Q1 2024 Resmed Inc Earnings Call

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Hello, and welcome to the resume first quarter fiscal year 2024 earnings conference call and webcast. If anyone should require operator assistance. Please press star zero on your telephone keypad, a question and answer session will follow the formal presentation.

Press Star one at any times be placed in the question queue.

As a reminder, this conference is being recorded.

My pleasure to turn the call over to Amy Wakeham, Chief Communications and Investor Relations Officer. Please go ahead Amy.

Great. Thank you, Kevin Hi, everyone. Good morning, and good afternoon welcome to RASM, That's first quarter earnings call for fiscal year 2024, we are live webcasting this call and a replay will be available on the Investor Relations section of our corporate website later today, along with a copy of the earnings press release and presentation.

Both of which are available now on the call today are Chief Executive Officer, Mick Farrell, and Chief Financial Officer, Brett Sandra Cock.

Following our prepared remarks, making Brett will be joined by Rob Douglas President and Chief operating officer to answer any questions you may have.

During today's call we will discuss several non-GAAP measures. We encourage you to review the supporting schedules in today's earnings press release for a reconciliation of the non-GAAP measures to the GAAP reported numbers. In addition, our discussion today will include forward looking statements, including but not limited to.

About our future financial and operating performance we.

We make these statements based on reasonable assumptions. However, our actual results could differ please refer to our SEC filings for a complete discussion of the risk factors that could cause our actual results to differ materially from any forward looking statements made today I'd like to now turn the call over to Nick.

Thanks, Amy and thank you to all of our shareholders for joining us today.

Our first quarter fiscal year 2024 results reflect strong growth across our entire business with double digit top line growth.

This growth was driven by double digit global growth in the mask category.

And double digit growth in our software as a service business.

We also achieved high single digit global growth in devices, even as that category annualized is very high growth in the prior year period.

The flexible and agile work all of our supply chain manufacturing and distribution teams has enabled us to provide ongoing global availability of our market, leading 100% cloud connected will flow generator platforms, we have unconstrained supply about essence platforms and enabled by excellent volume.

<unk> of the essence, 10 platform globally, and fast ramping approvals launches and delivery of the best in class since 11 platform country by country.

During the quarter, we accelerated delivery of the air since 11 in Japan, and we launched the <unk> 11 in Australia, and New Zealand, we have plenty of runway ahead on a pathway to launch in all of the 140 countries, where we sell our solutions we.

We are very proud to be able to support all global demand for flow generators through a combination of air since 10 in essence 11 platforms. We remain laser focused on accelerating the production and delivery of the SNS 11 platform. We are moving swiftly on that front.

Our masks and accessories business grew 21% year over year amongst a highly competitive market with all global players on the field in this category. Our commercial teams are doing an amazing job of showing the clinical and economic benefits of the resume mass portfolio.

Our clinical and commercial teams are also partnering with physicians and provide our customers to drive resupply programs directly with patients. The peer reviewed and published clinical evidence showing that adoption of our resupply program leads to better patient outcomes is proving itself out in the real world customer.

By customer.

We continue to see strong growth in the U S masks business, where provider resupply programs can scale powered by our digital health ecosystem, including <unk> for physicians and providers and my air for patients.

So patients around the world, especially in non reimbursed markets, we are developing launching and scaling outreach and subscription programs to help the consumer who is the ultimate customer to take control of their own health and engage directly and refreshing their mask tubing humidifier and other <unk>.

Operator: Hello, and welcome to the ResMed first quarter fiscal year 2024 earnings conference colon webcast. If anyone would require operator assistance, please press star zero under telephone keypad. A question and answer session will follow the formal presentation. You may press star one anytime to be placed into questions you. As a reminder, this conference is being recorded.

Centuries.

This has been a permanent uptick since COVID-19.

People care about respiratory health and respiratory hygiene and they are taking action and we are supporting them with digital solutions and services to meet their needs.

Kevin: It's not my pleasure to turn the call over to Amy Wakeham, keep communications and investor relations officer. Please go ahead Amy. Great, thank you Kevin.

Before I turn to review updates on our key strategic priorities I'd like to spend a little time discussing actions, we've taken to accelerate profitable growth across resume and to power our long term success.

Amy Wakeham: Hi everyone. Good morning and good afternoon. Welcome to ResMed's first quarter earnings call for fiscal year 2024. We are live webcasting this call and the replay will be available on the investor relations section of our corporate website later today, along with a copy of the earnings press release and presentation, both of which are available now. On the call today, our chief executive officer Mick Farrell and chief financial officer Brett Sandercock. Following our prepared remarks, Mick and Brett will be joined by Rob Douglas, president and chief operating officer to answer any questions you may have.

We've taken immediate steps to ensure we are prioritizing the right things to drive profitable growth and our leadership teams have carefully reviewed opportunities to improve our performance.

We have stopped some projects that were not working out as well as we thought we've increased investment in areas that we believe will be pivotal to long term success, such as our digital health Tech investments as well as focused hardware and software development, creating the smallest the quietest the most comfortable the most connected and the most Intel.

Amy Wakeham: During today's call, we will discuss several non-gap measures. We encourage you to review the supporting schedules in today's earnings press release for a reconciliation of the non-gap measures to the gap reported numbers. In addition, our discussion today will include forward-looking statements, including but not limited to expectations about our future financial and operating performance. We make these statements based on reasonable assumptions. However, our actual results could differ. Please refer to our SEC filings for a complete discussion of the risk factors that could cause our actual results to differ materially from any forward-looking statements made today.

<unk> healthcare solutions in the market. Please.

These changes have impacted some of our teams and this week, we have taken actions that resulted in a reduction of our global workforce by 5%.

Decisions like this that impact people are never easy.

However, we know that we are doing the right thing and we're doing the right thing to accelerate our growth and to refocus on our long term mission.

I feel more strongly than ever that we are well positioned with an incredibly long runway of profitable growth and value creation for all of our stakeholders as we move forward.

Mick Farrell: I'd like to now turn the call over to Mick. Thanks, Amy, and thank you to all of our shareholders for joining us today. Our first quarter fiscal year 2024 results reflect strong growth across our entire business, with double-digit top-line growth. This growth was driven by double-digit global growth in the masks category and double-digit growth in our software as a service business. We also achieved high single-digit global growth in devices, even as that category annualises very high growth in the prior year period.

Let's now turn to a discussion of our three key strategic priorities number one to grow and differentiate our core sleep apnea and respiratory care business number two to design develop and deliver market, leading medical technology as well as digital health solutions that can be scaled globally and number three.

To create innovate and grow the world's best software solutions for care delivered outside the hospital a field that we call residential medicine.

There are over 2 billion people worldwide suffering from sleep apnea, chronic obstructive pulmonary disease respiratory insufficiency, judo neuromuscular disease and insomnia.

Mick Farrell: The flexible and agile work of our supply chain, manufacturing, and distribution teams has enabled us to provide ongoing global availability of our market leading 100% cloud-connectable flow generator platforms. We have unconstrained supply of our essence platforms enabled by excellent volumes of the essence 10 platform globally and fast-ramping approvals, launches, and delivery of the best-in-class essence 11 platform country by country. During the quarter, we accelerated delivery of the essence 11 in Japan and we launched the essence 11 in Australia and New Zealand.

There are millions more that we can support as they navigate the complex outside hospital healthcare system, We believe that health care should be delivered in the lowest cost lowest acuity and highest comfort location possible very often that is a patients own hub, we have a massive opportunity ahead of us to help <unk>.

Grids of millions of people worldwide, our end markets remain incredibly underpenetrated with many opportunities to add value reduce friction lower costs and improve patient outcomes.

Now that we've been able to comfortably support support overall global market demand for sleep devices for the last few quarters, we're ramping up our demand generation initiatives, we're investing in marketing efforts to raise awareness and patient engagement across specific global markets.

Mick Farrell: We have plenty of runway ahead on our pathway to launch in all of the 140 countries where we sell our solutions. We are very proud to be able to support all global demand for flow generators through a combination of essence 10 and essence 11 platforms. We remain laser focused on accelerating the production and delivery of the essence 11 platform. We are moving swiftly on that front. Our marks and accessories business grew 21% year over year, amongst a highly competitive market, with all global players on the field in this category.

We are leveraging traditional health care channels as well as investing in cost effective direct to consumer demand Gen campaigns to help what we call sleep concerned consumers find their way into the screening diagnostic treatment and management pathway.

We will act as a digital concierge to guide patients on that journey in terms of analyzing the results of these efforts to date and ongoing we are tracking new patient starts in our physician and provide advice to ecosystem.

Mick Farrell: Our commercial teams are doing an amazing job of showing the clinical and economic benefits of the ResMed mark portfolio. Our clinical and commercial teams are also partnering with physicians and provider customers to drive resupply programs directly with patients. The peer-reviewed and published clinical evidence showing that adoption of a resupply program leads to better patient outcomes is proving itself out in the real world customer by customer. We continue to see strong growth in the US marks business where provider resupply programs can scale powered by our digital health ecosystem, including air view for physicians and providers and my air for patients.

Which now has more than $22 5 million patients as well as the new user stops in Maya with patients themselves choose to participate in their personalized health care journey to better breathing and better sleep.

Patient flow into the funnel is at an all time high we are well above the rights that we saw pre COVID-19 2019 across all geographies triple digits across the board. The bottom line is that we are driving strong growth of patients into the funnel.

We believe the work that's being done in the pharmaceutical industry right now with obesity drugs will be a net positive for patient flow and patient growth in sleep apnea COPD and for resume overall in terms of existing patients in our installed base. We are actively tracking a cohort.

Mick Farrell: For patients around the world, especially in non-reinverse markets, we are developing launching and scaling outreach and subscription programs to help the consumer who is the ultimate customer to take control of their own health and engage directly in refreshing their mask, tubing, humidifier and other accessories. This has been a permanent uptick since COVID-19. People care about respiratory health and respiratory hygiene and they are taking action and we are supporting them with digital solutions and services to meet their needs.

Of many thousands of patients on these G. L P. One medications and our Pap therapy.

We are not seeing any significant change in the path of adherence rights, nor any reduced participation in resupply programs versus control groups.

Mick Farrell: Before I turn to review updates on our key strategic priorities, I'd like to spend a little time discussing actions we've taken to accelerate profitable growth across ResMed and to power our long-term success. We've taken immediate steps to ensure we're prioritising the right things to drive profitable growth and our leadership teams have carefully reviewed opportunities to improve our performance. We have stopped some projects that were not working out as well as we thought.

These data indicate that there is a cohort of patients on combined therapies and a stable state.

In terms of new patients activated into the funnel, we are seeing the number of new patients activate into the health care final picking up we see patient flow is not only strong but increasing.

We believe in treating the whole person here at resonant, including a combination of cardiovascular exercise diet and nutrition as well as good sleep and breathing that combination was called the triumvirate of health by Professor build to Mint from Stanford May he rest in pace and we think a.

Mick Farrell: We've increased investment in areas that we believe will be pivotal to long-term success such as our digital health tech investments as well as focused hardware and software development, creating the smallest, the quietest, the most comfortable, the most connected and the most intelligent healthcare solutions in the market. These changes have impacted some of our teams and this week we have taken actions that resulted in a reduction of our global workforce by 5%.

<unk> of these three elements will result in the best outcomes for patients. It is quite possible that this new class of drugs may become as large or even larger than the cholesterol class or the blood pressure treatment class of pharmaceuticals. If this is the case, we will see a whole new population of patients activated with their primary care.

