@Karmast Yes indeed - great results. I'm on the call now with Mick Farrell in full flight!

Some snippets:

Consumer Tech - Going to be Big

• Lots of firms focussing on Sleep health including OSA at CES-25 ($RMD had a sleep lounge at CES-25)
• Samsung booth actually featured RESMED Kit
• All the wearables companies developing OSA diagnosis - some getting FDA approval
• $RMD collaborating with Apple on something to do with the Vision Pro (I didn't follow that, so will have to look at the transcript when it comes out)
• Overall, Mick said $RMD are positioned well to benefit from the comsumer tech. industry's increasing focus on sleep wellness

GLP-1 - the data gets better

• Last year's result report 300,000 patients on GLP-1 and CPAP
• Now $RMD has data on 1.2 million GLP-1 patients
• Independent peer-reviewed studies supporting findings that combination therapy is best
• GLP-1 users +10% more likely to use CPAP than non-CPAP users
• After 1-year, GLP-1 users have +3% higher resupply
• After 2-years, GLP-1 users have +5% higher resupply
• Conclusion is that patients on combination therapy are highly motivated and drive greater revenue to $RMD

In terms of the big picture, Mick pointed to the AASM Guidelines, which specify the treatment priorities as:

1. PAP
2. Dental device
3. GLP-1
4. Surgery

He noted that Eli Lilly are also educating patients on use of PAP, and positioning GLP-1 as a combination therapy for OSA, as the clinical evidence at the moment seems to show that the combination therapy is most effective. Of course, who knows what the evidence will show in 5-years time, but for now its very promising.

New Products

Mick very excitedly spoke (doesn't he always) about a new cloth-mask, for greater comfort. "World first."

Also working on COPD and insomnia.

Financial Results (numbers below off my model, so may be a few minor differences to the release, but I am in a hurry thie morning, so apologies)

Basically the results are excellent and the outlook is strong (of course it always is with Mick)

• %GM sustained from Q1 at 58.6%, which was up 290 bps to pcp; new head of supply chain says 59-60% GM should be sustained over medium term
• Revenue of $1,282.10 was up 10.3% on pcp
• Operating Profit at $417.25m was up 52% on pcp (but note that pcp has the restructuring charge, so it's a flattering result)
• Good cost control with SG&A up 9% and R&D up 10%

My Key Takeways

Very simply, strong results all round......(for a company that makes boxes that blow air!)

Disc: Held in RL and SM

Thanks for that Mike, i haven't listened to the result yet, but I will do it today. On the numbers, i don't forecast a half year but do forecast a full year and the implications for that full year from the numbers released are. 1. revenues about in line, 2. GM about in line, slightly better, 3. ebit margin well ahead, FY24 28%, i was expecting 30% came in at 32%, due to tight cost control across the board, so seeing op leverage. 4. RMD put through all sorts of funnies in the interest expense line and that was better due to one-offs, and restructuring falling away as well, as Mike commented. 5 cashflow very good, as has always been the case with RMD so debt gets redeemed very quickly. all up implies about 3% higher for me. it seems GLP is a distant memory. As an aside, the GM standard deviation is one of the lowest (best) i have seen, what that means is the control over inputs variations into pricing is exceptional, and together with outstanding GTM, this is a serious money-making beast.

held

@Solvetheriddle yes, the cash flow was strong, so they've been able to do a good job paying down debt.

[LT debt - Cash] was about $1.2bn at end FY23 (following acquisitions) and now its back down to $0.14m, which has of course been a boon given current interest rates. They're essentially debt free ... or will be in a few weeks!

So liquidity is looking very strong. Not sure if we'll see more bolt-on acquisitions or improved capital returns. They will buy back some more shares again, having spent $75m in the quarter on buybacks, which is almost as much as the $78m on dividends.

I wonder what the M&A agenda is? (Guess we'll find out.)

Overall, the result was a modest BEAT to consensus (at NPAT level, GAAP and non-GAAP). SP currently on about consensus, and I think we should see a few minor PT uplifts.

Steady as she goes!

I havent been able to pick RMD M&A forever, regional tech platform is my best bet.

