Welcome to the Q1 Fiscal Year 2021 ResMed Earnings Conference Call. My name is Cheryl, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Amy Wakeham, Vice President of Investor Relations and Corporate Communications. Amy, you may begin.

Great. Thank you, Cheryl. Hello, everyone, and welcome to ResMed's First Quarter Fiscal Year 2021 Earnings Call. Thanks for joining us. As Cheryl said, this webcast -- this call is being webcast live and the replay along with a copy of the earnings press release and the quarterly results presentation will be available on the Investor Relations section of our corporate website later today. On the call today to discuss our quarterly results are our CEO Mick Farrell and CFO Brett Sandercock. Other members of management will be available during the Q&A portion following our prepared remarks. During today's call, we will discuss some non-GAAP measures. For a reconciliation of non-GAAP measures, please review the notes to today's earnings release and earnings presentation. As a reminder, our discussion today may include forward-looking statements, including, but not limited to, expectations about ResMed's 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. And with that, I'll now turn the call over to Mick.

Thanks, Amy, and thank you all for joining us today. Since this COVID-19 pandemic began in January, ResMed has produced hundreds of thousands of ventilators, providing the gift of breath to people in need in 140 countries worldwide. We continue to support frontline respiratory medical professionals, health care providers, patients and our teammates, ResMedians, so they are all safe and healthy. We also continue to provide ventilators as local state and national health care providers are facing second and third waves of COVID-19 cases and associated hospitalizations. Thankfully, the magnitude of these hospitalization waves and thus, the need for emergency ventilators is decreasing over time. In our core markets, the patient diagnosis trends in sleep apnea, COPD, asthma and beyond are steadily increasing as well as prescription therapy flow from those diagnoses. Growing numbers of people are returning to health care systems, including primary care as well as specialist care. We are seeing more health care systems come back online through telehealth and in-person visits. Overall treatment capacity as well as capacity utilization rates of those systems are both increasing. We have seen a steady sequential, what we would call U-shape recovery of patient flow to primary care physicians as well as then to specialist physicians across the 140 countries that we serve. This is just as we forecast 90 days ago on our Q4 earnings call. We expect this same patient flow growth trend to continue throughout fiscal year 2021. In my remarks today, I'll provide a high-level overview of our Q1 business results, and then I'll hand over to Brett to walk us through further detail. I will also review progress towards our ResMed 2025 strategic goals, including execution highlights against our quarterly as well as our annual operating priorities. Today, we have reported high single-digit growth in…

Great. Thanks, Mick. In my remarks today, I will provide an overview of our results for the first quarter of fiscal year 2021 and some remarks on our FY '21 outlook. As Mick noted, we had a strong quarter. Group revenue for the September quarter was $752 million, an increase of 10% over the prior year quarter. In constant currency terms, revenue increased by 9% compared to the prior year quarter. Revenues for the first quarter were favorably impacted by continued demand for ventilator devices and accessories. We estimate that the incremental revenue benefit from ventilator devices and related accessories derived from COVID-19 demand was approximately $40 million in the first quarter. Additionally, we experienced strong mask revenue growth in both our domestic and international markets. However, we did observe continuing headwinds in the sleep device market. Taking a closer look at our geographic distribution and excluding revenue from our Software as a Service business, our sales in U.S., Canada and Latin America countries were $403 million, an increase of 9% over the prior year quarter. Sales in Europe, Asia and other markets totaled $257 million, an increase of 15% over the prior year quarter or an increase of 10% in constant currency terms. By product segment, U.S., Canada and Latin America device sales were $197 million, an increase of 6% over the prior year quarter. Masks and other sales were $206 million, an increase of 12% over the prior year quarter. In Europe, Asia and other markets, device sales totaled $176 million, an increase of 16% over the prior year quarter or in constant currency terms, an 11% increase. Masks and other sales in Europe, Asia and other markets were $81 million, an increase of 12% over the prior year quarter or in constant currency terms, an increase of…

Great. Thank you, Brett. Let's now turn to the Q&A portion of the call. [Operator Instructions] Cheryl, let's go ahead and start the Q&A.

