Welcome to ResMed's Conference Call. My name is Connor, and I'll be your operator for today's call. At this time, all participants are in a listen only mode. Please note that this conference is being recorded. I will now turn the call over to Agnes Lee, Senior Director of Investor Relations.
Agnes, you may begin.
Thank you, Connor, and thank you, everyone, for joining us today to discuss ResMed's exciting announcement. Hopefully, you all saw the press release we issued about an hour ago announcing the definitive agreement we have signed to acquire Brightree, a leader in 3rd party business management and clinical software applications. The release is posted on our website as is the investor presentation, both of which have been filed in a Form 8 ks with the SEC. On today's call, we will be referring to the investor presentation, and I encourage you to access the materials so you can follow along. As a reminder, this call will focus on the acquisition, and we are not providing any financial updates to our quarter.
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 and performance, including the integration of acquisitions. We believe 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 from those in the forward looking statements are detailed in filings made by ResMed with the SEC. 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.
We expect this to be a shorter call than our quarterly. I will now turn the call over to Mick Farrell.
Thank you, Agnes, and thanks to our investors for joining us on this call with such short notice. It has been literally just an hour or less than an hour since our press release hit The Wire, East Coast U. S. Time, which is my current time zone. We are very excited about the Brightree acquisition.
Brightree is an innovator and a leader in cloud based healthcare informatics solutions for the post acute care market. These software as a service solutions provide customers with increased efficiency and better cash flow through connected care. The post acute industry includes home medical equipment or HME providers, including many of our current valued U. S. Customers.
And it also includes new market segments in home health and in hospice. So with Brightree, we can not only help our HME customers become more efficient, profitable and scalable, but we also have access to the many patients with chronic disease in home health and hospice, so that these patients with sleep disordered breathing or chronic obstructive pulmonary disease or neuromuscular disease and other chronic diseases can potentially be referred back to our pulmonary and sleep medicine physicians for diagnosis and to our HME partners for appropriate therapeutic treatment for their SDB and COPD. Okay. Let's now get on to the presentation deck that we published that Agnes just talked about and it's on our investor website. Let's start on slide number 3.
So as you can see on slide 3, this is an all cash acquisition that is immediately accretive to our ResMed Group gross margins and it's also immediately accretive to our earnings after the close. The purchase price of $800,000,000 represents a valuation multiple of 13.5 times 2015 EBITDA for Brightree, including the present value of the expected tax benefits. The tax benefits are in the order of $300,000,000 associated with the transaction. I will let Brett go into the detailed financials in just a few minutes. We will fund this acquisition with cash and debt from our current portfolio of lenders and we're very comfortable with this level of debt.
We are putting our balance sheet to work with an acquisition that is fully aligned with our ResMed 2020 growth strategy. Okay. Let's now turn to Slide 4 and I'll provide an overview of the strategic rationale for this deal. As we discussed on our Q2 FY 2016 earnings call last month, ResMed has transformed itself into a tech driven medical device company. With the successful launch and market penetration of our AirSense 10 and our AirCurve 10 flow generator platforms as well as with the launch of Air Solutions, our portfolio of cloud based software solutions for our customers.
While Air Solutions and uSleep provide significant value in terms of workflow efficiency and increased cash flow for our customers, we know that we can provide even more customer value with the addition of Brightree to our portfolio of cloud based software offerings for our customers. As I outlined at the start of this call, Brightree is an innovation leader, providing cloud based software that helps customers in the post acute care industry, improving both their clinical and their business performance. Brightree will strengthen our leadership in connected care solutions. Our clear long term goal here is to help further improve the business and the clinical performance of our HME customers, ultimately helping them to improve outcomes for patients, physicians, payers and for the healthcare providers themselves. As I outlined earlier, Brightree will allow us to open doors in new market segments of the post acute care industry beyond HME, including home health channels and hospital channels.
These channels have a high prevalence of sleep disordered breathing, chronic obstructive pulmonary disease and neuromuscular disease and other chronic diseases. We'll look to identify and potentially refer patients back into the diagnostic and therapeutic channels as I talked to earlier with our existing physician, provider and payer models. Finally, many of you have heard me speak about the 3 criteria that we look for when we look at M and A candidates on our earnings calls and at investor conferences and beyond. This acquisition squarely meets these criteria. Let's briefly walk through our 3 key acquisition criteria and then apply them to Brightree.
