ResMed Q4 2025 Earnings Report

ResMed EPS Results

• Actual EPS: $2.55
• Consensus EPS: $2.47
• Beat/Miss: Beat by +$0.08
• One Year Ago EPS: $2.08

ResMed Revenue Results

• Actual Revenue: $1.35 billion
• Expected Revenue: $1.33 billion
• Beat/Miss: Beat by +$20.52 million
• YoY Revenue Growth: +10.20%

ResMed Announcement Details

• Quarter: Q4 2025
• Date: 7/31/2025
• Time: After Market Closes
• Conference Call Date: Thursday, July 31, 2025
• Conference Call Time: 4:30PM ET

ResMed (NYSE:RMD) is a global medical device company specializing in the diagnosis, treatment and management of sleep-disordered breathing and other chronic respiratory conditions. The company’s product portfolio spans continuous positive airway pressure (CPAP) and bilevel devices, masks, humidifiers and ventilation solutions for both in-center and home care settings. ResMed also offers digital health platforms designed to monitor patient adherence and therapy efficacy, providing clinicians with real-time data and analytics to improve treatment outcomes.

ResMed’s flagship devices—such as the AirSense™ and AirCurve™ series—integrate advanced algorithms that automatically adjust pressure in response to patients’ breathing patterns. The company complements its hardware offerings with cloud-connected software services like AirView®, which enables remote patient monitoring, compliance reporting and telehealth consultations. This combination of devices and digital solutions positions ResMed as a leader in connected care for sleep apnea, chronic obstructive pulmonary disease (COPD) and neuromuscular disease management.

Headquartered in San Diego, California, ResMed distributes its products in more than 120 countries through a network of direct sales, distributors and strategic partnerships. The company maintains regional offices and manufacturing facilities across North America, Europe, Asia-Pacific and Latin America to support local regulatory requirements and customer service. Its global footprint allows it to address diverse healthcare systems and respond to evolving patient needs in both developed and emerging markets.

Founded in 1989 by Dr. Peter C. Farrell, ResMed has grown from a developer of advanced positive airway pressure technology into a broader digital health innovator. Michael “Mick” Farrell, who has served as President and Chief Executive Officer since 2013, leads the company’s strategic focus on integrating data analytics with respiratory care. Under his direction, ResMed continues to expand its product pipeline and invest in research and development aimed at improving patient quality of life and reducing the burden of chronic respiratory diseases.

ResMed Q4 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: ResMed achieved 10% year-over-year revenue growth and 230 basis points of gross margin expansion in Q4, closing FY25 with $1.7 billion in free cash flow.
• Positive Sentiment: The Board approved a 13% increase in the quarterly dividend for FY26 and plans ~$150 million in share repurchases per quarter, underscoring strong capital returns.
• Positive Sentiment: FY26 gross margin is guided to 61%–63%, driven by procurement efficiencies, logistics improvements, and continued AS10-to-AS11 platform transition.
• Positive Sentiment: ResMed is scaling its digital health ecosystem via tuck-in acquisitions (Sonderware, Ectosense, Virtuox) and integrating AI-driven tools like the Dawn assistant, smart coaching, and attrition predictors.
• Negative Sentiment: CMS’s proposed resumption of the DME competitive bidding program introduces reimbursement uncertainty, leading ResMed to engage policymakers to defend patient access.

Presentation

[Operator]

Hello and welcome to the Q4 Fiscal Year twenty twenty five ResMed Earnings Conference Call. My name is Kevin and I'll 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'll conduct a question and answer session.

[Operator]

Let me hand the call over to Sally Schwartz, ResMed's Chief Investor Relations Officer. Sally, please go ahead.

[Salli Schwartz, Chief Investor Relations Officer at ResMed]

Thanks, Kevin. I want to welcome our listeners to ResMed's fourth quarter fiscal year twenty twenty five earnings call. We are live webcasting this call from Sydney, 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 that we believe provide useful information for investors.

[Salli Schwartz, Chief Investor Relations Officer at ResMed]

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.

[Salli Schwartz, Chief Investor Relations Officer at ResMed]

Please review our SEC filings for a complete discussion of the risk factors that could cause our actual results to differ materially from any forward looking statements made today. I'll now turn the call over to Mick.

[Michael Farrell, CEO & Chairman at ResMed]

Thank you, Sally, and good morning from a wintery, cold and rainy Sydney, Australia. Good afternoon to those in The U. S. And good evening to those in Europe and beyond. And welcome to ResMed's fourth quarter fiscal twenty twenty five earnings call.

[Michael Farrell, CEO & Chairman at ResMed]

I'm pleased to report that ResMed delivered another very strong quarter, closing out fiscal year twenty twenty five with excellent results. In our fourth quarter, we achieved 10% year over year reported revenue growth and two thirty basis points of year over year gross margin expansion. We continued our disciplined approach to investments in both research and development as well as SG and A, and we delivered another quarter of very strong free cash flow. In addition to the world's to being the world's leading sleep health and medical devices company, ResMed continues to build a global digital health ecosystem encompassing sleep health, breathing health and healthcare delivery in the home. We continue to see robust demand for our products and are now serving more than 154,000,000 lives through our hardware and software platforms as well as our technology solutions.

[Michael Farrell, CEO & Chairman at ResMed]

We are well on our way to achieving our ResMed 2030 goal of improving over 500,000,000 people's lives by 02/1930. I want to take this opportunity to thank the more than 10,000 ResMedians serving patients and customers in more than 140 countries worldwide for all that they do to serve those customers today and every day. Last quarter, I spoke to three key things. First, that ResMed generates robust free cash flow and has a very strong balance sheet. Second, we're committed to operational excellence as well as driving ongoing operating leverage.

[Michael Farrell, CEO & Chairman at ResMed]

And third, that ResMed is a compelling investment opportunity. We have a strong sturdy ship that can go through the waves and especially amidst the global macro uncertainty that we're seeing around tariffs and trade and so on ResMed has a very smooth path. These themes remain highly relevant here as we discuss our fourth quarter and our fourth quarter results illustrate them well. So let me walk through the first of those themes. First, our fiscal year twenty twenty five free cash flow was $1,700,000,000 which provides ResMed with significant flexibility to both invest in our business and return capital to our shareholders.

[Michael Farrell, CEO & Chairman at ResMed]

On the inorganic growth strategy front, we are focused on finding tuck in size acquisitions that will help us accelerate towards our ResMed 2030 strategy. Recent examples include Sonderware, which is software for sleep physicians and pulmonary physicians, Ectosense, which has their product the Nite Owl, which is basically a wearable fingertip size sleep home sleep apnea test. And just last quarter, we completed the acquisition of Vertuox. These businesses will help patients move through the sleep care funnel more efficiently. Vertuox reduces diagnostic delays.

[Michael Farrell, CEO & Chairman at ResMed]

Accelerates the rate of people moving from symptom recognition to home sleep apnea testing, and it keeps more patients on the path to treatment. VertuoX will continue to operate independently under its own brand, and there are no changes that we plan to how providers and physicians will interact with either VertuoX or ResMed. In The U. S. Healthcare system, physician prescriptions, payer requirements and the need for personalized setup and support make home medical equipment or HME providers our essential partners in ensuring patients receive and stay on effective therapy.

