ResMed Inc. Announces Results for the Third Quarter of Fiscal Year 2017

Revenue increased 13% to $514.2 million; up 14% on a constant currency basis

GAAP diluted earnings per share of $0.62; non-GAAP diluted earnings per share of $0.71

Operating cash flow of $67.6 million in the third quarter

SAN DIEGO, April 27, 2017 /PRNewswire/ -- ResMed Inc. (NYSE: RMD) today announced results for its quarter ended March 31, 2017. Revenue for the quarter was $514.2 million, a 13 percent increase compared to the same period of the prior year. Excluding the contribution from the Brightree business acquired in April 2016, revenue for the quarter was $479.2 million, a 6 percent increase.    

"We had solid double-digit constant currency revenue growth in Q3, led by our Brightree software solutions as well as mask and device sales," said Mick Farrell, ResMed's chief executive officer. "This quarter we saw strong demand for our new AirFit 20 range of masks. We also made significant progress on software innovation with the launch of enhanced integration capabilities with Brightree and our AirSolutions cloud-based software platform.  In our current quarter, we are launching our latest market-leading innovation: the ResMed AirMini – the world's smallest CPAP."

Farrell concluded, "Our focus on changing 20 million lives by 2020 has driven a pipeline of new products and connected care solutions that improve patient outcomes, create efficiencies for our homecare customers, and help physicians and providers better manage chronic disease while lowering healthcare costs."

Analysis of third quarter results
Third quarter revenue in the Americas was $332.1 million, an 18 percent increase over the same period of the prior year. This included Brightree revenue of $35.0 million. Excluding Brightree, revenue in the Americas was $297.1 million, a 5 percent increase over the prior year. Revenue in combined EMEA and APAC was $182.1 million, an increase of 9 percent on a constant currency basis, compared to the same period of the prior year.

Gross margin in the third quarter was 58.3 percent, higher than the prior year's quarter gross margin of 57.3 percent. The improvement in gross margin compared to prior year's quarter was due to manufacturing and procurement efficiencies and an incremental contribution from the Brightree acquisition.

Income from operations for the quarter was $107.4 million, a 3 percent increase compared with the quarter ended March 31, 2016. Non-GAAP income from operations for the quarter was $126.7 million, a 13 percent increase compared to the same period of the prior year. 

Selling, general and administrative expenses were $137.9 million, a 16 percent increase over the same period in the prior year, also a 16 percent increase on a constant currency basis. SG&A expenses increased to 26.8 percent of revenue in the quarter, compared with 26.3 percent reported in the quarter ended March 31, 2016.  

Research and development expenses were $35.1 million, or 6.8 percent of revenue. R&D expenses increased by 25 percent compared with the same period last year, or a 21 percent increase on a constant currency basis.

Amortization of acquired intangible assets was $11.4 million during the quarter, an increase of $6.8 million compared with the same period last year. The increase in amortization of acquired intangible assets was primarily due to the amortization expense associated with the Brightree acquisition.  Stock-based compensation costs incurred during the quarter of $11.5 million consisted of expenses associated with employee equity grants, and our employee stock purchase plan. 

Net income for the quarter was $87.8 million, a 3 percent decrease compared to the same period of the prior year. Non-GAAP net income was $100.7 million, a 3 percent increase compared to the prior year.

Non-GAAP measures adjust for amortization of acquired intangibles, acquisition related expenses and restructuring expenses. 

GAAP diluted earnings per share for the quarter decreased 3 percent to $0.62.  Non-GAAP diluted earnings per share of $0.71 were 3 percent higher compared with the same period of the prior year. 

Cash flow from operations for the quarter was $67.6 million compared to net income in the current quarter of $87.8 million.

Dividend program
The ResMed board of directors today declared a quarterly cash dividend of $0.33 per share. The dividend will have a record date of May 11, 2017, payable on June 15, 2017. 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 10, 2017 for common stock holders 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 10, 2017 through May 11, 2017 inclusive. 

Webcast details
ResMed will discuss its financial and business results and outlook 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 2017 earnings webcast" to register and listen to the live webcast. The online archive of the broadcast will be available on ResMed's website after the live call. In addition, a telephone replay of the conference call will be available approximately two hours after the call by dialing 800-585-8367 (U.S.) and +1 416-621-4642 (international) and entering a passcode of 98293201. The telephone replay will be available until May 11, 2017.

