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ResMed Inc. Announces Results for the Third Quarter of Fiscal Year 2022

·18-min read
ResMed Inc.
ResMed Inc.
  • Year-over-year revenue grows 12%, operating profit up 5%, non-GAAP operating profit up 5%

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, April 28, 2022 (GLOBE NEWSWIRE) -- ResMed Inc. (NYSE: RMD, ASX: RMD) today announced results for its quarter ended March 31, 2022.

Third Quarter 2022 Highlights
All comparisons are to the prior year period

  • Revenue increased by 12% to $864.5 million; up 14% on a constant currency basis

  • Gross margin contracted 140 bps to 56.8%; non-GAAP gross margin contracted 150 bps to 58.1%

  • Income from operations increased 5%; non-GAAP operating profit up 5%

  • Diluted earnings per share of $1.22; non-GAAP diluted earnings per share of $1.32

“Our third-quarter results reflect strong performance across our business, resulting in double-digit top-line revenue growth including extraordinary demand in our sleep and respiratory care business segment as well as solid high-single-digit growth in our software-as-a-service segment,” said Mick Farrell, ResMed CEO. “I am proud of our global team’s ability to pivot and drive continued growth while ongoing supply chain disruptions and a competitor’s recall continue to limit our ability to meet the incredible demand for our products. We remain focused on delivering products, software, and services for patients, working closely with our supply chain partners as well as physicians, providers, and beyond, to prioritize care for patients who most need it.

“While the current industry and macroeconomic environment remain uncertain, our long-term strategy allows us to keep our focus on helping 250 million lives in 2025. Our end-market demand from patients and providers remains strong, and our digital health technologies continue to deliver value. We are supporting patients with the world-leading portfolio of sleep apnea therapy, respiratory care therapy, and digital health solutions they need, as we deliver value for all of our customers.”

Financial Results and Operating Metrics
Unaudited; $ in millions, except for per share amounts

Three Months Ended

March 31,
2022

March 31,
2021

% Change

Constant
Currency (A)

Revenue

$

864.5

$

768.8

12

%

14

%

Gross margin (B)

56.8

%

58.2

%

(2

)

Non-GAAP gross margin (B)

58.1

%

59.6

%

(3

)

Selling, general, and administrative expenses

182.4

160.4

14

17

Research and development expenses

66.8

55.9

19

22

Income from operations

234.3

223.4

5

Non-GAAP income from operations (B)

253.0

241.8

5

Net income (loss)

179.0

(78.5

)

NM

Non-GAAP net income (B)

193.3

190.4

2

Diluted earnings (loss) per share

$

1.22

$

(0.54

)

NM

Non-GAAP diluted earnings per share (B)

$

1.32

$

1.30

2

NM Not meaningful

Nine Months Ended

March 31,
2022

March 31,
2021

% Change

Constant
Currency (A)

Revenue

$

2,663.4

$

2,320.7

15

%

15

%

Gross margin (B)

56.4

%

58.1

%

(3

)

Non-GAAP gross margin (B)

57.6

%

59.8

%

(4

)

Selling, general, and administrative expenses

544.5

488.9

11

13

Research and development expenses

189.3

165.4

14

15

Income from operations

744.9

662.0

13

Non-GAAP income from operations (B)

801.3

733.4

9

Net income

584.4

279.4

109

Non-GAAP net income (B)

631.5

582.2

8

Diluted earnings per share

$

3.97

$

1.91

108

Non-GAAP diluted earnings per share (B)

$

4.30

$

3.98

8

(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 Third Quarter Results
All comparisons are to the prior year period unless otherwise noted

  • Revenue grew by 14 percent on a constant currency basis, driven by increased demand for our sleep and respiratory care devices and increased demand following a recent product recall by one of our competitors.

    • Revenue in the U.S., Canada, and Latin America, excluding software-as-a-service, grew by 18 percent, primarily due to the factors discussed above and recovery of core sleep patient flow that was previously impacted by COVID-19.

    • Revenue in Europe, Asia, and other markets grew by 11 percent on a constant currency basis, primarily due to the factors discussed above.

    • Software-as-a-service revenue increased by 8 percent, due to continued growth in our Durable Medical Equipment category and stabilizing patient flow in out-of-hospital care settings.

  • Gross margin decreased by 140 basis points and non-GAAP gross margin decreased by 150 basis points, mainly due to higher freight and manufacturing costs, partially offset by favorable product mix changes and increase in average selling prices.

