The paragraph introduces the ResMed Q1 Fiscal Year 2025 Earnings Conference Call. Kevin, the operator, initiates the call before handing over to Amy Wakeham, the Chief Investor Relations Officer, who welcomes participants and mentions the availability of the webcast replay and report materials online. She explains that non-GAAP measures will be used in the presentation, advises reviewing GAAP financial information for a complete understanding, and includes a disclaimer about forward-looking statements. Finally, ResMed's Chairman and CEO, Mick Farrell, begins discussing the strong quarterly growth results.

ResMed reported strong financial performance, with an 11% increase in revenue driven by high demand for their sleep and breathing health devices, masks, and residential care software. The company saw double-digit revenue growth across all product and geographic categories, supported by new patient activations and ongoing re-supply. Strong market performance from the AirSense 10 and 11 platforms contributed to global device sales. Operating excellence programs led to a 27% increase in operating profit and a 34% rise in earnings per share. The results reflect the company's commitment to improving health outcomes and investing in advanced technologies like AI and GenAI.

ResMed is focused on enhancing efficiencies, managing costs, and investing strategically for sustainable growth. Device sales are strong, maintaining market leadership with the AirSense 10 and 11 platforms, which are expanding globally with regulatory approvals. The masks and accessories business has grown 11% year-over-year, with the AirFit F40 mask performing well due to its comfort and design. ResMed announced the AirTouch N30i, a new mask with a fabric-wrapped frame for added comfort, set to launch in select markets soon.

The paragraph discusses a new mask technology that aims to enhance CPAP, APAP, and bilevel therapy by improving sleep quality, thus benefiting patients' daily well-being. It highlights the importance of ReSupply programs, supported by platforms like myAir, AirView, and Brightree, in promoting therapy adherence and improving patient outcomes. These programs are expected to reduce healthcare costs as they expand globally. Additionally, the paragraph touches on two significant macro trends—consumer wearables and GLP-1 medications—which are expected to benefit the business. A real-world study involving nearly 989,000 subjects demonstrates the impact of GLP-1 medications on diabetes, obesity, and airway pressure therapy.

The paragraph discusses the positive impact of GLP-1 and PAP therapies on increasing patient adherence to sleep apnea treatment, with notable differences in ReSupply rates over 12 and 24 months. It highlights the growing trend of consumer wearables, like those from Samsung and Apple, integrating sleep apnea detection features. Major technology companies, including Fitbit, Garmin, Oura, and Whoop, are also focusing on sleep health tracking. This trend is seen as a significant opportunity for raising awareness and advancing sleep and breathing health.

The paragraph discusses ResMed's focus on driving patient engagement in sleep and breathing health through advanced technologies, such as cloud-connected devices and AI integration. ResMed emphasizes its leadership in providing effective sleep apnea solutions and highlights investments in digital health tools like AirView and myAir, with the recent addition of the NightOwl wearable home sleep test system. The company's long-term growth strategy, ResMed 2030, centers on enhancing its core business, exploring related areas, and leveraging digital health leadership to improve outcomes for all stakeholders.

The paragraph discusses ResMed's focus on advancing sleep and breathing health through innovative products and cloud-based data integration, resulting in improved healthcare solutions and outcomes. ResMed emphasizes the evolution of CPAP technology into a more intelligent, computerized form, facilitating better patient and healthcare system engagement via approximately 20 billion nights of stored sleep data and over 27 million cloud-connectable devices worldwide. Additionally, ResMed leads in digital health solutions for home care, utilizing machine learning and AI to enhance healthcare delivery through platforms like myAir and AirView, and software brands such as Brightree and MatrixCare. Their efforts aim to personalize healthcare and improve therapy adherence while making healthcare more accessible and efficient.

The paragraph highlights advancements in AI-driven healthcare products. A compliance coach aids home medical equipment providers in identifying at-risk patients, improving outcomes through timely interventions. Another product, Dawn, uses generative AI to assist U.S. consumers with sleep and breathing health queries, reducing live contact center interactions by 40%. These technologies promise improved quality, outcomes, and reduced healthcare costs. The company is expanding into areas like insomnia and COPD, focusing on cognitive behavior therapy for insomnia with Somnoware and enhancing non-invasive ventilation for COPD, aiming to tap into significant growth opportunities due to aging populations and rising chronic disease incidence.

The paragraph discusses ResMed's commitment to improving therapy for COPD and expanding its leadership in sleep apnea to broader sleep and breathing health markets. It outlines their ambition to empower over 500 million people by 2030 through health technologies delivered at home. ResMed is leveraging its financial strength, innovative products, and digital health ecosystem to meet the growing global demand for sleep and breathing health solutions. The company acknowledges the contribution of its employees, thanks its shareholders for their support, and transitions to Brett Sandercock for a detailed financial overview.

