ResMed (RMD) Fiscal Q1 2027 Earnings Call: EPS Rises 14%, Guidance Reaffirmed

ResMed (NYSE: RMD) reported fiscal Q1 2027 revenue of $1.4 billion, up 6% on a reported basis and 7% in core constant-currency terms. Non-GAAP diluted EPS rose 14% to $2.91 as gross-margin expansion and a lower share count supported earnings growth.

Key Takeaways

• Fiscal Q1 2027 revenue increased 6% to $1.4 billion, or 7% on a core constant-currency basis, supported by demand for sleep devices, masks and the remaining Residential Care Software businesses.
• Non-GAAP diluted EPS increased 14% to $2.91. Management attributed the gain mainly to revenue growth, gross-margin expansion and a lower diluted share count.
• Non-GAAP gross margin expanded 50 basis points to 62.5%, reflecting procurement, manufacturing and distribution productivity, favorable product mix and delayed supply-chain expansion costs.
• ResMed reaffirmed fiscal 2027 core constant-currency revenue growth guidance of 5% to 7% and non-GAAP EPS guidance of $12.00 to $12.25.
• The company repurchased $936 million of shares and returned more than $1 billion to shareholders, including dividends, during the quarter.
• Management continues to expect the Astral exit to reduce fiscal 2027 revenue growth by approximately 130 basis points, or about $75 million.

Core Financial Data

EPS growth included an approximate $0.05 headwind from the MatrixCare divestiture and Nidra acquisition, plus an approximate $0.08 foreign-exchange headwind. Net interest income was $16 million, while other income included an approximately $6 million gain related to Apnimed’s initial public offering.

Business and Operating Performance

In the Americas, sleep-device revenue increased 6%, masks and other revenue rose 10%, and life-support device revenue declined 94%. In markets outside the Americas, sleep-device revenue increased 13%, masks and other revenue advanced 11%, and life-support device revenue fell 79%.

Rest-of-world sleep-device growth benefited from a fleet replacement cycle in France, particularly the transition from AirSense 10 to AirSense 11. Management said this benefit is weighted toward the first half of fiscal 2027 and is expected to create a tougher comparison later in the year.

Residential Care Software revenue declined 7% on a reported basis and increased 5% in constant currency. Excluding the divested MatrixCare business, Brightree and MediFoxDan revenue increased 8%. ResMed continues to target high-single-digit fiscal 2027 growth for the remaining RCS operations, with operating leverage.

ResMed launched the AirTouch F40 fabric mask in the United States during the quarter. The company said recently launched fabric masks have produced a 6% increase in therapy adherence compared with their silicone equivalents. It also continued the U.S. rollout of AirCurve 11 ST and ST-A bilevel platforms.

The myAir patient application has exceeded 13 million downloads. Its generative AI sleep coach, Dawn, has handled more than 2.1 million patient inquiries, up more than 40% from the previous quarter. ResMed also said early real-world data for Smart Comfort showed a 4.3% increase in 30-day compliance compared with default device settings.

ResMed produced its first U.S.-manufactured AirSense 11 at its Atlanta, Georgia facility. The company is also building out its Indianapolis, Indiana distribution center. Management expects U.S. production eventually to achieve a delivered cost comparable with imported products, although start-up expenses and underutilization will affect the ramp-up period.

The MatrixCare divestiture closed on September 1. ResMed is using the proceeds to support capital returns and investment in its core businesses. The company is also expanding the commercial footprint of Nidra, its therapy for restless legs syndrome, from a small base.

ResMed has stopped selling Astral devices and is prioritizing available components for existing patients based on clinical acuity. The company recorded a $42 million reserve related to the ongoing Astral field safety corrective action.

Management Guidance

ResMed reaffirmed the following fiscal 2027 outlook:

The revenue outlook incorporates an approximately 130-basis-point, or $75 million, headwind from the decision to discontinue Astral sales. Excluding Astral, management said core constant-currency revenue growth would be 6.3% to 8.3%.

Reported revenue guidance assumes an approximately 60-basis-point foreign-exchange headwind based on quarter-end rates. Management identified global price increases, marketing execution, the conclusion of France’s fleet renewal and the broader inflationary environment as key variables within the range.

For fiscal Q2, ResMed expects a mid-single-digit sequential revenue increase after excluding the two months of MatrixCare revenue included in Q1. Non-GAAP gross margin is expected to decline slightly from Q1 as delayed expansion costs move into the quarter. R&D expense is expected to remain broadly flat, while SG&A is expected to increase sequentially due to marketing activity. Net other income is expected to fall by roughly $10 million from Q1.

Risks and Areas to Watch

• Inflation remains a pressure point, particularly for electronic components, and management expects its impact to increase during the remainder of fiscal 2027.
• The French fleet renewal supported first-half device growth but is expected to become a year-over-year headwind in the second half.
• Indiana distribution-center and other U.S. expansion costs were delayed from Q1 and are expected to create an approximately 30-basis-point sequential gross-margin headwind in Q2.
• ResMed’s fiscal 2027 revenue range partly depends on marketing programs converting sleep-health awareness into diagnosis and therapy. Management said these programs made no material contribution in Q1 and will take time to scale.
• The Astral exit will reduce revenue, while the company continues to manage its field safety corrective action and support existing patients.
• Foreign exchange reduced Q1 EPS by approximately $0.08 and is assumed to reduce full-year reported revenue growth by around 60 basis points.

Analyst Q&A Highlights

Gross margin: Management said Q1 pricing made almost no contribution. The 50-basis-point expansion came primarily from supply-chain productivity, favorable mix and the timing of U.S. expansion investments. Pricing benefits are expected to build gradually through the fiscal year but remain modest.

Full-year guidance: Despite the strong opening quarter, management maintained its ranges and said the midpoint remains the most likely outcome. The company cited fading French fleet-renewal benefits, inflation, marketing execution and the timing of price increases as important variables.

GLP-1 medicines: ResMed’s analysis covers more than 3.3 million de-identified patients. Patients with both CPAP and GLP-1 prescriptions were more than 11% more likely to start CPAP therapy, more than 3% more likely to record a resupply event after one year and more than 7% more likely after three years than the CPAP-only cohort. Management said data on oral GLP-1 users remain at an early stage.

Competition: Management said ResMed intends to defend and grow its position through its connected ecosystem of devices, masks, myAir, AirView and provider integrations. It also highlighted resupply tools within myAir as a potential longer-term growth driver.

Portfolio management: ResMed continues to evaluate tuck-in acquisitions generally below $500 million. Management said potential transactions must fit its sleep and breathing strategy, meet financial return criteria and add to the company’s culture.

