More annual reports from Nanosonics:
2023 ReportPeers and competitors of Nanosonics:
Cross Country HealthcareINFECTION
PREVENTION.
FOR LIFE.
ANNUAL REPORT 2022
2
O U R M I S S I O N
We improve the safety of
patients, clinics, their staff
and the environment by
transforming the way infection
prevention practices are
understood and conducted,
and introducing innovative
technologies that deliver
improved standards of care.
O V E R V I E W
Nanosonics (ASX:NAN) is an Australian infection prevention company that has successfully developed
and commercialised a unique automated disinfection technology, trophon®, representing the first major
innovation in high level disinfection for ultrasound probes in more than 20 years.
trophon is fast becoming the global standard of care for ultrasound probe disinfection. We will continue
to drive trophon adoption through our ability to transform the way infection prevention practices are
understood and conducted in existing markets and through continued geographical expansion.
Our commitment to innovation is reflected in our investment in research and product development as
we look to expand our product portfolio and bring new infection prevention products to market.
NANOSONICS LIMITED I ANNUAL REPORT 2022 3
Approximately 98,000 patients are protected every day from the risk
of ultrasound probe cross-contamination by trophon technology, equating
up to 25 million patients every year.
C O N T E N T S
2 Overview and Mission
28 The Board
4
6
8
Financial highlights
30 The Executive Team
Letter to Shareholders
32 Directors’ report
Financial and Operational Review
38 Remuneration report
22 Our Commitment to ESG
62 Financial statements
24
trophon®2
26 AuditPro™
63 Auditor’s independence declaration
102 Directors’ declaration
103 Independent auditor’s report
to the members
108 Shareholder information
110 Glossary
112 Corporate directory and
information for investors
INFECTION PREVENTION. FOR LIFE. 4
F I N A N C I A L H I G H L I G H T S
REVENUE ($M)
GROSS PROFIT ($M)
OPERATING EXPENDITURE ($M)
120.3
100.1
103.1
84.3
60.7
91.9
80.4
75.5
62.8
45.3
49.2
42.6
90.5
70.8
63.2
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
PROFIT BEFORE TA X ($M)
FREE CASH FLOW ($M)
CASH AND CASH EQUIVALENTS ($M)
16.8
20.9
12.4
11.0
91.8
96.0
94.5
69.4
72.2
5.6
6.2
5.9
1.6
2.6
2018
2019
2020
2021
2022
2018
2019
2020
2021
(0.2)
2022
2018
2019
2020
2021
2022
Total revenue for the year grew 17% to $120.3 million
resulting from continued growth in new installed base,
upgrades and consumables/service.
MICHAEL KAVANAGH, CEO & PRESIDENT
NANOSONICS LIMITED I ANNUAL REPORT 2022 5
2013-2022 RESULTS$’0002022202120202019201820172016201520142013Revenue 120,320 103,079 100,054 84,324 60,698 67,507 42,796 22,214 21,492 14,899 Gross profit 91,905 80,384 75,513 62,816 45,291 50,155 32,166 15,313 13,921 8,471 R&D expenses (22,358) (17,194) (15,558) (11,375) (9,882) (9,486) (7,297) (4,902) (4,103) (3,167)EBITDA7,509 15,188 15,563 17,642 5,861 14,140 950 (4,732) (1,845) (5,366)EBIT 1,782 10,763 11,671 15,502 4,362 12,866 (359) (5,795) (2,820) (6,410)Operating profit/(loss) before tax 1,578 10,984 12,459 16,830 5,583 13,852 136 (5,465) (2,636) (5,735)Net income tax benefit/(expense) 2,164 (2,406) (2,322) (3,228) 168 12,306 (14) 5 31 (33)Operating profit/(loss) after tax 3,742 8,578 10,137 13,602 5,751 26,158 122 (5,460) (2,605) (5,768)Cash and cash equivalents 94,512 96,027 91,781 72,180 69,433 62,989 48,841 45,724 21,233 24,064 INFECTION PREVENTION. FOR LIFE. 6
L E T T E R T O S H A R E H O L D E R S
After two years of significant disruptions due to the
global COVID-19 pandemic, Nanosonics is in a strong
position demonstrating growth momentum with a
clear growth strategy to expand its participation as
a leading contributor in the multi-billion dollar global
infection prevention market. FY22 saw significant
progress made against key strategic priorities, and
the Company’s strong balance sheet and resilient
business model means that we are well positioned to
continue to create value for all our stakeholders now,
and over the long term.
STEVE SARGENT
MICHAEL KAVANAGH
Chairman
CEO & President
In another year of significant change,
the partnership with our customers is a
key feature that remains constant. We are
very pleased to serve their infection
prevention needs during a time in which the
importance of infection prevention has only
been elevated.
We would like to recognise the resilience
and the outstanding efforts of our team,
who all demonstrate a passion for the
Company’s mission and again successfully
navigated a number of further lockdowns
around the world to deliver on our
objectives keeping our customers operating
and their patients safe.
During the year the Company significantly
increased its capabilities and capacity
through the move to new corporate
headquarters. Supported by the NSW
Government Jobs Plus Program, these new
facilities include expanded manufacturing
and state of the art R&D facilities that
enables the Company to further invest in
R&D and expand its infection prevention
portfolio focusing on significant unmet
market needs. Central to many of these
needs is the requirement to develop
solutions with integrated connectivity and
ability to access real time traceability data
to ensure compliance with necessary
standards to mitigate the risks of cross
contamination. Nanosonics has developed
a leading capability in this area and such
features are a cornerstone not only of
our current trophon solution but new
technologies under development.
The Company successfully executed
many key strategic priorities during the
year. Central to these was the successful
evolution of our sales model in our largest
market, North America. Aligned with the
Company’s ultimate goal of operating
through more direct sales channels, the
Company expanded its infrastructure in
North America and now operates under
a largely direct model while maintaining
ongoing ultrasound OEM partnerships
through capital reseller agreements.
Having a direct interface with our
customers brings many benefits to our
1. All research and new product development programs involve inherent
risks and uncertainties which can impact commercialisation timelines.
customers and also to Nanosonics,
where the direct access enables us
to broaden and deepen our customer
relationship with additional product and
service sales. We also get excellent
feedback from customers which generates
new ideas for product enhancements.
During the year, despite COVID-19
disruptions, we continued the important
investments in our geographical expansion
activities across Europe and Asia Pacific.
These investments included an expansion
of our local infrastructures and medical
affairs activities. With the total installed
base continuing to grow and market
fundamentals continuing to strengthen in
these regions, we expect our investments
to be further leveraged in FY23 with
improved market access conditions
after prolonged periods of COVID-19
related disruption.
Importantly, throughout the year
our manufacturing and logistics
teams continued to manage a
challenging and complex supply chain.
Effective management saw continuity of
supply maintained across all regions and
all customers orders delivered in full and
on time.
Our product diversification plans
progressed through increased investment
in R&D across our ultrasound reprocessing,
endoscopy reprocessing and cloud
solution platforms as well as investments
in chemistry and biosciences. Positive
progress continued in the development
activities, clinical and regulatory planning
and preparation for manufacturing of the
new endoscope reprocessing platform,
Nanosonics CORIS®.1
NANOSONICS LIMITED I ANNUAL REPORT 2022 T H A N K Y O U
Nanosonics is a highly respected
ASX 200 company and an emerging
global leader in automated
instrument reprocessing. I am proud
to welcome Steve Sargent, who
has outstanding qualifications and
track-record for this important
role of chairing the Company’s
Board of Directors. I will
hold the position of Deputy
Chairman, working with
Steve and the Board until
the 2022 AGM, at which
time I will not stand for re-
election, but rather, assume
the position of Chairman
of the new Innovation and
Infection Control Advisory
Committee.
As a Founder and Chairman of Nanosonics
for more than two decades, it has been my
privilege to see this company grow in literally
every dimension of its activities and continue
to make a significant contribution to patient
safety, and indeed, a dramatic improvement
in environmental health by the elimination of
the use of toxic chemicals used in instrument
disinfection. Proudly Australian, Nanosonics
has succeeded in leveraging innovation
and technology to a world market and is a
recognised emerging leader in its field.
The investment that the Nanosonics
team continues to make in R&D is world-
leading, significant and a tribute to the
Company’s vision, expressed in our
“Infection Prevention, For Life” statement.
Today, Nanosonics enjoys a new campus
at Macquarie Park, comprising of an
It was very pleasing to have the FDA
recently accept CORIS into the FDA Safer
Technologies Program (STeP). Products
accepted into this program are reasonably
expected to significantly improve the safety
of currently available treatments. Through
the program the FDA aims to provide
additional review resources facilitating
more interactive and timely communication
through the submission review process.
Total revenue for the year grew 17% to
$120.3 million resulting from continued
growth in new installed base, upgrades
and consumables/service. This was a very
pleasing result taking into consideration
the foreshadowed one-off revenue impact
in H2 associated with the transition to a
largely direct sales model in North America.
As a result of this revised sales model,
GE Healthcare ran down their capital and
consumable inventory and transitioned to
a non-stocking capital reseller extending
their agreement by a further 12 months to
30 June 2023.
Gross profit margin for the year was
76.4% delivering a gross profit of $91.9
million. Consistent with our investment for
growth strategy, our investments across
R&D, the revised North American sales
model, geographical expansion and broad
capability and capacity expansion saw
operating expenses increase to $90.5
million. Pleasingly, profit before tax for the
year was $1.6 million, which was ahead
of expectations, despite the complex
operating environment experienced during
the year and the foreshadowed one-off
impact in H2 FY22 on revenue in North
America associated with the move to a
largely direct sales model.
We recognise the tremendous value that
our people provide to the Company.
Throughout the year we continued to
expand our capacity and capability with the
total number of employees increasing 25%
to 425. Diversity and inclusion is recognised
as an important driver of our growth and
a core aspect of the Nanosonics culture.
The Nanosonics workforce now represents
around 33 different nationalities with 42%
of employees being female. 41% of senior
management positions in the organisation
are also held by females. Our people focus
was recognised with exceptional results
in the Company’s Employee Engagement
survey where 94% of our employees
strongly agree with the Company purpose,
and importantly, with 93% of our employees
knowing how their work contributes to the
goals of the Company.
We were also pleased to see the
Company’s expanding ESG agenda
outlined in the FY22 Sustainability Report.
We see sustainability as a key consideration
for our business, and one that is fully
aligned with our Values and Mission.
We are fortunate that our unique healthcare
solutions are in many respects neatly
aligned with sustainability principles which
means we achieve positive sustainability
outcomes for our customers because
they use far less hazardous chemicals
for cleaning and a lot less water, all the
while addressing their important infection
control needs and protecting their patients
and employees.
7
outstanding R&D centre and an impressive
new manufacturing capability, together
with a well-established presence in
the major international markets. In the
USA, we have transitioned to an evolved
business model, which brings us closer to
our customers and provides a remarkable
basis for future growth.
I am confident that Nanosonics is strongly
positioned for ongoing success over the
near and long-term, in a marketplace that is
demanding new ideas and innovation which
we are ideally positioned to provide. I look
forward to my new role with the Company
and working with an outstanding team and
Board to contribute to an exciting future for
all our stakeholders.
MAURIE STANG Non-executive Director
and Deputy Chairman
We would again like to recognise the
outstanding stewardship and commitment
of our Board during the year. We particularly
recognise the significant contribution of
our founder and longstanding Chairman,
Maurie Stang, who recently stepped
down as Chairman and assumed the role
of Deputy Chairman, until his retirement
following the 2022 Annual General
Meeting. Maurie has made significant
contributions not only to Nanosonics but
the wider infection prevention field over the
last two decades. Over this time Maurie
has created a number of very successful
businesses in the healthcare sector. He is
one of Australia’s leading authorities in
medical technologies, infection control
and the biosciences. We are pleased
that Maurie will continue to contribute
to the Company through an informal
advisory committee that will provide
ongoing advice to the Board on emerging
scientific, commercial developments and
opportunities in infection control.
STEVE SARGENT
Chairman
MICHAEL KAVANAGH
CEO & President
23 August 2022
INFECTION PREVENTION. FOR LIFE. 8
F I N A N C I A L A N D O P E R A T I O N A L R E V I E W
REVISED NORTH AMERICAN
SALES MODEL
As foreshadowed in our 8 February 2022
announcement, Nanosonics and GE
Healthcare revised the North American
sales model to a largely direct Nanosonics
sales model. Through this change, GE has
transferred all its trophon customers to
Nanosonics for the ongoing provision of
all consumables. In addition, through an
expansion of the Nanosonics direct
team, Nanosonics is now responsible for
the majority of all capital sales moving
forward, with GE still having access to
capital equipment as a non-stocking
capital reseller. This evolution of the North
American sales strategy to a largely direct
sales model with OEM capital reseller
partners represented another significant
milestone in the ongoing growth of the
organisation bringing many benefits to
Nanosonics and trophon customers.
The transition to the largely direct sales
model is now complete. The expanded
North American team is in place and
includes the hiring of a number of members
of the former GE high-level disinfection
team. Shipping volumes through the
Nanosonics logistics facility in Indianapolis
are up over 100% in the last three months
with no disruption in supply to customers
and sufficient capacity in place to support
expected future growth. The team has
also executed over 30 new enterprise
agreements with strategic accounts /
Integrated Delivery Networks with many
more due to be completed in the coming
months. Nanosonics has also established
the necessary partnerships to enable
selling to US Federal Government accounts
where GE previously represented 80% of
the sales to those accounts.
Our North American team is now well
positioned to manage the overall growth
strategy associated with new installed
base, upgrade adoption and consumables
usage. The business performance in Q4
FY22 saw many of these benefits start
to come to fruition. In that quarter the
Nanosonics team were responsible for
91% of the new installed base together
with 86% of upgrade sales. The resulting
deeper customer relationships with the
majority of North American hospitals and
our corresponding infrastructure expansion
also supports planned product expansion
beyond trophon.
INSTALLED BASE GROWTH
The global installed base increased 12% to 29,850 units, an increase of 3,100 units for the year. The installed base increased 1,690 units
in H2, up 20% compared with H1.
GLOBAL INSTALLED BASE (UNITS)
INSTALLED BASE GROWTH (BY HALF) (UNITS)
29,850
26,750
23,720
1,570
1,650
1,690
1,380
1,410
1,220
12%
CUMULATIVE
INSTALLED BASE
20%
NEW INSTALLED
BASE GROWTH
H2 VS. H1
FY20
FY21
FY22
H1
H2
H1
H2
H1
H2
FY20
FY21
FY22
NANOSONICS LIMITED I ANNUAL REPORT 2022 NORTH
AMERICA
In North America, the installed base increased 2,650 units for the
year to 26,130 representing an 11% increase. Hospital access
continued to improve throughout the year and the installed
base increased by 1,450 units in H2, up 21% compared
with H1. The North American installed base now represents
approximately 44% of the estimated total addressable market of
60,000 units where trophon is in use in over 5,000 institutions,
further consolidating its position as standard of care. The overall
ultrasound market continues to grow with new innovations in
the market such as wireless hand-held probes being released.
