ResMed Inc. (RMD) Earnings Call Transcript & Summary

Next up, we're very fortunate to be joined by Rob Douglas, the CEO of ResMed. In a moment, I'll hand over to Rob and invite him to make some introductory comments. Please do, as we go through the session, please shoot me any questions that you may have via e-mail. My e-mail is [email protected]. If I don't manage to get to them through the session, I'll endeavor to follow-up with the company. The session is due to last about 40 minutes or so. We're going to try and keep it interactive. And I'll hand over to Rob, and we'll go from there. Thanks, Rob.

Great. Thanks, Chris, and thank you, everyone, for joining. Just a few brief comments before we launch. The -- we reported our results about 4 weeks ago. And really, the story there is a sort of steady recovering new patient flow. The results were distorted versus last year is probably for many companies, given we had extremely unusual few quarters this time last year. But certainly, in the March quarter, we had a $35 million ventilator tailwind last year that just wasn't in the results this year. But without that comparable, we had about 1% CC growth in masks, and our SaaS business did well. And then devices had the huge headwind from really related to the ventilator issue, but also related to our new patient flow in the sleep labs. There were also in the quarter some sort of systematic headwinds as well. Typically, that January, February, March quarter in the U.S. where we see deductibles reset as always is typically sequentially below the previous quarter. We saw a COVID -- we saw improvements in COVID around the world, but also in Europe, particularly, we saw lockdowns get reinstated. And while they weren't nearly as bad as what had been the year before, they were also not helpful for new patient flow. We had some other additional notable events through the quarter, but we had pretty -- very good really expense control. Obviously, we're helped by not needing to travel and different marketing models, but that was certainly good. Certainly, in our supply chain, in things like freight were a headwind. And I think they're challenging across all many industries. We've got a very strong large team focusing on that, and we'll continue to work through that. We also announced a settlement -- potential settlement with the ATO and had a large provision put aside for that. And we've got some tough comparables coming because in the June quarter last year, we actually had around $120 million of ventilator sales. It was incredible times last year with basically infinite demand for ventilators and everything we could supply was needed, but that situation has certainly normalized now. And so we do have that $120 million headwind in a comparable coming up. But we expect by the new calendar year in the quarters in there, we'll start to see double-digit growth for the company. We also notably announced a few other issues, but one in particular to call out is we announced, we started the controlled market launch of the AirSense 11, which is very exciting for us, our next-generation CPAP. And I'm sure we'll get into some questions on that. With all that going on, as I said, it's really a story of recovering new patient flow. The actual demand for treatment of sleep apnea is unchanged and steady. We need to see capacity improvements in the diagnostic and treatment pathways, but that's all steadily improving. And we're totally confident in our strategy, our long-term strategy around digitally monitored CPAP therapy which really makes a difference in the lives of patients and improves outcomes and costs for providers. We're really confident in our digital strategy, which is -- we continue to execute on that. We're confident in our ability to execute despite it being challenging times for many manufacturers around the world, and we're well positioned for consistent steady growth into the future. Thanks, Chris.

Great. Thank you, Rob. Thanks very much for that. So look, let's make a start, please, on the first comments that you made there. So you commented on the steady recovery you're seeing in the new patient diagnoses. I know the last quarter, you commented the numbers were still around roughly sort of 10% to 30% below the sort of pre-COVID run rate. Can you just talk to how much of that do you think is sort of hesitation or some sort of deprioritization on the patient side? And how much of that is a function of restrictions or other sort of obstacles in the sort of sleep labs and the hospital channel itself?