Full Earnings Call Transcript

Complete Earnings Call Transcript

Management Remarks

Operator

Welcome to the Q1 Fiscal Year 2027 ResMed Earnings Conference Call. My name is Shamali, and I will be your operator for today's call. [Operator Instructions] Also, please note this conference call is being recorded. Later, we will conduct a question-and-answer session.

Let me hand over the call to Salli Schwartz, ResMed's Chief Investor Relations Officer.

Sallilyn Schwartz

Thanks Shamali. I want to welcome our listeners to ResMed's First Quarter Fiscal Year 2027 Earnings Call. We are live webcasting this call, and the replay will be available on the Investor Relations section of our corporate website later today. Our earnings press release is available online now. As with last quarter, we will be displaying our earnings presentation during our prepared remarks, and then we will post the slides to our IR website after the conclusion of our remarks. .

During today's call, we will discuss several non-GAAP measures that we believe provide useful information for investors. This information is not intended to be considered in isolation or as a substitute for GAAP financial information. We encourage you to review the supporting schedules in today's earnings press release to reconcile these non-GAAP measures with the GAAP reported numbers.

In addition, our discussion today will include forward-looking statements, including, but not limited to, expectations about our future financial and operating performance. We make these statements based on reasonable assumptions. However, our actual results could differ. Please review our SEC filings for a complete 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.

Michael Farrell

Great. Thanks, Salli, and welcome to all. We're all together here in Sydney, Australia and all filed up at 7:30 in the morning. During the first quarter of our fiscal year 2027, we delivered another strong set of results. 7% revenue growth on a core constant currency basis on the top line, 50 basis points of year-over-year gross margin expansion and 14% growth on the bottom line in non-GAAP earnings per share. We also returned more than USD 1 billion to our shareholders during the quarter through both our quarterly dividend and our share repurchase funded with the MatrixCare business divestiture proceeds and cash on hand. ResMed's fiscal year 2027 is off to an excellent start.

I'd like to take this opportunity to thank the global ResMed team for their unwavering dedication to our patients, our providers and physicians. We're building the world's leading digital health ecosystem encompassing sleep health, breathing health and health care technology delivered in the hunt. As we move throughout our fiscal year 2027, we're focused on 3 key areas: one, on our continued innovation and operational excellence to support ResMed's ongoing growth and transformation work; two, on active portfolio management across our business lines; and three, on leveraging our significant free cash flow to both reinvest in our business and return capital to shareholders.

ResMed is committed to innovation excellence across the sleep health ecosystem. This means ongoing innovation in our products and bringing together devices, masks, digital tools and provider support to create a more connected therapy experience and to help people stay engaged with their therapy over time. Last quarter, I talked about the launch of the AirCurve 11 ST and ST-A platforms into the U.S. market. The ST and the ST-A are bilevel device platforms for patients who need more pressure support or have more complicated breathing disorders, including central sleep apnea, complex sleep apnea and COPD plus OSA, which is known clinically as overlap syndrome.

The AirCurve 11 is built on our market-leading Air 11 platform that has CPAPs, APAPs and now these advanced bilevels, allowing us to leverage a shared technology and digital health ecosystem across a broader range of patient populations. This helps simplify workflows for providers while creating a more consistent experience for patients. We've also launched just this week a third fabric mask into the market. We call it the AirTouch F40 in the U.S. AirTouch F40 brings ResMed's proprietary ComfySoft fabric cushion to a minimalist design that is intended to adapt to a person's facial concierge dynamically as they move throughout the night.

In a ResMed study, 91% of patients rated the AirTouch F40 as comfortable or very comfortable at initial fitting. This technology can help patients get adherent with less provider effort and can drive patient and provide a preference for ResMed products. On our most recently launched fabric masks, we have now shown 6% increase in therapy adherence for the fabric masks versus their silicone mask equivalent. This is market-leading technology, and we continue to bring these products to market, watch this space. On the software side, we recently launched a refresh of our myAir patient app. We're now well over 13 million downloads of our myAir app, and we'll talk about that later. But in addition to the enhanced user interface of myAir and the optional dark mode, new features include an updated myAir score a nightly time line of events and therapy control to adjust comfort setting from the app, giving each user a more personalized experience.

MyAir now also includes a service that we call Equipment Care and sports in a number of geographies, and it makes it easier for patients to request resupply by showing a visual countdown for each mask or other device accessory. It can send time reminders when masks and accessories are eligible for replacement, helping encourage action by patients and increasing convenience for the patient and making it easier for the provider. Watch this space as we increase availability of this type of service for consumers who want to access better resupply. Also on the myAir app, our generative AI-powered digital sleep coach that we call Dawn, has now seen more than 2.1 million inquiries from patients already on therapy. That's up over 40% just from last quarter. This demonstrates that patients are very curious about their CPAP therapy, and they want to learn more.

Dawn helps patients find support wherever and whenever they need it, significantly reducing customer service inquiries to ResMed, but also reducing customer service inquiries to ResMed's HME partners and channel partners. Delighting patients and saving costs for HMEs is a double win for ResMed through this innovative GenAI tech. We will continue to evolve myAir based on consumer and provider feedback. Our aim is to bring clearer therapy insights, to bring more intuitive support and to bring increasingly personalized experience to engage patients throughout their therapy journey. Together with AirView, ResMed's remote monitoring platform for health care providers, myAir has been shown to meaningfully improve therapy compliance from 70% up to 87%, just by adding myAir for the patient.

One further update regarding our FDA-cleared AI-enabled digital medical device that we call Smart Comfort. We launched this just earlier this calendar year. Smart Comfort was built on millions and millions of nights of ResMed sleep data to recommend personalized adjustments to comfort settings like temperature, humidity and supplied on new AirSense 11 users. We predicted in previous quarters that increased comfort could lead to increased adherence, and it turns out that prediction has come true. Early real-world data shows a 4.3% increase in 30-day compliance versus the device's default settings. Smart comfort has been selected as a special mention in Time Magazine's best inventions of 2026. But more important than that, it's evolving our products to deliver increasingly personalized therapy to patients. and it's a winning use case for AI.

ResMed's digital health ecosystem is second to none, providing sustainable value for patients, for physicians, for providers even for payers and beyond. On the operational excellence side, we were able to execute some of our planned supply chain initiatives more quickly than we predicted. We're able to rephase some of our planned expansion initiatives, particularly in Indianapolis, Indiana, allowing us to exceed our own expectations for gross margin for the quarter. The transformational pipeline of initiatives, what I call our productivity pipeline for our supply chain team. They built it and it remains robust and multiyear, underpinning our ongoing confidence that we can deliver double-digit basis points improvement in gross margin every year, every fiscal year through 2030.

