ResMed Inc. 2026 Q4 Earnings Call

Thanks, Kevin. I want to welcome our listeners to ResMed's fourth quarter fiscal year 2026 earnings call. We are live webcasting this call, the replay will be available on the investor relations section of our corporate website later today. Our earnings presentation is available online now. Please note we will be displaying our earnings presentation during our prepared remarks, we'll post the slides to our IR website after the conclusion of our remarks. 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 GAAP financial information. We encourage you to review the supporting schedules in today's earnings press release to reconcile these 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 reasonable assumptions. However, our earnings 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 Mick.

Thank you, Salli. During the fourth quarter, we delivered another set of strong results, including first, 9% growth in headline revenue or 8% growth on a constant currency basis. Second, further progress in our supply chain efficiency initiatives, leading to gross margin expansion year-over-year. Third, a strong bottom line result with 16% growth in non-GAAP earnings per share. We closed out another great fiscal year for ResMed on June 30th. For fiscal year 2026, our 10% headline revenue growth and 180 basis points of operating margin expansion drove more than $1.6 billion in free cash flow. We used this capital to invest in our business both organically and inorganically, to return more than $1 billion to our shareholders through a combination of share repurchases and dividends. That's an increase of 72% versus the prior year.

I'd like to take this opportunity to thank the global ResMedian team, the ResMedians, for their unwavering dedication to our customers, including patients, providers, and physicians in more than 140 countries worldwide. ResMed continues to build the world's leading digital health ecosystem, encompassing sleep health, breathing health, and healthcare technology delivered in the home. Across fiscal 2026, we executed against several key priorities. For fiscal year 2027, our attention is laser-focused on three priorities. One, continued operational excellence and innovation excellence to support ResMed's ongoing growth and transformation. Two, active portfolio management across our product lines and our businesses. Three, leveraging our strong free cash flow to both reinvest in our business and return capital to shareholders. A key focus area this year will be ResMed's growth and transformation work. ResMed's core markets remain largely under-penetrated. For many years, awareness has been our greatest challenge and our greatest opportunity.

As wearables and GLP-1s gain traction, appreciation of the importance of sleep health is growing. In order to leverage this awareness opportunity effectively, ResMed needs to optimize the sleep health pathway. We're seeing greater sleep health awareness amongst consumers, with more and more people tracking their sleep with wearables and non-wearable sleep technology in their bedrooms, all while recognizing the clinical importance of good sleep health and its correlation to overall health. This increased attention needs to be met with high-quality, trusted data. As an example of this, let me talk about a recent ResMed partnership with the wearable ring-based technology company called ŌURA. With the ResMed plus ŌURA partnership, we are looking to expand access to sleep health education and pathways to care. Early performance from our ŌURA partnership has exceeded expectations.

Approximately 13,000 users have come to resmed.com from the ŌURA app, with thousands of them taking the ResMed sleep assessment and approximately 75% of those assessed identifying as previously undiagnosed. This highlights the potential of consumer wearables to drive earlier sleep health intervention. As another example of tech companies involved with sleep health, Samsung has just announced that its Galaxy Ring is pursuing FDA clearance for its sleep apnea detection capability later this year. Another sleep pathway enabler are glucagon-like peptides or GLP-1s. As we've discussed before, patients on GLP-1s both initiate CPAP more and stay on CPAP therapy with a higher adherence and resupply rate. As an update to our analysis built from a claims database of many tens of millions of patients, our specifically analyzed cohort now includes more than N equals 2.5 million de-identified patients.

We are still seeing that patients who have scripts for both PAP and GLP-1s are approximately 11% more likely to start on PAP therapy than patients who have a script for PAP alone. They also more than 3% more likely to have a resupply event at one year, and more than 6% more likely to have a resupply event at three years. As we've talked about before, sleep apnea risk factors include age, gender, and craniofacial anatomy, as well as weight. OSA, therefore, very often persists even after significant weight loss and still needs to be treated with gold standard therapy. During the SLEEP Medical Conference this June, ResMed highlighted several interesting data sets, including one showing that among newly diagnosed OSA patients, PAP therapy was initiated earlier than GLP-1s.

