ResMed Inc. (RMD) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary indicates strong financial performance with double-digit revenue growth, gross margin expansion, and increased operating profit. The Q&A section reveals positive sentiment towards new product launches and strategic initiatives like AI integration and market expansion. Despite higher SG&A expenses due to acquisitions and promotions, the overall outlook remains optimistic. The shareholder return plan, including dividends and buybacks, further supports a positive sentiment. However, uncertainty about Philips' market reentry and SG&A expenses slightly tempers the outlook, resulting in a positive but not strong positive prediction.
Key Financial Performance
Headline Revenue Growth 11% growth year-over-year (9% growth on a constant currency basis). Reasons for change: Positive contributions across device and mask portfolio and software business.
GAAP EPS Growth 16% year-over-year. Reasons for change: Driven by revenue growth and gross margin expansion.
Global Devices Revenue Growth High single-digit growth year-over-year. Reasons for change: Strategic expansion of mask portfolio and improved mask resupply through education and awareness.
Global Masks, Accessories, and Other Revenue Growth Double-digit growth year-over-year. Reasons for change: Targeted initiatives and focus in direct-to-consumer markets.
Europe, Asia, and Rest of World Masks, Accessories, and Other Revenue Growth 8% growth on a constant currency basis year-over-year. Reasons for change: Strategic expansion of mask portfolio and targeted initiatives in direct-to-consumer markets.
Residential Care Software (RCS) Revenue Growth 5% growth year-over-year on a constant currency basis. Reasons for change: Robust performance from MEDIFOX DAN software vertical, partially offset by challenges in senior living and long-term care vertical.
Gross Margin Expansion 310 basis points year-over-year. Reasons for change: Component cost improvements, manufacturing and logistics efficiencies, and positive impact from foreign currency movements.
SG&A Expenses Increased by 15% year-over-year (12% on a constant currency basis). Reasons for change: Growth in employee-related expenses, marketing, and technology investments, and expenses from VirtuOx acquisition.
R&D Expenses Increased by 12% year-over-year (10% on a constant currency basis). Reasons for change: Increases in employee-related expenses.
Operating Profit Growth 19% year-over-year. Reasons for change: Revenue growth and gross margin expansion.
Net Income Growth 15% year-over-year. Reasons for change: Revenue growth and gross margin expansion.
Cash Flow from Operations $340 million for the quarter. Reasons for change: Strong operating results, partially offset by increases in working capital.
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Operating Highlights
New Fabric Masks: Launched F30i Comfort and F30i Clear, the first compact full-face fabric masks. Positive feedback from patients and providers. Expected strong adoption over time.
AI-enabled Comfort Match: Introduced Comfort Match, an FDA-cleared AI-enabled medical device to improve CPAP therapy adherence. Helps patients adjust comfort settings for better therapy experience.
Global Revenue Growth: Achieved 11% headline revenue growth (9% in constant currency). High single-digit growth in global devices and double-digit growth in masks and accessories.
Regional Growth: 8% growth in Europe, Asia, and Rest of World for masks and accessories. Strong performance in U.S., Canada, and Latin America with 11% growth.
Gross Margin Expansion: Achieved 310 basis points year-over-year gross margin expansion. Supply chain improvements and cost efficiencies contributed.
U.S. Distribution Center: Started construction of a new distribution center in Indiana, expected to be operational by 2027. Will enable faster shipping to 90% of U.S. customers.
Portfolio Management in RCS Business: Focused on sustainable high single-digit growth and double-digit operating profit growth by fiscal year 2027. Mid-single-digit growth expected during portfolio management process.
AI and Digital Health Investments: Investing in AI and digital health tools, including sleep apnea detection and diagnostic pathways. Expanding ecosystem to improve patient diagnosis and adherence.
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Risk or Challenges
Portfolio Management in Residential Care Software (RCS) Business: The company is undergoing a portfolio management process in its RCS business, which is expected to result in mid-single-digit growth in the short term. This indicates challenges in achieving higher growth rates in this segment until fiscal year 2027.
