ResMed Inc. (RMD) reported second quarter 2011 EPS of 37 cents keeping in line with the Zacks Consensus Estimate but surpassing the year-ago result by a penny. The company reported revenue of $306 million, up 11% (14% at constant exchange rates, CER) compared with the year-ago quarter. However, revenues missed the Zacks Consensus Estimate by $4 million.
Based on a favorable product mix and vastly under-penetrated and growing sleep-disorder breathing market, ResMed recorded a robust 10% growth in the domestic market revenue to $162.6 million. Besides, revenues earned from the international market increased 12% to $142.8 million. Moreover the company benefited from strong sale of S9 Autoset and newly launched wide range of masks.
Gross profit for ResMed increased 13.2% to $185.9 million. The revenue increase led to a 110 basis point expansion in gross margin to 60.7% despite an 8% increase in cost of sales.
Operating expenses (excluding depreciation and amortization) witnessed a 9% increase year over year to $113.5 million led by a 9% rise in selling, general and administrative (SG&A) and a jump of 15% in research and development (R&D) expenses.
The increase in SG&A expenses was mainly due to sales expansion whereas the rise in R&D expenses was due to depreciation of the domestic currency against the Australian dollar. However, despite higher expenses, operating income increased 20.6% year over year to $72.4 million. Operating margin expanded 180 basis points to 23.6% on the heels of higher revenue.
ResMed exited the quarter with cash and cash equivalents of $616.2 million, up 26% from $488.8 million at the end of June 2009. Cash flow generated from operations was $68.3 million.
ResMed is one of the leading players in the market for generators, masks, and related accessories for the treatment of obstructive sleep apnea and related respiratory disorders. The company is focused on medical equipment for the diagnosis and treatment of sleep-disordered breathing. In addition, the industry is benefiting from an aging population and an inclination to avail medical care away from hospitals.
