# ResMed (RMD) Financial Model Free Excel 3-statement financial model and company analysis for ResMed. - Canonical: https://finamodel.com/companies/resmed - Industry: Medical Devices - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/RMD.xlsx ## Model Purpose This model provides a comprehensive equity valuation and scenario planning tool for an equity research analyst covering ResMed, focusing on the impact of device volume growth, mask resupply recurring revenue, SaaS expansion, and gross margin trajectory. ## Company Overview ResMed is a global leader in digital health and cloud-connected medical devices, primarily focused on diagnosing and treating sleep apnea, chronic obstructive pulmonary disease (COPD), and other respiratory conditions. The company provides hardware such as CPAP machines and masks, alongside a growing portfolio of out-of-hospital software solutions. Business segments include Sleep and Breathing Health (approximately 88% of revenue) and Residential Care Software (approximately 12% of revenue). Key geographies are the United States, Canada, and Latin America (generating roughly 58% of revenue) and Europe, Asia, and other markets (generating roughly 42% of revenue). The business model blends hardware sales with highly recurring consumable revenue from mask resupply and high-margin subscription revenue from its SaaS platforms. ResMed holds a dominant competitive position in the sleep apnea market, a position that strengthened significantly following a major product recall by its primary competitor, Philips. Recent major events include the May 2025 acquisition of VirtuOx, a software-enabled independent diagnostic testing facility, and a continued aggressive share repurchase programme. ## Revenue Deep Dive ### Sleep and Breathing Health - **Segment name:** Sleep and Breathing Health - **Revenue driver formula:** (Installed Base of Patients x Mask Replacement Rate x Average Selling Price) + (New Device Placements x Device Average Selling Price) - **Historical growth rate:** 8% to 11% CAGR - **Key growth levers and headwinds:** Growth is driven by increasing global awareness of sleep apnea, the shift to home-based care, and competitor supply constraints. A key potential headwind is the rising adoption of GLP-1 weight-loss drugs, which some investors fear could reduce the total addressable market for sleep apnea treatments. - **Pricing dynamics:** Largely competitive and reimbursement-driven, with pricing power tied to product innovation and digital connectivity features. - **Revenue recognition notes:** Recognised upfront at the point of sale when control of the devices or masks transfers to the customer. - **Seasonality:** Modest seasonality, with the quarter ending December 31 typically being the strongest due to the exhaustion of patient deductibles in the US healthcare system. ### Residential Care Software - **Segment name:** Residential Care Software - **Revenue driver formula:** Number of Software Subscriptions x Average Revenue Per User (ARPU) - **Historical growth rate:** 5% to 8% CAGR - **Key growth levers and headwinds:** Driven by the digitisation of out-of-hospital care, home medical equipment providers seeking operational efficiencies, and bolt-on acquisitions like Brightree, MatrixCare, and VirtuOx. - **Pricing dynamics:** Subscription-based pricing with contractual annual escalators and tiered pricing based on patient volume. - **Revenue recognition notes:** Recognised over time as the software services are provided to the customer. - **Seasonality:** Highly recurring and predictable, exhibiting minimal seasonal fluctuation. ## Cost Structure ### Variable Costs / COGS - **Line-by-line breakdown:** Manufacturing labour, raw materials (plastics, silicones), electronic components (semiconductors), freight, logistics, and software hosting costs. - **Gross margin range:** 58.0% to 62.0% over the last 5 years. - **Key input costs and commodity exposures:** Highly sensitive to semiconductor availability, global freight rates, and plastic resin prices. - **How COGS scales with revenue:** Exhibits operating leverage as manufacturing efficiencies and software mix increase, though temporary supply chain shocks have historically caused step-function increases in freight costs. ### Operating Expenses - **R&D:** Typically 6.5% to 7.0% of revenue. It covers the development of next-generation devices, mask materials, AI algorithms, and cloud infrastructure. - **SG&A:** Typically 19.0% to 20.0% of revenue. This includes a large direct sales force, global marketing campaigns, and integration costs for acquired software companies. - **Depreciation & Amortisation:** Significant amortisation of acquired intangibles due to the company's history of SaaS acquisitions, alongside standard depreciation of manufacturing facilities. - **Stock-Based Compensation:** Runs at approximately 1.5% to 2.0% of revenue, a moderate level for a medical technology company. - **Restructuring / one-time charges:** Infrequent, though the company recorded