  • Selling, general, and administrative expenses increased by 17 percent on a constant currency basis. SG&A expenses increased to 21.1 percent of revenue in the quarter, compared with 20.9 percent in the same period of the prior year. These changes in SG&A expenses were mainly due to increases in employee-related expenses.

  • Income from operations increased by 5 percent and non-GAAP income from operations increased by 5 percent.

  • Net income for the quarter was $179.0 million and diluted earnings per share was $1.22. Non-GAAP net income grew by 2 percent and non-GAAP diluted earnings per share grew by 2 percent, predominantly attributable to strong sales, partially offset by higher operating expenses.

  • Operating cash flow for the quarter was $117.4 million, compared to net income in the current quarter of $179.0 million and non-GAAP net income of $193.3 million. During the quarter we paid $61.4 million in dividends.

Other Business and Operational Highlights

  • Announced appointment of Urvashi Tyagi as new Chief Technology Officer and Bobby Ghoshal transitions to be President of ResMed’s software-as-a-service business segment full-time. Tyagi leads ResMed’s digital health technology team, driving innovation and adoption of world-leading cloud-based digital health platforms and investments in emerging technologies.

  • Published 2022 Global Sleep Surveys as part of National Sleep Awareness Week (March 13-19) and World Sleep Day (March 18). The surveys, conducted in the first quarter of the calendar year, asked nearly 25,000 respondents in 12 countries what’s keeping them up at night; the results aim to build awareness of the critical role good sleep plays in physical and mental health.

Dividend program
The ResMed board of directors today declared a quarterly cash dividend of $0.42 per share. The dividend will have a record date of May 12, 2022, payable on June 16, 2022. 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 May 11, 2022, 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 11, 2022, through May 12, 2022, inclusive.

Webcast details
ResMed will discuss its third-quarter fiscal year 2022 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 2022 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 +1 877-660-6853 (U.S.) or +1 201-612-7415 (outside U.S.) and entering the passcode 13727876. The telephone replay will be available until May 12, 2022.

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.

Condensed Consolidated Statements of Operations
(Unaudited; $ in thousands, except for per share amounts)

Three Months Ended

Nine Months Ended

March 31,
2022

March 31,
2021

March 31,
2022

March 31,
2021

Net revenue

$

864,500

$

768,767

$

2,663,390

$

2,320,722

Cost of sales

362,321

310,585

1,128,314

933,021

Amortization of acquired intangibles (1)

10,982

10,924

33,271

34,066

Restructuring—cost of sales (1)

5,232

Total cost of sales

$

373,303

$

321,509

$

1,161,585

$

972,319

Gross profit

$

491,197

$

447,258

$

1,501,805

$

1,348,403

Selling, general, and administrative

182,401

160,446

544,483

488,904

Research and development

66,801

55,941

189,258

165,409

Amortization of acquired intangibles (1)

7,730

7,445

23,175

23,377

Restructuring—operating expenses (1)

8,673

Total operating expenses

$

256,932

$

223,832

$

756,916

$

686,363

Income from operations

234,265

223,426

744,889

662,040

Other income (expenses), net:

Interest income (expense), net

$

(5,462

)

$

(5,823

)

$

(16,770

)

$

(18,341

)

Loss attributable to equity method investments

(2,627

)

(4,969

)

(5,927

)

(9,895

)

Gain (loss) on equity investments

(1,735

)

4,666

(527

)

9,442

Other, net

1,878

705

729

1,205

Total other income (expenses), net

(7,946

)

(5,421

)

(22,495

)

(17,589

)

Income before income taxes

$

226,319

$

218,005

$

722,394

$

644,451

Income taxes

47,307

296,486

138,018

365,046

Net income (loss)

$

179,012

$

(78,481

)

$

584,376

$

279,405

Basic earnings per share

$

1.22

$

(0.54

)

$

4.00

$

1.92

Diluted earnings per share

$

1.22

$

(0.54

)

$

3.97

$

1.91

Non-GAAP diluted earnings per share (1)

$

1.32

$

1.30

$

4.30

$

3.98

Basic shares outstanding

146,240

145,513

145,969

145,217

Diluted shares outstanding

146,962

145,513

147,034

146,394

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

Condensed Consolidated Balance Sheets
(Unaudited; $ in thousands)

March 31,
2022

June 30,
2021

ASSETS

Current assets:

Cash and cash equivalents

$

201,769

$

295,278

Accounts receivable, net

508,580

614,292

Inventories

664,943

457,033

Prepayments and other current assets

329,008

208,154

Total current assets

$

1,704,300

$

1,574,757

Non-current assets:

