Fisher & Paykel Healthcare Stock

All right. Good afternoon, everyone. I'm Neville Mitchell, the Chair of Fisher & Paykel Healthcare Board. Welcome to the 2026 Annual Shareholder's Meeting. A warm welcome to all of you here in person at our East Tamaki campus and those online.

So to start a few housekeeping items, bathrooms are located outside this meeting room to my left. In the event of a fire alarm, please follow the Fisher & Paykel team who are wearing Lanyards to the assembly area in the car park ahead of me.

On the information conveyed to me, I declare that a quorum of shareholders is present, and the meeting has been duly convened.

I would firstly like to introduce those joining us on stage today. We have our Managing Director and CEO, Lewis Gradon; our Directors, Anna Curzon; Sir Mike Daniell, Lisa McIntyre, Graham McLean and Cather Simpson; and our future Director, Margie Apa. Mark Cross is not well enough to be with us today in person. The flu has taken him down, but is joining us virtually.

The minutes of the last Annual Shareholders' Meeting have been approved by the directors and are available for inspection at the back of the room. The Notice of Meeting has been circulated to all shareholders, and I intend to take it as read. First on the agenda is the Chair's address in which I will provide some comments on the company's progress on behalf of the Board. Following that, our Managing Director and CEO, Lewis Gradon, will provide an update on our performance in the last financial year and in the year-to-date and on our opportunities looking forward. After addressing any questions on the financial statements, we'll move to the formal resolutions.

I'll now move to the Chair's address. Ladies and gentlemen, it is a privilege to address you again as Chair of your Board. In my address today, I will share the Board's perspective on the company's progress and long-term priorities. Lewis will then provide more detail on our financial and operational performance.

Fisher & Paykel is guided by a unifying purpose, improving care and outcomes of patients. One measure of that success is the number of patients who benefit from our products and therapies. Last year, this number was approximately 24 million people worldwide. It was another strong year financially. For the 2026 financial year, operating revenue increased to $2.3 billion. Net profit after tax increased to $468 million, and the Board approved dividends of $0.52 a share. These outcomes reflect the strength of a business that has been built over decades across products, therapies, geographies and markets.

In this industry, long-term value is created by continuing to improve products, expand clinical understanding and identify new ways to support patients and clinicians. Our shareholders will be familiar with our strong commitment to research and development. In the 2026 financial year, the company invested over $235 million in R&D and over the last 5 years, approximately $1.5 billion, all of that practically here in New Zealand. This level of investment is critical to sustaining innovation, expanding our clinical impact and ensuring a strong pipeline of future products.

Product innovation requires talented people, specialized equipment and spaces for collaboration, development and testing. Here at East Tamaki campus, you will see that work has progressed on our fifth building. The new facility will provide additional space for product development, manufacturing and warehousing and is on track to open around the middle of 2027.

As a Board, we remain disciplined in our approach to major capital investments. You will recall that we have purchased land to develop a second New Zealand campus in Karaka, and we continue to see this as an attractive location. We also see opportunities for growth beyond New Zealand as directors spending time in the regions where we operate is an important part of our oversight responsibility.

And last year, the Board visited our operations in China. We gained a deeper understanding of one of the world's fastest-growing health care markets and engaged directly with key people over there. Over the next year, we'll be looking to expand our manufacturing footprint in China to complement our ongoing investment here in New Zealand as well as Mexico and other regions.

As the company continues to grow, maintaining our culture globally becomes increasingly important. The people of Fisher & Paykel care deeply about patients as well as their coworkers. They have a relentless desire to improve, value original thinking, approach their work with humility and work together for the greater good. We believe the culture remains one of the company's greatest strengths and an important contributor to long-term performance. Your Board recognizes this and continues to monitor our progress.

I would now like to cover a few other matters that have received attention from the Board this year. First, the topic of sustainable procurement and addressing modern slavery risks. This year, New Zealand introduced a modern slavery bill into Parliament that will create a regulatory framework requiring large organizations to identify, address and report on modern slavery risks within their operations and supply chains. We believe companies have a responsibility to understand the conditions under which their products are made and sourced, and we have robust processes in place to guide procurement decisions.

As part of our belief in doing the right thing, we work with our suppliers to raise awareness about modern slavery risks and support them to address this issue. We already report under the Australian, British and Canadian legislation on this matter. Second, an update on the composition of the Board. Last year, we farewelled Pip Greenwood, and Anna Curzon was appointed to the Board in February. Anna has brought a wealth of knowledge in the technology and financial services industry to the Board. She is up for election today and will speak to you later in the agenda. And I would urge you to support that resolution when it comes up. We continue to support the future directors program, and we are fortunate to have Margie Apai as our future Director for this term. You may already be familiar with Margie as she is the former CEO of Health New Zealand.

Third, ahead of the vote today, I would like to say a few words on nonexecutive director remuneration. As shareholders would expect, attracting and retaining high-caliber directors is important for effective governance. The Board periodically reviews nonexecutive director remuneration with the assistance of external advisers to ensure it remains appropriate for the responsibilities involved and competitive with comparable organizations. This year, we have recommended changes to the director remuneration, and these are outlined in Explanatory Note 3 of the Notice of Meeting.

In closing, I would like to return to a theme I discussed last year, namely long-term thinking. We are operating in a world that is increasingly complex. Fisher & Paykel operates in over 120 different countries, so world events are very important to us. Supply chains remain exposed to disruption. Healthcare systems are under pressure. Geopolitics, trade policies and tariffs have continued to be important considerations. We do not underestimate these challenges. They require careful oversight and steady decision-making.

We've continued to follow these issues closely and have met with experts in New Zealand and overseas to navigate them. And in this regard, we'd like to acknowledge MFAT, the New Zealand MFAT and the advice that they provide us, which has been very valuable. We cannot control external events, but we can maintain our long-term view. This guides our decisions. The company's success does not rest on a single year's performance. It rests on a consistent strategy, innovative products, a strong culture and trust earned over many years. Those are the foundations the Board is focused on protecting and strengthening. On behalf of the Board, thank you to all of our people, our customers, our suppliers and you, the shareholders, for your continued support. I'd now invite Lewis to say a few words.

Thank you, Neville. So good afternoon, everyone. Welcome. I want to say that we really, really do appreciate the attendance that we get at these meetings. So thank you very much for coming along. So I'm going to cover off some financial and operational highlights for FY '26, and then I'll move on to our guidance for the first half and full year FY '27.

But first of all, I do want to recognize the efforts of our 8,000 people. They're across 55 countries. Our customers, our suppliers and especially our clinical partners. And I'm going to open with a video that I hope gives you some insight into how our people think about our clinical partners and about those patients that we jointly serve.

[Presentation]

Thanks, guys. So look, as Neville said, that was 24 million patients treated with our products last year. And I want to thank everyone that's contributed to that effort. So now we just have a quick look at the financial results from 2026 financial year. We generated $2.3 billion in revenue in constant currency terms. So constant currency is where we take out all of the foreign currency effects. So you can see kind of the underlying growth without currency distorting it. So in constant currency terms, that's 12% growth. And in particular, we've called out hospital hardware at 27% as strong across all regions and giving us great momentum for our FY '27 year coming forward.

Now during FY '26, we dealt with some costs due to trade policies and world events, but momentum from those thousands and thousands of continuous improvement projects helped us cope with the tariff costs and with the freight and raw material cost increases we've seen during the year due to the Middle East conflict, and we're able to generate an improvement of 122 basis points in gross margin, also constant currency to a gross margin of 63.7%. And then net profit after tax of $468.5 million, up 28% in constant currency terms. So great result.

I want to put those numbers in the context of the 10-year trends. In the 10-year trend, you can -- if you look at revenue on the left-hand side, you can pretty clearly see COVID starting to kick in, in FY '20. It was right at the end of FY '20 and then the COVID effect in FY '21 and '22. And probably in revenue, I'd say we're back on our pre-COVID track probably for the last 3 or 4 years.

And then when we go over to the net profit after tax data, you can -- again, you can see the COVID effect on FY '20. You can see the effect in '21 and '22, but that's an unsustainable workload for our people and our equipment generating that kind of result.

So during that FY '21, '22 years, we're putting in the extra infrastructure, the extra equipment, the extra people to cope with those COVID volumes. And you can see the impact on our net profit after tax in FY '23 and '24 there. And then it looks like over the last 2 years, we're back on that momentum to take our gross margin back to where we'd like to be, 65% target. And net profit after tax back to where we'd like to be as well.

I just want to touch on dividends very, very quickly. As Neville said, we increased our second half dividend by 38% to $0.52 per share for the year, and that's up 22% on last year. That's a payout ratio of 65% of our FY '26 net profit after tax. And we think that is roughly more or less a sustainable rate for us in terms of payout ratio. If you look over the last 10 years, you can see we've been very consistent with our dividend payout, and we've been very consistently growing our dividend payout. In fact, that's a 12% compound annual growth rate over the 10 years. So for investors, it's a relatively unusual combination where you have a growth company with steady and increasing dividend payouts for you to consider.

Now before I move on to outlook, I just want to talk through the comments that we included. So we manufacture in New Zealand, Mexico and now China. In our FY '26 year, we had U.S. tariffs applied to some of our hospital products that go from New Zealand to the United States. During the year, the mechanism under which those tariffs were applied and the rates changed. And one of those mechanisms was overturned by the U.S. Supreme Court.

So we're getting a refund for those tariffs that we paid. We're getting the refund in FY '27 for some of the tariffs that we paid in FY '26. So we called that out. And in our press release last week, that's the $23 million tax refund that we called out. And then just to be clear, we continue to pay tariffs in the U.S. on some of our hospital products sourced from New Zealand, but it's a different mechanism.

Now there's also a U.S. federal agency currently investigating the impact that medical supplies might have on national security in the U.S. So those tariff rates might change during the year. Also, the Middle East conflict impacts our freight and material costs during this year as well. Now you might be inclined to think of these as unusually difficult times. I think for us as a global manufacturer with raw materials coming from all over the world to 3 different manufacturing sites, a global supply chain to customers in 120 countries, we always have something every year that's causing a disturbance or causing our cost to go up.

And this is, I think, for us so far, almost like business as usual. There's cost in, and that's certainly how we're thinking of it. And the way we deal with cost in is just those continuous improvement projects over and over and over and efficiencies across the whole business.

Now over the longer term, of course, just to remind you of our thinking there, over the longer term, we can adjust our global manufacturing footprint to reduce the overall supply chain risk as we grow. So now on to the first half outlook. So we gave guidance for the first half of revenue guidance of approximately $1.24 billion and net profit after tax of approximately $280 million. So at the top line, at the revenue line, that equates to 14% growth in revenue. And if you take out the impact of the tariffs that are in that net profit after tax guidance, that's a 24% NPAT growth, not counting the tariff refund.

And then moving on to the full year. So after that predicted strong start, we increased our full year guidance of EBIT up to operating revenue in the range of about $2.47 billion to $2.57 billion and net profit after tax in the range of approximately $525 million to $565 million. Now I'll just make one thing I hope really, really clear. In that guidance, we've assumed that the tariffs stay where they are and the increased raw materials and freight costs from Middle East conflict stay where they are, and that's an assumption, so we can derive the numbers. It's not a forecast, that's what's going to occur. I just want to make that clear.

And even with those costs, we're still anticipating increasing our gross margin for the full year. Now the momentum of R&D projects that started 10 and 20 years ago, trusted customer relationships that span decades, continuous improvements by the thousands year after year, supplier partnerships that we've had for decades. That's the momentum that's generated the result we've seen for FY '26. But we also continue to build momentum for the future.

So if you look over the last 5 years, if you look at our people in research and development, that's increased 42% to nearly 1,000 people. We look at patents in the United States over the 5 years, that's doubled to 768 patents in the United States. Now we called out 1 country there so that you can see that those are distinct inventions. It's not just a couple of patents in lots and lots of countries. Our global patent portfolio granted patents is over 4,500. But anyway, if you put together the increase in R&D people, the granted patents doubling over the 5 years, we think that's a really good pointer that we continue to build momentum in that pipeline for products and therapies that are going to be unique to Fisher & Paykel and generate improvements in care and outcomes.

So now if we have a look at sales, salespeople increasing by 27% over the 5 years to over 1,500. And clinical practice guidelines for nasal high flow, that's increased from 5 to 12 clinical practice guidelines around the world for use of nasal high flow. That increase takes account of 3,200 cumulative published studies over the 5 years to generate more clinical practice guidelines. So when you put that together, we think that tells us we've got momentum continuing to grow to help us change clinical practice. And the next one there, if you look at anesthesia, so the number of professional bodies around the world that have a guideline in anesthesia for nasal high flow over the 5 years, that's gone from 10 professional bodies to 25.