I'm also proud to share that we produced our first Made in America CPAP device and AirSense 11 has come off the line at our Atlanta, Georgia facility. Having this capability for U.S. manufacturing gives ResMed additional flexibility to optimize operations as needed across our global manufacturing footprint. We also continued progress on our new Indiana, Indianapolis based distribution center, which once it's fully operational, will enable faster delivery to our North American customers. ResMed has a significant and growing U.S. manufacturing presence, and we continue to invest in expanding our capability to serve our highest volume market.

With regard to our government advocacy work, I can tell you that we are actively engaged with the U.S. government as well as industry partners to support policies that strengthen domestic U.S. manufacturing and global supply chain resilience while protecting patient access to our life-saving therapy in the U.S. and around 144 countries worldwide. Alongside these developments in the U.S., we are expanding our Asia manufacturing capabilities, including at our largest manufacturing facility in Singapore and our facilities in Malaysia that are joined to the Singapore operation. Together with our Sydney, Australia, Calabasas, California, Atlanta, Georgia, and our newly established Indianapolis, Indiana facilities.

Our global operations footprint positions us extremely well to serve our growing customer base and patients around the world. Over the past quarters, I've highlighted our initiatives to increase awareness of sleep apnea and the impact that chronic poor sleep has both on the individuals and health care system, but also on their partners and families and workmates. As you know, we've been excited to see growing appreciation of the importance of sleep health, driven by consumer wearables, including Samsung Galaxy Ring that just this week, I think actually overnight, got FDA clearance for sleep apnea detection from the Samsung Galaxy Ring, but also from being far and the GLP-1s the investment that particularly Lilly is making, but also Novo and driving patients into primary care.

Earlier this month, we announced the collaboration with Smart Mattress sensor maker, Eight Sleep. Their Eight Sleep pod users in both the U.S. and Australian markets will be able to securely connect their myAir sleep insights to the Eight Sleep app, giving them a more complete picture of their sleep health. Here in Australia, Eight Sleep users whose sleep data shows trends such as heavy snoring, may be guarded to ResMed sleep health resources, including sleep assessments and the pathway to diagnosis and therapy and beyond. This consumer sleep wellness collaboration adds to our partnership with Smart Ring maker Aura, that I discussed during ResMed's last earnings call. We've continued to see strong traffic to ResMed's website from Aura app users.

As of September 30, approximately 28,000 or users, more than double what we had seen at the end of July have come to resmed.com from a customized tile within Aura's own app. Many thousands of those users are -- have taken the ResMed sleep assessment right there on resmed.com. Approximately 72% of those assessed identified themselves as previously undiagnosed for OSA, highlighting the potential to turn sleep insights into action and helping more people get evaluated and ultimately treated for their sleep apnea. Another sleep pathway enabler are these new medicines will not so new, maybe 10, 15 years in the market, but newly ramping up GLP-1s.

As we've discussed before, patients on GLP-1s both initiate CPAP therapy more and stay on CPAP therapy longer and they buy more stuff. As an update to our analysis that's built from a claims database of tens of millions of patients, our specifically analyzed cohort now includes more than 3.3 million de-identified patients. We are still seeing that patients who have scripts for both CPAP and GLP-1s are more than 11% more likely to start on CPAP therapy than patients who have a script for CPAP alone. They are also more than 3% more likely to have a resupply event at 1 year and more than 7% more likely to have a resupply event at 3 years. The CPAP plus GLP-1 and the CPAP-only cohorts are measured on the same basis, i.e., patients who stopped CPAP remain in the base population for both groups.

Sleep apnea risk factors include age, gender, craniofacial geometry as well as white. OSA very often needs to be treated even after very significant weight loss. As we've seen in the clinical literature, the real-world day that we show and in the numbers as if you look at our incredible mass growth over time. ResMed continues to selectively invest in marketing that expands our awards, reduces barriers to diagnosis and treatment and helps more people understand the life-changing impact of better sleep, better breathing. You may have seen some of our campaigns underway. I'll highlight just 3 of them quickly here on our call. Number one, our so-called CPAP baddies campaign is helping normalize CPAP therapy through authentic community-driven conversations, making treatment more approachable and encouraging more people to start and stay on therapy. It's really creating a CPA community of people who are proud of changing their lives.

Number two, our in-bedwidth interview series features sleep dockers, sleep physicians and other sleep wellness thought leaders to help more people recognize symptoms of sleep apnea to seek care and ultimately, to improve long-term clinical outcomes as well as quality of life outcomes. And thirdly and finally, our athletic partnerships, most recently with a NASCAR drier Tyler Reddick enable us to reach new audiences with powerful real-world stories that demonstrate how effective sleep therapy can improve energy, performance and personal and family life. It's interesting. The most watched episode featuring Tyler Reddick, who's a world-class professional driver, was not about is improvement in sports performance and winning the Daytona 500 and the first 3 NASCAR races of the season, creating new sports records for that sport.

The most watched podcast and viral social media was about his wife, Alexa, showing that ResMed CPAP treatment made him a better husband, a better father and a better friend. The words from Patient 1, back here in Australia in 1989, Eddie Merck, who said this therapy saved my marriage, save my job, save my life come to mind. It's great to have that story retold from many perspectives and from a young racecar driver here right in 2026. Okay. Together, these sort of consumer engagement initiatives are helping ResMed interact with more people driving greater awareness and adoption. And ultimately, they fulfill our mission of improving lives through better sleep and better breathing, longer life which is longevity by span, but more importantly, health span, which is living longer with a good quality of life.

Greater awareness in the clinical community is another key element to ensuring consumers have ready access to information and pathways to diagnosis and therapy. Our continuing medical education or CME programs include sleep medicine physician society approved guidelines. Obviously, that includes the benefits of CPAP, APAP and bilevel therapy as the clinical gold standard, the frontline treatment for any patient diagnosed with sleep apnea. Our sleep apnea education courses have now been completed by approximately 108,000 times by more than 63,000 unique clinicians. We've been tracking the number of referrals for home sleep apnea tests and prescriptions for positive airway pressure, both before and after training. It's great to see that post training. These clinicians are not only saying they intend to change their clinical practices. They are actually changing them, and it's impacting patient flow.

Okay. Our second priority is active portfolio management. On September 1, we closed on the divestiture of our MatrixCare business. We continue to expect this move to accelerate the growth and profitability of our core residential care or RCS business. For fiscal year 2027, we are still planning for our RCS business to deliver high single-digit revenue growth with operating leverage, reflecting both improved mix and execution focus. We're off to a solid start with high single-digit growth, powered by our Brightree and MediFoxDarn product lines. We're also making good early progress integrating our Nidra or restless legs syndrome therapy that we acquired with the company was called Noctrix from the Stanford Biodesign incubator.

