Financial News

ResMed Inc. Announces Results for the Third Quarter of Fiscal Year 2021

- Year-over-year operating profit up 3%, non-GAAP operating profit up 2%

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 29, 2021 (GLOBE NEWSWIRE) -- ResMed Inc. (NYSE: RMD, ASX: RMD), a world-leading digital health company, today announced results for its quarter ended March 31, 2021.

Third Quarter 2021 Highlights
All comparisons are to the prior year period

  • Revenue was comparable at $768.8 million; down 3% on a constant currency basis
  • GAAP gross margin of 58.2%; non-GAAP gross margin contracted 40 bps to 59.6%
  • Net operating profit increased 3%; non-GAAP operating profit up 2%
  • GAAP diluted earnings (loss) per share of $(0.54); non-GAAP diluted earnings per share of $1.30

“Our March 2021 quarter results reflect the ongoing recovery of core patient flow across our business, while we anniversary the $35 million of incremental COVID-19 revenue in the same quarter last year. Excluding the COVID-19 revenue from the March 2020 quarter, we achieved positive revenue growth on both a headline and constant currency basis,” said Mick Farrell, ResMed CEO. “Our global team is supporting patients and all of our customers as the most recent waves of COVID-19 cases impact parts of Europe, Asia, and South America. I am extremely proud of our ResMed team as they innovate with new digital pathways for patients to be diagnosed and treated for their sleep apnea, COPD, asthma, and out-of-hospital needs.

"During the quarter we also made substantial progress toward resolving our long-running dispute with the Australian Tax Office. Although we do not have a final agreement, we have taken a reserve of $255 million, reflecting our estimate of the net impact of a potential settlement. Our next steps are to agree on the final terms of a resolution giving us clarity for the future.

"Going forward, we see accelerated awareness of the importance of respiratory health, growing adoption of digital health, and an increased focus on the importance of healthcare delivered at home. We are confident in accelerated growth in patient flow, and ongoing progress toward our goal of improving 250 million lives in out-of-hospital healthcare in 2025.”

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

               
 Three Months Ended 
               
 March 31,
2021
 March 31,
2020
 % Change Constant Currency (A) 
Revenue$768.8   $769.5  (0)% (3)% 
Gross margin (B) 58.2 %  58.4% (0)     
Non-GAAP gross margin (B) 59.6 %  60.0% (1)     
Selling, general, and administrative expenses 160.4    172.4  (7)  (11)  
Research and development expenses 55.9    51.4  9   3   
Income from operations 223.4    217.5  3      
Non-GAAP income from operations (B) 241.8    237.9  2      
Net income (loss) (78.5)   163.1  (148)     
Non-GAAP net income (B) 190.4    187.9  1      
Diluted earnings (loss) per share$(0.54)  $1.12  (148)     
Non-GAAP diluted earnings per share (B)$1.30   $1.29  1      
               
               
 Nine Months Ended 
               
 March 31,
2021
 March 31,
2020
 % Change Constant Currency (A) 
Revenue$2,320.7   $2,186.7  6 % 4 % 
Gross margin (B) 58.1 %  58.0% 0      
Non-GAAP gross margin (B) 59.8 %  59.8% -      
Selling, general, and administrative expenses 488.9    511.3  (4)  (7)  
Research and development expenses 165.4    149.4  11   7   
Income from operations 662.0    586.4  13      
Non-GAAP income from operations (B) 733.4    647.4  13      
Net income 279.4    443.8  (37)     
Non-GAAP net income (B) 582.2    499.5  17      
Diluted earnings per share$1.91   $3.05  (37)     
Non-GAAP diluted earnings per share (B)$3.98   $3.43  16      

