Hello, and welcome to the ResMed First Quarter Fiscal 2023 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. 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.

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 our 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. 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 a reconciliation of non-GAAP measures, please review the supporting schedules in today's earnings release. 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 solve problems, to support customers and 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 reengineered 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 health care 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 Card-to-Cloud device have greatly improved our ability to get closer to meeting the incredible demand in the market. AirSense 10 Card-to-Cloud 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 health care systems. Our goal is to ensure that patients get the care 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 3 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 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 3 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, more than it's more than doubled 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 achieved 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 noninvasive 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 SaaS 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 Brightree 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 MediFoxDarn, 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 U.S., 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 health care delivery, and ResMed is the right strategic home for these growth businesses. We are well positioned as the leading strategic provider of SaaS 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 health care 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 this data to the cloud, and we're unlocking value for patients, for providers, for physicians, for payers and for entire health care systems. Our mission and goal to improve 250 million lives through better health care 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 again. Brett, over to you.

Great. Thanks, Mick. In my remarks today, I will provide an overview of our results for the first quarter of fiscal year 2023. Unless noted, all comparisons are to the prior year quarter. We had strong financial performance in Q1 despite the headwinds we faced as a result of significant ongoing supply chain constraints. Group revenue for the September quarter was $950 million, an increase of 5%. In constant currency terms, revenue increased by 9%. Revenue growth reflected increased demand for our sleep products across our portfolio and ongoing device demand generated by our competitors' product recall. Year-on-year movements in foreign currencies, in particular, a weaker euro, negatively impacted revenue by approximately $36 million this quarter. While we continue to experience ongoing challenges in securing sufficient production components to meet market demand, we are now seeing a more predictable supply chain environment. This gives us confidence around our expectation of increasing device production in fiscal year '23 relative to fiscal year '22. Looking at our geographic revenue distribution and excluding revenue from our Software-as-a-Service business, sales in the U.S., Canada, and Latin America countries increased by 18%. Sales in Europe, Asia, and other markets decreased by 6% in constant currency terms. By product segment, globally in constant currency terms, device sales increased by 9%, while masks and other sales increased by 8%. Breaking it down by regional areas, device sales in the U.S., Canada, and Latin America increased by 23%, as we benefited from incremental revenue derived from the introduction of our Card-to-Cloud device. Masks and other sales increased by 11%, reflecting solid resupply revenue achieved despite the challenging device supply environment, which continues to limit new patient setups. In Europe, Asia, and other markets, device sales decreased by 10% in constant currency terms, mainly as a result of the ongoing challenges in securing sufficient production components for connected devices and lower sales of higher acuity devices relative to the strong sales we experienced in the prior year quarter. Masks and other sales in Europe, Asia, and other markets increased by 3% in constant currency terms. Software-as-a-Service revenue increased by 9% in the September quarter. We saw particularly strong performance from the HME vertical as customers continue to utilize our SaaS solutions to streamline and more efficiently run their businesses. During the rest of my commentary today, I will be referring to non-GAAP numbers. We have provided a full reconciliation of the non-GAAP to GAAP numbers in our first quarter earnings press release. Gross margin increased by 40 basis points to 57.6% in the September quarter. The increase is predominantly attributable to increases in average selling prices, partially offset by unfavorable product mix and foreign currency movements. Moving on to operating expenses, SG&A expenses for the first quarter increased by 10% or in constant currency terms increased by 16%. The increase was predominantly attributable to increases in employee-related costs and a post-COVID normalization of travel and entertainment expenses. SG&A expense as a percentage of revenue was 20.4% compared to the 19.5% we recorded in the prior year period. Looking forward and subject to currency movements, we expect SG&A expenses as a percentage of revenue to be in the range of 20% to 22% for fiscal year '23. R&D expenses for the quarter increased by 5% or in constant currency terms, increased by 9%. R&D expenses as a percentage of revenue was 6.6%, consistent with the prior year quarter. Looking forward and subject to currency movements, we expect R&D expenses as a percentage of revenue to be in the range of 6% to 7% for fiscal year '23. Operating profit for the quarter increased by 4%, underpinned by strong revenue growth and improvement in gross margin, partially offset by higher operating expenses. Our effective tax rate for the September quarter was 19.8% compared to the prior year quarter rate of 20%. Looking forward, we estimate our effective tax rate for fiscal year '23 will be in the range of 19% to 21%. Our net income for the quarter was $222 million, and non-GAAP diluted earnings per share was $1.51, both consistent with the same period in the prior year. Note year-on-year movements in foreign currencies negatively impacted earnings per share by approximately $0.07 this quarter. Cash flow from operations for the quarter was $45 million, reflecting solid underlying earnings offset by higher levels of working capital. Capital expenditure for the quarter was $29 million. Depreciation and amortization for the quarter totaled $36 million. During the quarter, we paid dividends to shareholders totaling $64 million. We recorded equity losses of $2 million in our income statement in the September quarter associated with the Primasun joint venture with Verily. We expect to record equity losses in the range of $3 million to $5 million per quarter through the balance of fiscal year '23 associated with the joint venture operation. We ended the first quarter with a cash balance of $207 million. At September 30, we had $795 million in gross debt and $588 million in net debt. Our debt levels remain modest. At September 30, we had approximately $1.4 billion available for drawdown under our revolver facility. In summary, our liquidity position remains strong. Our Board of Directors today declared a quarterly dividend of $0.44 per share. As reported last quarter, we expect to close on the MedifoxDarn acquisition by the end of the calendar year pending regulatory clearances. Additionally, we plan to continue to reinvest in growth through R&D and also expect to further deploy capital for tuck-in acquisitions. And with that, I will hand the call back to Amy.

