Sign in
RI

RESMED INC (RMD)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 delivered solid top-line and margin expansion: revenue $1.2917B (+8% y/y, +9% ccy), GAAP gross margin 59.3% (+140 bps), non-GAAP gross margin 59.9% (+140 bps), GAAP EPS $2.48, non-GAAP EPS $2.37 .
  • Results modestly beat Wall Street consensus: revenue by ~$7.4M and EPS by ~$0.01; prior two quarters also beat on both revenue and EPS (S&P Global; see Estimates Context).
  • Management guided Q4 gross margin broadly consistent with Q3; reiterated FY25 tax rate 19–21%, SG&A at 18–20% of revenue, R&D 6–7%; announced buybacks increasing to ~$100M per quarter starting Q4 FY25 and declared a $0.53 dividend .
  • Tariff risk de‑risked: CBP reaffirmed ResMed’s long-standing medical device tariff treatment; management expects no material impact from U.S. tariff changes .
  • Strategic catalysts: nationwide launch of NightOwl HSAT, brand evolution, and acquisition of VirtuOx to streamline diagnostics and accelerate funnel throughput .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion from manufacturing/logistics efficiencies, favorable product mix; sequential gross margin also improved (+70 bps non-GAAP) .
  • Broad-based growth: Devices +6% and Masks +11% globally; Residential Care Software +10% ccy; Americas +9%, Europe/Asia/Other +5% headline (+8% ccy) .
  • Strong cash generation: operating cash flow $579M; excluding IRS refunds ($107M), OCF was $471M; ongoing capital returns (dividend $78M; buybacks $75M) .

Management quote: “We delivered 9% constant currency revenue growth and 140 bps improvement in non-GAAP gross margin… evidence that sleep health customers recognize our products and software solutions as the gold standard for care.” — Mick Farrell, CEO .

What Went Wrong

  • FX headwinds: y/y FX negatively impacted Q3 revenue by ~$13M; FX pressured margins sequentially in prior quarter; net EPS impact ~-$0.02 in Q2 .
  • Non-cash investment portfolio write-downs of ~$6M lowered non-GAAP EPS; excluding, non-GAAP EPS would have been $2.41 (+13% y/y) .
  • Sleep lab backlogs remain a bottleneck; management is investing to expand HSAT throughput (NightOwl), titration tools (VPAP Tx), and funnel conversion programs to alleviate delays .

Financial Results

Consolidated Performance vs Prior Periods and Consensus

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$1,224.5 $1,282.1 $1,291.7
Revenue Consensus Mean* ($USD Millions)$1,182.9$1,267.2$1,284.3
GAAP Diluted EPS ($)$2.11 $2.34 $2.48
Primary EPS Consensus Mean* ($)$2.043$2.315$2.360
Non-GAAP Diluted EPS ($)$2.20 $2.43 $2.37
GAAP Gross Margin (%)58.6% 58.6% 59.3%
Non-GAAP Gross Margin (%)59.2% 59.2% 59.9%
GAAP Income from Operations ($USD Millions)$387.3 $417.2 $426.3
Non-GAAP Income from Operations ($USD Millions)$406.4 $435.9 $444.6

Values marked with * are from S&P Global consensus via GetEstimates.

Segment Breakdown (Revenue)

Segment ($USD Millions)Q1 2025Q2 2025Q3 2025
Sleep & Breathing Health$1,067.7 $1,125.6 $1,130.6
Residential Care Software$156.8 $156.5 $161.2
Total$1,224.5 $1,282.1 $1,291.7

KPIs and Operating Metrics

KPIQ1 2025Q2 2025Q3 2025
Operating Cash Flow ($USD Millions)$325.5 $308.6 $578.7; excl. IRS refunds $471.0
SG&A as % of Revenue19.5% 18.8% 19.0%
R&D as % of Revenue—6.3% 6.5%
Dividend per Share ($)$0.53 $0.53 $0.53
Share Repurchases222K shares; $50M 307K; $75M 314K; $75M
Cash Balance ($USD Millions, period-end)$426.4 $521.9 $932.7
Gross Debt / Net Cash ($USD Millions)—$673 gross debt; $151 net debt $675 gross debt; $258 net cash

Guidance Changes

MetricPeriodPrevious Guidance (Q2 FY25)Current Guidance (Q3 FY25)Change
Gross MarginH2 FY2559–60% Q4 broadly consistent with Q3 (59.9% non-GAAP) Maintained; near high-59s
SG&A as % of RevenueFY25 H2 / Remainder FY2518–20% 18–20% Maintained
R&D as % of RevenueFY25 H2 / Remainder FY256–7% 6–7% Maintained
Effective Tax RateFY202519–21% 19–21%; Q3 GAAP ETR 12.6% due to IRS interest benefit Maintained; noted one-time benefit
Net InterestFY25 H2Expect net interest income Net interest income of ~$1M in Q3; continued expectation Clarified
Share BuybacksFY2025~$75M per quarter Increase to ~$100M per quarter starting Q4 FY25 Raised
DividendQ3 FY25$0.53 declared $0.53 declared Maintained
Tariffs Impact2025Monitoring; no expected material impact CBP reaffirmed tariff treatment; no material impact expected Affirmed exemption

