Thanks very much, Catherine, and a very good morning, everybody. Thank you all for joining the call. By now, you will have seen the overall results for FY 2025, which include, I believe, a very good set of financial and operational outcomes for the year. Before we get into the details, there are a few key takeaways I'd like to call out. The first is the 17% growth in revenue that we achieved this year. It truly does highlight the strength and scalability of our trophon business model, where a large and growing critical mass of installed base that we've now established is driving accelerated growth in recurring revenue to our customer and value expansion strategies. This, of course, also supported solid bottom-line growth and operating leverage for the year.
The second is we do see multiple growth drivers ahead for trophon, and I'll cover some of these off a bit later. As demonstrated in the trophon-only financials that you can see the results of in the presentations, the trophon business is highly profitable. It's generating very good cash flow, and together with our existing strong cash balance, that certainly enables us to invest in our next growth horizon. Third, and importantly, we did achieve a number of key strategic milestones across innovation, operations, and digitalization during the year. Each of these milestones plays important roles in our next phase growth, and I'll cover some of those milestones off shortly as well. Finally, there were many important milestones for CORIS achieved during the year, and the next steps for our commercialization plans, they're now very well defined and indeed underway.
Looking at the outcomes in a bit more detail, starting with some of the financial highlights, and Jason will shortly expand on these, revenue for the year grew 17% to AUD 198.6 million. This was very much at the top end of the upgraded guidance that we announced at the half year. Our installed base grew 6%, where the cumulative installed base has now reached 37,000 trophon units. This large and growing critical mass of installed base devices did fuel 20% growth in our recurring revenue from consumables and service to AUD 146.1 million for the year. Total unit sales were 3,870 units, with 2,210 of those as new installed base and 1,660 upgrades. Together, they drove a 9% growth in capital revenue to AUD 52.5 million. Gross profit margin is improved to 78.2%.
Measured growth across our operating expenses, which were up 10% for the year, delivered many of the important milestones for our future growth. Importantly, we did see improved operating leverage with OpEx as a percentage of revenue decreasing. All of this translated into strong profit growth, with our profit before tax up 72% to AUD 22.3 million. As mentioned, there were many important milestones achieved during the year, and all of these being foundational for our next phase of growth. On the innovation front, we secured FDA clearance for CORIS. We completed our next-generation trophon technology, enabling us to recently launch trophon3 and trophon2 Plus. We also expanded our patent portfolio as we continue to work on our product roadmaps and portfolio expansion. Operationally, we've made significant progress. The CORIS supply chain has been established, and we have set up manufacturing here in Sydney for the CORIS equipment production.
We also expanded our Indianapolis facility in the U.S. to produce consumables for both trophon and CORIS and received the necessary regulatory approvals and registrations for this site. We expect these production lines to go live later this year. In Indianapolis, we also expanded the servicing capability at that facility to support the growth that we are seeing in our service business. Also in digitalization, this year there was a lot of achievements where we successfully implemented a new ERP system. That will support the business moving forward, as well as being an enabler for a number of our productivity initiatives. Importantly, we also established our cloud infrastructure to support broader customer connectivity and future SaaS-type revenue. The recent launches of trophon3 and trophon2 Plus include cloud-based traceability features, all of which enhance value for our customers.
Aligned with our overall digital strategy, we further strengthened our cybersecurity posture with ISO 27001 recertification to a higher standard. We do have plans in place in advance for further enhancements and international accreditations. These important milestones, along with many other operational achievements, have really laid important foundations for our next growth horizon. Before I move on, while it's not covered on the actual slide, I'd also like to mention some of our sustainability achievements during the year. Historically, electricity usage has been the primary driver of our Scope 2 emissions. A key component of our carbon reduction strategy has been to source 100% renewable energy for use in both our Australian and U.S. business operations. In FY 2025 we delivered on this commitment. As a result, about 56% or 270 tons of our Scope 2 emissions have been abated.
