Good day everyone, and welcome to the Fisher & Paykel Healthcare Conference Call. Today's call is being recorded. Now at this time, I'd like to turn the call over to Marcus Driller. Please go ahead. Thanks, April. Well, good morning everyone, and welcome to Fisher & Paykel Healthcare's Results Conference Call for the first half of the 2022 financial year. On the call with me today are Lewis Gradon, our Managing Director and Chief Executive Officer, Lyndal York, Chief Financial Officer, Paul Shearer, Senior VP of Sales and Marketing, and Andrew Somervell, our VP of Products and Technology. Lewis and Lyndal will first provide an overview of the results, and then we can open up to your questions for the team. We'll be discussing our results for the six months ended 30 September 2021. Earlier today, we issued our 2022 interim report, including financial statements and commentary to the NZX and ASX. These documents can be accessed on the investor section of our website at fphcare.com. With that, I'll pass over to Lewis. Okay, thanks, Marcus, and welcome to the call everyone. Today, I'm going to be referring to the investor presentation pack that we released to the NZX and the ASX this morning. Before we dive into those details of the results, I would like to acknowledge a few things and thank some important people. This pandemic continues to be a challenge across the globe. Earlier this month, the world surpassed 250 million cases of COVID-19. While some countries appear to be well-placed in their recovery at present, others are experiencing new surges. I'd firstly like to extend my thanks to our customers and the healthcare workers around the world who have worked tirelessly on this COVID-19 response for almost two years now. Their courage and their perseverance is just inspiring. I'm also grateful to our suppliers who are working so hard to provide us with the raw materials and the components in what are really some very challenging times. I'd also like to thank the people at Fisher & Paykel Healthcare. We especially acknowledge the role of our partners and families in supporting us and supporting Fisher & Paykel Healthcare. This remains a demanding period for our company, and it requires relentless commitment. Our people in many locations are still navigating through lockdowns, extended periods of remote work, and challenging environments, but they continue to go above and beyond. Thanks to their efforts, we have achieved another strong result. Now I'd like to turn to page three of the investor pack. Firstly, the safety and well-being of our people continues to be paramount for us. To this end, we provided convenient access to vaccinations for everyone at our manufacturing sites in New Zealand and Mexico. This included on-site vaccinations for more than 4,000 New Zealand employees and their family members. We launched the Vitera mask for non-invasive inhalation in the U.S. and the Evora Full mask for obstructive sleep apnea in New Zealand and Australia. We welcome Dr. Lisa McIntyre to the board. She brings with her a wealth of experience in healthcare and technology, and Lisa fills the spot left by our former Board Chair, Tony Carter, who retired last year. We are making good progress on our third manufacturing facility in Mexico, and earthworks are underway on our fifth building site in Auckland. Once that fifth building site is complete, our current site here in Auckland will be full, so we have initiated the search for a second R&D and manufacturing campus in New Zealand to accommodate our future growth. We expanded our direct sales footprint into several new locations. We now have a physical presence in more than 50 countries. Move now to our financials, page four. First half operating revenue was NZD 900 million. This is a 1% decline from the first half in 2021, and it's a 2% increase in constant currency. Net profit after tax was NZD 221.8 million. That's down 2% on the first half in 2021 and down 1% in constant currency. Again, our result was largely driven by our hospital product group. That accounted for 74% of revenue, and we'll look at that in more detail shortly through the pack. Last year was truly an extraordinary one amid COVID-19, and intense demand for our Airvo Optiflow systems fueled the growth in hospital hardware sales. We said at our annual shareholders meeting in August that sales were still being impacted by COVID-19 related hospitalizations, and we saw this continue in the last two months of the half year as North America saw a surge in COVID-19 hospitalizations. In other key Northern Hemisphere markets, hospitalization rates remained below their prior peaks, and demand for our hospital products tracked largely in line with that. Let's go to page five, and we'll look at the hospital products. This is divided into hardware and consumables. It includes our products and systems for invasive and non-invasive inhalation, nasal high flow, and surgery. Hardware continued to account for a large proportion of revenue compared to the pre-pandemic levels, making up 33% of hospital revenue for this first half. Moving now to page six. Hospital operating revenue for the first half was NZD 670.2 million, down 2% year-on-year, but up 1% in constant currency. In constant currency, hospital hardware declined 10%, offset by 8% growth in the consumables. New applications consumables was a key growth driver, up 24% in constant currency over the first half of 2021. This category includes non-invasive ventilation, Optiflow nasal high flow therapy, and surgical, and it accounted for 72% of our hospital consumables revenue, reflecting that ongoing shift in clinical practice towards nasal high flow therapy. The treatment of COVID-19 patients and a growing number of generalized clinical practice guidelines have continued to support this demand for our Optiflow and Airvo systems. Move on now to our home care product group on page seven. This category includes products used in the treatment of obstructive sleep apnea and chronic obstructive pulmonary disease, or COPD, as