Q3 2026 Earnings Call Transcript

Welcome to the Q3 Fiscal Year 2026 ResMed Inc. Earnings Conference Call. My name is Daryl, and I will be your operator for today's call. At this time, all participants are in a listen-only mode.

Also, please note this conference call is being recorded. Later, we will conduct a question-and-answer session. I will now turn the call over to Sally Schwartz, ResMed Inc.'s Chief Investor Relations Officer.

I want to welcome our listeners to ResMed Inc.'s third 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 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 release 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 a complete discussion of 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 Michael J. Farrell.

Thank you, Sally. Before we get into the details discussing our results for the quarter, I am sure all of you have had an opportunity to see our press release and our announcement that Brett will be retiring, and Aaron Blumer has been appointed our next chief financial officer here at ResMed Inc. On behalf of our ResMed Inc. Board and over 10 thousand ResMedians in 140 countries, I would like to thank Brett, who I have had the privilege to partner with for 26 years, including the last 55 quarters as a CEO and CFO team.

Brett has been an integral part of my executive team that has delivered growth, expanded access, and improved hundreds of millions of lives. Over two decades as ResMed Inc.'s CFO, Brett has built a financial foundation that has allowed us to deliver strong growth, robust free cash flow, and best-in-class operating margins. Brett has also helped shape the company's culture, and his legacy is embedded in our impact on the lives of many millions of patients worldwide. Brett leaves ResMed Inc. in a position of strength with a very disciplined and global financial team.

I am tremendously grateful to Brett for his service, his leadership, his friendship, and his commitment to ResMed Inc. I would also like to welcome Aaron Blumer to ResMed Inc. Aaron brings more than 17 years of global financial leadership, most recently serving as the CFO of Exact Sciences. He has a strong track record of driving strategic growth, operational excellence, and financial discipline across complex global organizations, including prior financial leadership roles at 3M and at Baxter.

Aaron's international perspective will be invaluable here at ResMed Inc. as we continue to execute on our global 2030 strategy to accelerate our business and to deliver long-term value for our shareholders around the world. We look forward to introducing you to Aaron over the coming quarters. Okay. Now turning to the third quarter.

We delivered another set of strong results, including 11% growth in headline revenue, or 8% growth on a constant currency basis. We delivered operating leverage leading to margin expansion both year over year as well as sequentially, resulting in 21% growth in non-GAAP earnings per share. A huge thank you to the global ResMed Inc. team for their steadfast dedication in serving patients in more than 140 countries worldwide. ResMed Inc. continues to build the world's leading digital health ecosystem, encompassing sleep health, breathing health, and healthcare technology delivered in the home.

I would like to return to the three key themes that I have been highlighting over the past year. One, that ResMed Inc. is an operational excellence machine and an innovation machine. Two, that ResMed Inc.'s robust free cash flow and strong balance sheet position us to both invest in the business and return capital to our shareholders. And three, that ResMed Inc. remains a compelling investment opportunity, especially amidst global macro uncertainty.

We just continue to deliver the results. I will address each of these three themes in my prepared remarks here before we go to Q&A. Our gross margin expansion in the quarter was strong: 290 basis points year over year and 50 basis points of gross margin expansion sequentially. These results demonstrate the operational excellence that is a ResMed Inc. hallmark.

We have continued to execute on our pipeline of supply chain optimization initiatives. These efforts, along with our experience from past supply chain perturbations including COVID impacts, the major recall of a competitor, and semiconductor chip shortages, position us well to navigate the current geopolitical uncertainty and any other external impacts to our resilient global supply chain. ResMed Inc. also remains an innovation machine. We have continued the global rollout of our portfolio of novel fabric-based masks.

These masks are designed to deliver an elevated experience for patients, and they are changing the basis of competition in mask technology. The AirTouch N30i and, more recently, the F30i Comfort as well as the F30i Clear have achieved strong early adoption combined with incredibly positive patient feedback and home care provider feedback. And now we also have real-world data that show that the AirTouch N30i drives 6% higher 90-day compliance than its silicone equivalent. Those of you that truly understand the clinical and business relevance of adherence know that those 600 basis points of extra compliance will mean a lot as this technology expands.

Adherence is the single biggest driver of lifetime value for patients, for physicians, for HME providers, and for ResMed Inc. Watch this space as fabric technology expands its impact in our full face category with the F30i product lines, both the F30i Comfort and the F30i Clear. On the device side of our business, we have made further progress with the global rollout of the AirSense 11 platform, including most recently in market in Latin America, and just this month in our fast-growing China market. For our China market, as we have discussed before, we leverage a local digital ecosystem, intentionally separated from our global ecosystems, including integration with platforms such as WeChat that create a personalized patient engagement experience.

