ResMed Inc.

Hello, and welcome to the Q4 Fiscal Year 2024 ResMed Earnings Conference Call. My name is Kevin, and I'll be your operator for today's call. At this time, all participants are in listen-only mode. Later, we'll conduct a question and answer session. You may be placed into question queue at any time by pressing star 1 on your telephone keypad. We ask that you please limit yourselves to one question, then return to the queue. Please note, this conference call is being recorded. I'll now turn the call over to Amy Wakeham, Chief Investor Relations Officer. Please go ahead, Amy.

Great. Thank you, Kevin. Hello, everyone. Welcome to ResMed's fourth quarter fiscal year 2024 earnings call. We are live webcasting this call, and the replay will be available on the investor relations section of our corporate website later today. Our earnings press release and presentation are both available online now. 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 to reconcile the non-GAAP measures with the GAAP reported numbers. In addition, our discussion today will include forward-looking statements, including but not limited to expectations about our future financial and operating performance. We make these statements based on our 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 the call over to our Chairman and CEO, Mick Farrell.

Thanks, Amy, and thank you to our shareholders for joining us as we announce results from our full fiscal year 2024 and review our fourth quarter results in more detail. Our global ResMed team executed incredibly well in our fourth quarter, producing another strong period of growth and execution across our business, with solid performance across all regions and all segments of our business and strong double-digit bottom-line growth. Ongoing new patient demand for our market-leading flow generators remained robust in the quarter, even against a very tough year-over-year comparable. Media interest in sleep apnea and all the various therapies seems to be helping patients find their way to screening, diagnosis, and therapy, and especially the lowest cost, most efficacious therapy with the best outcomes, which is positive airway pressure therapy. In terms of our masks and accessories business, physicians, respiratory therapists and patients are choosing ResMed masks when they start therapy and as they continue through resupply, resulting in very strong double digit growth in our masks and accessories business. Our residential care software business delivered double digit growth in revenue and in net operating profit. Our laser focus on operating leverage has delivered another quarter of strong, profitable growth, and we're well positioned to continue on this trajectory as we launch into fiscal year 2025. Over 2.4 billion people worldwide suffer from sleep apnea, insomnia, or respiratory insufficiency due to chronic obstructive pulmonary disease or neuromuscular disease. As the market leader in respiratory medicine and residential care globally here at ResMed, we're uniquely positioned to drive increased market penetration through demand generation to accelerate growth. These chronic conditions in sleep health and breathing health form a global health epidemic that ResMed is well positioned to address. We believe that healthcare should be delivered in the lowest cost, lowest acuity and highest comfort location possible. In the optimal case, that's right in a person's own home. ResMed is the clear leader in sleep apnea, a market of over 1 billion people globally. Our end markets remain significantly under-penetrated. We're leading the industry in digital health solutions with approximately 19 billion nights of medical data in the cloud and 26 million 100% cloud-connectable medical devices sold into over 140 countries worldwide. We've leveraged these de-identified data to show that our therapy solutions lower costs, improve outcomes, and bend the curve of chronic disease progression. Significant opportunities remain in digital health, and we plan to be right there at the cutting edge of innovation. The latest advances in wearables from the consumer technology industry and the latest medicines from big pharmaceutical companies will bring more and more new patients into the healthcare system. We have many opportunities to add value, expanding interoperability, lowering costs, and improving patient outcomes. Billions of people can benefit from our products and solutions, and we're focused on expanding our reach and growing the market to help people get on their pathway to better sleep better breathing, and better care at home. Sales of our flow generator devices, including the category-leading AirSense 11 platform, grew 6% year-over-year globally. We're supporting the global market, and every patient who needs a device has access to our market-leading 100% cloud-connectable platforms, the AirSense 10 and the AirSense 11. We continue increasing the availability and production of our AirSense 11 and our AirCurve 11 platforms worldwide as we secure regulatory clearances and launch these market-leading technologies country by country. Our masks and accessories business grew 15% year over year, expanding in a competitive category globally. Our latest mask innovation, the AirFit F 40 introduced last quarter is doing extremely well in the markets that it has launched in. New patients are selecting the F40 for its comfort, fit, and ease of use. It is the smallest profile oronasal mask on the market from ResMed. Patients are voting with their wallets, and respiratory therapists are voting with their setup protocols, and physicians are voting with their prescriptions. We look forward to ongoing success in the US and across global markets as we increase availability and introduce the F40 into more and more countries throughout fiscal year 2025. ResMed's clinical and commercial teams continue to partner with physicians and providers to drive resupply programs directly with their patients. And we're successfully establishing subscription programs in our cash pay countries to help consumers find