Q2 2024 Resmed Inc Earnings Call
Hello, and welcome to the resume second quarter fiscal year 'twenty 'twenty four earnings conference call and webcast. If anyone should require operator assistance. Please press star zero on your telephone keypad.
Question and answer session will follow the formal presentation.
Can you may be placed in the question queue at any time by pressing star one on your telephone keypad.
As a reminder, this conference is being recorded.
It's now my pleasure to turn the call over to Chief Investor Relations Officer, Amy Wake them. Please go ahead Amy.
Great. Thank you, Kevin Hi, everyone and welcome to resume second 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 these are now available.
Amy Wakeham: During today's call we will discuss several non-GAAP measures that we believe provide useful information for investors. This information is not intended to be considered in isolation or as a substitute for the GAAP financial information. We encourage you to review the supporting schedules in today's earnings press release for a reconciliation of these non-GAAP measures.
Amy Wakeham: The GAAP reported numbers.
Amy Wakeham: In addition to 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 review 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'll now turn our call over to resume CEO Mick Farrell.
Michael J. Farrell: Thanks, Amy and thank you to all of our shareholders for joining US today, our second quarter fiscal year 2024 results reflect strong execution across our entire business driving double digit top and bottom line growth.
Michael J. Farrell: These results are a testament to the incredible efforts of the global resumes.
Michael J. Farrell: Our results were driven by double digit global growth in both devices and our software as a service business together with high single digit global growth, you know masks and accessories business holding our leading market share amongst high comps from the same quarter a year ago.
Michael J. Farrell: In terms of bottom line leverage our reorganization efforts and efficiency efforts in the quarter have set us on a clear trajectory of profitable growth.
Michael J. Farrell: Taking a step back all 10000, whereas millions are energized about the opportunities in front of US there are over 2 billion people worldwide suffering from sleep apnea, chronic obstructive pulmonary disease risk.
Michael J. Farrell: Respiratory insufficiency, Judah neuromuscular disease or insomnia.
Amy Wakeham: These chronic conditions formed our healthcare epidemic and which resumes is uniquely positioned to help.
Amy Wakeham: We believe that health care should be delivered in the lowest cost lowest acuity and highest comfort location possible very often that is a patience on hub.
Amy Wakeham: Our end markets remain underpenetrated with many opportunities to add value reduce friction lower costs and improve patient outcomes. We.
Amy Wakeham: We support hundreds of millions of people as they take control of their health care journey and navigate the complex healthcare world outside the hospital system.
Amy Wakeham: Resumes is the global leader in digital Health solutions with over 17 billion nights of medical data in the cloud and over $23 5 million, 100% cloud connected medical devices sold into over 140 countries worldwide.
Amy Wakeham: We are the clear market leader in sleep apnea, a huge and growing market with over 1 billion people impacted globally.
Amy Wakeham: Our category, leading flow generator platforms grew 11% year over year, we have achieved and are maintaining supply of out to 100% connected boat essence platforms with unchanged unconstrained supply of the <unk> 10 platform globally every quarter, we continue to gain regulatory approval.
Amy Wakeham: To launch and to increased delivery volumes of the best in class assets 11 platform on our pathway to support more and more patients worldwide.
Amy Wakeham: Our commercial teams are successfully demonstrating the clinical and economic benefits of the resume mask portfolio during the quarter, our masks and accessories business grew 9% year over year in a highly competitive market maintaining good market share with all players in the field in this category globally.
We are excited to have achieved regulatory and reimbursement approval for our latest and greatest mask innovation and we look forward to bringing this technology to market soon.
Amy Wakeham: Personally worn this new mask and our test data show not just any one from the CEO that it is highly favored by physicians respiratory therapists and especially the most important customer our patients.
Amy Wakeham: In terms of maintaining our momentum of mask and accessory growth, our clinical and commercial teams continue to partner with physicians and providers to drive resupply programs directly with their patients peer reviewed and published clinical evidence shows that using resupply programs leads to better patient adherence and to better.
Amy Wakeham: Patient outcomes. This is proving out in the real world customer by customer.
Amy Wakeham: We continue to see strong growth in the U S mask and accessories business. We had resupply programs are powered by our digital health ecosystem, including <unk> for physicians brought tree for Han medical equipment providers and Maya for patients.
Amy Wakeham: Outside the U S. We are focused on developing launching and scaling our direct outreach and subscription programs to help consumers tight control of their own health and engage directly and refreshing their own mask their own tubing Braun humidifier and other accessories.
The importance of respiratory health and respiratory hygiene in the eyes of consumers has seen a permanent uptick since four years ago. When the COVID-19 epidemic started with supporting our customers with digital solutions and services to meet their needs and to ensure they have clean and fresh equipment to best treat their sleep suffocation and improve there.
Amy Wakeham: Health.
Before I review updates on our key strategic priorities I'd like to discuss recent actions, we have taken to accelerate profitable growth across resonate and to power our long term success.
Amy Wakeham: Last quarter I discussed the steps we've taken to ensure that we can refocus and drive even more profitable growth.
Amy Wakeham: We stopped some projects that were not working out and we increased investment in areas that will be pivotal to our long term success, including our digital health technology investments as well as focused device platform and mask technology development.
Amy Wakeham: We have introduced a new operating model centered on making resonate even more product led even more customer centric and even more brand enhanced we.
Amy Wakeham: We will measure the success of this new 2030 operating model by an increase in the velocity of new product innovation as well as enhanced value in the resume brand while accelerating profitable growth.
Amy Wakeham: As the founder of resumes Stites innovation is not just the invention of a great new technology is when a customer loves it adopts it and chooses to pay for it.
Amy Wakeham: We have an incredible legacy and an exciting product pipeline to bring to market.
Amy Wakeham: Let's now turn to a discussion of our three key strategic priorities number one is to grow and differentiate our core sleep health and breathing health business.
Amy Wakeham: Number two is to design and develop and deliver market, leading med Tech and digital health solutions that can be scaled and 140 countries plus worldwide.
Amy Wakeham: Number three is to create and leverage the world's best software solutions for care delivered outside the hospital and preferably in the hunt.
Amy Wakeham: In terms of addressing strategic priority number one as the world's clear leader in the field of sleep apnea and breathing health, we're laser focused in 2024 on ramping up our demand generation initiatives.
Amy Wakeham: We are raising awareness and creating pathways for patients to find access to care for sleep suffocation across specific global markets.
Amy Wakeham: We are leveraging traditional healthcare channels and investing in cost effective social media driven demand generation campaigns to help consumers who are concerned about their own sleep and breathing to find their way into screening diagnostic treatment and management pathways.
