Slide 1: HY23 Result Presentation
Hear now. And always HY23 Result Presentation 15 February 2023 Dig Howitt CEO & President Stu Sayers CFO © Cochlear Limited 2023 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: HY23 Summary
HY23 Summary Sales revenue up 9% (up 7% in CC*) Sales revenue $m in CC* • Strong demand across all regions for cochlear implants driven by the launch of the Nucleus® 8 Sound Processor with cochlear implant units up 14% 7% in CC* • Services revenue growth slowed in anticipation of the launch of the
Slide 4: HY23 Operational review: Cochlear implants
HY23 Operational review Cochlear implants 57% of sales revenue Cochlear implant unit growth of 14% with strong growth across both Cochlear implant sales revenue developed and emerging markets $m in CC* Developed markets • Volumes grew >10% with the US, Western Europe and Asia Pacific all delivering
Slide 5: HY23 Operational review: Services
HY23 Operational review Services 29% of sales revenue Revenue growth slowed in anticipation of the launch of the Services sales revenue Nucleus® 8 Sound Processor $m in CC* • Revenue flat in CC with revenues slowing in anticipation of the launch of the Nucleus® 8 Sound Processor • Follows the strong
Slide 6: HY23 Operational review: Acoustics
HY23 Operational review Acoustics 14% of sales revenue Strong demand for all products across all regions Acoustics sales revenue • Revenue up 17% in CC, the result of a strong product offering and a continued recovery in surgery $m in CC* volumes following COVID delays • The Cochlear™ Osia® 2 System
Slide 7: Profit & loss
Profit & loss Change Change $m HY23 HY22 (reported) (CC) Key points: Sales revenue 892.6 815.3 9% 7% Strong demand for cochlear and acoustic implants Gross margin % 75% 75% 0 pts 0 pts Gross margin maintained – in line with the longer‐term target Continued investment in market growth initiatives
Slide 8: Capital employed
Capital employed $m Dec22 Jun22 Change Key points: Increase driven by growing sales revenue and impact of the timing Trade receivables 337.5 308.4 29.1 of the launch of the Nucleus® 8 Sound Processor late in the half Stay‐in‐business inventory levels remain higher than pre‐COVID levels reflecting
Slide 9: Cash flow
Cash flow $m HY23 HY22 Change Key points: EBIT decline driven by increased cloud computing investment, new EBIT (underlying)* 185.7 217.6 (31.9) product launch costs and the impact of the weighting in operating expenses to the second half of FY22 Depreciation and amortisation 37.3 35.8 1.5 Increas
Slide 10: Dividends
Dividends HY23 HY22 % change Key points: Interim ordinary dividend (per share) $1.55 $1.55 0% % Payout ratio (based on underlying net profit) 72% 65% % Franking (final dividend) 35% 0% Franking balance depleted as a result of FY20 losses On‐market share buyback • Commencing a progressive on‐market
Slide 11: FY23 Outlook
FY23 Outlook The FY23 underlying net profit guidance range maintained at $290‐305m, an increase of 8‐13% when adjusted for the increase in cloud computing‐related expenses Key assumptions: • Guidance anticipates strong growth in sales revenue and ~18% underlying net profit margin before cloud comput
Slide 12: Supplementary information: Cochlear overview & strategy
Hear now. And always Supplementary information Cochlear overview & strategy 12
Slide 13: About Cochlear
About Cochlear For over 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 capitalis
Slide 14: Cochlear at a glance
Cochlear at a glance Business segments Global sales Market leader Cochlear Cochlear implant systems implants* % Cochlear™ Nucleus® > $1.6b $200m+ in annual R&D 57 Profile™ Plus with Slim Modiolar in sales revenue* Electrode (CI632) % % 60% > global market share** Services* Sound processor upgrades,
Slide 15: 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 over 40 years with over 60% global market
Slide 16: Financial history
Financial history Cochlear has a long track record of delivering growing sales revenue, profits* and dividends. Cochlear implants Net profit units $m underlying* 5% 18% in FY22 in FY22 Sales revenue Dividends $m per share 9% 18% in FY22 in CC in FY22 16 * Excluding one‐off and non‐recurring item
Slide 17: Our mission
Our mission The passion that drives the organisation and focuses the strategy e Empower e Transform e Innovate Our strategy Where we focus our time and resources to create value e Growth opportunity e Strategic priorities e A stronger organisation Value creation How the outcomes of our activities im
Slide 18: Growth opportunity
Our strategy Growth opportunity The factors driving industry growth Growth opportunity Hearing loss is prevalent and under‐treated Cochlear implants are a cost‐effective solution for all age groups Strategic priorities Product indications are broadening and funding is expanding A stronger orga
Slide 19: Hearing loss is prevalent and under-treated
Our Growth opportunity strategy Hearing loss is prevalent and under‐treated >60m people with severe or higher hearing loss Growth The WHO estimates that there are more opportunity than 60 million people worldwide who experience severe or higher hearing loss.4 Strategic priorities A challenge for hea
Slide 20: Cochlear implants are a cost-effective solution for all age groups
Our Growth opportunity strategy Cochlear implants are a cost‐effective solution for all age groups Growth Cochlear implants provide life changing The estimated lifetime societal opportunity outcomes for recipients, empowering them costs for a pre‐lingual deaf child in developed markets exceeds to co
Slide 21: Product indications are broadening and funding is expanding
