The ResMed Inc (ASX: RMD) share price will be one to watch on Friday.
This follows the release of the sleep treatment focused medical device company’s third quarter update.
ResMed share price on watch after earnings miss
Revenue up 12% (14% in constant currency) to US$864.5 million Gross margin down 150 basis points to 58.1% Operating income up 5% to US$234.3 million Earnings per share up 2% to US$1.32
What happened during the quarter?
For the three months ended 31 March, ResMed reported a 12% increase in revenue to US$864.5 million and a 2% lift in earnings per share to US$1.32. This fell short of consensus estimates by US$35.5 million and 12 US cents, respectively.
According to the release, ResMed’s top line growth was driven by increased demand for its sleep and respiratory care devices and increased demand in response to a recent product recall by one of its competitors.
Revenue in the U.S., Canada, and Latin America, excluding software-as-a-service, grew by 18% during the quarter. It was a similar story overseas, with the company reporting an 11% increase in revenue in Europe, Asia, and other markets.
ResMed’s software-as-a-service revenue increased by 8% during the three months. This was due to continued growth in its Durable Medical Equipment category and stabilising patient flow in out-of-hospital care settings.
However, offsetting much of this top line growth was a 150 basis point contraction in ResMed’s gross margin. This was mainly due to higher freight and manufacturing costs, which were partially offset by favourable product mix changes and increase in average selling prices.
In addition, the company’s operating expenses grew quicker than revenue during the period. This was mainly due to higher employee-related expenses. This ultimately led to operating income rising just 5% and earnings per share increasing a modest 2% for the period.
ResMed’s CEO, Mick Farrell, commented:
“Our third-quarter results reflect strong performance across our business, resulting in double-digit top-line revenue growth including extraordinary demand in our sleep and respiratory care business segment as well as solid high-single-digit growth in our software-as-a-service segment.
“I am proud of our global team’s ability to pivot and drive continued growth while ongoing supply chain disruptions and a competitor’s recall continue to limit our ability to meet the incredible demand for our products. We remain focused on delivering products, software, and services for patients, working closely with our supply chain partners as well as physicians, providers, and beyond, to prioritize care for patients who most need it.
“While the current industry and macroeconomic environment remain uncertain, our long-term strategy allows us to keep our focus on helping 250 million lives in 2025. Our end-market demand from patients and providers remains strong, and our digital health technologies continue to deliver value. We are supporting patients with the world-leading portfolio of sleep apnea therapy, respiratory care therapy, and digital health solutions they need, as we deliver value for all of our customers.”
Source: Read More