Hi, everyone. Thanks for joining us today for our first half results announcement.

Let me get started. As I said, we'll do a presentation upfront and then open for questions.

We always do like to start with our mission, and particularly this half where we've been very focused on the launch of Nexa, which is sort of the core of our mission of getting people to hear and be heard, and certainly highlights of being able to talk to professionals about their excitement around the technology in Nexa and what that brings for the future, and to be able to meet a bunch of recipients who have been excited by the technology and be able to benefit from features like SmartSync. Let's get into the results.

As I said, this year, this half is really all about Nexa, and certainly a big undertaking to launch Nexa. I'll explain a bit more about what's involved in just a few minutes.

Overall, we saw a very successful launch that really does set us up for the future. In doing that, and I'll go into some of the detail, we saw price increases, and we did see some delays in those price increases, some delays in sales.

That's really what's brought us short of where we expected to be in the first half, which led to sales revenue being down 2% in constant currency and the underlying net profit of $195 million. What that means for the outlook, and I'll talk more about the outlook a little bit later, but at a high level, we would now think we'll come in at the lower end of our original guidance range before we adjust for the recent rise in the Australian dollar.

The reason for that being at the lower end rather than just in the range more broadly is the shortfall in the first half, we don't see that we will catch up in the second half. Then on to FX, obviously Australian dollar has been on quite a run just over the last few weeks.

If it stays about where it is today, that's about a $30 million net profit hit through the half. You'll see later on we've provided a bit more detail because it has been moving around so that as it if it does continue to move around, you can have a chance of estimating what that impact will be.

Let's go and talk through the segments. I want to spend a bit of time on cochlear implants, obviously, with the Nexa launch, because the key with a launch like this is a significant exercise right across the company.

It's a change to our manufacturing process, obviously change to the distribution. It's also involves new software in all of the clinics around the world that are using Nexa.

We think about the logistics of that launch, it's a significant effort across the organization, and it does take time. We said at the start of the year that our performance, our revenue, and our profit would be weighted to the second half, and it still is.

If we think a bit more about Nexa, first of all, as we know, we had approvals in Western Europe and parts of Asia Pacific at the start of the half, we're able to start shipping into a number of countries in Western Europe and Australia from early in the half. We did then have to install software.

Some of that went quickly, but for instance, in the NHS, our new software got stuck in a queue in the NHS, it was actually some months before we were shipping Nexa into the UK in the half. In the US, we got FDA approval in early July.

We started shipping in September to hospitals that had recontracted with us for Nexa. Again, we really in the US sort of got four months of Nexa sales in that first half for the hospitals that contracted upfront, and some of them took longer, which meant even less impact of Nexa in that half.

We did as we went into this and we said at the start of the year, we would seek price increases in countries where the reimbursement system enables a price increase for new technology. In most of the countries where that's the case, that does mean contracting hospital by hospital.

That's the case in Germany, it's the case in the US. In going through that, we have been able to achieve the price increases that we set out to do, albeit took a bit longer in some instances.

Obviously when we're negotiating price, it's an opportunity for our competitors to compete with us quite aggressively. We expected that to happen, we saw that happen.

We saw a number of instances where when we were pushing for price, our competitors were offering discounts for bulk purchases in those hospitals, and that enables them to get a bit of stock on the shelf. Certainly a few cases where we lost a little bit of market share going through the contracting process.

That's a bit of a description of what happened. Where did we end up?

The way we end up is important for the confidence that it gives us looking forward. The result of all that is by December, over 80% of our developed market sales were in Nexa.

That's obviously a very significant shift. We did see in November and December across key markets a 10% lift those key developed markets, a 10% lift in our cochlear implant units compared to the prior year.

That's a sort of a good indicator of the impact that Nexa had once it was installed. We did get a low single-digit price increase.

We got the price increases we sought in the markets that we went for it, ended up with a low single-digit impact. Obviously not much of an impact for that in the first half given the timing.

As a result, we ended up with just a low growth in overall CI units. Now, we do know, while we've been very focused on Nexa, that the key to our success is driving growth in the cochlear implant market.

We have continued to execute our growth strategies, and we continue to push launch new growth strategy, I'll talk a little bit more about that, and push more resource into driving growth, particularly in the adults and seniors. Just one example of that is we're launching right now some new messaging on cognition using the latest results from independent studies showing the links between cognition and hearing loss and the benefits to cognition from using cochlear implants and starting to use that to again to raise awareness of the need to treat.

If I move on then to look at emerging markets. Emerging markets, we said going into the year that we expect to see volume growth, but at lower price but in the lower tiers.

That was particularly because of the China volume-based pricing, which came in in March last year. We had the full six months, and we also had that against a comparable half where we had noted higher than normal premium tier sales in emerging markets.

We saw very good volume growth in emerging markets, but it did lead to lower overall revenue. That's directly as a result of the volume-based pricing in China.

That said, we did execute very well in China. We're holding a strong market share.

We're seeing strong growth, and the team there have managed that transition very well. Overall in cochlear implants for the half, we saw sales down 2% in constant currency, a little bit up in developed, a bit down in emerging.

Certainly, from my perspective, very pleased with how we've executed on the Nexa launch, pleased with the execution through emerging markets, and both of those things set us up well for a strong second half in cochlear implant units. Let's move on to services.

