Release Date: April 23, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ResMed Inc (RMD, Financial) reported strong financial performance with an 8% increase in group revenue, reaching $1.29 billion for Q3 fiscal year 2025.
- The company achieved gross margin expansion, increasing by 140 basis points to 59.9%, driven by manufacturing and logistics efficiencies.
- ResMed Inc (RMD) maintained a disciplined approach to investments, allocating 6% to 7% of revenues into research and development, which is a key growth driver.
- The company is expanding its manufacturing footprint in the US with a new facility in Calabasas, California, which will double its current manufacturing capacity.
- ResMed Inc (RMD) continues to innovate with the launch of new products like NightOwl and VPAP Tx, enhancing its digital health ecosystem and expanding its market reach.
Negative Points
- ResMed Inc (RMD) faces challenges with sleep lab backlogs, which are at all-time highs, potentially impacting the speed of patient diagnosis and treatment.
- The company is navigating a complex global trade environment, particularly concerning tariffs, although it has secured exemptions for its products.
- There is uncertainty in the market due to geopolitical challenges and potential impacts from US tariffs, which could affect financial results.
- ResMed Inc (RMD) is investing heavily in demand generation and brand development, which requires careful management to ensure a positive return on investment.
- The company faces competition in the market, particularly from other diagnostic and treatment providers, which could impact its market share and growth.
Q & A Highlights
Q: Can you discuss the factors contributing to the strong gross margin expansion?
A: Brett Sandercock, CFO, explained that the expansion was driven by manufacturing and distribution efficiencies, including better recoveries through factories, improvements in distribution and freight, the transition from AS10 to AS11 platforms, and favorable product mix with mask growth relative to device growth.
Q: How are sleep labs managing patient backlogs, and what metrics are you tracking for investments in pre and post-diagnosis of sleep apnea?
A: Michael Farrell, CEO, noted that sleep labs are facing high backlogs. ResMed is tracking metrics such as time to titration, time to test, and time from diagnostic to therapy onset. The company is focusing on reducing churn and improving adherence to therapy through investments in products like NightOwl and VPAP Tx.
Q: What is the rationale behind increasing the share buyback program to $100 million per quarter?
A: Brett Sandercock, CFO, stated that the decision is based on strong operating cash flows, a robust business model, and a strong balance sheet. The increase is seen as accretive and balances capital allocation between dividends, buybacks, and potential tuck-in acquisitions.
Q: How are GLP-1 medications impacting the new patient funnel for CPAP therapy?
A: Michael Farrell, CEO, mentioned that while GLP-1s are not yet driving direct-to-consumer campaigns for sleep apnea, ResMed is proactively educating high-volume GLP-1 prescribers. The company is seeing some movement in referral and prescription rates, indicating potential for opening up the new patient funnel.
Q: How is ResMed managing the impact of US tariffs, and what is the status of tariff exemptions for CPAP products?
A: Michael Farrell, CEO, confirmed that ResMed's products continue to benefit from tariff exemptions under the Nairobi Protocol, reaffirmed by US Customs and Border Protection. This exemption applies to products manufactured in Australia and Singapore, and ResMed does not expect tariffs to materially impact financial results.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
