ResMed Inc. Announces Results for the Third Quarter of Fiscal Year 2023

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Year-over-year revenue grows 29%, operating profit up 28%, non-GAAP operating profit up 27%

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 27, 2023 (GLOBE NEWSWIRE) -- ResMed Inc. (NYSE: RMD, ASX: RMD) today announced results for its quarter ended March 31, 2023.

Third Quarter 2023 Highlights
All comparisons are to the prior year period

  • Revenue increased by 29% to $1,116.9 million; up 31% on a constant currency basis 
  • Gross margin contracted 150 bps to 55.3%; non-GAAP gross margin contracted 200 bps to 56.1%
  • Income from operations increased 28%; non-GAAP operating profit up 27%
  • Operating cash flow of $282.6 million
  • Diluted earnings per share of $1.58; non-GAAP diluted earnings per share of $1.68

“During the third quarter, we significantly ramped up production and delivery of our cloud-connected flow generator devices to meet ongoing high demand from customers, resulting in strong device sales growth across our global markets,” said Mick Farrell, ResMed’s CEO. “We now have full global availability of our connected AirSense 10 platform, while we continue to ramp production and availability across more geographies of our AirSense 11 platform. The bottom line is this: We can now support global customer demand for CPAP and APAP devices to serve the entire sleep device market. This is great news for physicians, providers, and especially for patients. We also saw very strong growth in our mask and patient interfaces businesses globally, demonstrating a sustainable focus on patient adherence and resupply. Our outside-hospital software-as-a-service business achieved high-single-digit growth organically and reached well into double-digit growth with a full quarter of contribution from our MEDIFOX DAN acquisition that we closed last November. We remain laser-focused on delivering lifesaving therapy solutions and accelerating the adoption of digital health in sleep apnea, COPD, insomnia, and out-of-hospital care. During the last 12 months, we improved over 156 million lives, and we are well on our way to our goal of helping 250 million people sleep better, breathe better, and live higher-quality lives with outside-hospital care in 2025.”

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

  Three Months Ended
  March 31,
2023		   March 31,
2022		   % Change   Constant
Currency (A)
Revenue $ 1,116.9     $ 864.5     29 %   31 %
Gross margin   55.3 %     56.8 %   (3 )    
Non-GAAP gross margin (B)   56.1 %     58.1 %   (4 )    
Selling, general, and administrative expenses   228.5       182.4     25     28  
Research and development expenses   76.4       66.8     14     16  
Income from operations   300.7       234.3     28      
Non-GAAP income from operations (B)   321.2       253.0     27      
Net income   232.5       179.0     30      
Non-GAAP net income (B)   247.8       193.3     28      
Diluted earnings per share $ 1.58     $ 1.22     30      
Non-GAAP diluted earnings per share (B) $ 1.68     $ 1.32     27      


  Nine Months Ended
  March 31,
2023		   March 31,
2022		   % Change   Constant
Currency (A)
Revenue $ 3,100.9     $ 2,663.4     16 %   20 %
Gross margin   56.1 %     56.4 %   (1 )    
Non-GAAP gross margin (B)   56.8 %     57.6 %   (1 )    
Selling, general, and administrative expenses   633.3       544.5     16     21  
Research and development expenses   209.5       189.3     11     13  
Income from operations   856.6       744.9     15      
Non-GAAP income from operations (B)   917.5       801.3     15      
Net income   667.9       584.4     14      
Non-GAAP net income (B)   714.3       631.5     13      
Diluted earnings per share $ 4.53     $ 3.97     14      
Non-GAAP diluted earnings per share (B) $ 4.85     $ 4.30     13      


(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 grew by 31 percent on a constant currency basis, driven by increased demand for our sleep and respiratory care devices as well as reduced competitive supply.
    • Revenue in the U.S., Canada, and Latin America, excluding Software-as-a-Service, grew by 32 percent, primarily due to the factors discussed above.
    • Revenue in Europe, Asia, and other markets, excluding Software-as-a-Service, grew by 28 percent on a constant currency basis.
    • Software-as-a-Service revenue increased by 35 percent, reflecting incremental revenue from our acquisition of MEDIFOX DAN and continued organic growth in our SaaS portfolio.
  • Gross margin decreased by 150 basis points and non-GAAP gross margin decreased by 200 basis points, mainly due to unfavorable product mix and higher component costs, partially offset by an increase in average selling prices.
  • Selling, general, and administrative expenses increased by 28 percent on a constant currency basis. SG&A expenses improved to 20.5 percent of revenue in the quarter, compared with 21.1 percent in the same period of the prior year. These changes in SG&A expenses were mainly due to increases in employee-related expenses and increases in travel expenses.
  • Income from operations increased by 28 percent and non-GAAP income from operations increased by 27 percent.
  • Net income for the quarter was $232.5 million and diluted earnings per share was $1.58. Non-GAAP net income increased by 28% to $247.8 million, and non-GAAP diluted earnings per share increased by 27% to $1.68, predominantly attributable to strong sales, partially offset by gross margin contraction.
  • Operating cash flow for the quarter was $282.6 million, compared to net income in the current quarter of $232.5 million and non-GAAP net income of $247.8 million. During the quarter we paid $64.6 million in dividends.