Further, our Scope 1 emissions also reduced by around 17% during the year. We expect to see these reduce even further in FY 2026 as we experience the full-year benefit. Of course, we will continue to explore further areas to reduce our overall footprint, which is not large overall. On recurring revenue growth, which was a standout for the year and growing 20% on the back of a 6% growth in cumulative installed base, in addition to the benefit for the 28 million patients protected annually from the risk of cross-contamination, this large and growing installed base is driving scalable recurring revenue growth with an opportunity to continue to add further value for our customers. Breaking this recurring revenue down, there are a number of product categories included. Importantly, we saw strong growth in each of those categories. First, we have revenue from core consumables and spare parts.
Those consumables are those that are used in the disinfection itself. This was up 18%, and that was primarily driven by volume growth to AUD 101.7 million. There was a little bit of price included in there, but it was primarily driven by volume growth. Likewise, revenue from our ecosystem consumables, and those consumables include products like wipes and clean covers, was actually up 28% to AUD 15.1 million. Our service business continued to deliver strong growth, again up 21% for the year to AUD 29.4 million. Altogether, delivering AUD 146.1 million in recurring revenue. Importantly, each element of this revenue has really good runway for continued growth. We also expect, just to point on this recurring revenue, to add another important component to this moving forward. With the launch of trophon3 and trophon2 Plus, we've enabled connectivity with customers' DICOM imaging systems. That provides full digital traceability linked to patient records.
DICOM is the global standard for medical imaging data. This integration positions us well for future SaaS-based type revenue. Looking ahead, we definitely see our digital revenue as an important element of our customer value expansion, which, of course, will drive our recurring revenue growth. Overall, we're very pleased, not just with the overall growth financially, but with the quality of that growth and the opportunities that it unlocks, which I'll speak to shortly. Before that, I'll hand over to Jason to walk through the financials in a bit more detail. Jason.
Thanks, Michael, and good morning, everybody. Before taking you through the financials, I'd like to spend a moment to call out some of the key financial messages that demonstrate how Nanosonics is driving value creation. Firstly, we've created a trusted brand in automated high-level disinfection with over 37,000 trophons currently installed. This extensive installed base powers our high-margin recurring revenue, showing the strength of our business model. Our disciplined capital allocation has driven operating leverage improvements and EBIT growth in the 2025 financial year, reflecting our commitment to financial prudence and strategic investments for growth. This approach has resulted in strong cash generation and high returns on capital in the trophon-only business, giving us flexibility to invest in future growth opportunities. As we continue to grow our trophon business and start to commercialize CORIS, we're well positioned to capture new market opportunities and deliver sustained value to our shareholders.
Looking at our P&L, it shows significant improvement year- on- year. We've been able to couple strong revenue growth with measured increases in operating expenses. As Michael already mentioned, total revenue grew 17%, reaching AUD 198.6 million. I'm pleased to report that we have achieved revenue growth across all regions, North America growing 17%, EMEA 22%, and APAC 4%. Margin also improved, and I'll come back to that shortly. Our operating expenses increased by 10% to AUD 138.7 million. With operating expenses, we reported 6% growth in R&D investment. It's worth noting that R&D decreased as a percentage of our revenue from 19% to 17% in FY 2025, a trend that we expect to continue. I'll also just call out the 19% growth in admin, which includes investments into the new ERP system.
As Michael mentioned, this has now gone live, so we expect costs relating to the ERP to fall in FY 2026 as we bed this down. With revenue growing faster than operating expenses and an improving margin, we're able to achieve 95% growth in EBIT on the prior year, with EBIT reaching AUD 17.8 million in FY 2025. Our net finance income increased by 16%, reflecting higher interest earned on our growing cash balance. As a result, our profit before tax has grown to AUD 22.3 million, a 72% increase on the prior year. Now, let's go back to gross margin. Our gross profit margin improved 0.3% to 78.2%, supported by the strength of our recurring revenue. This would have been around 78.5% had it not been for the tariffs. Let me make a few comments here. In FY 2025, we experienced a tariff impact of AUD 0.5 million in the fourth quarter.