So the first criterion is that it is a strong strategic fit. Well, Brightree's healthcare informatics capability ensures the efficiency of post acute care, including HME providers, and this is critical to the delivery of growth in both Horizon 1 and Horizon 2 of our ResMed 2020 strategy. The second criterion is that we can add value to the opportunities assets. Well, we can add very significant value to the Brightree assets with our global leadership in Connected Care. One key element of adding shareholder value will be through our ability to grow and scale recurring revenue streams.
And the 3rd criterion is that there's a strong cultural fit between the candidate and ResMed. Well, there's a very strong cultural fit between Brightree and ResMed. At Brightree, like ResMed, there is a focus on software innovation. There's a sense of urgency to get things done and there's a results orientation to not only meet, but also to beat customer needs. So before we take you through a more detailed summary the Brightree lines of business and how ResMed and Brightree teams will work together, I'd like to turn the call over to Brett Sandecock, our CFO.
Brett will summarize Brightree's financials and discuss the tax synergies and financing terms that constitute the Brightree acquisition. So over to you, Brett.
Great. Thanks, Mick. As Mick noted, we expect this profitable business to be immediately accretive to our non GAAP EPS after close, and we expect this acquisition to continue to be accretive in subsequent years. We're currently expecting to close by the end of the 4th quarter of our fiscal year 2016. Turning to slide 5.
You can see that Brightree had revenues in calendar year 20 15 of $113,000,000 with EBITDA of approximately $43,000,000 More than 80% of that revenue was recurring reflecting the SaaS based subscription model. We expect that percentage to continue after close adding to ResMed's recurring revenue streams. Now let me spend a few minutes on the tax synergies. Turning to slide 6. You can see that Brightree is structured as a limited liability company and this allows the transaction to be treated as an asset sale for tax purposes.
As a result, ResMed will receive a step up in the cost basis for the assets we are acquiring. This means we'll have an expect tax benefit of approximately $300,000,000 which will allow us to reduce our cash income taxes over the next 15 years. However, this benefit does not impact our non GAAP earnings. The present value of the tax benefit is estimated to be approximately 225,000,000 dollars You will note that we included this amount in the valuation multiple of 13.5 times 20.15 EBITDA. In summary, in addition to improving the valuation multiples of the acquisition that I just discussed, the tax benefits will improve our cash flows going forward.
Now let me briefly discuss funding arrangements. To finance the transaction, we are using approximately $100,000,000 of our existing cash and $700,000,000 in debt. On the debt side, we are increasing our existing revolving credit facility from $700,000,000 to 1,000,000,000 dollars and obtaining an additional term loan of $300,000,000 As a result, after close, we expect to have gross debt of approximately $1,200,000,000 dollars and net debt of approximately $600,000,000 On a pro form a basis, this will equate to leverage of approximately 1x net debt to calendar year 2015 EBITDA and we are very comfortable with this leverage. Finally, we intend to suspend our share buyback program for the next 12 months. Now let me turn the call back to Mick.
Thanks, Brett. Let's turn to slide 7 now and let me walk you through the Brightree business and how it will help fuel our future growth. So Brightree is a leader in post acute software and solutions, as I mentioned earlier. Their software and services have been delivering tangible, measurable results to HME customers in terms of increased efficiency and better cash flow. Brightree has a long history of being first to market with innovative solutions.
It was the first in the industry, for example, with built in business intelligence tools and an electronic claims concierge service. Slide 8 shows in more detail the customer footprint of Brightree in the most important post acute market segments. As you can see, Brightree is a well established business with deep customer relationships and wide recognition. Brightree was ranked in the prestigious Healthcare Informatics 100 listing of Healthcare IT Companies for the past 3 consecutive years. We are partnering here with a leader in growth, but also a leader in healthcare IT innovation.
Moving on to slide 9, we have mapped the combined capabilities of Brightree and ResMed from the perspective of the joint Brightree and ResMed customers. There is a lot captured on this page as we are showing many of the workflows and partner interfaces within our U. S. Delivery channel. The chart is adopted from our Investor Day presentation, so it will be familiar to those of you who attended that event in San Francisco mid last year.
You'll note that we've arrayed the Brightree solutions across the top of the chart, showing their relationship and interaction to our existing air solutions software offerings. We've been working with Brightree on these types of integrations since 2012. This acquisition provides an opportunity to further partner with our HME customers and provide even better end to end solutions to help them optimize their business. This combination will expand the tools available to help HME customers further improve operating efficiencies and further improve cash flow and therefore drive better patient outcomes. Let me close with a summary here.
