Fisher & Paykel Healthcare Corporation Limited · NZX:FPH
Fisher & Paykel Healthcare — H1 FY2021 Earnings Presentation
44 slides from Fisher & Paykel Healthcare's earnings presentation, Nov 25, 2020
Slide 1: Half Year Results Presentation FY2021
Half Year Results Presentation FY2021
Slide 2: Important notice
Important notice Disclaimer The information in this presentation is for general purposes only and should be read in conjunction with Fisher & Paykel Healthcare Corporation Limited’s (FPH) Interim Report 2021 and accompanying market releases. Nothing in this presentation should be construed as an inv
Slide 3: Half year business highlights
Half year business highlights + CONTRIBUTED to the global fight against COVID-19 by increasing manufacturing production on some hospital hardware devices by more than six times + PRESENTED virtual Nasal High Flow / COVID-19 symposium for 900 attendees at the European Respiratory Society Congress 202
Slide 4: Impact of COVID-19
Impact of COVID-19 * Our people - Our people continue to go above and beyond - Priority has been ensuring the safety of our people, and therefore protect our ability to manufacture, supply and train end users on essential respiratory support - Since January 2020, have hired over 1000 additional dire
Slide 5: Key half year financial results
Key half year financial results H1 FY21(6 months to 30 September 2020) % of Revenue NZ$M SPCP* acc* Operating revenue 100% 910.2 59% 61% Hospital operating revenue 75% 681.0 93% 94% Homecare operating revenue 25% 226.2 5% 6% Gross margin / Gross profit 62% 561.9 -534bps -420bps SG&A 21% (188.1) 15%
Slide 6: Hospital product group
Hospital product group HARDWARE H1 FY21 HOSPITAL REVENUE COMPOSITION ~~ (ite 4 TIPPER aunt jp Suis” me ss08ystem Gi 850 system CONSUMABLES Non-invasive ventilation Invasive ventilation mHardware ™ Consumables a Zi H1 FY20 Hospital revenue composition* ron " he i 4a Hardware: 15% Consumables: 85% ai
Slide 7: Hospital product group
Hospital product group H1FY21 (e) OF OPERATING 75 % REVENUE HOSPITAL OPERATING REVENUE (H1 FY21 $681.0M) 7 4 93% corte MN OAG NEW APPLICATIONS* CONSUMABLES REVENUE i * 41% comer NS SH = Noninva: entilation (NIV), nasal high flow therapy, surgical * H1FY21 Hospital hardware growth of 383% in constant
Slide 8: Homecare product group
Homecare product group HARDWARE H1 FY21 HOMECARE REVENUE COMPOSITION _-~ SleepStyle myAIRVO2 810System “.. CONSUMABLES Ce) CPAP Therapy/OSA A) Home Respiratory Support mHardware ™ Consumables H1 FY20 Homecare revenue composition Hardware: 16% Consumables: 84% Brevida Fisher Paykel HEALTHCARE
Slide 9: Homecare product group
Homecare product group H1FY21 (@) OF OPERATING (e) REVENUE HOMECARE OPERATING REVENUE (H1 FY21 $226.2M) NZ$ 5% CONSTANT (e) ie ad 6 % *« Home Respiratory Support business grew strongly, MASKS REVENUE driven by strong myAirvo sales NZ$ fe) * OSA mask revenue impacted by reduced 3 % new patient diagno
Slide 10: Gross Margin
Gross Margin GROSS MARGIN 70% 60% in ee ee * Gross margin for the half year: 50% - decreased by 534 bps to 61.7% - decreased by 420 bps in constant currency “on - decrease primarily driven by an increase in 20% freight cost as a result of COVID-19 * Excluding additional freight costs, gross 20% marg
Slide 11: Operating Margin
