Good morning, everybody, welcome to SomnoMed's presentation for the first half of FY 2026. With me today are Karen Borg and Amrita Blickstead, Co-CEOs of SomnoMed, and Yi-Fei Goh, , CFO at SomnoMed, who will take you through the results presentation, which was lodged with the ASX this morning. Just a bit of housekeeping before we kick off. Today's webinar is being recorded, including the Q&A, we will post this on SomnoMed's website following the completion of the webinar. We invite research analysts to ask questions at the end of the presentation, you can either do so via the online Q&A function or raise your hand we will take you off mute, you can ask your question that way. With that, I will now hand it over to Karen.
Thank you. Let's begin with our first half results. The first half of FY 2026 represents a period of disciplined execution and continued growth across our core markets. We delivered a record half-year revenue of AUD 60.7 million, up 13% on the prior corresponding period, reflecting sustained demand across Europe and North America and solid performance overall. EBITDA increased 35% year-on-year to AUD 7.8 million, reflecting a combination of improving operating leverage and the timing of certain operational and personnel investments weighted towards the second half. We generated positive operating cash flow of AUD 2.5 million after lease payments. Free cash flow was negative AUD 0.9 million, reflecting planned investment of AUD 3.4 million in capital expenditure, primarily in manufacturing expansion and R&D. These investments position us to support future growth while improving service levels and operational flexibility.
We closed the half with a strong cash balance of AUD 18 million, providing flexibility to fund our investment program while maintaining capital discipline. Overall, first half FY 2026 reflects improved earnings quality and disciplined capital allocation. We are growing responsibly, investing deliberately, and maintaining a strong cash position. This positions us well to execute confidently in the second half of the year. Before I hand it over to Yi-Fei to discuss the financials, I want to briefly highlight the opportunity that continues to drive our strategy. SomnoMed operates in a large and under-penetrated global market, with more than 900 million individuals estimated to suffer from obstructive sleep apnea. This scale creates a significant long-term growth opportunity. Our vision is a world where oral appliance therapy becomes the standard of care for sleep apnea treatment.
As the global leader in oral appliance therapy, our mission is to set the standard for outcomes, innovation, and patient experience, helping to drive transformation of sleep medicine worldwide. We continue to see supportive structural tailwinds, including increasing consumer awareness of sleep being a critical part of good health, ongoing demand for alternatives to CPAP, and continued clinical adoption of oral appliance therapy. Innovation remains part of our long-term strategy, including the development of technology-enabled solutions such as RestAssure. With a large global population affected by obstructive sleep apnea and SomnoMed's established leadership in oral appliance therapy, the company remains focused on disciplined execution and positioning the business for sustainable growth. I will now hand over to Yi-Fei to go through the financials in more detail.
Thank you, Karen, and good morning, everyone. It is my pleasure to take you through our half year FY 2026 financial performance. We delivered half year FY 2026 revenue of AUD 60.7 million, representing 13% growth on a reported basis and 8% in constant currency. Growth was driven by continued strength in our largest markets across both Europe and North America. Importantly, unit sales growth in the half exceeded the first half of FY 2025 levels, noting that the prior period had benefited from backlog clearance. From an earnings perspective, we generated EBITDA of AUD 7.8 million, up from AUD 5.8 million in the prior corresponding period. EBITDA margin improved from 11% to 13%. The margin expansion was driven by a combination of improving operating leverage and the timing of certain operational and personnel investments being weighted towards the second half.
Given this, we continue to expect full year EBITDA to be within the guidance range of AUD 10 million-AUD 12 million. Capital expenditure for the half was AUD 3.4 million compared to AUD 1.4 million in half one of FY2025, reflecting the investment in manufacturing equipment to support capacity expansion and product development. Regional performance reflected continued demand across our key markets. Europe remains our largest region, representing 54% of group revenue and growing 17% over the period, supported by reimbursement across most Western European jurisdictions. North America contributed over 40% of group revenue, reflecting sustained demand and increased contribution relative to prior years. The region was up 11% compared to half one FY 2025. APAC represents approximately 6% of revenue, with moderated performance during the half, down 4%, largely driven by increased competition and broader economic headwinds.
In the first half, we delivered strong earnings growth supported by revenue expansion and continued cost discipline. Gross margins remained broadly stable at 61.3%, compared to 61.6% in the previous corresponding period, demonstrating consistent product economics. Operating leverage continues to improve as we scale revenue across a largely fixed cost base. Importantly, we achieved NPAT profitability in the half, marking a milestone in our earnings progression. As mentioned, certain operational and personnel investments are weighted more towards the second half of the year, consistent with our full-year planning. Overall, the first half demonstrates improved earnings quality, stable margins, and scalability of the core business. Turning to the balance sheet, we closed the half with cash and cash equivalents of AUD 18 million, compared to AUD 17.3 million in 30th June 2025.
