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

  • Year-over-year revenue grows 5%, operating profit up 5%, non-GAAP operating profit up 4%

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. 27, 2022 (GLOBE NEWSWIRE) -- ResMed Inc. (NYSE: RMD, ASX: RMD) today announced results for its quarter ended September 30, 2022.

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

  • Revenue increased by 5% to $950.3 million; up 9% on a constant currency basis 
  • Gross margin expanded by 90 bps to 56.9%; non-GAAP gross margin expanded by 40 bps to 57.6%
  • Income from operations increased 5%; non-GAAP operating profit up 4%
  • Diluted earnings per share of $1.43; non-GAAP diluted earnings per share of $1.51

“Our first quarter fiscal year 2023 results demonstrate strong sales growth in the Americas and solid overall performance for our businesses,” said Mick Farrell, ResMed’s CEO. “Our global ResMed team continues to power through the dynamic supply chain environment to increase production volumes and deliver more products and software solutions into the hands of people who need them. During the quarter we saw strong customer uptake of our reengineered AirSense 10 Card-to-Cloud device. We also continued to increase our access to semiconductor communications chips, allowing us to produce more of our industry-leading, 100%-connectable platforms. Looking ahead, we remain focused on delivering lifesaving therapy solutions and driving accelerated adoption of digital health in sleep apnea, respiratory care, and out-of-hospital care. I am confident in our growth strategy and our ability to accelerate toward 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,
2022
  September 30,
2021
  % Change   Constant
Currency(A)
Revenue   $ 950.3     $ 904.0     5 %   9 %
Gross margin      56.9 %     56.0 %   2      
Non-GAAP gross margin (B)     57.6 %     57.2 %   1      
Selling, general, and administrative expenses     193.9       176.7     10     16  
Research and development expenses     63.2       60.0     5     9  
Income from operations     275.7       261.9     5      
Non-GAAP income from operations (B)     290.8       280.7     4      
Net income     210.5       203.6     3      
Non-GAAP net income (B)     222.1       222.0     Nil      
Diluted earnings per share   $ 1.43     $ 1.39     3      
Non-GAAP diluted earnings per share (B)   $ 1.51     $ 1.51     Nil      

(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 9 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 18 percent, primarily due to the factors discussed above and recovery of core sleep patient flow that was previously impacted by COVID-19.
    • Revenue in Europe, Asia, and other markets declined by 6 percent on a constant currency basis.
    • Software-as-a-Service revenue increased by 9 percent, due to continued growth in our Home Medical Equipment vertical.
  • Gross margin increased by 90 basis points and non-GAAP gross margin increased by 40 basis points, mainly due to an increase in average selling prices, partially offset by unfavorable product mix and foreign currency movements.
  • Selling, general, and administrative expenses increased by 16 percent on a constant currency basis. SG&A expenses increased to 20.4 percent of revenue in the quarter, compared with 19.5 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 5 percent and non-GAAP income from operations increased by 4 percent.
  • Net income for the quarter was $210.5 million and diluted earnings per share was $1.43. Non-GAAP net income was $222.1 million, and non-GAAP diluted earnings per share was $1.51, both consistent with the same period of the prior year.
  • Operating cash flow for the quarter was $44.7 million, reflecting the impact of increases in working capital. During the quarter we paid $64.4 million in dividends.

Other Business and Operational Highlights

  • Announced the acquisition of mementor, a German pioneer and health tech startup that develops and distributes digital medical products in the field of sleep medicine and related areas. mementor offers the first permanently approved Digital Health Application (DiGA), somnio, eligible for reimbursement in the field of sleep medicine.
  • Celebrated the official opening of ResMed’s new technology R&D facility in Ireland (Sandyford in Dublin) and announced a plan to double the Ireland-based software and technology team with 70 jobs over the next four years to support innovation, technology development, and product development.
  • Released updated global chronic obstructive pulmonary disease (COPD) prevalence numbers via a late-breaking abstract at the European Respiratory Society Congress. Based on ResMed’s updated research, it’s estimated over 480 million people worldwide suffer from COPD, a 22-126% increase over today’s most cited resources.

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 November 10, 2022, payable on December 15, 2022. 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 9, 2022, 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 9, 2022, through November 10, 2022, inclusive. 

