Cochlear (COH) H1 2025 earnings summary

Executive summary

• Sales revenue rose 5% (6% in constant currency) to $1,170 million for HY25, driven by strong growth in cochlear and acoustic implants, while services revenue declined after a strong prior period.

• Underlying net profit increased 7% to $206 million, with statutory net profit at $205 million; gross margin held steady at 75%.

• Operating expenses grew 10% due to higher R&D and market growth investments.

• Interim dividend increased 8% to $2.15 per share, representing a 68% payout ratio, and $19 million of shares were repurchased.

• Strong balance sheet maintained with net cash of $383 million, despite increased working capital and share buybacks.

Financial highlights

• Gross margin reached 75%, slightly above expectations, aided by higher ASPs in emerging markets.

• Underlying EBIT increased 8% to $275 million, with EBIT margin at 24%.

• Operating cash flow and free cash flow declined due to inventory build-up and higher capex.

• Net cash position decreased to $383 million, mainly from inventory increases and ongoing share buybacks.

• R&D spend maintained at 12% of revenue.

Outlook and guidance

• FY25 underlying net profit expected at the lower end of $410–430 million guidance, reflecting lower services revenue and higher cloud investment.

• Cochlear implant unit growth projected at around 10% for FY25, with strong adult referral rates and new product launches planned for mid-2025.

• Gross margin expected at 74.5% in FY25, slightly below the long-term 75% target due to new facility ramp-up.

• Cloud investment program increased to $250 million, with most spend in FY26–27; will be reported as a significant item.

• Capex guidance maintained at $110–130 million for capacity expansion.