Thank you for that. Good morning, ladies and gentlemen. My name is Steve Sargent, and I am the Non-Executive Chairman for Nanosonics. I hope that that short video gave you a sense of who we are at Nanosonics and what we strive for every day. I would like to extend a warm welcome to our shareholders here at the company's headquarters in Macquarie Park in Sydney, and those joining us online, welcome. It is my privilege to chair this 20th Annual General Meeting. I would also like to acknowledge the traditional owners of the various lands on which we meet today and pay our respects to all Aboriginal elders past and present, and acknowledge today's Aboriginal communities who are custodians of these lands. With me in the room, I am joined by the Nanosonics' board of directors, our company secretary, representatives of the company's auditor, Ernst & Young.
I have been advised by the company secretary that we have a quorum for this meeting, and I therefore declare the meeting open. The number of valid proxies received by 11:00 A.M. on Monday, the 2nd of November was 293 proxies, representing over 190 million shares, or just over 64% of the company's approximately 297 million shares that are on issue. I would like to take this opportunity to introduce the board and the company secretary and our auditor's representatives. Firstly, Michael Kavanagh, our Managing Director and CEO; Tracey Batten, in the middle there; Larry Marshall, on the end; Sarah Butler; Marie McDonald; and Gerard Dalbosco. Down the front, we have our company secretary, Matthew Carbines. And as required by the Corporations Act, the company's auditor, Ernst & Young, is also in attendance today, represented by Ms. Vida Virgo . Welcome, Vida.
Vida oversaw the Nanosonics engagement on behalf of Ernst & Young pertaining to the audit of the full year 2026 accounts. The board, company secretary, and the company's auditor are available to respond to any questions you may have during the meeting. Also present are members of our management team, who Michael will introduce when he gives his address. Today's meeting will commence with my Chairman's Address, and then Michael will then deliver his address. This will be followed by the formal business of the meeting. As this AGM is being conducted in person and online, I will now provide some housekeeping instructions on how to ask questions and how each group of shareholders should vote. This is my favorite part. For those shareholders joining online, shareholders can ask questions, which may be written or verbal. Online attendees can submit questions at any time.
To ask a question in writing, select the Q&A icon. Type your question into the text box. Once you have finished typing, hit the send button. Please note that while you can submit questions from now on, I will not address them until the relevant time in the meeting, possibly after each resolution. Please also note that your questions may be moderated or amalgamated if we receive multiple questions on the topic. There is further information contained in the meeting information under the Q&A tab for shareholders that wish to ask a question verbally. For those shareholders in the room, please raise your blue voting card if you wish to ask a question in the ordinary way, and one of our staff will provide you with a microphone for you to use when asking your question.
That way, not only the folks in this room can hear you, but folks online can hear you. We will set aside time after each resolution to answer any questions on the resolutions. In accordance with our usual practice, in addition to having an opportunity to ask questions on the resolutions, we will also invite general questions after the formal business. So, we will go through the eight resolutions, we will close voting, and then we will go to the general questions. This will avoid questions getting mixed with questions received and the resolutions during the formal business. For those shareholders joining online, while there will be time for voting after I have introduced each resolution, you may submit your votes at any time until I declare the poll closed.
There will also be some time to complete your voting after we have addressed any questions that are raised in relation to the resolutions. If you are eligible to vote, once voting opens, press the vote icon, and all resolutions will be activated with voting options. There is no need to hit a submit or enter button, as the vote is automatically recorded. You will receive a vote confirmation notification on your screen. You can change your vote up to any time up until the time we declare voting closed. For those shareholders joining in person, after I call for a vote on each resolution, all persons entitled to vote will be given a moment to complete their voting card, and before I move on to the next resolution. Voting will be conducted on each resolution by poll. For this purpose, I now declare the poll open.
Ladies and gentlemen, it is now my pleasure to deliver my Chairman's Address. As you saw in that video, our mission at Nanosonics is infection prevention for life. We work to improve the safety of patients, clinics, their staff, and the environment, and we do this by transforming infection prevention through innovative technologies that improve standards of care. Our infection prevention solutions engineer out the variability present in manual processes, and through automation, we deliver consistent, more effective, and reliable infection prevention control. We are proud that trophon has helped shape global standards in ultrasound probe reprocessing, while CORIS System has the potential to do the same with endoscope reprocessing. Both technologies are focused on protecting patients and improving the quality of care they receive. Full year 2026 was a year of solid performance and important strategic progress for Nanosonics.
The core trophon business continued to grow, and the number of patients protected during the year exceeded 31 million. With the launch of trophon3 and trophon2 Plus, we launched more new products last year than in any other year in our history. Additionally, Nanosonics laid the foundations for its phase of next growth of advancing CORIS to controlled market release. This progress has positioned Nanosonics well to pursue the most significant transformation in its history since the launch of trophon, becoming a multi-platform company and entering its next growth horizon. Our goal is both clear and ambitious. We want to build a broader global infection prevention company with multiple technology platforms, and we are aiming to more than double or even triple the number of patients protected from the risk of infection each year. We are confident we have the expertise and technologies to achieve this ambition.
Our confidence comes from our position as experts in the automation of manual healthcare processes, in medical reprocessing, and in digitization, which align with the key industry dynamics in the infection prevention space. Technology advancements and expanding clinical applications are driving growth across both ultrasound and endoscopy. Healthcare providers are increasingly seeking more effective solutions to reduce the risk of cross-contamination between patients, and these solutions need to be validated and audit-ready. Hospital budget pressures and inflation have continued, making purchasing decisions increasingly focused on solutions that can demonstrate risk reduction, workflow efficiency, and compliance value. Cybersecurity has risen in importance to become a critical component of social license. Patient data protection is paramount. These trends reinforce the relevance of our focus on patient safety, validated automation, and digital traceability and workflow efficiency.
