Thank you, Alison, and good morning, everyone. To begin, could you please ensure that your mobile phone is switched to silent? I would like to remind everyone that filming of today's meeting is not permitted, but there is a live webcast, and a recording will be made available on our website. In the very unlikely event it becomes necessary to evacuate the building today, we will be exiting via the same doors you entered through. Please ensure that you follow the instructions from the Cochlear team. This is a shareholders' meeting, and only shareholders or their appropriately appointed representatives are entitled to vote and to ask questions today. Questions submitted prior to the meeting will be addressed either as part of the Chair or CEO's addresses or as part of the relevant items of business.
For those in the room today holding a blue or yellow card to ask a question, please approach the microphone in the center of the room when prompted at the relevant item of business and wait to be introduced before asking your question. Anyone who requires assistance moving to the microphone, please let a member of our team know. For shareholders attending the meeting online, you can submit your written questions at any time via the online meeting platform by selecting the Q&A icon, then select the topic your question relates to. Simply type your question into the chat box and press send. You can also submit your questions verbally via the telephone line by pressing star one. Your question will then be transcribed by the operator and submitted as a written question.
All questions that are submitted online will be moderated to avoid repetition and may be summarized in the interests of time. All questions from shareholders online will be read by a Cochlear staff member. The Chair, Alison Deans, will answer all questions initially or may refer to another person if her response is appropriate. For each item of business, we will take questions from shareholders physically present in the meeting first, followed by questions from shareholders online. Now, we want to give as many shareholders as possible an opportunity to ask questions at the AGM. To do this, we ask that you speak briefly, ask questions at the relevant item of business, and limit yourself to no more than two questions at a time and then allow others to ask a question. Moving now to voting procedures. Polling is open now, and shareholders are encouraged to vote early.
The poll will remain open for five minutes after the close of the meeting to allow you to finalize your votes. A representative from Computershare, our share registry, will act as the returning officer for the purpose of the poll. If you are here in person, please complete the voting card that was issued to you at registration. You may complete your card and cast your vote at any time from now until the poll closes. To cast your vote, place your voting card in the designated boxes beside the meeting room door. If you need assistance, please ask one of the representatives from Computershare. If you are attending online and eligible to vote at this meeting, select the vote icon, and the meeting resolutions will appear on your screen. To vote, select your voting choice. A tick will appear to confirm receipt of your vote.
There is no need to press a submit or send button, as the vote is automatically recorded. You can, however, change your vote up until the poll closes. If you experience any difficulties with the online platform, please call the number on the screen behind me. During the AGM, the Chair intends to display the number of direct votes and proxies currently held for and against each resolution on the screen. This will be done before any discussion on each resolution. The Directors' voting recommendations are set out in the notice of meeting. I confirm that the Chair of the AGM intends to vote all available proxies in favor of each resolution. The final voting results will be released to the ASX after the meeting. I now welcome back our Chair, Alison Deans.
Thank you, Rob. I'd now like to move to my address. Ladies and gentlemen, Cochlear continues to be the global leader in implantable hearing solutions, connecting hundreds of thousands of people to a full life of hearing. We're a mission-led business, and our goal remains clear: to help more people hear and be heard. We know that our hearing implants have a profound impact on individuals, families, and communities around the world. As a result, we're committed to transforming the way people understand and treat hearing loss and addressing the significant unmet needs in hearing health. This year, we've made good progress, delivering solid financial outcomes and bringing groundbreaking new products to market. Our market-leading innovation, our focus on long-term growth, and our investment in our people continue to strengthen the value we deliver for each of our key stakeholders.
I'll now touch on some of the highlights of the year. At our core, we're committed to building a healthier and more productive society. We achieve this by raising awareness of the importance of hearing health, advocating for accessibility to implantable hearing solutions, and offering devices that provide a lifetime of benefits to recipients. This year, we helped over 53,000 people to hear with one or two of our cochlear or acoustic implants. Receiving an implant leads to improved health outcomes, reduced educational cost, and productivity gains. These benefits have been externally estimated as delivering net societal benefit of more than $9 billion over the lifetime of these new recipients. Over the past few years, we've seen a growing body of research establishing links between hearing loss and cognition.
A recent observational study from South Korea using nationwide population data revealed a significant link between hearing intervention and a reduced risk of dementia in adults with severe to profound hearing loss. The study found that over more than a decade, individuals over 50 with severe to profound hearing loss who did not use hearing aids or cochlear implants were more likely to develop dementia. For cochlear implant users, dementia rates were similar to those with no hearing loss and significantly lower than those using hearing aids. This highlights the potential added cognitive benefits of cochlear implants over hearing aids for those with severe to profound hearing loss. In December 2024, an Australian study found that cochlear implants may help to stabilize or improve cognition in older adults with severe to profound hearing loss.
The study reported significant gains in executive function and working memory among implant users, along with stable performance in other cognitive areas. These results support existing evidence linking hearing loss to cognitive decline and highlight the importance of prioritizing hearing loss treatment for both auditory and cognitive health. These studies also highlight the role of hearing interventions in enabling healthy, independent aging. We're committed to working with policymakers, health professionals, and advocacy groups to establish hearing health as a vital component of public health strategies. As this evidence for hearing intervention grows, we're also supporting the development of consistent referral pathways by which healthcare professionals diagnose, refer, and treat adults eligible for hearing implants. In recent years, we've worked with industry experts and advocacy groups to increase awareness and access to cochlear implants, strengthen clinical guidelines, and prioritize professional education in order to improve the consistency of referral.