[Michael Farrell, CEO & Chairman at ResMed]

And Sleep Labs and Home Sleep Apnea testing run from Sleep Labs is also a huge part of the infrastructure that we work with all day and every day. You will see us continue to selectively invest in our, what we call, digital sleep health concierge capabilities, including screening protocols, clinical tools, seamless workflows and cloud connected care pathways. We will be looking to expand the diagnostic funnel to keep up with new patient flow coming from three sources. One, and most importantly, our own ResMed driven demand generation efforts that I'll talk about later. Two, the greater awareness of sleep apnea that has been generated by the promotion of GLP-one or GLP-one medications, particularly to the specific primary care physician groups that they target and we can target as well with education.

[Michael Farrell, CEO & Chairman at ResMed]

And three, the accelerating momentum in consumer wearables that are capable of sleep health monitoring as well as some with specific sleep apnea detection capabilities. ResMed remains laser focused on helping the more than two point three billion people worldwide that suffer from sleep apnea, insomnia or respiratory insufficiency due to COPD or neuromuscular disease, and all those that need care delivered in the home. We've also returned significant capital to shareholders in fiscal year twenty twenty five through a combination of dividends and share repurchases that have totaled more than US610 million dollars for the year. I'm pleased to announce that ResMed's Board of Directors, my fellow Board of Directors has authorized an increase in the quarterly dividend for fiscal year twenty twenty six. Additionally, we are significantly increasing our targeted share repurchase activity for fiscal year twenty twenty six.

[Michael Farrell, CEO & Chairman at ResMed]

Brett will discuss both these actions in more detail in his remarks in a few minutes and they represent the strength of our business. ResMed's very strong free cash flow affords us the ability to invest in the business through R and D and SG and A expenses, but also to pursue our share buybacks and raise our dividend as I just mentioned. But in addition to that, to also have significant funds available for strategic technology and I would call pathway seamless pathway type tuck in acquisitions. My second key message relates to our commitment to operational excellence. ResMed has demonstrated a very strong track record of improving and driving gross margin expansion and a pipeline of opportunities to deliver further operating leverage across our business.

[Michael Farrell, CEO & Chairman at ResMed]

In the fourth quarter, we achieved two thirty basis points of gross margin expansion year over year and well over 100 basis points sequentially quarter over quarter. And we have more runway left. We'll continue the execution on these opportunities over the course of our fiscal year 2026 that we're just firing up on here. And I'll update you here on this call every quarter as we continue to deliver these results. We will also continue to evolve our global manufacturing footprint.

[Michael Farrell, CEO & Chairman at ResMed]

We're approaching the official opening of our newest manufacturing location in Calabasas, California. This site will double the size of our current manufacturing footprint in The United States and is designed for us to scale up our U. S. Made product volume over the coming years and leverage the amazing technology capabilities of folks in East LA in terms of aeronautical and automotive industries that we use in the field of motor technology and motor manufacturing. During the fourth quarter, we delivered very strong net operating profit growth, even with the continued investment in both R and D and SG and A.

[Michael Farrell, CEO & Chairman at ResMed]

We see these growing investments in innovative R and D as well as SG and A investments that are focused on demand generation, demand capture and demand curation as critical components to ResMed's long term growth. ResMed is an innovation machine with R and D focused on market leading masks, cloud connected devices and digital sleep health platforms, along with growing investments in AI, Gen AI technology that's across the business. We make the smallest, the quietest, the most comfortable, the most connected and the most intelligent therapy solutions for sleep apnea and now insomnia and respiratory insufficiency, as well as having the market leading software for healthcare and broader care delivered right where people live. We continue to roll out our amazing AirSense 11 platform to more and more countries in our global markets. Over the course of fiscal year twenty twenty six, you'll see us do the same for our latest patient interface technologies including the AirTouch N30i, which has an amazing fabric enhanced capability that can be put onto LSR manufacturing in a very unique way by by our manufacturing and technology teams.

[Michael Farrell, CEO & Chairman at ResMed]

And also, the air fit f 40, which is a minimally contact oral nasal mask among many of the products in our mask portfolio. We also have a robust roadmap for incorporating AI and GenAI technology into our digital products. In June, we integrated our digital assistant that we call Dawn as in the sunrises into MyAir in our Australia business to provide personalized twenty four seven support to our local users. We plan to have a wider rollout of Dawn on the MyAir platform, which is our app that sits on smartphones throughout fiscal year twenty twenty six as we get regulatory approvals and move that technology to to the various countries that we operate worldwide. Watch this space on that front.

[Michael Farrell, CEO & Chairman at ResMed]

Additionally, within the myAir app, our smart coaching feature uses machine learning combined with behavioral science based interventions to enhance personalized PAP therapy outcomes. And finally, our resupply attrition predictor helps Brightree customers in The US to better manage patients who are at risk of dropping off or quitting positive airway pressure therapy. This technology enables our HME partners to create personal touch points with patients and to ultimately increase long term adherence of those patients. Greater long term adherence leads to better patient outcomes, happier physicians, lower total cost of care for payers and better resupply volumes that are beneficial for HME providers and obviously for ResMed. As our trained AI technologies improve with more and more data, we foresee ResMed solutions will transform into proactive personalized healthcare companions.

[Michael Farrell, CEO & Chairman at ResMed]

ResMed is extremely well positioned to turn our over 23,000,000,000 nights of respiratory medical data, as well as our three plus decades of sleep science and sleep medicine knowledge into personalized treatments and personalized insights that integrate seamlessly with wearable data, health data, and virtual care. In addition to our products, we see multiple applications for AI and Gen AI in our business processes. In our R and D team, the use of agents in verification and validation can reduce development time to a fraction of our prior processes. We're using AI to write test scripts, to diagnose test failures, to write reports, as well as in verification of our product library. We are also re architecting development processes.

[Michael Farrell, CEO & Chairman at ResMed]

As one example, we've been able to use AI to develop a human head shaped variance model to represent a broad range of ethnic groups to run virtual fitting studies. This will allow us to replace what was previously our multiple in person mask fitting studies that would likely be limited in sample size to maybe 100 people and replace it with a digitized model that can simulate many thousands of people using less time, less planning and less investment dollars. This type of doing more with less resources approach is only accelerating as we expand and broaden our use of AI across the business. Our SG and A investments have also continued to show a very strong ROI. Earlier this year, we announced a comprehensive ResMed brand evolution strategy and several targeted direct to consumer marketing campaigns to build brand awareness and really importantly to drive undiagnosed patients to seek care.

[Michael Farrell, CEO & Chairman at ResMed]

Results to date have been very promising as we are in the early phases of this. But if this is a marathon, our first mile or I'm here in Australia, our first kilometer was a great lap time. We launched a multi market campaign targeting sleep health awareness primarily in countries where we have significant direct market channels, including Germany, Australia, New Zealand, Korea and India. To date, we have seen growing sell through and delivered a strong return on our advertising spend or ROAS as the Martech people call it, that is many multiples of the investment we've made. We've also had an omni channel U.

