Greetings, and welcome to the ResMed Second Quarter Fiscal Year 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star 1 on your telephone keypad, and we ask you to please ask one question and one follow-up to return to the queue. If anyone to require operator assistance, please press star 0. As a reminder, this conference is being recorded. It's not my pleasure to turn the call over to Sally Schwartz, Chief Investor Relations Officer.

Please go ahead. Thanks, Kevin. I want to welcome our listeners to ResMed's second quarter fiscal year 2026 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 GAAP financial information. We encourage you to review the supporting schedules in today's earnings press relief 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 complete discussion of the risk factors that could cause our actual results to differ materially from any forward-looking statements made today I will now turn the call over to Mick thank you Sally and good morning good Good afternoon and good evening to all of our shares of ResMed's second quarter fiscal year 2026 earnings call.

We delivered a currency basis, an expansion sequentially and year on year, and we achieved GAAP EPS growth of 16%, strong double digit bottom line growth, plus ResMedians who continue to innovate and evolve the digital sleep health pathway to expand access to our life-changing technology across over 140 countries worldwide. Our team drove high single-digit growth in global devices revenue and double-digit growth in global masks, accessories, and other revenue. High single-digit growth in this second quarter. The team from e-currency basis across Europe, Asia, and rest of the world, driven by continued strategic expansion of our mask portfolio, including our new fabric masks, a focus on improved mask resupply through education, awareness and execution, as well as targeted initiatives and focus in some of our direct to consumer markets around the world. And I'll spend a little time on that later. So well done to our EMEA and APAC teams. So talked about our portfolio management work that we're doing in ResMed's residential care software or RCS business. We are making strong progress with that work and I remain confident that we will be back to sustainable high single-digit growth and double-digit operating profit growth in fiscal year 2027. For this March and the June quarters we expect to process and maintain mid-single-digit growth across our RCS business as we go through that portfolio management. This software business this RCS business, remains a key synergistic enabler of our sleep health and breathing health business, particularly through Bright Tree in the Americas and through Medifox Darn in Germany, and it remains a core part of our long-term growth strategy. The Continued to Drive team delivered 310 basis points of year-over-year gross margin expansion. Incredible result. These results, along with our disciplined approach to business investments in both R&D and SG&A, translated to another quarter of strong mid-teens earnings per share growth. A huge thank you to the entire ResMed global team for their ongoing commitment. ResMed continues to build the world's leading digital health ecosystem, encompassing sleep health, breathing health, and healthcare technology that's delivered in the home. Three key themes and an innovation machine. Global macro uncertainty. It helps us well to invest in the business as well as to return capital. On the topic of operational excellence, I've shared with you ResMed's pipeline of margin improvement drive basis points of year-over-year gross margin expansion in the second quarter and 30 basis points of sequential gross margin expansion. We will continue to execute on these opportunities over the remainder of fiscal year 2026 and beyond. Earlier this month, our supply chain team to deliver double-digit basis points improvement in gross margin every year through 2030. It's a U.S. distribution center in Indiana, in that state, and we are on track to be up and running during calendar year 2027. Once this facility comes online, 30% of our U.S. customers in less than two business days. We recently announced expansion of our Calabasas, California plant, which doubles our U.S. manufacturing capacity. Investments in the next generation of market-leading masks, cloud-connected medical devices, and digital healthcare software position us to keep delivering the world's smallest, quietest, most comfortable, most connected, and most intelligent therapy solutions for sleep apnea and expansions into insomnia, respiratory insufficiency, and beyond. a clear range of masks these are the and they're in select key markets now we'll continue to roll them out around the world as we get regulatory approval on these new fabric masks has been incredible is into the launch but we expect strong adoption of these masks over time these latest variants expand resmeds and mask offerings which not only deliver advanced comfort mobility and interchangeability for patients of competition for masks product innovation recommender within the my air software platform this is resmed's first is intended to help people become more confident and more comfortable with cpap apap and bi-level therapy what i expect to see is having an ai to help you start therapy that can really help you improve not just short-term adherence but also long-term adherence as you get used to therapy there are a bunch of comfort settings on these devices and many people do not adjust them with help from ai we think this technology will unlock decades worth of comfort features that have been underutilized by consumers and patients alike. Moving on to rent and investments, we remain focused on demand generation, demand capture, and demand curation of our long-term growth. We continue to drive selected targeted direct-to-consumer campaigns into the funnel. This past quarter, we supported various focused on 11-11 or singles day in China and we also had some promotions around Christmas holidays and Black Friday within the US markets. I can tell you we've successfully encouraged consumers to give the gift of great sleep and we highlighted our portable travel air mini device which is lightweight and compact size as perfect for travel and we had good success in the December quarter. Earlier this year we expanded our offering of continuing medical education or CME programs that review sleep medicine guidelines including the benefits of gold standards CPAP, APAP and bi-level therapy. It's the frontline treatment for any patient diagnosed with sleep apnea and we're educating PCPs around the US. On date the CME programs have been completed nearly 60,000 times. That's a 50% increase from our first quarter 2026 earnings call numbers that we shared, with more than 35,000 unique clinicians completing the CME training. That demonstrates that actually many of these healthcare providers have taken multiple courses, so not just sleep 101 but sleep 201, sleep 301. Surveys at the end of these courses now show 77% of these providers intend to change their clinical practices related to sleep apnea and sleep health and breathing. We continue to stay abreast of important studies that highlight evidence impacts the body and