The operator welcomes listeners to the Q4 Fiscal Year 2024 ResMed Earnings Conference Call and introduces Amy Wakeham, Chief Investor Relations Officer. Amy discusses non-GAAP measures and forward-looking statements, and turns the call over to Chairman and CEO Mick Farrell to discuss the company's strong performance in the fourth quarter.

The company ResMed has shown strong performance and growth in all regions and segments of their business. They attribute this to an increase in demand for their sleep apnea products, as well as media attention on sleep apnea and its treatments. Their focus on operating leverage has resulted in profitable growth and they are well positioned to continue this trend. With their expertise in respiratory medicine and residential care, they are uniquely positioned to address the global health epidemic of sleep and breathing disorders. They believe in delivering healthcare in the most cost-effective and comfortable way, preferably in a person's own home. ResMed is the leading company in the sleep apnea market, which they believe is still largely underpenetrated.

ResMed is a leader in digital health solutions and has a large amount of medical data and devices sold globally. They have used this data to show that their therapy solutions are effective in lowering costs and improving outcomes for patients with chronic diseases. They plan to continue innovating in the digital health space and expanding their reach to help more people. Sales of their flow generator devices and masks have grown, with their latest mask innovation, the AirFit F40, performing well in the market.

ResMed is seeing success in the US and global markets as patients, respiratory therapists, and physicians continue to choose their products and services. They are increasing availability and introducing new products in different countries. Their resupply programs, powered by their digital health ecosystem, are helping patients adhere to therapy and improve clinical outcomes. They are also focused on expanding and growing the market through awareness and creating pathways to treatment. Their goal is to be the digital health concierge for each individual's journey to better sleep, better breathing, and better residential care. They are ramping up demand generation initiatives to raise awareness and provide access to care for sleep and breathing health.

ResMed is committed to providing both traditional healthcare options and cost-effective, social media-driven campaigns to help individuals with sleep and breathing concerns find appropriate screening, diagnosis, treatment, and management. Their digital health ecosystems, including the AirView software and myAir app, have a combined total of over 36 million users and are continuously growing. ResMed predicts that two global megatrends, increased awareness of sleep health issues driven by consumer technology companies and increased patient volumes due to efforts by big pharmaceutical companies, will further support their growth in the future.

ResMed believes that the increasing trend of consumer technology and the focus on GLP-1 medications by Big Pharma will lead to greater patient awareness and growth opportunities for their business. They plan to educate and guide patients through the process of screening, diagnosis, treatment, and ongoing management of sleep and breathing health. The emphasis on GLP-1 medications for weight loss may also drive more patients to seek treatment for other chronic diseases, including sleep apnea. This is expected to be a positive impact on ResMed's business.

ResMed has conducted a study using real world evidence on the impact of GLP-1s on patients seeking and adhering to positive airway pressure therapy. The study shows that patients prescribed with GLP-1s have a higher propensity to start and continue PAP therapy compared to those without a prescription. This is a positive trend for ResMed's business, as it brings in more motivated patients into the healthcare system. ResMed is committed to providing the best and most comfortable therapy for sleep concerned consumers.

ResMed's evidence shows that combining their device platforms with digital health solutions can achieve a high adherence rate of over 87% to PAP therapy in the first 90 days. However, they are also investing in alternative therapies for the 13% of patients who cannot adhere to PAP therapy. This includes dental devices, pharmaceutical options, and nerve stimulation technology. ResMed is also leveraging their extensive medical data to develop artificial intelligence capabilities and customer-facing products, such as compliance coach and generative AI sleep concierge. These products are being rolled out in various markets, including the US and Asia Pacific.

The company plans to continue sharing progress on their GenAI and simple ML technology, which is expected to enhance the user experience and drive consumer awareness. They have seen strong growth in their residential care software business and plan to maintain this growth in the upcoming fiscal year. They are also focused on driving operating leverage and have seen double-digit net operating profit growth in this sector. The residential care software business is integral to the company's overall growth portfolio and they are accelerating growth and driving operating leverage through various capabilities such as cloud compute and cybersecurity. They are also leading the industry in digital health technology and are scaling and driving efficiencies in their operations.

In the fourth quarter of fiscal year 2024, ResMed saw strong financial performance with a 9% increase in group revenue and a 30% growth in non-GAAP operating and net income. This was driven by the global team's focus on driving top line revenue growth while maintaining cost discipline and increasing efficiencies. The company is proud of their differentiated products and solutions that have improved over 178 million lives in the last 12 months. The CFO expressed gratitude to the team for their hard work and dedication across 140 countries. The CFO also provided an overview of the results for the quarter, which saw a 9% increase in group revenue and consistent contributions across the product and resupply portfolio.