Nidra's commercial footprint is expanding rapidly, albeit from a small base. We're keenly focused on increasing commercial coverage for Nidra and supporting expanded access to this novel noninvasive sleep physician prescribed DME channel delivered VA channel delivered to patients therapy. Prioritizing patient care is also central to our ongoing Astral field safety corrective action. We're responsibly supporting patients, including patient-centric and quality-focused completion of the ongoing action. We also recognize that home care provider customers need to be able to plan for future ventilation needs. That commitment is why we recently announced that we will no longer sell the Astral device. We're focusing all available components to service Astral devices for existing patients with prioritization based on the highest clinical acuity and guided by clinical judgment.

We're going to execute the best recall in the history of life support ventilation. We took $42 million reserve and I've seen the latest data, and it's very good. We're executing very well on that fill safety notice. We intend to keep allocating capital towards our high-growth, high-return opportunities. This allows us to accelerate the expansion of our digital health ecosystem to support continued innovation at scale and to drive strong progress towards successful execution of our 2030 strategy. In addition to investing in our business group continued innovation, partnerships and M&A, we're also maximizing the return of capital to our shareholders.

During the first quarter, we bought back approximately $936 million of our stock through a combination of open market repurchase and an accelerated share repurchase program using the proceeds from our MatrixCare business divestiture. Together with our dividend, we returned more than $1 billion to our shareholders this quarter. This is a record for ResMed and reflects our conviction that investing in our company is a compelling high return on investment opportunity.

Before I turn the call over to Aaron, I'd like to take this opportunity to thank Ron Taylor, ResMed's current Lead Independent Board Director. He recently announced his retirement after more than 21 years of service. Ron will not stand for reelection at our upcoming Annual General Meeting of Stockholders, which will be held on November 18, 2026. During his tenure, Ron helped guide ResMed's governance and strategy providing thoughtful leadership and independent oversight during a period of significant growth and transformation for the company. Ron's integrity, some judgment and unwavering commitment to our patients, employees and as a representative of shareholders help ResMed stay what it is, which is a strong company, innovating and driving growth.

My fellow board members and I have appointed Carol Burt to serve as our next Lead Independent Director, effective November 15. Carol has served on ResMed's Board since 2013 and currently chairs the Norman Gov Committee, she is also a member of the Audit Committee as well as the compliance Privacy and Quality Committee. Carol's extensive Board leadership experience, extensive governance experience and extensive health care industry, including payer knowledge position her very well to serve as ResMed's next Lead Director. I look forward to continuing to work closely with Carol and the entire board as we advance our strategy and create long-term value for our shareholders. Let me close with this. ResMed has a tremendous market opportunity, a leading market position, a very strong balance sheet and a strong track record of successful execution. We remain very excited about our 2030 strategy, and we're confident in our 5-year outlook that features high single-digit top line revenue growth and bottom line earnings growth that's higher than revenue growth with leverage. We are committed to keep delivering to the benefit of all of our stakeholders and most importantly, for the #1 stakeholder, our patients.

With that, I'll turn the call over to Aaron to go through a deeper dive into our financials, and then we'll open up the floor for Q&A. Aaron?

Aaron Bloomer

Great. Thanks, Mick. In my remarks today, I will provide an overview of our results for the fiscal quarter of for the first quarter of fiscal year 2027, Unless otherwise noted, all comparisons are to the prior year quarter and on a non-GAAP basis and core constant currency terms were applicable. We encourage you to review the updated detailed layout for a reconciliation of the non-GAAP to GAAP numbers in our first quarter earnings press release. We had a good start to our fiscal year 2027. Total revenue for the first quarter was $1.4 billion, a 6% increase on a reported basis and 7% increase on a core constant currency basis. As a reminder, core constant currency excludes our acquisition of Nidra restless leg syndrome therapy and includes only 2 months of the MatrixCare revenue in both fiscal years 2026 and 2027. Growth in the quarter reflected solid demand across devices, masks and our remaining RCS business. Non-GAAP earnings per share increased by 14% to $2.91 per share.

Moving to revenue by business and geography. Starting in the Americas, sleep device revenue increased by 6%. Life support device revenue declined by 94% and masks and other revenue increased by 10%. In the rest of world, sleep device revenue increased by 13%. Life support device revenue declined by 79% and masks and other revenue increased by 11%. The Rest of World sleep device growth in the quarter was supported in part by a fleet refresh in France, which is weighted towards the first half of the fiscal year. The total contribution from pricing was minimal this quarter. In the appendix of our earnings presentation, we've provided historical revenue figures for both sleep devices and life support devices. Residential care software revenue declined by 7% in the first quarter on a headline reported basis and increased 5% on a constant currency basis, removing the MatrixCare business that we've now divested, the remaining businesses of RCS, Brightree and MediFoxDan increased by 8%.

Non-GAAP gross margin was 62.5% in the first quarter, up 50 basis points year-over-year. The quarter's results was driven by productivity gains across procurement, manufacturing and distribution, along with favorable product mix, more than offsetting foreign exchange headwinds versus our initial expectations, our Q1 gross margin benefited from the phasing of supply chain expansion investments. primarily related to the continued build-out of our new U.S. facility in Indiana. We continue to experience the impacts of inflation, especially in some of our electronic components and expect these impacts to build throughout the remainder of the fiscal year. We are very proud of the work our supply chain team is doing to drive productivity and efficiencies despite the current inflationary environment.

Moving on to operating expenses. Non-GAAP R&D expenses for the first quarter increased by 16% on a reported basis and 14% on a constant currency basis. R&D expenses were roughly flat sequentially, excluding the impact of MatrixCare. The year-over-year increase was primarily driven by continued investment in our next-generation device and mass platforms. along with expanded development of AI-enabled tools that streamline the patient journey, helping patients start therapy sooner and stay on it longer.

Non-GAAP SG&A expenses for the first quarter increased by 6% on a reported basis and constant currency basis. The Q1 increase reflected investments we're making to drive growth, including marketing campaigns and by Nidra, partially offset by productivity gains that we're driving in our support functions. As you saw in the earnings release, during the quarter, we recorded restructuring and transformation-related charges of approximately $29 million as well as approximately $10 million of acquisition and divestment related expenses associated with the MatrixCare business. We are embarking on an exciting growth and transformation journey. This quarter, we identified early opportunities to address stranded costs. We'll have more to say on a separate and the benefits we expect to recognize in the coming quarters. Non-GAAP operating margin for the quarter was 35.8%, down 30 basis points year-over-year.

