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

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Steve Wheen: Yes, thanks Mick. I just wanted to follow up on that gross margin question. In the previous quarter, I think it was — Brett was talking to the efficiencies that you’re achieving through doing more volume, was — the margin benefit from that efficiency was sitting in your inventory balance and that’s obviously been building and spilt again this quarter. I’m just interested is that still the case that when that inventory comes off the balance sheet, you should automatically start to see the efficiency gains that you’ve been able to achieve to-date?

Mick Farrell: Brett, you want to have a first go at that question?

Brett Sandercock: Yes, Mick thanks. So, Steve, yes, I mean, that’s — what we’re doing — I mean — I think Rob articulated really, at the moment, we’re optimizing for delivery rather than efficiency and we got things like we’re running the three platforms at the moment. So, I’m really focused on delivering devices to patients. So, that’s having an impact. The big one is work through inventory or the wash-through is the freight cost. So, we’re seeing some reduction in freight costs. But that’s not manifested in our P&L, yet, that’s one for the Q3, Q4. So, there will be some benefits that starts wash through into Q3 and Q4 that we’re not seeing it that’s currently still in inventory. But on the efficiency side, we’re really — we will get there, but we’re optimizing on delivery for the moment. But I think as we work through the fiscal, we’ll be in a much better position to drive on efficiency measures.

Mick Farrell: And I just pile on there — it’ll get — Brett’s guidance, nice conservative guidance is that our gross margin will be sort of steady as we go forward. I look on this and say, I think there’s some upside. As we start to see mask rates start to improve, we saw 13% constant currency growth in masks during the quarter. I think, yes, as Brett said, the freight costs are washed through the inventory. And we’re getting great scale from the biggest respiratory medical manufacturing plant in the planet, there in Singapore and the efficiency we’ve got a well above any competitor and we’re doing really well on that and I think that’ll come through. And then in addition to that, you’ll get some upside from MediFoxDarn, which is accretive to revenue, gross margin, and EPS, as Brett said, throughout fiscal and beyond. So, that would be my guidance there as well, Steve. Thanks for the question.

Operator: Thank you. Next question is coming from David Bailey from Macquarie. Your line is now live.

David Bailey: Yes, thanks very much. Morning Mick and Brett. Just got a question on new patient growth. Just thinking about patients who have been prescribed the device and waiting and also those yet to be diagnosed, just wondering if you could compare and contrast the US and rest of world? And then some comments on what you think it means for industry device growth for fiscal 2023 and 2024 relative to our historical growth rates?

Mick Farrell: David, that’s a great question. It’s actually the answer. We could take the whole rest of the Q&A session to go through it because it’s what we do is trying to reach out to the 936 million people in our core market that suffocate every night with sleep apnea around the world and we’re laser-focused on it. As you saw, we delivered very strongly on those new patient setups 41% growth of devices in US, Canada, Latin America and we turned to positive there in Europe, Asia, and other. And what I can tell you is we’re really working through that excess patient demand. Those numbers will tell you we’re working faster through that excess demand in the US and getting closer to a state you get a prescription and you’ll get a device in days or weeks versus it got months there at the peak of the crisis.

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