Thank you for standing by and welcome to the Cochlear Investor Call. I would now like to hand the conference over to Mr. Dig Howitt, CEO and President. Please go ahead. Thanks everyone for joining on short notice this morning. As you said, we're gonna make a few comments to open. What I'd like to do is talk through what are the issues that are impacting the business that have led to a lower sales and lower profit. What are the short-term implications of them for the P&L? Then I think perhaps most importantly, what are the implications for our longer term strategy and how we implement strategy. I wanna make some comments on each of those, and then we'll open up for questions. Starting off, just with sort of what's happened more recently and what do we see that might be sitting behind that. I'll start, talk through each of the segments. I'm gonna talk with developed market Cochlear implants first and spend most of my time on that because it is the most significant piece. As we went into the second half, we had expectations for growth based on market growth and our Nexa share gains and share gains from Nexa. The contracting for Nexa is now complete. It's gone well, and we are seeing some of the share we talked about having lost in that contracting period being regained. We've regained that share. However, the market growth is much lower than we expected. We're not sure for the, obviously, for the year yet, but we think certainly below 5% for the year. Particularly I wanna focus on the Adults and Seniors segment, which is the biggest part of the developed markets and our biggest growth opportunity. It's there we're seeing a range of things across the world that I wanted to talk about. I'll start by talking about the U.S. As we said in the half, we saw some strong momentum in Q2 with good growth in November and December. That growth continued through until about the middle of February. Then from the middle of February, sales fell off. There were some weather events in February, which sort of possibly explains some February. From March, we saw a dip compared to, a decline compared to March last year, which is obviously very unusual for us, and we'll get a bit under what do we think is going on there. Hospital systems in Europe are under pressure. We're seeing that manifest itself in a few different ways. In the U.K. with the NHS is the most obvious example there. You know, we've had significant success in lifting referrals, we're not seeing that translate into more surgeries in the NHS. The NHS has really struggled, as have many healthcare systems since COVID. What we're seeing is growing waiting lists, not only at surgery, but also at audiology. We're also seeing quite frequent cancellations of CI surgeries. That is within the NHS, Cochlear implant surgeries are getting deprioritized relative to other surgeries. Also similarly in Germany, hospital systems under pressure. We're seeing growing waiting lists, and a lower priority in some hospitals there with that economic pressure. Also in strikes in Italy and strikes in Spain, in the hospital systems cutting surgical capacity. What we see there is that's different, a different manifestation of a hospital system under pressure. We do run into surgical slots access from time- to- time. That's not necessarily new, but what we've seen over the last few months is, whereas in the past it's perhaps been a bit patchy, it's happened across all of the major European markets over the last few months, and that's put real pressure on just the total number of CI surgeries and consequently onto our sales. Get back to just wanna look back a little bit further at this Adults and Seniors segment and what we've seen since since COVID and what we saw before COVID. I'm gonna link all these bits together and what the implications are for our strategy in just a minute, but I wanna give a bit more background first. If we look back before COVID, we saw adults and seniors growing at 10%- 11% per year-on-year, very consistently. What we've seen since COVID is the adults and seniors growth rate has gone from probably lower than 5% this year, which will be the lowest, to over 20%. Obviously it bounced back strongly out of COVID, which was a catch-up. Even in 2023, we saw 19% growth in adults and seniors. We've seen much more variability in the adults and seniors growth since COVID. As we've looked back at that and tried to understand it, we've also seen that adults and seniors growth rate has some correlation with what's happening in the hearing aid sales in developed markets. They had a similar burst of growth, high growth coming out of COVID. If we look across the hearing aid companies and what they're reporting, we have seen that sales growth slowing year-on-year for the last few years. It looks like there is a correlation between our sales in adults and seniors and hearing aids. As that segment becomes a bigger part of our business, we are seeing that correlation or that variability is having more of an impact on our overall revenue. We then take that back to the U.S. As we said at the half year, we have seen year-on-year growth in our referrals from hearing aid channel. We have seen that decline in the first half, and that's continued into this quarter. We also just see then that U.S. consumer sentiment is the lowest on record. We've got records going back just over 50 years, and U.S. sentiment now is lower than it's been at any time over that period. What we see, what we're concluding from that, and we're still exploring, is that our adults and senior sales is more correlated with sentiment and macroeconomic conditions than we've seen in the past. That's only being tested with the extremes of consumer sentiment that we have at the moment. I wanna do this. You see in the U.S., into Europe, we're seeing significant financial pressure on hospitals leading to ways of surgery schedules getting cut or disrupted in the U.S. We see some of that pressure on hospitals, but very much more pressure on the individual, and we're seeing individuals pull back from getting their hearing treated. I think there's a core theme that sits under both of those. That's where this gets to the importance of our strategy. That core theme is that hearing loss isn't being seen as a high priority intervention when either people become under pressure financially or when hospital systems come under pressure, they are deprioritizing hearing loss. Why that's important for our strategy, which I'll come back to a little bit later, is the core of our strategy is actually to medicalize hearing loss and to use the evidence out there to get it lifted both from a hospital priority perspective, but also from a consumer perspective. Then again, what we're seeing in the U.S. is people know they've got to pay out-of-pocket for hearing aids. When they see this in our market, consumer research, when they think about a Cochlear implant, they think that's gotta cost more. If I'm concerned on cost, people are more likely to pull back. We need to change that. Let me come back to that. We think there's a core theme that sits under what's going on across both those markets with quite different healthcare systems, which is