Slide 1: FY21 Result Presentation
Hear now. And always FY21 Result Presentation 20 August 2021 Dig Howitt CEO & President Stu Sayers CFO © Cochlear Limited 2021 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: 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 The passion that drives the organisation and
Slide 4: FY21 Summary
FY21 Summary Cochlear implant Record CI units & sales revenue units 36,456 • Cochlear implant (CI) units 15% to 36,456 ( 7% on FY19) • Sales revenue 19% to $1,493m in CC* ( 6% on FY19 in CC), driven by market share gains, market growth and rescheduled surgeries from COVID shutdowns 15% Contin
Slide 5: FY21 Operational review: Cochlear implants
FY21 Operational review Cochlear implants 61% of sales revenue Improving momentum with the pace of recovery varying across Cochlear implant sales revenue countries 1000 $m in CC* $899m Developed markets 900 800 • Units ~20% (~10% on FY19) with surgery mix back to pre‐COVID levels as patients progr
Slide 6: FY21 Operational review: Services
FY21 Operational review Services 29% of sales revenue Improvements across the year as clinic capacity improves Services sales revenue with new sound processor driving upgrade demand 500 $m in CC* $439m • Revenue 19% in CC (up 5% in CC on FY19) 450 400 • Q1 and Q3 revenue impacted by lower clinical
Slide 7: FY21 Operational review: Acoustics
FY21 Operational review Acoustics 10% of sales revenue Improving surgery momentum and a rapid shift to the Acoustics sales revenue Cochlear™ Osia® 2 System in the US 200 $m in CC* • Revenue 22% in CC (down 8% in CC on FY19) 180 $156m • Surgery volumes have been recovering in the US since May 2020
Slide 8: Progress against strategic priorities: Market-leading technology
Progress against strategic priorities Retain market leadership Market‐leading technology Growing market share • Eight new products and services achieve FDA approval over the past 18 months • Accelerated connected care development Nucleus® SmartNav Pioneering new implant categories System Cochlear™ N
Slide 9: Progress against strategic priorities: World-class customer experience
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 driving demand for sound processor upgrades • Cochlear™ Nucleus® 7 Sound Processor for Nucleus® 22 im
Slide 10: Progress against strategic priorities: Awareness & access
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 11: Progress against strategic priorities: Clinical evidence
Progress against strategic priorities Grow the hearing implant market Clinical evidence Cost effectiveness studies • Studies in Sweden and the Netherlands demonstrating the cost‐effectiveness of cochlear implants in adults with the Netherlands study detailing the significant cost, health and societa
Slide 12: Progress against strategic priorities: Revenue and earnings growth
Progress against strategic priorities Deliver consistent revenue and earnings growth Investing to grow Operational improvement Strong financial position • Delivered record sales revenue of • Commenced a major IT systems upgrade • Underlying net profit* of $237m, up 54% on $1,493m, up 19% in CC to im
Slide 13: Profit & loss
Profit & loss Change Change $m FY21 FY20 (reported) (CC) Key points: Improved sales revenue driven by market share gains, market growth Sales revenue 1,493.3 1,352.3 10% 19% and rescheduled surgeries from COVID shutdowns Gross margin % 73% 75% (2) pts (1) pt GM% impacted by stronger AUD Selling,
Slide 14: Cash flow
Cash flow $m FY21 FY20 $ change Key points: EBIT (underlying) 330.2 206.9 123.3 EBIT benefits from improved trading conditions Depreciation and amortisation 79.5 77.5 2.0 Changes in working capital and other (11.2) 66.9 (78.1) Final AMF‐related payment of US$75m in prejudgment interest and Cash im
Slide 15: Net cash
Net cash $m FY21 FY20 $ change Key points: Cash, cash equivalents and term deposits 609.6 930.0 (320.4) Less: Loans and borrowings Current ‐ (393.1) 393.1 Non‐current (45.0) (79.9) 34.9 Total loans and borrowings (45.0) (473.0) 428.0 Net cash 564.6 457.0 107.6 Strong cash flow generation drives $1
Slide 16: Capital employed
Capital employed $m FY21 FY20 $ change Key points: Trade receivables 262.1 211.4 50.7 Inventories 216.1 223.8 (7.7) Less: Trade payables (202.9) (155.3) (47.6) Working capital 275.3 279.9 (4.6) Working capital / sales revenue 18% 21% Property, plant and equipment 239.5 230.5 9.0 Intangible assets 40
Slide 17: Dividends
Dividends FY21 HY20 % change Key points: Dividend re‐introduced following improved trading conditions and Interim ordinary dividend (per share) $1.15 $1.60 (28%) positive cash flow generation Final ordinary dividend (per share) $1.40 ‐ Total ordinary dividends (per share) $2.55 $1.60 59% % payout
Slide 18: FY22 Outlook
FY22 Outlook Sales revenue to benefit from market growth and continuing recovery in surgery rates • Developed markets to continue to grow with variability across countries – the US has adapted quickly to COVID with the market growing well while Western Europe and parts of Asia Pacific are in the ear
Slide 19: Supplementary information
Hear now. And always Supplementary information Cochlear overview Growth opportunity Strategy 19
Slide 20: Cochlear overview
Hear now. And always Cochlear overview © Cochlear Limited 2021 20
Slide 21: 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 22: 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 23: 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 24: 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 25: Growth opportunity
Hear now. And always Growth opportunity © Cochlear Limited 2021 25
Slide 26: 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 27: 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 28: 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 29: 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 30: 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 31: 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 32: 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 33: Strategy
Hear now. And always Strategy © Cochlear Limited 2021 33
Slide 34: 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 35: 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 36: 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 37: 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 38: 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 39: 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 40: Adults and seniors: 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 41: 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 42: 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 43: 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 44: 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 44
Slide 45: 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 46: 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 47: 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 48: 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 49: www.cochlear.com
www.cochlear.com © Cochlear Limited 2021