- Year-over-year revenue grows 16%, non-GAAP operating profit up
31%
- Balanced growth across product portfolio, software solutions,
and global markets
- Focused on combating COVID-19 pandemic through increased
ventilator production and ongoing partnership and support of key
global stakeholders
Note: A webcast of ResMed’s conference call will be available at
4:30 p.m. ET today at http://investor.resmed.com
ResMed Inc. (NYSE: RMD) (ASX: RMD), a world-leading digital
health company, today announced results for its quarter ended March
31, 2020.
Third Quarter 2020 Highlights
All comparisons are to the prior-year period
- Revenue increased 16% to $769.5 million; up 17% on a constant
currency basis
- GAAP gross margin of 58.4%; non-GAAP gross margin expanded 70
bps to 60.0%
- Net operating profit increased 39%; non-GAAP operating profit
up 31%
- GAAP diluted earnings per share of $1.12; non-GAAP diluted
earnings per share of $1.29
“We are operating during unprecedented times, and I am extremely
proud of the way our global ResMed team has responded to the
COVID-19 crisis,” said Mick Farrell, ResMed’s CEO. “Our primary
goals are the safety and well-being of our team members, and the
preservation of life – helping people breathe while their immune
system fights this coronavirus. We have rapidly pivoted our
business to respond by ramping up production of life support
ventilators, non-invasive ventilators, and ventilation mask systems
for the people who need them most, wherever they live.
“We continue to execute our long-term strategy, supporting
customers around the world with digital health technologies and
out-of-hospital management software, enabling them to continue to
provide better care for those suffering from sleep apnea, COPD,
asthma, and for people in out-of-hospital care settings. As we
progress through the global COVID-19 pandemic, we are delivering
world-leading solutions to governments, health authorities,
hospitals, physicians, providers, and, most importantly, to
patients.
“Looking ahead, we are confident in our ability to navigate
through the challenging clinical and economic environment to
deliver for all our stakeholders. Our culture, operational
resilience, strong balance sheet, business continuity plans, and
growth prospects have positioned us well. In the near term, we
remain vigilant and thoughtful about the outlook for our business
as we continue to serve our customers and successfully weather the
crisis. Over the longer term, we believe our strong foundation will
accelerate the adoption of much-needed digital health solutions in
the field of respiratory medicine.”
Financial Results and Operating
Metrics
Unaudited; $ in millions, except for per
share amounts
Three Months Ended
March 31, 2020
March 31, 2019
% Change
Constant Currency (A)
Revenue
$
769.5
$
662.2
16
%
17
%
Gross margin (B)
58.4
%
57.5
%
2
Non-GAAP gross margin (B)
60.0
%
59.3
%
1
Selling, general and administrative
expenses
172.4
164.5
5
7
Research and development expenses
51.4
47.6
8
11
Income from operations
217.5
157.0
39
Non-GAAP income from operations (B)
237.9
182.0
31
Net income
163.1
105.4
55
Non-GAAP net income (B)
187.9
128.1
47
Diluted earnings per share
$
1.12
$
0.73
53
Non-GAAP diluted earnings per share
(B)
$
1.29
$
0.89
45
Nine Months Ended
March 31, 2020
March 31, 2019
% Change
Constant Currency (A)
Revenue
$
2,186.7
$
1,901.6
15
%
16
%
Gross margin (B)
58.0
%
57.4
%
1
Non-GAAP gross margin (B)
59.8
%
58.9
%
2
Selling, general and administrative
expenses
511.3
473.4
8
1
Research and development expenses
149.4
129.5
15
-
Income from operations
586.4
458.2
28
Non-GAAP income from operations (B)
647.4
520.1
24
Net income
443.8
335.8
32
Non-GAAP net income (B)
499.5
388.8
28
Diluted earnings per share
$
3.05
$
2.33
31
Non-GAAP diluted earnings per share
(B)
$
3.43
$
2.69
28
(A)
In order to provide a framework for assessing how our underlying
businesses performed excluding the effect of foreign currency
fluctuations, we provide certain financial information on a
“constant currency basis,” which is in addition to the actual
financial information presented. In order to calculate our constant
currency information, we translate the current period financial
information using the foreign currency exchange rates that were in
effect during the previous comparable period. However, constant
currency measures should not be considered in isolation or as an
alternative to U.S. dollar measures that reflect current period
exchange rates, or to other financial measures calculated and
presented in accordance with U.S. GAAP.
