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• Revenue Growth: Overall net sales increase of 6% in constant currency.

• Cochlear Implant Revenue: Increased by 13% with unit growth of 6%.

• Acoustics Revenue: Increased by 22%.

• Services Revenue: Declined by 12%.

• Underlying Net Profit: Increased by 7% to $206 million.

• Gross Margin: Maintained at 75%.

• Operating Expenses: Increased by 10%.

• Cash Position: $383 million, decreased due to inventory buildup.

• Dividend: Increased by 8% to $2.15.

• Inventory Increase: $69.5 million increase due to new product launches.

• Operating Cash Flow: Decreased by $47 million.

• Cloud Investment: $11.7 million in H1, expected $40 million for the full year.

• Guidance: Expected to be at the lower end of $410 million to $430 million.

• Warning! GuruFocus has detected 2 Warning Sign with CHEOF.

Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Cochlear Ltd (CHEOF) reported a 13% increase in Cochlear implant revenue and a 22% rise in Acoustics revenue, contributing to a 6% net sales increase in constant currency.

• The company achieved a 7% increase in underlying net profit, reaching $206 million, aligning with sales growth.

• Cochlear Ltd (CHEOF) maintained a strong balance sheet with $383 million in cash, despite inventory build-up for new product launches.

• The dividend increased by 8% to $2.15, reflecting a commitment to shareholder returns.

• The company is on track to help over 50,000 people with implants this year, maintaining its guidance range, albeit at the lower end due to specific challenges.

Negative Points

• Services revenue declined by 12%, attributed to cost of living pressures and higher cancellation rates, particularly in the US.

• Operating expenses increased by 10%, outpacing sales growth, due to continued investment in R&D and growth initiatives.

• Emerging markets underperformed expectations, with only 3% growth in the first half, partly due to delayed tenders in countries like India.

• The company anticipates coming in at the lower end of its guidance range due to lower services revenue and increased cloud spending.

• Chengdu manufacturing site is still in ramp-up stage, contributing to a slight headwind in gross margin, expected to persist for another year or two.

Q & A Highlights

Q: Can you explain the expected growth in unit sales for the second half and any factors contributing to this? A: We anticipate around 10% unit growth for the year, with stronger momentum in key countries. Europe, which was slower in the first half, typically sees a bigger second half due to the Northern Hemisphere summer. Emerging markets, which grew only 3% in the first half, are expected to show significantly stronger growth in the second half. Regarding China, the volume-based pricing mechanism aims to lower prices and expand access, which could increase volumes in the long run. However, the exact impact remains uncertain. (Diggory Howitt, CEO)