- Year-over-year revenue grows 9%, operating
profit up 12%, non-GAAP operating profit up 16%
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 digital
health company, today announced results for its quarter ended
December 31, 2020.
Second Quarter 2021 Highlights
All comparisons are to the prior year period
- Revenue increased 9% to $800.0 million; up 7% on a constant
currency basis
- GAAP gross margin of 57.8%; non-GAAP gross margin expanded 20
bps to 59.9%
- Net operating profit increased 12%; non-GAAP operating profit
up 16%
- GAAP diluted earnings per share of $1.23; non-GAAP diluted
earnings per share of $1.41
“Our second-quarter results reflect continued solid performance
and positive trends across our business resulting in top-line
growth as well as double-digit improvement in operating income and
earnings per share,” said Mick Farrell, ResMed CEO. “In our core
markets of sleep apnea, COPD, and asthma, we are seeing continued
sequential improvement in new patient volume and ongoing adoption
of our mask and accessories resupply programs. Our global teams
have managed SG&A investments judiciously as we navigate
through the global pandemic. We have seen great adoption of digital
health and an increase in the importance of out-of-hospital
healthcare these last 12 months, and that will only expand
throughout 2021 as vaccines become more widely available, and our
communities open up worldwide. We have continued to invest in
focused R&D programs in digital health and core medtech
innovation, to help accelerate our ResMed growth strategy:
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
December 31, 2020
December 31, 2019
% Change
Constant Currency (A)
Revenue
$
800.0
$
736.2
9
%
7
%
Gross margin (B)
57.8
%
58.0
%
(0
)
Non-GAAP gross margin (B)
59.9
%
59.7
%
0
Selling, general, and administrative
expenses
169.5
171.4
(1
)
(3
)
Research and development expenses
54.9
49.9
10
7
Income from operations
221.7
197.8
12
Non-GAAP income from operations (B)
254.5
218.5
16
Net income
179.5
160.6
12
Non-GAAP net income (B)
206.4
176.3
17
Diluted earnings per share
$
1.23
$
1.10
12
Non-GAAP diluted earnings per share
(B)
$
1.41
$
1.21
17
Six Months Ended
December 31, 2020
December 31, 2019
% Change
Constant Currency (A)
Revenue
$
1,552.0
$
1,417.2
10
%
8
%
Gross margin (B)
58.1
%
57.8
%
1
Non-GAAP gross margin (B)
59.9
%
59.6
%
1
Selling, general, and administrative
expenses
328.5
338.9
(3
)
(5
)
Research and development expenses
109.5
98.0
12
9
Income from operations
438.6
368.9
19
Non-GAAP income from operations (B)
491.6
409.5
20
Net income
357.9
280.7
27
Non-GAAP net income (B)
391.8
311.7
26
Diluted earnings per share
$
2.45
$
1.93
27
Non-GAAP diluted earnings per share
(B)
$
2.68
$
2.14
25
(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 Second Quarter Results
All comparisons are to the prior year period unless otherwise
noted
- Revenue in the U.S., Canada, and Latin America, excluding
Software as a Service, grew by 5 percent, driven by strong sales
across our mask product portfolio.
- Revenue in Europe, Asia, and other markets grew by 10 percent
on a constant currency basis, primarily driven by sales across our
device and mask product portfolio.
- Software as a Service revenue increased by 6 percent, due to
continued growth in resupply service offerings and stabilizing
patient flow in out-of-hospital care settings.
- Gross margin contracted by 20 basis points mainly due to
restructuring expenses associated with the cessation of our
portable oxygen concentrator business. Non-GAAP gross margin
expanded by 20 basis points, mainly due to benefits from
manufacturing efficiencies, product mix changes, and foreign
exchange rates, partially offset by declines in average selling
prices.
- Selling, general, and administrative expenses decreased by 3
percent on a constant currency basis. SG&A expenses improved to
21.2 percent of revenue in the quarter, compared with 23.3 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 12 percent and non-GAAP
income from operations increased by 16 percent.
- Net income grew by 12 percent and diluted earnings per share
grew by 12 percent. Non-GAAP net income grew by 17 percent and
non-GAAP diluted earnings per share grew by 17 percent,
predominantly attributable to strong sales and controlled operating
costs.