We are proud that our technologies both reflect rapidly evolving needs of our customers while also being powerful enough to shape healthcare standards. In full year 2026, Nanosonics delivered continued revenue growth, underpinned by the strength of the trophon franchise and disciplined cost management. Strong cash generation supported ongoing investment in research and development , the advancement of CORIS, and returns to shareholders through the completion of an on-market buyback. We have ended the year with a strong debt-free balance sheet, providing the financial flexibility to fund our strategic priorities and pursue long-term goals. Having completed a AUD 20 million on-market share buyback last year, we are continuing to return capital to shareholders through a new on-market share buyback of up to AUD 40 million, as we announced in August.
The buyback signals both our confidence in the future growth of Nanosonics, as well as our recognition that the current share price does not reflect the growth opportunities ahead, especially with CORIS. The share price has declined over the last 12 months, and while some of that is due to the broader fall across listed healthcare market, we remain disappointed for our shareholders. As a board, our priority must be disciplined execution against the substantial opportunity ahead to support the stock price. Our operational and financial performance reflects dedication of our global team of more than 500 people, and on behalf of the board, I thank each of them for their contribution and commitment throughout the year.
Sustainability remains an important element of our long-term strategy, and in full year 2026, we achieved a significant milestone with a 51% reduction in Scope 1 and Scope 2 emissions, reflecting the full year benefit of initiatives implemented over recent years. Looking over the last two years, this reduction has increased to an incredible 80% reduction in both Scope 1 and Scope 2. We also strengthened our sustainability foundations by advancing our global climate governance, risk management, and reporting capabilities while preparing the business for compliance with Australia's new AASB S2 climate disclosures. During the year, we farewelled Dr. Lisa McIntyre, who stepped down from the board in November 2025. On behalf of the board, I would like to thank Lisa again for her significant contribution to Nanosonics. We were pleased to welcome Sarah Butler as an Independent Non-Executive Director in January 2026.
She brings extensive healthcare, strategy, and growth experience that align strongly with the company's priorities and ambitions. Nanosonics is supported by an independent and deeply experienced board with extensive leadership backgrounds across global healthcare, medical technology, science, innovation, finance, and governance. This brings the breadth of expertise required to guide the company through its next phase of growth and value contribution. I would like to thank my fellow directors for their leadership, counsel, and commitment throughout the year as we've positioned Nanosonics for its next phase of growth. Today, we announce the appointment of Julien Sauvagnargues as an independent non-executive director. Julien brings extensive endoscopy, sterilization, and service operations leadership experience to the Nanosonics board. The last two decades of Julien's career was with Olympus Corporation, where he most recently served as President and CEO, Americas region for Olympus.
Julien is based in the United States, our largest customer market, and we look forward to warmly welcoming him to the board at the start of December. I would like to express my sincere appreciation to our shareholders for your ongoing confidence and support. We value the trust you place in us and continue growing the business. Nanosonics has strong momentum and clear priorities for 2027 to build further value from trophon, launch CORIS, and scale the capabilities needed for sustainable growth. These priorities will advance our ambition as a multi-platform infection prevention company to protect more patients and create long-term shareholder value. Thank you for that. Now, I'll ask Michael to come up and address the shareholders.
Well, a very good morning, everybody. Thank you very much, Steve, and good morning and welcome. It's great to see a number of very familiar faces to the AGM here, and thank you for taking the trip out to Macquarie this morning. And for everybody that's online as well, welcome. I'd like to begin, first of all, with a brief look back on FY 2026, our last financial year, because I think those results in and of themselves, they give us a very strong foundation for what comes next. What I would do then is I'll focus on three priorities for the business, and they are to extending the opportunity for trophon, where there's still great opportunity there; the commercialization of CORIS, which is critically important; but on top of that is looking at building Nanosonics into a multi-platform leader in automated infection prevention.
But before I begin, as Steve said, we've got the majority of the executive team here joining us here this morning, and they're all here in the front, and I won't name them all out, but I must say, you're looking pretty good today for someone who hasn't seen many of you wear a tie in a while. I am very fortunate, we're all very fortunate, because we do have a very experienced and dedicated executive team who are all really working together to create value, not just for our patients and for customers, but for our shareholders as well. Do certainly encourage you at the end of proceedings to engage with the teams. They would enjoy that.
Looking back on FY 2026, I think we delivered as a business, we delivered very solid underlying growth, but importantly, disciplined execution across a number of really important operational priorities that we had in the business. The reported revenue for the year was just under AUD 204 million, but it is important to look at that on a constant currency basis because that is what really gives you an indication as to the performance, the operational performance of the business. On a constant currency basis, the revenue increased 6% to AUD 211.5 million, with EBIT, of course, increasing 21% to AUD 21.6 million. Our revenue for the year, I acknowledge, was slightly below our target that we had set, but the strong gross margin that was delivered and, importantly, disciplined cost management in the business over the 12 months, that did support very, very strong earnings growth in constant currency terms.
The overall trophon placements was over 4,000 of those during the year, and so those placements grew 9%. Our cumulative installed base, which is important, that reached over 39,000 units internationally. And upgrade momentum certainly was particularly strong in North America, where the majority of the upgrade opportunity actually resides. At that same time, with the revenue, we did continue to invest in R&D, in manufacturing, in our digital capabilities, and of course, the commercialization preparations for CORIS. We did all do all of that whilst helping maintaining OpEx growing at a lower level than overall revenue. You see, we did that by holding OpEx growth to 2%. It is also, I think you will see on an annual basis in our results, we always call out the trophon-only business as well as the consolidated accounts.
I think that is quite insightful to give everybody an insight as to the performance of the core franchise and how that is doing as a business. As you can see, the trophon franchise, it continued to generate very strong profitability and cash flow, which is really important. The reported EBIT was AUD 50.6 million for the year, and in constant currency, EBIT was increased actually 16% to AUD 56.5 million. So, we delivered even further operating leverage in that business. In short, trophon remains a highly profitable engine that gives us the flexibility to fund CORIS, to maintain a debt-free balance sheet, and to continue to invest for the long term for growth of the business. But they are just the financials. The financials beyond them, the FY 2026 materially also strengthened our strategic position as a business.