Amy Wakeham: Our goal is to provide a digital health care Concierge service to help guide people on that journey.
Amy Wakeham: We are tracking new patient starts in our physician and provider based ecosystem, which now contains more than 26 million patient records as well as the new user stops in Miami, which is a patient app where patients choose to participate in their own personalized health care journey to better sleep better breathing.
Amy Wakeham: Our goal is to cost effectively drive more and more of the over 1 billion people worldwide, who need our help into the channel.
Amy Wakeham: There are two mega trends that can have an influence on increasing that patient flow one from big consumer Tech and one from Big Pharma, Let me talk briefly about each of these megatrends.
Amy Wakeham: Many of the big consumer Tech companies are increasing their focus on the area of sleep wellness.
Amy Wakeham: <unk> has sleep wellness tracking built into its latest generation Apple watch and has plans to enhance that capability with further sleep quality assessment.
Amy Wakeham: Google's Fitbit Division has sleep wellness tracking built into its platform.
Amy Wakeham: <unk> is doing the same.
Amy Wakeham: Samsung have not only built sleep wellness tracking intuit's latest operating platform, but it is helping to define sleep personas to help consumers better understand the 30% of their lives I spend in the state of sleep.
Amy Wakeham: We love this attention on the field of sleep wellness and many of these technologies will help each person find out if they have issues with sleep architecture issues with breathing during sleep or issues maintaining high quality sleep.
Amy Wakeham: This could be one of the biggest waves of people taking control of their own pathway to discovering they have sleep apnea or they have insomnia, where maybe they have.
Amy Wakeham: A state that is called Cammisa for co morbid insomnia and sleep apnea.
Amy Wakeham: Ultimately this will lead to increasing patient growth for resume overall and our goal is to best educate the person as they move from sleep wellness tracking to sleep health tracking and from consumer awareness into a true health care pathway for screening diagnosis treatment and ongoing management of their chronic condition.
Amy Wakeham: <unk> plans to be there with the person through that entire journey.
Amy Wakeham: In terms of the impact of Mega trends from Big Pharma. The current focus is squarely on <unk> one medications, let me take some time to address what we are seeing in the market with patients on latest generation GOP, one therapies and positive airway pressure therapy.
Amy Wakeham: We're tracking a cohort of over half a million patients with prescriptions for both GOP, one medications and positive airway pressure therapy.
Amy Wakeham: These data are included in our Investor deck. So you can review them there on our website, but I'll briefly summarize what we have observed.
Amy Wakeham: Around six months ago, there was a thought amongst some in the market that patients on <unk>, one medications would be less likely to start positive airway pressure therapy with.
Amy Wakeham: We stated at the time and still do that this was not likely the case as important risk factors such as cranial facial geometry.
Amy Wakeham: <unk>.
Amy Wakeham: And the basic physics and anatomy of the Upper railway would remain unchanged. Despite this new pharmaceutical therapy option still the theory remind so now we have real world data and real world evidence at scale, our analysis of over 529000 page.
Amy Wakeham: <unk> with GOP, one prescriptions shows that not only is there not a reduction in the propensity to start positive airway pressure therapy. It is the exact opposite.
Amy Wakeham: For patients who have been prescribed a GOP. One there is an increase of 10% of the absolute percentage of patients that commence positive airway pressure therapy.
Amy Wakeham: So as an example, if you take a baseline of 75% of patients that commenced pap therapy. After their prescription on average in a certain group that would become 85% of those same patients who were on a GOP one that would commence positive airway pressure therapy.
Amy Wakeham: And by the way the vast vast majority of these GOP ones are the latest generation medications.
Amy Wakeham: The hypothesis about six months ago was that patients on <unk> therapy, and Pap therapy would quit their pap therapy, their CPAP or their iPad at a higher rate than the general population of the time.
Amy Wakeham: The real World data again, with a cohort of over half a million patients shows the exact opposite at T. Equals 12 months after therapy commencement on Pap the Delta from general Pet population to our Pap plus GOP one prescribed population shows an increase in the resupply.
Amy Wakeham: Right of 300 basis points.
So again as an example, if the general population resupply right at 12 months was 70%. It would then become 73% for the population that was prescribed by the <unk> and <unk> one therapy.
Amy Wakeham: This delta actually increases going further with the Delta from the general Pet population, receiving resupply at 12 months being 500 basis points higher for a population prescribed both pap and <unk> ones.
Amy Wakeham: Here at resume we believe in treating the whole person, including a combination of what professor Bill demand one of the founders of the field of sleep Medicine may he rest in peace called a triumvirate of health.
Amy Wakeham: <unk> is one regular cardiovascular exercise.
Amy Wakeham: <unk> balanced diet, and nutrition and three good sleep and breathing.
Amy Wakeham: We believe that addressing all three aspects results in the best patient outcomes.
Amy Wakeham: In terms of best in class treatment for sleep apnea, achieving that goal of good sleep and good breathing we have peer reviewed and published research demonstrating that we can achieve 87% of patients adherent to our pep technology by combining our market leading device platforms with digital health solutions, including <unk>.
Amy Wakeham: For physicians and Maya for patients.
Even with this best in class Global technology, we still have more than 10% of patients that need alternatives. We just can't get them adherent does 10%.
Amy Wakeham: We're investing in these alternative therapies and we are working to help patients who do not adhere to positive airway pressure to find their path to second tier therapies, such as dental devices, where resume has invested in scaled market, leading three D printed dental device for sleep apnea in Europe.
Amy Wakeham: Cold novel.
Amy Wakeham: In addition, we have investments in other third tier therapies, including pharmaceutical agents with our <unk> investment as well as hypoglossal nerve stimulation technology without an <unk> investment.
Amy Wakeham: Resumes stands for respiratory medicine, not CPAP company, and we want to take care of the patient.
Amy Wakeham: Obviously stopped with the lowest cost highest efficacy therapies, including CPAP APAC and bi level therapies, and we then work through the alternatives to help the person sleep better and breakthrough.
Amy Wakeham: The bottom line is this a huge number of people need our sleep apnea treatment solutions today and for the next decade, two decades, three decades and beyond we want every patient to find a path to good breathing and good slate.
Amy Wakeham: Let's pivot for a moment to talk about our digital health technology investments leveraging the 17 billion nights of de identified medical data and the $23 5 million, 100% cloud connected devices in our ecosystem.
Amy Wakeham: We are investing in several artificial intelligence driven data products and capabilities in that ecosystem that we call Air solutions.
Amy Wakeham: We're continuing to rollout one publicly we're talking about which is called compliance coach to customers in the U S market and a controlled market launch.
