Fisher & Paykel Healthcare Corporation Limited

Welcome to Fisher and Paykel Healthcare Resorts Conference Call. My name is Amil and I'll be your operator for today's call. At this time, everyone except the guest speakers will be in listen-only mode. Later, we'll conduct a question and answer session. We ask for your assistance in keeping the call to a maximum of one hour. If assistance is required at any time, please press the star followed by zero on your phone and wait for a coordinator. If you require further assistance, you should redial into the call. Please note that this conference call is being recorded. I would now like to turn the call over to Marcus Traylor, VP Corporate. Please go ahead, sir.

Thank you, Amal. Good morning, everyone, and welcome to Fisher & Paykel Healthcare's 2022 Financial Year Results Conference Call. On the call today are Lewis Graydon, our Managing Director and Chief Executive Officer, Lyndall York, Chief Financial Officer, Paul Shearer, Senior VP of Sales and Marketing, and Andrew Somerville, VP of Products and Technology. Lewis and Lyndall will first provide an overview of the results and then we'll open up the call to questions for the team. We will be discussing our results for the year ended 31 March 2022. We have earlier today provided our 2022 annual report, including financial statements and commentary on our results to the NZX and ASX. These documents can be accessed on our website at fphcare.com forward slash investor. With that, I'd now like to turn the call over to Lewis.

