Q1 2025 Resmed Inc Earnings Call
Kevin: Hello and welcome to the Q1 Fiscal Year 2025 Resment earnings conference call. My name is Kevin and I will be your operator for today's call.
Kevin: At this time, I'm up to the sponsor of this and only mode.
Kevin: Later, we'll conduct a question and answer session. Please note this conference call is being recorded. I'll now turn the clover to Amy Wakeham, Chief Investor Relations Officer. Amy, you may begin.
Amy Wakeham: Great, thank you Kevin, hi everyone and welcome to Resment's first quarter fiscal year 2025 earnings call. As Kevin said we are live webcasting this call and the replay will be available on the investor relations section of our corporate website later today.
Amy Wakeham: Our earnings press release and presentation are both available online now.
Amy Wakeham: During today's call, we will discuss several non-gap measures that we believe provide helpful information for investors. This information is not intended to be considered in isolation or as a substitute for the reported gap financial information.
Amy Wakeham: We encourage you to review the supporting schedules and today's earnings press release to reconcile these non-gap measures with the gap reported numbers.
Amy Wakeham: In addition, our discussion today will include forward-looking statements, including but not limited to expectations about our future financial and operating performance.
Amy Wakeham: We make these statements based on reasonable assumptions, however, our actual results could differ.
Amy Wakeham: Please review our FTC 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.
Amy Wakeham: All now turn the call over to Resmond's Chairman and CEO Nick Farrell. Thanks, Amy, and welcome to all of our shareholders for joining us today as we review Resmond's first quarter results for fiscal year 2025.
Amy Wakeham: I'm pleased to report another strong quarter of growth across all of our business segments.
Amy Wakeham: We've seen solid revenue growth, improved growth margins, and disciplined investments in both S, G and A and R and D, resulting in very strong profit performance.
Amy Wakeham: The results we are presenting today reflect the hard work of the 10,000 plus resmedians operating in over 140 countries worldwide.
Amy Wakeham: and the dedication they bring to improving the lives of patients, physicians, providers, and all of our customers every day.
Amy Wakeham: Before delving into the details of our financial and strategic initiatives, I want to have for more emphasised that the results we are presenting here today are not just financial in nature. They represent an improvement in health outcomes for many tens of millions of people worldwide.
Amy Wakeham: Our mission here at ResMed is to create life, changing healthcare technologies that people love.
Amy Wakeham: Through cloud-connectable medical devices, masks, and accessories, digital health platforms, as well as ongoing investments in the latest technology, including ML and AI and Gen AI.
Amy Wakeham: We are committed to helping hundreds of millions of people so that they can breathe better, sleep better, and live longer and higher quality lives. Living the lives that they can to their fullest potential.
Speaker Change: Now, turning to a high level review of the financials. I'm proud to report that we delivered another strong quarter. Revenue grew by 11% reflecting strong demand for sleep health and breeding health medical devices.
Speaker Change: Almasks and accessories, as well as our residential care software offerings.
Speaker Change: We achieved double-digit revenue growth across all product and geographic categories this quarter. Mark's an accessories growth was augmented by new patient activations as well as ongoing and race supply.
Speaker Change: Our global device tails were driven by strong market performance from both the essence 10 and the essence 11 platforms.
Speaker Change: Our focus on operating excellence programs helped us drive operating leverage during the quarter. We achieved 27% growth in our operating process and we further achieved 34% growth in earnings per share.
Speaker Change: We're committed to driving increased efficiencies, managing our operating expenses, fruit and investing in areas that power long-term sustainable growth.
Speaker Change: By balancing strategic investments with cost discipline, we have together, we're driving an ongoing and sustainable, profitable growth here at RedSmen.
Speaker Change: Device sales remains strong, growing by a double digit percentage year over year and we continue to maintain market leadership without two essence platforms.
Speaker Change: We're supporting the global market and every patient or provider who needs a device has access to our market leading 100% cloud connectable platforms.
Speaker Change: the SNSTN and the SNSTE 11. We are increasing the availability of our SNSTE 11 platform worldwide with regulatory approvals expanding country by country. We will see ongoing momentum.
Speaker Change: Our marks and accessories business had another strong quarter delivering 11% year over year growth.
Speaker Change: The FIT F40, ResMed Smorsed, RO-NASIL Mark Ever, continues to perform well in the US market, and we're expanding the F40's availability across additional global markets.
Speaker Change: The F40 has a proprietary, adaptive, feel technology, combined with its lightweight and compact design, it has been incredibly well received.
Speaker Change: The F40 is priced for its fit, it's comfort and its adaptability, especially for patients who move frequently during sleep.
Speaker Change: At our investor day on September 30th, we are now at the upcoming launch of our latest mask innovation, the Air Touch in 30I.
Speaker Change: Today I can announce that this amazing new technology will be launched into select markets next week.
Speaker Change: The air touch N30i is resume's first mask with a fabric wrapped frame and a fabric-based patient interface. With a soft, breathable fabric system for optimal comfort.
Speaker Change: The way I see it, we sleep with fabric covered pillows and fabric sheets like cotton. Why can't we have CPAP mask technology that feels just as good?
Speaker Change: We believe this math technology will set a new standard for CPAP, A-PAP and Bi-Liable Patient in a face therapy. And will help more people love their therapy, including how they feel in the morning and all day, or because they can achieve longer and high quality sleep.
Speaker Change: This technology has been years in the making and we are very proud to be able to deliver it to customers starting next week.
Speaker Change: Re-supply programs remain a critical element of our strategy to drive adherence.
Speaker Change: to improve patient outcomes and to enhance long-term clinical results. Our Digital Health ecosystem empowers resupply through three market leading platforms, including my air for patients.
Speaker Change: Airview for Physicians and Providers, as well as Bright Tree for Home Medical Equipment or HME Providers.
Speaker Change: Public Research shows that patients enrolled in resupply programs have thought higher therapy adherence rates in the first year and over the long term.
Speaker Change: As we expand these types of resupply programs globally, we expect to see continued positive impacts on patient outcomes, as well as reduced overall health care system costs.
Speaker Change: We're proud of the progress we've made and we're excited about the opportunities in front of us.
