Michael "Mick" Farrell
Chief Executive Officer at ResMed
Thanks, Amy, and thank you to all of our shareholders for joining us today as we review results for the third quarter of our fiscal year 2022 ended March 31. Our third quarter results reflect strong performance across our business with double-digit revenue growth in our Sleep and Respiratory Care business and high single-digit growth in our Software-as-a-Service segment.
Our growth is the direct result of our global team's ability to pivot and drive for results even as we continue to manage through several external challenges that are impacting our business, including: one, ongoing supply chain disruptions; two, COVID restrictions in parts of the world; three, recovering post-COVID peak patient flows; and four, unprecedented demand from a competitor recall, which will keep them out of the market at least through the end of the calendar year.
The global supply chain environment remains very challenging across multiple industries. I'm very proud of our team, growing double-digits this quarter year-on-year with an astounding 30% growth this quarter for devices in U.S., Canada and Latin America. Even with this incredible growth, the demand in the market was even greater.
As with almost all customers in the global components industry, we remain on allocation from our suppliers, particularly for electronic components with our number one bottleneck being semiconductor chips. This allocation impacts our ability to meet the incredible demand that we see in our marketplace, and we are forced, in turn, to allocate ResMed products to our customers.
We have established guiding principles for allocation, giving priority to highest acuity patients first. Additionally, the ongoing challenges of sea freight and air freight due to reduced availability and increased prices are impacting our ability to efficiently get components into and finished goods out of our factories worldwide.
We are working closely with our global supply chain partners doing everything that we can to secure additional supply to further increase production of our devices. This work includes a combination of a number of work streams: one, shoring up the flow of existing parts from existing suppliers; two, establishing flow of existing parts from new suppliers; three, validating new parts from existing suppliers; and four, validating and verifying new parts from new suppliers as we review and redesign across key devices in our portfolio.
In addition, we have the fifth line of work. So it's five lines of work, and that fifth line is reengineering designs to eliminate and/or mitigate the top bottlenecks to achieve greater flow through our supply chain. The most significant example of a project in this fifth line of work is our newly released AirSense 10 card to cloud device.
This device eliminates the number one bottleneck of the 3G, 4G comms chip, while facilitating secure data upload to our cloud-based software platform called AirView so that providers and physicians can access the data and better manage the patient.
We've already begun to offer AirSense 10 card to cloud devices in select markets to some customers, and we will be ramping up from there. With these five lines of work continuing in parallel, we have been able to offset some of the impact of continuing component shortages and de-commits to help us better support patients, providers and physicians.
We recognize that this is a very difficult situation for all of our customers, including physicians who feel the pressure from their patients, home medical equipment providers who see this every day in their businesses, but also payers and entire health care systems and especially the most important customer, the patient themselves.
We are partnering across the industry to be the solutions provider to these problems. We expect a significant backlog of patients diagnosed and coming through the system to be present for at least the next 12 months to 18 months with incredible associated demand. We are working to address this demand with these portfolio of supply projects and beyond. And we will get through this time stronger than ever as an industry and as a company.
Our number one priority will always be patients, doing our best to help those who suffer from sleep apnea, chronic obstructive pulmonary disease, asthma and other key chronic respiratory insufficiency diseases as well as those who benefit from our out of the hospital care Software-as-a-Service solutions. Our goal is to ensure that every person gets the care that they need, where they need it and when they need it.
Let's now briefly discuss the other broad market conditions in our industry. We continue to see steady ongoing recovery of patient flow and demand through the diagnostic channel across the countries that we operate in. In fact, many countries are above 100% of pre-COVID levels of patient flow.
However, ongoing surges, variants and government restrictions continue to impact a few countries, which remain below pre-COVID diagnostic levels. China is a case in point right now with severe shutdowns in Shanghai and beyond.
But across our portfolio, our global portfolio, we're in 140 countries that we serve. I expect that these metrics will steadily improve to pre-COVID patient levels and beyond as vaccines and boosters roll out globally and people remain focused on their personal respiratory health and hygiene. It's been a big learning through COVID.
With the adoption of digital health solutions for screening, diagnosis and remote patient setup and remote patient monitoring as well as establish COVID cleaning protocols, sleep labs and other facilities, I expect the impact of new variants to diminish in absolute impact each and every time.
Let me now update you on our top three strategic priorities. Number one, which is to grow and differentiate our core sleep apnea, chronic obstructive pulmonary disease and asthma businesses. Number two, to design, develop and deliver world-leading medical devices as well as digital health solutions that can be scaled globally. And number three, to innovate and grow the world's best software solutions for care that is delivered outside the hospital, where people live and especially in the home.