(B)
See the reconciliation of non-GAAP financial measures in the
table at the end of the press release.
Discussion of Third Quarter Results
All comparisons are to the prior-year period unless otherwise
noted
- Revenue in the U.S., Canada, and Latin America, excluding
Software as a Service, grew by 12 percent driven by strong sales
across our mask and device product portfolios, including increased
demand for our ventilators due to COVID-19.
- Revenue in combined Europe, Asia, and other markets grew by 27
percent on a constant currency basis primarily driven by sales
across our mask and device product portfolios, including increased
demand for our ventilators due to COVID-19.
- Software as a Service revenue increased by 12 percent, due to
continued growth in Brightree and MatrixCare service
offerings.
- Gross Margin expanded by 90 basis points. Non-GAAP gross margin
expanded by 70 basis points primarily due to benefits from product
mix changes, and manufacturing and procurement efficiencies,
partially offset by declines in average selling prices.
- Selling, general, and administrative expenses increased by 5
percent or by 7 percent on a constant currency basis. SG&A
expenses improved to 22.4 percent of revenue in the quarter,
compared with 24.8 percent in the same period of the prior
year.
- Income from operations increased by 39 percent and non-GAAP
income from operations increased by 31 percent.
- Net income grew by 55 percent and diluted earnings per share
grew by 53 percent. Non-GAAP net income grew by 47 percent and
non-GAAP diluted earnings per share grew by 45 percent
predominantly attributable to strong sales, particularly in masks,
coupled with controlled operating costs.
- Cash flow from operations for the quarter was $239.7 million,
compared to net income in the current quarter of $163.1 million.
During the quarter we paid $56.4 million in dividends.
Other Business and Operational Highlights
- Introduced AirFit F30i, its first tube-up full face CPAP mask,
rounding out the most complete full face mask portfolio on the
market. AirFit F30i’s tube-up design makes it easier for users to
sleep in any position, under-nose cushioning prevents soreness and
irritation on the nasal bridge, and a quick-release elbow allows
users to quickly disconnect and reattach the mask from its
tubing.
- In partnership with ATS Foundation, awarded the third $100,000
research grant to study how remote monitoring can help improve the
management of patients with chronic obstructive pulmonary disease.
The study aims to detect early changes in lung function from daily
recordings and notify patients when to commence more intensive
treatment or seek medical attention.
- Launched a COVID-19 resource page with links to the latest
information from global and regional health organizations as well
as frequently asked questions about the use of ResMed’s devices in
relation to COVID-19 and information for healthcare
professionals.
Dividend program
The ResMed board of directors today declared a quarterly cash
dividend of $0.39 per share. The dividend will have a record date
of May 14, 2020, payable on June 18, 2020. The dividend will be
paid in U.S. currency to holders of ResMed’s common stock trading
on the New York Stock Exchange. Holders of Chess Depositary
Instruments trading on the Australian Securities Exchange will
receive an equivalent amount in Australian currency, based on the
exchange rate on the record date, and reflecting the 10:1 ratio
between CDIs and NYSE shares. The ex-dividend date will be May 13,
2020 for common stockholders and for CDI holders. ResMed has
received a waiver from the ASX’s settlement operating rules, which
will allow ResMed to defer processing conversions between its
common stock and CDI registers from May 13, 2020, through May 14,
2020, inclusive.
