Revenue increased 9% to $770.3 million; up 10% on a constant currency basis

GAAP gross margin of 58.3%; non-GAAP gross margin expanded 60 bps to 59.9%

Net operating profit increased 84%; non-GAAP operating profit up 24%

GAAP diluted earnings per share of $1.22; non-GAAP diluted earnings per share of $1.33

Revenue increased 13% to $3.0 billion; up 15% on a constant currency basis

GAAP gross margin of 58.1%; non-GAAP gross margin expanded 80 bps to 59.8%

Net operating profit increased 40%; non-GAAP operating profit up 24%

GAAP diluted earnings per share of $4.27; non-GAAP diluted earnings per share of $4.76

Revenue

Gross margin ^(B)

Non-GAAP gross margin ^(B)

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)

Revenue

Gross margin ^(B)

Non-GAAP gross margin ^(B)

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 4 percent, driven by strong sales across our mask product portfolio and increased demand for our ventilators due to COVID-19, partially offset by a decrease in demand for our sleep devices.

Revenue in combined Europe, Asia, and other markets grew by 22 percent on a constant currency basis, primarily driven by sales across our device product portfolio, including increased demand for our ventilators due to COVID-19.

Software as a Service revenue increased by 7 percent, due to continued growth in resupply service offerings and stabilizing patient flow in out-of-hospital care settings.

Gross margin expanded by 120 basis points while non-GAAP gross margin expanded by 60 basis points. These expansions were primarily due to benefits from product mix changes, partially offset by declines in manufacturing and procurement efficiencies driven by higher air freight costs.

Selling, general, and administrative expenses decreased by 4 percent or consistent on a constant currency basis. SG&A expenses improved to 21.5 percent of revenue in the quarter, compared with 24.3 percent in the same period of the prior year. These changes in SG&A expenses were mainly due to savings in travel and other cost management as a result of the COVID-19 pandemic.

Income from operations increased by 84 percent and non-GAAP income from operations increased by 24 percent.

Net income grew by 158 percent and diluted earnings per share grew by 154 percent, largely attributable to the impact of legal settlement expenses in the prior year. Non-GAAP net income grew by 40 percent and non-GAAP diluted earnings per share grew by 40 percent, predominantly attributable to strong ventilator device sales and controlled operating costs.

Cash flow from operations for the quarter was $330.3 million, compared to net income in the current quarter of $177.8 million. During the quarter we paid $56.5 million in dividends.

Accelerated the launch of cloud-based remote monitoring software for ventilators and Lumis devices across Europe, via the AirView platform. Through the new release, clinicians and care providers can remotely monitor patients’ respiratory rate and blood oxygen saturation, two key indicators to track changes in a respiratory patient’s condition.

Launched ResMed MaskSelector, a digital tool to make remote patient mask selection and sizing easier and more effective, helping patients receive the care they need from home. ResMed MaskSelector creates personalized ResMed mask recommendations based on a patient’s sleep attributes and facial measurements enabling HMEs to support patients when they can’t physically set them due to physical distancing.

Net revenue

Cost of sales

Amortization of acquired intangibles ⁽¹⁾

Total cost of sales

Gross profit

Selling, general and administrative

Research and development

Amortization of acquired intangibles ⁽¹⁾

Restructuring expenses ⁽¹⁾

Litigation settlement expenses ⁽¹⁾

Acquisition-related expenses ⁽¹⁾

Total operating expenses

Income from operations

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

Gain on previously held equity interest

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

Revenue

Add back: Deferred revenue fair value adjustment ^(A)

Non-GAAP Revenue

GAAP Cost of sales

Less: Amortization of acquired intangibles ^(A)

Non-GAAP cost of sales

GAAP gross profit

GAAP gross margin

Non-GAAP gross profit

Non-GAAP gross margin

GAAP income from operations

Amortization of acquired intangibles - cost of sales ^(A)

Amortization of acquired intangibles - operating expenses ^(A)

Deferred revenue fair value adjustment ^(A)

Restructuring expenses ^(A)

Litigation settlement expenses ^(A)

Acquisition related expenses ^(A)

Non-GAAP income from operations

GAAP net income

Amortization of acquired intangibles - cost of sales, net of tax ^(A)

Amortization of acquired intangibles - operating expenses, net of tax ^(A)

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

Restructuring expenses, net of tax ^(A)

Litigation settlement expenses, net of tax ^(A)

Fair value impairment of investment ^(A)

U.S. tax reform

Acquisition-related expenses ^(A)

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, deferred revenue fair value adjustment, restructuring expenses, litigation settlement expenses, fair value impairment of investment, the impact of U.S. tax reform on income tax expense and acquisition-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.

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

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

Totals and subtotals may not add due to rounding.

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.