Michael Farrell
Chief Executive Officer and Chair of the Board at ResMed
Thanks, Amy, and thank you to all of our shareholders for joining us today. Our third quarter fiscal year 2024 results reflect another strong period of execution across our entire business, resulting in solid top-line growth and strong double-digit bottom-line growth. Our results were driven by ongoing new patient demand for our devices across global markets, high single-digit growth in our software as a service business, and double-digit global growth in our masks and accessories business. This is exceptional performance given that we are annualizing a very strong quarter of growth in the prior year.
The recent launch of our ResMed 2030 operating model and our steady focus on driving increased operating leverage are delivering excellent bottom-line results and keeping us on a clear trajectory of ongoing profitable growth. Over two billion people worldwide suffer from sleep apnea, what I call sleep suffocation; insomnia, or respiratory insufficiency due to chronic obstructive pulmonary disease or neuromuscular disease. These chronic conditions form a healthcare epidemic that ResMed is uniquely positioned to address. We believe that healthcare should be delivered at the lowest cost, lowest acuity, and highest comfort location possible. In the optimal case, that's in a person's own home. We are the global strategic leader in providing therapies for this epidemic as well as market-leading enterprise software for residential care, including home medical equipment, home nursing, and beyond.
ResMed is the global leader in digital health solutions with over 18 billion nights of medical data in the cloud and over 24.5 million 100% cloud-connectable medical devices that have been sold into over 140 countries worldwide. We are the clear leader in sleep apnea, a market of over one billion people globally. Our end markets remain significantly underpenetrated.
We believe the latest advances in big consumer tech and big pharma can potentially bring incredible numbers of new patients into the healthcare system where ResMed is uniquely positioned to provide ongoing care at home. We have a myriad of opportunities to add value, to reduce friction, to improve interoperability, to lower costs, and to improve patient outcomes. We're the global strategic leader with software supporting hundreds of millions of people as they take control of their healthcare journey and navigate the complex healthcare world beyond the hospital system. Many more people can benefit from our products and solutions, and we're laser-focused on growing the market to help people get on the therapy they need and on a pathway to better sleep, better health, and better long-term care.
Sales of our devices, including the category-leading AirSense platforms grew 5% year-over-year globally. Excluding the one-time COVID-related ventilator sales in the third quarter of last year, global devices grew about 300 basis points higher than that, so right around 8% global devices growth. We are maintaining supply of two -- of the two market-leading 100% cloud-connectable platforms, the AirSense 10 and AirSense 11. We're working to increase the global availability of AirSense 11 platform by securing market-by-market regulatory clearances. We are following a similar path with our recently launched AirCurve 11 bilevel and non-invasive ventilator platform as we continue its launch in the US and beyond in the period ahead.
Our commercial teams are successfully demonstrating the clinical and economic benefits of the ResMed mask portfolio. Our masks and accessories business achieved 10% growth year-over-year. expanding at or above the market in a competitive category globally. During the quarter, we introduced our latest mask innovation into the US market called the AirFit F40. The F40 features a proprietary new technology that we call Adaptive Seal. It is a silicon cushion designed to create and maintain a better facial seal even when the person is moving frequently during sleep. It leverages a fully flexible frame technology to cope with such frequent nocturnal movement. Physicians, respiratory therapists, and patients love the F40 for its comfort, its fit, and its ease of use. It is the smallest full-face mask on the market from ResMed. Patients are voting with their wallets and respiratory therapists and physicians are voting with their recommendations and their prescriptions. We look forward to ongoing success in the US and to swiftly bring the F40 to other global markets very soon.
Mask and accessory resupply programs are an important element of our offering as we serve the ongoing therapy needs of patients globally. ResMed's clinical and commercial teams continue to partner with physicians and providers to drive resupply programs directly for their patients. In our cash-pay markets, we have established a number of subscription programs that have been adopted by consumers. Research shows that resupply programs lead to better patient adherence and better long-term clinical outcomes for the patients and their caregivers. In the US, our resupply programs are powered by our digital health ecosystem, including AirView for physicians, myAir for patients, and Brightree for home medical equipment providers. We will continue to develop, launch, and scale these technologies as well as direct subscription programs to help people take control of their own health, regularly refreshing ongoing therapy needs, including masks, tubing, humidifiers, and other accessories.
Let's now turn to a discussion of our top three global strategic priorities here at ResMed. Number one is to grow and differentiate our core sleep health and breathing health business. Number two is to design, develop, and deliver market-leading med tech and digital health solutions that can be scaled in 140-plus countries worldwide. Number three is to create and leverage the world's best software solutions for residential care. As the global market leader in these significantly underpenetrated markets, our most significant opportunity is actually to expand and grow the market itself through awareness, diagnosis, and pathways to treatment. We aspire to be the digital health concierge for each person as they pursue their personal journey to better sleep, better breathing, and better care where they live. We are ramping up our demand-generation initiatives to do just that.