[Michael Farrell, CEO & Chairman at ResMed]

S.-based campaign that's been focused on the perception of CPAP therapy. This effort ran in metropolitan areas in The US, very specific ones for several months earlier this year and touched both consumers as well as healthcare providers. So I think physicians, HMEs, primary care physicians and beyond. On the physician education front specifically, we've expanded our offering of continuing medical education or as they're called CME programs to teach physicians for the benefits of CPAP, APAP and as bilevel the gold standard, the frontline treatment for any patient that has been diagnosed positively with sleep apnea in accordance with sleep medicine guidelines from the AASM and beyond. We're seeing an increased participation from primary care physicians.

[Michael Farrell, CEO & Chairman at ResMed]

We had 20,000 unique primary care physician participants who have taken our courses and those CME courses and over 32,000 courses taken. So people are taking these multiple times. We love to see the repeat CME users. That means the the PCPs, the primary care physicians, the GPs, they want to get even deeper into the field of sleep health. One of the most encouraging statistics I saw from this work is that seventy five percent of the CME course graduates indicate in the survey that we do post the training that they specifically intend to change the clinical practices that they have in their practice related to sleep health based on what they've learned from our CME programs.

[Michael Farrell, CEO & Chairman at ResMed]

This is an incredible result and we will watch this space for the level of increased prescriptions and increased flow of patients into our home sleep apnea testing and sleep lab funnel and ultimately to prescriptions. For those who've been watching our brand enhanced investments closely, you will know that ResMed was recently named the official partner of the Qatari Aways British and Irish Lions Tour to Australia and beyond. It started actually in Dublin, Ireland and went around the world, where we all have businesses in all these countries and many of them omnichannel businesses. ResMed launched what we call the Tackle Your Sleep campaign. This is a comprehensive digital and content focused campaign featuring some of the world's best athletes in the field of rugby and coaches in the field of rugby.

[Michael Farrell, CEO & Chairman at ResMed]

This campaign aims to raise awareness about the importance of quality sleep as the third pillar of health along with cardiovascular exercise and good diet and nutrition. We will track brand awareness, net promoter scores, as well as consumer and patient flow statistics to measure the ROI and the return on advertising spend or ROAS. Our clear goal of these brand awareness and demand generation campaigns is to help the 2,300,000,000 people worldwide who need our solutions to know the ResMed brand and more specifically to know where, how and when to find a path to screening, diagnosis and ultimately to being on therapy for life, to save their job, to save their marriage, to save their life. Watch this space as we measure the ROI that we've had with these, I would say relatively modest global marketing efforts and we will pursue ongoing targeted additional phases of these initiatives in fiscal year twenty twenty six with every investment based upon strong ROI and proven ROI targets coupled with disciplined spend of our valuable SG and A resources. We are accelerating the next step of our ResMed 2030 operating model by integrating our revenue and product functions of our residential care software or RCS, sometimes called our SaaS or Software as a Service business into the broader ResMed organization.

[Michael Farrell, CEO & Chairman at ResMed]

This builds on earlier efforts that integrated our RCS finance, human resources, cybersecurity, and marketing functions and many more over the last periods. By aligning our people, our workflows, our platforms and our data across the business, we can continue to reduce friction, improve therapy adherence and deliver more personalized and more digital care. In line with this ResMed 2030 operating model evolution, I would like to announce that Bobby Gershell, who is the current Chief Commercial Officer for our RCS business, that Bobby will be leaving ResMed today actually here as we're in the August 1 here in Sydney tomorrow for The US. And he's leaving ResMed to become President and Chief Operating Officer of a software business that is not competitive to ResMed and it's in the field of software for urgent care. I would like to take this opportunity to thank Bobby for his amazing thirteen plus years of dedication and service to ResMed.

[Michael Farrell, CEO & Chairman at ResMed]

I personally hired Bobby from a company called ON Semiconductor to join the ResMed Americas commercial team that I was running at the time in 2012. Bobby played a key role in our digital evolution. He was one of the first ResMedians to jump into our new RCS business straight after our Brightree acquisition in 2016. We put him as a chief operating officer there almost out the gate. And in the years since then, Bobby has helped scale our residential care software business across home medical equipment as well as home health, home nursing and beyond.

[Michael Farrell, CEO & Chairman at ResMed]

He's helped us integrate strategic acquisitions as well as driving innovation. So we thank Bobby for his many contributions this decade plus and I personally wish Bobby the best of luck in the next phase of his career journey and his life journey. In terms of next steps of here at ResMed of our residential care software business leadership, our strong and capable Residential Care Software leaders, Hoegh Kim, Arne on Medifox, Tim on the MatrixCare brand and Greg across Brightree, they will now all report directly to Mike Fliss, our Global Chief Revenue Officer. This is a fulfillment of our 2030 operating model that will accelerate our journey to meet and beat our ResMed 2030 strategy goals. So one key message before I hand over to Brett for his remarks is this, quarter after quarter ResMed has demonstrated it is able to consistently both deliver financially and operationally.

[Michael Farrell, CEO & Chairman at ResMed]

We're a compelling investment opportunity amidst what I would call global macro uncertainty. We are delivering products, we're delivering solutions that customers love. And I use customers meaning patients, physicians, providers, payers, and they vote with their wallets. They buy our stuff more than our competitors. And we've been closely monitoring the global trade environment and the evolving regulatory landscape in both Washington, Brussels and Beijing.

[Michael Farrell, CEO & Chairman at ResMed]

And as I noted last quarter, because our products are used to treat patients with chronic respiratory disabilities, they've been subject to global tariff relief for decades and that has been ongoing and continuing. This affords ResMed the opportunity to remain fully focused on our business and helping the more than two point three billion people worldwide that need our help for their sleep apnea, insomnia, and the respiratory insufficiency, as well as all those needing our market leading software for health care delivered in the phone and then on the home. Let me make some brief comments about the competitive bidding program that CMS recently stated that it plans to resume. I simply cannot get too specific as CMS has not yet announced any of the details as to what product categories included nor the timeframe that they plan for the next round. But during this comment period, I'll remind you of this.

[Michael Farrell, CEO & Chairman at ResMed]

ResMed has a long standing track record of engaging constructively with The US government policymakers and industry participants over more than a decade in this area. I'm the incoming chairman of Advamed, which is our US based but also global advocacy group. And I plan to work with Advamed and work with all of our sort of industry groups to help give the right comments to the US government as we go through this process. Again, as always, Resonant remains committed to advocating for policies that protect most importantly patient access to care and policies that promote fair and sustainable reimbursement for our HME providers. We'll continue to support our HME customers and the millions of Medicare beneficiaries who rely on ResMed for access to market leading high quality sleep and respiratory care at home.

[Michael Farrell, CEO & Chairman at ResMed]

So I'll close with this. ResMed is highly resilient as a company and as a culture. We've successfully navigated the COVID crisis and immediately one of our competitors abrupt and multi year exit from the device market in The U. S. And then the global supply chain crisis, including specifically the semiconductor supply issues that we got through well.

