Welcome to the Second Fiscal Year 2020 ResMed Earnings Conference Call. My name is Christine, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded. I would now like to turn the call over to Amy Wakeham, Vice President of Investor Relations and Corporate Communications. Amy, you may begin.

Great, thank you, Christine. Good afternoon and good morning, everyone. Thanks for joining us, and welcome to ResMed's second quarter fiscal year 2020 earnings call. This call is being webcast live and the replay, along with a copy of the earnings press release and our updated investor presentation, will be available on the Investor Relations section of our corporate website later today. Joining me on the call today to discuss our quarterly results are CEO, Mick Farrell; and CFO, Brett Sandercock. Other members of management will be available during the Q&A portion of the call. During our call, we will discuss several non-GAAP measures. For a reconciliation of the non-GAAP measures, please review the notes to today's earnings release. As a reminder, our discussion today may include forward-looking statements, including, but not limited to, expectations about our future performance. We believe these statements are based on reasonable assumptions. However, our actual results may differ. You are encouraged to review our SEC filings for a discussion of the risk factors that could cause our actual results to differ materially from any forward-looking statements made today. With that, I'd like to now turn the call over to Mick.

Great, thanks Amy, and I'll go a little fast on my prepared remarks so we still have time for Q&A, despite the phone difficulties. Thanks, Amy. And thank you to all our shareholders for joining us today as we review results for ResMed's second quarter of fiscal year 2020. On today's call, I will discuss our long-term strategy. I'll then review top level financial results, some business highlights from the quarter, and a few key milestones. Then, I'll hand the call over to Brett who will walk you through our financials in further detail. Our team achieved another quarter of strong revenue growth across the portfolio driven by superb performance in the mask category, particularly in the US market with good performance across the 140 countries where we provide our solutions. We continue to take market share with our software solutions that enable increased therapy adherence with resupply programs providing support to those who need it and with our innovative new products. Customers are voting with their wallets and they are voting for ResMed. As the world's leading software driven medical device company, we are using digital health technology to transform the industry. We have sold nearly 11 million, 100% cloud connectable medical devices into the market, and Air Solutions our cloud-based ecosystem manages more than 12 million patients. In the last 12 months, we have changed over 15 million lives by providing a person with a ResMed device or complete ResMed mask system to help them breathe better and live better lives. In addition, our Brightree and MatrixCare software systems are helping to manage 90 million more people outside the hospital. Digital health technology is an integrator across everything that ResMed does. AirView, myAir, Propeller, and a portfolio of other digital health solutions allow us to better engage with…

Great, thanks Mick. In my remarks today I'll provide an overview of our results for the second quarter of fiscal year 2020. As Mick noted we had a strong quarter. Group revenue for the December quarter was 736 million, an increase of 13% over the prior year quarter. In constant currency terms revenue increased by 14%. Excluding revenue from acquisitions, group revenue increased by 11% on a constant currency basis. Taking a closer look at our geographic distribution and excluding revenue from our software as a service business our sales in US, Canada and Latin America countries were 408 million, an increase of 14% over the prior year quarter. Sales in Europe, Asia and other markets totaled 242 million, an increase of 5% over the prior year quarter. However, in constant currency terms sales in combined Europe, Asia and other markets increased by 8% over the prior year quarter. Breaking out revenue between product segments; US, Canada and Latin America device sales were 204 million, an increase of 9% over the prior year quarter. Masks and other sales was 204 million, an increase of 19% of the prior year quarter. The revenue in Europe, Asia and other markets, device sales of 162 million, an increase of 4% over the prior year quarter or in constant currency terms an increase of 6%. Masks and other sales in Europe, Asia and other markets was 79 million, an increase of 8% over the prior year quarter or in constant currency terms an increase of 11%. Globally in constant currency terms device sales increased by 8%, while masks and other sales increased by 16% over the prior year quarter. Software as a service revenue for the second quarter was 87 million, an increase of 37% over the prior year quarter. During the rest of…

Great, thank you Brett. We'll now turn to the Q&A portion of the call. I would like to remind everyone to limit yourself to one question and if you have additional questions, please feel free to return to the call queue. Christine. We're now ready for the Q&A portion of the call.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from line of Margaret Kaczor from William Blair. Your line is open.

Hey, good afternoon, guys and Good morning to Brett out in Australia.

Thank you.