Amy Wakeham: <unk> coach is a solution that helps home medical equipment providers to prioritize both digital and personal outreach to improve patient compliance and drive better patient outcomes at a lower cost.
Amy Wakeham: Compliance coach models and predicts the likelihood that a particular patient will or will not adhere to therapy based on algorithms built on billions of data points.
Amy Wakeham: The AI product then identifies for the HMA provided the key patients who may struggle to meet compliance requirements and takes a step further to drive digital <unk> human actions to maximize the probability of adherence across the group.
Amy Wakeham: Customers using the product and its initial launch are excited and are starting to see very positive results across the business and for their patients.
Amy Wakeham: One final update on AI technology for this quarter, we recently launched an in market trial of a resume developed generative II product that serves as a digital concierge to help a group of people that we call sleep concerned consumers to best navigate.
Amy Wakeham: A search for their sleep related information and they ask questions about their sleep wellness and potential treatment options.
Amy Wakeham: This generative IRI tool helps the person identify engage and enroll on their personal journey to better sleep and better breathing.
Amy Wakeham: We're currently beta test marketing this product in Asia Pacific and we will look to scale globally over time, our goal is to develop and scale. This digital sleep <unk>. So that all those seeking better sleep better breathing can find their personal pathway for the best outcome best treatment.
Amy Wakeham: And the best long term care.
Amy Wakeham: Our respiratory health business continues to be supported by sustained activity across our noninvasive ventilator platforms as well as our life support ventilator platforms, we continue to invest in clinical and economic trials for high flow therapy that we call HFC to even more cost.
Amy Wakeham: <unk> <unk> COPD in the home.
Amy Wakeham: As we develop these next generation therapies, we will generate strong clinical evidence and economic outcomes that will support broader adoption of these innovations for trading respiratory conditions at a time.
The prevalence of respiratory insufficiency due to COPD as well as neuromuscular disease continues to increase and we offer a low cost high quality treatments to help address this health care epidemic.
Amy Wakeham: Turning to our residential care software as a service business, we had another great quarter with year over year growth of 24%.
Amy Wakeham: Organic growth of our SaaS business was solid across our bright tree and our matrix <unk> brands with another full quarter contribution from our <unk> Dan brand in Germany.
Amy Wakeham: Ongoing customer facing synergies between our <unk> offering in the U S and our home medical equipment resupply revenue remains very strong driving good growth across both our SaaS business and our core sleep health business, we expect to have sustainable organic growth across our portfolio of <unk>.
Amy Wakeham: <unk> solutions in home medical equipment home.
Amy Wakeham: Health hub nursing and beyond to be in the high single digits. As we continue through this fiscal year and to achieve stable double digit organic growth through fiscal year 2025 and beyond.
Amy Wakeham: We continue to drive operating expense leverage through management of our capabilities for cloud compute capabilities for cyber security interoperability and technology development and we plan to accelerate net operating.
Amy Wakeham: <unk> growth across our SaaS portfolio and across the entire resume business.
Amy Wakeham: Our residential care SaaS business remains an integral part of <unk> growth strategy. This business complements the market, leading software and the market leading device solutions that we have in our sleep health and breathing health business and we are well positioned as the leading global strategic provider of SaaS solutions for residential care.
Amy Wakeham: We are transforming respiratory medicine and residential care at scale, we are leading the industry in developing applying in adopting digital health technology across our markets. We continue to scale and drive efficiencies in our operations. We're focused on driving topline revenue growth focused cost discipline and increased efficiencies.
Amy Wakeham: To accelerate profitability, we've created differentiated products and solutions for customers worldwide driving long term sustainable value for our shareholders.
Amy Wakeham: We lead the industry in digital health technology with the smallest quietest most comfortable most connected and most intelligent solutions and we don't plan to stop innovating anytime soon we invest around 7% of our revenues straight back into market, leading research and development.
Amy Wakeham: Regimens mission remains crystal clear to improve 250 million lives through better residential healthcare in 2025.
Amy Wakeham: This patient centric mission motivates me and <unk> every day during.
Amy Wakeham: During the last 12 months, we have improved over 117 million lives by delivering a medical device directly to a patient or a complete mask system to a patient or a digital health software solution that provides personal care for patients.
Amy Wakeham: We've helped each person to sleep better to breathe better.
Amy Wakeham: <unk> high quality lots with best in class healthcare delivered right with I live I'm very excited about the opportunities in front of us and the pipeline. We have ahead in closing I want to express my sincere gratitude to the more than 10000 was minions for their perseverance their hard work and dedication today and every day.
Brett: With that I'll hand, the call over to Brett in Sydney for his remarks, and then we'll open up to Q&A for Brett over.
Brett A. Sandercock: Over to you Brett.
Brett A. Sandercock: Great. Thanks, Nick.
Brett A. Sandercock: Our remarks today I'll provide an overview of our results for the second quarter of fiscal year 2024, unless noted all comparisons out of the prior year quarter and in constant currency terms where applicable.
Brett A. Sandercock: We had strong financial performance in Q2 revenue for the December quarter was one $1 6, billion% to 12% headline increase and 11% in constant currency terms.
Nick: Revenue growth reflects the ongoing combined availability of <unk> 10, and <unk> 11, sleek the losses to support solid underlying global demand and continued growth across our mask portfolio.
Nick: Year over year movements in foreign currencies positively impacted revenue by approximately $11 million in the December quarter.
Nick: 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 9% South in Europe Asia, and other markets increased by 12%.
Nick: Global <unk> device sales increased by 11%, while masks and other sales increased by 9%.
Nick: Breaking it down by regional areas <unk> sales in the U S, Canada, and Latin America increased by 7%.
Nick: Masks and other sales increased by 10% reflecting growth in resupply in new patient setups.
Nick: In Europe Asia, and other markets device sales increased by 16% again, reflecting strong demand and significantly improved availability of cloud connected devices.
Nick: Masks and other sales increased by 4%, reflecting the impact of a strong prior year comparable growth rate.
Nick: Okay.
Nick: Service revenue increased by 24% in the December quarter, reflecting the contribution from <unk> acquisition and continued strong performance from our high <unk> vertical.
Nick: Excluding that many folks Dan acquisition SaaS revenue grew by 10% in the December quarter.
Nick: Many folks staying contributed revenue of $28 million in the December quarter.
Nick: System with our expectations at the time of the acquisition.
Amy Wakeham: Note as we have now passed the first anniversary of our <unk> acquisition.
Amy Wakeham: Just as revenue year over year will reflect organic growth.
Amy Wakeham: During the rest of my commentary today, I will be referring to non-GAAP numbers. We have provided a full reconciliation of the non-GAAP to GAAP numbers in our second quarter earnings press release.
