Exchange: NYSE | Sector: Healthcare | Industry: Medical Instruments Supplies
Q4 2024
Published: Aug 9, 2024
Earnings Highlights
Revenue of $1.22B up 9% year-over-year
EPS of $1.98 increased by 27.6% from previous year
Gross margin of 57.6%
Net income of 292.24M
""Our global ResMed team executed incredibly well in our fourth quarter, producing another strong period of growth and execution across our business. With solid performance across all regions and all segments of our business and strong double-digit bottom-line growth."" - Mick Farrell
ResMed Inc (RMD) Q4 2024 Earnings Analysis: Revenue Up 9%, Margin Expansion to 59%+, and Robust Cash Flow Driven by AirSense 11, F40, and Digital Health Ecosystem
Executive Summary
ResMed delivered a solid Q4 FY2024, with group revenue of $1.223 billion, up 9% year over year (10% in constant currency). Growth was broad-based across devices (+6%), masks and accessories (+15%), and software-as-a-service (SaaS) (+10%), underscoring the company’s diversified, end-to-end sleep and breathing health platform. Gross margin expanded 330 basis points to 59.1%, driven by cost improvements, favorable mix, and higher selling prices, despite freight headwinds that management expects to persist into fiscal 2025. Operating income rose about 30% year over year, delivering a non-GAAP and GAAP-friendly trajectory with net income up roughly 30% and earnings per diluted share around $1.98 in the quarter.
Management emphasized operating leverage and the company’s digital health ecosystem as core growth accelerants. AirView now contains over 28 million patient records, myAir surpassed 8.3 million users, and the company is expanding AI capabilities (including Dawn, the AI sleep concierge) across regions to drive adoption and adherence. The residential care software (Brightree, MEDIFOX DAN) segment posted another strong quarter, with double-digit growth and an expectation of ongoing high single-digit to low double-digit growth in FY2025, aided by scale efficiencies and cross-segment synergies.
Looking ahead, ResMed reaffirmed a FY2025 gross margin target of 59% to 60%, with SG&A expected to be 18%–20% of revenue and R&D at 6%–7% of revenue, subject to currency moves. The firm highlighted several strategic tailwinds, including GLP-1 obesity/diet-related therapies that appear to increase patient engagement with PAP therapy, and long-term megatrends in consumer wearables and digital health that may expand the addressable sleep health market. Risks include ongoing freight-cost headwinds, currency fluctuations, competitive dynamics (notably Philips’ renewed market presence in multiple regions), and reimbursement environments. Overall, the combination of durable device and software revenue, a robust cash flow engine, and a clear path to profitability supports a constructive long-run investment thesis for ResMed.
Key Performance Indicators
Revenue
1.22B
QoQ: 2.19% | YoY:9.01%
Gross Profit
704.27M
57.58% margin
QoQ: 3.33% | YoY:14.07%
Operating Income
381.22M
QoQ: 1.77% | YoY:38.49%
Net Income
292.24M
QoQ: -2.75% | YoY:27.25%
EPS
1.99
QoQ: -2.45% | YoY:27.56%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $1.223B in Q4 FY2024; YoY +9.0% (CC +10%), with non-GAAP revenue growth in line with reported figures. SaaS revenue grew 10% in the June quarter.
Gross Margin: 59.1% in Q4 FY2024, up 330 bps YoY and up ~60 bps sequentially, driven by freight reductions, cost-of-goods improvements, favorable mix, and ASP increases. Management programs anticipate FY2025 gross margin of 59%–60% despite freight headwinds.
Operating Income: $381.22M, up ~30% YoY; Operating margin 31.17% (approx.).
Net Income and EPS: Net income $292.24M, up ~30% YoY; diluted EPS $1.98 (GAAP) / $1.99 (basic reported equivalent) for the quarter.
- Revenue: $1.223B in Q4 FY2024; YoY +9.0% (CC +10%), with non-GAAP revenue growth in line with reported figures. SaaS revenue grew 10% in the June quarter.