the brain. One important area in sleep apnea looks at a co-operative sleep apnea for incidents over time. With CPAP, may reduce the risk of developing Parkinson's disease in the first place. The studies finding they may meaningfully alter dementia appears to counteract pathways that link disrupted sleep to neurodegeneration. Studies have shown moderate to severe OSA increases the likelihood of developing dementia by 30 to 45 percent, while patients who remain adherent to positive airway pressure therapy experience substantially lower risks and rates of Alzheimer's disease and cognitive decline over time. Mechanistic studies reinforce this signal. CPAP use has been shown to partially restore glymphatic clearance and lubeal system that becomes impaired during OSA, and this reduces a key Alzheimer biomarker. Even short-term CPAP adherence around five hours a night can improve memory, attention, and executive function in older adults with milder. Consistent early intervention with CPAP may help on this front between sleep health and brain. CPAP, APAP, and bi-level have diabetes, health, and beyond. ...of life and death. Research published last year in the Lancet Respiratory Medicine Journal, found that CPAP therapy significantly reduces the risk with obstructive sleep apnea. More specifically, this study showed that CPAP therapy lowers the overall chance of dying by 37%, and the chance of heart-related or cardiovascular-related death is reduced by 55%. The study, which analyzed data from more than 1 million sleep apnea patients worldwide, underscores the importance of consistent CPAP therapy for improving survival outcomes in OSA patients. So this therapy saves lives. We announced that our medical affairs team has launched the ResMed science physicians in various specialties from around the world to provide strategic clinical and scientific guidance to our innovation efforts. Watch this space for results of their work. You know we've been tracking claims data now reflecting more than 1.95 million patients. What we've consistently seen is patients who have scripts for both a latest generation GLP-1 or GLP-1 are 10 to 11% more likely to start their CPAP therapy than patients who only have a script for CPAP. These patients have a resupply event at one year, meaning they're buying a new mask, a new accessory of some type, a hose, filter, beyond. We see more than 6% likelihood to have a resupply event at three years. This was the first time we had three-year data to share and we shared that. It's encouraging to see that the motivation of these patients lasts and even accelerates over time. On a GLP-1, get on CPAP more and stay on CPAP therapy longer. We've continued our investments in both R&N delivered strong operating profit growth in the first quarter. It's a compelling investment opportunity amidst global macro uncertainty. That's my second key message I'll spend a couple of minutes on and then get to Brett and we'll get to the Q&A. We continue to closely monitor the global trade environment and the evolving regulatory. In December, CPAP is not included in CMS's upcoming competitive bidding program. That's the first time in 15 years that's happened, and we're very happy that that result we think will be great for not just US citizens and Medicare recipients, but also for our HME partners and the overall sleep health and breathing health industry are used to treat patients with chronic respiratory disabilities such as obstructive sleep apnea and respiratory insufficiency. They've been subject to global tariff relief for decades. This relief has continued in the context of prior section 232 investigations and we expect it to remain true no matter what the result of those types of investigations are for medical supplies announced in the late September investigation that's currently underway. So the so-called neurobi protocol we see in play. To be able to remain fully focused therefore on executing on our 2030 strategy including the delivering value to all a very strong free cash flow generation machine. We have an incredibly robust balance sheet and that provides us with significant flexibility to both invest in our business and return capital to shareholders. This is my third final key message here. We'll continue to selectively invest in our digital sleep health concierge capabilities including screening tools, clinical tools, seamless workflows and cloud-connected pathways. We'll be looking to expand and speed up the diagnostic funnel to keep up with new patient flow and even accelerate it over time from our own ResMed demand generation efforts of sleep apnea generated by Big Pharma medications as well as the consumer wearables from Big Tech are capable of driving growth of patients into our funnel if ResMed does the work of curating and helping those patients find a pathway. As I said at JP Morgan earlier this month, I'm predicting that at least one, two or three of these wearable Samsung Galaxy watch detection capabilities that have passed through the FDA, both big tech and big pharma bringing people into the funnel and primary care education from ResMed driving like never before, we need to be prepared to address this ongoing and growing awareness of sleep apnea as well as other sleep health and breathing health disorders. I spoke a few minutes ago about our CME courses. I also talked about some of our ongoing product innovations such as our newer fabric masks. You've seen our prior acquisition of companies like Virtuox and the NIDAL product from a company called Ectosense as well as Somnaware which is the software for pulmonary and sleep medicine physicians. Ultimately through this M&A and organic developments we're expanding the ecosystem to help people quickly and swiftly move from sleep about your awareness through testing all the way to being diagnosed and treated and adherent on our therapy for life. Testing going back into our business absolute first priority for capital allocation we invest over six to seven percent of our revenues in R&D and 19 to 20 percent in SG&A but we're also returning capital to shareholders through dividends and we've been increasing those and we've added an increase to our share repurchases. Another $263 million to our shareholders through our quarterly dividend and our $175 million in share repurchases. Earlier this month that we are increasing our share repurchases to more than $600 million for fiscal year 2026. We picked up the pace of our share repurchases in the second quarter and will continue to deploy meaningful capital through our share repurchase program. Quarter After quarter, RESN will continue to demonstrate an ability to consistently deliver both financially and operationally. We've established a leading market position globally in under-penetrated markets and we still have a very long runway of growth ahead. We're in mile one of the marathon. This underpins our confidence in our ability to deliver for consumers, for patients, for physicians, for providers, for payers and for our communities that we serve. And of course, to all of you listening here, our shareholders. With that, Brett, I'll hand over to you to go and do a deeper dive on our financials, and then we'll open up the floor for your questions.