So we think that points to momentum to change clinical practice. It's building over multiple therapies, and that points to something that can persist for a very long time yet. And then cumulative hospital hardware sales of over $880 million for the 5 years, that tells us that we do have momentum in that installed base and that clinical practice is indeed changing.

And if we look at gross margin, I touched on this a few slides ago, but if you look at gross margin, you can see the COVID impact there in FY '22 and '23 really. And you can see the momentum of those continuous improvements moving gross margin back to where we'd like it to be.

So look, finally, from me, if we look at our history as a listed company, we've gone from generating a bit less than $200 million in revenue in 2001 to $2.3 billion this year. And this is not common growth, and it's not something we take for granted. And for us now, it's a matter of continuing to build on that momentum. And momentum is not about the financial performance in 1 year. It's not about a single problem, a single obstacle, a single issue in 1 year. It's about continuing to make progress. The main thing that's not me, is it? Okay. So momentum, it's about continuing to make progress in how we improve care and outcomes for patients. That's the big one for us and how we can remain as that trusted clinical partner whatever challenges arrive for us or for our customers.

So in closing, I want to acknowledge the people of Fisher & Paykel Healthcare for their commitment to stepping up to those challenges. And of course, I also want to thank our clinical partners, our customers, our suppliers and you, our shareholders, for your support and belief in this approach. Thank you very much.

Thank you, Lewis. Item #3 on the agenda is to receive and consider the financial statements and auditor's report for the year ended 31 March 2026. This is an opportunity to ask any questions specifically on the financial statements, the auditor's report or the company's 2026 annual report. We have Indy Sena, lead partner from PwC here to answer any questions you may have specifically on those items. Please note that there will be an opportunity for general questions at the end of the meeting. Would anyone in the room wishing to ask a question specifically on these items, please raise your hand and a microphone will be passed to you. We will then turn to our online audience. We ask that you please state your name before asking any question. No questions. Any questions online?

There are no questions.

As there are no further questions, I'll move on to the next item. The fourth item on the agenda is the consideration of the formal resolutions. There are 7 resolutions and each is an ordinary resolution. This means that they are required to be passed by a simple majority, more than 50% of the votes of shareholders who are entitled to vote on the resolutions and do vote. Shareholders in the room would have received a voting card on arrival. If you did not and wish to vote, please visit the registration desk at the back and the team will assist you. Shareholders online can vote using the electronic voting card received when online registration is validated.

To vote, please click Get a Voting Card at the top of your web page or below the video. You will be asked to enter your shareholder number or proxy number. You can then vote by clicking for, against or abstain for each resolution. Remember to click Submit Vote on the bottom of the card once you have finished voting. Further information is available in the MUFG Pension and Market Services online portal guide, and you can also call the help line on 0800-200-220 for assistance. After voting on the resolutions, we will be happy to take any general questions about your company and its operations. Those online can submit questions at any time by using the online question function. We now move to consideration of the resolutions.

Resolution 1 relates to the election of Anna Curzon. It is a requirement that a director appointed by the Board must not hold office without election past the next annual meeting following that director's appointment. Anna joined our Board in February this year, and I will now ask Anna to say a few words.

Well, thank you, Neville, and good afternoon, everyone. Gosh, it is a privilege to stand here before you today seeking your support for election to the board of Fisher & Paykel Healthcare. Now since joining the Board earlier this year, I've had the opportunity to gain a much deeper appreciation of this remarkable company. As a member of the People and Rem Committee, I've seen firsthand the quality of the people, the strength of the culture and the long-term mindset that underpins this company's success. It has reinforced my belief that exceptional care and outcomes for patients starts with exceptional people.

A few months ago, I had the privilege of visiting Middlemore Hospital. Now seeing Fisher & Paykel Healthcare's products being used in neonatal and in intensive care really brought home for me the real-world impacts that this company has on families, on patients and the communities around them. My career has really centered on helping organizations grow through innovation and technology. I spent 7 years on Xero's global leadership team, and the majority of that time was as Chief Global Product Officer, helping to scale one of New Zealand's most successful companies internationally.

For more than 5 years and across successive New Zealand governments, I have also served on the APEC Business Advisory Council by appointment of the Prime Minister. I currently chair the Regional Economic Integration Working Group, working with business and government leaders from right across the Asia Pacific to strengthen trade, innovation and economic growth.

I believe these experiences, together with my governance background will enable me to really contribute to Fisher & Paykel Healthcare's continued success as it pursues its long-term strategy and global growth ambitions. It would be a privilege to continue serving alongside my fellow directors, supporting management and helping to create enduring value for our patients, our partners, our people and of course, you, our shareholders.

I respectfully ask for your support. Thank you. Over to you, Neville.

Thank you, Anna. And I now move as an ordinary resolution that Anna Curzon be elected as a Director of the company. Are there any questions from shareholders in the room? Are there any questions online?

There are no questions online.

There appears to be no further discussion, please now record your vote on this resolution. Thank you.

[Voting]

The second resolution is to authorize the directors to fix the fees and expenses of PwC as the company auditor. Under the Companies Act, PwC is automatically reappointed as the auditor of the company. And just as a reminder, Indy Sena is with us today and can answer any of your specific questions. I now move as an ordinary resolution that the directors be authorized to fix the fees and expenses of PwC as the company's auditor. Are there any questions from shareholders in the room? Are there any questions online?

Yes, there's a question online from Grant Diggle, who's the proxy for the New Zealand Shareholders' Association. And the question or the comment is the audit was last tendered in 2016. Would the Board consider retendering the audit now 10 years has passed?

Look, it's a very topical question. And so I'll answer it with a little bit of philosophy. Our position as a Board is to be very insistent on audit quality. So our focus is on making sure that we have a very high-quality audit. And to that point, we have our own internal processes that we have a look at, largely under the direction of Mark Cross, who's the Audit Committee Chair; Lyndal, who's the CFO. We're satisfied on that front. We also look at the internal processes at PwC and their external reviews, and we also have a look at what the FMAs had to say on that.

And I think we're perfectly content at this point that we are receiving a quality audit. And the other aspect of that, of course, is independence. And again, we're satisfied on that independence front and have very little cost going through to PwC that's not audit related. So at this stage, we're not considering an audit tender, but we're mindful of the position in the market at the moment.

Yes. The next question online comes from Stephen Mayne, and the question is along the similar lines. PwC has been our long-term auditor. When did we last tender the audit? And when are we next planning to tender the audit?

Well, I think I've answered that, so we can refer back to that audit.

There are no further questions online.

All right. I'd ask that you please now record your vote on this resolution. Thank you.

[Voting]

The second -- where are we -- directors' remuneration. Resolution 3 relates to nonexecutive director fees. Each year, the Board reviews nonexecutive Director fees to ensure that they remain appropriate and aligned with the responsibilities of the role. As part of this process, the Board undertakes an independent market benchmarking review every 3 years. In March this year, we engaged Mercer an independent remuneration consultant to assess our director fees against comparable organizations and provide an independent objective view on their ongoing appropriateness.

Mercer looked at NZX and ASX companies of a similar size and scale. Mercer recommended an increase to director fees to place them at approximately the 50th percentile of the combined comparator group and the 75th percentile for the New Zealand comparator group. Mercer also proposed an increase to the total fee pool available for the payment of director fees to provide a headroom of approximately 15%. The Board has considered the experience and responsibility of the directors, the size and complexity of the company and the level of governance and time commitment required by the directors relative to the advice received from Mercer.

As a result of the benchmarking process and the Board's consultation with a number of shareholders, the Board proposes an increase in the total annual pool available for remunerating nonexecutive Directors. Now we also have Lizzy Cullen, Principal at Mercer, available on Zoom to answer any questions about the Mercer review, which was included in the papers.

I now move as an ordinary resolution that the maximum aggregate annual remuneration payable to nonexecutive directors be increased by NZD 350,000 to NZD 1,750,000 to NZD 2,100,000. Are there any questions from shareholders in the room? Are there any questions online?

Yes. First question is from [ Leslie Stephens ] and asks, when the next director's remuneration change is considered, would the benchmarking organization also consider and disclose the change in dividend per share and the change in value per share over the same period?

Yes, happy to include that. Just by way of reference, and of course, that's all public information anyway, if you want to go back and have a look at it. But the 3-year dividend growth is approximately 28.4% and the 3-year price movement is approximately 40%. And of course, the share price today is ahead of where it was at the 31st of March. But that might be useful to the question.

The next question comes from Stephen Mayne. And the question is, given that we've got 5 remuneration resolutions on the agenda, why not go the next step and offer shareholders an Australian-style nonbinding vote on the remuneration. Could Sydney-based Chair, Neville Mitchell, who has dealt with dozens of rem report votes during his career, comment on whether he's had any Board or major shareholder discussions about this issue. If Xero and Fletcher Building voluntarily put up rem reports for the vote, why don't we?

Well, he's quite right. I have dealt with this over many years. But -- we're a New Zealand company, and we comply with New Zealand regulations. And in fact, we go a little bit further than what New Zealand regulations go, and we include all of Lewis' details. We already provide all the remuneration of directors as well. So we're not going to go to the Australian style remuneration report. We're going to stick with what we've got here in New Zealand. And I think that's perfectly adequate.

I would also add that I did a very extensive consultation round before we issued our Notice of Meeting to have a look at what shareholders thought about this matter along with other things. And we didn't receive any support for an Australian-style shareholder remuneration report. They were perfectly satisfied with what we've got. So based on that feedback, based on the fact that we're a New Zealand company, we're happy to remain with the present arrangements.

There are no further questions online.

As there is no further discussion, please now record your vote on this resolution. Thank you.

[Voting]

The fourth resolution is to approve the issue of discretionary long-term variable remuneration instruments to Lewis Gradon, Managing Director and Chief Executive of the company. As explained in the Notice of Meeting, approval is being sought to issue performance share rights and/or options up to the total value of $1,463,635 to Mr. Gradon. Prior to the grant, Mr. Gradon will be entitled to choose the proportion of PSRs and options to make up the total value to be issued to him. The value of each PSR and option will be determined by an independent valuation to be completed following the meeting.

The key terms under which the PSRs and/or options will be issued are set out in explanatory Note 4 of the Notice of the Meeting. The Board believes that the issue of PSRs and options to executive management provides appropriate alignment of the interests of those employees with the interest of shareholders over the long term.

I now move the ordinary resolution that the grant of discretionary long-term variable remuneration instruments to Lewis Gradon, Managing Director and Chief Executive Officer, be approved. Are there any questions from shareholders in the room? Any questions online?

There are no questions online.

Please now record your vote on this resolution, and I thank you.

[Voting]

Resolutions 5, 6 and 7 relate to the company's long-term variable remuneration in North America. In 2025, the Board reviewed the company's long-term variable remuneration arrangements. Following that review, updated performance share rights options and employee share right plans were introduced for the company's employees, included for selected high-performing employees in North America. A summary of the key terms of each plan is provided in Explanatory Note 5 of the Notice of Meeting.

Under United States law, these plans require shareholder approval. I now move as an ordinary resolution that Fisher & Paykel Healthcare Corporation Limited 2025 Performance Share Rights Plan North America be approved. Are there any questions in the room? Any questions online?

Yes, there is a question from Stephen Mayne. Why aren't you disclosing the proxy votes? Did any of the proxy advisers recommend a vote against any of today's remuneration items, including this proposed performance rights grant? And has there any -- doesn't -- and has there any material proxy protest vote against? That was the wording verbatim. If so, what were the issues of concern?

So the issue of when you disclose the proxies has been an ongoing one, and our decision here has been that we disclose it at the conclusion of the meeting. So just like in a general meeting, you don't -- a general election, you don't know what the vote is before you vote. So we're taking the same approach here. I think it helps stimulate the conversation along the way if you know how -- if you don't know how the voting is going, you're quite entitled to ask questions along the way.

Then moving to the second part of it. So we will -- just to be clear, we will be putting up the proxy numbers, but that will be at the conclusion of the voting, and then you can see how others have voted.

In terms of the proxies, yes, we have all the proxies opine on our resolutions. And ISS voted against the nonexecutive director remuneration. They felt that, that was -- we already were adequately paid. But I think we've already moved past that agenda item, but happy to display it afterwards. And as a consequence of ISS, you'll see that there was votes against the nonexecutive director fee increase.

There are no further questions online.

All right. So Resolution 6, I now move as an ordinary resolution that the Fisher & Paykel Healthcare Corporation Limited 2025 share option plan, North America be approved. Are there any questions from shareholders in the room? Any questions online?