Speaker Change: Let's now talk about two significant macro trends that we've reviewed over recent quarters. Namely, consumer wearables and a new class of pharmaceutical medicines called GLPWants.
Speaker Change: We believe that both of these macro trends will have significant impact on our business as tailwinds.
Speaker Change: Let me start with a discussion of GLP1 medications, with a focus on the latest generation of these medicines that are targeted specifically to treat diabetes and now obesity and beyond.
Speaker Change: We've designed a real world data analysis with now in equals 989,000 subjects.
Speaker Change: who received both the prescription for a GLP1 medication and a prescription for positive airway pressure therapy.
Speaker Change: The results from this analysis are clear.
Speaker Change: People prescribed the GLP-1 and the Pap therapy have 10.8 absolute percentage points, more likely the good or propensity to commence positive air-wide pressure therapy, 10.8 absolute percentage points, 5.
Speaker Change: Moreover, once on therapy, people with a GLP1 prescription and a Pat prescription appear to be even more committed to long-term therapy adherence. Our analysis shows that after 12 months, the resupply rate for patients with GLP1s and Pat prescriptions is 3.2% absolute percentage points higher.
Speaker Change: At 24 months, this expands even further and the resupply rate difference increases to 5.3, absolute percentage points higher for patients on both a GOP1 and a Pat prescription.
Speaker Change: This suggests that patients who start geography one therapy are also motivated to start and adhere to this lead-backing treatment. As these therapies continue to expand and use, we believe that it will be a clear wound for our business.
Speaker Change: Next, let's turn to the consumer wearables macro-trained.
Speaker Change: In July, Samsung began selling its latest generation Galaxy Watch, which now includes detection of moderate to severe sleep apnea.
Speaker Change: Samsung achieved denovo FDA clearance for this capability.
Speaker Change: Just last month, Apple and Drew introduced its latest generation Apple Watchers with its own version of possible sleep apnea detection using a Tegrophied technology, track of multiple weeks as its detection method.
Speaker Change: It's incredible to have two world leading consumer technology companies recognize the importance of tracking sleep health and identifying sleep apnea.
Speaker Change: In addition to these technologies from Apple and Samsung, other wearables like Google, Spitbit, Garmin, Orr, Woof, and Beyond, a focusing on sleep health tracking.
Speaker Change: We see this investment by consumer wearable companies as an incredible, once in a generation, opportunity for sleep health and breathing health awareness and particularly for sleep apnea awareness.
Speaker Change: We believe that these technologies will help drive more patients to seek out information regarding their sleep health and breathing health.
Speaker Change: Resommage Obligation is to help these sleep health and breathing health consumers find their own pathway to appropriate diagnosis and treatment for sleep apnea.
Speaker Change: Where ResMed leans the world with the most clinically effective, the most non-invasive, the most prudent and the most cost-effective solutions for care.
Speaker Change: Our strong competitive position here at ResMed is underpinned by continuous innovation. Our commitment to patient care and our digital health ecosystem.
Speaker Change: We've made significant investments in our product offerings, including the expansion of the availability of cloud-connectable devices, the integration of artificial intelligence into our latest and greatest digital offerings.
Speaker Change: and the scaling of our digital health tools such as our patient management system called Airview and our consumer engagement application called MyAir, which now has over 8.8 million users globally.
Speaker Change: Additionally, we recently announced the ability to integrate our own wearable, homesleep apnea test system that's called night owl with our Maya platform.
Speaker Change: This will enable a more streamlined diagnosis process and provide improved consumer engagement on their path to therapy.
Speaker Change: Let's now turn to our long-term vision for growth, what we call our ResMed 2030 Strategy.
Speaker Change: As we outlined during our recent investor day, just over three weeks ago at the New York Stock Exchange. This strategy is centered on three key pillars.
Speaker Change: 1. Growing and differentiating our course lead health and breathing health business, 2. Expanding into near and adjacent areas and 3. Leveraging our leadership in digital health to drive better outcomes for patients, physicians, providers and payers.
Speaker Change: Let me cover some high level thoughts on each of these free pillars and then I'll hand the call over to Brett and after that we'll go into our Q&A session.
Speaker Change: So one, sleep health and breathing health. Here at ResMed, we are laser focused on maintaining and expanding our global leadership in Sleep Health and breathing health.
Speaker Change: Our goal is to bring the best products to market. Products that are the smallest, the quietest, the most comfortable, the most connected, and the most intelligent.
Speaker Change: The term CPAP has traditionally stored for continuous positive airway pressure.
Speaker Change: Taking some artistic license, I would propose that it now stands for computerized positive airway pressure.
Speaker Change: and the smarts go beyond the devices themselves. By liberating the data to the cloud, here at ResMed we can engage with patients with physicians, providers, and whole health care systems like never before.
Speaker Change: We now have approximately 20 billion nights of sleep health and breathing health data in the cloud. And we have more than 27 million 100% cloud connectable devices that we have provided in over 140 countries worldwide.
Speaker Change: This allows us to partner with patients, physicians, providers and beyond, with unparalleled insights. Ultimately leading to better product and better software offerings that help patients.
Speaker Change: and the KGB is a chief better health outcomes lower costs for the overall health care system and better management of chronic diseases.
Speaker Change: Second Health Technology at Hon.
Speaker Change: Resment is the global leader in digital health solutions for care delivered right where people live and often that's right in their own home.
Speaker Change: We are introducing the basic power of machine learning and artificial intelligence as well as more advanced generative AI to revolutionize healthcare delivery.
Speaker Change: Through platforms like Maya and FU, as well as our broad residential care software offerings, including go-to-market product brands like Bright Tree, Matrix Care, or Medifox Darm, we are making healthcare more accessible, more efficient and more patient-centered.
Speaker Change: We're also developing AI-driven solutions to further personalize healthcare and improve that therapy adherence. Let me briefly update on two in-market products in this AI-driven space.
Speaker Change: Our compliance coach, Digital Offering, is helping home medical equipment providers identify the most at-risk patients for adherence issues.
Speaker Change: and is making a significant impact to help deliver timely interventions to improve therapy outcomes for patients as well as their physicians and their providers.