(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

  • During the March quarter, we derived no incremental revenue from COVID-19 related demand whereas our prior year quarter included incremental revenue in the order of $35 million. Excluding the impact of the incremental COVID-19 related revenue from the prior year quarter, revenue increased by 1 percent on a constant currency basis.
  • Revenue in the U.S., Canada, and Latin America, excluding Software as a Service, grew by 2 percent, driven by strong sales across our mask product portfolio, partially offset by lower device sales, including decreased demand for our ventilators due to COVID-19.
  • Revenue in Europe, Asia, and other markets declined by 13 percent on a constant currency basis, primarily driven by lower device sales, including decreased demand for our ventilators due to COVID-19, and flat sales in our mask product portfolio.
  • Software as a Service revenue increased by 5 percent, due to continued growth in resupply service offerings and stabilizing patient flow in out-of-hospital care settings.
  • Gross margin decreased by 20 basis points and non-GAAP gross margin decreased by 40 basis points, mainly due to additional manufacturing costs associated with the transition to our new Singapore site during the quarter, higher freight costs and geographic mix changes.
  • Selling, general, and administrative expenses decreased by 11 percent on a constant currency basis. SG&A expenses improved to 20.9 percent of revenue in the quarter, compared with 22.4 percent in the same period of the prior year. These changes in SG&A expenses were mainly due to savings in travel and other cost management as a result of the COVID-19 pandemic.
  • Income from operations increased by 3 percent and non-GAAP income from operations increased by 2 percent.
  • Our income tax expense was impacted by the recognition of a $254.8 million reserve in relation to our ongoing dispute with the Australian Tax Office covering tax years 2009-2018.
  • Net loss for the quarter was $78.5 million and diluted loss per share was $0.54, predominantly due to the additional income tax reserve of $254.8 million. Non-GAAP net income grew by 1 percent to $190.4 million and non-GAAP diluted earnings per share grew by 1 percent to $1.30.
  • Cash flow from operations for the quarter was $196.3 million, compared to net loss in the current quarter of $78.5 million and non-GAAP net income of $190.4 million. During the quarter we paid $56.8 million in dividends.

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 13, 2021, payable on June 17, 2021. 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 12, 2021, 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 12, 2021, through May 13, 2021, inclusive.      

Webcast details
ResMed will discuss its third quarter fiscal year 2021 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 2021 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 +1 800-585-8367 (U.S.) or +1 416-621-4642 (outside U.S.) and entering the passcode 7757454. The telephone replay will be available until May 13, 2021.

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.


RESMED INC. AND SUBSIDIARIES

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

             
 Three Months Ended Nine Months Ended 
             
 March 31,
2021
 March 31,
2020
 March 31,
2021
 March 31,
2020
 
             
Net revenue$768,767  $769,455  $2,320,722  $2,186,669  
             
Cost of sales 310,585   307,657   933,021   880,633  
Amortization of acquired intangibles (1) 10,924   12,136   34,066   37,623  
Restructuring - cost of sales (1) -   -   5,232   -  
Total cost of sales$321,509  $319,793  $972,319  $918,256  
Gross profit$447,258  $449,662  $1,348,403  $1,268,413  
             
Selling, general, and administrative 160,446   172,441   488,904   511,304  
Research and development 55,941   51,449   165,409   149,425  
Amortization of acquired intangibles (1) 7,445   8,272   23,377   21,872  
Restructuring - operating expenses (1) -   -   8,673   -  
Litigation settlement expenses (1) -   -   -   (600) 
Total operating expenses$223,832  $232,162  $686,363  $682,001  
Income from operations 223,426   217,500   662,040   586,412  
             
Other income (expenses), net:            
Interest income (expense), net$(5,823) $(9,852) $(18,341) $(30,414) 
Loss attributable to equity method investments (4,969)  (5,295)  (9,895)  (19,082) 
Other, net 5,371   (10,698)  10,647   (15,922) 
Total other income (expenses), net (5,421)  (25,845)  (17,589)  (65,418) 
Income before income taxes$218,005  $191,655  $644,451  $520,994  
Income taxes 296,486   28,518   365,046   77,155  
Net income (loss)$(78,481) $163,137  $279,405  $443,839  
             
Basic earnings (loss) per share$(0.54) $1.13  $1.92  $3.08  
Diluted earnings (loss) per share$(0.54) $1.12  $1.91  $3.05  
Non-GAAP diluted earnings (loss) per share (1)$1.30  $1.29  $3.98  $3.43  
             
Basic shares outstanding 145,513   144,638   145,217   144,112  
Diluted shares outstanding 145,513   145,680   146,394   145,490  

