What changed in this filing

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Item 1A. Risk Factors

2024-08-09 compared with 2023-08-11 · 256 added, 230 removed, 388 unchanged (56% of the section changed)

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Before deciding to purchase, hold or sell our common stock, you should carefully consider the risks described below in addition to the other cautionary statements and risks described elsewhere, and the other information contained in this Report and in our other filings with the SEC, including our subsequent reports on Forms 10-Q and 8-K.

The risks and uncertainties described below are not the only ones we face.

The risks and uncertainties described below are not the only risks we face.

Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business.

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Risks Related to Our Business and Industry

• Our inability to compete successfully in our markets may harm our business.

• Consolidation in the health care industry could have an adverse effect on our revenues and results of operations.

• Global macroeconomic conditions, including inflation, supply chain disruptions, and fluctuations in foreign currency exchange rates, could continue to adversely affect our operations and profitability.

• Our business, financial condition and results of operations could continue to be harmed by the effects of outbreaks of COVID-19 or similar public health crises.

• Our inability to compete successfully may harm our business.

• Consolidation in the healthcare industry and healthcare payment reform could have an adverse effect on our revenues and results of operations.

• Global macroeconomic conditions, including inflation, supply chain disruptions, and fluctuations in foreign currency exchange rates, could adversely affect our operations and profitability.

• Our business, financial condition and results of operations could be harmed by the effects of pandemics, epidemics, or other public health crises.

• We are subject to various risks relating to international activities that could affect our overall profitability.

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• We are increasingly dependent on information technology systems and infrastructure.

• Actual or attempted breaches of security, unauthorized disclosure of information, attacks such as denial of service, or the perception that personal and/or other sensitive or confidential information in our possession is not secure, could result in a material loss of business, substantial legal liability or significant harm to our reputation.

• Actual or attempted breaches of security, unauthorized disclosure of information, attacks which reduce availability of systems such as denial of service, or the perception that personal and/or other sensitive or confidential information in our possession is not secure, could result in a material loss of business, substantial legal liability or significant harm to our reputation.

• We may not be able to realize the anticipated benefits from acquisitions, which could adversely affect our operating results.

• If we are unable to support our continued growth, our business could suffer.

• If we are unable to support our continued growth or achieve expected operating efficiencies, our business could suffer.

• Our business depends on our ability to market effectively to dealers of home healthcare products and sleep clinics.

• Our SaaS business depends substantially on customers entering into, renewing, upgrading and expanding their agreements for cloud services, term licenses, and maintenance and support agreements with us.

Any decline in our customer renewals, upgrades or expansions could adversely affect our future operating results.

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• If our SaaS products fail to perform properly or if we fail to develop enhancements, we could lose customers, become subject to service performance or warranty claims and our market share could decline.

• Our SaaS business depends substantially on customers entering, renewing, upgrading and expanding their agreements for cloud services, term licenses, and maintenance and support agreements with us.

Any decline in our customer renewals, upgrades or expansions could adversely affect our future operating results.

• If our SaaS products fail to perform properly or if we fail to develop enhancements, we could lose customers, become subject to service performance or warranty claims and our sales could decline.

• If there are interruptions or performance problems associated with our technology or infrastructure, our existing SaaS customers may experience service outages, and our new customers may experience delays in the deployment of our platforms.

• Climate change and related natural disasters, or other events beyond our control, could negatively impact our business operations and financial condition.

• Climate change and natural disasters, or other environmental events beyond our control, could negatively impact our business operations and financial condition.

Risks Related to Non-Compliance with Laws, Regulations and Healthcare Industry Shifts

• Healthcare reform may have a material adverse effect on our industry and our results of operations.

• Healthcare reform or other cost-cutting measures, including changes in coverage policy for our products, by government or commercial payors may have a material adverse effect on our industry and our results of operations.

• Government and private insurance plans may not adequately reimburse our customers for our products, which could result in reductions in sales or selling prices for our products.

• We are subject to various risks relating to our compliance with fraud and abuse laws and transparency laws relating to our interactions with our customers, health care providers, and patients, which could subject us to government investigation, litigation, or other penalties to the extent our activities or relationships are found not to comply, and could result in changes in our business operations that could harm our ability to successfully market and sell our products and services.

• Our use and disclosure of personal information, including health information, is subject to federal, state and foreign privacy and security regulations, and our failure to comply with those regulations or to adequately secure the information we hold could result in significant liability or reputational harm.

• We are subject to various risks relating to our compliance with fraud and abuse laws and transparency laws relating to our interactions with our customers, healthcare providers, and patients, which could subject us to government investigation, litigation, or other penalties to the extent our activities or relationships are found not to comply or could otherwise cause us to incur significant costs to defend our actions, and could result in substantial fines, penalties, harm our reputation, divert our management’s attention, or result in changes in our business operations that could harm our ability to successfully market and sell our products and services.

• Our use and disclosure of personal information, including health information, is subject to federal, state and foreign privacy, artificial intelligence, data, biometrics and security regulations, and our failure to comply with those regulations or to adequately secure the information we hold could result in significant liability, regulatory investigations, legal actions, or reputational harm.

• Our business activities are subject to extensive regulation, and any failure to comply could have a material adverse effect on our business, financial condition, or results of operations.

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• We are subject to tax audits by various tax authorities in many jurisdictions.

• Environmental, social, and corporate governance (ESG) issues may have an adverse effect on our business, financial condition and results of operations and reputation.

• Sustainability and corporate governance issues may have an adverse effect on our business, financial condition and results of operations and reputation.

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Risks Related to the Securities Markets and Ownership of Our Common Stock

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Risks Related to Our Business and Industry

Our inability to compete successfully in our markets may harm our business.

The markets for our products, which encompass Sleep and Respiratory Care products and SaaS offerings, are highly competitive and are characterized by frequent product improvements and evolving technology.

Our ability to compete successfully depends, in part, on our ability to develop, manufacture and market innovative new products and enhance existing products.

Our inability to compete successfully may harm our business.

The geographic markets for our products, which encompass Sleep and Respiratory Care products and SaaS offerings, are highly competitive and are characterized by frequent product improvements and evolving technology.

Our ability to compete successfully depends, in part, on our ability to develop, manufacture and sell innovative new products and to enhance existing products.

For our Sleep and Respiratory Care business, the development of innovative new products by our competitors or the discovery of alternative treatments or potential cures for the conditions that our products treat could make our products noncompetitive or obsolete.

Current competitors, new entrants, academics, and others currently may be developing, or may develop, new devices, alternative treatments or cures, and targeted or indirect pharmaceutical solutions to the conditions our products treat that could provide better features, clinical outcomes or economic value than those that we currently offer or subsequently develop.

For SaaS, the market for business management software is highly competitive, rapidly evolving, subject to changing technology, with low barriers to entry, shifting customer needs and frequent introductions of new products and services.

For example, certain pharmaceutical treatments, such as GLP-1’s currently used to treat diabetes or for weight loss, may enhance patient health, lower the occurrence of obesity, potentially reduce the severity of OSA, or be approved for treatment of OSA.

For SaaS, the demand for business management software is highly competitive, rapidly evolving, subject to changing technology, with low barriers to entry, shifting customer needs and frequent introductions of new products and services.

Many prospective customers have invested substantial personnel and financial resources to create, implement and integrate their current business management software into their operations and, therefore, may be reluctant or unwilling to change from their current in-house solution or provider to one of our platforms or products.

Additionally, some of our competitors have greater financial, research and development, manufacturing and marketing resources than we do.

The past several years have seen a trend towards consolidation in the healthcare industry and in the markets for our products.

Additionally, some of our competitors, including those described above, have greater financial, research and development, manufacturing and marketing resources than we do.

The past several years have seen a trend towards consolidation in the healthcare industry and in the geographic markets for our products.

Industry consolidation could result in greater competition if our competitors combine their resources, if our competitors are acquired by other companies with greater resources than ours, or if our competitors become affiliated with customers of ours.

Conversely, the health care space is attractive to many companies, particularly new entrants interested in developing digital health models to compete with offerings of more established companies like us.

The healthcare space is attractive to many companies, particularly new entrants interested in developing digital health models to compete with offerings of more established companies like us.

Additionally, one of our competitors, Philips, has an ongoing product recall.

We cannot predict the timing or nature of their substantial return to the market or the impact to our business, financial condition, and results of operations.

We cannot predict the timing or nature of their substantial return or the impact to our business, financial condition, and results of operations.

Continuing competition could increase pressure on us to reduce the selling prices of our products or could cause us to increase our spending on research and development and sales and marketing.

If we are unable to develop innovative new products, maintain competitive pricing, enhance existing products, and offer products that consumers perceive to be as good as those of our competitors, our sales and gross margins could decrease which would harm our business.

Consolidation in the health care industry could have an adverse effect on our revenues and results of operations.

Many home health care dealers and out-of-hospital health providers are consolidating, which may result in greater concentration of purchasing power.

Numerous initiatives and reforms by legislators, regulators, and third-party payers to curb the rising cost of healthcare have catalyzed a consolidation of aggregate purchasing power within the markets in which we sell our products.

As the health care industry consolidates, competition to provide goods and services to industry participants may become more intense.

These industry participants may try to use their market power to negotiate price concessions or reductions for medical devices and components produced by us.

If we are forced to reduce our prices because of consolidation in the health care industry, our revenues may decrease and our consolidated earnings, financial condition, and/or cash flows may suffer.

If we are unable to develop innovative new products, maintain competitive pricing, enhance existing products, and offer products that purchasers perceive to be as good as those of our competitors, our sales and gross margins could decrease which would harm our business.

Consolidation in the healthcare industry and healthcare payment reform could have an adverse effect on our revenues and results of operations.

Many home healthcare dealers and OOH health providers are consolidating, which may result in greater concentration of purchasing power.

Numerous initiatives and reforms by legislators, regulators, and third-party payors to curb the rising cost of healthcare have catalyzed a consolidation of aggregate purchasing power where we sell our products.

As the healthcare industry consolidates, competition to provide goods and services to industry participants may become more intense.