Operating Margin OPERATING (EBIT) MARGIN . Operating expenses * NZ$252.7M, +17% (417% CC) * Operating margin increased by 489bps 25% (+610bps CC) to 34% due to operating expense growth of 17%, significantly lower than sales 20% growth of 59% x Research & Development expenses * NZ$64.6M, +20% (+20% C
Slide 12: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet H1 FY20 H1FY21 NZ$M NZ$M Operating cash flow 113.5 218.1 Capital expenditure (including purchases of intangible assets) 86.6 94.5 Lease liability payments 4.3 5.3 Free cash flow 22.6 118.3 FY2020 H1 FY21 NZ$M NZ$M Net cash (including short-term investments) 42.2 781 Total
Slide 13: Gearing and Dividend
Gearing and Dividend * Target gearing ratio* of +5% to -5% debt to debt plus equity GEARING? 15% - Gearing ratio as at 30 September 2020 was -7.1% 10% * Increased interim dividend by 33%: 59% pana nn - 16.00 cps + 6.22 cps imputation credit 0% for NZ residents (gross dividend of NZ ee 22.22 cps) , -
Slide 14: Foreign exchange effects
Foreign exchange effects * 50% of operating revenue in USD (FY20: 49%) and 18% in € (FY20: 19%). Year to 31 March Hedging position for our main exposures FY21 FY22 FY23 FY24 FY25 FY26-27 USD % cover of expected exposure 95% 75% 40% 30% 30% - USD average rate of cover 0.654 0.658 0.637 0.630 0.624 -
Slide 15: Revenue and expenses by currency
Revenue and expenses by currency H1FY21 (for the 6 months ended 30 September 2020) REVENUE BY CURRENCY COST OF SALES BY CURRENCY OPERATING EXPENSES BY CURRENCY =NZD m#USD BEUR @MXN m Other = NZD USD MEUR @ MXN m@ Other =NZD mUSD BEUR @MXN mOther Fisher &Paykel 5 HEALTHCARE
Slide 16: Outlook FY2021
Outlook FY20?1 Guide assumptions (note these are not a forecast or a prediction of the course of COVID-19): - Hospital hardware sales return to normal levels from January 2021 - The use of our hospital hardware returns down to approximately normal rates for the second half of the financial year - OS
Slide 17: Overview
r ; Overview Fisher &Paykel HEALTHCARE
Slide 18: Fisher & Paykel Healthcare at a glance
Fisher & Paykel Healthcare at a glance Global leader in respiratory humidification devices 18 Medical device manufacturer with leading positions in respiratory care and obstructive sleep apnea 50 years’ experience in changing clinical practice to solutions that provide better clinical outcomes and i
Slide 19: ~NZ$20+ billion and growing market opportunity
~NZ$20+ billion and growing market opportunity Total addressable market estimates HOSPITAL HOMECARE ~90+ million patients (including ~50+ million in Hospital Respiratory Support)* ~100+ million patients Invasive Non-invasive _ Hospital Surgical _ Home Obstructive Sleep Ventilation Ventilation Respir
Slide 20: Our aspiration
Our aspiration 60 8®© 8 6 @ RESPIRATORY CPAP HOSPITAL HOME SURGICAL | HUMIDIFICATION | THERAPY/OSA RESPIRATORY RESPIRATORY | TECHNOLOGIES i SUPPORT SUPPORT Cs Fon SHORT-TERM MEDIUM-TERM LONGER-TERM OUR ASPIRATION: Sustainably DOUBLING our constant currency revenue every 5-6 years. Fisher &Paykel HEA
Slide 21: Markets and products
Markets and products * Hospital REVENUE BY PRODUCT GROUP -yegs as 6 MONTHS TO 30 SEPTEMBER 2020 - Heated humidification - Respiratory care - Neonatal care - Surgery <1% * Homecare - Masks - Flow generators - Data management tools - Respiratory care in the home Recurring items, consumables and : . @
Slide 22: Impact of changing demographics