Brett, over to you.

We can get you live here. If you just speak through teams there, Brett.

Brett Sandekok, I'm in the resume at call. I'm about to speak.

One moment, please. Let's speak to him for you. Thank you.

Rejoining, Brett. Hi, Kevin, how are you? Sorry about the call dropped out, but I'm back now. I'm ready to go, Mick. All right, great. Thank you, Mick. In my remarks today, I'll provide an overview of our results for the second quarter of fiscal year 2026. And let's note that all comparisons are the prior year quarter and in constant currency terms where applicable. We had strong financial performance in Q2. Group revenue for the December quarter was $1.42 billion, an 11% headline increase and 9% in constant currency terms. Revenue growth reflected positive contributions across our device and mass portfolio and our software business. Year over year movements in foreign currencies positively impacted revenue by approximately 25 million during the December quarter. Looking at our geographic revenue distribution and excluding revenue from our residential care software business, sales in US, Canada and Latin America increased by 11%. percent the regions increased by six percent on a constant currency basis globally on a constant currency basis device sales increased by seven percent and other sales increased by fourteen percent breaking it down by regional areas canada and latin america increased by eight percent masks and other sales increased by sixteen percent reflecting continued growth in both resupply and new patient setups as well as incremental revenue from our VirtuOx acquisition which we acquired in Q4 FY25. In Europe, Asia and other regions device sales increased by 5% on a constant currency basis and masks and other sales increased by 8% on a constant currency basis. Residential care software revenue increased by 5% on a constant currency basis in the December quarter underpinned by robust performance from our Medifox Darn software vertical partially offset by ongoing challenges in our senior living and long-term care vertical. 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 second quarter earnings press release. Growth margin we'll see 2.3% in the December quarter and increased by 110 basis points year over year and by 30 basis points sequentially. The year over year increase was primarily driven by component cost improvements and manufacturing and logistics efficiencies as well as a modest positive impact from foreign currency movements. Our supply chain team continues to work and make progress on our pipeline and gross margin productivity initiatives and we remain focused on making sustained long-term gross margin improvements looking forward and subject to currency movements we now expect gross margin will be in the range of 62 to 63 percent for fiscal year 2026 moving on to operating expenses sgna expenses for the second quarter increased by 15 on a headline basis and by 12 on a constant currency basis the increase was primarily attributable to growth in employee related expenses and marketing and technology investments as well as additional expenses associated with our VirtuOx acquisition. SG&A expenses as a percentage of revenue increased to 19.6% compared to 18.8% in the prior year period. Looking forward and subject to currency movements we still expect SG&A expenses as a percentage of revenue to be in the range of 19 to 20 percent for fiscal year 2026. R&D expenses for the quarter increased by 12 percent on a headline basis and 10 percent on a constant currency basis. The increase primarily reflects increases in employee related expenses. R&D expenses as a percentage of revenue increased to 6.4 percent compared to 6.3 percent in the prior year period. Looking forward and subject the currency movements we still expect R&D expenses as a percentage of revenue to be in the range of six to seven percent for fiscal year 2026. During the quarter we recorded a restructuring related charge of six million reflecting the finalization of our global workforce planning activities which we initiated in the first quarter of fiscal year 2026. Restructuring charges were comprised of employee severance and other one-time termination benefits. The restructuring charge has been treated as a non-GAAP item in our second quarter financial results. Operating profit for the quarter increased 19% underpinned by revenue growth and gross margin expansion. Our operating margin improved to 36.3% of revenue compared to 34% in the prior year period. Our net interest income for the quarter was 8 million. Our effective tax rate for the December quarter was 21.1% compared to 18 percent in the prior year quarter. As we previously noted in our Q1 earnings call, the increase in our effective tax rate was primarily due to the impact of global minimum tax legislation introduced in certain jurisdictions that became effective from July 1, 2025. We still estimate our effective tax rate for fiscal year 2026 will be in the range of 21 to 23 percent. Our net income for the December quarter increased by 15% and diluted earnings per share increased by 16%. Movements in foreign exchange rates had a positive impact on earnings per share of approximately $0.04 in Q2 FY26. Cash flow from operations for the quarter was $340 million, reflecting strong operating results, partially offset by increases in working capital. Capital expenditure for the quarter was $29 million and depreciation and amortisation for the quarter totaled $50 million. We ended the second quarter with a cash balance of $1.4 billion and at December 31 we had $664 million in gross debt and $753 million in net cash. We have approximately $1.5 billion available for drawdown under our revolver facility. We continue to maintain a solid liquidity position, strong balance sheets and generate robust operating cash flows. Today our Board of Directors declared a quarterly dividend of 60 cents per share. During the quarter we purchased approximately 704,000 shares under our previously authorized share by that program for consideration of 175 million. We plan to continue to repurchase shares to the total value of more than 600 million for fiscal year 2026. In addition to returning capital with two shareholders through a dividend share buyback program, we will continue to invest in growth through R&D and tuck in acquisitions. And with that, I will hand the call back to our operator, Kevin, for Q&A. Thank you.