Amy Wakeham: Gross margin increased by 10 basis points to 56, 9% in the December quarter. The increase primarily reflects a decrease in freight costs, an increase in average selling prices and favorable foreign currency movements.
Amy Wakeham: The benefits are partially offset by unfavorable product mix.
Amy Wakeham: <unk> gross margin increased by 90 basis points, primarily driven by a reduction in freight cost and an increase in average selling prices for our devices.
Amy Wakeham: Partially offset by unfavorable product mix.
Amy Wakeham: We remain confident of a positive gross margin trajectory like many companies, we are monitoring potential headwinds that could arise from the middle East conflict disruptions in the red So he will likely increase say freight costs and shipping lead times.
Amy Wakeham: We are closely tracking the situation and taking action to mitigate potential impacts where we can.
Moving onto operating expenses SG&A expenses for the second quarter increased by 4%.
Amy Wakeham: The increase was predominantly attributable to increases in employee related costs.
SG&A expenses as a percentage of revenue improved to 19, 1% compared to 25% in the prior year period and reflects savings and cost discipline. Following specific actions taken early in the December quarter.
Amy Wakeham: I'm looking forward and subject to currency movements we.
Amy Wakeham: We expect SG&A expenses as a percentage of revenue to be in the range of 18% to 20% for the second half of fiscal year 2024.
Amy Wakeham: This guidance reflects the impact of our restructuring activities.
Amy Wakeham: That resulted in a reduction in our workforce of approximately 5% during the quarter.
Amy Wakeham: R&D expenses for the quarter increased by 6% R&D expenses as a percentage of revenue was six 4% compared to the six 8% in the prior year period.
Amy Wakeham: Looking forward and subject to currency movements, we expect R&D expenses as a percentage of revenue to be in the range of 67% for the second half of fiscal year 2024.
Amy Wakeham: Operating profit for the quarter increased by 20% underpinned by strong revenue growth and modest growth in our operating expenses.
Amy Wakeham: Following following the acquisition of 84 extend our net interest expense for the quarter was $14 million as we continue to pay down debt. We expect interest expense to be in the range of $10 million to $12 million per quarter in the second half of fiscal year 2024.
Amy Wakeham: Our effective tax rate for the December quarter was 27% compared to 18, 3% in the prior year quarter.
Amy Wakeham: The increase in our effective tax rate was primarily due to a significant reduction in the tax benefit associated with employee equity compensation this quarter compared to the prior year quarter.
Amy Wakeham: We continue to estimate our effective tax rate for fiscal year 'twenty four we will be in the range of 19% to 21%.
Amy Wakeham: Net income for the December quarter increased by 13% and non-GAAP diluted earnings per share also increased by 13%.
During the quarter, we recorded $64 2 million of restructuring related charges. Following an evaluation of our existing operations and actions undertaken to improve operational efficiency and increased profitability.
Amy Wakeham: Restructuring charges included $28 6 million of employee severance and other onetime termination benefits.
Amy Wakeham: $33 2 million of intangible asset impairments associated with the wind down of certain business activities and $2 4 million of other asset impairments.
Amy Wakeham: The restructure charge is being treated as a non-GAAP item in our Q2 financial results.
Amy Wakeham: During the quarter. We also recorded a provision of $6 4 million for expected costs associated with the recently announced masked with magnets field safety notification.
Amy Wakeham: This expense is being treated as a non-GAAP item in our Q2 financial results.
Amy Wakeham: Cash flow from operations for the quarter was $273 million, reflecting solid underlying earnings and relatively stable working capital balances.
Amy Wakeham: <unk> expenditure for the quarter was $23 million depreciation and amortization for the quarter totaled $45 million.
Amy Wakeham: We ended the second quarter with a cash balance of $210 million on December 31, we had $1 2 billion in gross debt and $1 billion in net debt.
Amy Wakeham: During the quarter, we reduced debt by $130 million.
Amy Wakeham: December 31, we had approximately $955 million available for drawdown under our revolver facility and we continue to maintain a solid liquidity position.
Amy Wakeham: Today, our board of directors declared a quarterly dividend of 48 cents per share.
Amy Wakeham: As we advised last quarter as part of our capital management activities. We resumed our previously authorized share buyback program in the December quarter.
Amy Wakeham: We purchased 335000 shares for consideration of $50 million.
Amy Wakeham: We intend to continue to purchase approximately 50 million per quarter in the second half of fiscal year 2024.
Amy Wakeham: This will more than offset any dilution from the vesting of equity to employees during the year.
Amy Wakeham: Going forward, we plan to continue to reinvest and grow through R&D Paydown outstanding test and deploy further capital for tuck in acquisitions.
Amy Wakeham: And with that I'll hand, the call back to Amy.
Amy Wakeham: Great. Thank you Brad and thank you Mick Let's go ahead and turn to the Q&A portion of our call Kevin I'd like to turn it over to you to provide the instructions and then ran this part of the call.
Kevin Hi: Certainly, 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.
Amy Wakeham: Confirmation tone will indicate your line is in the question queue.
Kevin Hi: Press Star two if you'd like to move your question from the queue for participants using speaker equipment. It may be necessary to pick comprehensive before pressing star one.
Kevin Hi: One moment, please while we poll for questions.
Kevin Hi: First question today is coming from Margaret Andrew from William Blair. Your line is now live.
Kevin Hi: We do ask you limit yourself to one question. Please.
Kevin Hi: Great. Thank you very much and good after.
Kevin Hi: And good morning to everyone on the call.
I wanted to maybe follow up on your comments on the <unk>, even more so in the quarter.
Kevin Hi: I look at that 10% greater likelihood of folks starting feed papp, one year on <unk>. It seems like it could have a pretty meaningful impact for growth and yes im looking at it to say if you've gone from 75 patient new starts in a given period and to 85.
13% bigger market every year. So I guess conceptually is that something that you agree with that.
Kevin Hi: We didn't have a greater loss benefit impact if that trend continues.
Kevin Hi: Any comments on a real impact over the next three years at G. L. P adoption growth. Thanks.
Amy Wakeham: Yes, Margaret look it's a great question and.
Amy Wakeham: <unk>.
As a biomedical engineer I look at this and I don't know causality I just know the correlation and so we've now got data on the 529000 data points that show that there is a 10% higher propensity to start Pap therapy. If you are prescribed the GOP one before and then you get the Pap therapy 10 absolute percentage points higher.
Margaret: We'll stop Pap therapy.
Kevin Hi: My thought is that this is a more motivated patient are more engaged patient in the healthcare system and they've been brought in by this new therapeutic tool and so I do think that it will lead to greater growth. This mega trend of GOP ones will lead to greater growth of patients coming into our hour.