[Michael Farrell, CEO & Chairman at ResMed]

We have built the world's largest respiratory medical device manufacturing facility and we have an incredibly robust global supply chain. We have driven sustained strong top line growth and we're highly focused on operational execution as you saw in our gross margin expansion that we delivered this quarter and throughout fiscal year twenty twenty five and we're not done. We have maintained our very strong balance sheet and that gives us ballast in the boat and flexibility for the future. We've established a leading market position in over 140 countries worldwide in a very underpenetrated market that still has a long runway of growth ahead. All these factors give us confidence in our ability to deliver for all of our customers, for consumers, for patients, for physicians, for providers, for payers and for our communities, and of course, for you, our shareholders.

[Michael Farrell, CEO & Chairman at ResMed]

So as we launch here in the fiscal year twenty six, we continue to execute on our 2030 strategy, investing in innovation, scaling our impact, and we're laser focused on delivering another year of strong results. So with that, I'll hand the call for the first time just right next to me in the room over to Brett for a deeper dive into our financials and then we'll open the floor to your questions. Brett, over to you.

[Brett Sandercock, CFO at ResMed]

Great. Thanks, Mick. In my remarks today, I will provide an overview of our results for the 2025. Unless noted, all comparisons are to the prior year quarter and in constant currency terms where applicable. We had strong financial performance in Q4.

[Brett Sandercock, CFO at ResMed]

Group revenue for the June was $1,350,000,000 a 10% headline increase and 9% in constant currency terms. Revenue growth reflected positive contributions across our product and resupply portfolio. Year over year movements in foreign currencies positively impacted revenue by approximately $15,000,000 during the June. Looking at our geographic revenue distribution and excluding revenue from our residential care software business, sales in U. S, Canada and Latin America increased by 9%.

[Brett Sandercock, CFO at ResMed]

Sales in Europe, Asia and other regions also increased by 9% on a constant currency basis. Globally on a constant currency basis, device sales increased by 8%, while masks and other sales increased by 11%. Breaking it down by regional areas, device sales in The U. S, Canada and Latin America increased by 7%. Masks and other sales increased by 12% reflecting continued growth in resupply and new patient setups as well as incremental revenue from two months of owning Virtuox.

[Brett Sandercock, CFO at ResMed]

In Europe, Asia and other regions device sales increased by 10% on a constant currency basis and masks and other sales increased by 7% on a constant currency basis. Residential Care software revenue increased by 9% on a constant currency basis in the June underpinned by robust performance from our Medifox DAN and HME verticals. We will continue to report Residential Care software as a separate segment in our financial results. During the rest of my prepared remarks today, I will be referring to non GAAP numbers. We have provided a full reconciliation of the non GAAP to GAAP numbers in our fourth quarter earnings press release.

[Brett Sandercock, CFO at ResMed]

Gross margin of 61.4% in the June increased by two thirty basis points year over year and by 150 basis points sequentially. These increases were primarily driven by procurement, manufacturing and logistics efficiencies as well as favorable foreign currency movements. Indeed currency movements accounted for almost half the sequential improvement in gross margin. Changes in average selling prices had a minimal impact on our gross margin both on a year over year and on a sequential basis. We've made considerable progress on our gross margin expansion objectives and continue to work diligently on our gross margin initiatives pipeline.

[Brett Sandercock, CFO at ResMed]

We remain focused on making sustained long term gross margin improvements. Looking forward and subject to currency movements, we expect gross margin will be in the range of 61% to 63% in fiscal year twenty twenty six. Moving on to operating expenses, SG and A expenses for the fourth quarter increased by 9% on a headline basis and by 8% on a constant currency basis. The increase was primarily due to increases in employee related expenses and increases in marketing expenses including investments associated with our recent global brand launch along with targeted demand generation activities. SG and A expenses as a percentage of revenue improved to 19.7% compared to 19.8% in the prior year period.

[Brett Sandercock, CFO at ResMed]

Looking forward and subject to currency movements, we expect SG and A expenses as a percentage of revenue to be in the range of 19% to 20% in fiscal year twenty twenty six. R and D expenses for the quarter increased by 7% both on a headline and constant currency basis. The increase was predominantly attributable to increases in employee related expenses. R and D expenses as a percentage of revenue were 6.4% compared to 6.6% in the prior year period. Looking forward and subject to currency movements, we expect R and D expenses as a percentage of revenue will be in the range of 6% to 7% in fiscal year twenty twenty six.

[Brett Sandercock, CFO at ResMed]

Operating profit for the quarter increased by 19% underpinned by revenue growth and gross margin expansion. Our operating margin improved to 35% of revenue compared to 33% in the prior year period. Our net interest income for the quarter was $6,000,000 Our effective tax rate for the June was 21.9% compared to eighteen point seven percent in the prior year quarter. The increase in our effective tax rate was due to a low comparable prior period tax rate and current year changes in our global mix of earnings. Our effective tax rate for the full year was 19.9% compared to 20% for the prior fiscal year.

[Brett Sandercock, CFO at ResMed]

We estimate our effective tax rate for fiscal year twenty twenty six will be in the range of 21% to 23% with the uptick primarily due to the impact of tax legislation taking effect for certain jurisdictions beginning in fiscal year twenty twenty six. Our GAAP effective tax rate for the June was 17.1% as we recorded a one time tax benefit of $21,000,000 relating to the cessation of certain business activities. We have treated this tax benefit as a non GAAP item in our fourth quarter financial results. Our net income for the June increased by 22% and non GAAP diluted earnings per share increased by 23%. Movements in foreign exchange rates had a positive impact on earnings per share of approximately $05 in Q4 FY twenty twenty five.

[Brett Sandercock, CFO at ResMed]

Cash flow from operations for the quarter was $539,000,000 reflecting strong operating results and disciplined working capital management. Capital expenditure for the quarter was $31,000,000 and depreciation and amortization for the quarter totaled 64,000,000 We ended the fourth quarter with a cash balance of $1,200,000,000 At June 30, we had $668,000,000 in gross debt and $541,000,000 in net cash. We also have approximately $1,500,000,000 available for drawdown under our revolver facility. We continue to maintain a solid liquidity position, strong balance sheet and generate robust operating cash flows. We are well positioned to weather the ongoing global uncertainty and geopolitical challenges.

[Brett Sandercock, CFO at ResMed]

As Mick mentioned, we completed the acquisition of Vertuox during the quarter for consideration of $140,000,000 Vertuox has an annual revenue run rate of approximately $45,000,000 We have included Vertuox in our financial results from the May 1. Overall, the results are not material to the group and were neutral to non GAAP earnings per share for the June. Today, our Board of Directors declared a quarterly dividend of $0.60 per share representing an increase of 13% over our previous quarterly dividend and reflecting the Board's confidence in our operating performance. During the quarter, we purchased approximately 419,000 shares under our previously authorized share buyback program for consideration of 100,000,000 We plan to further increase our ongoing share buyback program and purchase share to the value of approximately $150,000,000 per quarter commencing in 2026. At the current share price, this would result in approximately 1.5% of our outstanding shares being repurchased during fiscal year twenty twenty six.

[Brett Sandercock, CFO at ResMed]

Going forward, we will continue to invest in growth through R and D, deploy further capital for tuck in acquisitions and continue our share buyback program. And with that, I will hand the call back to Sally.

[Salli Schwartz, Chief Investor Relations Officer at ResMed]

Thank you, Brett. We'll now begin the question and answer session. I'll hand the call over to our operator Kevin to provide instructions for that session.

