Michael Farrell
Chief Executive Officer at ResMed
Thanks, Amy, and thank you all for joining us today as we review the results for the fourth quarter of our fiscal year 2022 ended June 30. On today's call, I will provide a brief high-level overview of our financial results. I'll then review progress towards our ResMed 2025 strategic goals, and then discuss our actions to navigate through ongoing industry and supply chain challenges. Brett will then join the call to review our financial results in more detail.
Okay. Let's jump right in. Our fourth quarter results reflect strong performance across our business with high single-digit revenue growth in both our sleep and respiratory care business segment as well as in our Software-as-a-Service business segment. Our ongoing growth reflects our global team's relentless focus to solve very complex supply chain problems and find alternate design and engineering solutions to address the incredible industry challenges that we have faced over the past year and beyond.
The global supply chain environment remains very much in flux across multiple industries. We are starting to see indications that the macro environment is improving, particularly semiconductor availability. However, we're mindful that even as macro trends start to improve, we still need our supplier partners to prioritize med tech component needs over other nonlife-sustaining industries.
Demand in the market remains very strong. We've been able to mitigate some of the electronic component bottlenecks with the launch of our redesigned card to cloud AirSense 10 devices introduced to the market midway through our fourth quarter. As you can imagine, clearing one bottleneck simply brings the next rate-limiting step to the forefront. Our team is actively working to clear as many bottlenecks as they can as quickly as possible.
On the positive news side, the redesign, reengineering and launch of the card to cloud device greatly improved our ability to meet the incredible demand that we see in the marketplace. During the last month of the quarter, during June, we were able to allocate more products to our customers than in recent months and in recent quarters. We're not out of the woods yet, but the compass is pointing to true north and we are on top of it.
Throughout this crisis of demand and supply, our established ResMed guiding principles remain the same: that is that we will give priority to the production and delivery of devices to meet the needs of the highest-acuity patients first. As we discussed last quarter, we are still facing a challenging freight environment. The key challenges of sea freight and airfreight are due to reduced availability and elevated prices. These forces are impacting our ability to efficiently get components into our factories and then to get the finished goods out of those factories and ship to warehouses and ultimately to customers.
We continue to do everything that we can to secure additional supply to ultimately further increase production of our devices. As highlighted on previous calls, this includes a combination of five concurrent work streams in supply chain. One, we are locking in the flow of our existing parts from existing suppliers. Two, we are establishing flow of existing parts from new suppliers. Three, we're validating and verifying new parts from existing suppliers. And four, we're validating and verifying new parts from new suppliers. And then finally, five, we're reengineering designs to mitigate the major supply bottlenecks.
In summary, we're making good progress with these five lines of work, and we've been able to offset some of the impacts of the component shortages to best support patients, providers, physicians and beyond. In addition to the successful launch of our redesigned card to cloud device last quarter, we also continue to support our customers with our market-leading mask portfolio. The supply -- despite the challenges we faced with reduced new patient setups due to a competitor recall, we continue to see strong uptake of our mask solutions as our customers want the smallest, the quietest, the most comfortable, the easiest to fit and the most highly patient-rated masks in the market, and those come from ResMed.
Peer-reviewed and published studies have clearly shown that patients that are on a ReSupply program are much more likely to remain on sleep apnea treatment adherent for the long term than those that aren't on a ReSupply program. Our home care provider customers not only want to put new patients on therapy, they want to keep those new patients and all of their existing patients on therapy over the long term. And the ultimate goal there is to improve patient outcomes to lower total health care system costs as well as to drive their own recurring revenue streams.
We recognize that this demand outstripping supply situation remains a very difficult temporary state for all customers, including physicians, home medical equipment providers, payers, health care systems as well as the most important customer of all, the patient. We continue to work across the industry to be the best partner and the best solutions provider for all customers. We expect demand to be greater than supply for at least 12 more months, driven by the recall of one of our competitors primarily. The net result is that every device that we here at ResMed make during these next 12 months, we will sell as it leaves the production line to a warehouse and is shipped to a customer. We are looking at every angle to maximize supply and address this incredible demand these next 12 months.
