ResMed Inc.

Hello, and welcome to the ResMed first quarter fiscal 2023 earnings call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Amy Wakeham, Vice President, Investor Relations and Corporate Communications. Please go ahead, Amy. Thank you, Amy.

Great. Thank you, Kevin. Hi, everyone, and thanks for joining us. This call is being webcast live, and the replay will be available on the Investor Relations section of our corporate website later today, along with a copy of their earnings press release and presentation, which are both available now. Joining me on the call today are Chief Executive Officer Mick Farrell and Chief Financial Officer Brett Sandercock. Mick will provide a brief high-level overview of our financial results He'll review progress towards our ResMed 2025 strategic goals and discuss the current state of things as we continue to navigate the ongoing macro, industry, and supply chain challenges. Brett will then review our financial results in more detail, and finally, we'll move into the Q&A portion of our call. During the Q&A session, Mick and Brett will be joined by Rob Douglas, President and Chief Operating Officer, and David Pendarvis, Chief Administrative Officer and Global General Counsel. During our call today, we will discuss several non-GAAP measures. For reconciliation of non-GAAP measures, please review the supporting schedules in today's earnings release. And as a reminder, our discussion today will include some forward-looking statements, including, but not limited to, expectations about our future operating and financial performance. We believe these statements are based on reasonable assumptions. However, our actual results may 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'd like to now turn the call over to Mick.