[Operator]

Thank Our first question today is coming from Craig Wanpen from RBC. Your line is now live.

[Craig Wong-Pan, Director - Equity Research at RBC Capital Markets]

Thanks. Just wanted to understand the Rest of World Devices growth, kind of really good growth there. Just wanted to understand the dynamics you're seeing and if there was any kind of large tenders that contributed to that Rest of World Devices revenues?

[Michael Farrell, CEO & Chairman at ResMed]

Yes. Thanks for the question. And yes, look, very good growth in our Europe, Asia and Rest of World Devices at 10%. Yes, multiple factors can come into that. We have some markets where there are buyers that move ahead or behind like in Japan where it's more of a fleet approach.

[Michael Farrell, CEO & Chairman at ResMed]

We have some areas in the world where we have tenders that may come in and out. But roughly what we think is market growth for Europe, Asia and rest of world for devices in the mid single digits. So clearly, there's some fluctuations there. We're not saying that these demand generation activities have had that 304105100% improvement, right? We're just starting our approach there.

[Michael Farrell, CEO & Chairman at ResMed]

It's more in the tens of basis points of improvement that we're seeing from these early experiments. And so no change to actual market growth, but some pretty strong growth from ResMed in the quarter there. But we think going forward, it's sort of more in the mid single digits for devices in Europe, Asia, rest of world. Actually the same for our devices in The U. S.

[Michael Farrell, CEO & Chairman at ResMed]

Any other color Brett you want to provide on a country by country basis for Europe, Asia, rest of world?

[Brett Sandercock, CFO at ResMed]

No, I mean international markets we had a good quarter and there's a good growth in Europe, some improved albeit growth in China as well actually. So some really strong results through numerous markets and that's really contributed to that strong device performance.

[Michael Farrell, CEO & Chairman at ResMed]

Thanks for the question.

[Operator]

Thank you. Next question is coming from Dan Herron from MST Macquarie. Your line is now live, Marquis.

[Dan Hurren, Healthcare Analyst at MST Financial]

Yes, definitely, MST Marquis. Yes, look, thanks everyone. Look, really good looking gross margin and even better guidance. Brett, can you just talk through the elements of that gross margin guidance and maybe touch on the FX, which is probably going to get to you a little coming into 2026?

[Brett Sandercock, CFO at ResMed]

Yes, sure, Dan. Yes, mean, really pleased with the gross margin and really the team works really hard on gross margin improvement initiatives and you're really seeing that manifest in the gross margin. Clearly, had some benefit from foreign currency particularly the euro during the quarter. So if you look at that sequentially, basically almost half that sequential improvement was FX. That means just over half was actually gains we made through efficiencies. Now some of the large components around that were component costing improvements that we've been making. We've been making those progressively and they're starting to come through. We've got freight was also a contributor because we've in terms of the sea freight to air freight ratio now that is actually back to pre COVID levels.

[Brett Sandercock, CFO at ResMed]

So the logistics team has done a great job on that and that you're seeing that comes from the gross margin expansion as well. And then we continue with things like the AS10 to AS11 platform transition and so on which has been ongoing, but is also a little bit of a tailwind for us. So they're probably they're the major impacts on that gross margin expansion for this year, both year on year and sequentially actually.

[Michael Farrell, CEO & Chairman at ResMed]

And I'll just pile on there. I think the I had a one on one with our Chief Supply Chain Officer just hitting his one year anniversary with ResMed. And I think we've gone from ResMed having a good approach sort of an almost an arts type approach to a science based approach and a lot of learning over this last year. And Brett ran our operations for over six months and that strength between our financial teams and supply chain teams is stronger than it's ever been. And so that gives us the confidence with that guidance to say actually not only did we do really well in gross margin expansion in 2025, but as we look forward to 2026, 2027, 2028 and probably not at those levels because they're extraordinary in recovery from a supply chain crisis, but we will be able to have sort of an ongoing pipeline of innovation that we can set up and tune up and turn on as we go towards our 2030 goal.

[Michael Farrell, CEO & Chairman at ResMed]

And so it's not a one and done. There was some good reset and some catch up, But actually there's some sustainable improvements that allows us to give that guidance of 61% to 63% that you saw there Dan. Thanks for the question.

[Brett Sandercock, CFO at ResMed]

Thanks.

[Operator]

Thank you. Next question is coming from David Thornton from Goldman Sachs. Your line is now live.

[Davinthra Thillainathan, Healthcare Equity Analyst at Goldman Sachs]

Nick and team. Thanks for the presentation. I guess I just wanted to discuss Virtuox. Thank you for the disclosures on the materiality of revenues. But I guess it's more interested I'm more interested to understand the roadmap for this business post your acquisition.

[Davinthra Thillainathan, Healthcare Equity Analyst at Goldman Sachs]

What are the areas of investment that ResMed will be making over the next twelve months? And also what are the leading indicators that we can look at to assess those returns please?

[Michael Farrell, CEO & Chairman at ResMed]

Yes, all really good questions. Look, we're really excited about VirtualOx. But VirtualOx isn't an acquisition on its own. You've to think about it as a portfolio. So we've if you look at the last twelve, eighteen months, you look at Ectosense and what we're doing with NiteOwl that fingertip size wearable home sleep apnea test.

[Michael Farrell, CEO & Chairman at ResMed]

That's now FDA cleared and available albeit our U. S. Sales meeting, America sales meeting, annual sales meeting, ASM in a couple of weeks in San Diego. And that will be fully launched to our teams and education and driving it out. And I remember, you know, a decade and a bit ago launching the ApneaLink Air which we thought was the smallest and most capable device and had some cloud connectivity.

[Michael Farrell, CEO & Chairman at ResMed]

This is taking it to the next level and sending out a challenge to say, look ResMed, we're the number one in therapeutics in 140 countries. We don't need to be the number one in diagnostics in 140 countries. But if there isn't if there aren't companies or not there isn't an ecosystem of people driving home apnea testing, smooth software and scalable home sleep apnea testing then ResMed is the global leader in this space has to step in. So we're doing that with that wearable home sleep apnea test from Nite Owl. Then you add on Somnware and Subaf the CEO of that is now head of our innovation and growth group.

[Michael Farrell, CEO & Chairman at ResMed]

So we kept some great talent and moved in the business, but we kept that greater operating opportunity. And as you look at our AirView software and our software, watch this space as we start to bring those types of things together to create seamless and frictionless flow of patients through the funnel. Then to your question, Virtual Ops that fits in at the next phase, which is look, home sleep apnea testing is the scalable part. Our sleep labs are amazing partners, but they're full. They're full and hospitals are coming back post COVID and aren't expanding in lab testing capabilities.

[Michael Farrell, CEO & Chairman at ResMed]

So we have to expand home sleep apnea testing. And we have to bring down those wait lists that went up very high during COVID and get that backlog down. And so we're doing that in the in lab and we bought VirtualBox as the number one provider to drive home sleep apnea testing to show it can be scaled. And so watch this space as we invest in our marketing and capabilities. Obviously, look out our VirtualBox teams and now our core sleep health teams are separate sales teams.