to do with how people and how society more broadly views hearing loss and the importance of treating it. Let me go then just to the other segments. In Cochlear implants, you know, or across emerging markets, there our, certainly up through February, our sales were on track and in line with our expectations, and we were seeing good growth. Through the war in the Middle East is having a significant impact on us there. Our sales in the Middle East are always weighted for the last three or four months of the year. That's just a quirk of timing in that part of the world where we're typically selling into distributors or to government hospital systems in sort of bulk rather than sort of a run rate with surgeries. With the war in the Middle East, we are seeing some order cancellations. We are seeing reduced surgeries in a range of countries, and there are access issues. Getting logistics in terms of actually getting product into some countries is constrained. That's having an impact already. We're not sure of how big that impact will be through the rest of the year. That's one of the reasons for a pretty broad guidance range, is that there remains a fair bit of uncertainty over what we will sell into the Middle East through the next few months. On to China. We've talked about the impact of VBP, and that was in our forecast. What's happened in the last quarter is that we, there are special zones in China where we're able to sell premium product, where we've been selling Nexa. There was a level of reimbursement into those special zones that was withdrawn in Q2. That will have an impact on our premium tier sales into China as well. Go back to Services and Acoustics. Both of those performing in line with expectations. We said we see growth in the second half, and we've given the 13%, 11% Constant Currency growth rates that we saw in Q3. They seem to have been largely unaffected by what's going on so far. That's sort of the, if I run through the segments, what's happening. If I then just go quickly to what's the implications of that on the P&L. Just to quickly summarize, in adults and seniors, we've got weaker demand. In emerging markets in the Middle East, we've got the war, which is deferring our certainly deferring, canceling and possibly deferring some sales. Further to that, given the what's going on, there are some questions over the collection of some of our receivables in the Middle East. We just don't know at this stage. I don't think anyone can know at this stage as to the state that some of those governments will be in, 'cause it's all government payers, will be in into the future. We are being cautious to signal that we may need to provide for some of our receivables in the Middle East. Of course, we've had the rising Australian dollar, which we'd already factored in, but does have an impact on our profitability. That's led to lower sales. That's led to that guidance range. That guidance range is wide. We acknowledge that, and that is because there is a range of uncertainty that we still see even over the next 10 or 11 weeks. We're in quite an unusual situation across the world in terms of what we're seeing. The final component of that impact on the P&L is reduced manufacturing output. We have lowered our manufacturing output. We have lowered it by more than the fall in sales, and that's a consequence of the inventory levels that we are carrying. When we do that, there is manufacturing overhead that doesn't get recovered, and it goes straight through the P&L. Obviously, we had a choice here. We could have kept production running at the rates that we had planned, which would have pushed those costs into inventory, and then through the P&L in subsequent years. Obviously, we made the sensible decision to slow our production down. That means that there is a P&L impact in this year from that. That's the short term. For our term other questions, let me then just go to what does this mean for our strategy? I do think is actually the most important question of all of this. Just touching on market leadership first and then on to growth, which are the core elements of our strategy, and then on to costs in terms of how we implement them. Nexa continues to be well-received. Now it is out there. We've got a lot of interest in the potential of Nexa and to explore the potential of Nexa to improve hearing outcomes over time. We also have a very broad product pipeline, and we've talked about TICI and drug-eluting electrodes. We have great confidence in the specification of the products that we're building there. The progress of the trials and the experience we're seeing is very positive. They will come to market over the next few years. The products we have are built on our long experience and give us confidence of those products as they come to market. In terms of our growth opportunity and our growth strategy, first of all, that medium to long-term opportunity is unchanged. The clinical need is significant. We have very effective products. The products are very cost-effective from both the societal and a healthcare system. The clinical evidence supporting why treating hearing loss is really important for healthy aging, particularly around cognition and lowering the risk of dementia, is significant, and it's growing. We need to continue to prosecute, to build that evidence and to use that evidence to prosecute the case for standard of care for Cochlear implants and to medicalize hearing loss. I think all the data that we can see says that's certainly what would be beneficial for society, for healthcare systems, for that to be the case. As always, with a therapy, it does take time for that to happen. Perhaps just a quick example of the time it takes. Back in 2018, 2019, we set out, we helped facilitate a group of professionals around the world to develop a consensus statement on Cochlear implants, which is a standard thing for a therapy to do, what does all the evidence say about what should be the treatment process, treatment path, and treatment criteria for an intervention? A result of having a consensus statement, you can then start to build guidelines and have those guidelines adopted country by country. Just in the last few months, the U.S. has adopted a set of clinical guidelines based on this consensus statement and available evidence for the treatment of hearing loss and particularly Cochlear implants. How this helps is that as we talked about at half, go into the medical channel to build a referral base, we're not just there saying, "Do you know about Cochlear implants, and how can we educate them on you?" We can go in and say, "Are you aware of the latest guidelines for adopted by the U.S. professional bodies for the treatment of hearing loss?" Let's talk about you can talk about those guidelines because it also starts to put some professional obligation to follow guidelines when they are approved by the leading professional body. Just one example, but it was seven or eight years from starting that consensus statement to getting the guidelines actually adopted in the U.S. Now we've got to build. The guidelines approved, now we've got to build out adoption and awareness of those guidelines. It does