ResMed Inc. (ASX:RMD) announced results for its second quarter ended 31 December 2015, which showed an increase in revenue by 7 percent to $454.5 million, against the pcp in 2014.
ResMed is an Australian based medical equipment company and has the majority of its operations in the USA and Australia. In its North American operations, the company raised its revenue by 17 percent to $269.5 million (compared to the pcp), for the second quarter of FY16. On the flip side, revenue from the combined Europe, Middle East and Africa (EMEA) and Asia Pacific (APAC) regions decreased by 4 percent to $185 million, compared to the pcp; while the company also noted that the revenue was a 7 percent increase on a constant currency basis.
Gross margin in the quarter was 58.6 percent, which also included a one-time benefit relating to the release of $2.4 million in accrued expenses associated with SERVE-HF field safety notice. The margins declined as compared to last year, due to debilities in average selling prices and an unfavourable geographic and product mix. Subsequently, income from operations declined 1 percent compared to the pcp, but rose 5 percent in Non-GAAP reporting terms.
The group’s general selling and administration expenses for the second quarter declined by 4 percent to $118.2 million. Research and development expenses were $29.0 million for the quarter, or 6.4 percent of revenue. The R&D expenditure decreased by 1 percent compare to the pcp, however the amount is an increase of 14 percent on a constant currency basis.
The company stated its earnings in GAAP and Non-GAAP measures, where GAAP (Generally Accepted Accounting Principles) is a set of standardards that companies in the US follow, which include revenue recognition, classification of items in the balance sheet and other measurements; while the latter is just an alternative method of reporting. ResMed's net income for the quarter was $90.5 million, a 1 percent decrease compare to the pcp, where as Non-GAAP net income was $97.5 million, a 5 percent increase on the pcp. GAAP diluted earnings per share for the quarter were $0.64, while the Non-GAAP measure was $0.69. ResMed purchased 700,000 shares during the quarter, spending $40.1 million as part of its ongoing capital management program.
ResMed’s Chief Executive Officer, Mick Ferrel commented on the results: “We remain focused on delivering strong long-term growth from our sleep-disordered breathing and respiratory care businesses. Our team continued to deliver double-digit constant currency growth this quarter.”
RMD jumped 4.9% upon opening and last traded at $8.23 as at 10:19 AM (AEDT).
Author: Simon Herrmann
Jan 22, 2016
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.