About ResMed
ResMed (NYSE:RMD) changes lives with award-winning medical devices and cutting-edge cloud-based software applications that better diagnose, treat and manage sleep apnea, chronic obstructive pulmonary disease (COPD) and other chronic diseases. ResMed is a global leader in connected care, with more than 3 million patients remotely monitored every day. Our 5,000-strong team is committed to creating the world's best tech-driven medical device company – improving quality of life, reducing the impact of chronic disease, and saving healthcare costs in more than 100 countries.

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 and new markets for its products and the integration of acquisitions – 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 per share data)



Three Months Ended

March 31,

Nine Months Ended

March 31,


2017

2016

2017

2016






Net revenue

$514,204

$453,879

$1,510,051

$1,320,066

Cost of sales

214,490

193,999

627,012

557,460

Astral field safety notification expenses (1)

-

-

5,070

-

SERVE-HF accrual release (1)

-

-

-

(2,402)

Gross profit

299,714

259,880

877,969

765,008






Operating expenses:





Selling, general and administrative

137,864

119,351

406,028

348,664

Research and development

35,130

28,109

107,761

84,271

Restructuring expenses (1)

7,945

-

12,358

6,914

Litigation settlement expenses (1)

-

-

8,500

-

Acquisition related expenses (1)

-

3,550

10,076

3,550

Amortization of acquired intangible assets (1)

11,378

4,558

34,809

11,294

Total operating expenses

192,317

155,568

579,532

454,693

Income from operations (1)

107,397

104,312

298,437

310,315






Other income (expenses), net:





Interest income (expense), net

(2,911)

2,131

(7,841)

8,028

Other, net

3,504

2,553

6,525

3,791

Total other income (expenses), net

593

4,684

(1,316)

11,819

Income before income taxes

107,990

108,996

297,121

322,134

Income taxes excluding ASU 2016-09 (2)

21,601

20,538

60,336

62,757

Income taxes relating to ASU 2016-09 (2)

(1,434)

(2,333)

(3,887)

(9,906)

Total income taxes

20,167

18,205

56,449

52,851

Net income (1)

$87,823

$90,791

$240,672

$269,283






Basic earnings per share (2)

$0.62

$0.65

$1.70

$1.92

Diluted earnings per share (2)

$0.62

$0.64

$1.69

$1.90

Non-GAAP diluted earnings per share (1) (2)

$0.71

$0.69

$2.05

$2.01






Basic shares outstanding

141,714

140,187

141,266

140,140

Diluted shares outstanding (2)

142,724

141,232

142,363

141,666








(1)

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



(2)

As a result of the adoption of ASU 2016-09 "Improvements to Employee Share-Based Payment Accounting" during the quarter ended June 30, 2016 we now recognize an income tax impact relating to share-based payment transactions. The income taxes for the three and nine months ended March 31, 2016 have been restated to reflect the adoption of the standard as the benefit was previously recorded as a reduction to Additional Capital.   

 


RESMED INC AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited - In thousands)



March 31,

June 30,


2017

2016

Assets:



Current assets:



Cash and cash equivalents

$827,310

$731,434

Accounts receivable, net

413,612

382,086

Inventories

259,870

224,456

Prepayments and other current assets

104,569

81,743

Total current assets

1,605,361

1,419,719

Property, plant and equipment, net

387,412

384,276

Goodwill

1,050,083

1,059,245

Other intangibles, net

267,404

299,808

Deferred income taxes and other non-current assets

112,303

93,657

Total non-current assets

1,817,202

1,836,986

Total assets

$3,422,563

$3,256,705

Liabilities and Stockholders' Equity:



Current liabilities:



Accounts payable

$82,846

$92,571

Accrued expenses

169,896

156,805

Deferred revenue

48,682

50,009

Income taxes payable

34,854

39,166

Short-term debt

-

299,438

Total current liabilities

336,278

637,989

Non-current liabilities:



Deferred income taxes

12,988

9,061

Deferred revenue

49,135

40,281

Other long-term liabilities

856

1,211

Long-term debt

1,168,350

873,332

Total non-current liabilities

1,231,329

923,885

Total liabilities

1,567,607

1,561,874

Stockholders' Equity:



Common stock

567

563

Additional paid-in capital

1,352,676

1,303,238

Retained earnings

2,261,425

2,160,299

Treasury stock

(1,546,612)

(1,546,611)

Accumulated other comprehensive income

(213,100)

(222,658)

Total stockholders' equity

$1,854,956

$1,694,831




Total liabilities and stockholders' equity

$3,422,563

$3,256,705




 