- Gross Margin: 59.1% in Q4 FY2024, up 330 bps YoY and up ~60 bps sequentially, driven by freight reductions, cost-of-goods improvements, favorable mix, and ASP increases. Management programs anticipate FY2025 gross margin of 59%–60% despite freight headwinds.
- Operating Income: $381.22M, up ~30% YoY; Operating margin 31.17% (approx.).
- Net Income and EPS: Net income $292.24M, up ~30% YoY; diluted EPS $1.98 (GAAP) / $1.99 (basic reported equivalent) for the quarter.
- Cash Flow: CFO $440.1M; Free Cash Flow $413.8M. Capex $25.0M; D&A $54.75M.
- Balance Sheet and Liquidity: Cash and cash equivalents $238.36M; Gross debt $707.0M; Net debt $469.0M; Total debt $873.94M; ~US$1.50B revolver capacity available; debt reduction of $300M in the quarter.
- Shareholder Returns: Quarterly dividend $0.53 per share (up 10%); 232k shares repurchased for $50.0M; annual cadence to continue around $50M quarterly buybacks.
- Regional and Product Mix: Device sales +6% YoY; Masks and accessories +15% YoY; US/Canada/Latin America devices +5% and masks +17%; Europe/Asia/ROW devices +8% and masks +9%; SaaS contribution +10% in quarter.
- Key embedded metrics: DSO ~61.6 days, inventory days ~142.6, DIO ~142.6, and CCC ~163 days indicating working-capital optimization and solid cash generation.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1.22B
9.01%
2.19%
Gross Profit
704.27M
14.07%
3.33%
Operating Income
381.22M
38.49%
1.77%
Net Income
292.24M
27.25%
-2.75%
EPS
1.99
27.56%
-2.45%
Key Financial Ratios
currentRatio
2.59
grossProfitMargin
57.6%
operatingProfitMargin
31.2%
netProfitMargin
23.9%
returnOnAssets
4.25%
returnOnEquity
6.01%
debtEquityRatio
0.18
operatingCashFlowPerShare
$3
freeCashFlowPerShare
$2.82
dividendPayoutRatio
24.1%
priceToBookRatio
5.65
priceEarningsRatio
23.5
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- Strategy and growth trajectory: Mick Farrell, ResMed's CEO, stated, “Our global ResMed team executed incredibly well in our fourth quarter, producing another strong period of growth and execution across our business, with solid performance across all regions and segments and strong double-digit bottom-line growth.” He emphasized demand generation as a strategic priority and highlighted the company’s leading position in 140+ countries with a digital health strategy that leverages AirView, myAir and Brightree to improve adherence and outcomes.
- Product and technology momentum: Farrell noted that “Sales of our flow generator devices, including the AirSense 11 platform, grew 6% year-over-year globally,” and “Masks and accessories growth was 15% year over year,” with the F40 mask driving early adoption due to comfort and fit. He underscored the role of digital health ecosystems in enabling ongoing therapy management and resupply.
- Digital health and AI: Farrell highlighted investments in AI and GenAI, including the expansion of Dawn (the generative AI sleep concierge) from Asia Pacific to the US, and ongoing rollout of AI capabilities in AirView such as “compliance coach.” He framed these initiatives as outcomes-driven, aiming to improve patient experience and healthcare pathways rather than technology for its own sake.
- GLP-1 tailwinds and real-world evidence: The management team discussed positive real-world data indicating GLP-1 therapies increase PAP uptake and adherence. In particular, the company reported an expanded analytic cohort of over 811,000 de-identified subjects showing a 10.7 percentage-point higher propensity to start PAP therapy with a GLP-1 prescription, and a 3.1pp (12-month) to 5.3pp (24-month) higher PAP resupply rate for GLP-1 users, reinforcing a long-term tailwind for ResMed’s PAP ecosystem.