Our services was in line with our expectations. Cochlear implants, we're a little bit behind where we expected to be.

Services was in line. We did see growth in developed markets of 4% in constant currency.

This follows on what we've been talking about is and executing on is we've strengthened our digital marketing and new platform, better able to segment and target people eligible for upgrades, stronger messaging around Nucleus 8 based on direct feedback from people who have gone, particularly from Nucleus 7 to Nucleus 8, and the benefits of that emphasizing the waterproofing in Nucleus 8, and the launch of Kanso 3. All of that led to that 4% growth in developed markets.

What we see looking forward is stronger even much stronger growth in the second half, particularly with the retirement of Nucleus 7 in the US. We've seen a significant uplift in people inquiring about upgrades just over the last few weeks, which was in line with our expectation, but gives us confidence of our outlook for services into the second half.

Then on to acoustics. Acoustics down 3% in constant currency.

If we look at that by market, we actually continue to see good, very good growth in the underlying markets for acoustics, in particularly Osia, and we saw that particularly through Western Europe and Australia. One of our competitors launched a new product just over 12 months ago into the acoustic segment, and we know that it's sort of the second six months after launch where you start to see the impact of that launch.

We saw that. We lost a bit of share, particularly in the US and the UK.

That's better with a new product, people are going to try it. We remain very confident of our product features and product benefits, particularly in terms of hearing outcomes with Osia over the competition, and we have significantly better MRI indications.

While we've lost a little bit of share, we still hold a very significant share in that acoustic implant market, and we expect to regain some of that share, plus see market growth as we look into the future, but did see an impact from a competitive launch a bit over 12 months ago. It is that sort of six months later where you start to see that impact.

Before I hand over to Sarah, I did want to make a few points on our strategy. We talked in the release about some restructuring that we have been doing across the company, which is really something we've been working on over the last few years, and it's all about making sure that we are making the company fit to drive growth and fit to get scale as we grow.

There's three things that I wanted to call out in areas where we've been doing quite a bit of work to either drive growth or set ourselves up for the future. The first of those is the transition to the cloud, which has been a program that has been very visible for the last four or five years.

This is just about switching our platforms over to the cloud. It's also about getting consistent and aligned processes across the company and re-engineering our data to get consistent data architecture and data structures.

Those two things, combined with the systems, enable us to get scale as we grow, and they also become platforms for the use of AI, which is going to be part of us getting efficiency, part of us getting scale, but also getting insights into how we drive growth. Those programs continue to progress well.

The second area that we've worked hard on over the last six months, and certainly since the Nexa launch, is to restructure our R&D. It's the right time to do it after a big launch.

As our products are now much more complex than they used to be, our R&D organization is larger than it's used to be, quite naturally. In doing that, what we're doing is restructuring to make our R&D more modular, which improves accountability, but also enables us to target the capabilities we need and make sure we get concentrations of the right capabilities we need for future technology development.

Important piece of work there that's well underway and appropriate to do after the Nexa launch to make sure that our R&D organization stays future-fit and able to continue to develop an outstanding range of products. Then the third area is around driving growth.

We know that's the key to our longer-term success. We continue to work hard to lift the growth rate, particularly in that adults and seniors segment.

We've got a number of programs we've talked about over time, but we continue to add some new programs, new experiments, particularly focused on referrals and referrals out of the medical channel rather than perhaps the hearing aid channel. We're diverting more of our sales and marketing resource towards growth and towards building these referrals.

That's both requires some organizational change to do that and some reskilling of some of our commercial teams to have that because of different conversations that they have in the referral channel than they might have either in hearing aid or in the cochlear implant clinics. We've done some restructuring across our commercial organizations to set ourselves up there, too.

They're three important areas of strategy that we were making changes that don't have any benefit now, but are setting ourselves up to have benefit into the future. With that, I will hand over to Sarah.

All right. Thanks, Dig.

I will take us starting with the profit and loss. You see the sales revenue has declined by 2% in constant currency, but Dig's taken us through those details, I won't go into it further right now.

We go to gross margin. You see a two-point decline to 73%.

Now, this was largely expected, and there's three things that I'd call out in here. First is the mix shift to lower-margin emerging markets in the first half, including the impact of the China volume-based pricing coming through.

Second is Nexa. At launch, Nexa has higher COGS.

We expect that, but we also expect that as we come up the experience curve as the commercial volumes grow, we do expect that to decrease over time. Finally, Chengdu is a facility that is continuing to ramp up.

We're really happy with the production we're getting there, but there's still room to go in that facility. We'll continue to see Chengdu be a small headwind to gross margin for another year or so.

Our operating expenses declined 2%. That's a net effect.

As Dig's talked about, we've continued to invest to drive the long-term sustainable growth and to invest in R&D. That's strengthening our sales capabilities, getting more scalable in how we support our go-to-market, investing to strengthen the referrals pathways in the way that Dig talked about, and then also putting investment into R&D so that we support that project and services pipeline that we have coming.

However, at the same time, we've been very deliberate in this half about phasing our costs into the second half. That's to balance out the second half weighting of the revenue profile that we expected to have.

Finally, we're cycling a few one-off projects that finished up in the first half of last year and are finished at this point. That brings us to the underlying net profit margin of 17%.