- Cash flow from operations for the quarter was $169.9 million,
compared to net income in the current quarter of $179.5 million.
During the quarter we paid $56.7 million in dividends.
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 February 11, 2021, payable on March 18, 2021. 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 February
10, 2021, 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 February 10, 2021, through
February 11, 2021, inclusive.
Webcast details
ResMed will discuss its second quarter fiscal year 2021 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 “Q2 2021 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
800-585-8367 (U.S.) or +1 416-621-4642 (outside U.S.) and entering
the passcode 4291663. The telephone replay will be available until
February 11, 2021.
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.
RESMED INC. AND
SUBSIDIARIES
Condensed Consolidated
Statements of Income
(Unaudited; $ in thousands,
except for per share amounts)
Three Months Ended
Six Months Ended
December 31, 2020
December 31, 2019
December 31, 2020
December 31, 2019
Net revenue
$
800,011
$
736,157
$
1,551,955
$
1,417,213
Cost of sales
321,132
296,975
622,436
572,976
Amortization of acquired intangibles
(1)
11,164
12,052
23,143
25,488
Restructuring - cost of sales (1)
5,232
-
5,232
-
Total cost of sales
$
337,528
$
309,027
$
650,811
$
598,464
Gross profit
$
462,483
$
427,130
$
901,144
$
818,749
Selling, general, and administrative
169,470
171,422
328,459
338,862
Research and development
54,935
49,943
109,468
97,976
Amortization of acquired intangibles
(1)
7,689
8,556
15,932
13,599
Restructuring - operating expenses (1)
8,673
-
8,673
-
Litigation settlement expenses (1)
-
(600
)
-
(600
)
Total operating expenses
$
240,767
$
229,321
$
462,532
$
449,837
Income from operations
221,716
197,809
438,612
368,912
Other income (expenses), net:
Interest income (expense), net
$
(5,792
)
$
(10,018
)
$
(12,517
)
$
(20,562
)
Loss attributable to equity method
investments
(2,640
)
(6,924
)
(4,928
)
(13,786
)
Other, net
(2,692
)
(2,115
)
5,279
(5,225
)
Total other income (expenses), net
(11,124
)
(19,057
)
(12,166
)
(39,573
)
Income before income taxes
$
210,592
$
178,752
$
426,446
$
329,339
Income taxes
31,078
18,198
68,560
48,637
Net income
$
179,514
$
160,554
$
357,886
$
280,702
Basic earnings per share
$
1.24
$
1.11
$
2.47
$
1.95
Diluted earnings per share
$
1.23
$
1.10
$
2.45
$
1.93
Non-GAAP diluted earnings per share
(1)
$
1.41
$
1.21
$
2.68
$
2.14
Basic shares outstanding
145,246
144,212
145,053
143,966
Diluted shares outstanding
146,421
145,575
146,350
145,479
(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)
December 31, 2020
June 30, 2020
ASSETS
Current assets:
Cash and cash equivalents
$
255,865
$
463,156
Accounts receivable, net
509,364
474,643
Inventories
474,821
416,915
Prepayments and other current assets
211,435
168,745
Total current assets
$
1,451,485
$
1,523,459
Non-current assets:
Property, plant, and equipment, net
$
459,472
$
417,335
Operating lease right-of-use assets
131,291
118,348
Goodwill and other intangibles, net
2,323,490
2,338,492
Deferred income taxes and other
non-current assets
207,118
189,742
Total non-current assets
$
3,121,371
$
3,063,917
Total assets
$
4,572,856
$
4,587,376
LIABILITIES AND STOCKHOLDERS’
EQUITY:
Current liabilities:
Accounts payable
$
122,166
$
135,786
Accrued expenses
280,332
270,353
Operating lease liabilities, current
22,445
21,263
Deferred revenue
105,238
98,617
Income taxes payable
35,166
64,755
Short-term debt
11,988
11,987
Total current liabilities
$
577,335
$
602,761
Non-current liabilities:
