The paragraph outlines the introductory segment of ResMed's Q2 Fiscal Year 2025 earnings conference call. It starts with the operator, Matt, explaining the setup of the call, including a note on it being recorded. Mike Ott, Senior Manager of Investor Relations, greets the participants and mentions that the call is being webcast live, with a replay available later. He discusses the use of non-GAAP financial measures during the call, advising investors to consult attached schedules for GAAP reconciliation. Mike also makes clear that forward-looking statements will be part of the discussion, warning that actual results may vary due to risk factors detailed in SEC filings. The call is then handed over to Chairman and CEO, Mick Farrell, who expresses satisfaction with the strong quarterly financial performance.

In Q2, the company demonstrated strong year-over-year financial performance with revenue growth, improved gross margins, and disciplined investments, leading to excellent operating and net profit results. This success is attributed to the hard work of over 10,000 employees and a leading value proposition characterized by top-notch hardware, software products, and a digital health ecosystem. The company focused on cloud-connected medical devices and technology investments, particularly in AI and ML, to enhance patient lives globally. Financially, they achieved 10% global revenue growth, driven by strong sales in sleep and breathing health devices across key markets, with notable demand for their AirSense 10 and 11 platforms. The AirSense 11 platform's availability expanded, including a launch in India, with further plans for 2025.

The paragraph highlights ResMed's strong global demand for its AirSense 10 platform and masks and accessories, which have seen double-digit growth. The company attributes its success to Brightree ReSupply and Snap technology, particularly in the U.S., and aims to expand Snap technology across all HME management platforms by 2025. ResMed reports a significant increase in non-GAAP gross margin and earnings per share, driven by operational efficiencies and R&D investments. With a focus on supply chain improvements under new leadership, the company is committed to sustainable growth and patient adherence through its digital health ecosystem. ResMed plans to adapt its successful U.S. programs for international markets, recognizing the unique challenges in each of the 140 countries it operates in.

The paragraph discusses ResMed's strategic focus on innovation and R&D, investing 6% to 7% of its revenue into creating advanced sleep apnea devices and solutions. It highlights the launch of the AirTouch N30i, a fabric-based mask that offers enhanced comfort, potentially transforming mask innovation. The paragraph also mentions a collaboration with Apple's Vision Pro team to develop the Kontor Head Strap, emphasizing ResMed's leadership in facial interfaces for sleep and breathing health technology.

The paragraph discusses Apple partnering with ResMed to create an accessory for the Apple Vision Pro, highlighting the blending of medtech and consumer tech. ResMed showcased its expertise beyond medical tech, offering a sleep lounge at CES 2025 to promote sleep and breathing health. The event featured numerous consumer tech companies focusing on sleep wellness, with ResMed products also displayed in Samsung's booth, illustrating collaboration in sleep apnea solutions. The paragraph concludes by mentioning upcoming topics on GLP-1 pharmaceuticals for various health issues, including sleep apnea, and the role of consumer wearables in detecting sleep apnea.

In December, Eli Lilly received FDA approval for Zepbound, a GLP-1 drug, for treating obesity and moderate to severe sleep apnea, excluding those with diabetes. Eli Lilly emphasized using positive airway pressure (PAP) devices as the primary treatment for sleep apnea, in line with American Academy of Sleep Medicine (AASM) guidelines. Their materials also highlighted improvements in CPAP devices to enhance comfort. The AASM released a guide in January 2025 suggesting new drugs as adjunctive treatments, while continuing to advocate for PAP as the leading therapy, with weight-loss drugs considered supplementary.

The paragraph discusses the impact of the latest generation GLP-1 medications on patients with obstructive sleep apnea, highlighting their motivation and adherence to positive airway pressure (PAP) therapy. Despite weight loss not affecting key risk factors like craniofacial anatomy, these patients show over 10% higher likelihood of starting PAP therapy and maintain better adherence, including purchasing masks and accessories. This trend has been consistent over a wide sample size, with a noted increase in re-supply rates over two years. Educational initiatives targeting primary-care physicians, particularly those prescribing GLP-1s, aim to bridge knowledge gaps as pharmaceutical companies increase consumer advertising.

The paragraph discusses the long-term benefits of PAP therapy in reducing healthcare costs and improving patient outcomes, while highlighting ResMed's role in expanding healthcare access through integrating technology. It emphasizes the growing consumer interest in health and wellness tracking, noting ResMed's use of AI and machine learning. The text also highlights significant developments in consumer wearables, such as Samsung and Apple's advancements in sleep apnea detection, which could create substantial demand for sleep apnea solutions. The integration of ResMed's myAir scores with popular devices like Galaxy and Apple Watches is noted as a way to enhance patient adherence to treatments through gamification and real-time data access.

