Slide 1: HY22 Result Presentation
Hear now. And always HY22 Result Presentation 22 February 2022 Dig Howitt CEO & President Stu Sayers CFO © Cochlear Limited 2022 1
Slide 2: Cochlear's mission
Cochlear’s mission We help people hear and be heard. We empower people to connect with others and live a full life. We transform the way people understand and treat hearing loss. We innovate and bring to market a range of implantable hearing solutions that deliver a lifetime of hearing outcomes. 2
Slide 3: HY22 Summary
HY22 Summary Cochlear implant Sales revenue up 12% in CC* units • Sales growth driven by strong demand for sound processor upgrades and new acoustic implant products 7% • Cochlear implant revenue continued to experience variability in performance across countries with intermittent COVID‐related res
Slide 4: HY22 Operational review: Cochlear implants
HY22 Operational review Cochlear implants 56% of sales revenue Cochlear implant unit growth of 7% reflects continuing recovery Cochlear implant sales revenue from COVID, with variable recovery rates across countries $m in CC* Developed markets – CI units down 2% • Volumes overall are tracking ahead
Slide 5: HY22 Operational review: Services
HY22 Operational review Services 32% of sales revenue Growing recipient base and access to sound processor Services sales revenue upgrades drive demand $m in CC* • Revenue up 21% in CC • Growing recipient base increases sound processor upgrade opportunity • Improved access to clinics following lockd
Slide 6: HY22 Operational review: Acoustics
HY22 Operational review Acoustics 12% of sales revenue Strong demand for new products and a recovery from Acoustics sales revenue COVID‐related surgery delays $m in CC* • Revenue up 40% in CC • Rollout commenced for the Cochlear™ Osia® 2 System across Western Europe following the recent CE Mark accr
Slide 7: Progress against strategic priorities
Progress against strategic priorities Retain market leadership Cochlear™ Remote Market‐leading technology Assist: available to clinicians in Custom Strong market position Sound® Pro. Connects to • Nine new products and services achieve FDA approval over the past two years the patient’s sound process
Slide 8: Progress against strategic priorities
Progress against strategic priorities Retain market leadership World‐class customer experience Providing the latest technology to our existing customers • Cochlear™ Nucleus® Kanso® 2 Sound Processor and Cochlear™ Baha® 6 Max Sound Processor driving demand for sound processor upgrades • Cochlear™ Nuc
Slide 9: Progress against strategic priorities
Progress against strategic priorities Grow the hearing implant market Awareness & access Demand generation programs continue to strengthen • Growing referrals from direct‐to‐consumer (DTC) marketing activities • Growing rate of hearing aid channel referrals from the Cochlear Provider Network and Syc
Slide 10: Progress against strategic priorities
Progress against strategic priorities Deliver consistent revenue and earnings growth Investing to grow Operational improvement Strong financial position • Delivered record H1 sales revenue of • Commenced a major process • Underlying net profit** of $158m, up 26% on $815m, up 12% in CC* transformatio
Slide 11: Profit & loss
Profit & loss Change Change $m HY22 HY21 (reported) (CC) Key points: Strong demand for sound processor upgrades and new acoustic Sales revenue 815.3 742.8 10% 12% implant products Gross margin % 75% 72% 3% 3% Gross margin back in line with the longer‐term target Continued investment in market gr
Slide 12: Capital employed
Capital employed $m Dec21 Jun21** Change Key points: Trade receivables 284.8 262.1 22.7 Driven by increased sales revenue Building of safety stocks of both finished goods and some Inventories 238.0 216.1 21.9 componentry Less: Trade payables (169.8) (202.9) 33.1 Timing of payments Working capi
Slide 13: Cash flow
Cash flow $m HY22 HY21** Change Key points: EBIT (underlying*) 217.6 174.9 42.7 EBIT benefits from strong sales growth and improved gross margin Depreciation and amortisation 35.8 35.8 ‐ Increase in working capital to fund business growth. Includes an Changes in working capital and other (79.0) 3.
