ResMed (RMD)

Q4 2011 Earnings Call

August 04, 2011 4:30 pm ET


Brett Sandercock - Chief Financial Officer and Principal Accounting Officer

Peter Farrell - Founder, Executive Chairman, Interim Chief Executive Officer and President

Geoff Neilson - President of Respiratory Care Strategic Business Unit


David Clair - Piper Jaffray Companies

Michael Matson - Mizuho Securities USA Inc.

Craig Collie - Macquarie Research

Ian Abbott - Goldman Sachs & Partners Australia Pty Ltd

David Low - Deutsche Bank AG

Ben Andrew - William Blair & Company L.L.C.

Matthew Prior - BofA Merrill Lynch



Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 ResMed Earnings Conference Call. My name is Keisha, and I'll be your operator for today. [Operator Instructions] The company has asked me to address certain matters. First, ResMed does not authorize the recording of any portion of this conference call for any purpose. Second, during the conference call, ResMed may make forward-looking statements such as projections of future revenue or earnings, new product development or new market for the company's products. These statements are made under the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Risks and uncertainties exist that could cause actual results to materially differ from the forward-looking statements. These factors are discussed in ResMed's SEC filings, such as Forms 10-Q and 10-K, which you may access through the company's website at

With that said, I will like to turn the call over to Dr. Peter Farrell, ResMed's Chairman and CEO. Dr. Ferrell, please go ahead, sir.

Peter Farrell

Thank you very much, Keisha. Good afternoon. Good morning. Thank you for joining us. I'll begin with a summary on the quarter and talk about -- briefly about acquisitions and the recent partnership announcement. And I'll then turn the call over to Brett Sandercock, who as you know is our CFO. And Brett will go through the numbers in more detail, and then we'll take questions. And most members of the senior management team are also with us today and I might -- in fact, I'll very likely call them in to get involved in some of the question -- some of the answers to your questions.

First, the financial summary. We finished what we would describe as a very solid quarter and another excellent global revenues in the fourth quarter of 2011. The final quarter grew 17% to $342 million or up 11% on constant-currency basis. Revenues in the Americas grew a very solid 14% year-over-year to $183 million, while the rest of the world revenue increased by 22% or in constant currency terms, 8% to $159 million. GAAP EPS increased 9% to $0.37 for the quarter. And if we exclude amortization of acquired intangibles, EPS was $0.39.

In discussing product category performance, let me start with Masks and accessories as the results in this category were extremely encouraging. We've now exceeded over $0.5 billion in annual Masks sales alone. We believe we're hitting home runs on all the value propositions for the decision makers in our channel. We have a suite of products, in particular, the recent Quattro FX or let me say the FX series, the Quattro FX, the Mirage FX and the Swift FX, which meet the market needs all the way from the lab to the patient. Our Masks are effective, easy to fit, comfortable and more value for money. And they require less callbacks and ensure more compliance. In fact, on Tuesday, I was visiting a sleep position in Oklahoma City where the temperature -- beautiful day, the temperature hit about 114 degrees. But Jonathan Schwartz, he has 24 beds, and he was waxing lyrical almost about the Mirage FX, which he said fits virtually all patients immediately.

Turning to flow generators. Our global growth and sleep therapy devices was once again driven strongly by sales of our S9 order set. Preference for this product continues to increase globally, and the OSA has become a consistent source of our growth. We believe the increase in home sleep testing is and will continue to fuel sales of the order set. As expected, the addition of the bilevels on the S9 platform has arrested the decline in overall device sales in the Americas, and sales of the new S9 bilevels are doing very well and are ramping to our expectations.

Adding to flow generator performance was the recent launch in Europe of the Stellar 100, which is an adult and pediatric ventilator designed for both noninvasive and invasive use. Sales of Stellar have been growing progressively each month as we've launched country by country in Europe and parts of Asia. As we've always maintained, it takes time to launch any new product, but it is certainly ramping to our expectations. And the Stellar 150, where we will launch globally in fiscal Q2, that is the final quarter of this year, calendar 2011, this product includes what's known as IPAPs, our new automatic bilevel mode, which is automatic in both expiration and inspiration. The success of the Stellar is another positive indication of our progress in product development.

In addition to our success in internal development, we are pleased with the progress we are making in building strategic partnerships or relationships. And let me comment briefly on CareFusion, Gründler, which was just announced of course, and BiancaMed. Just over a week ago, we announced a 5-year exclusive distribution agreement with CareFusion to market our ventilation products in hospitals, long-term acute facilities or acute-care, I should say, facilities and skilled nursing facilities. The initial focus will be on the launch of the Stellar 100 and related products, and the Stellar is an excellent fit in the CareFusion ventilation platform as it provides them with the product facilities' differentiated features in a more competitive price point. It also allows us to quickly enter the institutional healthcare precious support ventilation marketplace. According to -- in Medicare's February 2011 report, the Americas sub-acute noninvasive pressure support ventilation market is the fastest-growing segment, estimated to be, albeit sub-$100 million, but it's growing at more than 6% annually.

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