What you see below that are some items I'd call out, in particular, the $24 million of cloud computing-related expenses, which we expected to invest there and will be reported as a significant item below the line. You'll see the fair value losses on investments of $9.6 million.

That's related to Saluda, which is a small long-term financial investment that we've had that was revalued on their listing back in December. Let's go on to the balance sheet on the next page.

Great. The main feature of balance sheet is the $48 million increase in working capital.

Now, that's a factor mainly driven by having fairly conservative safety stock coming into this half and holding that as we launched Nexa, Kanso 3, and Baha 7 progressively rolling out around the world. We continued also to build that stock ahead of what we expect will be a big second half.

We also continue to expect that that inventory will moderate over the second half. The other thing I'd note on here is you do see that $36 million change in trade receivables.

That variability is pretty normal and largely due to our emerging markets. If you remember back to the end of FY '25, we had seen receivables increase due to larger emerging market orders, and this is just the unwinding of that as the receipts come through.

I'd note the other net liabilities increase of $33 million. That's an increase in net tax assets, and it's very much a timing effect that will unwind by June.

Let's talk about cash on the next page if we can, please. All right.

The main feature in the cash flow, you see, is the $103 million decrease in net cash. There's a few factors behind that.

We have a number of quite lumpy payments in that first half. The $48 million increase in working capital that we just spoke to, there's the $34 million cloud investment that we mentioned, there's those taxes paid, noting that that's $30 million higher than what's expensed in the P&L due to the timing effects, and there's also the discretionary bonus that gets paid in the first half.

Now, this was $16 million, which is much smaller than our STI normally is. That reflected in FY '25 there was no STI paid to senior levels of management.

Final callout on here is our capital expenditure of $40 million. That is continued expansion in our Lane Cove and Malaysia facilities.

All right. Dig, back to you for the outlook.

Thanks, Sarah. On to the outlook, and I've touched on this upfront, but just a little bit more detail here as we're aiming to help 60,000 people hear this year.

Obviously, as we said at the start of the year and I've said upfront, weighted to the second half, but we were a bit behind where we had expected to be for cochlear implants, which means now the lower end of that $435 to $460 range. We don't expect to catch that back in the second half.

I've talked through each of cochlear implants and services, where we have some good confidence on the signs we're seeing of an uplift in the upgrades in the second half. That's, that's something, as we talked about, we've been working towards is getting that upgrades and services number back up.

Expect some lift in acoustics as well as we they see the market growth. We'll get some share, and with the Baha 7, all there from an upgrade perspective.

Now, in terms of the foreign exchange, we've gone into more detail here that guidance range was set at $0.66 and $0.56 for the Australian dollar to the US and the euro. If it stays where the spot rates are now, that's about a $30 million hit across the second half.

We have just provided there that for a little bit more detail, for each cent change against the US dollar, that's about $3 million impact for that in the half, and for each cent in euro, it's about $4 million. That's around our exposure for this half and also takes into account our hedging coverage for the half as well.

Look, let's finish the presentation, and now move into questions.

Thanks very much. Dig, if we could just start with the restructuring, just to be clear on that, when you talk restructuring, are we talking charges that we should be thinking about coming through the P&L?

I guess the more important question, you talked about the seniors pathway. Can you talk a little bit about how things are playing out there and maybe touch on where you think market growth is, particularly in some of those key markets where seniors have been a strong driver, please?

David, on the first one, the cost of the restructuring, we just took up through OPEX through the P&L, and we've done that for the last couple of years. It's a reasonable amount of money, but not huge amounts.

It is an active program of making sure that we keep the organization ready for the future as we're changing and as the markets and our technology changes. In terms of growth, yeah, look, it is the most critical issue for us.

What we've seen is some good progress on our DTC fronts. Nexa is an opportunity been an opportunity to re-engage with people who've engaged with in the past who either haven't been ready or haven't been in indications.

We've seen some good progress there. On the flip side, the referrals from hearing aids have been a little bit softer through the last half.

Possibly that's in line with what the hearing aid companies are saying about slower growth in hearing aid units. The big opportunity for us is to generate more referrals.

Now, we've been working hard in hearing aids on that. We are now doing more on the medical channel.

We've done quite a lot of analysis of the people who turn up at clinics that we don't have connection with before they get to a clinic and where have they come from. What we're seeing is quite a number of them have had referrals from other ENTs, sometimes from GPs.

We're now running some programs to experiment with how do we engage those people who are already referring to get them to refer more, and who are physicians like them who would also be able to refer. Further programs there, and as I said, we're also rolling out messaging on cognition, the links between cognition and hearing loss, and that, as we talked about many times, is a really important long-term part of our strategy.

The reason, one of the big reasons people don't get referred is people don't see hearing loss for seniors, particularly, as a very important medical issue. As the evidence grows that not treating hearing loss increases the incidence of dementia, and the evidence showing treating hearing loss properly with cochlear implants for people with severe to profound loss significantly reduces the incident of dementia, that evidence is there as it keeps growing.

It's important that we communicate that in the right ways to professionals and also to consumers. Dave, was that enough?

No, that's a lot. Thank you, Dig.

Could I just ask quick financial questions? Profit margin, actually, I know you're saying 17, but it's frankly 16 and a half.

This is the 18 we're used to. What should we expect second half, full year?

