Strong demand for its upgraded Nucleus 8 Sound Processor has lifted sales at Australian hearing aid technology group Cochlear (ASX: COH) in the December half, with total revenue jumping 25 per cent year-on-year to $1.11 billion.
When the US Food and Drug Administration (FDA) approved the latest offering in November 2022 it was the the smallest and lightest behind-the-ear cochlear implant sound processor available in the industry, also with the ability to provide direct audio connectivity to everyday consumer electronics.
In addition, the Nucleus 8 Sound Processor can sense changes in a person's environment and automatically adjust their listening settings.
The product led to a 35 per cent uplift in services revenue for the first half - the same percentage growth seen for net profit after tax (NPAT) which reached $191 million.
This meant that services revenue accounted for around 31 per cent of total sales at $348.9 million, compared to cochlear implants which accounted for 58 per cent of sales at $648.5 million. Acoustics sales declined 4 per cent to $116 million.
Cochlear reported a slightly lower gross margin due to inventory write-downs and the effects of starting production in Chengdu, China, but the positive momentum from the first half has led the group to lift its underlying NPAT guidance from $355-375 million to $385-400 million.
The impacts of these issues on margin is made more apparent when considering outright implant sales growth in constant currency terms outpaced growth in implant units by eight percentage points.
The improved guidance was unable to prevent a drop in the COH share price by 2.32 per cent to $326.775, although this is merely a reduction from all-time highs of $339.18 and is well above the 52-week low of $220.40 seen around this time last year.
Cochlear notes its guidance does not factor in any impact from the proposed acquisition of Oticon Medical, which is targeted for completion by the end of June 2024 with integration costs currently estimated at $30 million.
"As we look to the future, we remain confident of the opportunity to grow our markets," the company said in today's announcement.
"There remains a significant, unmet and addressable clinical need for cochlear and acoustic implants that is expected to continue to underpin the long-term sustainable growth of the business."
By the end of 2023 Cochlear had $485 million worth of cash sitting on its balance sheet.
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