The ResMed Inc. (ASX: RMD) share price could surge higher today after it smashed expectations in the third quarter.
Over in the United States, its NYSE-listed shares are up almost 7% in after hours trade.
How is ResMed performing?
This morning ResMed released its third quarter update and revealed quarterly revenue of US$769.5 million and non-GAAP net income of US$187.9 million. This was a 16% and 47% increase, respectively, on the prior corresponding period.
Quarterly diluted earnings per share came in 53% higher than the prior corresponding period at US$1.12.
As a comparison, according to MarketWatch, analysts were expecting earnings of US$1.03 per share on revenue of US$724.1 million.
In light of this strong quarter, year to date ResMed's revenue now stands at US$2,186.7 million and non-GAAP net income has reached US$499.5 million. This represents a 15% and 31% increase, respectively, over the same period in FY 2019.
What were the drivers of this result?
ResMed's revenue in the U.S., Canada, and Latin America, excluding Software as a Service, grew by 12% during the quarter. This was driven by strong sales across its mask and device product portfolios. It includes increased demand for ventilators due to the COVID-19 pandemic.
It was even better in Europe, Asia, and other markets. Combined revenue in these markets grew by 27% on a constant currency basis during the third quarter. Once again, this was primarily driven by sales across its mask and device product portfolios and includes increased demand for its ventilators due to COVID-19.
The company's Software as a Service business contributed. Its revenue increased by 12% in the third quarter due to continued growth in Brightree and MatrixCare service offerings.
Another positive was the expansion of its gross margin during the quarter. Its non-GAAP gross margin expanded by 70 basis points primarily due to benefits from product mix changes and manufacturing and procurement efficiencies. These were partially offset by declines in average selling prices.
Mick Farrell, ResMed's CEO, commented: "We are operating during unprecedented times, and I am extremely proud of the way our global ResMed team has responded to the COVID-19 crisis. Our primary goals are the safety and wellbeing of our team members, and the preservation of life – helping people breathe while their immune system fights this coronavirus."
"We have rapidly pivoted our business to respond by ramping up production of life support ventilators, non-invasive ventilators, and ventilation mask systems for the people who need them most, wherever they live," he added.
Outlook.
Mr Farrell appears optimistic on the future despite the challenging environment.
He said: "Looking ahead, we are confident in our ability to navigate through the challenging clinical and economic environment to deliver for all our stakeholders. Our culture, operational resilience, strong balance sheet, business continuity plans, and growth prospects have positioned us well."
"In the near term, we remain vigilant and thoughtful about the outlook for our business as we continue to serve our customers and successfully weather the crisis. Over the longer term, we believe our strong foundation will accelerate the adoption of much-needed digital health solutions in the field of respiratory medicine," he concluded.