Other Business and Operational Highlights

  • Announced the retirement of David Pendarvis, Chief Administrative Officer & Global General Counsel, effective June 30, 2023. An internal search for ResMed’s new Global General Counsel is underway and expected to be completed before Pendarvis retires. In parallel, announced the promotion of Amy Wakeham to Chief Communications & Investor Relations Officer, effective April 1, 2023. Wakeham joined ResMed in June 2018 and previously led IR at several other public companies.
  • Published 2023 Global Sleep Survey as part of National Sleep Awareness Week (March 12-18) and World Sleep Day (March 17). The survey, conducted in January, asked over 20,000 respondents in 12 countries what’s keeping them up at night; survey results aim to build awareness of the critical role good sleep plays in physical and mental health. Of note, 81% of respondents experience one or more symptoms indicating poor sleep quality, despite 64% saying they’re satisfied with the quantity of their sleep.

Dividend program
The ResMed board of directors today declared a quarterly cash dividend of $0.44 per share. The dividend will have a record date of May 11, 2023, payable on June 15, 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 May 10, 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 May 10, 2023, through May 11, 2023, inclusive. 

Webcast details
ResMed will discuss its third-quarter fiscal year 2023 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 2023 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 13737758. The telephone replay will be available until May 11, 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, 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.

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

  Three Months Ended   Nine Months Ended
  March 31,
2023		   March 31,
2022		   March 31,
2023		   March 31,
2022
               
Net revenue $ 1,116,898     $ 864,500     $ 3,100,936     $ 2,663,390  
               
Cost of sales   490,824       362,321       1,340,660       1,128,314  
Amortization of acquired intangibles (1)   8,322       10,982       22,001       33,271  
Total cost of sales $ 499,146     $ 373,303     $ 1,362,661     $ 1,161,585  
Gross profit $ 617,752     $ 491,197     $ 1,738,275     $ 1,501,805  
               
Selling, general, and administrative   228,457       182,401       633,317       544,483  
Research and development   76,436       66,801       209,498       189,258  
Amortization of acquired intangibles (1)   12,188       7,730       29,701       23,175  
Acquisition related expenses   —       —       9,157       —  
Total operating expenses $ 317,081     $ 256,932     $ 881,673     $ 756,916  
Income from operations $ 300,671     $ 234,265     $ 856,602     $ 744,889  
               
Other income (expenses), net:              
Interest income (expense), net $ (14,964 )   $ (5,462 )   $ (32,436 )   $ (16,770 )
Loss attributable to equity method investments   (183 )     (2,627 )     (5,037 )     (5,927 )
Gain (loss) on equity investments   6,418       (1,735 )     11,506       (527 )
Other, net   (2,564 )     1,878       (5,773 )     729  
Total other income (expenses), net   (11,293 )     (7,946 )     (31,740 )     (22,495 )
Income before income taxes $ 289,378     $ 226,319     $ 824,862     $ 722,394  
Income taxes   56,878       47,307       156,970       138,018  
Net income $ 232,500     $ 179,012     $ 667,892     $ 584,376  
               
Basic earnings per share $ 1.58     $ 1.22     $ 4.55     $ 4.00  
Diluted earnings per share $ 1.58     $ 1.22     $ 4.53     $ 3.97  
Non-GAAP diluted earnings per share (1) $ 1.68     $ 1.32     $ 4.85     $ 4.30  
               
Basic shares outstanding   146,914       146,240       146,681       145,969  
Diluted shares outstanding   147,395       146,962       147,400       147,034  


(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)

