ResMed Inc. Announces Results for the First Quarter of Fiscal Year 2020

Date : 10/25/2019 @ 4:05AM
Source : Business Wire
Stock : Resmed Inc (RMD)
Quote : 22.0  0.11 (0.50%) @ 9:57AM
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ResMed Inc. Announces Results for the First Quarter of Fiscal Year 2020

Resmed (ASX:RMD)
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2 Months : From Oct 2019 to Dec 2019

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  • 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.

 

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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