Total assets were AUD 79.9 million, and net assets increased to AUD 50 million, up from AUD 46.4 million at year-end, reflecting earnings improvement and the Employee Share Trust transaction conducted during the period. Borrowings remained minimal at AUD 0.7 million, relating primarily to European government-backed facilities, and lease liabilities reduced to AUD 5.9 million from AUD 7.2 million as at 30th June 2025. Overall, the balance sheet remains well-positioned to support continued manufacturing expansion and investment in innovation whilst maintaining financial discipline. From a cash flow perspective, the company delivered positive operating cash flow of AUD 4.1 million before leases and AUD 2.5 million after lease payments, which is broadly consistent with the previous corresponding period.
Fresh cash flow was negative AUD 0.9 million, compared to positive AUD 1.3 million in the half one of FY 2025, reflecting increased capital expenditure, primarily relating to manufacturing, infrastructure, and product development initiatives. Capital expenditure totaled AUD 3.4 million, up from AUD 1.4 million in half one of FY 2025. These investments are aligned with our longer-term growth priorities, supporting capacity expansion and product development. Overall, we are balancing growth investment with continued operating cash generation and financial discipline. I will now hand over to Amrita for the operational update.
Thank you, Yi-Fei. I'll now take you through the operational highlights for the half. During the half, we progressed our manufacturing expansion program, investing in capacity ahead of peak demand. Manufacturing capacity increased by more than 20% during the period, driven by the installation of milling machines and broader facility upgrades. This reduced reliance on overtime during elevated demand periods and improved turnaround times. We're also creating additional capacity headroom ahead of future demand. Production turnaround time improved significantly over the period, with December 2025 levels more than 50% lower than June 2025, reflecting our continued focus on operational efficiency and facility optimization. The expansion program continues into the second half, providing additional capacity headroom and operational flexibility. We also strengthened our leadership team over the period, with key appointments across marketing and transformation, enhancing our global commercial capability and operational execution.
We appointed Nathan Minnich as Chief Marketing Officer, bringing deep global commercial experience across dental, sleep, and medical technology sectors. Nathan will be based in North America. This shift in location of a key leadership position from Australia to North America marks our commitment to scaling the business in that jurisdiction and building the right foundation to launch and scale RestAssure. We also appointed Greg Knight as Chief Transformation Officer. Greg brings over 15 years of experience from ResMed across product, manufacturing, and operations. This newly created role will focus on mobilizing new projects, improving margins, and enabling innovation across the organization. Together, these appointments reinforce both our commercial growth capability and our focus on operational performance. I will now hand it over to Karen to provide an update on RestAssure.
Thanks, Amrita. RestAssure remains an important part of our long-term innovation strategy. As already reported, the device received FDA clearance for built-in compliance monitoring, establishing it as the first oral appliance of its kind with integrated monitoring capability. Late last year, we received FDA feedback regarding the proposed U.S. clinical study for efficacy monitoring, we are continuing to work through this feedback and will provide a further update to the market as appropriate. In parallel, we have recently commenced evaluating potential pathways to accelerate commercialization under the existing FDA clearance for built-in compliance monitoring. RestAssure remains central to our long-term differentiation strategy and reinforces our leadership in oral appliance therapy. FY2 205 was about reset and transformation. First half, FY 2026 has been about disciplined execution and capacity strengthening. Looking ahead, our focus for the remainder of FY 2026 is sustainable growth and targeted investment.
Financially, we aim to deliver continued revenue and marginal growth. Operationally, we are expanding our manufacturing footprint to support demand while maintaining service levels. From an innovation perspective, our priority remains advancing RestAssure towards broader commercialization and regulatory progression. We reaffirm our FY 2026 guidance. This includes full year revenue in the range of AUD 119 million-AUD 126 million, and EBITDA in the range of AUD 10 million-AUD 12 million. Capital expenditure is expected to be between AUD 6 million-AUD 8 million for FY 2026. Our expectations reflect continued momentum across our key markets, disciplined cost control, and planned investment in manufacturing and innovation. The capital expenditure primarily relates to manufacturing site expansion and continued R&D investment. These investments support sustainable growth while maintaining financial discipline. Thank you for your time this morning.
Thank you, everybody. We will now open it up for questions. As mentioned, we invite research analysts to ask questions by either typing them into the online Q&A function or by raising your hand. I can see that Shane Storey from Canaccord has got his hand up, so I will take you off mute now, Shane. I'm trying to take you off mute.
