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RESMED INC (RMD)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 delivered 9% revenue growth to $1.34B, non-GAAP gross margin expanded 280 bps to 62.0%, and non-GAAP EPS rose 16% to $2.55; GAAP EPS was $2.37 .
  • Results were modestly above consensus: revenue $1,335.6M vs $1,332.9M*, and non-GAAP EPS $2.55 vs $2.50*; strength was driven by manufacturing/logistics efficiencies and component cost improvements, with limited ASP impact .
  • Guidance largely maintained: FY26 gross margin 61–63%, SG&A 19–20% of revenue, R&D 6–7%, ETR 21–23%, buybacks ~$150M/quarter; dividend held at $0.60/share .
  • Strategic catalysts: mask innovation (AirTouch F30i), AI rollouts (Dawn, Comfort Match), U.S. manufacturing/distribution expansion (Calabasas, Indianapolis), tariff relief reaffirmed; all reinforce margin trajectory and cash returns .

What Went Well and What Went Wrong

  • What Went Well

    • Non-GAAP gross margin +280 bps YoY to 62.0% and +60 bps sequential, driven by manufacturing/logistics efficiencies and component cost improvements; ASP changes were minimal .
    • U.S./Canada/LatAm masks and other grew 12% and devices 8%; Sleep & Breathing Health up 10% globally .
    • Management emphasized operating leverage and innovation: “Our supply chain team delivered 280 basis points of… gross margin expansion… we are an innovation machine and an operational excellence machine.” .

  • What Went Wrong

    • RCS (Residential Care Software) grew mid‑single‑digits (+5% cc), below historical levels due to weaker skilled nursing/long‑term care segments; management is shifting investment toward higher‑margin SaaS .
    • Effective tax rate rose to 22.3% (global minimum tax), a headwind to EPS; RIC offsets in Singapore help but do not fully offset .
    • Europe/Asia masks growth was 4% cc off a strong prior-year comp, with management targeting resupply acceleration in these regions .

Financial Results

MetricQ3 FY25Q4 FY25Q1 FY26
Revenue ($USD Millions)$1,291.7 $1,348.0 $1,335.6
Gross Margin (%)59.3% 60.8% 61.5%
Non-GAAP Gross Margin (%)59.9% 61.4% 62.0%
Income from Operations ($USD Millions)$426.3 $454.5 $446.5
Non-GAAP Income from Operations ($USD Millions)$444.6 $476.4 $482.1
GAAP Diluted EPS ($)$2.48 $2.58 $2.37
Non-GAAP Diluted EPS ($)$2.37 $2.55 $2.55

Segment Breakdown

Segment ($USD Millions)Q3 FY25Q4 FY25Q1 FY26
Sleep & Breathing Health$1,130.6 $1,181.0 $1,169.4
Residential Care Software (RCS)$161.2 $167.0 $166.1
Total$1,291.7 $1,348.0 $1,335.6

Q1 FY26 Product and Regional Details

Region / Product ($USD Millions)DevicesMasks & OtherTotal
U.S., Canada, LatAm$413.4 $361.3 $774.8
Europe, Asia, Other$266.9 $127.8 $394.7
Global Totals$680.3 $489.1 $1,169.4
Residential Care Software——$166.1
Grand Total——$1,335.6

KPIs and Capital Returns

KPIQ3 FY25Q4 FY25Q1 FY26
Operating Cash Flow ($USD Millions)$578.7 $538.8 $457.3
Dividends Paid ($USD Millions)$77.7 $77.6 $87.8
Share Repurchases ($USD Millions)$75.0 $100.0 $150.0
Cash Balance ($USD Millions)$932.7 $1,209.5 $1,383.8
Gross Debt ($USD Millions)$675.0 $668.0 $669.0
Net Cash ($USD Millions)$258.0 $541.0 $715.0
Diluted Shares Outstanding (Millions)147.22 147.04 146.90

Actual vs Consensus (Q1 FY26)

MetricActualConsensus*Surprise
Revenue ($USD)$1,335,582,000 $1,332,902,740*+$2.68M
Non-GAAP EPS ($)$2.55 $2.49874*+$0.05