Speaker Change: Our latest, generated AI-driven consumer products that we call dawn is helping more people get access to the information they need. And to answer questions they have about their own personal sleep health, breathing health, and beyond.
Speaker Change: After just a few months of dawn being launched into our U.S. market, we've seen 25% of visitors initiate a session with dawn.
Speaker Change: This is led to an extraordinary 40% reduction in the volume of direct to live human contact centre queries.
Speaker Change: are allowing tech to do what tech does best and our people to connect with customers how they can make best as humans.
Speaker Change: The bottom line is these technologies represent high quality, better outcomes and lower costs for the healthcare system.
Speaker Change: and we are just getting started.
Speaker Change: 3. Expanding into adjacencies. We are investing in adjacent areas including insomnia, chronic obstructive pulmonary disease or COPD and other respiratory insufficiency fields, including neuromuscular disease and beyond.
Speaker Change: with an aging population and an increasing incidence of chronic diseases. These areas represent significant growth opportunities.
Speaker Change: We continue to expand our cognitive behaviour therapy for insomnia or CBTI offerings with a product called
Speaker Change: While also looking at other novel technologies in the market for the 860 million people worldwide who suffer from insomnia, the inability to get to sleep and stay asleep.
Speaker Change: We're also building on our leadership in non-invasive ventilation for COPD patients to help develop new pathways for high flow therapy in the home.
Speaker Change: The 480 million people who suffer from COPD urgently need better therapy and we are working on it.
Speaker Change: We also believe there's a significant opportunity for resmenge to capitalize on the growing trend of people worldwide seeking better sleep health, regardless of whether they have clinically significant sleep apnea.
Speaker Change: and we're excited to explore what this means for Resment as we've built on our leadership and sleep out here to extend more broadly into Global Sleep Health, Breathing Health.
Speaker Change: and in fact all health technology that's delivered in the home.
Speaker Change: As we look ahead, we are more energized than ever by the opportunities in front of the school. The global demand for sleep health and breathing health solutions is growing. And our mission to help people sleep better, breathe better, and live high quality lives to their fullest potential.
Speaker Change: Continues to drive everything we do. We have updated our goal, aligned with our 2030 strategy, and we now plan to empower over 500 million people to reach their fourth potential in 2030, with Sleep Health, Breathing Health and Health Tech at home.
Speaker Change: With our strong financial foundation, our innovative product pipeline, and our expanding digital health ecosystem, we are best positioned to achieve that goal.
Speaker Change: ResMed is at the forefront of a rapidly evolving healthcare technology landscape. We're leading with improving patient outcomes, applying new technology, and creating value for all of our stakeholders.
Speaker Change: Thank you to the 10,000 plus resmedians whose hard work and dedication may go mission possible and thank you to you our shareholders for your continued trust and support.
Speaker Change: with that. I'll hand the call over to Brett and Sydney for a deeper dive into our financials. And then we'll open the floor up for questions. Brett, over to you.
Brett: Great, thanks, Mick. In my remarks today, I will provide an overview of our results for the first quarter fiscal year 2025. Unless noted all comparisons are to the prior quarter and in constant currency terms, we're applicable.
Brett: We had a strong financial performance in Q1, group revenue for the September quarter was 1.22 billion, an increase of 11% on both their headline and constant currency bases.
Brett: Revenue growth reflects positive and consistent contributions across our product and resupply portfolio.
Brett: Year over year movements in foreign currencies positively impacted revenue by approximately 4 million during the September quarter.
Brett: Looking at our geographic revenue distribution and excluding revenue from our residential care software business, sales in US Canada and Latin America countries increased by 11 percent, sales in Europe, Asia and other regions increased by 10 percent.
Brett: Globally, the virus sounds increased by 10% while masks are increased by 11%.
Brett: Breaking it down by regional areas, device sales in the US Canada and Latin America increased by 11% Supportive by solid ongoing new patient demand.
Brett: masks and others outels increased by 10% reflecting growth in both resupply and new patients set up.
Brett: In Europe, Asia and other regions, advice styles increased by 9% on a constancy basis while masks and other styles increased by 11%.
Brett: Reds is in childcare software review, increased by 12% in the September quarter.
Brett: UnderPN by growth from Medifox Dan and continues strong performance from our HME software vertical.
Brett: During the rest of my commentary today, I will be referring to non-gap numbers. We have provided a full reconciliation of the non-gap to gap numbers in our first quarter earnings press release.
Brett: Gross margin increased by 320 basis points to 59.2% in the September quarter. The increase was primarily driven by manufacturing efficiencies and component costing improvements and an increase in average selling prices.
Brett: Sequentially growth margin was broadly consistent with life quarter.
Brett: We continue to monitor potential headwinds that could arise in the Middle East conflict and congestion in Asian ports.
Brett: We expect increased air and sea freight costs will continue to impact our growth margin throughout fiscal year 2025.
Brett: However, we had my good progress expanding growth margin over the last 12 months and we are focused on driving initiatives to further improve our growth margin.
Brett: Looking forward, we continue to expect Gross Martin will be in the range of 50-9 to 60% in fiscal year 2025.
Brett: Moving on to operating expenses, test urnate expenses for the first quarter increased by 7% the increased loss predominantly attributable to increases in employee related costs.
Brett: [inaudible]
Brett: Looking forward and subject to currency movements we expect SGNO expenses as a percentage of revenue to be in the range of 18 to 20% for fiscal year 2025.
Brett: R&D expenses for the quarter increased by 4% from the constant currency basis.
Brett: R&D expenses as a percentage of revenue with 6.5% compared to 6.9% in the prior year period.
Brett: Looking forward and subject to the County Movement, we expect other expenses as a percentage of revenue to be in the range of 6 to 7 percent for fiscal year 2025.
Brett: While creating profits for the quarter increased by 27% under PN by revenue growth and growth margin expansion.
Brett: Our net interest expense for the quarter was 1.7 million given our low debt levels, we expect net interest expense to be less than 1 million in the second quarter.
Brett: Additionally, we will likely generate an Indian-Trust incoming in the second half of fiscal year 2025.