The U.S. launch of our next-generation device platform called AirSense 11 continues to go very well. Although it is challenging to differentiate ongoing positive customer sentiment and feedback from the incredibly high demand in the U.S. market and beyond. The AirSense 11 has provided much needed additional product supply as we face all-time high demand for ResMed devices and it couldn't have launched at a better time for that purpose to help us mitigate ongoing component shortages.
We will introduce the AirSense 11 into additional countries in the fourth quarter that we're in right now here of fiscal year 2022 and throughout fiscal 2023. In parallel, we will continue to sell our globally available market-leading platform, the AirSense 10, which is second in customer preference only to the AirSense 11, including the new card to cloud Sense10, as we seek to maximize the total volume of CPAP, APAP and by levels available for all of our customers.
With our digital health technology ecosystem, we are engaging patients in their therapy in a digitally native environment like never before in the industry. We are also making it easier and more efficient for our home medical equipment and home care provider customers to manage their patient populations using our full suite of software solutions, including myAir for patients, AirView for physicians and providers and Brightree for HME providers.
When customers use these digital health technology solutions, they have increased efficiencies and lower costs. And together with us, we achieve improved outcomes for patients and their physicians. With the latest technology built into the AirSense 11 platform, we are driving higher adoption rates of the myAir app by patients, higher than ever before.
Right now, we are seeing more than double the myAir adoption rate as patients engage directly in their own health care. People want personal care. They want their own data on their own app, on their own phones.
And they like the coaching and the personal engagement of our digital ecosystem. This means more patients are signing up onto myAir every day and fully engaging with ResMed's software technology, helping us to now pass over 11.5 billion nights of respiratory medical data in the cloud.
Ultimately, these software solutions, these big data deliver a better patient experience. They deliver better efficiencies for home care providers. And most importantly, they deliver greater long-term adherence to therapy by patients.
Let me spend just a couple of minutes outlining some real-world evidence showing that greater therapy adherence leads to lower hospitalizations, lower mortality and better clinical outcomes through mitigation of chronic disease. We are demonstrating better patient outcomes and lowering costs for the healthcare system at a scale not seen before in the industry. These are critical components of the ResMed 2025 strategy. The latest example is a study recently published in the landmark American Journal of Respiratory and Critical Care Medicine Journal also known in the industry as the Blue Journal.
This article demonstrates that patients with obstructive sleep apnea and chronic obstructive pulmonary disease who were adherent to CPAP therapy versus non-adherent to CPAP therapy, and it showed significant year one and year two reduction of clinical use by over 30% and reduction of inpatient hospitalizations by nearly 50%.
It showed a 20% reduction in year one and year two total health care resource cost, which included a 25% reduction in emergency room costs and a 52% reduction in inpatient hospitalizations. These are important metrics for the whole health care system. Another key aspect of our long-term growth strategy is driving awareness and increasing the flow of patients through the top of the sleep apnea diagnostic funnel.
COVID-19 has advanced awareness, adoption and acceptance of digital health and respiratory health, including telehealth tools and specifically home-based sleep apnea tests. Although driving demand generation is not a priority in the immediate term, given the supply shortage and the incredible demand we're facing, we are maintaining our long-term focus and investments in this diagnostic channel so that we are ready when conditions improve to ensure sustainable long-term pipelines of new patients coming through the channel. With 1.6 billion people worldwide suffering from sleep apnea, COPD and asthma, it's also our duty to do this.
We are innovating with partners and our customers to create even more efficient and effective approaches to sleep apnea, patient identification, screening, diagnostics, treatment and management. We will continue to invest in technology that enable what we call an end-to-end seamless digital experience for patients.
One example we recently rolled out is the next generation of our remote mask selector tool that makes mask selection and sizing easier and more effective by creating personalized mask recommendations based on a patient's health, sleep attributes and their own facial measurements.
Choosing the right mask is challenging to do remotely. But getting the right mask fit is crucial to patient comfort and long-term adherence. The technology MaskSelector is a web-based tool that solves this problem by prompting the patient to answer a few simple questions and follow a few easy steps with their camera-enabled smartphone to capture a digital facial scan.
Based on the answers and the digital facial measurements, MaskSelector then provides a recommended mask and sizing. Whether a patient is then being set up at home remotely or preparing for a face-to-face interaction with the respiratory therapists and clinical staff at a provider's office, MaskSelector helps the patient quickly get to the right mask for their unique needs.