well as other chronic respiratory conditions. In terms of revenue composition, 18% came from hardware and the remaining 82% from consumables. On to page eight now. Operating revenue was NZD 226.9 million, up 0.3% on the first half of 2021, and up 3% in constant currency. We expanded our product range with the launch of the Evora Full mask for OSA in Australia and New Zealand, and this has been supported by positive trial results, and we're looking forward to launching that in more markets once we receive clearances and get manufacturing up to speed. Overall, we were pleased to see the 3% constant currency growth in our OSA masks. Our Vitera and Evora masks are performing pretty well. I'm now going to hand over to our CFO, Lyndal York, for a more detailed look at the financials. Lyndal. Thanks, Lewis, and good morning, everyone. On page nine, gross margin increased by 135 basis points from the same period last year to 63.1%, or up 53 basis points in constant currency. Because of challenges with global supply chains, we have been and continue to use air freight to bring in raw materials and deliver product to customers quickly. The cost of freight continued to be elevated. The rates per cubic meter for freight remained stable during the half, in line with the second half of last year, but were down from the highs we saw in the first half last year. This increased rate cost impacted our constant currency gross margin by approximately 190 basis points for the half compared to pre-COVID-19 rates. We anticipate freight costs will continue at elevated levels for the next 18-24 months, and that air freight will remain a higher proportion of total freight volume than it was before COVID-19. At the end of September, rates for air freight started increasing. At current rates, the elevated freight costs would impact our constant currency gross margin in the second half by approximately 400 basis points compared to pre-COVID-19 rates and our long-term target of 65%. This would give a full year impact of approximately 300 basis points. Excluding additional freight costs, we expect constant currency gross margin for the second half to be largely in line with the first half of this year. Moving on to page 10. Total operating expenses grew 5% or 8% in constant currency. Operating margin remained above our long-term target at 33.6%. R&D expenses grew 17% to NZD 75.7 million, reflecting continued growth and timing of R&D projects. R&D expenses were 8% of revenue for the half. We have estimated 65% of our R&D spend is eligible for the 15% R&D tax credit this half, similar to last year. SG&A increased 1% to NZD 189.6 million for the half or a 5% increase in constant currency. Travel and sales event costs were up a little from the half last year, but only a third of what would have normally been expected with no pandemic. Activity in many of our locations is increasing, and we anticipate travel and sales event costs for the full year to be about half of the normal expected level. For the full year, excluding the donation to the Fisher & Paykel Healthcare Foundation last year of NZD 20 million, we expect to grow our constant currency operating expenses by around 9%. A normal level of travel and sales event costs in the second half would add a further percentage point of growth to operating expenses for the full year. Moving to page 11. Operating cash flow this half was NZD 127.5 million. The final tax installments for last year's profit were paid this half, with total tax payments of NZD 188 million compared to NZD 81 million in the same period last year. Our working capital increased as inventory grew as usual in the first half, and to ensure that we can meet any surge demand from our customers. Capital expenditure, which includes purchases of intangible assets, was NZD 81 million for the half. We expect capital expenditure in the second half to be around NZD 110 million. Our third building in Mexico is well underway and we have commenced earthworks in preparation for our fifth building in New Zealand. As Lewis mentioned, once that building is complete, we will be at maximum capacity here on our Auckland campus. We have always carried additional manufacturing capacity so that we can scale up quickly in response to need. This served us well in the early months of the pandemic. Maintaining this ability takes space and buildings. To accommodate for our future growth, we have started a search for another New Zealand property to locate a second campus for R&D and manufacturing. We are planning to add an additional three manufacturing facilities outside New Zealand over the next five years, with the first being the third building in Mexico, which is in progress. We expect the investment in land and buildings to be approximately NZD 700 million over the next five years. The balance sheet remains strong. Debtor days were in line with the prior year at 41 days. Trade and other payables includes the NZD 20 million donation to the foundation committed to last year that will be paid during the second half of this year. Tax payable decreased NZD 102 million as the final tax installments, which reflect our estimated FY 2021 taxable income, were paid this half. Net derivative financial instruments assets reduced by NZD 43 million this period as the New Zealand dollar depreciated. Net cash at 30th of September 2021 was NZD 216 million, and our gearing ratio was -16.6%. Interest-bearing debt was NZD 72 million, with 88% of it being non-current. At 30th of September 2021, we had available liquidity of approximately NZD 475 million between undrawn facilities and cash and investments. Turning now to page 12. We have declared an interim dividend of NZD 0.17 per share. This represents a 6% increase on the interim dividend declared last year and is payable on 15th of December. This also maintains sufficient liquidity for the land and building purchases planned over the next five years, supporting the long-term growth of our business. Looking now at foreign currency on page 13. Foreign currency movements