The ResMed 2030 operating model changes that we made recently position us for success as a product-led customer-centric brand-enhanced leader in health tech. We're raising awareness and creating pathways for patients to find access to care for their sleep health and their breathing health across the globe. We are leveraging traditional market channels and investing in cost-effective social media-driven demand-generation campaigns. The goal is to help consumers concerned about their sleep and breathing find their way into appropriate screening, diagnostic, treatment, and management pathways.
As we continue on our journey to create this digital health concierge for individuals, we are tracking progress with hard metrics. We are looking at new patient starts in our physician and provider-based ecosystem, including AirView, which now contains more than 27 million patient records. We're also tracking new starts in myAir, our consumer patient engagement app where people choose to participate in their personalized healthcare journey to better sleep and better breathing. myAir now includes a population of 7.8 million users. We will drive more and more of the over one billion people worldwide who need our help for their sleep suffocation into the healthcare system.
We believe two global megatrends will further support our ongoing growth. Awareness driven by consumer tech specifically sleep-tracking wearables like the Samsung Galaxy Watch, which has a de novo FDA clearance to screen for sleep apnea. We expect similar capabilities from other wearables from big tech, including the Apple Watch and Google's Fitbit. In addition, we believe that the population of patients -- the otomegatrend [Phonetic], the population of patients coming from big pharma as they focus on obesity and related impacts on health, including sleep health will bring an incredible volume of patients into the health care system and the patients will have clinically significant sleep apnea that is best addressed by our therapies post these other therapies.
We love this attention from big consumer tech on the field of sleep wellness tracking, and we believe that many of these wearable technologies will help consumers find out if they have issues with breathing during sleep while maintaining high-quality sleep. This could be one of the biggest ways of people taking control for their own pathway for discovering they have sleep issues like sleep apnea or insomnia, or both, a new disease state that has been called by the physicians, COMISA. Ultimately, we believe that this will lead to increased patient awareness and sustainable long-term growth for ResMed. Our goal is to educate people as they move from sleep wellness tracking with these wearables to what I call sleep health tracking and from consumer awareness to a true healthcare pathway for screening, diagnosis, treatment, and ultimately ongoing management of their sleep health and breathing health.
We believe that here at ResMed, we are uniquely positioned to help. Big Pharma is squarely focused on GLP-1 medications right now. For many people dealing with their obesity, their healthcare goals are focused on losing weight while improving their diet, exercise, and their sleep routines. We believe that increased utilization of GLP-1s to treat obesity will bring many new people -- people into the healthcare funnel, activating them to see their primary-care physicians as they strive for weight loss and other medical help. We believe this will open these patients up to knowledge of their other chronic diseases from their primary-care physicians, including awareness of chronic diseases such as sleep apnea, ultimately driving new patients into diagnosis and treatment pathways that may not have previously been considered or have been treated for those patients. So we believe this will drive not just more patients into our channel, but also more motivated patients into our channel.
ResMed has been tracking the impact of GLP-1s through a de-identified patient analysis using an overlap of our data and third-party claims data. With another quarter of data analyzed, we are now up to an incredible N equals 660,000 subjects in our analysis. The bottom line is that the data show that GLP-1s are on patients seeking and adhering to positive airway pressure therapy. The latest numbers are an improvement from what we presented previously. For patients prescribed a GLP-1 medication, the latest data show a 10.5% higher propensity to start positive airway pressure therapy over those not taking the drug. As we follow these patients longitudinally, the resupply rate at T equals 12 months is 310 basis points higher. That's $3.1 billion absolute basis percentage points higher for patients who have a GLP-1 prescription. And then at T equals 24 months, the resupply rate is 500 basis points to 5.0 absolute percentage points higher for patients who have a GLP-1 prescription. These data show clearly that these new GLP-1 pharmaceutical class is actually a tailwind for our ResMed business. bringing more patients and more motivated patients into the health care system.
We've included the full analysis of these data in our investor deck, and I encourage you to review the data there. It's very positive information and very thorough and detailed work by our healthcare economics and outcomes research as well as our digital health analytics teams here at ResMed. Existing clinical studies show many factors impact sleep epidemiology, including craniofacial anatomy, age of the subject, gender, and weight. With over one billion people on the planet with sleep apnea right now, 80%-plus of them are undiagnosed in our biggest market, the United States and over 90% of patients are undiagnosed globally. There remains an incredible opportunity to help people sleep and breathe better through positive airway pressure therapy. The universally recognized gold standard for treating sleep apnea. We look forward to more patients entering the health care system for care and more motivated patients who can get on our therapy faster and stay on it longer.