I agree with the general increase of awareness and sleep testing by GPs. Purely observational, but in the last 6 months, 3 close family members have had sleep interventions.

1. Dad 80's

• Bad snorer happened to mention it to a different Dr he was seeing who made him get a sleep test. 
• Sleep test, at home, confirmed severe sleep apnoea.
• Test drive of a ResMed box and different masks before buying one.
• I had to set up the app for him, in doing so I couldn't find the model for the mask he said it was a resmed, when I looked at the mask it was a Fisher & Paykel mask. In his and mum's mind they thought they had a ResMed product, box and mask...... that's what they would have been telling the crowd at the bowls club. There seems to be a strong brand recognition and recall here in the general population for RMD that other brands don't have. 
• Positive: His OSA improved dramatically
• Negatives: He hates it, I have convinced him to do it for 3 months as a test. He doesn't feel like it has improved his energy/life at all, although mum is happy about the lack of snoring.
• Compliance: Dad clearly demonstrates the difficulty in ongoing compliance, I think the only thing that is keeping him engaged is the morning stats on the app which he periodically sends me, "see I got 100% and I don't feel any different" So, the app appears to be a good nudge, although in his case I'm not sure it is a positive!

2. Brother-in-law no 1: mid 50's very fit, not a snorer

• The only outward sign he displayed was tiredness through the day, all his blood tests etc were normal. A visit to the dentist suggested he might need a sleep test. The doctor concurred and to their surprise he had severe sleep apnoea, it was unexpected.
• His intervention however involved a mouth guard as a 1st trial rather than a CPAP. The improvement in his daytime tiredness and energy was instant. I asked what brand the guard was, “no idea” was his reply “the dentist just did it”. So, no brand recall here.
• @mikebrisy suggests that wearables will identify more OSA sufferers, in this case it would have as he is exactly the sort of person to wear and track stats.

3. Brother in law no 2: mid 50's not fit, overweight, chronic snorer

• My sister has been pushing him to address this for some time, the classic, dig in your heels male response to health intervention. The process started about 6 months ago but has been slow. Given he is overweight the GP didn't request a sleep test initially, go and try and lose some weight first etc.
• He has had the test now, but his issue is still unresolved, lack of follow up from him, perhaps. Despite being a prime candidate for a CPAP he has had the most friction working through the system.

As a Sidenote: An excerpt from Bioshares newsletter, November 2024, reviewing Somnomed

"Whilst oral devices for sleep apnoea - such as those manufactured by Somnomed - have advantages to the more obtrusive CPAP instruments, CPAP has the advantage in ease of supply, with most patients able to access their product within 48 hours. The mandibular splints take 17-30 days from initial dental consultation to supply. Russo said that whilst all companies say they have a better product, the turnaround time is critical."

Anything of value in these observations - My thoughts:

·     ResMed has a clear brand recognition, which could be considered a moat at this stage. 

·     Any improvements in apps & data could be good nudges for compliance, backs up RMD's investment/user case given the database they have.

·     Will doctors look at less invasive solutions first, a mouth guard sounds much better than a CPAP to me, is this a longer-term threat to watch? Pros & cons for both.

·     Compliance is an issue; you need enough new customers coming in to replace the drop off rate.

·     Wearables assessing OSA are a positive in identifying new patients, tailwind.

Held RMD & FPH

Do you see any current catalysts for further breakout? I havent been following their business strategy too closely lately

Im long on $RMD but see it as a solid compounder now that the market has brushed off the GLP1 jitters. Its one of my larger positions in my non-ETF allocations... but Id (pleasantly) surprised if we saw a big breakout.

@Aaronfzr I imagine once RMD can truely throw off the threat form the weight loss drugs, That'll be a catalyst. Are we there already?

I note @thunderhead that the SP has stuck its head above $40 on no news.

I don't follow RMD closely but I thought the consensus had swung around some time ago to weight loss drugs being more complimentary than a burden for the company? Am I wrong in that thought?

It sure seems to be shifting in that fashion. Combined with good operating performance and a reasonable valuation, the market is now firmly in ResMed's corner, reducing its attractiveness for new capital.