Great. Thanks, Brett. Kevin, I'd like to call you back on to the call and turn it over to you to provide the instructions and run the Q&A portion of the call.

Our first question today is coming from Steve Wheen from Jarden. Your line is now live.

Just looking at working capital, this one for Brett. We saw the levels of inventory continue to increase. Just wondering how you're going to think about managing Card-to-Cloud inventory levels at a time or as your supply chain starts to free up a little bit more to allow you to make more AirSense 11. Just trying to work out whether there's any risk around inventory obsolescence as you try and transition back towards your latest platform?

Yes, Steve, at the moment, the market is characterized by significant excess demand. We are still trying to meet that demand, which I believe will continue for some time. Therefore, we are building inventory while also considering future production plans. We have introduced Card-to-Cloud, which has performed very well, especially in the U.S. market, and it is an important part of our portfolio. We have strategies in place to manage the transition from Card-to-Cloud to connected devices as we receive more electronic components. This transition will be carefully managed, allowing us to shift from manufacturing Card-to-Cloud products to more connected devices as needed. We have plans to effectively carry out this transition.

If I could, Steve, just to add that inventory build that we've had is really a deliberate outcome of our strategy around managing the supply constraints where we've had to really build up the materials components inventories for everything so that we could build the maximum when we break through the bottlenecks on the specific components. And then as the supply chain situation improves into the future, we'll be able to wind back from that.

Next question is coming from Matthew Mishan from KeyBanc. Your line is now live.

Just a follow-up on the mask growth. I think you said at one point in the call that mask growth is still being affected by the lower patient setups. I mean, with Card-to-Cloud, was that an OUS comment, a global comment, or is that still an issue with the U.S. where we're still below the patient setup?

Thanks for the question, Matt. In the quarter, we experienced 11% growth in the U.S., Canada, and Latin America, which indicates strong double-digit growth. Europe, Asia, and the Rest of the World saw 3% growth, leading to a total global growth of 8%. In 2019, we projected market growth of mid-single digits for devices and high single digits for masks, and we’re currently at 8% total growth. However, I believe we could achieve even higher growth if we were able to serve every new patient. As noted, one of our competitors has been out of the market for the past 12 to 24 months, and while we have captured a significant share of the excess demand, we still haven’t reached all patients needing a device. This shortfall is what we believe could have pushed our mask growth even higher. In the U.S., we did see better mask growth, partially due to the successful acceptance of Card-to-Cloud. However, in countries where the reimbursement model for digital health and cloud-connected devices has changed, such as France and Japan, adoption has been slower. This presents structural challenges as they prefer to maintain the efficiencies and outcomes of our fully cloud-connectable systems. Overall, this indicates that there is still an opportunity to continue growing our device business and to further increase mask growth not only in the U.S. but also in Europe, Asia, and the Rest of the World. Thanks again for the question, Matt.