take time to build towards that standard of care and medicalizing hearing loss. I think that then what does this mean? We're confident with our strategy is on the right track, and we've got to learn as we implement. What we've also seen is we've got to invest more in this strategy, and that's why we are reshaping our cost base. We flagged at the half year that we've been working on the organization through the last few years to get more flexibility to redirect more resources to growth. What we're doing with the program that we are undertaking now is to accelerate that process, given the lower sales growth. That's what we need to do to make sure that we can provide the funds and still manage our margin to invest in growth. We're also nearing the end of replacing our core systems with cloud-based systems and consistent data structure and standardized processes across the world, which it sets us up to build scale and efficiency, and particularly to be able to more easily leverage AI in generating that scale and efficiency. It's the right time for us to accelerate. Because we are accelerating that program, we have called out that we'll see somewhere between AUD 25 million and AUD 35 million in costs that are gonna come through in this half in terms of accelerating the restructuring that we'll be undertaking to accelerate that program. That will all go above the line, 'cause it's really pulling forward expenses that we would have taken up in 2027 and 2028 as we worked to the plan we originally had, but we are accelerating that plan. Let me finish before going to questions to say there are a range of issues hitting us right now, which have had a significant impact on this year's performance. We remain confident in the long-term growth outlook and on the core of our strategy. What we see we do need to do is to free up more money within the organization, and we see we can do that to invest more in that growth to accelerate the execution of the growth programs. With that, I will hand over to questions. 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 David Low from UBS. Please go ahead. Thanks very much. Thanks, Steve. Could I just start with a sort of high-level question? I mean, It seems clear from what you said that this adjustment is not about the war or that effect or the Middle East lost sales. This is about the developed markets, and you're just seeing a slowing down in adult and senior sales versus what you expected. Yeah. Yeah, David, it's actually both those things. There's absolutely an impact from the Middle East on our sales. The last four months, our emerging market sales in the last four months of the year are disproportionately skewed to the Middle East. That's just the nature of the timing there. There is an impact of that, but there absolutely is a piece of this that comes from much slower adults and seniors growth in developed markets than we had expected and that we have seen over the last few years. Okay. When we look at the situation in Europe, it strikes me as that's gonna be more of a challenge because it's a system issue rather than a demand issue. You've talked about the strategy in broad brush sense. I mean, you need to ensure adequate prioritization of surgery. How quickly can you have an impact on those sort of systems? Yeah, good question. It is gonna take some time. You're right, we are not gonna solve the problems in those healthcare systems. What we wanna do is get a higher priority. When the scheduling happens, ENT and particularly Cochlear implants isn't seen as way down the list. Yeah, we can't solve the problem, what we can do is work on the priority. We think the evidence is there to strongly support that, particularly things like the data that came out of South Korea last year showing that for people with severe to profound hearing loss, Cochlear implants, those people who've got Cochlear implants have 70% lower rate of dementia than people who had hearing aids with the same level of hearing loss and 120% lower than people with no hearing treatment. It's that sort of data that I think when we can get in front of the right people in terms of healthcare systems, should lead them to say, "Yeah, well, this actually is not a discretionary. It's nice for older people to hear. It's actually saving the healthcare system money." That's a skill we are building, and we need to get better at, is that payer, government and policy influence. As we look to reshape our cost base, that's one of the areas that we will be strengthening, is that our government affairs and that ability to work at the policy level. All right. Just last one from me. Yeah. Cochlear's had this long-term policy of 18% after-tax profit margin. What's the plan going forward under, you know, post this year? Our intention is still to get back there. As we said at the half, it's going to take us a few years to do that. You know, the currency makes that harder. The lower sales growth makes that harder. We're still holding that, but it will take us a few years to get there. We've got some impacts on the gross margin that we've talked about, and we'll talk more about them in August. For the next couple of years, we should certainly assume that it's going to fall short of that. I mean, like, this year's number's going to be dramatically short of the 18% margin. Can you give us a sense to get back to 18%, you know, what's the pathway? Not more at this stage than it will take a few years. You know, when we come out in August, we'll have our outlook for 2027, and that'll give some insight into 2027. I don't wanna get more specific on that now. We need to go through the right process to have a solid outlook. All right. Wonderful. Thank you very much. Thanks, Dave. Thank you. Your next question comes from Andrew Goodsall from MST Marquee. Please go ahead. Thanks very much. Just on that, those restructuring charges, I'm not sure I picked up what would flow into FY 2027 or are they all gonna get done in this second half? The amount we've called out in the release is to hit in 2026. There will be some costs in 2027 likely too, but there were in 2024 and 2025, and we just absorbed them in the OpEx. We're just calling this out because this was a bigger one, and it is an acceleration. Okay. No distinct nothing distinct in 2027? Not at this stage. Look, when we go in to give our outlook for 2027, if there is another, a bigger piece, we will certainly call that out. At this stage we're not sure. You know, we know what we're gonna do now. There will be some more in 2027, we're just whether that's big enough to call out or whether we absorb it as normal, we will tell you then. Just in China and the special access zones, what percentage of you know, contribution to the total cost would reimbursement have been presumed for it to impact the markets quite material? Yeah. It actually was, I won't go into the full detail 'cause that would sort of end up showing what our price was, too, but it was a pretty significant contribution to the total. We've certainly already seen a drop-off in demand. That's just because it's. It's now entirely out of pocket. Yeah. Okay. Sorry. Entirely. Okay. Okay. That makes sense. Oh, no, no. That's