their path to therapy resupply directly. Masks and accessory resupply programs are a very important part of our offering as we serve the ongoing therapy needs of patients globally. Research shows that resupply programs can both improve patient adherence and improve long-term clinical outcomes. In the US, our resupply programs are powered by our digital health ecosystem. including AirView for physicians, MyAir for patients, and Brighttree for home medical equipment providers. We will continue to develop, launch, and scale these technologies and programs to help people take control of their own health, regularly refreshing their ongoing therapy needs. As the global leader in significantly underpenetrated markets, our most important opportunity is to expand and grow the market through awareness, diagnosis, and seamless pathways to treatment. We aspire to be the digital health concierge for each person as they pursue their personal journey to better sleep, better breathing, and better residential care. We are ramping up our demand generation initiatives to raise awareness and create pathways for patients to help them find access to care for their sleep health and their breathing health. We're serving traditional healthcare channels as well as investing in cost-effective, social media-driven demand generation campaigns to help consumers who are concerned about their sleep and breathing find ways, their own personal way, into appropriate screening, diagnosis, treatment, and management pathways. Our physician and provider-based software ecosystem called AirView now contains over 28 million patient records. Adoption of our consumer patient engagement app, which is called MyAir, where people choose to participate in their personalized sleep health journey, remains incredibly active and now includes over 8.3 million users. These digital health ecosystems are growing every quarter, showing the engagement of physicians as well as patients in accessing their own data to measure progress along their personal health journey. As we look to the future, I've discussed two global megatrends that I believe will further support ongoing growth for ResMed. Awareness of sleep health issues driven by consumer technology companies specifically sleep-tracking wearables like the Samsung Galaxy Watch, which has a de novo FDA clearance to screen for moderate to severe sleep apnea. And we expect similar capabilities from other wearable players in consumer tech, such as the Apple Watch, Google's Fitbit, the Oura Ring, Whoop, and Garmin. In terms of the second megatrend behind future patient growth, We are seeing increased volumes of patients entering the healthcare system driven by the efforts of big pharmaceutical companies as they increase awareness of the treatments for diabetes and obesity medicines. And they continue their research into the impacts of these medicines on sleep apnea. Together, we believe these two megatrends in consumer tech and Big Pharma will increase patient awareness and be a significant tailwind for long-term growth here at ResMed. Our goal is to educate people as they move from what we call sleep wellness tracking on a wearable to what we would call sleep health tracking, where they are seeking the help, advice, and care of a health professional in the field of sleep medicine. This connection pathway from consumer awareness of sleep health and breathing health issues into a true healthcare pathway is what we are calling the digital health concierge opportunity. Our plan is to be there for that person as they go through the process of screening, diagnosis, treatment, and ongoing management of their sleep health and their breathing health for life. Big Pharma is squarely focused on GLP-1 medications. For many people dealing with their obesity and diabetes issues, their healthcare goals are focused on losing weight while improving their diet, cardiovascular exercise, and their sleep routines, something that Bill DeMint called the triumvirate of health. We believe that increased utilization of GLP-1s to treat obesity will bring many new people into the healthcare funnel, activating them to see their primary care physicians as they strive to achieve and maintain weight loss. We believe this will open them up to treating other chronic diseases that they may suffer from, including increased awareness of sleep apnea, ultimately driving new patients into diagnosis and treatment pathways that they may not have previously considered or been treated for. So it's not just driving more patients into our channel, but we believe it's also driving more motivated patients. The emphasis on GLP-1 medications and increased focus by Big Pharma has put a spotlight on sleep apnea like never before. We believe that the growth in weight loss drugs will be a net positive for our business, and the data support that thesis. ResMed has added to the biggest study in the field and our data, which is using real-world evidence of the impact of GLP-1s through a de-identified patient analysis, leveraging third-party claims data. We now have an expanded cohort of over 811,000 de-identified subjects in our analysis. This analysis demonstrates that GLP-1s are having a positive impact on patients both seeking and adhering to positive airway pressure therapy. The latest numbers are an improvement from what we have presented previously. For patients prescribed a GLP-1 medication, the latest data show a 10.7 absolute percentage points higher propensity to start PAP therapy over those without a GLP-1 prescription. These data show that patients with this drug prescription are more motivated to start their CPAP, APAP, or bi-level therapy. In terms of longer-term impacts on PAP therapy, we have seen that the resupply rate at T equals 12 months is 310 basis points, so 3.1 absolute percentage points higher for the patients who have a GLP-1 prescription. And further, at T equals 24 months, the resupply rate is 530 basis points, or 5.3 absolute percentage points higher for pap therapy resupply for patients who have a GLP-1 prescription. These data show that