[Operator Instructions] Your next question comes from Chris Cooper of Goldman Sachs.

Could you please -- I mean you mentioned at the start, the announcement from CMS this week. Could you just confirm your interpretation of where we stand with competitive bidding now? I mean the wording seem to suggest to us that the structure of the bid as a current standard is not working as they intended. Is your expectation at this stage that we just move on for the next 3-year cycle with competitive bidding? Or do you think they'll try and rerun it ahead of that?

Thanks for the question, Chris. And look, the one thing we know is that January 1, 2021, the rates will remain where they are. And that -- it was great that CMS listened to feedback from the industry. And it wasn't just around COVID, it was really around the fact that reimbursement rates currently as they are fit for the need. And if you read through the detail, the CMS actually said that through the process, they found that they weren't going to have any savings as they put it, which meant from my perspective that we've reached sort of market equilibrium in terms of where things are at. Now that's my interpretation. But Dave Pendarvis studies this far more detail than I do. Dave, do you want to give some more color and thoughts around the CMS announcement these last few days?

Sure. So Chris, yes, our view of the probable outcome here is you've got a 3-year run at least until January 1, 2024, of these current rates, plus inflation adjustments on January 1 on each of those years. Those are in the competitive bid areas. In addition to that, CMS has got a proposed rule-out, which if they finalize, would add a continuation of the 50-50 blended rate in rural areas. Those are both really good outcomes for our industry. They provide stability, they provide rates that these folks can count on, and they allow for any willing provider to be able to provide in the markets. Now you can always find legislative opportunities for the administration to do different things, to come in earlier, to change things up a little bit. That -- so is it possible? Sure. Is it likely? We don't think so. So we're going to be basing our plans on a continuation of these rates going forward with the caveat that governments can always do things that are unexpected and subject to their own control.

Is there any risk that the commercial payers begin to take things into their own hands slowly and move ahead of Medicare?

So Chris, the private payers were already ahead of CMS on this and had been sort of on a mark-to-market basis doing things at their own rates before competitive bidding started back in the mid-2000s during and after. And so I don't think it's a risk. It's a guarantee that private payers are looking for market rates. I think what's great about this one because it's so public versus those sort of private negotiations that happen is that we've seen a public statement of an equilibrium reached between the bids that came in and the fair price that is appropriate for the provision of these services in the statement. So that's something that's new as part of it. But look, it's a complex web. We sell in 140 countries worldwide, not just one. We watch CMS, but we also watch the rest of the world, and we want to make sure that reimbursement rates are there for our channel, but really importantly, that we get to the 936 million people worldwide who suffer from sleep apnea.

Your next question is from Sean Laaman of Morgan Stanley.

I'd like to just ask about the sustainability and that suppression in SG&A growth. It seems like a very good outcome. If you could talk us through that? I know we've got guidance for fiscal '21, but if you could talk us through that, that would be really useful, Mick.

Yes. Thanks, Sean. I'll start, and I'll hand over to Brett for some more detail. Yes, look, excellent control. Obviously, travel costs are incredibly down. We have 75%, 80% of all the ResMedians worldwide selling in 140 countries working from home. And we've had a really smooth transition to 4,000, 5,000 people working from home and feeling comfortable doing so. And we are opening up our offices as appropriate in Europe, Asia and the Americas as cities, states and so on allow us to. Look, when we get to the other side of this pandemic, and that's a long time potentially with a vaccine and treatments that are efficacious, I do see some of those costs starting to go back up again, but they will be also concomitant with opening of health care systems that will be associated with the opening up of those economies. And so I think we've done a really good job in bringing expenses down on SG&A, 7% reduction year-on-year for the quarter to $159 million for the September quarter. But if you look closely, we also increased our R&D spend. We increased by 12%, constant currency, our R&D spend. And that's $54.5 million for the quarter. You annualize that, that's a really good $200-plus million that we're going to put into digital health technology, artificial intelligence, machine learning, improvements in smaller, quiet and more comfortable, more connected and more intelligent systems that can keep people breathing out of hospital and well taken care of. And so we are going to continue the investments in R&D and drive those through this crisis, and we are going to take the savings on SG&A now and be ready to reinvest in marketing and sales and growth in that SG&A as appropriate when the revenues start to come back. I hope that all makes sense, Sean. It's not just a one portfolio play, it's all part of a larger piece.