The Nanosonics R&D team has developed an accessory to enable
wireless probes to be decontaminated in trophon with the first of
such accessories due to launch in Q2 FY23.
During FY22, the Company also progressed the launch of
AuditPro in North America with a focus on a number of key
reference sites. In parallel, the Company advanced preparations
for ISO27001 accreditation, the internationally accepted standard
for the management of information security, which will further
streamline customer security assessment requests as part of
AuditPro implementation.
EUROPE AND
MIDDLE EAST
In the Europe and Middle East region, the installed base increased
310 units for the year, with the total installed base increasing by
21% to 1,820 units. Notwithstanding the impact of COVID-19
related market restrictions during the year, and other factors such
as the sanctions on Russia, the number of new installed base units
in H2 was 170 units, up 21% compared with H1. The Company
continued its investment in the EMEA region in FY22 in particular in
the UK and Germany. With market restrictions and hospital access
now markedly improved it is expected that FY23 will see the first
full year since 2020 where the investments in this region can be
fully leveraged.
ASIA
PACIFIC
In Asia Pacific, the installed base increased 140 units for the
year with the total installed base increasing 8% to 1,900 units.
The number of units installed in H2 was equivalent to H1 reflecting
the COVID-19 restrictions that prevailed during the year.
In Japan, the Company expanded its local team and medical affairs
activities as we worked with local authorities on the establishment
of local guidelines. In China, the registration of our Wholly Owned
Foreign Enterprise was completed. Further, after significant delays
due to COVID-19 related lockdowns, required local testing of the
trophon device and consumables by the relevant State authorities
has now commenced as part of our product registration plans.
9
11%
VS. FY21
TOTAL INSTALLED BASE (UNITS)
26,130
23,480
20,990
18,570
15,620
FY18
FY19
FY20
FY21
FY22
TOTAL INSTALLED BASE (UNITS)
1,820
1,510
1,120
880
730
21%
VS. FY21
FY18
FY19
FY20
FY21
FY22
TOTAL INSTALLED BASE (UNITS)
1,900
1,760
1,610
1,480
1,390
8%
VS. FY21
FY18
FY19
FY20
FY21
FY22
INFECTION PREVENTION. FOR LIFE. 1 0
F I N A N C I A L A N D O P E R A T I O N A L R E V I E W C O N T I N U E D
TROPHON UPGRADE
OPPORTUNITY
There is a significant opportunity for
upgrades from the first-generation trophon
EPR to trophon2, where approximately
9,000 trophon EPR units are now at least
seven years of age.
In North America, where the majority of the
upgrade opportunity exists, 880 upgrade
units were sold during the year up 283%
compared with FY21. Good growth
momentum was also achieved in H2
over H1, with 500 upgrade units in H2
up 32% compared with H1. Importantly,
63% of the upgrade units sold in North
America in H2 were sold in Q4 during the
transition to the largely direct sales model
with Nanosonics responsible for 86% of
those sales. This result demonstrates the
opportunity for Nanosonics to further drive
the upgrade strategy with its direct access
to all trophon customers.
In Australia / New Zealand, 100 upgrades
were sold with 80% of those in H2.
GLOBAL INSTALLED BASE AGE DISTRIBUTION AT JUNE 20221
9,000+ UNITS
13%
8%
5%
5%
1 yr
2 yrs
3 yrs
4 yrs
5 yrs
6 yrs
7 yrs
8 yrs
9 yrs
10+ yrs
1. Percentages represent the upgrade opportunity as a proportion of the cumulative Installed Base.
U P G R A D E S
DEVELOPING STRONG MOMENTUM IN CAPTURING UPGRADE VALUE.
Globally, 1,000 trophon EPR devices were upgraded in FY22, up 133% compared with FY21. Upgrade momentum continued into H2 with
upgrades of 600 units, up 50% compared with H1.
GLOBAL UPGRADES (UNITS)
600
370
400
60
H1
H2
H1
H2
FY21
FY22
133 %
GLOBAL UPGRADES
VS. FY21
50 %
UPGRADE UNITS
H2 VS. H1
Graphs are not to scale and therefore not comparable
NANOSONICS LIMITED I ANNUAL REPORT 2022 1 1
TOTAL REVENUE
Total revenue for the year was $120.3 million, up 17% (15% in constant currency1) on prior corresponding period. Revenue in H2 FY22
was $59.7 million, down 2% compared with H1 FY22 of $60.6 million.
The growth in revenue associated with both capital and consumables in H2 was impacted by the transition to the largely direct sales model
in North America. As part of that transition, GE ran down their capital and consumable inventory with no replenishment as they transitioned
to a non-stocking capital reseller by 30 June 2022.
REVENUE ($ MILLION)
H1 H2
CONSTANT CURRENCY1
100.1
103.1
51.6
60.0
84.3
43.6
40.7
48.6
43.1
60.7
30.7
30.0
120.3
59.7
60.6
17%
VS. FY21
2%
H2 VS. H1
FY18
FY19
FY20
FY21
FY22
118.7
58.4
60.3
FY22
15%
VS. FY21
3%
H2 VS. H1
1. Constant currency (CC) removes the impact of foreign exchange rate movements to facilitate comparability of operational performance. This is done by converting
the current period sales of entities that use currencies other than Australian dollars at the rates that were applicable in the prior period. The average exchange rate
used for the Company’s major foreign currency (USD) for the 12 months to 30 June 2022 was 0.7231 (2021: 0.7492).
INFECTION PREVENTION. FOR LIFE. 1 2
F I N A N C I A L A N D O P E R A T I O N A L R E V I E W C O N T I N U E D
CAPITAL REVENUE
Total capital revenue for the year
was $37.7 million, up 41% on prior
corresponding period. This increase reflects
the recovery from the significant reduction
in capital revenue experienced in H1 FY21
in North America associated with the
reduction in the number of units sold to
GE Healthcare in that period as a result of
the negative impact of COVID-19 on new
installed base growth.
While new installed base and upgrade
capital units increased in H2, capital
revenue of $18.6 million in H2 was down
2% compared with H1. This was primarily
due to the impact of the revised North
American sales model and GE Healthcare
destocking as they transitioned to a
non-stocking capital reseller.
CONSUMABLES AND SERVICE
REVENUE
As COVID-19 restrictions eased during the
year, market access conditions improved
resulting in ultrasound procedure volumes
returning to near pre-COVID levels.
Consumables and service revenue
represented 69% of total revenue
highlighting the attractive annuity revenue
nature of the business.
Total consumables and service revenue
for the year was $82.6 million, up 8% on
prior corresponding period. Revenue of
$41.1 million in H2 FY22 was down 1%
compared with H1 FY22 again reflecting
the impact of the revised North American
sales model with GE Healthcare consuming
their inventory. There was no impact in the
continuity of supply of consumables to
customers during the transition.
GLOBAL ($ MILLION)
H1 H2
30.0
15.6
14.4
FY20
GLOBAL ($ MILLION)
H1 H2
70.1
36.0
26.7
17.3
9.4
FY21
76.4
42.7
34.1
33.7
37.7
18.6
19.0
FY22
82.6
41.1
41.6
41%
VS. FY21
2%
H2 VS. H1
8%
VS. FY21
1%
H2 VS. H1
FY20
FY21
FY22
NANOSONICS LIMITED I ANNUAL REPORT 2022 1 3
REGIONAL FINANCIAL PERFORMANCE
NORTH AMERICA
Total revenue for the year in North America was $106.9 million, up 20% on prior corresponding period.
Capital revenue was $33.6 million, up 58% on prior corresponding period.
While installed base and upgrade units sold in H2 FY22 increased, capital revenue in H2 of $16.3 million was down 6%
compared with H1, primarily due to the impact of the revised North American sales model and GE Healthcare destocking.
Consumables and service revenue was $73.3 million, up 8% on prior corresponding period. In H2 FY22 consumables
and service revenue was $36.3 million, down 2% compared with H1 FY22 again reflecting the impact of GE
Healthcare’s destocking.
TOTAL REVENUE ($ MILLION)
H1 H2
54.4
27.2
27.2
FY18
76.5
39.4
37.1
FY19
90.1
46.5
43.7
FY20
89.2
52.3
36.9
FY21
106.9
52.5
54.4
FY22
20%
VS. FY21
3%
H2 VS. H1
CAPITAL REVENUE ($ MILLION)
CONSUMABLES/SERVICE REVENUE ($ MILLION)
H1 H2
27.6
14.1
13.5
FY20
33.6
16.3
17.4
FY22
21.3
14.1
7.2
FY21
58%
VS. FY21
6%
H2 VS. H1
H1 H2
62.7
32.4
67.9
38.2
30.3
29.7
73.3
36.3
37.0
FY20
FY21
FY22
8%
VS. FY21
2%
H2 VS. H1
INFECTION PREVENTION. FOR LIFE. 1 4
F I N A N C I A L A N D O P E R A T I O N A L R E V I E W C O N T I N U E D
EUROPE AND MIDDLE EAST
Total revenue for the year in the Europe and Middle East region was $7.5 million, up 4% on prior corresponding period.
H2 FY22 revenue was $4.1 million, up 21% compared with H1 FY22.
Capital revenue was $2.1 million, down 22% on prior corresponding period. The reduction in revenue reflects the
delayed easing of COVID-19 related market restrictions coupled with other factors including impact of sanctions on Russia.
It is important to note that the majority of units placed in the UK (the largest market in the region) are under the managed
equipment service model where no capital revenue is recognised.
Consumables and service revenue was $5.4 million, up 20% compared with prior corresponding period.
Consumables and service revenue in H2 FY22 was $2.8 million, up 8% compared with H1 FY22 as ultrasound
procedure volumes returned to near pre-COVID levels.
TOTAL REVENUE ($ MILLION)
H1 H2
3.0
1.6
1.3
FY18
3.8
2.1
1.7
FY19
5.2
2.8
2.4
FY20
7.2
3.6
3.6
7.5
4.1
3.4
FY21
FY22
4%
VS. FY21
21%
H2 VS. H1
CAPITAL REVENUE ($ MILLION)
CONSUMABLES/SERVICE REVENUE ($ MILLION)
H1 H2
1.4
0.9
0.5
FY20
2.7
1.2
1.5
2.1
1.3
0.8
22%
VS. FY21
63%
H2 VS. H1
H1 H2
3.8
1.9
1.9
4.5
2.4
2.1
5.4
2.8
2.6
FY21
FY22
FY20
FY21
FY22
20%
VS. FY21
8%
H2 VS. H1
NANOSONICS LIMITED I ANNUAL REPORT 2022 1 5
ASIA PACIFIC
Total revenue for the year was $5.9 million, down 12% compared with the prior corresponding period. H2 FY22 revenue
was $3.0 million, up 3% compared with H1 FY22. Importantly, FY21 included a one-off upgrade deal of 200 units with
I-MED Radiology Network, the largest customer in Australia.
Capital revenue was $1.9m, down 30% compared with the prior corresponding period, mainly as a result of the upgrade
deal with I-MED in FY21. H2 FY22 revenue was up 11% compared with H1 FY22.
Consumables and service revenue of $4.0 million was the same as the prior corresponding period. While revenue growth
in FY22 was impacted by the timing of shipments to distributors, sales of consumables (NanoNebulant) to end customers
increased in FY22 compared with FY21.
TOTAL REVENUE ($ MILLION)
H1 H2
3.3
1.8
1.5
FY18
4.0
2.1
1.9
FY19
4.7
2.3
2.3
FY20
6.7
4.1
2.6
FY21
5.9
3.0
2.9
FY22
12%
VS. FY21
3%
H2 VS. H1
CAPITAL REVENUE ($ MILLION)
CONSUMABLES/SERVICE REVENUE ($ MILLION)
H1 H2
1.1
0.6
0.5
FY20
2.7
2.0
0.7
FY21
30%
VS. FY21
11%
H2 VS. H1
1.9
1.0
0.9
FY22
H1 H2
3.6
1.7
4.0
2.1
1.9
1.9
4.0
2.0
2.0
FY20
FY21
FY22
0 %
VS. FY21
0 %
H2 VS. H1
INFECTION PREVENTION. FOR LIFE. 1 6
F I N A N C I A L A N D O P E R A T I O N A L R E V I E W C O N T I N U E D
OTHER FINANCIAL RESULTS
GROSS PROFIT
Gross profit margin for the year was 76.4% compared with 78% in prior corresponding period. This reduction was primarily attributable to
increased freight costs driven by global shortages in transport capacity. An increase in freight costs in Q4 FY22 were also attributable to the
transition to the largely direct sales model in North America (amounting to approximately $0.3 million). The gross profit margin was ahead of
the February 2022 guidance mainly due to favourable pricing outcomes in North America.
INVESTING FOR GROWTH – OPERATING EXPENSES
In line with the Company’s deliberate strategy to continue to invest
for growth in the multi-billion-dollar global infection prevention
market, operating expenses for the year increased 28% to
$90.5 million.
Attractive returns from these investments are expected over time as
demonstrated by the Company’s performance in North America,
its largest and most developed business, where operating margins
have been in the range of 55% – 60%.1
Of the total operating expenses in FY22 approximately:
• 43% was associated with market development activities.
The increase in these costs included the additional investment in
Q4 of approximately $0.8 million to expand the Company’s North
American operations;
• 25% of total operating expenses in FY22 was associated with
the Company’s product innovation programs across the new
Nanosonics CORIS technology as well as ongoing programs in
ultrasound reprocessing and cloud solutions; and
• 32% of total operating expenses in FY22 relate to the Company’s
infrastructure including, manufacturing and other headquarter
support costs.
OPERATING EXPENDITURE (GLOBAL, $ MILLION)
90.5
Q4
24.6
70.8
63.2
49.2
42.6
28%
VS. FY21
12%
H2 VS. H1
FY18
FY19
FY20
FY21
FY22
Operating expenses increased to $47.8 million in H2, up 12%
compared with H1 and in Q4 FY22 operating expenses were
$24.6 million or 27% of the total year.
In FY22, the Company incurred additional costs of approximately $1.5 million as a result of its relocation to its new global headquarter
facility, increasing the organisation’s capabilities and capacity for future growth.
Our new Macquarie Park
facilities will support future
company growth.