Next question today is coming from Gretel Janu from Credit Suisse.

So how are you allocating your iron here between U.S. and rest of world, given that the U.S. is adopting the Card-to-Cloud? So are you giving greater levels to rest of the world relative to what you historically have the mix between the 2 regions?

Yes, Gretel, that's an excellent question. It's quite complex. During the COVID crisis, we created a global epidemiology model focused on humanitarian needs, which helped us determine how to best allocate our limited supply of ventilators worldwide. We believe we managed this effectively in 2020. Over the past 12 to 15 months, we've utilized those same skills with a global team analyzing the 140 countries we operate in, prioritizing humanitarian needs for individuals struggling with conditions like sleep apnea and respiratory issues, particularly those utilizing the AirSense 10 platform. We also take into account our other respiratory care capabilities and the connected devices. Our global model assesses allocations based on patient demand and urgency, making it a dynamic and complex equation. Recently, we've seen strong performance from the AirSense Card-to-Cloud starting in the June quarter and continuing into September, and we expect this trend to hold. As a result, we may increase distribution of AirSense 11 devices to markets such as France and Japan, which have not adopted it as quickly due to local changes. This is a continuously evolving process that we monitor daily, weekly, and monthly in terms of production and delivery. While it's not a straightforward situation, we are committed to addressing humanitarian needs and ensuring fair distribution of our devices globally. This task is intricate, but our team is diligently working on it every day, and their efforts are reflected in our strong growth numbers. Thank you for your question, Gretel.

Next question today is coming from Saul Hadassin from Barrenjoey.

Mick, we've seen a lot of data breaches in the last few weeks, including in the health care space. And on the basis of how much data you guys have access to, just wondering if this has caused you to have a look again about data accessibility and risks associated with potential data hacks and just what your thoughts are on the strength of protection that you have. How do you actually protect against something that is happening in the future?

Yes, it's a great question. Cybersecurity is something we consider every day. Our Chief Information Security Officer and his team are very vigilant regarding the vast amount of data and the numerous cloud-connected medical devices we manage across many countries. I've seen reports about healthcare system hacks in Australia and similar incidents in the U.S., including ones involving United and local healthcare systems. This highlights the importance of being proactive. We must invest in cybersecurity and analyze the root causes of past hacks, which often stem from human error. Therefore, we are focusing on enhancing our training, addressing system vulnerabilities, and constantly monitoring the situation. Initially, hackers targeted consumer tech and fintech, but healthcare has become a priority for them as well. We recognize this threat and invest heavily in our cybersecurity measures. Balancing privacy, cybersecurity, and interoperability is crucial, and cybersecurity remains one of our core strengths. Thank you for your question, Saul.

Next question is coming from Dan Hurren from MST Marquee.

Look, I just want to ask about seafreight method. You previously talked about some degree of inventory builds that may shift away from airfreight and had to seafreight. And we've seen other mass participants already do that to sell the group want to ask where you are on that transition and what sort of impact it has on margins.

Yes, we've transitioned from relying almost exclusively on air freight to incorporating some sea freight. This change is gradual as we aim to maintain inventory levels at our distribution centers and ensure supply for patients. We're balancing these efforts and have already begun using sea freight. We're also noticing some reduction in freight rates, although it will take time for those changes to fully reflect in our operations. I believe that in the second half of the year, we'll start to experience some advantages from the overall decrease in freight costs compared to last year.

Your next question is coming from Mike Matson from Needham.

Yes. I guess just on the international side of the business was quite a bit weaker than the North American side. And I think you commented on the Card-to-Cloud not seeing as much uptake, but I just wanted to see if that was really the primary issue there. Was there anything else going on? Any kind of economic challenges in any of the OUS markets?

Thanks for the question, Mike. The key issue is the adoption of Card-to-Cloud in those regions. If Card-to-Cloud had the same uptake in Europe, the Middle East, Africa, and the Rest of World as it has in the U.S. and Canada, we would see much higher device growth. That's the main way we can tackle this. In countries without reimbursement models, we are also working on Card-to-Cloud, along with increasing the flow of AirSense 11, as I mentioned earlier. Additionally, Brett pointed out that a year ago Europe experienced high sales of ventilators, partly due to COVID and responses to recalls by a competitor in Europe, where ventilators and respiratory care comprise a larger segment of our business compared to the U.S. Those are the two main factors at play: Card-to-Cloud adoption and our year-on-year performance in noninvasive ventilation, life support ventilation, and the broader respiratory care market in Europe, which is simply a larger part of our business there. Thank you for the question, Mike.