This is an element of our broader strategy to scale our global ecosystem model encompassing devices, software, and data, yet also customized for ecosystem models that target local market needs. ResMed Inc. also continues to drive awareness in the sleep medicine clinical community. Our continuing medical education, or CME, programs include sleep medicine physician society-approved guidelines, including the benefits of CPAP, APAP, and bilevel therapy as the clinical gold standard, the frontline treatment for any patient diagnosed with sleep apnea. Our sleep apnea educational courses have now been completed more than 80 thousand times by more than 45 thousand unique clinicians.

Surveys at the end of these courses show that 78% of these providers intend to change their clinical practices related to improving sleep health and breathing health based on what they learned. We are following up with these clinicians to ensure that their intentions can translate into actions that benefit patients on their screening, diagnosis, and prescription journey. Early feedback suggests more patients being assessed for OSA and higher numbers of OSA diagnoses are occurring. We see this in our VirtualOx numbers as well.

We will remain laser focused on continuous improvement of the sleep apnea pathway to ensure patients who need CPAP, APAP, and bilevel therapy can readily access it and be treated for life. On the clinical research front, we continue to invest in and track important studies that provide new evidence in sleep health. Last quarter, I noted a study in JAMA Neurology where researchers found that early treatment of OSA with CPAP may reduce the risk of developing Parkinson's disease. Further, in the field of neurology and brain health, we are tracking an increased volume of clinical literature showing that sleep apnea is linked to higher risks of Alzheimer's disease, as well as the broader field of dementia.

Specifically, a large population-based study recently published in the medical journal Thorax analyzed data from more than 2 million adults in the United Kingdom and found that obstructive sleep apnea was associated with an increased risk of all-cause dementia and vascular dementia. Notably, individuals with OSA who were treated with CPAP did not show an elevated risk of dementia compared with matched controls that did not have CPAP treatment. This is huge. Additionally, a meta-analysis published in the journal GeroScience showed that individuals with apnea have a 33% higher risk of developing dementia, and OSA was associated with a 45% increased risk of Alzheimer's disease.

The growing body of evidence supports increased focus on screening, diagnosis, and treatment of sleep apnea as part of broader health and aging strategies. This is an area of rising cost and rising relevance for payers, providers, health care systems, patients, as well as their caregivers and loved ones. On the GLP-1 front, I would like to share some new data with you. We looked at patients on PAP who subsequently start GLP-1 therapy to see what happened to their PAP use versus a control group that only has PAP therapy.

For this real-world analysis, we analyzed a cohort of n = 1.7 million de-identified patient records and focused on the clinical and business-relevant outcome of mask and accessory resupply. Our findings were that PAP patients who subsequently start GLP-1 therapy show higher PAP adherence rates than patients on PAP alone. Specifically, the two-year resupply rates are 5.1% higher, and the three-year resupply rates are 6.2% higher for patients who are on PAP and then start GLP-1 therapy versus patients on PAP alone. As highlighted by Eli Lilly's own clinical trials in this space, these two therapies are better together.

This makes sense. Sleep apnea risk factors always include age, gender, craniofacial anatomy, as well as weight. I would say, therefore, OSA very often persists after even very significant weight loss and still needs to be treated. CPAP, APAP, and bilevel therapy remain the gold standard for treatment of OSA.

And the reason is simple: because these therapies are the most efficacious. Period. Building on our ongoing real-world analyses in this space, and the ongoing growth of our own mask and accessories business over the last number of quarters and years, we continue to see that patients on a GLP-1 both initiate CPAP therapy more and stay on CPAP longer. As an update to our ongoing large-scale claims analysis, data that are built from a claims database of over 30 million patients, our specifically analyzed cohort includes n = 2.1 million de-identified patients.

Our latest update to this analysis is that we are consistently seeing that patients who have scripts for both PAP and GLP-1 are 11% more likely to start on PAP therapy than patients who have a script for PAP alone. They are also more than 3% more likely to have a resupply event at the one-year time period, and more than 6% more likely to have a resupply event at the three-year time period. These data have remained consistent over the last years, as have our very strong masks and accessories business growth. The data are in sync.