The paragraph discusses the growing interest and investment in sleep health technologies by leading tech companies like Apple, Samsung, Google, and others, with expectations of integrating advanced features such as sleep apnea detection by 2025. This trend is viewed as a significant opportunity to raise awareness about sleep apnea, prompting more patients to seek diagnosis and treatment. ResMed aims to lead in providing effective solutions for sleep health and anticipates a sustained increase in patient interest as new technologies are introduced, supported by an infrastructure for demand generation and conversion. ResMed's 2030 strategy focuses on enhancing its core sleep and breathing health business and expanding into related areas like respiratory issues, insomnia, and more.

The paragraph outlines ResMed's strategy to enhance its brand value and expand its market reach. It emphasizes leveraging digital health leadership to improve outcomes for patients, providers, and payers. ResMed aims to strengthen brand awareness and ensure a return on investment for marketing initiatives. With a significant global demand for sleep and breathing health solutions, the company is optimistic about future growth. ResMed plans to invest in its core market of sleep apnea treatment and expand into new areas such as cloud-connected ventilators and digital health solutions for conditions like COPD, neuromuscular diseases, and insomnia.

The paragraph discusses the journey to address sleep-related issues and the importance of providing healthcare solutions at home. ResMed's software solutions, like Brightree and MEDIFOX, are highlighted as market leaders in improving healthcare efficiency and outcomes. In the past year, ResMed has provided a wide range of products to 147 million people and aims to impact 500 million people by 2030 with their healthcare technologies. The company credits its success to its financial foundation, innovative products, and dedicated team. The paragraph concludes with a transition to Brett Sandercock, who will discuss the company's strong financial performance in the second quarter of fiscal year 2025.

In the December quarter, the group reported a revenue of $1.28 billion, marking a 10% increase on both headline and constant currency bases. While foreign currency changes negatively impacted revenue by $2 million and are expected to further impact Q3 revenue by $15 million to $20 million, the revenue growth was supported by strong performance in product and ReSupply portfolios. Excluding residential care software, sales in the U.S., Canada, and Latin America rose by 12%, and by 8% in Europe, Asia, and other regions. On a constant currency basis, device and mask sales globally increased by 11%, with significant growth in the U.S., Canada, and Latin America. The residential care software revenue grew by 8%, driven by the MEDIFOX DAN vertical. Gross margin improved by 230 basis points to 59.2%, benefiting from efficiencies in manufacturing, logistics, and component costs. The report refers to non-GAAP figures, with reconciliations available in the company's earnings release.

The paragraph discusses the company's financial performance and future expectations. Despite facing a currency headwind, the gross margin remained consistent with the previous quarter and is projected to be 59-60% in the latter half of fiscal year 2025. SG&A expenses rose by 9% due to higher employee-related costs, while improving as a percentage of revenue. Looking ahead, SG&A is expected to be 18-20% of revenue. R&D expenses also increased by 10%, mainly driven by employee costs, and are projected to be 6-7% of revenue. Operating profit surged by 19% due to revenue growth and gross margin expansion. The interest expense was $1 million, with net interest income anticipated in the latter half of fiscal year 2025 due to lower debt levels. The effective tax rate decreased to 18%, driven by higher tax benefits related to employee equity compensation.

The paragraph discusses the company's financial performance and plans. For fiscal year 2025, they estimate an effective tax rate of 19% to 21%. Their net income and non-GAAP diluted earnings per share both increased by 29% in the December quarter. Operational cash flow for the quarter was $309 million, with capital expenditures of $21 million, and depreciation and amortization totaling $46 million. They closed the second quarter with $522 million in cash, $673 million in gross debt, and $151 million in net debt, with $1.5 billion available under a revolver facility. The Board declared a quarterly dividend of $0.53 per share, and the company bought back 307,000 shares for $75 million. They plan to continue share buybacks of $75 million per quarter for fiscal year 2025 to offset dilution from employee equity vesting. The company aims to reinvest in growth through R&D, make tuck-in acquisitions, and sustain their share buyback program. The paragraph concludes with a transition to a Q&A session, where Dan Hurren from MST attempts to ask a question related to currency.