No. That makes a lot of sense. Great results.

Your next question...

Sean, it's Brett. The only thing I'd add to add to that, it's a good summary from Mick, there's not too much more to add there. But I mean, clearly, we're not going to have negative SG&A every quarter. And we have -- I've got in the back half to kind of low double digits. And for that low double digits, mid-single digits is probably what we've consistently done. Really, our aim is we want to leverage SG&A relative to revenue growth. So that hasn't gone away, but we want to continue to do that in the medium to long term as well.

Your next question is from Gretel Janu of Credit Suisse.

So just at the last results, I think you mentioned that in July, you saw low single-digit revenue growth. This does then imply quite a sharp acceleration growth in August and September. So can you give us some more color on the incremental performance on a month-to-month basis as well as to how you performed into October?

Thanks, Gretel. It's a great question as we sort of model the kinetics of the recovery across our 140 countries. And as we look at it, and we -- obviously, I look at daily numbers, not just month-to-month and beyond, but there's a lot of sort of noise when you go down to a lower level of distraction. You pull back and you look at sort of that quarter-on-quarter trend, what we're seeing is sequential growth across the group. And let's look at some -- look at 3 big countries. And I think I talked about this 90 days ago, Gretel, but Germany is sort of, I would say, our leading country in terms of how they're opening up their economy. We are seeing at 85%, 90-plus percent of the pre-COVID patient flow and in some parts, 90% to 95% of the pre-COVID patient flow. It's through telehealth, it's through digital medicine, it's also through some in-person visits and in-lab tests. And so we're really at a very high point of recovery. And even with Angela Merkel closing restaurants and bars here in November, we do expect health systems to remain fully open during not just November, but on an ongoing basis because people need to get their primary care, people need to get their respiratory care. If they're suffocating, they need treatment for their sleep apnea. If they have trouble breathing, they need help for their COPD. And so we're seeing that in a really good case in Germany. If you take China, another big market we talked about last quarter, sort of at the 50% of pre-COVID levels. This quarter, China is now already at 70% of pre-COVID patient flow across a very large country, but that portfolio of different cities and states is now at 70% of pre-COVID, so a significant improvement from last quarter. And here in the United States, it's really a story of 50 different states and their approaches, but they vary from 60% to 80% if you think about it of the pre-COVID patient flow. And so on average of around 70% here in our biggest market in the United States. So you take that all and you see, yes, there is pretty strong sequential improvement. It's not a dramatic sort of V shape we're back to January 1 or December 31, 2019. But the -- every week, it does get better. Every month, it does get better across the portfolio of countries. Even with the second and third waves of Northern Hemisphere, with the coming flu period, we expect to see sequential improvement in the flow of sleep apnea, COPD and asthma patients into our system.

Your next question is from Margaret Kaczor of William Blair.

I just wanted to follow-up a little bit about the drivers like you said of new patient adds and mostly improvements that you're seeing. I understand the 90%, 70%, 70% are pre-COVID levels. But how much of that is being driven by clinics, sleep clinics reopening relative to home sleep testing? Meaning is home sleep testing accelerating? And would that be a more sustainable trend as we go forward 2, 3 years from now that PCPs are adopting this and you can get a steady trend of new patient adds from there?

Yes, Margaret, it's a really good question. I'm going to hand to Jim for some further detail on this way. Across the world, we're seeing home sleep test -- home sleep apnea testing picked up over time. COVID-19 has been an accelerator for that because it was the only choice during the severe lockdowns. And as we get to the other side, it is lower cost and has equivalent sensitivity and specificity from the technology that's out there. But Jim, what further color do you have on that?

