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ResMed Q2 Income Grew $18.9 Million

ResMed Inc. (Nasdaq: RMD), which offers technology to help people breathe better and connect them to their caregivers, grew its net income by $18.9 million in its second quarter, which ended Dec. 31.

The results capped off a tumultuous 2020 as COVID-19 touched the business in many ways.

Net income was $179.5 million, 12 percent higher than the $160.6 million it generated in the December quarter of 2019.

Revenue for the second quarter was $800 million, 9% higher than the $736.2 million in the December quarter of 2019.

The San Diego company’s manufacturing operation went into overdrive during the pandemic. In the first six months of 2020, RedMed produced 150,000 ventilators to help people breathe, more than 3.5 times its output over the same period of the previous year. “Demand was infinite and it was just crazy,” CEO Mick Farrell said in an interview last week. People in supply chain had to figure out how to source hundreds of ventilator parts during a global COVID lockdown. “The team came through.”

ResMed is largely identified with the CPAP (continuous positive airway pressure) machine. More broadly, the business helps caregivers treat sleep apnea, COPD (chronic obstructive pulmonary disease) and asthma. Its offerings include ventilators, masks and software for the remote monitoring of patients.

The business had nearly $3 billion in revenue in 2020, up from $2.61 billion in 2019. It does business in 140 countries.

Raising Awareness

COVID is “awful,” Farrell said. At the same time, the disease has generated interest in what ResMed does.

“COVID has highlighted the importance of respiratory health,” Farrell told analysts in January. “… [It] has raised the awareness of respiratory hygiene, respiratory health and the field of respiratory medicine. The crisis also showed us the importance of digital health and has accelerated the awareness and adoption of technologies that can be used for remote patient screening, remote patient diagnosis, remote patient set up as well as remote patient monitoring and management.”

“We have seen this crisis drive the importance of healthcare delivered outside the hospital. And that’s where ResMed competes for more than 90% of our business.”

The SARS crisis in Asia in 2003 actually gave ResMed a preview of what would happen with COVID-19, the CEO said.

An $800 Million Quarter

Revenue from the quarter ended in December 2020 was split between $708.2 million in Sleep and Respiratory Care Products and $91.8 million in Software as a Service.

ResMed finished the third quarter of its fiscal year at the end of March. It expects to release financial results in a few weeks. The consensus of analysts surveyed by Yahoo Finance is that the company will have revenue of $803.2 million and earnings of $1.29 per share. (Earnings per share are non-GAAP, that is, different from the standard that accountants call Generally Accepted Accounting Principles.)

Over the past 52 weeks, shares of ResMed have traded in the range of $149.16 to $224.43. They closed April 6 at $196.29.

The Road Ahead

Margaret Kaczor, an analyst with William Blair & Co. called ResMed a stock to own in a market downturn.

“Core sleep recovery trending better than expected out of Q4 and COVID recovery can deliver better-than-expected results in ’21,” she wrote in a March research note. Kaczor also noted a strong management team and stable free cash flow, adding that ResMed’s digital infrastructure “can support reliable growth even in market downturn.”

Analyst Mike Matson of Needham & Co. changed his rating of ResMed stock from hold to buy in mid-March.

ResMed will likely launch a new flow generator platform soon, which would drive a new product cycle, he wrote. In addition, Matson wrote that he expects reimbursement to be stable for the next few years.

Improving new patient volumes are expected to help offset slower ventilator sales as the pandemic eases, he wrote.

ResMed’s intellectual property portfolio includes more than 6,000 patents and designs.

The business has a goal of reaching 250 million patients by 2025, up from more than 118 million in the last 12 months.

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