Brett: Our effective tax rate for the September quarter was 19.2%. We estimate our effective tax rate for fiscal year 2025 will be in the range of 19 to 21%.
Brett: and that income for the September quarter increased by 35% and non-gap diluted earnings per share increased by 34%.
Brett: Cash Flow from Operations for the quarter was 326 million reflecting solid underlying earnings.
Brett: Capital expenditure for the quarter was 18 million depreciation and amortization for the quarter total to 45 million.
Brett: We ended the first quarter with a cash balance of 426 million. During the quarter, we reduced our debt by 30 million. We have now repaid our variable debt and our term that reminds of the attractive interest rates relative to the current market.
Brett: On September 30, we had 677 million in gross death and 251 million in net death, and we have approximately 1.5 billion available for drawdown under our revolver facility. We continue to maintain a solid liquidity position.
Brett: I have more directors to clear the course in the development of 53 cents per share.
Brett: During the quarter we purchased 222,000 shares under our previously authorised share by back program for consideration of 50 million.
Brett: We plan to purchase share to the value of approximately 75 men per quarter, so there is a reminder of fiscal year 2025. This will more than offset any dollars from the best thing of equity to employees during the year.
Brett: Going forward, we plan to continue to reinvest in growth through R&D, deploy further capital for tucking acquisitions and continue our shared by back program.
Speaker Change: and with that I will hand the cool back to Amy.
Amy Wakeham: Great, thank you, Brett. Kevin, I'd like to go ahead and turn the call over to you to provide the instructions again and run the Q&A portion of the call. Thank you.
Kevin: Thank you. Now begin the question and answer session. If you'd like to be placed in the question queue, please press star one under telephone keypad.
Kevin: As a reminder, please introduce yourselves to one question.
Kevin: If you have another question you want to hop back into the queue. Once again that star wants me to be placed in the question queue and please let me yourselves two one question.
Speaker Change: Our first question today is coming from Boris. That clip from UBS, your line is that light?
Boris: Hello, thank you for taking my question. Just a quick one, do you have any sense of pre-orders for your new mask? I know it's not available yet, but any sense of what demand looks like for that product?
Speaker Change: Yeah, thanks for the question Laura. You know it's de minimis at this point in terms of not material to the to the global financials and so we don't release information like that but what I can tell you is
Speaker Change: that we have shown this technology to our commercial teams in our big markets where it's going to launch next week.
Speaker Change: and there's incredible excitement. The marketing team have put together some fantastic programs. The sales team are ready to take it to customers. But most important here is the product engineering teams and the product management teams. You know, this has been over a decade in development. It's really hard to take fabric.
Speaker Change: and custom apply it onto liquid silicon rubber and do that at scale, the scale that ResMed needs to to launch.
Speaker Change: on the
Speaker Change: to Fabric is incredible. I truly think this is a game-changer, but very early days and nothing material to report at this point other than the great technology and the excitement of the commercial team. Thanks for the question, Laura.
Speaker Change: Thank you. Our next question today is coming from Craig Wontan from RBC. Your line is now live.
Speaker Change: Craig, if you are there, you might be on mute.
Craig Wontan: Yeah, sorry. Sorry about that. Thanks for taking my question.
Craig Wontan: I just wanted to touch on the rest of world devices growth, you know, 9% growth is good growth there. I was wondering if there was much benefit coming through from AirSense 11 sales given that they are higher priced, or if not, could you just explain some of the kind of growth drivers there for rest of world devices?
Speaker Change: Yeah, look, Craig, as you know, that's Europe, Asia-Pac, and rest of the world, so there's quite a lot that goes into that 9% number. Certainly very strong. We think we're holding share or taking share in the sort of 140 countries that are included in that broad group of countries. What I can tell you is, you know, it's full competition. All players are in those markets, and we're loving that global competition, and we're loving having...
Speaker Change: the smallest, quietest, and most comfortable devices.
Speaker Change: As you alluded to in your question, there is obviously some combination of the switch from AirSense 10 to AirSense 11 in the countries where that's improved, and that has a higher price and a lower COGS point, and so there are some advantages to that, and in the revenue line you'll see some of that. But I can tell you, the vast, vast, vast majority of that is volume, and just the growth that we're able to achieve, and that we're driving through demand gen, demand capture, and demand conversion in global markets.
Speaker Change: Tony Lu and the team in AsiaPac, they're just up there and performing really well and excited to, you know, 12 months in their new roles, just really excelling. So great to see that. Thanks for the question, Craig.
Speaker Change: Thank you. Next question is coming from Margaret Cazor Andrew from William Blair. Your line is now live.
Speaker Change: Hey guys, it's Jimmy on for Margaret. Thanks for taking the question and congrats on a great quarter here Mick I wanted to maybe touch on devices here and it's great to see you know double-digit growth worldwide You know as you've digested the drivers of the strength this quarter and maybe you know determine what you attribute the strength to
Speaker Change: Are you seeing any pull-through from Samsung or the spotlight that GOPs are putting on OSA? And, you know, maybe just talk to some of the confidence that might be giving, you know, you as you look at, you know, how ResMed is trying to make an impact in growing the market longer term.
Speaker Change: Yeah, Jimmy, thanks for the question. It's a good one. It allows us to talk to those macro trends and also sort of the micro of what happened these last 90 days.
Speaker Change: Firstly, on the micro, US, Canada, Latin America device growth was exceptional at 11%. Just want to be clear, that's on a comp of 2% from this time a year ago. So in Q1 2024, we had 2% growth in US, Canada, Latin America. So very good growth at 11%, but it's on a relatively low comp, so it won't take
Speaker Change: over credit for that but what I will say is that we're definitely holding share and taking share in those markets and it's great to have the AirSense 10 and AirSense 11 so we can have the number one rated device in the world which is the AirSense 11 and the number two rated device in the market.
Speaker Change: which is the Essence 10 available for sale. So I think that has a combination of it.