probably where I was going. It's total cash, okay. Then just with, I'm just more just trying to get a sense of proportion, but, you know, there's been some quite good articles talking about global hospital slowdown. On top of that, you've got the consumer. Do you have a sort of sense of sort of where that split is? Are the hospitals, you know, picking up any capacity or, you know, just any color you can add on that would be great. Yeah. Look, they have been reading those articles on, as I can see on hospital. We all have. Yeah, look, I think healthcare systems around the world are under significant pressure. Look, we are a tiny part of any hospital system. Our goal has to be, as I said, is to change the priority, not change the system. Not sure if that answers your question. Well, just thinking if the consumer gets excited, through, you know, well, not excited. Consumer takes, you get the call to action, particularly around, dementia and so on. Just the, where the capacity is. Yes. Okay. Yeah. No. Yeah. Yes. Again, part of us, yes. Part of us using the data that's there is to build, make consumers aware of the importance of treating hearing loss. When the best way to get a waiting list deal with it is for the patients themselves to be saying and their family saying, "Look, this is essential treatment. Look what you're not providing me," or, "Look at the implications of not getting treated." Particularly in socialized healthcare system, that is what gets action on waiting lists. Sort of patient advocacy is an important part of raising the priority. That's great. That's something we've been working with advocacy groups around the world for a few years now, and we do wanna, again, strengthen that along with the work we do on policy and payers. Appreciate it. Thank you. Thanks, Andrew. Thank you. Your next question comes from David Stanton from Jefferies. Please go ahead. Good morning, team, and thanks for taking my questions. Look, it's more a longer-term question, my first one. Given what you've called out as sort of public and private insurer pressure plus discretionary spend pressure that we're seeing, particularly in the developed market, you know, how long is this sort of low growth in developed market environment likely to continue? Should we be thinking that this is a story for at least two to three years, and then we might see volume growth as things hopefully improve across the systems? Or can we see a faster bounce back than that or a slower bounce back than that? Thank you. Yeah. Dave, good question. I don't think we can say at the moment. You know, I mean, what we're seeing from a consumer sentiment perspective is extreme, based on history, particularly in the U.S. How that changes, I think we can't say I don't know if anyone knows. Certainly not us on how quickly that's gonna change. The advocacy work that we need to do on policy, we are onto and we are gonna, with this reshaping go to spend more to accelerate that. Again, we're confident in the medium to long term of the opportunity and our strategy. It's hard to know over the next couple of years just given the range of factors and how that's gonna turn out. Okay. Just to follow up then. We shouldn't necessarily, it sounds like you're not really saying there's an immediate bounce back here? No, to do that, I'd have to be able to predict consumer sentiment. Right. Okay. Given the impact on. Yep. Yep. My second and last question. Can you give us some more color about this cost-based reshaping? Frankly, a little bit perplexed as to why you in this kind of soft environment, you feel you have to spend more. Can you help sort of explain exactly, you know, or as much as you're willing to do so, the increased cost you're putting into the business, firstly, and then second how that's gonna pay off over the medium to long term? Thank you. Yeah. We're not spending more. We are reallocating the costs that we've got. We're taking cost out, and there's a cost of taking costs out, 'cause our biggest cost is people. To reduce costs, we've got to have fewer people in the business, and we've called out the cost of doing that. With that cost that comes out, some of that will go to building the margin and some of that will go to further investments in growth. Understood. A follow-up from me. Building the margin happens over the medium to longer term, though? It, yeah, it'll be part of that next year. Yes, we're aiming to build back over the next few years. Understood. Thank you very much, Dig. Thanks, Dave. Thank you. Your next question comes from Saul Hadassin from Barrenjoey. Please go ahead. Morning to you guys for taking my questions. Just the first one, Dig, I wonder if you're willing to give us what you think Cochlear implant unit sales will look like for the second half of 2026? In particular, do you think you can actually increase the number of units sold in the second half versus first half of 2026? Saul, I don't wanna try and go into that now. We've said we can get, we think, between 2% and 6% revenue growth in the second half. You know, there's a range of variables that go into that, but I don't wanna try and give a more specific data than we've given in the release on that now. Obviously, you'll see in August and when we've seen the full year, we'll be able to make more in-depth comments. Okay. Second question, Dig. Just in terms of the impact on consumer that you're talking to, particularly in the U.S., consumer sentiment, I think you flagged that historically it's actually impacting on processor upgrades as well. You're noting now that upgrades actually seem to be doing, tracking quite well. I guess is what you're seeing on processor upgrades due to the obsolescence of the N7? As that obsolescence impact washes through, for example, into FY 2027, is there a risk that that sentiment starts to impact on processor upgrades again? I'm trying to reconcile the impact on the consumer of upgrades versus units. No. Waiting for this question because it's, yes, it's the why isn't upgrades affected by the sentiment. We haven't seen it so far. We think it's because once Now it's retired, it takes this upgrade from discretionary to essential. Insurers will pay for it. If someone's processor breaks, they've got to pay their co-pay, the insurer will pay the difference. We are watching through the fourth quarter. It's one of the potential variables just to see, do we see a higher rate of cancellations? There's certainly, to your point, that the impact of the retirement will take some time to flow through 'cause, you know, we have quite a lot of people out there in the U.S. still on Nucleus 7, and they don't all come in on the day we retire, so it will take some time to get them through. As they move through, yeah, I'd expect to see consumer sentiment have some impact on upgrades. Now, who knows where consumer sentiment will be then, and obviously at some point in the future, we will have the next generation of upgrade, which starts that cycle again. Thanks, Dig. Dig. Just lastly, you say you may need to take that provision for Middle East receivables. Is that incorporated into the range of guidance? If you do have to take that provision, do we assume then