I did think the hedging program over the years, I've been led to believe that it was pretty effective at protecting the next six months at least, I'm surprised at the level of exposure. Maybe it's changed, maybe I'm out of date.

Could I get you to touch on those two topics,

please? I can talk about some of those.

Certainly, first of all, the margin in the outlook excluding currency, we expect to be a bit under 18. The currency is going to bring that down further if it stays where it is.

Our hedging program is only a partial hedge. It's really hedging sort of the cash flow that comes back to Australia.

We're not trying to hedge our net profit. It's more about hedging the cash flow, which gives us time to adjust.

In this outlook, what we're not going to try and do is try and adjust our cost base, particularly given how quickly the Australian dollar has risen, to change that to have an impact in FY '26. We are looking at FY '27 and looking at the cost base and trying to get our, take the action we need to get the P&L back in line with our, the long-term structure of the P&L.

If you go back and look, I've been here 25 years. If you go back and look at our 25-year charts in the annual report, the Australian dollar has moved between $0.60 and $1.10 over that time,

and

there's pretty good consistency in the COGS, in the OPEX, in the net profit margin. You can see it moves around a bit when the currency moved extremes, but it the hedging gives us time to react and normalize it.

Assuming the Australian dollar stays up, that's the action we will take again as we've done in the past is to get our P&L back in line with our long-term targets.

I'll get back in the queue. Thank you.

Thanks, David.

Oh, thanks very much for taking my question. Just with Nexa, if I remember correctly, you wanted to be in about 90% of your jurisdictions by now.

Could I just check where that's at? Then, the 10% growth that you highlight in developed markets, just where you think that is relative to underlying market growth?

Andrew, we've got to just over 80% in December. That will continue to lift.

Countries like France have a, while they have a CE Mark, they have a registration process that sort of takes six months or more. We're expecting to get that registration in the second half in France.

Japan and Korea are always a bit slower. They're expecting to come on.

We expect that Nexa percentage to continue to lift, but quite reasonably happy with being at 80. There's still a few contracts that we haven't locked down that we expect to lock down over this quarter that will give us a bit further lift in, the US and in Germany, particularly.

In terms of the outlook for market growth, we think our CI developed market number developed market growth will be a bit under 10% as we look into the second half. I think that's pretty much in line with market growth.

We have lost a little bit of share, as I said, in some of these, particularly in some hospitals around the contract in the first half, which we'll get back. It's a short-term impact.

We're, having through the Nexa launch, got back focus pretty much on how do we drive growth and how do we drive that adults and seniors growth. We've seen some good progress over, the last four years, but we know we've got more to do to get that growth rate at the level we want and sustained at the level we want.

Just a quick second question on buyback. You haven't made any mention.

Looks like it was not really utilized in the first half, and maybe that reflects where your cash flow was. Just any comment on that going forward?

The no, that's a good observation. Buyback remains in place.

We want, we've got a target for our cash level. We're a bit under that at the moment, we want to get our cash back up to there, which we will do.

The inventory is high. I'm very comfortable with that going through a launch, but through the launch and with stability, we'll get the inventory back down, and we'll see cash generation pick up on the back of that.

The buyback will sort of look around that timing?

Yeah. Certainly it's going to it remains on foot, but we want to see the cash flow improve a bit.

Great.

Thank you.

Great. Morning, Dig.

Morning, Sarah. Thanks for taking my questions.

Dig, just picking up on that bit about market share loss, I guess, in the first half. Curious, do you feel like that was more in the US versus Europe, I guess, in the developed markets?

Then somewhat related to that, we've sort of picked up commentary in places like Germany as an example to sort of get the price uplift that you're putting through for Nexa, you kind of need the hospitals themselves to get an uplift in their funding through DRG reimbursement as an example, and that can take some time to come through. Could you please just highlight if that's correct and how long it could take to come through, please?

Okay. Just on where we've lost a bit of share, it's more actually on a sort of a hospital-by-hospital basis rather than sort of market-specific.

There's certainly some cases in the US, some in Germany. It is where competitors saw our launch coming and, sensibly, responded with pretty strong messaging and marketing.

That's what we'd expect. Also from a price perspective, as I said, we've seen instances of discounts for buying bulk, and then they get their implants on the shelves and they'll get used over time.

Those sorts of things have an impact in the short run. It's very sensible strategy on their part through a launch.

Not, it's a short-term issue on share, not a longer-term piece. In terms of DRG and price increase, a price increase for a device isn't directly linked to DRG.

If hospitals aren't getting an increase in the DRG, and the DRG is basically the amount of money that they are reimbursed for the procedure, that covers the device cost plus the hospital cost plus the surgeon costs. If the DRG doesn't move and the product price does, then the amount of money in the hospital to carry out the procedure is reduced.

Hospitals do push back on that. That creates some tension in the negotiations.

We knew that going in, and, therefore, expect some pushback. Equally, when you have an opportunity to get a price increase, we should go and it's right for us to go and see what we can do.

As I said, we got the price increases we were after, the negotiations were quite difficult in places. We did better in some places than others.

In terms of DRG rising, yeah, it is that over time, the device price, that does have an impact. There's often an assessment process that looks at the cost of procedures and looks at the DRG.

If the procedure cost goes up because the device and there can be an increase. We certainly know the reverse is true.