We've also invested in our understanding of the patient journey so that we can focus our initiatives on reducing barriers to surgery and bottlenecks in the pathway. We've worked with key professionals to strengthen the care model and increase audiological capacity ahead of growing demand. Moving now to our people, our success is made possible by our thriving people and our ongoing focus on building a stronger organization. We're proud to have a passionate, diverse, and highly skilled team of more than 5,000 individuals whose energy and commitment fuel our success. We've continued our effort to strengthen our culture, including targeted training, leadership development, and employee empowerment. These have supported our engagement score in remaining above 80%. Our people continue to feel connected to our purpose. They understand their role in our strategy and remain focused on delivering for our customers. Leadership development remains central to our people strategy.
This year, 78 senior leaders participated in our nine-month enterprise leadership program, helping to build a pipeline of future leaders with a global, enterprise-wide mindset. Finally, I'd like to highlight developments within the board, which are consistent with our ongoing commitment to orderly board renewal. We continue to appoint directors who bring diverse perspectives and relevant expertise while balancing continuity and retention of institutional knowledge. As part of this renewal process, long-serving Director Glen Boreham will retire from the board at the conclusion of this meeting. Over his decade on the board, Glen has helped in shaping our company's strategy and strengthening our overall effectiveness. He has done this by drawing on his extensive experience across diverse industries and roles. We wish to express our sincere thanks to Glen for his contribution to Cochlear and wish him well for the future. In August, we welcomed Richard Freudenstein to the board.
Richard has extensive leadership experience in global media and digital organizations, having been the CEO of Foxtel, The Australian, and Digital Media@News. Richard is a seasoned non-executive director, currently on the boards of REA, Coles, and Appen. His strong understanding of technology and innovation in complex global environments makes him a valuable addition to the Cochlear board. Richard is standing for election today, and he will expand on this during his election address. I'll now hand over to our CEO and President, Dig Howitt, who will talk to progress on our other value drivers.
Thanks, Alison, and good morning, ladies and gentlemen, and thank you for joining us here today. Innovation is the core of our business as we build a market-leading portfolio of high-quality products and services that support a lifetime of hearing outcomes for recipients. After more than two decades of consistent R&D investment, we launched the Cochlear Nucleus system that you saw in the opening video, the world's first smart cochlear implant system with upgradable firmware. This future-ready technology not only delivers superior hearing, but ensures recipients can benefit from future enhancements without the need for additional surgery. The new Nexa implant uses an advanced chipset with self-monitoring diagnostics, reducing workload for carers and recipients. It is the first implant with internal memory for storing and transferring user settings to any Nucleus Nexa sound processor, and it continues Cochlear's strong record of implant reliability.
The upgradable firmware of the Nexa platform has opened up more opportunities for future innovation, potentially including new stimulation strategies to improve music appreciation and hearing in noise, neural health diagnostics, and improved electrode placement. We achieved this milestone through a multi-decade philosophy of investing to grow and an unwavering commitment to innovation. Our market-leading technology underpins our global market share of over 60%, and in FY25, we invested over $290 million in R&D, representing 12% of revenue. Our main innovation goal is to enhance hearing outcomes by reducing listening effort and improving sound quality. We are working with research partners to protect inner ear structures and optimize electrode neural interface through drug-device combinations and improve surgical methods. This year, we launched two pivotal studies for our drug-eluting electrode, which contain the drug dexamethasone, aimed at improving patient hearing.
Previous data from a 2014 feasibility study and a recent multicenter trial show substantial impedance reductions, indicating the potential of a drug-eluting electrode to protect the cochlear by lowering inflammation and fibrosis. We continue to investigate how reducing fibrosis may help improve hearing preservation after implantation. We are committed to helping our existing recipients hear better. This year, we helped over 46,000 of our prior-generation cochlear implant recipients hear better with our latest sound processor technology, improving their hearing and quality of life. In June, we launched the Nucleus Kanso three Nexa and Kanso three sound processors that are compatible with our new Nexa and legacy Nucleus systems, respectively. The Kanso three sound processors will deliver all of the innovative features introduced with Nucleus three sound processor in an off-the-ear form factor. In the acoustic space, we launched the Cochlear BAHA seven sound processor and the new non-surgical BAHA soundband.
The BAHA seven sound processor, with its discreet design and 55 decibel fitting range, leads the industry in streaming technology, supporting Bluetooth LE audio and Auracast. Cochlear has committed to environmental responsibility, undertaking initiatives that support sustainable use of natural resources and minimize our environmental impact. We continue to make good progress towards our net zero targets. We have reduced scope one and two emissions by 71% from our FY19 baseline, increasing renewable energy usage at our manufacturing sites. We've now reached 99% renewable energy at our manufacturing facilities, with five of six using 100% renewable energy. This year, we reported our scope three emissions inventory for the first time, providing a clearer understanding of where we can drive meaningful reductions. Initiatives to optimize logistics, sourcing, and packaging, such as our newly recyclable paper-based packaging for the Nucleus Nexa system, further support our sustainability goals.