And you may be the first one for me is on mask growth. Obviously, you guys continue to do very, very well from that perspective. So as we look at the last maybe 12 to 18 months, can you give us a sense of the relative impact of new product launches, especially in the white spaces maybe that you weren't in before, the resupply agreements that you kind of referenced, a little bit at JP Morgan, market growth and general share taking and the idea is as we look forward how're the moving dynamics between those categories, and how do you kind of adjust your strategy to keep performance high? Thanks.

Yeah, thanks for your question, Margaret. And as you noted, there's a number of factors contributing to this very strong mask growth that we had, 16% constant currency on a global basis, and even taking out some of the software just well up there in the mid-teens. You hit on pretty much all of them. There's an increased adherence that we're driving through our digital health solutions when we're achieving 87% adherence, when the doctor is using AirView and the patient is using myAir, and all the digital techs in play that drives up our mask growth. Secondly, when there's resupply and patients have the opportunity if they want to, to participate in getting a fresh mask as their old mask becomes used, and we are partnering with Brightree, Connect, and with ResMed ReSupply to provide that and the acquisition of SnapWorx will help. And then thirdly and really importantly, these last 15 months, the steady flow of four really exciting new mask innovations. Interestingly, these mask innovations aren't to replace a previous product, but to go after underserved or under met customer needs. And we call the minimalist category and the freedom category where people move through different positions during sleep; prone, left, right, sleepers want a Freedom mask and people who had some claustrophobia or want small, larger masks go to the minimalist category, and the F30 that we just launched is right in the heart of both of those. So it's all the above contributing to this really strong growth. We still think that the market growth right is in the high-single digits for masks. And we took really good share during this December quarter. Our job and challenge is to keep driving all those things: resupply, adherence, mask innovation and we plan to do just that.

Thanks guys.

Thanks Margaret.

Your next question comes from line of Matthew Mishan from KeyBanc. Your line is open.

Great and thank you for taking the questions, hi, just a follow up on the market share gains in masks. Are you winning new patients at a higher market share clip or are you able to convert existing sleep apnea patients from competitors and getting them to switch?

Yeah, Matthew, that's a really good question. I'll hand that to Jim Hollingshead, the President of our Sleep Division to walk through that.

Good morning, Matthew. I'm down in Australia. So I hope you can all hear me as well.

I can hear you just fine.

Yeah, it's a combination of both. We feel very confident in our overall position with mask that we’ve had so many masks launched, and and as Mick referenced, we've had several mask launches in the last 15 months. All of them have been successful launches. We now have a very wide portfolio. It's the widest portfolio offering of mask on the market. So, we continue to take new patient share across all three mask categories. I'm sure we're likely to also be getting competitors switching, and there's less market data available on that dynamic, but we're very confident we're taking new patient share pretty successfully.

Thank you.

Your next question comes from line of Sean Laaman from Morgan Stanley. Your line is open.

Good morning, Mick. Hope you're well. My question relates to something you announced last quarter, and I wonder if you can give a bit of an update on how this Novartis deal with Propeller, is there any update there and how that might be tracking? Thanks.

Thanks, Sean. Well, we don't talk in our core business or in our new software businesses about individual customers or partners until things are public and moving along, but there was a public data last quarter from our work with pilot trials with both GSK and Novartis in the Propeller area looking at inhaled pharmaceutical medicines. Look, the beauty of it – as I sort of described in the opening remarks, the beauty of Propeller is it provides an end-to-end platform to help us take care of people with chronic obstructive pulmonary disease. And so, Stage 1 and 2, with Propeller, we can take care of the patients, ensure they have the medicines that their doctor prescribed for them but also engage with that person because they're going to – it's a progressive disease, they're going to move from Stage 1 to Stage 2 and Stage 3 and Stage 4 COPD. And so our goal with Propeller is not just to have a partnership with pharma company A or B, but it's to really create a platform where we help end-to-end management of a person as they move through disease progression and it helps us engage with that person to help them adhere to their therapy, whether that therapy is the pharmaceutical inhaler or that therapy is a portable oxygen concentrated or that therapy as they move forward is a non-invasive ventilator or a life support ventilator. And so that's our goal with these partnerships. As we hit milestones during 2020 on the pharma side and as we hit milestones on the healthcare system side, we'll give updates on that. But look, yes, we did talk to the MAGNIFY trial that we're still enrolling patients for with Novartis. That's in its early days. So we will give updates on the clinical data, but also importantly commercial partnerships as they move forward through 2020. Thanks for your question, Sean.

