MIL-OSI Australia: ResMed Inc. Announces Results for the Third Quarter of Fiscal Year 2022

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Source: Resmed Inc

  • Year-over-year revenue grows 12%, operating profit up 5%, non-GAAP operating profit up 5%

Note: A webcast of ResMed’s conference call will be available at 4:30 p.m. ET today at  http://investor.resmed.com

SAN DIEGO, April 28, 2022 (GLOBE NEWSWIRE) — ResMed Inc. (NYSE: RMD, ASX: RMD) today announced results for its quarter ended March 31, 2022.

Third Quarter 2022 Highlights
All comparisons are to the prior year period

  • Revenue increased by 12% to $864.5 million; up 14% on a constant currency basis 
  • Gross margin contracted 140 bps to 56.8%; non-GAAP gross margin contracted 150 bps to 58.1%
  • Income from operations increased 5%; non-GAAP operating profit up 5%
  • Diluted earnings per share of $1.22; non-GAAP diluted earnings per share of $1.32

“Our third-quarter results reflect strong performance across our business, resulting in double-digit top-line revenue growth including extraordinary demand in our sleep and respiratory care business segment as well as solid high-single-digit growth in our software-as-a-service segment,” said Mick Farrell, ResMed CEO. “I am proud of our global team’s ability to pivot and drive continued growth while ongoing supply chain disruptions and a competitor’s recall continue to limit our ability to meet the incredible demand for our products. We remain focused on delivering products, software, and services for patients, working closely with our supply chain partners as well as physicians, providers, and beyond, to prioritize care for patients who most need it.

“While the current industry and macroeconomic environment remain uncertain, our long-term strategy allows us to keep our focus on helping 250 million lives in 2025. Our end-market demand from patients and providers remains strong, and our digital health technologies continue to deliver value. We are supporting patients with the world-leading portfolio of sleep apnea therapy, respiratory care therapy, and digital health solutions they need, as we deliver value for all of our customers.”

Financial Results and Operating Metrics
Unaudited; $ in millions, except for per share amounts

  Three Months Ended
  March 31,
2022
  March 31,
2021
  % Change   Constant
Currency (A)
Revenue $ 864.5     $ 768.8     12 %   14 %
Gross margin (B)   56.8 %     58.2 %   (2 )    
Non-GAAP gross margin (B)   58.1 %     59.6 %   (3 )    
Selling, general, and administrative expenses   182.4       160.4     14     17  
Research and development expenses   66.8       55.9     19     22  
Income from operations   234.3       223.4     5      
Non-GAAP income from operations (B)   253.0       241.8     5      
Net income (loss)   179.0       (78.5 )   NM    
Non-GAAP net income (B)   193.3       190.4     2      
Diluted earnings (loss) per share $ 1.22     $ (0.54 )   NM    
Non-GAAP diluted earnings per share (B) $ 1.32     $ 1.30     2      

NM        Not meaningful

  Nine Months Ended
  March 31,
2022
  March 31,
2021
  % Change   Constant
Currency (A)
Revenue $ 2,663.4     $ 2,320.7     15 %   15 %
Gross margin (B)   56.4 %     58.1 %   (3 )    
Non-GAAP gross margin (B)   57.6 %     59.8 %   (4 )    
Selling, general, and administrative expenses   544.5       488.9     11     13  
Research and development expenses   189.3       165.4     14     15  
Income from operations   744.9       662.0     13      
Non-GAAP income from operations (B)   801.3       733.4     9      
Net income   584.4       279.4     109      
Non-GAAP net income (B)   631.5       582.2     8      
Diluted earnings per share $ 3.97     $ 1.91     108      
Non-GAAP diluted earnings per share (B) $ 4.30     $ 3.98     8      

(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 grew by 14 percent on a constant currency basis, driven by increased demand for our sleep and respiratory care devices and increased demand following a recent product recall by one of our competitors.
    • Revenue in the U.S., Canada, and Latin America, excluding software-as-a-service, grew by 18 percent, primarily due to the factors discussed above and recovery of core sleep patient flow that was previously impacted by COVID-19.
    • Revenue in Europe, Asia, and other markets grew by 11 percent on a constant currency basis, primarily due to the factors discussed above.
    • Software-as-a-service revenue increased by 8 percent, due to continued growth in our Durable Medical Equipment category and stabilizing patient flow in out-of-hospital care settings.
  • Gross margin decreased by 140 basis points and non-GAAP gross margin decreased by 150 basis points, mainly due to higher freight and manufacturing costs, partially offset by favorable product mix changes and increase in average selling prices.
  • Selling, general, and administrative expenses increased by 17 percent on a constant currency basis. SG&A expenses increased to 21.1 percent of revenue in the quarter, compared with 20.9 percent in the same period of the prior year. These changes in SG&A expenses were mainly due to increases in employee-related expenses.
  • Income from operations increased by 5 percent and non-GAAP income from operations increased by 5 percent.
  • Net income for the quarter was $179.0 million and diluted earnings per share was $1.22. Non-GAAP net income grew by 2 percent and non-GAAP diluted earnings per share grew by 2 percent, predominantly attributable to strong sales, partially offset by higher operating expenses.
  • Operating cash flow for the quarter was $117.4 million, compared to net income in the current quarter of $179.0 million and non-GAAP net income of $193.3 million. During the quarter we paid $61.4 million in dividends.