Finally, we strive to deliver sustained value through strong financial management and commitment to high standards of corporate governance and transparency. In FY25, we increased sales to $2.4 billion, up 3% in constant currency, with strong growth in cochlear and acoustic implants, moderated by a decline in services revenue. Underlying net profit increased 1% to $392 million within the updated guidance range that we provided in June. Full-year dividends increased by 5%, representing a payout of 72% of underlying profit. Importantly, looking ahead, we are confident in our ability to expand within our markets. A substantial and addressable clinical need for cochlear and acoustic implants persists, supporting the long-term sustainable growth of our business. We continue to be alert to an increase in trade tensions that has the potential to put strain on global supply chains. We globally source components and raw material for the manufacture of our products.
We have been managing the global supply chain by working closely with our suppliers and carrying higher levels of inventory. Our strong growth prospects, alongside increasing recognition of the connection between cognition, cognitive decline, and hearing loss, and a solid balance sheet, position us well to deliver value to our stakeholders both now and into the future. We provided earnings guidance for FY26 at the release of our result in August, outlining our expectations for an increase of underlying net profit of 11%- 17% on FY25, up 5%- 11% on a comparable cloud-adjusted basis. We continue to expect this level of increase. Thank you, and I'll pass back to Alison.
Thank you, Dig. I would now like to move to consider the items of business for today's meeting. Resolution 1.1 deals with the receipt and consideration of Cochlear's financial report, Director's report, and auditor's report for the financial year ended June 30, 2025. These are incorporated in the 2025 annual report, which has been made available to all shareholders. There's no requirement for a formal resolution on this item, however, it is the company's practice to do so. I now ask that the direct votes and proxies be displayed on the screen for resolution 1.1. Thank you. This item provides shareholders as a whole with an opportunity to ask questions on the company's financial and business performance. Any shareholder who has a question or comment on the financial and business performance or on the management of the company should raise them now.
This is also the appropriate time to raise any questions you have of the company's auditor. Shareholders have already raised a number of questions in advance of today's meeting, and we'll start by answering those questions not addressed as part of my or the CEO's address. First, we received a question on why we don't offer a dividend reinvestment plan. We review our capital and cash requirements on a regular basis, but currently, we have sufficient cash to fund the business needs, and as such, we don't currently intend to implement a dividend reinvestment plan. The next question is about breaking down voting results by shareholder bands to show how smaller shareholders have voted as distinct from the larger shareholders and proxy advisors.
All of the resolutions at today's meeting are being voted on by poll, and we disclose poll results as required by the Corporations Act and the ASX listing rules. The key principle of a poll is one share, one vote, and the disclosure we make is consistent with this as well as market practice. The next question is about our FY25 final dividend and whether our dividends will be fully franked in the near or distant future. The dividend paid to shareholders earlier this month was franked at 85%, which is higher than 80% of the prior year. We anticipate the franking level to continue to increase to around 90% over the next few years. We also have a question about the extent to which Cochlear intends to increase its manufacturing capacity expansion over the next 12 months.
The focus of capacity expansion over the next 12 months is in continuing to increase capacity in our Australian manufacturing sites to support the ongoing growth in demand. We will also be ramping up manufacturing volumes in our Chengdu facility for the China market. A shareholder has submitted a question about whether we will exit our operations in China to avoid sovereign risk. As always, we focus on our purpose, and we take the long-term view. There are many children and adults in China who would benefit from a cochlear implant, and we're committed to serving them. We've had a growing business in China for 30 years, and currently, there are over 60,000 people in China who depend on Cochlear for their hearing. Our experience is that China recognizes the importance of treating hearing loss in building a healthy, productive, and equitable society.
Indeed, in 2024, the China National Health Commission announced an action plan to promote hearing health for seniors. As a result, in recent years, we've continued to invest in this fast-growing and significant market, building stronger direct presence in sales and marketing, expanding our available product range, and investing in a manufacturing facility in Chengdu. At the same time, as with all our plans, we consider different scenarios, and we build resilience into our plans where we can. We have another question on China. How are sales and marketing developing in this market? As previously described in the previous response, in China, there are a very large number of people with severe to profound hearing loss. Awareness of cochlear implants is increasing, and consequently, the demand for our implants continues to grow.
A shareholder has asked us to comment on whether we know of competitor products, be it new invention or a superior product, that is a threat to Cochlear. As Dig described, we currently have a market-leading portfolio of products and services. You heard him talk earlier about this year's launch of our Nucleus Nexa system. It's the world's first smart cochlear implant, and its upgradable firmware ensures recipients can benefit from future innovation without the need for additional surgery. This is a significant step forward for Cochlear, and it's the result of our long-term commitment to investing in R&D and product leadership. At the same time, we take all competitors seriously. We actively monitor their developments, and that includes both close competitors and any adjacent technologies. We observe them closely, and we learn from them, and we collaborate where we can.
