ResMed 1Q25 Earnings Call Highlights

ResMed (ASX: RMD) shares opened 8% higher as the market opened on Friday after the company reported a better-than-expected 1Q25 report.

Q1 2025 Earnings Summary

• Revenue up 11% to $1.2 billion

• Gross margin up 420 bps to 59.2% vs. consensus 58.7%

• Income from operations up 34% to $387.3 million

• Earnings per share up 42% to $2.11 vs. consensus $2.05

Earnings Call Highlights

The below topics have been answered by CEO Michael Farrell and CFO Brett Sandercock.

Q1 2025 performance: "Revenue grew by 11%, reflecting strong demand for sleep health and breathing health medical devices, our masks and accessories, as well as our residential care software offerings."

Rest of the world device growth: "Sales in Europe, Asia, and other regions increased by 10%. Device sales in these regions increased by 9% on a constant currency basis, while masks and others have increased by 11%."

Demand drivers: "Samsung achieved FDA clearance for its Galaxy Watch's moderate-to-severe sleep apnea detection. Apple introduced a version of sleep apnea detection using actigraphy. These developments from consumer tech giants will drive sleep health awareness, creating opportunities for ResMed."

Margin performance: "Gross margin increased by 320 basis points to 59.2% in the September quarter. The increase was primarily driven by manufacturing efficiencies, component cost improvements, and an increase in average selling prices."

Logistics costs: "We expect increased air and sea freight costs will continue to impact our gross margin throughout fiscal year 2025."

Pre-orders for new mask: "We announced the upcoming launch of our latest mask innovation, the AirTouch N30i. Today I can announce that this amazing new technology will be launched into select markets next week."

M&A focus: "We plan to continue to reinvest in growth through R&D, deploy further capital for tuck-in acquisitions, and continue our share buyback program."

Impact from weight-loss drugs: "We conducted a real-world data analysis with 989,000 subjects. The data shows that patients prescribed both GLP-1 medication and CPAP therapy have a 10.8% higher likelihood of commencing positive airway pressure therapy."

FY25 guidance: "Looking forward, we continue to expect gross margin will be in the range of 59% to 60% in fiscal year 2025."

Analyst Q&A Highlights

Any sense of pre-orders for new mask: "The marketing team have put together some fantastic programs, the sales team are ready to take it to customers ... This has been over a decade in development ... I truly think this is a game changer, but very early days and nothing material to report at this point.”

Are trends like Samsung and GLP-1 driving demand for ResMed products: “It's very early days in those new technologies. They've just been rolled out...I do think the GLP-1 trend of getting patients in the primary care is helping. We're tracking 989,000 patients now with combo prescriptions for GLP-1 and PAP, and those are having some tailwind effect ... 11% growth in US, Canada, Latin America on a 2% comp. Really excited about Europe, Asia and rest of world growth of 9% and global growth of 10% constant currency in our devices category.”

What's driving double-digit sales growth: “It's a combination of new patients. We're seeing new patient flow to be pretty solid into the system. It's a combination of that plus resupply ... The masks per patient per year is going up, but there's still a lot of room ..."

Explain the increase in working capital this quarter: “A little bit of an increase in our inventory ... We're in the process of rebalancing on sea freight, air freight, and particularly trying to mitigate some of those increased freight costs ... There may be a little more of an increase in Q2, but then we think will be pretty stable after that.”

Production of AirSense 11 and sales mix (between AirSense 10 and 11): "Production of AirSense 11 is firing on all cylinders... AirSense 11 firing and really, really strong ... Vast, vast majority of products sold in the US are AirSense 11s ... Yeah, maybe some little bit of a backlog ... We've got really sophisticated at ongoing resupply for masks, tubing, and accessories ... So we will continue to do that."

Winning market share: "We're competing with another particular European player... device growth at 9% ... I think it's a combination of the products, AirSense 11, the communication throughout the commercial teams, and the supply chain ... ResMed is doing well, competing hard and winning accounts, winning tenders and winning share."