Yes. Thanks, Mick, and thanks, Margaret. It's a great question and it's a very insightful question. We don't have perfect data on this. But the data we do have and both the concrete data we have from sort of looking at our own devices that are used and also anecdotal data from the market very strongly suggests that home sleep testing across most of our markets has become a much higher percentage of testing. And to your point, I do think that that is sustainable. I think what we're seeing is a shift in practice. Patients certainly prefer it. And I think a number of clinicians are seeing that it's an easier way for them to diagnose, and they're certainly using home sleep testing and remote testing to serve their short-term patient needs. But as it gets adopted, I think we will see that practice remain very sustainable. And so in a market like France, we are already at something like 90% home sleep testing. We don't have perfect insight, as I said, but we do think home sleep test in the U.S. market has hit a very high percentage of tests, and we think that that will stick in the future.

The one bit of color I'll add on there, just to tag onto what Jim said, Margaret, is Germany, where there was actually quite a strong resistance from some sleep physicians to adopt home sleep apnea testing. They were skeptical of the efficacy, the practicality and could they really make it work. And because of the shutdowns were very strong in Germany during the peak of the crisis in March, April, it was the only way they could diagnose. The doctors then got used to it. And to Jim's point, I think on the other side of this, France will move up a little bit, but Germany will move up significantly in the percentage of patients with home sleep apnea testing as those doctors found that it was not only -- had high sensitivity and specificity on the clinical level, but it also had good outcomes at lower costs.

Your next question is from David Low of JPMorgan.

David, you may be on mute.

Yes. No, no. I was just getting the mute off. If I could just go back to the ventilators, I mean what I understood from was said that there was a $40 billion boost coming through there, and that we really should expect that that's pretty much done now. So that normalizes. And if we adjust for that, it would imply that the device sales growth was significantly lower. Just wondering how you think we should think about the recovery from here? I mean are we at the point now where device sales ex-ventilators can start to grow given how strong the recovery seems to have been through the quarter?

Yes, David, it's a really good question. I'll hand to Brett for some further detail on it after my remarks. But look, we've seen -- we saw incredible sort of $30 million in the March quarter, triple-digit millions of dollars in the June quarter, and as you noted, $40 million in the September quarter of what I would call emergency ventilator sales as part of the crisis. It may not go to precisely 0 this quarter, but it won't be as high in the December quarter as it was in the September quarter. And hopefully, as we're seeing the second and third waves, the magnitude, as I said in the prepared remarks, is lower of the second and third waves in terms of the impact on hospitalizations and reaching that sort of peak, ICU peak ventilator capacity. And so on a humanitarian basis, I hope we're right in that prediction that it goes very quickly down. We are seeing sequentially, from the June quarter to the September quarter, improvements in the number of patients coming through, the prescriptions coming through, and therefore, the devices that we are selling on the sleep side. We expect that improvement to continue through the December quarter. And so as you look through the fiscal year and you think about sort of modeling how that's going to happen, I think you can model a steady increase in the sleep apnea devices. And the sort of, what I will call a secular uptick in masks and accessories sales that was driven by, I think, respiratory hygiene and the importance of getting a clean mask, was not a onetime thing for the March or June quarter. You saw it was sustainable. As we predicted, it was sustainable here through the September quarter. And I think it's sustainable through the December quarter. I'm a patient and I know how important it is and how exciting it is, frankly, to get that new mask, to get that new cushion and to establish it up. It's like a brand-new cast mill and you get addicted to saying, "Wow, respiratory health is important," and that is one thing through the suffering of COVID-19. It's almost a blessing that we've seen people realize that sleep apnea, COPD and asthma, respiratory health is incredibly important and keeping your device clean and keeping your mask clean is incredibly important as well as accessing data digitally has been incredibly important. So we think all of that will be there, and that's why we talk about this strong sequential increase, steady sequential increase throughout fiscal 2021. Brett, any further color?

Yes. Thanks, Mick. I mean that's good now. I mean, Dave, you're right. I mean, obviously, year-on-year, we saw declines in sleep devices. But we saw a pretty strong sequential improvement from Q4 to Q1. And then going forward, as Mick said, we will -- we still think we'll see that sequential improvement. Now where does that end up in Q2, Q3, increase or decrease, we won't -- time will tell. But certainly, we're seeing that nice sequential increase week-to-week, month-to-month, which gives us, I think, a lot of confidence of sleep devices improving throughout FY '21. I think that's the main thing we're looking at. It's that nice strong financial increase, I think, that will give us a lot of confidence.

