Michael Farrell
Chief Executive Officer and Chairman of the Board at ResMed
Great. Thank you, Mike, and good morning and good afternoon as we welcome our shareholders and review ResMed's second-quarter fiscal year 2025 results. I'm pleased to share that ResMed delivered another strong quarter of global top-line and bottom-line growth.
We achieved excellent year-over-year performance in Q2 with solid revenue growth, improved gross margins, combined with disciplined investments in both R&D and SG&A, resulting in very strong operating profit and net profit performance. These results reflect the hard work of 10,000 plus ResMedians and our dedication to improving the lives of patients, improving the workflow of home care providers, physicians, payers and the communities that we serve in over 140 countries worldwide.
The foundation of our continued positive performance lies in our clear market-leading value proposition, including the sustainable competitive advantage that we have established with our best-in-class hardware and software products as well as our digital health ecosystem. Through cloud connectable medical devices, masks and accessories as well as digital platforms and ongoing investments in technology, including specifically ML, AI and generative AI. We are committed to helping hundreds of millions of people so that they can sleep better, breathe better and live longer and higher-quality lives.
Let me start with a high-level review of our financials. I'm proud to report that we delivered global revenue growth of 10%, reflecting positive and consistent contributions across our combined sleep health, breathing health and residential care software portfolio. Global device sales were driven by strong market performance across our US as well as Europe, Asia and rest of World markets, reflecting the continuing demand for our AirSense 10 and AirSense 11 platforms. Device sales remained strong, growing double-digits year-over-year. We increased the global availability of our AirSense 11 platform this quarter, launching in India during Q2.
We will have additional country launches of AirSense 11 planned throughout calendar year 2025. We make the market-leading sleep health platform with the AirSense 11. I want to make it clear that there is still strong global demand for the second-best device platform in the market and that is the AirSense 10 range.
Our masks and accessories business also had another strong quarter, delivering double-digit global growth in that category as well. Ongoing rollout of Bright tree resupply and SNAP technology have helped in our US market and we expect to maintain that momentum as we launch SNAP technology that can work on all HME management platforms throughout calendar year 2025. We achieved 230 basis-points of margin expansion in non-GAAP gross margin year-over-year to 59.2%, reflecting our ongoing focus on improving operating efficiencies.
With disciplined investments in R&D and SG&A, we achieved a 29% increase in non-GAAP earnings per share. Our new Head of Supply Chain, Shane Azi and his team are committed to driving increased supply and increased manufacturing efficiencies by investing in technology and infrastructure to power long-term cost improvements. By balancing this cost discipline with strategic investments in new product introductions, we will continue to drive sustainable and profitable growth for ResMed.
We have published peer-reviewed studies showing categorically that resupply programs drive patient adherence. They improve patient outcomes and they also lower long-term costs for the healthcare system. In the US, our digital health ecosystem, including both AirView for payers, for home medical equipment players, as well as for patients, the MyAir app. They continue together to power these resupply programs. We are actively investing in appropriate modified versions of the successful US resupply programs into our global markets.
Each of the 140 countries that we operate in have different regulatory, reimbursement, economic as well as cultural norms. It's our opportunity to leverage ResMed's knowledge of each of those markets and to optimize the best way for a person to regularly receive fresh supply for their life-changing and life-saving care.
ResMed is an innovation machine. Our ongoing investments of 6% to 7% of revenues into R&D is a key growth driver and a key part of our long-term success. With trailing-12 months revenue around $5 billion, that's $300 million to $350 million that we invest annually into R&D, creating the smallest, the quietest, the most comfortable, the most connected and the most intelligent devices, masks and software solutions.
During the quarter, we launched the Air Touch N30i to select markets. The Air Touch N30i is a world first from ResMed with its unique fabric-based patient interface. My philosophy is this. We sleep on cotton sheets. We have fabric covers for the pillows that we sleep on. Why can't we have sleep apnea therapy that is just as comfortable as that? Early feedback from respiratory therapists, from physicians and from patients directly is that the comfort and fit of the AirTouch N30i is outstanding.
This new technology could permanently change the basis of competition in mask innovation. It's one thing to create a prototype of a mask. It's another thing to have manufacturability at-scale with top-quality, top comfort, excellent seal and great long-term patient outcomes. Watch this space for our new to world fabric based AirTouch technology launched first year-on the Air Touch N30i platform.
During the quarter, we announced another collaboration with the Apple Vision Pro team with the launch of what we call the Contour headstrap. This is a premium accessory for the Apple Vision Pro. ResMed, as all of you as shareholders know, is the world-leader in providing facial interfaces in the field of sleep health and breathing health and healthcare technology at-home. This is great to see that now a top consumer tech company like Apple has chosen to partner with ResMed on an interface that we make that delivers a superb balance of softness and support for the extended wear time that users of the Apple Vision Pro need.