The trophon3 and trophon 2 Plus were launched, and both of those extend our leadership in ultrasound probe reprocessing and creates new upgrade software and connectivity opportunities with that critical mass of installed base that is out there today. CORIS, during the [audio distortion].
CORIS provides a validated 18-hour window to reprocess these scopes, and what that provided for that site was much greater operational flexibility as well. Apologies about the video because, w e can try?
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Said a lot better than what I tried to articulate, but that was a fantastic opportunity we have over there. So, as we did outline in our full-year results, this is the launch year for CORIS. Some of the CMR sites are continuing, we're learning more, but this is the launch year. Our focus this year is very much on building the broad market awareness, developing the sales pipeline, securing initial customers, and reference sites. I'm pleased to say that just a short few weeks ago, a very successful customer launch for the U.K. and Ireland took place, and the sales team are now out actively promoting and building the pipeline. We do expect the second FDA 510(k) determination for expanded scope indications shortly, and this will allow us to begin our planned U.S. activities. Preparations for the official launch are also underway here in Australia.
CORIS will feature next week at the ACIPC Conference, the large infection prevention conference taking place up in Queensland. In parallel, our clinical program continues to progress, and we do expect a number of further publications this year that will add further evidence of the technology's clinical performance. So, a great deal happening around CORIS, and we're definitely making good progress against the plans that we have set. There's still definitely work ahead, but this progress that we are seeing, the sort of customer feedback, and that's similar in all of them, what you saw today, is that we do believe that gives us real confidence on the future success opportunity. I will say also that I'm delighted to share that CORIS has very recently been also awarded gold at the Australian Good Design Awards in the medical and scientific category.
These awards have recognized excellence in design, in innovation since back in 1958, and with entries assessed independently by a panel of experts. The jury described CORIS as a highly innovative solution for a complex hygiene challenge. We were very, very proud to receive that on behalf of all of you, our shareholders, but also for all the teams here that have been working on it for many, many years. Finally, I'd like to close with three messages. First, trophon certainly remains a growing cash-generative platform with significant ongoing growth opportunity from new installed base, upgrades, consumables, service, connectivity, and geographic expansion. Second, CORIS addresses a large unmet need and gives us the potential to establish a second global platform with highly attractive recurring economics.
And third, we have built the capabilities as an organization to develop, manufacture, commercialize, and support these, but further new platforms at scale. Our priorities are therefore quite clear. We need to grow and modernize the trophon installed base. We need to execute and commercialize the rollout of CORIS, and then invest selectively in opportunities where we see both a strong clinical need and a compelling commercial case for platform expansion. And we have the financial capacity, the infrastructure, and experience to pursue this strategy. I would like to take the opportunity to thank the whole Nanosonics team globally, but also thank you, our shareholders, for your trust, your support, and your belief in the future of the company. Thank you.
Thank you, Michael. I appreciate that. We will now move to the formal business of the meeting. The notice of this meeting was circulated to shareholders, and copies are available at the registration desk and on the Nanosonics website. I propose that the notice be taken as read. I will now outline the procedure for this part of the meeting. Prior to calls for a vote on each resolution, the resolution and proxy votes will be shown on screen. I will invite questions and comments on each of the resolutions once the resolutions have been presented. For shareholders who are online, you may either cast your vote at the time that the resolution is read or complete voting on all resolutions after I have read through all the resolutions and we have concluded answering questions on each of them.
I will then provide a warning that the poll is about to close. For those shareholders in the room, I have the following specific instructions. Please use your blue voting cards. After I call for a vote on each resolution, all persons entitled to a vote will be given a moment to complete their voting card before I move on to the next resolution. On the reverse of your blue voting card is your voting paper and instructions. For proxy holders, you need to mark a box beside the motion to indicate how you wish to cast your open votes for any votes you are entitled to cast. For shareholders, you need to mark a box beside the motion to indicate how you wish to cast your votes. Once we have completed all the resolutions, a representative from Computershare will then come around and collect your completed voting cards.
If you require any assistance during the process, please raise your hand and a Computershare representative will come to assist you. As chairman, I have been given a number of undirected proxies, and I will vote these in favor of each resolution in the poll. The persons entitled to vote on the poll are all shareholders, representatives, and attorneys of shareholders, and for those in the room, proxy holders who hold blue voting cards. For those shareholders joining online, questions may be submitted at any time while the resolutions are being read using the functionality that I have previously described. Questions will be considered and answered for each resolution when the resolution has been read. However, there will be a pause at the end to ensure that all shareholders are afforded the opportunity to ask questions on the resolutions.
I'll now turn to the first item of ordinary business, which is to receive and consider the company's reports for the year ended 30 June 2026. No formal vote is required on this item of business. I would like to now pause for a few moments to invite any questions from shareholders. We'll go to the room first, then verbal second, and then written third. There are no questions for that, so we'll note that item. Resolution 1 concerns the election of a director, Ms. Sarah Butler. Ms. Butler was first appointed to the board earlier this year in 2026, and this resolution seeks shareholder vote on her appointment. Ms. Butler's election was unanimously supported by the board. I would like to invite Sarah to come up and say a few words, and then we'll take any questions on Sarah's appointment. Thanks, Sarah.
Thank you, Chairman, and good morning fellow directors, shareholders, colleagues, and guests. I had the privilege of joining your Nanosonics board and its Innovation and Development Committee in January this year. Today, I'm seeking your support for my election as an independent non-executive director. I also serve on the boards of Australian Clinical Labs; The George Institute for Global Health; a healthtech SaaS company, Lumonus; and IMA, the IAG-RACV insurance joint venture. I'm a strategic advisor as well across the broader health sector in the region and an adjunct professor of UNSW's Faculty of Medicine & Health. I bring to the board 35 years of global strategic advisory executive and board experience. After studying chemistry at the University of Cambridge, I joined strategy consulting firm Booz Allen Hamilton, which later became Booz & Company and then PwC Strategy&.