There are no questions online.

All right. Please, could you now vote on Resolution 6.

[Voting]

I now move on to Resolution 7, and I move as an ordinary resolution that the Fisher & Paykel Healthcare Corporation Limited Employee Share Rights Plan, North America be approved. Are there any questions from shareholders in the room? Any questions online?

There are no questions online.

There appears to be no further discussion. So please now record your vote on this resolution. Thank you.

[Voting]

That now concludes the voting today. Thank you for your participation. MUFG will collect your voting cards from those in the room. For those online, please ensure that you've now submitted your electronic votes. MUFG will count the votes as scrutineer, and the results will then be announced to the NZX and ASX. We will now display the proxy results that we had as of Monday's voting deadline. The final results of voting, including yours lodged today, will be announced to the NZX and the ASX as soon as they're available this afternoon. Let's take a moment to collect votes.

[Voting]

All right. I think that completes the voting. There is now an opportunity to ask any general questions about matters relating to the company. Are there any questions from shareholders in the room? Gentleman over there.

Good afternoon. My name is [ John Winsor ]. I just have one question, and my apologies if this has been covered in previous documentation or released by the company. But globally in the business that the company is in, firstly -- well, it's actually 2 questions. What is the company's market share? And who are the 2 biggest competitors globally?

Look, we don't normally disclose market shares and so on, but I might throw that over to Lewis just to have a general discussion about the global market, perhaps.

Yes. That is a hard question to be specific on for our business. And we talked about -- if you take the hospital business, it's based on changing clinical practice. So we don't really have a direct competitor that we go with head-to-head. What we're doing is we're taking an existing practice patients currently might be being treated like this. And if you use our therapies, treat them like that with Fisher & Paykel therapies, you'll get a better outcome. So it doesn't really sit in your question as it's structured. It's a little bit different.

And in that business, we tend to think of competitors as companies that are coming up behind us, maybe with technology that relates to our expired patents. Then when we go to home care, there's 2 components to our home care business. First of all, respiratory support in the home, very much the same situation that I just described with hospital. And then the other component of our home care business is OSA, obstructive sleep apnea. We don't really disclose market share that much. But the largest competitor there would be an Australian American company called ResMed.

Thank you, John. Any other questions? There's a question in front.

[ Norman Jacob ]. I've got a question around the recent uptake in weight loss medication, and I suppose it's twofold. One is, do we see any sort of downside risk in terms of demand for our products in the medium term. And then in the long term, as the drugs become more prevalent. And we sort of see obesity rates starting to drop worldwide.

I might just have a few overarching and then I might hand over again to Lewis, who's dealing with this every day. At this point, we're not seeing any impact on our numbers to date. And in fact, there's been some quite interesting studies that have been put out by others in the industry, which show that stronger compliance can actually lead to greater use of our devices.

But at this point, we're not seeing any impact. And I guess the other point that's important in this is the size of the market that we're going after is so huge that even if it does take off some of the edges, there's still an enormous market left for us, which has got many, many years to go.

But Lewis, I don't know if you've got anything further to add on this matter.

It's a complete description of our thinking on the topic.

Yes. Good.

This is not really a question. It's Dr. [ Peter Tillman ]. I am a retired family doctor. And I'd like to thank you all up there on our behalf for the wonderful job you've all done. I see that lady there, and I only wish we'd have one of those gadgets when I was working up at Wellsford before I -- when I first came here. Thank you, sir. Thank you, ladies and gentlemen, on the Board for all you're doing and keep up the good work because being retired, I definitely need that dividend.

Thank you very much, sir, and yes, of course, we'll do our very best. Thank you.

And that is the driver for most of the 8,000 people at Fisher & Paykel Healthcare, exactly what you said. Thank you.

Yes. Thank you. Any further questions?

[ Hem Nash ]. I noticed that the entire Board with the exception of Lewis, nonexecutive directors. Lewis is not a young man, I'm older, of course. And it concerns me -- or I'm asking a question of the Board, have you not considered some of your excellent staff to introduce them as you do with the nonexecutive Directors to arrive at the Board by that sort of means. I think it's important.

All right. Well, look, I think it's a good point, and we can consider it in the future. A lot of the -- and perhaps I might just ask some of them to stand up that we've got a number of senior executives here today, and I know they'd be very happy to talk with you after the meeting. So we have a number of our senior executives here and at the back as well. So please do engage with them because they are here. Well, yes.

These people attend executive Board meetings.

These are executives and yes, they're not Board members. But it's interesting, you mentioned this because they do attend all our Board meetings. So although they're not Board members and don't vote as a Board member, they do attend everybody who stood up there attends our Board meetings, including Justin Callahan, who is overseas, but he attended this morning's meeting, for example, by teams and very much part of that discussion because I concur with you. I think it's very important that we have interactions with senior management and not just with the Managing Director, excellent though he is. It's an important part of the culture here, and we've maintained that, I think. But thank you.

Hi. My name is [ Jagadev ] . So my question is, I went through the annual report, and I didn't see any mention of artificial intelligence. And for example, Anthropic is claiming that they are more business focused. So maybe they are trying to have some medical discoveries. So my question to the Board is, is it possible for some company in the world to create a patent with the help of LLM, which can make us second in the competition. It's like is it a possibility that somebody can find a patent which can actually [ defeat ] all the health care companies in the world?

We don't foresee that at this stage. But it's an interesting question, which leads into perhaps our use on AI, which I think is probably a broader question, but it goes to the basis of what you're talking. At Fisher & Paykel, we've tried to deploy artificial intelligence very widely through the company and encouraged its use throughout the company, and we monitor that and how it's being used, and it has to be in a safe environment.

So we think it's helping with efficiency and productivity, but we're not seeing it coming through in terms of dollar savings at this stage. But it's certainly a hugely useful tool, and we're into it and deploying it wherever we can.

Lewis, I don't know if you've got specifics or anecdotes to add around that.

To your question, I think we have all the tools and all the motivation and maybe more of the innovation and culture than any competitors might have.

Any other questions in the room?

[ Donald Howth ], shareholder. I'm a retired logistics and procurement manager, been retired about 16 years. And I was delighted to hear you commend your company's response to the logistical and supply route challenges of the last year or so. I follow those supply routes very carefully because I've got a spread of shareholding amongst about 20 New Zealand companies. And I see you people and Skellerup as 2 leading companies that have adapted so brilliantly and the impact of tariffs on your business has been minimal and your trajectory for growth and profit improvement is quite exceptional, I think. And so well done to all of your working staff, not just the Board, but the executive team and the working people at the coal face for overcoming those challenges and doing so well with them. Well done.

Look, thank you. And you're quite right, supply chains has been a major issue. And Andy Niccol, who's sitting right behind you, really spends a lot of time on optimizing this and how we work because it's hell of a complex, as you can appreciate, 120 different countries, manufacturing in Mexico, manufacturing here and getting that all in the right place is an enormous exercise. But do tackle Andy afterwards if you want to go through some of the specifics because I absolutely agree, it's been an impressive performance in a very complicated environment. Okay. Anybody else? Anyone on the line?

Yes, we have 4 questions online. The first question was received after Resolution 1, which was the reappointment of Anna, but the question -- we'll ask the question now. Given that Anna who is from Stephen Mayne -- given that Anna who is from Xero, which does put up its remuneration report for the vote each year, would she support Fisher & Paykel doing the same, especially considering we are dual listed in Australia where remuneration report voting is mandatory?

Look, I'll talk for the whole Board because we've discussed this and the Board's decision is we're sticking with the New Zealand regulations and expanding it where we think necessary and useful, and we're not going to adopt Australian regulations here.

The next question comes from [ Oscar Raymond Tolson ]. This is on slave reporting requirements. I believe the U.S. is looking or has already to introduce additional tariffs on companies sourcing materials from countries assessed as using slave labor. I understand one of those countries is China. Assuming my understanding is correct, where our products manufactured in China planned to be sold? Are there any other risks with manufacturing in China?

Look, there are risks with manufacturing in China, and we're very conscious of those. This is not a major development that we're doing in China. This is very much step by step by step. But in terms of the modern slavery regulations and so on, we've been over this for decades because we've had to report both under Australian and U.K. legislation and more recently, Canadian.

And now as we outlined, we're going to be reporting under New Zealand legislation law. So we've had processes in place for the last decade or more to follow through on this and try and make sure that we're not having any slave labor in our supply chains. We audit our suppliers. We do all the things that are necessary on that process. And I'm very satisfied that we comply with all the legislation and with the intent of the legislation in that regard. So, yes.

Yes. And just the next part of that, where are products manufactured in China planned to be sold?

Largely in China at this point.

Next question comes from [ Gordon ]. What percentage of dividends of shares are shareholders reinvesting back into the stock exchange yearly?

Look, I couldn't answer that. I don't know. These are individual investors who can reinvest their shares where they like. We pay out about 65%, as Lewis explained, of our profits to shareholders, and then it's up to them how they go about things.

You can't see what you're doing with it? .

Well, that's right, and it's not our business yet.

The last online question comes from David Horton. How well protected is FPH against an AI stealing the designs and selling a product based on our IP?

Yes. Look, it's an area that the Board has spent a lot of time, and we've had a number of presentations because obviously, management has been all over this. And I think on the basis of all of that, I think we're well protected. And you can never say never, but I think we've done everything that we think is possible on the cyberattack side and on the AI protection. And I'm satisfied with our position at this point.

There are no further questions online.

All right. Look, that concludes the formalities, everybody. Thank you for coming today. I do invite everybody to stay and share some refreshments. For those online, we appreciate your attendance and participation. I speak on behalf of the Board and the wider company when I say that we value your backing and your continued trust in the long-term success of this business. Thank you to you all.

Welcome to the Fisher & Paykel Healthcare FY '26 Results Announcement. My name is Justin, and I will be your operator for today's call. [Operator Instructions] Please note, this conference call is being recorded.

I would now like to turn the call over to Marcus Driller, VP Corporate.

Thank you, Justin. Good morning, everyone, and welcome to the conference call for Fisher & Paykel Healthcare's Full Year Results for the 2026 Financial Year. On the call today with me and Dan are Lewis Gradon, our Managing Director and CEO; Lyndal York, our Chief Financial Officer; Andy Niccol, our Chief Operating Officer; Justin Callahan, our 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'll move on to questions. We'll be discussing our results for the 12 months ended 31 March 2026.

Earlier today, we provided our 2026 annual report, including financial statements and commentary on our results to the NZX and ASX. These disclosures can be accessed on our website at fphcare.com/investor.

With that, I'd now like to turn the call over to Lewis.

Okay. And thank you, Marcus. Good morning, everyone, and thanks for joining us on the call today. I'm going to be referring to the investor presentation pack that was released to the NZX and ASX earlier this morning.

So we'll start on Page 2 with some of the key features from FY '26. And I'd like to just call out a few of these items. We'll start where it matters most, the efforts of our people, our clinical partners, customers and suppliers saw approximately 24 million patients treated by Fisher & Paykel products over the past year. So thank you to everyone who's contributed to improving caring outcomes for all these people over this period.

We achieved a strong result in hospital hardware sales. It's been strong across all the regions, but especially so in the United States, where both the [ EVO3 ] flow generator and the 950 humidification system were released just 2 years ago. And the body of clinical evidence for Optiflow nasal high flow therapy has continued to grow with some additional clinical practice guidelines released during this year. We now count 12 guidelines with those recent additions from the American College of Emergency Physicians, the National Institute for Health and Care Excellence in the U.K. and the global initiative for chronic obstructive lung disease.

So now let's turn to Page 3. Operating revenue for the year was $2.3 billion, up 14% on the prior period or 12% in constant currency. Net profit after tax was $468.5 million, up 24% on the prior period or 28% in constant currency. Lyndal is going to take you through our financial performance in more detail shortly. But before that, I have a few comments on hospital and home care revenue drivers.

So I'll start with hospital on Page 5. Operating revenue was $1.5 billion, up 18% on the prior period. That's 15% in constant currency. And once again, this is broad-based strength that's across the product portfolio and it's across the geographies. New applications consumables revenue grew 18% year-on-year and at 16% in constant currency. And hospital consumables as a whole grew 14% in constant currency and that is becoming the more relevant number for us these days. That growth in consumables is during a period where we think we've had a reduced year-on-year hospital admissions for respiratory illnesses during the Northern Hemisphere winter and that's in the United States and in the other major markets. So it does suggest that change in clinical practice was once again a strong growth driver for us. Hardware revenue was up 27% in constant currency on last year. And this exceptional result is probably another point to progress in changing clinical practice.