So we're on Slide 10 now looking at next steps. The key message here for our customers and core operations tomorrow morning is that it is business as usual as we seek final approval for the acquisition. After closing the transaction, Brightree will continue to operate as a separate team. Current Brightree customers will see seamless customer service and full availability of existing solutions offerings. Brightree will maintain its current offices and headquarters in the Greater Atlanta, Georgia area.
The current management team, including CEO, Dave Cormack and team will remain in place. Raj Soudi, who is President of ResMed's Global Business Unit in Healthcare Informatics as well as Jim Hollingshead, who is President of ResMed Americas are both joining this call today from the Brightree headquarters in Atlanta, Georgia. Raj and Jim together with Dave and the Brightree team will be walking the whole Brightree team through the next steps of this exciting process. I'm joining the group in Atlanta to spend time with the whole team at Brightree headquarters later this week. Our goal will be to share the ResMed 2020 growth strategy and vision and how we see Brightree as an integral and important part of that vision.
We're looking forward to closing this transaction and the opportunity to roll up our sleeves and get to work with Brightree to further drive enhancements and efficiencies and innovation for a broad range of post acute health care providers across an increasingly interconnected continuum of care. With that, I will now turn the call back to Agnes.
Thanks, Mick. We will now turn to Q and A and we ask everyone to limit themselves to one question and one follow-up question. If you have an additional question after that, please get back into the queue. Conor, we are now ready for the Q and A portion
of the call. Thank you.
We will now begin the question and answer Steve Wein with JPMorgan is online with a question.
You clearly have been utilizing Brightree software in the past. I'm just wondering what it is about the acquisition that it enhances relative to what you already had. And then just secondly on that, what proportion of the Brightree earnings are resulting from ResMed utilization of their software?
Thanks for the question, Steve. I will hand the first part of the question to Raj Sodhi, who is President of ResMed's Global Business Unit in Healthcare Informatics and the second part of the question over to Brett Sandacoff to talk about the financials. Raj, you want to join in from Atlanta and walk through how Brightree and ResMed working together will enhance performance for customers?
Yes, absolutely. Thanks, Nick, and thanks for the question, Steve. We've been working with Brightree closely to understand how our customers work within the software and then figuring out how to intersect our connected solutions with those workflows. And we've done that very much successfully in the sleep side and that helps our customers understand how to build a bigger and stronger trailing revenue stream for resupply. We see a really important opportunity on connected COPD and intersecting our connected devices in the home to drive similar efficiencies and similar value for our patients.
To give you a concrete example of that, there's scheduling that takes place in home health and hospice where a home health organization is looking at how do they optimize the scheduling, how do they get ahead of any exacerbation that's taking place in the home and without the connectedness that our devices deliver, it's difficult to do that. So we can optimize both getting ahead of therapy issues that are taking place or treatment issues that are taking place as well as making the home visit more efficient. So if you look at the workflow that take place in the home and the iPad app that Brightree has built to lead a clinician through an effective home visit, we can connect our ventilated data into that workflow so that it's more accurate, it's more efficient, it's better for the care providers as well as for the patients. So we see an opportunity to collaborate on the engineering side and intersecting our connected care technologies with their platform. That's just one example of where we think we can collaborate.
Great. And Steve, just on the second part, it's Brett. Yes, that's only a very small component of their revenues. It's certainly not material or anything like that. So I'd say it's just a very small amount.
Yes. And just sorry, back to that opportunities that we were talking about before. Is there some sort of revenue synergies or cost related synergies that you might be able to put some numbers around as well with regards to that opportunity?
I mean, I think well, there's going to be a bunch of I think there will be a bunch of opportunities. But certainly, I don't think we're going to be positioned at the moment that we wouldn't sort of try to wrap any numbers around it at this stage. But I mean that in the Connected Care world and what we're trying to do with informatics, you'd certainly have to think that there's plenty of opportunities that the team are looking at to deliver real value to customers.
Ben Andrews with William Blair is online with a question.
Good afternoon. And I guess my first question is, Mick, why now and why this platform as an acquisition because you're moving a little bit further away from the device side, obviously doubling down on some of the recent efforts on the informatics side. Does this suggest that device innovation in of itself is kind of fading in importance and much more of the competitive dynamic going forward is going to be on this front?