In the September quarter, the company reported strong financial performance with a group revenue of $1.22 billion, marking an 11% increase in both headline and constant currency terms. The revenue growth was attributed to consistent contributions from the product and ReSupply portfolio, with foreign currency movements contributing an additional $4 million. Sales increased by 11% in the U.S., Canada, and Latin America, and by 10% in Europe, Asia, and other regions, with device and mask sales showing solid growth. The Residential Care Software segment saw a 12% increase in revenue, driven by MEDIFOX DAN and strong HME software performance. The gross margin improved by 320 basis points to 59.2%, due to manufacturing efficiencies, component cost improvements, and higher average selling prices. The discussion primarily refers to non-GAAP numbers, with a reconciliation provided in the earnings press release.

The company is monitoring challenges such as Middle East conflicts and Asian port congestion, expecting these to affect freight costs and gross margins through fiscal year 2025. Despite these challenges, it projects a gross margin between 59% and 60%. SG&A expenses increased by 7% but improved as a percentage of revenue, expected to be between 18% and 20% for the year. R&D expenses rose by 4%, with a projected range of 6% to 7% of revenue. Operating profit grew by 27% due to revenue growth and improved margins, while net interest expenses are expected to decrease, potentially turning into net interest income later in the year. The effective tax rate for the year is estimated at 19% to 21%. Net income and non-GAAP diluted earnings per share increased by 35% and 34%, respectively, with cash flow from operations at $326 million.

The article's twelfth paragraph details the company's financial activities for the quarter, including a capital expenditure of $18 million, and depreciation and amortization of $45 million. The company reduced its debt by $30 million and ended the quarter with $426 million in cash. They have $677 million in gross debt and $251 million in net debt, with $1.5 billion available from their revolver facility, maintaining a strong liquidity position. The Board declared a quarterly dividend of $0.53 per share. During the quarter, the company repurchased 222,000 shares for $50 million and intends to continue a buyback of $75 million per quarter through fiscal year 2025 to offset employee equity vesting. Future plans include reinvesting in R&D, making acquisitions, and continuing the share buyback program. The paragraph ends with a transition to a Q&A session, with Laura Sutcliffe from UBS asking about pre-orders for a new mask product, to which Michael Farrell responds that it is currently not material to financials and such information is not disclosed.

The paragraph discusses the launch and excitement surrounding a new fabric-based technology by ResMed, which has been in development for over a decade. This innovation addresses the challenge of applying fabric onto Liquid Silicon Rubber at a global scale. The product has been introduced to the company's commercial teams, and there's significant enthusiasm among marketing, sales, and product teams. The speaker, a personal user of such devices, believes this could be a game changer. Following this, a dialog with Craig Wong-Pan of RBC highlights a 9% growth in device sales in non-US markets, driven by markets in Europe, Asia-Pacific, and elsewhere, with indications of holding or gaining market share amid strong competition.

The paragraph discusses the success and strategies of a company experiencing global growth, particularly in their device sales. The transition from the AirSense 10 to the AirSense 11 model has helped in markets where this switch leads to a higher price and lower cost of goods sold (COGS). This change, along with volume growth driven by demand generation and conversion in global markets, has contributed to their revenue. The company's teams in Europe and Asia-Pacific, led by Andrew Huxter and Tony Lou respectively, have performed exceptionally well. The conversation shifts to a Q&A session where an analyst, Jimmy, asks about double-digit growth in device sales and whether brands like Samsung or increased awareness of obstructive sleep apnea (OSA) have impacted growth. Michael Farrell acknowledges both macro trends and recent quarter performance, highlighting exceptional growth in the U.S., Canada, and Latin America.

The paragraph discusses the strong growth in Q1 2024 for a company, noting an 11% increase in certain markets, albeit from a low base of 2% growth the previous year. The company attributes its success partly to its leading devices, AirSense 10 and AirSense 11. It also touches on the early stages of new technologies by Samsung and Apple related to sleep apnea detection, comparing their progress to past tech launches like Apple Watch's EKG feature. The paragraph highlights the positive impact of GLP-1 trends on patient engagement in primary care and emphasizes the growing awareness and importance of sleep and breathing health.

The paragraph discusses growth in the healthcare and medical devices sector, particularly in mask sales. It highlights significant growth in North America, driven by increases in new patient flow, patient adherence, and potentially growing market share for ResMed. The company reports 10% growth in mask and accessories sales across the U.S., Canada, and Latin America, even following a substantial growth of 23% in the previous year. The text credits the commercial team and partnerships for this success and mentions the expansion of the Brightree ReSupply system to support this growth.