Mick Farrell: Decisions like this that impact people are never easy. However, we know that we are doing the right thing and we're doing the right thing to accelerate our growth and to refocus on our long-term mission. I feel more strongly than ever that we're well-positioned with an incredibly long runway of profitable growth and value creation for all of our stakeholders as we move forward.

<unk> that we may never have seen in the health care system. If this comes to pass we may see benefits for the entire health system.

And for the people being traded themselves and for resume as more and more people are evaluated and screened for sleep apnea respiratory insufficiency and other key chronic conditions as part of their primary care evaluations.

Mick Farrell: Let's now turn to a discussion of our three key strategic priorities. Number one, to grow and differentiate our core sleep apnea and respiratory care business. Number two, to design, develop and deliver market leading medical technology as well as digital health solutions that can be scaled globally. And number three, to create, innovate and grow the world's best software solutions for care delivered outside the hospital. A field that we call residential. Madison. There are over two billion people worldwide suffering from sleep apnea, chronic obstructive pulmonary disease, respiratory insufficiency judo, neuromuscular disease, and insomnia.

Our data is showing an all time high of patient flow and that supports this thesis.

Stepping back and looking at the science in the field of respiratory medicine, we've created a forward looking epidemiology model for our core market of sleep apnea spanning over two to three decades into the future.

We have assumed an aggressive case for high market penetration of this new class of pharmaceuticals.

We will publish the epidemiology model in our investor deck straight after this call the.

The model stops using a baseline of the global prevalence of sleep apnea, which was 936 million people in 2015 and this is based on peer reviewed and published data from the journal Lancet in 2019.

Mick Farrell: There are millions more that we can support as they navigate the complex outside hospital health care system. We believe that health care should be delivered in the lowest cost, lowest acuity, and highest comfort location possible. Very often that is a patient's own home. We have a massive opportunity ahead of us to help hundreds of millions of people worldwide. Our end markets remain incredibly underpenetrated with many opportunities to add value, reduce friction, lower costs, and improve patient outcomes.

Our epidemiology model grows with conservative population and aging assumptions to a prevalence of around one 4 billion people suffering from sleep apnea in 2015.

We then overwrite an aggressive assumption for the adoption of this new pharmaceutical class globally, we assumed some of the highest penetration rights that we have seen reported by analysts in the industry.

With this aggressive and sustained adoption of the new drug class, we forecast that the global prevalence of sleep apnea will still be around one 2 billion people in 2015.

Mick Farrell: Now that we've been able to comfortably support overall global market demand for sleep devices for the last few quarters, we're ramping up our demand generation initiatives. We're investing in marketing efforts to raise awareness and patient engagement across specific global markets. We are leveraging traditional health care channels as well as investing in cost effective direct-to-consumer demand-gen campaigns. To help what we call sleep-concerned consumers, find their way into the screening, diagnostic, treatment, and management pathway.

Now in terms of the market penetration of our Pap therapy into this population we have assumed market growth from our $22 5 million patients with Pap therapy here at the end of calendar year 2023, using steady state market growth rates that we saw in the years, leading up to 2019 that is.

Mid single digit growth for devices and high single digit growth for masks with these growth rates, we reach around 109 million patients on our Pap therapy by 2050.

Mick Farrell: We will act as a digital concierge to guide patients on that journey. In terms of analyzing the results of these efforts to date and ongoing, we are tracking new patient starts in our physician and provider-based ecosystem, AirView, which now has more than 22.5 million patients, as well as the new user starts in my air. Where patients themselves choose to participate in their personalized health care journey to better breathing and better sleep.

That leaves $1 1 billion people remaining in the addressable market in 2015 over and above those already on our Pap treatment.

We will continue to update our epidemiology model with all the new data as they arise. However, the bottom line is that there remains a huge number of people needing our sleep apnea treatment solutions today and for the next two to three decades and beyond.

Mick Farrell: Patient flow into the funnel is at an all-time high. We are well above the rates that we saw pre-COVID in 2019 across all geographies, triple digits across the board. The bottom line is that we are driving strong growth of patients into the funnel. We believe the work that's been done in the pharmaceutical industry right now with obesity drugs will be a net positive for patient flow and patient growth in sleep apnea, COPD, and for resmet overall.

While we are proud that we have peer reviewed and published data showing that we can achieve 87% adherence of patients to our Pep technology, combining our best in class Med Tech hardware with our digital health solutions.

<unk> Maya that still means 10% of our patients on an annual basis will need alternatives.

We are investing in those alternative therapies and we are actively working with direct to direct patients who do not adhere to that 10% plus to second line therapies, such as dental devices, where we have invested and scaled the market leading three D printed dental device for sleep apnea in.

Mick Farrell: In terms of existing patients in our install base, we are actively tracking a cohort of many thousands of patients on these GLP1 medications and our PAP therapy. We are not seeing any significant change in the PAP adherence rates nor any reduced participation in resupply programs versus control groups. These data indicate that there is a cohort of patients on combined therapies in a stable state. In terms of new patients activated into the funnel, we are seeing the number of new patients activated into the healthcare funnel picking up.

Europe called now Vol. In addition, we have investments in other second line therapies, including Pharmaceuticals, and hypoglossal nerve stemmed technology.

We want every patient who suffocates at night to find a path to good breathing and good sleep and it looks like there's $1 billion of them we need to help.

Mick Farrell: We see patient flow is not only strong but increasing. We believe in treating the whole person here at resmet, including a combination of cardiovascular exercise, diet and nutrition, as well as good sleep and breathing. That combination was called the triumvirate of health by Professor Bill Dement from Stanford, may he rest in peace. And we think a combination of these three elements will result in the best outcomes for patients. It is quite possible that this new class of drugs may become as large or even larger than the cholesterol class or the blood pressure treatment class of pharmaceuticals.

We start with the highest efficacy and lowest cost therapy, which is Pap technology, where we have very high adherence rights and the best outcomes for patients and we go from there.

Given this incredible multiple decades long runway of growth and as part of our ongoing efforts to improve and streamline that end to end patient pathway and to make it easier for sleep physicians and sleep labs to diagnose and manage these patients. We're excited about are some of the way of acquisition that we claw.

<unk> during the last quarter. Some nowhere is software for pulmonary and really all sleep physicians and it complements our current portfolio of software offerings for physicians homecare providers and patients, including air view bright tree and <unk>, respectively.

Mick Farrell: If this is the case, we will see a whole new population of patients activated with their primary care providers that we may never have seen in the healthcare system. If this comes to pass, we may see benefits for the entire health system and for the people being treated themselves. And for ResMed, as more and more people are evaluated and screened for sleep apnea, respiratory insufficiency and other key chronic conditions as part of their primary care evaluations. Our data are showing an all time high of patient flow and that supports this thesis.

The goal is to ultimately drive greater efficiency and better patient care by helping physicians to take best in class care of their patients with increased efficiency and a better overall experience for the doctor and for the patients.

We're making progress across several digital health technology initiatives to drive the value proposition of our cloud connected devices, even higher we are investing in several artificial intelligence driven data products and capabilities in our air solutions ecosystem.

Mick Farrell: Stepping back and looking at the science in the field of respiratory medicine, we have created a forward looking epidemiology model for our core market of sleep apnea spanning over two to three decades into the future. We have assumed an aggressive case for high market penetration of this new class of pharmaceuticals. We will publish the epidemiology model in our investor deck straight after this call. The model starts using a baseline of the global prevalence of sleep apnea, which was 936 million people in 2015.

This quarter, we started rolling out a digital product in our U S market cold compliance cuts.

Compliance coach is built for homecare providers to help them efficiently focus efforts and prioritize outreach to increase patient compliance and ultimately to drive better patient outcomes by helping them meet and beat 90 day adherence golf.

The application utilizes <unk>, many billions of nights of de identified sleep and respiratory care data in the cloud to predict the likelihood that a patient will be adherent to therapy or not the IRI product and advisers and coaches the homecare provider to best identify the patients who may struggle and to make.

Mick Farrell: And this is based on peer reviewed and published data from the journal Lancet in 2019. Our epidemiology model grows with conservative population and aging assumptions to a prevalence of around 1.4 billion people suffering from sleep apnea in 2050. We then overlaid an aggressive assumption for the adoption of this new pharmaceutical class globally. We assumed some of the highest penetration rates that we have seen reported by analysts in the industry. With this aggressive and sustained adoption of the new drug class, we forecast that the global prevalence of sleep apnea will still be around 1.2 billion people in 2050.

Compliance.

Requirements, where they can so they can prioritize their interventions and outreach to the best probabilities to support patient success.

It's early in our rollout program of compliance coach how where the customers using the product are excited and engaged and are starting to see results.

The spice for many more ways that we can work with all of our customers to unlock value from the incredible depth of de identified data using tech like AI and ml for the ultimate benefit of physicians providers and patients.

Mick Farrell: Now, in terms of the market penetration of our pap therapy into this population, we have assumed market growth from our 22.5 million patients with pap therapy here at the end of calendar year 2023 using steady state market growth rates that we saw in the years leading up to 2019. That is mid single digit growth for devices and high single digit growth for masks. With these growth rates, we reach around 109 million patients on our pap therapy by 2050.

Let me discuss the forward pathway stemming from our joint venture with Verily right now that was called premise.

Based on a mutual agreement between regimen in Burley, we've made the decision to unwind the joint Venture's day to day operations. We expect expect this to be complete by the end of the current quarter.

Over the past years of this partnership we've learned how to leverage technology to better identify and gauge diagnose and manage sleep concerned consumers in our U S market.

Mick Farrell: That leaves 1.1 billion people remaining in the addressable market in 2050 over and above those already on our pap treatment. We will continue to update our epidemiology model with all the new data as they arise. However, the bottom line is that there remains a huge number of people needing our sleep apnea treatment solutions today and for the next two to three decades and beyond. While we are proud that we have peer-reviewed and published data showing that we can achieve over 87% adherence of patients to our pap technology, combining our best in class medtech hardware with our digital health solutions, air view and Maya, that still means 10% of our patients on an annual basis will need alternatives.

We expect to take ownership of key assets of the Prima some developed model. So that we can build on the investment and the learnings and ultimately accelerate our ongoing demand generation efforts with sleep apnea patients across resume.

It is exciting to take the learning from demand Gen work in one project and in one country and to now look to apply that on a global scale across the 140 countries, where we provide solutions.

Our growing risk <unk> business continues to be supported by the increased adoption of both noninvasive and life support ventilator solutions in terms of Nextgen respiratory care therapies, we continue to invest in clinical and economic trials for high flow therapy that we call HFC with.

Mick Farrell: We are investing in those alternative therapies and we are actively working with direct to direct patients who do not adhere to path, that 10% plus to second-line therapies such as dental devices, where we have invested and scaled the market leading 3D printed dental device specifically that near in Europe called Nauval. In addition, we have investments in other second-line therapies including pharmaceuticals and hyperglot fossil nerve stem technology. We want every patient who suffocates at night to find a path to good breathing and good sleep and it looks like there's a billion of them we need to help. We start with the highest efficacy and lowest cost therapy, which is path technology, where we have very high adherence rates and the best outcomes for patients and we go from there.

The goal of cost effectively trading COPD in the home.

We continue to generate strong clinical evidence and economic outcomes that we believe will support broader adoption of these technology innovations for trading lung disease in the home. We believe this has the potential for future growth for resumes of the medium to long term.