This could have been higher, but was partially mitigated through inventory levels already held in the U.S. In financial year 2026, the impact of the current tariff rates on the cost of goods is expected to be approximately AUD 4 million. This is expected to result in a gross margin percentage of between 75%- 77% in FY 2026, which is below the FY 2025 levels. Through a range of initiatives, including price increases, we expect to mitigate the majority of these tariffs at an EBIT and profit before tax level. In addition to the pricing actions, we'll also look at sourcing more goods from U.S.-based suppliers and consider our timings for further OpEx investments. While these mitigation plans will protect profit before tax, pricing actions alone will not maintain the gross margin percentage at FY 2025 levels.
Without these tariffs, our GM for FY 2026 would be expected to come in at similar levels to FY 2025. Moving to OpEx, in FY 2025, our operating expenses as a percentage of revenue decreased, with an OpEx increase of 10% to AUD 138.7 million. This growth was strategically distributed, with the largest share going to investment in our core revenue-generating markets to drive ongoing growth, and 27% being invested in infrastructure and capability for today and the future. We continue to invest in R&D to drive our product expansion strategy. Approximately 2/3, or AUD 22.3 million, of R&D investment was focused on the Endoscope Reprocessing Innovation Program, while AUD 12.5 million was invested in the Ultrasound Reprocessing Innovation Program. As already mentioned, R&D as a percentage of revenue dropped from 19% to 17%. As I said before, we expect this to continue to decrease in 2026.
By strategically allocating our resources, we are ensuring that we continue to drive growth, innovation, and market expansion, positioning ourselves for long-term success. One last thing on OpEx. Due to government rezoning of our existing premises in Macquarie Park, we're unable to extend our lease beyond 2027 for our manufacturing and research lab site. Fortunately, we've been able to secure a site nearby on a long-term lease that allows us to combine our HQ, manufacturing, and research labs into one site. We will begin to fit that site out in calendar year 2026 in preparation for a move in 2027 when our existing leases end. This will also mean, for accounting purposes, we incur leasing costs on the new property in FY 2026 and capital expenditure associated with the fit-out in 2026 and 2027. Looking at cash, we had a good year on cash.
Our cash flow has grown due to EBIT growth, supported by improved accounts receivable collections, lower inventory holdings, and continued growth in service contracts paid in advance by our customers. This has resulted in a robust cash flow and cash and cash equivalents of AUD 161.6 million, providing a solid foundation for strategic investments in the future. Looking forward to 2026, while still maintaining positive cash flow, we expect it to be lower than 2025 due to increasing inventory associated with CORIS commercialization and the costs associated with the fit-out of the new property I mentioned earlier. With no debt, we maintain full flexibility to allocate capital for innovation, market expansion, and product development. This positions us well to create long-term shareholder value and drive future growth. Now, lastly, before I hand back to Michael, let's just take a look at the trophon-only business.
Here, we show the strength and profitability, which excludes our investments into CORIS. In fiscal year 2025, our trophon-only business continued to demonstrate significant strength and scalability. We've already touched on revenue and gross profit at the group level, so I won't repeat. Operating expenses of AUD 108 million for the trophon-only business grew slower than revenue, driven by disciplined investments in selling, general, and admin expenses, as well as research and development. Our EBIT for the trophon-only business rose 33% to AUD 48.4 million, demonstrating positive growth in operating leverage. EBIT was 24% of sales in FY 2025. Overall, our trophon-only business continues to generate significant cash flow, which funds our broader organizational long-term growth strategies. I'll now hand back to Michael, who will talk you through our growth strategies for the trophon business, provide an update on CORIS, and take you through the guidance for 2026.
Thanks very much, Jason. As Jason demonstrated, the standalone trophon business is certainly growing. It's profitable. It's generating good cash flow. Importantly, we see five key drivers underpinning sustained growth for this franchise that are outlined on the slide. First of all, you have capital growth. We expect continued growth in both new installed base and upgrades, especially on the back of the launch of our latest generation trophon3. With new installed base in North America, we estimate there's a further approximately 27,000 unit opportunity. That's based on the number of ultrasounds that are in use across that market and, of course, the growth of ultrasound as a clinical modality. We estimate this remaining opportunity to be split roughly 2/3 in the hospital systems and 1/3 in private practices. Interestingly, this split actually mirrors our current sales mix.
