ResMed Inc. Announces Results for the First Quarter of Fiscal Year 2024

  • Year-over-year revenue grows 16%, operating profit up 5%, non-GAAP operating profit up 10%
  • Expects to resume its share repurchase program during upcoming quarter

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, Oct. 26, 2023 (GLOBE NEWSWIRE) -- ResMed Inc. (NYSE: RMD, ASX: RMD) today announced results for its quarter ended September 30, 2023.

First Quarter 2024 Highlights
All comparisons are to the prior year period

  • Revenue increased by 16% to $1.1 billion; up 15% on a constant currency basis 
  • Gross margin contracted 250 bps to 54.4%; non-GAAP gross margin contracted 160 bps to 56.0%
  • Income from operations increased 5%; non-GAAP operating profit up 10%
  • Operating cash flow of $286.3 million
  • Diluted earnings per share of $1.49; non-GAAP diluted earnings per share of $1.64

“ResMed has started Fiscal Year 2024 with strong revenue growth driven by ongoing patient flow and solid demand across our global sleep and respiratory care markets, alongside increasing adoption of our outside hospital software solutions,” said Mick Farrell, ResMed’s CEO. “Our ability to meet global demand with technologies, including our best-in-class AirSense 11 platform, has positioned us well to continue growing across global markets, with particularly strong growth this quarter in Europe, Asia, and beyond. We’ve begun rolling out AI-driven software products into our digital health ecosystem, which I believe will create a new class of offerings that will allow us to continue to drive long-term, profitable growth. New patient starts on our physician and provider-facing platform, called AirView, and our patient-facing app, called myAir, show very strong patient flow. With these increasing rates of patients activated into the healthcare funnel, I am more confident than ever in our growth strategy and our ability to achieve our goal of improving 250 million lives in 2025.”

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

  Three Months Ended
  September 30,
2023
  September 30,
2022
  % Change   Constant
Currency (A)
Revenue $ 1,102.3     $ 950.3     16 %   15 %
Gross margin   54.4 %     56.9 %   (4 )    
Non-GAAP gross margin (B)   56.0 %     57.6 %   (3 )    
Selling, general, and administrative expenses   222.9       193.9     15     14  
Research and development expenses   75.7       63.2     20     21  
Income from operations   289.0       275.7     5      
Non-GAAP income from operations (B)   318.8       290.8     10      
Net income   219.4       210.5     4      
Non-GAAP net income (B)   241.2       222.1     9      
Diluted earnings per share $ 1.49     $ 1.43     4      
Non-GAAP diluted earnings per share (B) $ 1.64     $ 1.51     9      


(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 First Quarter Results
All comparisons are to the prior year period unless otherwise noted

  • Revenue grew by 15 percent on a constant currency basis, driven by increased demand for our sleep and respiratory care devices.
    • Revenue in the U.S., Canada, and Latin America, excluding Software-as-a-Service, grew by 10 percent.
    • Revenue in Europe, Asia, and other markets, excluding Software-as-a-Service, grew by 18 percent on a constant currency basis.
    • Software-as-a-Service revenue increased by 32 percent, reflecting incremental revenue from our acquisition of MEDIFOX DAN and continued organic growth in our SaaS portfolio.
  • Gross margin decreased by 250 basis points and non-GAAP gross margin decreased by 160 basis points, mainly due to costs associated with a field safety notification on Astral devices and higher component and manufacturing costs, partially offset by a favorable product mix and favorable foreign currency movements.
  • Selling, general, and administrative expenses increased by 14 percent on a constant currency basis. SG&A expenses improved to 20.2 percent of revenue in the quarter, compared with 20.4 percent in the same period of the prior year. The increase in SG&A expenses were mainly due to increases in employee-related expenses and incremental expense associated with our acquisition of MEDIFOX DAN.
  • Income from operations increased by 5 percent and non-GAAP income from operations increased by 10 percent.
  • Net income for the quarter was $219.4 million and diluted earnings per share was $1.49. Non-GAAP net income increased by 9% to $241.2 million, and non-GAAP diluted earnings per share increased by 9% to $1.64, predominantly attributable to strong sales, partially offset by gross margin contraction.
  • Operating cash flow for the quarter was $286.3 million, compared to net income in the current quarter of $219.4 million and non-GAAP net income of $241.2 million. During the quarter we paid $70.6 million in dividends.

Other Business and Operational Highlights

  • Presented at the European Respiratory Society (ERS) Congress on topics including improving NIV management, phenotyping, and personalizing OSA therapy, innovative clinical practice in home high-flow therapy, indication of use of ASV therapy, and implementing patient feedback in CPAP therapy management.
  • Announced and closed the acquisition of privately held Somnoware, a leader in digital sleep and respiratory care diagnostics software for sleep labs and physicians. Somnoware is upstream of and complementary to ResMed’s current post-testing AirView and Brightree offerings and will remain an open platform.