2x Manufacturing capacity
3x Laboratory space
400+ Employee capacity
GLOBAL HEADQUARTERS
7-11 TALAVERA ROAD
35-41 WATERLOO ROAD
R&D CENTRE + LABS
MANUFACTURING
WAREHOUSE
1. Before any HQ costs are allocated to the region.
NANOSONICS LIMITED I ANNUAL REPORT 2022 1 7
OTHER INCOME AND PROFIT BEFORE TA X
Other income for the year was $0.5 million, up $0.3 million
compared with prior corresponding period. The increase in other
income was mainly attributable to the NSW State Government
funding received from the Jobs Plus Program.
Profit before tax for the year was $1.6 million reflecting the
increased investment in the Company’s strategic growth agenda
as well as the foreshadowed impact in H2 on revenue in North
America associated with the move to a largely direct sales model.
WORKING CAPITAL
Free cash flow for the year was a net outflow of $0.2 million driven
mainly by capital expenditure associated with the new corporate
headquarters and the increase in the Company’s inventory
holding. Free cash flow in H2 FY22 was a net inflow of $3.6 million,
offsetting the net outflow in H1 of $3.8 million. The Company
expects to receive at least $1.6 million cash in FY23 relating to
infrastructure rebate claims in respect of FY22 under the NSW
Government Jobs Plus Program.
PROFIT BEFORE TA X (GLOBAL, $ MILLION)
FREE CASH FLOW (GLOBAL, $ MILLION)
20.9
16.8
12.4
11.0
5.6
1.6
6.2
2.6
5.9
FY22
3.6
(0.2)
(3.8)
FY18
FY19
FY20
FY21
FY22
FY18
FY19
FY20
FY21
H1
H2
Net
Cash and cash equivalents were $94.5 million at 30 June, providing a strong foundation for continued investment in growth.
The Company has no debt and continues to regularly review its capital management strategy.
During the year the Company increased its inventory holding by
91% to $22.6 million. This increase was driven by the need to carry
more safety inventory in response to increased supply chain risks
caused by the COVID-19 pandemic and the Company’s transition to
a largely direct sales model in North America. Of the total increase,
55% was associated with finished goods and the balance related
to raw materials. As a result of the Company’s COVID-19 pandemic
inventory policy, there were no supply disruptions to customers.
The Company expects it will maintain inventory at a similar level
throughout FY23 reflecting the ongoing complexities with the
global supply chain and the move to a largely direct model in North
America. It is anticipated that once the supply chain risks reduce
the Company’s inventory holding requirements will also reduce.
CASH AND CASH EQUIVALENTS (GLOBAL, $ MILLION)
91.8
96.0
94.5
69.4
72.2
FY18
FY19
FY20
FY21
FY22
INFECTION PREVENTION. FOR LIFE. 1 8
F I N A N C I A L A N D O P E R A T I O N A L R E V I E W C O N T I N U E D
R&D / NEW PRODUCTS
In FY22 the Company invested
$22.3 million in R&D.
Research and development is a corner stone of the future growth
of the Company. In FY22 the Company invested $22.3 million in
R&D up 30% compared with FY21. Through these investments,
which are all expensed, the Company has expanded its capacity
and capabilities programs across ultrasound reprocessing,
endoscope reprocessing, data through cloud solutions as well
as chemistry and bioscience. The Company also increased its
capacity to add new innovation programs to its R&D program
through the establishment of expanded R&D facilities as part of
its corporate headquarters move. These important investments
position the Company well to further expand its participation as
a leading infection prevention company in the significant global
infection prevention market.
INVESTMENT IN R&D (GLOBAL, $ MILLION)
H1 H2
17.2
9.6
15.6
8.8
11.4
5.9
5.5
6.8
7.6
9.9
5.2
4.6
22.3
11.6
10.7
FY18
FY19
FY20
FY21
FY22
30%
VS. FY21
8
%
H2 VS. H1
NANOSONICS CORIS –
TRANSFORMING THE CLEANING
OF FLEXIBLE ENDOSCOPES
In the United States, CORIS represents
a disruptive innovation. As such, there is
no existing predicate device like it on the
market. As a completely novel technology
platform, CORIS will be subject to the
FDA de novo clearance pathway thus
setting a new benchmark and creating
an entirely new category for endoscope
cleaning. Recently, the Nanosonics CORIS
technology was accepted into the FDA
Safer Technologies Program (STeP).
Products accepted into this program
are reasonably expected to significantly
improve the safety of currently available
treatments. The goal of STeP is to provide
patients and healthcare providers with
timely access to these medical devices by
expediting their development, assessment
and review while preserving the statutory
standards for approval. Through the
program, the FDA provides sponsors of
devices with additional review resources,
facilitating more interactive and timely
communication through the submission
review process.
The new CORIS platform aims to deliver
a solution to one of the biggest unmet
needs in instrument reprocessing –
reprocessing failures of flexible endoscopes
due to current limitations of manual
cleaning resulting in an increased risk of
cross-contamination.
NANOSONICS LIMITED I ANNUAL REPORT 2022 1 9
Recently, the Nanosonics CORIS technology was accepted into the
FDA Safer Technologies Program (STeP). Products accepted into this
program are reasonably expected to significantly improve the safety of
currently available treatments.
The potential to address the challenges of
contaminated endoscopes represents a
significant opportunity for Nanosonics in a
growing market with over 60 million flexible
endoscopy procedures per annum being
conducted across major Western markets
including the United States, Canada,
Australia and key European markets every
year. Similar to trophon (which comprises
a range of business models), CORIS will
include capital equipment together with an
annuity revenue stream associated with
consumables used for every cleaning cycle.
Studies have shown that the cost of the
full manual cleaning stage for a single
flexible endoscope today can be between
US$11 – $37.1 CORIS aims to automate a
significant proportion of the current manual
cleaning including the complex channel
cleaning and deliver significantly superior
cleaning outcomes compared to what can
be achieved today.
CORIS is being designed as a global
solution ultimately to be used across all
channeled flexible endoscope types.
The CORIS technology continues to
advance with the Company targeting
progressive market introductions aligned
with regulatory approvals, with the first
introduction targeted for calendar 2023 and
likely to be in Australia and/or Europe.
Further details on CORIS can be found
in the Company’s 2022 Full Year Results
Investor Presentation.
1. Ofstead, C.L., Quick, M.R., Eiland, J.E. and Adams, S.J., 2017. A glimpse at the true cost of reprocessing endoscopes. International Association of Healthcare
Central Service Material Management.
LARGE VARIETY OF ENDOSCOPES...
COLONOSCOPY GASTROSCOPY DUODENOSCOPY ENTEROSCOPY
ENDOSCOPIC
ULTRASOUND
BRONCHOSCOPY
UROLOGY
E.N.T.
GYNAECOLOGY
...WITH STRONG FUNDAMENTALS AND STANDARDS FOR REPROCESSING
Public Health
Agency of Canada
Irish Health
ServiceExecutive
ANSI/AAMI ST91:2021
Society of Gastroenterology
Nurses & Associates
(SGNA)
British Society of Gastroenterology
UK Department of Health
Steering group for Flexible
Endoscope Cleaning &
Disinfection (SFERD)
French National
Guidelines
German Society
of Hospital Hygiene
Global Standards/Guidelines
World Gastroenterology
Organisation (WGO)
ISO15883-4
Japan
Gastroenterological
Endoscopy Society
State Administration
for Market
Regulation and
Standardisation
Administration (SAC)
Gastroenterological
Society of Australia(GESA)
Australian/New
Zealand Standards
AS/NZS 4187:2014
INFECTION PREVENTION. FOR LIFE. 2 0
F I N A N C I A L A N D O P E R A T I O N A L R E V I E W C O N T I N U E D
• Operating expenses to grow between
15-18%. It is expected that the overall
proportion of operating expenses
associated with infrastructure will
decrease. Accordingly, the significant
majority of the increase in operating
expenses in FY23 is expected to be
weighted towards:
− market development activities; and
− ongoing product innovation across
ultrasound reprocessing, endoscope
reprocessing, data through cloud
solutions as well as chemistry and
bioscience.
All guidance is subject to ongoing
uncertainty in relation to variability in
market access conditions should COVID-19
pandemic related measures change in
relevant markets and broader economic
and geopolitical uncertainty.
Recognising the increasing global
focus on infection prevention and the
opportunities this presents for Nanosonics,
the Company will also continue to work on
identifying M&A opportunities to expand its
product portfolio.
INTELLECTUAL PROPERTY
Nanosonics recognises the importance
of its Intellectual Property (IP) portfolio in
maintaining its sustainable competitive
advantage. During FY22 Nanosonics filed
six patent applications, one provisional
application establishing a new patent family,
and one design registration establishing
another new patent family.
The subject matter protected by
Nanosonics’ IP portfolio helps protect
trophon (capital equipment, consumables
and accessories), new products
(AuditPro and ecosystem products), as well
as new product developments planned
for commercialisation including CORIS.
Nanosonics now has a dedicated IP
function that manages its active program
of IP development and third-party analysis
to support the Company’s strategic
growth agenda.
CASH RESERVES
Despite our record investments in an
expanded team, accelerated R&D and
resources for future growth, the Company
has maintained a significant cash reserve.
This cash reserve provides a significant
degree of stability and allows the
Company to continue to pursue its growth
agenda in uncertain times. Our Board
and management are actively engaged
in reviewing our priorities, identifying
opportunities for investment and ensuring
that Nanosonics remains on track to deliver
improved social and healthcare outcomes.
This remains entirely consistent with
building shareholder value through the best
use of the Company’s cash reserves.
BUSINESS OUTLOOK – FY23
Nanosonics is well positioned to continue
to invest in its longer-term strategic growth
agenda and expand its participation as
a leading infection prevention company
in the multi-billion-dollar global infection
prevention market.
While the threat of further COVID-19
related disruptions exist through growing
rates of infection or the emergence of new
variants, our expectation is that current
improved market conditions will prevail
throughout FY23.
FY23 will also be the first full year of the
largely direct sales model in North America
and is anticipated to be the first full year
since 2020 in which the Company will be
able to fully leverage its investments in
geographical expansion, especially in the
Europe and Middle East region.
TARGETS FOR FY23 INCLUDE:
• Total revenue growth of 20-25%.
• Gross margin of between 75-76%,
reflecting:
− an increase in the proportion of capital
revenue resulting from growth in the
sales of both new installed base units
(which drives growth in high margin
consumable revenue over time) and
upgrade units;
− ongoing increased freight costs; and
− increased component costs.
NANOSONICS LIMITED I ANNUAL REPORT 2022 2 1
BEYOND FY23
In addition to the targeted growth in FY23,
beyond FY23 Nanosonics is targeting:
• Continued expansion of the trophon
franchise across all regions including
growth in installed base, consumables
usage, service business and
trophon upgrades.
• Japan to become an important
contributor to the global trophon installed
base as well as further expansion across
the Asia Pacific region including China.
• Growth in our participation in the
• Ongoing investment in R&D,
infection prevention data and analytics
field through the AuditPro platform.
• Ongoing expansion of the product
portfolio introducing the new CORIS
endoscope reprocessing platform across
multiple markets and broader indications.
In addition, opportunities for strategic
acquisitions will continue to be identified
and assessed.
infrastructure, people and capability
to continue driving the Company’s
global growth strategy with the aim of
establishing Nanosonics as a global
leader in infection prevention.
INFECTION PREVENTION. FOR LIFE. 2 2
O U R C O M M I T M E N T T O E S G
Financial Year 2022 represented another year where Nanosonics, by continuing to deliver on its
objectives, created sustainable growth. This is only possible when we embrace the principles of
sustainability throughout our business.
As an emerging leader in the infection
control market, we are privileged to be
able to provide value to our stakeholders
through providing innovative, sustainable
solutions to some of the most complex
unmet needs in healthcare.
One of the key areas of value we provide is
to our customers through the products we
create and make available. In many cases,
our solutions replace old ways of working
that are harmful to the environment and for
that reason, the success of our business is
incidental to creating sustainable business
outcomes for all our stakeholders. That is
why readers will see an increased emphasis
on the sustainability outcomes that are
observable at each stage of our core
product’s lifecycle. In addition, there is
further emphasis on how Nanosonics’
business advances the United Nations
Sustainable Development Goals.
In that context, I am pleased to introduce
this year’s Sustainability Report. This is
the third year in which we have published
an extensive, standalone report from the
Annual Report detailing the Company’s
sustainability performance. We take pride
in our commitment to sustainability at
Nanosonics, helping to deliver on our
mission and contributing to a safer and
better environment for patients, clinics and
their staff around the world.
We have retained the usual format for this
year’s report. The report is divided into four
key sections: governance, environment,
people & culture, and communities.
In addition, we have provided some
additional context for how our healthcare
solutions deliver sustainability outcomes for
our stakeholders. I am particularly pleased
to see continued development of the
Company’s reporting against international
reporting standards and more detailed
year-on-year data disclosure and
target-setting.
In addition to the emphasis on
healthcare solutions described above,
I am also particularly pleased to see
a further emphasis on our greatest
asset, our people, in this year’s report.
The Nanosonics global team have shown
a remarkable commitment to our Values
of Collaboration and Agility in navigating
the return-to-work arrangements, and
contributing to community causes, whilst
still making enormous strides in achieving
our mission: Infection Prevention. For Life.
MICHAEL KAVANAGH
CEO & President
“We see sustainability as a key
consideration for our business,
and one that is fully aligned with
our Values and Mission. We are
fortunate that our unique healthcare
solutions are in many respects neatly
aligned with sustainability principles
which means we achieve positive
sustainability outcomes whilst
addressing our customer’s important
infection control needs.”
MICHAEL KAVANAGH
CEO & President
FOR MORE INFORMATION
See Nanosonics’ 2022
Sustainability Report available at
www.nanosonics.com/investor-
centre/reportsand-presentations/
2022
SUSTAINABILITY.
REPORT.