What the company does have going for it is still a large and under-penetrated market opportunity, combined with excellent data on their many patients which is an edge in the age of AI because it is proprietary.

@occy I think you are probably right.

I was surprised at how many times the issue has seemingly been dealt with, only for it to raise its ugly head again.

I hope it's done and dusted and perhaps the SP is an indication that it is.

At the same time I wouldn't be surprised if it came up again.

It will no doubt wax and wane with developments in the GLP-1 space, and more non-invasive treatments like the ones pushed by Inspire Medical etc.

There’s been some further broker upgrades.

@Aaronfzr to be perfectly candid I have been all over the place in my sentiment on $RMD (as my posts here make clear!)

First, when the GLP-1 news broke and the SP tanked, I significantly increased my long term holding, seeing the negative reaction as premature and likely overdone.

Then, when the direct evidence of OSA benefits from GLP-1s became clearer, I lost confidence and sold! Wanting to sit on the sidelines and reconsider.

Finally, late-last year I succumbed to the emerging evidence that not only will GLP-1 increase awareness of OSA - driving patients to $RMD, but that data from $RMD provided evidence that patients taking GLP-1's are more likely to start the treatment and stay on it. So, I added back a 5% RL position.

So, I am now back to my initial thesis.

Overall, I'm not sure what the long-term GLP-1 impact will be with respect to OSA and $RMD. I am somewhat skeptical about the positive $RMD data, due to the lack of indepedence in the reporting. But they do have the data.

What I find more exciting is the potential for wearables to drive referrals to physicians and sleep clinics for what is a heavily under-diagnosed condition. (I upgraded my Garmin recently, and it is amazing the data you get, including sleep analysis, even if mine doesn't detect OSA. It is amazing seeing how good sleep impacts my performance during exercise, including heart function, as well as the impact of having that one drink too many!)

Net-net, most of the excess gains I made on $RMD initially were unwound in the time I was out of the market, but I am firmly back onboard now.

Interestingly, GS have reinitiated coverage on $RMD on 16th Jan, with a Buy rating and $48.90 PT, although the research report is not yet accessible via CommSec. They ceased coverage around a year ago. They are probably the most bullish of the analysts at the moment.

Looking at the P/E history over the last 5 -years (see below) and ignoring the extremes during COVID-19, $RMD is still well below its average P/E which looks to be around 42, so arguably the GLP-1 de-rate might not have fully unwound yet.

My last valuation was about a year ago $35 ($31-$39) - and is about the level at which I re-initiated my RL position. Given the passage of time, all things being equal, this should be about $38 ($34 - $43) today. So, IMHO we're not far off fair value. I'm not a buyer today, but I'd consider holding a larger position if we get back below around $36.

But in answer to you question, I don't see specific catalysts beyond further evidence of a positive GLP-1 impact or evidence of people's wearables driving them to be diagnosed and starting treatment, as it looks like there is some P/E discount that is yet to unwind - if you believe in that kind of thing.

Disc: Held in RL only

That is a great graph @mikebrisy and exemplifies why I have always struggled with owing RMD and didn't until the dip in late 2023. It's a great company, but I find a PE of around 40 or higher very hard to swallow and I exited in late 2024 in line with by buy strategy that the GLP-1 impact was either a red herring or that was going to be many years before RMD felt any pain from it which the market would take a year to accept. We will see if GLP-1's are a true friend or foe in time.

However, that wasn't the reason I hadn't bought it before or the reason I sold. The one thing I find hard to accept with RMD is that it is essentially a single product business and the product is able to be replicated to a similar level of effectiveness with a level of investment justified by the market size. The moat I saw was narrow and for a determined attacker, not that big an obstacle, so I can't accept strong margins or high market share as a more than likely which is why the high PE's seemed unattractive.

Hence I was very happy with my 12 month gain eligible for the CGT discount and comfortable that it will most likely trade above $40 in the near future which it now has, but I was in for a good time not a long time and had what I thought of as better places for that money.

