ResMed Inc. (NYSE:RMD) Q2 2023 Earnings Call Transcript

Michael Polark: Hey, good afternoon. Two quick ones if I can sneak them in. Is there a vision or strategy to convert Card-to-Cloud products to connected solutions over time? Or is the base case to lead those units that have gone into the market over the last year or so, as is? And then the second quick one is MediFoxDarn, the gross margin on that revenue ballpark, can you share what that is? Thank you so much.

Mick Farrell: Thanks Mike and cheeky sneaking in two questions, but I’ll answer both for sure. Card-to-Cloud, as those devices — as those AirSense 10 Card-to-Cloud devices reach their either warranty period or payer allotted period at which a patient can get another device allocated to them, which is usually in the three years or five years, normally time horizon, those patients will get the opportunity to upgrade their devices from an AirSense 10 Card-to-Cloud to presumably an AirSense 11 device. And look, the first 26 years of ResMed’s existence, we had, firstly, non-connected and then Card-to-Cloud pager-type technologies sort of sneaking that. It works. It can get you there. It’s not as optimal. It doesn’t get that sort of patient engagement on myAir and all the abilities that we can get to that 87% adherence, but it’s darn good therapy.

It’s the smallest, quietest, the most comfortable therapy. And with the Card-to-Cloud, our HME — mostly sold in the US, HME customers have done this for years and the data go to the cloud, and so the doctor doesn’t see much difference because the doctor is seeing all the data in AirView on Card-to-Cloud and directly connected and so actually able to drive really good care with those patients. So, it will be a bolus of patients over that sort of 12-month period. And we’ve had, I would say, some pretty good success in humanitarian aid really and showing that ResMed isn’t just going to stick to a strategy. It’s going to say, if we need to pivot tactically to take care of patients, we’ll do it and we’ll take care of them long-term. But there will be a bolus of patients, I think, jumping at the front of REPAP a couple of years who want to get the latest and greatest technology and some on consumer pay markets might go quicker.

The second question around gross margin. Yes, look, MediFoxDarn accretive to our group gross margin. I’m not going to quantify it exactly, but that’s why I said you’re going to see, I think, some upside to our GM as we go through the fiscal year, including MediFoxDarn. It’s accretive to revenue, gross margin percentage, but also NOP dollars and our EPS performance over the fiscal and beyond. Thanks for the questions Mike.

Operator: Thank you. Next question is coming from Saul Hadassin from Barrenjoey Capital. Your line is now live.

Saul Hadassin: Good afternoon and good morning. Thanks for taking my question. Mick, just a quick one. Just the US flow generator growth rate of 41%, obviously, very strong. Just wondering if you can give us any color as to within that, how much was volume versus price and also mix?