[Michael Farrell, CEO & Chairman at ResMed]

But they can be partnerships where we see opportunities, wait lists are high and home apnea testing can scale. And so we'll look for opportunities to say, is the best need? Where is the most need for home sleep apnea testing to scale? And so watch this space as we do that. And this is not a step change with some sudden huge uptake of patients through home sleep apnea testing.

[Michael Farrell, CEO & Chairman at ResMed]

But I can tell you in the arms of a strategic versus private owners, I think home sleep apnea testing companies like Vertrox will do better. And we're the only strategic investing in this and I think it's the right thing to do. As we talk to our HME partners, the message to them is, this is fantastic because we're going bring more and more patients to you. As we talk to our sleep lab partners, we say, hey, here's another tool that you can use for the patients who are big on the waiting list that you know a very high probability obstructive sleep apnea so that you can have the complex cases that might have central sleep apnea, complex sleep apnea, COPD, overlap syndrome, complicating cardiovascular disease or post stroke, do all of them in your lab, have the complex cases in your lab and let's free up that capacity for them. And they end up on ST, STAs and ASV type therapy which is good margin for ResMed and really good for the patient because they get the care they need and expand with home sleep apnea testing.

[Michael Farrell, CEO & Chairman at ResMed]

So our goal is really VirtualBox is part of a long term play here. There's no simple win in this quarter. As Brett said, it wasn't material to our global results. But we did want to give you visibility on the revenue and size of it just because we don't want anything is bigger than it is or smaller than it is. But we are going to scale this.

[Michael Farrell, CEO & Chairman at ResMed]

And actually, want the competition to scale up too. I want a strong competitive diagnostics space there because it's really important that we help all across the 50 states that we operate with VirtualBox. And frankly, why can't we have models like that in 140 countries that we operate into? So I spent a long time on that question because it's a complex one. But watch this space, we'll keep giving you updates every quarter on not just Vertuox, but that ecosystem of Echosense, SomnareWear, VirtualBox and what ResMed is doing to free up the funnel and have more and more of the one billion people with sleep apnea worldwide get their way through the funnel.

[Michael Farrell, CEO & Chairman at ResMed]

And we'll talk about insomnia and respiratory insufficiency as we go as we look for ways to improve those pipelines as well. Thanks for the question.

[Operator]

Thank you. Next question today is coming from Saul Dassen from Barrington Research. Your line is now live.

[Saul Hadassin, Analyst - Healthcare Services at Barrenjoey]

Yes. Good morning, Mick and Britt. Mick, just a question on U. S. Mask growth.

[Saul Hadassin, Analyst - Healthcare Services at Barrenjoey]

Once again, low double digits. It seems to be ahead of what you described market growth at as high single digits on the last quarter. So just wondering if you can go into a bit of detail as to how much you think that is share gains versus just stronger growth in resupply overall at an industry level? Thank you.

[Michael Farrell, CEO & Chairman at ResMed]

Yes. Thanks, Saul. It's a really good question and you nailed all the elements of it, right? I do think as we look at that AirTouch N30i, I don't know if you've seen the physical product. Brett, Sally and I are doing a road show through Sydney, Melbourne and Singapore.

[Michael Farrell, CEO & Chairman at ResMed]

So for those investors that we see, I'm going to bring a sample that with you because it's that type of idea of bringing fabric to the part that is the pure patient interface. We call that whole thing a patient interface, but the part that touches your nose going from silicon rubber which is the last thirty five years of everyone in the space including ResMed, the market leader to now having fabric there. I think that that innovation is not only incredibly technically difficult to do at scale and manufacturing levels that we do in multi cavity tools and and the high pressure temperature liquid silicon rubber, but it's so impactful for the patient. And it's so comfortable for the patient. And the patient then loves that and wants to have it in our cash markets.

[Michael Farrell, CEO & Chairman at ResMed]

And then in our RT driven markets where home medical equipment respiratory therapists do set up, They see how comfortable it is. Many of them are patients as well and recommend it. So I think there is some share gains from the AirTouch N30i and the F40, which is in our full face category or our nasal mask category. Those are doing really well. But look, it's a competitive space.

[Michael Farrell, CEO & Chairman at ResMed]

There are competitors out there. So I think there's some element of that competitive share taking. But I think there's other elements. As you said, it's resupply and frequency around resupply and contact around resupply and getting better at Brightree, getting better at ResMed resupply, getting better at contacting consumers through MyAir and beyond. So, watch this space.

[Michael Farrell, CEO & Chairman at ResMed]

I think you'll start to see us enhance our resupply approach. And yeah, I think the market growth rate is high single digits. We were ahead of it for the quarter. Sorry. We're going be ahead every So you're still on.

[Michael Farrell, CEO & Chairman at ResMed]

I don't think our SG and A investments are great, So. But anyway, I'll finish that with I'll finish up with the masks and so on growth in U. S, Canada, Latin America, very solid in the quarter and expect us to continue to drive those resupply programs in partnership with our HMEs, in partnership with our Maya platforms. And I mean, you look at Europe, Asia, rest of world, I think we can do better at resupply in some of those markets where we're leveraging our own technologies like Maya and beyond. So mixed bag on that front, but we're very happy with the performance in The U.

[Michael Farrell, CEO & Chairman at ResMed]

S, Canada, Latin America. Thank you for the question, Saul.

[Operator]

Thank you. Next question is coming from Anthony Petrone from Mizuho Group. Your line is now live.

[Anthony Petrone, MD - Equity Research at Mizuho Financial Group]

Thank you. Congrats on another strong quarter. Have two quick ones. I'll just throw them out. The first one, Mick, competitive bidding, the proposal is calling for maybe just a consolidation of the number of contract suppliers out there.

[Anthony Petrone, MD - Equity Research at Mizuho Financial Group]

That just seems like a pretty good draconian proposal. Maybe just walk through that a little bit. If that does kind of stick in the final rule, like how rapidly do you think consolidation occurs in the DME space? And then on the second question is a broader strategy question. Mick, you've sort of commented in the past that ResMed today is a one stop shop for sleep apnea, but certainly wants to continue to expand across the spectrum.

[Anthony Petrone, MD - Equity Research at Mizuho Financial Group]

So maybe talk a little bit about oral drugs. There was a favorable outcome there from APNEMED Phase three study and just the latest thinking on hyperglossal nerve stimulation? Thanks.

[Michael Farrell, CEO & Chairman at ResMed]

Thanks, Anthony and thanks for the multipart question. Still writing it down. And your line, it will remain live through the questions so we can we can have a of conversation just as a heads up. Correct. Okay.

[Michael Farrell, CEO & Chairman at ResMed]

Yeah. So competitive bidding, I'll start with that part. Look, you know, this isn't our first rodeo. Think this was announced when I was running marketing in 2005 and took over CEO in 2013 in the midst of round two, one, two, 2A, 2B, 2C, three and our last round, round four where we saw an uptick from our HME customers actually bidding up against the proposal such that CMS just said, okay, let's go back to where it was and add inflation adjustments these last four years. And so we're watching it very closely.

[Michael Farrell, CEO & Chairman at ResMed]

Yes, look, the guidelines aren't clear yet and they haven't defined everything. And so we're in a comment period, we're going to talk and and when work with AA Homecare and Avamed and and give our feedback to to Washington. I was I was there in Washington just just last month in CMS, you know, with doctor Oz and team and I was also over at HHS with the folks in RFK juniors office there. So they're listening. This administration is listening and taking feedback from industry.