We remain focused on addressing COPD as one of the top three chronic diseases for hospitalization and the number one cause of re hospitalization.

The prevalence of respiratory insufficiency, Judah COPD as well as neuromuscular disease continues to increase and we are focusing and developing and plan to offer low cost high quality solutions to address this health care epidemic.

Mick Farrell: Given this incredible multiple decades-long plus runway of growth and as part of our ongoing efforts to improve and streamline that end-to-end patient pathway and to make it easier for sleep physicians and sleep labs to diagnose and manage these patients, we're excited about our somnaware acquisition that we closed during the last quarter. Somnaware is software for pulmonary and really all sleep physicians and it compliments our current portfolio of software offerings for physicians, home care providers and patients including air view, right tree and myore respectively.

Our SaaS business had another great quarter with year over year growth of 32%.

SaaS business growth was powered by another full quarter contribution from our fast growing <unk> business in Germany, as well as high single digit organic growth across our <unk> and matrix care brands in the U S market.

The sustained high single digit organic growth in our SaaS business is driven by strength in the HMA segment and stability as well as increased tech adoption by customers in the facilities segment.

We see a pathway to stable double digit organic growth across the SaaS business as well as increased net operating profit performance from this part of our business the ongoing synergies between our digital health solutions in SaaS and our core business remains strong and we continue to leverage that through combined managed.

Mick Farrell: The goal is to ultimately drive greater efficiency and better patient care by helping physicians to take besting class care of their patients with increased efficiency and a better overall experience for the doctor and for the patient.

Mick Farrell: We're making progress across several digital health technology initiatives to drive the value proposition of our cloud connected devices even higher. We are investing in several artificial intelligence driven data products and capabilities in our air solutions ecosystem.

<unk> of cloud compute cyber security interoperability Tech Dev as well as customer facing synergies, including patient resupply technology in our core business.

During the quarter, we appointed Greg Timmins as the new General manager of our bright tree business I'm excited to support Greg and Bobby to continue to drive growth in our home medical equipment providers and to help our customers across the U S market.

Mick Farrell: This quarter we started rolling out a digital product in our U.S, market called Compliance Coach. Compliance Coach is built for home care providers to help them efficiently focus efforts and prioritize outreach to increase patient compliance and ultimately to drive better patient outcomes by helping them leak and beat 90 day adherence goals. The application utilizes resmeds many billions of nights of de-identified sleep and respiratory care data in the cloud to predict the likelihood that a patient will be adherent to therapy or not.

Mick Farrell: The AI product then advises and coaches the home care provider to best identify the patients who may struggle and to meet compliance requirements where they can so they can prioritize their interventions and outreach to the best probabilities to support patient success. It's early in our rollout program of Compliance Coach however customers using the product are excited and engaged and are starting to see results.

This quarter I traveled to Hilda Sean Germany to meet in person with the entire team from our <unk> business the growth in Tech solutions for ambulant home nursing as well as stationary nursing.

<unk> businesses is very strong in Germany, with an aging population in that country and a government that is driving care to be more home based <unk>.

Through their policies and more digital through their policies, we see a long runway for growth without <unk> and across our global software as a service business.

Our SaaS business remains an integral part of <unk> growth strategy. This business complements the market, leading software and device solutions, we have in our respiratory medicine business and we are well positioned as the leading global strategic provider of SaaS solutions for residential medicine globally, and we've created a differentiated value for customers and we will draw.

Mick Farrell: Watch this space for many more ways that we can work with all of our customers to unlock value from the incredible depth of de-identified data using tech like AI and ML for the ultimate benefit of physicians, providers and patients.

<unk> long term sustainable growth for our shareholders.

Before we get into a detailed update on our financials. Let me say this here at resume we are transforming respiratory medicine and residential medicine at scale, we are leading the market in digital health technology across our markets.

Mick Farrell: Let me discuss the forward pathway stemming from our joint venture with Verily right now that was called Prima-Sun. Based on a mutual agreement between ResMed and Verily, we've made the decision to unwind the joint venture's day-to-day operations. We expect this to be complete by the end of the current quarter. Over the past years of this partnership we've learned how to leverage technology to better identify, engage, diagnose and manage sleep-concerned consumers. We expect to take ownership of key assets of the Prima-Sun-developed model so that we can build on the investment and the learnings and ultimately accelerate our ongoing demand-generation efforts with sleep apnea patients across ResMed.

As we continue to scale and drive efficiencies in our operations, we will leverage up appropriate pricing and cost reductions to drive profitable growth.

We're focused on driving top line revenue and tight.

Cost discipline as well as increased efficiencies so that we can accelerate profitability delivering value for all of our stakeholders and especially the 2 billion patients plus worldwide, who need our help.

As we move through fiscal year 2024, I'm confident non laser focus that we will continue to see improvements in our gross margin with GM leverage programs focused on five key areas number one to drive the launch of air since 11 into new global markets and to increase the availability of <unk>.

Mick Farrell: It is exciting to take the learning from demand-gen work in one project and in one country and to now look to apply that on a global scale across the 140 countries where we provide solutions. Our growing respiratory care business continues to be supported by the increased adoption of both non-invasive and life support ventilator solutions. In terms of next-gen respiratory care therapies, we continue to invest in clinical and economic trials for high-flow therapy that we call HFT with the goal of cost-effectively treating COPD in the home.

Since 11 ultimately in all the country markets that we serve number two to drive ongoing strong mask growth with a combination of resupply programs subscription programs and new product launches and you can see that's working this quarter number three to increase software solutions growth moving from her.

High single digit organic growth to double digit organic growth with increased net operating profit leverage in that segment.

Mick Farrell: We continue to generate strong clinical evidence and economic outcomes that we believe will support broader adoption of these technology innovations for treating lung disease in the home. We believe this has the potential for future growth for ResMed of the medium to long-term. We remain focused on addressing COPD as one of the top three chronic diseases for hospitalisation and the number one cause of re-hospitalisation. The prevalence of respiratory insufficiency due to COPD as well as neuromuscular disease continues to increase and we are focusing and developing and plan to offer low-cost, high-quality solutions to address this healthcare epidemic.

Number four to move the higher cost components and freight costs that we've seen through our legacy.

Through our P&L, turning what was a supply chain crosses headwind into a steady tailwind as we move through fiscal year 2024.

And number five to implement cost reduction actions in non core areas of our business to free up cash and to accelerate investments in market, leading med Tech and digital health solutions.

So in terms of digital health investments and solutions. We now have over 16 billion nights of de identified medical data in the cloud and over $22 5 million, 100% cloud connected medical devices sold in more than 140 countries worldwide. We continue to lead the industry in digital health technology.

Mick Farrell: Our SaaS business had another great quarter with year-over-year growth of 32%. SaaS business growth was powered by another full-quarter contribution from our fast-growing Medifox darn business in Germany as well as high single-digit organic growth across our bright tree and matrix-care brands in the US market. The sustained high single-digit organic growth in our SaaS business is driven by strength in the HME segment and stability as well as increased tech adoption by customers in the facility segment.

And we don't plan to stop anytime soon there is so much opportunity ahead of us.

Residents mission and key goal remain crystal clear to improve 250 million lives through better residential healthcare in 2025.

This patient centric mission drives and motivates, whereas <unk> every day during the last 12 months, we have improved over 165 million lives with the delivery of a medical device directly to a patient a complete mask system to a patient or a digital health software solution, helping each person to sleep better breathe better.

Mick Farrell: We see a pathway to stable, double-digit organic growth across the SaaS business as well as increased net operating profit performance from this part of our business. The ongoing synergies between our digital health solutions in SaaS and our core business remain strong and we continue to leverage that through combined management of cloud compute, cyber security, interoperability, tech dev as well as customer-facing synergies including patient resupply technology in our core business.

Until we have high quality lives with best in class healthcare delivered right with I live.

I am very excited about the opportunities in front of us in closing I want to express my sincere gratitude to the 10000 <unk> <unk> for their perseverance their hard work that data <unk>, but today and every day. Thank you with that I'll hand, the call over to Brett in Sydney and after <unk> remarks, we will open up for Q&A from the entire group Brett.

Over to you.

Mick Farrell: During the quarter we appointed Greg Timmans as the new general manager of our bright tree business. I'm excited to support Greg and Bobby to continue to drive growth in our home medical equipment providers and to help our customers across the US market. Marker.

Great. Thanks, Mike.

In my remarks today I'll provide an overview of our results for the first quarter of fiscal year 2024, unless noted all comparisons are to the prior year quarter.

We had strong financial performance in Q1 revenue for the September quarter was $1 1 billion, an increase of 16% in constant currency terms revenue increased by 15%.

Mick Farrell: This quarter, I travel to Hilda Shine, Germany to meet in person with the entire team from our Medifox darn business. The growth in tech solutions for ambulance home nursing as well as stationary nursing home businesses is very strong in Germany, with an aging population in that country and a government that is driving care to be more home based through their policies and more digital through their policies. We see a long runway for growth with our Medifox darn team and across our global software as a service business.

Revenue growth reflected the ongoing combined availability of <unk> 10, and <unk> 11 slate devices to support solid underlying global demand.

As well as strong growth across our <unk> product portfolio.

Year on year movements in foreign currency positively impacted revenue by approximately $10 million in the September quarter.

Looking at our geographic revenue distribution and excluding revenue from our software as a service business sales in U S, Canada, and Latin America countries increased by 10%.

Mick Farrell: Our SaaS business remains an integral part of ResMed's growth strategy. This business complements the market leading software and device solutions we have in our respiratory medicine business and we are well positioned as the leading global strategic provider of SaaS solutions for residential medicine globally. And we have created differentiated value for customers and will drive long term sustainable growth for our shareholders.

In constant currency terms sales in Europe, Asia, and other markets increased by 18%.

Globally in constant currency terms device sales increased by 8% while box and other sales increased by 21%.

Breaking it down by regional areas device sales in the U S, Canada, and Latin America increased by 2%, which reflects the fact that we are cycling a particularly high prior year comparable that was driven by sales of our cloud to cloud the losses.

Mick Farrell: Before we get into a detailed update on our financials, let me say this here at ResMed. We are transforming respiratory medicine and residential medicine at scale. We are leading the market in digital health technology across our markets. As we continue to scale and drive efficiencies in our operations, we will leverage appropriate pricing and cost reductions to drive profitable growth. We are focused on driving top line revenue and tight cost discipline as well as increased efficiencies so that we can accelerate profitability delivering value for all of our stakeholders and especially the two billion patients plus worldwide who need our help.

Masks and other sales increased by 23% reflecting growth in resupply and new patient setups.

In Europe Asia, and other markets device sales increased by 20% in constant currency terms again, reflecting strong demand and significantly improved availability of cloud connected devices.

Okay.

<unk>.

Software as a service revenue increased by 32% in the September quarter, reflecting the contribution from many folks Dan acquisition.

Mick Farrell: As we move through fiscal year 2024, I'm confident and I'm laser focused that we will continue to see improvements in our gross margin. With GM leverage programs focused on five key areas. Number one, to drive the launch of essence 11 into new global markets and to increase the availability of essence 11, ultimately in all the country markets that we serve. Number two, to drive ongoing strong mass growth with a combination of resupply programs, subscription programs and new product launches and you can see that's working this quarter.

And continued strong performance from our high Tech vertical.