Amy Wakeham: <unk> treatment pool over time, and certainly the data is showing that with that cohort of patients.
Amy Wakeham: Yes.
Amy Wakeham: Matt there of of an increase I think is that if those full penetration across the whole patient cohort in full adoptions youll be ones across every pricing coming through of course, that's the maximum state, but I think realistically as we see these pretty fast rollout of this new pharmaceutical cloth.
Amy Wakeham: We'll start to see more patients come into the health care system, everyone has seen that across med tech across healthcare.
Matt Smith: A more engaged and they do seem to be getting prescriptions for many different chronic diseases slipped that is non exception and we've got probably one of the highest number of patients in that cohort of over half a million patients that we're tracking and of course, we've got 26 million patients in our database. So this is a minority of patients that we're seeing on these but it is interesting you within that cohort to see a higher.
Matt Smith: Our participation right.
Matt Smith: Our goal will be to leverage that mega trend and to make sure that resonates there with the best tools for screening diagnosis treatment and management and we've done that over decades, and we plan to do it ahead.
Kevin Hi: It may be the consumer.
Matt Smith: Big Big trend of sleep wellness tracking might be slightly higher in its impact over time, maybe not as quick adoption.
These sleep wellness tool is coming across all consumer tech applications is incredibly exciting redwood has always been to leverage this demand Gen. That's coming to us from big pharma and Big Big Consumer Tech, but then more importantly to get that personalized health journey. So that regimen can be truly the <unk> for that person as they find the path to better slightly better health.
Matt Smith: We do expect these trends to be positive, but they won't be immediate and our job is to drive another time.
Speaker Change: Thank you next question is coming from Anthony Petrone from Mizuho Group. Your line is now live.
Anthony Petrone: Thank you for taking my questions. Congrats on a good quarter here, maybe Nick will stay on GOP ones, we're getting a lot of attention turning towards.
Anthony Petrone: In light of really surmount OSA study and maybe the Kpis that you're looking for in that study how relevant do you think the primary endpoint is are there other secondary endpoints that are more important and do you think over time, you can collaborate with slowly to drive the effort of use of using CPAP with the GOP one thanks.
Anthony Petrone: Yes, Thanks for the question Anthony and it's really put it one.
Matt Smith: Certainly we're watching this amount our site trial, it's a pretty small trials less than 500 patients five to 600 patients I believe so it's not sort of the order of the real world evidence real world data that we have like 500000 patients. We're talking about there, but I think it'll be very interesting to see.
The presumption is given it's the same biochemical compound is in other trials used for diabetes treatment and white loss that it will have somewhere in the order of 10 to 20, maybe even 30% white loss reduction in this cohort. So that's a metric that sort of well known from price.
Matt Smith: <unk>.
Matt Smith: The best evidence from the primary investigator on this professor Thomas Hotrod from University of California, San Diego. He has his assessment is that that should lead to a pretty significant IHI reductions in the treatment cohort versus placebo maybe in the order of 50 to 60, maybe 65% IHI reductions in the cohort of these.
Matt Smith: Hi, BMO and quite high IHI patients.
Thomas Hotrod: If you listen to a great podcast between professional Hotrod and Dr. Carlos Nunez, our Chief Medical officer, which are available on our websites.
Thomas Hotrod: When you're going to spend 45 minutes, but there was some cliffsnotes.
Thomas Hotrod: I think it worth sharing here in this investor call is that.
Thomas Hotrod: Professor Malhotra was asked.
Okay.
What's the best therapy to treat sleep apnea is it.
Weight loss or is it b CPAP.
Thomas Hotrod: And he said well that's that's a false dichotomy. This question. So false competition. It's it's a plus b. It has been for decades and will be for decades in the future and as <unk> says look we have a new pharmaceutical agent that's going to help with the treatment and of course that will be used in combination with treatment. So the pim.
Thomas Hotrod: The study is saying that he thinks the combination treatment of <unk>.
Thomas Hotrod: Weight loss medication.
<unk> prior work in bariatric surgery that have much higher weight loss numbers or diet and exercise that.
Anthony Petrone: Had all the variance that we've seen over decades of different methodologies there, but this one does seem to be a good agent for the treatment.
Anthony Petrone: And then we would need to be combined with treatment to fully treat sleep suffocation that the patients will have so don't just made the CEO of the company that makes the therapeutic trust. The primary investigator that saying combination treatment has worked for decades, and we will work for decades, I would expect that to be the outcome of the trial and.
Anthony Petrone: In terms of working with Big pharma and this I think they are very focused on on other areas like obesity and diabetes, but as much as we can get their attention to talk about sleep and sleep health and to do their day to pay advertising to talk about the importance of sleep and sleep health I think combined with the apples and the Samsung and the googles of the world talking about it it'll be a huge.
Anthony Petrone: Positive full of us in the sleep apnea treatment industry. Thanks for the question Anthony.
Thank you next question is coming from Mike Matson from Needham <unk> Company. Your line is now live.
Mike Matson: Yes, thanks for taking my question.
Mike Matson: I guess I'll just ask one on Philips, So I think they've talked about.
Mike Matson: Re launching their flow generators and some of the O U S markets.
Mike Matson: Just curious what youre seeing there have you have you seen that happening.
Mike Matson: Have they been able to recapture share anywhere.
Mike Matson: Yes.
Yes, thanks for the question Mike and.
Mike Matson: Yes, certainly in tens of countries in Europe, and Asia, we are in full competition with all the global players including.
Mike Matson: The company you mentioned in the large regionals from Europe and from Asia and have been for many quarters. So they've come back in masks and devices across tens of countries in Europe and Asia and.
Mike Matson: <unk> goal date, when they come back if they've been out for a year or two depending on the time, they're out of each market is to fight their way from the bottom <unk>.
Mike Matson: Zero percent, new patient start share when they first come back in and they are trying to fight their way up and in general they've had to fight against the number two the number three number four player who don't have like.
Mike Matson: <unk> is the leading technology the best.
Mike Matson: <unk> platform ride the essence 11 globally as the best platform in over 140 countries. The secondary platform in I'll say all 140 countries is the essence 10 platform.
Mike Matson: So the goal is to then against regional player from Europe with the number three or original player from Asia with the number four in the countries that they are coming back and so we're seeing that country by country were seeing them.
Thomas Hotrod: Fight for that share at the low end.
Thomas Hotrod: Our focus is the market later is on growing the market and.
Thomas Hotrod: And I think there are fair competitor we've competed against them for.
