Form: 8-K

Current report filing

May 2, 2019

Exhibit 99.1

 

LOGO

 

For investors    For media   
Amy Wakeham    Jayme Rubenstein   
+1 858-836-5000    +1 858-836-6798   
investorrelations@resmed.com    news@resmed.com   

ResMed Inc. Announces Results for the Third Quarter of Fiscal Year 2019

 

  •  

Year-over-year revenue grows 12%, gross margin improves 100 basis points, operating profit up 15%

 

  •  

MatrixCare contributes positively to revenue, gross margin, and profit

 

  •  

ResMed well-positioned for the future

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, May 2, 2019 – ResMed Inc. (NYSE: RMD, ASX: RMD), a world-leading connected health company, today announced results for its quarter ended March 31, 2019.

Third Quarter 2019 Highlights

 

  •  

Revenue increased 12% to $662.2 million; up 15% on a constant currency basis

 

  •  

Gross margin expanded 100bps to 59.2%

 

  •  

Net operating profit increased 15%; non-GAAP operating profit up 15%

 

  •  

GAAP diluted earnings per share of $0.73; non-GAAP diluted earnings per share of $0.89

“We had another strong quarter with top-line revenue growth across all categories of our business, including a solid contribution from recently acquired SaaS companies and growth in international device sales,” said Mick Farrell, ResMed’s CEO. “Our expanding mask portfolio continues to drive share growth across all geographies and we have a solid product pipeline to support future growth, including the recent launch of the AirFit P30i. We delivered operating leverage this quarter, even as we execute on our long-term strategy to provide innovative products, software, and solutions to improve outcomes, create efficiencies, and reduce overall healthcare system costs. We are on a trajectory to improve 250 million lives in out-of-hospital healthcare in 2025.”


RMD Third Quarter 2019 Earnings Press Release – May 2, 2019    Page 2 of 9

 

Financial Results and Operating Metrics

Unaudited; $ in millions, except for per share amounts

 

     Three Months Ended  
     March 31,
2019
    March 31,
2018
    % Change     Constant
Currency (A)
 

Revenue

   $ 662.2     $ 591.6       12     15

Gross margin

     59.2     58.2     2    

Selling, general and administrative expenses

     164.5       147.9       11       17  

Research and development expenses

     47.6       37.4       27       32  

Income from operations

     157.0       136.4       15    

Non-GAAP income from operations

     182.0       159.0       15    

Net income

     105.4       110.1       (4  

Non-GAAP net income

     128.1       132.5       (3  

Diluted earnings per share

   $ 0.73     $ 0.76       (4  

Non-GAAP diluted earnings per share

   $ 0.89     $ 0.92       (3  
     Nine Months Ended  
     March 31,
2019
    March 31,
2018
    % Change     Constant
Currency (A)
 

Revenue

   $ 1,901.6     $ 1,716.6       11     12

Gross margin

     58.8     58.2     1    

Selling, general and administrative expenses

     473.4       443.6       7       10  

Research and development expenses

     129.5       115.5       12       16  

Income from operations

     458.2       394.9       16    

Non-GAAP income from operations

     520.1       440.6       18    

Net income

     335.8       205.8       63    

Non-GAAP net income

     388.8       371.6       5    

Diluted earnings per share

   $ 2.33     $ 1.43       63    

Non-GAAP diluted earnings per share

   $ 2.69     $ 2.58       4    

 

(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.

Discussion of Third Quarter Results

 

  •  

Revenue in the U.S., Canada, and Latin America, excluding Software as a Service, grew by 10 percent compared to the prior year period, driven by strong sales across our mask and device product portfolios.

 

  •  

Revenue in combined Europe, Asia and other markets grew by 6 percent on a constant currency basis compared to the same period of the prior year. Mask sales were strong across these markets. As expected, device sales in France and Japan were impacted as customers completed their connected device upgrade programs. Device sales outside France and Japan grew well.

 

  •  

Software as a Service revenue increased by 101 percent, compared to the prior year period, due to continued growth in our Brightree service offerings and incremental contribution from the acquisition of MatrixCare, which closed in the second quarter and HEALTHCAREfirst, which closed in the first quarter.

 

  •  

Gross margin expanded by 100 basis points over the prior year period, primarily due to higher margin contribution from MatrixCare, benefits from manufacturing and procurement efficiencies and product mix changes, partially offset by declines in average selling prices.

 


RMD Third Quarter 2019 Earnings Press Release – May 2, 2019    Page 3 of 9

 

  •  

Selling, general and administrative expenses increased by 11 percent compared to the prior year period, or by 17 percent on a constant currency basis. Excluding the impact of recent acquisitions, selling, general and administrative expenses increased by 6 percent on a constant currency basis. SG&A expenses improved to 24.8 percent of revenue in the quarter, compared with 25.0 percent in the same period of the prior year.

