Sign in

    Resmed Inc (RMD)

    Q4 2024 Earnings Summary

    Reported on Jan 10, 2025 (After Market Close)
    Pre-Earnings Price$214.56Last close (Aug 1, 2024)
    Post-Earnings Price$210.00Open (Aug 2, 2024)
    Price Change
    $-4.56(-2.13%)

    What went well

    • ResMed is leveraging major trends in consumer technology and pharmaceuticals to drive patient growth and expand its market. They are focusing on becoming a digital health concierge to help patients find pathways to screening, diagnosis, and treatment, capitalizing on increased awareness from wearable devices like the Samsung Galaxy Watch and GLP-1 medications from big pharmaceutical companies. ,
    • ResMed is experiencing strong device sales growth, driven primarily by increased patient flow and potential market share gains. The growth is attributed to strong demand rather than price increases, indicating robust market dynamics and ResMed's competitive positioning.
    • ResMed's investment in resupply programs and subscription models has led to strong growth in mask sales, allowing them to outperform market growth rates. They are leveraging digital health technologies to support resupply and have implemented successful subscription programs, contributing to double-digit growth in masks and accessories.

    What went wrong

    • Device revenue growth came in lower than expected, with only a 6% increase, which may indicate challenges in driving new patient growth and reliance on price increases rather than volume growth. ,
    • Rising freight costs are a continuing headwind that could pressure margins, with management indicating uncertainty whether these cost increases are permanent or transitory, potentially impacting profitability. ,
    • The re-entry of competitors like Philips into key markets could intensify competition, potentially impacting ResMed's market share and pricing power, especially in Europe, Asia, and Rest of World regions.

    Q&A Summary

    1. Gross Margin Outlook
      Q: What are the positive drivers for FY25 gross margins?
      A: ResMed expects gross margins to improve to 59%-60% in FY25, up from 57.7% in FY24. Positive drivers include cost optimization initiatives, manufacturing efficiencies, procurement initiatives, scale benefits, favorable product mix due to the continued transition to the AS 11 platform, and new product introductions allowing for better pricing.

    2. Impact of GLP-1 Drugs
      Q: How will GLP-1 drugs affect new patient growth?
      A: The GLP-1 trend is bringing more motivated patients into the system, potentially increasing market growth by 50-125 basis points. ResMed is investing in digital health solutions to guide these patients through screening, diagnosis, and treatment, aiming to accelerate market growth.

    3. Competitor Philips' Reentry
      Q: Is Philips reentering international markets significantly?
      A: Philips is back in many markets in Europe and Asia, but ResMed continues to gain market share, achieving 8% growth in these regions. ResMed remains confident in outperforming competitors, emphasizing its position as the market leader with superior products.

    4. Mask Growth Sustainability
      Q: Is the strong mask growth sustainable?
      A: ResMed achieved 17% mask growth in the U.S. and 9% in other regions, driven by resupply programs and partnerships. While double-digit growth may not continue indefinitely, the company aims to meet or beat market growth by enhancing demand generation and improving resupply initiatives.

    5. Gross Margin Improvement Cadence
      Q: How will gross margins trend through FY25?
      A: Gross margins are expected to gradually improve throughout FY25 from the current 59.1%, reaching the target range of 59%-60% as cost optimization efforts take effect.

    6. Devices Revenue Drivers
      Q: What drove the 6% increase in device revenues?
      A: The global device revenue grew by 6% primarily due to increased patient volume, with minimal impact from pricing changes. Growth was 5% in the U.S., Canada, and Latin America, and 8% in Europe and Asia, reflecting strong patient flow.

    7. Pricing Impact and Inventory Levels
      Q: Can you elaborate on pricing impact and inventory levels?
      A: Pricing increases were associated with innovation, but the majority of growth was volume-driven. Inventory levels have been reduced to appropriate levels, with nothing unusual in masks and accessories.

    8. Sleep Concierge Service Initiative
      Q: How will digital technologies bring in more patients?
      A: ResMed aims to be a sleep health concierge, leveraging its extensive data to help patients find treatment paths. Investments are being made to drive more patients into the funnel, contributing to sustained double-digit growth.

    9. Competition from GLP-1 Therapies
      Q: Will GLP-1 drugs reduce CPAP usage?
      A: Despite the SURMOUNT-OSA study results, ResMed has not seen increased CPAP discontinuation. They believe combination therapy is beneficial and continue to monitor real-world data, with no significant change in patient adherence observed.

    10. Diagnostic Rates and Market Growth
      Q: Can diagnostic rates increase with GLP-1 and wearables?
      A: Diagnostic rates are low globally, but GLP-1 therapies and consumer wearables may increase awareness. ResMed is working to help patients find treatment, potentially increasing market growth by 50-125 basis points .

    Related Publications