Net interest income for the quarter was $16 million, primarily driven by the ongoing benefit from the Singapore net investment hedge. Net other income also reflected a gain of approximately $6 million from our ownership stick in Apnemed as a result of its initial public offering. Our non-GAAP effective tax rate for the first quarter was 21.2%, and compared with 22.3% in the prior year quarter, reflecting a more favorable jurisdiction mix of earnings. Non-GAAP diluted earnings per share increased by 14% to $2.91, driven primarily by revenue growth, gross margin expansion and a lower diluted share count. This growth was partially offset by an approximate $0.05 headwind from the MatrixCare divestiture and Nidra acquisition as well as an approximate $0.08 headwind related to movements in foreign exchange rates.

Free cash flow for the quarter was $374 million, down year-over-year. primarily driven by higher inventory goals that we have strategically built in light of the external environment and an increase in cash tax prepaids. Between fiscal year 2025 and 2026, we received significant U.S. tax refunds, which were netted against prepaid in the presentation of free cash flow. This quarter represents our expected steady state for prepaids moving forward. We ended the first quarter with a cash balance of approximately $1 billion. During the quarter, our share repurchases totaled $936 million. Along with our dividend, we returned more than $1 billion to our shareholders in Q1, a more than fourfold increase over Q1 fiscal 2026.

Turning to guidance. As a reminder, for fiscal year 2027, we are now providing full year revenue -- or full year guidance for revenue and non-GAAP earnings per share on both a core constant currency and reported basis. We are pleased with our solid start to fiscal year 2027 and are reiterating our full year revenue and earnings per share guidance. We continue to expect year-over-year revenue growth in the range of 5% to 7% on a core constant currency basis. As a reminder, this includes an approximately 130 basis point headwind or around $75 million, stemming from our decision to no longer sell Astral. When excluding the impact of Astral, our core constant currency revenue growth would range from 6.3% to 8.3%.

There are several key assumptions underpinning our revenue guidance. First, net price realization as we continue to roll out global pricing increases we discussed last quarter. Second, successful execution and impact from our new marketing campaigns that Mick shared in his remarks. Third, expected back half pressure in our Rest of World sleep devices as the France fleet renewal concludes. And finally, the broader external environment, including the continued impact of inflation on our customers, which we will continue to monitor. Our core constant currency growth includes guidance translates to reported revenue in the range of $5.75 billion to $5.85 billion. This assumes an approximately 60 basis point FX headwind based on rates as of quarter end.

We still expect non-GAAP earnings per share to be in the range of $12 to $12.25, an increase of approximately 7% to 10% on a reported basis. Excluding the dilution from the divestiture of the MatrixCare business, and the acquisition of Nidra, guidance implies year-over-year core EPS growth would be in the range of 12% to 14%. For gross margin, we still expect low double-digit basis margin expansion in fiscal year 2027. We may see some variability quarter-to-quarter based on inflationary impacts and timing of our supply chain initiatives and facility expansions. Our expectations for a slight increase in operating margin percentage in fiscal year 2027 remain unchanged.

We are laser focused on achieving operating leverage by driving productivity and efficiency. This will enable us to reinvest back into high growth and high ROI opportunities in both R&D and marketing. In Q1, we made significant progress towards returning more than $1.85 billion to shareholders over the course of fiscal year 2027, including both share repurchases and dividends. This remains our expectation, and we will continue to be opportunistic with our repurchase activity as the year progresses. We still expect capital expenditures in the range of $160 million to $180 million, as we expand and further automate our U.S. and global manufacturing footprint to address the growing demand for our products. While we do not provide quarterly guidance, we would like to share some Q2 trends.

ResMed has historically experienced a mid-single-digit sequential increase in total revenue from fiscal Q1 to Q2, and we expect a similar seasonal pattern to occur this year. excluding the 2 months of MatrixCare revenue that we had in Q1. We expect non-GAAP gross margin percent to be down slightly sequentially as certain expansion-related costs impact us in Q2 rather than in Q1. We also anticipate R&D expenses to be largely flat from Q1 and SG&A expenses to sequentially increase tied to the marketing campaigns Micron earlier. We'll continue to drive operating leverage across our support functions. We also expect net other income to be down roughly $10 million from Q1.

Last quarter, I shared my key priorities, driving sustainable growth supporting continued transformation of ResMed and maximizing return to shareholders. We've made progress on all 3 in Q1. The marketing campaigns and myAir updates aimed at helping patients start and stay on therapy. Partnerships we've entered into with companies like Eight Sleep and Aura to convert new patients entering into the phone and innovative new product launches such as the AirTouch S4, all support patients in the journeys towards better sweet health. At the same time, we're embracing change inside ResMed and creating a culture of continuous improvement, driving efficiencies, actively managing our portfolio and selectively evaluating M&A opportunities, while leveraging AI and technology to transform and improve productivity.

We also returned over $1 billion in cash to shareholders this quarter, a more than fourfold increase over last year. Looking forward, we will continue to prioritize reinvestment in the business while maintaining our commitment to the dividend, opportunistic share repurchase and an optimized capital structure.

And with that, I will hand the call back over to Shamali.

Operator

[Operator Instructions] Our first question comes from the line of Chris Cooper with JPMorgan.

Question-and-Answer Session

Chris Cooper

Maybe just perhaps for Aaron, on the gross margin. So you were guiding to a slight contraction year-over-year. You came in somewhere ahead of that with a 50 basis point increase non-GAAP. I know last quarter, you sort of alluded to it there. There was a lot of discussion on pricing. You were keen to emphasize these increases were very modest. And you also guided us, I think, to think that they don't really begin to benefit the P&L until the second quarter. So just wanted to understand, have these price rises benefited earlier than expected? Or should we think about further benefit building from here through the year? I think at the end there, you said there were some restructuring costs that moved from the first quarter to second quarter. So maybe just a bit more color on what drove that gross margin ahead of expectation, please?

Aaron Bloomer

Chris. So first, I mean, we have an unbelievable manufacturing and supply chain team. It's obviously in a very dynamic environment out there, and the team just continues to rise to the occasion and perform. It was really incredible to see firsthand a productivity pipeline that continues to build and expand. We have hundreds of specific initiatives, and the team has really done a phenomenal job of building that culture of continuous improvement. Specific to Q1, the margins expanded about 50 basis points. And again, a testament to the productivity gains across the entire manufacturing and supply chain team. we benefited a bit from the continued transition globally to AirSense 11. We talked about a slight FX headwind that we had in the quarter.