Our Growth opportunity strategy Product indications are broadening and funding is expanding Growth Product indications and funding US: lowered the age of cochlear Cochlear™ Osia® 2 System: opportunity are expanding as payers implantation from 12 to 9 months reimbursement achieved across a and includ
Slide 22: Cochlear implants can deliver superior outcomes to hearing aids
Our Growth opportunity strategy Cochlear implants can deliver superior outcomes to hearing aids for indicated patients We are the market But a small player in the severe Growth Cochlear implants can provide leader in cochlear or higher hearing loss segment opportunity implants…. where hearing aids d
Slide 23: Good hearing is essential for healthy ageing
Our Growth opportunity strategy 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. There is a growing understanding of the importance of properly treating hearing loss Growth in
Slide 24: Strategic priorities
Our strategy Strategic priorities How we focus our time and resources to create value Growth opportunity Retain market leadership We are committed to retaining our market leadership position in the industry by continuing to make substantial investments in R&D that enable us to bring to market implan
Slide 25: Retain market leadership: product and services portfolio
Our Retain market leadership strategy Our market‐leading product and services portfolio Cochlear implants Acoustic implants Convenience & confidence Telehealth solutions Growth opportunity Cochlear™ Nucleus® Profile™ Plus implant Strategic priorities Cochlear™ Osia® 2 Nucleus, Baha & Osia Smart Apps
Slide 26: Retain market leadership: what we are doing
Our Retain market leadership strategy What we are doing Growth We create value through innovation, bringing to market new products and services that opportunity deliver a lifetime of hearing outcomes. Key focus areas: Strategic Market‐leading technology World‐class customer experience priorities • M
Slide 27: Grow the hearing implant market
Our Grow the hearing implant market strategy We grow the market by transforming the way people understand and treat hearing loss Our efforts are targeted at improving awareness, expanding access and building on the clinical Growth opportunity evidence that demonstrates the effectiveness of our produ
Slide 28: Grow the hearing implant market: what we are doing
Our Grow the hearing implant market strategy What we are doing Our biggest opportunities to create value will be from building a sustainable adult referral Growth opportunity pipeline for cochlear implants and by broadening the acoustics market. Key focus areas: Strategic • Improve the awareness of
Slide 29: Deliver consistent revenue and earnings growth
Our Deliver consistent revenue and earnings growth strategy What we are doing We create value by maintaining discipline around our long‐term investment model and Growth opportunity continuing to refine our capital allocation processes to ensure we optimise investment. We balance maximising spending
Slide 30: Revenue drivers
Our Deliver consistent revenue and earnings growth strategy Revenue drivers Growth Sales revenue opportunity Cochlear implants $m in CC • Growing awareness and uptake by adults and seniors • Emerging market expansion Strategic • New products driving market growth and market share priorities Services
Slide 31: Invest to grow
Our Deliver consistent revenue and earnings growth strategy Invest to grow We take a long term approach to investing and have invested in growing the market for implantable Growth solutions since listing in 1995. opportunity Consistent investment in Growing R&D capability Delivering stable net sales
Slide 32: Operational improvement
Our Deliver consistent revenue and earnings growth strategy Operational improvement Disciplined capital investment and optimising cost of production strengthens our competitive position. Growth opportunity Disciplined use of capital Stable gross margin Capital employed Strategic priorities A stronge
Slide 33: Strong financial position
Our Deliver consistent revenue and earnings growth strategy Strong financial position Strong free cash flow generation provides funding for market growth activities and R&D as well as the Growth ability to reward shareholders with a growing dividend stream. opportunity High return on capital Quality
Slide 34: A stronger organisation
AOur stronger organisation strategy A stronger organisation The pillars that set the foundation for success Growth opportunity Shaping our culture Our people are our most valuable asset and are an engaged, capable, high‐performing and diverse Strategic team. The way our people work together is a cri
Slide 35: A stronger organisation: what we are doing
Our A stronger organisation strategy What we are doing To be successful over the long term, our organisation needs to be strong, agile and sustainable to Growth enable us to execute our strategy, support our customers and deliver on our growth ambitions opportunity Key focus areas: Strategic priorit
Slide 36: The value we create for all stakeholders
Value The value we create for all stakeholders, driving success now and creation into the future Success means achieving the following outcomes for our stakeholders: A healthier & Empowered A lifetime of more productive Thriving people Sustained value customers hearing solutions society Payers and s
Slide 37: 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 38: References
References Hear now. And always 1. Cochlear estimates based on the published economic model findings of Neve et al 2021. Dollar amount relates to all recipients implanted with one or more cochlear implants in FY22 across the developed markets. 2. Hearing Screening: considerations for implementation.
Slide 39: www.cochlear.com
www.cochlear.com © Cochlear Limited 2023