Year-over-year revenue grows 16%, non-GAAP operating profit up 22%

Balanced growth across product portfolio and global markets

Revenue increased 16% to $681.1 million; up 17% on a constant currency basis

Gross margin expanded 120 bps to 59.5%

Net operating profit increased 19%; non-GAAP operating profit up 22%

GAAP diluted earnings per share of $0.83; non-GAAP diluted earnings per share of $0.93

Revenue

Gross margin

Selling, general and administrative expenses

Research and development expenses

Income from operations

Non-GAAP income from operations ^(B)

Net income

Non-GAAP net income ^(B)

Diluted earnings per share

Non-GAAP diluted earnings per share ^(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.

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

Revenue in the U.S., Canada, and Latin America, excluding Software as a Service, grew by 13 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 8 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 manage their fleets following the completion of their connected device upgrade programs. Device sales outside France and Japan grew well.

Software as a Service revenue increased by 83 percent, compared to the prior year period, due to continued growth in Brightree service offerings and incremental contribution from the acquisition of MatrixCare, which closed in the second quarter of fiscal year 2019.

Gross margin expanded by 120 basis points over the prior year period, primarily due to benefits from manufacturing and procurement efficiencies, and higher margin contribution from MatrixCare.

Selling, general, and administrative expenses increased by 14 percent compared to the prior year period, or by 16 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 24.6 percent of revenue in the quarter, compared with 25.0 percent in the same period of the prior year.

Income from operations increased by 19 percent and non-GAAP income from operations increased by 22 percent compared to the prior year period.

Net income and diluted earnings per share both grew by 14 percent, predominantly attributable to strong sales, particularly in masks, coupled with controlled operating costs compared to the prior year quarter.

Non-GAAP net income grew by 16 percent and non-GAAP diluted earnings per share grew by 15 percent compared with the prior year quarter.

Cash flow from operations for the quarter was $162.4 million, compared to net income in the current quarter of $120.1 million. During the quarter we paid $56.1 million in dividends.

The Lancet Respiratory Medicine published a multinational analysis by ResMed and 12 academic leaders in sleep research indicating more than 936 million people have obstructive sleep apnea.

Completed a $500M private placement debt offering, significantly lengthening average debt maturity profile and providing improved visibility into long-term funding costs. Net proceeds were used to pay down current borrowings on ResMed’s senior unsecured revolving credit facility.

Named Dealmaker of the Year by Medtech Insight, an award that recognizes the company most adept at advancing its business through investment deals. During the entry period (June 2018–June 2019), ResMed announced the acquisition of five companies to advance its mission to help keep millions of people healthy and out of the hospital.

Celebrated 20 years listed on the New York Stock Exchange (NYSE) and 30 years in business by ringing the Opening Bell ^® at the NYSE on its listing anniversary.

Net revenue

Cost of sales

Gross profit

Operating expenses:

Selling, general and administrative

Research and development

Amortization of acquired intangible assets ⁽¹⁾

Total operating expenses

Income from operations ⁽¹⁾

Other income (expenses), net:

Interest income (expense), net

Loss attributable to equity method investments

Other, net

Total other income (expenses), net

Income before income taxes

Income taxes

Net income

Basic earnings per share

Diluted earnings per share

Non-GAAP diluted earnings per share ⁽¹⁾

Basic shares outstanding

Diluted shares outstanding

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

ASSETS

Current assets:

Cash and cash equivalents

Accounts receivable, net

Inventories

Prepayments and other current assets

Total current assets

Non-current assets:

Property, plant and equipment, net

Operating lease right-of-use assets

Goodwill and other intangibles, net

Deferred income taxes and other non-current assets

Total non-current assets

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY:

Current liabilities:

Accounts payable

Accrued expenses

Operating lease liabilities, current

Deferred revenue

Income taxes payable

Short-term debt

Total current liabilities

Non-current liabilities:

Deferred revenue

Deferred income taxes

Operating lease liabilities, non current

Other long term liabilities

Long-term debt

Long-term income taxes payable

Total non-current liabilities

Total liabilities

STOCKHOLDERS’ EQUITY:

Common stock

Additional paid-in capital

Retained earnings

Treasury stock

Accumulated other comprehensive income

Total stockholders’ equity

Total liabilities and stockholders’ equity

Cash flows from operating activities:

Net income

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

Depreciation and amortization

Amortization of right-of-use-assets

Stock-based compensation costs

Loss attributable to equity method investments

Impairment of equity investments

Changes in fair value of business combination contingent consideration

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

Accounts receivable, net

Inventories, net

Prepaid expenses, net deferred income taxes and other current assets

Accounts payable, accrued expenses and other

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of property, plant and equipment

Patent registration costs

Business acquisitions, net of cash acquired

Purchases of investments

Proceeds / (Payments) on maturity of foreign currency contracts

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from issuance of common stock, net

Taxes paid related to net share settlement of equity awards

Purchases of treasury stock

Payment of business combination contingent consideration

Proceeds from borrowings, net of borrowing costs

Repayment of borrowings

Dividends paid

Net cash (used in) / provided by financing activities

Effect of exchange rate changes on cash

Net increase / (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

GAAP income from operations

Amortization of acquired intangible assets ^(A)

Deferred revenue fair value adjustment ^(A)

Non-GAAP income from operations

GAAP net income

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

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

U.S. tax reform

Non-GAAP net income ^(A)

Diluted shares outstanding

GAAP diluted earnings per share

Non-GAAP diluted earnings per share ^(A)

ResMed adjusts for the impact of the amortization of acquired intangibles and deferred revenue fair value adjustment, 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.

U.S., Canada and Latin America

Devices

Masks and other

Total Sleep and Respiratory Care

Software as a Service

Total

Combined Europe, Asia and other markets

Devices

Masks and other

Total Sleep and Respiratory Care

Global revenue

Devices

Masks and other

Total Sleep and Respiratory Care

Software as a Service

Total

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.