In our European region, despite a challenging environment, we do still have strong conviction in the overall long-term opportunity there. Overall revenue grew 22% in FY 2025. However, we would have liked to see more new IB come through during the year. With the launch of trophon3, we certainly do have expectations to see stronger new installed base in FY 2026. In APAC, progress in Japan is slow, but there are some encouraging signs coming through. Further studies were conducted and published demonstrating pro-contamination, but also some studies demonstrating the effectiveness of trophon. The Japanese Society of Stenographers has now included a recommendation in their guidance for HLD actually calling out trophon. We have continued to try and establish guidelines across a broader group of societies and are engaged very much with a lot of the key opinion leaders up there to do so.
In FY 2026, we do aim to launch trophon3 in Japan. From an upgrade perspective, with approximately 10,000 now first-generation trophon EPR units out there, the launch of trophon3 presents a significant upgrade opportunity where customers can effectively skip a generation and go straight from the first generation to the third- generation trophon3, which offers numerous benefits to them. The second driver, still related to capital and actually more a new type of upgrade, is to do with capital software upgrades. This new source of revenue will come from the launch of the trophon2 Plus software upgrade. This software upgrade for trophon2 users will actually deliver the key features of trophon3 for their existing trophon2 machines. That includes a faster cycle time, which is greater than 40% faster than our current device, as well as all the new connectivity features built into the trophon3.
With approximately 20,000 trophon2 devices, actually more in the market, this represents a great opportunity over time. Initially, I will say our focus will be on the EPR capital upgrades. During the year, we expect to see more of these software upgrades coming through. The third driver, of course, is consumables growth. That is through core consumables and ecosystem consumables. By core, I mean the consumables associated with the actual disinfection itself. Growth here is driven by overall ultrasound procedural volume growth, which we did see in the hospital systems this year, as well as the educational efforts from our clinical applications teams to educate existing customers and trophon users on all the different types of ultrasound procedures that actually require high-level disinfection. Between both of those, we do expect to see ongoing consumables growth. New installed base growth will be a driver there.
There is also the ecosystem consumables growth. This is made up of the consumables offerings used in the broader reprocessing process. As I mentioned earlier, that includes items such as cleaning and drying wipes, clean probe covers, which get used after the probe is disinfected, for example. This year, we saw a 28% growth in ecosystem consumables to AUD 15 million. I believe there is still a great runway to continue to grow this element through greater awareness, through bundling efforts, and through new product additions also. The fourth driver is our service business, which in 2025 grew 21% to AUD 29.4 million. Service has become a significant and growing part of our business.
There is great opportunity for further upside through ongoing new installed base growth, but also significant upside as we convert legacy GE service contracts on those older EPR machines to Nan through the upgrades to T3 that only Nanosonics sells. Finally, the fifth will be driven on the back of the launch of T3 and trophon2 Plus, where we have, as I mentioned, enabled the integration with DICOM imaging systems. That provides full digital traceability linked to patient records. This sets the stage for growing subscription-based or SaaS-based revenue. In summary, the trophon business is really supported by multiple diverse growth drivers, each important contributors to strong and sustained growth overall. Moving on from trophon and onto CORIS, first of all, there were many important milestones achieved in the 2025 financial year. There is a clear pathway and plan now in place for broader commercialization.
One of the most important achievements was securing the FDA Genova clearance. That was a critical regulatory milestone that now enables us to pursue 510(k) submissions for expanded scope indications, as well as international approvals. What I mean by those expanded scope indications is there are many, many different types of scopes. There are colonoscopes, gastroscopes, bronchoscopes, cystoscopes, etc. The initial Genova clearance is associated with colonoscopes. What we aim to do, and CORIS is designed for this, is to submit a series of 510(k)s to give us broad coverage across all flexible endoscope types, which will come in time. Operationally, we've built the foundation for scale. We've established the device manufacturing and supply chain and set up a dedicated consumables production site in the U.S. as well. To build market awareness, we've published data and presented at key conferences, showcasing CORIS's superior efficacy outcomes.