So let's turn now to Homecare on Page 7. Homecare operating revenue was $802.7 million. That's up 8% on last year or 7% constant currency. And OSA mask growth was 7% or [ 5% ] constant currency with that growth generated by our latest [ solar ] and Nova ranges of nasal and polos masks. Hardware growth is also a feature of our home care result for this year.

I'm going to pause there for now and hand over to Lyndal.

Thanks, Lewis, and good morning, everyone. On Page 8, our gross margin was 63.7% for the year. This is an increase of 122 basis points in constant currency over last year. The range of margin improvement efforts across our business, including manufacturing efficiency and other efficiency gains, continued making a positive impact. U.S. tariffs on product sourced from New Zealand impacted our gross margin by approximately 90 basis points this year. We have no material impact to our gross margin in FY '26 related to the disruption in the Middle East. Lewis will outline the gross margin assumptions in our guidance for FY '27 later in the call.

Moving on to Page 9. Total operating expenses grew 8% in constant currency compared to last year. This reflects the higher investment made over the last few years and modest increase in people numbers in the last financial year. Operating margin was 27.6% for the year, an increase of 277 basis points in constant currency over last year. This reflects the improvement in gross margin as well as our operating expenses growing below revenue growth. R&D expenses grew 4% to $235.5 million and were 10% of revenue for the year. This represents a 6-year compound annual growth rate from FY '20 of 12%. We continue to estimate that about 60% of our R&D spend is eligible for the 15% R&D tax credit. SG&A expenses were $298 million this year, an increase of 9% in constant currency.

Moving to Page 10. Operating cash flow this year was $663 million, up 21% from last year, reflecting the strong increase in profit. Tax payments this year of $161 million were up from $90 million last year. Capital expenditure, which includes purchases of intangible assets, was $195 million for the year, up from $103 million last year. This includes $132 million spent progressing the construction of the fifth building at our East Tamaki campus in New Zealand and the second payment through our Karaka land purchase. Capital expenditure for the 2027 financial year is expected to be approximately $230 million. Within this is around $125 million on land and buildings, including the final payment on our Karaka land purchase. Looking at the balance sheet. Debtor days were slightly down on last year at 43 days. Net cash at the 31st of March 2026 was $401 million, and our gearing ratio was minus 22.8%. Interest-bearing borrowings were $53 million, all of it being noncurrent.

Turning now to Page 11. We have declared a fully imputed final dividend of $0.33 per share. This takes the total dividends declared this year to $0.52 per share up 22% on last year. And this represents a 65% payout of our full year profit. The final dividend will be paid on the third of July.

Looking now at foreign currency on Page 12. Foreign currency movements unfavorably impacted our net profit after tax growth by 4 percentage points or $15 million from the FY '25 reported results. This largely reflects the movement in hedging results, partly offset by the movement in spot rates when compared to last year. During the 2026 financial year, we recorded hedging losses of $21 million and foreign exchange losses on balance sheet translations of $3 million, all on a pretax basis. At the end of April exchange rates, we would recognize hedging losses of $17 million and foreign exchange losses on balance sheet translations of $1 million in the 2027 financial year both as pretax amounts.

At the end of April exchange rates, we would have an overall favorable impact to our net profit after tax growth of approximately 2 to 3 percentage points or $10 million to $15 million in FY '27 from the FY '26 reported results. If all currencies moved by 1%, our net profit after tax for FY '27 would move by approximately $2 million to $3 million based on the level of hedging in place. This excludes the impact of balance sheet translations, which would impact by approximately $1 million if all currencies moved by 1% between reporting dates.

Now it's back over to you, Lewis.

Okay, thanks, Lyndal. So let's turn now to outlook on Page 13, and there's a bit more there to digest this year. We've provided an estimate for full year operating revenue at exchange rates on the 30th of April, up between $2.45 billion and $2.57 billion. And for full year net profit after tax, we've estimated a range of about $500 million to $550 million. And for these interesting times, we've also provided insight into some of the assumptions that were incorporated into those estimates. And in general, we assume a continuation of the current status. And just for absolute clarity, these are assumptions that we have incorporated in our estimates and not necessarily a prediction of the future or future events.

So first of all, tariffs. There's a number of moving parts to potential U.S. tariffs during the year, and we fully expect some change at some time during the year. In this net profit after tax estimate, we've assumed that a 10% tariff rate for certain respiratory products manufactured in New Zealand is applied for the whole year. And this results in an estimated adverse impact to gross margin of 70 basis points in constant currency terms, and that is actually an improvement of 20 basis points over last year.

So now for the impact of the Middle East conflict. We've assumed that something similar to the current freight and raw material surcharges will continue to exist for the whole year. Now we have a very seasoned and experienced team of supply chain professionals, and we've got long-standing support of working relationships with our suppliers, and they have all been working long and hard from the very beginning to mitigate the impact of this conflict on our supply of medical devices. And I want to call out all those people and thank them for those efforts, which, of course, are ongoing. So thanks very much.

And so based on our current status, our best estimate for the impact on raw materials is an additional 45 basis point cost to gross margin and for freight and additional impact of 25 basis points to gross margin. Now we're also assuming that sea freight availability is not impacted to the extent that it pushes us to more airfreight than normal. And in addition, for our business, we are expecting any impact of revenue in the region from the conflict for the year.

Now we've also called out on the slide some of the other assumptions in our estimates for the year. There are more of an accounting nature. I hope they're self-explanatory. So after all that, it's a net 50 basis point negative impact to gross margin for the year. But for us, we still expect that our ongoing continuous improvement activities across the entire business will generate savings and efficiencies that more than offset that 50 basis points and result in an improvement to gross margin for the year.

Now finally, before we go to Q&A, I do just want to point you back to the word that sits on the cover of the slide pack, and it's on the cover of the annual report and its Momentum. We do believe that a business built on innovation, with the patients to change clinical practice, the discipline of a robust quality management system and a mindset of continuous improvement builds momentum. And in the face of these disruptions and uncertainties this momentum helps keep us on track towards the compelling market opportunities we have in front of us.

So Marcus at present, I think that momentum is carrying us into time for questions.

Very good. Thanks, Lewis. Justin, if I could ask you to please open the line up for questions. And can I please ask everybody to limit your questions to 2. This is to ensure that everybody has an opportunity to participate. You can rejoin the queue for any additional questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions]

Thanks. Our first question comes from Rob Morrison Craigs Investment Partners.

Congratulations on another excellent result. I'd like to kick off by asking about the revenue guidance. So you've guided to 6% to 11% revenue growth next year. Could you give me a bit of color on the assumptions that book-end, the top and the bottom of that range? And ideally, some color on the assumptions for our Hospital and Homecare divisions?

Sure. Okay, and thanks, Rob. So when we think about guidance, looking at the midpoint, you're looking at something like similar growth in Hospital consumables you're looking at similar growth in OSA masks. And you're probably looking at flat hardware year-on-year. At the top end, probably looking at improvement in everything, improvement in hospital consumables, improvement and growth rates in OSA masks and some growth in hospital hardware and home care hard care hardware. And at the bottom end, we'd be looking at probably a lower hospital result in consumables, probably a significantly lower hardware result at the lower end and similar, slightly lower growth rate in Homecare and Homecare hardware also dropping off significantly.

And I might just talk to those hardware comments. And we've had a big year with 27%, 28% in hospital hardware if that hospital hardware rate was to drop for FY '27 or even go backwards, if it went backwards 20% you'd still be looking at a cumulative placement of hardware over the 3 years, '25, '26, '27 that corresponded to a 10% compound annual growth rate. So I hope that gives you a bit of insight.

No, that's awesome. Well, just on that hardware point, it was very interesting, like that the hospital hardware growth accelerated strongly in the second half. So could you give me a bit of color on what was driving that, be it new products or whatever else? And then kind of speak to what you're seeing in terms of that growth on '27 to date?

Sure, I'll answer the first question there. Look, one of the bigger drivers is coming out of the United States. We introduced Airvo 3 and the 950 humidification system into the U.S. first half FY '25. We've seen pretty low hospital hardware growth in the U.S. '23, in '24. We saw really strong growth, '25. We've seen that strong growth in rest continue '26. So at this point in time, we're thinking probably some pent-up demand was generated and that's still flowing through.

[indiscernible] just on what you're seeing in on that?

That's a 1 month, I wouldn't make any comment on what we're seeing for 1 month in any way, whatsoever, and even more so on hardware.

Thanks, Rob. Our next questions come from Lyanne Harrison at Bank of America.

Can I start with gross profit. Obviously, we saw material expansion. I think even in the second half, that expansion in gross margin accelerated. Can you talk through the key improvement there? And then my follow-up question, I listened to your comments around assumptions for FY '27 gross margin being the 70 basis points impact from U.S. tariffs and then also the 25 and 45 from the Middle East conflict. But I'm just trying to understand how that gets to the 50 basis points net margin impact that you spoke to earlier? And is there any pass-through of those cost to consumers?

Okay. Thanks, Lyanne. I'll take the first part of all of that. In the second half, the strong revenue allowed us to produce more. So our production volume increasing, whereas we kept a lot of the overhead growth rate fairly controlled in the second half. So we did see a step-up in our overheads efficiency and leverage that we got there in the second half compared to the first. The improvement in gross margin is really everything. So everything else really continuing to benefit. That's the continuous improvement projects throughout the entire organization. pricing and mix benefit that we always get as well as keeping really controlled on the overhead spend continuing to grow into that overhead structure. So that really was the key as to why second half stepped up was supported by that revenue growth.

Now in terms of FY '27, the 70 basis points are on a stand-alone basis from tariffs, and that's comparable to the 90 basis points that we saw in FY '26. So tariffs actually helps us year-on-year '27 to -- from '26 by 20 basis points. So we get a positive impact there of 20 basis points. And then offsetting that is the 25 and 45 from the Middle East disruption where we had nothing in FY '26, and we've got that 70 basis points in FY '27. So that's 70 basis points from Middle East disruption in '27, netted off against the 20 basis points benefit year-on-year coming from tariff gives us that negative 50 basis points that we were talking about. Hopefully, that's clarified that for you.

Maybe I'll take the second question. Look, we typically don't pass on cost increases to our customers. I don't think we have any customers at all that we can just notify we're putting their prices up. It's not like we're the ASX or anything like that. So we -- for us, it's contracted pricing. It's negotiated pricing and it's a process we have to go through, and it's time and effort we have to put into it because the customers don't like it. So we tend to put our time effort into the growth opportunities rather than renegotiating pricing.

Thanks, Lyanne. Next questions come from Saul Hadassin at Barrenjoey.

Just first one on operating costs. Just wondering if you could provide some color on what you're assuming growth looks like for R&D and SG&A into FY '27?

Yes. So between the sort of bottom end and top end of our range, would be looking from sort of mid- to high single-digit growth in our OpEx. And that's fairly consistent across R&D and SG&A.

And maybe just one for Lewis. Lewis Hospital Hardware, you touched on that 27%, 28% growth. Just wondering if you can distill whether growth is equivalent for both the Airvo 3 and also the 950? Or is there a disproportionate growth in terms of the hardware within any of those categories?

I think it'd be pretty comparable for -- we don't really think of it like that, but I think pretty comparable. Nothing to call out, nothing unusual.

Thanks, Saul. Next question come from Chris Cooper at JPMorgan.

First one, actually, just on tariffs, if you don't mind. So I'd actually thought you'd come in a little bit worse than that in '26 -- and sorry, a little bit better than that in '26, a little bit worse in '27. You sort of exceeded my expectations there for the guidance for this year coming. How are you thinking about -- sorry, [ 122 ]. And just generally, just expectations for whether or not the [ 2 to 2 ] will impact the sector and how you may be able to respond to that?

Thanks, Chris. I'll touch on that. What we're not doing is trying to predict what's going to happen with tariffs through the end of the year. The best we can do is as we've done, lay out the assumptions saying if the current situation holds for the full year, here's what the impact would be, which is 70 basis points on an absolute basis. There, part of that reduction from '26 is in '26, we had some rates at 15%. So that's come down to 10%, which is what we're currently paying on products that are subject to tariff out of New Zealand.

And then just our continuing sort of growth that allows us to help manage where we put growth volume and capacity there. So we really don't want to speculate on what is going to happen going forward. The best we can do is let you know and try to be as clear as possible with the assumptions that we've based this guidance on.

Okay. And noting Lewis' prior answer there, I mean, if there was a situation where a tariff was imposed, would that be a situation where it might be appropriate to pass that on to customers in some way?