[Michael Farrell, CEO & Chairman at ResMed]

And so we're going to give that feedback And just make sure we protect patient care, protect HME's rights to be able to freely access and really to make sure beneficiaries of US Medicare have a chance to get access to great therapies like ResMed has. So it's all about the patient. We'll be advocating for that. Yes, with regard to consolidation, we've seen a lot of consolidation these last ten years of competitive bidding going through, but it's not really driven by that. It's driven by efficiencies and capabilities.

[Michael Farrell, CEO & Chairman at ResMed]

ResMed's job is to support all our customers, small mom and pops, medium sized regionals and large regionals as well as the big nationals. And with technologies like Brightree, you could be running a small regional as efficiently as some of these large nationals. So we want to support a whole ecosystem. Sometimes the care by a local is just as good or better. So all the customers are important to us.

[Michael Farrell, CEO & Chairman at ResMed]

And, I think, we've seen some really good, I would say mature infrastructure investments by our HME providers and some mature approaches to this. So I think we're going to do very well through this competitive bidding environment. And as we read through the rules there, they seem mostly in line with the last round and some improvements we have suggestions we'll make specifically to Washington. To your question about a one stop shop for sleep apnea. Yes, look, ResMed stands for respiratory medicine and residential medicine.

[Michael Farrell, CEO & Chairman at ResMed]

It doesn't stand for just CPAP company. And we've had more than a decade of being the best provider of not just CPAP, APAP and bilevel which we've done for thirty six years, but over a decade of providing mandibular repositioning devices, which is if CPAP, APAP and bilevel are the gold standard which they are, think Olympic metals, the silver goes to dental, MRDs. And so ResMed is the number one provider of three d printed dental devices in Western Europe, Northern Europe and beyond and everywhere where there's a good economic model for the consumer to get access to dental care. That's where we participate. For the bronze medal, right, for sort of third tier therapy, if you can't tolerate CPAP by bilevel, can't tolerate, dental, which both of them are relatively noninvasive, relatively affordable and use natural things like air and water very much in line with the sort of make America healthy again and actually European sort of naturalist approaches and cost effective approaches of any payer, then you might end up if you can't tolerate those on the thirty therapy.

[Michael Farrell, CEO & Chairman at ResMed]

And I think there's a range there. There's GLP-1s for pharmaceuticals. I think they've taken the wind out of the sales of that new med frankly because the GLP-one not only half treats, I'll say half treats because it's about an HR reduction of 50%. Some of the apnea leaves a lot of residual and should be using combination with gold standard and physicians know that. But it does that and some diabetic improvements in cardiovascular and all those.

[Michael Farrell, CEO & Chairman at ResMed]

And so I think it's more likely that a zip bound or that type of drug would be used as that third tier versus an apnea which only half traits the apnea. But we'll watch this space. We're an investor there. We're obviously on the advisory board. And yes, I want to keep the one stop shop thing for me, Anthony, is about ResMed keeping a relationship with the person who suffocates.

[Michael Farrell, CEO & Chairman at ResMed]

And if they are on CPAP, APAP bilevel, we've got an intimate relationship. They're on dental, we've got an intimate relationship. If they're on those third tier therapies, whether it's a drug or a hypoglossal nerve stem, I wanna still have that relationship. Because guess what? Those drugs may not be inherent for life.

[Michael Farrell, CEO & Chairman at ResMed]

Even an implant might not be something they want to keep turning on because of side effects or whatever. I want to have a relationship so I can bring them back and get them a chance to get the gold standard. Because as Professor Jean Louis Pepin from Grenoble University in France says, he says, the best alternative to failing positive airway pressure therapy is positive airway pressure therapy again. And so I want to keep that relationship, that's that. And I think I included the answer to your third question there on APNIMED in that last one.

[Michael Farrell, CEO & Chairman at ResMed]

So thanks for the triple there Anthony and we'll talk to you soon.

[Operator]

Thank you. Next question today is coming from David Bailey from Morgan Stanley. Your line is now live.

[David Bailey, Equity Research Analyst at Morgan Stanley]

Yes, thanks. Good morning, Mick and Brett. You sort of touched it on the last question there Mick, but just post the Zepbound label interested in your observations around new patients coming into the system and then maybe any feedback you can provide around the physicians prescribing patents post that label if they are starting to prescribe GLP-1s in conjunction with CPAP? Any observations on those two would be appreciated. Thank you.

[Michael Farrell, CEO & Chairman at ResMed]

Yes. Thanks, David. And very good question. I mean, it allows me to talk to a bit broader on that sort of demand generation part of it. And we're watching very closely.

[Michael Farrell, CEO & Chairman at ResMed]

We updated our numbers and so you'll see that in the book later. But it's really it's sort of well north of ten percent increase rate. I think it's now eleven percent increase rate of a patient with a GLP-one prescription starting CPAP, APAP or bilevel versus those who don't have the code that they have had a prescription for GLP one. So it's, you know, strong and just getting a little stronger of that. I'm a motivated patient.

[Michael Farrell, CEO & Chairman at ResMed]

I've come in for this new pharmaceutical capability which has the cardiovascular promise, the diabetes promise, the half treating, obviously, that you promise in this, I don't know, I'll call it the Kim Kardashian or Botox effect, right, this aesthetic effect. And so they come into the primary care physician wanting that, the GP wanting that. But then when the when the when the PCP, when the GP sees they have apnea, they're writing a prescription for CPAP. Like, it's happening because, you know, in The US, there's there's there's you'll get sued if you don't give gold standard therapy if you don't offer the standard of care. But also there's the Hippocratic Oath and they know that this is completely reversible, very cost effective, and a 100% effective if used as director.

[Michael Farrell, CEO & Chairman at ResMed]

And so that's why we're seeing that I think that eleven percent start rate. And you look at one year and two year and those are unchanged. They're north of three percent higher resupply rate for GLP-one prescribed patient versus control for one year and then north of five percent higher resupply rate at two years. And those numbers are steady. So you can see those in the numbers we've got now reported this quarter.

[Michael Farrell, CEO & Chairman at ResMed]

Look, we're not going to rely just upon Lilly's have got the IFU for Zepbound to say, well, that's our demand gen. We don't need to do any. We're to do what we said earlier. We're to do these consumer direct approaches in particularly our omnichannel markets, but we're also gonna do it in our primarily health care driven markets, health care insurance driven markets like The US, France, Germany because it's a combination of all the above. But it will be a contributor to us.

[Michael Farrell, CEO & Chairman at ResMed]

These patients are coming in. And you heard in my prep remarks the focus on CME that continuous medical education. That's huge to make sure that a primary care physician and we're targeting ones that are high volume GLP ones that have that have prescribed them before and are likely to be where people go. We're educating them about gold standard, silver, and bronze for sleep apnea therapy, showing them CPAP, APAP, and bilevel are there, and helping them set up home sleep apnea testing pathways. So very early days in demand gen from ResMed driven and Pharma driven and I'll call consumer tech wearable driven.

[Michael Farrell, CEO & Chairman at ResMed]

But we are starting to see some results in specific markets with more to come. Thanks for the question, Dave.

