ResMed Inc. 2027 Q1 Earnings Call

Thanks, Shamali. I want to welcome our listeners to ResMed's first quarter fiscal year 2027 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 is available online now. As with last quarter, we will be displaying our earnings presentation during our prepared remarks, and then we will 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 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. With that, I'll now turn the call over to Mick.

Great. Thanks, Salli, and welcome to all. We're all together here in Sydney, Australia, and all fired up at 7:30 A.M. During the first quarter of our fiscal year 2027, we delivered another strong set of results. 7% revenue growth on a core constant currency basis on the top line, 50 basis points of year-over-year gross margin expansion, and 14% growth on the bottom line in non-GAAP earnings per share. We also returned more than $1 billion U.S. to our shareholders during the quarter through both our quarterly dividend and our share repurchase, funded with the MatrixCare business divestiture proceeds and cash on hand. ResMed's fiscal year 2027 is off to an excellent start. I'd like to take this opportunity to thank the global ResMed team for their unwavering dedication to our patients, our providers, and physicians.

We're building the world's leading digital health ecosystem, encompassing sleep health, breathing health, and healthcare technology delivered in the home. As we move throughout our fiscal year 2027, we're focused on three key areas. One, on our continued innovation and operational excellence to support ResMed's ongoing growth and transformation work. Two, on active portfolio management across our business lines. Three, on leveraging our significant free cash flow to both reinvest in our business and return capital to shareholders. ResMed is committed to innovation excellence across the sleep health ecosystem. This means ongoing innovation in our products and bringing together devices, masks, digital tools, and provider support to create a more connected therapy experience and to help people stay engaged with their therapy over time. Last quarter, I talked about the launch of the AirCurve 11 ST and ST-A platforms into the U.S. market.

The ST and the ST-A are bilevel device platforms for patients who need more pressure support or have more complicated breathing disorders, including central sleep apnea, complex sleep apnea, and COPD plus OSA, which is known clinically as overlap syndrome. The AirCurve 11 is built on our market-leading Air11 platform that has CPAPs, APAPs, and now these advanced bilevels, allowing us to leverage a shared technology and digital health ecosystem across a broader range of patient populations. This helps simplify workflows for providers while creating a more consistent experience for patients. We've also launched, just this week, a third fabric mask into the market. We call it the AirTouch F40 in the U.S. AirTouch F40 brings ResMed's proprietary ComfiSoft fabric cushion to a minimalist design that is intended to adapt to a person's facial contours dynamically as they move throughout the night.

In a ResMed study, 91% of patients rated the AirTouch F40 as comfortable or very comfortable at initial fitting. This technology can help patients get adherent with less provider effort and can drive patient and provider preference for ResMed products. On our most recently launched fabric masks, we have now shown 6% increase in therapy adherence for the fabric masks versus their silicone mask equivalent. This is market-leading technology, and we continue to bring these products to market. Watch this space. On the software side, we recently launched a refresh of our myAir patient app. We're now well over 13 million downloads of our myAir app, and we'll talk about that later.

In addition to the enhanced user interface on myAir and the optional dark mode, new features include an updated myAir score, a nightly timeline of events, and therapy control to adjust comfort settings from the app, giving each user a more personalized experience. myAir now also includes a service that we call Equipment Care and it's launched in a number of geographies, and it makes it easier for patients to request resupply by showing a visual countdown for each mask or other device accessory. It can send timed reminders when masks and accessories are eligible for replacement, helping encourage action by patients and increasing convenience for the patient and making it easier for the provider. Watch this space as we increase availability of this type of service for consumers who want to access better resupply.

Also on the myAir app, our generative AI-powered digital sleep coach that we call Dawn, has now seen more than 2.1 million inquiries from patients already on therapy. That is up over 40% just from last quarter. This demonstrates that patients are very curious about their CPAP therapy and they want to learn more. Dawn helps patients find support wherever and whenever they need it, significantly reducing customer service inquiries to ResMed, but also reducing customer service inquiries to ResMed's HME partners and channel partners. Delighting patients and saving costs for HMEs is a double win for ResMed through this innovative GenAI tech. We will continue to evolve myAir based on consumer and provider feedback. Our aim is to bring clearer therapy insights, to bring more intuitive support, and to bring increasingly personalized experience to engage patients throughout their therapy journey.