(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,
2021
 June 30,
2020
 
ASSETS      
Current assets:      
Cash and cash equivalents$230,635  $463,156  
Accounts receivable, net 525,014   474,643  
Inventories 484,061   416,915  
Prepayments and other current assets 226,440   168,745  
Total current assets$1,466,150  $1,523,459  
Non-current assets:      
Property, plant and equipment, net$455,106  $417,335  
Operating lease right-of-use assets 128,755   118,348  
Goodwill and other intangibles, net 2,335,550   2,338,492  
Deferred income taxes and other non-current assets 200,163   189,742  
Total non-current assets$3,119,574  $3,063,917  
Total assets$4,585,724  $4,587,376  
LIABILITIES AND STOCKHOLDERS’ EQUITY:      
Current liabilities:      
Accounts payable$117,222  $135,786  
Accrued expenses 304,693   270,353  
Operating lease liabilities, current 22,499   21,263  
Deferred revenue 105,342   98,617  
Income taxes payable 314,795   64,755  
Short-term debt 11,990   11,987  
Total current liabilities$876,541  $602,761  
Non-current liabilities:      
Deferred revenue$86,898  $87,307  
Deferred income taxes 12,474   13,011  
Operating lease liabilities, non-current 115,266   101,880  
Other long-term liabilities 6,067   8,347  
Long-term debt 719,046   1,164,133  
Long-term income taxes payable 60,198   112,910  
Total non-current liabilities$999,949  $1,487,588  
Total liabilities$1,876,490  $2,090,349  
STOCKHOLDERS’ EQUITY:      
Common stock$582  $580  
Additional paid-in capital 1,586,545   1,570,694  
Retained earnings 2,941,336   2,832,991  
Treasury stock (1,623,256)  (1,623,256) 
Accumulated other comprehensive income (195,973)  (283,982) 
Total stockholders’ equity$2,709,234  $2,497,027  
Total liabilities and stockholders' equity$4,585,724  $4,587,376  


RESMED INC. AND SUBSIDIARIES

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

       
 Nine Months Ended 
       
 March 31,
2021
 March 31,
2020
 
Cash flows from operating activities:      
Net income$279,405  $443,839  
Adjustment to reconcile net income to cash provided by operating activities:      
Depreciation and amortization 120,034   116,341  
Amortization of right-of-use assets 25,805   19,524  
Stock-based compensation costs 47,032   41,421  
Loss attributable to equity method investments 9,895   19,082  
(Gain) loss on equity investment (9,442)  14,519  
Restructuring expenses 8,673   -  
Changes in fair value of business combination contingent consideration -   (7) 
Changes in operating assets and liabilities:      
Accounts receivable, net (39,899)  (34,140) 
Inventories, net (48,393)  (22,564) 
Prepaid expenses, net deferred income taxes and other current assets (41,036)  (68,724) 
Accounts payable, accrued expenses and other 158,119   (57,301) 
Net cash provided by operating activities$510,193  $471,990  
Cash flows from investing activities:      
Purchases of property, plant and equipment (74,805)  (77,360) 
Patent registration costs (11,149)  (7,391) 
Business acquisitions, net of cash acquired (30,704)  (27,910) 
Purchases of investments (20,038)  (31,616) 
Proceeds / (Payments) on maturity of foreign currency contracts 26,306   (32,177) 
Net cash used in investing activities$(110,390) $(176,454) 
Cash flows from financing activities:      
Proceeds from issuance of common stock, net 18,759   26,112  
Taxes paid related to net share settlement of equity awards (49,938)  (45,106) 
Payment of business combination contingent consideration (3,500)  (302) 
Proceeds from borrowings, net of borrowing costs 90,000   990,000  
Repayment of borrowings (536,000)  (883,012) 
Dividends paid (169,917)  (168,610) 
Net cash used in financing activities$(650,596) $(80,918) 
Effect of exchange rate changes on cash$18,272  $(8,885) 
Net increase / (decrease) in cash and cash equivalents (232,521)  205,733  
Cash and cash equivalents at beginning of period 463,156   147,128  
Cash and cash equivalents at end of period$230,635  $352,861  



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,
2021
 March 31,
2020
 March 31,
2021
 March 31,
2020
                
Revenue$768,767   $769,455   $2,320,722   $2,186,669  
Add back: Deferred revenue fair value adjustment (A) -    -    -    2,102  
Non-GAAP revenue$768,767   $769,455   $2,320,722   $2,188,771  
                
GAAP cost of sales$321,509   $319,793   $972,319   $918,256  
Less: Amortization of acquired intangibles (A) (10,924)   (12,136)   (34,066)   (37,623) 
Less: Restructuring - cost of sales (A) -    -    (5,232)   -  
Non-GAAP cost of sales$310,585   $307,657   $933,021   $880,633  
                