In a recent speaking event, Brett Sandercock discussed the impact of foreign exchange (FX) on margins, noting a negative effect of $0.02 on the EPS for the quarter due to the strong U.S. dollar. Looking forward, Sandercock explained that while there is a delay in FX effects, a weaker Singapore and Australian dollar might offer some advantages in the next quarter. However, Euro weakness persists, keeping gross margins neutral but possibly providing a slight benefit in R&D and SG&A. The conversation then shifted to Davin Thillainathan from Goldman Sachs, who inquired about the strong growth in the U.S. devices sector and the influence of GLP-1s on patient flow, hinting at potential impacts from Lilly's expansion. Michael Farrell began to address the question.

The paragraph discusses the influence of two megatrends, GLP-1s and consumer tech companies, on raising awareness about sleep apnea and driving patient interest in sleep and breathing health. While there has been notable growth in the devices market, particularly in the U.S. and internationally, the direct impact of Eli Lilly's new Zepbound indication is not yet significant due to the typical delay in pharmaceutical consumer advertising. Current efforts focus on clinical education and partnerships with primary care physicians to capture and convert demand into diagnosis and management of sleep apnea. This process is still in its early stages, with expectations of gradual patient flow improvement over the next several quarters and years.

Lyanne Harrison from Bank of America inquires about any notable bulk purchases or preemptive stocking due to potential tariffs impacting ResMed's recent positive device growth. Michael Farrell clarifies that there were no such bulk purchases in Q2, unlike Q1 in Japan due to the AirSense 11 launch. He assures that potential tariffs on China won't affect ResMed since its manufacturing isn't based there, although competitors could face issues. Farrell also mentions being actively involved in advocacy efforts to possibly exempt the medtech industry from such tariffs.

In the paragraph, the discussion revolves around ResMed's focus on capturing new patients for their therapies, particularly in light of increased awareness from new pharmaceutical treatments and wearable devices. The company aims to maintain its strong growth trajectory by implementing programs to sustain this momentum. In response to a question from Laura Sutcliffe about scaling services like home sleep testing and remote setups due to capacity issues in U.S. sleep labs, Michael Farrell acknowledges the physical constraints of existing infrastructure and emphasizes the need to address these challenges to accommodate more patients.

The paragraph discusses the increasing awareness of sleep and breathing health, leading to more people seeking medical advice and referrals. It highlights the importance of prioritizing sleep lab resources for severe cases like central sleep apnea and Overlap Syndrome, recommending therapies such as adaptive servo-ventilation and bilevel ventilation. For patients with obstructive sleep apnea and insomnia, treatments like CPAP or APAP are suggested, although insomnia options are primarily pharmaceutical. The paragraph also notes the scalability of home sleep apnea testing to accommodate growing demand, emphasizing its use for patients at high risk of obstructive sleep apnea. Large hospitals have both in-lab and home testing infrastructure to manage this demand efficiently.

In the paragraph, ResMed is addressing the challenge of meeting the increasing demand for sleep apnea testing by partnering with sleep labs and home testing companies. During COVID-19, they successfully adapted by increasing home sleep apnea testing when labs were closed. They have developed the necessary infrastructure, including products like ApneaLink Air and NightOwl, and are partnering with companies like Knox Medical in Europe. Their goal is to ensure quick access to testing for patients and provide options for more complex cases in labs. Over the next several quarters and years, they plan to scale and benefit from this infrastructure. The paragraph ends with a transition to a question from Craig Wong-Pan regarding SaaS revenue growth, to which Michael Farrell is about to respond.

The paragraph discusses the performance and strategy for a residential care software business that includes brands like MEDIFOX, Brightree, and MatrixCare. The MEDIFOX division is experiencing strong growth, surpassing the overall group's 8% growth rate. Brightree is also performing well, with high-single-digit growth. Post-COVID, some nursing and senior living facilities have not returned to previous growth rates, prompting a portfolio management approach that focuses investment on high-growth areas like Brightree and Snap technology. The aim is to achieve high-single-digit growth in the residential care software business, with double-digit growth in net operating profit. Investments will be directed based on growth potential, leveraging SG&A and R&D to drive profitability.

The paragraph discusses the growth in the device segment of ResMed's business. Mike Matson from Needham & Company asks about the double-digit device growth and whether it's due to an increase in patients, pricing benefits, or the rePAP program. Michael Farrell responds that the market growth for devices is generally mid-single-digit globally and in the U.S., while masks see high single-digit growth. ResMed aims to exceed this by focusing on demand generation, including ReSupply and rePAP programs. The attention is on acquiring new patients and upgrading devices for existing patients, especially those with devices over five years old, as warranties typically last three years, and most insurance, including Medicare, supports purchasing new devices after five years.