Deferred revenue
$
86,899
$
87,307
Deferred income taxes
12,733
13,011
Operating lease liabilities,
non-current
117,641
101,880
Other long term liabilities
9,481
8,347
Long-term debt
813,732
1,164,133
Long-term income taxes payable
90,051
112,910
Total non-current liabilities
$
1,130,537
$
1,487,588
Total liabilities
$
1,707,872
$
2,090,349
STOCKHOLDERS’ EQUITY:
Common stock
$
582
$
580
Additional paid-in capital
1,574,240
1,570,694
Retained earnings
3,076,569
2,832,991
Treasury stock
(1,623,256
)
(1,623,256
)
Accumulated other comprehensive income
(163,151
)
(283,982
)
Total stockholders’ equity
$
2,864,984
$
2,497,027
Total liabilities and stockholders'
equity
$
4,572,856
$
4,587,376
RESMED INC. AND
SUBSIDIARIES
Condensed Consolidated Statements of
Cash Flows
(Unaudited; $ in thousands)
Six Months Ended
December 31, 2020
December 31, 2019
Cash flows from operating
activities:
Net income
$
357,886
$
280,702
Adjustment to reconcile net income to cash
provided by operating activities:
Depreciation and amortization
80,046
77,077
Amortization of right-of-use assets
17,911
12,323
Stock-based compensation costs
31,441
27,309
Loss attributable to equity method
investments
4,928
13,786
(Gain) loss on equity investment
(4,776
)
5,419
Restructuring expenses
8,673
-
Changes in fair value of business
combination contingent consideration
500
(7
)
Changes in operating assets and
liabilities:
Accounts receivable, net
(19,259
)
(275
)
Inventories, net
(34,212
)
(28,294
)
Prepaid expenses, net deferred income
taxes, and other current assets
(29,875
)
(66,818
)
Accounts payable, accrued expenses, and
other
(99,348
)
(88,927
)
Net cash provided by operating
activities
$
313,915
$
232,295
Cash flows from investing
activities:
Purchases of property, plant, and
equipment
(48,443
)
(47,771
)
Patent registration costs
(8,367
)
(4,871
)
Business acquisitions, net of cash
acquired
(437
)
(3,423
)
Purchases of investments
(14,446
)
(21,841
)
Proceeds / (Payments) on maturity of
foreign currency contracts
19,922
1,064
Net cash used in investing activities
$
(51,771
)
$
(76,842
)
Cash flows from financing
activities:
Proceeds from issuance of common stock,
net
18,614
24,297
Taxes paid related to net share settlement
of equity awards
(46,507
)
(41,091
)
Payment of business combination contingent
consideration
-
(302
)
Proceeds from borrowings, net of borrowing
costs
55,000
730,000
Repayment of borrowings
(406,000
)
(700,012
)
Dividends paid
(113,165
)
(112,202
)
Net cash used in financing activities
$
(492,058
)
$
(99,310
)
Effect of exchange rate changes on
cash
$
22,623
$
824
Net increase / (decrease) in cash and cash
equivalents
(207,291
)
56,967
Cash and cash equivalents at beginning of
period
463,156
147,128
Cash and cash equivalents at end of
period
$
255,865
$
204,095
RESMED INC. AND
SUBSIDIARIES
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” excludes amortization expense from acquired
intangibles related to cost of sales and are reconciled below:
Three Months Ended
Six Months Ended
December 31, 2020
December 31, 2019
December 31, 2020
December 31, 2019
Revenue
$
800,011
$
736,157
$
1,551,955
$
1,417,213
Add back: Deferred revenue fair value
adjustment (A)
-
657
-
2,102
Non-GAAP Revenue
$
800,011
$
736,814
$
1,551,955
$
1,419,315
GAAP Cost of sales
$
337,528
$
309,027
$
650,811
$
598,464
Less: Amortization of acquired intangibles
(A)
(11,164
)
(12,052
)
(23,143
)
(25,488
)
Less: Restructuring - cost of sales
(A)
(5,232
)
-
(5,232
)
-
Non-GAAP cost of sales
$
321,132
$
296,975
$
622,436
$
572,976
GAAP gross profit
$
462,483
$
427,130
$
901,144
$
818,749