Yes. Thanks for the question, Ben. Clearly, you've seen the last 18 months now that we put a communications chip inside every sleep apnea device we sell, every AirSense 10 and every AirCurve 10 now has a communications chip and is taking data to the cloud. And we've been liberating that data and providing value to patients through MyAir, to HME providers, through AirView and through ResMed data exchange approaches to many hospital and payer provider systems. So the why now is we've really I think established a core competency in healthcare informatics and we've established ourselves as the global leader in connected care with the most cloud connected medical devices on people's bedside table.
So it's really a it's a logical double down on connected care. Air Solutions provides huge efficiencies for our customers, 50%, 60% reduction in labor costs to set up and manage patients. And we've improved adherence from baselines of 60% adherence up to 87% adherence with Air Solutions and U Sleep. And by adding Brightree, as Raj was explaining, there's huge opportunities in areas such as in COPD, where these patients may be in home health or they may be in hospice to identify the patients and pull them back in. So I think it's less about is device innovation limited, because I still think there's a lot of room for device innovation both on the flow generators and the mask side then it is that there is another great opportunity for us to grow and expand our capability in cloud based capabilities to bring efficiencies for the HME provider, efficiencies for the value chain that we can then turn back into investment for better patient care and investment for identifying more patients with sleep apnea and COPD to get into the channel.
So the why now is this makes a whole lot of sense with us strategically and it makes a whole lot of sense for us in terms of cultural fit as I was saying earlier. And the financials are very compelling. You got a 13.5 EBITDA multiple including the tax synergy. So it's a very nice immediately accretive gross margin, immediately accretive to earnings after close.
Okay. And then brief follow-up for me is what has been the durable growth profile of this business on the top line? And can ResMed actually add to that as we go looking at sort of the next 3 to 5 years for the franchise? What should we think about? And then for Brett, how is this going to be reported?
Thank you.
Yes. Brett, you want to address the questions about reporting and the financial questions there?
Sure. I mean we'll look at the disclosure kind of going forward as we get post close. And I think we'll just look at it and see what makes sense on that, Ben. I think we'll just need to balance that kind of shareholder and commercial considerations on that. So I think we'll get I think as we get if we move forward, I think we'll put some more color on that probably in subsequent earnings calls on exactly the extent of disclosure that we'll undertake.
Thanks for the questions, Ben.
Andrew Goodsall with UBS is on the line with a question.
Yes, thanks very much guys. Perhaps just doubling back on Ben's question, just what has been the growth profile to date and how penetrated do you think this product is in the market?
Yes. So Andrew, we're not giving sort of detailed historic financials associated with Roger. They have been growing pretty steadily, solid double digit top line growth. And we think that there is growth ahead. But we don't want to go into the core details of that.
Where the growth ahead is that there are tens of millions of patients that still need to come through the HME channel in terms of undiagnosed and untreated sleep apnea patients. And so the opportunity to partner on efficiencies and to help our HME customers achieve even better efficiency is just going to be really essential. We've seen declining reimbursements in Europe and the U. S. Over the last decade.
We don't expect that trend to stop. And so the only way we can deal with the tens of millions or hundreds of millions of undiagnosed sleep apnea and COPD patients is to ensure that there's scalable and efficient systems all the way through the value chain. So for us, this is really doubling down in an efficiency play in partnering with our HME providers and doing so in a way which is mutually beneficial here.
And just my follow-up, just when you talk to the revenue being recurring, I imagine that's established patients where there's reordering. Is that the correct way to think about that?
Yes. Jim Hollingshead, our President of the Americas is on the line. Jim, do you want to talk a little bit to the revenue model?
Yes. Andrew, it's a good question. It's actually recurring revenues from health care providers and not from patients. So this is software as a service and it has functions like billing and other administrative functions and customers are on subscriptions for the software service.
Will Dunlop with Bank of America Merrill Lynch is online with a question.
Just wondering what the plan is with Brightree in the future. You're going to run the business separately for now, but do you see yourself integrating it into ResMed in the future? And also, what is the thinking behind running it separately given that I imagine there are a lot of synergies in terms both financially, but also from an operational perspective that you could put into Brightree? Thanks.