In the June quarter, foreign currency fluctuations had minimal impact on revenue for the company. Sales in the US, Canada, and Latin America increased by 10%, while sales in Europe, Asia, and other regions increased by 8%. Device sales globally increased by 6%, while masks and other sales increased by 15%. In the US, Canada, and Latin America, device sales increased by 5% and masks and other sales increased by 17%. In Europe, Asia, and other regions, device sales increased by 8% and masks and other sales increased by 9%. Software as a service revenue increased by 10% in the June quarter. Gross margin also improved by 330 basis points to 59.1%, driven by various factors. However, there were some challenges, such as increased freight costs, which may continue to impact gross margin in the future. The company remains focused on driving initiatives to improve gross margin.

In fiscal year 2025, the company expects its gross margin to be between 59% and 60%. SG&A expenses are expected to be between 18% and 20% of revenue, with R&D expenses between 6% and 7%. Operating profit increased by 30% in the fourth quarter, with net interest expense expected to be between $1 million and $3 million in Q1 FY '25. The company also recognized unrealized losses of $15 million and expects an effective tax rate of 19% to 21% for fiscal year 2025. Net income and non-GAAP diluted earnings per share both increased by 30% in the June quarter.

The company's cash flow from operations for the quarter was $440 million, with strong underlying earnings and improved working capital. Capital expenditure was $25 million and depreciation and amortization totaled $44 million. The company reduced debt by $300 million and ended the quarter with a cash balance of $238 million. The board of directors declared a quarterly dividend of $0.53 per share, representing a 10% increase. 232,000 shares were purchased under the share buyback program for $50 million. The company plans to continue repurchasing shares at a value of $50 million per quarter in fiscal year 2025. They also plan to reinvest in growth, make tuck-in acquisitions, and continue the share buyback program. The Q&A portion of the call will be conducted by the CEO, and the first question is from an analyst regarding lower-than-expected device revenues.

The speaker discusses the strong growth in the company's devices business, with a 5% growth in the US and 8% growth in Europe, Asia, and rest of the world. They attribute this growth to demand generation and patient flow, and note that they are holding or gaining market share. There have been some changes in ASP and pricing, but the primary driver is the flow of patients.

The speaker responds to a question about the company's gross margin by stating that they expect it to continue to grow in the upcoming fiscal years. They mention potential challenges with freight costs, but still anticipate a gross margin of 59% to 60%. Another question is asked about the year-over-year trend, and the speaker clarifies that 2024 finished at 57.7% and they are guiding for a higher margin in the current year.

The speaker is asking for clarification on the positive drivers for the second half of the year. The response mentions factors such as cost optimization initiatives, scale benefits, transition to a new platform, favorable product mix, and new product introductions, which are expected to support gross margin in FY '25.

The speaker, Michael Farrell, responds to a question about Philips reentering international markets with their devices. He states that Philips is currently the fourth competitor in the market and is back in many markets in Europe, Asia, and the rest of the world. However, ResMed, the market leader, is still taking share from them. Farrell believes that Philips will have to work to repair their brand and compete with other players in the market. He also mentions that ResMed has the advantage of having the smallest, quietest, most comfortable and connected devices. He concludes by saying that ResMed will continue to beat Philips as they come back into the market.

The speaker discusses the growth of mask sales, which has been high single digits in Europe, Asia, and rest of the world and 17% in the US, Canada, and Latin America. He attributes this growth to investment in technology and subscription programs that make it easier for consumers to purchase masks. He also mentions a shift towards a more consumer-focused approach in the healthcare industry.

The speaker discusses the success of ResMed in the regulated provider-based markets and their goal to meet or beat market growth every quarter. They also mention the importance of masks in their business. The question is then raised about longer-term new patient growth and the potential for an increase due to awareness and better protocols for screening and diagnosis. The speaker notes that this has been a decades-long mission for ResMed and that they have seen success in this area during COVID. They also mention the potential impact of the big pharma GLP-1 trend in bringing in more motivated patients.

ResMed's latest update on their real-world evidence shows that 111,000 patients have seen a 10.7 absolute percentage point increase in their propensity to start CPAP. This is due to the trend of consumer tech, such as Samsung's de novo clearance to screen for severe sleep apnea from their watch. The question is whether ResMed can become the world leader in digital sleep health concierge and help patients find a path to screening, diagnosis, and treatment. They are making progress and have partnerships globally. This could potentially increase market growth rate by 50-125 basis points, but not double it.

