Cochlear Limited Strategy Overview 2020 Contents Welcome ................................................................................................................................................. 1 About Cochlear ....................................................................................................................................... 2 Cochlear’s mission ................................................................................................................................... 2 Cochlear at a glance ................................................................................................................................ 3 Investment proposition ........................................................................................................................... 4 Hearing loss is prevalent and under‐treated ........................................................................................... 5 Cochlear implants a cost‐ effective solution ............................................................................................ 6 Growing demand for cochlear implants .................................................................................................. 7 Strategic priorities ................................................................................................................................... 8 Retain market leadership ........................................................................................................................ 9 Commitment to technology leadership ..................................................................................................................................... 9 Market‐leading product portfolio ............................................................................................................................................10 World‐class customer experience ............................................................................................................................................11 Grow the hearing implant market .......................................................................................................... 12 Children in developed markets ................................................................................................................................................13 Adults and seniors in developed markets ................................................................................................................................14 Children in emerging markets ..................................................................................................................................................16 Deliver consistent revenue and earnings growth ................................................................................... 18 Financial history .......................................................................................................................................................................19 Investing to grow .....................................................................................................................................................................20 Operational improvement .......................................................................................................................................................21 Strong financial position ..........................................................................................................................................................22 References ............................................................................................................................................. 23 Cochlear Limited Strategy Overview 2020 Welcome The Strategy Overview provides an insight into Cochlear’s strategy to retain market leadership, grow the hearing implant market and deliver consistent revenue and earnings growth over the long term. Cochlear provides shareholders with an opportunity to invest in the global leader in implantable hearing devices, in an industry that has the potential to grow over the long term. We have a clear strategy to drive market growth and a strong financial position which enables the business to fund its growth activities while aiming to reward shareholders along the way with a growing dividend stream. While FY20 revenue was materially impacted by the COVID‐19 pandemic, due to the deferral of elective surgeries globally, our view to the longer‐term opportunity to grow our markets remains unchanged. We are committed to providing our shareholders, and potential shareholders, with an in‐depth view of the strategic priorities that drive investment decisions and capital allocation. This report provides a context for the hearing loss market and details our commitment to investing to retain market leadership while deepening our presence across three key customer segments. The Strategy Overview also provides insight into our financial history. Cochlear has a long track record of delivering growing sales revenue, profits and dividends which stems from maintaining focus on our core strength, implantable hearing solutions, a multi‐decade philosophy of investing to grow, combined with disciplined management of capital. For a detailed review of FY20 performance, I encourage you to read the 2020 Annual Report. Dig Howitt CEO & President Cochlear has a long track record of delivering growing sales revenue, 1,352 disrupted in FY20 by the impact of COVID‐19 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 Sales revenue ($m) 1 About Cochlear For 40 years, Cochlear has been the global leader in implantable hearing solutions. Cochlear commenced operations in 1981 as part of the Nucleus group and in 1995, listed on the Australian Securities Exchange. Today, Cochlear is a Top 50 listed Australian company with a market capitalisation of over A$12 billion. Cochlear aims to support cochlear implantation becoming the standard of care for people with severe to profound hearing loss and provide bone conduction implants for people with conductive hearing loss, mixed hearing loss and single‐sided deafness. The Company has provided more than 600,000 implant devices to people who benefit from one – or two – of the Company’s implantable solutions. Whether these hearing solutions were implanted today or many years ago, Cochlear continues to bring innovative new products to market as well as sound processor upgrades for all generations of recipients. Cochlear invests more than $180 million each year in R&D and currently participates in over 100 collaborative research programs worldwide. The global headquarters are on the campus of Macquarie University in Sydney, with regional offices in Asia Pacific, Europe and the Americas. Cochlear has a deep geographical reach, selling in over 180 countries, with a direct presence in over 30 countries and a global workforce of over 4,000 employees. Cochlear’s mission Cochlear’s mission is the passion that drives the organisation and, at a high level, focuses the strategy. 2 Cochlear Limited Strategy Overview 2020 Cochlear at a glance Key products Global sales Cochlear™ ~ Cochlear Nucleus® $1.4b implants* Profile™ Plus with Slim in sales revenue % Modiolar Electrode (CI632) 61 % % 49% 35 16 Americas* EMEA* Asia Pacific* Services* % 29 Cochlear™ Cochlear™ Nucleus® 7 Nucleus® Kanso® 2 Sound Processor Sound Processor (CP1000) (CP950) Acoustics* % % % 10 ~80 ~20 Developed Emerging markets* markets* Cochlear™ Baha® 5, Cochlear™ Baha 5 Power and Osia® 2 System Baha 5 SuperPower Market leader Growing scale + + + $ 180m ~ % 4,000 100 in annual R&D 60 employees collaborative research programs global market share** + + 30 6 600,000 countries with key manufacturing implants sold*** direct operations sites * % of sales revenue ** based on Cochlear estimates for cochlear implants *** includes cochlear and acoustic implants 3 Investment proposition Cochlear provides shareholders with an opportunity to invest in the global leader in implantable hearing solutions, in an industry that has the potential to grow over the long term. Global leader in implantable hearing solutions for 40 years with ~60% global market share and more than 600,000 devices sold Long‐term market growth opportunity with a significant, unmet and addressable clinical need for implantable hearing solutions and less than 5% market penetration Unrivalled commitment to product innovation, bringing innovative new products to market as well as sound processor upgrades for all generations of Cochlear’s recipient base Growing annuity income stream from servicing of the expanding recipient base Strong free cash flow generation provides funding for market growth activities and R&D as well as the ability to reward shareholders with a growing dividend stream* $1000 invested in Cochlear at listing $160,000 worth ~$140,000 as at 30 June 2020 $120,000 $80,000 $40,000 1995 1997 1998 2000 2001 2003 2004 2005 2007 2008 2010 2011 2012 2014 2015 2017 2018 2020 Cochlear total shareholder return since listing *cash flow generation and dividends disrupted in FY20 by impact of COVID‐19 and an adverse litigation outcome (see 2020 Annual Report for details) 4 Cochlear Limited Strategy Overview 2020 Hearing loss is prevalent and under‐treated The World Health Organization estimates that there are over 460 million people worldwide – over 5% of the world’s population – who experience disabling1 hearing loss.