- Year-over-year revenue grows 16%, non-GAAP operating profit up
22%
- Balanced growth across product portfolio and global
markets
Note: A webcast of ResMed’s conference call will be available at
4:30 p.m. ET today at http://investor.resmed.com
ResMed Inc. (NYSE: RMD, ASX: RMD), a world-leading connected
health company, today announced results for its quarter ended
September 30, 2019.
First Quarter 2020 Highlights
- 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
“Our global ResMed team delivered another quarter of strong
performance in the first quarter of fiscal year 2020 with
double-digit topline revenue growth, balanced growth across our
businesses and regions, and further improvements in operating
leverage resulting in double-digit growth at the bottom line,” said
Mick Farrell, ResMed’s CEO. “We were particularly pleased that
strong customer demand for our new products drove high-teens growth
in the mask category during the quarter. Through organic growth and
targeted acquisitions, we’re driving forward every facet of our
business, leading the innovation of devices and software that
improve health outcomes, create efficiencies, and reduce overall
healthcare system costs. We’re well on our way to improving 250
million lives in out-of-hospital healthcare in 2025.”
Financial Results and Operating
Metrics
Unaudited; $ in millions, except for per
share amounts
Three Months Ended
September 30, 2019
September 30, 2018
% Change
Constant Currency (A)
Revenue
$
681.1
$
588.3
16
%
17
%
Gross margin
59.5
%
58.3
%
2
Selling, general and administrative
expenses
167.4
147.3
14
16
Research and development expenses
48.0
38.8
24
27
Income from operations
171.1
144.1
19
Non-GAAP income from operations (B)
191.0
157.0
22
Net income
120.1
105.7
14
Non-GAAP net income (B)
135.4
116.3
16
Diluted earnings per share
$
0.83
$
0.73
14
Non-GAAP diluted earnings per share
(B)
$
0.93
$
0.81
15
(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
- 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.
Other Business and Operational Highlights
- 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.
Dividend program
The ResMed board of directors today declared a quarterly cash
dividend of $0.39 per share. The dividend will have a record date
of November 7, 2019, payable on December 12, 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 November
6, 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 November 6, 2019, through
November 7, 2019, inclusive.
Webcast details
ResMed will discuss its first quarter fiscal year 2020 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 2020 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 1076268. The telephone replay will be available until
November 7, 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.
RESMED INC. AND
SUBSIDIARIES
Condensed Consolidated Statements of
Income
(Unaudited; $ in thousands, except for per
share amounts)
Three Months Ended
September 30, 2019
September 30, 2018
Net revenue
$
681,056
$
588,279
Cost of sales
276,001
245,186
Gross profit
$
405,055
$
343,093
Operating expenses:
Selling, general and administrative
167,440
147,303
Research and development
48,033
38,791
Amortization of acquired intangible assets
(1)
18,480
12,867
Total operating expenses
$
233,953
$
198,961
Income from operations (1)
171,102
144,132
Other income (expenses), net:
Interest income (expense), net
$
(10,543)
$
(2,786)
Loss attributable to equity method
investments
(6,863)
-
Other, net
(3,109)
(2,465)
Total other income (expenses), net
(20,515)
(5,251)
Income before income taxes
$
150,587
$
138,881
Income taxes
30,439
33,144
Net income
$
120,148
$
105,737
Basic earnings per share
$
0.84
$
0.74
Diluted earnings per share
$
0.83
$
0.73
Non-GAAP diluted earnings per share
(1)
$
0.93
$
0.81
Basic shares outstanding
143,719
142,668
Diluted shares outstanding
145,099
144,030
(1) See the reconciliation of non-GAAP
financial measures in the table at the end of the press
release.