negatively impacted our profit after tax by NZD 2 million compared to the same period last year, primarily due to the New Zealand dollar being stronger on average through the period. This includes the results of our hedging program, which contributed a gain of NZD 15 million after tax for the period. At end of October rates, we would have an after-tax gain from hedging of approximately NZD 25 million in the second half. The net impact on profit from movements in foreign currency will depend on revenue for the period and the currency mix of that revenue. Now, it's back over to you, Lewis. Okay. Thanks, Lyndal. Now we'll move on to page 15 and cover off our forward-looking observations for the second half. Given the ongoing uncertainty around the COVID-19 vaccination rates globally and the efficacy of the vaccines over time and impacts on hospitalization surges, we can't give quantitative guidance for the full year. We do expect hospital consumable sales will continue to be impacted by a range of factors, including the rate of hospitalizations due to COVID-19 and the severity of the Northern Hemisphere's winter flu season, and the ability of hospitals to return to their pre-pandemic rates for surgeries. Our second half last year corresponded to peak COVID-19 hospitalization in North America and in much of Europe. In the absence of comparable surges, we would expect consumables revenue for the second half this year would grow sequentially from the first half this year, but be lower than last year's second half. We expect our hospital hardware sales would continue to respond to any COVID-19 hospitalization surges through the second half. However, we think the dynamics now are different. Many countries have already boosted their hospital treatment capacity, so we don't expect hospital hardware revenue to remain at the same elevated levels for the rest of the year. Now, for home care, growth in OSA masks is dependent on new patient diagnoses, and they continue to be impacted by COVID-19 and now the supply of treatment hardware. Currently, we're expecting new patient diagnoses to be at or above comparable FY 2021 rates for the second half of this year. There continues to be a lot of uncertainty with this pandemic, especially heading into winter in the Northern Hemisphere. We're currently seeing some countries returning to different forms of lockdown. It could be a long journey, yet, with COVID-19 to get to a point where business and life are more predictable. Whatever happens, we firmly believe that doing what is best for patients will also deliver the best outcomes for our business. With that, we're happy now to go to questions. Thanks, Lewis. We can now take the questions. Before we begin that, though, can I please ask everybody to limit your questions to two. This is just to ensure that everybody has an opportunity to participate. If you do have further questions, you're welcome to rejoin the queue, and we can do our best to cover off everything within the hour. April, over to you just to open up the question line. Thank you. If you would like to ask a question, simply press the star key followed by the digit one on your telephone keypad. Also, if you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, press star one at this time, and we'll pause for just a moment. Thank you, April. The first question comes from the line of Lyanne Harrison at Bank of America. Please go ahead, Lyanne. Good morning, all, and thank you for taking my questions. First of all, can I start with installed base in terms of, you know, how much do you think the hospital installed base for nasal high flow has increased because of COVID? My second question is, you know, what are you experiencing with the use of the nasal high flow devices as, you know, countries go through COVID waves in terms of when cases are lower? Do you see that clinical practices change, and some of those devices are used outside the ICU? Thank you. Yeah, thanks, Lyanne. Had some pretty complex questions there. Look, we don't actually disclose our installed base, and it's a little more complicated for us in that with our humidification systems, an installed base for us includes invasive ventilators, non-invasive ventilators and other systems that can deliver nasal high flow. So it's part of our installed base. Now, in turn, the second question was, what are you seeing in use as clinical practice has changed outside ICU? Look, we think there are some pretty good signs for a change in clinical practice, other than COVID, and that would include hospitals where they've been well penetrated with nasal high flow prior to COVID, and they've bought some hardware during COVID to cope with COVID. We see good anecdotal evidence that they continue using that hardware, as COVID abates. The other one we see is a much lower hurdle to continuing to use nasal high flow for acute hypoxemic respiratory failure, and that kind of makes sense. That can look a little bit similar to why we've been using nasal high flow for COVID, so certainly anecdotal evidence of that. I suppose the other pointer would be, if you look at Europe, for our first half, hospitalization rates due to COVID in Europe were largely declining for our first half, and hospital sales of hospital hardware continued at rates still well above pre-COVID levels. We think that's another good sign. Of course, the other good sign would be these clinical practice guidelines. There's been three of them published over the last twelve months, both in Europe and in the United States, pointing at usages for nasal high flow other than COVID. I think that's pretty much the summary. Um- To your question. Yeah. Thank you, sir. I missed the first part around the installed base, 'cause my line dropped out a little bit. You mentioned obviously invasive, non-invasive and humidifiers. You know, if I think about that as a group, did you quantify how much you think that's actually increased before COVID and to where it is now? Yeah, no, we haven't done that, Lyanne. Okay. Thank you. Thanks, Lyanne. Next