This includes close monitoring and engagement in the emerging areas of drug therapy and gene therapies for hearing. These are exciting areas of scientific development, and we have a team in R&D dedicated to understanding these opportunities. We do not see these areas producing a substitute for cochlear implants in the near term, but we do see opportunities for combined therapies to improve the effectiveness of our implants, and we're working on these opportunities. Our last pre-submitted question is for our auditor, KPMG. A shareholder has asked about whether our reporting of performance-based remuneration, including the dilutive effects of options and rights, complies with AASB two share-based payments. Now, before I pass to Rachel to answer that question, I would just note that in all its reporting, Cochlear complies with relevant accounting standards such as AASB two. This includes application of robust valuation methodologies and disclosures for performance-based remuneration.
Now, Rachel, would you like to elaborate on this question a little further?
Thank you very much, Chair. I would just confirm that our audit procedures are designed to provide reasonable assurance that the financial report taken as a whole is free of material misstatement. Our audit work is not carried out for the purpose of giving a separate opinion on the adequacy of any individual caption or disclosure, but I would say that based on the results of our work, we were able to issue an unmodified auditor's report on the financial report.
Okay thank you very much. Are there any questions in the room on this item of business?
I take it that there won't be an opportunity later on to ask questions?
There's an opportunity to ask questions on each of the items of business as they arise, but if it's a question related to the financial results or the overall performance of the business, then now's the moment.
Right. Thank you. I'm a member of TEM Invest and quite a long-term shareholder of Cochlear, about 15 years, I think. A couple of years ago, when I was at the AGM, I mentioned that our TEM Invest member aggregated shareholding would have placed us at 19th in the index. It's slightly increased now to 18th, which for just a bunch of individual shareholders is quite an achievement for a big company like Cochlear. That's just a statement. Getting back to Epiminder, which is one of the companies you've talked about in the past and I believe is shortly getting to be IPO'd. What's Cochlear's plans? I believe it is to retain its interest, but more to the point about ongoing, how's that investment enhanced Cochlear's knowledge of implants? You also mentioned the number of competitors, and there's one in particular that's working on a fully implanted device.
I just wonder what Cochlear got out of it, apart from a bit of money and the achievement and all that sort of stuff, as a learning exercise. Thanks.
There's a lot in that question to unpack.
Just the last.
I'll take it at the general level and then go to the specifics. It's a great question. As many of you may know, Cochlear has, over the last 10 years, invested relatively small amounts of money in a number of businesses that have novel technologies which can either be used to enhance our core technology or leverage our technology and know-how into another field. Epiminder is one of those portfolio companies, and we've been working with them for several years. I think this is an area where it is more about how we leverage our technology and our know-how into an adjacent field. We see our expertise as being implantable neurostimulation devices in the head, and epilepsy and sleep apnea have proven to be two quite prospective areas. That is the basis of our investment and ongoing collaboration with Epiminder.
What do you learn there?
I don't think we're going to talk specifically about what we learn in individual collaborations, but I would say that the focus here is much more about leveraging into an adjacent field.
Thank you.
Chair, I'd like to introduce Dan Steiner.
First of all, it's a good year. Thank you for that. My first question goes to KPMG, and it is, are KPMG using artificial intelligence to improve the scope, the scrutiny, and effectiveness of their audit?
I think that's a great question. Should I pass to you, Rachel? Do you want to?
Absolutely, Chair, and thank you for that question. We're all very much on the journey of how AI is going to impact everything, including the conduct of our audit. We are in the early stages of how AI will impact the conduct of the audit. We at KPMG are very proud of being the first of the Big Four to have been accredited in trusted AI and our use of AI in terms of how we use it internally and also how we propose we would use it with our clients through the conduct of the audit. I would say at this stage, it is not prevalent, and it is not being used in the audit of Cochlear right now.
We will continue to explore how AI can improve our audit processes' efficiency, but I would assure you it will be in a very trusted framework as per the accreditation we've already received.
Thank you.
Thank you. My second question relates a little bit more broadly. Cochlear is a global company. I needn't tell you that. I think, if I remember correctly, it's involved in over 100 countries. There have been some enormously unforeseen dramatic changes, particularly with regard to tariffs, and the United States is a major market for Cochlear. Have the tariffs or the prospect of fluctuation in tariffs had an impact on the financial performance of the company?
If I focus on the question around U.S. tariffs, as I think we all know, back in April, the U.S. introduced an import tax of 10% on products from Australia into the U.S. As we noted at that time, Cochlear has the benefit of a provision under the U.S. tax tariff schedule for duty-free importation of Cochlear implants, and that's in line with a protocol called the Nairobi Protocol. More recently, a month ago, the U.S. Department of Commerce did begin an investigation into a broad range of health-related products, and they're doing this under what's called Section 232 of the Trade Expansion Act, and it is looking at everything from PPE, consumables, as well as devices and Cochlear implants.
We're engaging in that investigation process, and we've made a submission very recently which basically advocates for continued duty-free import of Cochlear implants, and similarly, many aligned parties have made similar submissions to that process. We will continue to engage in that process. It may take a year for that to come to an outcome, and it's uncertain yet what that outcome will be. To date, we have not been subject to those tariffs. There is an investigation, and we don't know what outcome that might come to.
Thank you. I'm going to ask a third question.
You go.
I noticed that profits went up 1%, dividends went up 5%. Cochlear has had and continues to have a share buyback program, and I'm wondering if the reduction in number of shares in shareholders' hands has had a proportional impact on the amount of dividends distributed amongst a fewer number of shareholders.