These industry participants may try to use their market power to negotiate price concessions or volume reductions for medical devices and components produced by us.

If we are forced to reduce our prices because of consolidation in the healthcare industry, our revenues may decrease and our consolidated earnings, financial condition, and/or cash flows may suffer.

Global macroeconomic conditions, including inflation, supply chain disruptions, and fluctuations in foreign currency exchange rates, could continue to adversely affect our operations and profitability.

The global decline in economic conditions, geopolitical instability, and other macroeconomic factors, including inflation, supply chain disruptions, interest rate and foreign currency rate fluctuations, and volatility in the capital markets could continue to negatively impact our business, financial condition, and results of operations.

Global economic conditions, geopolitical instability, and other macroeconomic factors, including inflation, supply chain disruptions, such as recent shipping disruptions in the Red Sea, interest rate and foreign currency rate fluctuations, and volatility in the capital markets could negatively impact our business, financial condition, and results of operations.

The growth of our business and demand for our products are affected by changes in the health of the overall global economy.

Deterioration in the global economic environment may cause decreased demand for our products which could result in lower product sales, lower prices for our products, and reduced reimbursement rates by third-party payers, while increasing the cost of operating our business.

Macroeconomic conditions have impacted our global supply chain, primarily through constraints on raw materials and electronic components.

These constraints on raw materials and electronic components are also impacting companies outside of our direct industry, which has and continues to result in a competitive supply environment causing higher costs, requiring us to commit to minimum purchase obligations as well as make upfront payments to our suppliers.

These disruptions have impacted and may continue to impact our ability to produce and supply products in quantities necessary to

Deterioration in the global economic environment may cause decreased demand for our products which could result in lower product sales, lower prices for our products, or reduced reimbursement rates by third-party payors, while increasing the cost of operating our business.

Macroeconomic conditions may impact our global supply chain, primarily through constraints on raw materials and electronic components.

These constraints on raw materials and electronic components may also impact companies outside

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satisfy customer demand, which could negatively impact our results of operations.

These highly competitive and constrained supply chain conditions are increasing our cost of sales, which has and may continue to adversely impact our profitability.

Global economic conditions have also impacted foreign currency exchange rates relative to the U.S.

Although the majority of our net sales and cash generation have been made in the U.S., as our business in markets outside of the U.S.

of our direct industry, which could result in a competitive supply environment causing higher costs, requiring us to commit to minimum purchase obligations as well as make upfront payments to our suppliers.

These disruptions may impact our ability to produce and supply products in quantities necessary to satisfy customer demand, which could negatively impact our results of operations.

Highly competitive and constrained supply chain conditions may increase our cost of sales, which may adversely impact our profitability.

Global economic conditions may impact foreign currency exchange rates relative to the U.S.

Although the majority of our net sales and cash generation have been made in the U.S., as our business in countries outside of the U.S.

continues to increase, our exposure to foreign currency exchange risk related to our foreign sales and operations will increase.

Fluctuations in the rate of exchange between the U.S.

dollar and foreign currencies, primarily the Australian Dollar, Singapore Dollar, Euro, Chinese Yuan, and Canadian Dollar, have had and could continue to have an adverse effect on our financial results, including our net sales, margins, gains and losses, as well as on the values of our assets and liabilities.

Our business, financial condition and results of operations could continue to be harmed by the effects of outbreaks of COVID-19 or similar public health crises.

We are subject to risks associated with public health threats, including outbreaks associated with COVID-19 and its variants, which have had and may continue to have an adverse impact on certain aspects of our business.

While most countries have removed or reduced the restrictions initially implemented in response to COVID-19, the extent to which the COVID-19 pandemic or another public health crisis impact our business, results of operations, and financial condition will depend on future developments which are highly uncertain and are difficult to predict.

These developments include, but are not limited to, future resurgences of the virus and its variants, actions taken to contain the virus or address its impact, the timing, distribution, and efficacy of vaccines and other treatments, and the imposition of government lockdowns, quarantine and physical distancing requirements.

dollar and foreign currencies, primarily the Australian Dollar, Singapore Dollar, Euro, Chinese Yuan, and Canadian Dollar, have had and could in the future have an adverse effect on our financial results, including our net sales, margins, gains and losses, as well as on the values of our assets and liabilities.

Our business, financial condition and results of operations could be harmed by the effects of pandemics, epidemics, or other public health crises.

We are subject to risks associated with public health crises, which have had and may have an adverse impact on certain aspects of our business in the future.

The extent to which public health crises impact our business, results of operations, and financial condition will depend on future developments which are highly uncertain and are difficult to predict.

These developments include, but are not limited to, actions taken to contain outbreaks or address their impact, the timing, distribution, and efficacy of treatments, and the imposition of government lockdowns, quarantine and physical distancing requirements.

We are subject to various risks relating to international activities that could affect our overall profitability.

We manufacture substantially all of our products outside the United States and sell a significant portion of our products in non-U.S.

Sales in combined Europe, Asia and other markets accounted for approximately 36% and 37% of our net revenues in the years ended June 30, 2023 and June 30, 2022, respectively.

We manufacture substantially all of our products outside the United States and sell a significant portion of our products outside the United States.

Sales in combined Europe, Asia and other regions accounted for approximately 36% and 36% of our net revenues in the years ended June 30, 2024 and June 30, 2023, respectively.

Our sales and operations outside of the U.S.

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Additionally, the military conflict between Russia and Ukraine has resulted in the implementation of sanctions by the U.S.

and other governments against Russia and has caused significant volatility and disruptions to the global markets.

While we are not presently aware of any direct impacts these restrictions have had on our suppliers’ supply chains, disruptions resulting from the conflict in Ukraine and the UFLPA may materially and negatively impact our suppliers’ ability to obtain

and other governments against Russia and has caused significant volatility and disruptions globally.

Further, it is not possible to

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a sufficient supply of raw materials necessary to meet the quantity and/or timing of our product demands.

Further, it is not possible to predict the short- and long-term implications of this conflict, which could include but are not limited to further sanctions, uncertainty about economic and political stability, increases in inflation rate and energy prices, cyber-attacks, supply chain challenges and adverse effects on currency exchange rates and financial markets.

We are continuing to monitor the situation in China, Ukraine, and globally as well as assess its potential impact on our business.

Although our sales into Russia and Ukraine did not constitute a material portion of our total revenue in fiscal year 2023, further escalation of geopolitical tensions, or new geopolitical tensions, could have a broader impact that expands into other markets where we do business, which could adversely affect our business and/or our supply chain, business partners or customers in the broader region.

predict the short- and long-term implications of this conflict, which could include but are not limited to further sanctions, uncertainty about economic and political stability, increases in inflation rate and energy prices, cyber-attacks, supply chain challenges and adverse effects on currency exchange rates and financial markets.

Our sales into Russia and Ukraine did not constitute a material portion of our total revenue in fiscal year 2024.

Further escalation of geopolitical tensions, or new geopolitical tensions, could have a broader impact that expands into other markets where we do business, which could adversely affect our business and/or our supply chain, business partners or customers in the broader region.

We are continuing to monitor conflicts and geopolitical risks globally as well as assess the potential impact on our business.

Any of the above factors may have a material adverse effect on our ability to increase or maintain our sales or otherwise have a material adverse impact on our business, financial condition, and results of operations.

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As a part of the regulatory process to obtain marketing clearance for new products and new indications for existing products, or for other reasons, we conduct and participate in numerous clinical trials with a variety of study designs, patient populations, and trial endpoints.

We, our competitors, or other third parties may also conduct clinical trials involving our commercially marketed products.

We, our competitors, or other third parties may also conduct clinical trials involving our commercially sold products.

The results of clinical trials may be unfavorable or inconsistent with previous findings or could identify safety signals associated with our products.

Current or future clinical trials may not meet primary endpoints, may reveal disadvantages of our products and solutions for various markets we address, or could generate unfavorable or inconsistent clinical data.

Clinical data, or the market’s or regulatory bodies’ perception of the clinical data, may adversely impact our ability to obtain product clearances or approvals, and our position in, and share of, the markets in which we participate.

Moreover, if these clinical trials identify serious safety issues associated with our marketed products, potentially adverse consequences could result, including that regulatory authorities could withdraw clearances or approvals of our products, we could be required to halt the marketing and sales of our products or recall our products, we could be required to update our product labeling with additional warnings, we could be sued and held liable for harm caused to patients, and our reputation may suffer.

Current or future clinical trials may not meet primary endpoints, may reveal disadvantages of our products and solutions for various countries we address, or could generate unfavorable or inconsistent clinical data.

Clinical data, or purchasers or regulatory bodies’ perception of the clinical data, may adversely impact our ability to obtain product clearances or approvals, and our position in, and share of, the countries in which we sell our products.

Moreover, if these clinical trials identify serious safety issues associated with our products, potentially adverse consequences could result, including that regulatory authorities could withdraw clearances or approvals of our products, we could be required to halt the marketing and sales of our products or recall our products, we could be required to update our product labeling with additional warnings, we could be sued and held liable for harm caused to patients, and our reputation may suffer.

Any of these could have a material adverse impact on our business, financial condition, and results of operations.

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Any product liability claim brought against us, with or without merit, could result in the increase of our product liability insurance rates.

In addition, we would have to pay any amount awarded by a court in excess of our policy limits.

Our insurance policies have various exclusions, and thus we may be subject to a product liability claim for which we have no insurance coverage, in which case, we may have to pay the entire amount of any award.

We cannot assure you that our insurance coverage will be adequate or that all claims brought against us will be covered by our insurance and we cannot assure you that we will be able to obtain insurance in the future on terms acceptable to us or at all.

In addition, we would have to pay any amount awarded by a court outside of our policy limits.

Our insurance policies have various exclusions, and thus we may be subject to a product liability claim for which we have no insurance coverage, requiring us to pay the entire amount of any award.

We cannot assure that our insurance coverage will be adequate or that all claims brought against us will be covered by our insurance and we cannot assure that we will be able to obtain insurance in the future on terms acceptable to us or at all.