Values marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Gross Margin (%)FY2661%–63% 61%–63% Maintained
SG&A (% of Revenue)FY2619%–20% 19%–20% Maintained
R&D (% of Revenue)FY266%–7% 6%–7% Maintained
Effective Tax Rate (%)FY2621%–23% 21%–23% Maintained
Share RepurchasesFY26~$150M/quarter starting Q1 FY26 ~$150M/quarter Maintained
Quarterly DividendOngoing$0.60 declared in Q4 FY25 $0.60 declared in Q1 FY26 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4)Current Period (Q1 FY26)Trend
AI/digital health (Dawn, myAir)Dawn integrated in Australia; AI for coaching/resupply Dawn launched on myAir in U.S.; Comfort Match beta in Australia Accelerating rollout
Supply chain & marginsSequential GM expansion; logistics and component cost gains +280 bps YoY non-GAAP GM; ASP impact minimal Sustained improvement
Tariffs & tradeTariff relief reaffirmed; negligible duties expected Relief reconfirmed; industry advocacy via AdvaMed Stable policy backdrop
CMS competitive biddingHistory suggests benign impact; support HMEs Awaiting details; expect appropriate bidding; outcomes likely manageable Watching; low risk
Product innovation (Masks/devices)AirTouch N30i, AirFit F40; AirSense 11 rollout AirTouch F30i Comfort/Clear launched AU/U.S. Expanding portfolio
Regional demandU.S. devices +6% Q3; masks high single-digit U.S. devices +8%, masks +12%; EMEA/APAC devices +7% cc Solid; mask resupply strong
RCS/SaaS strategyRCS integration; leadership changes Portfolio shift to SaaS; mid-single-digit growth, plan to re-accelerate Refocusing on SaaS

Management Commentary

  • “Our fiscal year 2026 is off to a strong start… We delivered 9% headline revenue growth… 16% non-GAAP EPS growth.” — Mick Farrell, CEO .
  • “Gross margin increased… primarily driven by manufacturing and logistics efficiencies and component cost improvements.” .
  • “We are launching the first two full-face fabric masks… AirTouch F30i Comfort and F30i Clear.” .
  • “We still expect gross margin to be in the range of 61% to 63% for fiscal year 2026.” — CFO .
  • “At September 30, we had $669 million in gross debt and $715 million in net cash… ~$1.5 billion available under our revolver.” — CFO .

Q&A Highlights

  • Mask launch strategy: AirTouch F30i targets full‑face category with premium Comfort and B2B Clear variants; expected to accelerate mask growth ex‑U.S. .
  • Funnel optimization and tuck‑ins: NightOwl, VirtuOx, Somnoware to reduce leakage, improve screening-to-therapy conversion; more tuck-ins likely .
  • U.S. manufacturing/distribution: Doubling capacity; new Indianapolis distribution center to reach ~90% of customers in two days by 2027 .
  • Tax dynamics: ETR headwind from global minimum tax to 22.3%; Singapore RIC credits partially offset through P&L .
  • RCS growth: Lower near-term growth due to services/weaker segments; investment shifting to higher-margin SaaS (Brightree, MEDIFOX DAN, MatrixCare) .

Estimates Context

  • Revenue and EPS came in slightly ahead of S&P Global consensus: revenue $1,335.6M vs $1,332.9M*, non-GAAP EPS $2.55 vs $2.50*, with 19 revenue estimates and 12 EPS estimates contributing*.
  • Estimate revisions likely to reflect sustained margin trajectory (component/logistics efficiencies) and continued masks resupply strength; ETR headwinds (21–23%) should temper EPS leverage .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Margin durability: Multi‑pronged cost and logistics programs continue to expand gross margin; FY26 guide 61–63% underpins EPS resilience despite tax headwinds .
  • Innovation-led resupply: Fabric mask platform (AirTouch F30i) plus AI features (Dawn, Comfort Match) should support adherence and resupply, particularly in D2C-heavy markets .
  • Demand generation tailwinds: CME programs, GLP‑1 awareness, and diagnostics (NightOwl/VirtuOx) expand the funnel; expect incremental device growth vs market .
  • Capital returns: Strong operating cash flow, net cash position, and ~$150M quarterly buybacks plus $0.60 dividend favor near-term TSR .
  • Policy backdrop: Tariff relief reaffirmed; competitive bidding expected manageable; limited risk to U.S. economics near-term .
  • Watch RCS mix shift: Near-term growth slower as services de-emphasized; medium-term goal is higher SaaS growth and double-digit operating profit .
  • Trading lens: Modest beat, strong margin execution, and visible capital returns are supportive; monitor ETR trajectory and regional mask growth acceleration for estimate revisions .