If we pull the device price down, then often the payers will look at that and see the procedure cost is less and pull the DRG down. It's not a necessarily a linear relationship, and neither is it specifically time-based of, this happens on a point in time, in 18 months' time, you then see a proportionate impact.

Great. Thanks, Dig.

Maybe one for Sarah then on your gross margin. I've noticed the reduction relative to your previous guidance by about 100 bps.

Could you help us understand the moving bits there? I believe the Nexa delays likely a contributor, but I would have thought aren't there other sort of bits that play into it, sort of manufacturing perhaps in terms of your inventory build as well that has occurred?

Is that a drag in the second half? Could you help us work out what's driving that 100 bps, please?

Sure. Look, it is a combination of factors and it's those things that you said.

Part of that is that we were holding a reasonably conservative level of safety stock, because when we go into this product launch and over this first half, remembering we have Nexa, also Kanso 3, also Baha 7 all coming out to the market, what you don't want to be doing is get caught short if it suddenly goes faster than you expected. Right?

As Dig has talked through, we did go through this. You have to go through this contracting process.

You have to get the software installed and all of that, and as he said, it took a little bit longer. We've been holding some inventory at safety stock levels so that if it went the other way, we were prepared for that.

That's a contributor. Certainly, the contributing factor around the need to build and make sure we have the right stock ahead of the second half, which, as we've talked about, we do expect to be significant, we've got that inventory as well.

As I said, it will start to moderate over the second half.

All right. Thanks.

Morning, team, and thanks for taking my questions. Perhaps I could talk to more longer term, at least initially.

Call it FY '27 plus. Should we be thinking about greater than that 10% volume growth into FY '27, given the ongoing rollout of the Nexa?

What are the implications again longer term '27 plus for that previous NPAT margin guidance, please?

Okay. First, thanks for your questions.

Look, we continue to aim to get a sort of 10% revenue growth year on year and do that over the long term. I think, we're working through what FY '27 will look like now, but certainly expect us to continue growing.

Not going to give you a rate of, not going to give you our guidance for '27 right now. That would be premature.

Over time, look, the opportunity to grow is there. Our growth programs are having an impact.

We're expanding and putting more into those growth programs, and the evidence for people to be treated continues to grow. We see that in our consumer surveys is right, there is definitely growing awareness of the links between hearing loss and cognition in candidates.

Sorry, David, I thought there was a second part beyond just the

What's the implications for margin, please?

Yeah. Look, I think, as I said earlier, in the shorter run, the Australian dollar does put pressure on our margin, mitigating to some degree by the hedging, but not completely.

As you've seen over time, as the dollar moves, we'll adjust. Where our costs are, what we spend, and how we spend it to try to get that margin back in line.

That, that's why those lines are pretty consistent over 25 years in terms of net profit, R&D investment, gross margin.

Understood. So 18% underlying is still the target over the medium term at least?

Still target over the medium term. I think, it's certainly with the currency where it is, not going to happen this year.

We'll see where the currency goes over into '27 and the outlook there. Again, I'm not going to give guidance on margin for '27 at this stage.

Understood. Perhaps to ask in a different way, questions already been asked, this reorganization, what does that do to in the short term, at least, to SG&A as a percentage of revenue?

Will there be any changes in the second half from that, please?

No, we'll manage it within the envelopes that we set. We had reasonable restructuring costs for the first half, and we have 1% OPEX growth.

We are We know what we've got coming, and we budget around it and we manage around it.

Thank you. I'll get back in the queue as well.

Thank you.

Thanks, David.

Morning, Dig. Morning, Sarah.

First question, Dig, at the full-year '25 results, you spoke to 10%-plus growth for units in developed markets. You haven't given a specific rate this half, but in terms of what you just said around what you're seeing in the marketplace now as relates to market growth and your share, can you give us an update as to what you think unit sales growth will do this fiscal year based on the revised guidance?

Look, we think on developed markets will be under 10% this year. It's part, if we're pretty much sort of flat in the first half, 20% in the second half is beyond what we think we can do, even with Nexa in.

Over the year, it is going to be a bit under 10%.

I guess on that point, Dig, it sounds like from what you've been saying on the call that the opportunity in the seniors market is there, but you're having some degree of difficulty at least accessing that or tapping into that. Is that what we should be reading through?

In terms of a sustainable rate of growth for developed markets when you factor in pediatrics being flat and the growth coming from adults and seniors, I'm not sure you gave an actual percentage growth rate for the market, but should we be thinking that developed market growth at an industry level is more like up a single digit rather than 10% or 10%-plus?

No, we certainly still think 10% is well achievable. The potential is there.

We're working hard at getting it. If you look back over the last few years, we certainly saw stronger growth back in '23 and '24.

That flowed into '25. We expect that we should be able to lift that up with the activity that we're undertaking.

Right, and last one, just on services and the idea that you should get some uplift based on expressions, coming in from recipients noting obsolescence. The feedback from clinics in the last few months out of the US is that insurance companies continue to be problematic in allowance for processor upgrades, including wanting to see clinical notes to see whether there is, in fact, any issue with the processor.

You've mentioned strong recovery or strong growth of processors in second half. How confident are you that you'll be able to deliver on that revenue line?

Look, certainly what we are seeing is that the insurance companies are pushing hard, requiring more information. We've set up so that we're able to provide that information, because clinical notes are normally there, it's just a matter of getting access to them.