We've also launched regional clinical simulation and education labs to engage and train customers. Looking ahead, the steps are now well defined. Our plans are now well underway for the submission of the first 510(k) to the FDA for the first of the expanded scope indications. We are progressing towards regulatory certification also in Europe and Australia. Throughout this financial year, 2026, we will carry out, as I've mentioned before, a controlled market release of CORIS. It will first start in Europe and Australia, followed by the U.S. upon approval of the first 510(k) that we get for the expanded scope indications. As many of you will appreciate, when you're bringing effectively a new-to-world technology that we believe can certainly transform endoscope reprocessing, a controlled market release is an important process. It involves a strategically limited launch into select user environments for full commercialization.
What this does is it enables real-world feedback and helps to identify and resolve any unexpected issues prior to our broad commercialization. There is a lot to be achieved during FY 2026. However, by taking these measured steps, we are ensuring that CORIS is certainly set up for long-term success. We all expect and we believe that there is a significant growth opportunity with CORIS. There are over 60 million flexible endoscope procedures performed annually, and that's just across the top seven key markets alone. CORIS does represent a substantial growth opportunity for the organization. Similar, I guess, to the trophon business, our business model for CORIS is certainly designed to leverage multiple revenue streams to ensure a robust and scalable approach.
Importantly, while the overall capital unit opportunity may be a bit lower than trophon, and that's because they're all centralized in the endoscope reprocessing suites, whereas in trophon, they're actually there in the clinical setting at point of care. Because they are centralized, the recurring revenue per device through consumables is anticipated to be far greater than trophon, and that's due to the number of cycles going through the machine daily. That's driven by the fact that all endoscopes are required to be reprocessed. Also, the price per cycle will also be higher, noting that the price today of manual cleaning is anywhere between $11 and $ 37 . R eally a significant opportunity, especially from a consumables perspective. Finally, onto our guidance for this financial year.
As mentioned in the ASX release, we believe we are well positioned to continue to benefit from several trends in health care, and particularly infection prevention, such as the trend towards automation, the requirements for traceability, and the growth in digitalization. Of course, that will be driven by the opportunities of our newly launched trophon3 and trophon2 Plus. We are, like every company, I guess, taking a prudent approach to the macroeconomic uncertainties and recognizing the changing global trade environment. On that backdrop, as we look ahead to FY 2026, we anticipate continued revenue growth, with total revenue to be in the range of AUD 215 million- AUD 223 million. That represents an 8%- 12% growth. That growth includes ongoing capital revenue growth driven by the recent launches, but also continued recurring revenue growth from our customer value expansion strategies.
I should say that minimal revenue, as I've said before, is expected in FY 2026 for CORIS from the controlled market release. Most of this revenue growth generally is definitely associated with trophon. As Jason explained, our gross margin is expected to be between 75% and 77%, taking into consideration the impacts of tariffs, which, as he mentioned, is approximately going to be about AUD 4 million at the cost of goods line. Without the impact of tariffs, we would have expected gross margin actually to continue to be similar to FY 2025, above 78%. We do have various mitigation strategies in place, however, to offset the majority of this impact on the profit before tax line. These strategies include cost-sharing initiatives, so there will be price increases. We have to make sure they're reasonable price adjustments over time.
Also, work that we're doing on various sourcing strategies within the U.S., we look to try and mitigate the impacts of tariffs as much as we possibly can. From an operating expenses perspective, they're anticipated, again, to grow lower than revenue, with growth in OpEx expected to be between 6%- 9% for the year. In summary, I guess FY 2025 was a year of many achievements financially and operationally. We're confident in our ability to deliver another year of strong performance in FY 2026. With that, I'll now hand back to the operator to start off the Q&A. Thank you.
Thank you. If you would like to ask a question, please press star one on your telephone and wait for your name to be announced. If you would like to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Shane Storey from Wilsons Advisory . Please go ahead.
