ResMed Inc. (RMD) Earnings

Management highlights

### Core Strategic Priorities for FY2027 - Maintain operational and innovation excellence to support ongoing growth and transformation - Execute active portfolio management across all product lines and businesses - Leverage strong free cash flow to reinvest in the business and return capital to shareholders ### Market Growth Tailwinds & Ecosystem Expansion - Growing sleep health awareness driven by consumer wearables and GLP-1 medications creates large untapped opportunity in ResMed's underpenetrated core markets - Partnership with Oura (wearable ring brand) has exceeded early expectations: ~13,000 users have been driven to ResMed.com from the Oura app, 75% of assessed users were previously undiagnosed for sleep apnea, demonstrating wearables' ability to drive early intervention - GLP-1 medications remain a clear tailwind: analysis of 2.5 million de-identified patients shows patients with both PAP and GLP-1 scripts are 11% more likely to start PAP therapy, 3% more likely to resupply at 1 year, and 6% more likely to resupply at 3 years than patients with PAP only; oral GLP-1s show no material change in this dynamic to date - Ongoing continuing medical education (CME) programs for clinicians have been completed over 95,000 times by more than 55,000 unique clinicians, with early data showing measurable increases in home sleep test referrals and PAP prescriptions post-training ### Product Innovation & Rollout Progress - Global rollout of the AirSense 11 connected sleep device platform continues, with strong growth in the U.S. and Europe, and accelerating penetration following last quarter's launch in China - U.S. launch of the AirCurve 11 ST/ST-A bilevel device platforms for complex breathing disorders was completed in Q4, with additional launches in Hong Kong, Singapore, Australia, and New Zealand - Novel fabric technology masks (AirTouch N30i, AirTouch F30i, AirFit F40) have seen strong uptake, with data showing 6% higher 90-day patient adherence for the AirTouch N30i compared to equivalent silicone masks - Gen AI-powered digital sleep coach in the MyAir patient app has received over 1.5 million inquiries to date, while also reducing volume of customer service requests ### Portfolio Management Updates - Acquisition of Noctrix (developer of the first FDA-de novo classified device for restless legs syndrome) closed on June 1, 2026, and integration is underway; the product aligns with ResMed's core sleep portfolio and uses existing commercial distribution channels - Divestiture of the MatrixCare business was announced July 7, 2026, expected to close around September 1, 2026; this decision refocuses ResMed on its core high-growth areas (sleep health, breathing health, connected home health care) where it holds sustainable competitive advantages. Post-divestiture, the remaining RCS business (Brightree + Medifox DAN) is expected to deliver high-single-digit revenue growth in FY2027 ### Capital Return Updates - Returned over $1 billion to shareholders in FY2026 via share repurchases and dividends, a 72% increase year-over-year - Board of Directors increased the quarterly dividend by 10% to $0.66 per share - Confirmed existing Chapter 98 tariff relief remains in place for ResMed products following the recent U.S. Section 301 tariff announcement, eliminating material tariff risk

Guidance

- For FY2027, core constant-currency organic revenue growth (excluding 10 months of MatrixCare revenue and all Noctrix revenue to align comparable periods) is expected to be 5% to 7% year-over-year. This includes a 130 basis point (≈$75 million) revenue headwind from suspended Astral new device sales to prioritize the field safety corrective action for existing patients. - Total reported FY2027 revenue is expected to be between $5.75 billion and $5.85 billion, assuming a 50 basis point foreign exchange headwind based on end-of-FY2026 rates. - Reported non-GAAP EPS is expected to be between $12.00 and $12.25, a 7% to 10% increase year-over-year. Excluding $0.30 per share dilution from the MatrixCare divestiture and $0.20 per share dilution from the Noctrix acquisition, core non-GAAP EPS growth is expected to be 12% to 14% year-over-year. - Low double-digit gross margin expansion is expected for FY2027, driven by supply chain productivity and very modest strategic price increases that will more than offset ongoing inflation and macro uncertainty. A slight increase in full-year operating margin is also expected. - ResMed expects to return over $1.85 billion to shareholders in FY2027 (including $1.5 billion in share repurchases and dividends), a more than 75% increase year-over-year, marking the second consecutive year of over 70% growth in capital returns. $450 million of the share repurchase program will be funded by MatrixCare divestiture proceeds via an accelerated share repurchase. - Capital expenditures are expected to step up to a range of $160 million to $180 million, to expand and automate U.S. and global manufacturing capacity to meet growing product demand. - Q1 FY2027 is expected to see typical seasonal sequential revenue decline from Q4, with a slight year-over-year gross margin contraction and operating expense roughly flat with Q4. RCS is expected to deliver high-single-digit full year FY2027 growth.