Impact of changing demographics * Population age and weight both increasing - US population 65 years+ to grow ~80% over next 20 years! - US males 60 - 74 years, average weight increased 0.4 kg/year since 19602 * 60% of US healthcare cost is after age 65 years® * Developing markets increasing healthc
Slide 23: Hospital cost breakdown
Hospital cost breakdown 6% Medical devices Other - includes labour, utilities, drugs, supplies, 94% food, depreciation. : _— - - / FisheréPaykel 23 — Source: Estimates of Medical Device Spending in the United States, Donahoe, G and King, G, June 2014 HEALTHCARE
Slide 24: Lower care intensity = lower cost
Lower care intensity = lower cost $50,000 $40,000 $30,000 $20,000 $10,000 Mean cost (2008 US$) $0 MEAN ANNUAL COPD-RELATED MEDICAL, PHARMACY AND TOTAL COSTS BY CARE INTENSITY COHORT Outpatient cohort Urgent outpatient cohort ED cohort Standard admission cohort ICU cohort Source: Anand A Dalal, Laura
Slide 25: Hospital
25 | |B — ‘Hospital I 1 Fisher &Paykel HEALTHCARE
Slide 26: Respiratory humidification
Respiratory humidification ¢ Normal airway humidification 26 is bypassed or compromised during ventilation or oxygen therapy Mucociliary transport system operates less effectively Need to deliver gas at physiologically normal levels - 37°C body core temperature - 44mg/L 100% saturated Fisher &Paykel
Slide 27: Optiflow - displacing conventional oxygen therapy
Optiflow - displacing conventional oxygen therapy CONVENTIONAL NON-INVASIVE OXYGEN THERAPY VENTILATION Fisher &Paykel 27 HEALTHCARE
Slide 28: Patient groups who may benefit from Optiflow
Patient groups who may benefit from Optiflow ADULTS: * Acute respiratory °* Emphysema —s failure * Palliative Care | . * Asthma * Pneumonia * Atelectasis * Pulmonary embolism | * Bronchiectasis . Respiratory .\ i . * Bronchitis compromise > . * Burns * Viral pneumonia "Waal os * COPD * Carbon monoxi
Slide 29: Clinical outcomes of Optiflow nasal high flow therapy
Clinical outcomes of Optiflow nasal high flow therapy Optiflow NHF therapy is associated with: ADULTS: PAEDIATRICS: * REDUCED intubation® * REDUCED intubation" ¢ REDUCED re-intubation’” ® 2 * REDUCED length of stay'2 * REDUCED bilevel ventilation® * REDUCED respiratory distress'$ * REDUCED nursing w
Slide 30: Optiflow NHF - a growing body of clinical evidence
Optiflow NHEF - a growing body of clinical evidence NASAL HIGH FLOW CLINICAL PAPERS PUBLISHED ANNUALLY * The publication of 437 clinical papers on NHF continues to signify a high level of clinical interest in the 200 therapy * Of the 65 controlled studies* on the use 300 250 oo of NHF for respirator
Slide 31: Evidence based COVID-19 guidelines
Evidence based COVID-19 guidelines : Flow rate Clinical guideline references Optiflow >45 I/min NIH ANZICS SCCM WHO 5 80% 100% e@ 8 100% 75% e@ 9 100% 66% e@ e@ e@ 12 92% 66% e@ 2D 91% 82% e@ e@ e@ e@ Fisher &Paykel 3! HEALTHCARE
Slide 32: Strong growth in hospital new applications
Strong growth in hospital new applications CONSTANT CURRENCY REVENUE GROWTH RATE IN NEW APPLICATIONS CONSUMABLES* 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 -HIFY21 * New applications consumables currently make up 63% of Hospital consumables revenue,
Slide 33: Homecare
— Homecare Fisher &Paykel SB ACTH ARE
Slide 34: Obstructive Sleep Apnea
Obstructive Sleep Apnea * Temporary closure of airway during sleep * Can greatly impair quality of sleep, leading to fatigue; also associated with hypertension, stroke and heart attack * Estimate >100 million people affected in developed countries * Most common treatment is CPAP (Continuous Positive