Webcast details
ResMed will discuss its third-quarter fiscal year 2020 results
on its webcast at 1:30 p.m. U.S. Pacific Time today. The live
webcast of the call can be accessed on ResMed’s Investor Relations
website at investor.resmed.com. Please go to this section of the
website and click on the icon for the “Q3 2020 Earnings Webcast” to
register and listen to the live webcast. A replay of the earnings
webcast will be accessible on the website and available
approximately two hours after the live webcast. In addition, a
telephone replay of the conference call will be available
approximately two hours after the webcast by dialing +1
877-660-6853 (U.S.) or +1 201-612-7415 (outside U.S.) and entering
the passcode 13701214. The telephone replay will be available until
May 15, 2020.
About ResMed
At ResMed (NYSE: RMD) (ASX: RMD) we pioneer innovative solutions
that treat and keep people out of the hospital, empowering them to
live healthier, higher-quality lives. Our cloud-connected medical
devices transform care for people with sleep apnea, COPD, and other
chronic diseases. Our comprehensive out-of-hospital software
platforms support the professionals and caregivers who help people
stay healthy in the home or care setting of their choice. By
enabling better care, we improve quality of life, reduce the impact
of chronic disease, and lower costs for consumers and healthcare
systems in more than 140 countries. To learn more, visit ResMed.com
and follow @ResMed.
Safe harbor statement
Statements contained in this release that are not historical
facts are “forward-looking” statements as contemplated by the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements – including statements regarding
ResMed’s projections of future revenue or earnings, expenses, new
product development, new product launches, new markets for its
products, the integration of acquisitions, litigation, and tax
outlook – are subject to risks and uncertainties, which could cause
actual results to materially differ from those projected or implied
in the forward-looking statements. Additional risks and
uncertainties are discussed in ResMed’s periodic reports on file
with the U.S. Securities & Exchange Commission. ResMed does not
undertake to update its forward-looking statements.
RESMED INC. AND
SUBSIDIARIES
Condensed Consolidated Statements of
Income
(Unaudited; $ in thousands, except for per
share amounts)
Three Months Ended
Nine Months Ended
March 31, 2020
March 31, 2019
March 31, 2020
March 31, 2019
Net revenue
$
769,455
$
662,228
$
2,186,669
$
1,901,608
Cost of sales
307,657
270,318
880,633
782,874
Amortization of acquired intangibles
(1)
12,136
10,940
37,623
27,095
Total cost of sales
$
319,793
$
281,258
$
918,256
$
809,969
Gross profit
$
449,662
$
380,970
$
1,268,413
$
1,091,639
Selling, general and administrative
172,441
164,529
511,304
473,410
Research and development
51,449
47,610
149,425
129,513
Amortization of acquired intangibles
(1)
8,272
11,854
21,872
24,406
Litigation settlement expenses (1)
-
-
(600
)
-
Acquisition-related expenses (1)
-
-
-
6,123
Total operating expenses
$
232,162
$
223,993
$
682,001
$
633,452
Income from operations
217,500
156,977
586,412
458,187
Other income (expenses), net:
Interest income (expense), net
$
(9,852
)
$
(11,998
)
$
(30,414
)
$
(21,594
)
Loss attributable to equity method
investments
(5,295
)
(5,996
)
(19,082
)
(9,371
)
Other, net
(10,698
)
(1,054
)
(15,922
)
(4,140
)
Total other income (expenses), net
(25,845
)
(19,048
)
(65,418
)
(35,105
)
Income before income taxes
$
191,655
$
137,929
$
520,994
$
423,082
Income taxes
28,518
32,513
77,155
87,291
Net income
$
163,137
$
105,416
$
443,839
$
335,791
Basic earnings per share
$
1.13
$
0.74
$
3.08
$
2.35
Diluted earnings per share
$
1.12
$
0.73
$
3.05
$
2.33
Non-GAAP diluted earnings per share
(1)
$
1.29
$
0.89
$
3.43
$
2.69
Basic shares outstanding
144,638
143,316
144,112
142,907
Diluted shares outstanding
145,680
144,333
145,490
144,344
(1)
See the reconciliation of non-GAAP financial measures in the
table at the end of the press release.