So I hope for all that hold it that returns to it's 40 PE average and get's a GLP-1 boost, I will cheer you on from the sidelines. Winners usually keep winning, so I hope that is the case for RMD.

It is definitely getting to a point where you would rather lighten than add valuation-wise (and that presents its own dilemma for a shareholder of ~ 10 years like me, carrying it as my largest ASX holding), but for now, I am doing nothing.

Technically, if it can stick this landing, that bodes well for further gains over the coming weeks and months, barring any left-field surprises.

@Tom73 You make a great point. The moat is narrow.

Philips has been a poor competitor of late, fumbled and dropped the ball.

That has been very handy for RMD.

@Tom73 I agree - keeping an eye out on the progress of competitors is a perennial task. No compacency from me here at all.

The 60%+ CPAP market share is indeed a prize worth going after, but it does give the company phenomenal market dominance while it lasts. And its 7% of revenue expensed on continuing R&D is larger than most competitors entire revenue base.

$FPH is a good example of a company that has invested heavily in the sector. Some say it has superior products. I don't know. But to date it hasn't been able to dent $RMD"s leadership or share. It will be interesting to see how the competitive dynamic plays out when Respironics is back to full force. (How badly was that brand damaged by the recall?)

The market opportunity for continued growth is there, and the key question is can they continue to dominate this market. It they can, then the premium is arguably justified.

@Arizona I assess the moat very differently.

Henry Jennings (Marcus Today) has described $RMD as a "box that blows air" and that this can't justify a high P/E. I couldn't disagree more.

Here are the elements of the moat as I see them:

• IP for device and masks (including materials of construction, and electronics/control/reliability)
• Medical device registrations in multiple jurisdictions. (Filing a successful registration is in itself a capability)
• A global sales force with relationships into all sleep clinics
• 20 billion nights of user sleep data, with proprietary clinical knowledge and software tools/service
• A global manufacturing and supply chain to achieve high gross margins while maintaining high quality.
• Brand value - probably the strongest element of all, built over 35 years
• Market dominance - 60% of global CPAP market

I see this as a significant moat. You can't set up shop in a barn somehwere and replicate this quickly. As @Tom73 says, doing this would require a "determined competitor" and I would add a "highly capable and patient one". $FPH and Philips Respironics are arguably such competitors. So, I prefere to let the facts speak.

@mikebrisy Ha, Its not hard to imagine Henry Jennings saying something like that.

A compelling argument you make.

You have swayed my thinking here.

I think it's very easy to look at this Henry Jennings style. I'd like to think I haven't been quite that simplistic.

Having held since late 23, its great to be having these discussions now the share price has appreciated somewhat.

Thanks folks for kicking this around. I'm finding it really valuable.

Held in RL

One only has to take a look at the publicly available performance of the Marcus Today portfolios, to think you'd be better off on the other side of most Henry Jennings trades/suggestions...

And a few conversations with patients of Resmed devices will uncover that they usually describe there influence as "incredibly good" and "life changing". So, for the many people that need one given it's the current best standard of care, it's a hell of a lot more than an airbox!

Of course Resmed is very susceptible to a better treatment option coming along but there is hardly a company out there who isn't susceptible to some new and better competitor coming along. The good news is things move slowly in the medical world in regards to clinicians changing course, so you will get plenty of notice before it's gone to zero...

ResMed wouldn't be where it is today if its moat was that easy to dismiss. It definitely has one - whether it can maintain or strengthen it going forward is the question we should be asking and assessing.

RMD has fallen close to 15% from its ATH of $40.75 in late January after reporting results that the market seemed to like from the immediate price reaction. I couldn't find any specific news as to why the stock has fallen to a low of $35.22 this morning but I took the opportunity to top up in RL portfolio. From what I can see all 5 major brokers have a buy on the stock with PT ranging from $43.60 to $45.10.

FWIW @OxyBBear Ive been adding this morning, too, in RL.

@mikebrisy Another bite Mike? I topped up again today and have now purchased 80% of my portfolio limit.

I would, but I am now back to my full allocation for $RMD. And want to keep a little powder dry for other opportunities in case the bear has further to run.