Morning, everyone. Michael, I'm just going to start with the guidance, please, just really a clarification more than anything else. The revenue guidance you've given there, that I imagine anticipates some of those price increases that you're thinking as part of a mitigation strategy against the tariffs. When we look at, when we calculate through the guides through the various lines and end up with an EBIT number, that EBIT number will still capture that price increase, if that makes sense.
Yeah, the price, the top line revenue guidance provided is inclusive of any price adjustments that we do make during the year.
OK. When I look at the, I guess, the swing factor between the AUD 8 million sort of variation between the bottom end and the top end of the guidance, would I be right in thinking that the bottom end would be effectively a flattish kind of capital sort of result in 2026, and the top end may be looking for a little bit more activity?
Exactly correct. Now, obviously, we've given ranges. We believe that with the launch of trophon3 and trophon2 Plus, there's great opportunity to continue to grow unit volumes. It also takes a little bit into consideration, Shane, that in case there are any structural changes, which we're not necessarily anticipating in the U.S., just in case hospitals come under increased budgetary pressures, which again, we're not necessarily facing at the moment. If there were any structural changes to move towards rentals or the likes, whilst we still get the units, we wouldn't get all the revenue up front. The bottom line, how you're thinking about it is exactly right. At the bottom end of the guidance, it would be associated with flat capital growth.
Thanks, that's all I had. Thank you.
Thanks.
Thank you. Your next question comes from Josh Kannourakis from Barrenjoey . Please go ahead.
Hi, Michael and Jason. Just a couple of quick questions for me. Firstly, just on guidance as well. Can we just run through, just on the OpEx side, can you give us maybe a little bit of extra context just around how we should be thinking about depreciation into next year? Also, just a little bit more maybe around some of the rental costs and other potential one-offs that are sort of coming through in 2026?
Sure, Josh. I'll take that one. We're expecting higher depreciation levels, close to AUD 2 million higher than FY 2025, and that's due to the fit-out of the CORIS manufacturing line in preparation for the go-live, obviously. It's also some depreciation associated with a U.S. manufacturing setup of the Sonics and CORIS consumable. Around AUD 2 million in additional depreciation in 2026. In terms of the new property, we'll gain access to that property in probably April 2026, at which point we will have to incur, for accounting purposes, some costs on the lease. That'll be in the range of AUD 600,000- AUD 700,000 for additional leasing costs in the 2026 year. We'll also incur some CapEx associated with fitting out that property over the 2026 and 2027 year.
I'd suggest that that'll be in the range of AUD 10 million- AUD 12 million across the two years, so AUD 10 million- AUD 12 million in total. That will obviously then depreciate over the term of the lease, which is 10 years. A couple of new items.
Got it. Jason, in terms of CapEx, how should we be looking about the broader sort of business CapEx profile across 2026?
Yeah, so in 2025, we spent close to AUD 9 million. I expect in 2026, it'll be around AUD 10 million. Half of that will be due to the fit-out of the new building, and the other AUD 4 million or AUD 5 million is kind of back to a normal sort of run rate of CapEx in the business. I'd expect it to be about that.
Great. Michael, just a quick question for you around CORIS. Obviously, we've talked about the higher cycles per machine. Within relative to trophon as well, it looks like the cycles there have also been increasing. Can you give us a bit of a feel for what you're seeing in terms of how the daily cycles across the portfolio are trending, both for trophon and what that means for sort of CORIS cycles as well?
Yeah, I think it's on trophon, the cycles are on average across the 37,000. Obviously, we're seeing a bit of improvement, and that's really driven more by procedural volumes increasing in ultrasound in general. It's hard to compare trophon versus CORIS because two totally different things, of course. The way to think about it is, in ultrasound, not every ultrasound procedure requires high-level disinfection. Where a trophon sits in a clinical setting, they may do 15 or more ultrasound procedures in a day, but only three or four of them require high-level disinfection. Whereas in endoscopy, every one of them do. Where a CORIS is actually placed in an endoscopy reprocessing suite, every endoscope that comes in requires to be reprocessed. You could have a threefold plus number of cycles going through a CORIS device than you will a trophon device.