 

  •  

Income from operations and non-GAAP income from operations increased by 15 percent compared to the prior year period.

 

  •  

Net income decreased by 4 percent, predominantly attributable to the impact of recent acquisitions, higher interest and income tax expense compared to the prior year quarter, and non-GAAP net income decreased by 3 percent compared to the prior year period. Non-GAAP measures adjust for amortization of acquired intangibles, MatrixCare deferred revenue, and the impact of U.S. tax reform.

 

  •  

GAAP diluted earnings per share decreased by 4 percent, predominantly attributable to impact of recent acquisitions, higher interest and income tax expense compared to the prior year quarter, and non-GAAP diluted earnings per share were 3 percent lower compared with the same period of the prior year.

 

  •  

Cash flow from operations for the quarter was $139.6 million, compared to net income in the current quarter of $105.4 million. During the quarter we paid $53.0 million in dividends.

Other Business and Operational Highlights

 

  •  

Completed the acquisition of Propeller Health, a digital therapeutics company providing connected health solutions for people living with chronic obstructive pulmonary disease (COPD) and asthma, for $225.0 million.

 

  •  

Announced the broad availability of Mobi, ResMed’s premier portable oxygen concentrator, offering an optimal balance of oxygen delivery, weight, and battery life for people with chronic obstructive pulmonary disease (COPD) and other chronic diseases.

 

  •  

Introduced AirFit N30i, ResMed’s first top-of-head CPAP mask, expanding the mask portfolio with an option to keep tubing out of the wearer’s way, letting them move and sleep in any position.

 

  •  

Announced an agreement to settle all outstanding patent infringement disputes with Fisher & Paykel Healthcare.

 

  •  

Announced the acquisition of HB Healthcare, a fast-growing, privately held South Korean home medical equipment provider, expanding ResMed’s leading role in Korea’s CPAP and respiratory care market.

Dividend program

The ResMed board of directors today declared a quarterly cash dividend of $0.37 per share. The dividend will have a record date of May 9, 2019, payable on June 13, 2019. 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 8, 2019 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 8, 2019 through May 9, 2019, inclusive. 

 


RMD Third Quarter 2019 Earnings Press Release – May 2, 2019    Page 4 of 9

 

Webcast details

ResMed will discuss its third quarter fiscal year 2019 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 2019 Earnings Webcast” to register and listen to the live webcast. A replay of the earnings webcast will be accessible on our 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 +1 800-585-8367 (U.S.) or +1 416-621-4642 (outside U.S.) and entering the passcode 3977963. The telephone replay will be available until May 16, 2019.

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 120 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.

 

– More –


RMD Third Quarter 2019 Earnings Press Release – May 2, 2019    Page 5 of 9

 

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,
2019
    March 31,
2018
    March 31,
2019
    March 31,
2018
 

Net revenue

   $ 662,228     $ 591,634     $ 1,901,608     $ 1,716,566  

Cost of sales

     270,318       247,339       782,874       716,874  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

   $ 391,910     $ 344,295     $ 1,118,734     $ 999,692  

Operating expenses:

        

Selling, general and administrative

     164,529       147,893       473,410       443,559  

Research and development

     47,610       37,434       129,513       115,492  

Amortization of acquired intangible assets (1)

     22,794       11,673       51,501       34,772  

Restructuring expenses (1)

     —         10,922       —         10,922  

Acquisition related expenses (1)

     —         —         6,123       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

   $ 234,933     $ 207,922     $ 660,547     $ 604,745  

Income from operations (1)

     156,977       136,373       458,187       394,947  

Other income (expenses), net:

        

Interest income (expense), net

   $ (11,998   $ (3,491   $ (21,594   $ (9,196

Loss attributable to equity method investments

     (5,996     —         (9,371     —    

Other, net

     (1,054     (2,739     (4,140     (5,357
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expenses), net

     (19,048     (6,230     (35,105     (14,553
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

   $ 137,929     $ 130,143     $ 423,082     $ 380,394  

Income taxes

     32,513       20,018       87,291       174,617  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 105,416     $ 110,125     $ 335,791     $ 205,777  
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per share

   $ 0.74     $ 0.77     $ 2.35     $ 1.44  

Diluted earnings per share

   $ 0.73     $ 0.76     $ 2.33     $ 1.43  

Non-GAAP diluted earnings per share (1)

   $ 0.89     $ 0.92     $ 2.69     $ 2.58  

Basic shares outstanding

     143,316       142,898       142,907       142,688  

Diluted shares outstanding

     144,333       143,985       144,344       143,895  

 

(1)

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

 

– More –


RMD Third Quarter 2019 Earnings Press Release – May 2, 2019    Page 6 of 9

 

