The operator welcomes listeners to the ResMed First Quarter Fiscal Year 2024 Earnings Conference Call and introduces the speakers, CEO Mick Farrell and CFO Brett Sandercock. They will be joined by COO Rob Douglas to answer questions. Non-GAAP measures and forward-looking statements will be discussed, and shareholders are encouraged to review the supporting schedules and SEC filings. Mick Farrell thanks shareholders for joining and highlights the company's strong double-digit growth in the first quarter.

ResMed experienced significant growth in the masks category and software as a service business, with high single digit growth in devices. The company's supply chain and manufacturing teams have allowed for global availability of their flow generator platforms. The AirSense 11 platform has been launched in multiple countries and will continue to be rolled out globally. ResMed's masks and accessories business also saw strong growth, thanks to their competitive market position and successful resupply programs driven by clinical evidence.

ResMed is experiencing strong growth in their US mask business thanks to their digital health ecosystem. They are also developing outreach and subscription programs to help patients take control of their own health. To ensure long term success, ResMed has made changes to prioritize profitable growth, including stopping some projects and increasing investment in digital health tech. These changes have resulted in a reduction of their global workforce by 5%, which was a difficult decision but necessary for the company's growth and long term mission.

The company's CEO expresses confidence in their potential for growth and outlines their three main strategic priorities: expanding their core business, developing innovative medical technology and digital solutions, and creating software for residential medicine. They believe there is a large market for their products, especially in the areas of sleep apnea and respiratory care. The company is increasing their marketing efforts to raise awareness and engage with potential customers, and they aim to act as a digital guide for patients seeking treatment.

ResMed is tracking the results of their efforts to increase patient flow into their ecosystem, including through their physician and provider-based platform AirView and patient-driven platform myAir. Patient flow has significantly increased, and the company believes that the efforts in the pharmaceutical industry to develop obesity drugs will have a positive impact on patient growth in sleep apnea and COPD. The company is also actively tracking a cohort of patients on GLP-1 medications and LPAT therapy, and they have not seen any negative effects on PAP adherence rates or participation in resupply programs. Additionally, the company believes in treating the whole person, including through a combination of cardiovascular exercise, diet and nutrition, and good sleep and breathing. They predict that this new class of drugs may become as large or larger than other commonly used pharmaceuticals.

The author predicts that with increased screening and treatment for sleep apnea and other chronic conditions through primary care, there will be a rise in patient flow and benefits for the healthcare system. They have created an epidemiology model that shows a high market penetration of a new pharmaceutical class for sleep apnea, with a projected global prevalence of 1.4 billion people in 2050. This is based on conservative population and aging assumptions, and even with aggressive adoption rates, the prevalence is still expected to be 1.2 billion in 2050.

The company predicts steady market growth for their PAP therapy, reaching 109 million patients by 2050. However, there will still be 1.1 billion people in need of treatment, and the company is investing in alternative therapies such as dental devices, pharmaceuticals, and hypoglossal nerve stem technology to help these patients. They prioritize PAP technology as the most effective and cost-efficient therapy with high adherence rates.

ResMed's recent acquisition of Somnoware complements their existing software offerings for physicians, homecare providers, and patients, with the goal of improving the end-to-end patient pathway and making it easier for sleep physicians to diagnose and manage patients. They are also investing in artificial intelligence-driven data products and capabilities to enhance the value of their cloud-connected devices. One such product, Compliance Coach, utilizes ResMed's vast amount of sleep and respiratory care data to predict patient adherence to therapy and provide coaching to home care providers to prioritize outreach and improve patient outcomes. The rollout of Compliance Coach is still in its early stages.

The joint venture between ResMed and Verily, called Primasun, will be unwound by the end of the current quarter. ResMed will take ownership of key assets and use the learnings to accelerate demand generation efforts globally. The Respiratory Care business is supported by the increasing adoption of ventilator solutions and investments in clinical trials for high flow therapy. This has the potential for future growth for ResMed.

The company is focused on addressing the increasing prevalence of respiratory diseases like COPD and neuromuscular disease. Their SaaS business saw significant growth, with a full quarter contribution from their MEDIFOX DAN business in Germany. They expect stable double digit organic growth and increased profits from their SaaS business. The company also appointed a new General Manager for their Brightree business and the CEO traveled to Germany to meet with the team from their MEDIFOX DAN business.