RESMED INC. AND
SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(Unaudited; $ in thousands)
September 30, 2019
June 30, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
172,154
$
147,128
Accounts receivable, net
493,836
528,484
Inventories
357,033
349,641
Prepayments and other current assets
138,075
120,113
Total current assets
$
1,161,098
$
1,145,366
Non-current assets:
Property, plant and equipment, net
$
382,970
$
387,460
Operating lease right-of-use assets
81,650
-
Goodwill and other intangibles, net
2,353,274
2,378,399
Deferred income taxes and other
non-current assets
175,566
196,457
Total non-current assets
$
2,993,460
$
2,962,316
Total assets
$
4,154,558
$
4,107,682
LIABILITIES AND STOCKHOLDERS’
EQUITY:
Current liabilities:
Accounts payable
$
109,742
$
115,725
Accrued expenses
231,253
266,359
Operating lease liabilities, current
19,548
-
Deferred revenue
86,954
88,667
Income taxes payable
90,968
73,248
Short-term debt
11,992
11,992
Total current liabilities
$
550,457
$
555,991
Non-current liabilities:
Deferred revenue
$
82,668
$
81,143
Deferred income taxes
15,177
11,380
Operating lease liabilities, non
current
65,838
-
Other long term liabilities
2,047
2,058
Long-term debt
1,208,210
1,258,861
Long-term income taxes payable
112,910
126,056
Total non-current liabilities
$
1,486,850
$
1,479,498
Total liabilities
$
2,037,307
$
2,035,489
STOCKHOLDERS’ EQUITY:
Common stock
$
575
$
575
Additional paid-in capital
1,530,011
1,511,473
Retained earnings
2,500,506
2,436,410
Treasury stock
(1,623,256)
(1,623,256)
Accumulated other comprehensive income
(290,585)
(253,009)
Total stockholders’ equity
$
2,117,251
$
2,072,193
Total liabilities and stockholders'
equity
$
4,154,558
$
4,107,682
RESMED INC. AND
SUBSIDIARIES
Condensed Consolidated Statements of
Cash Flows
(Unaudited; $ in thousands)
Three Months Ended
September 30, 2019
September 30, 2018
Cash flows from operating
activities:
Net income
$
120,148
$
105,737
Adjustment to reconcile net income to cash
provided by operating activities:
Depreciation and amortization
37,954
30,424
Amortization of right-of-use-assets
5,963
-
Stock-based compensation costs
13,256
12,477
Loss attributable to equity method
investments
6,863
-
Impairment of equity investments
2,590
1,711
Changes in fair value of business
combination contingent consideration
(8)
(183)
Changes in operating assets and
liabilities, net of effect of acquisitions:
Accounts receivable, net
28,286
20,342
Inventories, net
(14,204)
(15,661)
Prepaid expenses, net deferred income
taxes and other current assets
(8,407)
(7,703)
Accounts payable, accrued expenses and
other
(30,078)
(99,025)
Net cash provided by operating
activities
$
162,363
$
48,119
Cash flows from investing
activities:
Purchases of property, plant and
equipment
(22,671)
(12,994)
Patent registration costs
(2,069)
(2,611)
Business acquisitions, net of cash
acquired
-
(126,439)
Purchases of investments
(2,741)
(2,467)
Proceeds / (Payments) on maturity of
foreign currency contracts
(5,743)
(3,678)
Net cash used in investing activities
$
(33,224)
$
(148,189)
Cash flows from financing
activities:
Proceeds from issuance of common stock,
net
5,609
513
Taxes paid related to net share settlement
of equity awards
(326)
(124)
Purchases of treasury stock
-
(19,399)
Payment of business combination contingent
consideration
(302)
(240)
Proceeds from borrowings, net of borrowing
costs
565,000
303,000
Repayment of borrowings
(614,003)
(86,133)
Dividends paid
(56,052)
(52,793)
Net cash (used in) / provided by financing
activities
$
(100,074)
$
144,824
Effect of exchange rate changes on
cash
$
(4,039)
$
(3,267)
Net increase / (decrease) in cash and cash
equivalents
25,026
41,487
Cash and cash equivalents at beginning of
period
147,128
188,701
Cash and cash equivalents at end of
period
$
172,154
$
230,188
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
September 30, 2019
September 30, 2018
GAAP income from operations
$
171,102
$
144,132
Amortization of acquired intangible assets
(A)
18,480
12,867
Deferred revenue fair value adjustment
(A)
1,445
-
Non-GAAP income from operations
$
191,027
$
156,999
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, 2019
September 30, 2018
GAAP net income
$
120,148
$
105,737
Amortization of acquired intangible
assets, net of tax (A)
14,122
9,987
Deferred revenue fair value adjustment,
net of tax (A)
1,107
-
U.S. tax reform
-
534
Non-GAAP net income (A)
$
135,377
$
116,258
Diluted shares outstanding
145,099
144,030
GAAP diluted earnings per share
$
0.83
$
0.73
Non-GAAP diluted earnings per share
(A)
$
0.93
$
0.81
(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.
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.
RESMED INC. AND
SUBSIDIARIES
Revenue by Product and Region
(Unaudited; $ in thousands, except for per
share amounts)
Three Months Ended
September 30, 2019
September 30, 2018
% Change
Constant Currency (A)
U.S., Canada and Latin America
Devices
$
186.9
$
172.4
8
%
Masks and other
183.4
154.0
19
Total Sleep and Respiratory Care
$
370.3
$
326.4
13
Software as a Service
86.9
47.5
83
Total
$
457.2
$
373.9
22
Combined Europe, Asia and other
markets
Devices
$
151.9
$
151.7
0
%
4
%
Masks and other
72.0
62.7
15
19
Total Sleep and Respiratory Care
$
223.9
$
214.4
4
8
Global revenue
Devices
$
338.8
$
324.1
5
%
6
%
Masks and other
255.4
216.7
18
19
Total Sleep and Respiratory Care
$
594.2
$
540.8
10
11
Software as a Service
86.9
47.5
83
83
Total
$
681.1
$
588.3
16
17
(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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191024005717/en/
For investors Amy Wakeham +1 858-836-5000
investorrelations@resmed.com
For media Jayme Rubenstein +1 858-836-6798
news@resmed.com
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