Specifically, the data showed that at 90 days after a positive OSA diagnosis, more than 40% of patients had started on PAP versus less than 3% starting on a GLP-1. The proportion of patients with PAP increased rapidly immediately after diagnosis, while GLP-1 initiations increased more gradually. We continue to see GLP-1 medications as a tailwind for ResMed's business. As we continue to study the OSA patient population more broadly, we're seeing some significant demographic shifts. We're seeing higher percentages of women, and we're seeing higher percentages of younger patients coming into the pipeline. These changes are leading us to evolve ResMed's promotional efforts, to evolve our product designs, including our software offerings and our educational content for consumers, for physicians, and for providers. Watch this space. It's an exciting opportunity.

Greater awareness in the clinical community is another key element to ensuring consumers have ready access to information, diagnosis, and the ability to get on and stay on treatment. Our continuing medical education, or CME programs, include Sleep Physician Society approved guidelines, including the benefits of CPAP, APAP, and bilevel PAP therapy as the gold standard, the frontline treatment for any patient diagnosed with sleep apnea. Our sleep apnea educational courses have now been completed more than 95,000 times by more than 55,000 unique clinicians. We've been tracking before and after training, specifically looking at the number of referrals for home sleep apnea tests and prescriptions for positive airway pressure therapy. It's still early days. We've already seen increases. It's great to observe that post-training, clinicians are not only saying they intend to change their clinical practices, but they are actually changing them quantitatively.

While education is important to getting patients through screening, diagnosis, and then on to therapy, optimizing patients' experience with therapy requires continuous innovation across the sleep ecosystem. Our innovation machine has made significant steps to improve the patient experience with product launches across devices, masks, and software. On the devices side of our business, the AirSense 11 platform is the foundation of our connected care ecosystem. It brings together device innovation, personalized digital engagement through apps like myAir for patients, and provider connectivity through our software platform called AirView. We have made further progress with the global rollout of the AirSense 11, including ongoing growth in the U.S., Europe, and fast-growing penetration after our launch into the China market just last quarter.

Expanding the AirSense 11 platform into global sleep health markets strengthens our ability to scale a common technology foundation while continuing to support the growing adoption of digital health and connected care software. During the fourth quarter, we also reached an important milestone with the U.S. introduction of the AirCurve 11 ST and the AirCurve 11 ST-A platforms. The STA and the ST are bilevel device platforms for patients who need more pressure support or who have complicated breathing disorders, including complex sleep apnea, overlap syndrome, and beyond. We additionally just launched the AirCurve 11 platform in Hong Kong, Singapore, Australia, and New Zealand. We continue to see opportunities to leverage a shared technology and digital health ecosystem across a broader range of patient populations, helping simplify workflows for providers while creating a more consistent experience for patients.

Prioritizing patient care is also central to our ongoing Astral field safety corrective action. We reaffirm our commitment to supporting patients as our number one priority, period. Patients come first. This includes patient-centric and quality-focused completion of the ongoing field action while providing home care provider customers with the certainty needed to plan for future ventilation needs. We are focusing all available PCBA and other electronic components on corrective activities and service support for existing patients, prioritizing based on the highest clinical need and guided by expert clinical judgment. Aaron will discuss the financial considerations as part of our fiscal year 2027 guidance in a few minutes. Beyond our device updates, we've continued our global rollout of our portfolio of novel fabric technology masks, including our AirTouch N30i and our AirTouch F30i masks. We also had strong uptake of our AirFit F40.

The F40 is ResMed's smallest ever tube-down, full-faced mask. All of these masks are designed to deliver an elevated comfort experience for patients. They are changing the basis of competition in mask technology, particularly this brand-new fabric technology. The correlation between new ResMed mask technology and patient outcomes is clear. We have data showing that the AirTouch N30i drives 6% higher 90-day compliance than its silicone equivalent. Adherence is the single biggest driver of lifetime value. Value for patients, value for physicians, value for payers, and value for our HME partners, and of course, value also for ResMed. On the software side, our new GenAI-powered digital sleep coach that's in the myAir app has seen more than 1.5 million inquiries to date. This incredible technology helps patients find support wherever and whenever they need it on the patient's terms.