We believe GLP-1s are truly a megatrend, and a once-in-a-generation demand-gen opportunity for ResMed Inc. Both GLP-1s and wearables alike are driving more patients to talk with their doctors and ultimately, we believe this will lead to more patients coming into the ResMed Inc. ecosystem. In order to ensure that these patients receive the care they need, we are making meaningful investments both organic in our business and inorganic in capturing and channeling the increased consumer awareness. We want to educate the clinicians to manage the interest and questions that come to them, and we want to create life-changing healthcare technologies that people love.

Watch this space for more investments and partnerships from ResMed Inc. in this exciting area of better helping the 1 billion people worldwide impacted by sleep apnea to find their way to screening, diagnosis, and ongoing therapy from ResMed Inc. This theme dovetails with my second message, which is that ResMed Inc.'s strong free cash flow generation and robust balance sheet provide us with significant flexibility to both invest in our business and to return capital to shareholders. We will continue to invest in our digital sleep health concierge capabilities, expanding the ecosystems to help patients quickly move from awareness through testing, all the way to being adherent on our therapy for life.

I am excited to announce today that we are expanding our leadership across the broader sleep health market. This week, we signed an M&A deal to acquire Noctrix, a company with an FDA de novo classified medical device that treats restless leg syndrome, known in the medical community by the acronym RLS. RLS is the world's third most prevalent sleep disorder after sleep apnea and insomnia. RLS impacts approximately 7% of adults globally and around 17 million people in the U.S. alone.

RLS has meaningful overlap with our core market of obstructive sleep apnea. RLS treatments from Noctrix are noninvasive, clinically proven, and drug free, just like our CPAP, APAP, and bilevel therapies. RLS prescriptions are written predominantly by sleep physicians, and the flagship product from Noctrix, called NIDRA, flows through the same HME/DME delivery channel that we here at ResMed Inc. lead in market share for our other sleep products. We expect to close this transaction on or around June 1, 2026. Brett will talk more about the expected impact to our financials in a few minutes, and we can discuss this strategic tuck-in acquisition in further detail during Q&A.

I will just say this: its revenue growth rate is higher than ResMed Inc.'s, and its gross margin is higher than ResMed Inc.'s. We are very excited about this tuck in. The reach of our ResMed Inc. brand among sleep physicians and HME providers, as well as our national and international distribution channel strength, makes us the best owner of this scarce asset. The market and clinical need is incredible.

Seven percent of the world's adult population need our help. Okay. With regard to our residential care software business, we continue our disciplined portfolio management approach and work, investing more in high-growth areas of the business and looking to find other solutions for the lower-growth areas of the business. We have made significant progress with our portfolio management work this quarter, and I remain confident that we will accelerate RCS revenue back to sustainable high single-digit growth with double-digit operating profit growth in fiscal year 2027. We will have further updates for you over the coming months and beyond.

While investing back into our business is our first priority for capital allocation through R&D and sales and marketing, ResMed Inc. also returns significant capital to shareholders through our combination of dividends and share repurchases. During the third quarter, we returned $262 million to shareholders through this combination of our quarterly dividend and $175 million in share repurchases. As you have seen, we picked up the pace of our share repurchases in the last couple of quarters, and we will continue to deploy meaningful capital here. In concert with our ongoing investments, we delivered strong operating profit growth and robust free cash flow growth in the third quarter.

ResMed Inc. remains a compelling investment opportunity amidst global uncertainty. This is my final, third point. During the third quarter, ResMed Inc.'s strong revenue growth, gross margin expansion, and disciplined investment approach generated 18% growth in non-GAAP operating income and $520 million in free cash flow—another quarter of above 100% free cash flow conversion. Whether you look back at the last 12 months, or at a compound annual growth rate across three years, five years, or even ten years, we have consistently been generating high single-digit revenue growth or higher, and earnings growth that steadily outpaced revenue growth.

This track record delivered by 10 thousand-plus ResMedians combined with the enormous market opportunity we have in front of us underpins our continued confidence in our five-year outlook for high single-digit revenue growth and earnings growth higher than revenue growth. We have a clear and sustained leadership market position. We are committed to keep delivering for consumers, for patients, for physicians, for providers, for payers, and for our communities that we serve—and of course, for you listening to this call, our shareholders. With that, I will hand the call over to Brett in Sydney to go through a deeper dive into our financials.

And then we will open the floor for your questions. Brett? Over to you.

Right. Thanks, Mick. In my remarks today, I will provide an overview of our results for fiscal year 2026. Unless noted, all comparisons are to the prior-year quarter and in constant currency terms where applicable. We had strong financial performance in Q3. Group revenue for the March quarter was $1.43 billion, an 11% headline increase and 8% in constant currency terms.