A successful product liability claim brought against us in excess of our insurance coverage, if any, may require us to pay substantial amounts, which could harm our business.

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We have in the past and may in the future be required to license patents and other intellectual property rights owned by other parties.

We have a number of pending patent applications, and we do not know whether any patents will issue from any of these applications.

We have pending patent applications, and we do not know whether any patents will issue from any of these applications.

We do not know whether any of the claims in our issued patents or pending applications will provide us with any significant protection against competitive products or otherwise be commercially valuable.

Legal standards regarding the validity of patents and the proper scope of their claims are still evolving, and there is no consistent law or policy regarding the valid breadth of claims.

Legal standards regarding the validity of patents and the proper scope of their claims are still evolving, and there is no globally consistent law or policy regarding the breadth of valid claims.

Additionally, there may be third-party patents, patent applications and other intellectual property held by entities much larger than us, that are relevant to our products and technology which are not known to us and that block or compete with our products.

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If the outcome of any litigation, proceeding or claim brought against us were adverse, we could be subject to significant liabilities to third parties, could be required to obtain licenses from third parties, could be forced to design around the patents at issue or could be required to cease sales of the affected products.

If we become involved in any intellectual property litigation, we may be required to pay substantial damages, including but not limited to treble damages, attorneys’ fees and costs, for past infringement if it is ultimately determined that our products infringe a third party’s intellectual property rights.

If we become involved in any intellectual property litigation, we may be required to pay substantial damages, including but not limited to treble damages, attorneys’ fees and costs, for past infringement, or could be at risk for an injunction if it is ultimately determined that our products infringe a third party’s intellectual property rights.

Even if infringement claims against us are without merit, defending a lawsuit takes significant time, may be expensive and may divert management’s attention from other business matters.

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Competition for top talent in the healthcare, technology and SaaS industries can be intense.

Our ability to recruit and retain such talent will depend on a number of factors, including hiring practices of our competitors, compensation and benefits, flexibility regarding virtual and hybrid work arrangements, work location, work environment, industry economic conditions, and corporate culture.

If we cannot effectively recruit, develop and retain qualified employees to drive our strategic goals, our business could suffer.

Our ability to source and retain such talent will depend on many factors, including hiring practices of our competitors, compensation and benefits, flexibility regarding virtual and hybrid work arrangements, work location, work environment, industry economic conditions, and corporate culture.

If we cannot effectively source, develop and retain qualified employees to drive our strategic goals, our business could suffer.

Our leverage and debt service obligations could adversely affect our business.

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We purchase configured components for our devices from various suppliers, including some who are single-source suppliers for us.

Disruptions to our suppliers may limit our ability to manufacture our devices in a timely or cost-

Disruptions in the price or supply of configured components may limit our ability to manufacture

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effective manner, which could result in a significant reduction in sales and profitability.

We cannot assure you that a replacement supplier would be able to configure its components for our devices on a timely basis or, in the alternative, that we would be able to reconfigure our devices to integrate the replacement part.

A reduction, delay or halt in supply while a replacement supplier reconfigures its components, or while we reconfigure our devices for the replacement part, would limit our ability to manufacture our devices in a timely or cost-effective manner, which could result in a significant reduction in sales and profitability.

We cannot assure you that our inventories would be adequate to meet our production needs during any prolonged interruption of supply.

our devices in a timely or cost-effective manner, which could result in a significant reduction in sales and profitability.

We cannot assure that a replacement supplier would be able to configure its components for our devices on a timely basis or, in the alternative, that we would be able to reconfigure our devices to integrate the replacement part.

A reduction, delay or halt in supply while a replacement supplier reconfigures its components, or while we reconfigure our devices for the replacement part, may limit our ability to manufacture our devices in a timely or cost-effective manner, which could result in a significant reduction in sales and profitability.

We cannot assure that our inventories would be adequate to meet our production needs during any prolonged interruption of supply.

In particular, a global semiconductor supply shortage has had and continues to have wide-ranging effects across multiple industries, and it has impacted suppliers that incorporate semiconductors into the parts they supply to us.

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While we have entered into agreements for the supply of many components, there can be no assurance we will be able to extend or renew these agreements on similar terms or that suppliers will fulfill their commitments under existing agreements.

Furthermore, in order to secure such necessary components, we may be obligated to purchase them at prices that are higher than those available in the current market and/or may incur significant price increases from these suppliers in the future.

Furthermore, to secure necessary components, we may be obligated to purchase them at prices that are higher than those available in the current market and/or may incur significant price increases from suppliers in the future.

In addition, we have and may continue to be required to commit to greater purchase volumes and/or make prepayments to our suppliers.

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Delays in our ability to produce and deliver our devices could cause our customers to purchase alternative products from our competitors.

In response to the global semiconductor supply shortage, we expanded our global offering of devices to include Card-to-Cloud (C2C) versions of our prior model AirSense 10 and AirCurve 10 offerings that do not incorporate a communications module.

We introduced C2C models to address the growing backlog of patients waiting for therapy with our devices during and after the COVID-19 pandemic.

Because C2C devices do not include communications capability they are not as appealing to our customers creating a risk that we will be forced to liquidate inventory of those devices as communications modules become available for our AirSense 10 and AirSense 11 devices.

Additionally, substantial increases in product demand, including in response to a product recall by one of our competitors, Philips, have resulted and could continue to result in higher costs for materials and components, and increased expenditures for freight and other expenses, which have and could continue to negatively impact our profit margins.

Additionally, substantial increases in product demand, including in response to a product recall by a major competitor, Philips, have resulted and could continue to result in higher costs for materials and components, and increased expenditures for freight and other expenses, which have and could continue to negatively impact our profit margins.

If supply constraints continue, our ability to meet increased demand and our corresponding ability to sell affected products may be materially reduced.

Alternatively, the reintroduction of products by Philips could lead to reduced demand for our products.

The reintroduction of products by Philips could lead to reduced demand for our products.

We are increasingly dependent on information technology systems and infrastructure.

Our technology systems are potentially vulnerable to breakdown or other interruption by fire, power loss, system malfunction, unauthorized access and other events.

We rely on information technology systems and infrastructure, including technologies and services provided by third parties, to support our business processes and activities, products and customers.

Our business therefore depends on effective, reliable and secure operation of our technology systems and related infrastructure.

These technology systems are potentially vulnerable to breakdown or other interruption by fire, power loss, system malfunction, unauthorized access and other events.

Likewise, data privacy breaches by employees and others with both permitted and unauthorized access to our systems may pose a risk that sensitive data may be exposed to unauthorized persons or to the public, or may be permanently lost.

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In addition, significant implementation issues may arise as we continue to consolidate and outsource certain computer operations and application support activities.

Actual or attempted breaches of security, unauthorized disclosure of information, attacks such as denial of service, or the perception that personal and/or other sensitive or confidential information in our possession is not secure, could result in a material loss of business, substantial legal liability or significant harm to our reputation.

Actual or attempted breaches of security, unauthorized disclosure of information, attacks which reduce availability of systems such as denial of service, or the perception that personal and/or other sensitive or confidential information in our possession is not secure, could result in a material loss of business, substantial legal liability or significant harm to our reputation.

Despite the implementation of security measures, our internal computer and information technology systems and those of our vendors and customers are vulnerable to attack and damage from computer viruses, malware, denial of service attacks, unauthorized access, or other harm, including from threat actors seeking to cause disruption to our business.

We face risks related to the protection of information that we maintain—or engage a third-party to maintain on our behalf—including unauthorized access, acquisition, use, disclosure, or modification of such information.

Cyberattacks are increasing in their frequency, sophistication and intensity and have become increasingly difficult to detect.

We face risks related to the protection of information that we maintain—or a third-party engaged to maintain information security on our behalf—including unauthorized access, acquisition, use, disclosure, or modification of such information.

Cyberattacks are increasing in their frequency, sophistication and intensity and have become increasingly difficult to detect and respond to.

Cyberattacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information.

A material cyberattack or security incident could

A material cyberattack or security incident could cause interruptions in our operations and could result in a material disruption of our business operations, damage to our reputation, financial condition, results of operations, cash flows and prospects.

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cause interruptions in our operations and could result in a material disruption of our business operations, damage to our reputation, financial condition, results of operations, cash flows and prospects.

We receive, collect, process, use and store a large amount of information from our clients, our patients and our own employees, including personal information, protected health and other sensitive and confidential information.

We receive, collect, process, use and store a large amount of information from our customers, our patients and our own employees, including personal information, intellectual property, protected health and other sensitive and confidential information.

This data is often accessed by us through transmissions over public and private networks, including the internet.

The secure transmission of such information over the Internet and other mechanisms is essential to maintain confidence in our information technology systems.

We have implemented security measures, technical controls and contractual precautions designed to identify, detect and prevent unauthorized access, alteration, use or disclosure of our clients’, patients’ and employees’ data.

However, the techniques used in these attacks change frequently and may be difficult to detect for periods of time and we may face difficulties in anticipating and implementing adequate preventative measures.

We may face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.

Beyond external criminal activity, systems that access or control access to our services and databases may be compromised as a result of human error, fraud or malice on the part of employees or third parties, or may result from accidental technological failure.

The secure transmission of such information over the Internet and other mechanisms is essential to maintain confidence in our information technology systems yet is vulnerable to unauthorized access and disclosure.

The techniques used in these attacks change frequently and may be difficult to detect for periods of time and we may face difficulties in anticipating and implementing adequate preventative measures.

Beyond external activity, systems that access or control access to our services and databases may be compromised as a result of human error, fraud or malice on the part of employees or third parties, or may result from accidental technological failure.

Because the techniques used to circumvent security systems can be highly sophisticated and change frequently, often are not recognized until launched against a target, and may originate from less regulated and remote areas around the world, we may be unable to proactively address all possible threats or implement adequate preventive measures for all situations.

If threat actors are able to circumvent or breach our security systems, they could steal any information located therein or cause serious and potentially long-lasting disruption to our operations.

Security breaches or attempts thereof could also damage our reputation and expose us to a risk of monetary loss and/or litigation, fines and sanctions.

