidentiality and privacy. Toward this end, Amplifon continuously monitors any changes and amendments to laws that could materialize over the next few years, takes the necessary measures deemed opportune (i.e., appointment of a Data Protection Officer) and provides training as needed. 

Amplifon’s strategy calls for significant investment in marketing and communications in order to strengthen its brand, increase the rate of penetration of hearing aids and stimulate organic growth.

The marketing investments focus on offline media advertising (mainly television campaigns) and digital channels (including Paid Advertising, Search Engine Optimization and Social Media). The Company also invests in advanced Customer Relationship Management (CRM) systems and campaigns in order to ensure unique and personalized experiences for its customers, as well as in the technological innovation program which comprises Amplifon brand products and the multi-channel eco-system (together referred to as the “Amplifon Product Experience”) to provide a complete value proposition, comprising product, service and experience.

Increased sector competition could result in a generalized increase in marketing investments which would be more costly and/or less effective. 

The company could, therefore, find itself in a situation which calls for greater investments in marketing in order to reach the defined targets for organic growth. In order to address this possible change in competition, in addition to counting on its market leadership position, Amplifon also pursues the efficiency and effectiveness of its global marketing investments and pays great attention to the relative returns.

In 2021 the Group, consistent with its development goals, continued to work on the implementation and release of new IT systems and:

·         continued with the centralization of purchasing activities and the release of the new ERP system within Group companies which was begun in 2020.  The new ERP system is equipped with cloud technology which simplifies, optimizes and integrates back-end processes relating, in particular, to finance, human resources and purchasing.

·         began the implementation of the new front-end system for stores.

Typically, these projects are highly complex, particularly with respect to the management of unique, local characteristics, the roll-out phases and change management.

To address these areas, Amplifon has equipped itself with the internal and external resources needed to ensure that the project goals will be achieved and developed a robust training program in order to train system users, as well as assist with change management.