RESMED INC. AND
SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(Unaudited; $ in thousands)
March 31, 2020
June 30, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
352,861
$
147,128
Accounts receivable, net
554,859
528,484
Inventories
358,772
349,641
Prepayments and other current assets
203,266
120,113
Total current assets
$
1,469,758
$
1,145,366
Non-current assets:
Property, plant and equipment, net
$
397,209
$
387,460
Operating lease right-of-use assets
126,277
-
Goodwill and other intangibles, net
2,349,421
2,378,399
Deferred income taxes and other
non-current assets
167,878
196,457
Total non-current assets
$
3,040,785
$
2,962,316
Total assets
$
4,510,543
$
4,107,682
LIABILITIES AND STOCKHOLDERS’
EQUITY:
Current liabilities:
Accounts payable
$
116,148
$
115,725
Accrued expenses
235,201
266,359
Operating lease liabilities, current
22,795
-
Deferred revenue
97,110
88,667
Income taxes payable
68,278
73,248
Short-term debt
11,987
11,992
Total current liabilities
$
551,519
$
555,991
Non-current liabilities:
Deferred revenue
$
84,615
$
81,143
Deferred income taxes
25,441
11,380
Operating lease liabilities,
non-current
107,251
-
Other long term liabilities
7,527
2,058
Long-term debt
1,364,849
1,258,861
Long-term income taxes payable
112,910
126,056
Total non-current liabilities
$
1,702,593
$
1,479,498
Total liabilities
$
2,254,112
$
2,035,489
STOCKHOLDERS’ EQUITY:
Common stock
$
579
$
575
Additional paid-in capital
1,533,905
1,511,473
Retained earnings
2,711,639
2,436,410
Treasury stock
(1,623,256
)
(1,623,256
)
Accumulated other comprehensive income
(366,436
)
(253,009
)
Total stockholders’ equity
$
2,256,431
$
2,072,193
Total liabilities and stockholders'
equity
$
4,510,543
$
4,107,682
RESMED INC. AND
SUBSIDIARIES
Condensed Consolidated Statements of
Cash Flows
(Unaudited; $ in thousands)
Nine Months Ended
March 31, 2020
March 31, 2019
Cash flows from operating
activities:
Net income
$
443,839
$
335,791
Adjustment to reconcile net income to cash
provided by operating activities:
Depreciation and amortization
116,341
108,203
Amortization of right-of-use-assets
19,524
-
Stock-based compensation costs
41,421
37,856
Loss attributable to equity method
investments
19,082
9,371
Impairment of equity investments
14,519
8,801
Gain on previously held equity
interest
-
(1,909
)
Changes in fair value of business
combination contingent consideration
(7
)
(272
)
Changes in operating assets and
liabilities, net of effect of acquisitions:
Accounts receivable, net
(34,140
)
(1,482
)
Inventories, net
(22,564
)
(55,002
)
Prepaid expenses, net deferred income
taxes and other current assets
(68,724
)
(17,453
)
Accounts payable, accrued expenses and
other
(57,301
)
(106,671
)
Net cash provided by operating
activities
$
471,990
$
317,233
Cash flows from investing
activities:
Purchases of property, plant and
equipment
(77,360
)
(46,507
)
Patent registration costs
(7,391
)
(6,556
)
Business acquisitions, net of cash
acquired
(27,910
)
(951,565
)
Purchases of investments
(31,616
)
(31,092
)
Proceeds / (Payments) on maturity of
foreign currency contracts
(32,177
)
3,902
Net cash used in investing activities
$
(176,454
)
$
(1,031,818
)
Cash flows from financing
activities:
Proceeds from issuance of common stock,
net
26,112
15,346
Taxes paid related to net share settlement
of equity awards
(45,106
)
(27,880
)
Purchases of treasury stock
-
(22,844
)
Payment of business combination contingent
consideration
(302
)
(648
)
Proceeds from borrowings, net of borrowing
costs
990,000
1,414,230
Repayment of borrowings
(883,012
)
(541,394
)
Dividends paid
(168,610
)
(158,592
)