Dividend program
The ResMed board of directors today declared a quarterly cash dividend of $0.48 per share. The dividend will have a record date of November 9, 2023, payable on December 14, 2023. 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 November 8, 2023, 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 November 8, 2023, through November 9, 2023, inclusive. 

Webcast details
ResMed will discuss its first-quarter fiscal year 2024 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 “Q1 2024 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 three hours after the webcast by dialing +1 877-660-6853 (U.S.) or +1 201-612-7415 (outside U.S.) and entering the passcode 13741866. The telephone replay will be available until November 9, 2023.

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, our supply chain, domestic and international regulatory developments, litigation, tax outlook, and macroeconomic conditions of our business – 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
  September 30,
2023
  September 30,
2022
       
Net revenue $ 1,102,321     $ 950,294  
       
Cost of sales   485,442       403,110  
Amortization of acquired intangibles (1)   8,908       6,374  
Astral field safety notification expenses (1)   7,911        
Total cost of sales $ 502,261     $ 409,484  
Gross profit $ 600,060     $ 540,810  
       
Selling, general, and administrative   222,874       193,933  
Research and development   75,710       63,188  
Amortization of acquired intangibles (1)   12,479       7,950  
Total operating expenses $ 311,063     $ 265,071  
Income from operations $ 288,997     $ 275,739  
       
Other income (expenses), net:      
Interest income (expense), net $ (14,957 )   $ (7,134 )
Loss attributable to equity method investments   (3,895 )     (2,028 )
Gain (loss) on equity investments (1)   (602 )     (3,280 )
Other, net   2,648       (1,504 )
Total other income (expenses), net   (16,806 )     (13,946 )
Income before income taxes $ 272,191     $ 261,793  
Income taxes   52,769       51,315  
Net income $ 219,422     $ 210,478  
       
Basic earnings per share $ 1.49     $ 1.44  
Diluted earnings per share $ 1.49     $ 1.43  
Non-GAAP diluted earnings per share (1) $ 1.64     $ 1.51  
       
Basic shares outstanding   147,075       146,431  
Diluted shares outstanding   147,486       147,134  


(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)

  September 30,
2023
  June 30,
2023
Assets      
Current assets:      
Cash and cash equivalents $ 209,100     $ 227,891  
Accounts receivable, net   692,388       704,909  
Inventories   958,233       998,012  
Prepayments and other current assets   444,864       437,018  
Total current assets $ 2,304,585     $ 2,367,830  
Non-current assets:      
Property, plant, and equipment, net $ 533,985     $ 537,856  
Operating lease right-of-use assets   123,416       127,955  
Goodwill and other intangibles, net   3,375,420       3,322,640  
Deferred income taxes and other non-current assets   403,380       395,427  
Total non-current assets $ 4,436,201     $ 4,383,878  
Total assets $ 6,740,786     $ 6,751,708  
Liabilities and Stockholders’ Equity      
Current liabilities:      
Accounts payable $ 177,048     $ 150,756  
Accrued expenses   348,263       365,660  
Operating lease liabilities, current   21,795       21,919  
Deferred revenue   146,718       138,072  
Income taxes payable   67,073       72,224  
Short-term debt   9,905       9,902  
Total current liabilities $ 770,802     $ 758,533  
Non-current liabilities:      
Deferred revenue $ 121,492     $ 119,186  
Deferred income taxes   87,672       90,650  
Operating lease liabilities, non-current   112,448       116,853  
Other long-term liabilities   34,328       68,166  
Long-term debt   1,351,511       1,431,234  
Long-term income taxes payable   12,157       37,183  
Total non-current liabilities $ 1,719,608     $ 1,863,272  
Total liabilities $ 2,490,410     $ 2,621,805  
Stockholders’ equity      
Common stock $ 588     $ 588  
Additional paid-in capital   1,791,351       1,772,083  
Retained earnings   4,401,841       4,253,016  
Treasury stock   (1,623,256 )     (1,623,256 )
Accumulated other comprehensive income   (320,148 )     (272,528 )
Total stockholders’ equity $ 4,250,376     $ 4,129,903  
Total liabilities and stockholders’ equity $ 6,740,786     $ 6,751,708  