NANOSONICS LIMITED
NANOSONICS LIMITED I ANNUAL REPORT 2022 2 3
E S G A T A G L A N C E
GOVERNANCE
PROGRESS MADE IN RESPECT OF
SUSTAINABLE
SUPPLY CHAIN
INITIATIVE
ARTICULATED
NANOSONICS’
CONTRIBUTION
TO THE UNITED NATIONS SUSTAINABLE
DEVELOPMENT GOALS
STRENGTHENED
IT, PRIVACY AND
CYBER SECURITY
PROTECTIONS
AS WE MOVE TOWARD
ISO27001 ACCREDITATION
ENVIRONMENT
68% OF
TOTAL WASTE
IN AUSTRALIA DIVERTED
TO RECYCLING
COMMITMENT
TO WORKING TOWARDS
AUSTRALIAN PACKAGING COVENANT
ORGANISATION 2025 TARGET
14 TONNES
OF END-OF-LIFE PRODUCTS AND
SERVICE PARTS RESPONSIBLY
RECYCLED IN ACCORDANCE WITH
WEEE AND OTHER REQUIREMENTS
PEOPLE & CULTURE
94% OF
EMPLOYEES
STRONGLY BELIEVE IN THE
PURPOSE OF NANOSONICS
FEMALES MAKE
UP 42%
OF THE GLOBAL WORKFORCE,
41% OF SENIOR MANAGEMENT AND
39% OF STEM-RELATED POSITIONS
ACHIEVED 100%
OF DIVERSITY OBJECTIVES AND
SUBSTANTIALLY ALL OF OUR
INCLUSION OBJECTIVES
COMMUNITIES
$38,500
RAISED THROUGH VARIOUS
CHARITABLE INITIATIVES
16 STUDENTS
PARTICIPATED IN INTERNSHIP PROGRAMS
ACROSS SEVERAL DEPARTMENTS
WIDENED
THE RANGE
OF COMMUNITY ACTIVITIES WITH
MORE TO FOLLOW THROUGH THE
ESTABLISHMENT OF THE COMMUNITY
ENGAGEMENT COMMITTEE
INFECTION PREVENTION. FOR LIFE. 2 4
P R O T E C T I O N B Y D E S I G N
RISK RECOGNITION
GROWS WORLDWIDE
This year has seen several reminders
around the need for standardised
ultrasound infection prevention guidelines to
reduce the risk of cross-contamination and
protect patient safety. There is a growing
acceptance of the infection risks associated
with ultrasound probes, and of the need for
validated, automated high-level disinfection
(HLD) of semi-critical medical devices and
critical devices that cannot be sterilised.
A validated method of disinfection for
semi-critical ultrasound probes is essential
for patient safety. In Germany, the Supreme
State Authorities responsible for medical
devices (AGMP) and the Federal Institute
for Drugs and Medical Devices (BfArM)
have joined the Robert Koch Institute
(RKI) in reinforcing the legal requirement
for validated reprocessing of semi-critical
devices1. The RKI had previously clarified
that they do not consider the final wipe
disinfection of semi-critical medical devices
to be validatable, and it is now clear
that validated reprocessing is the only
option for semi-critical devices, including
endocavity ultrasound probes, to meet
legal requirements.
A North American survey by the U.S.
Joint Commission (TJC) reported that 46%
of healthcare facilities were non-compliant
with their standard on intermediate,
high-level disinfection and sterilisation
of medical devices2. Following the survey,
the TJC reaffirmed that healthcare
organisations must follow the minimum level
of ultrasound probe reprocessing based
on intended use (as per the Spaulding
classification adopted by the FDA) and
manufacturer instructions for use.
In Australia, a recent survey of emergency
departments (ED) identified only 31% of
respondents had access to ultrasound
probe HLD3. The ED is a complex
healthcare delivery environment, and
standardised, reproducible, and easy-to-
use HLD options are key to support staff
and patient safety.
Two separate outbreaks in Europe and
North America last year are additional
reminders about the need for standardised
ultrasound infection prevention practices.
The North American multistate
gel-associated outbreak of
Burkholderia cepacia, which included
48 bloodstream infections, resulted in a
safety alert issued by the U.S. Centers for
Disease Control and Prevention (CDC)4.
The UK Health Security Agency (UKHSA)
also identified that a long-standing
outbreak of B. cepacia was linked to a
non-sterile ultrasound gel product used in
hospitals in the UK and Ireland5. While the
safety alerts were concerned primarily
with affected gels, both agencies took
the opportunity to reinforce guidance
around ultrasound infection prevention.
The CDC called for facilities to review
ultrasound probe reprocessing practices,
and UKHSA identified those procedures for
which higher levels of infection prevention
were expected.
There are over 150 procedures6 that
use ultrasound probes that risk contact
with mucous membranes, non-intact
skin and/or sterile tissue. Ultrasound is
routinely used in obstetrics, gynaecology,
radiology, cardiology, critical care, and the
operating theatre.
TROPHON ® – UNRIVALLED
HLD EFFICACY
The body of evidence demonstrating
trophon technology efficacy continues to
set the standard in automated HLD. As the
only automated technology with both FDA
classification and CE-Mark registration,
trophon represents the gold standard.
trophon delivers effective HLD by
generating a ‘sonically-activated’ hydrogen
peroxide (H2O2) mist which is unimpeded by
any shadows, crevices and grooves on the
ultrasound probe.
The trophon technology has demonstrated
microbial efficacy against the widest range
of clinically relevant pathogens, including
bacterial endospores, mycobacteria, fungi,
vegetative bacteria and virus. This efficacy
spectrum includes multi-drug resistant
bacteria, blood borne viruses (Hepatitis B,
HIV) and sexually transmitted infections
such as chlamydia, gonorrhoea and human
papillomavirus (HPV).
While trophon has not been tested directly
against SARS CoV-2 and Monkeypox
viruses, these fall into the category of
enveloped viruses, where trophon has been
proven to be highly effective.
INDUSTRY-LEADING TROPHON
PROBE COMPATIBILITY PROGRAM
Nanosonics is continuing the collaboration
with all major and several specialised
ultrasound probe manufacturers to ensure
that their probes are tested, approved, and
endorsed for use with trophon devices.
In the past year, the compatibility list grew
to over 1,200 ultrasound probes across 26
Original Equipment Manufacturers (OEM).
The trophon® family includes trophon® EPR and trophon®2 devices which share the same core technology of 'sonically-activated' hydrogen peroxide.
1. AGMP, BfArM, RKI. Validation of the final disinfection of semi-critical medical devices using wipe disinfection. Available at https://www.rki.de/DE/
Content/Infekt/Krankenhaushygiene/Aufb_MedProd/Validierung-Desinf-semikrit-MedProd.html. Accessed July 2022.
2. Joint Commission Online Newsletter – August 11, 2021. Available at https://www.jointcommission.org/-/media/tjc/newsletters/joint-commission-
online-aug-11-2021.pdf. Accessed July 2022.
3. Manivel V et al. Australas J Ultrasound Med. 2021 Sep 12;24(4):187-207.
4. Centers for Disease Control and Prevention. Multistate Outbreak of Burkholderia cepacia Infections Associated with Contaminated Ultrasound Gel.
Available at https://www.cdc.gov/hai/outbreaks/b-cepacia-ultrasound-gel/index.html. Accessed July 2022.
5. UK Health Security Agency National Patient Safety Alert NatPSA/2021/010/UKHSA.
6. Nanosonics analysis, SDMS guidelines, market reports.
NANOSONICS LIMITED I ANNUAL REPORT 2022 2 5
“We love the trophon device’s
ability to do work while we
move on to other tasks.”
KERRI SCOTT, LEAD SONOGRAPHER, PHYSICIANS EAST.
These numbers position Nanosonics as
the industry leader in scientifically proven
probe compatibility.
The rigorous trophon Probe Compatibility
Program ensures that each probe is
exposed to thousands of trophon cycles,
then functionally tested and approved
by OEMs before listing in the trophon
compatibility database.
CONSISTENT PROTECTION
FOR EVERY PATIENT
Automated HLD continues to be
recognised as best practice worldwide for
semi-critical probes and critical probes
that cannot be sterilised, reducing the risk
of cross-contamination between patients
and allowing facilities to standardise
best practice infection prevention for
their patients.
Designed with the user and their workflow
needs in mind, trophon2 devices guide
the user through the required steps of
preparing, disinfecting, storing and tracing
probes throughout the reprocessing
workflow. The automated workflow,
which includes digitised traceability
replacing cumbersome handwritten
logbooks, frees up several minutes of
hands-off time for the user – time which
can be spent with the patient.
The trophon portfolio offers a series of
consumable and accessory products
to provide a total ultrasound probe
reprocessing solution. These include
cleaning and drying wipes to prepare
the probe before the HLD process,
specialised probe bags to provide effective
probe storage between patient use,
and connectivity solutions and services
to facilitate automated disinfection
record management.
SUSTAINABLE AND
SAFE-TO-USE HLD
The trophon technology achieves effective
HLD without damaging the sensitive
probe or exposing patients, staff and the
environment to dangerous chemicals –
the ‘sonically-activated’ hydrogen peroxide
(H2O2) mist is broken down by the trophon
device to environmentally friendly oxygen
and water after each HLD cycle.
As a self-contained system, the
trophon device can be safely placed
in the examination room next to the
ultrasound console, further maximising
patient throughput and clinical
workflow efficiencies.
INFECTION PREVENTION. FOR LIFE. 2 6
N A N O S O N I C S A U D I T P R O ™ S T A N D A R D I S I N G
U L T R A S O U N D I N F E C T I O N P R E V E N T I O N P R A C T I C E S
AUTOMATED DIGITAL
TRACEABILITY LINKING INFECTION
CONTROL DATA TO PATIENT;
DELIVERING A NEW STANDARD
IN ULTRASOUND INFECTION
CONTROL MANAGEMENT
Many national infection control standards
and guidelines across the world require
facilities to collect reprocessing cycle
information, medical device identifiers,
procedure information and patient details to
demonstrate that semi-critical and critical
devices have been appropriately high-level
disinfected between patients 1-8.
Traditional mechanisms to capture the
necessary information are often manual
and time-consuming. As a result, there is
pressure to move to automation to improve
the accuracy of the information collected,
improve clinical workflows, and enable the
quick and confident retrieval of records
during compliance audits.
DIGITAL AUTOMATION DRIVING
STANDARDISATION
Nanosonics AuditPro equips facilities to
efficiently monitor ultrasound infection
prevention practices, driving increased
compliance to Standard Operating
Procedures (SOP) to better protect
patients, staff and organisations for every
ultrasound procedure.
The digital system provides end-to-end
automated data traceability and efficient
infection control compliance management
for ultrasound probe infection prevention.
With built-in education as part of the clinical
workflow, each procedure is qualified
against the Spaulding classification to
standardise the infection prevention
decision across multiple operators,
departments and facility sites every
time. Powered by trophon AcuTrace®
technology, facilities can, for the first
time, have complete data visibility across
patients, probes, clinical procedures and
reprocessing records.
PRODUCT DETAIL
The AuditPro automated digital system
intelligently links reprocessing workflow
data from trophon2 with probe and
patient procedure identifiers in real-time
to produce:
• A searchable digital logbook,
• Data-led infection control insights to
guide decision making, and
• Real-time alert notifications allowing for
fast risk management.
AUDITPRO DELIVERING CLINICAL
EFFICIENCY AND RISK REDUCTION
AuditPro launched in June 2021 and is
currently installed within facilities in the US
and Ireland, with further rollouts planned
for other markets over FY23. Feedback
from early adopting sites of this novel
technology has indicated strong clinical
user acceptance and demonstrated
consistent clinical compliance to facility
ultrasound infection control SOPs,
resulting in increased clinical efficiency
and risk reduction through standardisation
and automation.
EFFICIENCY GAINS
A recent efficiency study conducted
by an installed facility demonstrated a
sixfold reduction in ultrasound infection
control audit trace time9, providing
significant efficiency gains, following the
implementation of the AuditPro system.
RISK REDUCTION
In another facility, AuditPro was
successfully assessed in an external
compliance audit to meet accreditation
requirements. This audit demonstrated
elevation to 100% compliance following the
installation of AuditPro, demonstrating the
success of automated standardisation in
reducing risk10.
References:
1. AAMI ST58:2013 Chemical sterilization and high-level disinfection in health care facilities.
2. Association of periOperative Registered Nurses (AORN). High-Level Disinfection. AORN Guidelines for perioperative practice. Online: AORN, Inc; 2018
3. Canadian Standards Association (CSA) (2018). CAN/CSA-Z314-18 Canadian medical device reprocessing.
4. ASNZS 4187:2014 Cleaning, disinfecting and sterilizing reusable medical and surgical instruments and equipment, and maintenance of associated
environments in health care facilities.
5. Kommission für Krankenhaushygiene und Infektionsprävention (KRINKO) 2012. Anforderungen an die Hygiene bei der Aufbereitung von
Medizinprodukten. Bundesgesundheitsblatt – Gesundheitsforschung – Gesundheitsschutz: 66
6. Health Service Executive (HSE) Quality Improvement Division (2017). HSE Guidance for Decontamination of Semi-critical Ultrasound Probes;
Semi-invasive and Noninvasive Ultrasound Probes. Document: QPSD-GL-028-1.
7. European Society of Radiology (ESR) 2017. Infection prevention and control in ultrasound – best practice recommendations from the European
Society of Radiology Ultrasound Working Group.
8. Society and College of Radiographers and British Medical Ultrasound Society 2020. Guidelines for Professional Ultrasound Practice.
9. Introduction of Electronic Traceability for Semi-Invasive Ultrasound Probes in Radiology Department, Beaumont Hospital. K.Owens 2021.
10. Hutchinson Regional Medical Center, KS.
NANOSONICS LIMITED I ANNUAL REPORT 2022 2 7
“Following the implementation of
AuditPro, a study conducted by
our Decontamination Manager
confirmed a sixfold reduction
in audit trace time freeing up
our Senior Radiologists to see
more patients.”
KATE OWENS
Beaumont Hospital, Ireland
INFECTION PREVENTION. FOR LIFE. 2 8
T H E B O A R D
STEVEN SARGENT
BBus, FAICD, FTSE
MAURIE STANG
MICHAEL KAVANAGH
BSc, MBA (Advanced)
MARIE MCDONALD
BSc (Hons), LLB (Hons)
Non-executive Director
and Chairman
Non-executive Director
and Deputy Chairman
CEO & President and
Managing Director
Non-executive Director
Mr Sargent joined the
Nanosonics Board in July 2016
and was appointed Chairman
in July 2022, having previously
been Deputy Chairman and Lead
Independent Director. He had
a 22-year career with General
Electric and has extensive global
experience across a range of
industries, including financial
services and healthcare. He was
Vice President and Officer of GE,
a member of GE’s Corporate
Executive Council and CEO of
GE Australia NZ. Mr Sargent
is currently a Director of Origin
Energy (ASX:ORG), Ramsay
Healthcare Limited (ASX:RHK)
and a Director of the Great Barrier
Reef Foundation and Chairman of
the Origin Foundation. Previously,
Mr Sargent was a director of OFX
Limited (ASX:OFX), was a Director
of Veda Group, a Director of
Bond University and a Director of
the Business Council of Australia.
Mr Stang is a Non-executive
Director and Deputy Chairman
of Nanosonics, and has been
a member of the Board since
November 2000. He was
Chairman from March 2007 until
July 2022. Mr Stang has more
than two decades of experience
building and managing
companies in the healthcare
and biotechnology industry in
Australia and internationally. His
strong business development
and marketing skills have
resulted in the successful
commercialisation of intellectual
property across global markets.
He is a Non-executive Director
of Vectus Biosystems (ASX:VBS)
and has been a Non-executive
Chairman of Aeris Environmental
Ltd (ASX:AEI) since 2002.