Thanks, Amy, and thank you to all of our stakeholders for joining us today as we review results for the September quarter, our first quarter of fiscal year 2023. These financial results demonstrate solid performance across our entire business, driven by strong sales growth in the Americas region, as well as ongoing high demand for our sleep and respiratory care devices and mask systems worldwide. Achieving these numbers hasn't been easy given supply chain constraints, but we are powering ahead, focused on the long term. Of course, we see the same macroeconomic challenges that many other industries are also facing, as well as an industry-specific issue of a competitor-driven supply-demand imbalance the past 18 plus months, resulting in excess demand for our products. The good news is this. Our global ResMed team demonstrates over and over again their incredible ability to pivot and to solve problems, to support customers and to meet the needs of people around the world with market-leading therapies and software solutions. We are building on the success we achieved last quarter with our re-engineered AirSense 10 card-to-cloud device. Customer acceptance has been strong, particularly in the United States region, and this has enabled us to substantially increase shipping volumes to support patient demand. while we continue to fight through global supply chain challenges. It is interesting to note that outside the U.S., we are not seeing the same magnitude of adoption of the AirSense 10 card to cloud device as we are in the U.S. This is due to the fact that our 100% cloud connectable platforms, such as AirSense 11 and others, and our ecosystem of software solutions are so embedded into the workflows of healthcare systems. This is particularly evident in countries where we have partnered to develop digital health reimbursement models. Customers in countries such as France and Japan and beyond prefer to work with the limited product flow of our 100% cloud connectable devices rather than change their workflows for card to cloud models. While this means that some patients will have longer wait times in these regions, it does show the power of our long-term digital health strategy. Lowering labor costs, improving efficiency, and improving patient outcomes are just too hard to switch from. Nevertheless, on a global basis, the redesign and launch of the Card2Cloud device have greatly improved our ability to get closer to meeting the incredible demand in the market. Essence 10 Card2Cloud provided meaningful growth for the quarter, and far more importantly, it meant that patients could get access to a world-leading ResMed device to treat their sleep apnea. Clearly, launching this platform to address the spiking demand was and is the right decision. Our number one priority will always be patients. Doing our best to help those who need treatment for sleep apnea, chronic obstructive pulmonary disease, respiratory insufficiency due to neuromuscular disease, obesity, hypoventilation syndrome, asthma, and all those who need access to our out-of-hospital healthcare systems. Our goal is to ensure that patients get the care that they need, where they need it, and when they need it. We continue partnering with our global supply chain to increase access to the critical components that are needed to accelerate production of our medical devices. Last month, I had the opportunity to fly to Sydney and meet many of our supplier partners in person for the first time in three years at our STAR supplier event in Sydney. STAR is an annual celebration of our partnership with top suppliers. The event was also an opportunity to bring the ResMed story to life for our critical suppliers, focusing on the life-saving importance of what we do every day. We showed our suppliers that increased component allocation for ResMed ultimately benefits patients, providers, physicians, and all of our stakeholders worldwide. Supplier feedback from the STAR event was overwhelmingly positive and many attendees commented how the event helped them to better understand our strong patient focus here at ResMed as well as our commitment to product quality and the patient-driven need for them to increase supply to ResMed. As a consequence of these partnerships, our suppliers are responding positively, and I can share this. We expect steady increase in ResMed's device production each quarter throughout this fiscal year and beyond. Let me now review updates on ResMed's top three strategic priorities. Number one, to grow and differentiate our core sleep apnea and respiratory care businesses. Number two, to design, develop, and deliver market-leading medical devices as well as digital health solutions that can be scaled globally. And number three, to innovate and grow the world's best software solutions for care delivered outside the hospital and especially in the home. The launch and acceptance of our next generation device platform called AirSense 11 continues to go very well. Patient feedback remains very positive, and we continue to see very strong adoption of our MyAir patient app. In fact, it's more than double the adoption rate of MyAir with the AirSense 10 platform, with over 60% of all patients downloading and using the app on AirSense 11. We know that patient engagement in their therapy through MyAir is an incredibly important part of the therapy process and the ongoing compliance ecosystem due to our clinical publications in the area. Published real-world evidence data show that we achieve 87% adherence rates when our full tech stack is used, including both MyAir and AirView. Clearly, increasing production of the AirSense 11 platform remains a top priority for ResMed, and we are doing that every quarter. Additionally, we look forward to continuing to expand AirSense 11 into additional countries as we progress throughout fiscal year 2023 and as we continue to gain regulatory approvals country by country. A key part of our ResMed 2025 strategy is to reach hundreds of millions of patients with our respiratory care solutions, including non-invasive ventilation and life support ventilation, as well as newer therapeutic areas, such as cloud-connected pharmaceutical delivery solutions, as well as high flow therapy offerings. During the quarter, our ResMed team presented data at the European Respiratory Society Congress that the prevalence of chronic obstructive pulmonary disease, or COPD, is much higher than previously estimated. The epidemiology data presented at ERS showed that over 480 million people worldwide have COPD. This is 100 million more than previously published data. As the global population continues to grow and age, we estimate that over 590 million people will have COPD by 2050. This represents a 23% relative increase in global COPD numbers from the baseline of 2020. Combined with the estimated 330 million people worldwide that suffer from asthma, these prevalence figures highlight the importance of treating these chronic conditions with our respiratory care solutions. Turning to our software as a service business for outside hospital care, our SAS business achieved another quarter of high single digit growth year on year. The continued trend to move to lower cost and lower acuity locations for care is driving strong growth of home-based care. This is providing tailwinds for our home medical equipment and our home health software platforms. provided under our Bright Tree brand. We continue to grow with our home care customers as they increase their utilization of our software and data solutions to improve and optimize their own business efficiencies as well as patient care, including specifically our SNAP resupply offering. Census growth in skilled nursing as well as hospice is still challenged by post-COVID patient flow recovery. as well as labor shortages. One of our most innovative solutions in this space under our MatrixCare brand has been technology solutions to improve staffing efficiency, improving both staff hiring and management. As post-COVID patient census continues to improve and pent-up demand for technology investments continues to come to the market, we expect to see even more growth opportunities to sell our services and solutions to new and existing skilled nursing and hospice customers. Last quarter, I discussed our agreement to acquire Medifox Dahn, the leading provider of end-to-end software solutions for nursing homes and home health customers in Germany. We are on track to close this acquisition before the end of the calendar year. This current quarter we're in, December 2022. And we remain excited about our opportunity to accelerate SaaS innovation and SaaS growth in Germany. This is our first investment in a pure play SaaS business outside the US. And we look forward to updating you as we achieve key milestones in that business over the year ahead. Our integration team is primed and ready. I'm excited about the future of our SaaS business. It's an important part of ResMed's growth and complements the incredible software and device solutions we have in our core sleep and respiratory care businesses. We see a lot of opportunities to innovate in lower cost, lower acuity settings of care. We believe this is the future of healthcare delivery and ResMed is the right strategic home for these growth businesses. We are well positioned as the leading strategic provider of SAS solutions for out-of-hospital care and we have created differentiated value for our customers and long-term sustainable growth for our stakeholders. Bringing it all together, we are transforming out-of-hospital healthcare at scale, leading the market in digital health technology. We now have over 12.5 billion nights of medical data in the cloud and over 18.5 million cloud-connectable medical devices on bedside tables in 140 countries worldwide. We are liberating these data to the cloud and we're unlocking value for patients, for providers, for physicians, for payers, and for entire healthcare systems. Our mission and goal to improve 250 million lives through better healthcare in 2025 drives and motivates me and ResMedians every day. We made excellent progress towards that inspiring goal over this last period. During the last 12 months, We improved over 144 million lives with our device platforms, our full mask systems, and our software solutions in digital health. We're helping people sleep better, helping people breathe better, and helping people live higher quality and happier lives with care delivered right where they live. So before I hand over the call to Brett for his remarks, I want to once again express my gratitude to more than 8,600 ResMedians for their perseverance, their hard work, and their dedication today and every day. Thank you. With that, I will hand the call over to Brett in Sydney for his remarks, and then we will open up to Q&A with Brett, me, and the gang. Brett, over to you.