But as mentioned in the prepared remarks, I think the biggest thing kind of that benefited us in Q1 relative to expectations, was just phasing from some of the timing of the supply chain expansion investments. primarily the U.S. build-out of our facility in Indiana, and those costs are now expected in Q2. And so that's the biggest factor. That's about a [ 30 ] basis point headwind quarter-over-quarter from Q1 to Q2. Price very much in line with what we expected to begin with. Very, very modest for the full year. And as I mentioned in prepared remarks, really no contribution from pricing in Q1, and we would expect that to build as we progress throughout the year.

Operator

Our next question comes from the line of David Low with UBS.

David Low

Could we just talk a little bit about the rest of world. We haven't heard from ResMed much in the past on what happens in some of the other lesser markets. And I see you've called out the front sleep renewals. I could you talk -- give us a little bit of background on that and whether there's any other fleet renewal programs that we should be aware of, please?

Michael Farrell

Yes, David, thanks for the question. Yes, look, Europe, Asia, rest of world, 140-plus countries. So much going on there. But with sleep devices growing in rest of the world, plus 13%. We thought it was very important to call out if we consider globally mid-single-digit growth in our devices, clearly, there are a number of hundreds of basis points above that. And so we wanted to call out what's happening in France. What happens there is there's differentiated reimbursement in France for a cloud-connected seats as a non-cloud donated CPAP. And when they reach their 5-year life cycle, the customers, the distributors there have to renew their fleets to make sure that their patients have the latest in rose technology that they get appropriate reimbursement for the services they provide. And that renewal primarily from AirSense 10, now to AirSense 11 has been ongoing in France for a while. Obviously, that is an S curve a dose for a while, and then it plateaus out. And so we just felt like it was what to call that out.

And to your question and point, we do have other fleet-based markets like Japan and a few others around the world. And we will, as appropriate, when we see performance like that, call out what the outperformance is, what it looks like and that we normally expect sort of mid-single digit in global device revenue. Thanks for the question, David, and we can go into more details as we see other areas, and we will continue to highlight different countries and different things happening as they become material to the business and to our strategy.

Operator

Our next question comes from the line of Craig Wong-Pan with RBC Capital Markets.

Craig Wong-Pan

Thanks, Mick, for outlining all the marketing and partnership initiatives that you're using to drive growth and awareness. I just wanted to understand if they provide much benefit in the quarter to your top line? And when do you think that could provide a meaningful impact?

Michael Farrell

Yes, Craig, it's a great question. And I said this last quarter, I think I've said it every quarter the last number of years, which is we have to fight for growth every quarter. And a lot of that is in not so much top of funnel, which is awareness now around sleep supplications, sleep apnea and how important it is to treat a good sleep and good breathing for good health to lower cardiovascular risk, diabetes risk and sole cell tumor cancer risk, dementia outside and so on. It's middle funnel where somebody has -- is aware from their watch, they're wearable or a pharma company that there's an issue, and they turn up to that primary care physician. So to your point, we updated the numbers, lots of education happening there. We're tracking premium post that 63,000 unique clinicians in the primary care area, whether that's in NP, PA and or a nurse, making sure that when they see the positive diagnosis, they walk that patient through the education and their pathway to gold standard therapy. So it's very early days.

I think on the oral partnership, we're in the tens of thousands just announced. Yes, we have connectivity into Apple Health and Google held through APIs and Epic and Cerner creates a huge ecosystem. But as for driving 0 contributions in Q1, no, not yet. But watch this space throughout this fiscal year, and Aaron talked about this in his sort of what would get us to the 7% will get us to the 5%. That 7% revenue growth, that's about strong execution in our marketing programs and achieving great results. And 5% is if we don't achieve the great results that our pilot trials have shown us. I'm an optimist -- internal optimist, and I a lot of luck you haven't aiming for that. But it's a quarter in, quarter outside and got a lot going. No mature contribution in Q1. But as we look at fiscal year, I hope to be here in 12 months' time talking about some good material contribution from our marketing programs. Anything I miss there, Aaron?

Aaron Bloomer

There's such an opportunity on the top of the funnel like Mick talked about. And so we're laser focused on these critical investments targeting at the middle of the funnel. And this isn't about growth in a quarter or even a year. This is about creating durable growth that's sustainable over time. But like Mick said, it's going to take some time for some of these programs, the marketing campaigns, the myAir stuff that Nick talked about. It's going to take some time for those to be able to start to contribute.

Operator

Our next question comes from the line of David Rescott with Baird.

David Rescott

Great. Congrats on the results. I wanted to ask about the upcoming data, I think we're seeing on the pill form of the GLP-1 drug. And it sounds like there's been a pretty consistent adherence rate and new start rate that you've been calling out every quarter so far. So just wondering if at all, there's anything you're considering in your mind around if or why or why not, there would be a different maybe impact as you think about either the types of patients that could be coming in for the pill forma drug or based on where within which care setting, these patients are tending to come in through both from a headwind, I guess, and then that market expansion or potential that you've talked about in the past perspective.

Michael Farrell

Yes, David, thanks. It's a good question. Quite a nuance question. When you think about the injectable GLP-1s, they've tended to bring in a younger and a more female demographic into primary care physician. And for the goal -- the advertising that the farmer is doing is to bring them in for that injectable. And so when I talked about earlier, our middle funnel work, it's making sure that is educated about gold standard that they know the only way to 100% eliminate appears to create a pneumatic stent, that keeps the tongue of the ubular and all the clinical data that they are sort of -- well, they are obligated to write a script for pain. So as we focus on that, we've actually seen good movement the pill form, if I read the latest from the 2 major pharma companies in this is bringing in a slightly different demographic. They might be slightly more older and slightly more towards the mail side. But we'll watch that cohort as it comes through. It tends to be that an older and more male cohort is actually easier for us to get that middle of funnel. So -- but then you look at the adherence rates and the effect -- efficacy rates of the pills versus the injectables and they're slightly lower.

So there's sort of puts and takes as we look at this new cohort. I can tell you, we're now up to many millions of patients. I think we're up to 3.1 million patients, 3 million patients in our cohort that we're analyzing here, and we separate by drug type, by injectable, by pill, early days on the pill, but we're not seeing a material change in those data. And as we get a cohort that's big enough to talk about, if there is some material change we'll split it out, and we'll talk about the different cohort. If you're asking me my gut take, I think it will be a slightly more adherent group because it will be slightly older and slightly less female because that's what we've seen over history, but you don't know who it's there.

I do think, though, that the net benefit of bringing someone into the primary care, having someone else pay $150-plus million a year in advertising to bring someone into the funnel is incredible tailwind for us. Our job every quarter is to fight middle of funnel, get that prescription, make it easy to get the homesites, make it easier get the sleep lab test, make it easy to get that prescription and get on therapy. And then once they started therapy, that's when AirView, myAir, all the upgrades we talked about earlier today can maximize adherence. It's a great question, David. Thank you.