Turning to a discussion of our respiratory care business, focusing on our strategy to better serve the 380 million patients with COPD worldwide and the 330 million patients that suffer from asthma worldwide.
Our goal is to reach many hundreds of millions of patients with our respiratory care solutions, including non-invasive ventilation and life support ventilation as well as newer therapeutic areas such as our cloud-connected pharmaceutical delivery solutions from our Propeller technology and high-flow therapy offerings such as our product platform called Lumis HFT.
Demand for our core non-invasive ventilation and life support ventilation solutions for COPD and other respiratory insufficiency patients remained strong throughout the quarter, especially in markets outside the U.S. where providers shifted focus to supporting the most severe and highest acuity patients.
This demand and the work of providers is aligned with the ResMed guiding principles of our allocation process specifically to give the highest priority to manufacturing life support ventilation. As I speak, we are not component constrained on our life support ventilator called Astral.
Let me now review our Software as a Service business for out-of-hospital care. During the quarter, our SaaS business achieved high single-digit growth year-on-year across our portfolio of SaaS markets, including home medical equipment as well as facilities-based and home-based care settings. Our SaaS customers recognize the need for technology solutions to solve their challenges with efficiency and scale. And our software, services and solutions help them achieve both.
The continued growth of home-based care is providing tailwinds for our home medical equipment and our home health products, and we continue to grow with our customers as they increase their utilization of our software and data solutions to improve and optimize business efficiencies and patient care, including our landmark Brightree and SNF ReSupply products.
As businesses continue to open up, we've been able to visit customers in person as well as to attend SaaS trade shows, where interest in our Brightree, MatrixCare and Citus offerings, to name a few, remain very strong. We have a very solid pipeline in SaaS.
The COVID-19 pandemic has been and remains challenging for some verticals in our SaaS business, particularly skilled nursing facilities, where headwinds have kept patient census rates below pre-pandemic levels.
But as COVID restrictions continue to ease and our customers improve their line of sight to better conditions, we expect to see pent-up demand for technology investments, which provide opportunities for us to sell more services and more solutions to existing customers as well as to increase our new customer pipeline.
As we look at our portfolio of solutions across care settings, we expect our SaaS group revenue growth to maintain high single-digit growth as we exit this fiscal year and well into the next fiscal year and beyond. As always, our goal is to meet or beat that market growth rate as we continue to innovate, and we expect to grow the market and take market share.
We are the leading strategic provider of SaaS solutions for outside hospital care. And we provide mission-critical software across a broad range of very attractive vertical markets. We are well positioned, and we have created a differentiated value for customers and for ResMed with our SaaS businesses.
I'm excited about the future of our SaaS business. It's an important part of ResMed's future growth, and I see a lot of opportunities to innovate in lower cost, lower acuity settings of care. It's the future of health care delivery with strong organic and inorganic growth ahead for ResMed. Our focus is on personal care that is patient-centric, physician-centric and provider-centric.
This approach, combined with our unique ResMed culture means that we are positioned to continue winning in the vastly underserved medical markets of sleep apnea, chronic obstructive pulmonary disease asthma and beyond. We are transforming out-of-hospital healthcare at scale, leading the market in digital health technology.
As I said earlier, we have over 11.5 billion nights of medical data in the cloud, and we have over 17 million cloud connectable medical devices on bedside tables in 140 countries worldwide. We are unlocking value by using de-identified data to help patients directly, but also to help providers, physicians, payers and entire health care systems.
We have invested in the cybersecurity, the privacy, cloud operations as well as data analytics, including artificial intelligence, machine learning capabilities to do this at a scale unmatched by our competitors, and we are increasing our lead each and every day.
Our two key software customer-facing products, AirView and myAir are now 100% managed in the cloud. So not only are our devices cloud connected and our software cloud-enabled, we here at ResMed as a company are cloud connected and cloud enabled. In fact, we are a leading digital health company global.
Our mission and goal to improve 250 million lives through better healthcare in 2025 drives and motivates me and ResMedians around the world every day. We made excellent progress towards that inspiring goal during the last quarter.
Before I hand the call over to Brett for his remarks, I want to again express my sincere gratitude to the more than 8,000 ResMedians worldwide for their perseverance, their hard work and their dedication during these ongoing and unprecedented times. Thank you for all that you do.
With that, I will hand the call over to Brett in Sydney, and then we will move to open the lines for Q&A. Over to you, Brett.