And I'll be conducting your question and answer session. If you'd like to be placed in the question queue, please press star one on your telephone keypad. And as a reminder, we ask you to please ask one question and one follow-up, then return to the queue. If you'd like to remove yourself from the queue, please press star 2. Our first question today is coming from John Block from Steeple. Your line is now live.

Great. Thanks, guys. Appreciate it. Really strong U.S. mass number. I think it was 16%. Maybe if you could just help us out a little bit. We're counting roughly a 400 basis point benefit from VirtuOx when you think about that. And then, you know, Mick or Brent, any movement or stocking, if you would, from F30, relatively new, good reception? So should we calibrate any sort of benefit or stocking from that dynamic? And then I can ask a follow-up.

Yeah, I'll go first, John, and that VirtuOx. As you said, the masks, accessories, and other does include some contributions from the VirtuOx part. And so even taking that out, though, we have very solid growth. I'm going to say double-digit growth in our masks and accessories in the U.S., even taking out Virtuox. And so really, really solid. Look, yeah, I think when we launch a new mask, it can have some good cycles. Our channel doesn't tend to really stock of demand. They tend to buy when a new product comes and they start to see demand buy more. I can tell you that the new F30i Clear, and particularly for me, the F30i Comfort which has fabric not just the headgear that goes around the head. I think this is changing the basis of competition and I think we're going to see some really good adoption of these masks over time. Obviously we also have the high deductible health plans and health savings accounts which are a factor in the US market as they clear at the end of the December quarter there as well. So we will have some seasonality associated with that I'd say. But Brett, anything to add there specifically to the numbers that John mentioned on with and without VirtuOx?

No, I think you covered it pretty well, Mick. Even without VirtuOx, still double-digit growth, so it's still really strong. And VirtuOx had a really good quarter as well. So across the board, and I think we'd see some seasonality impact from that. I think you're right, Mick. And I think early days for the mask launches, but off to a good start that's kind of not as big an impact necessarily, But it's certainly there. It's incremental, I think, really, on the new fabric masks.

Next question is coming from Anthony Patron from the Zero Group. Your line is now live.

Thank you. And congrats on a nice quarter here. Maybe, Mick, you gave an update on just the GLP-1 landscape here, the claims data, obviously, holding solid here on the attach rate for CPAP post-starting GLP-1 therapy. We now have orals out there, and it's been almost a year since the initial clearance. You know, maybe just an update on the impact to the front end of the funnel more specifically, and the latest channel checks that we're hearing is that, you know, this indeed is actually bringing more patients in, and it's resulting in a high CPAP attach rate. So, maybe walk through that dynamic a bit and how you see that playing out the rest of the year.