Just on topic, I know I don't want to ask the second question. But I mean, I take $40 million of devices, actually, negative 1.6% growth for the quarter. So it looks pretty close to flat there. And I presume that's indicative of where CPAPs at relative to the same time last year.

Yes, there will be some -- yes, I mean, there's constant currency adjustments, things like that, but certainly decreased, single-digit decreases.

Your next question is with Lyanne Harrison of Bank of America.

Just following on from Margaret Kaczor's question. Thinking about the initiatives that have been put in place as a result of coronavirus, including telehealth, home sleep testing, can you give us some indication of how the reimbursement works for that? With home sleep testing, for example, are patients more likely to be out of pocket? And do you think that the reimbursement with the likes of telehealth will remain post coronavirus?

Lyanne, it's a great question, and it talks to how sustainable is what we're talking about earlier, Jim and I around home sleep apnea testing being adopted. In general, the costs for home sleep apnea testing are significantly below for the payer, the employer and the ultimate payer is the person who works for that company or pays the taxes in that country. So the numbers of the costs are significantly lower, often in order of magnitude lower. And so therefore, the copayments, if you're part of, say, U.S. plan like I'm, we have copayments, the copayment is proportional to the cost. And so therefore, an order of magnitude lower. So it is lower cost. And the question that physicians always had is, is it better care or at least as good care at lower cost. And I think what we saw through COVID-19, where people who hadn't adopted home sleep apnea testing as well, were forced to adopt it because it was the only way they could diagnose patients. They found well, the sensitivity and specificity from that clinical peer-reviewed article does happen in my practice, in my state, in my city. And so lower cost, as good outcomes, we saw great adoption. And I think that drives ongoing growth of it on a sustainable basis. As Jim was talking to earlier, I think countries that were x move to y, where y is above x, and we can't predict exactly what that permanent change is going to be. We just know it's going to move up because the momentum of economics and good clinical care just drive it that way. So I don't know, Jim, if you have any further color to provide on that from your last response on home sleep apnea testing.

I just would completely reiterate what you said. And as a reminder, if you're on a, let's say, U.S. market, if you're a consumer and you have a health plan, you have a 20% copay. If a typical lab test is $1,500 or $1,800, that you're out of pocket on that at 20%. If the typical home sleep test is reimbursed at, say, $250, $200, you're much lower out of pocket. And so for consumers, the barrier is much lower to do a home sleep test here. Most consumers would prefer a home sleep test. And so that's why I think we'll see it remain sticky. Now to telehealth, which I think was the second part of your question, some of those reimbursements have been done on sort of an emergency basis. The question is how? Will they persist after the emergency situations are declared nonemergency? There are a number of reasons to think that they will. I think that they've been very successful. And of course, the industry is lobbying very hard to put some of the things in place, both with government payers and with commercial payers. And so I think that most payers have seen telehealth to be pretty successful in terms of driving coverage and also driving down cost of care. So we can be optimistic about that. And I think the whole industry is working on it.

Yes. And this has actually been a sort of public-private partnership during COVID-19 as we all made the ventilators and partnered with the governments to do so that we have partnered on digital health, bringing -- as Jim said, bringing the emergency user authorization capability for that. There were actually codes that CMS had for digital health that were being underutilized in 2019. They brought them out early, I believe, in 2019. And even in 2018, we're doing some trials with them, and they were actually upset at CMS that the digital health codes weren't being utilized enough. COVID-19 drove an acceleration of that. And I think it will allow, again, the same thing as home sleep apnea testing applies to telehealth and all remote patient care, it's better during COVID times that you not go to that clinic because you won't get as exposed, not to that hospital, you won't get as exposed. It's also better during normal times, if you can do stuff at lower cost with better outcomes and not having to go to that hospital, not having to go to that clinic, if you can do it from the comfort of your own home. And as Jim said, the consumer prefers lower cost and at their own home, and that's all of ResMed's strategies to give that health care way you want it.

Next question is from Matthew Mishan of KeyBanc.

