Full Year 2026 Cochlear Ltd Earnings Call Transcript
Key Points
- Cochlear Ltd (CHEOF) successfully launched the Nucleus Nexa System, which was well received and achieved a 3% average price increase, with over 95% adoption in developed markets.
- The company enabled over 55,000 people to hear for the first time or regain their hearing, and more than 50,000 recipients received a new speech processor, demonstrating strong mission impact.
- Services revenue grew 6% in constant currency, with developed markets up 13%, driven by the retirement of the Nucleus 7 sound processor and effective marketing of the Nucleus 8.
- The company is making significant progress on its innovation pipeline, including drug-eluting electrodes and totally implantable cochlear implants, which are expected to drive future growth.
- Cochlear Ltd (CHEOF) implemented cost management measures that reduced fixed costs by 2 percentage points as a share of revenue, delivering around $40 million in run rate impact from FY27.
- The company's direct-to-consumer programs and referral pathway initiatives are showing strong growth, with Cochlear-supported surgeries growing 10% in the US despite challenging market conditions.
- The new Osia 3 Sound Processor has received FDA approval and CE mark, with market-leading features that are expected to help regain market share in Acoustics.
- Cochlear Ltd (CHEOF) reported sales revenue growth of only 2% in constant currency, below expectations, with underlying net profit of $322 million, reflecting a net profit margin of 14%, below the medium-term target of 18%.
- Developed market implant revenue grew only 1%, with Western Europe declining 8% due to healthcare system pressures, including NHS waiting lists, industrial action in Spain, and market share loss in Germany.
- The company faced significant headwinds in the US, including higher insurance delays and broader economic pressures, which made people more hesitant to proceed with surgery, leading to a decline in the self-navigated pathway.
- Gross margin declined 3 percentage points to 71%, impacted by product mix, manufacturing overhead absorption, and a stronger Australian dollar, with FY27 guidance expecting gross margin to remain flat.
- Emerging markets revenue declined 2%, with a full year of volume-based pricing in China and an unexpected reduction in reimbursement in special zones, reducing premium segment sales.
- The company recorded a $109 million fair value loss on investments, mainly driven by a non-write-down of its investment in Epiminder, impacting overall profitability.
- Cochlear Ltd (CHEOF) expects FY27 revenue growth to remain low single-digit, with modest developed market growth and continued instability in the Middle East, indicating a slow recovery.
Thank you for standing by, and welcome to the Cochlear FY26 results analyst and media briefing. (Operator Instructions)
I would now like to hand the conference over to Mr. Dig Howitt, CEO and President. Please go ahead.
Good morning, everyone. Thank you for joining us. Letâs get underway.
So in FY26, as always, our mission is central to what we do, and we enabled over 55,000 people to hear for the first time or to regain their hearing. And more than 50,000 of our over 800,000 recipients received a new speech processor last year, giving them access to better hearing.
Iâll give an overview of the year and then focus on actions to drive growth in the developed adults market. In FY26, sales revenue grew 2% in constant currency to $2.3 billion, and underlying net profit was $322 million. These results were below the expectations we set last August, but they were at the upper end of the guidance we revised in April, And revenue in the second half was
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