Slide 14: Net cash
Net cash $m Dec21 Jun21 Change Key points: Cash, cash equivalents and term deposits 553.1 609.6 (56.5) Less: Loans and borrowings Current (2.4) ‐ (2.4) Non‐current (45.1) (45.0) (0.1) Total loans and borrowings (47.5) (45.0) (2.5) Net cash 505.6 564.6 (59.0) Balance sheet remains strong with >$500
Slide 15: Dividends
Dividends HY22 HY21 % change Key points: Interim ordinary dividend (per share) $1.55 $1.15 35% % payout ratio (based on underlying net profit) 65% 61% Expect FY 70% payout, in line with target payout % franking 0% 0% Franking balance depleted as a result of FY20 losses 15
Slide 16: FY22 Outlook
FY22 Outlook FY22 underlying net profit guidance range maintained at $265‐285m, up 13‐22%* Guidance now incorporates cloud computing expenses and anticipates continuing COVID impacts for the balance of the year Key assumptions: • Sales revenue growth to be weighted to Services and Acoustics • Cochle
Slide 17: Supplementary information
Hear now. And always Supplementary information Cochlear overview Growth opportunity Strategy 17
Slide 18: Cochlear overview
Hear now. And always Cochlear overview © Cochlear Limited 2022 18
Slide 19: About Cochlear
About Cochlear For 40 years, Cochlear has been the global leader in implantable hearing solutions. Cochlear commenced operations in 1981 as part of the Nucleus group and in 1995 listed on the Australian Securities Exchange. Today, it is a Top 50 listed Australian company with a market capitalisation
Slide 20: Cochlear at a glance
Cochlear at a glance Business segments Global sales Market leader Cochlear Cochlear implant systems ~ + implants* % Cochlear™ Nucleus® $1.5b $190m in annual R&D 61 Profile™ Plus with Slim Modiolar in sales revenue* Electrode (CI632) % % % > 60 global market share** Services* Sound processor upgrades
Slide 21: How we create value
The key inputs to The value we create, driving success How we create value creating value now and into the future Customers & A healthier & more Societal benefits: communities productive society • Healthy ageing • Education and productivity opportunities Our capacity to create value Transforming the
Slide 22: Investment proposition
Investment proposition Cochlear provides shareholders with an opportunity to invest in the global leader in implantable hearing solutions, in an industry that has the potential to grow over the long term. Global leader in implantable hearing solutions for 40 years with over 60% global market share
Slide 23: Financial history
Financial history Cochlear has a long track record of delivering growing sales revenue, profits* and dividends, disrupted in FY20 by the impact of COVID. Cochlear implants Net profit units 36,456 $m underlying* 237 15% 54% in FY21 in FY21 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Slide 24: Growth opportunity
Hear now. And always Growth opportunity © Cochlear Limited 2022 24
Slide 25: Potential to deliver long-term growth
Potential to deliver long‐term growth Growing awareness of the cost‐effectiveness and quality of life benefits of our products has the potential to underpin long‐term industry growth. 1 Hearing loss is prevalent and under‐treated 2 Cochlear implants are a cost‐effective solution for all age groups 3
Slide 26: Hearing loss is prevalent and under-treated
1 Hearing loss is prevalent and under‐treated The World Health Organization estimates that there are over 60 million people worldwide who experience severe or higher hearing loss.1 A challenge for hearing care providers is that less than 5% of the people that could benefit from an implantable hearin
Slide 27: Cochlear implants are a cost-effective solution for all age groups
Cochlear implants are a cost‐effective solution for all 2 age groups Cochlear implants provide life changing outcomes for recipients, empowering them to connect with others and live a full life. They also provide a cost‐effective solution for all age groups, delivering significant returns on the inv
Slide 28: Product indications are broadening and funding is expanding
Product indications are broadening and funding is 3 expanding Product indications and funding are expanding as payers increasingly recognise the improved outcomes and cost‐effectiveness of Cochlear’s implantable solutions. New Zealand Czech Our focus cochlear implant Republic funding • Expansion of
Slide 29: Cochlear implants can deliver superior outcomes to hearing aids
Cochlear implants can deliver superior outcomes to 4 hearing aids for indicated patients Cochlear implants can provide a significant improvement in hearing outcomes and quality of life when compared to hearing aids for many people with a severe or higher hearing loss. We are the market But a small p
Slide 30: Good hearing is essential for healthy ageing
5 Good hearing is essential for healthy ageing Hearing loss is particularly prevalent in people over the age of 60, with one in four suffering moderate or higher hearing loss.6 There is a growing understanding of the importance of properly treating hearing loss in this age group. It affects communic
Slide 31: Opportunity to drive deeper penetration of the bone conduction segment
Opportunity to drive deeper penetration of the bone 6 conduction segment The bone conduction market is under‐penetrated and currently has limited geographic reach. The Cochlear™ Osia® 2 System expands the Acoustics portfolio into the next generation of bone conduction hearing solutions, providing a
Slide 32: Strategy
Hear now. And always Strategy © Cochlear Limited 2022 32