Global Supply Chain Challenges: Although the supply chain team delivered significant gross margin expansion, the CEO emphasized the need for continuous improvement in gross margin through 2030, indicating ongoing challenges in maintaining cost efficiencies.
Regulatory and Trade Environment: The company is closely monitoring global trade and regulatory changes, including Section 232 investigations and CMS competitive bidding programs. Any adverse changes could impact product pricing and market access.
Senior Living and Long-Term Care Vertical Challenges: The RCS business faces ongoing challenges in the senior living and long-term care vertical, which could hinder growth in this segment.
Increased Operating Expenses: SG&A expenses increased by 15%, driven by employee-related costs and marketing investments. This rise in expenses could pressure operating margins if not offset by revenue growth.
Global Economic Uncertainty: The CEO highlighted ResMed as a compelling investment amidst global macro uncertainty, indirectly acknowledging potential risks from economic instability.
Dependence on Regulatory Approvals for New Products: The rollout of new products like fabric masks is dependent on regulatory approvals, which could delay market entry and revenue generation.
Workforce Restructuring: The company incurred a $6 million restructuring charge related to global workforce planning, indicating challenges in optimizing workforce efficiency.
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Guidance & Outlook
Portfolio Management in Residential Care Software (RCS): The company expects to maintain mid-single-digit growth in the RCS business for the March and June quarters of fiscal year 2026. Sustainable high single-digit growth and double-digit operating profit growth are anticipated by fiscal year 2027.
Gross Margin Improvement: The supply chain team has been tasked with delivering double-digit basis points improvement in gross margin every year through 2030. Gross margin for fiscal year 2026 is expected to be in the range of 62% to 63%.
U.S. Distribution Center: A new U.S. distribution center in Indiana is under construction and is expected to be operational during calendar year 2027. This facility will enable shipping to 90% of U.S. customers within two business days.
Product Innovation and Launches: The company has launched new compact full-face fabric masks (F30i Comfort and F30i Clear) in select markets and plans to expand globally as regulatory approvals are obtained. Strong adoption of these masks is expected over time.
Artificial Intelligence in Products: The company is leveraging AI to enhance product offerings, including the Comfort Match feature in the myAir software platform. This is expected to improve therapy adherence and unlock underutilized comfort features.
SG&A Expenses: SG&A expenses as a percentage of revenue are expected to be in the range of 19% to 20% for fiscal year 2026.
R&D Investments: R&D expenses as a percentage of revenue are expected to be in the range of 6% to 7% for fiscal year 2026.
Share Repurchase Program: The company plans to repurchase shares worth more than $600 million for fiscal year 2026.
Market Trends and Awareness: The company anticipates increased awareness of sleep apnea driven by big pharma medications, consumer wearables, and primary care education. This is expected to drive growth in patient flow and demand for diagnostic and treatment solutions.
Competitive Bidding Program: CPAP, APAP, and bilevel products are not included in CMS' upcoming competitive bidding program, which is expected to benefit the U.S. sleep health and breathing health industry.
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Shareholder Return Plan
Quarterly Dividend: Declared a quarterly dividend of $0.60 per share.
Share Repurchase Program: Repurchased approximately 704,000 shares for $175 million during the quarter. Plan to repurchase shares for a total value of more than $600 million for fiscal year 2026.
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Key Q&A
Q:What was the growth rate for U.S. masks and accessories, and how much of it was attributed to VirtuOx?
A:The U.S. masks and accessories segment grew by 16%. Even without VirtuOx, the growth was still in double digits, indicating strong performance.
Q:What is the impact of the new F30i Clear and F30i Comfort masks?
A:The new F30i Clear and F30i Comfort masks are expected to drive good adoption over time. The F30i Comfort, in particular, features fabric around the nasal interface and headgear, which is changing the basis of competition.
Q:What is the impact of GLP-1 therapies on the CPAP market?
A:GLP-1 therapies are bringing more patients into the healthcare system, resulting in a higher CPAP attach rate. Claims data shows a 10-11% higher start rate and a 6.2% higher resupply rate at 3 years for patients on CPAP therapy.
