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Key points
- ResMed delivered solid revenue and profit growth in the second quarter
- A major competitor product recall boosted demand
- However, its revenue still fell short of analyst expectations
The ResMed Inc. (ASX: RMD) share price will be one to watch on Friday morning.
This follows the release of the sleep treatment focused medical device company's second quarter update.
ResMed share price on watch after falling short of expectations
- Revenue increased 12% (13% in constant currency) to US$894.9 million
- Gross margin contracted by 230 basis points to 57.6%
- Net income up 12% to US$201.8 million
- Diluted earnings per share up 11% to US$1.37
- Quarterly dividend of 42 US cents declared
What happened during the quarter?
For the three months ended 31 December, ResMed reported a 12% increase in revenue to US$894.9 million. This was driven by increased demand for sleep and respiratory care devices and the benefits of a major product recall by one of its largest competitors.
ResMed recorded top line growth across all its operations. Revenue in the Americas grew 14%, in Europe, Asia, and other markets it grew 12%, and its software-as-a-service business reported 8% revenue growth.
However, while this revenue growth was strong, it still fell short of the market's expectations. The consensus estimate was for revenue of US$927.5 million. In after hours trade in the US, the ResMed share price is down 4.5% on the news.
Also potentially weighing on the ResMed share price today was its softer gross margin. Management advised that its gross margin decreased by 230 basis points due to higher freight and manufacturing costs, which were partially offset by favourable product mix changes.
Management commentary
ResMed's CEO, Mick Farrell, was pleased with the company's performance during the quarter, especially given the supply chain challenges it was facing.
He said: "Our second-quarter results reflect continued strong performance across our business resulting in double-digit top-line revenue growth, driven by ongoing high demand for our sleep and respiratory care products, and solid growth in our software-as-a-service business. Our global ResMed team continues to find ways to deliver products and solutions to our customers, even amid ongoing supply chain challenges that have limited additional access to critical electronic components."
"We are working every day to meet the extraordinary demand generated by our competitor's ongoing device recall. We continue to ensure priority for the highest-need patients first, and we are working with physicians, providers, and healthcare systems to maintain delivery of medical devices and digital health solutions for the patients who need care," he added.
Mr Farrell remains positive on the future and notes that the company continues to focus on improving 250 million lives by 2025.
He commented: "Despite constantly evolving market dynamics, we remain focused on our goal to improve 250 million lives in the year 2025; supporting patients with the sleep apnea therapy, respiratory care therapy, and digital health solutions they need as we deliver value for all of our customers."
"We are investing in medical device research and development, as well as digital health innovation that will unlock value across the healthcare system. I am incredibly proud of our global ResMed team, working around the clock with providers and physicians across 140 countries to get products directly into the hands of patients who most need our help," Mr Farrell concluded.