Over that time, I worked with over 150 organizations in more than 30 countries across Asia-Pacific, Europe, and the Americas, including three years based in the U.K. and five years in China, working all across the Asia region. So, more than 50 of these clients were medtech, health providers, insurers, pharma, diagnostics companies, and governments, and I advised them on a range of topics, including reimagining the future of health, growth strategy, digital and AI, people and culture, and partnerships. I also had 20 years of executive leadership, delivering better customer outcomes, profitable growth of 20% a year, and improved diversity and inclusion. I led PwC's $2 billion global health services practice and its New South Wales government practice through COVID-19. Earlier, I was Booz & Company's global insurance leader for 10 years and doubled the China business as managing director.
I've also been a board director for 10 years, and chaired board committees on strategy and ventures, people and remuneration, and audit and risk, and this includes governing through significant transformation, so strategy refreshes, global growth, a pivot to agentic AI, M&A, and leadership transitions. I've kept pace with areas like technology innovation, recently co-authoring a white paper on agentic AI governance. As we heard from Steve and Michael, Nanosonics is at a really exciting stage, becoming a multi-platform company and entering its next horizon of growth, r eally strong foundation of purpose, customers, products, people, and potential, and supported by a differentiated capability system from R&D through commercialization. I believe my experience in strategy, go-to-market, profitable growth into new markets, innovation, SaaS, AI, and partnerships, underpinned by really strong people, financial and risk management, can help the company successfully scale new infection prevention technologies.
Like the company, I measure our success by the number of people we protect from infection, and if elected, I look forward to continuing to work alongside my board colleagues and our experienced management team to deliver great outcomes for our shareholders, our customers, our employees, and our communities. Thank you very much.
Thank you very much, Sarah . She has been contributing on the board for almost 12 months now, and I can assure you, we are very, very fortunate to have her. You can see the results of Resolution 1 on screen. Are there any questions in the room? No, but we have a question online.
We have a question online for Sarah, which is, if you can hear me, what do you see as your key duties as a director?
[inaudible]
Yeah.
I think, come up here.
I think, clearly, as a director, you are in a uniquely privileged position to help support the aspirations and success for the organization. As mentioned, delivering for all our different stakeholders and communities, so that includes all our shareholders who are in the room and on the phone, as well as our customers, communities, employees, and broader partners and stakeholders more broadly. So, fiduciary duty to the organization, and really being part of helping enable the success of the organization.
Thank you, Sarah. Appreciate that. There are no more questions. We will move on to the next resolution. Resolution 2 concerns the re-election of a director, Dr. Larry Marshall. Dr. Marshall was first appointed to the board in October 2023. He was appointed Chair of the Innovation and Development Committee in November 2025. This resolution seeks shareholder approval for his reappointment. Dr. Marshall's election is unanimously supported by the board. I would now like to invite Larry to come up and say a few words.
Thank you, Chair, and thank you, board. Thank you, shareholders. Not quite unanimous, I actually did not vote for myself. I am humbled to be considered for re-election to this extraordinary company. Nanosonics is fairly unique in Australia. There are many great Australian inventions, but very few of them turn into globally successful companies. Unfortunately, our innovation is nowhere near as good as our invention. Nanosonics is further unique because it has created now two amazing inventions and turned them into real-world products, and they are both new-to-world innovations. Nanosonics, in a very real way, created a whole new market vertical for infection prevention, a whole new category of product that simply did not exist before Nanosonics created it. That is very rare in this country.
But what I am even prouder of is that every single one of us, from the board to the management team to the people that work in the company and to the shareholders, we are all focused on using technology to protect and save lives. In an age where technology seems hell-bent on replacing humans, is it not fantastic to work in a company or work with a company that is focused entirely on protecting humans, on saving their lives, on making their lives better? Thank you so much for consideration of my re-election. I am really humbled and proud to serve you.
Thank you very much, Larry. Really appreciate it. Are there any questions with regard to this resolution in the room? None online?
There is one online. It is [inaudible]. We have a question for Dr. Marshall. What does Larry regard as the two best decisions the board has made during his time as a director? And if he had his time again, would we have done anything differently?
And one of them was appointing you.
Look, I've spent most of my life learning by mistakes, so my errors are a far richer area of discussion than my correct decisions. But look, the process of turning ideas into real products and actually successfully crossing the valley of death, it's very, very hard. 90% of things fail. I think the key to this board is there's extraordinary diversity around the table. We never entirely agree on everything. In fact, we often interrogate things very robustly before we make a decision, but that is the secret of getting to the right decision. Launching CORIS, absolutely. And another decision that I can't share with you yet, but I think you're going to love the outcome, I think that will be the other great decision. Thank you.
It's not me.
Great. Thank you for that, Larry. Appreciate it. You can see the results on there, and we'll now move to the next resolution. Resolution 3 is for the re-election of Dr. Tracey Batten. Dr. Batten was first appointed to the board in September 2023. This resolution seeks shareholder approval for her appointment, reappointment, I should say. Dr. Batten's election is unanimously supported by the board, and I'd like to invite Tracey to come up and say a few words.
Thanks very much, Chairman, and it is good afternoon now, everyone. Thanks very much for joining us here today. I am Tracey Batten, and today, I am seeking your support for my re-election as an independent non-executive director of Nanosonics. Like many of you, I am a shareholder of Nanosonics and inspired by its mission to transform infection prevention. Over the past three years on the board, I have served on the Audit and Risk Committee and on the Innovation and Development Committee. My career spans more than 30 years of working in the healthcare sector, primarily in Australia, but also internationally. Having initially trained and worked as a medical practitioner, I transitioned relatively early in my career into healthcare management, supplementing my clinical training with a number of management and governance qualifications, including an MBA from Harvard and a fellowship of the Australian Institute of Company Directors.