Excluding <unk> acquisition SaaS revenue grew by 7% in the September quarter.

Mick Farrell: Number three, to increase software solutions growth, moving from high single digital organic growth to double digital organic growth with increased net operating profit leverage in that segment. Number four, to move the higher cost components and freight costs that we've seen through our legacy through our P&L, turning what was the supply chain crisis headwind into a steady tailwind as we move through fiscal year 2024. Number five, to implement cost reduction actions in non-core areas of our business to free up cash and to accelerate investments in market leading med tech and digital health solutions.

Many folks band contributed revenue of $25 7 million for the September quarter, consistent with our expectations at the time of the acquisition.

No we will anniversary this acquisition in Q2, FY 'twenty force, our headline SaaS growth rate will moderate in Q2.

During the rest of my commentary today I'll be referring to non-GAAP numbers, we have provided a full reconciliation of the non-GAAP to GAAP numbers in our first.

First quarter earnings press release.

Gross margin declined by 160 basis points to 56% in the September quarter. The decrease primarily reflects an increase in component manufacturing costs, partially offset by favorable product mix due to the increase in mask growth relative to the volume growth and favorable foreign currency movements sequential.

Sequential gross margin improved by 20 basis points, driven primarily by favorable product mix.

Moving onto operating expenses SG.

SG&A expenses for the first quarter increased by 15% or in constant currency terms increased by 14%.

The increase was predominantly attributable to increases in employee related costs as well as the incremental SG&A expense associated with many folks Dan that we acquired in November 2022.

Mick Farrell: So in terms of digital health investments and solutions, we now have over 16 billion nights of de-identified medical data in the cloud and over 22.5 million 100% cloud connectable medical devices sold in more than 140 countries worldwide. We continue to lead the industry in digital health technology and we don't plan to stop anytime soon. There is so much opportunity ahead of.

SG&A expenses as a percentage of revenue was 22% compared to the 23% in the prior year period.

Looking forward and subject to currency movements, we expect SG&A expense as a percentage of revenue to be in the range of 18% to 20% for fiscal year 'twenty four.

Mick Farrell: Davis, ResMed's mission and key goal remain crystal clear to improve 250 million lives through better residential health care in 2025. This patient's centric mission drives and motivates resmedians every day. During the last 12 months, we have improved over 165 million lives with the delivery of a medical device directly to a patient, a complete mask system to a patient, or a digital health software solution, helping each person to sleep better, to breathe better, and to live higher quality lives with best-in-class health care delivered right where they live. I'm very excited about the opportunities in front of us.

This guidance also reflects the impact of restructuring we initiated earlier this week when we estimate this will result in a reduction in our workforce of approximately 5%.

We expect to complete the restructure during our second quarter of fiscal year 'twenty four.

R&D expenses for the quarter increased by 20% in constant currency terms increased by 21%.

R&D expenses as a percentage of revenue was six 9% compared to the six 6% in the prior year period.

Looking forward and subject to currency movements, we expect R&D expenses as a percentage of revenue to be in the range of 6% to 7% for fiscal year 'twenty four.

Mick Farrell: In closing, I want to express my sincere gratitude to the 10,000 resmedians for their perseverance, their hard work, their dedication, both today and every day. Thank you.

Operating profit for the quarter increased by 10% underpinned by strong revenue growth, partially offset by a lower gross margin.

Brett Sandercock: With that, I'll hand the call over to Brett in Sydney, and after Brett's remarks, we will open up for Q&A from the entire group. Brett, over to you.

Net interest expense for the quarter was $15 million and we expect interest expense to be in the range of $12 million to $14 million per quarter over the balance of fiscal year 'twenty four.

Brett Sandercock: Great. Thanks, Mick.

Brett Sandercock: In my remarks today, I'll provide an overview of our results for the first quarter of fiscal year 2024, unless noted, all comparisons are to the prior year quarter. We had strong financial performance in Q1, group revenue for the September quarter was 1.1 billion, an increase of 16%. In constant currency terms, revenue increased by 15%. Revenue growth reflected the ongoing combined availability of S&C-10 and S&C-11 sleek devices to support solid underlying global demand, as well as strong growth across our mask product portfolio.

Our effective tax rate for the September quarter was 21% broadly consistent with the prior year quarter.

Looking forward, we estimate our effective tax rate for fiscal year 'twenty four will be in the range of 19% to 21%.

Net income for the September quarter increased by 9% and non-GAAP diluted earnings per share of $1 64 also increased by 9%.

During the quarter, we recorded a provision of $8 million associated with the expected cost of the recently announced Astral field safety notification.

Brett Sandercock: Here on year movements in foreign currencies positively impacted revenue by approximately 10 million in the September quarter. Looking at our geographic revenue distribution and excluding revenue from our software as a service business, sales in US Canada and Latin America countries increased by 10%. In constant currency terms, sales in Europe, Asia and other markets increased by 18%. Globally, in constant currency terms, device sales increased by 8%, while masks and other sales increased by 21%.

We also recorded acquisition related expenses of about half a million dollars during the quarter.

Both have been treated as non-GAAP items in our Q1 financial results.

We recorded losses of $4 5 million at September quarter associated with the <unk> joint venture with Verily.

As Nick discussed the joint venture will be winding down operations, and we will incur further losses going forward in relation to Amazon.

Cash flow from operations for the quarter was $286 million, reflecting solid underlying earnings and stable working capital balances.

Brett Sandercock: Breaking it down by regional areas, device sales in the US, Canada and Latin America increased by 2%, which reflects the fact that we are cycling a particularly high prior year comparable that was driven by sales of our card to cloud devices. Masked and other sales increased by 23%, reflecting growth in resupply and new patient setups. In Europe, Asia and other markets, device sales increased by 20% in constant currency terms, again reflecting strong demand and significantly improved availability of cloud connected devices.

Capital expenditure for the quarter was $30 million depreciation and amortization for the quarter totaled $45 million.

We ended the first quarter with a cash balance of $209 million and at September 30, We had $1 4 billion in gross debt and $1 2 billion in net debt.

During the quarter, we reduce that debt.

Million.

At September 30, we had approximately $825 million available for drawdown on our revolver facility and we continue to maintain a solid liquidity position.

During the quarter. We also closed the previously announced <unk> acquisition. The company that was an upstream diagnostic management platform that is complementary to our current <unk> and <unk> solutions.

Brett Sandercock: Increased patient setups. Offer as a service revenue increased by 32% in the September quarter, reflecting the contribution from our Medifilks ban acquisition and continues strong performance from our HME vertical. Excluding our Medifilks ban acquisition, SaaS Revenue agreed by 7% in the September quarter. Medifilks ban contributed revenue of 25.7 million for the September quarter, consistent with our expectations at the time of the acquisition. Note, we will anniversary this acquisition in Q2 FY24, so our headline SaaS growth rate will moderate in Q2.

Our board of directors today declared a quarterly dividend of <unk> 48 per share.

As part of our capital management activities, we plan to resume our previously authorized share buyback program starting in our second quarter.

We expect to purchase shares to the value of approximately $15 million per quarter.

This will more than offset any dilution from the issue of employee equity during the year.

Finally, concurrent with our capital management activities, we plan to continue to reinvest in growth through R&D and expect to deploy further capital for tuck in acquisitions.

Brett Sandercock: During the rest of my commentary today, I will be referring to non-gap numbers. We've provided a full reconciliation of the non-gap to gap numbers in our first quarter earnings press release. Gross margin declined by 160 basis points to 56% in the September quarter. The decrease primarily reflects an increase in component and manufacturing costs, partially offset by favorable product mix due to the increase in mass growth relative to device growth and favorable foreign currency movements.

And with that I'll hand, the call back to Amy.

Great. Thank you Brad and thank you Mick Kevin Let's go ahead and turn the call back over to you to remind participants about instructions for the Q&A portion of the call.

Thank you, we'll now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

Brett Sandercock: Sequential gross margin improves by 20 basis points driven primarily by favorable product mix. Moving on to operating expenses, S-GNA expenses for the first quarter increased by 15% or in constant currency terms increased by 14%. The increase was predominantly attributable to increases in employee-related costs as well as the incremental S-GNA expenses associated with medical expand that we acquired in November 2022. S-GNA expenses as a percentage of revenue was 20.2% compared to the 20.3% in the prior year period.

Press Star two if you'd like to have a question from the Q1 moment. Please while we poll for questions.

Our first question is coming from David Bailey from Macquarie. Your line is now live.

Yes. Thanks, Good morning, I was just like with Chris.

And some of his comments around the market in 2015.

Just your thoughts around.

GOP wants.

As potentially being complementary to see that as opposed to the biggest substitution for.

And maybe just giving you some thoughts around the upcoming clinical trials and how that could influence.

Brett Sandercock: Looking forward and subject to currency movements, we expect S-GNA expense as a percentage of revenue to be in the range of 18 to 20% for fiscal year 24. This guidance also reflects the impact of restructuring we initiated earlier this week and we estimate this will result in a reduction in our workforce of approximately 5%. We expect to complete the restructure during our second quarter of fiscal year 24. R&D expenses for the quarter increased by 20% or in constant currency terms increased by 21%.

That will take going forward.

Yes, thanks for the question David.

I'm just happy that we have had 90 days and we put some science behind the analysis of this.

As the World leader in the field of respiratory medicine, and sleep apnea, we really know these prevalence numbers really well and so that baseline of 936 million patients from 2015 growing to $1 4 billion through 2050 is really I think pretty conservative in its assumption of the growth rate of populations and aging populations in lower growth areas.

Brett Sandercock: R&D expenses as a percentage of revenue was 6.9% compared to the 6.6% in the prior year period. Looking forward and subject to currency movements, we expect R&D expenses as a percentage of revenue to be in the range of 6 to 7% for fiscal year 24. Operating profits for the quarter increased by 10% underpin by strong revenue growth, partially offset by lower gross margin. Now net interest expense for the quarter was 15 million and we expect interest expense to be in the range of 12 to 14 million to quarter over the balance of fiscal year 24.

But what that shows is $1 4 billion.

<unk> in that time, not including any impact from any of these <unk>.

<unk>, one class of drugs, and we took really the maximum aggressive efforts, including <unk>.

Current indications and in some future ones to assess what the impact could be on the potential of patience in terms of sleep apnea prevalence worldwide really aggressive and assume not only aggressive penetration, but sustained that the adherence rate would stay.

80% to 100% on these on these drugs, which they not achieving out there in the market, but we just said look let's take that high penetration case and that showed $1 2 billion patience in 2015. So we will look at every update that comes from.

Brett Sandercock: Our effective tax rate for the September quarter was 20.1% broadly consistent with the prior year quarter. Looking forward we estimate our effective tax rate for fiscal year 24 will be in the range of 19 to 21%. Our net income for the September quarter increased by 9% and non-gap diluted earnings per share of $1.64 also increased by 9%. During the quarter, we recorded a provision of 8 million associated with the expected cost of the recently announced astral field safety notification.

Pharma industry, they're very active in this class of GOP ones, but we think we're taking a very high penetration analysis to get there and so we will continue to look at any new data that come on in every quarter, we'll update that epidemiology model and move it around but what it shows is a is a huge opportunity $1 1 billion patients above our penetration.

At quite high growth rates through the next number of decades to your question around concomitant therapy useful that's what we've been saying in the last two years since a number of these have been out there in the diabetes side and on the at least the indications. It's obviously early days, but we're tracking many thousands of patients on <unk> and <unk>.