Yeah, thank you Mick.

Your next question comes from the line of John Deakin-Bell from Citigroup. Your line is open.

Good morning. My question just relates to the increase in the SG&A, obviously, you've got fantastic leverage from that and I think we've talked about it previously, but the 2% underlying seems a – I think that's a record low numbers for you. And just give us a sense perhaps, of how that might look over the next six months and maybe going forward or should it return back to the kind of mid-single digit levels?

So I'll hand that to Brett who's down in Sydney.

Yeah, thanks. Hi, John. Yeah, it was a low this quarter. And we did benefit, certainly from much lower litigation related expenses this quarter relative to last year. So that did certainly moderate that growth rate. In my guidance, I said, I think will revert back to the range of 23 to 25 for the second half, which would suggest that it will track higher in terms of growth rates for SG&A at least in the back half, but certainly helped by some reduction or significant reduction in litigation costs coming through this quarter relative to last year was probably the single biggest driver. And that certainly motivated the growth rate. And try to adjust for that in that kind of range above given as a percentage of revenue going forward to be a better indicator, I think.

That's helpful. Thanks Brett.

Your next question comes from the line of Saul Hadassin from UBS. Your line is open.

Saul, you may be on mute.

No, I'm not. Can you hear me?

We can hear you now. Yes.

Great, thanks. Yeah, just a question for Brett, Brett just on gross margin, I'm just wondering if you can give some color on the underlying sleep and respiratory care business to what the gross margin has done ex acquisition contribution and usually provide an outlook for the rest of the fiscal year for gross margin as well. Can you just give us that some color there too? Thanks.

Yeah, I mean, I think going forward the second half, I think we'll be consistent with where we are, would be an estimate on the gross margin, as you know, a lot of moving parts on that. That would be our expectation. If you look at the acquisitions, we did – [indiscernible] halfway through the quarter, but fairly – it's kind of fairly minimal impact this quarter, the big drivers of that year-on-year growth or expansion of that gross margin around the product mix. And that's really being driven by that out performance you're seeing in mask growth and that's typically high margins, what you would see on devices so that that's the biggest impact. And then we're still seeing manufacturing efficiencies, some around logistics and so on as well. And they continue to come through on gross margin, so they're the two big drivers this quarter.

Alright, thank you.

Your next question comes from line of Shane Storey from Wilson HTM Limited. Your line is open.

Yeah, hi, thanks. Just looking again, back at the US mask business kind of just from another angle, you spoke about the adherence in resupply. But have you measured the step up in the number of mask per patient per year say, over the last 12 to 18 months and the last reference point that I've got is may be a tick under two per patient per year? So any observations around that might be very useful. Thanks.

Yeah, Shane thanks for your question. I think there's a whole portfolio of customers doing different levels of resupply in different countries around the world. If you take the example of France, there's a government mandated requirement that you provide to masks, two masks per patient per year. And it's different in all the 140 countries. Yeah, you focused on the US growth, which was strong. And yes, the last public number we didn't talk about that was 1.9 masks per patient per year. But look out of the 5000 customers in the US there's a broad spectrum of adoption of Brightree. Resupply, Brightree Connect, ResMed resupply, and technologies like SnapWorx that we just acquired. And so there's a broad range. But Jim, do you want to – Jim Hollingshead, do you want to provide any further color as to what you'd want to share on mask supply metrics?

Yes. Thanks Mick and thanks Shane. I would just add to add to a mix that just a couple things. The first one is the trend is we don't we don't talk about the number of publicly obviously, but the trend in the US has been steadily slowly, but steadily up over the last several years. And we attribute that both to the range of things Mick talked about earlier in the call. So better adherence tools that we're providing our platforms, better masks lead to better adherence initially and therefore better long term adherence and also the adoption of resupply platforms by our HME customers. So the trend is slowly and steadily up. It's still well below Medicare and commercial parallel levels and so it's a good trend and there's still a lot of opportunity.

Okay, thanks.

Your next question comes from line of Steve Wheen from Evans & Partners. Your line is open.

Hey, good afternoon guys. My question is just on specs [ph] businesses and growth rate there. I was wondering if you could help us reconstruct that growth rate, particularly between MatrixCare and Brightree and perhaps as part of that, to give us an update as to your understanding of how those businesses are performing since you've been acquired. I guess, with reference to the EPS outlook that you provided at the time of the acquisitions.

