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

Thursday, 27. January 2022 22:05
  • Year-over-year revenue grows 12%, operating profit up 12%, 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, Jan. 27, 2022 (GLOBE NEWSWIRE) -- ResMed Inc. (NYSE: RMD, ASX: RMD) today announced results for its quarter ended December 31, 2021.

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

  • Revenue increased by 12% to $894.9 million; up 13% on a constant currency basis
  • Gross margin of 56.4%; non-GAAP gross margin contracted 230 bps to 57.6%
  • Income from operations increased 12%; non-GAAP operating profit up 5%
  • Diluted earnings per share of $1.37; non-GAAP diluted earnings per share of $1.47

“Our second-quarter results reflect continued strong performance across our business resulting in double-digit top-line revenue growth, driven by ongoing high demand for our sleep and respiratory care products, and solid growth in our software-as-a-service business,” said Mick Farrell, ResMed CEO. “Our global ResMed team continues to find ways to deliver products and solutions to our customers, even amid ongoing supply chain challenges that have limited additional access to critical electronic components. We are working every day to meet the extraordinary demand generated by our competitor’s ongoing device recall. We continue to ensure priority for the highest-need patients first, and we are working with physicians, providers, and healthcare systems to maintain delivery of medical devices and digital health solutions for the patients who need care.”

“Despite constantly evolving market dynamics, we remain focused on our goal to improve 250 million lives in the year 2025; supporting patients with the sleep apnea therapy, respiratory care therapy, and digital health solutions they need as we deliver value for all of our customers. We are investing in medical device research and development, as well as digital health innovation that will unlock value across the healthcare system. I am incredibly proud of our global ResMed team, working around the clock with providers and physicians across 140 countries to get products directly into the hands of patients who most need our help.”

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

             
 Three Months Ended
             
 December 31,
2021
 December 31,
2020
 % Change Constant Currency (A)
Revenue$894.9  $800.0  12 13%
Gross margin (B) 56.4%  57.8% (2)   
Non-GAAP gross margin (B) 57.6%  59.9% (4)   
Selling, general, and administrative expenses 185.4   169.5  9  10 
Research and development expenses 62.5   54.9  14  14 
Income from operations 248.7   221.7  12    
Non-GAAP income from operations (B) 267.7   254.5  5    
Net income 201.8   179.5  12    
Non-GAAP net income (B) 216.2   206.4  5    
Diluted earnings per share$1.37  $1.23  11    
Non-GAAP diluted earnings per share (B)$1.47  $1.41  4    
             
             
 Six Months Ended
             
 December 31,
2021
 December 31,
2020
 % Change Constant Currency (A)
Revenue$1,798.9  $1,552.0  16 16%
Gross margin (B) 56.2%  58.1% (3)   
Non-GAAP gross margin (B) 57.4%  59.9% (4)   
Selling, general, and administrative expenses 362.1   328.5  10  10 
Research and development expenses 122.5   109.5  12  11 
Income from operations 510.6   438.6  16    
Non-GAAP income from operations (B) 548.4   491.6  12    
Net income 405.4   357.9  13    
Non-GAAP net income (B) 438.3   391.8  12    
Diluted earnings per share$2.76  $2.45  13    
Non-GAAP diluted earnings per share (B)$2.98  $2.68  11    

(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 grew by 13 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 14 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 12 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 230 basis points, mainly due to higher freight and manufacturing costs, partially offset by favorable product mix changes.
  • Selling, general, and administrative expenses increased by 10 percent on a constant currency basis. SG&A expenses improved to 20.7 percent of revenue in the quarter, compared with 21.2 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 12 percent and non-GAAP income from operations increased by 5 percent.
  • Net income grew by 12 percent and diluted earnings per share grew by 11 percent. Non-GAAP net income grew by 5 percent and non-GAAP diluted earnings per share grew by 4 percent, predominantly attributable to strong sales.
  • Operating cash flow for the quarter was $219.9 million, compared to net income in the current quarter of $201.8 million and non-GAAP net income of $216.2 million. During the quarter we paid $61.2 million in dividends.

Other Business and Operational Highlights

  • Elected Desney Tan and John Hernandez, both leaders with digital health experience at world-leading technology companies, to ResMed’s board of directors.  