Brett Sandercock: We also recorded acquisition related expenses of a half a million during the quarter. These both have been treated as non-gap items in our Q1 financial results. We recorded losses of 4.5 million in our September quarter associated with the pre-Masson joint venture with Verily. As Nick discussed, the joint venture will be winding down operations and we will incur no further losses going forward in relation to pre-Masson. Cash flow from operations for the quarter was 286 million reflecting solid underlying earnings and stable working capital balance.

And we're seeing maintenance of adherence, we're seeing maintenance of resupply programs and really no change when you look at so that's what the aggregate level, we are seeing now.

No change there we are seeing more patients coming into the funnel I look we know we're doing al.

Janus programs albumin demand Gen programs and there are other alternative therapy is doing to managing that bring patients into the funnel that we get a benefit from but we truly believe that this idea that you could come in to the health care system someone who's maybe <unk> basin likely avoiding the health care system as a high avoidance of people with BMI.

Brett Sandercock: Cooper will expenditure for the quarter of a 30 million depreciation and amortization for the quarter total 45 million. We ended the first quarter with a cash balance of 209 million and at September 30 we had 1.4 billion in gross debt and 1.2 billion in net debt. During the quarter we reduced our debt by 80 million. At September 30 we had approximately 825 million available for drawdown under our revolver facility and we continued to maintain a solid liquidity position.

The 30 to $32 35, all of the primary care system.

So we believe it will bring more patients and we're seeing that with a very high patient flow. So we're just looking at the data, we're observing which is patients on concomitant therapies. The multiple years and we can attract those and track the adherence and we'll publish that every quarter, we're seeing actually our adherence rates.

Brett Sandercock: During the quarter we also quoted our previously announced somewhere acquisition, the company that provides an upstream diagnostic management platform that is complementary to our current air view and grocery solutions. A board of directors today declared a quarterly dividend of 48 cents per share. As part of our capital management activities we plan to resume our previously authorised share by back program starting in our second quarter. We expect a purchase share to the value of approximately 15 million per quarter.

Steady and resupply rates steady in that installed base and in the new patient flow. So we're actually seeing increased all time highs of patients coming into the funnel. So we're watching all of these above and we're looking forward to two to three decades and still see with highest case penetration Zika role in any study like you're still going to see north of one hundreds of millions to 1 billion patients between the <unk>.

<unk> penetration and now our disease state and beyond but David Thanks for the question and.

Look forward to ongoing discussions.

Brett Sandercock: This will more or not set any dollars from the issue of employee equity during the year. Finally, concurrent with our capital management activities we plan to continue to reinvest in gross through R&D and expect to deploy further capital.

Thank you as a reminder, its star one to be placed in the question queue and USC. Please limit yourselves to one question the return to the queue.

Our next question is coming from David low from Jpmorgan. Your line is now live.

Amy Wakeham: For talking acquisitions and with that we'll hand the call back to I mean. Great thank you Brett and thank you Mick Kevin let's go ahead and turn the call back over to you to remind participants about instructions for the Q&A portion of the call. Thank you now but you don't need a question and answer session if you'd like to be placing the question to please press star one under telephone keypad. A confirmation tone will indicate your line is in the question Q may press star two if you'd like to a request from me Q one moment please will we pull for questions.

Thanks, very much if I could stick on the same topic.

Could I get you to talk a little bit to the 22 5 million patients that you've got on my error.

To understand how data into the categories of mild moderate and severe sleep apnea.

Just you've given us some very big numbers with fully aware that about half of those patients are in the mall category.

Clear to me that many of those patients are currently seeking treatment or treatment in future. So if you could just help us with what you can see in the data and so we can make an assessment as well please.

David Bailey: Our first question is going from David Bailey from a quarry your line is now live. Yeah thanks for morning because it's like the press a bit more on some of the comments around the market to 2050. Just in your thoughts around geography once. As potentially been complementary to see that as opposed to being a substitution for. And maybe this giving some thoughts around the upcoming clinical trials and how that could influence that I'll take you on forward.

Yeah.

Yes, David Thanks, Thanks for the question and as you look at the epidemiology data there.

A number of splits on IHI, what we're lacking.

In the market is a split around symptomatology and how patients feel.

And.

As we're looking at the data of patients with IHI is five to 15 15 to 30 and 30 plus.

And overlapping that with concomitant therapy.

It will be peer reviewing and publishing data at upcoming conferences in 2024 on this to some of these some of these nuances of delta's, but on the aggregate group, we're not seeing changes in adherence and even in the subsets of mild to moderate we're not seeing significant changes in adherence rights all new patients coming into the funnel.

David Bailey: Yeah thanks for the question David and you know just I'm just happy that we've had 90 days and we put some science behind the analysis of this. You know the world leader in the field of respiratory medicine and sleep out here we really know these prevalence numbers really well and so that baseline of 936 million patients from 2015 growing to 1.4 billion. Through 2050 is really I think pretty conservative and it's a function of the growth rate of populations and aging and populations in lower growth areas.

<unk> is a great measure of the number of suffocation episodes per hour just to remind people in IHI <unk>.

<unk> just on the <unk>, which is considered mild is suffocating every four minutes of sleep. So a doctor may call that mild but to a patient who is suffocating every four minutes of sleep.

David Bailey: But what that shows is you know 1.4 billion available in that time not including any impact from any of these geography one class of drugs. And and we took really the maximum aggressive efforts including all current indications and and some future ones to assess what the impact could be on on the potential of patients in terms of obviously about me prevalence worldwide really aggressive and and assume not only aggressive penetration. But sustained that the adherence rate would stay you know sort of 80 to 100% on these drugs which they're not achieving out there in the market.

<unk>.

15 times 14 times, an hour and you're sleeping all through the night and having 90 suffocation episodes, they stick on the therapy and new patients coming in as well. So look we're watching this really carefully and we're really analyzing.

IHI by symptomatology by craniofacial distance between the tongue and the uvula and actually size of tongue, because theres a whole lot of factors that go into go into the prevalence of sleep apnea, and obviously the issues around hypopnea, as which are far more prevalent in women and lead to.

David Bailey: But we just said let's take that high penetration case and and that shows 1.2 billion patients in 2050 and so we will look at every update that comes from the farmer industry they're very active in this this class of geography ones. But we think we're taking a very high penetration analysis to get there and so we'll continue to look at you know any new day that come on and every quarter will update that epidemiology model and and move it around and what it shows is a is a huge opportunity 1.1 billion patients above.

Worse excessive daytime sleepiness headache, and Comorbidities that are not associated with <unk> at all but look we're looking through all of these data and as we as we look forward over the next number of decades, there will be an impact. There's no question by these these are weight loss medications, but it'll be on the margin and it won't be.

Suddenly the market believes it's going to be dramatic given the last 90 days of that stock and I can tell you every bit of clinical data that we have going forward and every bit we have going retrospectively and we've got the biggest database in the world and its $21 5 million patients as we look at that split between mild moderate and severe we're not seeing we're not seeing changes, but look every quarter, we will continue to.

David Bailey: Our penetration that that quite high growth rates through the next number of decades to your question around concomendent therapy and use well that's what we've been seeing the last two years since a number of these have been out there in the diabetes side and and on the obesity indications it's obviously early days but we're tracking many thousands of patients on glp ones and pap and we're seeing maintenance of adherence we're seeing maintenance of re supply programs and really no change when you look at you know so that's at the aggregate level. We're seeing no no change there we are seeing more patients coming into the funnel look we know we know we're doing our awareness programs our demand manager demand and programs and there are other alternate therapies doing demand and that bring patients into the funnel that we get a benefit from.

<unk> that and we will do more and more splits on severity we published.

<unk> modeled this quarter and will continue to update it and continue to provide data I'm also making sure that we keep some of those data. So we can get them into the peer reviewed published press like the lancet article that started this epidemiology model and so we'll be publishing the information that we can and then.

Every quarter here on the on our Investor side, but then we'll also be running the real thoughts and epidemiology models and healthy <unk> and outcomes research work and making sure that gets into the peer reviewed and published press as well.

David Bailey: But we truly believe that this idea that you could come in to the health care system someone who's maybe obese or morbidly a decent. Like we avoiding the health care system there's a there's a high avoidance of people with BMI of a thirty thirty two thirty five of the primary care system. And so we believe it will bring more patients in we're seeing that with our very high patients flow. So we're just looking at the data we're observing which is patients on concomendent therapies there multiple years and we're going to track those and track the adherence and we'll publish that every quarter we're seeing actually our adherence rates.

Thank you. Your next question is coming from Dan <unk> from minus your line is now live.

Good morning, I was kind of going to ask some questions about the results Robyn GOP one drugs if that's okay.

Then that would be delightful.

Okay. Just a question for Brett could we work can you just walk through the headwinds and <unk> for gross margin over the balance of FY 'twenty four.

Let me say some price increases out there in the market and product mix shifting around could you just perhaps walk through those.

David Bailey: And we're looking forward to the three decades and still see with highest case penetrations and you could roll in any study you like you're still going to see north of hundreds of millions to a billion patients.

Those factors.

Yes show up there and as we look forward on Jal.

I mean, Nick mentioned in his remarks as well, but if you look at it in terms of.

Jay and we do feel that we're going to see improvements in our gross margin over FY 'twenty four.

Mick Farrell: Between the the likely penetration and now our disease state and beyond but David thanks for the question and look forward to the ongoing discussion.

And that is <unk> that really really going to be around improved product mix.

Manufacturing improvements and efficiencies in everything we can drive.

Unknown Attendee: Thank you.

Unknown Attendee: As a reminder, it's Star 1's be pleased in the question of Q.

Freight cost reductions are still making their way through inventory and some of that will manifest in FY 'twenty four.

Unknown Attendee: When you ask me, please let me yourself to one question that returned to the Q.

David Low: Our next question is coming from David Low from JP Morgan, your line is now live. Thanks very much. If I could stick on the same topic, could I get you to talk a little bit to the 22 and a half million patients that you've got on my air? Really good to understand how they fit into the categories of mild, moderate, and severe sleep apnea, because as much as you've given us some very big numbers, we're fully aware that about half those patients are in the mild category, and it's unclear to me that many of those patients are currently seeking treatment or will seek treatment in future.

Things stabilized can pilot costs now we that was a headwind even for this quarter.

We are cycling lastly, softening that particularly in the second half of FY 'twenty four.

And then we have obviously the <unk> tend to iOS 11 transition that will be progressive.

Slide 24 as well.

And then your point mentioning a little bit around pricing as well. So a combination of those factors will give us confidence I think in gross margin through FY 'twenty four.

Thank you. Your next question is coming from Chris Cooper from Goldman Sachs. Your line is now live.

David Low: So if you could just help us with what you can see in the data and so we can make an assessment as well, please. Yeah, David, thanks for the question. As you look at the epidemiology data, there are a number of splits on AHI. What we're lacking in the market is a split around symptomatology and how patients feel. As we're looking at the data patients with AHI is 5 to 15, 15 to 30 and 30 plus, and overlapping that with concomitant therapy, we'll be peer reviewing and publishing data at upcoming conferences in 2024 on this to show some of these nuances of deltas.

Sorry to come back to you guys, but.

I think it is an important topic. So just on the patient data to make that you're tracking CPAP patients also in GOP ones can you just update us on how many patients you're tracking there and.

And when you intended publishing data on a rope.

