Slide 1: FY20 Result Presentation
Hear now. And always FY20 Result Presentation 18 August 2020 Dig Howitt CEO & President Brent Cubis CFO © Cochlear Limited 2020 1
Slide 2: Cochlear at a glance
Cochlear at a glance Key products Global sales Market leader Cochlear ~ implants1 % Cochlear™ Nucleus® Profile™ Plus with Slim Modiolar $1.4b $180m + 61 Electrode (CI632) in sales revenue in annual R&D ~ 60 % % % % global market 49 35 16 + share2 Services 1 Americas EMEA Asia Pacific 600,000 % impla
Slide 3: 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. 3
Slide 4: FY20 – Result review
FY20 – Result review Impact of patent litigation expenses and COVID‐19 on sales revenue during H2 resulted in a net loss of $238.3 million • Sales revenue ↓ 6% (11% in CC1) to $1.4bn → H1 ↑ 9% + H2 ↓ 22% • Cochlear implant units ↓ 7% → H1 ↑ 13% + H2 ↓ 26% • Underlying net profit2 ↓ 42% to $154m due
Slide 5: FY20 – Operational review
FY20 – Operational review Strong start to the year with cochlear implant units up 13% in H1 • Market share gains from the launch of the Cochlear ™ Nucleus® Profile™ Plus Series cochlear implant • Emerging markets benefiting from investment in capability over many years COVID‐19 disruption with signi
Slide 6: Cochlear implants – 61% of revenue
Cochlear implants – 61% of revenue Cochlear implant Strong H1 offset by COVID‐19 deferral of elective sales revenue surgeries in H2 1000 $m in CC* Developed markets 900 $818m • Cochlear™ Nucleus® Profile™ Plus series implant driving share gains in 800 many markets throughout FY20 700 • Cochlear impl
Slide 7: Services – 29% of revenue
Services – 29% of revenue Services COVID‐19 clinic closures restrict access to sound sales revenue processor upgrades 500 $m in CC* • Penetration rates high for Cochlear™ Nucleus® 7 Sound Processor at this 450 point in the upgrade cycle $396m 400 • Services materially impacted by COVID‐19 in Q4 with
Slide 8: Acoustics – 10% of revenue
Acoustics – 10% of revenue Acoustics COVID‐19 deferral of elective surgeries in H2 sales revenue $m in CC* • In H1, some share loss in Cochlear™ Baha® 5 implants from competitor 200 product launch as well as market slow down in anticipation of the launch of the Cochlear™ Osia® 2 System which receive
Slide 9: FY20 – Regional review
FY20 – Regional review Americas EMEA APAC sales revenue sales revenue sales revenue $m in CC* $m in CC* $m in CC* 800 800 800 $650m 600 600 600 $480m 400 400 400 $222m 200 200 200 0 0 0 FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY18 FY19 FY20 H1 H2 H1 H2 H1 H2 Sales revenue 11% i
Slide 10: FY20 Result Presentation – Brent Cubis CFO
Hear now. And always FY20 Result Presentation 18 August 2020 Brent Cubis CFO 10
Slide 11: Profit & loss
Profit & loss Change Change $m FY20 FY19 (reported) (CC) Key points: Sales revenue 1,352.3 1,446.1 (6%) (11%) Decline driven by COVID‐19 deferral of elective surgeries % GM 75% 76% (1) pt 0 pts Benefit of lower warranty costs offset by lower prodn since May Selling, marketing and general expense
Slide 12: Other expenses
Other expenses $m FY20 FY19 Change Key points: Includes US (CARES Act), Australia’s JobKeeper Program and other Government assistance (COVID‐19‐related) 23.6 ‐ 23.6 assistance programs offered in Europe and Asia Release in the contingent consideration (Sycle) 13.2 10.8 2.4 Final release in the c
Slide 13: Cash flow
Cash flow $m FY20 FY19 $ change Key points: EBIT (underlying) 206.9 359.3 (152.4) Impact of significant decline in sales revenue in Q4 Depreciation and amortisation (excl AASB16 49.1 38.5 10.6 impact) AASB16 lease‐related cash flows reflected in financing cash flows Depreciation and amortisation (
Slide 14: Net debt & financial position
Net debt & financial position $m FY20 FY19 $ change Key points: Loans & borrowings: Current 393.1 3.3 389.8 Non‐current 79.9 178.3 (98.4) Total loans and borrowings 473.0 181.6 291.4 Cash and term deposits increase driven by the $1.1bn capital Less: Cash, cash equivalents and term deposits (930.0) (
Slide 15: Capital employed
Capital employed $m FY20 FY19 $ change Key points: Trade receivables 211.4 299.5 (88.1) Reduction driven by lower sales in Q4 (COVID‐19 related) Inventory build during sales downturn in anticipation of resumption Inventories 223.8 195.4 28.4 of surgeries + building of safety stock Less: Trade pa
Slide 16: Dividends
Dividends FY20 FY19 % change Key points: Interim ordinary dividend (per share) $1.60 $1.55 3% Dividend suspended in March until trading conditions sustainably Final ordinary dividend (per share) ‐ $1.75 (100%) improve and cash flow generation is sufficient to support its resumption Total ordinary
Slide 17: FY20 Result Presentation – Dig Howitt CEO
Hear now. And always FY20 Result Presentation 18 August 2020 Dig Howitt CEO & President 17
Slide 18: Strategic priorities
Strategic priorities Retain market leadership Market‐leading technology I World‐class customer experience Grow the hearing implant market Awareness I Market access I Clinical evidence Deliver consistent revenue and earnings growth Invest to grow I Operational improvement I Strong financial position