Slide 33: Strategic priorities
Strategic priorities Our strategy is focused on improving awareness of and access to implantable hearing solutions for people indicated for our products. We are committed to maintaining our technology leadership position in the industry by investing in R&D to improve hearing outcomes and expand reim
Slide 34: Strategic priorities: Retain market leadership
Strategic priorities Retain market leadership Market‐leading technology I World‐class customer experience We innovate to bring to market a range of implantable hearing solutions that deliver a lifetime of hearing outcomes. Cochlear has been the global leader in implantable hearing solutions for 40 y
Slide 35: Market-leading product & services portfolio
Market‐leading product & services portfolio Telehealth solutions Benchmark in Cochlear size, implant Cochlear™ Link implants reliability and Slim Modiolar neural interface, Electrode Convenient, at‐home with proven testing for routine Cochlear™ perimodiolar Nucleus® Profile™ cochlear implant advanta
Slide 36: Strategic priorities: Grow the hearing implant market
Strategic priorities Grow the hearing implant market Awareness I Market access I Clinical evidence We grow the market by transforming the way people understand and treat hearing loss through awareness and access activities. Three key market segments have been prioritised with strategies to improve a
Slide 37: Grow the hearing implant market: Children in developed markets
Grow the hearing implant market Children in developed markets Description What we are doing Cochlear implantation has been established Cochlear implants started as a solution for children with a profound hearing loss. Over the last 30 years, neonatal screening has been successfully established acros
Slide 38: Grow the hearing implant market: Adults and seniors in developed markets
Grow the hearing implant market Adults and seniors in developed markets Description What we are doing Adults and seniors in the developed markets According to the WHO, hearing loss is particularly prevalent in people over the age of 60, with 65% experiencing hearing loss and one in four people suffe
Slide 39: Grow the hearing implant market: Developing a treatment pathway for adults
Grow the hearing implant market Adults and seniors in developed markets Developing a treatment pathway for adults What standard of care looks like for adults Standard of care initiatives aim to establish a consistent process for diagnosing and referring adult cochlear implant candidates by all healt
Slide 40: Grow the hearing implant market: Children in emerging markets
Grow the hearing implant market Children in emerging markets Description What we are doing Cochlear’s emerging markets business has China has become a leading market for cochlear implants driven by a commitment from the government to fund implants for children which has driven the development of cli
Slide 41: Strategic priorities: Deliver consistent revenue and earnings growth
Strategic priorities Deliver consistent revenue and earnings growth Invest to grow I Operational improvement I Strong financial position To deliver consistent revenue and earnings growth over time, we balance maximising spending to grow the market with investment to maintain our competitive position
Slide 42: Deliver consistent revenue and earnings growth: Revenue drivers
Deliver consistent revenue and earnings growth Revenue drivers 1,600 Sales revenue Cochlear implants $m in CC 156 • Growing awareness and uptake by adults and seniors 1,200 • Emerging market expansion 439 • New products driving market growth and market share Services 800 • Growing recipient base • G
Slide 43: Deliver consistent revenue and earnings growth: Invest to grow
Deliver consistent revenue and earnings growth Invest to grow We take a long‐term approach to investing and have invested in growing the market for implantable solutions since listing in 1995. Consistent investment Growing R&D capability Delivering stable net in sales and marketing profit margins 43
Slide 44: Deliver consistent revenue and earnings growth: Operational improvement
Deliver consistent revenue and earnings growth Operational improvement Disciplined capital investment and optimising cost of production strengthens our competitive position. Disciplined use of capital Stable gross margin Capital employed Cumulative use of operating cash flows 74% 73% since listing 1
Slide 45: Deliver consistent revenue and earnings growth: Strong financial position
Deliver consistent revenue and earnings growth Strong financial position Strong free cash flow generation provides funding for market growth activities and R&D as well as the ability to reward shareholders with a growing dividend stream. High return on capital Quality operating cash Conservative gea
Slide 46: Notes
Notes Hear now. And always Forward looking statements Cochlear advises that this document contains forward‐looking statements which may be subject to significant uncertainties outside of Cochlear’s control. No representation is made as to the accuracy or reliability of forward‐looking statements or
Slide 47: References
References Hear now. And always 1. World report on hearing. Geneva: World Health Organization; 2021. Licence: CC BY‐NC‐SA 3.0 IGO. (https://www.who.int/activities/highlighting‐priorities‐for‐ear‐and‐hearing‐care). 2. Market penetration estimate based on Cochlear sourced data. 3. Mohr et al., 2000; C
Slide 48: www.cochlear.com
www.cochlear.com © Cochlear Limited 2022