Foreshadowed last month that you would be sort of releasing that data when it makes sense to do that before or do you think maybe after the majority of study that's going to read out next year and just any high level thoughts you have on the outcome of that study would be helpful. At this stage. Thank you.

Yeah. Thanks, Chris So yes, there will be ongoing longitudinal studies that we'll get out to the peer reviewed press, but obviously look it's an urgent issue and if you look at the market reaction last 90 days. There is an assumption of 30% 40% reduction in immediate Tam right. If you look at that market cap range and Thats just in Congress with every piece of scientific evidence that we have.

David Low: But on the aggregate group, we're not seeing changes in adherence, and even in the subsets of mild to moderate, we're not seeing significant changes in adherence rates or new patients coming into the funnel. AHI is a great measure of the number of suffocation episodes per hour, just to remind people an AHI of 14, just under 15, which is considered mild, is suffocating every four minutes of sleep. A doctor may call that mild, but to a patient who's suffocating every four minutes of sleep in 14 times an hour and you're sleeping all through the night and having 80, 90 suffocation episodes, they stick on the therapy and new patients coming in as well.

Looked at historically and going forward.

So theres many thousands of patients on our <unk> database.

We also have 17000 patients that we're tracking that have had gone through bariatric surgery, and our own Pap therapy post surgery with 50 plus percent weight loss reductions in that cohort. So we're tracking.

Much stronger whitewall cohort and this sort of depending on which type of <unk> 110, 2030, plus percent weight loss reductions in the extreme case of the 50% weight loss reductions and so we will be.

David Low: We're watching this really carefully and we're really analysing by AHI, by symptomatology, by craniofacial distance between the tongue and the uvula, and actually size of tongue, because there's a whole lot of factors that go into the prevalence of sleep apnea, and obviously the issues around hypotenia which are far more prevalent in women and lead to worse excessive daytime sleepiness, headache and comorbidities that are not associated with weights at all. But look, we're looking through all of these data and as we look forward over the next number of decades, there will be an impact.

Publishing data in the peer reviewed clinical price across all of those cohorts as we go forward.

We will choose as we as we keep putting out the epidemiology data, we will choose to put some of those data which aren't going into the peer reviewed press rights that we don't corrupt those studies that we actually want to get into the clinical information that can really be the out there versus just the stuff that we put together for an investor, which then would prohibit those same data going in.

<unk>.

Ah clinical paper, but we are finding the balance between those and we definitely you.

David Low: There's no question by these weight loss medications, but it'll be on the margin and it won't be, I mean, certainly the market believes it's going to be dramatic given the last 90 days of our stock, and I can tell you every bit of clinical data that we have going forward and every bit we have going retrospectively, and we've got the biggest database in the world and there's 21.5 million patients. As we look at that split between mild, moderate and severe, we're not seeing changes.

The market is looking for those data I can tell you now that the data on aggregate showing no change, despite how you, which <unk> cloth, which IHI group for adherence and resupply, but I will start to find the right division between the information we can get out on the short to medium term basis and the information that needs to go on those long.

<unk> studies to really show the science behind this and really balance it out one of the best ways. We're doing it every quarter is to show the incredible growth that we're getting in our devices and our mosques and particularly the resupply of mosques right Theres no impacts of anyone's recall there is no impacts of any.

David Low: But look, every quarter will continue to update that and we'll do more and more splits on severity. We've published these epidemiology model this quarter, and we'll continue to update it and continue to provide data. I'm also making sure that we keep some of those data so we can get them into the peer reviewed and published press, like the Lancet article that started this epidemiology model and so we'll be now investigate, but there will also be running the real science and epidemiology models and healthy content outcomes research work and making sure that gets into the peer reviewed and published presses, as well.

Mick Farrell: Thank you.

A drug therapy unused loop at the replenishment rate of marks if you are not on therapy and not ordering mosques and we're seeing really strong resupply. The other fact to bring into this that we can publish and do publish is the number of patients in our air solutions ecosystem $22 5 million patients that continues to go up we had record numbers of new patients.

<unk>.

And in addition to that record numbers of patients themselves engaging with Miami.

Dan Hurren: Next question is coming from Dan Hurren from Managed Hearline, is our live.

And Thats driven by essence, 11, being far more digitally engaged in higher rates of adoption of that but we're seeing a really strong uptake of patients in flow in and patience on adherence, but we will continue to publish every quarter. Those those data in the appropriate data we can from the clinical and we'll definitely update the epidemiology model every quarter.

Dan Hurren: Good morning. I was going to ask some questions about the results rather than GOP1 drugs. If that's okay. Dan, that would be delightful. Okay. All right. Look, just a question to Brett. Could we walk if you just walk through the headwinds and tailwinds for gross margins over the balance of FY24 and maybe we've seen some pricing creases out there in the market and product mix shifting around? Could just perhaps walk through those factors.

Thank you next question is coming from Craig Wong Pan from RBC. Your line is now live.

Dan Hurren: Yeah, sure, Dan, as we look forward on GM. I mean, Nick mentioned him in his remarks as well, but if you look at it in terms of GM, we do feel that we're going to see improvements in our gross margin over FY24. Those tailwinds are really going to be around improved product mix, manufacturing improvements and efficiencies, everything we can drive. Fake cost reductions are still making their way through inventory and some of that will manifest in FY24.

Thanks.

America's mask growth could you provide some more details on where that additional growth and re supply has been coming from and how long do you think you can sustain that strong year on year growth in mask revenues.

Yeah. Thanks, Craig it's a really good question because the mask growth across the group was 21% on constant currency Europe was incredibly strong at 15%.

Constant currency growth in our full competition market with everybody on the field and 23% in U S, Canada Latin America.

Dan Hurren: We're seeing stabilized component cost now. That was a headwind even for this quarter, but we're cycling largely cycling that particular in the second half of FY24. And then we have obviously the AS-10 to AS-11 transition that will be progressive over FY24 as well. And then you'll point mentioning a little bit around pricing as well. So combination of those factors will give us confidence I think in gross margin through FY24.

Brett Sandercock: Thank you.

Look as I said in.

My description in the prepared remarks on on.

Ill look forward over the next.

A number of decades, the stable market growth now.

Field was mid single digits on the device side and high single digits on the mask side. If you look at the five year CAGR on a three year CAGR, leading into 2019 pre COVID-19 and that's sort of what we're looking at that epidemiology model that.

Chris Cooper: Next question is coming from Chris Cooper from Goldman Sachs for wine is now live.

Mid single digit growth on devices and high single digit growth on masks. So if you think of that as the market growth and a stable state and then comes up to well what can resume do in market demand what can we do in demand Gen. What can we do to get patients into the funnel.

Chris Cooper: Sorry to come back to it guys, but I think it is an important topic. So just on the patient day to make that you're tracking CPAP patients also on TLP1. Can you just update us on how many patients you're tracking there and when you intended publishing that. I know Rob for shadow last month that you would be sort of releasing that data. Would it make sense to do that before or do you think maybe after the majority of study that's going to read out next year. And just any high level thought you have on the outcome of that study would be helpful this stage.

I truly believe to the three questions focus on this new class of drugs I do believe we are seeing more patients coming into the funnel more patients into primary care. That's great. I mean, I think there's a trillion dollars worth of market cap now from these companies and they will turn that into marketing to bring people in for the for the Miracle drug and that will absolutely bring.

Patients in for assessment for all of the other comorbidities that are associated with patients that might have been severely over white and now likely on the other side of these will still be of white, including sleep apnea COPD.

Mick Farrell: Thank you. Yeah, thanks Chris. So yeah, there will be ongoing longitudinal studies that will get out to the peer reviewed press, but obviously look at it's an urgent issue and if you look at the market reaction last 90 days, you know, there's an assumption of 30, 40% reduction in immediate tam right if you look at that market cap change and it's just in Congress with every piece of scientific evidence that we've looked at historically and going forward.

And other cardiovascular diseases and beyond so we're watching that really closely I look we've consistently.

The decades that we've been in business not just accepted mask growth rates from the market, We said, let's drive it higher and higher.

Mick Farrell: Yeah, so there's many thousands of patients on our GLP1 plus PAP database. We also have 17,000 patients that we're tracking that have had gone through bariatric surgery and are on PAP therapy post surgery with 50 plus percent weight loss reductions in that cohort. So we're tracking, you know, much stronger weight loss cohort and and this sort of, you know, depending on which type of GLP1, 10, 20, 30 plus percent weight loss reductions and extreme case of the 50% weight loss reductions.

23% is extraordinary and very strong in a highly competitive market, but I look at what we're doing with resupply I'll look what we're doing with new product launches I look at what we're doing to drive patients into the funnel and I think we can meet and beat that high single digits that mark market would grow at and with us being such a strong share we get to when we do demand Gen. We.

To get a very good share of those patients through the funnel. So theres more of an incentive for resume to drive demand Gen initiatives. When we get such good share of it on the device and mask side and we've seen that in many of the markets. We operate in worldwide, but it's a great question Craig.

Mick Farrell: And so we'll be publishing data in the peer reviewed and clinical press across all of those cohorts as we go forward. Yeah, we will choose as we keep putting out the epidemiology data. We will choose to put some of those data which aren't going into the peer reviewed press right so that we don't corrupt those studies that we actually want to get into the clinical information that can really be out there versus just the stuff that we put together for an investor, which then would prohibit that some of those same data going into a clinical paper.

Thank you next question is coming from Sean <unk> from Morgan Stanley. Your line is now live.

Good morning, continuing high for everybody as well.

Really good Opex control in the quarter and I think Brent mentioned, if I picked it up correctly, 18% to 20% as the guide on revenue going forward I'm. Just wondering if there is more restructuring to donal to be done or you think you are.

Mick Farrell: But we are finding that the balance between those and we definitely hear you that the market is looking for those data. I can tell you now that the data on aggregate are showing no change despite how you will wish GLP1 class, which AHI group for adherence and resupply. But I will start to find, you know, the right division between the information we can get out on the short to medium term basis and the information that needs to go in those longitudinal studies to really show the science behind this and really balance it out.

You brought sides.

At the moment.

Yes, Sean Thanks for the question and as.

As I said in the prepared remarks stuff that impacts our people.

Are the toughest decisions to make and we did this week.

Have a change.

5% of our global workforce reduction to <unk>, a global workforce.

Mick Farrell: One of the best ways we are doing it every quarter is to show the incredible growth that we are getting in our devices and our masks and particularly the resupply of masks. There is no impact of anyone's recall, there is no impact of any drug therapy and you just look at the replenishment rate of masks. If you are not on therapy you are not ordering masks and we are seeing really strong resupply.

Decisions to make I really think that that is if you think about it that is the restructuring there are some changes I'm looking at in the operating model certain roles and responsibilities and a focus on a more product led brand led company that will come over time, but not massive.

Restructures, and I think what that 18% to 20% of revenues.

Mick Farrell: The other fact to bring into this that we can publish and do publish is the number of patients in our S-Solutions ecosystem, 22.5 million patients that continues to go up. We had record numbers of new patients starting up. And in addition to that record numbers of patients themselves engaging with my air. And that is driven by S-N-11 being far more digitally engaged and higher rates of adoption of that. But we are seeing a really strong uptake of patients and flow in and patients on adherence. But we will continue to publish every quarter those data and the appropriate data we can from the clinical. And we will definitely update the epidemiology model every quarter.

