NANOSONICS LIMITED — AGM Information 2018

Nov 8, 2018

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Nanosonics Limited 2018 Chairman’s Address Annual General Meeting

Friday, 9 November 2018

Thomas Keneally Room, Sydney Harbour Marriott, 30 Pitt Street, Sydney NSW 2000

Introduction

Over the last Financial Year, the Nanosonics team has grown and continued to strengthen internationally, delivering an outstanding series of milestones across virtually every dimension of the business. A key message at this AGM is that your company is ideally positioned to leverage its success and expertise in innovative infection control solutions, both geographically and into new market segments.

Our global installed base continued to grow strongly and specifically our leadership in the field of ultrasound automated reprocessing has been further driven by the successful launch of trophon2 in an increasing number of our international markets. I am pleased to report that we currently have active new programs in the Nordics, and the Middle East and we are undertaking focussed business development in Japan. All of our key international markets are growing and entry into new markets remains an important strategic imperative as the fundamentals for adoption continue to strengthen internationally.

In parallel, Nanosonics is materially accelerating its investment in Research and Development and this effort is directed at a number of unmet needs, which have been highlighted by a close collaboration with infection control peak bodies throughout the world. Today, Nanosonics is proudly an ASX 200 company with a global focus and footprint. From its early inception, your company has enjoyed substantial support from the investment community with initial investments by Brandon Capital, 3M Corporation and indeed GE as it progressed its journey. We are today a respected technology disruptor in the MedTech industry and well regarded in the capital markets.

It is increasingly understood that emerging disruptive companies must not only deliver innovation, but importantly have a superior level of execution to the competitors in markets which they wish to disrupt. Today, Nanosonics is such a company.

The last five years in particular have been transformative for the Company. Annual sales have tripled and we are listed in the ASX 200 with a market capitalisation in the vicinity of a billion dollars. Nanosonics is the market leader in ultrasound reprocessing in Australia, whilst more than 90% of our sales are exported to 19 countries. We have successfully executed our business model, with a hybrid of direct and distributor sales in key markets such as the United States, France, Germany and the UK.

Key 2018 Highlights

On behalf of our board and our entire base of shareholders, I would like to congratulate our CEO Michael Kavanagh and his entire team for delivering a series of milestones, which is captured very well by the phrase “Nanosonics punches well above its weight.” Equally, I am

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delighted to recognise that Nanosonics is now poised to leverage its many strengths into a larger share of the global infection and microbial control markets.

trophon2

A most significant achievement this year was the completion of the developmental work on trophon2, together with a successful regulatory filing and approval in the last quarter of FY 2018 and subsequent launch in the first quarter of FY 2019. trophon2 was developed in an integrated and consultative partnership with our distributors, customers and sales and technical team, further extending our leadership in the field of ultrasound reprocessing. The market response to trophon2 has been gratifying and the complete ecosystem takes the customer’s experience to a whole new level in terms of functionality, usability and workflow.

Financials and Shareholder Returns (high level overview)

Your company has maintained a strong and growing cash position whilst substantially increasing its investment in sales, marketing, service and operations, which will underpin our strategic growth plans. Key to our vision for growth is a commitment to patient outcomes, improved processes, cost efficiency and a clear focus on the environmental and OH&S benefits we can deliver to our customers. Whilst Nanosonics has a promising internal pipeline of technology innovation, it is also looking to expand its strategic relationships and indeed, potential partnerships with companies around the world, together with a capability to in-license or acquire technologies that may be accretive to our overall mission. We expect to continue to generate an increasing level of free cash flow and we believe that our strong cash reserves can be leveraged as a competitive advantage in a very uncertain world where Nanosonics can determine its growth priorities and execute them as a function of its own financial strength.

Remuneration

Nanosonics’ ongoing success is driven by the talent and dedication of the Nanosonics team. Key to our future is our capability to execute and pivot faster than our competitors and have each and every team member of Nanosonics benefit, not only in terms of work satisfaction, but also via remuneration and opportunities for equity participation.

We continue to actively evolve our remuneration structure, aligning it with corporate and shareholder objectives. We benefit from the advice of experts in the area of compensation, and most importantly, our remuneration policies and programs are derived from a deep and consultative process with our team to maintain both alignment and a shared vision of the future.