Thomas Hotrod: Decades, since they bought restaurants and and in general we've won and taken share we were winning and taking share from them in 2019, we're winning them taking share from them in 2023, and 2024 as they come back country by country, and if and when they come back to the U S market and devices by the way the already hiromasa. Nevertheless, we've been converting leads.
I look forward to coming back to the U S market. So we can get any stock overhang away about what's it going to look like whether it's going to look like and what it looked like in all the other kinds of countries with a fight for share from the bottom and work their way up and.
Thomas Hotrod: I look forward to look forward to competition healthy competition, and we we seem to do very well because we got the smallest quarters. Most comfortable most connected and most intelligent solutions and it's really about that it's about the value provide getting that patient to the right care lowering the cost improving adherence and we've done a great job and I'd.
Kevin Hi: Like all global competition in the space.
Matt Smith: Thank you. Our next question is coming from Suraj Kalia from Oppenheimer. Your line is now live.
Matt Smith: Hey can you hear me all right.
Suraj Kalia: Got you loud and clear Suraj.
Suraj Kalia: Congrats on a nice quarter. So they can the 2030 operating model right. If I got your commentary right.
Suraj Kalia: Rick Smith branded profitability velocity of product control.
Rick Smith: Some of these things that you highlighted I guess wages compliance coach.
Suraj Kalia: Within the 2030 strategic model more specifically I'm just trying to understand how do you measure the ROI.
The compliance coach.
Suraj Kalia: This is going to be primarily reactive AI model any additional clarity would be great. Thanks.
Well, thanks, Suraj I could spend the rest of the time answering that call around the 2030 operating model I will just briefly talk about it and then talk specifically about compliance coach.
Suraj Kalia: <unk> thousand 30 operating model, yes, it's the three tenants right the three tenants.
Suraj Kalia: Product led customer centric brand enhanced resume its always been product led but now we have a global chief product officer, whose sole role is to write.
Suraj Kalia: Alright that product portfolio with an amazing team of hundreds of engineers in market tiers to bring great innovation to market. So we will measure the success on that on product velocity, how quickly do we bring innovation to market time to market time to success.
Rick Smith: Customer centric, we've always been customer centric, but we haven't always done the best job of analyzing the net promoter scores of patients net promoter scores of physicians homecare providers physician payer providers and so on so really understanding the marketing metrics around that and having our first chief marketing officers sit at the top title and really be laser focused on those NPS scores and driving them.
And really valuing the multibillion dollars resume brand and enhancing that over time and in the third quarter round.
Rick Smith: Focusing on profitable growth.
Kevin Hi: And driving that leverage with al first chief revenue officer, it's really around that profitable growth.
Litle was used.
Kevin Hi: I would call it the chief profitable growth officer, Robin Chief revenue officer, but really it's around keeping that discipline on the great growth we've had on the topline, but ensuring we get that leverage through opex.
Kevin Hi: R&D and particularly on SG&A in the new world to do things differently with tech and that segways into the second part of your question compliance coach Yes.
Kevin Hi: Look this is this is a great <unk> tool by the way, it's not generally have IRI compliance coach. The other one that we launched in Asia Pacific. The digital coffee is generated by <unk> and has that extra capability.
Compliance.
Rick Smith: Garden variety what would've been called machine learning is now artificial intelligence, it's a great algorithm and it's out there.
Suraj Kalia: The measure that one success on that one suraj is doesn't lower the cost to serve at that HMA or with the same labor force of respiratory therapists and pulmonary doctors can they sort of more patients so lower cost higher efficiency and really the key metric is whats the adherence rate for Dino Ani dial 365 year two year three in that patient.
What that has gone through compliance coach is it statistically and significantly higher than what that customer is getting before if there are best in class resume customer getting 87% adherence to <unk> does it go up to 90 does it go up to 92 and by the way those customers are very sophisticated in understanding what that means for their business what it means for them to sell.
Suraj Kalia: The pie is that they reduce costs in hospital care and that they improve outcomes for the patient and how they feel and of course, how they improve their own revenue and.
Suraj Kalia: And our replenishment supply anyway.
Suraj Kalia: The briefest answer I could do to that great question. Thanks Suraj.
Suraj Kalia: Thank you next question is coming from Steve Wheen from Chardan. Your line is now live.
Suraj Kalia: Yes. Good morning, just a question for Brett.
Great I was just wondering if we could.
Suraj Kalia: Looking to the gross margin a little bit further.
Brett A. Sandercock: And trying to understand are we seeing in across that quarter. The full benefit of the price that you've taken or is that some annualized I shouldn't affect us.
Brett A. Sandercock: Some customers, perhaps roll off contracts and whether or not.
From a REIT perspective could you just kind of reiterate what your.
Expectations are there and what you're seeing with regards to the pricing following the conflict.
Brett A. Sandercock: Yes, sure sure Steve So yes.
Brett A. Sandercock: On the gross margin and recent price increases reports here during the quarter.
Brett A. Sandercock: Some of those there'll obviously be contractual arrangements there as well so we put some some of it has gone through is a general increase and then there'll be specific contractual arrangements that means that as pricing will be able to get progressive I guess, if you look over the back half of fiscal 'twenty four on that.
Brett A. Sandercock: That's let's let's call that would be kind of progressing to evolve further.
Steve: And we think some of it some of that impact already on that.
Steve: I think the second part of your question was around is that around the sort of flight.
Steve: Rich say disruptions and settle.
Steve: Yes, yes.
Steve: Sort of internally if you could just sort of take that commentary what you are seeing in the market and how.
Steve: How you actually.
Steve: Trying to anticipate or protect yourselves against that.
Steve: Yes.
Anthony Petrone: <unk> definitely seen the impact there and a lot of that that shipping is not obviously not going to say I think going carrying around good.
Steve: Good hope so that that's happening.
Suraj Kalia: Certainly increase lead times I think probably you could be looking at two to three weeks on that particularly this is particularly frightening to Europe in particular, but also to some extent.
Suraj Kalia: The U S, where you've got to find alternate fright policy if you like.
That's having an impact and we're also seeing some increase in actual flight rights as well I think industry wide not just ourselves.
So.
Suraj Kalia: Looking at that closely we're looking at.
Suraj Kalia: Alternative routes, we're looking at multi modal distribution there.
Suraj Kalia: So there's a number of things we're looking at to mitigate that where we can but.
Matt Smith: Realistically, probably see some uptick in fright coffee will not manifest in our P&L in Q3, but there could be some headwinds in Q4 on that but again I think we just got to see how that evolves over the next to the wall.
Matt Smith: Thank you next question is coming from Soho Dawson from Baron Joey Capital. Your line is now live.
Matt Smith: Thanks. Good afternoon. Good morning, just another question for Brett.
