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

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- 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.

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Amy Wakeham

Jayme Rubenstein

+1 858-836-5000

+1 858-836-6798

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