That Brett talked about in SG&A is indicative of the change that we've made here and re established a new base.

And a push for as you said really strong profitable growth across our business, but the world has changed we are already a product led organization.

Unknown Attendee: Thank you.

Our brand has increased its value across the world and we need to document and understand that and understand how to engage people in non reimbursed markets as consumers into the funnel and we've already invested in a number of our D to C markets in that and we're driving that and in our <unk> markets. We're also working with our health care partners and.

<unk> is in the channel to work at how to best get patients into the funnel. So we were sort of if you like with freeing up cash to reinvest in demand Gen reinvest in getting patients into the funnel and and we think there is 1 billion reasons in terms of the patients that need our help to get out there and do it and that's going to that's going to be there for decades, and we've got to we've got.

Craig Wong-Tan: Next question is coming from Craig Wong-Tan from RBC. Your line is in our line. Thanks.

Craig Wong-Tan: Just on your America's mask growth, could you provide some more details on where that additional growth and resupply has been coming from and how long do you think you can sustain that strong year-on-year growth in mask revenues? Yeah, thanks Craig. It's a really good question because the mask growth across the group was 21% on constant currency. Europe was incredibly strong at 15% constant currency growth in a full competition market where everybody on the field and 23% in US Canada, Latin America.

Find better ways to do it but to answer your question directly yes that restructure is done and we're now focused on moving forward.

Thank you. Your next question is coming from Margaret <unk> from William Blair. Your line is now live.

Hey, good afternoon, everyone and thanks for taking my question.

I wanted to focus on the quarter as well you guys talked about this all time high patient flow number which is notable.

Craig Wong-Tan: Look, as I said in my description in prepared remarks on our look forward over the next number of decades, the stable market growth in our field was mid-single digits on the device side and high-single digits on the mask side. If you look at the three-year Kagga leading into 2019 pre-COVID and that's what we're looking at that epidemiology model that mid-single digit growth on devices and high-single digit growth on masks. If you think of that as the market growth in a stable state, it then comes up to, well, what can resmed do in market demand?

Yes, when you said the channel I guess were you referencing those are CPAP prescriptions are folks getting tests.

Any color you can give us on how that growth profile compared to recent quarters.

And anything kind of on the U S device growth this quarter as well.

Yes, Thanks, Margaret and.

Yes, so look we have a relatively low share of the diagnostic space in home sleep apnea testing with our App Neil in GAAP product.

So we are tracking that those are up.

The best data, we have is through our <unk> solution system. So we talk about the $22 5 million patients on our air solutions platform and the <unk>.

Craig Wong-Tan: What can we do in demand gen? What can we do to get patients into the funnel? I truly believe to the three questions focused on this in your class of drugs. I do believe we are seeing more patients come into the funnel, more patients into primary care. That's great. I mean, I think there's a trillion dollars worth of market cap now from these companies and they will turn that into marketing to bring people in for their miracle drug and that will absolutely bring patients in for assessment for all the other code morbidities that are associated with a patient that might have been severely overweight and now likely on the other side of these will still be overweight, including sleep apnea, CFPD and other cardiovascular diseases and beyond.

Almost 7 million patients that we now have on my patients directly in guidance. We watch those stocks very closely. We also do have the identified an objective data from bright tree showing across the whole industry patients coming into the funnel.

In sleep apnea, but also across other home medical equipment categories and I can tell you prices are getting engaged and finding their way into the to the primary care treatment funnel and specifically in sleep apnea and we believe it's not short term that this is a sustainable rate of growth of patients coming in and.

<unk>.

I think it's really exciting to see that to your question specifically about device growth. Yes. So it's 8% globally I mean I've got to say.

Craig Wong-Tan: We're watching that really closely. Look, we've consistently over decades that we've been in business not just accepted mask growth rates from the market. We've said let's drive at higher and higher. 23% is extraordinary and very strong in a highly competitive market, but I look at what we're doing with resupply, I look at what we're doing with new product launches, I look at what we're doing to drive patients into the funnel and I think we can meet and beat that high single digits that the market market would grow at and with us being such a strong share, when we do demand gen, we get to get a very good share of demand gen initiatives when we get such good share of it on the device and mask side and we're seeing that in many of the markets we operate in worldwide.

I'm incredibly proud of our Europe, Asia, and rest of world markets growing at 20%.

This quarter year on year, that's where we are competing directly without competitive that was out for their recalled back in many countries in Europe Asia and rest of world and.

Meeting and beating them.

Head to head I think proves out the thesis that <unk> has the best in class products services and solutions not just the hardware, but the software and the capability and we've been investing in that for a long period of time.

This period, a year ago, the September quarter 2022.

We had just unleashed card to cloud on an allocated basis and it took off despite usually what is quite quite a low growth quarter in September given that summer here in the U S. We had incredible growth last summer with Alcon to cloud solutions. So we're lapping that growth.

Craig Wong-Tan: But it's a great question. Great, thanks. Thank you. Next question is coming from Sean Lomon from Morgan Stanley, your line is LIS. Good morning, Nick and Tim. Hope everybody's well. Nick are really good optics control in the quarter and I think Brett mentioned if I pick it up correctly 18 to 20% as the guide on revenue going forward. I'm just wondering if there is more restructuring to done or to be done or you think you're right sides at the moment.

I think the team would.

That device growth of 2% is building on what was an extraordinary uptick from cloud to cloud.

When we look at the number of patients coming through the diagnostic funnel and setups coming into <unk> and the set up so the patients coming into into Maya.

Craig Wong-Tan: Yes, Sean, thanks for the question. And, you know, as I said in the prepared remarks, it's stuff that impacts our people, you know, are the toughest decisions to make. And we did this week have a change in 5% of our global workforce reduction in 5% of our global workforce and tough decisions to make. I really think that that is, you know, if you think about it, that is the restructuring. There are some changes I'm looking at in the operating models.

Growth rate of patients.

Mid single digits, plus and with Repap really up there and so I think that's why I can say that I think it is sustainable for us to meet and.

Sort of the pre pre Covid 2019 early a CAGR of mid single digit growth for the devices, we can meet and beat that throughout demand Gen and high single digit growth in masks, we can definitely making baked that through our work.

<unk> experience and expertise now on resupply engagement with patients and the changes that happened during COVID-19 have a focus on respiratory health and respiratory high chain. So I hope that answers your question Margaret Thanks to them.

Craig Wong-Tan: There are also certain roles in the responsibilities and a focus on a more product led and brand led company that will come over time, but they're not not massive restructurs. And I think what that 18 to 20% of revenues that Brett talked about in SG&A is indicative of the change that we've made here and reestablished a new base. And a push for, as you said, you know, really strong profitable growth across our business.

Thank you. Your next question is coming from Steve Wheen from Jordan. Your line is now live.

Yes. Thank you.

Just a question back on to the gross margin.

When we think about fourth quarters gross margin it went down largely because of FX and mix and yet we've got that going.

Craig Wong-Tan: But, look, you know, the world has changed. We are already a product led organisation. But our brand has increased in its value across the world. And we need to document and understand that and understand how to engage people in non-reinverse markets as consumers into the funnel. And we've already invested in a number of our D to C markets in that and we're driving that. And in our B to B and B to B to C markets, we're also working with our healthcare partners and distributors in the channel to work out how to best get patients into the funnel.

In your favor in this.

In this quarter I'm, just curious as to really what is holding that gross margin back when when you do have such a strong mix geographically with devices in rest of world up but it also masks as a category overall and you've got the FX tailwind as well and just to clarify the <unk>.

<unk> field safety notice cost he's not in the 56%.

Craig Wong-Tan: So we sort of, you know, if you like, we're freeing up cash to reinvest in demand, and reinvest in getting patients into the funnel. And we think, you know, there's a billion reasons in terms of the patients that need our help to get out there and do it. And that's going to be there for decades. And we've got to find better ways to do it.

Gross margin from what I can look at is that if that's correct as well.

Yes, Hi, David spread yes, Thats correct Thats excluded from non-GAAP audit from the 56%.

But if you're talking year on year on the gross margin really the biggest impact coming through what's the component cost increases it may still cycling through and working through inventory.

Mick Farrell: But to answer your question directly, yeah, that restructure is done. And we're now focused on moving forward. Thank you.

So that was the biggest factor we did see some product mix.

Margaret Cusort: Next question is coming from Margaret Cusort from William Blair. Your line is now live. Hey, good afternoon, everyone. Thanks for taking the questions. I wanted to focus on the quarter as well. You know, you guys talked about this old time, high patient flow number, which was notable. Yeah, when you said the channel, I guess, where you referencing those are CPAP prescriptions or folks getting tests and, you know, any color, you can give us on how that growth profiles compared to recent borders.

<unk> ability, there, but not enough to offset those component cost increases for example.

That was the biggest impact on the year on year reduction in <unk>.

Thank you. Your next question is coming from Paul Dobson from Baron jewelry capital. Your line is now live.

Okay.

Hi, good morning, Thanks for taking my question.

You've kind of commented on on sustainability of U S flow Gen growth. So I wanted to ask you. So.

Margaret Cusort: Anything kind of on the US device growth is for us. Thanks. Yeah, thanks, Margaret. And, yeah, so look, we have a relatively low share of the diagnostic space in home sleep apnea testing with our apnea link air product. So we are tracking that. Those are up. The best data we have is through our air solution system. So we talk about the 22.5 million patients on our air solutions platform and almost 7 million patients that we now have on my patients directly engage in so we watch those starts very closely.

The growth rate based on revenues this quarter I pause about a 17% cake.

Going back to <unk> fiscal 2000, and so the September 19th quarter.

So I'm just wondering if you think you can sustain sort of a $1 of <unk> sales that you reported this quarter or do you think sales are going to step down as we work through the rest of fiscal 2004, just wondering if you could sustain.

The level of sales in dollar terms. Thanks.

Yeah. So thanks, it's a good question, but it's a complicated answer because there's so many moving pieces between that baseline you took there for that <unk> number 19 and 20.

Margaret Cusort: We also do have the identified an objective data from right tree showing across the whole industry patients coming into the funnel in sleep apnea but also across other home medical equipment categories. And I can tell you patients are getting engaged and finding the way into the to the primary care treatment funnel. And specifically in sleep apnea and we believe it's not short term that this is a sustainable rate of growth of patients coming in. And, you know, I think it's really exciting to see that.

Shutdowns al spin up on ventilators with 150000, Vince at the start of 2020, and then the slowdown in the restart up of the sleep apnea funnel and the shifts that happened through 2000 22021, and then of course Dakota <unk> that made it a perfect storm of a competitor with a record $5 5 million devices.

'twenty, one through 'twenty, three and ongoing so.

With all that I'll, just talk to I'll, just talk to the market growth rate that we saw stable pre 2019 right of that mid single digit growth of devices and high single digit growth in masks, we think that where we're at now taking a baseline of now we can meet and beat that that growth.

Mick Farrell: Two questions specifically about device growth here. So it's 8% globally. I mean, I go say I'm incredibly proud of our Europe Asia and rest of world markets going 20%. This quarter year on year, you know, that's where we're competing directly with our competitor that was out for their recall. They're back in many countries in Europe Asia and rest of world. And, you know, meeting and beating them head to head I think proves out the thesis that ResNet has the best in class products but services and solutions.

Right right and so that definitely doesn't mean going backwards.

What we've got now which is I believe.

<unk> strong share of the U S market and the 140 countries we're in competition, but it's.