Revenue growth reflected positive contributions across our device and mask portfolio, and in our software business. Year-over-year movements in foreign currencies positively impacted revenue by approximately $39 million during the March quarter. Looking at our geographic revenue distribution and excluding revenue from our residential care software business, sales in the U.S., Canada, and Latin America increased by 9%. Sales in Europe, Asia, and other regions increased by 7% on a constant currency basis.

Globally, on a constant currency basis, device sales increased by 6% while masks and other sales increased by 12%. Breaking it down by regional areas, device sales in the U.S., Canada, and Latin America increased by 6%. Masks and other sales increased by 14%, reflecting continued growth in our mask portfolio and resupply as well as incremental revenue from VertuOx, which we acquired in Q4 fiscal 2025. Excluding the revenue contribution from VertuOx, Americas masks and other sales also grew at a double-digit percentage year over year. In Europe, Asia, and other regions, device sales increased by 6% on a constant currency basis and masks and other sales increased by 10% on a constant currency basis.

Residential care software revenue increased by 4% on a constant currency basis in the March quarter, underpinned by robust performance from our MediFox Dan 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 third quarter earnings press release. Gross margin was 62.8% in the March quarter and increased by 290 basis points year over year and by 50 basis points sequentially.

The increases were primarily driven by component cost improvements and manufacturing and logistics efficiencies, as well as a small positive impact from product mix and foreign currency movements. Our supply chain team continues to focus on our pipeline and productivity initiatives. Despite some of the current headwinds around fuel costs and emerging component cost pressures, we remain focused on making ongoing long-term gross margin improvements. Looking forward and subject to currency movements, we still expect gross margin to be in the range of 62% to 63% for fiscal year 2026. Moving on to operating expenses.

SG&A expenses for the third quarter increased by 14% on a headline basis and by 9% on a constant currency basis. The increase was primarily attributable to additional expenses associated with our VertuOx acquisition and growth in employee-related expenses as well as marketing and technology investments. SG&A expenses as a percentage of revenue increased to 19.5% compared to 19% 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% for fiscal year 2026. R&D expenses for the quarter increased by 12% on a headline basis and 8% on a constant currency basis.

The increase was attributable to increases in employee-related expenses. R&D expenses as a percentage of revenue decreased to 6% compared to 6.5% in the prior-year period. Looking forward and subject to currency movements, we still expect R&D expenses as a percentage of revenue to be in the range of 6% to 7% for fiscal year 2026. During the quarter, we recorded acquisition and portfolio review-related expenses of $6 million reflecting costs associated with the evaluation of strategic transactions including legal and professional fees for due diligence and related consulting work. These expenses have been treated as a non-GAAP adjustment in our Q3 financial results.

Operating profit for the quarter increased by 18%, underpinned by revenue growth and gross margin expansion. Our operating margin improved to 36.7% compared to 34.4% in the prior-year period. Our net interest income for the quarter was $12 million, which includes additional net interest income associated with a ten-year Singapore dollar to U.S. dollar net investment hedge that was executed on February 2, 2026. We expect this net investment hedge will generate $9 million in net interest income on a quarterly basis going forward. As a result, we expect net interest income in Q4 fiscal 2026 will be approximately $15 million.

During the quarter, we recognized unrealized losses of $10 million associated with the write-down of several investments in our minority investment portfolio. This reduced our Q3 fiscal 2026 earnings per share by $0.07. Our effective tax rate for the March quarter was 20.9%, compared to 20.1% in the prior-year quarter. As we noted in our last quarter 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%.

Our net income for the March quarter increased by 20%, and non-GAAP diluted earnings per share increased by 21%. Movements in foreign exchange rates had a positive impact on earnings per share of approximately $0.05 in Q3 fiscal 2026. Cash flow from operations for the quarter was $554 million, reflecting strong operating results and disciplined working capital management. Capital expenditure for the quarter was $34 million, and depreciation and amortization for the quarter totaled $59 million. We ended the third quarter with a cash balance of $1.7 billion.

At March 31, we had $664 million in gross debt, and $996 million in net cash. We continue to maintain a solid liquidity position, strong balance sheet, and generate robust operating cash flows. As Mick discussed, we have entered into an agreement to acquire Noctrix Health for consideration of $340 million, which we expect to close on June 1, 2026. We will include Noctrix Health in our group results from the closing date. The current annual revenue run rate for Noctrix is approximately $24 million; we will report this revenue within our Americas devices category.