Thanks for the question, Steve. That allows us to talk to our investment in SAAS and again SAAS this quarter was 12% of our global revenue. And so it's a sector that we're calling out and you'll see that in our financials. It's a very hyper competitive sector, when you look at HME software, you look at skilled nursing facility software and you look at home health and hospice software, so I'm going to be really hesitant to give detailed market share and/or growth rates within each of those sectors. What I said on the prepared remarks is true that cost – if you look at ResMed's weighted average revenue across HME, skilled nursing facility, home health and hospice, as well as the others private duty home care and client communities. The weighted average market growth rate in those sectors is in that high single digit. And during the December quarter over that portfolio we held share, we grew at the – taking out the acquisition benefit that gave us 37% growth. We grew in that high single digit on our weighted average portfolio. One thing I'll say is we've – when we hit April here in 2020, we will have and Brightree four years. And as you guys remember, because you followed the stock for a long time, the first two years with Brightree we were investing. Yeah, we put some new management team leaders in there we brought in new CEO, new CTO and some skill sets in R&D. We're doing very similar things now in our MatrixCare journey. And so I'm not going to break it out in detail, but qualitatively I'll say that the investments that we put in those first two years into Brightree are really starting to pay off. We've got new logos, new customers, new modules, and we're taking share, the growth is picking up. And at MatrixCare we're making those investments today in more R&D, more management skills and capabilities and looking obviously back in synergies across our portfolio. So I think we can meet or beat the timing of our Brightree investments and the strong and sustainable growth that we're now getting out of that in our MatrixCare investment.

Thanks Mick.

Your next question comes from the line of David Low from JP Morgan. Your line is open.

Thanks very much. Just a quick one from me, you mentioned that the mask sales included some software revenues, just wondering if you could explain what that is and how much contribution that will make going forward?

Yeah, there's a little bit of that. I'll hand it to Brett to go through the financial details on that.

Sure. The probably the bigger one there is the – just through the software related to the – or the platform related to Propeller acquisition. So that's kind of – that's probably the biggest single delta, but there are a few other things there, but that's probably the biggest one.

Great, thanks very much.

Your next question comes from line of Andrew Goodsall from MST Marquee. Your line is open.

Thanks very much, just obviously looking at the current of coronavirus issue and I think if we go back to size, you might sales of about $5 million of sleep [indiscernible] levels into China. Just wondering if there's any follow through affect to yourself from the current coronavirus.

Yeah. Thanks, Andrew. It's Rob Douglas speaking. There's a pretty dynamic situation going on at the moment in China. And so tracking, it's difficult, but we are tracking very closely. In terms of our China business, we think obviously the hospital's going to be very busy on their respiratory. So there'll be a lot of focus on that. We would expect to see increased demand for ventilators, whether it's of the same relative scale to size or not, we don't know yet. We're actually working hard on our local supply chain there. Remember, we've got a really good team in China building good ventilators in China for China. And so, in fact, some of that team has been working in some of these hospitals and Jason Sun, Head of China they're local heroes who are really staying on the ground there and helping look after patients in the face of this terrible disease. So I wouldn't be predicting exactly what the impact will be on an overall scale, there will be an offset as well, likely the hospitals won't be looking at sleep patients for a while. So there may be some in asleep in China, but it's unlikely all of that to be material. Just one other point in terms of the overall business, we've mentioned many times our supply chain isn't configured around China. Most of its not in China, but there are some second and third tier suppliers in their way work closely with them at the moment. We wouldn't expect this to be a problem, but we'll have to keep a close eye on them.

Thank you very much.

Your next question comes from the line of Lyanne Harrison from Bank of America. Your line is open.

Good morning, gentlemen and thank you for taking my question. Just to continue the discussion on the SaaS business and probably most specifically previously we talked about resupply expansion and that given over about six months in, can you share how the resupply program outside of sleep apnea is tracking and what your expectations are for the remainder of financial year '20?