Slide 35: Mask matters most
Mask matters most *« Masks are key to compliance * Unique, patented designs *« Released F&P Evora compact nasal mask in the US, and a patient mask app in the US, Canada, Australia and UK. F&P EVORA” F&P VITERA” F&P BREVIDA™ FisheréPaykel 35 HEALTHCARE
Slide 36: Home respiratory support
Home respiratory support *« Chronic obstructive pulmonary disease (COPD) is a lung disease which is commonly associated with smoking P ' ¢ Emphysema and chronic bronchitis are both | forms of COPD *« Chronic respiratory disease, primarily COPD, is the third leading cause of death in the world!” ¢ 6%
Slide 37: High level of innovation and investment in R&D
High level of innovation and investment in R&D * R&D represents 7% of operating revenue: NZ$64.6M * Product pipeline includes: - Humidifier controllers - Masks - Respiratory consumables - Flow generators - Compliance monitoring solutions 330 US patents, 419 US pending, 1378 Rest of world patents, 12
Slide 38: Growing patent portfolio
Growing patent portfolio FISHER & PAYKEL HEALTHCARE US PATENT PORTFOLIO (2008 - 2020) 450 400 350 300 250 200 150 100 HH 0 2008 2010 2012 2014 2016 2018 2020 mUS Patents mUS Patent Applications Average remaining life of FPH patent portfolio (all countries): 11.5 years* Fisher &Paykel HEALTHCARE
Slide 39: Manufacturing and operations
Manufacturing and operations Auckland, New Zealand * Four buildings: 110,000 m2 / 1,180,000 ft? * Co-location of R&D and manufacturing in NZ a competitive advantage Tijuana, Mexico * Two buildings: 41,000 m2 / 450,000 ft? * Commenced planning of third manufacturing facility in Tijuana, which is to b
Slide 40: Environmental, Social & Governance
Environmental, Social & Governance Summary of key environmental metrics Topic Description Target of measure Scopel1&2 Tonnes 4.2% annual reduction 70 carbon Co,e from 2019 base year 60 emissions 50 3 2 40 2 30 5 20 Scope 3 Tonnes SBTi supplier engagement 10 carbon Coe ° emissions 2018 2019 2020 mmm
Slide 41: Strong global presence
Strong global presence REVENUE BY REGION 6 MONTHS TO 30 SEPTEMBER 2020 * Direct/offices - Hospitals, home care dealers - Sales/support offices in North America, Europe, Asia, South America, Middle East and Australasia, 18 distribution centres - ~1,000 employees in 39 countries - Ongoing internationa
Slide 42: Ownership structure and listings
Ownership structure and listings * Listed on NZX and ASX (NZX.FPH, ASX.FPH) SHAREHOLDING STRUCTURE AS AT GEOGRAPHICAL OWNERSHIP AS AT 30 SEPTEMBER 2020 30 SEPTEMBER 2020 1% m™ New Zealand m Australia @NZ Institutions @ Other Institutions : serene Coe UK) . ren m Brokers & Retail m Other mRest of Wor
Slide 43: Consistent growth strategy
Consistent growth strategy 43 OUR INPUTS OUR OUTPUTS xe Improved tare 5000" outsomos for pationts 50 years of trusted relationships Increased ‘ofriciency of care Increased shareholder value Excatlonce in RAD , through and world-leading thea c Benefits to our people Doubling our constant ‘currency re
Slide 44: References
References References 1. Clinical guidelines for use of NHF on Covid-19 patients, including those issued by the HHS, WHO, SCCM, ACEP, NIH and the CDC. 2. Grayson k. Vincent, Victoria A. Velkoff, The Next Four Decades. The Older Population in the United States: 2010 to 2050, US Census Bureau, 2010. 3
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