Mick Farrell: Not just the hardware but the software and the capability we've been investing in that for a long period of time. This period a year ago, the September quarter 2022, we had just unleashed card to cloud on an unallocated basis. And it took off despite, you know, usually what is quite quite a low growth quarter in September given it summer here in the US. We had incredible growth last summer with our card to cloud solutions.

A good a good a good place for us to be.

We're looking at.

From where we are achieving mid single digit plus growth ahead of US is in high single digit growth plus on our on our mosques and not we don't intend to go backward at all in fact, we intend to not only go forward, but go forward strongly and I think what we've shown up in the numbers. This quarter is our incredibly strong growth I talked earlier that are incredibly strong growth in device.

A 20% in Europe Asia, and rest of World, We had 15% growth in masks in Europe Asia and around the other countries and so I think what it's shown us that regimen is going to go head to head with full competition out there and be able to meet them.

Mick Farrell: So we're lapping that growth. I think the team, you know, with that device growth of 2% is building on what was an extraordinary uptick from card to cloud. But when we look at the number of patients coming through the diagnostic funnel and the setups coming into air view and the setups of the patients coming into my air, the growth rate of patients is mid single digits plus and with repap really up there.

The competition, because we've got the smallest quarters, most comfortable most connected and most most intelligent health systems and it's that whole combination of just not just the product, but the solution and the service and how it's embedded in the health care system to the patient to the physician that allows us to achieve that so we're not going backwards, we're going forward, so and we're going to we're going to grow at or ahead of market and in many countries.

Mick Farrell: And so I think that's why I can say that I think it's sustainable for us to meet and beat sort of the pre-COVID 2019 earlier. Caga of, you know, mid single digit growth for devices, we can meet and beat that through our demand gen and high single digit growth in masks. We can definitely meet and beat that through our work and experience and expertise now on resupply engagement with patients. And the changes that happen during COVID have a focus on respiratory health and respiratory hygiene. So I hope that ends your question Margaret. Thanks. Thank you.

He is going to drive demand Gen. Two increase the whole aggregate market growth rate and pull more patients into the funnel because now we're going to greater incentive than ever to do that thanks for the question.

Thank you. Your next question is coming from Mathieu Chevrier from Citi. Your line is now live.

Yes. Good afternoon. Good morning, Thanks for taking my question one on SaaS. Please.

Steve Wheen: Next question is coming from Steve Wheen from Jordan, Lyanne is our live. Yeah, thank you. Just a question back on to the gross margin. When we think about fourth quarters growth margin, it went down largely because of FX and mix and yet we've got that going in your favor in this in this quarter. I'm just curious is really what is holding that gross margin back when when you do have such a strong mix geographically with devices in rest of world up, but also masks as a category overall up and you've got the FX tailwind as well.

So what will drive the SaaS revenues.

Our revenue to now grow up double digits from from high single digit previously.

Okay.

Yeah. Thanks for the question, Matthew and welcome to covering resume.

Yes, so look what's going to happen.

With our organic SaaS business as you saw in the quarter, we had good high single digit growth at 7% and we sort of been in that sort of 7% to 8% in our organic growth across our.

U S franchise really matrix care plus brought tree.

And with the many folks Don group, we haven't sort of been breaking out organic growth within that but it is it is going to be.

Incremental to that group, but in addition to that there is a great product pipeline at both brought trend matrix care that I feel confident and some portfolio focuses on the high growth parts of their portfolio and moving out or a backing up with some of the low growth areas in that portfolio of matrix care that gives me great confidence as I look for.

Steve Wheen: And just to clarify the astral field stage safety notice cost is not in the 56% gross margin from what I can work out is that if that's correct as well. Yeah, I think it's great. That's correct. That's that's exclusive non-gap item from the 56%. But if you're talking year on year on the gross margin, really the biggest impact coming through was component cost increases that we're still cycling through and working through inventory.

Forward over the fiscal year and beyond that we're going to turn on organic growth from sort of where it is now in the high single digits to double double digit growth on a stable organic basis across that SaaS business. So Matthew it's a combination of many focused on increasing the group, but also some some great product pipelines in the card business to be able to get.

Steve Wheen: So that was the biggest factor. We did see some product mix favorability there, but not enough. I'll get those component cost increases. For example, that was the biggest impact on the year. We did year on year reduction in GDN. Thank you.

And the final.

Punchline I'll put there is in addition to that driving that better.

Top line growth.

Saul Dawson: Next question is coming from Saul Dawson from Baron Joey Capital. Your line is that way.

Working.

Restructure as well on SG&A and some R&D in our SaaS business. This week this quarter and that will allow us to get good leverage on the net operating profit bottom line and I see that moving closer and closer to resume group and even being a strong contributor.

Saul Dawson: Good morning. Thanks for taking my question. You've kind of commented on on sustainability of US flage and growth. I just wanted to ask you. So the growth rate based on revenue is this quarter. It applies about a 17% KG. Going back to one Q fiscal 20. So there's a 10 and 19 quarter. I just want to if you think you can sustain sort of the dollars of flage and sales that you reported this quarter.

Even stronger contributor for us as we as we look to maximize our long term EPS and return on.

Invested capital across across our groups. So great question, Matthew but we're very confident we can achieve that as we go through fiscal year 'twenty, four 'twenty, five and beyond and SaaS business.

Saul Dawson: Or if you think sales are going to step down as we work through the rest of fiscal 24 to sustain the level of sales in dollar terms. Thanks. Yes, all thanks. It's a good question, but it's it's a complicated answer because there's so many moving pieces between that baseline. You took there for that Kagga number 19 and 20 with the COVID shutdowns out our spin up on ventilators with 150,000 vents at the start of 2020.

Thank you we've reached end of our question and answer session I'd like to turn the floor back over to Mick for any further or closing comments.

Well thanks.

Everybody for attending this call and for the great detailed questions and thanks, Kevin.

Yes.

With this <unk> well positioned for ongoing future success and accelerated profitable growth and we're taking actions to prioritize on the right initiatives and we're optimizing costs to fuel our long term growth.

Saul Dawson: And then the slow down and then the restart up of the sleep apnea funnel and the shift that happened through 2020, 2021. And then of course the perturbation that made it a perfect storm of a competitor with a recall of 5.5 million devices and 21 through 23 and ongoing. So you know, with all that, I'll just talk to I'll just talk to the market growth rate that we saw stable pre 2019 right of that mid single digit growth of devices and high single digit growth and masks.

Opportunity in front of us is huge and largely untapped and it's an incredible runway, we see more and more people coming into the health care system every quarter, and we'll benefit and help them sleep better breathe better and live better lives and 140 countries and will keep proving it to you every quarter as we go forward. Thanks.

Thanks for all the 10000 <unk> <unk> many of whom are also shareholders for all that you do today and every day and with that I'll hand, the call back to you Amy to close us out.

Saul Dawson: We think that where we're at now taking our baseline of now, we can meet and beat that that growth rate. Right. And so that that definitely doesn't mean going backwards. Take what we've got now, which is I believe, you know, a very strong share of the US market and, you know, in 140 countries, we're in competition, but it's, you know, a good a good a good place for us to be. We are looking at from where we are achieving, you know, mid single digit plus growth and out of ises and high single digit growth plus on our on our masks.

Great. Thank you Mick Thanks, everyone. We appreciate your interest and your time as always if you have any additional questions. Please don't hesitate to reach out to US directly. This does conclude resonates first quarter 2020 for a conference call. Kevin you can now end the call.

Okay.

Thank you you may now disconnect your lines and have a wonderful day, we thank you for your participation today.

Saul Dawson: And no, we don't intend to go backward at all. In fact, we intend to not only go forward, but go forward strongly. And I think what what was shown up in the numbers this quarter is our incredibly strong growth. I talked earlier that our incredibly strong growth in devices of 20% in Europe Asia and rest of world. We have 15% growth in masks in Europe Asia and around the other countries. And so I think what's what it's shown is that resumes going to go ahead to head with full competition out there and be able to meet and beat the competition because we've got the smallest, quietest, most comfortable, most connected and most most intelligent health systems.

Saul Dawson: And it's that whole combination of just not just the product, but the solution and the service and how it's embedded in the healthcare system to the patient, to the physician that allows us to achieve that. So we're not going backwards. We're going forward saw and we're going to we're going to grow at or ahead of market. And in many countries we're going to drive the mangen to increase the whole aggregate market growth rate and pull more patients into the funnel because now we've got a greater incentive than ever to do that. Thanks for the question.

Mick Farrell: Thank you.

Matthew Chevrier: Next question is from Matthew Chevrier from Sydney, you're lying as I lie. Yeah, good afternoon, good morning. Thanks for taking my question.

Brett Sandercock: One on staff, please. So what will drive the staff's revenue to now go out double digits from from a high single digit previously? Thank you. Yeah, thanks for the question Matthew and welcome to covering a resume. Yeah, so look what's going to happen is with our organic SaaS business, you know, as you saw in the quarter, we had good, you know, high single digit growth there, seven and we sort of been in that sort of seven to eight percent in our organic growth across our US franchise, really matrix care plus bright tree.

Brett Sandercock: And with the many folks down group, we haven't sort of been breaking our organic growth within that, but it is, it is going to be, you know, incremental to that group. But in addition to that, there's a great product pipeline at both bright tree and matrix care that I feel confident and some portfolio, you know, focuses on the high growth parts of their portfolio and moving out or backing up with some of the low growth areas in that portfolio of matrix care that gives me great confidence as I look forward over the fiscal year and beyond that we're going to turn organic growth from sort of where it is now in the high single digits to double, double digit growth on a stable organic basis across that SaaS business.

Brett Sandercock: So Matthew, it's a combination of many folks down increase in the group, but also some great product pipelines in the current business to be able to get us there. And the final punch line I'll put there is in addition to that driving that better top line growth, we're working, you know, we were a restructure as well on SG&A and some R&D in our SaaS business this week, this quarter. And that will allow us to get good leverage on the net operating profit bottom line.

Brett Sandercock: And I see that moving close from close to the resume group and even being. A strong contributor, even stronger contributor for us as we as we look to maximize our, you know, long term EPS and return on and invest capital across across our groups. So great question Matthew, but we're very confident we can see that as we go through fiscal year 2425 and and beyond in our SaaS business. Thank you.

Mick Farrell: We reach end of our question and I'd like to turn the floor back over to Mick for any further closing comments. Well, thanks everybody for attending this call and for the great detail questions and thanks Kevin. Yeah, look, I'll close with this resume as well position for ongoing future success and accelerated profitable growth. We're taking actions to prioritize on the right initiatives and we're optimizing costs to fuel our long term growth.

Mick Farrell: The opportunity in front of us is huge and largely untapped and it's an incredible runway. We see more and more people coming into the healthcare system every quarter and will benefit and help them sleep better, breathe better and live better lives in 140 countries and we'll keep proving it to you every quarter as we go forward. Thanks for all the 10,000 resmedians, many of whom are also shareholders for all that you do today and every day and with that, I'll hand the call back to you Amy to close us out.

Amy Wakeham: Great. Thank you, Mick. Thanks everyone. We appreciate your interest and your time. As always, if you have any additional questions, please don't hesitate to reach out to us directly.

Amy Wakeham: This does conclude resmed's first quarter, 2024 conference call.

Kevin: Kevin, you can now end the call.

Operator: Thank you, you may not disconnect or allow the number wonderful day, we thank you for your participation today.