Yeah, thanks, Anthony. it's a really good question and uh as you noted yeah we're now tracking 1.95 million patients in our claims data analysis there and that shows that 10 up to now 11 percent higher start rates so you know at the top of funnel as you mentioned um there's just a really uh i would say a motivated patient group we don't fully understand the psychology we we see the correlation don't know the causality but but our assumption as we do our channel checks talk to the doctors talk to the pulmonary doctors and the primary care physicians who are starting to see the patients brought in by glp ones and they're saying these are motivated patients and so i think that's what gets us at the top of funnel that sort of um uh you know inspiration to come back into the healthcare system with this new class of medicines whether it's the injectables or the pill which will go broader market but then the interesting part and the new data this quarter is the three year data showing a six percent higher I think 6.2 percent higher resupply rate at three years and so this this impact is it seems to be not only a motivated patient when I show up to the PCP or the pulmonary doc but that motivation seems to last a long time and and as Carlos Nunez said Dr. Carlos Nunez on the stage at the healthcare conference earlier this month, it seems to stay motivation for our therapy even longer than the motivation for the other therapy. So whether or not they stay on the GLP-1, where the adherence rate often is only 30% or 40% at one year, they're more motivated on our therapy over the long term. So we're watching very closely. We've now got three years of data. We'll continue to watch that. But to your point, it does bring more patients in. They are more motivated. and your channel checks confirm what we're hearing with our sleep doctors, that this is bringing people in. And now with the primary care doctors, they're getting motivated to get trained, 60,000 CME trainings, and many of them are saying, 77%, I'm going to change what I do on my screening, referral and pathways and so on. And we'll be there to help them with VirtuOx and all these virtual pathways, but we'll also support our pulmonary physicians in our HME industry to scale to the flow that we need to deal with this increased demand. Thank you for the question Anthony.

Thank you. Going forth in order to accommodate as many questioners as possible we ask you to limit yourselves to one question. Our next question is coming from Dan Hearn from MST. Your line is now live.

Good morning and thanks very much. Question for Brett. Can I just ask about an SG&A? The SG&A growth is uncharacteristically ahead of revenue growth. I'm just wondering if there's any transient expenses in there as you settle these acquisitions or is this a rebasing hire with promotional activities in Salesforce etc.

Yeah, I mean, there was some impact from the VirtuOx acquisition, Dan, so that if you excluded that, you'd get, we would be at high single digits for SG&A growth, so tracking pretty close on revenue growth, but as Mick mentioned in his remarks, we're also doing some around some marketing programs, and we've done, for example, China Single Day and things like that, so there's some promotions around during the quarter as well on that. So overall, if you look at more underlying, it's more tracking to kind of revenue growth on that, I think.

Your next question is coming from Laura Sutcliffe with City. Your line is now live.

Thank you for taking my question. Another one on the patient funnel, if I can, please. Which sort of areas or stages of the patient funnel, all the way from an initial visit to a PCP through to a first night with a ResMed device, do you think you've had the most impact on in the last couple of years and where do you think there's most work left to do?

And it's a complex one because that funnel obviously we map every single decision process and step along it from consumer, sleep concern consumer, considering diagnostic, then prescription therapy and then therapy for life year one and year X right, year N. So probably in the top of the funnel area, I think we are being given some, I would say, without having to pay for it, some extra awareness from Big Pharma in bringing patients in to the funnel with their GLP-1 medicines. They're spending a lot of money on direct-to-consumer advertising with ZepBound and other products to follow. So that brings patients in. And then, you know, from Big Tech, the fact that your Apple Watch or Samsung Galaxy Watch, and as I predicted at least one more of the others, Whoop, Garmin, Oura Ring, UltraHuman, someone else is going to add that in. That brings patients in too. So that top of the funnel, I think that's moved a lot. Our challenge at ResMed is to partner with our channel to say, can we scale home sleep apnea testing? And so that's why we bought Ectosense and we have the Night Owl product out in the US. That's why we bought VirtuOx, which is a home sleep apnea testing service company to help primary care physicians and pulmonary physicians with a very efficient home sleep apnea testing service and then you saw us buy Somnaware which is software that can help a pulmonary or sleep clinic be more efficient and more capable so really focusing on expansion that top part of the funnel and then of course we're partnering with our HME customers to say how can we help you grow now that we're not in competitive bidding CPAP APAP it's all out there's no distractions let's grow our businesses together and so we're helping them understand how to scale their setup process to run their business more efficiently with Brightree so that they can cope with the the greater flow of patients through the funk you know I've said this publicly I don't think this is going to be like some crazy doubling of growth rates of devices in the U.S. but you certainly can see in the numbers we reported today that there is some good improvements there and I think if the market is growing at mid-single digits on devices and high single digits on masks, we clearly drove extra market growth and or took share this quarter. And it's our goal to do that every quarter. Will we do it every quarter? No, but will we try? Absolutely. And as Brett said, we invested in some of these programs on Singles Day in China and some D2C work around the holidays in Australia, New Zealand, Korea, Singapore, and even in the US. We make sure there's an ROI to every program. And if there is, we continue with it and if there isn't we stop and then and reevaluate and try another program and so watch this space there's no particular area Laura but I would say that top of funnel middle of funnel is the area where laser focused on now because once they've got that prescription we are a machine at getting that 87% adherence with our technology at day 90 and keeping a mom's therapy for life and also the symptom relief that you get from CPAP keeps them there as well thanks for the question Laura thank you next question is coming from Leanne Harrison from Bank of America.

Your line is now live.