Yes. We're talking globally, so it's really the sum of a whole lot of different situations in different markets, different countries. And that 70% to 90% of sort of patient -- of diagnostic capacity, if you like, or new patient flow, there is across countries. China, which was the first-line hit and had a big dive in new patient flow. And that was slower than we expected to come back and really sit down to probably an unease of going into hospitals by patients as the labs all reopened. In the U.S., it's a different story in different states and different regions as we saw different highlights. Obviously, the improving vaccination rates have helped a lot. And as we commented on our call a month ago, March, we saw a steady improvement through the quarter in that. Sleep labs are reopening, but they still have infection control protocols that may reduce their capacity. Perhaps they can't use beds sequentially on sequential days or they've got limited access times for patients to come in to make sure we don't have overlaps and stuff like that. So that is a sort of a headwind that will gradually reduce as vaccinations go -- improve. Europe was looking good later last year, but then really, they had those small lighter waves come in and incremental lockdowns, which weren't as impactful as they had been a year ago, but they were still significant in there. There are a few other factors going on in some areas. There's a little bit of home sleep testing that made up for it. But that still really has sort of the setup problems around protocols and capacities around that. And then obviously, in the emerging markets, the situation in Brazil and Latin America is really, really tough. While not material markets for us, we've got significant teams on the ground there, has been a big issue and challenging for them to manage through that. And actually, in India, we have seen some incremental demand for ventilators off our market as a fairly small part of our overall market. But certainly, there are headwinds on sleep market in those areas as well. So it's a mixture of things. And the net of it all is that we're seeing gradual improvement, but it's a little bit hard to predict to make predictions on it just because of the rates of vaccination or variable. The latest news in Europe's really good, vaccinations are picking up. But it's a little bit uncertain as to how that flow is really going to go and where it will end.

Understood. I mean if I was to maybe narrow the question just on the U.S. market. It does sound as though maybe you're closer to that sort of minus 10% and minus 30%. First of all, would that be a reasonable assumption? And then secondly, also given the success of the vaccine rollout, would it be a reasonable assumption as well to say that maybe within the next of 2 quarters or so, you're back within touching distance of pre-COVID levels? Or is that a bit too optimistic at this stage?

No, I think, that would be fine. As I said, we're talking by the end of the calendar year. In the quarters we reported, next calendar year, we'd be looking to double-digit growth. So really back to a solid growth position and ahead of it. The next few quarters for the company as a whole will be challenged by these ventilation comparables where we had -- in calendar year 2020, in the March quarter, we had $35 million of unanticipated ventilator sales, if you like. In the June quarter, we had $120 million; and in the September quarter, we had $40 million. So you'll need to sort of -- if you're thinking about annualized growth rates, you need to understand that headwinds there as well. But using 2020 as a baseline for anything, it's probably not a great idea. It might be better to look for -- look over a few years and look at longer-term growth trends [ and that ].

Agreed. And so sorry, just to clarify the comment on double-digit growth. So this is a broader comment around the entirety of the group or that's specifically on...

Yes.

Okay. Got it. Thank you. All right. Great. So just sort of more sort of midterm. I mean one of the things that happened in the middle of COVID, which I'm not sure that the market maybe gave much focus to at the time because it was around the time that the drug manufacturers were coming out with good vaccine data. But CMS told us around October time that competitive bidding would not be moving forward in OSA. Can I just get your latest thoughts there? I mean this was, obviously, a bit of an overhang for the stock. And there were some scenarios there where we could have seen some quite material pricing cuts in some of your OSA categories. That's now not happening. What's the latest expectation? And how much of that benefit gets passed on to you? I mean this is something that's going to be, I guess, in the first instance, a beneficiary to the DMEs. Is that something that then kind of translates over to the manufacturers as well?