In terms of best-in-class treatments for sleep apnea, achieving that goal of good sleep and good breathing, we have peer-reviewed and published evidence demonstrating that we can achieve over 87% of patients adherent through our positive airway pressure technology by combining our market-leading device platforms, our market-leading masks with our digital health solutions. Even with this best-in-class global tech just over 10% of patients still need alternative therapies and we have a very high volume of patients coming through these days.
We're investing in alternative therapies and we're working to help patients who just can't adhere to positive airway pressure therapy despite the latest technology to find their path to second-line therapies, such as dental devices where ResMed has the market-leading 3D printed dental device on the planet for sleep apnea in Western Europe and Northern Europe. That's called Narval. In addition, we have investments in third-line therapies, including pharmaceutical options, we're an investor in Apnimed. And we're also an investor in hypoglossal nerve stimulation technology, through our investment in a company called Nyxoah. ResMed is about sleep health. It's about breathing health, and it's about delivering the best care right where you live. We make sure the person finds the path to the highest efficacy, lowest cost, most comfortable therapy that's best for them.
Let's pivot now to talk about our digital health technology investments. leveraging our 18 billion nights of deidentified medical data in the cloud and our 24.5 100% cloud-connectable devices that are out there in our ecosystem across 140 countries. We are investing in a portfolio of artificial intelligence-driven capabilities as well as customer-facing AI products in our ecosystem. We continue to roll out these products in our AirView ecosystem, such as Compliance Coach that I talked about last quarter, that's rolling out in the United States.
We're also progressing well with our generative AI capabilities to help patients along their journey, really people before their patients and then they become people seeking sleep health and breathing health solutions, and then on their journey, they become patients and we're rolling out that Gen AI capability in the Asia Pac region for now, and we'll look to scale that as we move forward. We'll continue to share progress on this front as this revolutionary tech is developed and scaled across our business and many of our medtech and health tech peers are doing the same and our ecosystem will move forward.
Our Respiratory Health business continues to be supported by sustained activity across our noninvasive ventilator platforms and our life support ventilator platforms. We continue to invest in clinical and economic trials for high-flow therapy that we call HFT to treat chronic obstructive pulmonary disease at home at a cost-effective rate. This is a long-term opportunity focused on generating evidence, developing pathways, and driving new reimbursement options. We are focused on driving adoption of these technologies for treatment at home. The prevalence of respiratory insufficiency due to COPD as well as neuromuscular diseases, continues to increase, and we have low-cost high efficacy, and high-tech treatments in HFT and beyond to address this health care epidemic.
Turning to our Software as a Service business in the field of residential care we had another strong quarter with year-over-year growth of 8%. We plan to maintain high single-digit growth in the remainder of fiscal year 2024 and we plan to accelerate to double-digit growth for our Residential Care Software as a Service business on an organic basis throughout fiscal year 2025. We are seeing ongoing customer-facing synergies between our Brightree offering in the US and our core home medical equipment channel and its resupply capabilities. We are driving good growth across both our residential care SaaS and our core sleep health and breathing health businesses while serving many hundreds of thousands of patients.
Our residential care SaaS business is integral to ResMed's growth portfolio, and we're excited to have created a global business that will achieve double-digit growth on an organic basis throughout fiscal year 2025. We continue to drive our opex leverage by managing our capabilities for cloud compute, cybersecurity, interoperability, privacy, and R&D across our go-to-market brands that include Brightree, MatrixCare, and MEDIFOX DAN. And those synergies go not just across the SaaS businesses, but also directly into our core sleep health and breathing health business. And beyond this infrastructure leverage, our residential care SaaS business drives platform development synergies and customer engagement facilities and capabilities that are synergies as well. And these highly complement the market-leading med tech and software solutions capability that's there right in our core sleep health and breathing health business ecosystem, including products like AirView and myAir and beyond.
We are transforming respiratory medicine and residential care at scale. We are leading the industry in developing, applying, and adopting digital health technology across our markets. We continue to scale and drive efficiencies in our operations. We're focused on driving top-line revenue growth, focused cost discipline, and increased efficiencies to accelerate profitability all the way to the bottom line and we made very good progress on that this quarter. The team delivered non-GAAP operating income up 23% and non-GAAP net income up 27%. We have created differentiated products and solutions for customers worldwide, driving long-term sustainable value for our shareholders. We lead the industry in digital health technology with the smallest, quietest, most comfortable, most connected, and most intelligent medtech solutions.
During the last 12 months, we have improved over 174 million lives by delivering a medical device directly to a patient, a complete mask system to a patient, or a digital health software solution that provides personal care for a patient right where they live. We've helped each person sleep better, breathe better, and live higher-quality lives with best-in-class health care.
In closing, I want to express my sincere gratitude to the more than 10,000 ResMedians for their perseverance hard work, and dedication today and every day. Thank you.
With that, I'll hand over the call to Brett in Sydney for his remarks, and then we'll open up to Q&A with the entire team between Sydney and San Diego. Over to you, Brett.