Good morning, Mick Bratton team. I might come back to Anthony's questions on GLP-1. You know, obviously you're tracking a lot of patients now and you've got three years' worth of data. But, you know, with the GLP-1 prices coming now and then now in pill form, we expect more people to be on GLP-1s for longer. Are you seeing any changes in compliance or therapy for those GLP-1 OSA patients in the cohort you're tracking who've been with you for three years now, in particular those who have mild or moderate sleep apnea?

Yeah, thanks for the question, Leanne. And look, we have those aggregate numbers that we shared and clearly at three years we see more purchases and so these people are motivated and buy more from us. To your specific question of tracking individual patients and where they go through this therapy, what we're finding is patients who have this therapy, even if they have so-called mild to moderate sleep apnea and their AHI might be reduced somewhat, The symptomatic relief that they get from CPAP, APAP bilable, you never really, you don't cure this disorder by lowering your HR. You can mitigate some of its severity. But what we're finding is the symptomatic relief and the care that patients have on therapy is such that they stick on our therapy for life. You know, the side effects of these medicines are, you know, in the early stages, nausea, diarrhea and some aspects. You have to get used to GLP-1 medicines. For CPAP, it's the opposite. You have symptomatic relief. Your bed partner says, wow, you've stopped snoring. We can now sleep in the same room together. The sleep divorce is over. We have aspects of the patient themselves where they wake up refreshed in the morning versus morning headaches. They're not tired in the afternoons at their jobs or in front of the television or movies with friends. And so that symptomatic relief and change of life is very addictive. So even if patients go from an age of 40 to 20 or 20 to 10, they are sticking with therapy. And it's out there in those aggregate numbers, but we're actually looking and we'll do case studies around people where the combination therapy, which, by the way, was shown in Lilly's Surmount OSA study to be the best outcome in their own analysis, is one that we would encourage. Weight loss and treating your sleep apnea has always been part of the care of pulmonary doctors. They now have a new injectable slash pill to cover with weight loss versus just eat less and exercise more. so it's a combination of all the above that's leading to these numbers but yeah no we're looking at our adherence on the short medium and long term not seeing any reductions and particularly within this cohort of patients we're actually seeing patients that are more adherent to therapy more motivated to start and stick with therapy so watching very carefully but the thesis that this could be a headwind is completely gone it's a tailwind and the question is now, how much of a tailwind will it be? How many PCPs can we educate to get those combination prescriptions? And when a patient's on therapy, how can we meaningfully engage with them so that they stay adherent for life? And we're having good success with this new cohort of patients. Thanks for the question, Leanne.

Thank you. Next question is coming from Matt Taylor from Jeffrey's. Your line is now live.

Hi, thanks for taking the question, Mick. You actually sort of led into what I wanted to ask about, which is you've given a lot of positive stats about how GLP-1s are helping the funnel in your business. I guess I was wondering if you've tried to quantify that now with some of the data that you have, could you help us understand how much of a tail end it is now or could be in the future? Or if they didn't exist, how much would you be growing? Would it be a material difference? Thank you.

Yeah, Matt, it's a really good one that we're wrestling with internally to data down to to the individual um you know how many basis points to your point how many basis points of that uh really good u.s devices growth in the quarter was eight percent how much of that was driven by big tech and apple and samsung identifying someone that came to a pcp versus uh big farmers uh you know advertising uh a new uh injectable or pill that brought someone into pcp that then got the referral uh to the specialist and prescription and we've got a lot of that macro data. We also, through MyAir, we now have 11 million users of MyAir and obviously on a voluntary basis, every person who signs up to MyAir can tell us, how did you hear about sleep apnea? Was it your bed partner? Was it snoring? Was it a big pharma? Was it a GLP-1? Or was it big tech? Was it a wearable? And so we're asking those questions and we're getting early data. We're not prepared to publicly talk about it yet, But I can tell you that it is a contributor, and it's one that we are working very carefully to quantify and also to work out how we can continue to scale with, to make sure that our funnel, the primary care physicians, the home sleep apnea testing capabilities, the prescription capabilities of a sleep doctor. Sleep doctors are very busy. They have long waiting lists. How can we help them with Somnaware and Brightree to better manage their practice and their DME if they have that part? And then for our DME customers to really help them scale. You know, we're seeing a great demand for Brightree and its ability to lower costs and improve outcomes. And although we are completely out of competitive bidding, our HMEs have other products that are in there. So the more costs that we can help an HME take out of their business with Brightree and the more resupply we can help them drive to where a patient wants that new mask or accessory, that's what's going to get us to where we need to be. So, yeah, thanks for the question, Matt. We are quantifying it, not yet ready to sort of release that. But we may, you know, peer review and publish some evidence on this through a scientific part of our business to really get it out there in the peer review press. And then I can start to talk about it publicly. But it is a contributor, and we'll quantify it over time. But I'm really excited to have this moment, if you like. Sleep Health is having a very good moment in healthcare right now, and we're leveraging that.