Yes. I mean it's helpful. It's helpful for the whole industry, and it's helpful for patients to ensure that they get good quality care and get treated. When we sell a device or a mask, we don't know what patient it's going to, and we don't know what insurance -- what their insurance is and whether it's public or private or whatever. So it's not a one-for-one in that sense. And recall that CMS -- because sleep apnea is really most diagnosed in the middle ages, it's not particularly -- old people have it, but it's not a -- particularly a disease of elderly people. CMS represented about 25% of the patients in the U.S. So it was never a major part. And then our pricing to our HME customers is driven by what value we create in terms of the overall offering and how likely the patients are to stay on treatment and hit the compliance targets so that they can be billed for. And then also, whether they are going to stay on treatment long term so that they'll need -- they'll get the benefit of long-term treatment and having -- by having good masks made available to them as well. So it's not a simple algorithm. And always when there was the threat of particular reimbursements going down or staying steady or going up, doesn't translate one-to-one to any particular price implications for us. That said, we have said that the price environment is relatively stable. And obviously, the CMS situation helps that. We were never privy to the exact policy decisions and processes inside CMS. But you'd have to think that the competitive bidding issue won't come back until at least 3 years out after that last decision. And we would also suspect that part of the last decision may have been that the actual bid pricing didn't result in cost savings for CMS. So that maybe tells you something about where the current reimbursement levels are in terms of how much room there is to just move them around further. So I think long term, we can be reasonably confident. And one of the factors underpinning that, and I'm sure you'll come to the AHRQ report later as well. But one of the factors underpinning it, whenever it's properly looked at and systematically analyzed, treating sleep apnea with CPAP -- with well-managed CPAP and monitored CPAP and keeping patients compliant and keeping them up with masks is one of the most cost-effective treatments for improving outcomes and quality of life available to our health system. So we would expect that long term, that will keep going. That's not to be said that with the types of volumes because there's still about 900 million untreated sleep apnea patients around the world. We're going to treat those patients, obviously, the per patient cost will have to trend down in order to allow the health systems to be able to fund the scale of treatment. And that's been our long-term setting. Last 20 years, we've had the luxury of not -- of being in a low inflation environment, and it's a little bit of an uncertain inflation environment ahead and how that will all pan out. But certainly, our settings are aiming to leverage off the volume increases that we see, continued design improvements that not only make the products better, but make them simpler and less parts and lower cost and we're able to drive that long term.

So just picking up on a point you made there. So I mean, I agree with you. I think probably one of the outcomes of the bid process in that round of competitive bidding was that the price costs were probably not what CMS was hoping to see. So is there -- I take your point entirely, that we're probably at least 3 years out from another sort of crack at this, but is there a scenario here where they have to redesign the big program in the way that they did for around 2021? They didn't get the outcomes that they were hoping for. Do they have to move back to maybe a more onerous mechanism, which could pose further risk in the future?

I mean that's a possibility. You couldn't rule it out. But in our view, the bid processing that they ran last time was reasonably well founded, and there were solid protections for patient care and quality of service and ability to deliver and stopping sort of bogus bidding, if you like, we think it's probably a reasonable process. But that said, you can't rule out changes to it. Health systems, including CMS, never want to spend more on a treatment, particularly a treatment that's increasing in volume. But if it is a treatment that's really cost-effective and delivers good outcomes, the net of it is it's actually lower cost to a health system to invest in finding and treating sleep at patients than it is for them to pay for the treating the consequences of it, be they motor vehicle accidents, cardiovascular events, metabolic events or whatever.

Got it. You mentioned the AHRQ report as well, Rob. I mean maybe we could just touch on that since you brought it up. So can you just talk us through exactly what the agency is looking at here and what the potential outcomes and time lines are, please?