For Q4 fiscal 2026, we expect Noctrix Health to reduce non-GAAP EPS by approximately $0.02. Today, our Board of Directors declared a quarterly dividend of $0.60 per share. During the quarter, we repurchased approximately 673 thousand shares under our previously authorized share buyback program for consideration of $175 million. We plan to purchase shares to at least the value of $175 million during 2026. In addition to returning capital to shareholders through a dividend and share buyback program, we will continue to invest in growth through R&D and tuck-in acquisitions. Finally, as you know, this is my last earnings call ahead of my retirement, and I would like to take this opportunity to thank you for your support over many years.

For me, it has truly been a great honor and privilege to have worked for our investors over the last two decades. I will continue to be a huge advocate for the great company that ResMed Inc. is. Thank you so much. And with that, I will hand the call back to Daryl.

Thank you. We will now open the call for questions. As a reminder, we will limit you to one question at a time so we can accommodate everyone on the call. If you have another question, you can rejoin the queue. Our first question comes from the line of David L Bailey with Morgan Stanley. Please proceed with your question.

Reduced component cost has been supportive of gross margins over past couple of years. I wonder if you could please talk to some of the changes you are seeing in component costs and freight at the moment and maybe also reference any contracting or supply chain changes you have made post-COVID and the volatility we have seen in more recent years?

Yes, thanks, David. I will go first and maybe hand to Brett to talk about broader gross margin implications. It is a very good question. Obviously, we are seeing some geopolitical uncertainty in the Middle East impacting fuel rates potentially with oil and gas supply.

One thing, and the good news for ResMed Inc. in terms of our logistics, is we go across the Pacific Ocean on sea freight through the Panama Canal to the East Coast, and we are not seeing any impacts from that geopolitical uncertainty impacting our core supply chain. But as you said, there are impacts on fuel, and we have done a very good job of going from air freight to the very, very vast majority of our work on sea freight. But there are some component costs we are looking at. I can tell you our pipeline of supply chain improvement opportunities is such that at this moment, we are not changing our guidance, which is that ResMed Inc. plans to have gross margin accretion through 2030 and double-digit basis points improvements each year from here to 2030, even amidst all the changes that are happening.

Obviously, these changes happen daily and things continue to move and we will watch everything. But at this point, we still, as you saw, had very good gross margin accretion in the quarter, quarter to quarter and year on year. And we expect as we look to fiscal 2027, 2028, 2029, all the way through 2030, to be able to, through our great pipeline of work, still achieve gross margin accretion. It is more difficult given the geopolitical and external circumstances.

With that, Brett, any thoughts?

You covered it well, Mick. The team has done a pretty good job over the last few years on components and improvements there. It gets tougher, obviously, in this environment, and realistically, we will see some cost inflation on components coming through. But if you think about it, and Mick talked about that productivity pipeline, there are a lot of other things we can do that will offset that.

Think about platform standardization benefits, vendor management—which we have done a great job on—some longer-term contracts and improving those enormously, and improving resilience as well. Then think around execution on manufacturing: cycle times, asset utilization, logistics efficiencies, and freight optimization. There are many things that we can do that we think can certainly offset that, and our long-term objective is to increase gross margin over time.

Thank you. Our next question comes from the line of Analyst with Jarden. Please proceed with your question.

Just a question on Noctrix. Just to confirm, it is growing faster and it has got higher margins—are you talking to gross margin? And any indication as to what that will do to your SG&A and R&D? And how does it get reimbursed, and is there any risk for that reimbursement to change over time?

Yes, great questions. I will go first and ask Brett to jump in if he likes. Noctrix Health has a very novel technology—NIDRA is the product. It is a noninvasive nerve stimulation device that has excellent efficacy in treating restless leg syndrome, particularly moderate to severe restless leg syndrome.

The current therapies for RLS are often pharmaceutical options—older drugs that have many side effects—and we think this is a huge opportunity for a noninvasive medical device with sleep doctors writing prescriptions and HMEs setting them up. So it is growing faster than ResMed Inc. and has higher gross margins than ResMed Inc. Obviously, they are in the early development cycle, and we will be investing in R&D. We will be investing in sales and marketing.

I will just say this at a high level: this is not just about one product coming into the sleep health portfolio for ResMed Inc. We are the best owner of this asset. We can scale it faster than anyone. Our market access team and our knowledge of CMS, the DMACs, the DMEs, and where we can go to drive reimbursement further are going to be incredible.

The startup team from Noctrix Health has done a great job of going payer by payer and getting reimbursement and getting this FDA de novo classified product into the market quickly. Brett told you the run rate that they are hitting on the current quarter; multiply that by four, and we expect to do better than that as they go into this year because they are growing faster than ResMed Inc., as I said earlier. So watch this space. We are going to help them get more market access, more reimbursement, and grow faster than they are.