We also face risks associated with security breaches affecting third parties that conduct business with us or our clients and others who interact with our data.

While we maintain insurance that covers certain security incidents, we may not carry appropriate insurance or maintain sufficient coverage to compensate for all potential liability.

We are subject to diverse laws and regulations relating to data privacy and security, including HIPAA and European data privacy laws.

Complying with these numerous and complex regulations is expensive and difficult, and failure to comply with these regulations could result in regulatory scrutiny, fines, civil liability or damage to our reputation.

In addition, any security breach or attempt thereof could result in liability for stolen assets or information, additional costs associated with repairing any system damage, incentives offered to clients or other business partners to maintain business relationships after a breach, and implementation of measures to prevent future breaches, including organizational changes, deployment of additional personnel and protection technologies, employee training and engagement of third-party experts and consultants.

Additionally, the costs incurred to remediate any security incident could be substantial.

In addition, on July 26, 2023, the SEC issued a new proposed rule intended to enhance and standardize disclosures regarding cybersecurity risk management, strategy, governance and cybersecurity incident reporting, which will require us to develop additional policies and procedures to comply with these new rules and provide additional disclosure on our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

We cannot assure you that any of our third-party service providers with access to our, or our clients, patients and/or employees’ personally identifiable and other sensitive or confidential information will not experience security breaches or attempts thereof, which could have a corresponding effect on our business.

If threat actors circumvent or breach our security systems, they could steal information or cause serious and potentially long-lasting disruption to our operations.

Security breaches or attempts could also damage our reputation and expose us to a risk of monetary loss and/or litigation, fines and sanctions.

We also face risks associated with security breaches affecting third parties that conduct business with us or our customers and others who interact with our data.

While we maintain insurance that covers certain security incidents, we may not carry enough insurance or maintain sufficient coverage to compensate for all potential liability.

We are subject to diverse laws and regulations relating to data privacy and security, including HIPAA and GDPR, among others.

Complying with these numerous and complex regulations is expensive and difficult, and failure to comply could result in regulatory scrutiny, fines, civil liability or damage to our reputation.

In addition, any security breach or attempt could result in liability for stolen assets or information, additional costs associated with repairing any system damage, incentives offered to customers or other business partners to maintain business relationships after a breach, and implementation of measures to prevent future breaches, including organizational changes, deployment of additional personnel and protection technologies, employee training and engagement of third-party experts and consultants.

The costs incurred to remediate any security incident could be substantial.

We cannot assure that our third-party service providers with access to our, or our customers, patients and/or employees’ personally identifiable and other sensitive or confidential information will not experience actual or attempted security breaches, which could have a negative effect on our business.

We may not be able to realize the anticipated benefits from acquisitions, which could adversely affect our operating results.

Part of our growth strategy includes acquiring businesses consistent with our commitment to innovation in developing products for the diagnosis and treatment of sleep apnea and respiratory care as well as our SaaS business.

For example, we acquired MatrixCare in November 2018, Propeller Health in January 2019, and MEDIFOX DAN in November 2022.

The success of our acquisitions depends, in part, on our ability to successfully integrate the business and operations of the acquired companies.

Additionally, our management may have their attention diverted while trying to integrate these businesses.

If we are not able to successfully integrate the operations, we may not realize the anticipated benefits of the acquisitions fully or at all, or may take longer to realize than expected.

Additionally, our management may have attention diverted while trying to integrate acquisitions.

If we are not able to successfully integrate the operations of acquisitions, we may not realize the anticipated benefits fully or at all, or may take longer to realize than expected.

Acquisitions involve numerous risks and could create unforeseen operating difficulties and expenditures.

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Moreover, we have recorded intangible assets, including goodwill, in connection with our acquisitions.

At least on an annual basis, we must evaluate whether facts and circumstances indicate any impairment of the intangible assets’ values.

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At least on an annual basis, we must evaluate whether facts and circumstances demonstrate any impairment of the value of acquired intangible assets.

The qualitative and quantitative analysis used to test goodwill is dependent upon various considerations and assumptions, including macroeconomic conditions, industry and market characteristics, projections of acquired companies’ future revenue, discount rates, and expectations of future cash flows.

While we have made such assumptions in good faith and believe them to be reasonable, the assumptions may turn out to be materially inaccurate, including for reasons beyond our control.

Changes in such assumptions may cause a change in circumstances indicating that the carrying value of intangible assets may be impaired.

Changes in such assumptions may cause a change in circumstances demonstrating that the carrying value of intangible assets may be impaired.

Consequently, we may be required to record a significant charge to earnings in the financial statements during the period in which any impairment of intangible assets is determined.

If we are unable to support our continued growth, our business could suffer.

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If we are unable to support our continued growth or achieve expected operating efficiencies, our business could suffer.

As we continue to grow, the complexity of our operations increases, placing greater demands on our management.

Our ability to manage our growth effectively depends on our ability to implement and improve our financial and management information systems on a timely basis and to effect other changes in our business including the ability to monitor and improve manufacturing systems, information technology, and quality and regulatory compliance systems, among others.

Unexpected difficulties during expansion, the failure to attract and retain qualified employees, the failure to successfully replace or upgrade our management information systems, the failure to manage costs or our inability to respond effectively to growth or plan for future expansion could cause our growth to stop.

We continually assess opportunities for improved operational efficiency and to better align expenses with revenues, while preserving our ability to make investments in research and development projects, product and technology acquisitions and our people, which we believe is important to our long-term success.

As a result of these assessments, there have been, and may in the future be, restructuring activities, realignment of strategies and cost reduction initiatives.

These measures could yield unintended consequences, such as distraction of our management and employees, reduced employee productivity, business disruption, and inability to attract or retain key personnel, which could negatively affect our business.

Moreover, our restructuring and optimization initiatives could incur additional costs which impact our operating results.

We cannot guarantee that the activities under our restructuring plans or other initiatives will result in the desired efficiencies and estimated cost savings.

If we fail to manage our growth effectively and efficiently, our costs could increase faster than our revenues and our business results could suffer.

In addition, productivity initiatives may at times involve reorganization or relocation of manufacturing activities.

Such manufacturing realignment may result in the interruption of production, which could increase our costs and reduce our sales.

Any interruption in production capability could require us to make substantial capital expenditures to fill customer orders, which could negatively affect our profitability and financial condition.

Our business depends on our ability to market effectively to dealers of home healthcare products and sleep clinics.

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In addition, home healthcare dealers have experienced price pressures as government and third-party reimbursement has declined for home healthcare products, and home healthcare dealers are requiring price discounts and longer periods of time to pay for products purchased from us.

We cannot assure you that physicians will continue to prescribe our products, or that home healthcare dealers or patients will not substitute competing products when a prescription specifying our products has been written.

We have expanded our marketing activities in some markets to target the population with a predisposition to sleep-disordered breathing as well as primary care physicians and various medical specialists.

We cannot assure you that these marketing efforts will be successful in increasing awareness or sales of our products.

Our SaaS business depends substantially on customers entering into, renewing, upgrading and expanding their agreements for cloud services, term licenses, and maintenance and support agreements with us.

We cannot assure that physicians will continue to prescribe our products, or that home healthcare dealers or patients will not substitute competing products when a prescription specifying our products has been written.

We have expanded our marketing activities in some areas to target the population with a predisposition to sleep-disordered breathing as well as primary care physicians and various medical specialists.

We cannot assure that these marketing efforts will be successful in increasing awareness or sales of our products.

Our SaaS business depends substantially on customers entering, renewing, upgrading and expanding their agreements for cloud services, term licenses, and maintenance and support agreements with us.

Any decline in our customer renewals, upgrades or expansions could adversely affect our future operating results.

We typically enter into term-based agreements for our licensed on-premises offerings, cloud services, and maintenance and support services, which customers have discretion to renew or terminate at the end of the initial term.

In order for us to improve our operating results, it is important that new customers enter into renewable agreements, and our existing customers renew, upgrade and expand their term-based agreements when the initial contract term expires.

We typically enter into term-based agreements for our licensed on-premises offerings, cloud services, and maintenance and support services, which customers have discretion to renew or terminate.

To improve our operating results, it is important that new customers enter into renewable agreements, and our existing customers renew, upgrade and expand their term-based agreements when the initial contract term expires.

Our customers have no obligation to renew, upgrade or expand their agreements with us after the terms have expired.

Our customers’ renewal, upgrade and expansion rates may decline or fluctuate as a result of a number of factors, including their satisfaction or dissatisfaction with our offerings, our pricing, the effects of general economic conditions, competitive offerings or alterations or reductions in our customers’ spending levels.

Our customers’ renewal, upgrade and expansion rates may decline or fluctuate for a number of factors, including their satisfaction or dissatisfaction with our offerings, our pricing, the effects of general economic conditions, competitive offerings or alterations or reductions in our customers’ spending levels.

If our customers do not renew, upgrade or expand their agreements with us or renew on terms less favorable to us, our revenues may decline.

If our SaaS products fail to perform properly or if we fail to develop enhancements, we could lose customers, become subject to service performance or warranty claims and our market share could decline.

Our SaaS operations are dependent upon our ability to prevent system interruptions and, as we continue to grow, we will need to devote additional resources to improving our infrastructure in order to maintain the performance of our products and solutions.

The applications underlying our SaaS products are inherently complex and may contain material defects or errors, which may cause disruptions in availability or other performance problems.

We have from time to time found defects in our

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products and may discover additional defects in the future that could result in data unavailability, unauthorized access to, loss, corruption or other harm to our customers’ data.

If our SaaS products fail to perform properly or if we fail to develop enhancements, we could lose customers, become subject to service performance or warranty claims and our sales could decline.

Our SaaS operations are dependent upon our ability to prevent system interruptions and, as we continue to grow, we will need to devote additional resources to improving our infrastructure to maintain the performance of our products and solutions.

The applications underlying our SaaS products are inherently complex and may contain material defects or errors, which may cause disruptions in availability or other performance problems.

We have from time to time found defects in our products and may discover additional defects in the future that could result in data unavailability, unauthorized access to, loss, corruption or other harm to our customers’ data.