Net cash (used in) / provided by financing
activities
$
(80,918
)
$
678,218
Effect of exchange rate changes on
cash
$
(8,885
)
$
(5,821
)
Net increase / (decrease) in cash and cash
equivalents
205,733
(42,188
)
Cash and cash equivalents at beginning of
period
147,128
188,701
Cash and cash equivalents at end of
period
$
352,861
$
146,513
RESMED INC. AND
SUBSIDIARIES
Reconciliation of Non-GAAP Financial
Measures
(Unaudited; $ in thousands, except for per
share amounts)
The measures “non-GAAP gross profit” and
“non-GAAP gross margin” excludes amortization expense from acquired
intangibles related to cost of sales and are reconciled below:
Three Months Ended
Nine Months Ended
March 31, 2020
March 31, 2019
March 31, 2020
March 31, 2019
Revenue
$
769,455
$
662,228
$
2,186,669
$
1,901,608
Add back: Deferred revenue fair value
adjustment (A)
-
2,254
2,102
4,283
Non-GAAP Revenue
$
769,455
$
664,482
$
2,188,771
$
1,905,891
GAAP Cost of sales
$
319,793
$
281,258
$
918,256
$
809,969
Less: Amortization of acquired intangibles
(A)
(12,136
)
(10,940
)
(37,623
)
(27,095
)
Non-GAAP cost of sales
$
307,657
$
270,318
$
880,633
$
782,874
GAAP gross profit
449,662
380,970
1,268,413
1,091,639
GAAP gross margin
58.4
%
57.5
%
58.0
%
57.4
%
Non-GAAP gross profit
461,798
394,164
1,308,138
1,123,017
Non-GAAP gross margin
60.0
%
59.3
%
59.8
%
58.9
%
The measure “non-GAAP income from operations” is reconciled with
GAAP income from operations below:
Three Months Ended
Nine Months Ended
March 31, 2020
March 31, 2019
March 31, 2020
March 31, 2019
GAAP income from operations
$
217,500
$
156,977
$
586,412
$
458,187
Amortization of acquired intangibles -
cost of sales (A)
12,136
10,940
37,623
27,095
Amortization of acquired intangibles -
operating expenses (A)
8,272
11,854
21,872
24,406
Deferred revenue fair value adjustment
(A)
-
2,254
2,102
4,283
Litigation settlement expenses (A)
-
-
(600
)
-
Acquisition related expenses (A)
-
-
-
6,123
Non-GAAP income from operations
$
237,908
$
182,025
$
647,409
$
520,094
RESMED INC. AND
SUBSIDIARIES
Reconciliation of Non-GAAP Financial
Measures
(Unaudited; $ in thousands, except for per
share amounts)
The measures "non-GAAP net income" and
“non-GAAP diluted earnings per share” are reconciled with GAAP net
income and GAAP diluted earnings per share in the table below:
Three Months Ended
Nine Months Ended
March 31, 2020
March 31, 2019
March 31, 2020
March 31, 2019
GAAP net income
$
163,137
$
105,416
$
443,839
$
335,791
Amortization of acquired intangibles -
cost of sales, net of tax (A)
9,287
8,441
28,765
20,963
Amortization of acquired intangibles -
operating expenses, net of tax (A)
6,330
9,147
16,723
18,883
Deferred revenue fair value adjustment,
net of tax (A)
-
1,727
1,610
3,281
Litigation settlement expenses, net of tax
(A)
-
-
(528
)
-
Acquisition-related expenses (A)
-
-
-
5,362
Fair value impairment of investment
(A)
9,100
-
9,100
-
U.S. tax reform
-
3,327
-
4,505
Non-GAAP net income (A)
$
187,854
$
128,058
$
499,509
$
388,785
Diluted shares outstanding
145,680
144,333
145,490
144,344
GAAP diluted earnings per share
$
1.12
$
0.73
$
3.05
$
2.33
Non-GAAP diluted earnings per share
(A)
$
1.29
$
0.89
$
3.43
$
2.69
(A)
ResMed adjusts for the impact of the
amortization of acquired intangibles, deferred revenue fair value
adjustment, litigation settlement expenses, acquisition-related
expenses, fair value impairment of investment and the impact of
U.S. tax reform on income tax expense from their evaluation of
ongoing operations, and believes that investors benefit from
adjusting these items to facilitate a more meaningful evaluation of
current operating performance.