Together with AirView, ResMed's remote monitoring platform for healthcare providers, myAir has been shown to meaningfully improve therapy compliance from 70% up to 87%, just by adding myAir for the patient. One further update regarding our FDA-cleared AI-enabled digital medical device that we call SmartComfort. We launched this just earlier this calendar year. SmartComfort was built on millions and millions of nights of ResMed sleep data to recommend personalized adjustments to comfort settings like temperature, humidity, and it is applied on new AirSense 11 users. We predicted in previous quarters that increased comfort could lead to increased adherence, and it turns out that prediction has come true. Early real-world data shows a 4.3% increase in 30-day compliance versus the device's default settings. SmartComfort has been selected as a special mention in Time magazine's Best Inventions of 2026.

But more important than that, it is evolving our products to deliver increasingly personalized therapy to patients, and it is a winning use case for AI. ResMed's digital health ecosystem is second to none, providing sustainable value for patients, for physicians, for providers, even for payers, and beyond. On the operational excellence side, we were able to execute some of our planned supply chain initiatives more quickly than we had predicted. We were able to rephase some of our planned expansion initiatives, particularly in Indianapolis, Indiana, allowing us to exceed our own expectations for gross margin for the quarter. The transformational pipeline of initiatives, what I call our productivity pipeline for our supply chain team, they built it and it remains robust and multi-year, underpinning our ongoing confidence that we can deliver double-digit basis points improvements in gross margin every year, every fiscal year through 2030.

I am also proud to share that we have produced our first made-in-America CPAP device. An AirSense 11 has come off the line at our Atlanta, Georgia facility. Having this capability for U.S. manufacturing gives ResMed additional flexibility to optimize operations as needed across our global manufacturing footprint. We also continue progress on our new Indiana, Indianapolis-based distribution center, which once it is fully operational, will enable faster delivery to our North American customers. ResMed has a significant and growing U.S. manufacturing presence, and we continue to invest in expanding our capability to serve our highest volume market. With regard to our government advocacy work, I can tell you that we are actively engaged with the U.S. government as well as industry partners to support policies that strengthen domestic U.S. manufacturing and global supply chain resilience while protecting patient access to our life-saving therapy in the U.S. and around 144 countries worldwide.

Alongside these developments in the U.S., we are expanding our Asia manufacturing capabilities, including at our largest manufacturing facility in Singapore and our facilities in Malaysia that are joined to the Singapore operation. Together with our Sydney, Australia, Calabasas, California, Atlanta, Georgia, and our newly established Indianapolis, Indiana facilities, our global operations footprint positions us extremely well to serve our growing customer base and patients around the world. Over the past quarters, I have highlighted our initiatives to increase awareness of sleep apnea and the impact that chronic poor sleep has both on the individuals and healthcare system, but also on their partners and families and workmates. As you know, we have been excited to see growing appreciation of the importance of sleep health driven by consumer wearables, including Samsung Galaxy Ring, that just this week, I think actually overnight, got FDA clearance for sleep apnea detection from their Samsung Galaxy Ring.

But also from Big Pharma and the GLP-1s, the investment that particularly Lilly is making, but also Novo in driving patients into primary care. Earlier this month, we announced a collaboration with smart mattress sensor maker Eight Sleep. Their Eight Sleep Pod users in both the U.S. and Australia markets will be able to securely connect their myAir Sleep Insights to the Eight Sleep app, giving them a more complete picture of their sleep health. Here in Australia, Eight Sleep users whose sleep data shows trends such as heavy snoring may be guided to ResMed's sleep health resources, including sleep assessments and the pathway to diagnosis and therapy and beyond. This consumer sleep wellness collaboration adds to our partnership with smart ring maker ŌURA, that I discussed during ResMed's last earnings call. We have continued to see strong traffic to ResMed's website from ŌURA app users.