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/digital healthContinued investment in ML/AI; generative AI “Dawn”; ecosystem (myAir/AirView/Brightree) Emphasis on generative AI, digital concierge vision; expanding adherence/resupply tech Building momentum; broader deployment
Supply chain & marginsNon-GAAP GM 59.2% in Q1/Q2; drivers: manufacturing/logistics, components; H2 guide 59–60% GM up to 59.9% non-GAAP; drivers: manufacturing/logistics efficiencies, product mix; sea vs air freight improvement Sustained expansion; pipeline of initiatives
Tariffs/macroExpected no material impact; manufacturing in AU/SG/US CBP reaffirmation; Nairobi Protocol history; competitors may face headwinds Risk reduced; potential competitive advantage
Product performanceAirSense 10/11 strong; masks double-digit growth; AirTouch N30i fabric mask Devices +6% global; masks +11%; VPAP Tx launch; AS11 transition benefits Continued strength; new lab tools
Diagnostics funnelEcosystem investments; CME programs; wearables & GLP‑1 awareness NightOwl nationwide HSAT; VirtuOx acquisition; metrics to reduce backlog and improve TTT Accelerating capacity & integration
Regional trendsAmericas +11% Q1; +12% Q2; Europe/Asia +10%/+8% Americas +9%; Europe/Asia +5% headline (+8% ccy) Normalization; steady ccy growth
R&D executionTarget 6–7% of revenue; continued device/mask innovations R&D 6.5%; new U.S. manufacturing hub (Calabasas) for masks/motors Sustained investment; U.S. capacity build
Brand evolutionUnified brand strategy announced Comprehensive brand evolution rollout and ROI discipline Execution phase

Management Commentary

  • “Our continued success is driven by our market-leading value proposition with top quality hardware and… investments in machine learning, artificial intelligence as well as generative AI technology.” — Michael Farrell .
  • “Gross margin increased by 140 basis points… driven by manufacturing and logistics efficiencies… and favorable shifts in product mix.” — Brett Sandercock .
  • “We do not expect the introduction of U.S. tariffs to have a material impact… CBP confirmed current tariff treatment continues.” — Brett Sandercock .
  • “First full commercial rollout of NightOwl in the United States… helping move patients through the screening and diagnostic funnel.” — Michael Farrell .
  • “We plan to… purchase shares to the value of approximately $100 million per quarter, commencing in Q4 FY ’25.” — Brett Sandercock .

Q&A Highlights

  • Gross margin drivers: manufacturing recoveries, distribution/freight mix (sea vs air), AS11 transition, component costs; product mix favorable (masks) .
  • Demand funnel metrics: tracking time-to-test and time-to-therapy; CME for PCPs and targeted consumer streaming campaigns showing measurable increases .
  • Capital allocation: confidence in raising buybacks to $100M/quarter given net cash and strong OCF; tuck‑in M&A pipeline aligned to 2030 strategy .
  • Tariffs: ResMed’s imports under long-standing medical device tariff treatment; reaffirmed in April; competitors may face different outcomes .
  • GLP‑1 adherence: >1M patient dataset shows higher PAP starts and multi‑year resupply vs garden-variety patients; combination therapy viewed favorably .

Estimates Context

ResMed beat consensus revenue and EPS in Q1–Q3 FY2025; Q3 beats were modest on EPS and low-single digit on revenue. The beat/miss table:

MetricQ1 2025Q2 2025Q3 2025
Revenue Actual ($USD Millions)$1,224.5 $1,282.1 $1,291.7
Revenue Consensus Mean* ($USD Millions)$1,182.9$1,267.2$1,284.3
Beat/Miss (Revenue)+$41.6M+$14.9M+$7.4M
GAAP Diluted EPS Actual ($)$2.11 $2.34 $2.48
Primary EPS Consensus Mean* ($)$2.043$2.315$2.360
Beat/Miss (EPS)+$0.07+$0.03+$0.01

Values marked with * are from S&P Global consensus via GetEstimates.

Where estimates may adjust:

  • Continued gross margin strength and buyback uplift could support modest upward EPS revisions near-term .
  • FX headwinds and softer Europe/Asia headline growth may temper revenue adjustments; management points to ccy resilience .

Key Takeaways for Investors

  • Margin expansion appears durable, underpinned by structural supply chain efficiencies and product mix; management aims to sustain high‑59s non‑GAAP GM near term .
  • Diagnostics throughput is a strategic focus: NightOwl nationwide launch and VirtuOx acquisition should lower backlog and shorten time‑to‑therapy — a tailwind for devices and masks .
  • Capital returns accelerating: dividend maintained at $0.53 and buybacks increasing to ~$100M/quarter starting Q4 — supportive of EPS and share count .
  • Tariff uncertainty de‑risked: CBP reaffirmation suggests no material impact to ResMed’s U.S. imports; potential pressure for certain competitors .
  • GLP‑1/wearables awareness likely expands funnel over multiple quarters/years; ResMed’s ecosystem (myAir/AirView/Somnoware) well-positioned to capture and convert demand .
  • Watch Q4: guidance implies steady margins; U.S. Calabasas facility ramp (June 2025) expands U.S. mask capacity and proximity to largest market .
  • Non-GAAP nuances: IRS interest/tax refund benefits and investment write-downs affected optics; underlying OCF and operating profit trends remain strong .

S&P Global disclaimer: Consensus values marked with * were retrieved from S&P Global.