Q2 2025 Earnings Summary
- ResMed is achieving device sales growth significantly above market rates, with U.S. devices up 12% and devices in Europe, Asia, and Rest of World up 9%, driven by effective demand generation strategies such as rePAP and ReSupply, leading to strong market share gains. ,
- ResMed is well-positioned to benefit from emerging megatrends, including increased sleep apnea awareness from consumer tech companies like Apple and Samsung, and new GLP-1 weight loss drugs like Eli Lilly's Zepbound, which are expected to drive sustained increases in patient flow over the coming years. ,
- Gross margin expansion initiatives are expected to drive improved profitability, with guidance of 59% to 60% gross margins in the second half of fiscal year 2025, supported by manufacturing optimization, procurement initiatives, scale benefits, and new product rollouts. ,
- ResMed's device growth may not be sustainable, as the company acknowledges that market growth is only mid-single-digit, and maintaining double-digit growth requires significant effort and is "not a given." ,
- Gross margin improvements are uncertain, with the company currently at the low end of its 59%-60% guidance. Factors such as product mix, freight costs, and timing of benefits from new products may hinder margin expansion, and the company admits these are "probably still a watch and wait."
- Expected benefits from GLP-1 drugs and consumer wearables may take time to materialize, with the CEO stating they are in the "very early stages" of seeing any flow from these megatrends, and significant impact is expected over the "coming 1, 3, 5 quarters" and "1, 3, 5 years and beyond," potentially delaying anticipated growth. ,
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +10% | The growth reflects continued strong demand for devices and masks, alongside SaaS expansion (including prior acquisitions). It represents a slight deceleration compared to the +16% growth in Q1 2024, as the company cycles against high pandemic-driven demand. |
Sleep & Respiratory Care | +11% | Primary drivers include robust device and mask sales linked to new patient setups and resupply programs, building on the 14% YoY increase observed in Q1 2024. Improved manufacturing and distribution efficiencies further supported the segment’s growth. |
Software as a Service (SaaS) | +8% | This marks moderated growth compared to prior double-digit expansions (e.g., +32% in Q1 2024), partly due to maturing contributions from the MEDIFOX DAN acquisition. Continued performance in the HME software vertical remains a positive factor. |
U.S., Canada, and Latin America | +12% | Effects from expanded resupply programs and higher mask replacement rates fueled the region’s revenue, building on the +10% growth in Q1 2024. The acceleration also reflects improved device availability and increased awareness of sleep health. |
Combined Europe, Asia, and Other | +8% | The segment continues to benefit from strong device and mask sales (+22% in Q1 2024 previously), though currency tailwinds lessened this period. Steady market demand and supply chain improvements contributed to the growth. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Effective Tax Rate | FY 2025 | 19%–21% | 19%–21% | no change |
Gross Margin | 2H FY 2025 | no prior guidance | 59%–60% | no prior guidance |
SG&A Expenses | 2H FY 2025 | no prior guidance | 18%–20% | no prior guidance |
R&D Expenses | 2H FY 2025 | no prior guidance | 6%–7% | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Net Interest Expense | Q2 2025 | Less than $1 million | -4,097(thousands of USD, indicating net interest income) | Surpassed |
Effective Tax Rate | Q2 2025 | 19% to 21% | Approximately 18.2% (derived from Net Income of 344,622And Operating Income minus Interest Expense) | Surpassed |
Gross Margin | Q2 2025 | 59% to 60% | ~58.6% (calculated from Revenue of 1,282,089Minus COGS of 530,814, i.e. 751,275 ÷ 1,282,089) | Missed |
SG&A as % of Revenue | Q2 2025 | 18% to 20% | ~18.85% (241,613÷ 1,282,089) | Met |
R&D as % of Revenue | Q2 2025 | 6% to 7% | ~6.35% (81,373÷ 1,282,089) | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Device sales growth and market share | Q1 2025: 10% global device growth, highlighted strong global demand. Q4 2024: 6% global increase, still above mid-single digits. Q3 2024: 5% global device growth, holding or gaining share. | 11% global device growth, with 12% in the U.S./Canada/LatAm and 9% in Europe/Asia; outpacing market. | Consistent outperformance |
Recurring focus on 59%-60% gross margin targets | Q1 2025: Achieved 59.2%, up +320 bps YoY; reiterated 59%-60% target. Q4 2024: Exited at 59.1%, aiming for 59%-60% in FY25. Q3 2024: Discussed margin improvements, but no specific 59%-60% target. | Reiterated 59%-60% margin goal, at 59.2% in Q2 (+230 bps YoY). Emphasized cost initiatives and product mix benefits. | Ongoing priority |
Freight costs and supply chain | Q1 2025: Persistent higher freight costs; shifting to sea freight to mitigate impact. Q4 2024: Freight a headwind but partially offset by efficiencies. Q3 2024: Reductions boosted margins by ~240 bps. | Freight costs stabilized; supply chain optimization ongoing, viewed as a mild variable on margins. | Gradual improvement |
Digital health technologies and wearable integration | Q1 2025: Focus on AI-driven tools (myAir, Dawn), wearable home sleep test integration. Q4 2024: Samsung watch FDA clearance, expanding AI pilots. Q3 2024: Leveraging ~18B nights of data, strong digital ecosystem. | Emphasized wearable integration with Apple/Samsung and generative AI “Dawn” for patient flow, boosting adherence. | Expanding adoption and innovation |