While we implement bug fixes and upgrades as part of our regularly scheduled system maintenance, we may not be able to detect and correct defects or errors before implementing our products and solutions.

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Further, if we fail to innovate or adequately invest in new technologies, we could lose our competitive position in the markets that we serve.

To the extent that we fail to introduce new and innovative products, or such products are not accepted in the market or suffer significant delays in development, our financial results may suffer.

To the extent that we fail to introduce new and innovative products, or such products are not accepted or suffer significant delays in development, our financial results may suffer.

An inability, for technological or other reasons, to successfully develop and introduce new products on a timely basis could reduce our growth rate or otherwise have an adverse effect on our business.

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We depend on services from various third parties as well as our own technical operations infrastructure to distribute our SaaS products via the internet.

If a service provider fails to provide sufficient capacity to support our platform or otherwise experiences service outages, such failure could interrupt our customers’ access to our service, which could adversely affect their perception of our platform’s reliability and our revenues.

If a service provider fails to provide sufficient capacity to support our platforms or otherwise experiences service outages, such failure could interrupt our customers’ access to our service, which could adversely affect their perception of our platform’s reliability and our revenues.

Any disruptions in these services, including as a result of actions outside of our control, would significantly impact the continued performance of our SaaS products.

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Design and mechanical errors, spikes in usage volume and failure to follow system protocols and procedures could cause our systems to fail, resulting in interruptions in our SaaS products.

Any interruptions or delays in our service, whether or not caused by our products, or as a result of third-party error, our own error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with customers and cause our revenue to decrease and/or our expenses to increase.

Any of the above circumstances or events may harm our reputation, cause customers to terminate their agreements with us, impair our ability to obtain contract renewals from existing customers, impair our ability to grow our customer base, result in the expenditure of significant financial, technical and engineering resources, subject us to financial penalties and liabilities under our service level agreements, and otherwise harm our business, results of operations and financial condition.

Climate change and related natural disasters, or other events beyond our control, could negatively impact our business operations and financial condition.

Any interruptions or delays in our service, whether caused by our products, or as a result of third-party error, our own error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with customers and cause our revenue to decrease and/or our expenses to increase.

Any of the above circumstances or events may harm our reputation, cause customers to terminate their agreements, impair our ability to obtain contract renewals from existing customers, impair our ability to grow our customer base, result in the expenditure of significant financial, technical and engineering resources, subject us to financial penalties and liabilities under our service level agreements, and otherwise harm our business, results of operations and financial condition.

Climate change and natural disasters, or other events beyond our control, could negatively impact our business operations and financial condition.

Natural disasters and other business disruptions could adversely affect our business and financial condition, and global climate change could result in certain types of natural disasters occurring more frequently or with more intense effects.

The impacts of climate change may include physical risks (such as frequency and severity of extreme weather conditions), social and human effects (such as population dislocations or harm to health and well-being), compliance costs and transition risks, shifts in market trends and other adverse effects.

The impacts of climate change may include physical risks (such as frequency and severity of extreme weather conditions), social and human effects (such as population dislocations or harm to health and well-being), compliance costs and transition risks (including due to regulatory changes), shifts in market trends (including customer preference for sustainably produced or reusable products) and other adverse effects.

Such impacts may disrupt parties in our supply chain, our customers, and our operations.

For example, if a natural disaster strikes our manufacturing facilities, we will be unable to manufacture our products for a substantial amount of time and our sales and profitability will decline.

Our facilities and the manufacturing equipment we use to produce our products would be costly to replace and could require substantial lead-time to repair or replace.

In the event our facilities were affected by natural or man-made disasters, we could be forced to rely on third-party manufacturers.

Although we believe we possess adequate insurance for the disruption of our business from causalities, such insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all.

For example, if a natural disaster strikes our manufacturing facilities, such as those in Sydney, Australia and Singapore which are vulnerable to such events, we may be unable to

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In addition, the increasing concern over climate change has resulted and may continue to result in more legal and regulatory requirements designed to mitigate the effects of climate change on the environment, including regulating greenhouse gas emissions, alternative energy policies and sustainability initiatives.

If such laws or regulations are more stringent than current legal or regulatory requirements, we may experience increased compliance burdens and costs to meet the regulatory obligations.

manufacture our products for a substantial amount of time and our sales and profitability may decline.

Our facilities and the manufacturing equipment we use to produce our products would be costly to replace and could require substantial lead-time to repair or replace.

In the event our facilities are affected by natural or man-made disasters, we could be forced to rely on third-party manufacturers.

Although we believe we possess adequate insurance for the disruption of our business, it may not be sufficient to cover our potential losses and may not continue to be available to us on acceptable terms, or at all.

In addition, the increasing concern over climate change has resulted and may continue to result in more legal and regulatory requirements designed to mitigate the effects of climate change on the environment, including regulating greenhouse gas emissions and related reporting requirements, alternative energy policies and sustainability initiatives.

If such laws or regulations are more stringent than current legal or regulatory requirements, we may experience increased compliance burdens and costs to meet the regulatory obligations, as well as adverse impacts on the availability of raw materials, manufacturing operations and the distribution of our products, which could adversely affect our operations and profitability.

Risks Related to Non-Compliance with Laws, Regulations and Healthcare Industry Shifts

Healthcare reform may have a material adverse effect on our industry and our results of operations.

Healthcare reform or other cost-cutting measures, including changes in coverage policy for our products, by government or commercial payors may have a material adverse effect on our industry and our results of operations.

In March 2010, the ACA was signed into law in the United States.

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The ACA required adults not covered by an employer or government-sponsored insurance plan to maintain health insurance coverage or pay a penalty, a provision commonly referred to as the individual mandate.

The ACA also contained a number of provisions designed to generate the revenues necessary to fund the coverage expansions.

The ACA also contained provisions designed to generate the revenues necessary to fund the coverage expansions.

This included new fees or taxes on certain health-related industries, including medical device manufacturers.

Beginning in 2013, entities that manufacture, produce or import medical devices were required to pay an excise tax in an amount equal to 2.3% of the price for which such devices are sold in the United States.

Beginning in 2013, entities that manufacture, produce or import medical devices were required to pay an excise tax in an amount equal to 2.3% of the price for such devices sold in the United States.

This excise tax was applicable to our products that are primarily used in hospitals and sleep labs, which includes the ApneaLink, VPAP Tx and certain respiratory care products.

Through a series of legislative amendments, the tax was suspended beginning in 2016, and permanently repealed effective January 1, 2020.

In addition to the competitive bidding changes discussed above, the ACA also included, among other things, directions to develop organizations that are paid under a new payment methodology for voluntary coordination of care by groups of providers, such as physicians and hospitals, and the establishment of a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research.

The increased funding and focus on comparative clinical effectiveness research, which compares and evaluates the risks and benefits, clinical outcomes, effectiveness and appropriateness of products, may result in lower reimbursements by payors for our products and decreased profits to us.

In addition to the competitive bidding changes discussed above, the ACA also included, among other things, the implementation of new payment methodologies for voluntary coordination of care by groups of providers, such as physicians and hospitals, and the establishment of a new Patient-Centered Outcomes Research Institute to oversee, identify, prioritize and conduct comparative clinical effectiveness research.

The increased funding and focus on comparative clinical effectiveness research, which compares and evaluates the risks and benefits, clinical outcomes, effectiveness and appropriateness of products, may result in changes to Federal healthcare program coverage and reimbursement methodologies for our products which could also lead to lower reimbursements for our products by payors and decreased revenues to us.

Other federal legislative changes have been proposed and adopted since the ACA was enacted.

These changes included an aggregate reduction in Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013.

The CARES Act, which was signed into law in March 2020 and subsequently amended, suspended the payment reductions from May 1, 2020 through December 31, 2020, and extended the sequester by one additional year, through 2030.

In addition, on January 2, 2013, the American Taxpayer Relief Act of 2012, was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

The full impact on our business of the ACA and other new laws is uncertain.

The Budget Control Act of 2011 required, among other things, mandatory across-the-board reductions in certain types of federal spending, also known as sequestration.

Medicare claims with dates-of-service or dates-of-discharge on or after July 1, 2022 and effective until further notice, incur a 2% reduction in Medicare payment, known as Medicare Sequestration Payment Reductions.

In addition, on January 2, 2013, the American Taxpayer Relief Act of 2012, was signed into law, which further reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

More recently, the Consolidated Appropriations Act of 2024 (CAA) was signed into law in March 2024.

Among other things, the CAA reduced by half the 3.37% reduction to 2023’s Medicare Physician Fee Schedule conversion factor that had been in place since January 1, 2024, increasing the conversion factor to $33.32 for services furnished between March 9 and December 31, 2024.

Absent from the CAA are extensions of the Medicare telehealth flexibilities set to expire at the end of 2024.

Without Congressional action, Medicare will no longer cover most telehealth services furnished to beneficiaries in their home or to individuals residing in urban areas after the end of the year which could have an adverse impact on rates of diagnosis of OSA.

The full impact on our business of the ACA, the Medicare Sequestration Payment Reductions, and other new laws is uncertain.

Nor is it clear whether other legislative changes will be adopted, if any, or how such changes would affect the demand for our products.

Future actions by the administration and the U.S.

Congress including, but not limited to, repeal or replacement of the ACA could have a material adverse impact on our results of operations or financial condition.

Additionally, all or a portion of the ACA and related subsequent legislation may be modified, repealed or otherwise invalidated through other judicial challenge.

On June 17, 2021, the U.S.

Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA.

Prior to the Supreme Court’s decision, President Biden issued an executive order to initiate a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace, which began on February 15, 2021 and remained open through August 15, 2021.

The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA.

It is unclear how other healthcare reform measures of the Biden administration or other efforts, if any, to challenge, repeal or replace the ACA will impact the ACA or our business.

Various healthcare reform proposals have also emerged at the state level within the United States.

The ACA as well as other federal and/or state healthcare reform measures that may be adopted in the future, singularly or in the aggregate, could have a material adverse effect on our business, financial condition and results of operations.