- Financial discipline and guidance: CFO Brett Sandercock described gross-margin expansion to 59.1% and guided for FY25 gross margin to be 59–60%, acknowledging freight-cost headwinds that may temper margin improvements. He also outlined SG&A at 18–20% of revenue and R&D at 6–7%, with Q1 FY25 expected at the higher end of the SG&A range. The company emphasized ongoing operating leverage and strong cash flow generation, including a $0.53 quarterly dividend (up 10%) and a $50M quarterly buyback run-rate.
- Capital allocation and balance sheet health: Brett noted a debt reduction of $300M in the quarter, ending with a net debt of $469M and substantial liquidity ($1.5B revolver available). The emphasis on deleveraging alongside capex and R&D investment supports a resilient capital structure amid macro headwinds.
"Our global ResMed team executed incredibly well in our fourth quarter, producing another strong period of growth and execution across our business. With solid performance across all regions and all segments of our business and strong double-digit bottom-line growth."
— Mick Farrell
"We are ramping up our demand generation initiatives to raise awareness and create pathways for patients to help them find access to care for their sleep health and their breathing health. We will continue to develop, launch and scale these technologies and programs to help people take control of their own health."
— Mick Farrell
Forward Guidance
- Gross margin trajectory: The company reaffirmed a FY2025 gross margin target of 59%–60%. Management attributed potential upside to manufacturing efficiencies, procurement optimization, scale benefits from higher volumes, and the continued transition to AirSense 11 platforms. Freight costs remain a near-term headwind, but are expected to be offset by cost-optimization initiatives and favorable mix as new products gain scale.
- Operating expenses: SG&A expected to be 18%–20% of revenue in FY2025, with Q1 FY25 at the higher end due to seasonality and ongoing restructuring benefits already realized in prior quarters. R&D to be 6%–7% of revenue, in line with prior cadence and currency considerations.
- Cash flow and capital allocation: The company intends to sustain robust operating cash flow (CFO) and free cash flow generation, supporting continued share repurchases (~$50M per quarter) and ongoing R&D investments, while maintaining a strong liquidity position (approx. $1.5B revolver availability).
- Growth catalysts and risks to monitor: GLP-1 tailwinds (weight management drugs) can expand the diagnostic and treatment funnel, particularly in the U.S. and other large markets, but regulatory and reimbursement dynamics could influence uptake. Digital-health initiatives (AirView, Dawn, myAir, Brightree) should improve patient access, adherence, and resupply, potentially driving longer-term share gains. Risks include ongoing freight-cost volatility, FX fluctuations, competition (notably Philips’ renewed presence), and macroeconomic pressures impacting payer reimbursement and device procurement.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
RMD Focus
57.58%
31.20%
6.01%
23.50%
TFX
55.70%
10.70%
0.70%
94.19%
WST
38.00%
22.00%
4.76%
47.61%
ALC
54.60%
18.30%
2.07%
22.56%
ICUI
26.80%
-3.27%
-0.81%
-35.10%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
ResMed’s Q4 FY2024 results underscore a durable growth engine built on a diversified portfolio of devices, masks, and software that benefits from strong demand generation and a scalable digital health platform. The company’s revenue trajectory remains resilient (CC revenue +10% YoY), and the margin expansion to 59.1% demonstrates ongoing cost discipline and favorable mix. With expected FY2025 gross margins of 59–60% and a continued commitment to 18–20% SG&A and 6–7% R&D as a percentage of revenue, the company appears well-positioned to sustain double-digit earnings growth in the near term, supported by robust free cash flow generation (FCF per share of $2.82 in the quarter; FCF of $413.8M).