the new pharmaceutical class is a clear tailwind for our business, bringing more patients into the healthcare system. And more than that, we believe it is bringing highly motivated patients into the healthcare system. We've included this updated analysis in our quarterly earnings PowerPoint deck, and I encourage you to review the data there in further detail. ResMed is the clear world leader in sleep health, breathing health, and healthcare delivered at home. Frankly, it's our obligation, and it's our brand promise, it's the ResMed brand promise to ensure that sleep-concerned consumers find their path to the highest efficacy, lowest cost, and most comfortable therapy that's out there, and it's best for them. Our peer-reviewed and published evidence demonstrates that we can achieve over 87% to Pap technology, 87% adherence to Pap technology in the first 90 days by combining our market-leading device platforms with digital health solutions, MyAir and AirView. Of course, that means that 13% of patients in that scenario still need alternatives, and ResMed wants to be there to help those patients too. So we are investing in alternative therapies to help patients who can't adhere to pap therapy to find their pathway to second line therapies. And that includes dental devices where ResMed provides Narval, the market leading 3D printed dental device for treatment of sleep apnea with dental treatment in Western and Northern Europe. In addition, we have investments in third-line therapies, including pharmaceutical options with our investment in ApniMed and hyperglossal nerve stimulation technology with our investment in Nixoa. So let's step back and talk about broadly our digital health technology investments, leveraging an extraordinary ecosystem of almost 19 billion nights of de-identified medical data. We are developing and continue to expand a portfolio of artificial intelligence-driven capabilities, as well as customer-facing AI products that we're launching into the market from our ecosystems. We continue to roll out and expand the AI products in AirView, such as Compliance Coach in the United States and our new Smart Coaching Pilot, which is expanding into a few new countries as we go through our current quarter, which is Q1 of fiscal year 2025 and beyond. We are also progressing with our generative AI capabilities to help patients along their health journeys. A project that was initially piloted within our Asia Pacific region, our generative AI sleep concierge that we call Dawn, and yes, that is a reference to the sun rising at dawn after a great night of sleep. Dawn was recently expanded from AsiaPac into our US market. We'll continue to share the progress on this front of GenAI and Simple ML and generic AI as well, as this tech is further developed and scaled across our business. It's going to enhance the user experience and drive consumer awareness. And what we're focused on is outcomes, not the tech, but what it can do for a patient, a physician, a provider. In our residential care software as a service business, we had another strong quarter with year-over-year growth of 10%. supported by strength in our home medical equipment provider business through our Bright Tree brand, as well as very strong growth in our home nursing and nursing home business with our Medifox DAN brand. We've made very good progress in the business segment throughout fiscal 2024, and we plan to maintain high single-digit growth to low double-digit growth throughout each quarter in fiscal year 2025, But really importantly, we're driving operating leverage, and we're going to have very strong double-digit net operating profit growth from our residential care software business sector in 2025. Our residential care software business is integral to the broader ResMed growth portfolio with ongoing synergistic growth opportunities across our businesses. We are accelerating growth across our residential care software business intrinsically, but we're also helping to support the core business through mask and accessory resupply growth. We continue to drive operating leverage by managing across our businesses with capabilities managed such as cloud compute, cybersecurity, interoperability, privacy, and research and development velocity across our software platforms and with our core sleep health and breathing health businesses. We are transforming respiratory medicine and residential care software at scale. We are leading the industry in developing, applying, and adopting digital health technology across the 140 plus countries that we serve. We continue to scale and drive efficiencies in our operations. We're focused on driving top line revenue growth, but with strong cost discipline and increasing efficiencies to accelerate profitability at the bottom line. We made excellent progress on that this quarter. The global team delivered growth in non-GAAP operating income of 30%. The global team also delivered growth in non-GAAP net income of 30%. I'm more than incredibly proud of our global team and their performance. We provide differentiated products and solutions for customers worldwide, driving long-term sustainable value for our shareholders. We lead the industry in digital health technology with the smallest, quietest, most comfortable, most connected, and most intelligent technologies. During the last 12 months, we have improved over 178 million lives by delivering a medical device directly to a patient or a complete mask directly to a patient or a digital health software solution that provides personal care. We've helped each person sleep better, breathe better, and live high-quality lives with best-in-class healthcare delivered right where they live. In closing, I want to express my sincere gratitude to 10,000-plus ResMedians for their perseverance, hard work, and dedication today and every day across 140 countries. Thank you, team. With that, I'll hand the call over to our CFO, Brett, who's in Sydney this morning, for his remarks, and then we'll open up to Q&A with the global team here in San Diego and Sydney. Over to you, Brett.