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

  Three Months Ended
  September 30,
2023
  September 30,
2022
Cash flows from operating activities:      
Net income $ 219,422     $ 210,478  
Adjustment to reconcile net income to cash provided by operating activities:      
Depreciation and amortization   44,934       36,273  
Amortization of right-of-use assets   8,508       7,761  
Stock-based compensation costs   18,510       16,919  
Loss attributable to equity method investments, net of dividends received   3,895       2,028  
(Gain) loss on equity investment   602       3,280  
Changes in operating assets and liabilities:      
Accounts receivable, net   6,534       (56,238 )
Inventories, net   26,911       (147,096 )
Prepaid expenses, net deferred income taxes and other current assets   (42,015 )     (36,784 )
Accounts payable, accrued expenses, income taxes payable and other   (1,018 )     8,041  
Net cash provided by operating activities $ 286,283     $ 44,662  
Cash flows from investing activities:      
Purchases of property, plant, and equipment   (30,035 )     (29,056 )
Patent registration and acquisition costs   (10,831 )     (3,317 )
Business acquisitions, net of cash acquired   (103,183 )     (19,100 )
Purchases of investments   (3,680 )     (4,291 )
Proceeds from exits of investments   250        
(Payments) / proceeds on maturity of foreign currency contracts   (1,501 )     (3,042 )
Net cash used in investing activities $ (148,980 )   $ (58,806 )
Cash flows from financing activities:      
Proceeds from issuance of common stock, net   983       2,610  
Taxes paid related to net share settlement of equity awards   (225 )     (59 )
Payments of business combination contingent consideration   (1,293 )      
Proceeds from borrowings, net of borrowing costs   105,000       50,000  
Repayment of borrowings   (185,000 )     (30,000 )
Dividends paid   (70,597 )     (64,431 )
Net cash (used in) / provided by financing activities $ (151,132 )   $ (41,880 )
Effect of exchange rate changes on cash $ (4,962 )   $ (10,523 )
Net increase / (decrease) in cash and cash equivalents   (18,791 )     (66,547 )
Cash and cash equivalents at beginning of period   227,891       273,710  
Cash and cash equivalents at end of period $ 209,100     $ 207,163  


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 and restructuring expense related to cost of sales and are reconciled below:

  Three Months Ended
  September 30, 2023   September 30, 2022
       
Revenue $ 1,102,321     $ 950,294  
       
GAAP cost of sales $ 502,261     $ 409,484  
Less: Amortization of acquired intangibles (A)   (8,908 )     (6,374 )
Less: Astral field safety notification expenses (A)   (7,911 )      
Non-GAAP cost of sales $ 485,442     $ 403,110  
       
GAAP gross profit $ 600,060     $ 540,810  
GAAP gross margin   54.4 %     56.9 %
Non-GAAP gross profit $ 616,879     $ 547,184  
Non-GAAP gross margin   56.0 %     57.6 %


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

  Three Months Ended
  September 30, 2023   September 30, 2022
       
GAAP income from operations $ 288,997     $ 275,739  
Amortization of acquired intangibles—cost of sales (A)   8,908       6,374  
Amortization of acquired intangibles—operating expenses (A)   12,479       7,950  
Acquisition-related expenses (A)   483       745  
Astral field safety notification expenses (A)   7,911        
Non-GAAP income from operations $ 318,778     $ 290,808  


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
  September 30, 2023   September 30, 2022
       
GAAP net income $ 219,422     $ 210,478  
Amortization of acquired intangibles—cost of sales (A)   8,908       6,374  
Amortization of acquired intangibles—operating expenses (A)   12,479       7,950  
Acquisition-related expenses (A)   483       745  
Astral field safety notification expenses (A)   7,911        
Income tax effect on non-GAAP adjustments (A)   (8,019 )     (3,458 )
Non-GAAP net income (A) $ 241,184     $ 222,089  
       
GAAP diluted shares outstanding   147,486       147,134  
GAAP diluted earnings per share $ 1.49     $ 1.43  
Non-GAAP diluted earnings per share (A) $ 1.64     $ 1.51  


(A) ResMed adjusts for the impact of the amortization of acquired intangibles, acquisition-related expenses, Astral field safety notification expenses, and associated tax effects 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
  September 30,
2023
(A) September 30,
2022
(A) % Change   Constant
Currency (B)
U.S., Canada, and Latin America              
Devices $ 345.9   $ 339.5   2 %    
Masks and other   292.5     238.6   23      
Total U.S., Canada and Latin America $ 638.4   $ 578.1   10      
               
Combined Europe, Asia, and other markets              
Devices $ 218.8   $ 178.0   23 %   20 %
Masks and other   105.8     88.3   20     15  
Total Combined Europe, Asia and other markets $ 324.7   $ 266.3   22     18  
               
Global revenue              
Total Devices $ 564.7   $ 517.6   9 %   8 %
Total Masks and other   398.3     326.9   22     21  
Total Sleep and Respiratory Care $ 963.0   $ 844.4   14     13  
               
Software-as-a-Service   139.3     105.9   32      
Total $ 1,102.3   $ 950.3   16     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.
   


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