We have seen that uplift in interest and inquiries because of the N7 retirement, and that uplift's certainly in line with our expectations. That gives us confidence in the outlook that we have set.

That's in the US, and then in Western Europe, too, we've seen stronger upgrade performance in that in the last half as well, and expect that to continue into the second half.

Just on that, Dig, last point, in the context of the revised guidance, can you give us a sense of what strong growth means in percentage terms in terms of that services revenue line in second half?

No, we haven't gone into breakdown of what we expect in the second half, but we are, we are anticipating a good strong significant uplift in services.

Thanks. That's all I had.

Thanks, Saul.

Good morning, Dig. I just wanted to ask about the delay in the contracting process that you saw during first half.

With that contracting, was the issue that was causing some of that frustration price, or was there other factors to the contracting process? Now that you've got 80% of your target contracted, can you just give us an indication, have they all made the software upgrades as well?

Okay. On the software, yes.

The software installation, issue early on, particularly in the UK, a few places, but that's, there's a just the logistics and time to do it, but that is done. Then in terms of the sort of contracting more broadly, when it's always price.

Yeah. It's just, people push It's a range of things from the obvious, people push back on price and say, "Justify."

In hospitals, there's particularly more rigor around prices. They might, "Yep, okay, we put a price increase."

"Yep, okay, we've got a value committee and that value committee meets in 3 months' time. We take all our price increases there."

There's nothing we can do apart from wait for the 3 months for to elapse and for those meetings to be held. In terms of it taking longer than estimated, we haven't done a price increase like this around a new implant in a very long time.

We put our best estimate of what it would take us and with some ambition in it, as we should, and we've fallen a bit short of that. We've, overall got the results that we were looking for.

Yeah. As part of the contracting process, today are you asking those customers to commit to a certain volume, or they're just agreeing on price only and then it remains to be seen what they order?

Just asking that from the perspective of your confidence in the second half.

Yeah. There's a whole range.

Certainly in some places, there is price and volume linked, and in others, it's just a price.

Got it. Just one quick question on the accounting for Sarah.

Last year, at the end of FY '25, you released the STI provision into the P&L because they weren't going to be triggered, and indicated that you would be rebuilding that provision during FY '26. Just wondered where you got to with the rebuild, and whether or not you would be rebuilding it to that sort of level given the performance of first half?

Look, we are continuing to rebuild that, you see that coming through in the employee benefits provision. The rebuild happens like it normally does, which is over the year, we've accrued for, about half of that, but the the rebuild will continue.

It's it's I think I've answered your question.

You're saying $25 million of provision has been put into the P&L this half. Where does that sit?

Is that in the SG&A line?

The employee benefits provision has increased. It's offset by what's paid in that discretionary where that came out this year.

From an P&L perspective, it's through the SG&A. It's actually through every line item, right?

There's people in COGS who get the STI, some goes through there, some through SG&A, some through R&D. Wherever we've got people, there's a provision being built.

Yep. Okay.

Thanks for your help.

No worries, Steve.

Thanks. Morning, Dig.

You've given some commentary around the expectations for developed markets for the full year, unit sales I'm talking here, maybe a bit less than 10%, good growth in the second half. Just on the emerging market side, I do note that there was some very strong growth coming through in the second half of '25, particularly in China, I'm guessing.

Maybe just help us understand what you're expecting for unit sales growth in emerging markets in the second half, and maybe an overall number for unit sales for either the second half or full year considering both developed and emerging markets would be helpful.

Okay. We do expect strong growth in emerging markets across the board, both CI and acoustics into that second half.

We've got a lot of the emerging market business works off sort of either tenders or orders, and those orders we get reasonable visibility into that in advance. We can see quite a strong forward order book.

It's particularly into Q4, and so that sits under that sits in our outlook. Similarly, as we sort of strong second half, a number of those orders are sort of annual orders into some countries, they come back at the same time a year.

Be easier for us if they didn't occur in Q4, but that's, they don't care about our financial year. In terms of where do we expect overall CI growth for the year, we haven't given a guide on the number, but we do expect pretty strong unit growth overall.

Part of that's driven by China, but we've see obviously a pickup in the developed markets in the second half and a pickup more broadly in the emerging markets as well. We haven't given a guidance on to the CI unit number.

That's fine. Maybe just a more of a medium-term question.

I've asked this before, so, but I'll ask it again. Just on the totally implantable, it looks like there's been a new pivotal study coming through on ClinicalTrials.gov for Cochlear.

Can you maybe just talk a little bit about potential timing for Cochlear, and maybe it looks like there is a competitor that could launch towards the end of calendar year '27. Just what are you sort of seeing in terms of that space and potential launches for others versus what Cochlear might be able to achieve?

Look, exciting area. We have got pivotal studies up on ClinicalTrials.gov and recruiting for totally implantable.

The pivotal study is a step to regulatory approval. For a new technology like that, do need to complete a pivotal study, meet certain endpoints, around safety and around hearing performance that the regulators then take into account in review.

Those studies are going to run, probably 18 months or so. It sort of depends on recruiting speed.

There's a 6-month and a 12-month follow-up, and then there's a regulatory process on top of that. Being a new product, it's not we're not necessarily on the standard regulatory timelines.