Okay, well thanks Marcus and welcome everyone. So today we're going to be referring to the investor presentation pack that was released to the NZX and ASX this morning. But we would like to begin by thanking our customers and our clinical partners who have been relentless in their efforts to respond to COVID-19 over the last few years. It's inspiring. We also want to thank the people of Fisher & Paykel Healthcare for their hard work this year. They had to manage through another disruptive year and deal with lockdowns, higher rates of absenteeism because of COVID-19 and the global supply chain issue. And through all of this, our people demonstrated that we could deliver to our customers. We also want to thank our suppliers who came through for us yet again. They too were operating in a difficult environment. They've had to adapt and change along with us. Our suppliers are critical to our success and we're very grateful for these relationships. So let's start now on page three. During the 2022 financial year, we continued to respond to waves of COVID-19 driven demand across the globe. And our products were used by clinicians to treat approximately 20 million patients around the world. At the same time, we've stayed focused on the long view. And today we announced the launch of two new applications that expand the market opportunity for OptiFlow into anesthesia. We also unveiled our new Evo III device and we'll tell you more about those opportunities shortly. We've continued investing in our sales force and to support all that hospital hardware placements globally and to deliver on the opportunity in anesthesia. And as always, we continued growing our manufacturing and supply chain capacity. So let's turn to page four. So just to put this into perspective, our full year operating revenue for FY19 before the pandemic was just over $1 billion. For FY20, it was over $1.2 billion. And revenue increased to nearly $2 billion for FY21 last year. Off the back of that extraordinary year, FY22 was another year of high demand and performance was once again strong. Operating revenue for FY22 was $1.68 billion, and this was a decline of 15% from that previous financial year, or 14% decline in constant currency. Net profit after tax for FY22 was $376.9 million, and that's a 28% decline from the previous financial year, or 30% decline in constant currency. Again, for context, this result was strong. Operating revenue for the 2022 financial year was 33% above the pre-COVID-19 2020 financial year. Turning now to page five, our hospital product group. This includes the devices and systems used with invasive and non-invasive ventilation, nasal high flow, and for surgery. And I'd like to spend a little more time on this slide this time. One of the strengths of our business is that we offer a continuum of care for respiratory patients and that's across an entire hospital and for nearly all modes of respiratory therapy. Hospital hardware includes our range of humidifiers and airvotes. Our humidifiers are used with invasive ventilators for intubated patients in ICU, intensive care units. Most modern invasive ventilators are also capable of delivering non-invasive ventilation and nasal high-flow therapy, and they do that in conjunction with our humidification systems. Our humidifiers are also used with non-invasive ventilators, and modern non-invasive ventilators are also capable of delivering nasal high-flow. Again, that's in conjunction with our humidification systems. And these humidifiers can also be used with flow sources such as blenders and flow meters to deliver nasal high flow therapy. Our airbow system is used exclusively for delivering nasal high flow therapy. So our consumables can be used with all of these hardware arrangements I just mentioned. This flexible range of applications and consumables means we don't have an installed base for a particular therapy, we have an installed base for respiratory care. And the therapies supported by our hardware, largely driven by nasal high flow, are increasingly utilized in more parts of the hospital. So application of our installed base is flexible, and usage patterns vary depending on the location in a hospital, the different clinical practices between and within hospitals, and how a hospital chooses to deploy their hardware. So this all impacts how we think of utilization and why it's beyond just a simple turns ratio for a particular or specific therapy. For us, the indicator of change in clinical practice is the number of patients treated with a therapy. The number of patients treated is best represented by concernable volume. And because patient census varies for all sorts of reasons, that needs to be over a period of time. So now that we've been through that, I hope it's been illuminating, let's look more closely at our result on page six. In the hospital product group, revenue was $1.21 billion for the full year, a decline of 19% from FY21, and that's 19% in constant currency. Of total hospital product group revenue, 27% was from the sale of hardware, That's the range of humidifiers and EMOs. And 73% was from the sale of consumables. Sales from new applications consumables increased 3% in constant currency over the prior financial year. And that growth was across the respiratory therapies in that category. Hospital hardware was very strong at $323 million for the year. That's more than triple a pre-COVID year. So move on now to our home care product group on page 7. This includes products used in the treatment of obstructive sleep apnea, or OSA, and chronic obstructive pulmonary disease, or COPD, as well as other chronic respiratory conditions. On page 8. Home care revenue was $469.5 million for the full year, which was a 1% increase over the previous financial year, or 2% in constant currency. Reported revenue for OSA masks is up 3%, or 4% in constant currency for the year, and that's 6% for second half. Growth in OSA masks is dependent on new patient diagnosis rates, and in FY22, Mask revenue continued to be impacted by reduced new patient diagnoses due to COVID-19, as well as the limited supply of the treatment hardware. Our Evora full mask for OSI has been one of the most positive new mask launches we've ever experienced. And that's based on customer feedback and initial sales performance to date in the regions where it's been available. And we've just launched it in the United States in May this year. So let's turn to page nine. So this is our aspiration slide. And before the pandemic, our long-term goal was to sustainably double our constant currency revenue every five or six years. And you can see that over the different timeframes, we're expecting a progression of different applications to contribute to the longer-term goals. So now if you turn to the next page, page 10, This is still a graphic, it's not a graph, but it's to illustrate how we're thinking about the potential impact of the pandemic on our long-term growth aspirations. Our aspiration doesn't change, but we have an opportunity to bring forward our progress. Now, as you know, we've had a steep increase in revenue over FY21 and FY22 with COVID-driven demand, and that's placed about 10 years' worth of hospital hardware in only two years. So we're representing that by the bump, which is not to scale and marked COVID-19 on that graphic. I think it's also fair to say that we can't be exactly sure where we are on that bump just yet. But as we change clinical practice, transitioning hospital hardware to a broader application for respiratory insufficiency, our course moves above where we were before COVID and that puts us ahead. of where we were before COVID. And the size of that step up depends on the time it takes to transition that hospital hardware. Because we've moved ahead, we need to bring forward the release of new products and applications, invest sooner in clinical research, accelerate the growth of sales teams, and continue growing our manufacturing and distribution facilities, all compared to before COVID. So this is something else that we started working on over the last two years. On that note, move on to page 11. Today we announced the launch of two new hospital products, OptiFlow Switch and OptiFlow Trace. These interfaces are designed to facilitate the use of nasal high flow in anaesthesia applications. In procedures with much heavier sedation, where the patient will need a machine to breathe for them, OptiFlow Switch lets the anesthesiologist make sure the patient is full of oxygen before they stop breathing, and then also while the artificial ventilation is being put in place. Compared to the current practice, OptiFlow Switch can give the anesthesiologist more time to intubate the patient, And it can help in preventing desaturations. It's not enough oxygen in the blood. Opti-Fo switch lets the anesthesiologist swap to their normal anesthesia mask at any time, quickly and efficiently, so they can check the airways or they can add pressure to assist breathing whenever they need to. Now, in procedures with lighter sedation, where the anesthesiologist expects that the patient will be able to make a breathing effort themselves throughout the procedure, OptiFloat Trace helps measure the exhaled CO2, carbon dioxide, so that they can check that the patient is breathing throughout the procedure. Now, if we move on to page 12, we also announced the launch of our new Evo 3, for nasal high-flow therapy today. EVO3 makes it easier for more patients to be treated in more parts of the hospital and by more healthcare practitioners. There's quite a bit of technology that comes together to enable all of that, which you can see here on page 12. So we're going to spend some time on that at our investor day tomorrow. So with that, I'll turn you over to our CFO, Linda York, to give you more details on the year.