Next question is coming from David Bailey from Macquarie.

Yes. But you sort of mentioned some of the constraints to set up from component shortages in a competitor recall. Just interested in your thoughts on that patient backlog. If you've got any estimates as to how many patients do you think could be waiting for a device, how long it will take to work through? And what that might mean for industry growth relative to that mid-single-digit number you sort of talked to previously.

I'll take that first, David. Thanks for the question. There's significant excess demand out there with the second major player in a competitive market being out for 15 months. They suggest they might return in January, but I’m doubtful given their various challenges. We’re doing everything possible to address this situation. We understand the market size, the patient flow, our leading share and its growth, as well as the growth of their second position. We capture a substantial portion of that, but not all of it, indicating there’s still unmet demand. This situation creates a backlog, which is problematic for patients as wait times extend from days to weeks, months, and even quarters in certain areas. This is why we are redesigning and reengineering the AirSense 10 Card-to-Cloud and parts of the AirSense 11 and AirSense 10 connected devices, and we're ramping up production on all three. Our leading product is the AirSense 11, followed by the fully connected AirSense 10, and then the AirSense 10 Card-to-Cloud. We are distributing all three from our centers in Sydney, Singapore, Atlanta, and Europe. While it’s challenging, we are gathering insights, but I can't disclose specifics for competitive reasons. The speed of addressing demand relies on how quickly we can receive components and parts in our Singapore facility, which is improving. As I mentioned earlier, we plan to increase production of the AirSense 10 Card-to-Cloud and AirSense 11 each quarter. We made deliveries in June and September, and we will continue to deliver in December and March ‘23, and June ‘23. While I won’t specify exact timelines, I want to ensure we shorten the time to meet the rising demand and bring our inventory back to balance.

Next question is coming from Matt Taylor from Jeffries.

This is Zack on for Matt. I was just curious if you could give some color on supply chain improvement on a quarter-over-quarter basis? And any color on how you can reach full capacity over the next couple of quarters.

Rob, do you want to have a go at that?

Thanks, Zach. Mick mentioned earlier about the quarter-on-quarter device volumes. Brett noted that we are seeing some stabilization in the supply chain. Previously, we operated under a plan that often changed due to unexpected decommits, but now we are observing a significant decrease in the rate of these decommits, although they aren't completely eliminated. This creates some uncertainty regarding the exact delivery days for certain products, as some commitments may change. Moving forward, the engineering projects Mick discussed, including the validation of new communication modules, will aid us. It's worth noting that while the demand for phones and similar devices appears to be moderating, the demand from the automotive sector remains strong. The technologies we utilize are more prominent in cars than in mobile devices, which continues to exert some pressure on chip components. However, as our engineering efforts progress and we validate more options, we are more likely to increase our production volume. Currently, we are producing significantly more devices than before the pandemic or the recent competitive recall. Our inventory levels indicate that we have the necessary parts to continue increasing our output. If we receive the final components, we will push to enhance these volumes further. While there are some risks, both up and down, we are quite optimistic about our situation.

Next question today is coming from Lyanne Harrison from Bank of America.

Just following on the question about how long your competitor might be out of the market. Is that gets delayed or pushed out up to 24 months. Do you think ResMed will have enough production volume as we think about third quarter fiscal and fourth quarter fiscal, enough volume to meet the gap that Phillips has left? And then also, last quarter, you also spoke about some of your demand generation initiatives. Are you at a point now in terms of your visibility on production that you're implementing some of those demand generation initiatives?