Operator

Our next question comes from the line of Brett Fishbin with KeyBanc Capital Markets.

Brett Fishbin

Just thinking about the quarter and rest of your setup, it seems like you beat pretty nicely versus Street and the quarterly guidance on both revenue growth and EPS, and I know it's just the first quarter of the year, but just curious on the decision to maintain full year guidance since this is a new practice for the company, if there's any thought around like early year conservatism? And if we should maybe be thinking about the higher end of the range as being more likely now versus signaling to the Street that we should really just be lowering the rest of the year numbers commensurate with the 1Q beat.

Aaron Bloomer

Brett, thanks for the question. You are red as early and so just as a reminder, guiding 5% to 7% on a core constant currency basis. We did 7% in Q1. And so obviously, towards the high end of that, we're really pleased at a solid start to the year, but we're 1 quarter in. Just reiterating the guide at this point is prudent. I want to reiterate that the most likely outcome is still the midpoint of our guide and go 5% to 7%. And I did discuss in some of the prepared remarks, some of the more important assumptions that's going to move us towards either the low or the high end of the guide. The net price realization as we roll out our price increases around the world. And as I mentioned, that's going to build as we progress throughout the year, but that it's very modest. Second and really importantly is these new marketing campaigns, the middle of the funnel work that we're doing. We have a tremendous opportunity to drive durable, sustainable growth in this middle of the funnel work over time. But as I mentioned a couple of questions ago, that's going to take some time. And so we're monitoring that closely. And obviously, that's going to be more of an H2 type of dynamic.

The external environment, we're continuing to see inflation not only on us, but on our customers and just the broader macro environment that our channel is facing. And then just from a phasing perspective, it in the call that we are really benefiting in the first half of the year in Rest of World devices, in particular, a really great recap fleet renewal in France. That will be a -- that's a huge tailwind in Q1 as you see the 13% device growth in rest of world. That's going to become a headwind as we go into the back half of the year. So look, we're monitoring all of that really, really closely. And I thought just prudent to reiterate the guide at this point.

And then just on the earnings side, again, obviously, a really strong beat to start the year, but we're still only 1 quarter through 4 quarters in a full year. The team delivered really great productivity. In the first quarter, it's great to see the culture of continuous improvement and extending beyond supply chain down through the rest of the organization as well. But again, it's still early. Obviously, we did have the benefit of Apnimeds. There's some non-op benefit in the earnings per share. We also had a much more weighted share buyback in the first quarter. So we talked about almost $1 billion worth of cash deployed towards share buyback. You saw our Wassa come down quite a bit. And so those are some of the dynamics that drove the strength in the first quarter.

Operator

Our next question comes from the line of Laura Sutcliffe with Citi.

Laura Sutcliffe

I'd just like to ask about how your portfolio optimization process is going, if I can. Do you see an abundance of opportunities out there at the moment that fit with the target deals as you've spoken to previously, your areas of focus, maybe your distribution channels. In your opinion, do tend to see what you think is outback?

Michael Farrell

Laura, it's a great question. And obviously, Yes, we've talked about back in acquisitions in that sort of sub-$500 million range, sort of $100 million to $500 million. And you saw last quarter that we closed on an amazing product need. And just having that sales team come into our headquarters in San Diego and meet with that team to see the passion they have as a startup, it really felt to me like sort of ResMed 1994, just pre-our IPO, you've got an incredibly fast growth opportunity, a huge market potential and just so excited about that Nidra product and what we can do for the 400 million plus people worldwide with restless leg syndrome. But right now, let's focus on the $17 million in the United States and the reimbursement and get market access and really make that work in its first market. So early days on Nidra were very excited.

Yes. Look, we don't talk about the pipeline. I can tell you that we have Nardi stakes in a number of companies that we think could become future bright trees, future ambiance, future natures, future snaps. And as those come to the right point where we say, actually now ResMed's the best owner of that asset. It strategically fits with our sleep and breathing portfolio. it pencils out in the numbers in net present value, but also in how it's going to contribute in terms of accretion and growth in top line and gross margin, ultimately, EPS. And then thirdly, that there's a cultural fit, that this is a cultural add to ResMed. It stretches us and takes us to the right direction that has all the foundations around honesty, integrity, cybersecurity and privacy and so on. And so early days in this.

There's a number of candidates that we look at out there, but the money that we have is not burning a hole in our pocket. We want to return it to shareholders. We want to invest in R&D primarily for growth. We're a product-led company. And we want to do appropriate marketing as we talk about in middle of funnel to make sure people who get aware into the system get through. So nothing to announce right now. And as we find more Nitras, we'll talk about them and bring them into market. And -- but we're actively looking an amazing portfolio. We have an incredible strategy team has their fingers in a lot of pies irons and a lot of fires and we'll talk about them as they come through it. But again, I'll reiterate, it's tuck-in acquitions, sub-$500 million, and it's things that align strategically for us, and we're the best owner asset. Thanks for the question, Laura.

Operator

Our next question comes from the line of Anthony Petrone with Mizuho Group.

Anthony Petrone

Congrats here on a strong start to the year. Maybe Mick, just a little bit on the U.S. competitive landscape. I know it's been a topic for quite some time here. You have Rathelthin, and certainly, there's chatter there that Philips may come back. But if we have a more robust competitive land in the U.S. What is the strategy from ResMed to defend its market share position? Can the company really maintain its growth trajectory even if the landscape shifts a bit?

Michael Farrell

Yes, Anthony, it's a great question. And I'll start with this and we love competition. It's amazing in all 143 countries worldwide, we have full competition in devices, mass, software, accessories, all across the planet there. And within the U.S. market, incredible competition from every player in masks, and I look forward to the day where every player in devices as well because we love being competitors no matter where it is. Look, particularly as we think about our market share, yes, absolutely, we can defend our market share. We can even grow our market share in masks and devices in some of the countries. And -- but I really don't look back at the competition and think, "Oh, gosh, what are those -- what's our company? And at what are they looking for? I look forward. But in terms of what we've created, we've created an ecosystem. If you think about what I talked earlier about driving adherence up with our fabrics technology, that's great. And it's IP and it's hard to keep up with in that space that's full open competition. But the advances we made in my ear that drive adherence rates up to 87%.

