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ResMed's Sales and Profits Rise

By Brian Feroldi - Oct 30, 2017 at 8:23AM

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Investors cheer the company's successful start to its fiscal year.

ResMed (RMD 2.90%), a medical device marker focused on continuous positive airway pressure (CPAP) machines and accessories, reported its fiscal first-quarter results on Thursday, Oct. 26. The company's top and bottom lines once again moved in the right direction and compared favorably to what market watchers had predicted. Investors applauded the company's success.

Doctor holding sign that says sleep disorder

Image source: Getty Images.

ResMed's first-quarter 2018 results: The raw numbers

Metric

Q1 2018

Q1 2017

Year-Over-Year Change

Sales

$523.7 million

$465.5  million

13%

Non-GAAP net income

$94.1 million 

$87.7 million

7%

Non-GAAP earnings per share

$0.66

$0.62

6%

Data source: ResMed. 

What happened with ResMed this quarter?

  • Total sales grew 11% on a currency neutral basis.
  • Sales at Brightree, the company's software solution, grew 15% to $38.1 million. However, the growth was helped in part by the inclusion of two recent acquisitions. On an organic basis, Brightree revenue increased 13%.
  • Spending on selling, general, and administrative (SG&A) expenses and research and development (R&D) increased by 12% and 9%, respectively.
  • Non-GAAP EPS of $0.66 was $0.01 ahead of what Wall Street had expected.
  • ResMed repaid $60 million worth of debt during the quarter.
  • Six million patients are actively being monitored with the company's AirView software, and 1,300 new patients are signing up for the myAir patient engagement app every single day.

What management had to say

CEO Mick Farrell commented:

Our new masks have performed well around the world, device sales are solid, and operating profit returned to double-digit growth in the quarter. We are achieving share gains with new product innovation and delivering sustainable operating profit growth. We continue to pioneer products, services, and solutions that improve patient outcomes, create efficiencies for our homecare providers, and help physicians and payers better manage chronic disease and lower long-term healthcare costs.

Farrell also reaffirmed that the company remains focused on executing its "Three Horizons 2020" growth strategy. This plan calls for the company to increase demand for its core sleep apnea products, grow its software solutions segment, and expand its reach into new growth markets like sleep health and wellness, chronic disease management, and out-of-hospital software.

CFO Brett Sandercock also provided investors with an update related to the company's capital return program:

We expect to recommence our share buyback in the second quarter of fiscal year 2018. As a minimum, the aim of the buyback will be to offset the dilution impact from employee equity grant. This is estimated to be in the range of 1 million to 1.5 million shares annually.

Looking forward

ResMed's management team doesn't provide Wall Street with guidance, but Sandercock did give investors some insight into the company's financial projections for fiscal 2018. Specifically, he stated that gross margin will be consistent with this quarter's results, SG&A and R&D expenses will moderate over the course of the year, and the company's tax rate will increase to roughly 22%.

Overall, ResMed's strong start to the fiscal year 2018 helped prove to investors that the bull thesis remains on track. Investors responded by sending shares up following the report. Given the upbeat results, it isn't hard to figure out why this stock is trading at an all-time high.

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ResMed Inc. Stock Quote
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