The ResMed Inc (ASX: RMD) share price shot up 14% this morning after releasing a strong first-quarter result. Here is your two-minute guide to ResMed’s results.
ResMed Inc is a United States-based business that develops and manufactures medical devices to help people with sleep apnea, chronic obstructive pulmonary disease (COPD) and other chronic diseases. ResMed, which is short for Respiratory Medicine, was founded in 1989 by Dr. Peter Farrell and now helps customers & patients in over 120 countries.
ResMed’s Report
ResMed has reported an impressive 16% jump in revenue to $681.1 million, which comes in about 3% above analyst forecasts. On a constant currency basis revenue was up 17%.
ResMed managed to once again increase its gross profit margin, reaching an impressive 59.5% (up from 58.3%). ResMed’s ability to continue to expand its gross margins is a testament to the quality products it offers and the competitive advantage with which it operates.
Net operating profit increased 19% to $120.1 million. Earnings per share (EPS) were $0.83, which constitutes a 14% uplift versus the same period last year.
Revenue in the U.S, Canada and Latin America, excluding software as a service (SaaS), grew by 13%. Meanwhile, revenue in Europe, Asia and other markets showed more modest growth of 8%.
Software as a service (SaaS) revenue increased 83% versus the prior period, but it was off a low base. This came about due to continued growth in its Brightree service offerings and the contribution from the acquisition of MatrixCare, which was completed in Q2 of FY19.
Selling, general and administrative (SG&A) expenses were up 14%. Although if you strip out the effect of acquisitions, these expenses were up just 6% on a constant-currency basis.
During the quarter, ResMed paid out $56.1 million in dividends, which equates to about 3.9 cents per share. On an annualised basis this provides for a dividend yield of less than 1%. However, ResMed is sought after for its high growth potential — not for the dividends.
However, it’s important to point out that if ResMed continues to deliver strong profit growth dividends will inevitably rise over time.
Management Reaction
Commenting on the results, ResMed CEO Mick Farrell said, “Our global ResMed team delivered another quarter of strong performance in the first quarter of fiscal year 2020 with double-digit top line revenue growth, balanced growth across our businesses and regions, and further improvements in operating leverage resulting in double-digit growth at the bottom line.”
He went on to add, “Through organic growth and targeted acquisitions, we’re driving forward every facet of our business, leading the innovation of devices and software that improve health outcomes, create efficiencies and reduce overall healthcare system costs.”
ResMed is one of Australia’s higher-quality healthcare businesses, just like Cochlear Ltd (ASX: COH) and CSL Ltd (ASX: CSL).
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At the time of publishing, Luke has no financial interest in any companies mentioned.