Thanks Lyanne. Yeah, so you're talking about our expansion of – our resupply capabilities, we went into some diabetic supplies and orthotics and urology products and so those – they're not a material part of ResMed's overall business. But they were a good expansion of ResMed's capabilities to look off to the HME sector beyond just sleep apnea and sleep app supplies that we are very good at making sure that they work through and so it's not material to our overall business. I'm not going to break out the specifics and other than to say they're going well and customers are adopting them and I'd love them to become a material part of our overall business to be able to break out like that. But it's early days and it's a good strategic ply of Brightree to sort of expand their capability with workflow optimization and both the combination of live call and tech that we use on masks and sleep apnea supplies. It's the same technology used on those diabetics and those other areas of HME. And so we're just helping our customers grow their businesses and get appropriate resupply when customers are there and requiring for authorization for it as well. So sorry, I can't get more specific than that, Lyanne.

Thank you.

Thank you.

Your next question comes from line of Gretel Janu from Credit Suisse. Your line is open.

Thanks. Good morning. So would you be able to give us an update on the outlook for competitive bidding? So what are your expectations in terms of reimbursement changes in 2021? And if there is potentially a decline in mask reimbursements, how is ResMed thinking about responding? Thanks

So I'll hand that question to Dave Pendarvis. Dave?

Yeah. Thanks Gretel. We continue to be at the same place we were last quarter. And that is we're waiting along with everyone else in the industry what the results are, the competitive bids that are in. We expect them at the end of the North American summer. So sometime around August or September and we'll know where the results are. We are pleased with the efforts that we made and others in the industry made to educate bidders, so they understand the portfolio nature of the lead item pricing and the impact of bidding on CPAP reimbursement on mask reimbursement. We're comfortable that that we conduct business with our customers now on a portfolio basis. And however, reimbursement settles out in the Medicare space. We expect to there'll continue to be strong demand for mask resupply that will continue to be important part of our customers business and it'll be an important part for patients' long term adherence success. So we don't see any significant changes in the trajectory going forward. But obviously, like with everyone else, we just have to wait and see what the actual reimbursement amounts come out to be.

Thanks very much.

Your next question comes from line of David Bailey from Macquarie. Your line is open.

Yeah, good morning, guys. Just for me Brett, cash flow looked a bit awake this quarter. Just wondering if you could talk through some of the moving parts there? You've called out the Department of Justice litigation settlement. Just talk us through what normalized tax cash payment would look like? And then also net interest on a cash basis for the quarter will be great.

Yeah, so yeah, was impacted by plenty of tax payments as well, if you look at it underlying, excluding those I still think actually pretty strong on the cash flow front. Normalize is probably –you're probably more like around the kind of 40 million a quarter. And I think going into Q3, it's going to be more like that. So that's impacted for this quarter. Expect Q3 and Q4 to be much better in terms of cash flow performance. And in the next one was that on the interest, interest expense?

Managed expenses, it is broadly monitor [ph] the income statement you're talking about.

Yeah, pretty close. You wouldn't – that's a good proxy. It's not that far different to that.

Yeah. Okay. Thanks.

Your next question comes from line of Chris Cooper from Goldman Sachs. Your line is open.

Thanks for taking the question. I was going to follow up to one of the previous questions. So the competitive bidding, I know it's a bit early to speculate on the particular outcome. I just guess I'm more interested in how you expect to manage the discussion with the DNA partners yourselves. Would you expect positive and negative changes to be passed on to you one to one? Or is there an outcome here where, I guess you bet more downside than the upside given there's a possible agreement here were some categories going to increase and some decrease just any thoughts around how you think that would be helpful.

So I'll hand that for David and if Jim, you want to add any color from the customer perspective, as well, but Dave you first and then Jim?

Sure, I mean, we already have ongoing discussions with our customers. We view them as good partners with us and we have robust discussions where they would like to get the best prices they can and we want to make sure that we serve them as best we can. That dynamic won't change with competitive bidding or anything else. So we expect to continue to have good discussions with them and the environment for the last year and a half and for the balance of calendar year '20 is that there's been about a 2% increase each year in the Medicare reimbursement. And so that's obviously contributed to a benign pricing environment that we've been experiencing for the last period of time. But we didn't participate with our customers in their bidding, obviously, they made their own decisions, we're confident that the bidding process will be a more fair one this time, and we're hoping it'll end up with a process that will be able to be good for the overall industry. But in terms of individual customer negotiations, Jim, you might want to comment on that.

Thank you, Dave. I'll just add to that, I mean, I think that's very well, but we do have very good relationships with all of our customers with our key customers and we'll work through it together. The other thing I would just remind everybody is a Medicare fee for service is the minority part of the market. So it's an important part of the market, but it's a small percentage of the market.