Yes. I'll start at the 50,000 feet level and then Raj maybe hand over to you to talk about to you and Jim maybe to talk a little bit about running the businesses separately and why that makes sense. At the 50,000 feet level and as you start to think out 1, 3, 5 years out there, ResMed operates in 100 countries worldwide as you know Will. And this is really a double down on cloud based SaaS systems within the U. S.
Market to help our U. S. HME provider customers. And so there will be learnings about workflow mapping about how to understand diagnosis treatment billing and management protocols within an HME provider that could be applicable in the future in terms of that workflow management and automation in other countries around the world as we look at France and Germany, U. K.
And other markets Japan and so on. And so those skill sets that are part of the Brightree capability are skill sets that we could bring to play across the 100 countries we're in. But Raj, Jim, why don't you guys talk a little bit about the running of the businesses and the sort of short to medium term as well for Well.
Yes. Thanks, Mick. I think Brightree has got a strong engineering team, a strong product management team. Just as we've established ourselves as leaders in connected care, they've done so in the HME and home health, hospice side of the fence with their efficiency and outcomes based solutions. I think you said it.
I think Brightree has taken the approach as we have follow the people that do the work, understand the clinical implications and stakeholder pathways, overlay some market dynamics, intersect connected technologies and we come out with something that's unique and powerful for our customers. I think it's the collaboration of the teams to drive those type of activities that's going to give us a really important product, your point of driving efficiency in the market and outcomes for patients and providers. Yes. And this is Jim. I would just add to that.
On the commercial front, I mean Brightree has obviously been very, very successful in serving customers in the HME space where we obviously have a lot of call point overlap, and in other spaces where ResMed does not currently have a call point. I think the commercial models are, while they're similar, are sufficiently different in terms of what's being sold that it makes sense for us to run the 2 groups separately, even in a commercial model. Obviously, we've been collaborating with Brightree over the last couple of years in some co promotions we've run with some joint software offerings or some connected software offerings. So I think we have a rhythm of collaborating in the field where we need to, but Brightree runs a great shop and I think running commercially separately makes sense.
Thanks. And just a quick follow-up. You said you've stopped your share buyback program, but you're quite comfortable with the level of debt you'll have after the acquisition. Could you just explain why you've done that given the debt isn't that high?
Yes, Will. It's a good question. I'll start and then hand to Brett. I mean, our net debt after this acquisition, as Brett was saying earlier, is going to be around $500,000,000 And I think stopping the share buyback for a period of time is just prudent given that we've done 3 reasonably sized acquisitions these last 12 months and we need to focus on driving that. And we've really with this leverage, I think it's good leverage.
I think we can absolutely manage the leverage. It's putting our balance sheet to work and allowing us to execute on a strategic plan and makes a whole lot of financial sense. But Brett, Brett, do you want to add a little bit more to that for Will's follow-up question?
Yes, sure, Mick. And I agree with that. I mean, really what we've done is we just feel that it was sensible to the buyback while we digest some of these recent acquisitions. So that's what we've undertaken to do.
Matthew O'Brien with Piper Jaffray is online with a question.
Good afternoon. Thanks for taking the question. Just to start with kind of a housekeeping question, but just as a percentage of the revenues that Strike 3 generates, are a majority of those going through HMEs? Or is there any substantial piece that's going through another part of the delivery, part of the system via hospices or hospitals?
Yes. So Matt, there is revenue in the HME space as well as in home health as well as in hospice and some other market segments. The majority of the business their business is through the home medical equipment side. I don't think we want to get much more granular than that.
Okay, fair enough. And then just from a strategic perspective, Nick, this seems to make a lot of sense, but just can you give us an idea as far as where the bigger opportunities really lie, both near term and then maybe a little bit longer term in terms of trying to dig in to the cloud based information that you have to get access to CPAP patients or to accelerate your total oxygen business or non invasive ventilator business. Just any thoughts there as far as where some of the strategic incremental revenue opportunities may lie?
Yes. Thanks, Matt. Well, the primary focus here is about efficiency, scalability and partnership with our home medical equipment partners and customers. And so as we've identified many, many millions of patients and diagnosed and treated them in the United States these last 25 years with our HME partners. We've all seen CMS and their approaches to reimbursement reductions through competitive bidding and we've seen private payers doing a mark to market on a monthly quarterly basis.
