ResMed (RMD) Q4 FY26 earnings call: guidance and Q&A

What caused the sequential decline in gross margin, and what is the impact of price increases on the customer base?

The sequential gross margin decline was primarily due to increased inflation in electronic components and freight costs, along with a 20 bps FX headwind. Management stated they are implementing very modest price increases to offset inflation, but their primary focus remains on driving volume growth.

“But just given the inflation, we can no longer offset inflation with productivity alone. And as part of actively managing our portfolio, are taking, again, very modest price increases that's going to build as we progress throughout fiscal year 2027.”

asked by Steven Wheen · answered by Aaron Bloomer

What factors would push the FY27 revenue guidance towards the top end of the 5% to 7% range, considering various moving parts like Astral, new NIV products, and pricing?

The underlying core growth, excluding the Astral headwind, is north of 6% to 8%. Key drivers include continued momentum in core sleep devices (market growing mid-single digits, ResMed exceeding this), strong mask growth (double-digit in Q4), and the Residential Care Software business returning to high single-digit growth post-MatrixCare divestiture.

“And if you look at kind of the components then within the business, I'll start with continued momentum around -- in our core sleep devices. We just grew 8% constant currency, both in the Americas as well as 9% globally this most recent quarter in a market that we've said is traditionally growing mid-single digits.”

asked by Davinthra Thillainathan · answered by Aaron Bloomer

Can you elaborate on the size of M&A deals you're considering, key ROI metrics, current valuation thoughts, and the acquisition funnel?

ResMed is looking at 'tuck-in' acquisitions in the $100 million to $500 million range. Examples include med-tech innovations like Noctrix (neurostim for RLS) and companies that enhance the end-to-end sleep health pathway like VirtuOx (home sleep apnea testing). ROI over WACC is a key metric, and accountability post-acquisition is emphasized.

“Look, in terms of quantifying the order of magnitude, it's sort of in that order of $100 million to $500 million that we're talking about, which I would consider for a $30-plus billion company to be tuck-in acquisitions.”

asked by Young Li · answered by Michael Farrell

Did you discuss OpEx within FY27 guidance, especially given the material step-up in R&D in Q4?

Management stated that OpEx may fluctuate between R&D and SG&A quarter-to-quarter. The focus is on delivering world-class returns with a core EPS guide of 12% to 14%, which includes low double-digit gross margin expansion and slight operating margin expansion. R&D investment is prioritized for innovation across devices, masks, and software.

“But I think the most important thing, right, is that we are committed to delivering world-class returns to shareholders, and that's what we did with the core revenue -- core EPS guide, excuse me, of 12% to 14%.”

asked by Dan Hurren · answered by Aaron Bloomer

Can you break down the 5% to 7% organic revenue growth into price versus volume components, and how to think about masks and devices within this given past guidance?

Management reiterated that the predominance of growth has been and will continue to be driven by volume. While modest price increases are being implemented, their contribution to growth is expected to be small and build throughout FY27. The market growth rates for devices are mid-single digits and masks are high single digits, which ResMed aims to meet or beat.

“Not going to get into the specifics of how much exactly is embedded in the guide of volume versus price. But again, the predominance of our growth has and will continue to be coming from volume growth.”

asked by Jordan Bernstein · answered by Aaron Bloomer

What are the further expenses expected for the Astral field safety process in FY27 beyond the Q4 provision, and are they included in guidance?

The $42 million charge in Q4 FY26 is the estimated total cost for the global field action. For FY27, the $75 million revenue headwind from suspending new Astral sales translates to approximately a $0.15 EPS headwind, which is embedded in the 12% to 14% core EPS growth guidance. The company is prioritizing existing patients and has not made decisions for FY28 and beyond regarding Astral sales.

“The $42 million charge we took in Q4 is our estimate for the total work that's needed for this field action globally. And we have taken a very conservative approach and a very patient-first quality-driven approach that ResMed is going to execute the best recall in the history of the med tech industry, and that's our aim.”

asked by Lyanne Harrison · answered by Michael Farrell

What is ResMed's early experience with oral GLP-1s compared to injectables in terms of driving patients into the sleep health funnel?

It's early days for oral GLP-1s, which have shown lower adherence and weight loss in peer-reviewed literature compared to injectables. However, both oral and injectable GLP-1s contribute to a tailwind for ResMed by increasing awareness and driving patients to primary care physicians. This, combined with wearables, contributes to demand generation for PAP therapy, which sees faster uptake post-OSA diagnosis than GLP-1 prescriptions.

“So it's a combination of all of the above, Laura. And we're not seeing a material change from them going from talking about injectables to pills. I think it will be a minority of their sales probably. But over time, both will be a tailwind for us, just at different levels and different rates.”

asked by Laura Sutcliffe · answered by Michael Farrell

Given the AirSense 11 launched 5 years ago, and R&D is increasing for next-gen devices, should a new platform be expected soon, or will the AirSense 11's life cycle be extended due to past supply constraints?

Management declined to comment on future product pipelines or specific launch timings for new platforms. They emphasized that there is significant runway left for the AirSense 11, with ongoing global rollouts and new market approvals. Increased R&D is across devices, masks, and software, reflecting continuous innovation.

“We will give no information on this call nor anywhere about that. But look, I think your question allows us to talk to the sort of nuance and the amazing situation that we've had these last 5 years, which was we were able to have the best and the second best CPAP, APAP and bilevel platform in market for these last 5 years.”

asked by Saul Hadassin · answered by Michael Farrell