the range would be skewed to the lower end? It is in the range of guidance. I won't, I don't wanna comment now on whether that would take us to the low end or not. There's, you know, several moving parts at the moment that goes into that outlook of which the receivables is one, but it is included in the guidance range. Okay. Thanks, Dig. That's all I had. No problem. Thank you. Thank you. Your next question comes from Chris Cooper from JP Morgan. Please go ahead. Morning. Thanks for taking the question. Dig, Beyond the 18% net margin guidance, which has been in place for some time and remains in place by the sounds of it, the other long-term guidance you've had is 10% revenue growth, on a long term go forward. Today you've called out quite a number of headwinds on implants, some of which hopefully are sort of short term in nature, many of which sound a little bit more structural. Is 10% revenue growth over the long term still the right number to be anchored to? Yeah. We see that it is. You're right, there are a bunch of headwinds right now. Some of those, I think will come off over time. We said we're working on the policy level and the evidence level to get hearing loss as a high priority. The opportunity is there. The effectiveness of the products is there. The cost of effectiveness in terms of the patient outcome and the cost effectiveness for society and healthcare systems is there. As we communicate that more clearly to the right people, we do see that that opportunity to grow at 10% is there. When we look to our future product pipeline, there too, we see further opportunities to drive growth. Just a follow-up. If the revenue opportunity is sort of over the longer term as attractive as it has been in the past, why is now the right time to be thinking about changes to the cost base and becoming a lower cost of service business as you described today? Yeah. That's it. Yep. Why is the right time now? Two things. One is we are seeing, as I talked about, we're seeing more variability in our sales than we saw pre-COVID. Just that on its own says we need to get more variability into our cost so that we can better deal with that variability. Part of that is you've got to pull fixed costs out to get to that point. Second one is we do believe we have the right strategy. We do have that opportunity I just talked about. We've talked about this before. In terms of building our standard of care, it's effectively, you can think about it like trying to build an asset. The faster you invest in that asset, the faster it gets built. If we can create more capacity to invest, we build that asset, which is standard of care, faster, and we get to that more consistent growth faster. We see it in the organization with the work we've been doing over the last few years, that the time is right that we can do this. We think the opportunity is there in changing how we work, in leveraging AI, in leveraging the new platforms we've put in. We've been building towards this. We're now just accelerating what we're doing, because the opportunity is there. You know, there's nothing like the imperative of lower growth to reinforce all across the business. We had a call with global call this morning with the business on this is the situation we're in. Here's how we need to respond. These are, you know, we don't like being here. This is an opportunity to galvanize people even more strongly around our outlook and our strategy and our mission. Okay, thank you. Just one quick specific one on the Middle East. Forget 2026 for a second, just over the last couple of years, how much revenue contribution from that region through 2024, 2025, just rough numbers? Yeah, we haven't called that out. Emerging markets overall is now a bit over 20% of our revenue, which China is the biggest component. The Middle East would follow China as being a significant part of that. We don't call it out explicitly, but it is a reasonable part of the business. It's quite a profitable part. It's particularly overweighted in the last four months of any year, again, just due to timing of how our orders work in that part of the world. Okay. Thanks for taking the questions. Thanks, Chris. Thank you. Your next question comes from Steven Wheen from Jarden. Please go ahead. Thanks very much. Morning, Dig. Just my question is around the Nexa launch. Just trying to understand, particularly in developed markets, whether you've been able to achieve the price premium as you've been recontracting some of these hospitals, and if that's part of the issue here with regards to the earnings impact or the surprise relative to your previous guidance. No. There's nothing in the change in guidance that's related to price. We have achieved the pricing outcomes that we set out across the world. You know, we did a bit better in some places and a bit behind, but overall, we've got where we wanted to get to. There's no change there that's had an impact on the change in our outlook for the year. I mean, I might just push a little bit harder on that channel checks that we've done, it would suggest that hospitals, particularly in the U.S., have not seen a price increase. They've been able to negotiate no price increase relative to the 600 Series. Just trying to understand that. I mean, is that just we just chosen the ones that were able to achieve that? Or is that a bit more commonplace in the U.S., and you're getting price improvements elsewhere in the world? Our, the pricing, average price increase we achieved in the U.S. was above it, above our expectation. Looks like you've spoken to, a few, a small subset. I'm intrigued on which ones, because there's very few. There are some that have contracts that aren't up for renewal yet. Possibly you've spoken to them, but anyway. I mean, the issue that hospitals are saying in the U.S. is that with an absence of features in the Nexa platform and no change to the reimbursement for the implants, then it's difficult for them to accept a price increase. I'm just. Yeah. First off, there was an increase in the CMS reimbursement. That part of what they told you wasn't accurate. There are features in the Nexa, so that wasn't accurate either. It is the argument we hear, right? Yep. What are the next features that we can expect? I mean, this is the big question that we're trying to understand is. When will we see these differentiated sort of software? You can add on to the status? We've got the one that is there right now, which has a direct impact on clinic profitability, is SmartSync. You know, people don't need to come into the clinic if they lose or break their processor. We can ship them a blank one. That takes unbillable time out of the clinic. That one has direct impact on hospital profitability now. That said, we've got pre-market research that has been done on Nexa. We will very soon start to show the results of that. We are also working on regulatory approval for some research tools, which will enable a range of clinics to be able to start exploring the features of Nexa. It's certainly getting plenty of interest, and we're getting closer. We are getting much closer to showing some results and getting closer to enable a range of clinics to