RMD Result Fy24

Although FY24 numbers were 1% light for me at the top line and bottom line, there was a positive mix in these numbers.

The FY25 outlook for GM, SGA and R&D were all positive IMO. Below see graphs of GM turnaround.

As usual RMD paid off debt vey quickly, the ability to de-gear after acquisitions is a strength of the business and is driven by the PPE line in CFI being only 15% of CFO. That is a phenomenal number and means the reinvestment rate to maintain the business is very low. Allowing FCF for acquisitions, buybacks etc.

RMD continues to exhibit one of the most consistent and strong eps growth profiles in the Australian market. Cash reconciliation has been a bit inconsistent coming out of C19 but is now normalising.

Growth rates were cycling some strong numbers in the US and did so well, IMO, and ROW picked up. As expected no sign of any volume impact so far from weight loss drugs. Competition is still not great with Philips now fallen to number four. RMD dominant in space.

Of course the current operations are only part of the story with RMD. The company presented similar data to previously showing a correlation with GLP-1 users with higher and persistent uptake of CPAP machines. They did mention the latest trial with 600 patients and criticised it (as expected), for being too small and heavily coached to obtain the outcome. The AHI results were down but not enough in RMD view. My view we are still early in this story.

RMD see the big game as getting more of the 1B Tam into their funnel, with 28m in Airview the potential growth is large, probably high single digit penetration if all competitors and therapies are included. RMD see, or would like, the treatment schedule to be CPAP, then weight loss pills, then other therapies. Again it is a story of more into the funnel due to increased awareness from wearables (Samsung, google, AAPL) and weight loss drugs bringing in more RMD customers than RMD losses as patients quit CPAP’s over time. RMD reiterated they are seeing no CPAP/APAP quitters so far from the weight loss drugs.

Conclusion, this was a good result. The real question remains what RMD business pipeline looks at as GLP-1 become cheaper and easier to use (IMO). We will not know for a few years. Given the risks involved and the strength of the results perhaps a $26-36 range is appropriate.

Held --middle weight