question comes from David Low at JP Morgan. Thanks. Thank you. Can I just follow up on that last question from Lyanne on and hardware? You're saying that in Europe, despite the fact COVID cases went down, hardware sales were well above pre-COVID, yet in the guidance commentary or the outlook commentary, you've said that hardware sales are gonna go down. How do we sort of reconcile those two? It sounds like hardware sales could remain stronger post-COVID. The way to reconcile that is reducing, but still way above pre-COVID, but with a reducing trend. Okay. No, that's just trying to make sure I understand that one. I mean, we've got hardware sales dropping off a cliff on the back of the expectations that everyone got enough hardware and that'll last a while, so it's an interesting and more positive trend. Otherwise, maybe if I just jump into the sort of topic of the half, this RECOVERY-RS trial and the results that came out from it, I think everybody's probably talked through it a lot, but just if I could get you to comment on any changes in buying behavior in use of nasal high flow therapy, be it in the U.K. or be it in other markets, please. Yeah. Look, the short version of that, David, would be, I would say absolutely no impact in North America, Europe, Australia, maybe some impact in the U.K., but if there is, it's around the edges. All right. That was quick and easy. Thanks. Well, that is the short version. I mean, the longer version would be how long it takes to change clinical practice when you have robust clinical practice guidelines with 50, 60, 80 randomized controlled trials. We know that takes a very long time. I think expecting that particular study to have an immediate impact is maybe a bit- Stretch. ...optimistic. No, look, I. Thanks Thanks for the more detailed answer. I mean, I think we were cautious that perhaps during the times of COVID, things can change a little bit more quickly. That, that's really quite reassuring. Mm. I will get back in next year. Thanks very much. Thanks, David. Next question comes from Gretel Janu at Credit Suisse. Go ahead, Gretel. Thanks very much. Good morning. I just wanted to touch on the level of stocking in the hospitals at the end of the half. As the Delta wave was winding down through September, did you see more hospitals increase the level of consumables inventory in anticipation for future waves? I guess, yeah, just trying to work out how much is actually in the hospitals at this point, if there's not another further COVID surge in this half. Yeah. That's always a difficult one, and we're not able to quantify the value or the volume of hospital stock. At present, certainly in North America for August and September, we expect that there probably is some overstocking as a result of that surge in North America. We think in Europe and elsewhere, probably not so much. Okay, thanks. That's very helpful. Secondly, I guess, what are we seeing with respiratory diseases returning after being pretty nonexistent in the last 12 months? Are we seeing normal flu rates, RSV returning or it's still lagging? We see a little bit of evidence of RSV picking up in the neonatal pediatric population in our numbers. But other than that, there's nothing that we can discern yet. At the moment, I don't know how we'd tease that out from COVID and normal surgeries and things like that. I don't think we'd be able to do that going forward either. What's the impact of actual other flu? Understood. Thank you very much. Thanks, Gretel. Our next question comes from John Deakin-Bell at Citigroup. Thank you. I'm just interested just with that, the increase in the manufacturing capacity over the next five years. Can you just give us a sense of the scale of that versus the current installed capacity? And you know, whether it's hardware, whether it's consumables. I'm assuming it's mostly hospital. Just a little more color. Sure. Just to put it in context, if you think of one of our buildings as a manufacturing unit, I mean, right now we have six, and this plan gives us another four buildings over the next five to six-year period, to use that context. It is spread across hospital and home care products. In terms of manufacturing real estate, square footage, that's, it's largely consumable for us. The hardware has a much smaller footprint. Thanks, Lewis. Secondly, just some clarification for me, if you don't mind, on the OSA business. Obviously, Philips out of the market. ResMed can sell everything they can make in terms of devices. You appear to have decided not to want to take advantage of that disruption in the market and increase market share. Can you just give us a little color on the thinking behind that? Well, I think you're well aware of our OSA strategy over the last few years, and with these recent events, really, we haven't had a lot of choice. In that for us to rapidly scale up any kind of CPAP manufacturing relies on raw materials, and it's been an absolute struggle to maintain what we were already planning. That's been hard enough. We really haven't had any choice around that decision, mate. Okay. Thanks very much. Thanks, John. Next question's coming from the line of Adrian Allbon at Jarden. Go ahead, Adrian. Oh, good morning, Lewis and team. Just reflecting on some of the comments that sort of Lewis was making about the freight rates remaining at elevated levels for the next sort of 12-18 months or so. Is the business now starting to sort of think about sort of putting price increases through on some of the sales volume? Or is it still a wait and see with the COVID environment? Thanks, Adrian. We're still of the view that freight is a bit of a transitory impact to our business. While we have that view, we're not investigating really our options to mitigate that at this stage. If we get to a point where we believe it's more structural or a more permanent shift to the business, we'll then investigate our options. Okay, understood. Maybe a question for Lewis. I was wondering if you could give us a sense of, like, as we sort of look at