actually get in and experiment with the potential. In terms of timing that we can expect to see some sort of benefit in terms of take-up rate? I think as we start to show, we're already seeing some benefit of that. As we start to show some of these results, I think that will, that does reinforce the opportunity for Nexa and the take up that we'll see. As people start to do research, it should help even further. I'm not gonna put times publicly on when those, second part of it's subject to regulatory approval, but both of those things are getting closer. Okay. I might just talk to guidance overall. We've had a number of disappointments relative to guidance, over the last few halves. Just trying to understand, is this guidance now, is it, is there any ambition in there, or have you approached this with a lot more conservativeness so that we can sort of at least establish a new base? I think we all try to learn as we go. We make sure that we're getting better in all of the things that we do. So that the guidance we've put out there is based on our collective view and our experience. It is a broad range 'cause there is a fair bit of uncertainty. There's a number of dimensions to it, which we're calling out, and there's a bit of a range on each of those. Yeah. Okay. Sorry, one final just point of clarification. At the first half results, you guided the gross margin down to 73%. Is this the commentary about another, the 100 basis points? Is that now suggesting 72%? Just wanted to clarify that. Yes, that's right. Yeah. Great. Thank you. Thanks, Steve. Thank you. Your next question comes from David Bailey from Morgan Stanley. Please go ahead. Yeah, thanks. Morning, Dig. Just on the U.S. hearing aid channel, wondering if you could help us just size that in terms of how material that is in terms of referral base. I suppose the extension then is if you're seeing more discretionary behavior, does that mean that fewer people are going in for the initial consult? Is that a thematic? Do you think that maybe the audiologists are referring a little bit less if they're under pressure financially, they make a bit more money on hearing aids, maybe they're referring less for Cochlear implants. Just some of the observations around the hearing aid channel in particular, if you can. No worries. I think it's all of those things, and obviously conscious talking about the hearing aid channel. We have some insights through the cycle data, and then we have the sort of anecdotes and what we read in the hearing aid manufacturers' public reporting. Certainly there has been slower organic growth across the hearing aid companies year- on- year for the last few years. We see in the cycle data that there is bit less traffic in hearing aid clinics, and that's obviously a segment. It's not all. We're also seeing a bit that people are sort of trading down a model, so people who are replacing their hearing aids are not necessarily buying the same tier. You know, these are I'm speaking cautiously because, you know, this is, this is sort of macro look at a lot of data and obviously hearing aid companies know this way better than we do. I think all, you know, all of that suggests that people are being more cautious on what they're spending on hearing aids. That means less hearing aid retailers, probably seeing less revenue than they were. Our lower referrals suggests that they are holding on to people more so than in the past. Yeah. No, that's helpful. Just how significant is that channel? If you did a pie chart, you know, how significant would hearing? Our 35% of our business comes from our DTC and our hearing aid referrals. We actually don't break out which of those two, what's the split in those two. It's in that segment where we're seeing the reduction in referrals. We also know in the other 65%, about half of those referrals come from the hearing aid channel, the other half come from the medical channel. We have visibility of a proportion of the referrals from the hearing aid, but not all. The proportion we got visibility of, we can see has declined, but we suspect that decline has gone into the proportion we can't see. There's no reason to believe why it wouldn't be different in that part we can't see. Just a quick follow-up, sorry, an extra question. First half, you sort of said there was a bit of discounting from competitors. Just wanna understand the competitive dynamics subsequently. Sounds like you're winning share, can you just talk through what you sort of think, if you think the trends are more macro-driven as opposed to share dynamics at the moment? Certainly what we're seeing in terms of sales is a macro, an overall market issue, not a share loss. We've seen, we've been gaining share. We did lose some shares, we said. We've regained that share. Note that one of the competitors recently publicly reported increased competitive intensity and hinted at poorer outlook than expected on their CI sales. That's great. Thanks, Dig. Thanks, Dave. Thank you. Your next question comes from Craig Wong-Pan from RBC Capital Markets. Please go ahead. Thanks. Could you talk about what growth you've been seeing in the pediatric markets in the U.S. or Europe during the third quarter? It's the pediatrics, try to give a quarterly number because there is a delay in registration, so the best we could do is only give you about half a quarter. What we did say at the half is we had seen, particularly in the U.S., a decline in the pediatrics. Remembering this is a smaller and smaller part of our developed market business. It's now less than 30% of our developed market sales are in the, this Pediatric segment. Given that, the U.S. we said at the half We had seen a decline. Okay. Within Europe, have you been seeing similar activity there? In Europe, again, can I sort of look back to the first half and it looked pretty flat. Yeah, again, I don't wanna again, given the lag on registration, I don't wanna go into what's happening in Q3 because we wouldn't be able to do it accurately. Okay, not a problem. Second question, just the hospital capacity issues that you mentioned in Europe. Has that transpired in the U.S. as well? Or is it more just the adults and seniors, the consumer activity and cost of living pressures having an impact there? In, it's more stark in the, in Europe and socialized healthcare systems. I suspect, I have no data, but I suspect they have less able to get a sort of efficiency in their hospitals, whereas the U.S. with commercial hospital system, you know, are pretty clearer rather on, you know, their overall financial state. No doubt the U.S. healthcare system is under pressure as well. You know, some of the changes being made by the administration to Medicaid has the potential to impact some hospital funding. Well, what I called out, we just see in the U.S. more of an impact from consumer than we do broadly across the hospital. There's no doubt that there are hospitals that are under pressure, and there are hospitals where, you know, it's been tough for doctors doing CI to get surgery slots in the U.S. It just less of a theme than we see in Europe, where it's pretty consistent. Okay. Then just the production volumes being lowered