ResMed's CEO Discusses F1Q 2012 Results - Earnings Call Transcript

ResMed ( RMD)

F1Q 2012 Results

October 24, 2011 4:30 p.m. ET

Executives

Peter Farrell - Founder, Chairman, and CEO

Don Darkin - President, SDB Strategic Business Unit

Brett Sandercock - CFO

Geoff Neilson - President, Respiratory Care Strategic Business Unit

Analysts

Matthew Prior - Merrill Lynch

Ben Andrew - William Blair

David Clair - Piper Jaffray

Michael Matson - Mizuho Securities

Dan Hurren - UBS

David Low - Deutsche Bank

Presentation

Operator

Good day ladies and gentlemen, and welcome to the first quarter 2012 ResMed Incorporated earnings conference call. [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 for future revenue or earnings, new product development, or new markets 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 www.resmed.com.

With that said, I would now like to turn the call over to Dr. Peter Farrell, ResMed’s chairman and chief executive officer. Dr. Farrell, please go ahead sir.

Peter Farrell

Thanks operator, and thanks everybody for joining us. I’ll begin with some summary comments and then turn the call over to Brett Sandercock, and then we’ll take questions and I might bring some of the other guys in as needed.

First, the finance. We finished with what we think is a very solid quarter. Global revenue grew 12% to $315 million, or 8% on a constant currency basis. Revenue in the Americas grew by 9% year over year to $169.3 million, and ROW revenue increased by 15% to $145.5 million, which was 7% on a constant currency basis.

US GAAP EPS decreased to $0.33 for the quarter, but let me quickly mention this was primarily impacted by forex and Brett will go into that in a little more detail. But it was a significant impact. And if we exclude amortization of acquired intangibles, the hybrid EPS was $0.35, which matched First Call’s expectations.

In looking at product category performance, let me start first with masks and accessories. The results in this category continue to perform well across the globe, and we continue to take share. The three new mask offerings, the 4X trilogy, the Quattro, the Mirage, and the Swift FX, continue to do very well.

We also just recently launched versions of all of the FX series masks for women, in our Choices for Her program. This popular family of masks, which are lightweight, unobtrusive, and comfortable, offers female-friendly versions of all three categories with fitting and comfort options especially with women in mind. And I believe we are the first company to design a mask simply for female patients.

We also launched the first pediatric mask in the industry, developed specifically for the treatment of sleep disordered breathing in children, in this case age 2 and older. This is not just a scaled-down adult mask. Every feature of the new Pixie was designed to address and improve comfort acceptance with both child and caregiver in mind.

With the new Pixie nasal mask, we now have three options to meet the needs of children with sleep disordered breathing. And, by combining the new Stellar 100 ventilator with the Pixie nasal mask, we now offer an ideal pediatric therapy solution, particularly in either a hospital or institutional care setting.

One reason we continue to see strong growth in masks and accessories other than our new products is that even in this very challenging economy there is excellent business in the resupply or replenishment of masks to existing patients, and we are working with our customers, the HMEs, to leverage this significant business opportunity.

Now, moving to devices, our global growth in sleep therapy devices was mainly driven by sales of the S9 AutoSet, as well as our adaptive servo ventilation offerings the VPAP Adapt and the AutoSet CS.

Growth in the rest of the flow generator segment was problematic, especially in the low-end products, as was reported for the previous couple of quarters. This continues to be a challenging environment, especially in the Americas, as everybody knows in the medtech space. But on top of that, we had tough comps, and in addition, the Q1 for us, the September quarter, is always a challenge because of France and Germany vacation issues.

So it’s a difficult macroeconomic environment, but one of the key reasons for some impact on the top line was that we chose to walk away from business because it was uneconomic. So in other words, we intentionally left significant potential revenue on the top line. We left money on the table, but we think it was the right call. However, while flow generator sales were softer than expected in the Americas, Europe still posted fairly good results.

A few weeks ago, ResMed introduced the S9 AutoSet for Her, within the Choices for Her program. Offering the quiet comfort of the S9, the Easy Breathe motor, and the enhanced AutoSet algorithm, the S9 for Her ensures that the sleep environment for a woman will remain quiet and peaceful.

And in addition, there is the H5i, the humidifier with climate control, which also has been designed with her in mind. It’s also interesting to note that we think the timing on this makes a lot of sense, because the latest statistics show that 40% of the newly diagnosed sleep patients are actually women.

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