With the pandemic-induced chip shortage still ballooning around the world, ResMed has been forced to deflate its expectations for what it hoped to reap in the vacuum caused by Philips’ major ventilator recall.
As its competitor's Class I recall expanded to include around 5.2 million CPAP, BiPAP and other respiratory machines earlier this year, ResMed said it was aiming to rake in an extra $300 million to $350 million in its 2022 fiscal year, which ends June 30, just from filling the absence left by Philips.
In a January call with investors about the company’s second-quarter results, CEO Mick Farrell noted that ResMed wouldn’t be able to completely meet that “seemingly infinite demand,” especially with the chip shortage in full force, but maintained those lofty incremental revenue projections.
One quarter later, ResMed has tempered its view. Speaking to investors Thursday, the company’s Chief Financial Officer Brett Sandercock reported that revenues from the recall fell somewhere in the range between $35 million and $45 million in its third fiscal quarter, severely stunting its ability to reach the original forecast. With just one quarter to go, the year’s total currently sits between $170 million and $190 million.
“We continue to experience challenges in securing sufficient components, and this has hampered our ability to materially increase our supply of devices. We expect our fiscal fourth quarter to remain supply-constrained and similar to our recent fiscal quarters, therefore limiting incremental revenue during the fourth quarter,” Sandercock said, per a transcript of the call. “We now expect the total incremental device revenue opportunity for fiscal year 2022 will fall somewhere between $200 million and $250 million.”
When asked about that $100 million drop, Farrell pointed investors toward an unnamed semiconductor supplier’s “very significant double-digit de-commit” on a large contract with ResMed, causing the company to move “two steps forward and two steps back” in its production efforts.
That set ResMed back approximately $100 million in its expected earnings, he said. It also made the devicemaker hesitant to set a concrete forecast for its next fiscal year, with the CEO saying ResMed will instead simply “strive for sequential growth every quarter” into 2023.
“Look, it’s not perfect sailing ahead when you get de-commits,” Farrell said. “But I can tell you that all the work that we’ve been doing, this hard work by our supply chain, has allowed us to actually achieve these results despite that headwind.”
Indeed, even as it fell short of its recall-specific forecasts, ResMed still saw its overall revenue grow 12% compared to the same period last year, attributing much of that growth to increased demand for its products caused by the recall.
In total, the quarter’s revenue reached $864.5 million, marking a steady decline from the previous quarter’s $894.9 million and the $904 million it took in during its first fiscal quarter of 2022.