And these are just a constant drumbeat of what's happening in the reimbursement side. And so really this last decade we've partnered with our HME customers to help with efficiency and oftentimes it's things like air solutions and u sleep where our capabilities in cloud based systems have taken 50%, 60% of the labor costs out of a setup. The improvements in adherence are not only great for patients because they're using the device more and for caregivers and loved ones because their loved ones are not snoring and treating for their sleep apnea or are breathing for those who are on non invasive ventilation and life support ventilation in the more severe COPD and neuromuscular disease side. But it's really about providing efficiency for our customers so that we can scale for the many, many more millions of patients we need to push through the system. In terms of revenue opportunities, home health and hospice, although growing parts of the Brightree business, they're very, very highly prevalent with patients with sleep disorder breathing and with COPD.
And so certainly there will be many patients in that group that are undiagnosed and treated that may need positive airway pressure, portable oxygen concentrators, non invasive ventilation therapy and others. And so we think establishing appropriate ways to get screening diagnosis and referral tools back to pulmonary and sleep medicine physicians is a really exciting sort of strategic upside as you look long term. So it's really a 1, 2 punch if you like. The one punch is efficiency of the channel and allowing us to scale with the channel we have and the other is accessing patients from 2 new channels to refer back into our primary channel. So that's sort of how we're thinking about it from a strategic perspective.
Matt Taylor with Barclays is online with a question.
Hi, thanks for taking the question. So I just wanted to get some kind of sense for the trajectory. It seems like from a lot of the awards that the company has won, they're growing very quickly. And just wondering if you could talk a little bit about how that's been or how you view that going forward? And then how are you going to report this in your structure?
Okay. Yes. So maybe I'll hand the first part of the question to the sort of recognition of the industry and the growth to Jim Heinsett and then and Brett you can maybe talk to the reporting after that. Jim?
Yes. Thanks, Mick, and thanks, Matt. We think there's a lot of growth runway for Brightree as a business. They've done very well and they are a leader in the space that they're playing in now, but we think there's they've grown well. There's significant growth left, both through penetrating the 3 markets they're chasing but also through user growth and through the addition of additional modules in the Software as a Service platform.
So we think there's lots of runway in front of
Yes. And Matt, just on the disclosure side, I was saying earlier, what we're going to do is we'll review that and see what makes sense from a disclosure perspective and then kind of give you more color on our future calls once we've closed the deal. It's just a matter of balancing the shareholder and commercial considerations, I think. And then we'll let you know what sort of template or what changes we make, if any, to the disclosure.
Okay. Thanks. Just curious are you going to I don't
know I guess rejigger because you've done a
few deals now. So just curious how you're going to report kind of the old organic business growth versus a lot of the new stuff?
Yes. I think on the I think the top line sort of organic versus kind of inorganic growth as you like, I think we will yes, with the accumulation of some of those acquisitions, we probably will give some color on that on the kind of revenue side.
Thanks for the questions, Matt.
Raj Denhoy with Jefferies is online with a question.
Great. This is Anthony in for Raj. Just two quick questions. I'm wondering how penetrated Brightree is into the U. S.
HME market. If you could give just an update there how penetrated they are with, say, some of their HME solutions? And then specifically, looking at some of the software solutions that they provide, I'm wondering if there's any overlap with the existing infrastructure of ResMed. So specifically, they do offer sleep therapy compliance. So any update on how much overlap there is between Brightree and existing ResMed portfolio that would be helpful?
Thanks for the questions, Anthony. So I'll actually hand the first part of that question over to Jim in terms of how penetrated MUTRE is within HME in the second half to Raj to talk about software solutions and any overlap between our two businesses. Jim, do you want to go first?
Yes. Anthony, I don't think we want to get into detailed disclosure of exact share numbers and things like that. I'll say that Brightree is the market share leader in this SaaS space in HME, and they've grown very well. And as I was saying before, we think there's still growth left both in terms of HMEs who could adopt the platform but also in terms of number of users in each account and also the offerings, the additional offerings that are signed up. So there's a core billing platform and there are other services that can come along with that.
And so we think there's growth in all three dimensions available. On the second part in terms of the overlap in the sleep therapy compliance, I think prior to our integrations with Brightree, HME managed patients with sleep inside of the platform through a series of workflows that payers or other parties demanded out of that sequence of events caring for the patient through setup and on to ongoing therapy maintenance. What I think the overlap comes through in integrations, it's not really that we're doing an overlap, it's that we've driven the solution through an integration. And just to give you a clear example, removing the steps for a provider to have to log into 2 systems, we've done that through an integration or notifying when a patient achieves a therapy milestone, we've done that through an integration. So it's not really an overlap, more as it is a smart integration between our systems.