Matt Smith: Brett just regarding the restructuring charges and also the charge for the.
Brett A. Sandercock: The mosque recall is that done now in terms of P&L cost. So do you expect any further.
Brett A. Sandercock: Cost to bank.
Matt Smith: Third quarter Wednesday fourth quarter this fiscal year.
Matt Smith: Yes.
Matt Smith: We're largely through that.
Matt Smith: We will restructure as from time to time, but I think that the material restructure that we did is behind us now so.
Matt Smith: Anything going forward I think would be pretty pretty modest on that so.
Matt Smith: I would characterize that assigned yet we've done we've done.
Matt Smith: Restructure.
Matt Smith: That should clear now.
Brian: Just to jump in there, Brian a little bit specifically.
Brian: So his question about the amounts with magnets.
Upgrade over our labeling which was cost as a recall in U S and some other jurisdictions that cost was fully taken account of in this quarter, we're not expecting to add anything more on the mask with magnets action.
Brian: Reliable and recall in certain jurisdictions.
Brian: Yes, absolutely.
Brian: Thank you next question is coming from Mathieu Chevrier from Citi. Your line is now live.
Brian: Good afternoon, and thanks for taking my question.
Brian: When do you expect to be fully transition.
Mathieu Chevrier: The <unk> 11 platform.
Mathieu Chevrier: Matthew very simple question, but rather complex answer in that we.
Mathieu Chevrier: We sell in 140 countries worldwide and each of them.
Mathieu Chevrier: Most of them have their own regulatory pathway.
Mathieu Chevrier: Often very different in complex and.
Mathieu Chevrier: And obviously labeling language.
Amortization of the product for all the regulatory requirements needed in all of that 140 countries. So we clearly launched in our top countries were launched in the U S.
Mathieu Chevrier: Many countries in Europe, we just got Japan last quarter, the quarter before and we're starting to ramp up there and you saw that in.
Mathieu Chevrier: Good.
Mathieu Chevrier: <unk> and devices in Europe, Asia, and other in the quarter of 16%. Some good sort of starting that ramp there in a place like Japan, which as you know is our fleet driven market versus.
Mathieu Chevrier: By quarter, driven market and so great to see Japan.
Mathieu Chevrier: The citizens of Japan to be able to get access to the best in the World technology in essence, 11, but look we've got hundreds of countries.
Matt Smith: Over 100 countries, we still have to go there and so we're going to get regulatory country by country and we care about people suffocating.
And all of those 140 countries in the same way and so our regulatory and quality team Don Hockey Al Chief quality and regulatory officer working.
Matt Smith: Tinsley with all regulatory authorities in those countries as we have to ramp that up and then in addition, we're ramping up supply. The good news is that we have the second best platform in the world and the <unk> 10, and that is completely unconstrained. So if you do Suffolk I can get a prescription in the country that essence 11 has not cleared yet.
Matt Smith: Can you get access to incredibly.
Matt Smith: Small quiet, an efficacious therapy since 10 platform and our best in the World Maas platform and so.
There is no simple answer to when it will be completely done in 100% in all countries, because I think as in different to maybe the 7% site <unk>.
Matt Smith: <unk> and <unk> 10 generations is that we have a pretty unique citizen.
Thomas Hotrod: Situation with a global citizenship here that we are the global leader and we got a different responsibility to maintain our second best platform, which is the second best in the world for a little longer and so that will that will be out and I'm not going to give a defined indict now, but I will tell you. This we're going country by country with driving regulatory and with scaling manufacturing as fastest.
We can on essence 11, because it is it is better.
Rick Smith: <unk> technology is low cost to make and we are able to have a premium for it in pricing. So it makes sense for us the customers and for our shareholders.
Speaker Change: Thank you. Your next question today is coming from Matt Taylor from Jefferies. Your line is now live.
Speaker Change: Alright, thanks for taking the question.
Matthew Taylor: I wanted to ask a follow up question on <unk>.
Matthew Taylor: Announced study I think you outlined a lot of the high level stuff there.
Matthew Taylor: They are really well.
Matthew Taylor: My question is a little more specific I wanted to ask about.
Matthew Taylor: What you thought you could see in terms of comparing the two arms of <unk> versus CPAP plus DLP. One do you think youll see a difference there and what would you make of the results.
Matthew Taylor: A different one way or the other.
Matthew Taylor: Yes.
Matthew Taylor: Yes, thanks for the question, Matt and so for.
For those of you who haven't read through the NIH Dot Gov feel free to go mine.
Matthew Taylor: <unk> on the visual Luna, there's a split chart that the top half of it on the trial as a GOP one side and the bottom half as a placebo side and so they have this 600 odd will less than 600 patients split between those two.
In a certain proportion and then within the <unk> they split to those on <unk>.
CPAP and those not on CPAP and the sign within the placebo. So there ends up being four arms. If you look at it but if you go to the end of those anomalous placebo no CPAP. So I'd just call that the placebo placebo arm.
Matthew Taylor: Then there is a placebo plus <unk>.
And then as GOP <unk> and <unk>. So you start to get down to the sub analyses. It gets less pallet I actually I'm reading, what you up on NIH Dot golvin. So.
My presumption is at the highest level they want to show that the GOP one is better than placebo.
Matthew Taylor: <unk> lowering white and improving IHI I think they will achieve that primary outcome I mean, all the data.
Matthew Taylor: 10%, 20%, 30% weight loss reduction on that should correlate to significant IHI reduction. So I think they will show that as opposed to the sub studies of CPAP versus no CPAP within each of those look we got 35 years of history, knowing that CPAP doesn't half trade right I mean, the best that ive seen from weight loss reductions in bariatric surgeries.
Matt Smith: And the best in the GOP, one prelim data is that it can hop trade right might be 50% reduction IHI I'd call that half treatment I don't think any pulmonary physician in the world would be happy with half trading and IHI with positive airway pressure frankly, if youre not turning the IHI to less than five you're not truly treating the patient and if it is highland.
Matt Smith: It might be residual central's and you have to move them to a bi level or it might be complex sleep apnea have to move them to adaptive servo ventilation. So there's so many options between sleep iPad bi level ISP that the physician should walk through but they wouldn't be happy unless the IHI is less than five I think the probability.
But trust me in my quote on this Matt again, the primary investigator in this study.
Matt Smith: Professor Malhotra said the idea that weight loss alone can treat sleep apnea is preposterous that was the word. He used so you can use and he has to pay on this study you can use his thoughts to what he thinks between the <unk> and the non <unk>.
Suraj Kalia: So you sort of leaning towards what he said earlier the best treatment for sleep apnea is not weight.