to reflect what you're seeing with demand. I mean, volumes do seem to have been fairly volatile. I guess, just wondering how quickly you can ramp up production if needed. Yeah. We can ramp production. We have an efficient way of carrying some headroom, in production so that we can lift, you know, output by at least 10% quite easily. Okay. Just my last question on the TICI. You've mentioned that as, you know, that some studies underway. Just wondering if you could give any rough timing for when, you know, how that might come through? Yep. Yeah, that's a cautious to give timing, because, largely because of the regulatory process. We do have pivotal studies, so studies for regulatory approval running in Europe and in the U.S. Those studies are recruiting, the surgeries are going, then there is a follow-up period then the regulatory submission. It's still a few years away. You know, the regulatory cycle for a new product like that is certainly less predictable than an iteration of a conventional implant. We're cautious on giving timing for that reason. We're also cautious that, just from a, we don't want to be signaling to people to hold back getting a Cochlear implant now in the anticipation of a TICI. Okay, great. Thank you. Thanks. Thank you. Thank you. Your next question comes from Paul Grace, from Evans & Partners. Please go ahead. Good morning. Actually, Sacha Krien here. Look, a couple questions on the guidance, first of all. Just wondering if we should still be expecting the AUD 50 million STI provision rebuild or whether that has now been reversed. Yeah, in our outlook, there is an allowance for the STI made. An appropriate allowance for STI. Obviously, STI is subject to a board's decision at the end of the year, but there is an allowance in there in that guidance. In that guidance. Okay. I think you previously spoke to AUD 50 million there. Is that the allowance we should be thinking about? No, that's slightly different. That was what we took out of our STI potential last year. We have a, you know, an STI pool. That pool was reduced by AUD 50 million because of performance last year. When you look at the OpEx this year, assuming 100% STI, AUD 50 million of the OpEx for whatever it will be this year would have to be STI for 100%. That makes sense. It's fully covered in, in the guidance and, you know, when we get to the end of the year, the board will look at our performance and make a decision on what size pool that should be. Okay. Just to be clear, I'm not 100% following this. You've got all of it, all 100% covered within the current guidance and some of that may not be paid out, and therefore the guidance may change a little bit? Is that the message? No. We have sufficient in that guidance to cover the range of outcomes that we can see for this year. Okay. Whatever, the STI will not take us outside of guidance, whatever it is. It's not offering guidance. Yeah. Okay. You've given guidance for second half Constant Currency Sales growth, 2%-6%. Just wondering if you can share third quarter, the third quarter Constant Currency Sales growth? You've given some of the component parts. No. Can you just No? Yeah, no, I don't wanna share more detail. We think we've shared enough details, only as much as we're comfortable with and we think makes sense. Okay. Just on the U.S. market, just wondering, I mean, you mentioned a couple of times that you've regained share with the Nexa. Yep. Are you actually meeting your expectations for share gains, or is it a bit hard to say in the current environment? Look, I think it is hard to say in the current environment. We remain based on feedback we get optimistic on the outlook for Nexa and the potential of the product, and therefore the potential for further share gains. As I always say, it is hard to be too specific on share over a short period of time. Yep. Okay. Just last one for me. I just wanted to dig a little bit more into your comments about deprioritizing hearing. I'm just wondering, are you saying that, you know, U.S. hospitals are deprioritizing Cochlear implant surgeries to a degree, given the economics of those surgeries? Certainly seeing it in Europe, more from a, the deprioritized more on the basis of what's perceived as the most important therapies to or conditions to treat. There certainly are cases in the U.S., you know, as they look at profitability, they'll schedule something that they see as more profitable than a Cochlear implant in, but it's certainly not a dominant driver of the, it's not a driver of our sales being below forecast. Yep. You're not seeing any change in sort of reimbursement knockbacks for Cochlear implant surgery? We're watching insurance approvals carefully. We are hearing of some anecdotes of some insurance rejections, which almost always get overturned on appeal. The data is anecdotal rather than comprehensive at this stage. Okay. All right. Thank you. Thanks, Sacha. Thank you. Your next question comes from Stuart Welch from Alphinity. Please go ahead. Hi, Dig. Can you hear me? Hi, Stuart. Yes, can. Excellent. Thank you. I was just wanna focusing on that cost out initiative that you got underway. I guess my understanding is you guys have been adding sales reps to help deal with some of the customer or the patient interactions to take the weight and load off some of the audiology clinics to give them a bit more space and time. You know, given that's where large part of the investment's been, like, where can you take cost out to reinvest? Look, they're short answer is across the board. We're very Yeah, we will be surgical as we do this. We will make sure that we are protecting revenue growth. We'll protect things like, obviously, things like product quality. There still is a range of things that we've got across the business. There's certainly an opportunity. There's an opportunity to improve efficiency everywhere through the better use of information and through the use of our systems and through the redesign of some of our work. Nowhere is off-limits, we're also being very careful not to damage or put at risk core parts of our growth or core parts of our, you know, the, the, you know, competitive advantage as we do this. Yeah. How what's been the competitive, sort of landscape, if you like, on the ground, you know, vis-a-vis MED-EL and AB with that strategy? Have you sort of seen, like, how have they evolved as you've been adding more salespeople in the field? Yeah, I mean, they're strong competitors, and they certainly compete very hard. You know, MED-EL are a good company. They're clear on their messages and on how they the rationale for why they think their product is best. They prosecute that well. Advanced Bionics have, you know, have a couple of features around bimodal and around remote programming that they get from Sonova again, that's they're their differentiator, so they do a good job of selling those. You know, it comes back to we have the most complete system, the most comprehensive system, with the broadest set of features and benefits. You know, it's why we hold the share we do, and we make sure we sell that well. Our competitors are good. Okay, thank you. Thanks, Dig. Thanks, Stuart. Thank you. Your