Thank you for the question, Lyanne. It has two parts. First, it's challenging for me to assess the timeline because it depends on the US government, specifically the FDA and DOJ, as well as a competitor's consent decree, and I'm not privy to those discussions. I can only see what is publicly available. We can't predict how long our competitor will be sidelined, but we do run different scenarios. They might return in January, July, or later in 2023. Regardless, our focus is on increasing production of our products each quarter. If production ramps up, there are scenarios in which we could meet the entire industry demand by the end of 2023, although many factors must align for that to happen. We are committed to ensuring that no patient is left without access. Anyone who requires our device should have a minimal wait time, regardless of their location, and we are making every effort to address the excess demand, which we expect to persist over the coming months. By looking ahead to 2023, I believe it's possible that supply and demand could align for us and other players in the industry. Now, regarding your second question about demand generation initiatives, we have some exciting plans underway, particularly from our teams in Asia and Latin America, focusing on markets like China, India, and Brazil. These initiatives aim to enhance patient access and ensure equitable care delivery across different socioeconomic groups in these high-growth regions. Our partnership with Verily, specifically the joint venture called Primasun, is also promising. We've been collaborating closely on demand generation strategies to attract and enroll patients concerned about sleep. These initiatives will gradually roll out throughout the year. Additionally, our teams in Western and Northern Europe are implementing innovative programs we piloted during the COVID crisis. The pandemic has encouraged collaboration with our partners, and I anticipate the launch of several demand generation initiatives in 2023 as we work to increase supply to meet demand and reinvigorate the market. Thank you for your insightful question, Lyanne.

Next question is coming from Craig Wong-Pan from RBC.

Sorry about that. I think there have been some changes in the expectations for costs like R&D, which is now estimated at 6% to 7% of sales, compared to the previous estimate of 7% to 8%. Additionally, the losses from the Primasun joint ventures have increased. Could you explain what has caused these shifts in expectations?

Yes, sure. I'll talk to... Mick, I think that's a great question for you. Yes. The R&D expenses have seen a slight decrease, primarily due to the weaker Australian dollar, as we conduct a significant portion of our R&D activities in Australia. This reflects the impact of the declining currency. We will still maintain the same number of people in R&D working on projects, but the currency translation effect will be noticeable as we look ahead. That covers the R&D side. What was your other question?

The Primasun joint venture has increased...

Sort of Mick mentioned that some of the milestones, some of the activities that you're undertaking. So they will look to invest or fund more of those demand gen activities as they kind of move into a more commercializing phase. So that's going to uptick, I think, over the next few quarters. Our share of those costs essentially. So that's why I guided that to be a little bit higher over the next several quarters.

Our next question is coming from Chris Cooper from Goldman Sachs.

Can I ask one on the outlook for pricing? We heard some pockets of feedback late in the quarter that at least one of your competitors is beginning to price more aggressively on masks. Are you seeing that feed through yet? If you do sort of begin to see a more competitive price environment, how would you envisage responding to that?

Thanks for your question, Chris. Pricing has been a significant topic in our industry over the past year as inflation has risen globally. We have started to respond to these changes, particularly in relation to increased shipping costs. At the beginning of this year, we implemented surcharges on products in the U.S. and Europe to cover those additional shipping expenses. Additionally, we have adjusted prices on specific products in collaboration with customers and within healthcare systems due to our increased costs, sharing some of these burdens with our channel. While acknowledging your channel checks and discussions with customers, we are not observing significant changes in average selling prices for either devices or masks. It's worth noting that we experienced strong growth in mask sales, with an 11% increase in the U.S., Canada, and Latin America in a competitive market without any recalls. Despite a reduced flow of new patients needing setups, most of our sales are repeat business from our existing customer base. Currently, prices remain stable to slightly up for devices and consistent for masks. We monitor these dynamics actively but prioritize value over price. Our focus is on ensuring a proper fit with ResMed products, which leads to better adherence rates and lower mask leaks. Customers recognize this, and we provide them with supporting data through myAir, enabling them to compare our masks against competitors. This is why doctors and home care providers prefer our products. We compete based on value, not price, and we anticipate continued competition and growth in both devices and masks. We thrive in a competitive market and generally perform well within it.

Your next question is coming from Suraj Kalia from Oppenheimer.

Perfect. So Mick, you mentioned about taking most of the excess demand share. Maybe if I could ask my question a little differently, Mick. So let's say we use three buckets. Patients either remain on Phillips, patients switched to ResMed or the third bucket that patients are left to find on their own, right? Let's just assume these 3 buckets. How would the pie charts of existing patients versus new patients coming into the funnel look like? Just trying to understand at a very simplistic level, where are we in the share transfer and what is happening to these patients?