We do continue to have a buyback program available to the company. The amount which has actually been bought back under that program over the years has been very small and has had minimal impact on that dividend program.
Thank you.
Chair, I'd like to introduce Raja Gupal from the ASA.
Hi, good morning. I do admire your company, and so does ASA. We regard the company as a technology gem with a global footprint. I have a question regarding your global strategy because you made several references to China, and I have a natural affinity for making a question regarding India. The reason I ask you about this is, does the company have a plan to build a global capability center like many other companies have done in India to leverage their country's technology workforce and the country's growing market potential and as a supply security source?
Thank you. India is a growing market for us, and in fact, just yesterday, we were having a discussion at the board about exactly this under Stu Sayers' leadership in APAC. It is a growing market for us, and it is one that has huge potential. We don't currently have plans to do more than sales and marketing expansion into India, but it's an area that we continue to develop over time. We have a small number of concentrated centers of research and innovation and manufacturing, but we continue to evaluate how that grows over time and certainly take market potential into the consideration.
Chair, I'd like to reintroduce Ray Tollison .
Thank you. Just on the China thing, which has just been mentioned, there was a headline in July, can't always believe the headlines, that said Cochlear takes fast lane as it brings new hearing devices to the Chinese market, and it talked about a centralized procurement program significantly reducing the cost of implants down to about a quarter. I just wonder whether that's likely to have any impact on Cochlear's margin or whether it's more some other cost reduction type thing. I can speak to somebody else afterwards if you're not aware of it.
Yeah, I'm not familiar with that number. Do you know? That statement doesn't seem familiar to me, but it might seem familiar to Dig.
It talks about, it says, the first centralized procurement program will significantly reduce Cochlear implant costs from over ¥ 200,000 to approximately ¥ 50,000 after March, substantially improving the intervention accessibility of hearing impaired newborns. I'm just saying, if it's doing that, is it impacting the costs?
Took to that one certainly, the Chinese government has a program that they are applying across healthcare of trying to expand access to healthcare for people in China. There are a couple of ways in which they do that. One of the ways that they do that is to try to bring prices down and enable volume and expansion, and that's what this article is talking about. That has happened for Cochlear implants, and we've talked about in our result, we're seeing volume expansion from that. The other path is that there are special access zones in China where the latest technology is able to be brought into the country at higher prices to enable people who can afford more to be able to get access to the latest technology. There are a number of government programs to increase access, some of them at lower price and some of them at higher price.
In terms of our outlook, we factor in, obviously, any impact that those things would have on our outlook, and that's contained in our guidance for 2026.
Chair, I'd like to reintroduce Dan Steiner.
Cochlear has, forever, in my experience, devoted a very substantial portion of its profits to research and development. A number of years ago, Cochlear built this facility in this location with the intention of having a global hearing center across the street. In expenditures for R&D, is that proximity significant? Do you utilize that facility to assist, support the enormous R&D and product improvement that has been mentioned? I think every year I've attended a Cochlear meeting.
I'll get Dig to talk to it more specifically. I think you're referring to the hearing hub across the road and the center of hearing specialization. I think we have strong collaboration with Macquarie University and particularly the hearing hub, and that comes in various forms of research related to hearing outcomes and audiology services. I don't know if Dig, you want to talk to specifics related to that?
Just, I think, firstly, as background, the environment we're in here at Macquarie University is unique in the world in terms of hearing. There is everything from basic research into hearing done at the university through our research, our product development. There is, at the hospital on campus at the university just over here, Cochlear implant surgery done in the Australian Hearing Hub. We have the Shepherd Center and, on the other side of campus, Next Sense, both organizations that support people after they've got Cochlear implants with rehabilitation and particularly children with therapy, and the Australian Hearing and the National Acoustic Laboratories. There is end-to-end research and manufacturing, application, surgery, and aftercare, all within a few hundred meters of here, and that is unique in the world and hugely valuable to us from an experiential perspective.
It opens up opportunities like one that is quite public, that between those organizations and us and Google, there is some research going on into how hearing could be improved in noise using artificial intelligence, and it's having a center like this that attracts a company like Google to want to invest in research. We don't talk about how much of our R&D as a proportion goes in there, but it is very significant for us to be in this environment.
Thank you. I have one final question. Again, going back to the global economic situation, in many of the markets that Cochlear operates, support from federal governments, national governments, whatever, to reduce the cost to the patient of having Cochlear implant or Cochlear upgrades. Have any of the major markets seen a change in the attitude of governments because of financial pressures on their budgets, which then has a corresponding potential impact on Cochlear sales in those markets?
Yeah, it's a great question, and we are very conscious that it is a consistent feature of health systems that they do have economic pressure. That's just a given, certainly, for the 10 years I've been with Cochlear. That pressure continues. It puts the onus on us to demonstrate the value of a Cochlear implant to make sure that it is high on the priorities of health systems when it comes to choosing how to allocate funds. To date, that has served us well. We're also conscious of continuing to improve that case for the economic benefits for a Cochlear implant, and this growing understanding of the relationship with cognitive decline will be an important part of that cost-benefit analysis into the future.
Thank you.