Speaker Change: To the specific part of your question around Samsung with their DeNovo clearance, you know, earlier in the year and then Apple with their most recent launch of their latest watch with their, you know, possible sleep apnea detection and Samsung with DeNovo FDA clearance for moderate to severe sleep apnea detection, I think it's very early days in those new technologies. They've just been rolled out. I think there's a long runway to go as they get them out there and a long runway, if you think about the analog being Apple Watch launching an EKG capability, what, five, five and a half years ago, and it's really now just starting to, you know, get good flow through cardiology. I think it'll go faster than that, but it won't be sort of in this, you know, one or two quarters since Samsung and just a quarter or less since Apple launched theirs and so really early days there.
Speaker Change: Look, I do think the GLP-1 trend of getting patients into primary care is helping.
Speaker Change: And, you know, we're tracking 989,000 patients now with combo prescriptions for GLP-1s and PAP, and those are having some tailwind effects. So all of these macro trends are positive. What I can tell you is I think it's just getting awareness out there, that all this talks to the importance of sleep health, breathing health, and that people are thinking about
Speaker Change: Big consumer tech companies, big pharma are thinking about it, and people in general are. And they're coming into the healthcare system and they're getting those prescriptions.
Speaker Change: So, no, really excited about 11% growth in US, Canada, Latin America on a 2% comp. Really excited about Europe, Asia, and rest of the world growth of 9% and global growth of 10% constant currency in our devices category. And look, I'll give credit to the team. I think the team has done a great job commercially and a great job with our partners in home care providers, physicians, getting prescriptions, and helping to expand the diagnostic funnel. Again, early days, we're excited about the flow and really, really proud to report these numbers.
Speaker Change: Thank you. Next question is coming from David Lau from J.P. Morgan. Your line is now live.
David Lau: Thanks very much. Mick, perhaps a similar topic. Mass sales for the last year or so have been double-digit.
David Lau: I'm looking particularly at the North American market. Just wondering if you could talk about the drivers there. I mean, what comes to mind is master patient is increasing, adherence is increasing, and perhaps ResMed's market share is increasing. Can I get a touch on what you think the drivers are and maybe talk a little bit about what to expect in the future, please?
David Lau: and Rye Tree Customs.
David Lau: We're going to make it operable with whatever ERP type management system you're using for your HME.
Speaker Change: We've got really good share with Brightree, but if you're not using Brightree, we don't have to convert you to Brightree, although we want to, to put you on SNAP. And so that's a new advance there on resupply.
Speaker Change: So, you know, runway left there. Yeah, I think the masks per patient per year is going up, but there's still a lot of room. I think there's a lot of people. I mean, I talk to them anecdotally. But if you go out and do your channel checks and research, not everybody knows that reimbursement will pay for, you know, two, three or even four mask systems per year. And some people are still getting one mask system per year or less. And so there's a lot of room to improve. Some people are on those programs and they love it and they get on the subscription ones.
Speaker Change: I love it because it's an overlap of altruism with the profit motive. The only reason someone's going to buy a new mask is if they're getting good care and pay that copay and go through the sign-off that they have to do. So really good growth there of 10% US, Canada, Latin America. But I'm also really proud of Europe, Asia, and rest of the world, where we don't have all those systems like Bright Tree and Snap Technologies and all the sort of sophistication that we have with our US HME channel partners.
Speaker Change: and or direct engagement through home care providers or direct engagement to the consumers, the patients themselves. And so global growth of 11% really solid. Look, you know, we still see the market growth as mid single digits on devices and high single digits on masks.
Speaker Change: But what you saw is this quarter, ResMed doesn't accept market growth, we drive it. And the third part you said around share.
Speaker Change: Yeah, look this isn't carbonated beverages industry and Coke versus Pepsi or you know McDonald's versus KFC This is this is really around expanding the pie
Speaker Change: And so, yes, we've done very well in share, have extraordinary good share in AirSense 10, AirSense 11, and our new masks, the F40, great share there in full face, and I think we'll continue to take some points. But for me, it's less about that. I want to do that. Every day we fight for share of devices and masks.
Speaker Change: But more and more, it's about one billion people.
Speaker Change: suffocating worldwide and you know we're really happy to say we've sold 28 million 100% cloud connectable medical devices you know that's 2.8% of the potential. Throw in the rest of the market we're less than 5% into this global market and so our biggest opportunity is getting more patients into the funnel. I'm loving that big tech you know from the consumer side and big pharma are going to bring more patients in and it's ResMed's job to help those people find the pathway through as I said in the prep remarks. That's how we'll be able to sustain these sort of as we said in our investor day.
Speaker Change: High single digit growth for ResMed and then better growth than that in terms of our profit and better growth than that in our free cash flow and earnings per share. Thanks for the question David.
Speaker Change: Thank you. Next question today is coming from Saul Hadassan from Baron Joey Capital. Your line is now live.
Saul Hadassan: Good morning, good afternoon, Mick and Brett, can you hear me?
Speaker Change: I hear you loud and clear, Sol.
Saul Hadassan: Thanks Mick. Maybe one for Brett. Brett, just on working capital, looked like it was a bit of a headwind this quarter as it related to your operating cash flow and in particular some inventory bills.
Saul Hadassan: Can you just talk to, is there sort of just seasonality in this, is it just some inventory build as it relates to new product launch, or any other issues that you're seeing as relates to the cost of that inventory that's coming through the balance sheet? Thank you.
Speaker Change: A little bit of an increase in our inventory if you look at it sequentially on the working capital.
Speaker Change: What we've done is we've...
Speaker Change: We're in the process of rebalancing on sea freight, air freight, and particularly trying to mitigate some of those increased freight costs and freight rates.
Speaker Change: so
Speaker Change: increasing our inventory levels in the short term. There may be a little more of an increase in Q2, but then we think we'll be pretty stable after that. It's just a process of balancing that. So part of what we're trying to do to mitigate some of those freight costs. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. Next question today is coming from Anthony Patron from Mizzou. Hope your line is now live.
Speaker Change: Thanks. Congratulations on the quarter, and thanks again for all the feedback at the analyst day.
Anthony Patron: Maybe a quick one, Mike, on pricing, Mike or Brett. Last year, you put in some price increases, both devices and resupply.
Anthony Patron: I think we're approaching the anniversary of a few of those price actions last year. So maybe just a little bit on the pricing strategy going forward.
