But we have always done the best of analyzing the Net Promoter Scores of patients, Net Promoter Scores of physicians, home care providers. Physician payer providers and so on. So really understanding the marketing metrics around that, having our first Chief Marketing Officer sit at the top table and really be laser-focused on those NPS scores and driving them up and really valuing the multibillion-dollar ResMed brand and enhancing that over time. And the third part around focusing on profitable growth and driving that leverage with our first Chief Revenue Officer, it’s really around that profitable growth. And if the title was used broadly, I would call it the Chief Profitable Growth Officer rather than Chief Revenue Officer, but really, it’s around keeping that discipline on the great growth we’ve had on the topline, but ensuring we get that leverage through OpEx R&D and particularly on SG&A in the new world to do things differently with tech.
And that segues into the second part of your question, Compliance Coach. Yes, look, this is a great AI tool. By the way, it’s not generative AI Compliance Coach. The other one that we launched in Asia Pacific, the digital concierge is generative AI and has that extra capability. Compliance Coach is [garden-variety], what would have been called machine learning is now artificial intelligence, it’s a great algorithm, and it’s out there. The measure of that one, success on that one, Suraj, is does it lower the cost to serve at that HME or with the same labor force of respiratory therapists and pulmonary doctors can they serve more patients. So lower cost, higher efficiency, and really, the key metric is what’s the adherence rate at day 90, day 365, year two, year three, in that patient cohort that’s gone through Compliance Coach.
Is it statistically and significantly higher than what that customer was getting before? If they’re a best-in-class ResMed customer getting 87% adherence at day 90, does it go up to 90, does it go up to 92. And by the way, those customers are very sophisticated in understanding what that means for their business, what it means for them showing the payers that they reduce costs in hospital care and that they improve outcomes for the patient and how they feel and of course, how they improve their own revenue and hours through replenishment supplies. Anyway, that’s my – the briefest answer I could do to that great question. Thanks, Suraj.
Operator: Thank you. Next question is coming from Steve Wheen from Jarden. Your line is now live.
Steven Wheen: Yes. Good morning. Just a question for Brett. Brett, I was just wondering if we could look into the gross margin a little bit further and trying to understand, are we seeing in – across that quarter, the full benefit of the price that you’ve taken? Or is that some annualization effect as some customers perhaps roll off contracts and whether or not from a rate perspective, could you just kind of reiterate what your expectations are there, what you’re seeing with regard to the pricing following the conflict?
Brett Sandercock: Yes. Sure, Steve. So yes, I mean, on the gross margin and recent price increases we put through during the quarter, some of those are obviously be contractual arrangements there as well. So we’ve put some – some of it’s gone through as a general increase, and then there will be specific contractual arrangements that means those pricing will be a little bit progressive. I guess if you look over the back half of fiscal 2024 on that. So let’s call that be kind of progressively roll through. But we’re definitely seeing some of that impact already on that. I think the second part of your question was around – is that around the sort of freight Red Sea disruptions and so on?
Steven Wheen: Yes. Just what you were sort of intimating, if you could just repeat that commentary, what you’re seeing in the market and how you actually are trying to anticipate or protect yourselves against that?
Brett Sandercock: Yes. Yes. So we’re definitely seeing the impact there and a lot of that shipping is obviously not going through the Red Sea, but then going around kind of good hope. So that’s happening certainly increased lead times, I think, probably you could be looking at two to three weeks on that. Particularly, this is a particularly trading to Europe in particular, but also to some extent, to the U.S. where you’ve got to find alternate freight paths, if you like. So that’s having an impact. And we’re also seeing some increase in actual freight rates as well. And I think this is an industry wide not just ourselves. So we’re looking at that closely. We’re looking at alternative routes. We’re looking at multimodal distribution there.
So there’s a number of things we’re looking at to mitigate that where we can. But it realistically probably see some uptick in freight cross. It would not manifest in our P&L in Q3, but there could be some headwinds in Q4 on that. But again, I think we’ve just got to see how that evolves over the next little while.
Operator: Thank you. Next question is coming from Saul Hadassin from Barrenjoey Capital. Your line is now live.
Saul Hadassin: Thanks. Good afternoon, good morning. Just another question for Brett. Brett, just regarding the restructuring charges and also the charge for the Mask recall. Is that done now in terms of those P&L costs? Or do you expect any further costs to be incurred in third quarter or indeed fourth quarter this fiscal year? Thanks.
Brett Sandercock: Yes we’re largely through that. I mean, I can’t – I don’t think you can rule out restructures from time to time, but I think the material restructure that we did is behind us now. So going – anything going forward, I think, would be pretty minor on that. So I would say – I’d characterize that as saying, yes, we’ve done the big restructure, and that should clear us now for the next…
Michael Farrell: Just to jump in there, Brett, a little bit specifically to Saul’s question about the mask with magnets upgrade of our labeling, which was classed as a recall in the U.S. and some other jurisdictions. That cost was fully taken account of in this quarter. We’re not expecting to add anything more on the mask with magnets action relabel and recall in certain jurisdictions.