Chair, I'd like to introduce Vikram Malhotra.
Good morning, everyone. I'm just a shareholder, been with Cochlear for a while. Just a question. I saw in the presentation that the revenue has increased just by 1% in the reported financial year. What was the reason for this small increase? I would have expected a bit more. Thank you.
No, it's a good question. First, I'd say we remain committed to our medium-term goal of 10% top-line growth, and that's baked into our guidance for this year. Last year, there were a number of factors that played into that lower than trend growth rate. In particular, we did see a slowing of the growth in the upgrades business. Against that, we continued to see strong growth in the adult market, in the developed market for adults, and that's the source of our long-term growth potential. That's the area where we have a very large unmet clinical need and capacity to pay in clinical guidelines. That underlying growth in the adults and seniors was strong. The growth in upgrades was not where we would like it to be.
There are no further questions in the room, chair.
Thank you. Do we have any questions online?
Chair, we have received the following question online from Stephen English of COOENG Pty Limited. Many Cochlear shareholders are probably also BHP shareholders. Surely, the top 100 companies could work out a way so that their AGMs are not at the same time on the same day.
Thank you for the feedback. It is always a juggling act finding the right time to have an AGM, and I'm sure Christine is delighted to have one more thing to consider for future years. No, it's a valid question, and we do want to give the maximum opportunity for shareholders to participate as fully as possible. It is something we will explore exactly how that scheduling works, but we do make a webcast available, and we also record the meeting so that shareholders who aren't able to attend either in person or virtually at that time can see the entire proceedings later in the day. Thank you. Are there any further questions online?
Chair, there are no further questions online.
Thank you. Please cast your vote now on this item. Okay, the next item of business is the adoption of the remuneration report set out in pages 102- 122 of our 2025 annual report. This resolution is advisory only and doesn't bind the company or the directors. The remuneration report contains information on the company's remuneration framework and outcomes for the financial year ended 30 June 2025 for the CEO and President and other key management personnel. I now ask that the direct votes and proxies be displayed on the screen. Thank you. Are there any questions in the room on this item of business?
There are no questions, Chair.
Thank you. Do we have any questions online?
Chair, there are no questions online.
Thank you. Please cast your vote now on this item. The next item of business is the election and reelection of directors. In accordance with Cochlear's Constitution, Karen Penrose and Michael Del Prado are retiring at this AGM and standing for reelection. Further, Richard Freudenstein is standing for election today, having been appointed to the board in August. The board has determined that each of the directors standing for election or reelection today is independent and brings impartial judgment to bear on board decisions. Karen Penrose is standing for reelection today. Karen's background has been set out in the notice of meeting, and I'll now ask Karen to speak to her reelection.
Thank you, Chair, and good morning, everyone here today and online. I am Karen Penrose, and I am seeking your support for my reelection to the Cochlear board. I was first elected to the board in 2022, and if reelected today, this will mark the commencement of my second term. Like you, I am a shareholder in Cochlear. I thought I might start briefly with the three aspects of Cochlear that set it apart and fuel my dedication as a director. The first is the profound human impact. Meeting recipients whose lives have been transformed by their ability to hear and be heard reminds us as directors why we do this work. These are not just products, they are pathways to connection, education, and opportunity across all ages. The second is that Cochlear exemplifies how Australian innovation can lead globally.
This company proves that world-class research and development paired with strategic focus can create lasting competitive advantage. Third, and most importantly for shareholders, Cochlear's long-term strategic vision. We are building a company that aims to have the financial and the operational resilience to support a baby with a lifetime of hearing outcomes. This intergenerational commitment requires disciplined governance, robust risk management, and an unwavering focus on sustainable value creation. My own understanding of the hearing health landscape continues to deepen through Cochlear's research and development commitment and our board discussions and education. This is personal for me as well. I continue to have good hearing, but I am conscious of protecting it and encouraging my own children and my grandchild to do the same.
As I get older, I see the value in ensuring not just a long life, but a good quality of life, and hearing is essential to healthy aging. I have the privilege of chairing Cochlear's Audit and Risk Committee, and this is a role that I am passionate about. It combines my foundation in financial analysis with the opportunity to engage with talented Cochlear executives who underpin the financial health and culture of your company. In this role, we focus on ensuring Cochlear maintains rigorous financial controls, effectively manages strategic and operational risks, and continues to invest in technology for its systems and in innovation while delivering sustainable returns for shareholders. Since 2014, I have worked full-time as an independent non-executive director. I currently serve on three other ASX listed boards, all carefully selected to ensure I can commit my time and contribute fully to each.
My experience spans healthcare businesses in Australia and overseas, technology transformation, and consumer-focused companies. This breadth allows me to view audit, risk, and climate-related issues from multiple angles, bringing diverse perspectives to my role at Cochlear. If reelected, I will continue to represent your interests as shareholders focused on the long-term sustainability and growth of this exceptional company. Thank you for listening, and thank you for your support.
Thank you, Karen. I now ask that the direct votes and proxies be displayed on the screen. Are there any questions in the room on this item of business?
There are no questions, chair.
Thank you. Do we have any questions online?
Chair, there are no questions online.