Other Business and Operational Highlights

  • Announced appointment of Urvashi Tyagi as new Chief Technology Officer and Bobby Ghoshal transitions to be President of ResMed’s software-as-a-service business segment full-time. Tyagi leads ResMed’s digital health technology team, driving innovation and adoption of world-leading cloud-based digital health platforms and investments in emerging technologies.
  • Published 2022 Global Sleep Surveys as part of National Sleep Awareness Week (March 13-19) and World Sleep Day (March 18). The surveys, conducted in the first quarter of the calendar year, asked nearly 25,000 respondents in 12 countries what’s keeping them up at night; the results aim to build awareness of the critical role good sleep plays in physical and mental health.

Dividend program
The ResMed board of directors today declared a quarterly cash dividend of $0.42 per share. The dividend will have a record date of May 12, 2022, payable on June 16, 2022. 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 Interests (“CDIs”) 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 11, 2022, 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 11, 2022, through May 12, 2022, inclusive. 

Webcast details
ResMed will discuss its third-quarter fiscal year 2022 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 2022 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 13727876. The telephone replay will be available until May 12, 2022.

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 digital health technologies and 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.

Condensed Consolidated Statements of Operations
(Unaudited; $ in thousands, except for per share amounts)

  Three Months Ended   Nine Months Ended
  March 31,
2022
  March 31,
2021
  March 31,
2022
  March 31,
2021
Net revenue $ 864,500     $ 768,767     $ 2,663,390     $ 2,320,722  
Cost of sales   362,321       310,585       1,128,314       933,021  
Amortization of acquired intangibles (1)   10,982       10,924       33,271       34,066  
Restructuring—cost of sales (1)                     5,232  
Total cost of sales $ 373,303     $ 321,509     $ 1,161,585     $ 972,319  
Gross profit $ 491,197     $ 447,258     $ 1,501,805     $ 1,348,403  
Selling, general, and administrative   182,401       160,446       544,483       488,904  
Research and development   66,801       55,941       189,258       165,409  
Amortization of acquired intangibles (1)   7,730       7,445       23,175       23,377  
Restructuring—operating expenses (1)                     8,673  
Total operating expenses $ 256,932     $ 223,832     $ 756,916     $ 686,363  
Income from operations   234,265       223,426       744,889       662,040  
Other income (expenses), net:              
Interest income (expense), net $ (5,462 )   $ (5,823 )   $ (16,770 )   $ (18,341 )
Loss attributable to equity method investments   (2,627 )     (4,969 )     (5,927 )     (9,895 )
Gain (loss) on equity investments   (1,735 )     4,666       (527 )     9,442  
Other, net   1,878       705       729       1,205  
Total other income (expenses), net   (7,946 )     (5,421 )     (22,495 )     (17,589 )
Income before income taxes $ 226,319     $ 218,005     $ 722,394     $ 644,451  
Income taxes   47,307       296,486       138,018       365,046  
Net income (loss) $ 179,012     $ (78,481 )   $ 584,376     $ 279,405  
Basic earnings per share $ 1.22     $ (0.54 )   $ 4.00     $ 1.92  
Diluted earnings per share $ 1.22     $ (0.54 )   $ 3.97     $ 1.91  
Non-GAAP diluted earnings per share (1) $ 1.32     $ 1.30     $ 4.30     $ 3.98  
Basic shares outstanding   146,240       145,513       145,969       145,217  
Diluted shares outstanding   146,962       145,513       147,034       146,394  

(1)    See the reconciliation of non-GAAP financial measures in the table at the end of the press release.

