ResMed’s sleep business powers a stronger start after MatrixCare exit

Core sleep business drives first-quarter growth

ResMed Inc. (ASX:RMD) started fiscal 2027 with its strongest growth concentrated in the business it is now prioritising. Sleep and Breathing Health revenue rose 8% to US$1.260 billion in the three months ended September 30, driven by higher demand and unit sales across devices, masks and other products. Total revenue increased 6% to US$1.415 billion, while gross margin edged up to 61.5% from 61.2%.

Devices contributed US$720 million, up 6%, while masks and other products rose 10% to US$540 million. ResMed said the gains reflected increased demand across its sleep health portfolio, including device fleet renewals in France. That growth was partly offset by lower life-support device sales, primarily because of the planned discontinuation of its Astral device.

MatrixCare sale boosts earnings but reduces software revenue

The portfolio reshuffle is visible in the second operating segment. Residential Care Software revenue fell 7% to US$155 million, or 6% on a constant-currency basis, predominantly because the MatrixCare transaction closed on September 1. Growth in the MEDIFOX DAN and Brightree verticals partly offset the divestiture. The sale had been outlined in the planned MatrixCare sale, which was described earlier as part of a move towards sleep technology and connected care.

ResMed received US$470 million at closing, with US$8 million placed in escrow, producing net cash proceeds of US$451 million after cash divested. It recognised a preliminary pre-tax gain of US$62 million, although that figure remains subject to customary post-closing purchase price adjustments. The gain lifted other income sharply and helped push net income to US$418 million from US$349 million, while diluted earnings per share rose to US$2.92 from US$2.37.

Buybacks and debt repayment consume cash proceeds

Capital allocation was unusually aggressive during the quarter. ResMed repurchased 3.6 million shares for US$855 million, including a US$450 million accelerated share repurchase agreement, and repaid US$250 million of debt. The ASR delivered an initial 1.6 million shares, with final settlement expected by December 29, 2026. A further 4.3 million shares remain available under the company’s repurchase programme.

Those outflows reduced cash and cash equivalents to US$1.011 billion from US$1.469 billion at June 30, despite US$422 million of operating cash flow and US$451 million of net proceeds from the MatrixCare sale. ResMed reported US$410 million of debt outstanding, US$1.5 billion of undrawn revolving-credit capacity and compliance with its debt covenants.

Costs, litigation and supply-chain execution remain variables

The operating result was less spectacular than the bottom line. Research and development expenses rose 15% to US$103 million, while selling, general and administrative expenses increased 12% to US$315 million. Restructuring and business transformation charges reached about US$19 million, and ResMed said inflation in manufacturing inputs, particularly electronic components, is expected to continue through fiscal 2027. The company is also expanding parts of its supply chain, which may cause fluctuations in gross margin as new or expanded sites are activated.

The filing also leaves legal uncertainty unresolved. ResMed faces ongoing patent disputes involving Cleveland Medical and Fractus, including appeals and patent-office proceedings concerning connected devices, software platforms and antenna technology. The company said it cannot currently make a reasonable estimate of any potential loss from the open matters. Separately, the acquisition of Noctrix Health, previously reported as expanding ResMed’s sleep-health portfolio in the Noctrix Health acquisition, added to the quarter’s acquisition-related activity but was not material to the financial statements.