ResMed is focused on helping patients navigate the complex global healthcare system to access their therapy. They use a combination of traditional and digital channels to reach patients, and they have seen market growth in the past five years. As the global leader in this space, they feel a responsibility to continue this growth. In terms of gross margin, they expect a gradual improvement throughout FY '25. In response to a question about pricing impact, ResMed did not provide specific details but noted that they are always monitoring and adjusting their prices to remain competitive.

Mick and Brett from ResMed are answering questions about pricing and inventory levels. Mick addresses the first question about pricing impact, saying that the company has had to deal with increased costs and has shared some of that with customers through price increases, often associated with innovation. Brett will answer the second question about inventory levels for masks and accessories, specifically mentioning that the total inventory has come down but there may be some fluctuations due to new mask inventions like the F40.

The majority of the company's growth is attributed to an increase in volume rather than pricing. The focus is on getting more patients with sleep apnea, insomnia, and COPD into the system. The company hopes to eventually share savings with customers, but for now, they are focused on investing in awareness and making sure the channel is profitable. Inventory levels have been brought down over the past year and are expected to grow in line with revenue. There is nothing specific to note about masks and accessories inventory.

Margaret Andrew from William Blair asks a series of three questions about ResMed's plans for a sleep concierge service, the potential impact of digital technologies on the market, and the company's future growth. CEO Michael Farrell responds by discussing the potential for demand generation and leveraging the current opportunities in the pharmaceutical and wearable technology industries. He also reiterates the company's goal to become a digital health concierge for sleeping and breathing.

ResMed provides technology and services in the healthcare field, and they charge for these services. They have a large database of medical data and want to make this information accessible to the world. Patients do not have to pay for the myAir app, and the company wants to offer access to treatment pathways on a freemium basis. They may charge for advanced information and analytics. The primary goal is to help a billion people find treatment. They have analytics to measure the number of patients in the channel and how many were referred from consumer tech, big pharma, or standard referrals.

The speaker discusses their company's focus on analyzing their patient channel and driving more patients to use their products. They mention their growth in different areas of their business and their goal to continue this growth. They also mention the potential impact of Lilly's involvement in DTC advertising for sleep apnea and the potential for a higher diagnostic rate. They then discuss the different options for treating sleep apnea, including dental devices, CPAP therapy, and hypoglossal nerve stimulation.

The decision-making process for treating obstructive sleep apnea is expected to evolve over time with the introduction of GLP-1 therapy. The Wisconsin Cohort study found a diagnostic rate of 15-20% in the United States, but rates are lower in other regions of the world. Currently, the market for sleep apnea treatment is only penetrated by single digits globally and there is a need for alternative therapies. The company is investing in various treatment options including CPAP, dental therapy, and pharmaceuticals to provide care for all patients.

The goal of the continuum of care is to find the most effective and cost-efficient treatment for sleep apnea. This involves starting with CPAP, upgrading to APAP or bilevel if needed, and then considering dental therapy or pharma options. If a patient cannot tolerate these treatments, an implant may be necessary. The goal is to increase the percentage of patients receiving a proper diagnosis and treatment to improve overall health and reduce healthcare costs.

Saul Hadassin from Barrenjoey asks Mick, Brett, and Amy about the SURMOUNT-OSA write-up in the New England Journal, specifically the secondary endpoints and if there is any data on the number of people who have been able to come off CPAP after being prescribed GLP-1. Mick responds by stating that the real-world evidence is being looked at in every way possible and mentions the extraordinary results seen in the SURMOUNT-OSA trial, where even the placebo group had significant reductions in weight and HI. He also notes that the results were not as good as dental devices and positive airway pressure therapy, but still larger than expected. Mick believes that this will lead to the two companies investing in this area to obtain the indication for use and do direct-to-consumer advertising.

The speaker discusses the potential impact of a catchy tune on driving patients into the therapeutic funnel. They mention that they are closely monitoring churn rates and the use of CPAP, APAP, and bilevel therapy. However, they have not seen any increase in quitter rates with the latest generation of GLP-1s. They are conducting real-world data analysis and have a strong focus on the combination therapy of CPAP and drug therapy. They have a large number of patients in their study and plan to publish data on it in various journals. The speaker acknowledges the vast opportunities in front of them.

The speaker praises the success of ResMed and thanks the company's employees and shareholders for their contributions. They also mention the company's global reach and the positive impact it has on people's health. The call concludes with the speaker handing the call back to the moderator.

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