GAAP gross profit$447,258   $449,662   $1,348,403   $1,268,413  
GAAP gross margin 58.2 %  58.4 %  58.1 %  58.0 %
Non-GAAP gross profit$458,182   $461,798   $1,387,701   $1,308,138  
Non-GAAP gross margin 59.6 %  60.0 %  59.8 %  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,
2021
 March 31,
2020
 March 31,
2021
 March 31,
2020
               
GAAP income from operations$223,426  $217,500  $662,040  $586,412 
Amortization of acquired intangibles - cost of sales (A) 10,924   12,136   34,066   37,623 
Amortization of acquired intangibles - operating expenses (A) 7,445   8,272   23,377   21,872 
Restructuring - cost of sales (A) -   -   5,232   - 
Restructuring - operating expenses (A) -   -   8,673   - 
Deferred revenue fair value adjustment (A) -   -   -   2,102 
Litigation settlement expenses (A) -   -   -   (600)
Non-GAAP income from operations$241,795  $237,908  $733,388  $647,409 


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,
2021
 March 31,
2020
 March 31,
2021
 March 31,
2020
                
GAAP net income (loss)$(78,481)  $163,137  $279,405   $443,839  
Amortization of acquired intangibles - cost of sales, net of tax (A) 8,395    9,287   26,136    28,765  
Amortization of acquired intangibles - operating expenses, net of tax (A) 5,721    6,330   17,936    16,723  
Reserve for disputed tax position (A) 254,776    -   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)   -  
Fair value impairment of investment (A) -    9,100   -    9,100  
Deferred revenue fair value adjustment, net of tax (A) -    -   -    1,610  
Litigation settlement expenses, net of tax (A) -    -   -    (528) 
Non-GAAP net income (A)$190,411   $187,854  $582,170   $499,509  
GAAP diluted shares outstanding 145,513    145,680   146,394    145,490  
Anti-dilutive shares excluded from GAAP 858    -   -    -  
Non-GAAP diluted shares outstanding 146,371    145,680   146,394    145,490  
GAAP diluted earnings (loss) per share$(0.54)  $1.12  $1.91   $3.05  
Non-GAAP diluted earnings per share (A)$1.30   $1.29  $3.98   $3.43  

(A)    ResMed adjusts for the impact of the amortization of acquired intangibles, reserve for disputed tax positions, restructuring expenses, deferred revenue fair value adjustment, litigation settlement expenses, the (gain) loss on equity investments and the fair value impairment of investment 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 millions, except for per share amounts)

             
 Three Months Ended 
             
 March 31, 2021 (A) March 31, 2020 (A) % Change Constant Currency (B) 
U.S., Canada and Latin America            
Devices$192.9 $196.5 (2)%    
Masks and other 210.0  197.1 7      
Total Sleep and Respiratory Care$402.9 $393.5 2      
Software as a Service 93.8  89.6 5      
Total$496.7 $483.1 3      
             
Combined Europe, Asia and other markets             
Devices$172.8 $195.0 (11)% (18)% 
Masks and other 99.2  91.3 9   0   
Total Sleep and Respiratory Care$272.1 $286.3 (5)  (13)  
             
Global revenue            
Devices$365.7 $391.5 (7)% (10)% 
Masks and other 309.2  288.4 7   4   
Total Sleep and Respiratory Care$674.9 $679.9 (1)  (4)  
Software as a Service 93.8  89.6 5   5   
Total$768.8 $769.5 (0)  (3)  
             
             
 Nine Months Ended 
             
 March 31, 2021 (A) March 31, 2020 (A) % Change  Constant Currency (B) 
U.S., Canada and Latin America            
Devices$595.3 $586.9 1 %    
Masks and other 637.5  584.9 9      
Total Sleep and Respiratory Care$1,232.8 $1,171.8 5      
Software as a Service 277.8  263.2 6      
Total$1,510.6 $1,435.0 5      
             
Combined Europe, Asia and other markets             
Devices$536.9 $509.3 5 % (1)% 
Masks and other 273.3  242.4 13   6   
Total Sleep and Respiratory Care$810.1 $751.7 8   2   
             
Global revenue            
Devices$1,132.1 $1,096.2 3 % 0 % 
Masks and other 910.8  827.3 10   8   
Total Sleep and Respiratory Care$2,042.9 $1,923.5 6   4   
Software as a Service 277.8  263.2 6   6   
Total$2,320.7 $2,186.7 6   4   
             

(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.

For investorsFor media
Amy WakehamJayme Rubenstein
+1 858-836-5000+1 858-836-6798
investorrelations@resmed.comnews@resmed.com

 


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