I think that should work now. Yeah.
Fantastic. Go ahead, Shane.
Yeah. Good morning. Hi. First question, just for Karen, I suppose just following on from your just review there of Rest Assure and just asking to maybe share a little bit more information about what you're possibly thinking there with, you know, going with the existing clearance for Rest Assure and what that might look like in this year.
Sorry. Okay. Pardon me. That was a small technical hitch, Shane. Okay.
It's interesting.
I think the thing to note is that we are exploring sort of avenues to really leverage the compliance approval that we received now last year. How that might be sort of ultimately executed, we're still working through that. We're conscious that, you know, sort of we have been looking obviously at two areas for Rest Assure. Internally we believe that we might be able to do something a little sooner with the product than we had originally sort of indicated in terms of commercializing or at least, being able to maximize and optimize that claim around compliance.
We haven't finalized anything yet, so I think probably, the best way to answer that would be, we will ask you to stay tuned, but we are very active on this particular area.
Cool. I'll watch that space. Maybe one for Amrita, please. I'm just very interested there listening to the comments on capacity. If I look at the level of revenue this year in the guidance, I mean, what does the headroom currently look like over and above, you know, what you might deliver this year? How does the headroom look so we sort of look through into FY 2027 and 2028, please?
Don, unmute it. You, he can hear you through here.
Oh, he can.
Yeah.
Okay. Hi. Thanks, Shane. In regards to capacity expansion, earlier this year we mentioned that we would raise capacity over 20% for the full financial year. We have already delivered that, and that helped us improve our turnaround times over the first half, which was great. The headroom currently sits at over 20%, but we obviously want to keep making sure that we stay ahead of the curve of demand for the business. While over 20% is healthy, we are still gonna continue moving forward with our plans to continue to ramp capacity into the second half. I don't think you should see too much of a change in terms of how we're operating. Our TATS are already, by that I mean turnaround times, doing very well.
We have headroom at the moment, so there is full flexibility there on the manufacturing line.
Thank you. My last question is just really around the guidance, and it's to do with the what FX assumptions have you made specifically for the second half component of the guidance, please?
Hi, Shane. It's a great question. Look, we have taken a reasonable approach on FX without sharing I guess exact numbers. What we are doing is actively obviously monitoring the current situation, in particular with the USD and the Europe fluctuations and monitoring that in line or with respect to the guidance we've put out to the market. The reaffirmation of the guidance for in sort of today's presentation takes into consideration of the FX movements recently.
Okay. Thank you. That's it, that's it from me. Thank you.
Thanks, Shane. I've got another hand. Dennis, I'm gonna take you off mute. All right, you should be good to go.
Okay. Thank you very much. Just a relatively simple question, and it might almost be historical, but just in relation to the U.S. tariffs, you'd done a self-assessment under the Nairobi Protocol. I'm just curious, did you actually get a response from U.S. Customs about whether they'd accepted your self-assessment as being exempt under the Nairobi Protocol?
Dennis, hi. It's Yi-Fei. We are still waiting for the correspondence to come back from the Customs and Border Protection that we've lodged. We are working with our advisors and continuing to, at the moment, self-assess as exempt on the tariff, so as we have been in the past.
Okay. Thank you. Just also following up on Shane's question just on Rest Assure with compliance monitoring, just really wanting to understand your thinking. Is it about getting the device in, you know, in the mouths of patients so you can get some feedback there? Would you envisage sort of pricing the compliance monitoring in line with current products, and then you'd have a, an uplift if you were able to have the efficacy monitoring come in? Just a little bit about your thinking there, please.
Well, as you know, Dennis, I mean, the fundamental driver for reimbursement in the United States is, of course, compliance rather than efficacy. You know, that is an area of ultimately true sort of true monetization. That is something I guess that's driven our thinking and, more importantly, why we want to accelerate around compliance monitoring. In terms of how we might execute, I think we're still working through how that might best be delivered. I mean, the product at this stage, as we know, has had the endorsement from the FDA. I think it's just more the practical aspects about how we can best deliver it to market. So, data will an ab...
will be an absolute part of it. Clearly, we are looking to ensure that reimbursement is improved as a result of this feature.
You know, a soft launch in compliance monitoring, is that something that you'd actually contemplate in this half or it would be more preparing for executing next financial year?
I'm still working on it, but I would say we would be looking at FY 2027, yes.
Okay. Thank you. That's all from me.
All right. I'll just check if there's any sort of further questions. I don't think there are. With that, I wanna thank everybody for your time. As mentioned at the start of the webinar, we have recorded this webinar as well as the Q&A, and we will be posting it onto the SomnoMed website. Thank you very much