The Apple Vision Pro accessory is crafted with a blend of ResMed's exclusive ultra-premium materials and designed to be gentle on the skin. This project shows that ResMed's expertise is applicable outside a pure-play in medical technology and it's part of this convergence of med-tech and consumer tech and the learning that will provide for both the medical and consumer fields is an important part of this opportunity. Watch this space.
ResMed had a very strong presence at the Consumer Electronics Show or CES in Las Vegas at the start of 2025 just a couple of weeks ago. We provided a digital sleep lounge that offered people a place to go to relax and to learn about the importance of sleep health, of breathing health and care delivered at-home. Across CES display booths, there were many consumer tech companies showing their latest and greatest sleep wellness and sleep monitoring solutions from Apple to Samsung to Google's Fitbit, Aura Rings, Garmin, Whoop and beyond. We are very excited to have sleep Health become mainstream.
Interestingly, ResMed products were on display in the massive Samsung booth. Samsung was touting their new Galaxy Watch's sleep apnea detection capability and illustrating the link between their Galaxy Watch ecosystem and ResMed's market-leading products for the treatment of sleep apnea.
I'll talk more about sleep apnea detectors and this convergence of med-tech and consumer tech a little later. But now let me provide a brief update on GLP-1s, the new class of pharmaceuticals that are focused on weight-loss, diabetes and metabolic control, cardiovascular outcomes and now also sleep apnea. I'll then come back to consumer wearables that can detect sleep apnea.
So late during our Q2 on December 20th, Eli Lilly gained FDA approval for the use of, a GLP-1 in-patients with obesity and moderate-to-severe sleep apnea with a reduced calorie diet and physical exercise. It's interesting to note that the OSA trial excluded patients with diabetes. In the lead-up to its launch to consumers, Eli Lilly's early educational documents that are available to the medical community on the Eli Lilly website includes a patient guide for the treatment of obstructive sleep apnea or OSA.
It was encouraging to see that Lilly followed the American Academy of Sleep Medicine or AASM guidelines that explicitly state that positive airway pressure devices are the frontline and gold standard for treating sleep apnea and that these PAP devices, CPAP APAP have the highest efficacy when used as directed.
Beyond just the guidelines, their own FAQs on the Lilly website informed physicians and patients that CPAP devices are now smaller and quieter and that CPAP masks have been refined to increase comfort. We agree. We welcome the opportunity to educate potential patients on the benefit of all therapy options for the treatment of obstructive sleep apnea, starting with the gold standard frontline CPAP, APAP bilevel, then considering the next most efficacious dental devices. And finally, looking at pharmaceutical or even surgical options.
On January 14, 2025, the AASM issued a quick reference guide to providers, considering the use of new drugs for the treatment of OSA. The AASM continues to emphasize the use of positive airway pressure as the frontline treatment and suggests that weight-loss drugs may be useful as an adjunctive or combination therapy.
Our experience with bariatric surgery patients these last two-plus decades and now with these latest generation GLP-1s these last five-plus years is that when someone loses weight, that doesn't change their age, that doesn't change their gender. That doesn't change most importantly in this context, their cranial facial anatomy.
These are key risk factors for sleep apnea. We are looking-forward to addressing the educational gap on the prevalence and treatment of obstructive sleep apnea with continuing medical education or CME programs that we are aiming specifically at primary-care physicians and we're especially targeting those who are high-volume, currently high-volume GLP-1 prescribers. They will be the frontline for the patients that pharmaceutical companies will attract as they ramp-up their own consumer advertising throughout calendar year 2025 and beyond.
We are now tracking 1.2 million patients who have had a prescription for the latest generation GLP-1 medicines and who also have a prescription for positive airway pressure therapy. The data are clear in this real-world analysis and that is that these people are very motivated. In fact, they are more than 10% more likely to start PAP therapy. That motivation versus a garden variety patient remains.
One year later, we continue to see north of 3% higher not just adherence, but actually buying masks and accessories. Then the curves separate with a greater than 5% increased propensity for resupply at two years. These data have now been steady with the same trend, plus or minus a couple of tens of basis-points as we have grown our analysis from a year-ago with 300,000 plus patients to now tracking over 1.2 million patients.
One thing is clear, the real-world evidence shows that the combination of a GLP-1 prescription and a PAP prescription is powerful for patients with obstructive sleep apnea. They start our therapy more and adhere more to PAP therapy over the long-term. And we know that adhering to PAP therapy over the long-term saves healthcare costs, improves patient quality-of-life outcomes and lowers patient mortality. We believe that GLP-1s are helping activate a whole new population of patients into the healthcare system that weren't coming in before and ResMed is well-positioned to support them.
Okay. Next, let's briefly return to the consumer wearables megatrend. The velocity of change in the way the world operates in consumer tech and in health tech is amazing and ResMed is right in the nexus of that. In fact, we are driving adoption of basic ML and AI broadly into our software offerings across-the-board and we are pioneering generative AI with our commercially available product Dawn, which I see is just the start of what I call the Sleep Health Concierge platform. More to come on that later. But the bottom-line is consumers are more focused than ever on tracking their personal health, their personal wellness and their personal well-being.