Sure. So the AHRQ is part of CMS or health and human services in the U.S. The typical remit is to do assessments of medical technology of -- and looking at the evidence of the benefits for that technology. We see these health technology associations in other countries. And the notable one is the U.K. NICE organization, National Institute of Clinical Evaluations. And it has a remit to do a health technology assessment. I look at all the evidence and then also do an economic analysis and look at the cost of the treatment per what they call a quality of adjusted life year gain from that treatment. And when NICE looked at CPAP 8 years ago, it came up as one of the -- as I mentioned, one of the best, most cost-effective treatments. They're actually in the process of expanding that. And they're looking at the benefits of treating mild sleep apnea with tele-monitored devices, so you get more likely patients to use it. And there's a recent study in the U.K. showing that, that actually really improves outcomes for patients as well. So we're expecting that. Now with AHRQ. They're doing the first part of that, but not the economic analysis. And they were requested by CMS to look at sleep apnea. And particularly, they were driven by one study called the SAVE study, which was predominantly done in China. It was the cardiovascular outcomes. We were not that keen to be overly involved. We did support the trial with diagnostic devices. But we didn't think it was really being managed, and particularly the ethics of doing randomized controlled trials on a treatment like CPAP, whether it's been standard of care for so many years, it was a little bit dubious. And the rationale of the SAVE study, would it be okay to not have the -- to have a control arm that was -- didn't get treatment because these patients probably wouldn't get treatment in the countries they are in any way. So also, it was not particularly well controlled in terms of usage and their average usage was about 3 hours a night. Consequently, it didn't meet its hard cardiovascular endpoints. It actually did meet a secondary endpoint on quality of life, which was -- ensured a quality of life improvement, which even at that usage rate, we felt was pretty good. But the AHRQ looked at that study and other RCT studies with hard endpoints in the last 10 years, and there just haven't been that many of them. And so their conclusion was that they -- there was an evidence supporting that CPAP improved these hard endpoints. And so they've got a lot of -- they published a draft report in April, I think, and then they had a 30-day comment window where a lot of people have commented, us included. And our points were that there were many other studies that support the evidence that they didn't look at, and also, particularly with a lot of real-world evidence. And we have real-world evidence studies with ends of hundreds of thousands because of our connected device network that really could support this. We saw a lot of input from medical associations in the clinical world. Now we don't know -- that was sort of a longer same line, so there were studies missed in -- is quite a narrow interpretation. They have -- we don't know -- there's no real process for what happens that we're aware of now. They don't take that commentary. They may ignore it or they may amend the draft. But if they published it as the draft, it should have the commentary with it. And then that will sit there, and we'll see where that process goes. Our view is that there's so much good evidence that CPAP is a good and effective treatment with good outcomes. It's highly unlikely that it could be used to influence a coverage decision or something like that. But that may happen, but we think that's a pretty low risk.

Got it. Thanks, Rob. Okay. Let's just step back and just talk about the sort of product landscape, if you don't mind. So you mentioned you now have AirSense 11 in limited release. First of all, can we touch upon that? I mean what's been the sort of early feedback? What's the strategy in terms of rollout? What does this give you that AirSense 10 didn't?

Yes. So we always do control market release with our products. And what -- we've been working on the product for many years, of course. Now we think it's a really good product. When we've got everything ready and all regulatory approvals and run it through our quality systems in production, then we start launching it, and we do controlled launches, which are really -- we've targeted customers in targeted markets of limited numbers so that we can have very close follow-up on the data and what happens. We're not -- it's not a testing phase. And if there's a problem, it's a recall or anything like that, so -- but what we're looking at, if we got sort of the positioning right and how we've got user instructions and training and all of those types of things, so we're in that process. Usually, we don't announce it, but because the devices are now connected devices, we had to clear it with the SEC, we put a photo of it on their website. So it was sort of public, and we felt that we might as well talk about it then. And so we'll go through that process, learn it, make any adjustments around the overall packaging and that type of figure. And then start launching it in specific target markets, which will happen through this calendar year. We're not being specific on the timing around that. Early feedback's really positive. It's a great product. It's really quiet, really comfortable, very easy to use. And we've got some great extensions to the software environment that comes with it as well, which is very significant.

And then, sorry, in terms of the launch strategy, so this calendar year that, that instant comment that includes both U.S. and Europe, or that's just a U.S. comment?

We'll be targeting specific markets around the world. And I wouldn't get granular on the sequencing of markets and how that all pans out. There's a few other factors going on in the industry related to supply chains in particular and also competitive announcement on product quality, which has sort of limited some supply as well. And that's sort of a factor in how we plan the launch as well. But we'll be aiming to target the right markets on the right time with good capacity and a really solid system put up that will work first go and it will be a great extension from the current system, but it will be easy to build into the current workflows and systems of how patients are being managed. So that's a little bit of a watch-this-space answer to you, Chris, there, but that's where we're at with these sort of private launches.

Got it. Can I just follow-up on your comment there on the competitive product quality issues. So how much of an opportunity is that for you? I know they've since replaced the product with a question in the U.S. with a sort of new iteration, but I gather there's potentially more of an opportunity perhaps in Europe. Is that the way you're thinking about it?