ResMed's growth in tech solutions for ambulant and stationary nursing homes in Germany is strong due to an aging population and government policies. Their SaaS business is an important part of their growth strategy and complements their respiratory medicine business. ResMed is focused on driving top line revenue, cost discipline, and increased efficiencies to accelerate profitability and deliver value to their stakeholders. They are confident in seeing improvements in their gross margin through GM leverage programs, including launching AirSense 11 in new global markets and increasing its availability in all countries they serve.

In this paragraph, the speaker outlines five key goals for ResMed's future growth, including increasing mask sales, expanding software solutions, reducing costs, and investing in digital health solutions. The company's mission to improve 250 million lives by 2025 remains a driving force for its employees. The speaker expresses gratitude to the company's employees for their hard work and dedication.

Brett Sandercock, speaking on behalf of the company, provided an overview of their financial performance in the first quarter of fiscal year 2024. Revenue increased by 16%, or 15% in constant currency terms, driven by strong demand for their sleep devices and masks. Sales in the US, Canada, and Latin America increased by 10%, while sales in Europe, Asia, and other markets increased by 18%. Device sales globally increased by 8%, while masks and other sales increased by 21%. Specifically, device sales in the US, Canada, and Latin America increased by 2%, while masks and other sales increased by 23%. In Europe, Asia, and other markets, device sales increased by 20%.

In the September quarter, the company's software as a service revenue increased by 32%, driven by the MEDIFOX DAN acquisition and strong performance in the HME vertical. Excluding the acquisition, SaaS revenue grew by 7%. Gross margin declined by 160 basis points, primarily due to increased costs, but improved sequentially by 20 basis points. Operating expenses increased by 15% or 14% in constant currency, mainly due to employee costs and the acquisition. The company expects SG&A expenses to be in the range of 18% to 20% for fiscal year '24, taking into account the impact of a recent restructuring that will result in a 5% reduction in the workforce. The restructuring is expected to be completed in the second quarter of fiscal year '24.

In the first quarter, the company's R&D expenses increased by 20% or 21% in constant currency terms, with a 6.9% expense as a percentage of revenue. Operating profit increased by 10% due to strong revenue growth, but gross margin decreased. Net interest expense was $15 million and is expected to be between $12 million to $14 million for the rest of the fiscal year. The effective tax rate for the quarter was 20.1% and is estimated to be between 19% to 21% for fiscal year '24. Net income and non-GAAP diluted earnings per share both increased by 9%. The company recorded a provision of $8 million and acquisition-related expenses of $0.5 million, treated as non-GAAP items. Losses of $4.5 million were recorded for the Primasun joint venture, which will be winding down operations. Cash flow from operations was $286 million, with $30 million in capital expenditures and $45 million in depreciation and amortization. The company ended the quarter with $209 million in cash, $1.4 billion in gross debt, and $1.2 billion in net debt.

The company reduced its debt by $80 million during the quarter and has a solid liquidity position. They also closed a previously announced acquisition and declared a quarterly dividend. The company plans to resume their share buyback program and reinvest in growth through R&D and acquisitions. Mick Farrell discussed the potential for GLP-1s to complement CPAP rather than substitute it, and mentioned upcoming clinical trials that could influence future developments.

The baseline estimation of 936 million patients in 2015 growing to 1.4 billion by 2050 is conservative and does not include the potential impact of GLP-1 drugs. A high penetration analysis shows a potential of 1.2 billion patients in 2050. The company will continue to monitor and update their epidemiology model. Early data on patients using GLP-1s and PAP show no change in adherence or resupply programs, and there is an increase in patients entering the funnel.

The speaker addresses the concern about the effectiveness of their demand generation programs in bringing in patients with moderate to severe sleep apnea. They believe that their approach can bring in more patients, even those with mild sleep apnea who may be avoiding the healthcare system. They have observed high patient flow and steady adherence rates in their existing patient base and an increase in new patients. They estimate that there are still millions of potential patients who could benefit from their treatment. The speaker then responds to a question about the 22.5 million patients on myAir, stating that they are unsure of the breakdown of mild, moderate, and severe cases, but believe that many of these patients are not currently seeking treatment.

Mick Farrell, CEO of ResMed, discusses the data on sleep apnea and how it relates to patient adherence and new patient recruitment. He mentions that there are different splits on AHI (apnea-hypopnea index) but what is lacking is a split based on symptomatology. However, the company will be publishing data at upcoming conferences in 2024 to show the nuances of deltas in different subsets of patients. Overall, they are not seeing significant changes in adherence rates or new patients coming into the funnel. Farrell also highlights the severity of sleep apnea and how it can impact patients' quality of sleep. He mentions that they are analyzing various factors such as AHI, symptomatology, and craniofacial distance between the tongue and uvula. He also notes that there may be an impact on sleep apnea from weight loss medications in the future.