As a company, we are learning every day. And as an industry, we will get through this challenge stronger than ever. Our goal is to ensure that every person gets the care that they need, where they need it, when they need it, and we won't stop until we achieve that goal.
Let's now briefly review the COVID-related market impacts on our industry. Most of the 140 countries that we operate in are now above 100% of pre-COVID levels of patient flow. It is noted that in some regions and some countries, we see ongoing surges of new COVID variants with some select governments continuing to impose COVID restrictions. In these areas, patient flow remains below pre-COVID levels. But across the board, we are seeing ongoing adoption of digital health solutions for screening, for diagnosis and for remote patient setup and monitoring as well as well-established COVID cleaning protocols at sleep labs and physician offices. These trends continue to minimize the impact of new variants and diminish the absolute impact of COVID on our industry over time.
Let's now step back a little and review ResMed's top three strategic priorities: number one, to grow and differentiate our core sleep apnea and respiratory care businesses; number two, to design, develop and deliver world-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 that is delivered outside the hospital and especially in the home.
The launch of our next-generation device platform called the AirSense 11 continues to go very well. It remains somewhat difficult to differentiate the success of the launch from previous generations with the incredibly high demand we're seeing around the world. Every Air 11 we make is sold immediately as it leaves the manufacturing floor. However, when we drill into patient feedback data, we see that patients are very excited about the platform, including the Air 11 device itself and the myAir software solutions surrounding it.
During the fourth quarter, we introduced the AirSense 11 into several new countries outside the United States where we first launched the platform, including France, Switzerland and across the Nordic countries of Northern Europe. We look forward to further expansion into additional countries as we progress through our fiscal year 2023.
One area that we are closely watching is patient adoption of digital health solutions. And to that point, adoption rates of the myAir app by new patients set up on therapy with the AirSense 11 continue to be more than double that of the AirSense 10. This is because the AirSense 11 platform is designed to enable and encourage patients to engage directly with their own health care.
The bottom line is that people want personal care. They want their own data on their own app on their own phone. And they love the coaching and personal engagement of our ecosystem. They are voting with their digital presence, and repeat usage of the myAir app is stronger than ever. More patients on myAir means more patients are fully engaging with ResMed's software technology. This has led us to now passing over 12 billion nights of sleep apnea and respiratory care medical data in the cloud. Our software solutions, including myAir and AirView, are delivering a better patient experience, better efficiencies for home care providers and physicians, and most importantly, greater long-term adherence to therapy for the patient.
Another key aspect of our long-term growth strategy is driving awareness and increasing the flow of patients through the top of the sleep apnea diagnosis funnel. COVID-19 has advanced awareness, adoption and acceptance of digital health. For our industry, this is specifically seen in the increased usage of home-based sleep apnea tests. Although new patient demand gen is clearly not a top priority in the immediate term given the current supply-demand imbalance, we are maintaining our focus in this area and our long-term investments so that we are ready when conditions improve and we can pivot and fire up our portfolio of demand-gen models and thereby ensure sustainable long-term pipelines of new patients for our industry.
With over 1 billion people suffocating every night with sleep apnea worldwide, we see this work as an opportunity, but also an obligation as the market leader in the field. We are innovating with health care system partners and all of our customers to create an even more efficient and effective approach to sleep apnea patient identification, screening, diagnosis, treatment and management. We will continue to invest in technology that enables an end-to-end, seamless, digital experience for patients and their caregivers.
As we consider opportunities to address the wider sleep market, we are investing in opportunities to address another major sleep disorder epidemic, that of insomnia. Insomnia has been shown in clinical research to occur in combination with sleep apnea, and that's a deadly combination. To this medical need and this medical opportunity, just last week, we announced the acquisition of a company called mementor. This is a German and Swiss digital health start-up that develops and sells digital medical products in the field of sleep medicine and beyond. mementor offers the first and so far the only permanently listed digital health application in the field of sleep medicine that is reimbursed by the statutory insurances in Germany. The acronym for these German digital health apps is DiGA, D-I-G-A.
