ResMed's 2024 fiscal year kicks off with plans to lay off 5% of workers

As it continues to take advantage of the gaping hole left in the CPAP machine market by competitor Philips’ ongoing respiratory recall troubles, ResMed is still fine-tuning its long-term growth strategy—a process that’s now resulting in some short-term shrinkage.

During a call with investors on Thursday afternoon to discuss ResMed’s financial results for the first quarter of its 2024 fiscal year, CEO Mick Farrell said the actions that the company is taking to “accelerate profitable growth across ResMed and to power our long-term success” have led to a 5% reduction in its global workforce.

“We have stopped some projects that were not working out as well as we thought. We’ve increased investment in areas that we believe will be pivotal to long-term success, such as our digital health tech investments, as well as focused hardware and software development, creating the smallest, the quietest, the most comfortable, the most connected and the most intelligent healthcare solutions in the market,” Farrell said.

“These changes have impacted some of our teams,” he continued. “Decisions like this that impact people are never easy. However, we know that we are doing the right thing, and we’re doing the right thing to accelerate our growth and to refocus on our long-term mission. I feel more strongly than ever that we are well positioned with an incredibly long runway of profitable growth and value creation for all of our stakeholders as we move forward.”

Farrell didn’t disclose the exact number of employees affected by the workforce reduction, which began earlier this week. However, as of ResMed’s most recent annual report (PDF), the company counted more than 10,140 employees, meaning the layoffs could impact at least 500 workers.

Brett Sandercock, the devicemaker’s CFO, said on Thursday’s call that the restructuring is on track to be completed during the second quarter of ResMed’s fiscal 2024.

When asked later whether additional restructuring could be in ResMed’s future, Farrell suggested that this week’s actions represent the biggest chunk of changes for now.

“There are some changes I’m looking at in the operating model, in roles and responsibilities, and a focus on a more product-led and brand-led company that will come over time, but they’re not massive restructures,” he said. “That restructure is done, and we’re now focused on moving forward.”

The layoff announcement came as ResMed reported a quarter of strong growth. For the first quarter of its fiscal 2024, which began July 1, the company took in revenues of more than $1.1 billion, up 16% year over year, per Thursday’s earnings report.

Its net profits rose, too, despite taking hits from incremental expenses tied to the recent acquisition of German software developer Medifox Dan, from increased component and manufacturing costs and from an $8 million provision it took to prepare for the costs of a recently launched corrective action for some of its Astral ventilators. Its quarterly net income weighed in at more than $219 million, up 4% from the $210.5 million profit it recorded a year prior.

Still, thanks to those expenses, the company’s gross margin shrank by 250 basis points—down to 54.4% from nearly 57% a year ago. That led its stock price to continue its steady dip downward: After slipping below the $200 mark for the first time in a year upon the release of its full-year 2023 results in August, the stock has since fallen even further below that threshold, spending much of the last two months below $150 and briefly dipping in after-hours trading Thursday to a three-year low of $124.