Mick, I'll keep this one simple. Can you just give us a sense of when Propeller Health can become more meaningful to the P&L?

Thanks, Matthew. Good question. Propeller Health is early phase in terms of the technology. It's certainly having a huge impact in getting a major multi-hundred billion-dollar pharma companies to adopt it with their brand-new prescribable drugs, particularly in the asthma space in Europe and Japan. As to when it becomes a material part of ResMed's P&L and I'm breaking it out on a quarterly basis, it's going to be a while for that. And so it won't be in here in fiscal 2021. But as we look to our 2025 strategy over these next 5 years, I do expect that that type of digital health solution is going to be a double-digit part of ResMed's delivery, and I will be talking about it on a quarterly basis, not just through milestones of pharmaceutical company releases with lead products and brand-new not generics, but high-end prescribable products. I think that we will see this go well beyond where it started just here in asthma. It will go across COPD. And there are literally billions -- tens of billions of dollars that could be saved in keeping COPD patients out of hospital with better adherence to their drugs. Our work has shown that we can improve adherence rates by up to 58% and lower total cost of emergency visits and emergency costs by 25%. But look, it's a great question, Matthew. I'm not going to predict the exact quarter and timing, but I can tell you that over the next 20 quarters, it will become a significant part. We will be calling it out because it works. And pharmaceutical companies know how to do things at scale. And when they start to see that it improves the outcomes for their patients, that their doctors are happier and most importantly, that the patients are happier and out of hospital, lower cost, better outcomes, it's going to take off very quickly, exponentially.

Your next question is from Saul Hadassin of UBS.

Mick, can I just ask you, I don't think it was in your prepared remarks, but you did preview the Lumis HFT device at the ERS Conference this quarter. Can you talk to, I guess, a bit more detail as to where you see that device sitting in within the portfolio of the ResMed offering and when we might expect to see that device commercialized?

Yes. I'll provide just a little overview, and then I'll hand to Rob Douglas, our COO, to provide further. Look, what we've seen during COVID-19 is a variety of different products and solutions that have been used for patients from oxygen to high-flow therapy, to full noninvasive ventilation and then full invasive intubated ventilation. So I think there was some good exposure to what high-flow therapy can do with COVID because it can provide some of the particles to move around hospitals and so on. HFT did not get as frontline on its therapy as fully intubated ventilators. But we think it gave some good exposure and has accelerated a little bit. Yes, this is very early days with high-flow therapy, but it's a technology that we've put together on some of our existing platforms with great intellectual property and great opportunities for growth over time. But Rob, do you want to provide some further detail on what we're doing with Lumis HFT?

Yes, sure. Thanks, Mick. So yes, we think HFT is clearly a valid treatment and got some very interesting use cases. We -- again, you know our strategy is out of hospital, and it hasn't been strongly studied in those types of environments. So really, it's more part of a long-term play to see how HFT might fit in with our long-term strategy. It's a trial that will take its time to enroll patients. These respiratory device trials in the home setting are generally pretty tough to do and so -- and take a time. So we won't be reporting out of that super quickly, but it's certainly a very interesting area for us, and we think we've got some good solutions.

Your next question is from Suraj Kalia of Oppenheimer.

Mick, one question from my side. The SaaS unit is now growing at single digits. Can you help us understand the structural dynamics that could possibly push the segment back to double-digit growth? Is there price elasticity of demand? Are you looking at OUS adoption? Are acquisitions the key? Just help us frame this segment, in particular, for the next 12, 24 months.