Segment performance

Q4 FY2026 total group revenue was $1.5 billion, a 9% headline increase (8% constant-currency). Breakdown by segment: - **The Americas**: Sleep device revenue increased 8% year-over-year; Life support device revenue declined 45% year-over-year; Masks and other revenue increased 10% year-over-year. - **Rest of World**: Sleep device revenue increased 13% year-over-year; Life support device revenue decreased 38% year-over-year; Masks and other revenue increased 12% year-over-year. - **Residential Care Software (RCS)**: Revenue increased 2% year-over-year, with growth from Medifox DAN and Brightree partially offset by declines in MatrixCare. Full year FY2026 total revenue grew 10% headline (8% constant-currency). Non-GAAP gross margin for Q4 was 62.3%, up 90 basis points year-over-year. A $42 million provision for Astral field safety costs was excluded from non-GAAP results. R&D expenses increased 22% headline (19% constant-currency), and SG&A increased 10% headline (7% constant-currency) year-over-year. Non-GAAP operating margin was 35.2%, down 10 basis points year-over-year. Non-GAAP EPS increased 16% to $2.95. Full year FY2026 non-GAAP EPS grew 17%, with $1.6 billion in free cash flow.

Risks & headwinds

- The Astral field safety corrective action requires reallocating all available electronic components to existing patient support, resulting in a $75 million revenue headwind for FY2027 and a $42 million pre-provision charge in Q4 FY2026. The recall impacts a larger device population than prior Astral field actions, creating execution and cost uncertainty. - Persistent inflation in electronic components and freight costs has outpaced near-term supply chain productivity gains, creating near-term pressure on gross margins. - Foreign exchange rate volatility creates negative headwinds for both revenue and EPS, with a 50 basis point FX headwind already incorporated into FY2027 revenue guidance. - The company operates in 140 countries, with exposure to global regulatory changes, trade policy shifts, and macroeconomic uncertainty that could impact performance. - The large underpenetrated core market relies on continued demand generation and clinician education to drive growth, which may not materialize at expected rates.

Analyst Q&A

• Q: What factors drove the sequential Q4 gross margin decline, and how will price increases impact margins going forward?

  A: While gross margin was down 50 basis points sequentially, it was still up 90 basis points year-over-year on the back of ongoing supply chain productivity. The sequential decline primarily stems from recently accelerating inflation in electronic components and freight, plus a 20 basis point sequential FX headwind. Very modest strategic price increases will be phased in gradually through FY2027 to offset inflation, with minimal benefit in Q1 and growing contributions in later quarters. Management remains focused on driving volume growth as the core contributor to overall revenue growth, rather than price increases.

• Q: What M&A size, strategy, and criteria is ResMed prioritizing?

  A: ResMed is focused on tuck-in acquisitions in the $100 million to $500 million range, aligned with its core sleep and respiratory health strategy. Targets fall into three categories: innovative medtech devices that fit existing commercial channels (like Noctrix for restless legs syndrome), services/technology that strengthen the end-to-end patient pathway from awareness to ongoing management (like VirtuOx for home sleep testing), and software that adds value for existing HME customers (like Snap Technologies resupply software). All acquisitions must deliver ROI above ResMed's weighted average cost of capital within a short timeframe, with ongoing accountability for performance post-close.

• Q: What is the expected impact of the Astral field safety action on FY2027 earnings, and are additional costs expected beyond the $42 million Q4 charge?

  A: The $42 billion charge taken in Q4 FY2026 is a conservative, all-in estimate of total global field action costs, and it covers all expected work through completion. The suspended new Astral sales creates a $75 million top-line headwind and a 15¢ per share earnings headwind for FY2027, both of which are already embedded in the published FY2027 guidance. Management is prioritizing components for the sickest existing patients first, with no decisions made yet on when new Astral sales will resume beyond FY2027.

• Q: What is the core split of volume vs price contribution to the 5%-7% FY2027 organic revenue growth guide, and how should we think about sleep device vs mask growth?

  A: ResMed has always been and remains focused on volume growth, which makes up the vast majority of expected 5%-7% organic growth. Very modest price increases contribute only a small portion of growth, with this impact building gradually through FY2027. Market growth for core sleep devices is expected to be mid-single digits, and masks high-single digits, matching ResMed's long-term guidance. Excluding the $75 million Astral headwind, underlying core business growth is 6%-8%, with ResMed targeting meeting or beating market growth rates each quarter.