ResMed Inc. Q2 FY2026 earnings call

• Operational excellence: Global supply chain team delivered 310 basis points of year-over-year gross margin expansion. Pipeline of margin improvement drivers will continue to be executed. - Innovation: R&D investments in next-gen masks, cloud-connected devices, digital health software. Launched F30i Comfort and Clear masks. AI application with Comfort Match, first FDA-cleared AI-enabled medical device. - SG&A initiatives: Focus on demand generation, capture, and curation. Supported holiday-related D2C campaigns. Expanded CME programs with 60,000+ completions and 77% of providers intending to change practices. - Clinical research: Evidence of link between sleep apnea and brain health, cardiovascular health, etc. ResMed Science of Sleep Apnea Advisory Group launched.

Group revenue for the December quarter was $1.42 billion, an 11% headline increase and 9% in constant currency terms. Globally, on a constant currency basis, device sales increased by 11%. Masks and other sales increased by 14%. Regionally, sales in U.S., Canada and Latin America increased by 11% other regions increased by 6% on a constant currency basis. 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.

• Expect gross margin to be in the range of 62% to 63% for fiscal year 2026. - Still expect SG&A expenses as a percentage of revenue to be in the range of 19% to 20% for fiscal year 2026. - Still expect R&D expenses as a percentage of revenue to be in the range of 6% to 7% for fiscal year 2026. - Estimate effective tax rate for fiscal year 2026 will be in the range of 21% to 23%. - Plan to repurchase shares for a total value of more than $600 million for fiscal year 2026.

• Need to closely monitor global trade environment and evolving regulatory landscape. For example, CPAP, APAP and bilevel products not included in CMS' upcoming competitive bidding program, but other regulatory and tariff uncertainties exist.

Q: Great. Thanks, guys. Appreciate it. Really strong U.S. mask number, I think it was 16%. Maybe if you could just help us out a little bit. Was that -- we're counting roughly a 400 basis point benefit from VirtuOx when you think about that? And then Mick or Brett, 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 if I could ask a follow-up.

A: Yes. I'll go first, Jon, and then hand to Brett to go through the -- with and without VirtuOx. As you said, the mask, accessories and other does include some contributions from the VirtuOx part. And so even taking that out, though, we had very solid growth. I'd say -- 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, yes, I think when we launch a new mask, it can have some good cycles. Our channel doesn't tend to really stock ahead 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 at the nasal interface, but also around 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 U.S. market as they clear at the end of the December 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 Jon mentioned on with and without VirtuOx?

Q: Congrats on an excellent 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. Maybe just an update on the impact to the front end of the funnel more specifically in the latest channel checks that we're hearing is that 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.

A: Yes. Thanks, Anthony. It's a really good question. And as you noted, we're now tracking 1.95 million patients in our claims data analysis there, and that shows that 10%, up to now, 11% higher start rate. So at the top of funnel, as you mentioned, there's just a really -- I would say a motivated patient group. We don't fully understand the psychology. We see the correlation, don't know the causality. But our assumption as we do our channel checks, talk to the doctors, talk to the pulmonary doctors, then the primary care physicians, who are starting to see the patients brought in by GLP-1s, 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 inspiration to come back into the health care 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 3-year data showing a 6% higher, I think, 6.2% higher resupply rate at 3 years. And so this impact 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 as Carlos Nunez said, Dr. Carlos Nunez is 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 it very closely. We've now got 3 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, 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.