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 February 10, 2022, payable on March 17, 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 February 9, 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 February 9, 2022, through February 10, 2022, inclusive.          

Webcast details
ResMed will discuss its second-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 “Q2 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 13725581. The telephone replay will be available until February 10, 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.

For investors  For media 
Amy Wakeham Jayme Rubenstein  
+1 858-836-5000+1 858-836-6798
investorrelations@resmed.com news@resmed.com  


RESMED INC. AND SUBSIDIARIES

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

            
 Three Months Ended Six Months Ended
            
 December 31,
2021
 December 31,
2020
 December 31,
2021
 December 31,
2020
            
Net revenue$894,874  $800,011  $1,798,890  $1,551,955 
            
Cost of sales 379,325   321,132   765,993   622,436 
Amortization of acquired intangibles (1) 11,231   11,164   22,289   23,143 
Restructuring - cost of sales (1) -   5,232   -   5,232 
Total cost of sales$390,556  $337,528  $788,282  $650,811 
Gross profit$504,318  $462,483  $1,010,608  $901,144 
            
Selling, general, and administrative 185,362   169,470   362,082   328,459 
Research and development 62,507   54,935   122,457   109,468 
Amortization of acquired intangibles (1) 7,738   7,689   15,445   15,932 
Restructuring - operating expenses (1) -   8,673   -   8,673 
Total operating expenses$255,607  $240,767  $499,984  $462,532 
Income from operations 248,711   221,716   510,624   438,612 
            
Other income (expenses), net:           
Interest income (expense), net$(5,948) $(5,792) $(11,308) $(12,517)
Loss attributable to equity method investments (1,914)  (2,640)  (3,300)  (4,928)
Gain (loss) on equity investments (4,404)  (3,700)  1,208   4,776 
Other, net 841   1,008   (1,150)  503 
Total other income (expenses), net (11,425)  (11,124)  (14,550)  (12,166)
Income before income taxes$237,286  $210,592  $496,074  $426,446 
Income taxes 35,535   31,078   90,710   68,560 
Net income$201,751  $179,514  $405,364  $357,886 
            
Basic earnings per share$1.38  $1.24  $2.78  $2.47 
Diluted earnings per share$1.37  $1.23  $2.76  $2.45 
Non-GAAP diluted earnings per share (1)$1.47  $1.41  $2.98  $2.68 
            
Basic shares outstanding 145,990   145,246   145,835   145,053 
Diluted shares outstanding 147,040   146,421   147,044   146,350 

(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,
2021
 June 30,
2021
ASSETS     
Current assets:     
Cash and cash equivalents$194,476  $295,278 
Accounts receivable, net 526,036   614,292 
Inventories 592,146   457,033 
Prepayments and other current assets 234,582   208,154 
Total current assets$1,547,240  $1,574,757 
Non-current assets:     
Property, plant, and equipment, net$477,778  $463,490 
Operating lease right-of-use assets 146,045   128,575 
Goodwill and other intangibles, net 2,323,472   2,320,483 
Deferred income taxes and other non-current assets 240,207   240,820 
Total non-current assets$3,187,502  $3,153,368 
Total assets$4,734,742  $4,728,125 
LIABILITIES AND STOCKHOLDERS’ EQUITY:     
Current liabilities:     
Accounts payable$163,369  $138,008 
Accrued expenses 286,803   320,599 
Operating lease liabilities, current 23,912   23,585 
Deferred revenue 111,647   109,611 
Income taxes payable 23,333   307,963 
Short-term debt 12,000   12,000 
Total current liabilities$621,064  $911,766 
Non-current liabilities:     
Deferred revenue$94,427  $91,496 
Deferred income taxes 12,873   11,319 
Operating lease liabilities, non-current 132,970   114,779 
Other long-term liabilities 6,350   6,802 
Long-term debt 667,979   643,351 
Long-term income taxes payable 53,244   62,933 
Total non-current liabilities$967,843  $930,680 
Total liabilities$1,588,907  $1,842,446 
STOCKHOLDERS’ EQUITY:     
Common stock$585  $583 
Additional paid-in capital 1,629,031   1,622,199 
Retained earnings 3,362,570   3,079,640 
Treasury stock (1,623,256)  (1,623,256)
Accumulated other comprehensive income (223,095)  (193,487)
Total stockholders’ equity$3,145,835  $2,885,679 
Total liabilities and stockholders' equity$4,734,742  $4,728,125 