This acquisition furthers our efforts to diversify and accelerate growth of our ResMed business in Germany and the potential opportunity with DIGA to expand this offering into other markets around Europe and around the world. There's an unmet need in diagnosing and treating people with sleep problems, such as sleep apnea and insomnia, the two biggest sleep problems on the planet and especially when there's an overlap of these chronic conditions. This acquisition of mementor broadens our focus in this vertical from a sleep apnea therapy company to a true sleep therapy company. More to come as we pursue growth in this exciting space in Germany and beyond.
Growth trends in the global sleep apnea market are in a state of flux in the short term given the market supply-demand dynamics that we talked about and the recall from one of our competitors. Long term, we estimate the underlying growth trends in the global sleep apnea market to be very strong; in the mid-single-digit range for devices and the high single-digit range for masks. As always, our goal is to drive market demand and to meet or beat market growth through generation of new patients and sales of our market-leading therapy solutions and the introduction of new innovations and alternative treatment pathways that enable us to address even more patients with undiagnosed sleep apnea.
Current industry dynamics indicate that we have a multiyear opportunity to drive even greater ongoing acceptance and adoption of our solutions to further solidify our market leadership position. I've challenged our global ResMed team to strive for even stronger growth in the coming months and quarters and the fiscal year and beyond. I'm telling them to go get the share, to go lock in that share with digital health with value that speaks for itself with lower costs, better outcomes for patients and increased efficiencies for the health care system.
Turning to a discussion of our respiratory care business. I want to focus on our strategy to better serve the 380 million people worldwide with chronic obstructive pulmonary disease, or COPD, with many others with neuromuscular diseases and respiratory insufficiency and the 330 million patients that suffer from asthma worldwide. Our goal is to reach hundreds of millions of patients with our respiratory care solutions, including noninvasive ventilation as well as life support ventilation; as well as newer therapeutic areas, such as our cloud-connected pharmaceutical delivery solutions from our Propeller team; and high-flow therapy offerings that we are conducting clinical trials on right now, including our product platform called Lumis HFT.
Demand for our core noninvasive ventilation and life support ventilation solutions for COPD and neuromuscular disease and beyond remains solid throughout the quarter. Ventilation solution demand was supported by the continued success, adoption and scaling of our AirView for ventilation software platform by customers as they experience the benefits of remote monitoring to better manage their ventilated patient populations through remote access to clinical data as well as customizable physician notifications.
Let me now review our Software-as-a-Service business for outside hospital care. Our SaaS business achieved another quarter of high single-digit growth year-on-year across our portfolio of verticals, including home medical equipment as well as facilities-based and home-based care settings. Our SaaS customers recognize the need for technology solutions to solve their challenges with efficiency and scale, and our software, services and solutions help them achieve both.
The continued growth of home-based care is providing tailwinds for HME solutions as well as home health solutions. We continue to grow with our customers as they increase their utilization of our software and our data solutions to improve and optimize their business efficiencies and their patient care, including Brightree and Snap ReSupply offerings.
As businesses continue to open up, we've been able to visit customers more and more in person as well as attend trade shows, host conferences, where the interest in our Brightree, MatrixCare, HEALTHCAREfirst and Citus offerings remain very strong.
Earlier this week, I personally attended the Inspire 2022 Conference in Austin, Texas. This is MatrixCare's annual customer summit, and it was in person for the first time since 2019. I had the pleasure and the opportunity of presenting and engaging in person with over 600 customers and partners from home health, skilled nursing, senior living, private-duty home care, life plan community verticals and beyond. The passion for caring for each patient that was involved in every conversation I had this week, the openness, the sharing and the ability for us as a community to move patients to lower-cost, lower-acuity and higher-quality outcome cares, those settings was palpable at Inspire 2022. I came away from that conference even more energized and excited about the opportunities that we have to support customers across the care settings with our digital health and our software solutions.
The ultimate goal is that customers of our Brightree- and MatrixCare-branded solutions can provide better care for the people that they serve. Given the passion of our customers and the service levels that we're providing and the product pipeline that was discussed at this conference, I expect we'll continue to not only take share from our competitors across the portfolio, but even drive growth with more tech solutions being adopted by customers across care settings.