Probably not, Chris. I mean it will depend on the magnitude, of course, but it wouldn't be our go-to and we'd be balancing time and effort about passing on the cost because it doesn't come free that time and effort versus time and effort on the growth opportunity. The same with the manufacturing and supply chain footprint actually same logic we can adjust our footprint based on where we put our growth and our first preference.

Okay. And just a quick one on Homecare, if you don't mind. I mean, 5% growth in OSA masks, it does look like you perhaps lost a couple of points of share. Anything you could put that down to, given you probably have had a couple of launches recently. I know you've had a new nasal mask launched January or so this year. So is that going to drive an improvement? Or is there anything else that's going on there that -- in that revenue line?

Hard to say. I mean, I think what we're looking at is more a result of lapping 2 -- 3 years of double-digit growth than anything else.

Thanks, Chris. Next questions come from Sacha Krien at Evans & Partners.

First question on hardware as well. Just wondering if you can give us any sort of guidance or whether you have any visibility on the extent to which that growth is being driven by replacement versus expansion units?

Yes. Yes. Unfortunately, we can't. Typically, it is 80% to 90% replacement. And typically, it's driven by growth. So this is a scenario where a customer has 850 heater bases. They want to add 10 more. They have to decide whether they buy 10 more 850s. They probably will not mix the 950 and the 850 models so if they want to go to 950, they're probably going to do [ 60 line 50s ]. Hence, the comment, it is largely replacement driven by growth.

Yes. Okay. That makes sense. And then I think in your CEO report, you do talk about the contribution from anesthesia. I'm just wondering if you can provide a bit more color on that and what whether there's been any particular guideline change or anything that's making penetration into the U.S. faster?

Probably not. I mean it's a strong uptake. It's off a small base. We're still looking at better than 40% growth this year, currently heading towards over 10% of new apps. Not really running into clinical evidence or guidelines as the hurdle, I would say, at this point. One difference with this product is the anesthesiologist control the product on the first patient, and they can see the impact in the first 5 minutes.

Okay. So can you just explain that in the sense that they can trial the product?

So they can trial the product. They can see that the patient is not breathing and they can see that saturation levels are not changing. And they can see that every single time on the first patient.

Thanks, Sacha. Next questions come from Davin Thillainathan at Goldman Sachs.

Lewis, maybe a question for you to start off. The revenue guidance for FY '27 would imply about 9% at the midpoint. And I think you were talking about momentum in your opening remarks. I would say that 9% is perhaps a touch lighter than your 12% aspiration. So perhaps if you can help us understand what's holding growth tag on that 12-month view, please?

Sure. So you can get to the midpoint by maintaining hospital consumables growth at 14%, maintain those, I would say, masks at 5% and then hardware going backwards. First of all, hospital hardware, which I kind of spoken to, we think we've got some pent-up demand driving the last 2 years, and it's a matter of whether that rolls off or not, that would be fair enough. And if you -- even if hospital hardware is to go backwards 20% over the 3 years, that's still pretty high cumulative placements.

And then also, we've got a phenomena in homecare as well. We've had -- in FY '26, we've had growth in CPAP. So we've had growth in, hardware. That's pretty unusual for us. It's usually going in the opposite direction. That's been driven by a turn off of 3G and swap over the 4G so a bit of a bolus of hardware replacement in a particular market through FY '26. We're not expecting that to repeat into FY '27. So to get to your midpoint, you've also got OSA hardware going backwards. Reasonable assumptions, I think, and neither of them something to panic about.

Yes. Yes. No, that's clear. And I guess the next question is on your assumptions as well that you've incorporated into '27 specifically on the gross margin and the comments about the surcharges going into the Middle East conflict. I mean, I guess the comments about the surcharge I would read that as a temporary increase, and therefore, there should be an unwind once things change. So I guess one of the leading indicators we should be looking at, given you had given as the building blocks your guidance range. So what should we be looking at to think about that change in the charge assumption, please?

Yes, Davin. I'll sort of take that. I think it's on the end of the disruption in the Middle East and things normal. I think that even when the war stopped it will still take quite a bit of time for supply chains and everything to work their way through. So we -- whilst, yes, we think this probably is a temporary surcharge cost, how long that temporary goes for is uncertain at this point in time. And I would say that we would anticipate that it still remains for a reasonable period after the war stops.

Next question come from Dan Hurren at MST Marquee.

Look, I guess first question to Lyndal. Clearly, tariff mitigation is going better than expected. So is there any change to your original comment that this will all cost through an extra year in achieving your long-term gross margin guidance?

Thanks, Dan. So look, I think if everything sort of holds as it is at the moment. We have historically been able to do that 100, 150 basis point of just BAU improvement. If tariffs and Middle East disruption sort of stay as it is, we think we could get back to that 65 in, say, 2 to 3 years. Now that's with the caveat that we're at very favorable exchange rates at the moment. So we'd actually be targeting for higher than that at this stage.

The next point, I can't remember if you said this or we've all assumed it, but there's probably some ability to shift geographic manufacturing footprint to minimize that tariff impact. Is that -- is that something you're doing? And I mean and if so, how you're progressing with that?

Yes. The important thing for us, as I said, to spend our time and effort on growth rather than moving things around. But within the plants, we can move some capacity from plant to plant. We've done that during FY '26, maybe helped to the churn of a couple of million dollars in the year. And then also if we're adding manufacturing lines, we can maybe pull forward where we add them to help with that, and we've done that during the year as well, probably a couple of million dollars of total in terms of moving things around. But when I say moving things around, I don't mean picking stuff up and moving it from 1 plant to another, [ 1 million ] valuing from 1 plant to the other. Yes.

Thanks, Dan. Our next questions come from Adrian Allbon at Jarden.

Perhaps the first question for Lewis. Just on Slide 5. Just wondering -- just picking up on a comment you made around hospital consumables and total becoming a more relevant focus, I guess, rather than the new app, which has traditionally been a strong focus. I'm not saying you're losing focus on it, but are you able to just give us a bit more color what sort of driven each of those kind of lines, like I think IV consumables was again pretty strong at 9% growth. You've called out anesthesia at 40% plus, around about 10% of new apps. Can you just give us a bit more between sort of nasal high flow in IV?

Yes, look, they're all pretty strong across the board, Adrian. But the comment I kind of wanted to make is -- we might have ventilated replace during COVID, and there was quite a big turnover of the world's ventilator fleet. The modern ventilators can deliver invasive ventilation, noninvasive ventilation and nasal high flow. So what we see these days is we do see noninvasive ventilation use and nasal high flow use on a ventilator can look like an invasive consumable to us. So when you now look at our new apps versus our invasive consumers or traditional consumables, traditional has got new apps in it and that's just back to the matter.

So personally, I don't tend to look at new apps to the same extent I used to, I'm looking at hospital consumables. And so I'm very appreciate if you asked the question because I think that's the one we need to look at. That's one we'll look at going forward. But we don't want people to feel like we're taking something off them.

Sure. Okay. That's helpful. Can you just before we leave the first question, are you able to kind of just give us a sense of, I guess, the Optiflow versus the traditional Optiflow versus in IV within the new app, I appreciate there's a little bit of spillover into the IV stuff?

They're not all that different in terms of growth rates.

Okay. All right. That's good. I don't know if this is a question for Marcus maybe. But just coming back to the tariff situation. Are you able to kind of just give us a bit of an update of what you've been doing on the Nairobi protection? And how -- and what sort of guidance you've received as to how that might apply in a forward-looking construct including potentially like a Section 232?

Thanks for the question, Adrian. I think what we would say is that nobody knows the answer to how these different exceptions will be treated under any future changes. So that nobody can give you an opinion on that, that will be full proof. So we're still carrying on business as usual. We've included that 10% sort of assumption for the year. We know that will not necessarily be how things play out, but we have various free trade agreements and the exceptions that currently apply, whether they apply in the event of our Section 301 tariff for Section 232, that's still to be played out.

Okay. But okay, I understand that part, but can you just give us a bit of an update on what you've been doing on the Nairobi? I understand that's kind of been expended to the Airvo 3 in particular, I think, -- and.

Yes, we do have some assumptions that are on the U.S. Customs and Border Protection website, and that's for Airvo range of products and consumables and in 950 and some various consumables associated with the 950.

Thanks, Adrian. Next question come from Ben Crozier at Forsyth Barr. Please go ahead, Ben.

Just first one for me, just on that hospital hardware. Is there anything anecdotal you can sort of call out how these 950 and Airvo 3 maybe I've dropped that opportunity outside the ICU a lot more than prior device vision test?

Yes, I'm going to ask Justin to maybe some color on that.

Yes. Thanks, Ben. Justin here. I think from the 950, that's typically used on a ventilator. So typically, wherever ventilators are is where they're used. So I wouldn't sort of suggest too much is happening outside of the ICU there. The [ EVO3 ] does provide it's a lot more mobile than our previous generation products, so people can use that in other areas of the hospital. That's primarily to transfer patients from one department to another. And that's one of the big features of that product, and that's definitely being valued.

Yes. And then maybe just on [indiscernible] think previously, you called out maybe full face mask been a bit of a headwind because it's been a few years since you've launched a new mask. Is that still what you're seeing? And the new masks that you've launched in recent years are still growing quite well, but it's more offset by some of those mass categories where you haven't launched the mask lately?

Actually, I don't think I'd call that out then, but that's all a fair assumption, right? Quite accurate. I think as an answer in the same.

Thanks, Ben. Next question comes from Marcus Curley at UBS.

I just wondered if we start with a little bit of color in terms of how you're thinking about R&D these days. Obviously, it was a year of much slower growth. And so just keen on getting an understanding of your thinking behind that and in particular, how you think about it going forward? Is there a greater discipline being put over the top of the R&D in terms of its incremental return? Or am I just sort of overplaying more of a moderation in the growth rate?

Yes, Marcus, I think it's sort of you're overplaying it probably a little bit here. It's more a reflection of we purposely going through COVID and coming out of COVID accelerated our investment in R&D. And we said we were very willfully and purposely doing that. And so then this last year was more a reflection of that, which is where sort of over the 6 years, a 12% CAGR, on growth of R&D sort of feels about rightish to us. There is some lumpy expenses in the R&D number like biocompatibility expenses, clinical trials. So that can through just that R&D growth rate around a little bit, not material to the overall results.

But just looking at that R&D growth rate can make that look a bit higher and a bit lower and we had a little bit of that highest in some of those costs in '25, a bit lower in '26, which was reflected in the '25 being a bit higher, '26 looking a bit lower from a growth rate. So I wouldn't read anything into that.

Sure. Okay. And then secondly, I suppose an extension of that, maybe for Lewis. We haven't seen a full-face mask in OSA in a while, I was sort of expecting to see one. Could you talk a little bit about the challenges in full face relative to the other categories where clearly you've had a much greater cadence of March release?

I think it comes back down to the fundamental philosophy for us in this business, and that is to have a product where our customers, dealers, patients can see a difference. So when we're running our R&D programs, we're aiming at a perceivable difference. And whether we like it or not, that takes as long as it takes in the matter the planning and the strategies and the schedules that go in. We don't know we've hit that metric until we hit it. I think it's as simple as that.

Does that suggest that you have more false starts or you have -- or the process has a number of false starts in terms of ideas that don't necessarily meet that criteria and hence don't get launched?

Yes, it's a fair assessment. When it takes longer, that's probably had more iterations than it. Yes, absolutely right.

Thank you, Marcus. Next questions come from Andrew Paine at CLSA. Go ahead, Andrew.

Congrats on the results. Just coming back to gross margin. I'm just wondering if that guidance has any second half weighting. And also, you touched on it before, but visas that headwinds ease. How long would it take for gross margin than normalized, just thinking about the inventory build and how long it would take to work through that?

Yes. Look, not really giving much color on second half. The second half seasonality so sort of where we see the biggest uncertainty, I guess, in terms of what our revenue is likely to be. And so that can move that around a little bit. So nothing really to call out one way or another for that. In terms of working through inventory, I don't see that as being a major impact there. It just sort of depends on how long these costs go up for.

I guess one thing that I do want to call out as a risk to that margin in FY '27 is the amount of volume going air freight. We're assuming, as Lewis said, sort of stable supply chains, and that's sort of almost at a record low of the percentage going air freight and air freight where we've seen the biggest fuel surcharge impact. So I just really want to call that out as a bit of a risk to these numbers as well.

Okay. So just to clarify, so the 45 basis points raw material, you're assuming that is for the entire FY '27?

Correct.