The paragraph outlines ResMed's strategy to expand its Snap Technologies to users beyond its current Brightree customers, allowing compatibility with various ERP systems for HME management. The company aims to increase the number of masks per patient annually by making customers aware of reimbursement options for multiple mask systems. While ResMed sees mid-single-digit growth in devices and high-single-digit growth in masks globally, it notes a solid growth of 10% in the Americas and 11% in other regions despite fewer resources like Brightree. ResMed emphasizes its proactive approach to driving market growth rather than just accepting industry trends.

The paragraph involves a discussion led by Michael Farrell about the approach to market share in the medical devices industry, specifically comparing it to industries like carbonated beverages or fast-food chains. While acknowledging good market share for devices like AirSense 10, AirSense 11, and new masks, Farrell emphasizes the broader goal of expanding the market to reach 1 billion people who suffer from breathing issues. Despite selling 28 million cloud-connectable devices, they are still penetrating less than 5% of the potential global market. The focus is on attracting more patients, aided by big tech and pharma companies, to achieve sustained growth in revenue, profit, free cash flow, and earnings per share. The conversation then shifts to a question from Saul Hadassin concerning working capital, specifically inventory build and operating cash flow, which Brett might address, suggesting possible seasonality impacts.

In the paragraph, Brett Sandercock explains that there has been a slight increase in inventory levels due to adjusting freight methods, specifically increasing stock in transit via sea freight to mitigate rising freight costs. This adjustment may lead to a minor inventory increase in Q2, but they expect stability afterward. Anthony Petrone then asks about the company's pricing strategy and U.S. Durable Medical Equipment (DME) purchasing patterns, noting past price increases on devices and ReSupply. Michael Farrell responds, indicating he and Brett will address the pricing strategy question and assess DME purchasing trends.

The paragraph discusses ResMed's pricing strategy amidst supply-chain challenges, especially regarding electrical components like semiconductors. The company faced increased freight costs over recent quarters, impacting their inventory. ResMed shared the financial burden of these cost increases with customers while absorbing some losses themselves. Despite observing similar price increases in everyday retail items, the company notes a slower reduction in prices even as supply-chain pressures ease. Operating in the healthcare industry, they navigate controlled reimbursements, collaborating with partners to manage effects. ResMed is actively managing costs with careful oversight from Shane Azzi, the new Chief Supply Chain Officer, and has plans in place to mitigate ongoing and potential issues.

The paragraph discusses the importance of effective communication between the finance and supply chain teams in managing inventory and pricing strategies. It mentions that some price increases in components like tubing and humidifiers may occur due to high costs but generally expects a stable pricing environment. Regarding U.S. HME purchasing patterns, it notes that there has been no significant change across the market, contrasting with Japanese customers who tend to make bulk purchases and stock inventory. In the U.S., both the company and its large customers aim to minimize excess inventory while ensuring essential healthcare products are available. The focus is on maintaining an efficient supply chain with just-in-time practices to avoid patient shortages without holding excessive stock. The paragraph concludes with a caller, Daniel Hurren, attempting to ask a question.

In the paragraph, Michael Farrell discusses the company's approach to mergers and acquisitions (M&A), specifically emphasizing "tuck-in acquisitions." He references the successful acquisition of Snap Technologies from a few years ago, which was small financially but strategically significant. This acquisition enhanced their service offerings by improving engagement with healthcare providers and patients and introducing new technology. Farrell indicates that the company continues to seek similar small, strategic acquisitions, highlighting another example with Somnoware, to further strengthen and expand their business capabilities. Additionally, Farrell defers to Brett, the CFO, to address broader capital management strategies.

The paragraph discusses recent acquisitions by a company in the pulmonary and sleep medicine field. They acquired Somnoware to enhance their capabilities in respiratory and sleep health, integrating it into their digital sleep health services. A key figure, Subath, who joined the team following the acquisition, is actively seeking further potential acquisitions. Another acquisition mentioned is Ectosense's NightOwl, a home sleep apnea test that integrates with their myAir platform. NightOwl is a wearable device that offers high sensitivity and specificity for sleep apnea detection.

The paragraph discusses ResMed's advancements in sleep health diagnostics, highlighting their high sensitivity and specificity compared to other consumer tech companies. Their devices, FDA 510 cleared, are designed for diagnostic purposes, like home sleep apnea tests, and can be prescribed by physicians. ResMed plans to relaunch their product, NightOwl, in the U.S. market, aiming to provide scalable digital models for patients potentially identified by Samsung or Apple devices as having sleep apnea. They emphasize developing a comprehensive digital sleep health portfolio and service, ensuring patients receive timely care. The CFO, Brett Sandercock, mentions that ResMed is constantly considering tuck-in acquisitions to enhance value, with potential investments ranging from $100 million to $500 million, reflecting the company's financial capacity and growth strategy.