Condensed Consolidated Balance Sheets
(Unaudited; $ in thousands)

  March 31,
2022
  June 30,
2021
ASSETS      
Current assets:      
Cash and cash equivalents $ 201,769     $ 295,278  
Accounts receivable, net   508,580       614,292  
Inventories   664,943       457,033  
Prepayments and other current assets   329,008       208,154  
Total current assets $ 1,704,300     $ 1,574,757  
Non-current assets:      
Property, plant, and equipment, net $ 513,250     $ 463,490  
Operating lease right-of-use assets   141,173       128,575  
Goodwill and other intangibles, net   2,302,301       2,320,483  
Deferred income taxes and other non-current assets   244,240       240,820  
Total non-current assets $ 3,200,964     $ 3,153,368  
Total assets $ 4,905,264     $ 4,728,125  
LIABILITIES AND STOCKHOLDERS’ EQUITY:      
Current liabilities:      
Accounts payable $ 149,797     $ 138,008  
Accrued expenses   326,276       320,599  
Operating lease liabilities, current   24,130       23,585  
Deferred revenue   112,449       109,611  
Income taxes payable   42,646       307,963  
Short-term debt   11,967       12,000  
Total current liabilities $ 667,265     $ 911,766  
Non-current liabilities:      
Deferred revenue $ 94,094     $ 91,496  
Deferred income taxes   10,711       11,319  
Operating lease liabilities, non-current   127,254       114,779  
Other long-term liabilities   5,103       6,802  
Long-term debt   668,735       643,351  
Long-term income taxes payable   53,298       62,933  
Total non-current liabilities $ 959,195     $ 930,680  
Total liabilities $ 1,626,460     $ 1,842,446  
STOCKHOLDERS’ EQUITY:      
Common stock $ 585     $ 583  
Additional paid-in capital   1,645,453       1,622,199  
Retained earnings   3,480,163       3,079,640  
Treasury stock   (1,623,256 )     (1,623,256 )
Accumulated other comprehensive income   (224,141 )     (193,487 )
Total stockholders’ equity $ 3,278,804     $ 2,885,679  
Total liabilities and stockholders’ equity $ 4,905,264     $ 4,728,125  

Condensed Consolidated Statements of Cash Flows
(Unaudited; $ in thousands)

  Nine months ended
  March 31,
2022
  March 31,
2021
Cash flows from operating activities:      
Net income $ 584,376     $ 279,405  
Adjustment to reconcile net income to cash provided by operating activities:      
Depreciation and amortization   122,198       120,034  
Amortization of right-of-use assets   26,636       25,805  
Stock-based compensation costs   49,265       47,032  
Loss attributable to equity method investments   5,927       9,895  
(Gain) loss on equity investment   527       (9,442 )
Restructuring expenses         8,673  
Changes in operating assets and liabilities:      
Accounts receivable, net   98,158       (39,899 )
Inventories, net   (209,476 )     (48,393 )
Prepaid expenses, net deferred income taxes and other current assets   (127,977 )     (41,036 )
Accounts payable, accrued expenses, income taxes payable and other   (277,973 )     158,119  
Net cash (used in) / provided by operating activities $ 271,661     $ 510,193  
Cash flows from investing activities:      
Purchases of property, plant, and equipment   (106,192 )     (74,805 )
Patent registration and acquisition costs   (17,449 )     (11,149 )
Business acquisitions, net of cash acquired   (35,915 )     (30,704 )
Purchases of investments   (16,614 )     (20,038 )
Proceeds from sale of investment   6,802        
(Payments) / proceeds on maturity of foreign currency contracts   (5,309 )     26,306  
Net cash used in investing activities $ (174,677 )   $ (110,390 )
Cash flows from financing activities:      
Proceeds from issuance of common stock, net   26,269       18,759  
Taxes paid related to net share settlement of equity awards   (52,278 )     (49,938 )
Payments of business combination contingent consideration         (3,500 )
Proceeds from borrowings, net of borrowing costs   160,000       90,000  
Repayment of borrowings   (136,000 )     (536,000 )
Dividends paid   (183,853 )     (169,917 )
Net cash (used in) / provided by financing activities $ (185,862 )   $ (650,596 )
Effect of exchange rate changes on cash $ (4,631 )   $ 18,272  
Net increase / (decrease) in cash and cash equivalents   (93,509 )     (232,521 )
Cash and cash equivalents at beginning of period   295,278       463,156  
Cash and cash equivalents at end of period $ 201,769     $ 230,635  

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” exclude amortization expense from acquired intangibles related to cost of sales and are reconciled below:

  Three Months Ended   Nine Months Ended
  March 31, 2022   March 31, 2021   March 31, 2022   March 31, 2021
Revenue $ 864,500     $ 768,767     $ 2,663,390     $ 2,320,722  
GAAP Cost of sales $ 373,303     $ 321,509     $ 1,161,585     $ 972,319  
Less: Amortization of acquired intangibles (A)   (10,982 )     (10,924 )     (33,271 )     (34,066 )
Less: Restructuring—cost of sales (A)                     (5,232 )
Non-GAAP cost of sales $ 362,321     $ 310,585     $ 1,128,314     $ 933,021  
GAAP gross profit $ 491,197     $ 447,258     $ 1,501,805     $ 1,348,403  
GAAP gross margin   56.8 %     58.2 %     56.4 %     58.1 %
Non-GAAP gross profit $ 502,179     $ 458,182     $ 1,535,076     $ 1,387,701  
Non-GAAP gross margin   58.1 %     59.6 %     57.6 %     59.8 %