Thank you. Next question today is coming from David Bailey from Morgan Stanley. Your loan is now live.

Thanks very much. Morning, Mick. One of the most frequent questions we get is the potential return of Philips back into the U.S. device market. Okay, just thoughts on a potential timing of that re-entry, to the extent you've got any thoughts there, the potential impacts and where they have re-entered your observations in relation to the competitive dynamics. That would be great. Thanks.

Yeah, thanks for the question, Bolt, to what that company's CEO said at a conference earlier this month and what their CFO said at a conference I was at the quarter before, which is they don't know. You know, I don't really look back to the number two, three or four competitor, which that company is in the various markets, 140 markets we compete in. I look forward to say, you know, the last five questions, how do we deal with this new flow of patients in? I can say this, though, you know, they're back in over 100 countries in Europe, Asia, rest of the world, and some they've been back for 12, 18, 24 plus months. So we've lapped it multiple times, you know, in these quarterly calls. And I don't know if you looked into the Europe-Asia WrestleWorld device growth in the quarter, pretty solid. They're at 5%, like right in line with market, maybe a little demand gen that we're driving. We're holding share and competing well with that competitor. But more importantly, frankly, in some of those regions, other competitors that have taken that number two spot, that competitor you mentioned has to fight with to get back to number four, number three, and even number two space. So I welcome competition. I think competition is fantastic. I'm not fearful at all about that player they're going to be making products I think going to Thailand now and shipping them to the US and Europe I look forward to to that I think we've got a better product that's smaller it's quieter it's more comfortable it's more connected and it's more intelligent and that ecosystem what we've developed with my air and air view and bright tree that ecosystem is very hard to match and none of our competitors really can compete across the board on that but um no have no idea of their us devices entry but they've been in the us for masks and accessories these last 20 quarters uh and uh we've been competing very well against them and meeting and beating their growth and taking share when that's all they could sell in that market i'm

very happy to have them back monday morning or next year and it really won't affect us in terms of how we grow to the market they'll have to fight to get that number three or number two position from another player who took it and uh we welcome we welcome that competition thanks for the question david thank you next question is coming from devon thillanesan from coleman sachs for light is now live thanks uh thanks mick and team for the presentation it's a good segue to my question mick on uh the question about devices um for the ex-us markets um sort of five percent uh constant currency growth can you sort of help us understand that uh growth a little bit better clearly it's a

market that is quite lumpy uh was there any sort of pull forward of demand that happened in the previous quarters that you know sort of weighed on growth this quarter how do we think about i guess some of the demand generation activities that you are doing yeah no it's a really good question and the rest of the world is very solid in in uh where we're at and it's in line with market there were some you know of devices in the in the in the japan market but look you know So the way I look at it is we've got 140 countries we sell in across there. Our job, you know, the portfolio of managing all those is to continue to grow across them. And I think our teams did very well. There was some good promotional work that we did in China and Korea and Australia and New Zealand markets that, you know, can help that market. And, you know, not just in the December quarter, but that's a particularly good one for D2C markets with the holidays and Air Mini particularly. But, yeah, there was some lumpiness in the year before. But, look, there are no excuses. The market's growing mid-single digits. Our team has to grow mid-single digits in devices and high single digits in masks. And I'm very proud of our EMEA and APAC teams that they delivered in the December quarter. And, you know, now they're on to March and June and will continue to deliver. And our goal really is to, across those 140 countries, emulate our best approach to help be that digital sleep health and breathing health concierge and drive patients in the funnel and through the funnel for their best path to get to therapy. Brett, anything to add on that for Europe, Asia, rest of world devices?

No, no, we're pleased with that result. And the only thing I'd say is that, yeah, the prior year comp that you mentioned, Mick, was 9% last year. So it was very, very strong comparable. But overall, I think, yeah, pretty solid, pretty happy with it.

Your next question is coming from Brandon Vasquez from William Blair. Your line is now live.

Hi, everyone. Thanks for taking the question. Mick, I wanted to ask, it's been a little bit over a year now that you started kind of stepping up the investments within the PCP channel. Talk to us a little bit about what are you seeing from that channel? How excited are you about it? And what can it mean for growth on the devices side? And what kind of metrics should the investors be looking for as maybe like positive ROI on these investments within the PCP channel? Thanks.