And your next question comes from line of Mike Matson from Needham. Your line is open.

Hi, thanks for taking my questions. Just have, I guess one more competitive bidding question. So with – specifically with non-invasive ventilation, that's the first time it's been included, I think could see a fairly steep decline. So can you maybe comment on what you expect there? And then also, I don't know if you could quantify how much of your sales are coming from non-invasive ventilation in the US, but just to help us understand what the exposure is.

Dave and Jim, you again,

Up again, so thanks, Mike. Non-invasive ventilation obviously is in two different categories. One what we would characterize as life support ventilation is the new category that it's now going to be a competitive bidding, our air curve ranges the buy levels have previously been in competitive bidding. So that's not changing. It's more on the life support side. And that is newly there, but they're also had been reductions in that reimbursement over the past few years leading up to this. So it's not necessarily the case that you'll see the same kinds of reductions that you saw in the round two kind of range previously for the sleep products. Nevertheless, we think it's important that patients can benefit particularly COPD patients can benefit from these devices, they ought to get into the hands and that's of those patients and it's certainly a device that requires a lot of service. A lot of people in the in the home are making sure the device is working appropriately, so you need to have a strong reimbursement for it. It's a smaller group of customers who actually do this kind of business, and they're probably likely to be focused on what their real cost of serving are. So again, we're optimistic that our customers are sophisticated customers, they'll bid appropriately, so that they can make an adequate margin to be able to provide that service that's really, particularly in this area very well needed. So we'll wait and see how it goes. But we don't break out specifically our sales of life support anywhere in the US or otherwise, but thanks.

Okay, thanks and then just would SnapWorx, maybe just comment on what that brings to the table they didn't already have with Brightree? Thanks.

Yeah, so SnapWorx is a technology that adds to Brightree end-to-end capabilities that SnapWorx has to partner with the HME. So it goes beyond just the live call and technology capability. They have provided to a number of customers and ability to further reach out to customers. And we had observed this software that was partnering with our Brightree platform and performing really well with those customers. And so we had a relationship with SnapWorx over the last 12, 24, 36 months and we've seen them really grow into a really good technology talking and the Brightree team looked at the technology from the team there in Nashville, Tennessee that created this tech and the entrepreneurs that created it. And we're really excited not only by what they're achieving in the market, which has better adherence and better engagement with both the HME and really importantly, with the end user customer. And what I bring it back which is the patient, what I bring it back to this is some data, some clinical data that we presented from the 5.5 billion knots of data that show that as you increase adherence, and as you engage with the patient and resupply the two add to each other. And some data we just released last quarter shows that for every hour of sleep, we reduce the total healthcare costs for inpatient by 8%. So this is all tied together, right. So Brightree, resupply – ResMed resupply and SnapWorx will increase adherence, drive increased mask resupply and that will also through that increased adherence lower the costs of the total healthcare system by 8% for every hour of sleep after those seven hours and so I think that combination is really powerful of now Brightree plus SnapWorx. Now, it's early days, we're just literally going through the finals of this acquisition, but watch us over the next 12, 24 months and we'll give you updates obviously every quarter as to how well that integration on that technology's going.

Your next question comes from the line of Suraj Kalia from Oppenheimer. Your line is open.

Good afternoon, and thanks for taking my question. This is Mike on for Suraj. We read recently that Fitbit is adding an oxygen variation graph for select users with an FDA submission for sleep apnea diagnosis somewhere in the near term here. I'm just curious if you see that as longer term helping to increase the number of OSA patients treated.

Yeah, Mike thanks for the question. And look, it's really interesting that tech companies are really getting involved in the field of, I call it health wellness and sleep wellness is a big part of that. Obviously, we have our partnership with Verily and I have the Google watch as part of their baseline study and they're doing some identification, I'd call it. You call the diagnosis; I call it identification of potentially at risk people for poor sleep suffocation or sleep apnea. I think what Fitbit has is along those same lines and what they try to do, and that Fitbit is now part of the Google portfolio. I believe there's an acquisition in line there. It'll probably add on to that capability of, if you see de-saturations in the oxygen, there's a higher likelihood. There's other causes potentially of those de-sat, but there's a high likelihood of sleep apnea, so I would call it more in the medical terms a screener that will then hopefully identify and engage a person that maybe I have a sleep issue, maybe I have a breathing issue and indicate to them they need to get on to the true diagnostic pathway. And then we can sort of bring them into the identification, engagement enrollment capability we're trying to perform. But look, Jim you run the global fleet business, is there any further detail you think about some of these tech companies and the ability for them to identify more patients?