Thanks, Suraj. It's a great question. So Software as a Service, our SaaS division, is 12% of our revenues. It's a really important part of our long-term growth to apply our digital health technology capability outside the hospital and in the 7 verticals we're in where we're a market leader in the top 1 or 2 of each of those categories. Yes, as I noted in the prep remarks, Suraj, we've seen a slowdown of the flow of patients into hospitals and therefore, out of hospitals to skilled nursing facilities, in particular, as well as nursing homes and others. And we do expect that that, sort of, if you like, recovery will take some time. And that's why I sort of said that the markets that we serve as a weighted average portfolio growth will grow in those sort of mid-single digits throughout this fiscal year. We expect to meet that and beat that where we can. And then as we get to beyond the sort of 12-month time frame, I do think there's opportunities for those markets to get to the high single-digit growth. And with inorganic plays, there are opportunities to get to low double-digit growth across that portfolio. Look, we never accept market growth. We want to meet it and beat it. One thing we are doing in that division as well as in our core sleep apnea, COPD and asthma groups is we're investing in innovation. We have great -- in the beauty of Software as a Service innovation is you're talking weeks between sprints and then getting an MVP out there to provide a solution to customers. And so we have seen some really good innovation come into play to help people deal with COVID-19 that have helped them sort of through this crisis. And we think that when we get back to the sort of normal flow through hospitals and ASCs of patients getting discharged into the out-of-hospital post-acute network, we will start to see the centers pick up and therefore, the revenues pick up as the number of patients in that setting picks up over time. And so yes, look, we have a leading position. We're going to do well in the mid-single digits. We'll do well in the high single digits. And over time, as we add inorganically, we can push even beyond that.

Your next question is from David Bailey of Macquarie.

Mick, you sort of touched on the resupply coming through, expecting that to continue into the second quarter. Just wondering if you can talk a little bit about how you're seeing that opportunity over the medium to longer term? Do you think there's further opportunities on the resupply? And then within that mask and accessories as well, just whether you think some of the new product launches are driving increased share for ResMed? That would be great.

Thanks, David. Yes, that's a 2-part question. So I'll have a go. Actually, you know, I'm going to hand the whole question to Jim Hollingshead rather than do half of it. Over to you, Jim.

Thank you for the question, David. I mean we think -- we've been obviously quite pleased with the dynamics of resupply through Q1. We expect it to continue in Q2. And actually, I do think what's going on, especially, probably, globally, but the dynamics of resupply are really a specific to U.S. market where reimbursed. And we think what's going on is that, a, patients want new clean equipment, they're more synthesized to that because of the pandemic; and b, our HME provider customers have realized that that's an avenue that's both better for the patients and better for patient care, but also better for their own business. So we think that dynamic should stay. One thing -- we had a question earlier about competitive bidding. One of the good results at a competitive bidding being delayed for some period of time is that it won't change mask reimbursement. And so we think that with the competitive bidding reannouncement, it maintains the economics of resupply that exist in the U.S. market, which is our biggest resupply market. And that's one of the reasons we think that the dynamics for that part of the market will persist through, I think, at least in the fiscal year. I think that it will remain robust. So we've got a change in customer behavior, change in patient behavior, both of which tend to resupply and then stability and reimbursement. And I think those are really key points. On market share, we have the broadest and most effective portfolio of masks and accessories on the market. We can -- with our range of products now and with our latest launch of the AirTouch N20, our line is complete across our range of masks, and we can provide a certain fit for every patient with the right mask every time. None of our competitors come even close to what we offer in the market, and we feel really good about our share and position and our ongoing innovation.

Your next question is from Andrew Goodsall of MST Marquee.

Just thinking about the quarter, just wondering if you saw any DME restocking effect in the quarter. And also if I could just ask you to talk to oxygen, whether that's still getting us some tailwind with COVID?

So the first question about restocking, second one about POCs. Look, Brett, do you want to take something with regard to the restocking and talk about inventory levels from Q-on-Q? And then, Rob, do you want to have a go at the oxygen question. Over to you, Brett, first?

Yes, sure, Mick. I mean typically on the whole DME, they don't hold too much inventory. So I guess they've got -- they typically buy pretty regularly. I'm not sure. I mean, as volumes have come up and patient flows come back. Obviously, there's orders coming in the system to support the patient flow coming back, and we're seeing that sequentially, but I'm not sure they're really restocking like huge orders. They'll restock as the patient flow comes back in a pretty orderly fashion. And obviously, we're seeing that throughout our revenues and sequentially what's happening there. But I wouldn't say it is characterized by significant restocking orders. I think that's a bit more steady flow that we're seeing coming through it.

Okay. So I got a reasonable match up with the sort of return of patients to return of orders?