Property, plant, and equipment, net

$

513,250

$

463,490

Operating lease right-of-use assets

141,173

128,575

Goodwill and other intangibles, net

2,302,301

2,320,483

Deferred income taxes and other non-current assets

244,240

240,820

Total non-current assets

$

3,200,964

$

3,153,368

Total assets

$

4,905,264

$

4,728,125

LIABILITIES AND STOCKHOLDERS’ EQUITY:

Current liabilities:

Accounts payable

$

149,797

$

138,008

Accrued expenses

326,276

320,599

Operating lease liabilities, current

24,130

23,585

Deferred revenue

112,449

109,611

Income taxes payable

42,646

307,963

Short-term debt

11,967

12,000

Total current liabilities

$

667,265

$

911,766

Non-current liabilities:

Deferred revenue

$

94,094

$

91,496

Deferred income taxes

10,711

11,319

Operating lease liabilities, non-current

127,254

114,779

Other long-term liabilities

5,103

6,802

Long-term debt

668,735

643,351

Long-term income taxes payable

53,298

62,933

Total non-current liabilities

$

959,195

$

930,680

Total liabilities

$

1,626,460

$

1,842,446

STOCKHOLDERS’ EQUITY:

Common stock

$

585

$

583

Additional paid-in capital

1,645,453

1,622,199

Retained earnings

3,480,163

3,079,640

Treasury stock

(1,623,256

)

(1,623,256

)

Accumulated other comprehensive income

(224,141

)

(193,487

)

Total stockholders’ equity

$

3,278,804

$

2,885,679

Total liabilities and stockholders’ equity

$

4,905,264

$

4,728,125

Condensed Consolidated Statements of Cash Flows
(Unaudited; $ in thousands)

Nine months ended

March 31,
2022

March 31,
2021

Cash flows from operating activities:

Net income

$

584,376

$

279,405

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

Depreciation and amortization

122,198

120,034

Amortization of right-of-use assets

26,636

25,805

Stock-based compensation costs

49,265

47,032

Loss attributable to equity method investments

5,927

9,895

(Gain) loss on equity investment

527

(9,442

)

Restructuring expenses

8,673

Changes in operating assets and liabilities:

Accounts receivable, net

98,158

(39,899

)

Inventories, net

(209,476

)

(48,393

)

Prepaid expenses, net deferred income taxes and other current assets

(127,977

)

(41,036

)

Accounts payable, accrued expenses, income taxes payable and other

(277,973

)

158,119

Net cash (used in) / provided by operating activities

$

271,661

$

510,193

Cash flows from investing activities:

Purchases of property, plant, and equipment

(106,192

)

(74,805

)

Patent registration and acquisition costs

(17,449

)

(11,149

)

Business acquisitions, net of cash acquired

(35,915

)

(30,704

)

Purchases of investments

(16,614

)

(20,038

)

Proceeds from sale of investment

6,802

(Payments) / proceeds on maturity of foreign currency contracts

(5,309

)

26,306

Net cash used in investing activities

$

(174,677

)

$

(110,390

)

Cash flows from financing activities:

Proceeds from issuance of common stock, net

26,269

18,759

Taxes paid related to net share settlement of equity awards

(52,278

)

(49,938

)

Payments of business combination contingent consideration

(3,500

)

Proceeds from borrowings, net of borrowing costs

160,000

90,000

Repayment of borrowings

(136,000

)

(536,000

)

Dividends paid

(183,853

)

(169,917

)

Net cash (used in) / provided by financing activities

$

(185,862

)

$

(650,596

)

Effect of exchange rate changes on cash

$

(4,631

)

$

18,272

Net increase / (decrease) in cash and cash equivalents

(93,509

)

(232,521

)

Cash and cash equivalents at beginning of period

295,278

463,156

Cash and cash equivalents at end of period

$

201,769

$

230,635

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” exclude amortization expense from acquired intangibles related to cost of sales and are reconciled below:

Three Months Ended

Nine Months Ended

March 31, 2022

March 31, 2021

March 31, 2022

March 31, 2021

Revenue

$

864,500

$

768,767

$

2,663,390

$

2,320,722

GAAP Cost of sales

$

373,303

$

321,509

$

1,161,585

$

972,319

Less: Amortization of acquired intangibles (A)

(10,982

)

(10,924

)

(33,271

)

(34,066

)