Anthony Patron: Is that going to be a part of the steady diet?
Anthony Patron: And if I could sneak one in there as well, just USDME purchasing patterns, are they holding more inventory and buying more in bulk just because of the supply situation out there? Thanks again, congratulations.
Speaker Change: Yeah, thanks Anthony. I'll have a go at both questions and Brett, feel free to chime in, Anthony is opening up for both of us. But firstly on pricing strategy, yeah look, as we saw during the supply chain crisis, the impacts on electrical components, availability and cost,
Speaker Change: and specifically around semiconductors and QAMS chips.
Speaker Change: you know, four, eight, twelve quarters have really flowed into our inventory and had a big hit on us. And so, and we took that hit, you know, four, five quarters ago, you saw us take significant hits from that.
Speaker Change: We are working through that and so look, you know as we worked with our customers We shared some of the pain of those those price increases that we saw We took some of the hit frankly at ResMed as the market saw and we passed on some of that in saying look these costs Have gone up. They've gone up for everything for everyone bread milk
Speaker Change: bananas, fruits, I mean it's happened and frankly it's interesting to me on the retail side not all of them have lowered their prices as things have started to come down. Here at ResMed, look we're in the healthcare industry, we understand this is controlled reimbursement in many countries by governments and private payers and so we partner up with our channel to say look what's happening and so we shed some of that pain there. I think things are starting to level out somewhat as you saw in our costs, we're managing air freight better, sea freight better, we're moving our way through those high cost components, we're always wary of what could happen with Red Sea issues and Panama Canal issues and even a seaport threat of a union strike just last month and so we're watching it with a productive sense of paranoia but what I can tell you is Shane Azzy, our new Chief Supply Chain Officer is all over this.
Speaker Change: and Mark Williams.
Speaker Change: to where we price them, but in general, I think it'll be a benign pricing environment.
Speaker Change: and that it's as just in time as possible with no patient left behind.
Speaker Change: Thank you. Next question is coming from Daniel Hearn from the MST marquee. Your line is now live.
Daniel Hearn: Good morning. Thanks very much. Look, we've noticed that the term...
Daniel Hearn: Sorry, can you hear me?
Speaker Change: Yes, got you loud and clear, Dan.
Daniel Hearn: Thanks, thanks Mick. Look, we've noticed that this term tuck in acquisition has become very common in your commentary and in the presentation you're pointing out the 1.5 billion dollars in debt capacity so I was hoping you could talk to just the M&A priorities
Daniel Hearn: and the scale of the M&A priorities, I guess, and how you think about capital management as the free cash really starts to ramp up over the next 12 months as that debt's retired.
Speaker Change: Okay Dan, well I'll take the first part of that question about Tuck in M&A and I'll hand to Brett to talk about capital management more broadly as our CFO and you know he eats, sleeps and and breathes that.
Daniel Hearn: In terms of tuck-in acquisitions, you know, obviously I'm not going to go into details of our radar and what we're looking at and conversations we're having, but what I will talk about is what we've done in terms of successful tuck-in acquisitions.
Daniel Hearn: So, you know, if you look at what we did sort of around three, four years ago with Snap Technologies, it was a tuck-in acquisition. It was de minimis in terms of the number. I don't think we even published the number. It was relatively small in terms of our annual cash flow. But what it did was it gave us the ability to engage with.
Daniel Hearn: HMEs and engage with their customers, the patients, in ways that we hadn't ever before and brought new technologies, so it improved.
Daniel Hearn: both bright trees.
Daniel Hearn: sort of residential care software as a service business, but it also improved our core sleep health and breathing health business by making sure people, when they wanted a new mask, could easily and capably get approval, copays made, all the I's dotted and T's crossed for the healthcare system, and then get the product needed that they could get. So we are absolutely out there on the lookout for acquisitions like SNAP. Another tuck-in acquisition I'll talk about is called Somnaware.
Daniel Hearn: Somnaware is software for pulmonary and sleep medicine physician practices, you know, across the respiratory spectrum. So sleep apnea, COPD and beyond, all sort of sleep health and breathing health.
Daniel Hearn: Again, de minimis in that we didn't release the total number, we didn't need to, but we got amazing capabilities with that acquisition, a team of engineers here in the U.S. and in India.
Daniel Hearn: and actually a great entrepreneur in Subarth who joined our team. I first met him at a sleep meeting maybe 15 years ago.
Daniel Hearn: you out there today.
Daniel Hearn: Final one I'll talk about, I could talk all day on it, but our final one for this is a tuck in M&A that we did of a technology from a company called Ectosense, and the technology is called Night Owl.
Daniel Hearn: And I actually just talked in the prep remarks about how we've just integrated Night Owl with MyAir, the MyAir platform, the patient consumer app, and Night Owl. Night Owl is a home sleep apnea test.
Daniel Hearn: that is basically a wearable, I mean it's the size of a band-aid with a sensor that goes on your finger.
Daniel Hearn: And with that, connected to your smartphone, we can get very high.
Daniel Hearn: sensitivity and specificity. Sensitivity and specificity well higher than you get from some of these other wearables I talked about from consumer tech companies because we're doing different things.
Daniel Hearn: They're both FDA 510 clear devices, but ours is designed to be a diagnostic, a home sleep apnea test that can be a diagnostic and a prescription written from a pulmonary physician.
Daniel Hearn: Great tuck-in acquisition. Again, we didn't release the number, it was relatively small, and that's why it's a tuck-in, but that technology, scaled by ResMed.
Daniel Hearn: in 140 countries.
Daniel Hearn: and we're just ready to relaunch it here in the U.S. market, I think the timing couldn't be better.
Daniel Hearn: Because if Samsung and Apple get these people thinking, oh, possible sleep apnea from my phone, or maybe I've got this moderate to sleep apnea infection, where do I go? Well, guess what? They go to a primary care physician, or they go to a sleep physician. And then we need digital, scalable models for them. So a product like NIDILE helps with that. And we're creating, not just in our own diagnostics, but a portfolio of capabilities with other diagnostics companies and service providers in the U.S. and beyond. Because that digital sleep health concierge is an obligation for ResMed. People are going to come with problems of sleep health and breathing health. We don't want them waiting in a do loop.