Yes, I think so because they don't like holding a lot of inventory. So they all typically do -- they can get inventory quite quickly from the manufacturers, and they'll typically operate -- obviously, they need enough inventory. And -- but I think the patient flow will drive their order patterns.

That's great. And then just on POC.

Andrew, yes, our POC program sort of just continues as we have -- we continue to learn. We've still got our products in their sort of product launch, process and post that. And we continue to learn, and we're sort of still making adjustments and experiments of how to get the right patients to the right providers for the right treatment there. So it's pretty much a sort of a long-term thing for us on that.

No particular call out on COVID around that?

No. Not that material to our overall business.

Your next question is from Anthony Petrone of Jefferies.

Maybe just a couple on math questions on vents and NIVs and just comments in relation to COVID cases and NIVs going forward. And so when we back out the $40 million from devices and you sort of bake in patient flows in core sleep, I'm just wondering, again, the math doesn't quite get there to low single digits. So I'm wondering if pricing, in particular, firmed up in the quarter that can kind of get you there or other respiratory was better. And then again, the comment on NIVs going forward, potentially not being a driver. Just wondering why that would be considering where the case counts are going?

Thanks, Anthony. Yes, look, it's a complex equation, and there are so many moving pieces with second and third waves as regards to the global pandemic. So all we know about every prediction that's been made in the last 9 months is they're wrong. So we don't know precisely what the needs are going to be through the second and third waves. And last quarter, we were a bit muted about what we thought would happen this quarter and then we had $40 million worth of sales in the September quarter. But look, our best projections of the sort of epidemiology and sort of humanitarian model that we put together at the flow of COVID-19 around 140 countries that we treat in within the big countries, specifically in some cities and states that we're looking at, we don't think we're going to reach a state where there's going to be hospitalizations like we had early January, February in Wuhan, and then March -- February, March in Milan and then March, April in New York, where you reached 100% capacity and literally ran out of ventilators and ran out of ICU beds for those ventilators. Our best models show that the magnitude of the second and third waves are actually reduced in cities in China, that we've seen second and third waves, across Singapore, where we've seen them in in some parts of Europe, where we're already seeing them. And so we're just being realistic that we don't expect sort of those emergency use ventilators to be at the sort of magnitude. And you can actually see that it went from a triple-digit millions in the June quarter, down to $40 million in the September quarter. It will be significantly reduced here in the December quarter. I'm not saying it will…

Your last question will come from David Low of JPMorgan.

Thought I'd cancel that one. But just one last question. We've got some reports that some of ResMed's masks were in back orders through the quarter. Just wondering if you could talk to that, what might have caused it? How significant it was? And I guess I'm trying to understand whether it was demand driven or whether there was any supply issues there, please?

Thanks, David. Yes, yes, I believe it was demand driven, as you saw, we had really good numbers in the quarter. But Jim, do you know any details of -- across the sleep business?

Yes, without trying to go math by math...

Right.

Most of the back orders that we faced were demand driven. There were some logistical issues as well in the supply chain. We've had also some domestic shipping issues. Little things here and there that have been an issue, but it's almost all demand driven.

We are now at the 75 minute mark, so I will turn the call over to Mick Farrell.

Thanks, Cheryl, and thanks again to all of our shareholders for joining us on this call. I'd like to take the opportunity here at the end to thank the 7,500 ResMedians, many of whom, almost all of whom are shareholders as well for their dedication, hard work, helping people sleep better, breathe better and live better lives outside the hospital in 140 countries. Thanks for what you do today and every day. Thanks especially to our ResMed heroes who are going to our plants and production plants, our distribution plants, our tech services centers, and actually, because you have to touch physical product not being able to work from home. Thank you for following all safety procedures and doing that really well through this crisis. I look forward to talking to all of our shareholders here in around 90 days. Amy, I hand over to you to close out.

Great. Thanks, Mick. Thank you all again for joining us today. If you do have any additional questions, please don't hesitate to reach out to Investor Relations or to me directly. As previously mentioned, all of the documents, along with the transcript and a replay of our call today will be available on our website later. Cheryl, you may now go ahead and close our call.

This concludes ResMed's first quarter of fiscal year 2021 earnings live webcast. You may now disconnect.