Less: Restructuring—cost of sales (A)

(5,232

)

Non-GAAP cost of sales

$

362,321

$

310,585

$

1,128,314

$

933,021

GAAP gross profit

$

491,197

$

447,258

$

1,501,805

$

1,348,403

GAAP gross margin

56.8

%

58.2

%

56.4

%

58.1

%

Non-GAAP gross profit

$

502,179

$

458,182

$

1,535,076

$

1,387,701

Non-GAAP gross margin

58.1

%

59.6

%

57.6

%

59.8

%

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

Three Months Ended

Nine Months Ended

March 31,
2022

March 31,
2021

March 31,
2022

March 31,
2021

GAAP income from operations

$

234,265

$

223,426

$

744,889

$

662,040

Amortization of acquired intangibles—cost of sales (A)

10,982

10,924

33,271

34,066

Amortization of acquired intangibles—operating expenses (A)

7,730

7,445

23,175

23,377

Restructuring—cost of sales (A)

5,232

Restructuring—operating expenses (A)

8,673

Non-GAAP income from operations

$

252,977

$

241,795

$

801,335

$

733,388

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

Nine Months Ended

March 31,
2022

March 31,
2021

March 31,
2022

March 31,
2021

GAAP net income (loss)

$

179,012

$

(78,481

)

$

584,376

$

279,405

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

8,374

8,395

25,373

26,136

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

5,894

5,721

17,673

17,936

Reserve for disputed tax position(A)

254,776

4,111

254,776

Restructuring—cost of sales, net of tax(A)

4,663

Restructuring—operating expenses, net of tax(A)

7,730

(Gain) loss on equity investments(A)

(8,476

)

Non-GAAP net income(A)

$

193,280

$

190,411

$

631,533

$

582,170

GAAP diluted shares outstanding

146,962

145,513

147,034

146,394

Anti-dilutive shares excluded from GAAP

858

Non-GAAP diluted shares outstanding

146,962

146,371

147,034

146,394

GAAP diluted earnings (loss) per share

$

1.22

$

(0.54

)

$

3.97

$

1.91

Non-GAAP diluted earnings per share(A)

$

1.32

$

1.30

$

4.30

$

3.98

(A) ResMed adjusts for the impact of the amortization of acquired intangibles, reserve for disputed tax positions, restructuring 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.

Revenue by Product and Region
(Unaudited; $ in millions, except for per share amounts)

Three Months Ended

March 31,
2022

(A)

March 31,
2021

(A)

% Change

Constant
Currency (B)

U.S., Canada, and Latin America

Devices

$

250.8

$

192.9

30

%

Masks and other

224.7

210.0

7

Total Sleep and Respiratory Care

$

475.4

$

402.9

18

Software as a Service

101.1

93.8

8

Total

$

576.6

$

496.7

16

Combined Europe, Asia, and other markets

Devices

$

182.3

$

172.8

5

%

10

%

Masks and other

105.6

99.2

6

13

Total Sleep and Respiratory Care

$

287.9

$

272.1

6

11

Global revenue

Devices

$

433.1

$

365.7

18

%

21

%

Masks and other

330.3

309.2

7

9

Total Sleep and Respiratory Care

$

763.4

$

674.9

13

15

Software as a Service

101.1

93.8

8

8

Total

$

864.5

$

768.8

12

14


Nine Months Ended

March 31,
2022

(A)

March 31,
2021

(A)

%
Change

Constant
Currency (B)

U.S., Canada, and Latin America

Devices

$

771.5

$

595.3

30

%

Masks and other

681.8

637.5

7

Total Sleep and Respiratory Care

$

1,453.3

$

1,232.8

18

Software as a Service

297.7

277.8

7

Total

$

1,751.0

$

1,510.6

16

Combined Europe, Asia, and other markets

Devices

$

608.3

$

536.9

13

%

15

%

Masks and other

304.2

273.3

11

14

Total Sleep and Respiratory Care

$

912.4

$

810.1

13

15

Global revenue

Devices

$

1,379.7

$

1,132.1

22

%

23

%

Masks and other

986.0

910.8

8

9

Total Sleep and Respiratory Care

$

2,365.7

$

2,042.9

16

16

Software as a Service

297.7

277.8

7

7

Total

$

2,663.4

$

2,320.7

15

15

(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.

For investors

For media

Amy Wakeham

Jayme Rubenstein

+1 858-836-5000

+1 858-836-6798

investorrelations@resmed.com

news@resmed.com



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