The paragraph discusses ResMed's strategic focus on acquisitions, research and development (R&D), and capital management. The speaker outlines the criteria for acquisitions, emphasizing strategic, financial, cultural alignment, and potential capabilities. ResMed has made successful acquisitions in recent years and is open to more as the market develops. Additionally, they plan to increase stock buybacks each quarter. The conversation then shifts to the technology behind the new AirTouch N30i mask, highlighting its advanced fabric technology. This fabric, which took a decade to develop, can potentially be applied to other masks in their portfolio, offering a unique selling point that might command a price premium.

The paragraph discusses the introduction of a new medical product, the AirTouch N30i, which is designed to improve patient interfaces by using more comfortable materials like cotton instead of plastic, similar to those in home environments. Although the product comes at a higher cost due to advanced manufacturing requirements, it is expected to enhance patient adherence and reduce return rates, ultimately lowering overall healthcare costs. The introduction aims to deliver significant health benefits, such as reduced risks of heart attacks and strokes, as demonstrated in the Alaska study. The AirTouch N30i, launching next week, is generating significant interest and excitement due to its potential global impact.

Brett Fishbin from KeyBanc Capital Markets asked about strategies ResMed might use to capitalize on the macro tailwind from wearable tech platforms. Michael Farrell explained that ResMed focuses on demand generation, capture, and conversion. With big tech and pharma driving demand towards healthcare professionals, ResMed aims to enhance their efforts by using tools like Dawn, a generative AI interaction platform. Dawn can engage patients with sleep health questions and offer advice, covering aspects like sleep habits, hydration, exercise, and dietary considerations, more efficiently than human operators.

The paragraph discusses ResMed's ambition to become a leading digital sleep health service, emphasizing the complexity of achieving seamless, personalized care for individuals with conditions like sleep apnea and COPD. The company aims to integrate various technologies and services (such as DAN, Somnoware, myAir, and AirView) to create an end-to-end experience. ResMed focuses on capturing and converting demand by tailoring solutions across different regions and healthcare systems, recognizing that each individual requires a personalized approach. The goal is not merely to build brand awareness, but to truly enhance sleep and health outcomes through innovative and individualized technology solutions.

In the paragraph, Michael Farrell addresses questions from analysts about ResMed's brand performance and market strategies. He describes how the company successfully drives brand engagement, leading to better health outcomes for its customers. Farrell acknowledges the company's strong global market position and its obligation to expand its customer base. Answering Suraj Kalia's question, he discusses ResMed's growth strategies, including mask re-supply, pricing, and inventory management, and explains that despite competition from Philips, ResMed has achieved notable growth in regions like Europe and Asia.

The paragraph outlines ResMed's competitive spirit and strategy, highlighting its ongoing success against competitors, particularly from Europe and Asia, from 2001 to 2021. The company anticipates continued competition and views it as beneficial for staying agile. ResMed focuses on future macro trends and leveraging its sustainable competitive advantage in digital health, emphasizing its offerings like myAir and AirView, which aid in patient and doctor engagement. The aim is to guide consumers towards effective therapies. The paragraph concludes with a statement from an operator introducing Lyanne Harrison from Bank of America, who congratulates ResMed on a strong financial quarter.

In the paragraph, Michael Farrell discusses the production and distribution status of the AirSense 11, a respiratory medical device manufactured by their company. He confirms that production is at full capacity in their Singapore plant and that there is a strong presence of AirSense 11 devices, which outsell AirSense 10 devices in the U.S. market. Farrell acknowledges a potential backlog for the AirSense 11 from consumers waiting for insurance-covered replacements after five years of therapy. He notes that determined consumers can find alternative ways to purchase the AirSense 11, such as through online dealers, and sees a significant opportunity in the rePAP (replacement positive airway pressure) market, which he feels they could focus more on.

The paragraph discusses the company's focus on enhancing customer engagement with their AirSense 11 technology and emphasizes the importance of regular updates to CPAP devices, particularly for those at the five-year mark. It highlights their success in expanding the AirSense 11 capabilities and mentions ongoing efforts to maintain momentum. The conversation then shifts to market competition, specifically in Europe, Asia, and other regions. Michael Farrell acknowledges strong growth in these markets, noting competition with a European player, good performance in Japan and China, and the success of their European team under the leadership of Mike Fliss and Andrew Huxter.

The paragraph discusses ResMed's emphasis on communication and partnership within its team to improve customer service, marketing, sales, and product delivery, particularly in Europe. The company highlights the contribution of the AirSense 11 product, commercial team communications, and enhanced supply chain logistics to its success. Despite a competitive environment, ResMed is succeeding by winning accounts and increasing patient intake. Michael Farrell expresses gratitude to employees and shareholders for their support during a strong quarter and encourages continued effort. The call concludes with Amy Wakeham thanking participants and inviting further inquiries.

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