some reopening sort of situations, particularly in your bigger markets, like, how is the sales force shaping in terms of access to hospital and what sort of priorities have they got in terms of education materials and the like? Yeah. We've been talking about that a lot over the last month or two. Look, I think the summary there is, you've got a bit of everything in most countries. The summary would be access is improving, but it's still not back to normal. Then the other comment that comes through, actually, from most of our salespeople is don't forget, our customers want to see us, and they're trying to make it work. It's the COVID limitations. Do you wanna- Yeah, I can add to that a little bit, Paul here, Adrian. I think, you know, basically hospitals requiring people to be fully vaccinated, which, you know, generally most of our sales force around the world is. We're getting access to hospitals. Sometimes we're not getting as much access as we'd like to the patient care floors. We might be getting access to the hospital itself, but not where the patients are being treated. You know, access is improving, you know, generally all the time. The guys are hard at it, obviously just making sure that with the influx of hardware that's been installed around the world, that, you know, we're making sure that we're educating, you know, our customers. Yeah, the final part of the question, Adrian, is really the educational materials for us now are those clinical practice guidelines. Yeah. That's the primary tool. Yeah. Okay. I guess, as the little bit of access that you've had over the last little while and some sort of, I guess, just more time, is that partly informing, I guess, the tighter frame you're given around the sort of second half consumables expectation? Or is there some other sort of level of detail that you can share with us? It's, we kind of haven't really got that detail really building up our second half commentary. You know, we're assuming the reps will be busy. The commentary's in the absence of major surges that prevent access. That's kind of built into the second half commentary. I think that's everything I can give you. Yeah. Okay. No, that's good. Thank you. Thanks. Thanks, Adrian. Next question comes from Stephen Ridgewell at Craigs Investment Partners. Yeah, good morning. Just firstly, interested in any comments you can make on kind of the demand patterns you've been seeing in the U.S. and the EU recently. I mean, there's been a suggestion from one of your competitors that device orders have been placed relatively early this year in North America compared to last year. And therefore, you know, you might have seen a bit of a pull forward of demand the September quarter from December quarter. And also some suggestions therefore that, you know, those device orders could fall reasonably sharp in that December quarter. Is this sort of consistent with your thinking, or what you're seeing? Our thinking would be a little bit different. The way we're thinking of it is if you look at hospitalization in the U.S. in August and September, you see that massive increase and then decrease. Our hardware and consumables have kind of tracked along with that same shape, just like they have been doing everywhere all through the pandemic. Yeah. Historically, that appears to have led to an overstocking period, which is totally understandable when you've got demand increasing and then decreasing that rapidly. We're sort of more than halfway expecting the same thing to occur here in the U.S. anyway. Then I'll just reiterate the other comment. We haven't really seen that in Europe this half to the same extent. Okay. That's helpful. Thank you. Just secondly, into a broader brush question. Can you give us a sense of the extent to which the company thinks sort of pre-COVID demand for hospital consumables has you know been impacted or potentially starting to recover this year? You know, you sort of you're tracking around about 10 million units a year for those consumables pre-COVID. Just interested if you sort of started to see surgery volumes recover you know in the period just reported if you've got any insight on that. I'm not sure where you're going with that. You know, consumables are up 8% sequentially. If you go back to pre-COVID, FY 2020, I don't know what the number is, but it's probably 70%, 80%, 90% or something. Sorry, Lewis. I was trying to get a sense of how you think kind of non-COVID demand has been tracking in hospitals, right? In terms of- Oh. ....you know, surgery volumes and those kinds of things that were, you know, the bedrock of the hospital business pre-COVID. What trends are you hearing there? Sorry, mate, I misunderstood the question. Well, you know, you know, I think you know that when we sell it, we don't know what it's going to be used for. Probably I can say that, again, if you look at Europe in our first half, you've got Europe as a whole declining hospitalizations. When we look at our consumables, you know, they remain above pre-COVID. For pre-COVID, I'm thinking maybe FY 2020, they're still elevated above pre-COVID levels. That's probably the best pointer I think we can give you. Cool. Thank you. Thanks, Stephen. Next questions come from Marcus Curley at UBS. Good morning. Lewis, I just wondered, you know, if you could provide any comments, you know, around, you know, the Pfizer antiviral drug. Do you? You know, have you looked at it, you know, in terms of the clinical trials, and, you know, do you think that, you know, is what they suggest is a game changer in terms of COVID treatment next year? Hey, Marcus, the short and long answer there is no, we haven't. Obviously, it's good news for the planet. No, we haven't really. In terms of, you know, impact to our business, there's, you know, there's a lot of life yet to go and a lot of runway yet to go after COVID, which is kind of why we haven't gone that route. I suppose the second part to that is, you know, when you think about budgeting for next year, let's just forget about the second half of this year. You know, when you start thinking about next year, you know, what do you pencil in for, you know, hospital equipment sales and traditional consumables? You know, is the starting point, you know, pre-COVID or, you know, are the trends you're seeing at the moment for the, let's say the, you know, the non-new consumables part of the business higher than that? Yeah, that's a super question, Marcus. Obviously we haven't got there yet. Now thinking out loud, we probably would take pre-COVID as our benchmark. I would say for invasive, and we would probably expect to see some growth over pre-COVID. 