During my senior executive career, I spent over 15 years as a chief executive of a number of large hospital groups, including St Vincent's Health Australia, here based in Sydney, and Imperial College Healthcare NHS Trust, based in London. These experiences gave me significant strategic, operational, and commercial expertise, and considerable skills working with clinicians to deliver high-quality patient care. Medical research and its translation into clinical practice was central to these hospitals continuously improving health outcomes for their patients. For the past nine years, I have served as a non-executive director on companies in both Australia and New Zealand. My current directorships include Medibank Private Limited, which is Australia's largest private health insurer; EBOS Group Limited, which is the largest and most diversified Australasian wholesaler distributor of healthcare, medical, and pharmaceutical products; and I have recently joined the board of IHH Healthcare Berhad, which is a large multinational private healthcare group headquartered in Malaysia and in Singapore, operating 89 hospitals and 190 healthcare facilities around the world.
My healthcare industry knowledge, my expertise gained as a senior executive and CEO working in hospitals, and my governance skills gained serving on a diversity of boards are the capabilities that I bring to the board of Nanosonics. As you have heard, Nanosonics is entering a really exciting phase of its history, from delivering a proven trophon product to becoming a multi-platform leader in automated infection prevention with the launch of CORIS. This is something I am really passionate about, and I believe Nanosonics is really well-positioned to continue to set new benchmarks for infection prevention standards. With your support, it would be a privilege to continue to serve you as an independent non-executive director and to work with my board colleagues and our experienced management team to continue to drive innovation and growth at Nanosonics. Thanks very much for your support.
Thank you very much, Tracey. Again, Tracey has been a tremendous contributor over the last three years, and really appreciate that. Do we have any questions on this resolution? None online. Great. You can see the results there. We will move to the next resolution, which is the Remuneration Report. For Resolution 4, the Remuneration Report is required to be considered for adoption in accordance with the Corporations Act. The Remuneration Report forms a part of the Directors' Report and appears on pages 36- 59 in our Annual Report. The vote on this resolution is advisory only and non-binding. The resolution gives members the opportunity to ask questions or make comments concerning the Remuneration Report during the meeting. The chairman of the meeting, other directors, and other key management personnel, or any other closely related parties will not be included in the votes for this resolution.
Where, in my capacity as chairman, I am holding undirected proxies and the appointer has authorized the chair to vote undirected proxies on this resolution, I will be voting in favor for. The resolution and the proxies received are now on the screen. Let's see, 94% for. Are there any questions folks may have on the Remuneration Report? Anything online? Thank you. We will move to the next resolution, which is Resolution 5. Resolution 5 concerns the issue of 70,833 service rights to the Chief Executive Officer and President, Michael Kavanagh, under the full year 2026 short-term incentive. The resolution and the proxies received for Resolution 5 are on the screen, the results there. Are there any questions on Resolution 5? It does not look like there is any in the room and nothing online. You can see that was voted for.
We will now move to Resolution 6, concerns the issue of 625,363 performance rights to the Chief Executive Officer and President, Michael Kavanagh, under the full year 2027 long-term incentive award. The resolution and the proxies received for the resolution are shown on the screen. Similar support, as we can see. Are there any questions on t he long term? Great. We have two questions in the room. We will go to the gentleman on the left-hand side here first. Yep.
Hello?
Yep.
[Peter Breton], shareholder. My question is that the short-term incentives, 12-month performance, and then we have got the long term, which I understand is a three-year performance, i s that a rolling three years? If it is a rolling three years or even a set three years, are you not double counting the performance review, and therefore you are just doubling up on the performance rights as well?
Okay. Thanks for your question. It is a set three years. For the short-term incentive, just like I think every other listed company on the ASX, and I would throw the New York Stock Exchange and NASDAQ, all listed companies from my experience, you have a short-term incentive based upon objectives that the team can or will meet during the year. So, they are very specific objectives over three years. For the long-term incentive, there is usually a market measure, so how has the stock performed vis-à-vis a comparator group of companies? Then, there is typically a long-term, in our case, EPS CAGR, so how long are we growing earnings per share over that three-year period? So, it is very standard, different measures. You are not, you are not [crosstalk].
Okay. I understand. The criteria is different for each [crosstalk].
Exactly. One is focused on.
Okay.
Immediate short-term objectives for this year. The other is focused on ensuring long-term growth. And they are different measures within each. Sir?
Hi, Chairman. My name is [Peter Demello].
Hi.
A long-suffering shareholder. For this grant, what are the hurdle rates you have used? Is there a share price performance? Because in NASDAQ, you spoke about NASDAQ normally grants.
Yep.
Over a certain hurdle.
Yep.
Otherwise, they vest zero.
Exactly.
So, what is the share price?
Marie, can you grab that? Thanks. Marie has the numbers in front of her.
There are two [inaudible] for the long-term incentive. [audio distortion] Sorry, I'll start again. There are two metrics for the long-term incentive. There is the relative TSR one, which is measured against the ASX 300, excluding energy, financial, mining resources, and REITs stocks, so companies that are quite different to us. That is used for the relative TSR. And the EPS CAGR is set against, or the one going forward will be set against last year's earnings per share.
If those, the point you made is correct, if those hurdles are not met, they do not vest. So, there is complete alignment with shareholders. If shareholders wins, benefit, management will benefit. Any other questions on the LTI? If I can now move to Resolution 7. Resolution 7 considers the reapproval of the Nanosonics Equity Plan. This is something, the equity plan gets approved, or presented to shareholders every three years. It was approved by shareholders back in 2023, and now up for renewal again. We have got the results on screen. Are there any questions? No questions online. If I can then move on to Resolution 8. Resolution 8 considers the approval of an increase in the maximum aggregate of non-executive directors' remuneration from AUD 1.2 million to AUD 1.6 million.
Should be noted that the proposed aggregate remuneration of AUD 1.6 million per financial year is a ceiling only, and at this date, in the notice of meeting, it is not intended that the full amount of the available pool will be paid to non-executive directors. This will also provide us with a little buffer as we bring on new directors like Julien Sauvagnargues in the United States, to bring on someone with his experience there. That is the rationale for that. Any questions here? No questions online. The results are there. So, I am just going to pause for a few moments to provide shareholders with a further opportunity to ask any questions with regard to the resolutions. Then, once that is clear, we will close the meeting and we can close the poll, then we will go to more general questions, which I think there may be certainly a few online.