Whilst we've not disclosed to the market yet the price per cycle or consumable, you know the lower-end cost of doing this cleaning today manually is in the order of AUD 10. We believe there is significant opportunity there for that consumable revenue coming through with CORIS.
Got it. That's helpful. Final one for me, just back to some of the upgrades, especially around the capital software upgrades. How should we think about what the potential uplift is there for revenue across upgrading the existing sort of trophon2s from a software perspective?
Yeah. As I mentioned, first of all, we're going to be the software that's got to be loaded onto the machine, and so they can connect their devices, and we can try and download the software, but it will require some field engineers to support the upgrade initially. We're going to be very focused initially on the EPR upgrades, the pure capital upgrades from EPR T3. We're not looking at it or driving it as a highlight, certainly not in the first half. We anticipate that we'll see growth in it in the second half. Now, for some customers that we just sold T2s to very late in the last financial year, obviously, we've gone in and upgraded those as part of their purchase. I can tell you that the feedback from those customers with respect to the upgrade is very, very positive.
OK, great. Give someone else a turn. Thanks, Gus.
Thank you. Once again, if you would like to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Elyse Shapiro from Canaccord Genuity . Please go ahead.
Hey, guys. Thanks for taking the question. Kind of following on that software angle, as we think about the annual, I guess, annuity stream per device, is there a SaaS component as well associated with the DICOM compatibility piece in addition to the cost of the initial software upgrades?
Yeah. There'll be an initial cost for the upgrade, and then we expect an annual subscription for the DICOM connectivity in the cloud. That may be in the order of, let's round it out at about AUD 1,000 per annum.
OK. That's really helpful. In terms of CORIS, I think minimal expectations in FY 2026. What sort of color and feedback can you give us around any sort of early demand, how your conversations with hospitals have been going, and kind of timing to some of those initial sites? Thanks.
Yeah. Obviously, we haven't been going out taking orders yet, but what we have been doing is a lot of education. We've had a lot of people through the clinical simulation labs. What I can say is customers that are coming through certainly understand the need and the problems that exist with the current methodology of cleaning. You just look, and you'll see it in the investor presentation. You're seeing increases in adverse events, and those increases in adverse events, most of those are associated with risks of contamination. That's because these channels still remain contaminated, especially the ones that they can't brush, whereas CORIS does all of them. They're very impressed with the technology, what it does, and the results that it delivers.
What we want to do and what we're very focused on now is getting to this controlled market release, learn from that, and I think that will give us some really good indications as to what the demand profile may start looking like in FY 2027.
Great. Thanks, that's helpful. Just one last one. You've kind of historically had a bit of an open mind towards the potential M&A into some new product lines. Is this still something that's on the radar?
Oh, look, we still have a very, very open mind. As Jason said, cash generation this year was like AUD 32 million, nearly double what it was last year. That has resulted in a cash balance of AUD 161 million on the balance sheet. It's sort of a good problem to have, but we want to make sure that we're putting that to the best work as possible for our shareholders. M&A, it's out there as long as we can identify an acquisition that makes sense. To date, we have looked at various things, but it just hasn't made sense.
What I do expect, however, is that CORIS will actually open the door to more opportunities for us to look at because the value stream, when you look at it from an endoscope, from the time it gets used to the time it's ready to be used again, what happens along that full reprocessing value stream, there are a lot of elements in there. Just like we've built an ecosystem with our trophon business, I think through M&A, there could be opportunities for us to build up a good ecosystem of products around CORIS as well. I think CORIS may open the door for us. Of course, we don't want the tail wagging the dog. We'd get CORIS out there first.
Great. Thanks, that's helpful.
Thank you. Your next question comes from Taj Wesson from RBC . Please go ahead.
Morning, team. Thanks for taking my question. My question centers around U.S. hospital CapEx budgets and incremental tightening we've seen over the last sort of six to 12 months. I want to understand what sort of portion of your customers may be aligned with these comments. Secondly, does that form part of guidance for 2026?