Yes. Thanks, Suraj. And I appreciate the angle you're coming at on it. Let me give you my thoughts on it and address your question from this angle. So I'll put it. I'll say there's 2 buckets. There's new patients and then there's patients getting what we call recap or a device that's 5 to 7 years old, let's say, it's out of warranty maybe, 3 to 5 years and they want to upgrade. And then there's a third bucket of patients who are part of the competitive recall. So the first bucket, which is new patients. Yes, look, there's ResMed and a bunch of small share players competing all day, every day for those new patients and incredible excess demand and every product we make, we can sell into that space. And we are doing very well and taking a lot of share, as you see in the numbers. 23% growth in devices in U.S., Canada, Latin America, 9% growth worldwide in that category of devices. So doing incredibly well in that new patient's bucket. If you look at the existing patients that are looking to retap, right, after three, five or seven years on therapy, I think some home care providers and HMEs in Europe and rest of the world won't be contacting those patients right now. They know the situation. They don't want to get somebody into the channel where the wait times are long. And so I think there's some opportunity for even further excess demand in that second bucket of existing patients looking to retap that haven't been turned on. It's another type of demand gen to Lyanne's question earlier that our channel probably is not turning on much and keeping that dial very low, except for those patients who come and say, "Look, I really need an upgrade, then they put them in the queue." That's the second bucket. The third bucket is the 5.5 million patients who are on a competitive device from the recall that was announced June a year ago. Our competitor, that's their duty and they are working through those. They're not there. They say they're maybe 3 million into the 5 million. I'm skeptical of that. I think they're talking about production numbers versus delivered numbers. As I look to the channels and speaking to people about how many of the devices that they've asked for have actually been received for as part of that recall. So that third bucket is tough. And so what does the patient do there? Do they just wait? Or do they go get a prescription and try to go spat.com or easybreathe.com or some other retail channel in a different market and try to come in and drive some excess demand that way. It's very hard to determine all of that. We do have some numbers around it. But that third bucket is really the duty of our competitor to take care of, and they're working their way through it. And it looks like it's 18 months through to December. If they get there by June next year, that's 24 months. I'd hope that they are at least there then and can come back. Again, as I said earlier, with the scenarios, we're looking at all sorts of scenarios. I want them back. I love the competitive game. I love beating them in the game of who's got the smallest quite, most comfortable, and most cloud-connected device that lowers costs and improves outcomes. And we were doing that in 2019. Actually, from the launch of AirSense 10 in 2014 to 2019 for 5 strong years, and I look forward to continuing to do that afterwards. But that's how I'd look at it. Three buckets, new patients are doing incredibly well. Repap, not really turning that dial right now, probably turn it on as we get demand gen. And the third one, yes, we will be getting some of that. We're not fighting for that because that's not where we want to play. That's a competitor's duty to take care of them. And we're focused for the long run. And the 1 billion people worldwide is suffocate who haven't yet been brought into the channel. That's the real opportunity. Thanks for the question, Suraj.

Next question is coming from Margaret Kaczor from William Blair.

This is Maggie on for Margaret. I wanted to ask on the mass growth specifically and just trying to get a better picture of the resupply trend. So obviously, I can appreciate the amount of new patients coming on service. But maybe if you can kind of talk about the resupply trends and what you're seeing and what we can kind of expect for the remainder of the fiscal year.

Thanks, Maggie. That's a great question about resupply. In our SaaS business through Brightree and Snap resupply, we have effective models that showcase the synergy between our SaaS operations and our core sleep and respiratory care business. We benefit from back-end synergies in cybersecurity, cloud operations, and interoperability, while the front-end synergies focused on driving resupply have been particularly strong. Brightree and Snap resupply significantly contribute to resupply revenue. In fact, you've noted an 11% growth in the U.S., Canada, and Latin America in resupply. The U.S. is where we see advanced models and strong incentives for patients, providers, ResMed, and payers due to the benefits of reduced hospitalizations, which keeps patients supplied with new masks. However, these systems are less developed in Europe, the Middle East, Africa, and Asia Pacific. We are making progress, especially in areas where we collaborate directly with providers and patients to enhance resupply models. There remains significant opportunity to boost resupply in those regions. If you look at what Catherine Pucknat and our team in Germany are doing to engage patients, or what Lyon is accomplishing in Asia and Latin America to help patients access clean masks regularly, there's much innovation ahead. I'm pleased with the 8% growth in a challenging environment with new patients entering the system. I aim for even higher growth, particularly in Europe, Asia, and the Rest of World, and I expect those regions to improve from low to mid- to high single digits again. We will achieve this as both resupply and new patient influx increase. There are many factors at play here, Maggie. Thanks for your question.