The Samsung Galaxy Watch was the first to get de novo FDA clearance for detecting OSA early in 2024 and Apple announced sleep apne detection from the main stage as they launched the latest generation Apple Watch in September 2024. The data tracked by those two leading wearables will provide the opportunity for their millions -- no, their hundreds of millions of users to potentially detect sleep apnea. This is not a one-quarter step-change, but a chance for gradual and steady long-term demand-generation for sleep apnea patients that benefits ResMed.
Of course, the information goes both ways. Patients can get their MyAir scores from the ResMed MyAir app, but they can also get them from their Apple Watch. They can get their Myers scores on their Samsung Galaxy Watch. We know that this type of gamification of healthcare can help drive adherence. We expect more-and-more people are going to want access real-time to sleep data as the interest in improving sleep continues to grow. As I said earlier, it's not just these two leading tech players in Apple and Samsung, but it's also Google's Fitbit, Aura's Ring, Whoops device, Garmin devices and beyond.
We expect that they will all continue to expand their sleep architecture and sleep assessment capabilities. And my personal bet is that more than a few of these other wearable players will add sleep apnea detection in 2025. We see this investment by consumer wearables companies and pharmaceutical companies in sleep health as a once in a generation opportunity for sleep apnea awareness. We believe that these technologies will help drive more potential patients to seek out information regarding their sleep health and their breathing health.
ResMed's obligation is to help sleep health concerned consumers to find their own pathway to appropriate diagnosis and treatment for sleep apnea, where ResMed leads the world with the most clinically effective, the least invasive, the most proven and the most cost-effective solutions on the planet.
We don't believe that these two megatrends will drive a simple one-and-done or onetime step-change in-patient flow. Rather, we believe that this will be an increase from baseline patient flow that starts over one, three, five quarters as these technologies roll-out, but has durability over one, three, five years and beyond. We are creating the infrastructure for demand-generation, demand capture and demand conversion to help these people find the care that they need. Watch this space.
So turning now to our long-term vision that we outlined at our Investor Day at the New York Stock Exchange last September. Our ResMed 2030 strategy is crystal-clear. It's focused on three key pillars. Number-one, growing and differentiating our core sleep health and breathing health business. Two, expanding into adjacent areas, including respiratory insufficiencies such as COPD, including insomnia, including and beyond. And three, leveraging our leadership in digital health to drive better outcomes for patients, for providers and for payers.
So a key component of pillar number-one is driving the value of the ResMed brand. That decision, that moment of truth when a physician writes a script for ResMed, when a respiratory therapist recommends a ResMed mask solution, when a healthcare provider chooses a ResMed digital health solution or where a consumer anywhere in the 140 countries where we sell our products and services establishes a personal relationship with the ResMed brand.
All of these moments added together, that is the equity that is built into the ResMed brand. We will continue to build our ResMed brand awareness and evolve our brand to be more future-focused and closer to the customer. I want to make it clear that our marketing tech team will ensure that there is ROI return on investment for every single demand-generation, every single demand capture and every single demand conversion project as we move more-and-more people into the diagnosis and treatment funnel.
With over 1 billion people suffocating with sleep apnea worldwide, we have a lot of runway ahead in our core market. It's great that we have a couple of megatrends on our side to help. The global demand for sleep health and breathing health solutions is growing in our mission to help people sleep better, breathe better and live high-quality lives to their fullest potential continues to drive everything that we do. But when you combine those opportunities from our core sleep apnea market with pillar number two, that is expanding into new adjacencies. The future couldn't be brighter.
We will continue to invest in our cloud-connected non-invasive ventilators for respiratory insufficiency, including COPD and neuromuscular disease. We will continue expanding our digital health and medtech solutions for insomnia patients. I believe we're just at the start of that journey of that awful disease that we need to treat the inability to get to sleep, stay asleep and wake-up with refreshing sleep and beyond.
And for the generation of people who want to age in-place to receive healthcare at the best place, lowest-cost, lowest acuity and highest-quality of life, which is their home. We have our market-leading software solutions like Brighttree and we are best-positioned to lower costs, improve efficiencies and improve long-term outcomes.
We create life-changing healthcare technologies that people love. In the last 12 months, we provided over 147 million people with a product such as a CPAP, an APAP, a bi-level, a non-invasive ventilator, a mask, a cushion, a humidifier, other accessories or a digital health solution such as Maya, AirView,, Brighttree, MEDIFOX and beyond. Our ambitious goal is to empower that impact and to empower 500 million people to reach their full potential in 2030 with sleep health, breathing health and healthcare technology provided to them right where they live.
With our strong financial foundation, our innovative product pipeline and our expanded digital health ecosystem, we are well-positioned to meet and beat our goals. Thank you to all the 10,000 ResMedians for your hard work and dedication to make our mission possible, and thank you to our shareholders for your continued trust and support of our global ResMed team.
With that, I'll hand the call over to Brett and Sydney for a deeper dive into our financials and then we'll open up the floor to questions. Brett, over to you.