'Cause we've got some pretty significant geographical expansion here as well. Then for new apps, we'd probably be looking at, you know, what's happened in the second half. We'd be wondering how much of that was COVID, and I guess we'd be working off that. Well, probably can't give you any more color till we get there. Okay. Thank you. Yeah. Thanks, Marcus. Next questions come from Tom Deacon at Macquarie. Morning, guys. Thanks for taking the questions. Just first one from me on geographic splits. You know, the four-month update you gave us a sense of what the North America and Europe hardware sales and consumables sales were doing relative to the rest of the world. Could you provide us any detail with respect to those numbers for the half? Yeah. Again, there's pretty significant geographical expansion going on. It's been going on all through this COVID period, and this half was no different. For the half, somewhere around 70% of hardware was outside North America and Europe. Then for consumables, it's a smaller installed base, however you can count it. Consumables quite a bit smaller than that. Okay. That's helpful. Second question from me, well, it's just around the trends that you might have seen in myAirvo within home care. Have you guys still seen, you know, a bit of uplift in device sales for that particular product? Well, actually, no. We've seen the opposite. That actually has declined and in this half compared to the first half last year. What we are thinking there is that during the last 12 months, we have seen what we've classified as home care dealers purchasing hardware and potentially renting or placing that in hospitals, and we've classified it as myAirvo. They're either placing it in hospitals or putting it in the home for COVID patients at home. That whole portion of the business has just got a whole lot more murky for us. Interesting. Thanks very much for the color, Lewis. Appreciate it. Okay. No worries. Next question comes from Andrew Goodsall at MST. Thanks very much for taking my question. We're just interested in the home care business outside the U.S. Obviously, that's the strength of your sort of hardware sale or CPAP sales have been perhaps stronger in Europe and elsewhere. Has that continued since the recall, or how has that played out? If you just looked at our CPAP business, you'd say it's really strong growth, but it's off a very small base. In the context of home care and the context of our business, you'd say it's not material. Okay. Actually, I think Dan's gonna jump on the line for my second one, so I'll leave that one. Okay. Thanks, Andrew. Andrew, it looks like Dan's jumped off, so you might wanna ask your second one if you want to now. All right. All right. He can come back. He said he can come in the queue, so I'll leave him. I'll leave. Okay. All right. Next question comes from Matt Montgomerie at Forsyth Barr. Yeah, hi guys. Maybe just firstly on the CapEx, so you've set aside sort of NZD 700 million for land and buildings over the next five years and guided to three facilities outside of New Zealand. Just wondering how we should think about this, and if you're expecting to fill these sort of over the medium term, or is it partly to build redundancy in the portfolio? It's normal, what we normally do. We normally have some redundancy in the portfolio, if you like. We normally have additional capacity, and that's an absolute requirement. You've seen why with this pandemic, and then also with the kind of growth rates we aspire to, we try and keep our available facilities ahead of, you know, current revenue. We're just seeing it as staying on normal, actually. Great. Maybe just secondly, just wondering if you could sort of provide any insight into a view or indication on the consumables turn rate in the half or any sort of color around this. Just trying to get an indication of the utilization of the installed base. Yeah. We've totally abandoned consumables turns or any measure like that for now. It's just one, too volatile; two, you have stocking and de-stocking playing into it; and then three, with more and more ventilators having nasal high flow modes, having a base to say what your turn rate is just gets so complex. Even going back several years ago, you know, I just can't emphasize enough. This was a number we kind of looked at on an annual basis or a six-monthly basis. It's not something we looked at, you know, on a monthly or quarterly, actually not even six-monthly basis. I hope that answers your question. Thanks, Matt. Next questions come from John Copley at Evans & Partners. Good morning. Thank you for taking the question. Just wanted to circle back to CapEx, if I may. It seems like that's a bit of an uptick. Could you give us any indication as to whether, you know, this has sort of been driven by renewed expectations or changed expectations around future demand? Second of all, just clarifying a comment made at the full year in August, or sorry, earlier in the year, which was around 65% of your CapEx being attributable to property plant equipment. Is that the way we can think of it going forward as well? Thank you. Thanks, John. The CapEx isn't necessarily a tick up. It's, as Lewis said, how we always operate and have always operated, ensuring that we've got the ability to ramp up production as needed. It's really a continuation of that. We did say about 65%. I think that was for more operational plant and equipment, not property