Yes. Okay. And then just staying on to gross margins. So obviously, you've got the 65 basis points target. You did [ 63.7% ] this year with a 90 basis point headwind. So if we look at like an underlying gross margin, you're at [ 64.6% ] you're still targeting 100 to 150 basis points year-over-year, but you're saying sort of 3 years to 65% net income exchange rates. I'm just thinking like how far does this have to go? Are you still targeting 65% as a baseline? Or do you think you'll get above that over the next few years on an underlying basis?

Yes. Look, if -- so we want it to be on a -- as we're building a basis rather than an underlying basis. So we're going to that 65% based on the cost that we're seeing today because we're just doing our usual efforts to mitigate them and just treating them effectively as normal costs in. At these exchange rates, we wouldn't stop at 65% because as you highlight, we're pretty close to that if you stripped out the tariff impact. So at these exchange rates would probably be aiming for about 67%, 68%.

The 65% gross margin target is over the long term. So we think of it as over the whole range of foreign exchange over that whole launch. That means when it's favorable, you need to be a bit above which is now. Yes.

Thanks, Andrew. Next questions come from Vanessa Thomson at Jefferies.

Just wanted to continue on that [ FX ] same.I think it says in the [ Pac ] sensitivity of $2 million to $3 million for every 1% change in the New Zealand dollar. Is that typical? Or is that a little higher than we would have seen in the past?

Thanks, Vanessa. Look, it's possibly a little bit on the lower side. We're coming into the year with quite good amount of hedging so that can go up and down depending on the level of hedging we enter the year in. And we do show you in the in the pack, what our level of coverage is on Slide 16 that you can see we're really in quite a well-hedged position for most of our currencies.

And then I also wanted to ask about the clinical guidelines. Obviously, you've seen some really good progress in the primary medical support category. I wonder if you could give us a bit more color on guideline progress for the other categories of clinical practice.

Maybe a generic comment. I mean, certainly for respiratory Optiflow, that's Research and clinical practice guidelines has been well out of our control, I think, for quite a few years now. That's being run by the research community in general. I think for the current set of clinical practice guidelines that we have if every hospital that we visited just implemented current clinical practice guidelines, why do you want to think about what volume would look like. So I think the content and the -- what the current guidelines cover is not a hindrance to us at all. We do expect them to continue improving and continue building out over time. That's not something we have any control over.

Next question comes from David Bailey at Morgan Stanley.

Yes. Just got a question on anesthesia. Wondering if we can get that as a percentage of new apps revenue, that would be useful. And then thinking about the uptake or the penetration of addressable markets, how would you characterize that compared to high flow? Do you think it's been faster? Is it easier? So the question is your percentage of new apps relevant to anesthesia and then how the path of penetration as compared to high flow, if you could, please?

Sure. But over 10% of new apps would be anesthesia. In terms of penetration, I think it's on a fairly similar trajectory going back to what respiratory was at the time. So maybe a little quicker Yes. Yes, maybe a little quicker. Part of that is we've accelerated the sales force, of course, maybe a little quicker actually is we think I'll end on that one.

Okay. No, that's helpful. And then just pulling the pieces of gross margin, together, it looks like the previous estimates from tariffs is 130 annualized basis point impact. That's changed a little bit now, but now you've got some tariffs and -- sorry, some freight and other bits and pieces. So [ 130 ] previously, 90 this year plus 50 next year, is we're thinking of the cumulative headwinds being 140 bps over '26 and '27 now compared to the 130 previously, which didn't have the freight and other bits and pieces in there.

Yes. Look, I think that's a reasonable assumption there. Just the one little timing nuance I'd say is that material cost increases. So the we said 70 basis points for the surcharges across freight and materials. Some of the materials we might be buying for the full year this year. So there's probably another 20-odd basis points to come to sort of 20, 25 basis points to come in '28 if everything stayed as it was now.

Next questions come from Craig Wong-Pan at RBC.

Great. Look, related to that last point, I just wanted to understand how much worth of raw materials and finished goods did you have at the start of '27 to mitigate those impacts of higher input costs?

Yes. Look, we probably hold and you can see in our inventory not fairly good levels of raw materials, several months' worth of raw materials and whilst we've been advised of some of these prices, some of them haven't kicked in yet in terms of our purchasing. So that's why we don't get the full impact this year.

Okay. And then Second question is just with the Middle East conflict, has that impacted pricing. But has there been any constraints on or difficulty in obtaining raw materials?

I'm going to pass that question over to Andy.

Yes, Andy here. We haven't seen that yet. Obviously, our supply chain team got on to this very early, as Lewis said in his opening remarks, and they've been working really, really hard to sort of mitigate that sort of being a sort of medical device manufacturer. We're all over sort of thing. So they responded really, really quickly to mitigate that and keep on top of it.

Yes. And when you look at the experience our supply chain team have had over the last 5 years, Craig, I'm thinking of COVID, we're pretty seasoned. The great thing about supply chain at the moment is 10 years experience every 12 months.

Next question comes from Sacha Krien at Evans & Partners.

I just have one follow-up. We have -- I think we've discussed seasonal hospitalizations, which were, I think, the swing factor in last year's guidance. I'm just wondering if you could provide a few comments on how that sort of played out for you over the course of '26, whether or not you think you did see the impact from the weaker flu season or whether or not maybe those -- do you expect the impact wasn't quite as much as you were initially flagging at the start of the year?

Super question, Sacha, a pretty complex topic. But I just want to put a context on the discussion and that is that most years, generally, the seasonal variation is less than 5% of our hospital business. So that's what we're talking about. And then the other thing to consider is when we're talking about it, you've got virulence, that's one thing. You got hospital admissions, that's one thing. And then respiratory intensity that's a whole completely different thing. And it's really admissions versus intensity that we're potentially exposed to and can move us around.

And if you look at the year we've just completed. We've delivered 14% growth in hospital consumables, constant currency with what looks like a considerably lower respiratory seasonality. So all you can really make up that today is the changing clinical practice has overwritten the whatever impact seasonality had and that's actually what we've seen over the last few years as well. So then when we look at seasonality going forward, you think how are we going to treat it? What are we going to do? And I think going forward, the only real implication that you can use seasonality for us that if you see a big change year-on-year in seasonality, and that lines up with a big change in our consumables growth, we probably need to think through what the implications of that are.

So for example, if we saw a very large increase in seasonal hospitalizations and that lined up with a pretty large increase in our hospital consumables growth rate we probably need to think about what information does that give us for the growth rate in the future. And then you've got the opposite effect, if we see a big decrease in seasonal respiratory admissions, and we've got a decrease in our growth rate, that might not be the right growth rate that we should be taking forward into the future. So I think that's the sum total extent to all that. I don't want to overthink it. I think it's mostly about if you see a big swing year-on-year and it lines up with a big swing in our numbers, we need to think through. Let me be careful how we interpret that.

Thanks, Sacha. I think we've got time for one more question in the queue. That's from Christine Trinh at Macquarie Bank.

Congratulations on another solid result. You mentioned before that the potential revenue impact from Middle East conflict haven't really been considered in the guidance. I was just wondering if you could give us some color what that might look like if the world does continue. Just any comments around magnitude and percentage of sales that may impact?

Yes, Christine, we have totally considered that in our guidance. And what we're considering is that it won't have any impact. So hospital products used to treat patients is what our business and that part of the world is. So we don't expect any impact from a conflict. Maybe in terms of delivery times and shipping, that might not be smooth during the year. But in terms of total impact over the financial year to revenue, we don't expect anything.

Thanks very much, Christine. That concludes the time we have for questions. Please feel free to follow up with Dan or I. Now I'm going to pass back to Lewis for his final remarks.

Okay. Thanks, Marcus. Thanks to everyone for dialing in. Thanks for asking all the questions today. They were great, and we do appreciate it. And thank you, as always, to the entire team at Fisher & Paykel Healthcare for your contribution towards our results and for building the momentum. And we continue to be grateful for the support of our customers, our suppliers, our clinical partners and our shareholders.

Thank you, everyone, and enjoy the rest of your day.

Thank you. That does conclude today's conference. We do thank you for your participation, and have an excellent day.

Welcome to Fisher & Paykel Healthcare's Results Conference Call. My name is Lisa, and I'll be your operator for today's call. [Operator Instructions] Please note, this conference call is being recorded. I'd now like to turn the call over to Marcus Driller, VP Corporate.

Thank you, Lisa. Well, good morning, everyone, and welcome to the conference call for Fisher & Paykel Healthcare's First Half Results for the 2026 financial year. On the call today are Lewis Gradon, Managing Director and Chief Executive Officer; Lyndal York, Chief Financial Officer; Andy Niccol, Chief Operating Officer; Justin Callahan, VP, Sales and Marketing; and Andrew Somervell, VP of Products and Technology. Lewis and Lyndal will first provide an overview of the results, and then we'll move on to questions. We'll be discussing our results for the 6 months ended 30 September 2025. Earlier today, we provided our 2026 interim report, including financial statements and commentary on our results to the NZX and ASX. These disclosures can be accessed on our website. With that, I'd now like to turn the call over to Lewis.

Okay. And thank you, Marcus. Good morning, everyone, and thanks for joining us here this morning. I'm going to be referring to the investor presentation pack that we released to the NZX and the ASX earlier today. So we'll start on Page 2 with a recap of some of the recent highlights. I'm pleased to note that the company has achieved $1 billion in first half revenue for the first time, and we really appreciate the contributions of our people right around the world during this half. Thank you, everyone. We continue to roll out our latest Nova Nasal OSA mask during the period, and this is now available in New Zealand, Australia and major markets in Europe.

At our investor event in Royal Melbourne Hospital in Australia this year, we showcased the complexity involved in how clinical practice changes. And one way we contribute to that journey is hosting clinical forums and that's where interested health care professionals can get together, compare their clinical practice, compare their results with clinical data and the clinical practice guidelines. And over the last half, we hosted over 100 of these forums globally. Our U.S. team was honored to be recognized with the Zenith Award from the American Association for Respiratory Care and we got the construction of our fifth building at our East Tamaki campus here in Auckland, New Zealand underway, and they're making good progress as we speak.

So turn now to Page 3. Operating revenue for the first half was $1.089 billion, up 14% on the prior period or that's 12% at constant currency terms. Net profit after tax was $213 million, and that's up 39% on the prior period or 28% in constant currency. Lyndal's going to unpack the financial results in more detail shortly.

So we'll move on to the Hospital product group on Page 5. Operating revenue was $692 million. That's up 17% on the first half last year or 15% in constant currency, and that's come from a broad-based strength right across the hospital consumables business. New applications consumables revenue was up 18% or 16% in constant currency. And when we consider the robust growth that we're lapping from the first half last year, we think this result probably does reflect a consistent ongoing change in clinical practice. Hospital hardware revenue grew 21% in constant currency. And as you all know, hardware revenue can be quite variable on a month-to-month basis. And so we do anticipate that the full year hardware results will probably moderate down from this first half year result.

So turn now to Page 7 for Home Care. Home Care operating revenue was $396 million, up 10% on our first half last year or 8% in constant currency. I would say, mask growth was 8% or 6% in constant currency. Our latest range of OSA mask has performed well and the Solo range and the Nova Micro range are available in most major markets. And as I mentioned earlier, Nova Nasal is in the early stages of its rollout, with a U.S. launch planned for later in our second half. Our home care result also has a strong contribution from OSA hardware growth, which we're not expecting to repeat in the second half. And if anything, we feel it might be a pull forward of demand from the second half.

I'll pause there for now and hand over to Lyndal.

Thanks, Lewis, and good morning, everyone. On Page 8, our gross margin was 63% for the half. This is an increase of 110 basis points or 60 basis points in constant currency over the same period last year. The range of margin improvement efforts across our business, including manufacturing efficiency and other efficiency gains continued making a positive impact. U.S. tariffs on hospital products sourced from New Zealand impacted our gross margin by 32 basis points in this half. If the current global tariffs remain in effect as they currently are, our gross margin would be impacted by approximately 130 basis points on an annualized basis with approximately 75 basis points impacting in the 2026 full financial year. Our ongoing investment -- our ongoing improvement efforts are anticipated to more than offset this to provide an overall gross margin improvement for the full year FY '26 of roughly 50 basis points in both constant currency and reported currency using end of October exchange rates.

Moving on to Page 9. Total operating expenses grew 8% or 6% in constant currency compared to the prior period. This reflects the higher investments made over the last few years and modest increase in people in the last financial year. Operating margin was 26.3% for the half, an increase of 335 basis points or 286 basis points in constant currency over the same period last year. This reflects the improvement in gross margin as well as our operating expenses growing below revenue growth. R&D expenses grew 4% to $114 million and were 10% of revenue for the half. We continue to estimate that about 60% of our R&D spend is eligible for the 15% R&D tax credit. SG&A expenses were $285.5 million this half, an increase of 10% or 7% in constant currency.