Actually, we're thinking sort of from an industry perspective, we think the priority will be getting -- making sure that the right patients who need treatment, get it when they need it. And our thinking is because this issue also applies to ventilator products as well and buy levels and ASV products as well. We'll be making sure in terms of -- in the face of what is the disruption through supply chains that we'll be looking to make sure we make products available to the most acute patients that we can. Beyond that, we'll be making sure that we can help as many patients as possible. The world's not just -- are you -- just buy a CPAP from whoever has got it on the day anymore, the issue of the data monitoring and the integration of the software and looking for good outcomes is really important as well. So obviously, we'll be wanting to support providers around the world who have those systems and when we use those systems to get the good outcomes. So there -- clearly, when there's a shortage, there is a short-term opportunity. But really, we're taking a long-term view of this and trying to make sure we focus on patients. There is an added complication in the situation in the global supply chain is challenging the best all the time at the moment anyway. And so things like freight and airfreight are not that easy to come by. The electronic component industry is a challenge now. We hear a lot about the auto industry and stuff like that in the press, but medical manufacturers, their volumes are nothing like that. And also [indiscernible] would be talk about priorities. So hopefully, we can manage our way through that and be able to support as many patients as we can. The other comment I'd make regarding the announcement from the competitors is actually, there was an announcement on the earnings call a month ago, but there's been very little information since. And so it's quite hard to tell them exactly what's going on. There's little regulatory information.

Okay. All right. And just shifting gears slightly on to masks. So I know at the start of the pandemic, we saw some elevated demand, I think, it's reasonable to say, in OSA masks. And I think you subsequently sort of defined that as some -- to some extent, precautionary buying, but also a greater degree of focus on respiratory health. Going forward now, I mean, a year after, we saw those sort of elevated numbers, I mean, you're still seeing some good numbers come through. Did you -- how are you thinking about it? Do you expect this kind of increased focus on respiratory health to continue through the midterm? Or should we be expecting this kind of trajectory just to kind of normalize back to where we were prior to the pandemic?

Yes. I mean I think there's a few issues there. But in terms of the long-term issue, COVID's clearly introduced a focus on respiratory health. it's clearly introduced a concern to stay out of hospital. And it's clearly introduced greater acceptance of connected technology as ways to provide care. And all of those are 3 sort of the 3 foundations of our strategy. So longer term, COVID, if anything, has accelerated the events that have driven our long-term strategy and our target of improving the lives of 250 million patients in 2025, and we're about halfway there at this stage. Back to sort of shorter term in terms of masks, one of the things that happened in the lockdowns, particularly in the U.S., last year was the new patient flow reduced a lot. And so looking after existing patients became something that our provider customers had opportunity and capacity to do. And we had some technology supporting resupply. We had just acquired the Snap resupply. So we had really good additional resupply system to our already good ones. And so we were promoting that. And we did see -- as that all took off, we did see increased demand for masks. There are other factors in masks. We continue to expand the mask product portfolio with really good products going out in that, and we think that was probably helpful as well. Now what -- and that all went through. But what has happened now is that, that dip in new patient flow last year has been, I guess, affected the number of patients that are in the pool. And so we're probably seeing the resupply missing out on those new patients today would be eligible for resupply. So that's a little bit of a headwind, not a major one, but it's probably a factor in where masks are at the moment, but that will normalize pretty quickly.

In terms of calculating that headwind there, Rob, so roughly speaking, would it be around about 1/5 or 1/4 of masks that would be sold sort of through, I guess, new patient starts, and then the majority sort of 75%, 80% would be through the resupply program in the U.S. around those kind of numbers?

Yes. We -- when we sell a mask, we don't exactly know, but our triangulation, and as we report, about 80% of the mask go to existing patients.