RESMED INC AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited - In thousands)



Nine Months Ended

March 31,


2017

2016

Cash flows from operating activities:



Net income

$240,672

$269,283

Adjustment to reconcile net income to cash provided by operating activities:



Depreciation and amortization

83,989

59,827

Impairment of long-lived assets

-

2,815

Stock-based compensation costs

34,263

34,779

Changes in fair value of business combination contingent consideration

10,076

(154)

Payment of business combination contingent consideration

(8,460)

-

Impairment of cost-method investments

588

750

Changes in operating assets and liabilities, net of effect of acquisitions:



Accounts receivable, net

(32,793)

2,798

Inventories, net

(38,146)

26,012

Prepaid expenses, net deferred income taxes and other current assets

(28,554)

99

Accounts payable, accrued expenses and other

12,105

8,764

Net cash provided by operating activities

273,740

404,973

Cash flows from investing activities:



Purchases of property, plant and equipment

(43,857)

(44,133)

Patent registration costs

(6,980)

(6,891)

Business acquisitions, net of cash acquired

(3,394)

(242,645)

Investments in cost-method investments

(6,464)

(8,215)

Proceeds / (Payments) on maturity of foreign currency contracts

10,085

(5,711)

Net cash used in investing activities

(50,610)

(307,595)

Cash flows from financing activities:



Proceeds from issuance of common stock, net

15,255

16,937

Purchases of treasury stock

-

(102,058)

Payment of business combination contingent consideration

(11,682)

(1,228)

Proceeds from borrowings, net of borrowing costs

350,000

310,000

Repayment of borrowings

(355,000)

(193,092)

Dividends paid

(139,546)

(126,026)

Net cash (used in) / provided by financing activities

(140,973)

(95,467)

Effect of exchange rate changes on cash

13,719

(665)

Net increase / (decrease) in cash and cash equivalents

95,876

1,246

Cash and cash equivalents at beginning of period

731,434

717,249

Cash and cash equivalents at end of period

$827,310

$718,495

 

Reconciliation of Non-GAAP Financial Measures (Unaudited)

(In US$ thousands, except share and per share data)


The measure, "non-GAAP income from operations" is reconciled with GAAP income from operations below:



Three Months Ended

March 31

Nine Months Ended

March 31,


2017

2016

2017

2016

GAAP income from operations

$107,397

$104,312

$298,437

$310,315

SERVE-HF accrual release (A)

-

-

-

(2,402)

Astral battery field safety notification expenses (A)

-

-

5,070

-

Restructuring expenses (A)

7,945

-

12,358

6,914

Litigation settlement expenses (A)

-

-

8,500

-

Acquisition related expenses (A)

-

3,550

10,076

3,550

Amortization of acquired intangible assets (A)

11,378

4,558

34,809

11,294

Non-GAAP income from operations

$126,720

$112,420

$369,250

$329,671


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

March 31,

Nine Months Ended

March 31,


2017

2016

2017

2016

GAAP net income

$87,823

$90,791

$240,672

$269,283

SERVE-HF accrual release, net of tax (A)

-

-

-

(1,682)

Astral battery field safety notification expenses (A)

-

-

3,549

-

Restructuring expenses, net of tax (A)

5,210

-

8,295

5,204

Litigation settlement expenses, net of tax (A)

-

-

5,392

-

Acquisition related expenses (A)

-

3,550

10,076

3,550

Amortization of acquired intangible assets, net of tax (A)

7,704

3,416

23,679

8,572

Non-GAAP net income (A)

$100,737

$97,757

$291,663

$284,927

Diluted shares outstanding

142,724

141,232

142,363

141,666

GAAP diluted earnings per share

$0.62

$0.64

$1.69

$1.90

Non-GAAP diluted earnings per share (A)

$0.71

$0.69

$2.05

$2.01



(A) 

ResMed adjusts for the impact of the Astral battery field safety notification expenses, release of SERVE-HF accrual, restructuring expenses, litigation settlement expenses, acquisition related expenses and amortization of acquired intangible assets from their evaluation of ongoing operations and believes 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 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 in evaluating ResMed's performance from core operations and provides consistent financial reporting. Our use of non-GAAP measures is intended to supplement, and not to replace, our 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.

 

Contacts:

For Investors 

For News Media

Agnes Lee 

Alison Graves

O: 858-836-5971 

O: 858-836-6789

investorrelations@resmed.com 

news@resmed.com

 

 

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SOURCE ResMed Inc.