Most importantly, we are going to take care of a whole bunch of patients. Seven percent of the adult population worldwide has RLS, and in the U.S., 17 million people have RLS, and a very good portion of that are potentially addressable by this product. Brett, any further thoughts to the questions further down the P&L of Noctrix Health?

The only thing I would add is it is a strong growth trajectory, so we will continue to invest in SG&A and R&D. The guidance I gave earlier on EPS impact or dilution is a good estimate as we go forward, but we will update that with a bit more clarity next quarter.

Thank you. Our next question comes from the line of Analyst with Barrenjoey. Please proceed with your question.

Mick, maybe just a question on combined Europe/Asia revenue growth. Again, another quarter of strong growth. It is now several quarters in a row that you have delivered robust growth rates, particularly in masks. Is this the same measures that you have spoken to in the last few quarters that is driving that growth that looks to be above market?

Any color you can give us on particular contracts or countries, lumpiness in sales—just some color as to what is driving that strong growth rate, please?

It is a great question. Our Europe, Asia, and rest-of-world category includes around 140 countries. Looking for highlights, I will say our team in Western Europe has done a good job of partnering with home care provider customers. In markets in Northern Europe where we have been able to achieve and continue on contracts with ongoing annual capabilities and growth, they have done well.

In our Asia-Pacific markets, we have seen strong omnichannel approaches in China, Korea, Australia, and New Zealand, where the teams have subscription protocols, direct-to-consumer resupply opportunities, and leverage the HME/home care provider channel to drive resupply as well as re-PAP. We talk about mid single-digit growth in devices and high single-digit growth in masks as the general market. To your point, with robust mask growth, it looks like we are taking share. Why are we taking share and growing the market in masks?

Look to the AirTouch N30i—our brand new fabric technology mask. It is the first in the world where you can put fabric on top of silicone at scale and mass production from a world-leading company in sleep apnea. As I said in my prepared remarks, this is changing the basis of competition, and it is not just about the N30i. The most recently released ones we just launched, the F30i Comfort and the F30i Clear in the full-face category—which is a higher-margin area—I think change the basis of competition in how mask therapy happens.

Go to your channel checks, talk to patients, talk to providers, talk to respiratory therapists who do the setup every day. The comfort is incredible. On the devices side, we are leveraging macro trends from big pharma and big tech, and ResMed Inc. is doing a better job. We have set up re-PAP programs that are working in the U.S., and even in the tougher markets of Europe, Asia, and rest of world.

Hard to cover 140 countries in three or four minutes, but that is the gist.

Thank you. Our next question comes from the line of Analyst with UBS. Please proceed with your question.

Thanks very much for taking my question. We are increasingly hearing about the change in funding models—particularly Synapse comes up from time to time—and some caution amongst the DME customers of yours that this is going to be a challenge. What are you seeing on that front? Are there any trends that concern you?

It is an interesting question because it gets to the evolution of our U.S. HME business. We had our HME advisory board here in San Diego with top HME customers across the U.S., speaking with our commercial teams in sales, marketing, and clinical about what they want over one, three, five years, and what their patients want: smaller, quieter, more comfortable devices; more cloud-connected devices; smoother pathways; and all the work we are doing with our VirtualOx home sleep apnea testing protocols and our Acrivon—Ectosense and NiteOwl—home sleep testing products to smooth the channel and middle-of-funnel work from prescription to setup.

They did bring up questions around Synapse and what they are doing in their experiments. Over the last 15 years, a company called CareCentrix did similar utilization management; ultimately, UnitedHealth bought them. If you are looking at areas of waste and loss in healthcare, you go to the hospital and high-cost areas where there is a lot of waste, not lower-acuity care like ASCs and home care where ResMed Inc. plays. I do not think this is a huge threat.

It might be something they work on for a while. Payers will find physicians want to work with an insurance company that takes care of patients in the right way. We have had utilization management approaches in France and Germany, so we can deal with any segment of the market that goes here. Employers, physicians, and others will choose based on Net Promoter Scores.

OSA—particularly CPAP—is a very low-cost, low-acuity, high clinical and high economic return therapy. We can show the ROI for integrated payer-providers and for payers alone. We are working closely with payers to make sure this forms part of the ecosystem. It is not a big fear for the HMEs; it is manageable.

Thank you. Our next question comes from the line of Analyst with MST. Please proceed with your question.