Congress could have a material adverse impact

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on our results of operations or financial condition.

It is unclear exactly how the 2024 election will impact healthcare reform measures of the existing administration or whether a new administration could impose other reform efforts, including what, if any, impact such changes will have on our business.

Various healthcare reform proposals have also emerged at the state level within the United States.

Government and private insurance plans may not adequately reimburse our customers for our products, which could result in reductions in sales or selling prices for our products.

Our ability to sell our products depends in large part on the extent to which coverage and adequate reimbursement for our products will be available from government health administration authorities, private health insurers and other organizations.

These third-party payers are increasingly challenging the prices charged for medical products and services and can, without notice, deny or reduce coverage for our products or treatments that may include the use of our products.

Therefore, even if a product is approved for marketing, we cannot make assurances that coverage and reimbursement will be available for the product, that the reimbursement amount will be adequate or that the reimbursement amount, even if initially adequate, will not be subsequently reduced.

For example, in some markets, such as Spain, France and Germany, government coverage and reimbursement are currently available for the purchase or rental of our products but are subject to constraints such as price controls or unit sales limitations.

In other markets, such as Australia, there is currently limited or no reimbursement for devices that treat sleep apnea conditions.

These third-party payors are increasingly challenging the reimbursement models and prices charged for medical products and services and can, without notice, deny or reduce coverage for our products or treatments that may include the use of our products.

Therefore, even if a product is approved for marketing, we cannot assure that coverage and reimbursement will be available for the product, that reimbursement will be adequate or that the reimbursement amount, even if initially adequate, will not be subsequently reduced.

For example, in some countries, such as Spain, France and Germany, government coverage and reimbursement are currently available for the purchase or rental of our products but are subject to constraints such as price controls or unit sales limitations.

In other countries, such as Australia, there is currently limited or no reimbursement for devices that treat sleep apnea conditions.

As we continue to develop new products, those products will generally not qualify for coverage and reimbursement until they are approved for marketing, if at all.

In the United States, we sell our products primarily to home healthcare dealers, health systems and sleep clinics.

Reductions in reimbursement to our customers by third-party payers, if they occur, may have a material impact on our customers and, therefore, may indirectly affect our pricing and sales to, or the collectability of receivables we have from, those customers.

Reductions in reimbursement to our customers by third-party payors, if they occur, may have a material impact on our customers and, therefore, may indirectly affect our pricing and sales to, or the collectability of receivables we have from, those customers.

A development negatively affecting reimbursement stems from the Medicare competitive bidding program mandated by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA).

Under the program, our customers who provide DME must compete to offer products in designated competitive bidding areas, or CBAs.

Under the program, our customers who provide services must compete to offer products in designated competitive bidding areas, or CBAs.

We cannot predict the impact the competitive bidding program and the developments in the competitive bidding program will have on our business and financial condition.

If changes are made to this program in the future, it could affect amounts being recovered by our customers.

If changes are made to this program in the future, it could affect amounts being recovered by our customers and subsequent purchases from us.

In addition, our products are the subject of periodic studies by third party agencies, including the Agency for Healthcare Research and Quality (AHRQ) in the United States, intended to review the comparative effectiveness of different treatments of the same illness.

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We believe that the AHRQ methodology was too restrictive, that retrospective and prospective observational studies should have been included, that real-world evidence should have been considered, and that CPAP therapy does have long-term positive effects on health outcomes.

Although the results of comparative effectiveness studies are not intended to mandate any reimbursement policies for public or private payers, it is not clear what, if any, effect such research will have on the sales of our products.

Although the results of comparative effectiveness studies are not intended to mandate any reimbursement policies for public or private payors, it is not clear what, if any, effect such research will have on the sales of our products.

To date, the AHRQ assessment has not impacted CMS or private payor reimbursement.

Decreases in third-party reimbursement for our products or a decision by a third-party payer to not cover our products as a result of a third-party study could have a material adverse effect on our sales, results of operations and financial condition.

We are subject to various risks relating to our compliance with fraud and abuse laws and transparency laws relating to our interactions with our customers, health care providers, and patients, which could subject us to government investigation, litigation, or other penalties to the extent our activities or relationships are found not to comply, and could result in changes in our business operations that could harm our ability to successfully market and sell our products and services.

Decreases in third-party reimbursement for our products or a decision by a third-party payor to not cover our products as a result of a third-party study could have a material adverse effect on our sales, results of operations and financial condition.

We are subject to various risks relating to our compliance with fraud and abuse laws and transparency laws relating to our interactions with our customers, healthcare providers, and patients, which could subject us to government investigation, litigation, or other penalties to the extent our activities or relationships are found not to comply or could otherwise cause us to incur significant costs to defend our actions, and could result in substantial fines, penalties, harm our reputation in the market, divert our management’s attention, or result in changes in our business operations that could harm our ability to successfully market and sell our products and services.

We are subject to healthcare fraud and abuse regulation and enforcement by federal, state and foreign governments, which could significantly impact our business.

We also are subject to foreign fraud and abuse laws, which vary by country.

In the United States, the laws that may affect our ability to operate include, but are not limited to:

• the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, receiving, offering, or paying remuneration, directly or indirectly, in cash or in kind, in exchange for or to induce either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service for which payment may be made, in whole or in part, under federal healthcare programs such as Medicare and Medicaid.

A person or entity does not need to have actual knowledge of this statute or specific intent to violate the Anti-Kickback Statute itself to have committed a violation.

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exchange for or to induce either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service for which payment may be made, in whole or in part, under federal healthcare programs such as Medicare and Medicaid.

A person or entity does not need to have actual knowledge of this statute or specific intent to violate the Anti-Kickback Statute itself to have committed a violation.

government has interpreted this law broadly to apply to the marketing and sales activities of manufacturers and distributors like us.

Violations of the federal Anti-Kickback Statute may result in significant civil monetary penalties for each violation, plus up to three times the remuneration involved.

Violations of the federal Anti-Kickback Statute may result in significant civil monetary penalties for each violation, plus up to three times the remuneration involved, plus potential exclusion from participation in Federal healthcare programs.

Violations of the Federal Anti-Kickback Statute can also result in significant criminal penalties and imprisonment;

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Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry.

Responding to investigations can be time-and resource-consuming and can divert management’s attention from the business.

Responding to investigations can be time-and resource-consuming and can divert management’s attention.

Additionally, as a result of these types of investigations, healthcare providers and entities may face litigation or have to agree to settlements that can include monetary penalties and onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement.

Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business.

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us now or in the future, we may be subject to penalties, including civil and criminal penalties, damages, fines, disgorgement, exclusion from governmental health care programs, additional compliance and reporting obligations, imprisonment and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results.

Any such investigation even if unfounded and even if we are in compliance with applicable laws, could damage our reputation, increase costs, and otherwise have an adverse effect on our business.

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If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us now or in the future, we may be subject to penalties, including civil and criminal penalties, damages, fines, disgorgement, exclusion from governmental healthcare programs, additional compliance and reporting obligations, imprisonment and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results.

In December 2019, we entered into a settlement agreement with the U.S.

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The total final costs relating to these matters was $40.6 million.

Contemporaneous with the civil settlement, we also entered into a five-year Corporate Integrity Agreement, or CIA, with the Department of Health and Human Services Office of Inspector General.

Contemporaneous with the civil settlement, we also entered into a five-year Corporate Integrity Agreement, or CIA, with the Department of Health and Human Services Office of Inspector General, or OIG.

The CIA required, among other things, that we implement additional controls around our product pricing and sales and that we conduct internal and external monitoring of our arrangements with referrals sources.

The settlement agreement with the government and the CIA could result in reputational harm or the curtailment or restructuring of our operations, any of which could materially adversely affect our financial results and our ability to operate our business.

In addition, our failure to comply with our obligations under the CIA could result in monetary penalties and our exclusion from participating in federal healthcare programs.

Our failure to comply with our obligations under the CIA could result in monetary penalties and our exclusion from participating in federal healthcare programs.

The costs associated with compliance with the CIA, or any liability or consequences associated with its breach, could have an adverse effect on our operations, liquidity and financial condition.

Our use and disclosure of personal information, including health information, is subject to federal, state and foreign privacy and security regulations, and our failure to comply with those regulations or to adequately secure the information we hold could result in significant liability or reputational harm.

Most of the obligations of the CIA expire on December 18, 2024.

Absent an inquiry for additional materials from the OIG, we expect to close out the CIA by the end of fiscal year 2025.

Our use and disclosure of personal information, including health information, is subject to federal, state and foreign privacy, artificial intelligence, data, biometrics and security regulations, and our failure to comply with those regulations or to adequately secure the information we hold could result in significant liability, regulatory investigations, legal actions, or reputational harm.

The appropriate privacy and security of personal information whether stored, maintained, received or transmitted electronically or in paper form is a key regulatory issue in the United States and abroad.

While we strive to comply with all applicable privacy and security laws and regulations, as well as our own posted privacy policies, legal standards for privacy, including but not limited to “unfairness” and “deception,” as enforced by the FTC and state attorneys general, continue to evolve and any failure or perceived failure to comply may result in proceedings or actions against us by government entities or others, or could cause us to lose audience and customers, which could have a material adverse effect on our business.

While we strive to comply with all applicable privacy and security laws and regulations, as well as our posted privacy policies, legal standards for privacy, including but not limited to “unfairness” and “deception,” as enforced by the FTC and state attorneys general, continue to evolve and any failure or perceived failure to comply may result in proceedings or actions against us by government entities or others, or could cause us to lose audience and customers, which could have a material adverse effect on our business.

Recently, there has been an increase in public awareness of privacy issues in the wake of revelations about the activities of various government agencies and in the number of private privacy-related lawsuits filed against companies.

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HIPAA establishes a set of national privacy and security standards for the protection of individually identifiable health information, or protected health information, by health plans, healthcare clearinghouses and healthcare providers that submit certain covered transactions electronically, collectively referred to as “covered entities,” and their “business associates,” which are persons or entities that perform certain services for, or on behalf of, a covered entity that involve creating, receiving, maintaining or transmitting protected health information, as well as their covered subcontractors.