Slide 19: Market-leading product portfolio
Market‐leading product portfolio Cochlear™ Nucleus® Slim Modiolar BTE & OTE Profile™ Plus Series implant Electrode Sound Processors Benchmark in size, implant Proven perimodiolar Benchmark in size, smartphone connectivity reliability and neural interface advantage and hearing performance Cochlear™ N
Slide 20: Record number of important new product approvals
Record number of important new product approvals broadening the breadth and depth of the portfolio Implants and electrodes Sound processors Cochlear™ Nucleus® Cochlear™ Profile™ Plus with Nucleus® Kanso® 2 Slim 20 Electrode Sound Processor Cochlear™ Nucleus® 7 Sound Processor for Cochlear™ Osia® 2 N
Slide 21: Cochlear Nucleus Kanso 2 Sound Processor
Cochlear™ Nucleus® Kanso® 2 Sound Processor What’s new • Latest connectivity features and proven hearing performance technology • Built‐in rechargeable battery and improved dust and water resistance • Smallest and lightest rechargeable off‐the‐ear (OTE) sound processor Why this is important for our
Slide 22: Cochlear Nucleus 7 Sound Processor for N22 Recipients
Cochlear™ Nucleus® 7 Sound Processor for N22 Recipients What’s new • Delivering the latest sound processor technology to our earliest cochlear implant recipients Why this is important for our customers • Recipients with N22 implants can now enjoy industry leading features like ‐ Direct Audio Streami
Slide 23: Custom Sound Pro Fitting Software
Custom Sound® Pro Fitting Software What’s new • Latest generation of CI fitting software • New Dashboard screen giving instant visibility to all‐ important patient information at a glance • New Patient Goals feature to optimise patient outcomes and engagement Why this is important for our customers
Slide 24: Nucleus SmartNav System
Nucleus® SmartNav System What’s new • New intraoperative tool to support surgeons placing cochlear implant electrode • Innovative algorithm to check the electrode placement and enable real‐time monitoring of electrode insertion • Wireless and intuitive design for easy setup in surgery Why this is im
Slide 25: Remote Check
Remote Check What’s new • Convenient, at‐home testing tool that allows patients with a Nucleus® 7 Sound Processor or Nucleus® Kanso® 2 Sound Processor to complete hearing tests using the Nucleus® Smart App • Clinicians can review the results by logging into the myCochlear.com Professional Portal – t
Slide 26: Major capex projects progressing to plan
Major capex projects progressing to plan Cochlear’s new US head office in Denver, Colorado opened in May Construction of Cochlear’s China manufacturing facility to be completed by the end of 2020 26
Slide 27: FY21 outlook
FY21 outlook Aim to continue to strengthen our competitive position and invest in growth • Continue to grow investment in R&D to extend product portfolio leadership • Investment in awareness and referral channels in developed markets and awareness and presence in emerging markets CI surgery recovery
Slide 28: FY21 outlook
FY21 outlook Services continues to be impacted by lower clinic capacity • June/July revenue at ~70% of last year • The launch of the Kanso 2 Sound Processor, the growing recipient base and the adoption of remote care tools are expected to underpin demand for upgrades over the longer term • Near term
Slide 29: Appendix
Hear now. And always Appendix 29
Slide 30: 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‐19 Sales revenue 1,352 A$m FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Slide 31: Investing to grow
Investing to grow Cochlear takes a long term approach to investing and has invested in growing the market for implantable solutions since listing in 1995 Consistent investment in sales and marketing Selling, marketing & general expenses 33% 35% Our investment in sales and marketing activities is bui
Slide 32: Operational improvement
Operational improvement Disciplined capital investment and optimising cost of production strengthens our competitive position Gross margin 74% 75% Stable gross margin Cochlear’s gross margin has been relatively stable since listing. 1,008 We use our scale to generate efficiency gains to reinvest bac
Slide 33: Strong financial position
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 Operating cash flow v net profit Quality operating cash flows One of the highlights of Cochlear’s financial hi
Slide 34: Strong financial position
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 Net debt / (cash) Conservative gearing levels Cochlear has a strong balance sheet. It is a growth company that
Slide 35: 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 36: Trademarks
Cochlear, Hear now. And always, Nucleus, Kanso, Baha, the elliptical logo, and marks bearing an ® or ™ symbol, are either trademarks or registered trademarks of Cochlear Limited or Cochlear Bone Anchored Solutions AB (unless otherwise noted). © Cochlear Limited 2020.