ResMed believes that non-GAAP diluted
earnings per share is an additional measure of performance that
investors can use to compare operating results between reporting
periods. ResMed uses non-GAAP information internally in planning,
forecasting, and evaluating the results of operations in the
current period and in comparing it to past periods. ResMed believes
this information provides investors better insight when evaluating
ResMed’s performance from core operations and provides consistent
financial reporting. The use of non-GAAP measures is intended to
supplement, and not to replace, the presentation of net income and
other GAAP measures. Like all non-GAAP measures, non-GAAP earnings
are subject to inherent limitations because they do not include all
the expenses that must be included under GAAP.
RESMED INC. AND
SUBSIDIARIES
Revenue by Product and Region
(Unaudited; $ in thousands, except for per
share amounts)
Three Months Ended
March 31, 2020 (A)
March 31, 2019 (A)
% Change
Constant Currency (B)
U.S., Canada and Latin America
Devices
$
196.5
$
181.3
8
%
Masks and other
197.1
168.7
17
Total Sleep and Respiratory Care
$
393.5
$
350.0
12
Software as a Service
89.6
79.9
12
Total
$
483.1
$
429.9
12
Combined Europe, Asia and other
markets
Devices
$
195.0
$
155.2
26
%
29
%
Masks and other
91.3
77.1
18
22
Total Sleep and Respiratory Care
$
286.3
$
232.3
23
27
Global revenue
Devices
$
391.5
$
336.4
16
%
18
%
Masks and other
288.4
245.8
17
18
Total Sleep and Respiratory Care
$
679.9
$
582.3
17
18
Software as a Service
89.6
79.9
12
12
Total
$
769.5
$
662.2
16
17
Nine Months Ended
March 31, 2020 (A)
March 31, 2019 (A)
% Change
Constant Currency (B)
U.S., Canada and Latin America
Devices
$
586.9
$
540.2
9
%
Masks and other
584.9
494.8
18
Total Sleep and Respiratory Care
$
1,171.8
$
1,035.0
13
Software as a Service
263.2
190.6
38
Total
$
1,435.0
$
1,225.6
17
Combined Europe, Asia and other
markets
Devices
$
509.3
$
463.1
10
%
13
%
Masks and other
242.4
213.0
14
17
Total Sleep and Respiratory Care
$
751.7
$
676.0
11
15
Global revenue
Devices
$
1,096.2
$
1,003.2
9
%
11
%
Masks and other
827.3
707.8
17
18
Total Sleep and Respiratory Care
$
1,923.5
$
1,711.0
12
14
Software as a Service
263.2
190.6
38
38
Total
$
2,186.7
$
1,901.6
15
16
(A)
Totals and subtotals may not add due to rounding.
(B)
In order to provide a framework for assessing how our underlying
businesses performed excluding the effect of foreign currency
fluctuations, we provide certain financial information on a
“constant currency basis,” which is in addition to the actual
financial information presented. In order to calculate our constant
currency information, we translate the current period financial
information using the foreign currency exchange rates that were in
effect during the previous comparable period. However, constant
currency measures should not be considered in isolation or as an
alternative to U.S. dollar measures that reflect current period
exchange rates, or to other financial measures calculated and
presented in accordance with U.S. GAAP.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200430005937/en/
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