Still a few years away. We've got there's other competitors on the journey.

The thing I'd say I think is that the timelines are unpredictable, both around the study, around the results, and then around the regulatory process. We are certainly confident very confident of the performance of our TICI.

We first did a TICI 20 years ago. We've done a couple of feasibility studies with, over the last six or seven years with the technology to give us confidence in the technology.

Us going to a pivotal study, it's an indication we're confident of the performance of the product and the ability to meet the regulatory hurdles. That doesn't give you a great guide as to exactly how long it's going to be, but it's still at least a few years away.

Thanks, Dig.

Thanks, David.

Thanks, and good morning. Just with services, you saw good improvement in developed markets, but a decline in emerging.

Do you have any ideas of why there was that decline in the emerging markets?

We do. Certainly part of that is just timing.

As I said, the emerging markets, these orders can happen in a lumpy way. Part of it is that part of upgrades in China is caught up in the VBP process, so that's had some impact.

Okay. Then just a question on gross margins for Sarah.

The drivers there, you talked about that compression, mix, Nexa, and then Chengdu. Could you provide any color as to the splits between those, what was there any kind of particular one that was bigger than others?

Look, we don't provide the detailed breakdown of that. The mix shift to lower-margin emerging markets and the Nexa higher COGS for right now, which will come down over time, are reasonable share of that.

Chengdu, as we've said previously, is kind of just under half a point, and we'll continue to be that working out for the next year or so.

Okay. Then just a question on the restructuring that was done.

Still guiding to 13% of sales for R&D. Is there any benefits beyond FY '26 where that comes down because of this restructuring, or through the sort of SG&A lines as well?

The 13% in R&D wasn't from the restructuring. It was just with our lower sales last year, we chose to continue to invest at a rate as a dollar rate in R&D and have the sales catch up, so that'll get back to 12%.

No, this restructuring is don't expect changes in margin or the lines. It's about making sure that we've got the right resources in the right places with the right skills.

It's, some of it will give us efficiency, for sure, but then we will use that to reinvest either in growth or in a new technology area. It's very much about making sure that we've got the right capabilities for the future, the right structure and accountability for the future that enables us to get scale, but it's not done with the goal of it will just deliver efficiency in itself.

Okay. Then just last question, on the drug-eluting electrode, there's two studies out there, that you're conducting.

When could we expect some readouts from that?

Those studies are certainly one of them has closed, we've seen the data, but we'll, we will use that data. That data is for the regulators.

That's our priority there. What we over time will probably disclose some of that data as much to our customers on what we see, but we haven't made decisions on when we'd do that at this stage.

As I said, the core purpose of that data is for the regulators.

Thank you.

I think perhaps I would add to that we're pleased with the results that we are seeing. Without showing you the data, I can say we are seeing what we had expected to see.

Good morning. Thanks for taking my questions.

Look, first of all, on services and your second half expectation, I'm just wondering if you can give us a sense to the extent to which payers are approving upgrades on service discontinuations since 1 Jan. I talked about inquiries, but I'm just want to get a sense of how much you're seeing approvals on that basis.

Thanks, Sacha. Once we retire a product, we're no longer repairing it, then it does enable It does open up for the insurers to be able to cover it.

Obviously, they do that because they want to see that the processor has a proper life or it isn't it's reparable. It does sort of open that path up.

Obviously, we have to retire products because there's actually an ability for us to support the components. These are using electronic components, which have pretty short life cycles.

There is a limited time that we can support the external products. That's the reason for retiring, and I think insurers recognize that something that's external can't run forever and can't be repaired forever because just not technologically possible.

That makes sense. I just we've had some feedback that some payers are saying it actually needs to be broken rather than not repairable.

I'm just I guess, I'm just wondering, are you saying that the majority of payers will basically approve on the basis of service discontinuation?

There's actually not really a difference between not repairable and broken, because if it needs repair, there's something broken. If that can't be fixed, then the processor's broken.

I'd say there's not it's perhaps semantics rather than a real difference. If a person can keep using the processor, the insurers might expect them to do that.

If they can't and we're unable to repair it, then they will replace it.

Okay. Then FX, I know you're not giving guidance for '27, but I'm just wondering roughly, if we're talking about a $30 million headwind in the second half, does that equate to about $60 million next year on the same currency levels as today?

It depends, right? The amount that we put in that number's changed every day this week as the Australian dollar's risen, so, that number is sort of as good as

Presuming it got worse, though, right?

Yeah. Who knows?

As I said, look, there's hedging there, and then we will work to adjust our cost base to track back to the margins that we're aiming for. Obviously doing that at a sensible rate while we can keep investing in the business, and that's what we've done over time, and we'll continue to do that.

Okay. Then last question, just wondering if you can give us a sense of pediatric developed market growth during the period?

I know it's been a bit soft. Has that come back at all?

Look, we did see it was flat through the pretty much through the half, but we did see some declines in a few places, which a bit been unexpected. Certainly, the US was one, and I think there's probably some local conditions around sort of some of the support and infrastructure there.

Broadly flat.

Yeah. the repositioning or restructuring that you're talking about towards the medical channel, does that mean there's a little bit less confidence in being able to achieve that sort of market growth without these changes that you're making?