Thank you. Please cast your vote now on this item. Michael Del Prado is the next Director standing for reelection today. Michael's background has been set out in the notice of meeting, and I'll now ask Michael to speak to his reelection.
Good morning, ladies and gentlemen, and valued shareholders. I stand before you today seeking your support for my reelection as Director of Cochlear Limited. I joined the board in early 2022 after a long global leadership career in the healthcare industry. It is very gratifying to be part of the Cochlear story during these times of tremendous opportunities and unprecedented challenges. It was great to witness firsthand the company's unwavering commitment to its purpose and values while confronted with the immense challenges of the pandemic. Coming out of that difficult period, Cochlear redoubled its efforts in building an even more competitive and more global company with world-leading innovation. Not resting on its laurels, the company is transforming work across the business to lead into the future. During my career, which began in the mid-1980s, it was a privilege to get up each day knowing that what I did truly mattered.
After almost four decades, this noble mission of the healthcare industry bringing better care to millions around the world so that they can live as fully as they can continues to motivate me. Hence, at this juncture of my life journey, I remain immersed in the industry as an independent board member, strategic advisor, and mentor. Cochlear has a special appeal not only because of its crucial role in restoring one of life's greatest joys, the ability to hear and be heard, but also for its unique offering, which involves hardware, electronics, software, and connected solutions, which enable surgeons, audiologists, and other allied care providers to make the recipient experience more seamless and satisfying. All these are key ingredients in delivering effective and value-based care.
As one of the board members with deep industry experience, I have endeavored to provide not only strategic insights but also operational perspectives as the board fulfills its oversight and advisory roles. As the only board member based in the U.S. and outside of Australia and New Zealand, I provide a global viewpoint at the board table and am a conduit to connect with global leaders in the space and to learn best practices and support optimized decision-making. The role I enjoy most is collaborating with the people of Cochlear, engaging with the leaders and associates across the world, supporting leadership development, and actively contributing to the board renewal process. If reelected to the board, rest assured of my strong commitment to continue consolidating Cochlear's leadership position as it navigates the complexities of the global healthcare environment and that it remains steadfast in its mission.
I will do my utmost best to promote good governance and to provide wise counsel to make informed decisions that benefit our patients, our people, and their communities and shareholders alike. Thank you for your time, your consideration, and your continued support.
Thank you, Michael. I now ask that the direct votes and proxies be displayed on the screen. Thank you. Are there any questions in the room on this item of business?
Chair, there are no questions.
Thank you. Do we have any questions online?
Chair, there are no questions online.
Thank you. Please cast your vote now on this item. In accordance with Cochlear's Constitution, Richard Freudenstein is standing for election today, having been appointed to the board in August. Richard's background has been set out in the notice of meeting, and I'll now ask Richard to speak to his election.
Thank you, Alison, and good morning, everyone. I'm excited to offer myself for election to the board of Cochlear. It is a real privilege to join a company with such a strong and important mission to help people to hear and to contribute to building a healthier and more productive society. I have a lot to learn about the Cochlear business, but I believe I have a range of skills that enable me to add value to the board of Cochlear. In particular, I have worked as a CEO of a content and technology business and a fast-growing digital business, including five years at Foxtel. I'm currently a board member of Coles Group Ltd, where I chair the People and Culture Committee, and REA Group Ltd, where I served as chair for almost six years.
Both Coles and REA are top 25 ASX listed companies, which provides me with insights into a wide range of business models, as well as a strong understanding of corporate governance of large market cap businesses. I also currently chair Appen Ltd, a smaller ASX listed company that works in the AI services space, operating mainly in the U.S. and China, although I will be retiring from that role at the end of the year. I have international experience, having worked as a senior executive in the U.K. for seven years and as a board member of a Malaysian listed company and a Pan-Asian sports television joint venture. My current roles at Appen and REA, which have significant international operations, provide me with the opportunity to continue building the global perspective relevant to a truly international company like Cochlear.
I have a broad range of experiences, including through my current board roles, that afford me with valuable insights on how companies are innovating and adapting to the rapid changes in ways of working as technological change and AI in particular continue to offer opportunities and threats to existing business models. At Cochlear, I currently serve on the People and Culture, Product and Services Innovation, and Nomination Committees. I strongly believe in Cochlear's mission to help people hear and be heard, and if elected, I'm committed to working with the board and executive team to further that mission, continue to expand the business, and create value for you, fellow shareholders, now and over the long term. I'll be honored to be elected to serve the interests of Cochlear shareholders. Thank you.
Thank you, Richard. I now ask that the direct and proxy votes be displayed on the screen. Thank you. Are there any questions in the room on this item of business?
Chair, I'd like to reintroduce Dan Steiner.
One of the portions of the annual report I almost always look at is the board skills matrix. I was a monitor for the ASA for many years and kept pressing diversity, diversity, and the board has achieved that in terms of gender diversity. In looking at the board skills matrix, two things stand out for me, and these are the areas of skills that seem to be the least prominent in the annual report. There are skills labeled as individual board directors having expert or experienced skill and inexperienced. Two of them that stand out that I particularly would like Mr. Freudenstein's comments on, not particularly to that, but how he hopes to contribute to these apparent shortcomings, and that might be the wrong term, chair. The two areas are research and development, and you've highlighted AI and technology as something that you specifically have an interest in.
