- Year-over-year revenue grows 12%, gross
margin improves 100 basis points, operating profit up 15%
- MatrixCare contributes positively to
revenue, gross margin, and profit
- ResMed well-positioned for the
future
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
March 31, 2019.
Third Quarter 2019 Highlights
- Revenue increased 12% to $662.2
million; up 15% on a constant currency basis
- Gross margin expanded 100bps to
59.2%
- Net operating profit increased 15%;
non-GAAP operating profit up 15%
- GAAP diluted earnings per share of
$0.73; non-GAAP diluted earnings per share of $0.89
“We had another strong quarter with top-line revenue growth
across all categories of our business, including a solid
contribution from recently acquired SaaS companies and growth in
international device sales,” said Mick Farrell, ResMed’s CEO. “Our
expanding mask portfolio continues to drive share growth across all
geographies and we have a solid product pipeline to support future
growth, including the recent launch of the AirFit P30i. We
delivered operating leverage this quarter, even as we execute on
our long-term strategy to provide innovative products, software,
and solutions to improve outcomes, create efficiencies, and reduce
overall healthcare system costs. We are on a trajectory to improve
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 March 31,2019 March 31,2018 % Change
ConstantCurrency (A)
Revenue $ 662.2 $ 591.6 12 % 15 % Gross margin 59.2 % 58.2 % 2
Selling, general and administrative expenses 164.5 147.9 11 17
Research and development expenses 47.6 37.4 27 32 Income from
operations 157.0 136.4 15 Non-GAAP income from operations 182.0
159.0 15 Net income 105.4 110.1 (4 ) Non-GAAP net income 128.1
132.5 (3 ) Diluted earnings per share $ 0.73 $ 0.76 (4 ) Non-GAAP
diluted earnings per share $ 0.89 $ 0.92 (3 ) Nine
Months Ended March 31,2019 March 31,2018 % Change
ConstantCurrency (A)
Revenue $ 1,901.6 $ 1,716.6 11 % 12 % Gross margin 58.8 % 58.2 % 1
Selling, general and administrative expenses 473.4 443.6 7 10
Research and development expenses 129.5 115.5 12 16 Income from
operations 458.2 394.9 16 Non-GAAP income from operations 520.1
440.6 18 Net income 335.8 205.8 63 Non-GAAP net income 388.8 371.6
5 Diluted earnings per share $ 2.33 $ 1.43 63 Non-GAAP diluted
earnings per share $ 2.69 $ 2.58 4 (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.
Discussion of Third Quarter Results
- Revenue in the U.S., Canada, and Latin
America, excluding Software as a Service, grew by 10 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 6 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 completed their connected
device upgrade programs. Device sales outside France and Japan grew
well.
- Software as a Service revenue increased
by 101 percent, compared to the prior year period, due to continued
growth in our Brightree service offerings and incremental
contribution from the acquisition of MatrixCare, which closed in
the second quarter and HEALTHCAREfirst, which closed in the first
quarter.
- Gross margin expanded by 100 basis
points over the prior year period, primarily due to higher margin
contribution from MatrixCare, benefits from manufacturing and
procurement efficiencies and product mix changes, partially offset
by declines in average selling prices.
- Selling, general and administrative
expenses increased by 11 percent compared to the prior year period,
or by 17 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 24.8 percent of revenue in the
quarter, compared with 25.0 percent in the same period of the prior
year.
- Income from operations and non-GAAP
income from operations increased by 15 percent compared to the
prior year period.
- Net income decreased by 4 percent,
predominantly attributable to the impact of recent acquisitions,
higher interest and income tax expense compared to the prior year
quarter, and non-GAAP net income decreased by 3 percent compared to
the prior year period. Non-GAAP measures adjust for amortization of
acquired intangibles, MatrixCare deferred revenue, and the impact
of U.S. tax reform.
- GAAP diluted earnings per share
decreased by 4 percent, predominantly attributable to impact of
recent acquisitions, higher interest and income tax expense
compared to the prior year quarter, and non-GAAP diluted earnings
per share were 3 percent lower compared with the same period of the
prior year.
- Cash flow from operations for the
quarter was $139.6 million, compared to net income in the current
quarter of $105.4 million. During the quarter we paid $53.0 million
in dividends.
Other Business and Operational Highlights
- Completed the acquisition of Propeller
Health, a digital therapeutics company providing connected health
solutions for people living with chronic obstructive pulmonary
disease (COPD) and asthma, for $225.0 million.
- Announced the broad availability of
Mobi, ResMed’s premier portable oxygen concentrator, offering an
optimal balance of oxygen delivery, weight, and battery life for
people with chronic obstructive pulmonary disease (COPD) and other
chronic diseases.
- Introduced AirFit N30i, ResMed’s first
top-of-head CPAP mask, expanding the mask portfolio with an option
to keep tubing out of the wearer’s way, letting them move and sleep
in any position.
- Announced an agreement to settle all
outstanding patent infringement disputes with Fisher & Paykel
Healthcare.
- Announced the acquisition of HB
Healthcare, a fast-growing, privately held South Korean home
medical equipment provider, expanding ResMed’s leading role in
Korea’s CPAP and respiratory care market.