Impact of GLP-1 weight loss drugs | Q1 2025: Real-world data of 989k patients on GLP-1 plus PAP showing higher adherence. Q4 2024: Analysis of 811k showed +10.7% PAP starts. Q3 2024: ~660k patients, similarly higher adherence. | Gradual tailwind from Eli Lilly’s Zepbound; combination therapy improves PAP initiation and adherence. | Growing positive impact |
AirSense 11 global rollout | Q1 2025: Full-capacity production, driving robust device sales. Q4 2024: 6% device growth partly due to AirSense 11 expansion. Q3 2024: Rapid adoption in the U.S. and scaling in EU/Asia. | Launched in India this quarter; ongoing global expansions planned through 2025. | Continued expansion |
Masks and accessories | Q1 2025: 11% YoY mask sales growth; new products and resupply programs. Q4 2024: 15% growth, strong performance of AirFit F40. Q3 2024: 10% growth, resupply driving adherence. | Double-digit global growth; introduced AirTouch N30i; strong ReSupply fueling sales. | Sustained strong contribution |
Competition from Philips and others | Q1 2025: Confident vs. Philips’ reentry; strong digital ecosystem advantage. Q4 2024: Philips rebuilding after recall; ResMed retaining market share. Q3 2024: Philips competing mainly with Tier 2/3 players; ResMed leads. | Not discussed in Q2 2025. | No new mention in Q2 |
Inventory management | Q1 2025: Short-term inventory rise for sea freight strategy, affected working capital. Q4 2024: Lower inventory helped strong cash flow. Q3 2024: Inventory near targets; contributed to solid cash flow. | No specific mention in Q2 2025. | Previously stabilized, no Q2 update |
Concerns over sustainability of above-market device growth | Q1 2025: No direct concerns raised; strong brand momentum. Q4 2024: No explicit mention of sustainability issues. Q3 2024: Expressed confidence in ongoing patient flow and new patient starts. | Reaffirmed above-market growth driven by demand generation, rePAP opportunities, and consumer tech tailwinds. | Positive outlook reaffirmed |
Limited pricing power | Q1 2025: Benign pricing environment; modest adjustments to offset higher costs. Q4 2024: Some price lifts, but volume drives most growth. Q3 2024: Not explicitly addressed. | Not mentioned in Q2 2025. | No recent mention |
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Devices Growth and GLP-1 Impact
Q: Is GLP-1 starting to impact devices growth?
A: Michael Farrell noted that U.S. devices grew by 12% year-on-year, and international devices grew by 9% in Europe, Asia, and Rest of World. He does not see a significant material impact from GLP-1 drugs yet. The impact is expected over the coming 1, 3, and 5 quarters, gradually improving patient flow. As Lilly's Zepbound begins direct-to-consumer advertising and obtains broader reimbursement, ResMed anticipates that combination therapy of CPAP and GLP-1 drugs will be the future of obstructive sleep apnea treatment. -
Gross Margin Outlook
Q: Do you expect gross margins to improve in the second half?
A: Brett Sandercock stated they guided gross margins in the range of 59% to 60%, currently at the low end. They aim to improve margins through manufacturing optimization, procurement initiatives, and scale benefits. Factors like product mix, freight costs, and new product rollouts could influence margins. They expect to maintain margins within the guided range in the medium term. -
Device Growth Sustainability
Q: What drove device growth above market rates, and is it sustainable?
A: Michael Farrell explained that while market growth for devices is mid-single digits, ResMed aims to exceed that through demand generation and initiatives like ReSupply and rePAP. They experienced strong device growth this quarter, with U.S. mask growth at 12%. Growth is driven by both new patients and those replacing devices older than five years. Maintaining momentum involves focusing on demand capture, conversion, and optimizing the patient pathway. -
FX Impact on Margins
Q: How is foreign exchange affecting your margins?
A: Brett Sandercock noted a 30 basis point sequential impact on gross margin due to FX. The net impact was a negative $0.02 on EPS for the quarter. Looking forward, gross margin impact is expected to be relatively neutral in Q3, with slight benefits in R&D and SG&A expenses. -
One-off Purchases and Tariffs
Q: Were there any bulk purchases or tariff impacts this quarter?
A: Michael Farrell confirmed there were no bulk purchases or one-off events affecting the quarter's results. Potential tariffs are not expected to impact ResMed due to their diversified manufacturing in Sydney, Singapore, and Atlanta. However, tariffs could negatively affect competitors importing from China or manufacturing in Mexico. -
Scaling Sleep Testing Capacity
Q: How are you addressing capacity constraints in sleep testing?
A: Michael Farrell discussed expanding home sleep apnea testing to meet increased demand. ResMed offers products like ApneaLink Air and NightOwl to facilitate scalable home testing. They are partnering with sleep labs and testing companies to reduce patient wait times and efficiently manage the influx of new patients over the next 1, 3, and 5 quarters and years. -
SaaS Revenue Growth
Q: Can you update us on your SaaS business growth?
A: Michael Farrell reported that their SaaS business saw group growth of 8%. MEDIFOX, their German software business, is growing strongly ahead of this rate. They expect high single-digit revenue growth and double-digit net operating profit growth in their residential care software business.