Speaker Change: We want them taken care of. So they're the sort of three examples of tuck-in acquisitions and more to come on that. Brett, in terms of capital allocation, any thoughts to share with Dan on a broader level?
Speaker Change: strategically like, financially like, culturally like and then what sort of capability it can bring.
Speaker Change: and the rest of it, and how we might leverage that. So we think pretty hard about it before we actually make the acquisition, but there have been really good acquisitions over the last two or three years, and there's more out there as the market continues to develop. So anything in that range I think we would look at.
Speaker Change: And then the other side on capital management, you heard my comments earlier, we will increase the buyback each quarter going forward and that obviously remains a lever for us going forward.
Speaker Change: So that's kind of the two.
Speaker Change: Two areas, I guess. Well, three really. Fundamentally R&D investment, where we get that's the greatest return we get. We'll look at, as Nick said, we'll look at the tucking acquisitions and then we'll do some capital management as well. Kind of the three areas of focus.
Speaker Change: Thank you. Next question is coming from Mike Matheson from Needham & Company. Your line is now live.
Mike Matheson: Yeah, thanks for taking my question. I guess I just wanted to ask one. So, you know, with the new masks, with the new N30i, with that fabric over the straps, is that a technology that you can apply to other masks in your portfolio? And then, is that something that you're able to get a price premium for?
Speaker Change: Yeah, it's a great question, Mike, and thanks for coming to our investment day. You were able to touch and see that product because I think.
Speaker Change: You've really got to touch and see what the AirTouch N30i is. It's in its name, right? It's an AirTouch. That fabric is extraordinarily advanced technology. As I said, we've been looking for a decade at fabrics and how to get them at scale and with efficacy on a mask that could be ResMed quality. And we were able to bring that to market.
Speaker Change: to your question, you know, can we apply that technology to other masks?
Speaker Change: Absolutely. You know, I think this is a game-changer and it changes the basis of competition for how patient interfaces are delivered from plastics and rubbers, sort of medical type products that you might find in a hospital.
Speaker Change: to ones that you might find at home, you know, people sleep on cotton or silk fabric sheets.
Speaker Change: But I think what you'll find is that first-time fit rates will go up.
Speaker Change: that return rates will go down and that adherence rates will go up, as we do with all our technology. That's the goal. Lower the cost of the overall health care system, improve adherence, which means less chances of heart attack, stroke, less chances of death, as we've shown in the Alaska study for patients who are adherent on CPAP versus not.
Speaker Change: And we think that these types of improvements will have a huge return on investment for the patient, for the physician, for the provider as we launch them to market. So yeah, the AirTouch N30i is coming out. It will have a price premium because it's got a higher cost. We can take it to other masks and we will over time. But you know, early days, we're just launching it next week. Lots of interest and excitement from our commercial team and the customers have sort of got sneak preview and we're excited about AirTouch N30i and what it can do more broadly across the world.
Speaker Change: Thank you. Next question is coming from Brett Fishman from Key Bank Capital Markets. Your line is now live.
Brett Fishman: Hey guys, thanks so much for taking the questions. I just wanted to follow up a little bit on the macro tailwind around the wearable tech platforms. You know, you've talked about it a bunch at the investor day and then again on today's call. And I was just curious if you could maybe touch on a few potential strategies that the company could be looking at that, you know, would best position ResMed to capture potential increases in new patient demand driven by the adoption of these technologies. Thank you so much for taking the question.
Speaker Change: Yeah, it's a great question, Brett. I mean, it's a complex answer. It could take all of the eight minutes we've got left on the call and longer, but as you heard in the sort of four-hour overview that we gave on our Investor Day three weeks ago, there's lots of things we're doing in this. You know, the broad categories are demand generation, demand capture and demand conversion, three areas.
Speaker Change: Now, if Big Tech and Big Pharma are taking on some of that demand gen, driving people into PCPs, driving people into specialist sleep physicians, then what we have to do at ResMed is take the next phase in that.
Speaker Change: So, what we have to do is have products like DAWN, our generative AI interaction format that can talk and engage with patients to help them if they've just got...
Speaker Change: sleep health questions about getting better sleep.
Speaker Change: drinking more water, exercising more, less alcohol after certain times, less caffeine after certain times.
Speaker Change: different food and timing of food intake. All this type of broader sleep health can be conducted by a bot at levels that just, you know, human banks of callers don't have time for and don't spend as much time on, and people can be embarrassed to ask some questions about sleep health and breathing health. There's a stigma associated with all healthcare, and that's why
Speaker Change: companies like hims and hers and all these other type of digital platforms are out there and and achieving some success and so ResMed wants to be that digital sleep health concierge
Speaker Change: And, you know, as I said, the answer is complex. It's more than just Dawn. It's more than just Somnaware. It's more than just Maya. It's more than just Airview and the whole combination. But it is those components, and it's how you stitch them together and how you create that seamless, frictionless, end-to-end experience for a person.
Speaker Change: Let's not call them a consumer, let's not call them a patient, let's say it's a person who suffocates and is looking for their own care, or their spouse and bed partner's care.
Speaker Change: And so we're really focused on this and we think these macro trends are going to drive patients in, consumers in, persons in.
Speaker Change: and ResMed's job is to do the best job.
Speaker Change: at Capture and Demand Conversion. We've got many experiments around 140 countries, and we'll update you. It's not gonna be one-hit wonder. Oh, here we got the panacea, and it's this. No, there's gonna be multiple attempts in different areas, different MSAs, different technologies, different healthcare systems. Every person is different. All of the one billion people with sleep apnea, the 2.3 billion with sleep apnea, or insomnia, or COPD, or some combination of the above with respiratory insufficiency, they all need an individualized, personalized pathway.
Speaker Change: to better sleep, better health and better health technology at home. So ResMed's goal is to capture across that with a combination of technologies.
Speaker Change: And as we launch them and as the experiments are successful, we'll let you know. I want to be clear, this isn't just about brand awareness and brand driving, this is about brand ROI. Return on investment that we show the experiments are successful, that the people see the ResMed brand, they engage with it, and then they find a path to better sleep health and breathing health. We're best positioned globally to do this with our market share and capability. If we did nothing, we'd get good share. I think our goal and our obligation is to do a lot.