The paragraph discusses strategies and achievements regarding demand management for a digital health platform related to sleep specialists and CPAP (Continuous Positive Airway Pressure) devices. There has been growth attributed to the platform and partnerships with physicians, particularly due to the advancement in digital and remote solutions driven by COVID-19. The goal is to achieve consistent growth across devices, masks, and software, with recent successes noted in beating growth expectations. Anthony Petrone raises a question about reimbursement coverage in the U.S. for GLP-1 medications compared to CPAP, asking if commercial payers will require CPAP use before GLP-1 medication coverage. Michael Farrell acknowledges the query.

The paragraph discusses the strategy and outlook for Lilly's new class of medicines, particularly focusing on their efforts in the respiratory medtech space with the drug Zepbound. While the speaker acknowledges that pharmaceutical analysts may have better insights into the drug's approval with insurers like United, Humana, and Cigna, they note that private players often follow Medicare's lead to some extent. Lilly's efforts are not limited to sleep apnea but extend to obesity, cardiovascular, diabetes, and metabolic syndrome. The speaker highlights the importance of the positive data from the SURMOUNT-OSA trial and anticipates direct-to-consumer advertising once reimbursements are secured for various indications. Currently, Lilly is investing in continuing medical education and adhering to the American Academy of Sleep Medicine's guidelines, which prioritize using the most effective and least invasive therapies first.

The paragraph discusses the positive outcomes of combining GLP-1 and CPAP therapies for treating obstructive sleep apnea, as demonstrated by data from Lilly's SURMOUNT-OSA trials and other studies. The speaker anticipates future advertising of this combination therapy, post-approval, as an effective treatment for sleep apnea and related weight issues. The paragraph also highlights the potential impact of consumer technology, such as wearable devices capable of detecting sleep apnea, and the importance of integrating these patients into the digital healthcare system.

The paragraph discusses the importance of further research and education on the benefits of CPAP, especially in light of aggressive expansion by pharmaceutical companies regarding GLP-1s. Michael Farrell highlights the extensive data ResMed has on respiratory health, emphasizing the proven benefits of CPAP, such as reducing mortality and improving cardiovascular and metabolic outcomes. He challenges the company’s Chief Medical Officer to expedite and direct clinical research to focus on outcome-based studies, demonstrating the relationship between regular CPAP use and reduced healthcare costs.

The paragraph discusses the benefits of using CPAP, highlighting a reduction in healthcare costs by 7% for every hour of sleep, up to a 50% reduction with seven hours. ResMed is focusing on integrating data into healthcare systems like Intermountain and Kaiser to enhance patient outcomes. There's an emphasis on the importance of government-run insurance programs in Western and Northern Europe for long-term outcome data. ResMed claims to be a market leader in digital health and promises more advancements, especially with big pharma entering the field. Additionally, the paragraph includes a transition to a question from David Low, JPMorgan, asking Michael Farrell about the factors contributing to ResMed's growth rate surpassing 10%, including aspects like price and mix, and whether rePAP is becoming significant.

The paragraph discusses the company's strong market position in the U.S., Europe, and Asia, and its ability to capture market share despite competition. It highlights partnerships with physicians, home care providers, and distributors, leveraging technologies like Brightree and AirView to identify patients for ReSupply programs. The paragraph notes a 12% growth in U.S. mask sales for the quarter and mentions device market performance being ahead by a few hundred basis points. Additionally, it stresses the importance of process optimization from referral to therapy to maintain momentum and prepare for future market trends.

The paragraph discusses a complex portfolio management approach for demand generation, capture, and conversion across existing and new patients, focusing on both devices and masks. The company has done well in the current quarter and aims to continue this success into 2025 by investing in infrastructure and capabilities to improve patient experiences from initial concerns to long-term therapy. During a Q&A session, Brett Sandercock, addressing a question on gross margin guidance for the second half of the fiscal year, stated that they aim to improve gross margins to a range of 59% to 60%. The improvement is driven by initiatives in manufacturing, procurement, and scaling benefits. Key factors influencing this include product mix, freight costs, and the transition to the AS11 platform, with freight being a variable factor to monitor.

The paragraph is a conclusion of ResMed's second quarter 2025 conference call. Michael Farrell thanks shareholders and ResMed employees for their efforts and contributions, emphasizing the company's focus on maintaining a robust product pipeline to support consistent performance and gross margin over the medium term. Mike Ott also expresses gratitude to participants and invites further questions, signaling the end of the call. The operator closes the conference call, allowing participants to disconnect.

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