[Operator]

Thank you. Next question today is coming from Brett Fishman from KeyBanc Capital Markets. Your line is now live.

[Brett Fishbin, VP - Senior Equity Research Analyst at KeyBanc Capital Markets]

Hey, guys. Thanks very much for taking the questions. Just wanted to circle back on the gross margin question from earlier. I thought the answer on 4Q drivers was very clear. Just wanted to follow-up more on the FY 2026 guidance, 61% to 63% represents 200 bps year over year at the midpoint and 300 bps at the high end.

[Brett Fishbin, VP - Senior Equity Research Analyst at KeyBanc Capital Markets]

So pretty significant there. And I was just hoping you could talk through maybe the primary drivers supporting that level of expected improvement. How much do you think is coming from the FX movement this quarter? And then any considerations around seasonality or phasing that we should be thinking about? Thank you.

[Brett Sandercock, CFO at ResMed]

Sure, Brett. I'll take that.

[Michael Farrell, CEO & Chairman at ResMed]

So it's Brett to Brett.

[Brett Sandercock, CFO at ResMed]

Yes. So it's good see my namesake here. So yes, I mean we've got that the guidance there is sixty one-sixty three. We're kind of at lower end and then we want to progressively improve that. So I think that through the month started that lower end, right?

[Brett Sandercock, CFO at ResMed]

And we'll look to exit the fiscal year a higher rate than what we started. So that's how we're kind of thinking about it. And then what if we kind of what are the drivers going to be through FY 2026? It's probably what I talked about continuing theme, but it's really that pipeline of cost optimization initiatives. So it will be around procurement initiatives, it will be around manufacturing improvements in terms of how we balance that, cycle times, all that plays out.

[Brett Sandercock, CFO at ResMed]

There'll be scale benefits. Want to keep going with our logistics efficiencies as well. We've made a lot of inroads obviously on that over the last twelve months. So we think we can there'll be some there that we have still to get I think on logistics efficiencies and we'll keep working on that. The transition of AS10 to AS11 platform will continue to play out. Obviously, a lot of that has played out, but that still play out through FY 2026. We're probably likely we'll probably have a natural kind of product mix tailwind probably favorable think going into FY 2026. And then new product introductions always give you an opportunity as well through that. So they kind of there's no one silver bullet on this. It's really about really strong execution to drive that on multiple fronts and that's how you have to tackle it.

[Brett Fishbin, VP - Senior Equity Research Analyst at KeyBanc Capital Markets]

Very helpful. Thank you.

[Operator]

Thank you. Next question today is coming from Matt Taylor from Jefferies. Your line is now live.

[Matt Taylor, Managing Director at Jefferies & Company Inc]

Hi, guys. Thanks for taking the question. I did want to go back, because you had so much experience with competitive bidding last time. Maybe you could just summarize in your words the impacts that it did have on your business and maybe more importantly didn't have. I know there was a lot of concerns covering you back then and then ultimately it wasn't that bad.

[Matt Taylor, Managing Director at Jefferies & Company Inc]

And could you draw any lines from that situation to what may happen now?

[Michael Farrell, CEO & Chairman at ResMed]

Yeah, Matt. It's really good. And I know we've only got three minutes left here, I'll do my best to summarize the last fifteen years or so of this. Yeah, when I took over as CEO, like thirteen years ago, twelve, thirteen years ago, we're in the heat of it. And I've been running the Americas before that and we were in the heat of it.

[Michael Farrell, CEO & Chairman at ResMed]

And so a lot of a lot of learning. I'll do my best to say, I think, you know, when this sort of started round one, round two, Medicare reimbursement was very significantly above private payer reimbursement. And so, really couldn't argue the justification of not doing the program because government was paying a lot more than private payers. As I look at it now, Medicare and private payers are very much in sync. The private payers, there's lots of them and there's 50 states and there's it's like a two fifty data point matrix with five payers in 50 states.

[Michael Farrell, CEO & Chairman at ResMed]

But they mark to market on a very regular basis annually or even quarterly in summon and they're there. The government is right in line with them. And as you saw in the last round, that round four in 2021, we've a very mature HME provider population who looked at their costs and looked at the capabilities and bid appropriately. And it was slightly above the rates that were previously there. And so then the program went back to what what I call just a CPI or inflation based adjustment with some efficiency measures these last four years.

[Michael Farrell, CEO & Chairman at ResMed]

I think if know, I look at the rules and I look at all the stuff that we've seen so far, it looks pretty similar to that last round. There's some justifications of different percentiles and different averages and some questions we have that will get sorted out. But it's really it's not that different to what we've seen before and the rates aren't that different from Medicare to private payers. So I think, I wouldn't say it's going to be a non issue. Think for our HME customers, want to work really closely with them, help them and through our industry associations and so on we will.

[Michael Farrell, CEO & Chairman at ResMed]

And we're going to support them through this. But look, ResMed doesn't bid directly. So we're directly involved in the program. But all I can say is it's pretty benign. I don't think there's going to be any major perturbations.

[Michael Farrell, CEO & Chairman at ResMed]

And as you said, we got through what was pretty dramatic changes fifteen years ago and ten years ago very well. Actually, we grew very well through that. This will be a much relatively a much more minor change. And I think, we will power through and I think our customers will power through too. But I think most importantly, Medicare beneficiaries who pay the taxes that drive the government money that supports the Medicare and Medicaid programs, they will get access to care.

[Michael Farrell, CEO & Chairman at ResMed]

And ResMed will fight for that, fight for the patients particularly in rural areas that they get access to care. We've been very strong in advocating for that and we'll continue to do so. Thanks for the question. Was a great one, Matt.

[Operator]

Thank you. We reached end of our question and answer session. I'd to turn the floor back over for any further or closing comments.

[Michael Farrell, CEO & Chairman at ResMed]

Great. Well, look, thank you for joining us on our earnings call today. On behalf of the more than 10,000 ResMedians operating in 140 countries worldwide, I'm very pleased that we're able to deliver another very strong year of performance and to build value for all of you, our shareholders. We look forward to speaking to you, many of you over the coming weeks and we'll see all of you in ninety days. Sally?

[Salli Schwartz, Chief Investor Relations Officer at ResMed]

Thank you, Mick. And I'll echo Mick's thank you to everyone for listening. We appreciate your time and interest. If you have any additional questions, please don't hesitate to reach out directly. Kevin, you may now close the call.

[Operator]

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Participants

Executives

• Salli Schwartz, Chief Investor Relations Officer
• Michael Farrell, CEO & Chairman
• Brett Sandercock, CFO

Analysts

• Craig Wong-Pan, Director - Equity Research at RBC Capital Markets
• Dan Hurren, Healthcare Analyst at MST Financial
• Davinthra Thillainathan, Healthcare Equity Analyst at Goldman Sachs
• Saul Hadassin, Analyst - Healthcare Services at Barrenjoey
• Anthony Petrone, MD - Equity Research at Mizuho Financial Group
• David Bailey, Equity Research Analyst at Morgan Stanley
• Brett Fishbin, VP - Senior Equity Research Analyst at KeyBanc Capital Markets
• Matt Taylor, Managing Director at Jefferies & Company Inc