Mr Kavanagh joined Nanosonics
as CEO and President effective
October 2013. He was a
Non-executive Director of the
Board from July 2012 to October
2013. Mr Kavanagh has more
than 29 years of international
commercial experience in the
healthcare market, having
held local, regional and global
roles in medical device and
pharmaceutical industries.
Before joining Nanosonics,
he was Senior Vice President
of Global Marketing for the
major medical device company
Cochlear Ltd, a position he held
for more than 10 years. In the
last three years Mr Kavanagh has
held no other directorships.
Ms McDonald joined the
Nanosonics Board in October
2016, bringing with her a strong
background in corporate and
commercial law, having practiced
for many years as a partner at
Ashurst. Ms McDonald was
Chair of the Corporations
Committee of the Business Law
Section of the Law Council of
Australia (2012 to 2013) and
was a member of the Australian
Takeovers Panel from 2001 to
2010. Ms McDonald is currently
a Non-executive Director of
CSL Limited (ASX:CSL), Nufarm
Limited (ASX:NUF) and the
Walter and Eliza Hall Institute of
Medical Research.
NANOSONICS LIMITED I ANNUAL REPORT 2022 2 9
LISA MCINTYRE
BSc (Hons), PhD
DAVID FISHER
BRurSc (Hons), MAppFin, PhD,
FFin, GAICD
GEOFF WILSON
ACID, BCom, ICCA, CPA,
US CPA
Non-executive Director
Non-executive Director
Non-executive Director
Dr McIntyre joined the
Nanosonics Board in November
2019. Her executive background
is in strategy, particularly in the
areas of medical technology and
healthcare, with many years as
a partner at L.E.K. Consulting
in the US and Australia where
she led the Asia Pacific Health
practice. Dr. McIntyre was a
Director of the Garvan Institute
of Medical Research for 12 years
and is a Senate Fellow of the
University of Sydney and on
the advisory committee of the
NSW Generations Fund. She is
currently a Non-executive
Director of HCF Group, Insurance
for NSW (icare) and Studiosity
Pty Ltd.
Dr Fisher has been a member of
the Board since July 2001. He is
a founding partner of Brandon
Capital Partners, a leading
Australian venture capital
provider. Dr Fisher has more than
35 years’ extensive operating
experience in the biotechnology
and healthcare industry in
Australia and overseas. He held
senior positions with Pharmacia
AB (now part of Pfizer, Inc) and
was CEO of Peptech Limited
(now part of Cephalon Inc.
(Nasdaq:CEPH). He has not held
any directorships of other listed
companies in the last three years.
Mr Wilson joined the Board in
July 2019. He has a breadth
of local and international
executive leadership and
director experience together
spanning more than 37 years,
including many years with
KPMG in Australia, Hong
Kong and the USA. He has a
strong background in finance,
audit and risk management,
as well as in Asia Pacific
markets. Mr Wilson is currently
a Director of TOLL Holdings
Limited, HSBC Bank Australia
Limited, Future Generation
Global Investment Company
Limited (ASX:FGG), ipSCAPE,
and Sydney Symphony Limited.
He is also an Ambassador
for the Australian Indigenous
Education Foundation.
INFECTION PREVENTION. FOR LIFE. 3 0
T H E E X E C U T I V E T E A M
MICHAEL KAVANAGH
BSc, MBA (Advanced)
MCGREGOR GRANT
BEc, CA, GAICD,
FGIA, FCIS
STEVEN FARRUGIA
BE, PhD
DAVID MORRIS
Bus, BAppSc, GAICD
CEO, President and
Managing Director
Chief Financial Officer
and Company Secretary
Chief Technology Officer
Michael joined
Nanosonics as CEO
and President effective
October 2013. He was a
Non-executive Director
of the Board from July
2012 to October 2013.
Michael has more than
29 years of international
commercial experience
in the healthcare market,
having held local,
regional and global
roles in medical device
and pharmaceutical
industries. Before joining
Nanosonics he was
Senior Vice President of
Global Marketing for the
major medical device
company Cochlear Ltd,
a position he held for
more than 10 years.
McGregor joined
Nanosonics in April
2011. He is responsible
for the overall financial
management of the
Company and also
serves as the Company
Secretary. McGregor
has more than 24 years’
business experience in
a number of senior roles
in the medical device
and healthcare industries
located in Australia and
the United States, and
previously worked for
Coopers & Lybrand
(now PwC) in Australia
and Europe.
Steven joined Nanosonics
as Senior Vice President,
Design and Development,
in September 2016 and
was appointed to the role
of CTO in February 2018.
He has over 21 years’
experience leading
the development of
medical devices. Prior
to Nanosonics, Steven
held a range of senior
executive roles with
ResMed, including VP
of Technology and VP of
Product Development.
He is an inventor of
almost 300 granted and
pending patents and is
an Adjunct Professor
of Engineering at The
University of Sydney.
Chief Strategy
Officer and Regional
President Asia Pacific
David joined Nanosonics
in February 2019. David
has more than 25 years
of executive leadership,
international business
development, and
strategy experience.
David was Chief Executive
Officer and Managing
Director at the Monash
IVF Group, and prior to
that he was an Executive
at Cochlear Limited,
where he was the Chief
Strategy Officer, and
the President of Bone
Anchored Solutions.
Prior to joining Cochlear
Limited, David worked
at Accenture in their
Strategy practice.
ROD LOPEZ
MBA, BEng (Hons),
GAICD
Chief Operating Officer
Rod joined Nanosonics
in April 2019. He is an
international operations
executive with over
20 years of experience,
having held critical roles
in companies such as
Cochlear and GM Holden.
During his 13-year tenure
at Cochlear, Rod held
roles such as Global
Head of Manufacturing
and Chair of the
Operational Excellence
Strategy Group. At GM
Holden, Rod held
senior management
roles across operations
and global customer
support. Rod is also an
award-winning academic
with continuing Adjunct
Faculty appointments
for over 15 years with
MGSM, AGSM and the
University of Sydney
Business School.
NANOSONICS LIMITED I ANNUAL REPORT 2022 3 1
MATTHEW CARBINES
LLB, BCom
MATTHEW LIPSCOMBE
MBA, BSc, BE
JODI SAMPSON
MBA (Exec), CPHR
KEN SHAW
BSc Finance
RONAN WRIGHT
BSc, Bus Management,
BEng
General Counsel
Chief Marketing Officer
Chief People and
Culture Officer
Regional President
for North America
Regional President for
Europe and Middle East
Matthew joined
Nanosonics in April 2022.
He has over 20 years of
experience in strategic
marketing and product
management in medical
device, high technology
and consulting fields
across the full product
development cycle.
Prior to Nanosonics,
Matthew held a range of
strategic executive roles
including Global Director
of Portfolio Strategy &
Planning at Cochlear,
R&D management at
ResMed and Founder-
CEO of an enterprise
SaaS startup.
Jodi joined Nanosonics
in April 2020. Jodi is
an experienced human
resources professional
who has contributed
to strategy, culture and
business transformation
at an executive level in
the finance, telco and IT
industries. Most recently,
Jodi was Head of Human
Resources with the
Eclipx Group. She has
also led international
human resource functions
as HR Director for
Samsung and Head
of Human Resources,
Asia Pacific at Orange
Business Services.
Ken joined Nanosonics
in September 2017 as
Regional President for the
United States, Canada
and Latin America.
He has more than
25 years’ experience in
the healthcare, medical
devices and consumer
products industries,
with a specific focus
on infection prevention
products. Most recently
Ken was the President
for Amoena GmbH and
prior to that he held
senior management
roles at Essity, Medicom,
Energizer and Pfizer.
Ronan joined Nanosonics
in September 2019
and is responsible for
Nanosonics’ continued
expansion across Europe
and the Middle East. He
has more than 20 years’
experience in infection
prevention through senior
sales, management and
business development
roles with Advanced
Sterilization Products and
Wassenburg Medical,
a global leader in
endoscope reprocessing.
Most recently, Ronan
was the Vice President of
Global Sales and a Board
member at Wassenburg
Medical, where he had
also served as Managing
Director for Ireland and
Director of Business
Development for EMEA.
Matt joined Nanosonics
in August 2017 and
was appointed to the
Executive Team in
October 2021. Matt
is responsible for all
legal matters across
the Nanosonics Group
and supports the
Company Secretary on
corporate governance
matters. Prior to joining
Nanosonics, Matt held
a variety of senior legal
roles in Australia and
abroad with a focus
on technology and
healthcare. Immediately
prior to joining
Nanosonics, Matt served
as General Counsel
for an international
software business based
in London. Matt is a
member of the Australian
Institute of Company
Directors, and the
Governance Institute
of Australia.
INFECTION PREVENTION. FOR LIFE. 3 2
D I R E C T O R S ’ R E P O R T
Your directors submit their report together with the Consolidated Financial Report of Nanosonics Limited and its subsidiaries
(the Group or Nanosonics) for the year ended 30 June 2022 and the Auditor’s Report thereon.
P R I N C I PA L A C T I V I T I E S
During the year, the principal activities of the Group consisted of:
‒ Manufacturing and distribution of the trophon® ultrasound probe disinfector and its associated consumables and accessories.
‒ Research, development and commercialisation of infection control and decontamination products and related technologies.
There have been no significant changes in the nature of these activities during the year.
R E V I E W O F O P E R AT I O N S A N D F I N A N C I A L R E S U LT S
A review of operations and information on the financial results of the Group and its business strategies and prospects is set out in the
Financial and Operational Review on pages 8 to 21 of this Annual Report.
M AT E R I A L B U S I N E S S R I S K S
Nanosonics has a risk management framework to identify, assess and appropriately manage risks. Details of the risk management
framework are set out in the 2022 Corporate Governance Statement, which is available on the Company’s website. Nanosonics’
material business risks and how they are addressed are outlined below. These are risks that may materially adversely affect the Group’s
business strategy, financial position or future performance. It is not possible to identify every risk that could affect the Group’s business,
and the actions taken to mitigate these risks cannot provide absolute assurance that risk will not materialise. Other risks besides those
detailed below or in the financial statements could also adversely affect Nanosonics’ business and operations. Accordingly, the material
business risks below should not be considered an exhaustive list of potential risks that may affect Nanosonics.
Risk
Description and potential consequences
Strategies used by Nanosonics to mitigate the risk
COVID-19
Change in
North American
channel strategy
COVID-19 continues to represent a risk to
the business in a number of ways. Due to
the uncertainties that COVID-19 (and future
strains thereof) represent, COVID-19 should
be considered a risk in itself and is referred
to in a number of the risk areas in this
material business risk summary. In particular,
there remains a risk that COVID-19 and/or
government measures to contain it could
further impact the Group’s employees,
supply chain, and customers.
During the year, the Company announced
a revision to its North American sales
model. This revision sees Nanosonics’
direct operations now being responsible for
an increased proportion of capital sales in
the North American market, as well as the
ongoing provision of consumables to all
customers. This represents a potential risk
to Nanosonics’ growth rate.
The business has put in place a number of mitigations
for the various risks posed by COVID-19. These include
Work Health and Safety (WHS) protocols and people
policies to support our people, increased inventory and
other mitigations to improve the resilience of our supply
chain, and alternative selling models to better engage
with our customers.
Whilst this topic can be characterised as a risk, the
Company considers that the risks have been adequately
mitigated as evidenced by the Company’s FY22 H2 results.
Further, there are a range of benefits to Nanosonics that flow
from the revision.
The Group expanded its own direct operations in North
America and now has significant direct sales capability in
place which can be scaled further. A number of members
of the previous GE high-level disinfection team have joined
Nanosonics during the year. The Group has also appointed
other distributors and resellers in the USA (many of whom
are ultrasound OEMs) and has extended its relationship with
its key distributor customer. Further, a large proportion of the
Company’s sales comprise consumables, which continue
independent of the changes to its relationship with its key
distribution customer.
NANOSONICS LIMITED I ANNUAL REPORT 2022 3 3
D I R E C T O R S ’ R E P O R T
Risk
Description and potential consequences
Strategies used by Nanosonics to mitigate the risk
Research &
development and
commercialisation
Competition
Intellectual
property
Nanosonics currently has a platform
technology, trophon, and recognises the
need to expand its product portfolio by
creating new products. Development and
subsequent commercialisation of any new
product requires a significant amount of
investment (time, money and resource
commitment).
Further, all research and new product
development programs involve inherent
risks and uncertainties which can impact
commercialisation timelines. New products
are also likely to require a range of
regulatory approvals.
The potential for increased competition
exposes Nanosonics to the risk of losing
existing and new market share.
Nanosonics is also exposed to the risk of
medical and technological advancement by
competitors where alternative products or
methods are developed and commercialised
that will impact the rate of adoption of
trophon, cause trophon to lose market share,
or render trophon obsolete.
The Company relies heavily on its ability to
maintain and protect its intellectual property
(IP), including registered and unregistered IP.
Nanosonics recognises the potential risk
of litigation for alleged infringement by
Nanosonics, the need to prosecute third
party infringers of Nanosonics’ IP, the expiry
of Nanosonics’ registered IP, and the risk
of being unable to register the underlying
subject matter or processes in any new
products.
To manage these risks, the Company has a clearly defined
framework to support the processes covering product
ideation, development and subsequent commercialisation
and has made the development of additional technologies
a key strategic priority supported with an appropriate
level of investment. In late FY21, the Company launched
a new digital traceability product, Nanosonics AuditPro™.
In addition, the Company has informed the market that it
is developing a new platform technology associated with
the cleaning of endoscopes, to be known as Nanosonics
CORIS, where significant R&D investments have continued
to be made, with regulatory and commercialisation plans
progressing. Nanosonics also engages with a range of
experts in relevant fields, as well as customers, to determine
the focus of its R&D efforts.
To address this risk, the Company has invested in R&D
for the second generation of trophon, trophon®2, and
continues to invest in the trophon product roadmap. The
trophon2 is now sold in many key markets, and regulatory
approvals continue to be obtained in new markets. Further,
the Company actively upgrades its first generation trophon
EPR fleet to trophon2 units at the appropriate time which
helps to retain its existing installed base of trophon units
in key markets.
The Company also invests in its relationships with ultrasound
OEMs, including its probe compatibility program, as well as
considering product development opportunities.
Nanosonics seeks appropriate patent, design and trademark
protection and manages any identified IP risks. Nanosonics
also recognises the significant value in unregistered IP.