  March 31,
2023		   June 30,
2022
Assets      
Current assets:      
Cash and cash equivalents $ 227,894     $ 273,710  
Accounts receivable, net   686,264       575,950  
Inventories   1,011,269       743,910  
Prepayments and other current assets   412,388       337,908  
Total current assets $ 2,337,815     $ 1,931,478  
Non-current assets:      
Property, plant, and equipment, net $ 528,778     $ 498,181  
Operating lease right-of-use assets   127,508       132,314  
Goodwill and other intangibles, net   3,353,302       2,282,386  
Deferred income taxes and other non-current assets   366,476       251,494  
Total non-current assets $ 4,376,064     $ 3,164,375  
Total assets $ 6,713,879     $ 5,095,853  
Liabilities and Stockholders’ Equity      
Current liabilities:      
Accounts payable $ 161,896     $ 159,245  
Accrued expenses   347,354       344,722  
Operating lease liabilities, current   23,129       21,856  
Deferred revenue   141,043       108,667  
Income taxes payable   78,368       44,893  
Short-term debt   9,901       9,916  
Total current liabilities $ 761,691     $ 689,299  
Non-current liabilities:      
Deferred revenue $ 108,875     $ 95,455  
Deferred income taxes   113,015       9,714  
Operating lease liabilities, non-current   115,090       120,453  
Other long-term liabilities   69,553       5,974  
Long-term debt   1,575,963       765,325  
Long-term income taxes payable   37,183       48,882  
Total non-current liabilities $ 2,019,679     $ 1,045,803  
Total liabilities $ 2,781,370     $ 1,735,102  
Stockholders’ equity      
Common stock $ 588     $ 586  
Additional paid-in capital   1,728,997       1,682,432  
Retained earnings   4,088,057       3,613,736  
Treasury stock   (1,623,256 )     (1,623,256 )
Accumulated other comprehensive income   (261,877 )     (312,747 )
Total stockholders’ equity $ 3,932,509     $ 3,360,751  
Total liabilities and stockholders’ equity $ 6,713,879     $ 5,095,853  
               

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

  Three Months Ended   Nine Months Ended
  March 31,
2023		   March 31,
2022		   March 31,
2023		   March 31,
2022
Cash flows from operating activities:              
Net income $ 232,500     $ 179,012     $ 667,892     $ 584,376  
Adjustment to reconcile net income to cash provided by operating activities:              
Depreciation and amortization   44,356       42,306       118,396       122,198  
Amortization of right-of-use assets   8,434       9,302       23,967       26,636  
Stock-based compensation costs   17,832       15,860       51,215       49,265  
Loss attributable to equity method investments   183       2,627       5,037       5,927  
(Gain) loss on equity investment   (6,418 )     1,735       (11,506 )     527  
Changes in operating assets and liabilities:              
Accounts receivable, net   (12,629 )     15,689       (88,452 )     98,158  
Inventories, net   (21,974 )     (70,227 )     (255,091 )     (209,476 )
Prepaid expenses, net deferred income taxes and other current assets   (19,961 )     (106,588 )     (86,607 )     (127,977 )
Accounts payable, accrued expenses, income taxes payable and other   40,240       27,722       31,012       (277,973 )
Net cash provided by operating activities $ 282,563     $ 117,438     $ 455,863     $ 271,661  
Cash flows from investing activities:              
Purchases of property, plant, and equipment   (28,817 )     (48,445 )     (85,223 )     (106,192 )
Patent registration and acquisition costs   (2,406 )     (3,712 )     (10,043 )     (17,449 )
Business acquisitions, net of cash acquired   —       —       (1,011,225 )     (35,915 )
Purchases of investments   (12,597 )     (4,250 )     (29,729 )     (16,614 )
Proceeds from exits of investments   3,937       6,802       3,937       6,802  
(Payments) / proceeds on maturity of foreign currency contracts   11,780       110       18,961       (5,309 )
Net cash used in investing activities $ (28,103 )   $ (49,495 )   $ (1,113,322 )   $ (174,677 )
Cash flows from financing activities:              
Proceeds from issuance of common stock, net   983       2,814       25,649       26,269  
Taxes paid related to net share settlement of equity awards   (584 )     (2,253 )     (30,297 )     (52,278 )
Payments of business combination contingent consideration   (316 )     —       (316 )     —  
Proceeds from borrowings, net of borrowing costs   —       —       1,070,000       160,000  
Repayment of borrowings   (215,000 )     —       (260,000 )     (136,000 )
Dividends paid   (64,640 )     (61,418 )     (193,571 )     (183,853 )
Net cash (used in) / provided by financing activities $ (279,557 )   $ (60,857 )   $ 611,465     $ (185,862 )
Effect of exchange rate changes on cash $ (208 )   $ 207     $ 178     $ (4,631 )
Net increase / (decrease) in cash and cash equivalents   (25,305 )     7,293       (45,816 )     (93,509 )
Cash and cash equivalents at beginning of period   253,199       194,476       273,710       295,278  
Cash and cash equivalents at end of period $ 227,894     $ 201,769     $ 227,894     $ 201,769  
                               