Speaker Change: and to drive more patients in and to help them find that best path that they can have. Thanks for the question, Brett, and sorry to trivialize the answer with only a four-minute answer, but we've probably got time for a couple more questions.
Speaker Change: Thank you. Next question is coming from Mr. Raj Kalia from Oppenheimer. Your line is now live.
Raj Kalia: Hey Meg, Brett, hope you're well.
Raj Kalia: So, Mick, congrats on a great quarter. Mick, I want to piggyback on Anthony's question, right? So your nominal growth...
Raj Kalia: Right now is a perfect trifecta of pushing more resupply masks to patients, price increases, and I believe Brett mentioned something about a little bit of inventory also to cater to patients just in time. Nick, as we think forward,
Raj Kalia: How would you say ResMed is buffered from a potentially more price sensitive environment if and when Philips returns to the market? Thank you for taking my questions and congrats again.
Speaker Change: Yeah, thanks for the question, Suraj. Look, as you said, you know, there's some really interesting overlays between our more masks and the technology we're bringing to market, our pricing strategies, and our inventory management strategies.
Speaker Change: With regard to the competitor you mentioned, look, you know, as I said, we just announced pretty good growth in Europe, Asia, rest of the world, right? 9% growth in devices, 11% growth in masks and accessories. That competitor is available in almost all of the 140 countries we're in, and they've been there for many, many, many quarters, and so love them. I love to compete with them. I love to beat them. I do the same with all the other competitors. I love the players from Europe and Asia. Competition's a fantastic thing for ResMed. We love it. And, you know, we were beating that particular competitor all the way from 2001 through to 2021, as they had the recall in the U.S. in devices, which is the only area, right? So we've been ongoing competition with them in masks the whole time, and they've been out for a couple of years, two, three years now in devices.
Speaker Change: I look forward to them coming back here, they'll have to fight for that number two, number three position against some other players with importing products from China and Europe that they've sort of taken that number two, number three position and you know, I think they've got to set up new manufacturing and get a new sales team and I look forward to them coming back. We were beating them before their recall and we will beat them after. But look, you know, I don't spend that much time of my time looking back at the competition from Europe or Asia or that particular player from Europe. I look more forward and I think about these macro trends and what we can do to take care because this isn't just a share game. What we've got is a sustainable competitive advantage in a digital health ecosystem that patients engaging with MyAir, doctors engaging with Airview and more importantly
Speaker Change: consumers, persons who just suffocate coming in, they don't know where they want to go. We want to help them find that pathway and be objective about it, and then they will choose the smallest, quietest, most comfortable, most connected, and most intelligent therapies. That's how ResMed competes, and that's how ResMed wins.
Speaker Change: Thank you. Next question is coming from Leanne Harrison from Bank of America. Your line is now live.
Speaker Change: Thank you for watching. Bye. Bye.
Leanne Harrison: Good morning all and congratulations on a very strong quarter. Can you comment a little bit on...
Leanne Harrison: the production of AS11. You know you mentioned you're increasing, you're targeting it to come off allocation at the end of this calendar year. Is that still on track? And then also can you comment on the mix of AS11s to AS10 devices that you're selling in the United States and do you have a sense that there might be a repack backlog waiting for the AS11 still?
Speaker Change: and their S&T 10 in many of these markets. And so there is a mix.
Speaker Change: as you said. In the U.S. specifically, you asked Leanne, well over 50%, vast, vast majority of products sold in the U.S. are Essence 11s.
Speaker Change: To the final part of your question, you know, do we think that there are people sort of at that Oh, I've been on therapy for five years and insurance will pay for a new one I'm waiting until AirSense 11 is available. Yeah, maybe some little bit of a backlog with some particular consumers but if you really want one a consumer at that level might be going to one of the online dealers or Looking at other ways to make sure they get in line for an AirSense 11 So I think there's always a bit of a backlog. I always think that repap opportunity is huge for us We don't spend enough time on it. Our customers don't spend enough time on it. We've got really sophisticated at Ongoing resupply for masks tubing and accessories I think we need to be better at repap on a regular basis and so it's a good call out and and the team are on it with many things going on to make sure that
Speaker Change: As we get full AirSense 11 capability, everyone who's at that five-year point gets the chance to say, yes, I want the latest and greatest therapy, smallest, quietest, most comfortable, most connected, and most intelligent, and that's the AirSense 11. So we will continue to do that. As I said in the prep remarks, I think there's a long runway, lots of momentum left on the AirSense 11.
Speaker Change: Thank you. Our final question today is coming from Andrew Payne from CSLA. I'm sorry, CLSA. Your line is now live.
Andrew Payne: Just going back to the rest of world devices and just thinking about the EU sales, it'd just be good to get some views on competition that you're seeing in the region, in particular if you're seeing a declining presence from Philips in some of these markets, which would open you up to taking a larger market share.
Speaker Change: Yeah, thanks for the question, Andrew, and yeah, look, we're competing with...
Speaker Change: as well.
Speaker Change: help them get best-in-class care.
Speaker Change: Thank you for the questions, Jane.
Speaker Change: Thank you. I'll now hand the call over to Kevin.
Kevin: We've reached the end of our question and answer session. Mick, do you have any further closing comments?
Mick: Uh, yeah, look, uh...
Mick: You know, they got the prepared remarks here. I'm not gonna say all that. Thanks to 10,000 ResMedians, 140 countries, you guys are doing amazing things. Thank you to all our shareholders for the support. Incredible quarter, let's power up and let's do it again for another 90 days. And with that, Amy, I'll hand over to you to close out the call. Awesome, thank you, Mick. Thank you everyone for listening, for your questions, and we do appreciate your interest.
Amy Wakeham: If you have follow-up questions or need anything else, please don't hesitate to reach out to us directly. This does conclude our first quarter 2025 conference call. Kevin, you may now close the call.
Kevin: Thank you. This concludes ResMed's first quarter fiscal year 2025 earnings live webcast. You may now disconnect.
Kevin: Thank you. Bye.