Certain portions of our business, such as the cloud-based software digital health applications, are subject to HIPAA as a business associate of our covered entity clients.

To provide our covered entity clients with services that involve access to PHI, HIPAA requires us to enter into business associate agreements that require us to safeguard PHI in accordance with HIPAA.

Through certain portions of our business, such as the cloud-based software digital health applications, we are subject to HIPAA as a business associate of our covered entity clients.

To provide our covered entity clients with services that

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involve access to PHI, HIPAA requires us to enter into business associate agreements that require us to safeguard PHI in accordance with HIPAA.

As a business associate, we are also directly liable for compliance with HIPAA.

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Courts can award damages, costs and attorneys’ fees related to violations of HIPAA in such cases.

While HIPAA does not create a private

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right of action allowing individuals to sue us in civil court for HIPAA violations, its standards have been used as the basis for a duty of care claim in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.

HIPAA further requires business associates like us to notify our covered entity clients “without unreasonable delay and in no case later than 60 calendar days after discovery of the breach.” Covered entities must notify affected individuals “without unreasonable delay and in no case later than 60 calendar days after discovery of the breach” if their unsecured PHI is subject to an unauthorized access, use or disclosure.

While HIPAA does not create a private right of action allowing individuals to sue us in civil court for HIPAA violations, its standards have been used as the basis for a duty of care claim in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.

HIPAA further requires business associates like us to notify our covered entity clients in the event of a breach.

Covered entities must notify affected individuals “without unreasonable delay and in no case later than 60 calendar days after discovery of the breach” if their unsecured PHI is subject to an unauthorized access, use or disclosure.

If a breach affects 500 patients or more, covered entities must report it to HHS and local media without unreasonable delay, and HHS will post the name of the breaching entity on its public website.

If a breach affects fewer than 500 individuals, the covered entity must log it and notify HHS at least annually.

Breach notification obligations under business associate agreements often have shorter notification timeframes which we are required to abide by contractually.

We could also face contractual liability if we fail to meet our obligations under our business associate agreements.

If we are unable to properly protect the privacy and security of health information entrusted to us, our solutions may be perceived as not secure, we may incur significant liabilities and customers may curtail their use of or stop using our solutions.

In addition, if we fail to comply with the terms of our business associate agreements with our clients, we are liable not only contractually but also directly under HIPAA.

In addition, if we fail to comply with the terms of our business associate agreements with our clients, we may be liable not only contractually but also directly under HIPAA.

In addition, the California Consumer Privacy Act of 2018, or CCPA, as amended by the California Privacy Rights Act (collectively, “CCPA”), became effective on January 1, 2020.

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Although the law includes limited exceptions, including for “protected health information” maintained by a covered entity or business associate, it may regulate or impact our processing of personal information depending on the context.

A To date, approximately ten additional US states have implemented comprehensive data privacy laws, certain of which became effective starting in January 1, 2023.

Although the majority of these laws are directed to consumer, not business, data, if we are subject to or affected by these state laws, HIPAA, or other domestic privacy and data protection law, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.

We also expect that there will continue to be new laws, regulations and industry standards concerning privacy, data protection and information security proposed and enacted in various jurisdictions.

If we are subject to other domestic privacy and data protection laws, beyond HIPAA and the CCPA, any liability from failure to comply with these laws could adversely affect our financial condition.

In addition to these comprehensive data protection laws, to date, at least three states have adopted laws specifically regulating the collection, use, storage, and disclosure of biometrics, and additional states may seek to regulate—and/or restrict the use of—biometrics in the future.

Certain of our products use, or permit the use of, information that could be classified as a biometric under these or other laws.

If we are subject to or affected by these or other laws, including potential damages for improper use of biometrics, we may be subject to damages claims, required to modify the way in which we make available our product or certain features of our product.

More recently, the FTC and the Office for Civil Rights (OCR, the agency that enforces HIPAA) have taken interest in the use of online tracking technologies that collect, use, and disclose personal information about users, including use of such online tracking tools to gather information to be used for redirected marketing.

More recently, the FTC and the Office for Civil Rights (OCR, the agency that enforces HIPAA) have taken interest in the use of online tracking technologies that collect, use, and disclose personal information about users, including use of online tracking tools to gather information to be used for redirected marketing.

FTC has taken enforcement actions against companies that have used online tracking tools either in a misleading or deceptive manner.

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Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of personal information that identifies or may be used to identify an individual, such as names, contact information, and sensitive personal data such as health data.

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These laws and regulations are subject to frequent revisions and differing interpretations and have generally become more stringent over time.

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The GDPR imposes stringent data protection requirements for the processing of personal data in the EEA or UK.

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strengthening individual data rights, shortening timelines for data breach notifications, limiting retention periods and secondary use of information (including for research purposes), increasing requirements pertaining to health data and pseudonymized (i.e., key-coded) data and imposing additional obligations when we contract with third party processors in connection with the processing of the personal data.

The GDPR also imposes strict rules on the transfer of personal data out of the EEA and, including to the United States, and recent legal developments in Europe have created complexity regarding such transfers of personal data from the EEA and UK to the United States.

The GDPR imposes several stringent requirements for controllers and processors of personal data, and increased our obligations, for example, by imposing higher standards for obtaining consent from individuals to process their personal data, requiring more robust disclosures to individuals, strengthening individual data rights, shortening timelines for data breach notifications, limiting retention periods and secondary use of information (including for research purposes), increasing requirements pertaining to health data and pseudonymized (i.e., key-coded) data and imposing additional obligations when we contract with third party processors in connection with the processing of personal data.

The GDPR also imposes strict rules on the transfer of personal data out of the EEA and recent legal developments in Europe have created complexity regarding such transfers of personal data from the EEA and UK to the United States.

For example, the European Commission and the United Kingdom have adopted new standard contractual clauses under which entities may transfer personal data from the European Union and the United Kingdom, which we may be required to implement.

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The UK GDPR mirrors the fines under the EU GDPR, i.e., fines up to the greater of £17.5 million or 4% of global turnover.

Compliance with these and any other applicable privacy and data security laws and regulations is a rigorous and time-intensive process, and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules.

Any failure or perceived failure by us to comply with privacy or security laws, policies, legal obligations or industry standards or any security incident that results in the unauthorized release or transfer of personally identifiable information may also result in governmental enforcement actions and investigations, fines and penalties, litigation and/or adverse publicity, including by consumer advocacy groups, and could cause our customers to lose trust in us, which could have an adverse effect on our reputation and business.

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Failure to comply with these regulations could result in, among other things, recalls of our products, substantial fines and criminal charges against us or against our employees.

Furthermore, certain of our products could be subject to recall if the Food and Drug Administration, or the FDA, other regulators or we determine, for any reason, that those products are not safe or effective.

Furthermore, certain of our products could be subject to recall if the Food and Drug Administration, or the FDA, other regulators or we determine that those products are not safe or effective.

Any recall or other regulatory action could increase our costs, damage our reputation, affect our ability to supply customers with the quantity of products they require and materially affect our operating results.

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Any changes to our ability to use AI or concerns about bias could require us to modify our products and services or could have other negative financial impact on our business.

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Product sales, introductions or modifications may be delayed or canceled as a result of FDA regulations or similar foreign regulations, which could cause our sales and profits to decline.

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The 510(k) clearance process can be expensive, time-consuming and uncertain.

In the 510(k) clearance process, the FDA must determine that a

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proposed device is “substantially equivalent” to a predicate device with respect to intended use, technology and safety and effectiveness, in order to clear the proposed device for marketing.

In the 510(k) clearance process, the FDA must determine that a proposed device is “substantially equivalent” to a predicate device with respect to intended use, technology and safety and effectiveness, in order to clear the proposed device for marketing.

The FDA has a high degree of latitude when evaluating submissions and may seek additional information before clearing a proposed device or may ultimately determine that a proposed device submitted for 510(k) clearance is not substantially equivalent to a predicate device.

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Marketing and sale of our products outside the United States are also subject to regulatory clearances and approvals, and if we fail to obtain these regulatory approvals, our sales could suffer.

We cannot assure you that any new products we develop will receive required regulatory approvals from U.S.

We cannot assure that any new products we develop will receive required regulatory approvals from U.S.

or foreign regulatory agencies.

The definition of “device” in the Federal Food, Drug, and Cosmetic Act (FD&C Act) was amended in 2016 to exclude certain software functions.

Our software offerings may include functions that fall under FDA’s jurisdictional definition of a medical device, while there may be software offerings that are considered exempt from the “device” definition even when utilizing data coming from an FDA regulated medical device.

Our determination of the appropriate classification of our digital offerings may lead to regulatory inquiry and the expenditure of time and resources to meet FDA feedback as to the appropriate category for particular digital offerings.

We are subject to substantial regulation related to quality standards applicable to our manufacturing and quality processes.

Our failure to comply with these standards could have an adverse effect on our business, financial

Our software offerings may include functions that fall under FDA’s jurisdictional definition of a

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condition, or results of operations.

medical device, while there may be software offerings that are considered exempt from the “device” definition even when utilizing data coming from an FDA regulated medical device.

We are subject to substantial regulation related to quality standards applicable to our manufacturing and quality processes.

Our failure to comply with these standards could have an adverse effect on our business, financial condition, or results of operations.

The FDA regulates the approval, manufacturing, and sales and marketing of many of our products in the United States.

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As a device manufacturer, we are required to register with the FDA and are subject to periodic inspection by the FDA for compliance with the FDA’s Quality System Regulation requirements, which require manufacturers of medical devices to adhere to certain regulations, including testing, quality control and documentation procedures.

For example, in February 2024, the FDA issued a final rule to amend and replace the Quality System Regulation, or QSR, which sets forth the FDA's current good manufacturing practice requirements for medical devices, to align more closely with the International Organization for Standardization standards.

Specifically, this final rule, which the FDA expects to go into effect on February 2, 2026, establishes the "Quality Management System Regulation," or QMSR, which among other things, incorporates by reference the quality management system requirements of ISO 13485:2016.

