ResMed (RMD 0.23%), a medical device company focused on breathing disorders, reported its fiscal third-quarter 2019 results on Thursday.

Revenue growth jumped 12% from the year-ago period, which represents a modest acceleration on a sequential basis. However, bottom-line profits are still under pressure since the company is currently digesting a number of acquisitions. 

ResMed's fiscal third-quarter results: The raw numbers


Fiscal Q3 2019

Fiscal Q3 2018

Year-Over-Year Change


$662 million

$591 million


Non-GAAP net income

$105 million 

$110 million


Non-GAAP earnings per share




Data source: ResMed. GAAP = generally accepted accounting principles.

What happened with ResMed this quarter?

  • On a currency-neutral basis, revenue growth would have been 15%. The double-digit gain was credited to strong sales in North America and a big boost in software revenue.
  • Software sales more than doubled to $79 million, thanks to mid-single-digit organic growth from Brightree and the recent acquisitions of HEALTHCAREfirst and MatrixCare. 
  • Gross margin expanded 110 basis points to 59.5%, thanks to manufacturing efficiencies and higher software sales.
  • Selling, general, and administrative expenses increased by 11% and R&D costs grew 27%. Both of these costs are being affected by recent acquisitions.
  • Non-GAAP operating profit expanded 15% to $182 million. However, Non-GAAP net income fell 4%. The divergence between these two figures is explained by acquisition costs, a big jump in interest expenses, and increased income tax expense.
  • Wall Street was expecting only $0.84 in non-GAAP EPS for the quarter, so the actual result pleasantly surprised market watchers.
  • The company's long-term debt balance ballooned to $1.3 billion from $269 million last year on the back of the recent acquisition spree. 
  • Ten million patients now use AirView, the company's trial-based patient management system.
  • ResMed acquired a home medical equipment supplier in South Korea called HB Healthcare, to expand its presence in the region.
Woman putting a mask on before bed

Image source: Getty Images.

What management had to say

CEO Mick Farrell was thrilled with the company's broad performance during the quarter:

Our expanding mask portfolio continues to drive share growth across all geographies, and we have a solid product pipeline to support future growth, including the recent launch of the AirFit P30i. We delivered operating leverage this quarter, even as we execute on our long-term strategy to provide innovative products, software, and solutions to improve outcomes, create efficiencies, and reduce overall healthcare system costs. 

On the conference call with investors, Farrell talked up the big opportunity ahead for the company's growing software-as-a-service (SaaS) portfolio:

We see significant growth opportunities for these SaaS businesses, serving the out-of-hospital healthcare space with a lot of runway ahead. The total addressable market is over $1.5 billion in out-of-hospital SaaS in the United States alone. With our competitive advantages and our leading positions in multiple SaaS verticals, we expect ResMed SaaS portfolio to move from high-single-digit pro forma growth to low-double-digit pro forma growth over the medium term and to be sustainable at that rate for the long term. 

Check out the latest ResMed earnings call transcript.

Looking forward

ResMed's stock jumped 6% in the trading session following the earnings release. The jump is most likely attributable to the better-than-expected non-GAAP EPS result.

Farrell ended his prepared remarks on the conference call by reminding everyone the company still has a huge market opportunity ahead:

We are well positioned for continued success throughout the last quarter of FY '19 that we're just in and beyond. The continued traction of our diversified mask and device portfolio, along with our expanded lifeline of new products and enhanced digital health solutions for sleep apnea, COPD, and out-of-hospital medical software, gives us confidence in our ongoing momentum as we look to the future. We've positioned ResMed for the long term as an innovative global leader in digital health, but we're just getting started.