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 related to cost of sales and are reconciled below:

  Three Months Ended   Nine Months Ended
  March 31, 2023   March 31, 2022   March 31, 2023   March 31, 2022
               
Revenue $ 1,116,898     $ 864,500     $ 3,100,936     $ 2,663,390  
               
GAAP cost of sales $ 499,146     $ 373,303     $ 1,362,661     $ 1,161,585  
Less: Amortization of acquired intangibles (A)   (8,322 )     (10,982 )     (22,001 )     (33,271 )
Non-GAAP cost of sales $ 490,824     $ 362,321     $ 1,340,660     $ 1,128,314  
               
GAAP gross profit $ 617,752     $ 491,197     $ 1,738,275     $ 1,501,805  
GAAP gross margin   55.3 %     56.8 %     56.1 %     56.4 %
Non-GAAP gross profit $ 626,074     $ 502,179     $ 1,760,276     $ 1,535,076  
Non-GAAP gross margin   56.1 %     58.1 %     56.8 %     57.6 %
                               

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

  Three Months Ended   Nine Months Ended
  March 31, 2023   March 31, 2022   March 31, 2023   March 31, 2022
               
GAAP income from operations $ 300,671   $ 234,265   $ 856,602   $ 744,889
Amortization of acquired intangibles—cost of sales (A)   8,322     10,982     22,001     33,271
Amortization of acquired intangibles—operating expenses (A)   12,188     7,730     29,701     23,175
Acquisition-related expenses (A)   —     —     9,157     —
Non-GAAP income from operations $ 321,181   $ 252,977   $ 917,461   $ 801,335
                       

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, 2023   March 31, 2022   March 31, 2023   March 31, 2022
               
GAAP net income $ 232,500   $ 179,012   $ 667,892   $ 584,376
Amortization of acquired intangibles—cost of sales, net of tax (A)   6,207     8,374     16,531     25,373
Amortization of acquired intangibles—operating expenses, net of tax (A)   9,090     5,894     22,317     17,673
Acquisition related expenses, net of tax (A)   —     —     7,527     —
Reserve for disputed tax position (A)   —     —     —     4,111
Non-GAAP net income (A) $ 247,797   $ 193,280   $ 714,267   $ 631,533
               
GAAP diluted shares outstanding   147,395     146,962     147,400     147,034
GAAP diluted earnings per share $ 1.58   $ 1.22   $ 4.53   $ 3.97
Non-GAAP diluted earnings per share (A) $ 1.68   $ 1.32   $ 4.85   $ 4.30


(A) ResMed adjusts for the impact of the amortization of acquired intangibles, acquisition related expenses and the reserve for disputed tax positions 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
  March 31,
2023		 (A) March 31,
2022		 (A) % Change   Constant
Currency (B)
U.S., Canada, and Latin America              
Devices $ 372.1   $ 250.8   48 %    
Masks and other   257.1     224.7   14      
Total U.S., Canada and Latin America $ 629.1   $ 475.4   32      
               
Combined Europe, Asia, and other markets              
Devices $ 235.8   $ 182.3   29 %   36 %
Masks and other   115.2     105.6   9     15  
Total Combined Europe, Asia and other markets $ 351.0   $ 287.9   22     28  
               
Global revenue              
Total Devices $ 607.9   $ 433.1   40 %   43 %
Total Masks and other   372.2     330.3   13     15  
Total Sleep and Respiratory Care $ 980.1   $ 763.4   28     31  
               
Software-as-a-Service   136.8     101.1   35      
Total $ 1,116.9   $ 864.5   29     31  
               


  Nine Months Ended
  March 31,
2023		 (A) March 31,
2022		 (A) %
Change		   Constant
Currency (B)
U.S., Canada, and Latin America              
Devices $ 1,057.1   $ 771.5   37 %    
Masks and other   765.4     681.8   12      
Total U.S., Canada and Latin America $ 1,822.5   $ 1,453.3   25      
               
Combined Europe, Asia, and other markets              
Devices $ 611.1   $ 608.3   Nil%   9 %
Masks and other   307.9     304.2   1     12  
Total Combined Europe, Asia and other markets $ 919.0   $ 912.4   1     10  
               
Global revenue              
Total Devices $ 1,668.3   $ 1,379.7   21 %   25 %
Total Masks and other   1,073.3     986.0   9     12  
Total Sleep and Respiratory Care $ 2,741.5   $ 2,365.7   16     20  
               
Software-as-a-Service   359.4     297.7   21      
Total $ 3,100.9   $ 2,663.4   16     20  


(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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Source: ResMed Inc.

Released April 27, 2023