Dividend program
The ResMed board of directors today declared a quarterly cash
dividend of $0.37 per share. The dividend will have a record date
of May 9, 2019, payable on June 13, 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
May 8, 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 May 8, 2019
through May 9, 2019, inclusive.
Webcast details
ResMed will discuss its third quarter fiscal year 2019 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 2019 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 3977963. The telephone replay will be available until
May 16, 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 Nine Months Ended March 31,2019
March 31,2018 March 31,2019 March 31,2018 Net revenue $
662,228 $ 591,634 $ 1,901,608 $ 1,716,566 Cost of sales
270,318 247,339 782,874
716,874 Gross profit $ 391,910 $ 344,295 $ 1,118,734 $
999,692 Operating expenses: Selling, general and
administrative 164,529 147,893 473,410 443,559 Research and
development 47,610 37,434 129,513 115,492 Amortization of acquired
intangible assets (1) 22,794 11,673 51,501 34,772 Restructuring
expenses (1) - 10,922 - 10,922 Acquisition related expenses (1)
- - 6,123 -
Total operating expenses $ 234,933 $ 207,922 $ 660,547 $ 604,745
Income from operations (1) 156,977 136,373 458,187 394,947
Other income (expenses), net: Interest income (expense), net $
(11,998 ) $ (3,491 ) $ (21,594 ) $ (9,196 ) Loss attributable to
equity method investments (5,996 ) - (9,371 ) - Other, net
(1,054 ) (2,739 ) (4,140 ) (5,357 ) Total
other income (expenses), net (19,048 ) (6,230 )
(35,105 ) (14,553 ) Income before income taxes $
137,929 $ 130,143 $ 423,082 $ 380,394 Income taxes 32,513
20,018 87,291 174,617
Net income $ 105,416 $ 110,125 $ 335,791
$ 205,777 Basic earnings per share $ 0.74 $
0.77 $ 2.35 $ 1.44 Diluted earnings per share $ 0.73 $ 0.76 $ 2.33
$ 1.43 Non-GAAP diluted earnings per share (1) $ 0.89 $ 0.92 $ 2.69
$ 2.58 Basic shares outstanding 143,316 142,898 142,907
142,688 Diluted shares outstanding 144,333 143,985 144,344 143,895
(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)
March 31,2019 June 30,2018
ASSETS Current assets:
Cash and cash equivalents $ 146,513 $ 188,701 Accounts receivable,
net 511,403 483,681 Inventories 319,930 268,701 Prepayments and
other current assets 124,850 124,634
Total current assets $ 1,102,696 $ 1,065,717 Non-current assets:
Property, plant and equipment, net $ 382,496 $ 386,550 Goodwill and
other intangibles, net 2,455,586 1,284,128 Deferred income taxes
and other non-current assets 157,748 327,528
Total non-current assets $ 2,995,830 $ 1,998,206
Total assets $ 4,098,526 $ 3,063,923
LIABILITIES AND STOCKHOLDERS’ EQUITY: Current liabilities:
Accounts payable $ 124,466 $ 92,723 Accrued expenses 191,130
185,805 Deferred revenue 82,288 60,828 Income taxes payable 52,739
160,427 Short-term debt 12,346 11,466
Total current liabilities $ 462,969 $ 511,249 Non-current
liabilities: Deferred revenue $ 76,703 $ 71,596 Deferred income
taxes 87,312 13,084 Other long term liabilities 865 924 Long-term
debt 1,323,349 269,988 Long-term income taxes payable
125,999 138,102 Total non-current liabilities
$ 1,614,228 $ 493,694 Total liabilities $ 2,077,197
$ 1,004,943
STOCKHOLDERS’ EQUITY: Common stock
$ 573 $ 571 Additional paid-in capital 1,476,099 1,450,821 Retained
earnings 2,420,731 2,432,328 Treasury stock (1,623,256 ) (1,600,412
) Accumulated other comprehensive income (252,818 )
(224,328 ) Total stockholders’ equity $ 2,021,329 $
2,058,980 Total liabilities and stockholders' equity $
4,098,526 $ 3,063,923
RESMED
INC. AND SUBSIDIARIES Condensed Consolidated
Statements of Cash Flows
(Unaudited; $ in thousands)
Nine Months Ended March 31,2019 March 31,2018
Cash
flows from operating activities: Net income $ 335,791 $ 205,777
Adjustment to reconcile net income to cash provided by operating
activities: Depreciation and amortization 108,203 88,256 Loss
attributable to equity method investments 9,371 - Stock-based
compensation costs 37,856 35,933 Impairment of equity investments
8,801 3,620 Changes in fair value of business combination
contingent consideration (272 ) 383 Gain on previously held equity
interest (1,909 ) - Changes in operating assets and liabilities,
net of effect of acquisitions: Accounts receivable, net (1,482 )
(39,421 ) Inventories, net (55,002 ) (11,146 ) Prepaid expenses,
net deferred income taxes and other current assets (17,453 )