Good morning. On the fabric masks, Mick, when we do channel checks, we keep hearing that the price point is such that a traditional HME cannot make any profit on either setup or resupply. From a commercial perspective, it makes the compliance benefit irrelevant. Is this correct, or are we hearing the wrong thing?

It depends on the payer landscape. There are 50 states and multiple payers per state, so you have a large matrix when you think about payers, what they pay, and where the correct price points are. We want to work with all the different models, and we price for what is right in terms of the extra cost that goes into those fabrics but also the extra value that we see. There is a 6% increase in adherence.

For many parts of the country where there is margin at the current price points of an N30i, that 6% increase in adherence provides a for-profit reason to put that mask on—HMEs can run the spreadsheet themselves. The most important thing is that the patient is satisfied, and it is a better mask. If you get the patient over the line and they love it and it is more comfortable, and there is the potential for the HME and the patient to both sustain this, then that is there in many states and many payers. We are driving that forward.

It will not be the case in every state and every payer. If your checks cover some below that line, that is not going to be many parts. We hope DMEs will help those patients find a way to cash-pay channels if that is the best mask for them. But we work with HMEs to make sure the economics are in line, and for the vast majority, we can make the economics work within the reimbursed environment.

In Europe, Asia, rest of world, and cash markets, it is price elasticity; patients will pay for comfort. In HME-driven markets, our goal is that price points allow profit across the vast majority of customers; it will not be every customer because payers differ by state and payer.

Thank you. Our next question comes from the line of Analyst with KeyBanc Capital Markets. Please proceed with your question.

I wanted to ask about competitive dynamics in the devices segment, mainly in the U.S. Thinking about one of the competitive launches that took place late in 2025—can you speak to the level of noise you have observed in the U.S. around that launch, and whether you have seen any level of market share shift?

As the market leader, we look at every new entrant and technology. I would say we are productively paranoid. There has been no launch in the last 12 months that made us say, “We did not think of that.” But we do use competition to challenge ourselves—when was the last time we upgraded our AutoSet algorithm? There is new technology called AI.

It is more difficult to adopt in the medical space, and we already have one FDA-cleared product in AI that we talked about in SmartCare last quarter. Watch this space from ResMed Inc. We are focused on smaller, quieter, more comfortable, more cloud-connected, and more intelligent therapies. We will bring out more intelligent therapies over time.

As you saw in the devices number—very solid in the U.S., 6% growth—we are not seeing an impact. We look at new patient starts, new customer adoption, and all new technologies. There is no new competitive threat that we are worried about, but we are accelerating our own pipeline.

Thank you. Our next question comes from the line of Anthony Charles Petrone with Mizuho Group. Please proceed with your question.

Maybe one on primary care engagement—on the CME educational program you have, how often does that turn into a new prescriber? How often are these primary care physicians actually new to the CPAP world—they take an educational program, and then they begin writing prescriptions? What is the conversion rate there? And any updated chatter on the Philips return to the market?

On PCP engagement, we have 80,000 CME programs completed by 45,000 unique clinicians. We track closely. We target PCPs who are already engaged at some level in home sleep apnea testing—maybe one referral per month or more over the last 12 months. We do not do pure evangelism with someone who has never engaged.

After education, we look at change in referral volume—does it go from one per month to three to five, from five to seven to nine, etc. That is where we focus. Our VirtualOx data show a double-digit increase in home sleep apnea tests. The VirtualOx team is energized, and we are building partnerships to continue growth in primary care.

It is less about brand-new greenfield and more about increasing volume with already-engaged PCPs—teaching signs and symptoms, the right questions, and the gold standard therapy. We are seeing volumes increase; you see it in VirtualOx numbers and in our device numbers growing at 6%, where the market might be a little below that. Regarding Philips, nothing new to add beyond what is broadly known; our focus remains on execution and serving patients.

Thank you. Our next question comes from the line of Davinthra Thillainathan with Goldman Sachs. Please proceed with your question.

A question on U.S. devices. Channel checks were suggesting some one-off events that may have held back growth, particularly to do with weather events. Any thoughts there? And with the oral GLP-1 rollout, how can that part of the portfolio grow over the next few quarters?

We did not see a major weather event impact our U.S. devices in the quarter. There was seasonality from Q2 to Q3—with HDHPs and HSAs—Q2 devices growth was closer to 7%–8% and went to 6% in Q3. So some seasonality, but not weather-related. At 6%, we are at the high end of mid single digits—doing pretty well. On GLP-1 pills versus injectables, we are seeing a good flow of patients into primary care and into the diagnostics funnel.