The second one, which is increasingly important in the annual report, is sustainability, and Cochlear has achieved remarkable performance in sustainability, but nevertheless, it is one of those areas in terms of board skills matrix that doesn't reflect that. I'm hoping with the election of Richard Freudenstein, we'll see an uptick in all of those, but particularly in the two areas I've highlighted.
Thanks, Dan. I think I might answer that question. It might seem a little early for Richard to give that perspective across the whole board skills. You rightly point out those two areas as ones that we are consciously building. First of all, in the area of R&D, we think about R&D broadly, and that includes, because the area of Cochlear's R&D has so many facets to it and across very long time horizons. Different members of the board will bring different skills towards that broader sense of R&D. In particular, the person who has the most closely analogous experience in R&D is obviously Mike Daniel, who was the CEO of Fisher & Paykel Healthcare for many years. Also, what we look for in board members is what I think of as a T-shape.
We want them to be broad, to be able to contribute broadly across the board, and then to have specific expertise in specific areas. Not everybody is going to have specific expertise.
In all those areas, it's very much about finding breadth and then a T-shape. Richard does have experience of global digital businesses specifically, and then also more recently with Appen in AI and how that is being adopted in other companies. In terms of the sustainability question, it's interesting. We review the skills matrix each year to make sure that it is currently what we really need to have within the business. One of the things we did this year is reflect on what we meant by expertise in sustainability. What we realized is that we don't need someone who's an operational expert in sustainability in the same way that we don't need someone who's an operational expert in AI, cybersecurity, etc. What we do want is people who are experienced in the board-level questions and stress testing that you want to see in the area of sustainability.
We adapted, you'll see that we adapted the definition of sustainability to reflect the board's role in oversight of sustainability. I think once we looked at that, we realized that there's actually quite a great, there is significant depth of experience in that role of oversight of sustainability in an ASX context of large organizations. That's what you'll see reflected in the new numbers in the skills matrix. Sustainability is also one that we're very conscious continues to evolve. While we also have a broad board education program in the area of sustainability, many of us are working on other boards where sustainability is a more significant issue than it is, or problem than it is within Cochlear. We also engage with experts in the area of sustainability to make sure that we're getting the right expertise.
Chair, there are no further questions.
Thank you. Do we have any questions online?
Chair, we have received the following question online from Mr. Peter Calorero. Richard is on four boards and will have an increasing workload at REA thanks to the competitive pressures of the entry of CoStar into Australia and the intense competition in India. Whilst I am happy with Richard's skills and abilities, I am worried about his workload. Why is Richard confident he can devote enough time to Cochlear given the increasing pressure at REA?
I think I'll take that one as well. Richard, as Richard mentioned, he's leaving Appen at the end of this month and is also finishing, is that in December, end of December, and also leaving his role at Sydney University at the end of this month. Once he's done that, he's actually got three ASX board roles: Cochlear, REA, and Coles. That is well within a normal load for any NED in an Australian context, well within proxy advisor guidelines of the five points. More than anything, what matters is that what we've seen is Richard is committed and well prepared in all our interactions so far. We're not concerned about his board load. Do we have any other questions online?
Chair, there are no further questions online.
Okay, thank you. Please cast your vote on this item now. We now move to the next item of business, approval of long-term incentives to be granted to the CEO and President. As stated in the notice of meeting, the terms of the Cochlear Equity Incentive Plan mean that an exception to ASX listing rule 10.14 applies. Nevertheless, the company is seeking the approval for the grant of the long-term incentive awards to the President and CEO, Dig Howitt. It's the company's practice to do so and reflects good corporate governance. I now ask that the direct and proxy votes be displayed on the screen. Thank you. Are there any questions in the room on this item of business?
Chair, there are no questions in the room.
Thank you. Are there any questions online?
Chair, there are no questions online.
Thank you. Please cast your vote now on this item. Are there any shareholder questions that haven't been addressed in the meeting so far today?
Chair, I'd like to introduce Sandra Googan.
Good morning. Yes, I'm a shareholder and I have a son who has a Cochlear implant and that was 30 years. I have a comment or a question about this AGM. Why is it not subtitled when real-time captioning is very easy to make it so inclusive for everybody here? Thank you.
I think that's a really good observation. We will take that one away and think about it. Thank you for your comment. Are there any more questions or observations?
Chair, there are no more questions in the room.
Do we have any more questions remaining online?
Chair, there are no more questions online.
Thank you. That concludes our discussion of the items of business. Voting will close five minutes after the conclusion of the meeting. If you haven't already done so, please ensure that you cast your vote on all resolutions now. The voting results will be released to the ASX as soon as they're available. We'll also post the results and a recording of the AGM webcast on the AGM webpage of the Cochlear website. This brings us to the end of the FY25 AGM. I now declare the meeting closed, subject to finalization of the poll. For those of you who've joined us here at Cochlear headquarters in Sydney, please join us for some light refreshments in the room outside. In addition, you heard Dig talk about Nexa earlier in his address.
Management has organized a display of Nexa in the Taylor Room, and the demonstration of Nexa will commence about 30 minutes from now. This is a great opportunity to see the culmination of two decades of consistent investment in R&D. Have a good morning, and thank you for your participation today.