So, the poll will be closing shortly. If you can note you are voting. Before it does, I just want to make sure you have got, get your blue cards in the room here. Online, complete. In the room here, we have got representatives from Computershare collecting all of the vote cards. Thank you. If online attendees can ensure the vote is submitted. I think we are all good. Yeah, great. Thank you. So, the formal business is now completed, and I declare the poll closed. Results of the poll will be announced to the ASX in due course, probably later on this afternoon. I would now like to invite general questions about the business overall. You can ask the board, Michael, management, Ernst & Young, any questions you may have. We will start with questions in the room first. Great. So, I will start with [Michael]. I will come sit down here.
Yeah. Okay. Sorry, you do not mind if I sit down?
Please.
I would like to stand up, but I am not able. CORIS has the potential to open a much larger market than ultrasound probe disinfection. That seems to be confirmed listening to you all today. What are the biggest barriers to commercial adoption delay, and what evidence should we investors look for over the next 12 months to realize adoption is accelerating?
Great question, [Michael], and thank you for that. As I alluded to in my address, there is a lot of activities happening now with CORIS. We have officially launched it in the U.K. and Ireland. We are preparing for the same now here in Australia. The determination of the 510(k) will be an important one, because that will kick things off in the United States as well. This financial year, what we have said to the markets, as you are well aware, is it is the launch year, and when you are launching, you have got to build a pipeline. We want to get some of those early units in and continue to build reference centers. So, the things you would be looking at is when you start hearing about the initial commercial adoption, first units going in.
We will internally then be very much looking at the pipeline build and our confidence in the pipeline build as the teams are out there making the markets aware. Certainly, the activity now is ramping up in terms of our presence at all the relevant healthcare and scientific conferences. It just featured very, very recently in Belgrade at the World Congress in Infection Prevention; a week prior to that in Barcelona; next week, it is up in Brisbane. So, a lot of activities. For an investor, I would be looking out at publications coming out, regulatory approvals, and you should hopefully start seeing some announcements of initial adoption. With that initial adoption, then those sites become reference centers and beachheads for others to either visit as well and gain awareness. So, a lot of activity going on.
Can I ask another follow-up question? Talking about regulatory approval, in my estimation, you applied for a 510(k) around May, and this is quite a while since then. It seems to be a longer period than the usual 510(k). My question, I hesitate very strongly to mention anything about America these days, but nonetheless, the FDA happens to be there, so I cannot avoid it. Is the FDA talking to you?
Yes. There is a very distinct process you go through with the regulators for a 510(k), a De Novo, or any sort of application. In that process, there can be a lot of engagement between the company and the FDA, where the submissions are made, then there can be initial rounds of questions that come back in. Depending on the types of questions that are asked, it is sometimes advisable to organize an actual meeting with the FDA. That takes some time, and there is dialogue that takes place in there. Then, based on that dialogue and getting a detailed understanding of their questions, so you are not misinterpreting anything, then you put in the answers to those questions. That gets submitted, and the process can keep going, where they can come back with further questions. So, it is a discrete process that we follow, and we have done that with trophon successfully.
We have done it with the first 510(k), the De Novo. We are following a discrete process. I know sometimes it is, you know, you can try and back calculate from a date of submission and anticipate, well, we should have an approval by that date, and i f there is not an approval by that date, well, then market reaction can always err on the side of there must be something wrong. You should see silence as just the process is following. We are following the process. If there was anything material, I can tell you, my fellow board members would be telling me, "Michael, we need to inform the market." So, we are just following the process, and there certainly is engagement with the FDA.
Can I ask another question? Sorry. The De Novo approval was given quite a while ago. Now, this is for a layperson like me. I thought a 510(k) would be chicken feed compared to that. So, maybe I am wrong.
There is nothing chicken feed about the regulations around medical devices. Certainly, the requirements are certainly less, but still the requirements for a 510(k) are quite stringent. Remember that De Novo back when it was approved on FDA advisement, and that identifies that there is always dialogue with the FDA, was for the approval of a single scope, the endoscope, because their advice was get that approved and then build the number of scopes approved. Hence why you had the first 510(k) and the second 510(k). Within 510(k)s, there were other elements that we put into the 510(k)s beyond just endoscope expansion of indications. There are other elements, and they can attract questions as well. So, we feel confident in the direction we are going with the FDA, and we look forward to informing the market when there is something to inform the market with.
I have another question.
Can I ask you to hold, [Michael], if you don't mind?
Sure.
We'll listen out, please, and we'll come back to you. Yeah.
[Peter Breton] again. I noticed, Mr. Chairman, that your address and the CEO's address was put on the ASX online at 9:35 A.M. this morning. As I was in the train, I got a bit peeved about that, thinking that shouldn't your address and the CEO's address come after you've given your address to the shareholders who bothered to turn up or have gone online for a couple of hours? Anyway, I'll just make that statement.
The requirements we're obliged to comply with is we had a board meeting this morning, and the board has to approve and sign off all the documents that you've seen here today. We've gone through, we had a board meeting last week, we go through any adjustments, any amendments are all approved by the board. Our meeting started at 8:00 A.M. this morning. We approved everything that was released on the ASX, as required. Then, we also approved the release of the announcement of the new director in the United States, Julien Sauvagnargues. So, it's, we can't really, I'm trying to think. I don't think there's any other alternative. It's just once the board approves it, which is typically first thing in the morning, just like when we approve half-year results or full-year results, we approve, it gets listed on the ASX immediately thereafter, or very shortly thereafter.
We've got a question down the back.