Sure yet, Mike, thanks for the question. I think it's an unreserved good that companies like Fitbit are putting in place technologies to help consumers understand how they're sleeping and whether they might have a sleep disorder. And we know that there's 936 million people globally, who suffer from sleep apnea, the vast majority of them don't know it. And forever in the industry, one of the bottlenecks has been driving awareness on the one hand and then making objective screening and then diagnosis, on the other hand easier and so when companies like Fitbit – there's a whole range of companies that are now doing something like that in the space. When they when they decide to put that out in consumers hands. It's fantastic for us and for those patients more importantly.

Great, thanks Mick and Jim.

Your next question comes from the line of Anthony Petrone from Jefferies. Your line is open.

So maybe just two quick ones, one just on local manufacturing just given bushfires, obviously in Australia, so any update just on that manufacturing plant. And then just one on legislation in the US, H.R.2771 just to maintain the 50-50 blended rate in rural areas, is there any update on actually where that sits and the likelihood that it gets to Congress this year? Thanks.

Thanks for the questions Anthony. I'll ask Rob to answer the first one around manufacturing and then Dave to answer the second one around the H.R.

Yeah. Thanks, Anthony. As we said the ResMed supply chain is configured around multiple sources. At this stage most of our manufactured products come from our Singapore plant, but we have full capability in the Sydney plant that does often focus on newer and more complex products. But we have full process capability in both plants. The fire season in Australia has been devastating. However, it hasn't actually gone into the outskirts of Sydney, which would actually make the whole thing a lot worse if it did. And today, we haven't seen any interference with that at all. But if there was interference that wouldn't overly affect us because of our ability to reconfigure.

Thank you.

And as to the bill and we certainly support that bill. Again, we think it's important that our customers receive the appropriate reimbursement and particularly in rural areas. It's difficult to do that. So we certainly support 2771. I think it's – you may have noticed there's a lot going on in Congress these days. So it's a little difficult to get anything through. But there is an opportunity in the middle part of the year, when I think some of the Medicare extenders come up for renewal, that there could be a push to get this along with some of the other items the industry supports in place. So we'll have to wait and see. But we certainly support that. And at a minimum, Congress indicating their support the industry is positive.

Thanks.

Your last question comes from the line of David Bailey from Macquarie. Your line is open.

You know like I'm just following up on Saul's question actually, just wondering if you're able to quantify the contribution of those acquisitions to US or America's masks and accessories revenues for the quarter that would be helpful.

Yeah, I said in the prepared – thanks for the question David. I said in the prepared remarks, it's the – so if you take that sort of global mask growth rate of 16%, and you take out Propeller software, you're going to be in the mid-teens, so maybe 100 basis points or something on global. And if you take the US growth, we're all pretty – I mean most of the Propeller software is the US growth on masks was 19% on a constant currency basis. If you take out Propeller and the software, you're about 200 basis points there, you're probably around 17% growth in the US territory, so 16 becomes around 15 and 19 would become around 17 David. I think that answers both your questions. And thanks to everyone for spending an extra eight minutes since we were eight minutes delayed due to the phone lines there, but appreciate that all.

And there are no further questions at this time. I turn the call back over to Mick Farrell.

Hey, great. Thanks, Christine. And thanks again to all of our shareholders for joining us on this call. I'd also like to take the opportunity to thank the 7,500 ResMedians, many of whom are also shareholders, for their dedication and hard work. You produce these great numbers that we get to report. You help people sleep better, you help people breathe better, you help people live better lives outside the hospital in a 140 countries, which is pretty amazing. Thanks for all that you do today and every day and we'll talk to all of you again in around 90 days. Amy?

Great, thank you all again, for joining us today and to echo Mick, thanks for bearing with us through the audio difficulties. If you do have any questions or additional questions, please don't hesitate to reach out. As previously mentioned, all the documents along with the transcript and hopefully a clean replay of today's call will be available on our website. Christine, you can now close the call.

This concludes ResMed's second quarter of fiscal year 2020 earnings live webcast. You may now disconnect.