Along with internal personnel to manage IP opportunity
and risk, Nanosonics works closely with specialists and
advisors internationally to monitor and manage its IP
portfolio, opportunities and risks. The trophon, for example,
is covered by 14 patent families. Most have a significant
period remaining in their term, including patents relating to
the consumables which do not expire until 2031. Additional
patents have been filed in respect of trophon2, AuditPro
and the new CORIS platform. The Group has a dedicated IP
function and an active program to continue to protect the IP
in its technology, having regard to its commercial strategy as
well as defensive purposes, as well as maintain other barriers
to entry. Nanosonics ensures that its projects, products and
related activities include an appropriate assessment of any
third-party IP profile against its own IP profile.
Supply chain
The Group is highly aware of managing
risks in the supply chain, particularly its
dependence on critical suppliers for the
supply of key materials which carries the risk
of delay and disruption. Certain materials are
available from sole suppliers and regulatory
requirements could make substitution costly
and time-consuming. There is also a risk
of ongoing COVID-19 related disruption to
Nanosonics’ global supply chain.
The Group regularly monitors its suppliers and their
performance and seeks to enter into agreements, where
appropriate, to mitigate any supply risk. Inventories are
managed in sufficient quantities to ensure continued product
supply in the short term.
The Company has managed the disruptions that have
impacted its global supply chain for its main products
arising from COVID-19 and this risk continues to be
actively managed.
INFECTION PREVENTION. FOR LIFE. 3 4
D I R E C T O R S ’ R E P O R T
Risk
Description and potential consequences
Strategies used by Nanosonics to mitigate the risk
Regulation
The Group operates in a highly regulated
industry. Medical devices are subject to
strict regulations of various regulatory bodies
where the products are sold. Regulatory
bodies perform regular audits of Nanosonics’
manufacturing sites, as well as its third-party
suppliers, and failure to satisfy regulatory
requirements presents significant risks,
including potentially compromising the
Company’s ability to sell products, and/
or result in an adverse event such as a
product recall.
The Group has a highly developed worldwide Quality
Management System to manage this risk and invests in
suitably qualified personnel to oversee the implementation of
that system. Nanosonics monitors the changing regulatory
landscape in the countries in which it operates and ensures
that its operations adjust to any changes which apply to it.
The business is also subject to annual regulatory audits from
key regulators.
Financial
The Group is exposed to foreign currency
risk and credit risk in light of the international
nature of its operations.
The management of these risks is guided by the Group’s
internal financial risk management policy. The Company
seeks external advice, as appropriate. Further information
is available in Note 8 to the financial statements.
Product liability
The Company recognises the risk that its
products (or their use) may cause damage to
a third party given the nature of the product
and the industry the Company operates in.
The Group operates a compliant Quality Management
System across all aspects of the design, manufacture and
release of products to market. The Group also has product
liability insurance in place.
The Company has programs in place for WHS, and the
attraction, recruitment and retention of talent.
The Company has a new global headquarters in
Macquarie Park which is expected to support its
growing Australia-based team to work more effectively.
The Company’s WHS and people policies have been
updated to address COVID-19 related matters, including
supporting mental health, work from home and return to
work arrangements. Physical distancing measures and
sanitiser stations were also introduced, together with
widespread education on the importance of good hand
hygiene. The Company is also enhancing its programs
for attracting, recruiting and retaining talent in the current
environment.
The Group’s priority remains taking care of its people and
protecting its strong relationships with customers and
suppliers. This risk is monitored closely in all markets.
Nanosonics is taking steps to enhance its cyber-
security strategy and disaster recovery plans with a
view to safeguarding the business against these risks,
including progressing towards ISO27001 accreditation.
Personnel
Cyber security
Nanosonics recognises that providing a safe
and rewarding working environment is critical
to its sustainability. Further, the Company
operates in a competitive market in relation
to attracting, recruiting and retaining key
talent, including scientific, medical device
regulations, and engineering talent. There
is a risk that it will be more difficult to hire
talent internationally and locally whilst
mobility restrictions are in place. Increased
competition for local talent may also impact
talent retention.
During the year, the Company has
transitioned the majority of its personnel
globally from work from home arrangements
to a hybrid approach. There remains a
risk that the COVID-19 pandemic and/or
government measures to contain it could
further impact the Group’s employees.
Nanosonics recognises the risks associated
with cyber security and the potential impact
on the Company’s operations. A cyber
security incident could lead to a breach
of privacy, loss of and/or corruption of
commercially sensitive data, and/or a
disruption of critical business processes.
This may adversely impact customers and
the Company’s business activities and cause
significant reputational damage.
The Company also recognises the need to
ensure operations can continue in the event
of a disaster impacting its critical IT systems.
NANOSONICS LIMITED I ANNUAL REPORT 2022 3 5
D I R E C T O R S ’ R E P O R T
S I G N I F I C A N T C H A N G E S I N T H E S TAT E O F A F FA I R S
In the opinion of the Directors, other than the matters described above and in the Financial and Operational Review on pages 8 to 21
of this Annual Report, there were no significant changes in the state of affairs of the Group during the financial year under review and to
the date of this report.
D I V I D E N D S – N A N O S O N I C S L I M I T E D
The directors do not recommend the payment of a dividend for the financial year ended 30 June 2022. No dividends were proposed,
declared, or paid during the financial year (2021: Nil).
The Board reviews the dividend policy regularly. The Company’s dividend policy in the future will depend upon the profitability and the
financial position and the capital allocation priorities of the Group at the relevant time.
M AT T E R S S U B S E Q U E N T T O T H E E N D O F T H E F I N A N C I A L Y E A R
On 17 August 2022, the Company issued 37,692 shares at $4.00 per share for a total of $150,768 under the Global Employee Share
Plan (GESP).
No other matters or circumstances have arisen since 30 June 2022 that have significantly affected, or may significantly affect:
a. The Group’s operations in future financial years.
b. The results of those operations in future financial years.
c. The Group’s state of affairs in future financial years.
L I K E LY D E V E L O P M E N T S A N D E X P E C T E D R E S U LT S O F O P E R AT I O N S
Comments on expected results of the operations of the Group and business outlook are included in the Financial and Operational
Review on pages 8 to 21 of this Annual Report.
Further information on likely developments in the operations of the Group and the expected results of operations have not been
included in this Annual Report because the Directors believe it would be likely to result in unreasonable prejudice to the Group.
E N V I R O N M E N TA L R E G U L AT I O N
The Group is subject to statutory environmental regulations. The Board believes that the Group has adequate processes in place to
manage its environmental regulatory obligations and is not aware of any breach of those environmental regulations as they apply to
the Group.
D I R E C T O R S A N D C O M PA N Y S E C R E TA R Y
During the year and to the date of this report, the Board of Nanosonics Limited comprised Steven Sargent, Maurie Stang, Geoff Wilson,
David Fisher, Marie McDonald, Lisa McIntyre, and Michael Kavanagh.
During the year and to the date of this report, McGregor Grant is the Company Secretary.
Mr Stang stepped down as Chairman on 1 July 2022 and assumed the role of Deputy Chairman. He will retire from the Board at the
AGM on 18 November 2022. Mr Sargent was elected by the Board as Independent Chairman and assumed this position on 1 July 2022.
Information on the Directors, Company Secretary and the executive team is a part of the Directors’ report and can be found on pages
28 to 31 of this Annual Report.
As at the date of this report, Nanosonics Limited has the following committees of the Board: Audit and Risk, Nomination, Remuneration,
People and Culture (RPC), and R&D and Innovation. The Board establishes ad hoc committees focused on specific topics and during
the year, the Board convened a Related Party Committee. Details of members of the committees of the Board are included below and
on page 40 of the Remuneration Report.
INFECTION PREVENTION. FOR LIFE. 3 6
D I R E C T O R S ’ R E P O R T
M E E T I N G S O F D I R E C T O R S
The number of Directors’ meetings, including meetings of the committees, held during the year ended 30 June 2022, and numbers
of meetings attended by each of the Directors were as follows:
Full meetings
of Directors1
Audit and Risk
Nomination
RPC
R&D and
Innovation2
Related Party3
Held4 Attended Held4 Attended Held4 Attended Held4 Attended Held4 Attended Held4 Attended
Meetings of committees
Maurie Stang
Steven Sargent
Geoff Wilson
David Fisher
Marie McDonald
Lisa McIntyre
Michael Kavanagh
17
17
17
17
17
17
17
17
17
16
17
17
17
17
5
5
5
5
5
5
5
55
45
5
3
5
5
55
2
2
2
2
2
2
2
2
2
2
2
2
2
25
6
6
6
6
6
6
6
6
6
6
65
6
65
65
3
3
3
3
3
3
3
3
3
35
3
35
3
3
—
3
3
3
3
3
3
—
3
3
3
3
3
35
1. A number of additional Board meetings were held during the year. These essentially represented the continuation of a single meeting held over a number of days.
2. In addition to the R&D and Innovation Committee meeting held during the year, R&D matters were considered on a regular basis at Board meetings.
3. The Board establishes ad hoc committees focused on specific topics and during the year the Board convened a Related Party Committee.
4. Indicates the number of meetings held which the Director is eligible to attend.
5. Attended in part or full in ex-officio capacity.
S H A R E - B A S E D PAY M E N T S
Shares issued and rights and options granted under the share-based compensation plans during the year are detailed below.
S H A R E S I S S U E D
During the year ended 30 June 2022, the Company issued a total of 370,110 (2021: 861,449) new ordinary shares in Nanosonics Limited
of which 67,616 shares were issued under the Global Employee Share Plan at an average price of $4.42 per share and 302,494 were
issued pursuant to the exercise of rights and options under the share-based compensation plans. No amount was unpaid on any of the
shares issued.
As at 30 June 2022, there were 301,835,129 (2021: 301,465,019) ordinary shares in Nanosonics Limited on issue. At the date of
this report, there were 301,872,821 shares on issue. Further information on issued shares is provided in the Share-based payments
Note 4.3 and Capital and reserves Note 9.1 to the financial statements.
S H A R E O P T I O N S G R A N T E D
During the financial year and to the date of this report, the Company granted under the terms and conditions of the Nanosonics
Omnibus Equity Plan for no consideration, 818,639 (2021: 771,787) unquoted rights with nil exercise price and 843,496 unquoted share
appreciation rights (2021: 920,633 unquoted share options) over unissued ordinary shares in Nanosonics Limited. Further information
on the grants is provided in Share-based payments Note 4.3 to the financial statements. Section 7.3 of the Remuneration Report
provides the details of grants received by Key Management Personnel.
S H A R E S U N D E R O P T I O N
At the date of this report, there were 5,782,527 unissued ordinary shares of Nanosonics Limited under option under the Nanosonics
Omnibus Equity Plan. As at 30 June 2022, there were 5,792,730 (2021: 4,825,225) unissued ordinary shares of Nanosonics Limited
under option. Further information on the options is provided in the Share-based payments Note 4.3 to the financial statements.
Share-based compensation plan
Total shares under option at 30 June 2022
Rights and options lapsed
Total shares under option to the date of this report
Number of shares
under option
5,792,730
(10,203)
5,782,527
The options entitle the holder to participate in a share issue of the Company provided the options are exercised on or after their vesting
date and prior to their expiry date. No option holder has any right under the options to participate in any other share issue of the
Company or any other entity.
NANOSONICS LIMITED I ANNUAL REPORT 2022 3 7
During the year, the auditor of the Group, Ernst & Young,
provided certain other services in addition to its statutory
duties. These activities were conducted in accordance with the
Company’s Auditor Independence Policy, and in the Company’s
view did not compromise their independence.
Details of amounts paid or payable to the auditor of the Group
in relation to audit and non-audit services are disclosed in
Note 10.5 to the financial statements.
O F F I C E R S O F T H E C O M PA N Y W H O A R E
F O R M E R A U D I T PA R T N E R S O F E R N S T & Y O U N G
There are no officers of the Company who are former audit
partners of Ernst & Young.
A U D I T O R ’ S I N D E P E N D E N C E D E C L A R AT I O N
A copy of the auditor’s independence declaration as required
under section 307C of the Corporations Act is included on
page 63 of this report.
A U D I T O R
Ernst & Young was appointed auditor effective from 3 November
2017 and continues in office as auditor in accordance with
section 327 of the Corporations Act.
C O R P O R AT E G O V E R N A N C E
The Company’s Corporate Governance Statement and the
ASX Appendix 4G are released to ASX on the same day
the Annual Report is released. The Corporate Governance
Statement and Corporate Governance policies can be found
on the Company’s website at http://www.nanosonics.com/
Investor-Centre/Corporate-Governance.
R E M U N E R AT I O N R E P O R T
The Remuneration Report forms part of the Directors’ Report.
This report, which includes the Financial and Operational
Review (on pages 8 to 21), the Information on the Board and
the Executive Team (on pages 28 to 31) and the Remuneration
Report (on pages 38 to 61), is made on 23 August 2022 and
signed in accordance with a resolution of directors, pursuant to
section 298(2) of the Corporations Act.
GEOFF WILSON
Director, Sydney
23 August 2022
D I R E C T O R S ’ R E P O R T
I N D E M N I F Y I N G O F F I C E R S O R A U D I T O R
During the financial year, the Company paid insurance premiums
to insure the Directors and Secretary and Key Management
Personnel of the Company and its controlled entities.
The liabilities insured are legal costs that may be incurred in
defending civil or criminal proceedings that may be brought against
the officers in their capacity as officers of entities in the Group, and
any other payments arising from liabilities incurred by the officers
in connection with such proceedings. This does not include such
liabilities that arise from conduct involving a wilful breach of duty
by the officers or the improper use by the officers of their positions
or of information to gain advantage for themselves or someone
else or to cause detriment to the Company. It is not possible to
apportion the premium between amounts relating to the insurance
against legal costs and those relating to other liabilities.
The Directors have not included in this report the amount of
the premium paid in respect of the insurance policy, as such
disclosure is prohibited under the terms of the contract.
To the extent permitted by law, the Company has agreed to
indemnify its auditors, Ernst & Young, as part of the terms of its
audit engagement agreement against claims by third parties from
the audit (for an unspecified amount). No payment has been made
to indemnify Ernst & Young during or since the financial year.
P R O C E E D I N G S O N B E H A L F O F T H E C O M PA N Y
No person has applied to the Court under section 237 of the
Corporations Act for leave to bring proceedings on behalf of the
Company or intervene in any proceedings to which the Company
is a party, for the purpose of taking responsibility on behalf of the
Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of
the Company with leave of the Court under section 237 of the
Corporations Act.
R O U N D I N G
The amounts contained in this report and in the financial report
have been rounded to the nearest $1,000 (where rounding is
applicable) and where noted ($’000) under the option available
to the Company under ASIC Instrument 2016/191. The Company
is an entity to which that Instrument applies.
N O N-A U D I T S E R V I C E S
The Company may decide to employ the auditor on assignments
additional to their statutory audit duties where the auditor’s
expertise and experience with the Company and/or the Group
are important.