Our next question today is coming from Mathieu Chevrier from Citi.

Just a longer-term question. How do you see home testing and the Primasun JV impacting the longer-term growth rate of the industry?

Home sleep apnea testing has become integral to our operations. The COVID pandemic pushed us to adopt telehealth and digital health across the 140 countries we serve, leading to a surge in the uptake of home sleep testing globally, which is very encouraging. For instance, France has consistently embraced home sleep testing, while Germany, which lagged behind before the pandemic, is now experiencing growth as physicians and home care providers recognize its benefits. We are actively promoting the adoption of home sleep testing in Northern and Western Europe. Once our supply meets demand, we will harness opportunities for generating demand for home sleep testing, particularly considering that over a billion people worldwide are affected by sleep apnea, with less than 20% in the U.S., and even lower percentages in Europe and Asia receiving treatment. Our efforts include innovative marketing approaches, such as engaging an Indian rap star to raise awareness about home sleep testing, which has notably increased interest. We're focusing on cost-effective strategies, utilizing social media rather than traditional advertising methods like purchasing Super Bowl or Champions League ads. Survey data indicates that 80% of people prefer to test for sleep apnea at home, while 20% may require hospital visits due to comorbidities or other conditions. We plan to enhance home sleep testing in the U.S. through our Verily partnership and collaborate with home care partners across the U.S. and the other 140 countries we operate in. Thank you for the question. I think that concludes our inquiries. Amy, what are your thoughts?

Our final question today is coming from Steve Wheen from Jarden.

A little squeaking another one. I just wonder in response to the consent decree that Philips is in the process of negotiating. They've obviously done a very large impairment to the Respironics business. Do you have any sort of thoughts as to what they might be needing to contemplate as part of that, whether it impacts innovation, whether it impacts their ability to manufacture just if you had any high-level thoughts as to what you think that decree could look like?

That's a great question. I'll give some thoughts on hand to Dave Pendarvis, who's not only our Chief Administrative Officer but also a lawyer and maybe we'll understand that. Look, you have to wait until these things come out. We haven't seen a public discussion of what the consent decree looks like. They're negotiating it now. So when that comes out, we'll look at it. What has been public is a number of responses on that 483 and really specifically talking about culture changes, management changes and a focus on quality. The reengineering and cultural training that that type of change requires a lot of work. And I would think people will have to move from development and R&D back to what I would call quality remediation and quality systems improvement. So there will be some sort of quality debt, if you like, that would be needed to pay back if you just read through the public information on that 483. But Dave, what are your thoughts and perspective on this?

Yes, I think you've got it right, Mick. There's a broad range of where this thing could land from sort of a watch and report on the one hand to almost closing down operations on the other end. And without being in the mix of either talking to the agency or talking to the company, which we can't do either one on this particular topic. It's hard to know where they're going to land in between there. But as Mick said, if you look at the public statements, which is both the 483 and also their proposal to take control of the recall, you can see the issues that the agency is concerned about. And so what they're going to want to do is get assurance that those issues are not going to put patients at risk in the future. You've got to have systems in place not only for the products that are issued now but for other products that may be out there on the market or be brought to the market in the future. So except for the agency, obviously, it's a consent decree for a reason. It means that there is an agreement between the parties as to what those parameters will be. And until they announce it, it's really tough to speculate on what the exact details will be. And as I said, there's a pretty broad range.

We've reached the end of our question-and-answer session. I'd like to turn the floor back over to Mick for any further closing comments.

Well, thanks, Kevin, and thank you to all of our shareholders for joining us on this call. I'd like to once again take the opportunity to thank the 8,600 ResMedians, many of whom are also shareholders for their dedication and hard work, helping people breathe better, sleep better and live better lives in residential medicine in over 140 countries worldwide. Thanks for all that you do. I look forward to talking with you all right here in 90 days. Thank you.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.