Resmed’s Growing Customer Base
We’ve postured that Resmed has fundamentally changed the US business model in its favour with its Airsense platform. After the release of Resmed’s second quarter results for financial year 2017, we explore how it is tracking against this thesis.
Sales of flow generators in North America grew by 13 per cent in the second quarter of financial year 2017, which is remarkably strong considering the Airsense was launched over two years ago. Flow generator sales are a good indicator of Resmed’s core customer base because these devices sit on the patients’ bed side tables, providing respiratory support and profiling their sleep history.
Pleasingly, international device growth was also strong at 21 per cent after adjusting for currency, but much of this was due to abnormally high sales in China.
Mask growth languished however, with only 4 per cent growth in America and international sales declining by 4 per cent, adjusting for currency movements. Masks generate a much higher gross margin than flow generators, and our primary thesis for holding Resmed is its ability to sell higher margin products into this growing customer base.
Resmed released a new range of masks in America at the end of November 2016, so the question now is whether this one month of new mask sales promoted the positive result, which if extrapolated points to high growth in the coming periods. Management certainly thinks so, having guided the market at the conference call to anticipate a strong result this year.
We are pleased with Resmed’s performance to date and will be monitoring the industry’s reception of the new masks closely.
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