Culture and Diversity

This year’s global employee culture survey entitled "Your voice: Make it heard" received a very high employee response, with results that rated higher than industry standard across key dimensions such as passion, engagement, organisational progress, purpose, participation and people. The program generated insights that supports our continuous development of employee engagement, culture and a focus on Nanosonics being one of the leading employers of choice in the MedTech industry.

Diversity and indeed a meritocracy, are a natural outcome of our commitment to excellence. We have 30 nationalities represented in the Nanosonics workplace, 35 per cent of the fulltime workforce is female, including 29 percent of our management team. This diversity is encouraged through the organisation by proactive talent management, succession planning and a number of training and development initiatives, which all target recruitment and promotion based on individual achievement. Today and very much on a global basis,

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Nanosonics receives a continuous flow of job applications from outstanding candidates who see Nanosonics as both a successful and highly innovative market leader.

Last year, Trophon was recognised for its environmental excellence, winning the Environmental Solutions Award at the Premier’s NSW Export Awards. I’m delighted to report that we were winners again this year – this time in the Health and Biotechnology category which recognises the outstanding success of Trophon, Nanosonics’ international growth and its commercial success.

Governance

In an uncertain world, Nanosonics remains focussed on delivering the highest levels of corporate governance, together with a strong commitment to social and environmental responsibility. This is also a core component of our risk management, recognising that we are in a regulated industry and are wholly dependent on our risk management and quality systems, underpinning the strength of our value creation for our shareholders. I want to thank our directors who chair a number of sub-committees, including my deputy chair and lead independent director, Steve Sargent, who all work tirelessly to support our broad corporate and business objectives. We continue to focus on ensuring our policies are equitable, motivating and comply with best-practice standards internationally.

Conclusion

Nanosonics is proud of its past achievements but very much at an inflection point in our journey. We’re committed to leveraging our many competitive advantages but most importantly, the domain expertise of our team, which is second to none. This team has demonstrated an impressive capability from inception of a product to driving it through the full spectrum of research and development, achieving regulatory approvals, and indeed market leadership. Crucially, our team has demonstrated that not only can it secure regulatory approval, but critically maintain it through each and every subsequent audit. Your company is driven by a belief that innovation in technology and excellence in execution will drive financial success.

Today in the US, we are now in approximately 4,000 hospitals and healthcare facilities including all of the top 50 hospitals. Globally as at June 30 we had an installed base of over 17,700 units, which drives approximately 55,000 Trophon disinfection cycles daily, with practitioners worldwide secure in the knowledge that the Trophon ecosystem affords the ultimate in efficiency, effectiveness and protection. In the US, we have achieved a penetration of approximately 40% of the estimated 40,000 unit potential with an ongoing growth trajectory. Other international markets are now being driven by strengthening guidelines, and the fundamentals for adoption growing stronger every day, together with an increasing support from the leading global ultrasound OEMs.

We are committed to the investment in our growth program. We expect an expansion of investment in research and development to approximately $13 million in FY19. In addition to our successful launch of trophon2 and a number of related ecosystem products, our aim is to continue investment in R&D where we are building a pipeline of new product opportunities with the goal of introducing a range of new products over time commencing with the first by the end of FY20 (subject to regulatory approval). Our new product pipeline is targeting attractive new markets beyond the Trophon ultrasound segment.

I am privileged to have been a part of Nanosonics’ journey and tremendously excited by our future potential. Our customers and their patients face many challenges, generated by an ever-evolving array of micro pathogens, which for many reasons, are likely to get worse. Our

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commitment to “infection prevention for life” is a proactive statement that drives our absolute belief that making money by doing good is a hallmark of the most successful companies.

We acknowledge and thank every member of the Nanosonics team for their outstanding contribution to the company’s success, achievements and future horizons. I take this opportunity to recognise the tireless efforts and commitment of my fellow board members, who bring a very broad range of expertise and experience to our board. Key to our journey has been the support and conviction of our growing shareholder base. We recognise the ongoing support we have from the capital markets and key analysts and are fully committed to ongoing excellence.

I would now like to invite the Company’s CEO and President, Mr Michael Kavanagh to deliver his presentation. Michael has served as CEO for the past five years and, under his outstanding leadership, Nanosonics continues to go from strength to strength.

Mr Maurie Stang Chairman

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