Q:Why did SG&A expenses grow faster than revenue?
A:SG&A growth was influenced by the VirtuOx acquisition and promotional activities, such as marketing programs in China and Singles Day promotions. Excluding VirtuOx, SG&A growth was in high single digits, tracking close to revenue growth.
Q:What progress has been made in the patient funnel, and where is more work needed?
A:Most progress has been made at the top of the funnel, with increased patient awareness driven by big pharma and big tech. More work is needed in scaling home sleep apnea testing and improving efficiency in sleep clinics and HME setups.
Q:What is the impact of GLP-1 therapies on patients with mild or moderate sleep apnea?
A:Patients with mild or moderate sleep apnea are sticking with CPAP therapy due to symptomatic relief, even if their AHI is reduced. The combination of weight loss and CPAP therapy is proving effective, and adherence rates remain high.
Q:What is the potential impact of Philips reentering the U.S. device market?
A:The timing of Philips' reentry into the U.S. device market is uncertain. ResMed is confident in its competitive position, citing superior products and ecosystem. Philips' return is not expected to significantly impact ResMed's growth.
Q:What drove the 5% growth in devices in Europe, Asia, and Rest of World?
A:The 5% growth was driven by promotional activities in markets like China, Korea, Australia, and New Zealand. The prior year had a strong comparable growth of 9%, and the current growth aligns with market trends.
Q:What is the progress in engaging primary care physicians (PCPs)?
A:ResMed has conducted 60,000 CME trainings for PCPs, increasing awareness and referrals for sleep apnea testing and treatment. The company is investing in education and digital tools to streamline the patient pathway.
Q:Will the strong U.S. mask growth persist in the second half of the year?
A:While the 16% growth in U.S. masks is exceptional, it may not persist at the same level every quarter. ResMed aims to meet or beat high single-digit growth consistently, with promotional programs contributing to the performance.
Q:Review of Unclear Management Responses
A:Management avoided directly quantifying the impact of GLP-1 therapies on growth, stating that they are still analyzing the data. They also did not provide a clear timeline for Philips' reentry into the U.S. market, relying on public statements from Philips' executives.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
APAP bilevel
Alzheimer
CPAP therapy
EMEA APAC
GLP CPAP
JPMorgan month
OSA CPAP
Parkinson disease
RCS
RD
SGA
Sandercock
Teams
apnea sleep
bilevel therapy
brain health
breathing health
care conference
cohort
comfort
course
death
dementia
device people
effort
evidence OSA
fabric mask
health brain
health breathing
holiday
investigation
likelihood
mask ResMed
mask accessory
message
minute
patient script
share repurchase
therapy risk
RMD Transcript
ResMed Inc. (RMD) Q2 2026 Earnings Call Transcript
Positive1-29
The earnings call summary indicates strong financial performance with double-digit revenue growth, gross margin expansion, and increased operating profit. The Q&A section reveals positive sentiment towards new product launches and strategic initiatives like AI integration and market expansion. Despite higher SG&A expenses due to acquisitions and promotions, the overall outlook remains optimistic. The shareholder return plan, including dividends and buybacks, further supports a positive sentiment. However, uncertainty about Philips' market reentry and SG&A expenses slightly tempers the outlook, resulting in a positive but not strong positive prediction.
ResMed Inc. (RMD) Presents at 44th Annual J.P. Morgan Healthcare Conference Transcript
Neutral1-12
ResMed Inc. (RMD) Q1 2026 Earnings Call Transcript
Positive10-30
The earnings call summary reveals strong financial performance, especially in product development and shareholder return plans with increased dividends and share buybacks. The Q&A section highlights strategic expansions and acquisitions, enhancing growth prospects. Despite some unclear management responses, the overall sentiment is positive due to the focus on innovation, market expansion, and robust growth strategies. The positive impact of new product launches and strategic acquisitions outweighs concerns about restructuring costs and tax impacts, suggesting a positive stock price movement.
ResMed Inc. (RMD) Presents at Bank of America Global Healthcare Conference 2025 Transcript
Neutral9-23
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