plant and equipment. We're tracking around about 60-odd percent there, so it's not materially different. Yeah. Maybe the other comment is that the only thing in there that you might call a tick up is we've accommodated some land in New Zealand for a campus, a second campus in New Zealand, and we'd want to get you know at least a 20-year growth trajectory out of that land. If you're gonna call anything a tick up, that would be it. Correct. Sort of take that out and normalize that over the next 20 years. Yeah. Apart from the land. We don't see that as revised. Yeah. If you stick to the plan over 20 years, it's completely normal. Yes. Yeah. Yeah. Understood. Thank you. That's all from me. Thanks, John. Next questions come from Stephen Ridgewell at Craigs. Thanks, Marcus. Lewis, earlier in the call, you talked about some challenges in the supply chain, which obviously a lot of companies were feeling in the last few months. I guess, do you feel F&P can't fully capture the demand increase that typically we're seeing in the U.S. in August and September? Just interested if you did suffer any supply chain disruptions or you feel that the company sort of weathered that pretty well. It's always challenging. It's been challenging since the beginning of COVID for us. It's challenging getting product to customers. It's been challenging getting raw materials in. We've been able to manage it, and the way I would think of it is, what it costs us to manage it. We've got an additional cost managing it. To put a context on it, you know, in that part of the operation pre-COVID, that's two or three people maybe working on raw materials issues, 'cause not like you ever have none, and freighting options. Whereas now that would probably be over 20 people working on those kinds of issues on an ongoing basis. Carry on. Um- Thanks, Lewis. In terms of meeting demand, we were able to meet demand during that period in North America, Stephen. Oh, sorry. I should have led with that. Yeah, thanks. Thanks, Paul. Just more broadly, I mean, given what you're saying, significant increase in demand, you know, for the company's products outside the traditional core markets in the last 18 months or so, can you just give us a bit of a sense of the company's kind of headcount growth to support, you know, further expansion into emerging markets that you've put in place in the last say 18 months? Yeah, sure, mate. Since the beginning of last year, we've added. On FY 2021, we added about 100 salespeople around the world. FY 2022, we're adding about 40 salespeople around the world, so that's plus 20%. Of that 140 additional salespeople, 100 of them are outside North America and Europe. We've added- Great. ...people into 11 countries over that timeframe. That's interesting. Thank you. Thanks. Thanks, Stephen. Next questions come from Marcus Curley at UBS. Lewis, can you just talk a little bit to the lift in the R&D spend? You know, is anything you know sort of substantial you know from a project perspective in that or is it more related to just people? Both. It's largely related to people, that's the headcount increasing. The way we're thinking of it is we've had a substantial lift in revenue due to COVID. We're assuming we're gonna be successful in getting that to stick over time, and that means we want to bring our R&D future forward-looking product pipeline forward, and that's what we're doing. In that space, you do that by adding people. Marcus, also, R&D can often be quite lumpy. We're sort of looking at just one six-month period compared to the same six-month period last year is to find a decent trend on. We're sort of comfortable with where it is over an average period. Yeah. You wouldn't call out, you know, significant incremental cost with regard to the home high flow therapy clinical trials in different countries? Not specific. Not significant, but I mean, that is something we have boosted over the last two years. Yeah, that's part of the acceleration. Yeah. The vast bulk of the cost is people. Yeah. Yeah. Okay. Secondly, you know, yeah, Philips has obviously had some incremental problems with their foam. You know, it does look like, you know, your second rounds of testing, you know, on the current foam used, you know, for their current platform, you know, potentially also has issues. You know, can you talk a little bit about what you have done, you know, in response to their issues, you know, to provide, you know, I suppose some perspective in terms of where you're positioned? Yeah, absolutely. I think it's a pretty obvious response. When it first surfaced, we checked any foams that we had in any of our products, and we checked their composition, and we checked all of the required biocompatibility and toxicological testing. I don't have to say that's all in place. All the required testing's done and, as it happens, we don't utilize the second foam at all that they've used. Yeah, but you all make your foam? Yeah. I don't know exactly what it is, but I do know we don't use it. That testing was done by independent parties, Lewis? Always, yeah. Okay. Thank you. Thanks, Marcus. Next questions come from Chris Cooper at Goldman Sachs. Morning, and thank you very much. Just on the geographical split again, if you don't mind. You were helpful enough in the full month trading update to give a bit more color on the segment performance by region, some segregation between hardware and consumables. Could I ask you just to kind of roll that forward for the final two months of the period and just give us a sense of, you know, I'm particularly interested in U.S. and Europe. You know, overall, we've seen sort of low double-digit declines in those regions. How does that break down between hardware and consumables, please? Thank you. Well, look, we don't wanna get into two months by region, and I don't have it in front of me either as it happens. I think the pertinent things in there is that across all regions, new apps is up in all regions for the half. I think that's important. And I think it's important that, for