Yes. Okay. Okay. You touched upon it earlier. I mean home sleep testing was something which was another sort of interesting development that sort of got catalyzed somewhat through COVID. How do we think about this one here? So I know in the U.S. historically, it hasn't been as widely accepted as it has in some European markets. We've, obviously, seen some elevation as much by necessity as anything else. Do we now see this something as sort of something of a zero-sum game where we basically have sleep labs coming back as we go through the next couple of quarters? Obviously, volumes are going to come down again and it kind of nets off. Or do you see home sleep testing sort of being elevated for a period of time yet?

Yes. I don't think it's ever really a zero-sum game. And history showed that over the last 5 or 6 years, we thought the sleep labs that embraced home fleet testing and in lab testing were the ones that thrived -- thrive the most in terms of patient flow and running a good diagnostic business there. So to comment around different -- in different markets in France, the reimbursement rate for home sleep testing is the same as the reimbursement rate for PSG testing, set about closer to the cost of home sleep testing and PSG testing. And so about 80% of the tests done there are home sleep tests, and that's maybe sort of the limit level of where it could eventually get to if ever it was thought through that way. In Germany, the medical profession did say that it didn't really think it worked very well. And so it was not used. That viewpoint, we think, has changed in Germany through COVID. But much like in the U.S. or in Germany and other markets where there's an infrastructure and a group of physicians who are doing patient care in a certain way, that doesn't change overnight. And so there are infrastructure investments and all of that, that have to earn their living in this as well. And so probably, we'll see return to normal and return to trends in the U.S. on home sleep testing, where we -- it was somewhere over 45% of tests we thought were done in home sleep testing. When COVID hit and the labs got converted to emergency COVID wards and things like that, the percentage went up, but actually, the actual numbers didn't go up hugely in terms of home sleep testing. The percentage of homes sleep testing went up, but the actual numbers didn't so much. So we think as things couldn't renormalize or reset back to traditional ways of working, but home sleep testing is valid, and it's sort of proven its capability, and it will keep going. The other thing in the short term, my earlier commentary on protocols limiting capacity, infection control protocols moving capacity. That applies to home sleep testing setups equally as to lab testing setups.

And just on that comment there, Rob. So basically, as things reopen to normalize, you expect the levels to go back to sort of trend. But you also made the comment about the reimbursement level in France being equivalent across the 2 referral pathways. And so you do see a general preference almost for home sleep testing. So...

It's over 30%.

Yes. So what is the current reimbursement difference in the U.S.? And given the validation about the approach that you just talked to in the U.S., could you see an argument to narrow that reimbursement differential across the 2 channels, and therefore, get home sleep testing up that way?

Yes. I mean we're not -- we don't particularly play in that part of the market. We do actually provide home sleep testing equipment, but it's not a material part of our business. The issue of sort of costs. So for a lab test in a hospital with complicated PSG testing and lab technician to stay overnight and watch you and follow-up, it is intrinsically a more costly than in-lab testing. The question is which patients need lab testing versus which ones are good at home testing. And that's quite hard to predetermine. With some patients, we have a very simple and obvious diagnostic where you can almost tell by talking to the person that's -- they're likely to have. That may be easier, but other patients they have all the symptoms, but it's very hard to measure exactly what's going on and you do need the lab for more insight into it. The question about reimbursement differentials really is up to the payers and the insurance companies to think through about what value they're getting from each and then what's the best way to operate that. So there's been little -- France is -- as far as I'm aware, France is the only one I'm aware of when they set the reimbursement so close to each other.

Yes. Got it. Okay. Can we move on to the SaaS portfolio as well, please, Rob? So Brightree, obviously, gets a lot of focus and attention. I guess any sort of changes you're seeing in Brightree? I mean you've done a very good job at penetrating a good proportion of the DME channel. We're now seeing perhaps some larger degrees of consolidation in that channel, and that trend is probably one that looks at to continue. What is the sort of future runway and outlook for Brightree as a standalone business, please?