Growth has slowed and with the focus that you had? I'd

put it more as we have as we grow, we're able to expand the growth programs that we take on. As we implement our growth programs, what we've always said is we experiment and we learn, and from that, we then adapt the programs.

I'd say this is a natural extension of the work we're doing and what we've learned along the way and the application of more resource to driving growth, which is part of us growing and part of us reprioritizing our internal activity to make clearer choices on resource allocation and putting more into growth, which again, is just part of the strategy process. As we develop as a company as an organization, and get better visibility over what we're doing, better data on what we're doing, and are better able to redirect resources to higher-value activities.

Thanks.

Thank you.

Hi, this is Lyanne Harrison. Can you hear me?

Hi, Lyanne.

Oh, hi. Just coming back to the Nexa pricing, understand you took low single-digit pricing this time, but given that you hadn't taken price for a long time, also the efforts that went into the contracting, why didn't you ask for higher prices, whether it's mid or high single-digit increases?

Low

single Was there any change to your

Yeah. No, good question for clarification.

Low single digit is the outcome we achieved across the board. In some markets, we can get increases, in some can't.

Where we went for increases, we went for more than that. The sort of weighted average of that gives us low single digits.

You're quite right. If we're going to take the effort and the delay, we want to push for a more of a higher single digit, but we know we couldn't get that it's not all the places we had that opportunity.

Then with that pricing strategy where you were able or where you had taken smaller increases, are you likely to go back to those hospitals or customers a bit more frequently to try and get increases later down the track?

Look, it varies by market. We certainly have again, depending on the circumstances in market.

In the US, we have been working for a while to get more regular price increases through. In other markets, we don't have that opportunity.

One of the things we have with Nexa and with the upgradeability, which we've talked about in the past, is in markets where you can't get an increase until you've got clinical evidence of a benefit, with Nexa and its upgradeability, as we explore that, as we demonstrate some of the benefit that we think's there, there is potential to go back to those markets to make the case for a price increase based on evidence of improvements in outcomes or quality of life. We've got a quite a comprehensive pricing strategy around Nexa, of which we've implemented some of it so far, and some of it will extend in and it extends over several years into the future as we think about and bring about the potential.

Okay. Then the next question for Sarah on gross margin.

Understanding, Nexa has higher costs or higher COGS currently, but you expect that to decrease over time. At what point do you expect, obviously Nexa with increased prices, etc., when would that become sort of gross margin neutral or a gross margin tailwind?

Look, on that one, I'd look back to prior products where we know that it takes a year or so for those COGS to kind of come as we come up the experience curve. It does take time, but that's what helps us bring those COGS down over time.

Okay. Then just one last question following up on what Sasha was asking about that medical channel.

What proportion of your referrals come from that medical channel at the moment?

Look, it does vary by market, but in some of our markets, we're seeing half of the So there's a component of our referrals that we get through DTC, that can be sort of 30% to 40% depending on the So 20% to 40% depending on the market. Then we have between 60% and 80% that is self-referred or gets there in another way.

Up to half of that can be medical channel referrals. It's quite a significant part of the business, and certainly of current referrals that we don't get involved in, and we can see the opportunity to expand that further when we look at the base of potential referrers against those who are referring.

Great. Thank you.

I'll leave it there.

Thanks, Lyanne.

Hello. Thank you for taking my question.

I think you mentioned back in August that you were seeing some surgeries delayed by choice waiting for the Nexa. I was just wondering if, considering your exit rates in November and December, whether you were starting to see some of those come through, and if perhaps they provided a boost at that point during the year, or whether they're coming steadily, or whether you're still waiting for them?

I think to the extent surgeries were delayed, and there certainly were some, we think they were caught up through the half. Now, what's hard to know, though, is, because surgical slots can be tight, those got caught up in the half, but did it push, someone who was scheduled, and maybe was scheduled in December is now scheduled into the middle of February?

Because someone was sort of it pushes the pipeline down a bit. I think fortunately, we did see some deferrals, but not a huge number through that early period.

The gains from, the gains we get from here are going to be more around just market growth and picking up share, and rather than a sort of a backlog of deferred. Certainly backlogs for surgery, but they're more the normal than they are just deferred Nexa.

Great. Thank you.

That's it for me.

Thanks, Laura.

Morning, everyone. Thanks for taking my question.

Just a quick one from me. It just sounds like quite a lot of work is going on to kind of tap into that seniors market, medical channel, direct-to-consumer.

I just wanted to know how we should be thinking about sales and marketing going forward over the next year or so. Thanks.

Yeah. No, thanks, Christine.

No, we will manage that within the bounds of our normal SG&A. That's what we were talking about, reallocating resources internally, not expanding SG&A to do it.

Sorry, it's Lyanne Harrison here again. I had one follow-up.

In previous reporting calls, you've talked about the cost of living challenges that was weighing on services revenue. Are you still seeing that as a headwind through this first half, or has it alleviated somewhat?

No,

look, I think it still sits there. In the US, where there's a copay and sort of macroeconomic conditions, it still sits there.

Look, we haven't called it out explicitly. I think we sort of did that on the way down because it was definitely part of services falling.

It is still an underlying issue, as is the insurance pressure that's been talked about. With those things, we remain confident of the ability to grow the services into the second half.

Great. Thank you very much.

Thanks, Lyanne.

Look, thanks, everyone, for joining the call. Appreciate your time.

Thank you.