The measure “non-GAAP income from operations” is reconciled with GAAP income from operations below:

  Three Months Ended   Nine Months Ended
  March 31,
2022
  March 31,
2021
  March 31,
2022
  March 31,
2021
GAAP income from operations $ 234,265   $ 223,426   $ 744,889   $ 662,040
Amortization of acquired intangibles—cost of sales (A)   10,982     10,924     33,271     34,066
Amortization of acquired intangibles—operating expenses (A)   7,730     7,445     23,175     23,377
Restructuring—cost of sales (A)               5,232
Restructuring—operating expenses (A)               8,673
Non-GAAP income from operations $ 252,977   $ 241,795   $ 801,335   $ 733,388

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,
2022
  March 31,
2021
  March 31,
2022
  March 31,
2021
GAAP net income (loss) $ 179,012   $ (78,481 )   $ 584,376   $ 279,405  
Amortization of acquired intangibles—cost of sales, net of tax(A)   8,374     8,395       25,373     26,136  
Amortization of acquired intangibles—operating expenses, net of tax(A)   5,894     5,721       17,673     17,936  
Reserve for disputed tax position(A)       254,776       4,111     254,776  
Restructuring—cost of sales, net of tax(A)                 4,663  
Restructuring—operating expenses, net of tax(A)                 7,730  
(Gain) loss on equity investments(A)                 (8,476 )
Non-GAAP net income(A) $ 193,280   $ 190,411     $ 631,533   $ 582,170  
GAAP diluted shares outstanding   146,962     145,513       147,034     146,394  
Anti-dilutive shares excluded from GAAP       858            
Non-GAAP diluted shares outstanding   146,962     146,371       147,034     146,394  
GAAP diluted earnings (loss) per share $ 1.22   $ (0.54 )   $ 3.97   $ 1.91  
Non-GAAP diluted earnings per share(A) $ 1.32   $ 1.30     $ 4.30   $ 3.98  
               
               

(A)     ResMed adjusts for the impact of the amortization of acquired intangibles, reserve for disputed tax positions, restructuring expenses and the (gain) loss on equity investments 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.

Revenue by Product and Region
(Unaudited; $ in millions, except for per share amounts)

  Three Months Ended
  March 31,
2022
(A) March 31,
2021
(A) % Change   Constant
Currency (B)
U.S., Canada, and Latin America              
Devices $ 250.8   $ 192.9   30 %    
Masks and other   224.7     210.0   7      
Total Sleep and Respiratory Care $ 475.4   $ 402.9   18      
Software as a Service   101.1     93.8   8      
Total $ 576.6   $ 496.7   16      
Combined Europe, Asia, and other markets              
Devices $ 182.3   $ 172.8   5 %   10 %
Masks and other   105.6     99.2   6     13  
Total Sleep and Respiratory Care $ 287.9   $ 272.1   6     11  
Global revenue              
Devices $ 433.1   $ 365.7   18 %   21 %
Masks and other   330.3     309.2   7     9  
Total Sleep and Respiratory Care $ 763.4   $ 674.9   13     15  
Software as a Service   101.1     93.8   8     8  
Total $ 864.5   $ 768.8   12     14  
               
  Nine Months Ended
  March 31,
2022
(A) March 31,
2021
(A) %
Change
  Constant
Currency (B)
U.S., Canada, and Latin America              
Devices $ 771.5   $ 595.3   30 %    
Masks and other   681.8     637.5   7      
Total Sleep and Respiratory Care $ 1,453.3   $ 1,232.8   18      
Software as a Service   297.7     277.8   7      
Total $ 1,751.0   $ 1,510.6   16      
Combined Europe, Asia, and other markets              
Devices $ 608.3   $ 536.9   13 %   15 %
Masks and other   304.2     273.3   11     14  
Total Sleep and Respiratory Care $ 912.4   $ 810.1   13     15  
Global revenue              
Devices $ 1,379.7   $ 1,132.1   22 %   23 %
Masks and other   986.0     910.8   8     9  
Total Sleep and Respiratory Care $ 2,365.7   $ 2,042.9   16     16  
Software as a Service   297.7     277.8   7     7  
Total $ 2,663.4   $ 2,320.7   15     15  

(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.

Source: ResMed Inc.

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