Strategic growth levers include the AirSense and AirView ecosystem, ongoing product introductions (AirSense 11, AirCurve11, F40 mask), and the expansion of residential care software (Brightree, MEDIFOX DAN) that is expected to deliver high single-digit to low double-digit revenue growth in FY2025. The GLP-1 tailwind provides a potential amplifier for new patient volume and improves PAP adherence, with ResMed reporting a real-world cohort of 811,000 subjects showing a 10.7 percentage-point higher propensity to start PAP therapy when GLP-1 prescriptions are present, plus a meaningful uplift in resupply over 12 and 24 months (3.1pp and 5.3pp respectively).
Risks to monitor include freight-cost headwinds (management expects persistent pressure in FY2025), FX fluctuations, and the competitive landscape (notably Philips’ renewed market activity). Despite these, ResMed’s balance sheet strength, capital allocation discipline (dividend increase and steady buybacks), and the scalable, data-driven nature of its digital health stack support a constructive long-run investment thesis. Investors should watch for: (i) the pace of gross-margin improvement as freight costs normalize; (ii) the monetization trajectory of Dawn and other AI-driven offerings; and (iii) the rate at which GLP-1–driven demand translates into sustainable PAP adoption and customer retention across markets.
Key Investment Factors
Growth Potential
Exposed to a large and underpenetrated sleep/breathing health market with meaningful upside from GLP-1 tailwinds, wearables-driven awareness, and the digital health concierge strategy. The 28M AirView records and 8.3M myAir users illustrate an extensive data-driven platform that can unlock higher engagement, better outcomes, and durable recurring revenue via subscription services and SaaS offerings (Brightree/MEDIFOX DAN). The company targets high single-digit to low double-digit top-line growth in FY2025 for residential care software, with strong double-digit net operating income growth in that segment.
Profitability Risk
Freight-cost inflation remains a key margin headwind in FY2025; currency fluctuations could compress reported results; Philips’ re-entry could intensify competitive pressure in some markets; the pace of GLP-1 adoption and subsequent lifestyle changes could affect PAP demand; reliance on adherence programs and third-party payers introduces regulatory and reimbursement risk; product transitions (AirSense 11) entail execution risk and potential period-over-period volatility in ASPs.
Financial Position
Strong free cash flow generation (FCF per share: $2.82; FCF $413.8M in Q4), prudent debt management (net debt $469M; debt reduction of $300M in the quarter; ~US$1.5B revolver facility available), and a disciplined capital-allocation framework (dividend up 10% to $0.53 per share; ~$50M quarterly buybacks). The balance sheet supports ongoing R&D investments and potential tuck-in acquisitions while preserving liquidity to weather freight and FX headwinds.
SWOT Analysis
Strengths
Market leadership in sleep health, breathing health, and home-based care across 140+ countries.
Diversified revenue mix: devices (AirSense 11, AirCurve11), masks/accessories, and software/SaaS (Brightree, MEDIFOX DAN, MatrixCare).
Strong digital health ecosystem (AirView, myAir, Brightree) enabling high engagement and recurring revenue.
Substantial operating cash flow and strong balance sheet with meaningful liquidity.
Large, real-world data asset (nearly 19 billion nights of de-identified data) enabling AI and analytics-led products.
Weaknesses
Freight and logistics costs subject to macro disruptions and port congestion; margin can be sensitive to freight headwinds.
High reliance on PAP therapy adherence; tiered therapy options require ongoing investment and customer education.
Cyclicity in medical device demand and regulatory changes across geographies.
Opportunities
GLP-1 tailwinds expanding the addressable pool of motivated patients entering the sleep-health pathway.
Digital health concierge and freemium-to-paid analytics monetization potential ( Dawn, advanced AirView analytics).
Expansion of cash-pay subscription models for masks/devices (US and international markets) to boost resupply and adherence.
Ongoing expansion of residential care software with cross-sell opportunities to sleep/breathing devices and services.
Threats
Competitive re-entry by Philips and other device makers could tighten market share dynamics.
Currency volatility and inflation impacting成本 of goods sold, pricing power, and international revenue translation.
Regulatory, privacy, and data-security risk associated with AI and cloud-based health data platforms.
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