Moving to Page 10. Operating cash flow this half was $245.8 million, up 5% from last year. Tax payments this half of $119.6 million were up from $53.8 million in the same period last year. Capital expenditure, which includes purchases of intangible assets, was $61.8 million for the half, up from $55.1 million in the same period last year. This includes the progress on the construction of the fifth building at our East Tamaki campus in New Zealand. Capital expenditure for the full 2026 financial year is expected to be approximately $210 million. Within this is around $125 million on land and buildings, including the next payment on our Karaka land purchase.

Looking at the balance sheet, debtor were largely in line with last year at 43 days. Net cash at the 30th of September 2025 was $237.8 million, and our gearing ratio was minus 13.5%. Interest-bearing borrowings were $55 million, all of it being current.

Turning to Page 11. We have declared a fully imputed interim dividend of $0.19 per share. This represents a 52% payout of our first half profit and is an increase on the interim dividend declared last year. It will be paid on the 16th of December.

Looking now at foreign currency on Page 12. Foreign currency movements positively impacted our net profit after tax by $19 million compared to the same period last year. This largely reflects the movement in spot rates and hedging results when compared to the same period last year. In this half, hedging losses were $6.2 million after tax and foreign exchange losses on balance sheet translations were $1 million after tax. At end of October rates, we would have an overall positive impact on net profit after tax of approximately $10 million to $15 million for the full financial year FY '26 when compared to the full financial year FY '25. This includes hedging losses in FY '26 of $20 million after tax and losses on balance sheet translation of about $0.5 million after tax for the full 2026 financial year. Now back over to you, Lewis.

Okay. Thanks, Lyndal. So turning now to our outlook on Page 13. At 31 October exchange rates, we now expect full year operating revenue to be in the range of approximately $2.17 billion to $2.27 billion. And net profit after tax to be in the range of approximately $410 million to $460 million. And this revenue guidance revision is driven by currency movements since our last update in August.

Our Hospital consumables second half growth can be influenced by year-on-year variations in the Northern Hemisphere winter respiratory season, and we don't have any additional insights into the potential impact at present. The available data does indicate that last winter was a historically strong season and so a similar season this year would be pushing our results towards the top end of our guidance. And conversely, a lower season would be tending to push us towards the lower end of guidance. Net profit after tax guidance incorporates this FX-driven revenue update, a 75 basis point impact to gross margin due to tariffs, good progress on gross margin improvements achieved during the first half and maintaining our operating expense growth below our long-term aspirational revenue growth. So I'll end my remarks here, so that we can open the line to questions.

Thanks, Lewis. Lisa, if I could ask you to please open up the lines for questions. And can I please ask everybody to limit your questions to 2. This is to ensure that everybody has an opportunity to participate and then you can rejoin the queue for additional questions.

[Operator Instructions]

Okay. So the first question comes from the line of Lyanne Harrison at BofA. Please go ahead, Lyanne.

Congratulations on hitting that $1 billion revenue for the first half. I might start with guidance and a question for Lyndal. I know you mentioned that FX is driving that increase or upgrade in guidance that you provided today. But for the NPAT level, you mentioned FX tailwinds of about $10 million to $15 million. But from a guidance perspective, your range increased by about $20 million. Can you talk to what else might be in that?

Yes, Lyanne, that's sort of what Lewis mentioned in terms of the gross margin improvement activities continuing on through the second half and growing our operating expenses below that long-term revenue aspiration to aim for some continued modest growth there.

Okay. And then on the gross margin, can you talk a little bit more, obviously, got very good gross margin expansion this half one on a constant currency basis. Can you talk about what aspects contributed most to that gross margin expansion?

Yes. Look, it's really everything that we do in the business. We've been back to sort of business as usual across our business with everything playing a role there. It's our manufacturing teams, getting the manufacturing efficiencies, doing all their continuous improvement projects, getting really strong improvement out of that, a bit of pricing through the sales team that we typically get and just sort of all of that playing a role into the gross margin improvement. And so as we anticipate, pre-COVID, we're able to improve gross margin about sort of 100 to 150 basis points on average per year, and we saw delivering that.

Maybe one other little bit of color, Lyanne, the complexity in that answer is in the operations and manufacturing space. Typically, that's over 3,000 improvement projects per year, all individually relatively small, but all adding up.

Thanks, Lyanne. Next question comes from Dan Hurren, MST.

Look, thanks for the guidance on the tariff impact and that color there. But I was hoping you could help us understand like how that tariff experience is playing out in the ground with price efficiencies?

Sure, Dan. We're thinking of is just another cost-in just like all other cost-ins and it's in the bag of just business as usual cost-ins. We're running the business as we normally would. We're running our continuous improvement projects as we normally would. So today that's really no material impact on the ground at all.

And look, a follow-up then. If we -- if you have a look around, it appears that Fisher & Paykel will probably be more gentle on price compared to other tariff impacted companies and broadly the same channel. Is there a potential that the price becomes a more of a lever over time as sort of the -- as the world gets used to these tariffs.

Could look at that 2 ways down. I mean we've got wonderful opportunities with every single customer we have to improve clinical practice. We don't have a single hospital anywhere in the world let alone in the United States, that's fully penetrated using all of our therapies for every patient that could. So we think we get a much better result spending our time talking about improving clinical practice, improving current outcomes. We think that gives us a better result in the short term and the long term, gives the customers a better result. So that's where our focus is at present.

Thanks, Dan. Next question come from Stephen Ridgewell at Craigs Investment Partners.

Just had a couple of questions on the hospital business performance, particularly during the first half and perhaps what you're seeing going to the second half. Hospital devices were a standout with constant currency growth of 21% in the period. Unless you may recall back in May, I think the indication was you weren't expecting too much from Airvo 3 or Airvo 3 NIV in terms of being a material driver. I'm just wondering, was that 21% growth we've seen, does that include a strong contribution from those products or otherwise, could you just give us a little bit color as to perhaps what's driven that strong result from Hospital Devices in the first half, please?

Yes, sure. First caveat, Stephen, is if you've been following us for more than a year or 2, you've seen that, that hospital hardware result is very lumpy, can be lumpy year-on-year, certainly lumpy half-on-half and kind of where we're going with that first half result, but I mean it's a great result, 21%. It looks like a very positive lump. We would not be surprised if it's followed by a negative lump for our second half and kind of reverting to more traditional growth for the full year, that would be our pick. And then the contribution very consistently in our business pretty much forever is a mix shift from one generation of product to the previous one. And right now, you're seeing that from 850 hardware to 950 hardware, and you're seeing that from Airvo 2 to Airvo 3. So that's certainly a contributor. Probably not much more than normal would be my pick, it's always happening.

And so just a follow-up to that. Have you seen within that 21% more of tilt towards growth from the Airvo product suite or pretty consistent with the humidifier controllers?

I don't think consistent out of that choice. I mean there are different stages, there are different evolutions, but nothing unusual there.

Okay, good. And then the second question is still on the hospital business. Again, so probably another surprise versus where the market was at was on kind of core consumables, which have come in again, a bit stronger, which given -- I know it's not purely with the respiratory data has a big influence, but we sort of see 19% constant currency growth in core. Just curious, is it sort of more market share gains have you entered some new markets or won some contracts. Just a bit of color there would be helpful to understand. Is that growth sustainable into the second half in the core consumables business?

Yes. So what we think is going on there, is during COVID an awful lot of these fully functional ventilators went out that could do invasive, noninvasive and nasal high flow. So we think, over time, people are using those ventilators across the range and they're using them for noninvasive and nasal high flow in some markets. And that does mean that for us, it looks like they're using an invasive circuit. So we think some of the noninvasive should we say growth and maybe even a little bit of the Optiflow nasal high flow growth in circuits a little bit sleeked into what looks to us and looks to you like that traditional consumables or invasive consumers.

Thanks, Stephen. Next question come from Davin Thillainathan at Goldman Sachs.

I just want to understand the guidance upgrade for the full year a little bit better. Just trying to make sure we understand the moving parts here. Part of it is clearly FX that is helping. But if I look at your first half results, you have come ahead of your guidance for the half, clearly indicating there's underlying momentum in the business? Because my understanding is your FX for the half hasn't really changed relative to when you set that guidance. So could you help us understand where the business outperformed in the half and perhaps why you don't expect that outperformance to flow through for the full year, if my understanding is right that your guidance upgrade is largely FX driven.

Absolutely right and good question. Thank you. So there's 2 components there. First one is hospital hardware, which we kind of just spoke to. It's quite lumpy. That performed pretty well in last couple of months. And I think probably doesn't flow into H2 like that. In fact, maybe even goes the other way. And then the other one is also hardware but OSA hardware. And this is CPAP machines where we've had a customer in a market where 3G is being turned off, accelerate the CPAP replacement cycle. So that's in our home care result. And once again, that hardware has probably come out of the second half.

Okay. And then thinking about the consumables part of your business in the Hospital segment. There's a whole range of new products that have, I guess, been released progressively over the last few years. And one particular sort of therapy that seems to be getting a bit more attention from a product launch perspective is in the NIV part of your franchise. Could you perhaps help us understand that a little bit better how does NIV sort of help the business, particularly given you are focused on changing clinical practice with the high flow part of it. So perhaps just the overlap between those therapies and how you expect that part of the franchise to grow over the next few periods?

Sure. Well, I think, overall, we are building our respiratory care business that covers all respiratory care applications and usages in a hospital, whatever the requirement and wherever the patient is. So NIV plays a role in that. And the leading clinical change in that space is nasal high flow for respiratory support. But another component of that is more and more usage of NIV and another component of that is humidified NIV, probably still less than 20% of the market would be humidifying NIV.

So the way we tend to think of it is our driver is a change in clinical practice towards nasal high flow. And once a customer is using that therapy to some extent, it makes a lot more sense for them to move to humidification and noninvasive therapy as well or to move to our noninvasive therapy offering. So we said it's kind of following along behind the change in clinical practice.

Thanks for your questions, Davin. Next questions come from the line of Vanessa Thomson at Jefferies.

I just wanted to ask about the respiratory season. You mentioned that last year, it looks like it was a strong season. I think when we look at all respiratory illness combined my understanding was it looked moderate. Is that wrong? Or is it that flu requires more support -- inducing more of your products than the other viruses?

So I'd kind of like to restate that, if you don't mind. So our assessment of last year, second half was that was the biggest flu season data in 15 years. So we think that was a biggie. You've got a COVID component and other components in there. So over time, you'd expect COVID to probably be coming down. And then we've kind of moved away from classifying them as high, moderate and low and all that kind of thing. It's just too murky. And what we've done last year, what we're trying to do this year is really just confine our analysis to this year versus last year and not categorize them. We've just found it too confusing. And so when we go down that route, well, last year, H2, our biggest flu season in 15 years, COVID was still relatively material.

Okay. Thank you. Okay, and my second question, I just wanted to ask if you had seen any impact from the shutdown. I think it was around 6 weeks, and we've seen some of the distributor companies talk to some slowdown. I wanted to get that affected you at all?

Shutdown. I would say I'm looking around the room, not from hospitals, not from FDA, not from reimbursement. We're shaking our heads on that one.

Thanks, Vanessa. Next questions come from Matt Montgomerie at Forsyth Barr.

Well done on a solid result. Just on Home Care for the second half. I was wondering if you could give us a feel for where you see growth rates. Would that be roughly consistent with the first half?

Well, I think probably the case for us is you'd expect a similar result to the first half under similar conditions, certainly for masks. And I've spoken to the hardware component of that. We think our first half growth is probably coming out of the second half.

And then secondly, on the anesthesia business, are you able to give us color for where that's in terms of growth or as a share of new apps in the first half?

Well, growth is still pretty solid, still got a 40% odd, something like that off that low base, that low base has become a bit over 10% of new apps consumables this half.

Thanks, Matt. Next questions come from Craig Wong-Pan at RBC.

Just looking at the full year guidance ranges. If I look at what that implies for the second half growth, I calculate the midpoint would imply 6% revenue growth, but actually NPAT declining by 1% in the second half. Just wanted to understand, is there anything we should be aware of in thinking about NPAT either in the PCP or in this coming second half to explain why there might be a decline in NPAT?

I'll take that. It's really a case of the revenue that Lewis has spoken about, the hardware likely coming back from the second half into the first half. Margin, we're still expecting improvements, but we get the full half of impact of tariffs in the second half. So there's quite a headwind related to that. And then OpEx still managing to grow that below our long-term revenue aspiration. And so what that ends up being will depend on where we land from a revenue perspective.