next question is from Davin Thillainathan from Goldman Sachs. Please go ahead. Thanks, Dig. It's Davin from Goldman Sachs. Just thinking about the U.S. market, Dig, and I guess the question really is relative to your previous expectations and previous guidance range. You had sort of flagged a slowing referral base from the hearing aid channel, so I don't think that's necessarily in my view anyway, the real reason why the U.S. market's probably underperformed to your previous guidance range. What else is happening? Do you sort of feel like people have gone through the pipeline, gone and had a referral, then ultimately just not gone ahead and converted to get an implant? Yes. A couple of comments for. One is, you know, the, a decline in referrals is definitely part of this. As I said, it's more than that. It is, you know, this we are seeing, is people who are getting referrals not going ahead. That's part of it too. What we are hearing from clinics is they are just, they are seeing fewer people coming in more recently, and that I think links back to, again, we're sort of triangulating this, that links back to the fewer referrals, also a sentiment issue of, you know, this is a discretionary treatment and it might cost me something, I'm just gonna hold off for like, at least for now. Yeah. No, I label the point as clearly there's a question here about whether it's cyclical, i.e., discretionary impacts on the consumer versus m ore structural questions on your referral base. My understanding in this space has been it takes more than two months for someone to be referred and ultimately get put on an implant. Your guidance two months ago, which was based on some visibility you had in your pipeline to what you're putting out today, what's been the key change really? Good. Good, good question. So you're right, it does take more than two months for people to come through the system. I think a couple of things to that. People can withdraw from the process at any time, and as, so that does happen. Secondly, we don't have full visibility of that pipeline. As we talked about before, we got visibility in this was about 35% of the surgeries. The 65, we don't have visibility, so we actually, you know, we don't know. We get feedback from clinics, but we don't have numbers on how many people were turning up six months ago for assessments. You're right, two months isn't enough time, but equally we didn't have, we never have perfect information. Yeah. Okay. Just sort of follow on question on this. You've talked about making some changes to your cost base, I assume part of it will be to sort of pivot referral sources. Could you sort of help us understand some more tangible changes you can make on that point, and if that can start contributing to some better outcomes in FY 2027? Yeah. Certainly the work that we are doing in the medical channel, which is now well underway. We are working in four cities in the U.S. to build a referral base. That is progressing very well. We do see it, as we said at the half year, as a significant opportunity that about half our referrals come from medical channel already, and that is without us doing a lot of work to stimulate referrals. I think it's, it is potentially a bit of a buffer to sort of economic conditions impacting hearing aid referrals because it is a medical channel, it's more used to what's your condition, I know where to send you, rather than I have a treatment for you know, the hearing aid where there's a, you know, a financial incentive not to refer in some, in many instances. That's an example where it both can insulate from the macroeconomic, and it is definitely a growth opportunity. The other part which we've talked about, which is more for Western Europe, but it has a role in the U.S. as well, is working at the policy and the payer level, on the evidence of the effectiveness of treating hearing loss and the, particularly around cognition, what happens if you don't treat it, and therefore what costs are avoided if you provide the right level of treatment, and therefore, why it should be a higher priority for in terms of the prioritization process that goes on in hospitals of what procedures to undertake. Yeah. Just one last one, Dig. Yeah, just, and just building on that too, that, you know, that work we're doing in the U.S. with the sort of the Director professional referrals is something that we are working out. We are expanding that one into Germany, and into Australia and then some of the other Western European markets to build out that medical channel referral. Yeah. Okay. Just one last one on your cost base and the restructure initiatives that you've highlighted today. Just if you didn't think about adding more costs or just investing into the headcount, if I just think about it being the headcount you've reduced from your restructuring initiatives, just how much of reduction in SG&A and R&D costs from a year-on-year would that yield in FY 2027 versus FY 2026, please? No, we're not gonna give that out at this stage. As we get into 2027, we'll work out what we wanna say about where we are. You know, we are, as I said, taking costs out for broadly across the business, and a significant part of that we will reinvest. As we'll keep you informed as we go through the process, but I don't wanna put numbers up now of this is what's coming out and this is what's going back in. We'll get further down the track before we do that. Okay. Thanks, Dig. Thank you. 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 Shane Ponraj from Morningstar. Please go ahead. Good morning, Dig. Just one from me, please. I just want to clarify the guidance for the cost base reshaping. You've called out up to AUD 25 million today. It sounds like some of that is accelerating the cloud investment you were already planning. Am I correct in that thinking? No, no. This is separate. No, that AUD 25 million is related to the taking costs out of the business. In terms of the reference to accelerating the cloud, it's not accelerating the cloud program. That's nearing completion. It's accelerating the realization of benefits from that program. Great. Just as a follow-up, if I remember correctly, at the half, I think you called out AUD 80 million this year for cloud expenses as a significant item. That guidance hasn't changed at all. Hasn't changed. That's correct. Roughly about AUD 20 million remaining for 2027? Yeah. Yeah. Sorry, Dig Howitt, did you want to add to that one? Yeah, that's the envelope that we had given. Okay, great. Thanks very much. Thank you. Your next question comes from Trent Crawley from Copia Investment Partners. Please go ahead. Hi, Trent, your line is now live. Thank you. Your next question will be from David Grace from Evidentia Group. Please go ahead. Like, we're finished with the questions, I think. Yes, unfortunately, there seem to be some technical difficulties with their lines. As there are no further questions, I'll now hand back over to Mr. Howitt for any closing remarks. Just to say look, thanks all for joining this call at short notice, and thanks for your questions. That does conclude our conference for today. Thank you for participating. You may now disconnect.