(72,332 ) Accounts payable, accrued expenses and other
(106,671 ) 164,540 Net cash provided by operating
activities $ 317,233 $ 375,610
Cash flows from investing
activities: Purchases of property, plant and equipment (46,507
) (44,961 ) Patent registration costs (6,556 ) (6,743 ) Business
acquisitions, net of cash acquired (951,565 ) (482 ) Purchases of
cost-method investments - (6,445 ) Purchases of equity-method
investments (31,092 ) - Proceeds / (Payments) on maturity of
foreign currency contracts 3,902 (4,667 ) Net
cash used in investing activities $ (1,031,818 ) $ (63,298 )
Cash flows from financing activities: Proceeds from issuance
of common stock, net 15,346 9,603 Taxes paid related to net share
settlement of equity awards (27,880 ) - Purchases of treasury stock
(22,844 ) (27,897 ) Payment of business combination contingent
consideration (648 ) (205 ) Proceeds from borrowings, net of
borrowing costs 1,414,230 120,000 Repayment of borrowings (541,394
) (390,000 ) Dividends paid (158,592 ) (149,527 ) Net
cash (used in) / provided by financing activities $ 678,218
$ (438,026 ) Effect of exchange rate changes on cash $ (5,821 ) $
8,060 Net increase / (decrease) in cash and cash equivalents
(42,188 ) (117,654 ) Cash and cash equivalents at beginning of
period 188,701 821,935
Cash and cash
equivalents at end of period $ 146,513 $ 704,281
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 Nine Months Ended March 31,2019
March 31,2018 March 31,2019 March 31,2018 GAAP income from
operations $ 156,977 $ 136,373 $ 458,187 $ 394,947 Amortization of
acquired intangible assets (A) 22,794 11,673 51,501 34,772 Deferred
revenue fair value adjustment (A) 2,254 - 4,283 - Restructuring
expenses (A) - 10,922 - 10,922 Acquisition related expenses (A)
- - 6,123 - Non-GAAP income from
operations $ 182,025 $ 158,968 $ 520,094 $ 440,641
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 31,2019 March 31,2018 March 31,2019
March 31,2018 GAAP net income $ 105,416 $ 110,125 $ 335,791 $
205,777 Amortization of acquired intangible assets, net of tax (A)
17,588 8,483 39,846 25,260 Deferred revenue fair value adjustment,
net of tax (A) 1,727 - 3,281 - U.S. tax reform 3,327 5,621 4,505
132,224 Acquisition related expenses (A) - - 5,362 - Restructuring
expenses, net of tax (A) - 8,316 -
8,316 Non-GAAP net income (A) $ 128,058 $ 132,545 $ 388,785 $
371,577 Diluted shares outstanding 144,333 143,985 144,344 143,895
GAAP diluted earnings per share $ 0.73 $ 0.76 $ 2.33 $ 1.43
Non-GAAP diluted earnings per share (A) $ 0.89 $ 0.92 $ 2.69 $ 2.58
(A) ResMed adjusts for the impact of the amortization
of acquired intangibles, deferred revenue fair value adjustment,
the impact of U.S. tax reform on income tax expense,
acquisition-related expenses, and restructuring-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.
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
March 31,2019
March 31,2018
% Change
ConstantCurrency (A)
U.S., Canada and Latin America Devices $ 181.3 $ 168.1 8 %
Masks and other 168.7 149.4 13 Total Sleep and
Respiratory Care $ 350.0 $ 317.5 10 Software as a Service
79.9 39.9 101 Total $ 429.9 $ 357.4 20
Combined
Europe, Asia and other markets Devices $ 155.2 $ 160.1 - 3 % 3
% Masks and other 77.1 74.1 4 12 Total Sleep and
Respiratory Care $ 232.3 $ 234.2 - 1 6
Global revenue
Devices $ 336.5 $ 328.2 3 % 6 % Masks and other 245.8
223.5 10 13 Total Sleep and Respiratory Care $ 582.3 $ 551.7 6 9
Software as a Service 79.9 39.9 101 101 Total $ 662.2
$ 591.6 12 15 Nine Months Ended
March 31,2019
March 31,2018
% Change
ConstantCurrency (A)
U.S., Canada and Latin America Devices $ 540.2 $ 499.7 8 %
Masks and other 494.8 443.7 12 Total Sleep and
Respiratory Care $ 1,035.0 $ 943.4 10 Software as a Service
190.6 116.6 63 Total $ 1,225.6 $ 1,060.0 16
Combined Europe, Asia and other markets Devices $ 463.0 $
451.8 2 % 6 % Masks and other 213.0 204.8 4 9 Total
Sleep and Respiratory Care $ 676.0 $ 656.6 3 7
Global
revenue Devices $ 1,003.2 $ 951.5 5 % 7 % Masks and other
707.8 648.5 9 11 Total Sleep and Respiratory Care $
1,711.0 $ 1,600.0 7 9 Software as a Service 190.6
116.6 63 63 Total $ 1,901.6 $ 1,716.6 11 12 (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/20190502005793/en/
For investorsAmy Wakeham+1
858-836-5000investorrelations@resmed.com
For mediaJayme Rubenstein+1
858-836-6798news@resmed.com
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