The Board of Directors has considered the position and, in
accordance with advice received from the Audit and Risk
Committee, is satisfied that the provision of the non-audit services
by the auditor did not compromise the auditor independence
requirements of the Corporations Act for the following reasons:
a. All non-audit services have been reviewed by the Audit and
Risk Committee to ensure they do not impact the impartiality
and objectivity of the auditor.
b. None of the services undermines the general principles relating
to auditor independence as set out in APES 110 Code of Ethics
for Professional Accountants as they did not involve reviewing
or auditing the auditor’s own work, acting in a management
or decision making capacity for the Company, acting as an
advocate of the Company or jointly sharing risks and rewards.
INFECTION PREVENTION. FOR LIFE. 3 8
R E M U N E R AT I O N R E P O R T
L E T T E R F R O M T H E C H A I R M A N O F T H E R E M U N E R AT I O N ,
P E O P L E A N D C U LT U R E C O M M I T T E E
Dear Shareholders,
On behalf of the Remuneration, People and Culture Committee
and the Board, I am pleased to present the Remuneration Report
for the year ended 30 June 2022 (FY22).
NANOSONICS IN FY22
Nanosonics’ demonstrated continued commitment to its growth
strategy during the year, advancing a number of important strategic
priorities. The Company reported a 17% increase in total revenue
to $120.3 million resulting from the ongoing growth in new installed
base, increased trophon2 upgrade sales and ongoing growth in
consumables and service. This was a pleasing result considering
the short-term impact of the revised sales model in North America
with GE Healthcare on second half revenue in North America. The
successful transition to the revised sales model involved substantial
work for our team and is expected to bring a number of benefits to
Nanosonics going forward.
The global installed base grew by 12%, or 3,100 units, despite
COVID conditions impacting Europe and Asia Pacific in H1 FY22.
As the external market conditions improved, the new installed
base increased by 20% in H2 in comparison to H1. It was also
encouraging to see the number of trophon2 upgrades increase
significantly over the last year, with 1,000 unit upgrades in the year.
With product expansion a cornerstone of the Company’s strategic
growth agenda, during the year the Company continued to
invest in R&D, increasing 30% to $22.4 million. This investment is
directed across multiple areas including ultrasound reprocessing,
endoscopy reprocessing and cloud solutions platform.
In the second half of the year the Company relocated to new global
headquarters and established a state-of-the-art new manufacturing
and R&D facility. The investment in this move further supports
the growth agenda of the organisation, creating an excellent
work environment to support all our employees in achieving their
best. This relocation pleasingly coincided with more employees
returning to the workplace while flexible work arrangements remain
in place. We are pleased that the total number of employees
increased by 25% to 425 employees. We continued our focus on
diversity, with the number of female Nanosonics’ employees being
comparable to last year at 42% globally. Importantly, the level of
senior management positions in the organisation held by females
increased to 41% from 38% in FY21.
Nanosonics’ culture remained strong during FY22, illustrated by
the outcomes of the Nanosonics Global Employee Engagement
Survey, where 93% of employees participated in the survey
and 94% of the employees continued to remain highly engaged
with the overall purpose of Nanosonics. Importantly, 93% of our
employees understood how their work contributes to the goals
of the Company.
FY22 REMUNERATION AND OUTCOMES
As foreshadowed in the 2021 Remuneration Report, we
implemented the second phase of an increase in the target
Short Term Incentive (STI) opportunity for Other Executive Key
Management Personnel (Other Executive KMP) from 40% in
FY21 to 50% in FY22. The Chief Executive Officer & President’s
(CEO&P) target STI opportunity remained at 60% of Total Fixed
Remuneration (TFR). We also implemented the results of a
previously postponed review of base remuneration, which resulted
in an increase to the base remuneration of 4.5% for the CEO&P
and an average of 5.6% for Other Executive KMP.
Details of the performance of the team against their FY22 metrics
are provided in section 4 of this Remuneration Report. As a result
of the transition to the revised sales model in North America in H2,
there was an impact on the outcome for the FY22 STI financial
group metrics. The financial metric outcomes were:
‒ Profit Before Tax (PBT) of $1.6 million, being below threshold
performance, resulting in 0% achievement.
‒ Global Installed Base (IB) of 3,100 new IB, being below threshold
performance, resulting in 0% achievement.
The overall outcomes for the year reflected positive outcomes
across many of the operational metrics of the business including:
‒ Good progress on the strategic R&D growth activities, and
development of product roadmaps.
‒ Seamless move to new headquarters in Macquarie Park,
including a new manufacturing and R&D centre which has
significantly increased the manufacturing capacity and
laboratory space.
‒ Effective management of supply chain and freight management
in a complex business environment.
‒ Good progress on geographic regional growth.
‒ Enhanced risk management and governance processes.
In addition, the Company successfully transitioned to the revised
largely direct North American sales model, which was not planned
at the time of the setting of the annual objectives.
Notwithstanding the achievements of the Nanosonics team across
the planned and additional operational objectives the Board was
cognisant of the shareholder experience and, accordingly, it did
not exercise any discretion in relation to the STI financial metrics. It
did however exercise discretion to increase the STI outcome for the
personal objectives for one member of Executive KMP, the Chief
Operating Officer, Mr Rod Lopez, from an outcome of 40% to 50%
to recognise his exceptional contribution to the Nanosonics and
GE transition, effective management of the supply chain ensuring
continuity of customer supply as well as the move to the new
corporate headquarters.
In summary for FY22:
‒ The CEO’s STI outcome was 30.77% of maximum (40% of target).
‒ Other Executive KMP STI outcomes ranged between 22.22%
and 40% of maximum (30% to 50% of target).
‒ The aggregate STI outcome for all KMP was 31.83%
of maximum (41.40% of target).
‒ The 2018 Long Term Incentive (LTI) outcome was 100% of
target due to the performance conditions (PBT Gate and
Absolute Compounded Annual Growth Rate (CAGR) Total
Shareholder Return (TSR) being met. Therefore, 100% of the
Performance Rights and Options vested.
There were no downward Values rating modifiers applied to the
CEO&P or Other Executive KMP in FY22.
In FY20, following a comprehensive assessment undertaken
with external remuneration consultants, Godfrey Remuneration
Group (GRG), the Board approved changes to the Executive
Remuneration Framework, in particular the design of the STI
and LTI Plans. These changes were introduced in FY21 and we
believe that they strike an appropriate balance between driving
accountability for sustainable short-term results and generating
long-term growth and value creation for shareholders.
NANOSONICS LIMITED I ANNUAL REPORT 2022 3 9
and value creation for shareholders. Furthermore, the structure
of the STI scheme is designed to capture the R&D expenses
and therefore address the disciplined management of R&D
expenditure in the short term because a significant portion of the
award is tied to the achievement of current year PBT (including
R&D expenditure). The Board believes this framework provides
the appropriate balance of running the business well for the short
term while investing for the long term.
Prior to recommending this metric, we engaged extensively with
a significant number of our large shareholders, by whom it was
well received. That support is evidenced by the high level of
Remuneration Report resolution approval over the last two years.
The feedback we received confirmed we had the balance right and
the Board considers the calculation of UROE is the measure which
is most fit-for-purpose for this tranche of the LTI award.
FY23 REMUNERATION
The Board approved some adjustments to the Executive
Remuneration framework for the coming year. For Executive KMP
STI, this involved changing the weighting of PBT and installed
base metrics from 20%/40% to a more balanced 30%/30%. In
addition, the installed base measure was changed from global
new installed base to a global trophon units measure (new
installed base and upgrades), to reflect the strategic importance
of upgrades to the business and customer experience.
In response to the external market conditions of retaining talent and
having regard to 2021/22 external market data provided by GRG in
FY22, we increased the base remuneration for Executive KMP, 6%
for CEO&P and 3.5%–5% (average 4.2%) for Other Executive KMP.
There were no increases recommended for the Non-Executive
Directors’ (NED) Board fees for FY23, with the last review and
increase having occurred in FY19.
The focus for FY23 will be to continue to reward performance to
align the interests of employees and shareholders, with a clear
focus on attraction and retention of key talent to deliver on the
Company’s continued growth and investment strategy.
As our Executive Remuneration Framework adopted in 2020
will have been in place for three years by FY24, the Committee
proposes to conduct a high-level review of the framework in
FY23 to ensure that it continues to be effective in motivating
and aligning the executive team with the Company’s strategic
ambitions and shareholder experience. Any changes will not
be implemented until FY24 and will be disclosed in next year’s
Remuneration report letter.
On behalf of the Committee and the Board, I would like to thank
shareholders for their ongoing belief in the Company’s purpose
and vision.
MARIE MCDONALD
Chairman, Remuneration, People and Culture Committee
23 August 2022
R E M U N E R AT I O N R E P O R T
Following extensive engagement with investors and proxy
advisor organisations these changes were strongly supported by
shareholders in the last two years. Full details are set out in section
3.3 and 3.4 of the Remuneration Report.
As the Company received some feedback and questions on
the LTI metrics, to ensure transparency we have reiterated our
rationale here for adopting these metrics. The LTI award contains
two performance metrics: an external, market-based metric –
Index-TSR; and an internal, financial metric – Underlying Return
on Equity (UROE).
After careful consideration as to what would be the most
appropriate comparator group for the Index-TSR metric for the
2020 LTI Award, the Company adopted the ASX300 Industrials
Index. The Board gave careful consideration to using an industry-
based comparator group, however it determined that identifying
a group of companies within the Health Care industry that were
similar enough to Nanosonics and could be considered as a
suitable ‘relative comparator’, was not possible. After considering
advice received, the Board determined that, due to Nanosonics
position within the ASX based on market capitalisation, the
TSR of the ASX300 Industrials Index was the most appropriate
comparator group.
The absence of a meaningful Healthcare comparator continued
for the 2021 LTI award. At the start of FY22, there were 38
companies with a GICS classification of Health Care Equipment
& Supplies Industry. On the bases of market capitalisation,
total assets, net assets, revenue and earnings, two companies
were significantly larger than Nanosonics across each of these
measures, one company was around the same as Nanosonics
for most measures and the rest, 35 companies, were less than
a third of Nanosonics’ size for each measure. Accordingly, there
were not sufficient Health Care Equipment and Supply companies
within a relevant size range of financial statistics (33% to 300%),
operational and geographic comparability to form a statistically
reliable peer group against which to compare Nanosonics’ TSR
performance over a three-year period.
As investors had previously indicated a preference for a TSR
measure, the Board determined that the Company’s TSR
performance for this tranche of the 2021 LTI would again be best
measured relative to the ASX 300 Industrials Index. The upcoming
2022 LTI award (to be granted in FY23) will also employ the same
comparator group.
The rationale for applying a third of the grant value to the Index-
TSR metric was due to the relative volatility of Nanosonics’ stock
price performance historically and uncertainty regarding future
TSR. The Company’s historically high Price Earnings (PE) ratio
required a significant stretch performance of management to
deliver inbuilt expectations, evident in the then share price. It is
also important to note that there is a positive TSR gate.
The second LTI metric, representing two thirds of the award, is
UROE, which excludes R&D expenses from the calculation. The
rationale for assigning two thirds of the award to the UROE metric
is to encourage management to work towards driving long-term
sustainable value for shareholders in the ‘core business’, noting
the correlation between long-term ROE in excess of the cost
of equity has a strong correlation with strong TSR outcomes
for shareholders.
Nanosonics is in the investment/growth phase and if the
R&D expenses were not excluded, a perverse incentive could
be created for management to reduce investment in future
developments/growth, to the detriment of long-term growth
INFECTION PREVENTION. FOR LIFE. 4 0
R E M U N E R AT I O N R E P O R T
The Remuneration Report for the year ended 30 June 2022 (2022 Financial Year or FY22) forms part of the Directors’ Report. It has
been prepared in accordance with the Corporations Act 2001 (Cth) (the Act), Corporations Regulation 2M.3.03, and in compliance with
AASB124 Related Party Disclosures. Except for section 4.5, this Remuneration Report has been audited as required by section 308(3C)
of the Act. It also includes additional information and disclosures that are intended to support a deeper understanding of remuneration
governance and practices, where statutory requirements are not sufficient.
R E P O R T S T R U C T U R E
The report is divided into the following sections:
1. Key Management Personnel
2. Remuneration link with Company performance and strategy
3. Remuneration Framework
4. Company performance and remuneration outcomes
5. Governance
6. Non-executive Director remuneration
7. Statutory tables and disclosures
1 . K E Y M A N A G E M E N T P E R S O N N E L
This report covers Key Management Personnel (KMP) which are defined as those who have the authority and responsibility for planning,
directing and controlling the activities of Nanosonics. The KMP in FY22 and their relevant roles during the year were as follows:
Name
Role
Non-executive
Maurie Stang
Steve Sargent
Geoff Wilson
David Fisher
Chairman, Non-independent Director
Deputy Chairman, Lead Independent Director
Independent Director
Independent Director
Marie McDonald
Independent Director
Lisa McIntyre
Independent Director
Executive
Michael Kavanagh1 Chief Executive Officer & President (CEO&P)
and Managing Director
Committee membership
Appointed
Nomin-
ation
Audit
and Risk
RPC
R&D and
Innovation
C
C
C
14 Nov 2000
6 Jul 2016
17 Jul 2019
30 Jul 2001
24 Oct 2016
13 Dec 2019
21 Oct 2013
McGregor Grant
Steven Farrugia
David Morris
Chief Financial Officer (CFO) and Company Secretary
28 Apr 2011
Chief Technology Officer (CTO)
Chief Strategy Officer (CSO) and Regional President,
APAC
5 Sep 2016
4 Feb 2019
4 Mar 2019
Rod Lopez
Chief Operating Officer (COO)
= member, C = Chairman
1. Mr Kavanagh was appointed director on 30 July 2012 and appointed CEO&P on 21 October 2013.
From time to time, the Board establishes ad hoc committees focused on specific areas. During FY22, the Board convened a
Related Party Committee, chaired by Mr Sargent, Deputy Chairman, and attended by the relevant Directors.
There were no changes to KMP during FY22. However, a number of changes to Board positions were announced on 31 May 2022:
‒ Mr Stang stepped down as Chairman on 1 July 2022 and assumed the role of Deputy Chairman. He will retire from the Board at the
AGM on 18 November 2022.
‒ Mr Sargent was elected by the Board as Independent Chairman and assumed this position on 1 July 2022.
‒ Ms McDonald was elected by the Board as Chairman of Remuneration, People & Culture Committee and assumed this position on
1 July 2022.
NANOSONICS LIMITED I ANNUAL REPORT 2022 4 1
R E M U N E R AT I O N R E P O R T
2
R E M U N E R AT I O N L I N K W I T H C O M PA N Y P E R F O R M A N C E A N D S T R AT E G Y
2.1 O v e r v i e w o f R e m u n e r a t i o n F r a m e w o r k
Nanosonics’ Remuneration Framework, outlined below, is designed to support the Company’s strategy and reward executives for
successful implementation. Additional information on the Nanosonics Remuneration Framework is provided in section 3.