The conversion to CPAP setup—the middle of funnel—has more work to do. That is why we bought Somnoware, VirtualOx, and NiteOwl: to help with that flow and to support HMEs with higher volumes and virtual referrals. Our goal each quarter is to push 50–100 basis points higher when we can through demand generation, capture, and conversion. As injectables expand to pills, it will appeal to a broader population, and more patients will come through.

This is more of a one-, three-, five-year tailwind than a one- to three-quarter phenomenon. This mile marker was good—we will keep building.

Thank you. Our next question comes from the line of Jonathan Block with Stifel. Please proceed with your question.

Going to continue down the same road a bit on U.S. devices. We have called out increasing ad spend from Eli Lilly and their Zepbound OSA brand campaigns—dontsleeponosa.com—and the broader population for the pills. When that Zepbound OSA patient walks into their PCP or sleep doc, are they walking out with GLP-1 and CPAP prescriptions? And how would you describe that patient’s behavior—are they getting that CPAP prescription filled, and what is their journey exiting the doctor?

We have thought a lot about this and are analyzing it closely. We did not pay for the demand gen—big pharma did—and that brings in patients we might never have reached. Once at the PCP, especially those we target with high GLP-1 volumes and HST providers, that PCP is writing a CPAP prescription. Clinically and often legally, they should prescribe the lowest-cost, most-efficacious therapy.

CMS and most payers have a 90-day adherence requirement—70% usage in any 30-day period within the first 90 days. When this approach was put in place 15–20 years ago, some saw it as a threat; ResMed Inc. saw a 90-day sprint opportunity to help a patient get to the most efficacious and reversible therapy. PCPs and sleep doctors know this. We do not get every patient adherent—our 87% day-90 adherence still means 13% do not get there—but we aim to maximize this once-in-a-generation opportunity.

That is what we are educating PCPs and sleep doctors on. We are very focused on maximizing probability of setup and adherence. Importantly, the company making the GLP-1 publicly states that combination therapy is better, and their own clinical data show that. Our data on 2.1 million patients show that those with scripts for both PAP and GLP-1 are more likely to start and stay on therapy with higher resupply events at one and three years.

We also analyzed patients who start PAP and then add a GLP-1—n = 1.7 million—and they also show higher adherence and resupply. The next phase is patients who receive both prescriptions at the same time; we are analyzing that now. We like what we are seeing and will keep optimizing.

Thank you. Our next question comes from the line of Brandon Vazquez with William Blair. Please proceed with your question.

You reiterated expectations next year and through 2030 for high single-digit growth and better leverage on the bottom line. From a high level, what are the growth drivers you see? Any new product launches as we go into fiscal 2027? And, Brett, what levers are there on a go-forward basis in 2027—more of the same with efficiencies, or anything else new we should contemplate?

You know I do not release product pipeline ahead of launch, but I can talk about what is already out there: the N30i and its strong takeoff; the F30i Comfort and F30i Clear are doing really well at premium prices; our core masks are doing well; AirSense 11 rollout across Latin America—Brazil, Argentina, beyond—and the recent China launch in a fast-growing consumer-driven market where we are a premium and successful brand. Korea omnichannel, Australia, New Zealand, Singapore—all growing. I also talked about algorithms and how digital upgrades can also come with hardware upgrades—watch this space.

Brett?

We will keep executing on driving top line with really good operating margins, so whatever we deliver on top line will fall through to the bottom line. It is important for us to keep executing on our strategy, and that is what we will continue to do into fiscal 2027.

We are now at the sixty-minute mark, so I will turn the call back over to Michael J. Farrell.

Thank you, Daryl, and thank you to all for joining us for our earnings call today. On behalf of the more than 10 thousand ResMedians in 140 countries, I am pleased to say we were able to deliver another strong quarter of performance and continue to build value for all of our stakeholders. Many of our ResMedians are shareholders, so well done to you as well. And, Brett—55 quarters—thank you for being a great partner and friend, and best wishes on your retirement.

Welcome to Aaron Blumer—he is going to be an amazing, high-energy CFO who will take us to the next level and build on the amazing foundation that Brett has set up. Over to you, Sally.

Thank you, Mick, and thank you as well, Brett. Thank you to everyone who joined us today. We appreciate your time and interest. If you have any additional questions, please do not hesitate to reach out directly to InvestorRelations@resmed.com. Daryl, you may now close the call.

Ladies and gentlemen, thank you so much for your participation. This does conclude today's teleconference. You may disconnect your lines at this time and enjoy the rest of your day.