Although the FDA has stated that the standards contained in ISO 13485:2016 are substantially similar to those set forth in the QSR, and although our quality system is currently designed to comply with ISO standards in connection with our device certifications, it is unclear the extent to which this final rule, once effective, could impose additional or different regulatory requirements on us that could increase the costs of compliance or otherwise negatively affect our business.

If we are unable to comply with QMSR, once effective, or with any other changes in the laws or regulations enforced by FDA or comparable regulatory authorities, we may be subject to enforcement action, which could have an adverse effect on our business, financial condition and results of operations.

In addition, the federal Medical Device Reporting regulations require us to provide information to the FDA whenever there is evidence that reasonably suggests that a device may have caused or contributed to a death or serious injury or, if a malfunction were to occur, could cause or contribute to a death or serious injury.

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On July 10, 2020, the FDA announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system.

During the COVID emergency, the FDA issued numerous guidances providing for enforcement discretion or processes for issuance of Emergency Use Authorizations (EUAs) for certain devices that had the effect of relaxing certain regulatory requirements with respect to selected devices during the pendency of the COVID emergency.

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relaxing certain regulatory requirements with respect to selected devices during the pendency of the COVID emergency.

Recently, in anticipation of the termination of the COVID emergency effective May 11, 2023, on March 27, 2023, the FDA released two final guidance documents to assist with transitioning medical devices:

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These guidance documents finalize the corresponding draft guidance documents that were issued on December 23, 2021.

The guidances call for a “phased transition process” with respect to devices that fell within the expiring COVID enforcement policies.

The guidance calls for a “phased transition process” with respect to devices that fell within the expiring COVID enforcement policies.

To the extent our devices have been authorized for market based on COVID-related enforcement discretion or EUAs, we may need to implement a transition plan for such devices, the outcome of which may be uncertain and could potentially affect our ability to market such devices in the post-COVID regulatory environment.

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In particular, clearance under Section 510(k) only permits us to market our products for the uses indicated on the labeling cleared by the FDA.

We may request additional label indications for our current products, and the FDA may deny those requests outright, require additional expensive clinical data to support any additional indications or impose limitations on the intended use of any cleared products as a condition of

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If the FDA determines that we have marketed our products for off-label use, we could be subject to fines, injunctions or other penalties.

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Tax laws, regulations, and administrative practices in various jurisdictions are evolving and may be subject to significant changes due to economic, political, and other conditions.

Developments in relevant tax laws, regulations, and administrative and enforcement practices could have a material adverse effect on our operating results, our financial position and cash flows and could impact the tax treatment of our earnings.

There are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain, and significant judgment is required in evaluating and estimating our provision and accruals for taxes.

Governments are increasingly focused on ways to increase tax revenues, particularly from multinational corporations, which may lead to an increase in audit activity and aggressive positions taken by tax authorities.

Changes or clarifications to U.S.

tax laws could materially affect the tax treatment of our domestic and foreign earnings.

The Organisation for Economic Co-operation and Development, an international association of 34 countries, including the United States, released the final reports from its Base Erosion and Profit Shifting, or BEPS, Action Plans, which aim to standardize and modernize global tax policies.

The BEPS Action Plans propose revisions to numerous tax rules, including country-by-country reporting, permanent establishment, hybrid entities and instruments, transfer pricing, and tax treaties.

The BEPS Action Plans have been or are being enacted by countries where we have operations.

Additionally , the U.S.

Treasury department recently proposed the adoption of a global minimum corporate tax rate of at least 15%, which, if enacted, could negatively impact our effective tax rate.

Developments in relevant tax laws, regulations, administrative practices and enforcement practices could have a material adverse effect on our operating results, financial position and cash flows, including the need to obtain additional financing.

Furthermore, due to shifting economic and political conditions, tax policies and rates in various jurisdictions may be subject to significant change.

For example, in calendar year 2022, the United States passed the Inflation Reduction Act, which made a several changes to the Internal Revenue Code of 1986, as amended ("IRC"), including a 15% corporate minimum tax on adjusted financial statement income for companies whose average adjusted net income for any consecutive three-year period beginning after December 31, 2022 exceeds $1.0 billion.

While we do not anticipate any materially adverse impacts to our effective tax rate, we cannot provide any assurances that these provisions will not have a materially adverse impact on our effective tax rate.

Further, beginning in 2023, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five years for U.S.

incurred expenditures or fifteen years for non-U.S.

incurred expenditures, pursuant to IRC Section 174.

However, recently

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proposed tax legislation, if enacted, would restore the ability to deduct currently domestic research and development expenditures through 2026 and would retroactively restore this benefit for 2023 and 2024.

Finally, several countries, including the United States and other members of the Organization for Economic Cooperation and Development (“OECD”) have reached agreement on a global minimum tax initiative (“Pillar Two”).

Other OECD countries are also actively considering changes to existing tax laws or have proposed new laws to align with the recommendations and guidelines proposed by the OECD, including Pillar Two.

Enactment of such tax laws could increase our tax obligations in countries where we do business or cause us to change the way we operate our business.

Pillar Two will be in effect in some of the jurisdictions in which we operate beginning in 2025.

We have assessed the impacts of these new laws in countries that we operate in and do not currently anticipate any material impacts to our effective tax rate in fiscal year 2025.

However, we cannot provide any assurance that there will not be a material impact to our effective tax rate because of these developments and evolving tax legislation.

We are subject to tax audits by various tax authorities in many jurisdictions.

Our income tax returns are based on calculations and assumptions that require significant judgment and are subject to audit by various tax authorities.

Our income tax returns are based on calculations and assumptions that require significant judgement and are subject to audit by various tax authorities.

In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws.

We regularly assess the potential outcomes of examinations by tax authorities in determining the adequacy of our provision for income taxes.

We regularly assess the potential outcomes of examinations and audits by tax authorities in determining the adequacy of our provision for income taxes.

On September 19, 2021, we concluded the settlement agreement with the Australian Taxation Office (“ATO”) in relation to the previously disclosed transfer pricing dispute for the tax years 2009 through 2018 (“ATO settlement”).

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On September 28, 2021, we remitted final payment to the ATO of $284.8 million, consisting of the agreed settlement amount of $381.7 million less prior remittances made to the ATO of $96.9 million.

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Tax years 2018 to 2022 remain subject to future examination by the major tax jurisdictions in which we are subject to tax.

Tax years 2018 to 2023 remain subject to examination by the major tax jurisdictions in which we are subject to tax.

In addition, the taxing authorities of the jurisdictions in which we operate may challenge our positions and methodologies related to transfer pricing, including valuing developed technology, intercompany arrangements and intellectual property transfers.

If challenged by tax authorities, ResMed will vigorously defend our positions and methodologies.

Any final assessment resulting from tax audits may result in material changes to our past or future taxable income, tax payable or deferred tax assets, and may require us to pay penalties and interest that could materially adversely affect our financial results.

Environmental, social, and corporate governance (ESG) issues may have an adverse effect on our business, financial condition and results of operations and reputation.

There is an increasing focus from certain investors, regulators, legislators, customers, consumers, employees and other stakeholders concerning ESG matters.

Additionally, public interest and legislative pressure related to public companies’ ESG practices continue to grow.

If our ESG practices fail to meet regulatory requirements or stakeholders' evolving expectations and standards for responsible corporate citizenship in areas including environmental stewardship, support for local communities, Board of Director and employee diversity, human capital management, employee health and safety practices, product quality, supply chain management, corporate governance and transparency, our reputation, brand, and employee attraction and retention may be negatively impacted, and our customers and suppliers may be unwilling to continue to do business with us.

In addition, a failure to comply with new laws, regulations, or reporting requirements, could negatively impact our reputation and our business.

Although we believe our tax positions are appropriate, any final assessment resulting from tax audits may result in material changes to our past or future taxable income, tax payable or deferred tax assets, and may require us to pay penalties and interest that could materially adversely affect our financial results.

Sustainability and corporate governance issues may have an adverse effect on our business, financial condition and results of operations and reputation.

There is an increasing focus from certain investors, regulators, legislators, customers, consumers, employees and other stakeholders concerning sustainability matters.

Additionally, public interest and legislative pressure related to public companies’ sustainability practices continue to grow.

If our sustainability practices, including our external reporting thereof, fail to meet regulatory requirements or stakeholders' evolving expectations and standards for responsible corporate citizenship in areas including environmental stewardship, carbon emissions, renewable energy targets, support for local communities, Board of Director and employee diversity, human capital management, employee health and safety practices, product quality, supply chain management, corporate governance and transparency, our reputation, brand, and employee attraction and retention may be negatively impacted.

Customers and/or suppliers may also adopt policies that include sustainability provisions or they may seek to include such provisions in their terms and conditions.

These sustainability provisions and initiatives can be unpredictable and may be difficult for us to meet.

If we are unable to comply, our customers and suppliers may be unwilling to continue business with us.

In addition, failure to comply with new laws, regulations, or reporting requirements could negatively impact our

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reputation and our business.

Our adoption of certain standards or mandated compliance to certain requirements could necessitate additional investments that could impact our profitability.

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• the effect of foreign currency transaction gains or losses;

• other activities, including product recalls, by our competitors;

• other activities, including product recalls, by us and our competitors;

• the perceived demand for our products in light of the introduction of pharmaceuticals to treat obesity and potentially OSA;

• general economic conditions, including rising interest rates, inflationary pressures, recessions, consumer sentiment and demand, global political conflict and industry factors unrelated to our actual performance.

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Provisions of our certificate of incorporation may have the effect of delaying or preventing changes in control or management which might be beneficial to us or our security holders.

In particular, our board of directors has the authority to issue up to 2.0 million shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without further vote or action by the stockholders.

The rights of the holders of our common stock

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will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future.

Our board of directors has the authority to issue up to 2.0 million shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without further vote or action by the stockholders.

The rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future.

The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control, may discourage bids for our common stock at a premium over the market price of our common stock and may adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock.

ITEM 1B UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors