Welcome to the Q2 Fiscal Year 2017 ResMed Inc. Earnings Conference Call. My name is Mariama, and I will be your operator for today's call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session.
Please note that this conference is being recorded. I will now turn the call over to Agnes Lee, Vice President, Investor Relations and Corporate Communications. Agnes, you may begin.
Thank you, Mariama, and thank you for attending ResMed's live webcast. Joining me on the call today are Mick Farrell, our CEO and Brett Sandercock, our CFO. Other members of the management team will also be available during the Q and A portion of the call. If you've not had a chance to review the earnings release, it can be found on our website at investor. Resved.com.
I want to remind our listeners that our discussion today may include forward looking statements, including, but not limited to, statements about future expectations, plans and prospects for the company, corporate strategy, integration of acquisitions and performance. We believe that these statements are based on reasonable assumptions, but actual results may differ materially from those indicated. Important factors, which could cause actual results to differ materially are in the forward looking statements detailed in filings made by ResMed with the Securities and Exchange Commission. I will now hand the call over to Mick Farrell.
Thanks, Agnes, and thank you to all of our shareholders as we summarize our results for the Q2 of fiscal year 2017. We achieved solid double digit global revenue growth this quarter, led by sales from Brightree and continued strong growth in our device platforms. We also saw the start of a steady ramp of our latest mask technologies. For the call today, I will review top level financial results, outline some regional highlights and discuss key announcements this quarter. Then I will hand the call over to Brett, who will walk you through our financial results in further detail.
We achieved strong device sales due to our leadership in digital health and connected care. The number of patients managed on the Air Solutions platform and the number of daily users of our Brightree platform continue to grow rapidly. This quarter, we announced that we have reached a milestone with more than 1,000,000,000 nights of sleep data in our cloud based physician and provider solution called AirView. With well over 2,000,000 100 percent cloud connected medical devices, we are liberating data and unlocking value for physicians, providers and patients like never before. Midway through the quarter, we commenced the launch of our new AirFit range of masks, the AirFit N20 Nasal Mask and the AirFit F20 Full Face Mask.
Both of these products leverage new step change technology called Infinity Seal that provides significant advances in fit and comfort for patients. Earlier this month at the JPMorgan Healthcare Conference, I announced that we had received FDA clearance for the ResMed AirMini, our world leading travel friendly CPAP technology. I will talk more about that a little later. At the bottom line, in terms of non GAAP net operating profit, we grew at 13% on a year on year basis in Q2. Including financing costs, our diluted earnings per share or EPS was $0.73 on a non GAAP basis.
We continue to balance revenue growth and gross margin improvements as well as ensuring appropriate investments in both R and D and SG and A so that we can maximize the success of multiple product launches across our global markets. Now for some regional highlights. The Americas region produced double digit revenue growth. These results were fueled by software as a service revenue from Brightree and 13% growth in devices. Device growth was particularly remarkable given that we were up against a 24% year over year comparable.
The mask and accessories category in the Americas grew 4% in the quarter. There is clearly a long way to go in the ramp of these products in Q3, There is clearly a long way to go on the ramp of these products in Q3, Q4 and into fiscal year 2018. Growth in devices was driven by the continued support for the AirSense 10 systems by our customers. These are powered by the cloud based Air Solutions software platform including the MyAir patient engagement app that has over 1,000 new patients sign up every day. We achieved good growth in our respiratory care device platforms in the Americas, particularly our cloud connected life support ventilation platform called Astral.
We earned strong growth in our combined EMEA and APAC regions this quarter, primarily driven by flow generator sales with some outstanding performance from our combined curative and ResMed China businesses. We have now completed the earn out and the integration is going very well. As we enter the Chinese New Year, we have truly formed 1 ResMed China team with 1 vision, 1 mission, 2 brands and many and varied customer channels. The team is really coming together well. Mask, accessory and other sales in the combined EMEA and APAC regions were down year over year due to a couple of factors.
1, we had some international licensing revenue from the comparable quarter a year ago in the region and 2, the N20 and F20 were only released in a few countries. And as we know, uptake of new masks is a lot slower in EMEA and APAC than the U. S. Market. We expect this mask category to return to positive growth in EMEA and APAC as we continue to launch the N 2020 and F 2020.
Feedback from patients, physicians and home care providers on the fit range and comfort of the N20 and F20 are very positive. This is a great indicator for stronger mass growth in Q3, Q4 and into FY 2018. Looking at our software as a service revenue, Brightree continues to grow strongly and in line with our acquisition model in the low to mid teens. We are on track with our work to integrate Brightree software functionality into the Air Solutions portfolio. We are truly creating end to end software solutions for our customers and Brightree is achieving strong double digit growth with high levels of customer satisfaction and customer workflow efficiency gains.
Let me now take a few minutes to update you on the progress against each of the three horizons in our 2020 growth and then hand the call over to Brett. In the first horizon of growth, which focuses on our core sleep apnea business, we are making significant advances with the smallest, quietest and most comfortable products, catalyzed by digital health and connected care solutions. We launched our new AirFit F20 full face masks and our new AirFit N20 nasal masks in the Q2. The Infinity Seal technology is a step change in comfort for patients and fit ranges of 97% to 99% of patient populations approving a winning value proposition with respiratory clinicians. We are seeing exceptionally strong demand for the N20 and F20 products.
And for some of the mask SKUs, demand is in fact outpacing supply as we ramp up our production capabilities for these new technologies. We will continue to ramp up our supply and we expect to be outpacing demand as we go through Q3 and into Q4. At the JPMorgan Healthcare Conference in San Francisco earlier this month, we announced the FDA clearance of the world's smallest CPAP called the ResMed AirMini. It's a tiny portable travel PAP with all of ResMed's best in class comfort features. AirMini is intended to be a secondary device for travel and it truly complements our world leading AirSense 10 platform.
AirMini is an amazing technology and we expect to launch this product commercially before the end of the fiscal year. I have personally been using a prototype of the ResMed Air Mini for over 12 months. It has traveled with me to Asia, all over Europe and throughout the Americas. For those listening to this call who may also be CPAP patients, feel free to go to airmini. Resmed.com and sign up.
We will make sure that you're amongst the first to know when the product is fully launched through our home care channel partners. We continue to lead in the field of Connected Care, one of the key foundations of our growth strategy. We have reached, as I said earlier, 1,000,000,000 nights of sleep data and are focusing on algorithms to convert big data into actionable information. The ultimate goal is to unlock even more value for physicians, providers, payers and most importantly for patients. This quarter, we announced results from a European study published by PricewaterhouseCoopers analyzing data from more than 23,000 patients in Germany and the U.
K. The study showed that MyAir patients when compared to controls use their CPAP devices for longer durations and have significantly higher adherence rates. This adherence study was executed in our core sleep apnea vertical. We are extending these cloud based coaching algorithms to our ventilation and oxygen technologies. Watch this space.
This is a great transition to the 2nd horizon of the ResMed 2020 growth strategy. We know that COPD is the number 3 cause of death and the number 2 cause of rehospitalization in the Western world. The spectrum of cloud connected respiratory care products across our ResMed portfolio will play a big role in reducing costs for providers and improving outcomes for patients with this debilitating disease. Connected Care in ventilation can reduce costs and improve patient outcomes in COPD and beyond. We continue to see portable oxygen concentrators or POCs as an important addition to our spectrum of respiratory care products.
Our integration of the Inova acquisition has focused on quality improvements to the current Actavox POC platform. We are gradually ramping the launch of this technology to our global sales teams as we continue to improve quality and functionality of the product. We will ultimately add cloud connectivity to our POC platform, which will help drive adherence for patients, fleet management for providers and activity tracking for physicians. Our 3rd horizon of growth encompasses a portfolio of long term opportunities, including sleep health and wellness as well as clinical adjacencies such as atrial fibrillation and heart failure with preserved ejection fraction. Another key area of Horizon 3 growth is our work in chronic disease management algorithms, including population health models, healthcare analytics, care coordination and software as a service models for home health, home nursing and hospice.
In the area of sleep health and wellness, we are making good progress with our new joint venture called SleepScore Labs with capital investments from ResMed, Pegasus Capital and Doctor. Mehmet Oz. We started the partnership last quarter with an entire Doctor. Oz show dedicated to the field of sleep wellness. Doctor.
Michael Bruce and Doctor. Oz leveraged the S Plus by ResMed, the world's 1st non wearable sleep device and smartphone app designed to help people track, better understand and improve their sleep. The sleep awareness campaign encompassed anonymous sleep data from a database with over 1,000,000 nights of sleep. SleepScore Labs calculated America's overall sleep score and Doctor. Oz announced the results at the Consumer Electronics Show or CES in Las Vegas earlier this month.
Doctor. Oz reported that people are not sleeping as well as they should. We're getting less than what the National Sleep Foundation recommends, which is 7 to 8 hours plus of sleep. We are about 1 hour behind the minimum with around 6 hours of sleep. People say they're tired and people say they want to understand their sleep better.
SleepScore Labs will do just that. They will truly quantify sleep and help people objectively determine which sleep solutions are best for them. For ResMed, this is about driving the importance of sleep awareness and sleep health. We will be helping people realize that they need to go see their doctor if they have any risky breathing at night or any shortness of breath day or night. These and other signs and symptoms of sleep apnea and COPD impact overall health.
We will continue to drive sleep health and sleep awareness and our ResMed brand as the leader in the field. Let me close with this. We are incredibly excited about the ongoing launch of our N20 and F20 mask technologies and our pipeline of products in 2017, including the new ResMed AirMini. We continue to lead in connected care with enhanced solutions that lower cost for providers and improve outcomes for patients. We are leading the industry driving consumer awareness of sleep so that undiagnosed consumers go to see their doctors and healthcare providers.
We continue to bring our strategy into action for the benefit of physicians, providers, payers and most importantly to improve the lives of tens of millions of sleep apnea and COPD patients around the world. With that, I will turn the call over to Brett for his remarks and then we will go to Q and A. Over to you, Brett.
Right. Thanks, Mick. In my remarks today, I'll provide an overview of our results for the Q2 fiscal year 2017. As Nick noted, we had a solid quarter. Group revenue for the December quarter was $530,400,000 an increase of 17% over the prior year quarter.
In constant currency terms, revenue increased by 18%. Excluding acquisitions and in constant currency terms, organic revenue increased by 10% over the prior year quarter. Taking a closer look at our geographic distribution and excluding revenue from our Brightree acquisition, our sales in the Americas were $293,000,000 an increase of 9% over the prior year quarter. Sales in combined EMEA and Asia Pacific totaled $203,600,000 an increase of 10% over the prior year quarter. In constant currency terms, sales in combined EMEA and Asia Pacific increased by 13% over the prior year quarter.
Breaking out revenue between product segments. Americas device sales were $154,300,000 an increase of 13% over the prior year quarter. Masks and other sales were $138,600,000 an increase of 4% over the prior year quarter. The revenue in combined EMEA and Asia Pacific device sales were $146,700,000 an increase of 19% over the prior year quarter. And in constant currency terms an increase of 21%.
Mask and other sales were $57,000,000 decrease of 7% over the prior year quarter or in constant currency terms a decrease of 4%. Globally in constant currency terms, device sales increased by 17% while masks and other increased by 2% over the prior year quarter. Brightree revenue for the Q2 was $33,800,000 with growth on a prior year comparable basis continuing to track in the low to mid teens. During the rest of my commentary today, I'll be referring to non GAAP numbers. The non GAAP measures adjust for the impact of amortization of acquired intangibles, acquisition related expenses associated with additional contingent consideration, restructuring expenses and litigation settlement expenses.
In the prior year comparable, they exclude amortization of acquired intangibles, restructuring expenses and the release of the SERVE HF accrual. We have provided a full reconciliation of the non GAAP to GAAP numbers in our 2nd quarter earnings press release. Our gross margin for the December quarter was 58.3%. On a year over year basis, our non GAAP gross margin increased by 20 basis points, reflecting manufacturing and procurement efficiencies and the favorable impact from our Brightree acquisition. These were partially offset by product mix, typical declines in selling prices and unfavorable currency movements.
Assuming current exchange rates and likely trends in product and geographic mix, we expect gross margin to continue to be in the range of 58% to 60% for the balance of fiscal year 2017. Moving on to operating expenses. Our SG and A expenses for the quarter were $139,300,000 an increase of 18% over the prior year quarter and in constant currency terms also an increase of 18%. Excluding the impact from acquisitions and in constant currency terms, our SG and A expenses increased by 10%. SG and A expenses as a percentage of revenue were 26.3% compared to the 26% that we reported last year.
Looking forward and subject to currency movements, we expect SG and A as a percentage of revenue to be in the range of 27% to 28% for the balance of fiscal year 2017. This reflects expected marketing expenses associated with product launches and ongoing legal expenses. R and D expenses for the quarter were $38,200,000 increase of 32% over the prior year quarter, while on constant currency basis an increase of 28%. This increase largely reflects the impact of our recent acquisitions and incremental investments across our R and D portfolio. Excluding the impact from acquisitions, our R and D expenses in constant currency terms increased by 11% over the prior year.
R and D expenses as a percentage of revenue was 7.2% compared to the year ago figure of 6.4%. Looking forward and subject to currency movements, we expect R and D expenses as a percentage of revenue to be in the range of 7% to 8% for the balance of fiscal year 2017. Amortization of acquired intangibles was $11,700,000 for the quarter, an increase of $7,300,000 over the prior year, reflecting the additional amortization associated with our recent acquisitions. Stock based compensation expense for the quarter was $10,800,000 Non GAAP operating profit for the quarter was 131 $600,000 an increase of 13% over the prior year quarter. Non GAAP net income for the quarter was $103,300,000 an increase of 1% over the prior year quarter.
Net income for the quarter was $76,700,000 Non GAAP diluted earnings per share for the quarter 0 $0.73 consistent with the prior year quarter, while GAAP diluted earnings per share for the quarter were 0 $0.54 Note that our prior year earnings per share comparable was restated as a result of our adoption of accounting standard ASU 20 sixteen-nine whereby we recorded a tax benefit of $5,100,000 in Q2 FY 2016. In the current quarter, under the standard, we recorded a tax expense of $25,000 Excluding this impact, non GAAP earnings per share would have increased by 6% over the prior year quarter. Additionally, foreign exchange movements negatively impacted 2nd quarter earnings by $0.03 per share reflecting the unfavorable impacts from the weaker euro and stronger Australian dollar relative to the U. S. Dollar.
On a non GAAP basis, our effective tax rate for the quarter was 21.1 percent and looking forward, we estimate our effective tax rate for the fiscal year 2017 will be in the range of 20% to 22%. During the quarter, we recognized restructuring expenses of $4,400,000 associated with the rationalization of our European R and D activities. Additionally, we recognized an expense of $10,100,000 for additional contingent consideration associated with our Curative acquisition. The additional accrual was a result of the business achieving performance milestones that resulted in the maximum contingent consideration payable under the purchase agreement. Finally, we recognized an expense of $8,500,000 as part of a global settlement of all litigation between ResMed, BMC and 3B.
Cash flow from operations was $119,900,000 for the quarter. This reflects strong underlying earnings offset to some extent by modest increase in net working capital balances during the quarter. Capital expenditure for the quarter was 14,700,000 dollars Depreciation and amortization for the December quarter totaled $27,700,000 Our Board of Directors today declared a quarterly dividend of $0.33 share, an increase of 10% over our prior year quarterly dividend. As previously announced, we have temporarily suspended our share repurchase program due to recent acquisitions. At present, we expect to recommence the buyback in fiscal year 2018.
At December 31, we have approximately $1,200,000,000 in gross debt and $380,000,000 in net debt. Our balance sheet remains strong with modest debt levels. At December 31, total assets were $3,300,000,000 and net equity was $1,700,000,000 And with that, I will hand the call back to Agnes.