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited; $ in thousands)

 

     March 31,
2019
    June 30,
2018
 

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 146,513     $ 188,701  

Accounts receivable, net

     511,403       483,681  

Inventories

     319,930       268,701  

Prepayments and other current assets

     124,850       124,634  
  

 

 

   

 

 

 

Total current assets

   $ 1,102,696     $ 1,065,717  

Non-current assets:

    

Property, plant and equipment, net

   $ 382,496     $ 386,550  

Goodwill and other intangibles, net

     2,455,586       1,284,128  

Deferred income taxes and other non-current assets

     157,748       327,528  
  

 

 

   

 

 

 

Total non-current assets

   $ 2,995,830     $ 1,998,206  
  

 

 

   

 

 

 

Total assets

   $ 4,098,526     $ 3,063,923  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY:

    

Current liabilities:

    

Accounts payable

   $ 124,466     $ 92,723  

Accrued expenses

     191,130       185,805  

Deferred revenue

     82,288       60,828  

Income taxes payable

     52,739       160,427  

Short-term debt

     12,346       11,466  
  

 

 

   

 

 

 

Total current liabilities

   $ 462,969     $ 511,249  

Non-current liabilities:

    

Deferred revenue

   $ 76,703     $ 71,596  

Deferred income taxes

     87,312       13,084  

Other long term liabilities

     865       924  

Long-term debt

     1,323,349       269,988  

Long-term income taxes payable

     125,999       138,102  
  

 

 

   

 

 

 

Total non-current liabilities

   $ 1,614,228     $ 493,694  
  

 

 

   

 

 

 

Total liabilities

   $ 2,077,197     $ 1,004,943  
  

 

 

   

 

 

 

STOCKHOLDERS’ EQUITY:

    

Common stock

   $ 573     $ 571  

Additional paid-in capital

     1,476,099       1,450,821  

Retained earnings

     2,420,731       2,432,328  

Treasury stock

     (1,623,256     (1,600,412

Accumulated other comprehensive income

     (252,818     (224,328
  

 

 

   

 

 

 

Total stockholders’ equity

   $ 2,021,329     $ 2,058,980  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 4,098,526     $ 3,063,923  
  

 

 

   

 

 

 

 

– More –


RMD Third Quarter 2019 Earnings Press Release – May 2, 2019    Page 7 of 9

 

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited; $ in thousands)

 

     Nine Months Ended  
     March 31,
2019
    March 31,
2018
 

Cash flows from operating activities:

    

Net income

   $ 335,791     $ 205,777  

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

    

Depreciation and amortization

     108,203       88,256  

Loss attributable to equity method investments

     9,371       —    

Stock-based compensation costs

     37,856       35,933  

Impairment of equity investments

     8,801       3,620  

Changes in fair value of business combination contingent consideration

     (272     383  

Gain on previously held equity interest

     (1,909     —    

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

    

Accounts receivable, net

     (1,482     (39,421

Inventories, net

     (55,002     (11,146

Prepaid expenses, net deferred income taxes and other current assets

     (17,453     (72,332

Accounts payable, accrued expenses and other

     (106,671     164,540  
  

 

 

   

 

 

 

Net cash provided by operating activities

   $ 317,233     $ 375,610  

Cash flows from investing activities:

    

Purchases of property, plant and equipment

     (46,507     (44,961

Patent registration costs

     (6,556     (6,743

Business acquisitions, net of cash acquired

     (951,565     (482

Purchases of cost-method investments

     —         (6,445

Purchases of equity-method investments

     (31,092     —    

Proceeds / (Payments) on maturity of foreign currency contracts

     3,902       (4,667
  

 

 

   

 

 

 

Net cash used in investing activities

   $ (1,031,818   $ (63,298

Cash flows from financing activities:

    

Proceeds from issuance of common stock, net

     15,346       9,603  

Taxes paid related to net share settlement of equity awards

     (27,880     —    

Purchases of treasury stock

     (22,844     (27,897

Payment of business combination contingent consideration

     (648     (205

Proceeds from borrowings, net of borrowing costs

     1,414,230       120,000  

Repayment of borrowings

     (541,394     (390,000

Dividends paid

     (158,592     (149,527
  

 

 

   

 

 

 

Net cash (used in) / provided by financing activities

   $ 678,218     $ (438,026
  

 

 

   

 

 

 

Effect of exchange rate changes on cash

   $ (5,821   $ 8,060  
  

 

 

   

 

 

 

Net increase / (decrease) in cash and cash equivalents

     (42,188     (117,654

Cash and cash equivalents at beginning of period

     188,701       821,935  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 146,513     $ 704,281  
  

 

 

   

 

 

 

 