The COVID-19 pandemic has been and remains challenging for facility-based verticals in our SaaS business, particularly skilled nursing and to a lesser extent hospice, where patient census rates below -- remain below pre-pandemic levels. As COVID restrictions continue to ease and our customers improve their line of sight to better conditions and better cleaning, we are seeing pent-up demand for technology investments in these facility-based areas. This provides opportunities for us to sell more services and more tech solutions to existing customers as well as to increase our new customer pipeline.
One MatrixCare customer at Inspire 2022 grabbed me at the conference, and he described what he called a rocket ship acceleration of demand at skilled nursing tech solutions for those skilled nursing customers. This is a really welcome sign for sustainable growth across our SaaS portfolio.
So as we look at our portfolio of solutions across care settings, we expect our SaaS group revenue to maintain high single-digit growth throughout fiscal year 2023. As always, our goal is to meet or beat market growth rates, and we will continue to invest and innovate to grow the market and to take share. Our growth in SaaS will come through organic and inorganic growth.
We've long talked about our desire to expand our SaaS offerings internationally if and when we found the right opportunity for ResMed. In early June, we announced the acquisition of MEDIFOX DAN, the leading provider of end-to-end software solutions for home health and for nursing home providers in Germany. We've been closely watching the evolution of the German digital health system and the associated outside hospital health care system for many years. And we've actually been closely watching MEDIFOX DAN for a number of years. This is our first investment in a pure-play SaaS business in Europe, and it's a great opportunity to expand our reach in this business globally.
We're starting in Germany as it is not only a market where we're vertically integrated in our core business of sleep and respiratory care, it's also one of our largest markets globally and a country where the government is investing in digital health reimbursement. We're excited about the opportunity to accelerate innovation and recurring revenue business models through this acquisition in Germany. As we discussed on the acquisition call that we had in June, MEDIFOX DAN will be immediately accretive to ResMed at close. Progress towards closing this acquisition is moving ahead as expected. We remain on track to close by the end of December 2022 in our fiscal 2023 second quarter.
We are the leading strategic provider of SaaS solutions for outside hospital care globally, and we provide mission-critical software across a broad set of very attractive markets. We are well positioned, and we have created a differentiated value for our customers and for ResMed with our SaaS business investments. I'm excited about the future of our SaaS business. And Bobby Ghoshal and the excitement that he had on Inspire 2022 with the crowd for both MatrixCare and Brightree was an inspiration for me as the CEO of the parent company but also for the whole team there. It's an important part of ResMed's future growth, and I see a lot of opportunities to invest in lower-cost, lower-acuity settings of care. We believe that this is the future of health care delivery, and that's where ResMed competes and it's where ResMed wins.
To bring it all together, our strategic focus remains on personal care that is patient-centric, physician-centric and provider-centric. This triple-pronged approach, combined with our unique ResMed culture, means that we are very well positioned to continue winning in the vastly underserved medical markets of sleep apnea, COPD, neuromuscular disease, asthma, insomnia and beyond.
We are transforming outside hospital care at scale. We're leading the market in digital health technology with over 12 billion nights of medical data in the cloud and nearly 18 million cloud-connectable medical devices on people's bedside tables in 140 countries worldwide. We are unlocking value by using de-identified data to help patients, providers, physicians, payers and entire health care systems. We have invested in the cybersecurity, the privacy, the cloud ops, the data analytics, the AI/ML capabilities to do this at scale, unmatched by any competitor. And we are increasing our investments and our lead each and every day.
Our two key global customer-facing software products, AirView and myAir, are 100% in the cloud. Our devices are both cloud-connected and cloud-enabled, making ResMed itself a market-leading cloud-connected and cloud-enabled digital health company. Our mission and goal to improve 250 million lives through better health care in 2025 drives and motivates ResMedians every day. We made excellent progress towards that inspiring goal this last fiscal year 2022. We changed nearly 141 million lives these last 12 months with our devices, our mask systems, our software solutions, helping people sleep better, breathe better and live higher-quality lives with outside hospital care.
Before I hand the call over to Brett for his remarks, I want to once again express my sincere gratitude and thanks to more than 8,000 ResMedians helping their customers in 140 countries. Your perseverance, hard work and dedication has been impeccable. Thank you.
With that, I'll hand the call over to Brett in Sydney, and then we'll open up for Q&A. Brett, over to you.