minor restructuring charges in late 2024 and 2025 related to workforce planning. ### Margin Profile - **Gross margin:** 58.0% to 62.0% (expanding recently due to normalising freight costs). - **EBITDA margin:** 30.0% to 33.0%. - **Operating margin:** 27.0% to 30.0%. - **Net margin:** 20.0% to 23.0%. - **Margin trend:** Expanding. The company has recovered from pandemic-era supply chain cost spikes and is benefiting from a higher mix of high-margin software and mask resupply revenue. ## Balance Sheet Structure - **Total assets:** Approximately $6.0 billion to $6.5 billion. - **Key asset categories:** Goodwill and intangible assets, inventory, and accounts receivable. - **Goodwill & intangibles as % of total assets:** Approximately 45% to 50%, reflecting the transformational acquisitions of Brightree and MatrixCare. - **Working capital profile:** - **Days Sales Outstanding (DSO):** 55 to 65 days. - **Days Inventory Outstanding (DIO):** 90 to 105 days (elevated recently to buffer against supply chain shocks). - **Days Payable Outstanding (DPO):** 35 to 45 days. - **Net working capital as % of revenue:** 15% to 20%. - **Is working capital positive or negative?** Positive. The company requires working capital to fund inventory for global distribution. - **PP&E:** Consists of advanced manufacturing facilities in Australia, Singapore, and the US. Useful lives are typically 3 to 10 years for equipment and up to 40 years for buildings. - **Right-of-use assets / operating leases:** Material but manageable, representing global office and warehouse space. ## Capital Expenditure & Investment - **Capex as % of revenue:** 2.0% to 3.0%. - **Maintenance capex vs. growth capex:** Approximately 40% maintenance and 60% growth (expanding manufacturing capacity and tooling for new product lines). - **Major capex programmes underway or planned:** Automation of mask manufacturing and expansion of distribution centres, such as the new facility in Indiana. - **Capitalised software / development costs:** Material, as the company capitalises certain costs related to its cloud platforms and internal-use software. - **M&A pattern:** Historically transformational in the SaaS space, but currently focused on strategic bolt-on acquisitions like VirtuOx. - **Typical acquisition multiple paid:** 4x to 6x revenue for software assets. ## Debt & Capital Structure - **Total debt:** Approximately $1.0 billion to $1.2 billion, resulting in a very low net debt position given strong cash balances. - **Debt/EBITDA ratio:** Consistently below 1.0x. - **Credit rating:** Investment grade profile, though unrated by some major agencies due to low reliance on public debt markets. - **Key debt instruments:** Unsecured revolving credit facility and syndicated term loans. - **Maturity profile:** Well-staggered with no near-term liquidity cliffs. - **Interest rate profile:** Primarily floating rate, partially hedged with interest rate swaps. - **Covenants:** Standard maximum leverage and minimum interest coverage ratios, with massive headroom. - **Share repurchase programme:** Highly active. The company repurchases approximately $150 million to $175 million in stock per quarter. - **Dividend policy:** Progressive dividend policy. The current quarterly payout is $0.60 per share, representing a payout ratio of roughly 25%. ## Cash Flow Characteristics - **Operating cash flow conversion:** Excellent. OCF to Net Income typically ranges from 1.1x to 1.3x. - **Free cash flow margin:** 25% to 30% of revenue. - **Major non-cash items:** Depreciation, heavy amortisation of acquired intangibles, and stock-based compensation. - **Working capital cash flow impact:** Inventory build has been a use of cash in recent years, but this is normalising. - **Capex intensity:** Very low, allowing for massive free cash flow generation. - **Cash tax rate vs. GAAP effective tax rate:** Cash taxes are generally aligned with the GAAP effective tax rate of 18% to 20%, benefiting from geographic mix and R&D tax credits. ## Sheet Structure 1. **Assumptions**: Contains all hardcoded drivers, including segment growth rates, margin targets, macro variables, and tax rates. 2. **Revenue_Build**: Projects revenue split by Sleep and Breathing Health (US/CAN/LA), Sleep and Breathing Health (ROW), and Residential Care Software. 3. **Income_Statement**: Standard GAAP income statement down to net income, with a supplementary section for Non-GAAP adjustments (adding back amortisation of acquired intangibles). 4. **Balance_Sheet**: Assets, liabilities, and shareholders' equity, balancing via the revolver. 5. **Cash_Flow_Statement**: Indirect method starting from net income, adjusting for non-cash items and working capital changes to arrive at ending cash. 6. **Working_Capital**: Schedules for accounts receivable, inventory, and accounts payable driven by DSO, DIO, and DPO. 7. **Debt_Schedule**: Tracks term loan balances, revolver drawdowns, and calculates interest expense based on average balances. 