– More –


RMD Third Quarter 2019 Earnings Press Release – May 2, 2019    Page 8 of 9

 

RESMED INC. AND SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures

(Unaudited; $ in thousands, except for per share amounts)

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

 

     Three Months Ended      Nine Months Ended  
     March 31,
2019
     March 31,
2018
     March 31,
2019
     March 31,
2018
 

GAAP income from operations

   $ 156,977      $ 136,373      $ 458,187      $ 394,947  

Amortization of acquired intangible assets (A)

     22,794        11,673        51,501        34,772  

Deferred revenue fair value adjustment (A)

     2,254        —          4,283        —    

Restructuring expenses (A)

     —          10,922        —          10,922  

Acquisition related expenses (A)

     —          —          6,123        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP income from operations

   $ 182,025      $ 158,968      $ 520,094      $ 440,641  
  

 

 

    

 

 

    

 

 

    

 

 

 
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,
2019
     March 31,
2018
     March 31,
2019
     March 31,
2018
 

GAAP net income

   $ 105,416      $ 110,125      $ 335,791      $ 205,777  

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

     17,588        8,483        39,846        25,260  

Deferred revenue fair value adjustment, net of tax (A)

     1,727        —          3,281        —    

U.S. tax reform

     3,327        5,621        4,505        132,224  

Acquisition related expenses (A)

     —          —          5,362        —    

Restructuring expenses, net of tax (A)

     —          8,316        —          8,316  
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP net income (A)

   $ 128,058      $ 132,545      $ 388,785      $ 371,577  
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted shares outstanding

     144,333        143,985        144,344        143,895  

GAAP diluted earnings per share

   $ 0.73      $ 0.76      $ 2.33      $ 1.43  

Non-GAAP diluted earnings per share (A)

   $ 0.89      $ 0.92      $ 2.69      $ 2.58  

 

(A)

ResMed adjusts for the impact of the amortization of acquired intangibles, deferred revenue fair value adjustment, the impact of U.S. tax reform on income tax expense, acquisition-related expenses, and restructuring-related expenses 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.

 

– More –


RMD Third Quarter 2019 Earnings Press Release – May 2, 2019    Page 9 of 9

 

RESMED INC. AND SUBSIDIARIES

Revenue by Product and Region

(Unaudited; $ in thousands, except for per share amounts)

 

     Three Months Ended  
     March 31,
2019
     March 31,
2018
     % Change     Constant
Currency (A)
 

U.S., Canada and Latin America

          

Devices

   $ 181.3      $ 168.1        8  

Masks and other

     168.7        149.4        13    
  

 

 

    

 

 

    

 

 

   

Total Sleep and Respiratory Care

   $ 350.0      $ 317.5        10    

Software as a Service

     79.9        39.9        101    
  

 

 

    

 

 

    

 

 

   

Total

   $ 429.9      $ 357.4        20    
  

 

 

    

 

 

    

 

 

   

Combined Europe, Asia and other markets

          

Devices

   $ 155.2      $ 160.1        - 3     3

Masks and other

     77.1        74.1        4       12  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total Sleep and Respiratory Care

   $ 232.3      $ 234.2        - 1       6  

Global revenue

          

Devices

   $ 336.5      $ 328.2        3     6

Masks and other

     245.8        223.5        10       13  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total Sleep and Respiratory Care

   $ 582.3      $ 551.7        6       9  

Software as a Service

     79.9        39.9        101       101  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 662.2      $ 591.6        12       15  
  

 

 

    

 

 

    

 

 

   

 

 

 
     Nine Months Ended  
     March 31,
2019
     March 31,
2018
     % Change     Constant
Currency (A)
 

U.S., Canada and Latin America

          

Devices

   $ 540.2      $ 499.7        8  

Masks and other

     494.8        443.7        12    
  

 

 

    

 

 

    

 

 

   

Total Sleep and Respiratory Care

   $ 1,035.0      $ 943.4        10    

Software as a Service

     190.6        116.6        63    
  

 

 

    

 

 

    

 

 

   

Total

   $ 1,225.6      $ 1,060.0        16    
  

 

 

    

 

 

    

 

 

   

Combined Europe, Asia and other markets

          

Devices

   $ 463.0      $ 451.8        2     6

Masks and other

     213.0        204.8        4       9  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total Sleep and Respiratory Care

   $ 676.0      $ 656.6        3       7  

Global revenue

          

Devices

   $ 1,003.2      $ 951.5        5     7

Masks and other

     707.8        648.5        9       11  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total Sleep and Respiratory Care

   $ 1,711.0      $ 1,600.0        7       9  

Software as a Service

     190.6        116.6        63       63  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 1,901.6      $ 1,716.6        11       12  
  

 

 

    

 

 

    

 

 

   

 

 

 

 

(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.

 

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