GAAP gross margin
57.8
%
58.0
%
58.1
%
57.8
%
Non-GAAP gross profit
$
478,879
$
439,839
$
929,519
$
846,339
Non-GAAP gross margin
59.9
%
59.7
%
59.9
%
59.6
%
The measure “non-GAAP income from operations” is reconciled with
GAAP income from operations below:
Three Months Ended
Six Months Ended
December 31, 2020
December 31, 2019
December 31, 2020
December 31, 2019
GAAP income from operations
$
221,716
$
197,809
$
438,612
$
368,912
Amortization of acquired intangibles -
cost of sales (A)
11,164
12,052
23,143
25,488
Amortization of acquired intangibles -
operating expenses (A)
7,689
8,556
15,932
13,599
Restructuring - cost of sales (A)
5,232
-
5,232
-
Restructuring - operating expenses (A)
8,673
-
8,673
-
Deferred revenue fair value adjustment
(A)
-
657
-
2,102
Litigation settlement expenses (A)
-
(600
)
-
(600
)
Non-GAAP income from operations
$
254,474
$
218,474
$
491,592
$
409,501
RESMED INC. AND
SUBSIDIARIES
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
Six Months Ended
December 31, 2020
December 31, 2019
December 31, 2020
December 31, 2019
GAAP net income
$
179,514
$
160,554
$
357,886
$
280,702
Amortization of acquired intangibles -
cost of sales, net of tax (A)
8,566
9,210
17,742
19,478
Amortization of acquired intangibles -
operating expenses, net of tax (A)
5,900
6,538
12,214
10,392
Restructuring - cost of sales, net of tax
(A)
4,663
-
4,663
-
Restructuring - operating expenses, net of
tax (A)
7,730
-
7,730
-
Deferred revenue fair value adjustment,
net of tax (A)
-
503
-
1,610
Litigation settlement expenses, net of tax
(A)
-
(528
)
-
(528
)
(Gain) loss on equity investments (A)
-
-
(8,476
)
-
Non-GAAP net income (A)
$
206,373
$
176,277
$
391,759
$
311,654
Diluted shares outstanding
146,421
145,575
146,350
145,479
GAAP diluted earnings per share
$
1.23
$
1.10
$
2.45
$
1.93
Non-GAAP diluted earnings per share
(A)
$
1.41
$
1.21
$
2.68
$
2.14
(A)
ResMed adjusts for the impact of the
amortization of acquired intangibles, restructuring expenses,
deferred revenue fair value adjustment, litigation settlement
expenses, and the (gain) loss on equity investments 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 millions, except for per
share amounts)
Three Months Ended
December 31, 2020 (A)
December 31, 2019 (A)
% Change
Constant Currency (B)
U.S., Canada, and Latin America
Devices
$
205.0
$
203.5
1
%
Masks and other
221.8
204.5
8
Total Sleep and Respiratory Care
$
426.8
$
408.0
5
Software as a Service
91.8
86.7
6
Total
$
518.6
$
494.7
5
Combined Europe, Asia, and other
markets
Devices
$
188.0
$
162.3
16
%
10
%
Masks and other
93.4
79.2
18
12
Total Sleep and Respiratory Care
$
281.4
$
241.5
17
10
Global revenue
Devices
$
393.0
$
365.8
7
%
5
%
Masks and other
315.2
283.7
11
9
Total Sleep and Respiratory Care
$
708.2
$
649.5
9
7
Software as a Service
91.8
86.7
6
6
Total
$
800.0
$
736.2
9
7
Six Months Ended
December 31, 2020 (A)
December 31, 2019 (A)
% Change
Constant Currency (B)
U.S., Canada, and Latin America
Devices
$
402.4
$
390.4
3
%
Masks and other
427.5
387.8
10
Total Sleep and Respiratory Care
$
829.9
$
778.2
7
Software as a Service
184.0
173.6
6
Total
$
1,013.9
$
951.8
7
Combined Europe, Asia, and other
markets
Devices
$
364.0
$
314.2
16
%
11
%
Masks and other
174.0
151.2
15
10
Total Sleep and Respiratory Care
$
538.1
$
465.4
16
10
Global revenue
Devices
$
766.4
$
704.6
9
%
6
%
Masks and other
601.6
539.0
12
10
Total Sleep and Respiratory Care
$
1,368.0
$
1,243.6
10
8
Software as a Service
184.0
173.6
6
6
Total
$
1,552.0
$
1,417.2
10
8
(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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