Dear board, Chairman, CEO, like I prefaced my question, I am a long-suffering shareholder holding it for five years, and every year you see the share price coming down and down. The objective is that you do well for your employees, yourself, and even the shareholders. First, I want to divide my talk into two parts. First, a comment, and second, a question is, what always happens is there is the organic business of the company, and there is the public-facing, the share price, which is indicative of how you sell the story, how sexy you appear to the shareholders. So, my question would be, how is your investor group doing that part of the job? Because I see you are well-qualified doctors, and you have the product within your control.
But the second part, selling the story to the market, I know this year, you have earmarked AUD 44 million for the share buyback, and I can see the support coming in. However, if you see, I think it is about seven, eight months back, your share was AUD 5.20, and suddenly it dropped, and then you guys got a query from the ASX also, which you all replied. So, I want to know what are you doing for the share price management, and what happened at that point when the share price overnight fell from AUD 5.20, and it came to something like AUD 3.00?
Look, thank you for your question. The share price performance, we have to acknowledge, and we are all shareholders in this room, has been disappointing. There are many dimensions that drive share prices, some of those dimensions out of our control. The most important thing that we can do as an organization is to focus on the execution of the approved strategy for the business. When you look at the results of the business, I think last year, there was a pretty solid performance both financially, I mean, you have constant currency EBIT growing over 20%. We had record placements, more placements of trophon units in over three years. We had record upgrades. We introduced new innovations in trophon3, trophon2 Plus. They are the things that are in our control, and we protected more and more patients.
They're the things that are in our control, and that's what we have to focus on and execute. The market can react to many different things. It can react to if there's a 1% miss on a particular metric, then there can be a disproportionate impact on the share prices. You've all seen across the equity markets in general the degree of volatility that exists. Whilst it's encouraging to see that happening, we need to make sure that does not take away our focus on what is most important. We believe the trophon business, that's why we pull out the trophon business as a standalone business. Last year, you saw EBIT of AUD 56.5 million in the trophon-only business, up 16%. You saw operating leverage continue to grow. All of those sort of things.
On many traditional measures, you would say that the share price probably doesn't even reflect the value of the trophon-only business, let alone the opportunity that exists in CORIS. Now, that may be an internal perspective, but the confidence with a AUD 40 million share buyback, because we are generating that sort of cash, is trying to give a return in that way to investors. Because at the moment, dividend doesn't make sense because we don't have very many franking credits. So, I apologize for the share price performance, but I am dedicated and highly focused, as are the board and as are the rest of the management, to be very, very focused on the strategy that we've outlined, because we believe that the delivery on all the components of that strategy will be reflected in the share price in the future. But I do appreciate your question.
I think we can go back to [Michael].
Thank you. Oh, thank you. Thank you very much. I was going to ask this question earlier in the week, but then this morning, I was wondering whether I should go ahead and ask it. That was to do with the announcement you made this morning with the new part of the executive. I was highly impressed by, I was amazed to see a person of such caliber to come and work in Nanosonics, considering the market's view of Nanosonics is pretty hopeless. He was a man of that stature, saying, "I'm going to work with them." Now, okay, all my doubts were virtually dispelled. The question is this, he's a former, well, manager of Olympus, the biggest manufacturer of flexible endoscopes in the world. De Novo was based on Olympus' model, and the 510(k), first one, again. Now, I read a notice.
I have floating things around the world. All of a sudden, I got this note from FDA about Monaco. The FDA was declaring that Olympus products need to be approved. I said, "That's quite extraordinary that this should be happening now." Listening to you all this morning, your confidence is very high. I think the very fact that this person accepted the job to work with Nanosonics is enough said about confidence. That's it.
If I, thanks, Michael. I'll try because I know we have, I can see online, we've got another question with regard to appointment of a new director, Julien Sauvagnargues. Just take 60 seconds to help people think about how we go about appointing directors. There was a question, why, say, well, why did they get announced today? The simple answer is, it takes a long time to, A, find these people. They've got to come to the other side of the world. The way we think about it is we look at the company's strategy, look at where we're going, what we need to get there. We look at the executive team we have in place, then we think about what are the capabilities and skills that we need on the board to support that team and hold that team to account and represent our shareholders.
One that certainly in our discussions with shareholders over the years, once they do, why don't you have a director based in the United States? And I think that's a valid question. I lived there for the best part of nearly two decades. Larry lived there for a very similar point of time. I know Tracey lived there for a while and studied there. So, we've got a lot of experience in the market, but it is fair to say we're not current. So, our first goal was to find someone in the U.S. Our second goal was to find someone who understood the flexible endoscope market and someone who understood the sterilization of flexible endoscopes. Although it is a bit of trying to find a needle in a haystack, we engaged the firm we used. I guess it'll answer your question that's online.
We used Heidrick & Struggles, and w e had a very, very focused scope. We spoke to a lot of people. To get to ensure we had the right buy-in from Julien, Julien came and spent a week out here, interviewed, saw our facilities, saw our manufacturing facilities, saw our laboratories, met with every executive on the team. In fact, today, he's in Indianapolis meeting with our U.S. executive. He was doing his due diligence on us as we were doing our due diligence on him. That process then takes a very long period of time to get everything lined up. We're required to do police checks and validation checks of education and all those good things that are required with the appointment of any executive and certainly any director. Those processes take time too. I agree with you.
I think Julien's going to be a wonderful addition to the board. We're all very excited to have him. Are there any other questions? We've got another question.
I just want to ask a question, and I'm sorry if somebody else wants to ask an important one, but mine's important too.
Yeah.
I'm a biologist, and I don't get involved in money. I do, but not to the same extent as everybody, and people who are investors. I sat in a room, not this room, I think, a number of years ago when the trophon was being introduced, and I was quite astounded and quite impressed with the way it was going to be sterilized. The instruments were going to be put into that box and sterilized, and H2O2 and so on. I was very impressed. Of course, you've moved on to the CORIS. I'm curious. It's just a curiosity question. Because I'm a biologist, I need to know. The instruments that you are sterilizing, are they usually stainless steel? Because you would imagine that they should be. It would be the safest thing to use.