Webcast details
ResMed will discuss its first-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 “Q1 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 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 13733726. The telephone replay will be available until November 10, 2022.

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
    September 30,
2022
  September 30,
2021
         
Net revenue   $ 950,294     $ 904,015  
         
Cost of sales     403,110       386,667  
Amortization of acquired intangibles (1)     6,374       11,059  
Total cost of sales   $ 409,484     $ 397,726  
Gross profit   $ 540,810     $ 506,289  
         
Selling, general, and administrative     193,933       176,719  
Research and development     63,188       59,950  
Amortization of acquired intangibles (1)     7,950       7,707  
Total operating expenses   $ 265,071     $ 244,376  
Income from operations     275,739       261,913  
         
Other income (expenses), net:        
Interest income (expense), net   $ (7,134 )   $ (5,360 )
Loss attributable to equity method investments     (2,028 )     (1,386 )
Gain (loss) on equity investments     (3,280 )     5,612  
Other, net     (1,504 )     (1,991 )
Total other income (expenses), net     (13,946 )     (3,125 )
Income before income taxes   $ 261,793     $ 258,788  
Income taxes     51,315       55,175  
Net income   $ 210,478     $ 203,613  
         
Basic earnings per share   $ 1.44     $ 1.40  
Diluted earnings per share   $ 1.43     $ 1.39  
Non-GAAP diluted earnings per share (1)   $ 1.51     $ 1.51  
         
Basic shares outstanding     146,431       145,680  
Diluted shares outstanding     147,134       146,860  

(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,
2022
  June 30,
2022
ASSETS        
Current assets:        
Cash and cash equivalents   $ 207,163     $ 273,710  
Accounts receivable, net     620,483       575,950  
Inventories     864,852       743,910  
Prepayments and other current assets     341,199       337,908  
Total current assets   $ 2,033,697     $ 1,931,478  
Non-current assets:        
Property, plant, and equipment, net   $ 487,376     $ 498,181  
Operating lease right-of-use assets     125,319       132,314  
Goodwill and other intangibles, net     2,276,994       2,282,386  
Deferred income taxes and other non-current assets     254,174       251,494  
Total non-current assets   $ 3,143,863     $ 3,164,375  
Total assets   $ 5,177,560     $ 5,095,853  
LIABILITIES AND STOCKHOLDERS’ EQUITY:        
Current liabilities:        
Accounts payable   $ 181,485     $ 159,245  
Accrued expenses     324,055       344,722  
Operating lease liabilities, current     21,076       21,856  
Deferred revenue     108,195       108,667  
Income taxes payable     47,942       44,893  
Short-term debt     9,906       9,916  
Total current liabilities   $ 692,659     $ 689,299  
Non-current liabilities:        
Deferred revenue   $ 97,620     $ 95,455  
Deferred income taxes     11,830       9,714  
Operating lease liabilities, non-current     114,214       120,453  
Other long-term liabilities     5,838       5,974  
Long-term debt     785,436       765,325  
Long-term income taxes payable     37,076       48,882  
Total non-current liabilities   $ 1,052,014     $ 1,045,803  
Total liabilities   $ 1,744,673     $ 1,735,102  
STOCKHOLDERS’ EQUITY:        
Common stock   $ 586     $ 586  
Additional paid-in capital     1,701,902       1,682,432  
Retained earnings     3,759,783       3,613,736  
Treasury stock     (1,623,256 )     (1,623,256 )
Accumulated other comprehensive income     (406,128 )     (312,747 )
Total stockholders’ equity   $ 3,432,887     $ 3,360,751  
Total liabilities and stockholders’ equity   $ 5,177,560     $ 5,095,853  