Matt Smith: White loss will be CPAP, it's a philosophy and so that's what I expect this study to show.
Matt Smith: We'll see the data that'll be out there and <unk> whenever they want to release and headline and we will continue to go we will continue to grow we will continue to drive patients into the funnel and I think this therapeutic class will help us with it.
<unk> decade to bring more patients into the funnel.
Speaker Change: Thank you. Your next question today is coming from Lyanne Harrison from Bank of America. Your line is now live.
Lyanne Harrison: Yes, good morning, Mike MC President Amy.
Lyanne Harrison: I'll ask a question.
Lyanne Harrison: About <unk>.
Lyanne Harrison: Your device in Marseille staff, so obviously strong device sales.
Lyanne Harrison: Resupply programs, obviously given that some focus.
Lyanne Harrison: But masked this quarter came out weaker than we expected can you talk us through where the disconnect there might be.
Lyanne Harrison: Thanks for the question Lyanne and really really happy to take the question and talk about our devices business and our <unk> business. So devices growth globally. It was incredibly strong in the quarter at 11% mask growth.
Globally incredibly strong at 9%, we talk about the market being mid single digit growth for the devices. So we clearly well ahead of that.
Lyanne Harrison: With the launch of <unk> 11 in Japan, and Europe is risk well and doing well in the U S. A couple of hundred basis points above and then in masks and accessories, you talked about global growth being high.
Lyanne Harrison: High single digits, and so beating that in U S, Canada Latin America, but.
Lyanne Harrison: But what you're probably focusing on is the Europe Asia.
Lyanne Harrison: And rest of world growth.
Lyanne Harrison: Q2, FY 'twenty, four being 4% right and just to be clear.
Lyanne Harrison: <unk> Q2, FY 2023 growth in that same category was 14%.
Lyanne Harrison: And we want.
<unk> 500 basis points of share 12 months ago, and then losing at this quarter I really think if you look at the weighted average of that which is what I would say in Nevada by <unk>, 9% is sort of more in line with the market growth in that mid to high single digit growth of mosques there.
Lyanne Harrison: And look Theres, some theres some things around.
Lyanne Harrison: Some contracts with a particular countries that were moved from a December to January and others I'm not going to go into all the details other than the Si we look really closely at share. We look really closely what we're doing and this 90 day snapshot.
Lyanne Harrison: Four quarters ago, which had 14% we werent, taking 500 basis points of share we are holding share growing and a little a category here or there.
And now this quarter at 4%, we're not losing 500 bps of share, we're actually holding share across that and it's due to some of those shipping areas launch areas and frankly, a couple of tenders that will move from one month to another so really not much to see in that but what I will say is that as we move forward maintaining that high single.
Matt Smith: <unk> digit growth in devices globally.
Thomas Hotrod: The hot sorry, mid single digit growth in devices globally and high single digit growth in masks globally is not a given we've got to drive that demand we're going to leverage this big pharma trend, we're going to leverage the big Tech trend and we're going to get better at doing demand generation in the areas, where we know we can push it up and so that's what we're going to be focused on going forward.
Lyanne Harrison: That answers your question Lyanne.
Lyanne Harrison: Thank you. Our final question today is coming from Michael Pollard from Wolfe Research. Your line is now live.
Hey, good afternoon, I will ask a mask.
Michael Pollard: As well following up there in a slightly different way so the U S number was up 2% sequentially.
Michael Pollard: Emily you see high single digit increase Q over Q kind of year end.
Michael Pollard: Seasonality in the U S deductible flush that kind of thing.
Michael Pollard: What are the puts and takes in that number and the specific question is did the magnet.
Michael Pollard: Field safety notice kind of limit your ability to.
Fully capture.
Michael Pollard: Demand in the quarter or were there other influences. Thank you so much.
Yes, Great question, Michael So U S, Canada, Latin America at 10% growth in the marks in the quarter was actually very strong market growth rate high single digits.
Michael Pollard: Holding share there.
Do we do do see that December, particularly for U S markets, where high deductibles and deductibles reset December 31.
Michael Pollard: So some good revenue there and so we had a good comp from the year before in both solid numbers there from the company before and this 10% U S. Canada Latin America growth. So I think we did really well there.
Michael Pollard: As we closed out the quarter in terms of any impact from the <unk>.
Michael Pollard: With magnets.
Michael Pollard: <unk> on our labeling cost in the U S. As the U S. FDA as I recall I'm going to tell you.
Michael Pollard: There was no product removed from the market this was about having.
Michael Pollard: Our plastic clips as an option, which we scaled up manufacturing and have them as an option. So when a patient is set up if there's a very very small minority of people, who have an implanted pacemaker or other metal device in the upper chest or craniofacial area. Then those patients are offered an upgrade to the plastic clips.
For everyone else the other $95, 99% of patients they keep the convenience of the magnets. So that if they go to the bathroom and then they can come back in the dark and just click it on and not have to seek for plastic clips to put together the magnet completely goes on there and so as we've done that labeling upgrade and while we had a competitor a similar one about 12 months.
The market has been very trained in knowing to ask questions about implants to ask questions about our partners implants, and if I have that to offer offer the plastics eclipse, which are fully available on resume mosques as an alternative to our moss with magnets. The month with Magnus is so convenient they are doing so well and for 99% of the people they're great for that 1%.
Michael Pollard: The actuaries are very comfortable now to answer those questions and they are the 140 countries. We are working through the appropriate way is to ask questions and get people the best mask and have the best fit and drive the best adherence the time, but had no impact on our quarterly sales whatsoever, and we don't expect an impact going forward because this was an upper.
Tried to labeling that was actually in line with clinical practice over the last 12 months and it just makes sense to do that.
Michael Pollard: Thanks, a lot for the question Michael.
Michael Pollard: Thank you we reached end of our question and answer session I would like to turn the floor back over to Mick for any further closing comments.
Kevin Hi: Thanks, Kevin and thank you again to all of our stakeholders for joining us on this call the opportunity in front of US is huge and largely untapped. It's an incredible runway, we see more and more people coming into the healthcare system and this will benefit us as we seek to help them sleep better breathe better and live better lives and 140 countries. Thank you to all 10000 raise millions. Many of you are also.
Kevin Hi: Holders.
Amy Wakeham: But what you do today and every day with that I'll hand, the call back to Amy to closes out great. Thank you Mike. Thanks, everyone for listening we do appreciate your time and your interest.
Kevin Hi: If you have any additional questions. Please don't hesitate to reach out directly. This does conclude our second quarter 2020 Conference call. Kevin you can go ahead and close this out.
Kevin Hi: Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.
Kevin Hi: Yeah.