8. **Depreciation_Amortisation**: Waterfall schedules for PP&E capex and intangible asset amortisation. 9. **Shareholders_Equity**: Tracks share count, share repurchases, dividends paid, and retained earnings. 10. **DCF**: Unlevered free cash flow calculation, WACC build, and terminal value computation for equity valuation. ## Key Financial Relationships 1. "Sleep and Breathing Health US/CAN/LA Revenue = Prior Year Sleep and Breathing Health US/CAN/LA Revenue x (1 + US/CAN/LA Growth Rate)" 2. "Sleep and Breathing Health ROW Revenue = Prior Year Sleep and Breathing Health ROW Revenue x (1 + ROW Growth Rate)" 3. "Residential Care Software Revenue = Prior Year Residential Care Software Revenue x (1 + SaaS Growth Rate)" 4. "Total Net Revenue = Sleep and Breathing Health US/CAN/LA Revenue + Sleep and Breathing Health ROW Revenue + Residential Care Software Revenue" 5. "COGS = Total Net Revenue x (1 - Gross Margin %)" 6. "Gross Profit = Total Net Revenue - COGS" 7. "R&D Expense = Total Net Revenue x R&D Margin %" 8. "SG&A Expense = Total Net Revenue x SG&A Margin %" 9. "Amortisation of Acquired Intangibles = Hardcoded schedule based on historical M&A + % of new M&A spend" 10. "Operating Income (GAAP) = Gross Profit - R&D Expense - SG&A Expense - Amortisation of Acquired Intangibles - Restructuring Charges" 11. "Non-GAAP Operating Income = Operating Income (GAAP) + Amortisation of Acquired Intangibles + Restructuring Charges" 12. "Interest Expense = Average Debt Balance x Weighted Average Interest Rate" 13. "Basic Shares Outstanding = Prior Period Shares - (Share Repurchases / Average Share Price) + Shares Issued for SBC" 14. "Dividends Paid = Basic Shares Outstanding x Annualised Dividend Per Share" ## Cross-Sheet Dependencies - The **Assumptions** sheet dictates the growth and margin profiles used in the **Revenue_Build** and **Income_Statement**. - The **Revenue_Build** feeds the top line of the **Income_Statement**. - The **Income_Statement** generates Net Income, which flows to the top of the **Cash_Flow_Statement** and into Retained Earnings on the **Shareholders_Equity** sheet. - The **Working_Capital** sheet calculates changes in assets and liabilities, feeding the operating section of the **Cash_Flow_Statement**. - The **Debt_Schedule** calculates interest expense for the **Income_Statement** and ending debt balances for the **Balance_Sheet**. - A circular reference exists between the **Debt_Schedule** (interest expense), the **Income_Statement** (net income), the **Cash_Flow_Statement** (cash available for debt paydown), and the **Balance_Sheet** (revolver balance). This requires a circuit breaker toggle in the **Assumptions** sheet. ## Sign Convention - Revenue, Assets, and Equity balances are entered as positive numbers. - Expenses on the Income Statement (COGS, SG&A, R&D, Interest) are entered as negative numbers. - Cash outflows on the Cash Flow Statement (Capex, Dividends, Share Repurchases, Debt Principal Repayments) are entered as negative numbers. - Cash inflows (Debt issuance, positive changes in working capital liabilities) are entered as positive numbers. ## Things Most Likely to Go Wrong - The model must separate GAAP and Non-GAAP earnings. ResMed has massive amortisation of acquired intangibles from its SaaS acquisitions. Valuing the company on GAAP EPS severely understates its true cash-generating power. - Foreign currency translation can swing reported revenue by 3% to 5% year-over-year. The model should include a constant-currency growth assumption toggle. - The mix shift between hardware and software impacts consolidated gross margins. If SaaS grows faster than hardware, consolidated gross margins will mathematically expand. - Inventory levels have been highly volatile due to supply chain buffering. Assuming historical pre-2020 DIO will result in inaccurate working capital cash flow projections. - The GLP-1 narrative is a major valuation driver. The model needs a scenario toggle to adjust long-term terminal growth rates based on the assumed impact of weight-loss drugs on the sleep apnea total addressable market. - Stock-based compensation runs at roughly 1.5% to 2.0% of revenue. Excluding it from adjusted free cash flow flatters the valuation and must be handled carefully in the DCF. - The company frequently repurchases shares. Failing to reduce the share count dynamically will understate future EPS. - Segment-level operating income is not cleanly disclosed without corporate allocations. The model should build margins at the consolidated level rather than attempting a bottom-up segment margin build. ## Validation Checks - Consolidated Gross Margin should remain in the 59.0% to 62.5% range based on recent performance. Flag if outside this band. - R&D as a percentage of revenue should remain between 6.0% and 7.5%. - SG&A as a percentage of revenue should remain between 18.5% and 20.5%. - Operating Cash Flow to Net Income conversion should consistently exceed 1.1x. - Total Assets must equal Total Liabilities plus Shareholders' Equity in every forecast period. - Debt to EBITDA should remain below 1.5x given the company's conservative capital structure. - The effective tax rate should remain between 18.0% and 20.0%. - Dividend payout ratio should remain between 20.0% and 30.0% of Net Income. ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | Sleep & Breathing Health US/CAN/LA Growth | 10.0 | % | Based on Q1 and Q2 FY2026 actual constant currency growth rates. | | Sleep & Breathing Health ROW Growth | 6.0 | % | Based on recent European and Asian market performance. | | Residential Care Software Growth | 5.0 | % | Based on recent SaaS segment performance. | | Consolidated Gross Margin | 61.5 | % | Reflects Q1 and Q2 FY2026 margin expansion from freight normalisation. | | R&D as % of Revenue | 6.5 | % | Consistent with historical averages and management guidance. | | SG&A as % of Revenue | 19.6 | % | Based on Q2 FY2026 actuals, reflecting recent marketing investments. | | Days Sales Outstanding (DSO) | 60 | Days | Calculated from recent balance sheet receivables. | | Days Inventory Outstanding (DIO) | 95 | Days | Reflects current elevated inventory buffering strategy. | | Days Payable Outstanding (DPO) | 40 | Days | Calculated from recent balance sheet payables. | | Capex as % of Revenue | 2.5 | % | Historical average for maintenance and facility expansion. | | Effective Tax Rate | 19.0 | % | Based on recent GAAP effective tax rates. | | Annual Share Repurchases | 600 | $ Millions | Run-rate based on $150M-$175M quarterly repurchases in FY2026. | | Annual Dividend Per Share | 2.40 | $ | Based on the $0.60 quarterly dividend declared in Q2 FY2026. | | Weighted Average Cost of Capital (WACC) | 8.5 | % | Standard discount rate for a large-cap, low-beta medtech company. | | Terminal Growth Rate | 3.0 | % | Reflects long-term GDP growth plus structural tailwinds in home healthcare. | ## Data Sources & Benchmarks - **Filings:** SEC EDGAR for ResMed Inc. (10-K, 10-Q, 8-K) and the ResMed Investor Relations website. - **Peers for benchmarking:** Inspire Medical Systems (INSP), Philips (PHG), Fisher & Paykel Healthcare (FPH). - **Industry data sources:** Medicare reimbursement schedules for durable medical equipment, sleep clinic diagnostic volume data. - **Consensus estimates:** Bloomberg or FactSet for forward-looking revenue and EPS consensus. - **Proprietary data:** IQVIA for prescription data regarding CPAP setups and GLP-1 adoption rates. ## Sources - ResMed Inc. Form 10-K for the Fiscal Year Ended June 30, 2025 (SEC EDGAR). - ResMed Inc. Q1 Fiscal Year 2026 Earnings Release (October 30, 2025). - ResMed Inc. Q2 Fiscal Year 2026 Earnings Release (January 29, 2026). - ResMed Investor Relations Presentations and Webcasts (investor.resmed.com). --- ## Frequently asked questions ### What is ResMed's primary business focus and what products do they offer? ResMed is a global leader in digital health and cloud-connected medical devices, primarily focused on diagnosing and treating sleep apnea, chronic obstructive pulmonary disease (COPD), and other respiratory conditions. The company provides hardware such as CPAP machines and masks, alongside a growing portfolio of out-of-hospital software solutions. ### How does ResMed generate revenue, and what are its key business segments? ResMed generates revenue through a blend of hardware sales, highly recurring consumable revenue from mask resupply, and high-margin subscription revenue from its SaaS platforms. Its main business segments are Sleep and Breathing Health, which accounts for approximately 88% of revenue, and Residential Care Software, making up about 12% of revenue. ### What is the assumed revenue growth rate for ResMed in the financial model? The financial model for ResMed assumes a revenue growth rate of approximately 12.8%. This assumption is a key input for forecasting the company's top-line performance over the forecast horizon from FY2026 to FY2030. ### What are the key elements considered in the equity valuation for ResMed? The equity valuation for ResMed focuses on several key elements, including device volume growth, the recurring revenue from mask resupply, and the expansion of its SaaS platforms. The gross margin trajectory is also a critical factor in understanding the company's profitability and overall valuation. ### Can I download an Excel financial model for ResMed, and what is its forecast horizon? Yes, an Excel financial model for ResMed is available for download. This comprehensive model provides an equity valuation and scenario planning tool with a forecast horizon spanning from fiscal year 2026 to fiscal year 2030. ### What is the assumed capital expenditure as a percentage of revenue in ResMed's financial model? In ResMed's financial model, capital expenditure is assumed to be approximately 3.1% of revenue. This figure helps project the company's investment in assets like advanced manufacturing facilities and distribution centers, balancing maintenance and growth capex. [Interactive forecast calculator](https://finamodel.com/companies/resmed/forecast)