Yes. So Brightree, it's really is a good business. It's -- the team run it really well, and it's got a very good market position. In terms of the HME industry that it serves, and it really sort of runs the operating system and the patient records for the DME industry, and it's got a market-leading position in that. The DME industry came through COVID quite well. The commentary you made on consolidation has been a long-term trend. There's been a long-term trend of the bigger players combining or buying smaller players. But there's also fairly low barriers to entry in the industry. And we do see some sort of churn and creation. So -- and we still have many, many thousands of customers of HME customers in the U.S. and that speaking is Brightree customers as well as ResMed customers as well. So long term, we think there's actually still opportunity on the technology front for Brightree to improve the performance and the capability of these businesses to operate more efficiently. And that's a continual development. As you see, when we break out our results, we have a fairly R&D-intensive SaaS businesses combined. And we could -- that R&D is going into making technology improvements. We were able to do bolt-on acquisitions as well. So in these SaaS industries, there's a lot of sort of partnerships in terms of co-selling of software solutions. You integrate through your APIs with best-of-breed solutions. And some of those end up being really good bolt-on acquisition targets as well that expand the scale of the offering. And then Brightree continue to invest in capabilities that are sort of expanding the scope of the DME businesses that we can add value to. So yes, it's got a great future.

And if we look at the SaaS portfolio holistically, when does this -- I mean, the high single-digit growth is the kind of near-term target. I mean does this ever get back to low double?

Our ambition is for it to get back to low double digits. Clearly, with MatrixCare and particularly through COVID where one of Matrix' largest segments were the skilled nursing facilities that were badly knocked around by the whole COVID situation in terms of just infection rates in their age population and then politics around what the institutions were meant to be doing. And then obviously, with the cessation of so-called elective surgeries, which often, many of them sounded pretty urgent to me, but many of those patients would typically be discharged in those facilities. So it was tough. They're in recovery mode still coming through, and that's definitely a factor in MatrixCare, but we certainly got some other good segments that are exhibiting opportunities for good growth. We do have an execution imperative to execute well and really get our software solutions being best-of-breed and working well through there. We do have to do that execution. But both those businesses should support that -- support the corporate growth rates that we've established as ambitions.

Great. You touched upon the supply chain issues in an earlier comment. Perhaps we could just drill into that a little bit. I know, as you say, freight is clearly an issue. I think that's being seen by a number of device manufacturers at the moment. I mean one of the more notable characteristics about ResMed over the last 6, 7 years plus, is the ability to consistently grow cost below revenue. It does now see the cost is coming back in and revenue perhaps isn't quite normalized yet. So are we in here for a period of margin pressure? How long do you expect that to last? And what's the sort of near versus midterm outlook with some of these costs that you're just seeing as being elevated for the time being?

Well, I mean, from the big-picture point of view, the markets that we're in are still really underpenetrated. And our story is one of volume growth. And as I said earlier, not always volume growth at the same per unit price, but we'll run faster than that, and we have managed to have a really good leverage. With the COVID crisis where -- as an international company, we spent a lot of time on the road. We had significant travel expenses and many of the marketing -- the face-to-face marketing programs, both in the software and the device businesses incur a lot of costs, and that will just stop. So 2020, as a baseline comparative period, always will be challenging as we get back to, however, the working processes are. We talk about we're adding the office back in as an option to the types of communications that we have to work together. We will be adding in face-to-face travel as an option and presumably some face-to-face marketing activities as well. But the scale of what they're at is a little bit unclear. So I think if you sort of look across that year into a longer term, I think, we should be able to stick on with that leverage story going ahead. Clearly, in the face of electronic component shortages, the Texas freeze actually had implications on supply chains that happened in February this year. The sort of great reduction in air freight as commercial traffic dropped off and then the challenges in freight are all going to be headwinds to that, and our team will be fighting hard to manage faster than that. But I think, again, it's another -- let's have a look and see how this goes over the next year as well. There certainly will be those specific headwinds, and we'll be aiming to run faster than that, but we may not always get that on every quarter.

Got it. Okay. I think we're just about out of time. So we'll probably look to wrap up there. Rob, thank you very much for joining us. Really appreciate the time you've taken. Good luck for the rest of the quarter and look forward to catching up again soon.

Thanks, Chris. Great to catch up, and thanks, everyone, for listening in. Thank you.

Thanks.