U.S. Markets closed

ResMed Inc. Announces Results for the Third Quarter of Fiscal Year 2020

  • 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

...