I think there's lots of runway there in terms of enhancing those integrations and providing better value to our customers. Thank you.
Sean Lammon with Morgan Stanley is online with a question.
Good morning, and thanks for taking my question. Maybe just a bit more granular and in relation to the last question. Maybe just, gentlemen, if you can just talk to how this might benefit the uptake in compliance with U Sleep?
Yes, so we I can take that and make it. So we've seen a strong uptake between the integration that we've completed and that was our first integration with Brightree. We feel good about our current implementation with U Sleep. Customers are seeing the value. And I think what it's allowing them to do is have U Sleep do all the patient engagement and managed biopsying behind the scenes, but still offer the benefit of living within the Brightree system.
And so really, it's just a continuation of what we've been doing today and having customers use the current implementation of Usuite. So it'll just be a matter of jointly sharing that value with more customers and driving the adoption that we're seeing today.
Great. Thank you.
Victor Windeyer with Citi is online with a question.
Hi, thanks very much. Look, I just wanted to ask about the treatment of research and development or software development in the account for BriarTree?
Brett, do you want to take that question?
Yes. Victor, I mean, it's the typical way that they're trading it under. I mean, we look through that in diligence on the GAAP and so on. So just your normal R and D expense under the various rules.
Yes, okay. So there's no capitalization of some development here? No, no. Okay. Thanks so much.
Saul Hadassan with Credit Suisse is online with a question.
Thanks. Mick, just a question. Referring to Slide 9, you've obviously in the last 12 months, as you know, built out that offering quite early in terms of the HME. Is there anything else in terms of their business performance and processes, are there any gaps that you are noting in terms of your coverage of the solutions you can offer them?
Yes. Look, I mean, as you look at that Slide 9, it's a pretty busy chart. And so I'm not sure if you were there in San Francisco, but we walked through it at the ResMed Investor Day there. We walked through it in a lot of detail where we built up the many, many workflows that are behind some of those lines on that chart as we interface with the whole value chain, the HME and the referring physician and the OSA patient and the payers and so on. I think we are really helping in almost every step of the value chain.
I mean clearly there's more help we can provide. As you look at Air Solutions and its ability to take labor costs out of the system and in Brightree and its ability to provide efficiencies in terms of physician referrals, document management, inventory management and resupply. We really got a lot of the needs of the HME covered. Having said that, there's always more needs that they have. And so we're working with HMEs in our U.
S. Business every day to look for ways that we can better serve them. And we think they're certainly providing the best devices that are quiet, comfortable and fit patients and masks that are as light and comfortable as they can be, but also systems that help them achieve that efficiency. So we've got a lot covered, but there's always more runway ahead is the way we look at it, Saul.
All right. Thanks, Mick.
Thanks. Suraj Kalia with Northland Securities is online with a question.
Good afternoon, gentlemen. Thank you for taking my questions. So, Mick, as I understand for Brightree, Phillips and Fisher and Paykel also are customers. How does that work once you all close this acquisition in terms of there will be some overlap with your competitors also?
Jim, do you want to have a go with that, the question as to how we work with other manufacturers in the space?
Yes, that's right. So Phillips and Fisher and Paykel both have to some extent some data integration into the RightTree platform. And our stance on that is we would like to maintain those data integrations because we think that they create value for our customers. And so that's what we intend to do.
Okay. And Nick, obviously, this is a pretty significant multiple for this company. We don't know the growth rate at which it is growing. You all did feel this was the time to jump in to acquire Brightree. I guess what I'm trying to understand is, was there a competitive environment from other strategics to take out Brightree, which necessitated this valuation.
I'm just trying to understand, I mean, we know the numbers, at least to the extent that you given. I'm just trying to understand the rationale for the timing and it's a pretty lofty multiple. Thank you for taking my questions.
So we respectfully disagree with you, Suraj. I don't think it's a lofty multiple at all. I think the 13.5% multiple on 2015 EBITDA, including the tax synergies is a very fair multiple and within a good range actually for both parties when you think about where SaaS businesses are these days. Why now? I'm not going to go into the details of the process, but I think it's rest assured to say we are a strategic that really gets and understands this space and we've been partnering with Brightree for 3, 4, 5 years in terms of providing great efficiencies to our HME customers and it's really just a next step in that relationship where we're even getting closer to Brightree and becoming part of the same family, although operating as separate teams.