I'm just hoping maybe there will be some hard plastics involved at some stage of the game, because I can see Nanosonics moving ahead to all the other instruments that are being used in surgery. I can see the openings there, and I'm sure you will do it.
Thank you. The endoscopes obviously have a lot of materials in them, from Teflon to stainless steel to et cetera. A lot of the lumens, the internals of the lumens are actually more Teflon-based. But your point is warranted, and what I mentioned is the sort of guiding principle that we are looking at is, there is a lot of medical devices and a lot of medical instrumentation, and they do have different components, different materials, constructs. Our goal is not necessarily dictated to by what material they are made from. Our guiding principle is, if there today, there is a significant manual process in the reprocessing, we want to bring automation to that. I think we have got the internal capabilities from a bioscience, a chemistry, an engineering perspective that irrespective of what the material is, we should be able to manage that.
Thank you so much.
Okay. Now, I think we can move to questions online. Matt?
Thank you, Mr. Chairman. The first question is about CORIS, and it is actually about the TAM or total addressable market for the CEO. The question is, could you comment on the size of the TAM for CORIS?
Yeah. Great question. Traditionally, the TAM or total addressable market has always been looked at, even from a trophon perspective, in terms of the number of units of trophon we could sell. I think the way to be thinking about the CORIS opportunity is not the number of CORIS devices that are out there, it is the number of endoscope procedures that are actually conducted. That is the TAM. Our goal is, just like we were with trophon, is we are agnostic of brand, be that Olympus, Fujifilm, Pentax, et cetera. Over time, we expect to cover all brands like we do with trophon in ultrasound, and all types of endoscopes. I mentioned, I put up a figure earlier that with the initial target markets, which makes up about seven markets, there is about 60 million endoscope procedures being conducted.
At the moment, that is sort of the TAM figure, and it is how well we can penetrate into that particular 60 million. I will also make the point that unlike trophon, where there are markets around the world today that do not high-level disinfect, but we believe that over time, those fundamentals will improve. In every market around the world today, endoscopes are reprocessed. So, we do believe over time that 60 million is a lot higher because, CORIS really should be a global opportunity.
Thank you. I have got another question here which has three prongs to it. The first part is about the share price, which I think you have commented on already. Then, there are two more aspects. One is, when will we pay a dividend, and how are we going in Japan?
The dividend, I think I already mentioned that, we announced to provide a return to the shareholders with the cash balance that we have, the board determination of doing a buyback. We did AUD 20 million last year and announced AUD 40 million this year, and I think of that AUD 40 million, we are probably close to AUD 8 million of that already. That makes a lot more sense at the moment, because the franking credits, the amount of franking credits that we have today are probably sub-AUD 900,000. Obviously, as franking credits and we start paying more tax, I think last year, we paid about 11% in tax, and as the business becomes more profitable, well, then we pay more tax, franking credits will go up, et cetera. So, we definitely want to provide returns to our shareholders, but we think the buyback this year will do that. Sorry, the second part?
Japan, how are we going?
Japan, I did mention very briefly in my address, and as you know, Japan actually is one of those markets where high-level disinfection of ultrasound transducers, irrespective if those transducers are inserted into the body, are not required to be high-level disinfected. So, over the years, our big focus in Japan has been how do we get guidelines established to mandate the requirement for high-level disinfection. To do that, we've had to conduct local studies in Japan to demonstrate that the degree of contamination is actually real. We have conducted now three, four studies. Every one of them showed contamination. They're being presented at the conferences over there. Actually, some of the data from Japan being presented internationally. The good news is that one of the prominent societies in Japan has established now a subcommittee for the establishment of guidelines.
So, all the hard work that we've been doing over many years, it's getting to the pointy end because that's where, that's to us the trigger point. We are selling some trophons over there at the moment, but we need those guidelines in place to reach a point of inflection. And Japan, it's one of those markets where we're investing in because traditionally, it can be the third, fourth individual largest market outside of the United States. On a population basis, in Japan, there's more ultrasound procedures done per capita than anywhere in the world. So, it's worth the time, it's the effort. As an organization, we have to make strategic bets. We discussed that at the board, and we think Japan is one of those. But the great news is we believe guidelines, the appropriate mechanisms for guidelines establishment now are underway.
Thank you. We do have a few more questions that I'll be guided by. Perhaps we have time for a couple more.
Yeah, maybe two more.
Two more?
Yeah.
The next one is about the trophon-only P&L and OpEx. The shareholder understands that this excludes CORIS costs, but does it include the general corporate costs in that trophon?
Yeah, so the trophon-only business includes all the corporate costs. Even though I would say a percentage of my time, all the executives' time, the overheads associated with the buildings, et cetera, have a big CORIS component to it, all of those costs are captured in the trophon-only business, which again, I think signifies the performance of that business as being a profit, high-profit, cash-generating business, which we are looking to emulate again with CORIS.
Okay, thank you. If we had time for two more, this would be the last one, which is a long question relating to the shorts on the stock that it's been experienced. The question is, can we share everything we know? I am summarizing here. Can we share everything we know about the shorts, and in particular, do we know whether our major shareholders have a policy of lending their stock to the shorts as well?
The shorts, pleasingly, have gone down about 50% in the last 12 months. It's not the favorite part of my, you know, I come to work every day to try and grow, and to have people out there looking to hope almost for something to go down for financial gain is just against one of my principles. Sorry, that's probably a thought bubble I verbalized. But in terms of the thesis that some of the shorts have, I mean, it's a financial instrument that a lot of these, you know, many funds leverage and use, and we have no control over it. The only thing I will say on the shorts is that as long as we keep executing, well then, that's our job.
Keep executing against our strategy and our priorities that are dictated by the strategy, well then, the shorts really don't have much legs to stand on for the future. But they are coming down.
Thank you for that. I think we've covered off all of those. So, that concludes the business today of the meeting, and I declare the meeting closed. Thank you very much for joining us today. It's always great to see you, and we really do appreciate your support that you've given the company over a very long period of time. Thank you.