The advances we've made in upgrading the capability for doctors to get access in their own EHR system, whether it's Epic or Cerner or Allscripts, however they want the data, wherever they want the data they get it. And so 60%, 65% plus of sleep doctors write prescription, branded prescriptions for a device. They might write ResMed on the script, they might write AirSense 11 on the script, but they might also just write our view our software on it. And it's an incredible ecosystem that provides lower cost for the HME, lowest labor costs have set up and incredible value for the doctor that those 12 minutes they spend the patient once a year are much more valuable because all the data they've already got through the digital. So that's what's created the value. That's what's created incredible competitive nature out there. But I love the competition. I love the players coming there. We're not only going to defend our share. We're going to grow our share. But more important than that, we're going to grow the market. And we're going to find a way to get more patients in that top of funnel and leverage the work of consumer tech and big pharma to make sure middle of funnel, we maximize, if you know you suffocate. If you've got a prescription, we want to make it seamless and frictionless to start that therapy, and most importantly, stay on that therapy, not just at day 90, but day 365, year 2, our 3 year 4 for life.

Aaron Bloomer

I would also add the work that we're doing and some of the things Mick talked about related to myAir. And so how do we, beyond just grow the existing installed base, but how do we make sure that we're ensuring that all of our -- the millions of patients that use our device every single night to help them sleep are getting the appropriate new masks tubs, tubes throughout the year. And some of these grades that we're starting to implement with myAir, we think can have a meaningful impact on our resupply program over time.

Operator

Our next question comes from the line of Davin Thillainathan with Goldman Sachs.

Davinthra Thillainathan

A question on your mask franchise. I guess I'm trying to understand the success of the investment into your fabric range. Clearly, you've launched another product there, which I believe is in the full face category, which is an attractive size. Could you give us a sense of how that range is going, please, whether a mix of your mask sales or even just on your market share, just to give us a sense of the momentum there?

Michael Farrell

Yes. Davin, it's a great question. And I got to tell you, having watched 7 years of the development of the fabrics technology and experimentation of our primarily Singapore-based fabrics engineering fabrics design team to brought those first masks to market like the AirTouch N30i and now to have the AirTouch F40 in play. We've now got real-world data to show a 6% increase in adherence for those first launched now 12, 18 months in market marks. And so this isn't just about look sexy. It looks great, feels comfortable that first fit, which it does. And the HMEs love it, and the patients love it. They say, "I'm choosing rest mat, I'm choosing the fabric. That's great because first time fit does map. First time failure is a big issue for many of our competitors. They have these masks that try to look like or they just don't fit the patient rejects them immediately.

But ours, they don't only like them immediately. Day 90, we're getting 6% higher adherence. And we'll produce more and more real-world evidence to show, I think that will be sustainable over time. I think the delta of a fabric mass versus a silicone equivalent will play out in all the areas. As you said, F40, it's an or nasal breather. It's up 30% of people breathe through their mouth at night. They need the pneumatic stent to cover both the oral and nasal parts of the body. And what's great about that, Yes, it's a high-margin, high-growth area. But more important than that, if we can get fabric, which we can now to form a feel that moves with you all night. If you heard my prep marks, I talked about the contour and moving. Every person moves and tosses and turns at night unconsciously. So the body doesn't get cirrhosis and issues with muscles and so on. That movement can hurt. If your mask isn't good, it can come off and just serve the bed partner and not give therapy to you. This math feels comfortable to start moves with you all night and drives higher adherence on the former fabric mask.

So early days with AirTouch F40, there'll be more fabric masks to come with 2 or 3 in, and I just love the fact that ResMed is again doing a game-changing technology with IP, but more importantly, manufacturing capability that others can't touch and scale and distribution that others can't touch. Excited about AirTouch F40 early days, launched this week but we'll give you updates as we go throughout the fiscal year on the whole range of fabric masks.

Operator

Our next question comes from the line of Dan Hurren with MST.

Dan Hurren

I was wondering about the U.S. manufacturing initiative just in terms of capacity and unit cost versus the legacy capacity, what sort of drag will be on gross margin during ramp-up and then at scale?

Michael Farrell

Yes, Dan, it's a great question. And what we look at and how we're looking at this is from all our supply chain work that we did during COVID, during the semiconductor crisis, the supply chain crisis. found out -- I know this is a known event we talked about it publicly in 2022. We rented 777 jet from Air Canada, we could get ventilators over when FedEx and all those were shutting down, and we just need to get product to our biggest volume market. And it was devices, masks and vents. And so we never want to be in a position like that. No matter what happens with fortifies supply chain. Our biggest volume market is the U.S., and we need to have local manufacturing there. So we made that plans and we've been putting those in place, and we now have aligned to make AirSense 11 in Atlanta, Georgia. We have masks and cushion accessories and motors that we can make in Calabasas, and we're expanding our distribution in Indiana, so we can get the stuff to people within 48 hours around North America. And so these investments are good.

Aaron talked in prepared remarks, he can make some comments now around the investments of those and how we account for those in our books. But I can tell you, I look at the delivered landed provided cost and we want to make it equal. We've got a lot of robotics. We've got a lot of automation and we can get parts and pieces in and make product in Atlanta so that it's delivered to a customer in the U.S. at the same delivered cost as something that we're transporting by or freight or sea freight on our volume manufacturing in Singapore. So that's what we're aiming for. The supply chain team has got the numbers we're ramping up and we're ready. It also provides us incredible flexibility and capability, not just with supply chain perturbations or tariff perturbations or whatever might happen in the world ResMed will be able to make sure everyone in 140 countries get the product they need at the right time and at the right cost so that we can keep our P&L and balance sheet together as well. Aaron, what did I miss on that?

Aaron Bloomer

You hit the key thing, which is that over time, we expect to be able to deliver a similar landed cost in the U.S. than what we would get importing. Obviously, there's start-up costs. We talk about that, for example, with the Indiana distribution center, and we'll experience some of those start-up costs in Q2 and Q3. Under utilization, right, as you continue to expand. But it's a great problem to have. We have an ever-growing increased demand for our products globally, and we have the opportunity to be able to bring manufacturing closer to where the customer is, and that's what we're looking to do.

Operator

And we are now at the 60-minute mark, so I will turn the call back to Mick Farrell for closing remarks.

Michael Farrell

Thank you, Shamali, and thank you to all of our stakeholders for joining us on the call today, particularly our long-term shareholders. On behalf of approximately 11,000 ResMedians serving people in 144 countries worldwide. I'm pleased we're able to deliver another strong quarter here in Q1 and we'll continue to build value for all of our stakeholders. We look forward to speaking with many of you over the coming days and weeks in more detail, and I'll turn the call back to Salli to close this out.

Sallilyn Schwartz

Great. Thank you, Mick. I'll echo Mick, thank you. We appreciate your time and interest. If you have any additional questions, please don't hesitate to reach out directly to investorrelations@resmed.com. Shamali, you may now close the call.

Operator

Thank you. And this concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.