A lot of the capital budget constraints that we saw about over 12 months ago or so, we're not seeing. Hospitals obviously are continuing to be very prudent with their capital spend. Based on even on the results that you're seeing this year, nearly 4,000 units sold overall, we're not experiencing major sort of distractions associated with hospital capital budgets at this stage. That's not to say they won't come. Lots of changes with new bills coming through in the U.S., the big beautiful bill, and Medicare and Medicaid changes, etc. We're not seeing at this stage changes in patient volumes going through hospitals. We saw that with our consumables. If we do, if we are faced with hospital capital budgets, at least with the trophon business and actually even with CORIS, we're in a very strong position to be able to offer a range of models.
As I say, that may be rentals that grew a little bit last year. We've got other sort of products like own-it-through service. We recognize the revenue on those. There might have been AUD 200,000 or so in the last 12 months. We recognize the revenue. We do have optionalities to help our customers out if they do have capital budget constraints. You're right. It's something that we have to be cognizant of. We've taken that into consideration in our guidance.
Great. Thank you. Just on trophon, you provided the business EBIT margin there. Looking forward to some new products as they sort of come online and penetration increases, maybe just some color around the margin potential for that business unit.
Oh, on the trophon business, again, I think we would like to see, again, even further leverage coming forward and EBIT margins improving even a little bit more. 24% is a pretty good margin at this stage. On the CORIS business, it's going to be the exact same business model. In actual fact, it's probably going to be more weighted towards consumables. Once we get to the relevant level of market penetration with CORIS, which will take a bit of time, once we get that level of market penetration, we do believe that the EBIT margins on a business like CORIS could be even a little bit better.
Great. Thank you. That's all for me.
Thank you.
Thank you. Your next question comes from John Hester from Bell Potter. Please go ahead.
Hi, Michael and Jason.
Hey, John.
Michael, on your R&D spend, 21% or 17% of your revenue is spent on R&D in FY 2025. Can you give us a bit of an overview of what's internal and what's external there? It appears that a number of your projects have sort of come to a logical conclusion. What's next for your R&D budget?
The majority is absolutely internal. The R&D spend that you see there is, you know, that's the statutory reporting of R&D and is inclusive of a lot of things. All our biosciences, clinical, all of that's included. It's not just engineering. We say that some of the things come to a natural conclusion. I don't think when you've got a medical device, anything concludes because you're always going to have new generations. You're always going to have software upgrades. I think, especially as we continue to move forward with our scope, broader indications, et cetera, we'll be still investing in our CORIS R&D moving forward and for a bit of time. Yes, the balance between what goes into CORIS versus trophon versus something that's new, that may all change. The general statement I would make is we are committed to ongoing internal innovation.
We're also committed to R&D as a percentage of revenue continuing to decrease.
In absolute terms?
I'm not going to give a figure yet. Just like it went down from 19% to 17%, it could go down again to maybe another 2 points or so next year. We'll see.
Fair enough. Just on the CORIS device, have you given any initial consideration to how you're going to price this relative to the $11-$ 37 estimated cost of reprocessing currently? What I'm getting at there is that, you know, is there going to, are you likely to come into any resistance from hospitals with regard to taking on an additional cost over and above the current cost of reprocessing?
Yeah, I think that there's many costs. Obviously, there's the pure financial cost. The simple answer is yes, we have taken into consideration. We're looking at the whole economics of it. We've just not announced that to the market. That's $11-$ 37, just gives people an indication as to the opportunity that's out there. There are many costs built into what hospitals absorb. It's not just the time cost, you know, the user cost. It's cost of absences. There's an awful lot in it, John. We think that the price point that we're going to set it at is going to be an accessible price point. We've done research to actually confirm that. Some of that will come out as we bring it out to market a bit more broadly.
OK, thank you very much.
Thank you. There are no further questions at this time. I'll now hand the conference back over for any closing remarks.
Thank you again, everybody, for joining the call. As I said, summarizing, we believe FY 2025 has been a really great year for the organization, both financially and operationally, and set us up to hopefully deliver on another great result for you in FY 2026. I'm sure I'll be speaking to many of you over the coming days. Thank you all for joining.
That does conclude our conference for today. Thank you for participating. You may now disconnect.