So I think 13.5 times EBITDA, a very strong top line and revenue of $113,000,000 for the calendar year, EBITDA of 43,000,000 dollars for the calendar year, immediately accretive on gross margin and on earnings after close. It's actually a really solid financial deal.
Margaret Kaczor with William Blair is online with a question.
Good afternoon, guys. Can you hear me?
Yes, Margaret, loud and clear.
All right. Appreciate it. So a couple of quick ones for me. In terms of the revenue per customer, the PMPM, however you guys want to term it, I think I calculated about $45,000 or so. Where can that be long term?
Are we just thinking of it going to $80,000 or is that $45,000 that I calculated not the right way to look at it? And then how much of that growth historically and going forward is going to be going deeper into accounts versus new customer wins?
Well, Margaret, your quick study and already started to delve into the numbers. I'm not sure we're going to get quite as granular as you have started to go or want to on this call. But Jim, do you want to talk to at a high level what we're doing with customers to provide more efficiency and help grow between customers and within customers to get towards Margaret's question?
Sure. I'm not sure what the right metric is, Margaret. I think that's a really interesting way to look at it. The way we've been thinking about it is, the better we can understand our customers' businesses and the more we can do to take labor out at every step, that's how we're going to create value, right? And so that's really been our solution strategy with our customers over the last 16, 18 months, really automating all the steps they can do in sleep.
And what Brightree does is it actually automates several labor intensive steps across the whole HME business. So not just in sleep therapy, but across oxygen and other things that HMEs do. And so we think there's as I was saying before on the call, we think there's tremendous potential to continue to grow. They can acquire new customers. As the channel consolidates, what we're seeing is that there are more users per customer.
And so the HMEs that are efficient are the ones that tend to be leaning towards using 3rd party software provision as a way to automate their businesses and make their businesses more efficiency and so are more efficient. And so what we're seeing with channel consolidation, which is actually moving a bit slower than we would have anticipated, but we're seeing more users in each account. So that's a way to grow business. And then as we can work together to really understand the workflows in our customers, we can offer more services within the modules. And bringing the two businesses together, from my point of view, what you've got is the leading manufacturer in software as a service provision in the space today and the leading administrative billing function provider coming together.
And the combination can really only help us to identify better ways to streamline the offering and to streamline our customers' businesses. And so there's multiple ways that I think we can continue to grow. But I like your metric question. We'll think about that.
All right. So for my follow-up, I'm also going to have a second metric question. But in terms of the number of customers, I think you guys listed 2,500 in the slide deck. I know some of them are home health, obviously, but should we consider Brightree to reach 2,000 of the, I don't know, 7000 to 10000 DMEs in the U. S?
And then how do we think about kind of the users per account as well? Thank you.
Yes. So Margaret, we're not going to go into the detailed split of that 2,500 between HME home health and hospice. But yes, look the majority of them are HME, which according to your math you picked it right? There's a lot of runway left to provide these services to other HMEs out there. And as Jim provided just earlier, there's a lot of services even within accounts that we're already working for to find better efficiencies for them and software modules that we're already working their to provide even more efficiencies for their business processes to improve their business efficiency also improve their cash flow.
So they can reinvest that cash in patient care and in reaching out to doctors and getting more undiagnosed patients into the channel, so they can get therapy. So we will look forward to releasing more metrics and thoughts about this business as we move forward on our future earnings calls. Thanks for the questions.
We have reached the
end of the call. So I will turn the call back over to Mick Farrell.
Well, great, Connor. Thanks. And in closing, I'd like to thank all of you for taking this call at short notice. And I want to thank the soon to be after this close almost 5,000 strong team at ResMed Globally for providing solutions for patients in over 100 countries worldwide and for your continued focus on end to end solutions to help optimize the business of our customers. Thanks a lot to everybody.
We're changing millions of lives literally with every breath and we'll talk to you with our earnings call and more details about the Brightree acquisition in the coming months. Thanks a lot and we'll talk to you soon. All right.
Thank you, everyone, again for joining us today. If there are any additional questions, please feel free to contact me. The webcast replay will be available on our website in about 2 hours on investors. Resbed.com. Connor, you may now close the call.
This concludes today's conference call. You may now disconnect.