Okay. That's helpful. And then just wanted to understand the clinical forums. I mean, Lewis, you called out 100 hosted events this kind of period. Just trying to understand, is that sort of a similar level to usual? Or is this going to be something kind of going forward to help you change clinical practice?

So our business is based on a change in clinical practice. That's what we do for living. It's pretty much what we've always done, and it's relatively unique in our space. It's a relatively unique thing to be doing. And we had an Investor Day in a hospital in Melbourne earlier this year, and we went through some of the complexities and changing clinical practice. So what I thought I'd do this time is just following up on that theme, giving people more of an understanding of what changing in clinical practice, what that really means. I'd follow up with giving you some insight into the forums that we run. Now having said all that, that is actually pretty normal to us. We generally do over 100, I'd say, every half. Just trying to give some insight to that whole process.

Thanks, Craig. Next question has come from Saul Hadassin at Barrenjoey.

First one is on OpEx. I think at the full year '25 results, the guidance was for around 10% growth in operating costs in FY '26. Clearly, it's a lot lower in the first half. Maybe Lyndal, just if you can talk about where you think OpEx growth will land for the full year and what's embedded in that NPAT guidance range?

Yes. Look, probably sort of high single-digit growth we'd be anticipating for the full year in OpEx.

Okay. And Lewis, just your comments about sort of pull forward of sales on Home Care flow generators, but also that commentary around Hospital Hardware. You've had 2 months almost of the second half. Can you comment on what you're actually seeing on the ground in terms of those hardware sales? Is that what is giving you the guide as it relates to second half? Is it what you're already seeing? Or is that just still effectively an estimate and you don't actually have insights yet into second half performance?

It's just an estimate. I mean when we look at our hospital hardware numbers on a 6-monthly basis, you can see they're pretty lumpy. There's nothing to read into it. On a month or 2, I wouldn't read much into it. But I guess our pack is we probably wouldn't expect to see that first half again in the second half that kind of volume.

Thanks, Saul. Next question comes from Marcus Curley at UBS.

Just on the Home Care business, you reported 6% in masks. It's probably a touch below market. Could you just talk a little bit about what you think is happening there? Maybe it reflects weakness in the full face category again? Or just some color would be useful.

Okay. Sure. I think the fundamental is lapping 14% growth this half last year. So this half last year, we had the Solo Nasal, Solo pillows were launched that drove 14%. In the second half, we had Nova Micro launch. In the second half, we also had 3 or 4 launches from competitors in that half. And that still drive 9%. So I think this H1 story is more about what we're lapping, and it's about no new introductions for us materially during the half.

Have you seen any impact on those growth rates in the installed base or resupply part of your business? Or is it too difficult to tell in terms of your visibility into that?

So as far as we can tell, I'd say no. We haven't seen any unusual impact in resupply at all.

And then just on Home Care, competitive bidding most likely kicking off next year. Do you have a view on how that would affect the industry and yourselves?

Justin, what?

Marcus, it's Justin here. I think, I mean, at this stage, the final rules and requirements around competitive bidding haven't been really disclosed. And we expect the market to sort of react in a reasonable way. So we're not reading too much into it at this stage. It's still pretty early.

So Justin, your base view would be reimbursement levels in the U.S. relatively stable. You wouldn't be expecting a material decline?

I think we'd be expecting whatever the adjustment is it would be sort of a lot more reasonable. There's a lot more sort of experience in that space now from our customers. So I think it's -- we're not expecting anything too major.

Thanks, Marcus. Next questions come from Andrew Paine at CLSA.

Congrats on the results. Just looking at your full year guidance of $460 million at the top end of the range for NPAT. And just kind of working down, looking at that at the top end of the range, you've done $213 million in the first half. So you need $247 million in the second half to hit the top end of the range. If we back out FX there, bringing that down to $237 million constant currency, that would imply just 6% growth year-over-year in NPAT. Obviously, you've got the tariff impact in there, which if I'm right, that's about 120 basis points annualized. So that adds another 4% but OpEx is also performing better than expected. So just trying to get a bit of color around that growth rate at the top end of the range. It looks somewhat achievable even with maybe a slightly worse flu season year-over-year.

Maybe one thing, Andrew, that I'll just clarify that currency is actually a headwind in our second half compared to the second half of last year. So these numbers instead of being a tailwind of the 10 that you were talking about, it's actually a headwind of close to that. So because if you remember, the first half, we've got a $19 million benefit of NPAT. And we said for the full year, probably $10 million to $15 million. So that means the second half itself has got quite a tailwind -- sorry, headwind. So -- and then it's pretty much revenue dropping down, the tariff coming in, but still getting some good improvements, excluding that tariff for gross margin and OpEx in that sort of high single digit growth.

Yes. Okay. So even with the FX kind of moving favorably. I assume that's just impacted by the hedging that you have in place?

Yes. Look, it's a range of things. They're the biggest mover in the currency half compared to the second half last year is actually the balance sheet translations where we had a gain of about $7 million last year in the balance sheet translations. So not expecting much this year. So there's a large part of that headwind.

Okay. Sure. Okay, that makes sense. And then just obviously, it's difficult to really kind of talk to this, but there's the ongoing tariff investigation. I don't know if you can provide any clarity around if a similar tariff was applied in Mexico, what that would mean in terms of margin impact to the business?

We haven't really gone there. I mean, I think -- our thinking about tariffs is somewhat colored may be compared to most but anything we think about to do with tariffs or to manage tariffs or to change things because of tariffs, that's time and effort that we're not putting into growth. So that's always as a front line for us, actually, in tariffs are the topic.

Thanks, Andrew. Next questions come from Adrian Allbon at Jarden.

Maybe just a clarification question. Maybe this is for you, Lyndal. Just on your interim report, and as you get to the bottom of the comments from Neville and Lewis, there is like a discretionary bonus of $9 million to be shared amongst the employees. Just to understand that, is that a normal feature? Or is it -- and you just called it out this time? Or -- and how is it sort of accounted for?

Yes. So we've been doing this. This is a profit share payment that we make to all employees globally, and we've been doing it since we were formed basically...

Since before listing.

Since before listing. And we do normally show that amount in our annual report every year and in our interim report. So nothing's changed, nothing out of the ordinary.

Okay. And would that have been accrued until the first half anyway, just as per normal?

Correct, yes.

Or is it a full year payment?

No, no, no. It's half on that premium.

Okay. All right. No problem. Sorry about that. Just the second question, like also in that sort of interim report, like you make a call out on the RENOVATE study, which I guess in the theme of this one, like you sort of -- you are putting a bit more emphasis on the change in clinical practice. Like is my sort of read of that, that's sort of like quite -- it's a large sort of clinical trial that's sort of you're presenting some useful results in terms of for hypoxic cases using high flow as a triaging type product. Is that the right way to think about the output from that study and how you might be using it to sort of educate?

Well, I think the thing about that study is the number, I think it's towards 2,000 patients. So it's a large number of patients and covers COVID and not COVID as well. And it's a comparison against noninvasive ventilation if memory serves me correctly, which is kind of a step up. And if finds nasal high flow, the word they use is not non-inferior, non-inferior. So as we're saying -- yes, yes, you've got a therapy that the user would rather use. You've got a therapy that a patient would rather have, and it's not inferior to NIV. That would be the short version.

Right. And obviously -- but presumably, that also dovetails nicely into like the Airvo 3 being wider use across the hospital as well and simpler to use for -- as you go down the staff levels.

Yes. I mean I want to be careful. We've called out one. It had a lot of press at the time it was released. It's unusual. It's big numbers elegantly done an analyzed study, but it's one of hundreds and probably more compelling is into clinical practice guidelines around the world. And that's really stepped up the issuing of clinical guidelines from the different professional bodies.

Thanks, Adrian. Next questions come from David Bailey at Morgan Stanley.

One for Lyndal and one for Lewis. Lyndal, 50 bps in gross margin this year, including 75 bps from tariffs. So if you strip out tariffs, you're doing 125. You sort of said on a full year run rate, full year tariff impact is 130. So as I look at fiscal '27, should we be thinking that all else equal, there's an incremental 65 basis point tariff impact to come through and then the underlying will give you sort of 60. So just trying to understand the incremental change from the tariff impacts in '27, just given that we know that the underlying should be around 125 basis points or so.

Yes, David. Look, you're spot on that. There's another top up of that headwind of tariffs coming into FY '27. So you're right, sort of 65 bps. And look, anywhere from sort of 100 to 150 basis points on average a year, we try to do is underlying improvement.

Okay. That's helpful. And just for Lewis, I mean there's some commentary here around clinical adoption. There's clinical evidence that comes through to the sales and marketing effort as well. Just wondering if you can sort of talk to a little bit about how those two have progressed? And then in terms of utilization of hardware and asset turns on, how is that sort of driving more consumables used per device, if you can?

Yes. So that's sort of a double bang. I'll answer the second one first because our therapies are used across such a diverse range of hospital situations from EDs to recovery rooms to general wards to ICUs, we don't really have a utilization versus consumable terms per device, model or predictor because there's so much variation in there. We can't do it. So we've kind of abandoned that measure. And then in terms of clinical evidence, sales and marketing effort, the big mover there is clinical practice guidelines. Once we have clinical practice guidelines from a reputed clinical body, our approach is generally to use the clinical practice guideline. And I think I'm looking at Justin, I don't think we've got any hospital anywhere on the planet perfectly implementing clinical practice guidelines on every patient they could.

Not yet.

Any comment?

Correct.

So at this stage of the nasal high flow evolution anyway, it's about the clinical practice guidelines, and that's what we utilize in our sales, if it's more than anything else.

Yes. Understood. Okay. Maybe just a different way to ask it then is, do you think the devices are being used more broadly across the hospitals?

Yes, we do. Yes, absolutely.

Thanks, David. Next questions come from Christine Trinh at Macquarie Bank.

Congratulations again on a strong result. Just 2 quick questions from me on the consumables space. Firstly, New Apps growth of 16%, constant currency was ahead of our expectations. Can we expect a similar level of growth going forward? And on the U.S. launch of the Nova in the second half, can we just get your expectations for contributions to growth there? We think in kind of double digits that we saw in the first half of '25.

U.S. Nova, let me talk to that first, probably late in H2. So I wouldn't be making any material contribution at this stage probably later in our second half. And then New Apps at 16%. So when we think about second half, we're moving into the seasonal hospitalization zone. And you would think that if we had a similar seasonal hospitalization, this second half compared to last year, this should probably get a similar growth rate in the second half to what you saw in the first half. This time around, because of the very high flu season numbers from last year and also COVID probably decreasing, we would characterize last year as probably really high and probably top end of range. If we had a similar season this year, we'd expect we'd be at top end.

Great. And just on that Nova piece, if it's in the first half of '27, can we just get your thoughts on growth expectations for that half?

Yes, maybe way bit too far out for us at the moment, Christine.

Next question comes from Marcus Curley at UBS. Please go ahead, Marcus.

Could you just talk a little bit maybe a little about the trajectory on R&D. Obviously, 4% in half is low for the business. Is that just reflecting some lumpy projects? Or are you generally starting to see lower percentages of R&D for the business for the next, say, 12 to 24 months?

Yes, Marcus, what that is, is really reflecting the higher than sort of our normal revenue aspirational growth over the past number of years. So it's just sort of writing that as the sort of average over time. So we'd probably expect that to remain a little bit on the lower side, sort of low to mid-single digits for probably another year or 2.

Great. And then just on anesthesia. Could you provide any color in terms of any noticeable difference between trace and switch specifically, is it sedation or GA driving it or both? Just can you get a bit of color in terms of the different components of the market?

It kind of depends on the release track we've taken places where we've had Trace and Switch for -- from day 1, probably on comparable contributions. And then at least in the U.S., we led with Trace, and we're still leading with Trace. That's the bulk of it in the U.S. So the answer to your question, it varies depending on what we led with when we led with it.

And Switch is in the U.S. these days?

Well, it's approved in the U.S. We are still following up all the Trace opportunities in the U.S. at present.

And that's different to a Switch opportunity?

Yes. That's right.

Thanks, Marcus. We don't have any more questions in the queue. So I will now turn over to Lewis for some concluding comments.

All right. Well, thanks, Marcus, and thanks to everybody for your questions today. And as always, I'd like to conclude by thanking all of the people at Fisher & Paykel for your contribution this half. And we'd like to acknowledge the support of our customers, suppliers, clinical partners and shareholders. So thank you, everybody, and enjoy the rest of your day. Thank you.

This concludes our call today. Thank you for your participation. You may now disconnect.