The speaker discusses the company's expected gross margin for the next fiscal year, which they believe will improve due to factors such as pricing increases and changes in product mix. They also mention their large database and ongoing research efforts to support their claims.

The company expects tailwinds in improved product mix, manufacturing efficiencies, and freight cost reductions in FY24. They also anticipate stabilized component costs and the AS10 to AS11 transition to contribute to gross margin. The company is tracking CPAP patients and GLP-1s and plans to publish data on their outcomes. The market has reacted negatively to the assumption of a 30-40% reduction in TAM, but the company believes there is strong scientific evidence to support their products.

The company is tracking 17,000 patients who have undergone bariatric surgery and are now on PAP therapy with significant weight loss. They will be publishing data on this cohort in peer-reviewed and clinical press. They are also finding a balance between releasing data for investors and for clinical purposes. Despite the type of GLP-1 class and adherence level, there has been no change in the data. The company is also showing strong growth in device and mask resupply, indicating the success of their therapy.

ResMed's Air Solutions ecosystem has 22.5 million patients and continues to grow. They had record numbers of new patients starting up and engaging with myAir due to the success of AirSense 11. They will continue to publish data on patient engagement and update their epidemiology model every quarter. There was strong mask growth in the Americas region, with a 21% increase in revenues. ResMed expects the market growth for devices and masks to be mid and high single digits, respectively, in the next few decades. They will focus on demand generation and getting more patients into their funnel.

The speaker believes that there has been an increase in patients seeking primary care due to the marketing efforts of companies in the healthcare industry. They are closely monitoring this trend and are confident in their ability to exceed market growth rates through initiatives such as resupply and new product launches. The company has been successful in gaining a strong share of patients through their demand generation efforts. The speaker also mentions the good control of operating expenses in the previous quarter and states that they will continue to keep it at 18-20% of revenue. The questioner asks if there are plans for further restructuring, to which the speaker does not directly answer.

The speaker discusses the recent workforce reduction of 5% and the company's focus on becoming a more product-led and brand-led organization. They also mention the need to engage consumers in non-reimbursed markets and reinvest in demand generation to reach more patients in need. The restructuring is complete and the company is now focused on moving forward. The speaker also acknowledges the company's record high patient flow number for the quarter.

The speaker discusses the growth of CPAP prescriptions and tests in the home sleep apnea market, noting that their company has a relatively low share in the diagnostic space. They mention tracking data from their Air Solutions System and myAir patients, as well as de-identified data from Brightree showing an increase in patients entering the treatment funnel. The speaker also mentions a global device growth rate of 8%, with particular pride in the 20% growth in Europe, Asia, and the rest of the world, where they are competing with a recently recalled competitor. They attribute their success to their products, services, and solutions, which they have been investing in for a long time.

In the September quarter of 2022, the company saw strong growth in their card to cloud solutions, despite it being a typically slow quarter due to summer in the US. They are confident in the sustainability of this growth and believe they can beat their pre-COVID growth rates in devices and masks. The gross margin in this quarter is expected to improve due to favorable FX and geographic mix, and the Astral field safety notice cost is not included in the gross margin calculation.

The company's gross margin has been impacted by component cost increases and inventory management, resulting in a reduction in year-on-year growth. The sustainability of US flow gen growth is a complicated issue due to various factors, including the impact of COVID-19, the company's spin-up on ventilators, and a competitor's recall of devices. However, the company believes they can meet and beat the market's growth rate, indicating that they do not expect a decline in sales.

ResMed is confident in their current market share and plans to continue growing in the US and 140 other countries. They have seen strong growth in their devices and masks, and intend to beat their competition by offering the smallest, quietest, most comfortable, and most connected health systems. They expect to grow at or ahead of market and drive demand to increase the overall market growth rate. In terms of their SaaS business, they anticipate double-digit growth due to their strong organic growth in the previous quarter.

The company has experienced consistent organic growth in the US and expects this trend to continue with the addition of MEDIFOX DAN. The company also has a strong product pipeline and has restructured to improve profitability. The company is confident in achieving double digit growth in the SaaS business in the coming years.

ResMed is well positioned for future success and growth. They are prioritizing the right initiatives and optimizing costs to fuel long term growth. The opportunity in the healthcare market is huge and they are seeing more people entering the system each quarter. They are committed to helping people sleep, breathe, and live better lives in 140 countries. The company thanks its employees and shareholders for their contributions. The call is now concluded.

This summary was generated with AI and may contain some inaccuracies.