Yeah, in the prep remarks, I talked about the 60,000 trainings we've done on CME with PCPs or GPs as they're known here in Australia and Europe. What's exciting for me is that, I mean, it was the number one downloaded PCP training in the last quarter and it was up 50% just in the quarter. That's a metric, a very leading indicator, but it's a metric you can think about, which is what's the demand for knowledge about this? A primary care physician, they've got a tough job. They've got to deal with everything from headaches to tinea, head to toe, every complication. And in general, particularly in the US market, they've got very little time. I think it's on average five to seven minutes with a patient on an annual basis. And they've got to assess everything. And so the fact that we can get sleep health on their radar, that maybe somebody has told them, come in and ask for an injectable that might help with your sleep health and your breathing health. And then they come in and talk to the PCP. If they've done our education, that PCP knows where to send a patient to a home sleep apnea testing protocol. They know what is gold standard, CPAP, APAP and biolab, the only therapy that can completely eliminate your AHI to zero if used perfectly and as directed. and they know what the backup plan is on dental and the backup to the backup plan, which is a pharma solution, and they're writing prescriptions. And so it's happening. As I said earlier, we're not yet quantifying exactly how much that we are seeing that comes through PCPs or from referrals of big pharma and big tech into PCPs versus that are coming sort of organically through our demand generation that we're driving or through the general organic demand that we've seen over the last decade. in our space but we are investing in this pcp channel we're going to continue to invest in education what i love about doing it as cme education is it's pure it's true yes it has the resume brand on the last page we get a little bit there but it's all done according to the american academy of sleep medicine guidelines so it's in line with what the doctors are saying on those guidelines and it just helps the pcp say okay here's the pathway and and here's what i should do and look you know many of you on the cell side here are doing channel checks and talking to everyone even ENT surgeons are saying no gold standard of course even though they make money from doing the surgery they're saying gold standard is this non-invasive completely reversible incredibly effective positive air pressure therapy so we're seeing that the PCPs know it and it's just helping them find a pathway so here's a screening protocol here's a home safe apnea testing service and here's a referral pathway to a specialist and a DME that's going to take care and get very high adherence for you and you'll at the update and the next physical with this patient through a digital platform into your Epic or your Cerner or your Allscripts, whatever you use, because we have API calls going in and out, you know, hundreds of times a second into and out of our Airview system to the doctor systems. Thanks for the question, Brandon, and we'll continue to update you on those leading metrics for PCP education and more as we get more comfortable sharing across that new channel that we're developing. Thanks for the question.

The question is coming from Nathan Trebek from Wells Fargo. Your line is now live.

Great. Thanks for taking the question. Congrats on a great quarter. Are you seeing anything that would suggest that U.S. mask strength that you saw in fiscal Q2 will persist at that level into the second half of the year?

Thanks.

Nathan, yeah, I mean, U.S. masks, accessories, and other growth was 16% in the quarter, an incredible performance from our U.S. and, you know, broader America's team. Look, no, I mean market growth is in the high single digits so we don't expect to outperform by whatever if you take nine percent as high single just by 700 basis points every quarter and as Brett said earlier there was some contribution from VirtuOx on that accessory side so even taking out that you know we said we've had double-digit growth in VirtuOx by the way which is great and does feed the core business in in new patient flow but even taking out VirtuOx We're still in the double digits, so still beating high single-digit market growth. And so what do we do? Well, we have promotion campaigns. We talk to people about, you know, getting a new mask, and we engage with people through BrightTree, through MyAir, and through our DME partners. And in other parts of the world, we did this as well. And so we're having some success with that. You can't do that every quarter, and you can't drive it every quarter. But I do think we can meet and beat that high single-digit growth of masks, you know, every quarter as we go, meet and or beat. And the beats like this come where we get the brand ROI, we get the demand-gen ROI, and we have good promotional programs that play out there. So it's a portfolio management. It's a balance, and we're balancing our investments, I think, pretty well. You know, 6% to 7% into revenue and 19% to 20% into R&D for revenue and 19% to 20% of revenue into SG&A, these sort of sales and marketing programs. And I think we're doing a very efficient job. And I can tell you our marketing team, now one global team, is looking at the ROI of every single program down to the return on advertising spend, the ROI of that individual metropolitan statistical area. What program did we run? How did it go? And if it's profitable, of course we'll continue to do it. If it's not, we stop and then rejoin. And so it's not perfect and smooth, and we won't outperform every quarter, but I'm really proud of the team and proud to report these numbers, and I challenge them to outperform every quarter. I just expect them to meet and or beat that high single-digit growth, and they clearly beat it this quarter. Thanks for the question, Nathan.

Thank you. We reached 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 everyone for joining us on our earnings call today. On behalf of more than 10,000 ResMedians serving people in 140 countries worldwide, I'm pleased to say we're able to deliver another strong quarter of performance and continue to build value for all of our shareholders. We'll talk to you, many of you, over the coming days and weeks, and we'll talk to many of you right here in 90 days. And with that, Sally, I'll hand over to you to close out the call.

Great. Thank you, Mick. I'll echo Mix. Thank you to everyone for listening. We really appreciate your time and interest. If you have any additional questions, please don't hesitate to reach out directly to Investor Relations at ResMed.com or anyone on the ResMed IR team. Kevin, you may now close out the call.

Thank you. That does conclude today's teleconference webcast. You may just connect your line at this time and have a wonderful day. Thank you for your participation today.