The Remuneration Framework is intended to attract, motivate and retain talent to enable the Company to deliver on the growth strategy
of the core business and to develop and implement the long-term strategy through significant investments to establish Nanosonics as a
globally recognised leader in infection prevention.
E X E C U T I V E K M P R E M U N E R AT I O N O B J E C T I V E S
An appropriate balance
of fixed and variable
components.
Attract, motivate
and retain executive talent.
The creation of reward
differentiation to drive
performance and behaviours.
Shareholder value creation
through equity components.
FIXED
VARIABLE
To t a l R e m u n e r a t i o n
Total Fixed Remuneration (TFR)
Short-Term Incentive (STI)
Long-Term Incentive (LTI)
Fixed remuneration is set based on
relevant market relativities, reflecting
responsibilities, performance,
qualifications, experience and location.
STI performance criteria are
set by reference to Company and
individual performance targets relevant
to the specific position.
LTI targets are linked to
shareholder value creation.
Base salary plus any fixed elements
related to local markets, including
superannuation or equivalents.
D e l i v e r y
Part cash and part equity.
The delivery of equity as part of the
award facilitates Executive KMP share
ownership in the business as encouraged
by the Company’s Share Ownership
Policy. The equity component is deferred
to facilitate malus/clawback policies,
and to create a longer-term aspect
to the short-term incentive.
Equity is held subject to performance
and service tests. The measurement
period is three years to create a long-term
focus aligned with the financial interests
of the Company shareholders.
S t r a t e g i c i n t e n t a n d m a r k e t i n g p o s i t i o n i n g
TFR will generally be positioned
at the median compared to relevant
market-based data considering
expertise and performance
in the roles.
Performance incentives are directed
to achieving demanding growth targets.
TFR + STI is intended to be positioned
competitively when compared to
groups of similar companies.
LTI is intended to align Executive KMP
with the Company’s long-term growth
strategy and shareholders’ interests.
Total Remuneration is intended to be positioned competitively when compared to relevant market and internal relativities
2.2 A s s e s s m e n t o f b e h a v i o u r s a g a i n s t N a n o s o n i c s ’ C o r e V a l u e s
Nanosonics believes that the value created by desirable behaviours is inextricably linked to sustainable long-term value creation for
shareholders. Our Values, desired behaviours and the relationship with our customers and the broader community are taken into
consideration when assessing individual performance which has implications on the modification of variable remuneration where
appropriate. The Board conducts a formal behavioural assessment of each Executive KMP as part of their overall performance review.
INFECTION PREVENTION. FOR LIFE. 4 2
R E M U N E R AT I O N R E P O R T
3
R E M U N E R AT I O N F R A M E W O R K
3.1 Ta r g e t r e m u n e r a t i o n m i x
The remuneration mix for each Executive KMP is weighted to provide an appropriate balance between fixed and variable performance-
based remuneration to ensure focus on short, medium, and longer-term performance. The Board considers that this approach aligns
Executive KMP remuneration with shareholders’ interests and expectations. A portion of executive remuneration is paid in equity
(48% for the CEO&P and 37.5% for Other Executive KMP at Target achievement). The tables below show the CEO&P remuneration mix
and the average remuneration mix for the Other Executive KMP and reflects the increased STI opportunity for Other Executive KMP in
FY22 to 50% from 40% in FY21.
CEO&P REMUNERATION MIX
Minimum
$755,000
Target
$1,888,000
Stretch
$2,703,000
100%
40%
28%
12%
12%
36%
60% Performance based
48% Equity based
11%
11%
50%
72% Performance based
61% Equity based
OTHER EXECUTIVE KMP REMUNERATION MIX
Minimum
$416,000
Target
$833,000
Stretch
$1,103,000
100%
50%
38%
TFR
Cash STI
Deferred STI
LTI
12.5% 12.5%
25%
50% Performance based
37.5% Equity based
12%
12%
38%
62% Performance based
50% Equity based
3.2 To t a l F i x e d R e m u n e r a t i o n ( T F R )
TFR comprises base salary plus any fixed elements relating to local markets, including superannuation or equivalent. In addition to base
salary, executives may receive benefits in line with local practice, such as health insurance and a car allowance.
TFR for Executive KMP is benchmarked regularly for market competitiveness by reference to appropriate independent and externally
sourced comparable information. Adjustments are only made in response to individual performance, an increase in job responsibilities,
changing market conditions or promotion. Any adjustment to Executive KMP remuneration is approved by the Board, based on
recommendations by the CEO&P and the Remuneration, People and Culture Committee.
Target Total Remuneration (TTR) is comprised of an appropriate mix of remuneration elements, including TFR, short-term and long-term
variable components. The intended long-term market pay position of TTR is P62.5.
NANOSONICS LIMITED I ANNUAL REPORT 2022 4 3
R E M U N E R AT I O N R E P O R T
3
R E M U N E R AT I O N F R A M E W O R K c o n t i n u e d
3.3 S h o r t -Te r m I n c e n t i v e ( S T I )
As foreshadowed in the 2021 Remuneration Report, the second phase of an increase in the target STI opportunity for Other Executive
KMP was implemented from 40% in FY21 to 50% in FY22. The CEO&P’s target STI opportunity remained at 60% of TFR.
The FY22 STI is dependent on meeting Group Financial and Operational metrics for the year, as detailed below:
Purpose
To motivate and reward executives for the achievement against annual weighted metrics which are approved by
the Board at the beginning of the financial year.
Performance
measures
The measure for metrics with stretch outcomes, for example the Group Financial metrics, will be scaled according
to outcome levels with the reward calculated on a straight-line basis between each level. The three performance
levels are:
Threshold: Represents a minimum level of outcome that would result in a reward.
Target: Represents the desired outcome that is considered challenging and reasonably achievable.
Stretch: Represents the upper limit of outcomes that are inherently challenging.
The targets for the performance levels within each discrete metric are approved by the Board, taking into
consideration prior performance, market conditions and Board approved budgets. The CEO&P metrics for
FY22 are:
‒ Group Financial metrics (60% weighting) with achievement at Threshold resulting in award of 50% of weighted
opportunity, achievement at Target resulting in award of 100% of weighted opportunity, and achievement at
Stretch resulting in award of up to 150% of weighted opportunity:
› Profit Before Tax (PBT) (20% weighting): PBT is considered to be an appropriate metric aligned with the
Company’s continued growth strategy and is a financial indicator that is able to be influenced by the CEO&P.
› Global Installed Base (40% weighting): Global Installed Base is considered an appropriate metric as it aligns
with shareholders’ long-term interests in driving profit. The higher weighting was applied recognising the
strategic importance of continuing to grow the installed base.
‒ Operational metrics (40% weighting): With achievement of the metric resulting in a maximum of 100% of the
weighted opportunity. The FY22 Operational metrics are aligned with the FY22 business priorities: Strategic
Partnerships, Product Expansion Strategy and three-year Operational Plan.
The weightings for each Executive KMP are as follows:
Executive KMP
Michael Kavanagh
McGregor Grant
Steven Farrugia 1
David Morris 2
Rod Lopez
Metric weighting allocation
Group
financial metrics
Individual/
operational metrics
Profit
before tax
Global
installed
base
Regional
financial
Individual/
operational
20%
20%
20%
10%
20%
40%
40%
30%
20%
40%
40%
40%
50%
30%
40%
40%
1. Dr. Farrugia, Chief Technology Officer, had a higher weighting attached to the achievement of Operational metrics on product development.
2. Mr. Morris, Chief Strategy Officer and Regional President, APAC, had a higher weighting attached to the achievement of Regional and
Operational metrics reflecting the role of Regional President, APAC.
Opportunity
CEO&P: Target opportunity is 60% of TFR, with maximum of up to 78% of TFR for achievement of Stretch outcomes.
Other Executive KMP: Target opportunity is 50% of TFR, with a maximum of up to 65% of TFR for the
CFO and COO, up to 62.5% for the CTO or up to 67.5% for the CSO and APAC President for achievement of
Stretch outcomes.
INFECTION PREVENTION. FOR LIFE.
4 4
R E M U N E R AT I O N R E P O R T
3
R E M U N E R AT I O N F R A M E W O R K c o n t i n u e d
Calculation
The overall STI outcome is calculated as demonstrated below, including the impact of the Values rating modifier.
The Values rating is a downward modifier and is based on each executive’s individual behaviour in relation to
living the Company’s Core Values of Collaboration, Innovation, Discipline, Agility and Will to Win. The Values rating
modifier is applied to the total STI outcome % in recognition of the contribution of behaviour.
In determining the total STI award, the TFR is used to calculate the amount paid to the individual during the
financial year (1 July 2021 to 30 June 2022).
Total STI
award
($)
=
TFR
($)
X
STI
opportunity
X
STI
outcome
X
(calculated on the
amount paid during
the financial year)
(% of TFR)
(includes total results of each
discrete metric, including stretch
outcomes, where applicable)
Values
rating
modifier
(0% to 100%)
Delivery
The STI is delivered as follows:
‒ 50% of STI paid in cash.
‒ 50% of STI delivered as Service Rights subject to one-year service condition and one-year exercise restriction
period, i.e. two-year lockup.
Allocation
method
The equity component will be determined based on the Volume Weighted Average Price (VWAP) of Nanosonics’
shares during the 20 business days from the date of announcement following the release of the Company’s FY22
full year results.
Dividends
Rights do not carry any dividend or voting rights prior to exercise.
Termination of
employment
To be eligible to receive the cash component, the participants must be employed by the Company and not
working a notice period at the time the cash is paid.
To be eligible to receive the equity component, the participants must be employed by the Company and not
working out a notice period from the date of grant to the vesting date.
Board
discretion
The Board retains discretion to modify STI award assessment outcomes, or the form of settlement, if it deems
it appropriate in the circumstances that prevailed over the measurement period. The Board will disclose the
application of such discretion to Executive KMP STI awards, when applicable.
NANOSONICS LIMITED I ANNUAL REPORT 2022 4 5
R E M U N E R AT I O N R E P O R T
3
R E M U N E R AT I O N F R A M E W O R K c o n t i n u e d
3.4 2 0 2 1 L o n g -Te r m I n c e n t i v e ( LT I )
At the 2021 Annual General Meeting held on 19 November 2021, shareholders approved the 2021 LTI award for the CEO&P.
The LTI structure includes two financial measures: an external, market-based metric (Index-TSR or iTSR) reflecting a Nanosonics
specific risk adjusted return relative to a return of the ASX300 Industrials Index, and an internal, earnings-based metric, Underlying
Return on Equity (UROE) to support investment in growth. These measures were first introduced in the 2020 LTI structure.
Details of the 2021 LTI award, which applies to all Executive KMP, are set out below:
Purpose
To align a significant portion of executives’ overall remuneration opportunity with the indicators or drivers of
shareholder value creation over the longer term and to align executive interests with those of shareholders.
Opportunity
CEO&P: Target opportunity is 90% of TFR, with a maximum of up to 180% of TFR for achievement of Stretch outcomes.
Other Executive KMP: Target opportunity is 50% of TFR, with a maximum of up to 100% of TFR for achievement
of Stretch outcomes.
Delivery
Equity grants to the Executive KMP were awarded as follows:
‒ The iTSR component (33.33% weighting) was awarded as Share Appreciation Rights (SARs), which are
cashless exercise options with a notional exercise price of $6.825 (determined based on the Volume Weighted
Average Price (VWAP) of Nanosonics’ shares during the 20 business days from the date of the release of the
Company’s FY21 full year results).
‒ The UROE component (66.67% weighting) was awarded as Performance Rights with a nil exercise price.
Allocation
method
The number of Share Appreciation Rights or Performance Rights granted is calculated as follows:
Number
of Rights
=
TFR
($)
X
LTI
opportunity
% at Stretch
X
Tranche
weighting
/
Value of
Right
The value of each Share Appreciation Right or Performance Right is determined using a Black-Scholes model
(prepared by an independent consultant), ignoring vesting conditions (i.e. no discounting applies).
Measurement
period
The measurement periods for the Share Appreciation Rights and Performance Rights are:
‒ Share Appreciation Rights: from the announcement of the Company’s FY21 financial results to the
announcement of the Company’s FY24 financial results based on the 20-day VWAP of the Company’s shares
following those dates.
‒ Performance Rights: from 1 July 2021 to 30 June 2024.
The performance measurement periods for the LTI plans issued prior to 2021 that have not yet vested are
summarised below:
LTI year
Measurement period
2020
2019
‒ Share Appreciation Rights: from the announcement of the Company’s FY20 financial results
to the announcement of the Company’s FY23 financial results based on the 20-day VWAP of
the Company’s shares following those dates.
‒ Performance Rights: from 1 July 2020 to 30 June 2023.
‒ 27 August 2019 to the date of the release of Nanosonics’ FY22 financial results.
Exercise
restriction
period
The Rights will be subject to an exercise restriction period of one year after the Vesting Date and may only be
exercised after that date.
In the event that a taxing point arises during employment with the Company in relation to vested Rights, and the
Exercise Restriction or disposal restrictions have not elapsed, then those restrictions will cease to apply to 50% of
the taxable Rights.
INFECTION PREVENTION. FOR LIFE. 4 6
R E M U N E R AT I O N R E P O R T
3
R E M U N E R AT I O N F R A M E W O R K c o n t i n u e d
Gate and
Performance
Conditions:
Gate
A Gate is a condition that, if not fulfilled, will result in nil vesting of certain Rights, irrespective of performance in
relation to the Performance Conditions. The Gate for the 2021 LTI is as follows:
‒ For the Share Appreciation Rights (iTSR), the Gate is that the Company’s TSR must be positive over the
Measurement Period.
‒ For UROE Performance Rights, no Gate applies.
Performance Conditions
The Performance Conditions for the 2021 LTI are:
‒ For the Share Appreciation Rights (iTSR), the Performance Condition will be based on the Total Shareholder
Return (TSR) of the Company over the Measurement Period (equivalent to the change in Share Price,
plus dividends declared assumed to be reinvested), compared to the TSR of the ASX 300 Industrials Index
after adding a premium of 3.5% at Target and 7% at Stretch which was determined by the Board in assessing
the Company’s risk profile. Vesting will be determined based on delivery of expectations which are inherently
challenging according to the following scale:
Outcome
NAN TSR performance
Stretch
Target
Index TSR% + 7.0% CAGR
Index TSR% + 3.5% TSR CAGR
Threshold
Index TSR%
Below
Continue reading text version or see original annual report in PDF format above