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

    Three months ended
    September 30,
2022
  September 30,
2021
Cash flows from operating activities:        
Net income   $ 210,478     $ 203,613  
Adjustment to reconcile net income to cash provided by operating activities:        
Depreciation and amortization     36,273       39,102  
Amortization of right-of-use assets     7,761       8,517  
Stock-based compensation costs     16,919       17,303  
Loss attributable to equity method investments     2,028       1,386  
(Gain) loss on equity investment     3,280       (5,612 )
Changes in operating assets and liabilities:        
Accounts receivable, net     (56,238 )     33,704  
Inventories, net     (147,096 )     (55,976 )
Prepaid expenses, net deferred income taxes and other current assets     (36,784 )     (14,391 )
Accounts payable, accrued expenses, income taxes payable and other     8,041       (293,303 )
Net cash (used in) / provided by operating activities   $ 44,662     $ (65,657 )
Cash flows from investing activities:        
Purchases of property, plant, and equipment     (29,056 )     (27,340 )
Patent registration and acquisition costs     (3,317 )     (4,453 )
Business acquisitions, net of cash acquired     (19,100 )      
Purchases of investments     (4,291 )     (6,600 )
(Payments) / proceeds on maturity of foreign currency contracts     (3,042 )     (3,481 )
Net cash used in investing activities   $ (58,806 )   $ (41,874 )
Cash flows from financing activities:        
Proceeds from issuance of common stock, net     2,610       4,354  
Taxes paid related to net share settlement of equity awards     (59 )     (195 )
Proceeds from borrowings, net of borrowing costs     50,000       150,000  
Repayment of borrowings     (30,000 )      
Dividends paid     (64,431 )     (61,189 )
Net cash (used in) / provided by financing activities   $ (41,880 )   $ 92,970  
Effect of exchange rate changes on cash   $ (10,523 )   $ (4,568 )
Net increase / (decrease) in cash and cash equivalents     (66,547 )     (19,129 )
Cash and cash equivalents at beginning of period     273,710       295,278  
Cash and cash equivalents at end of period   $ 207,163     $ 276,149  


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
    September 30,
2022
  September 30,
2021
         
Revenue   $ 950,294     $ 904,015  
         
GAAP cost of sales   $ 409,484     $ 397,726  
Less: Amortization of acquired intangibles (A)     (6,374 )     (11,059 )
Non-GAAP cost of sales   $ 403,110     $ 386,667  
         
GAAP gross profit   $ 540,810     $ 506,289  
GAAP gross margin     56.9 %     56.0 %
Non-GAAP gross profit   $ 547,184     $ 517,348  
Non-GAAP gross margin     57.6 %     57.2 %


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

    Three Months Ended
    September 30,
2022
  September 30,
2021
         
GAAP income from operations   $ 275,739   $ 261,913
Amortization of acquired intangibles—cost of sales (A)     6,374     11,059
Amortization of acquired intangibles—operating expenses (A)     7,950     7,707
Acquisition-related expenses (A)     745    
Non-GAAP income from operations   $ 290,808   $ 280,679


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,
2022
  September 30,
2021
         
GAAP net income   $ 210,478   $ 203,613
Amortization of acquired intangibles—cost of sales, net of tax (A)     4,835     8,435
Amortization of acquired intangibles—operating expenses, net of tax (A)     6,031     5,878
Acquisition-related expenses (A)     745    
Reserve for disputed tax position (A)         4,111
Non-GAAP net income (A)   $ 222,089   $ 222,037
         
GAAP diluted shares outstanding     147,134     146,860
GAAP diluted earnings per share   $ 1.43   $ 1.39
Non-GAAP diluted earnings per share (A)   $ 1.51   $ 1.51

(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
    September 30,
2022
(A) September 30,
2021
(A) % Change   Constant
Currency (B)
U.S., Canada, and Latin America                
Devices   $ 339.5   $ 275.9   23 %    
Masks and other     238.6     215.1   11      
Total Sleep and Respiratory Care   $ 578.1   $ 491.0   18      
Software-as-a-Service     105.9     97.5   9      
Total   $ 684.0   $ 588.6   16      
                 
Combined Europe, Asia, and other markets                
Devices   $ 178.0   $ 218.2   (18 )%   (10 )%
Masks and other     88.3     97.2   (9 )   3  
Total Sleep and Respiratory Care   $ 266.3   $ 315.5   (16 )   (6 )
                 
Global revenue                
Devices   $ 517.6   $ 494.2   5 %   9 %
Masks and other     326.9     312.3   5     8  
Total Sleep and Respiratory Care   $ 844.4   $ 806.5   5     9  
Software-as-a-Service     105.9     97.5   9     9  
Total   $ 950.3   $ 904.0   5     9  
                 

(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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+1 858-836-5000 +1 858-836-6798
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Source: ResMed Inc.