you to know that a large chunk, I said around 70% of hardware has gone outside North America and Europe. And then you've got a smaller base outside North America and Europe. So, you know, don't plug in 70% of consumables or anything like that. And then everywhere we're looking at, Sorry, when you say up for the half year, you're saying year-over-year or sequentially? Oh, I'm thinking year on year. Sequentially, our second half last year was a monster. Peak hospitalizations in North America and Europe. Secondly, just on SG&A, I mean, I think I understood correctly that you're guiding to a fairly steep sequential acceleration in the second half of fiscal 2022. Is that all travel and events, or is there something else that you're needing to invest in on the OpEx side as we go forward the next few months? Yeah, look, a lot of that is actually the people. As we've spoken about, the sales people that we've added around the globe and continuing to add around the globe is probably the primary impact there. We will see a bit of a tick up in terms of travel and events and sort of expect to be about 2/3 of normal travel and events in the second half. And then that's comparing to the second half last year where it really did start falling off a cliff and drying up with restrictions and controls. People as well as a bit of that travel and events. We're just trying to give you a little bit of a steer on the travel event. We've said, you know, about 1% of that is travel and events. Just to give you a steer, if we had a normal year's travel and events, you'd add another 1%. Yeah. Because, you know, that's yet to be seen, really, what we're able to do. Thanks, Chris. Next question comes from Dan Hurren at MST. Oh, thanks very much for squeezing me in. Look, I understand that your guidance on hospital consumable sales relies upon not getting into another, a surge of COVID patients like we did in the first half. We're already seeing elevated COVID hospitalizations in some parts of the U.S. and Eastern Europe now. I guess what I was asking is, in trading in second half to date, are your consumable sales still being pushed around by these movements in COVID? Yeah, they are. If you go, like, country to country, city to city, or region to region, it's still responsive to COVID surges, material COVID surges. But if you look at, like, Europe as a whole, and we tend to look at rest of world as a whole, it's kind of not that, not as volatile. How's that? Does that any help? Right. We're thinking about cons- Over to you, Dan. Do you have anything further? Sorry, I missed last bit of that answer. So sorry. In other words, the hospital consumable guidance we have some COVID surge in there because not another peak like we saw in the first half. That's kind of like a through the cycle kind of COVID number. In our second half, we've got some ups and some downs in there, and it's kind of that assumption we've made is, you know, it's kind of I would think it was nothing material, nothing like what you saw in Europe, in the second half. Nothing like what you saw in the U.S. in August, September. That's kinda what we're meaning. No rapid increases of large numbers of hospitalizations. Right. I guess just last question, and I think someone's touched on this a little bit already. What you're saying there is that your customer hospitals are back to normal. They're operating again. Sales force can get in there, detail the product, do all those sorts of things. The world is sufficiently back to normal to return to growth, normal growth. Yeah. Well, with that guidance kind of has it bubbling along much as it is now. Understood. Well, that comment really should say. Got it. Thanks very much. Thanks, Dan. I'm conscious that we're at the one-hour limit, but we do have one last question, which we'll take from Steve Wheen at Jarden. Please go ahead, Steve. Thanks, Marcus. Good morning, and thanks for taking my question. I just had a question around the Philips recall. Again, sorry. This time, it looks like given the FDA findings around the foam, that there's potential for the Trilogy ventilator to be recalled. There's certainly a question mark over on it that's yet to be resolved. I just wonder if there's opportunities for- High flow therapy as a potential alternative if there was a wide scale recall of that Trilogy vent. Well, you're talking about clinical practice there. I don't know how to answer the question, Steve. I mean, we certainly wouldn't be baking that into anything we're thinking about. The reason I raise it is, I've heard of DMEs that are starting to, you know, swap out trying to find alternatives, have used high flow as an alternative in the home, in anticipation that they don't wanna get too many more patients of their lists onto ventilators. So, that's the source of the question. But, you, I guess you're suggesting you haven't seen that yet. No, we couldn't call that out. All right. As a thing. No. Yep. Just lastly, semiconductors. Any comment on that? Any restrictions that's impacting your ability to sort of manufacture any of your products? Not yet. Not yet. You know, on semiconductor parts, we got 18 months and we work on what we don't have an assured supply of. So far we're not seeing anything. Yep. It is limited. Great. Thanks a lot. Trying to do more than you used to do is very, very challenging. Understood. Thank you. Thanks, Steve. That brings us to the end of the questions, so hand over to Lewis to close. All right. Hey, thanks to everyone for all your questions. Once again, I'd like to thank our customers, our suppliers, and our clinical partners for your commitment. My thanks also really do go to the team at Fisher & Paykel Healthcare for all the work that's gone into this first half result. Lastly, of course, I'd like to thank our shareholders for your ongoing support through this extraordinary period. Thanks again for your time today, and we'll look forward to connecting again soon. That does conclude today's conference. Thank you all for your participation. You may now disconnect.