RESMED INC. AND SUBSIDIARIES

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

      
 Six Months Ended
      
 December 31,
2021
 December 31,
2020
Cash flows from operating activities:     
Net income$405,364  $357,886 
Adjustment to reconcile net income to cash provided by operating activities:     
Depreciation and amortization 79,891   80,046 
Amortization of right-of-use assets 17,334   17,911 
Stock-based compensation costs 33,404   31,441 
Loss attributable to equity method investments 3,300   4,928 
(Gain) loss on equity investment (1,208)  (4,776)
Restructuring expenses -   8,673 
Changes in fair value of business combination contingent consideration -   500 
Changes in operating assets and liabilities:     
Accounts receivable, net 82,469   (19,259)
Inventories, net (139,249)  (34,212)
Prepaid expenses, net deferred income taxes and other current assets (21,389)  (29,875)
Accounts payable, accrued expenses, income taxes payable and other (305,694)  (99,348)
Net cash (used in) / provided by operating activities$154,222  $313,915 
Cash flows from investing activities:     
Purchases of property, plant, and equipment (57,747)  (48,443)
Patent registration and acquisition costs (13,737)  (8,367)
Business acquisitions, net of cash acquired (35,915)  (437)
Purchases of investments (12,364)  (14,446)
(Payments) / proceeds on maturity of foreign currency contracts (5,419)  19,922 
Net cash used in investing activities$(125,182) $(51,771)
Cash flows from financing activities:     
Proceeds from issuance of common stock, net 23,455   18,614 
Taxes paid related to net share settlement of equity awards (50,025)  (46,507)
Proceeds from borrowings, net of borrowing costs 160,000   55,000 
Repayment of borrowings (136,000)  (406,000)
Dividends paid (122,434)  (113,165)
Net cash (used in) / provided by financing activities$(125,004) $(492,058)
Effect of exchange rate changes on cash$(4,838) $22,623 
Net increase / (decrease) in cash and cash equivalents (100,802)  (207,291)
Cash and cash equivalents at beginning of period 295,278   463,156 
Cash and cash equivalents at end of period$194,476  $255,865 


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

            
 Three Months Ended Six Months Ended
            
 December 31,
2021
 December 31,
2020
 December 31,
2021
 December 31,
2020
            
Revenue$894,874  $800,011  $1,798,890  $1,551,955 
            
GAAP Cost of sales$390,556  $337,528  $788,282  $650,811 
Less: Amortization of acquired intangibles (A) (11,231)  (11,164)  (22,289)  (23,143)
Less: Restructuring - cost of sales (A) -   (5,232)  -   (5,232)
Non-GAAP cost of sales$379,325  $321,132  $765,993  $622,436 
            
GAAP gross profit$504,318  $462,483  $1,010,608  $901,144 
GAAP gross margin 56.4%  57.8%  56.2%  58.1%
Non-GAAP gross profit$515,549  $478,879  $1,032,897  $929,519 
Non-GAAP gross margin 57.6%  59.9%  57.4%  59.9%

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

               
 Three Months Ended Six Months Ended
               
 December 31,
2021
 December 31,
2020
 December 31,
2021
 December 31,
2020
               
GAAP income from operations$248,711  $221,716  $510,624  $438,612
Amortization of acquired intangibles - cost of sales (A) 11,231   11,164   22,289   23,143
Amortization of acquired intangibles - operating expenses (A) 7,738   7,689   15,445   15,932
Restructuring - cost of sales (A) -   5,232   -   5,232
Restructuring - operating expenses (A) -   8,673   -   8,673
Non-GAAP income from operations$267,680  $254,474  $548,358  $491,592

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,
2021
 December 31,
2020
 December 31,
2021
 December 31,
2020
               
GAAP net income$201,751  $179,514  $405,364  $357,886 
Amortization of acquired intangibles - cost of sales, net of tax (A) 8,564   8,566   16,999   17,742 
Amortization of acquired intangibles - operating expenses, net of tax (A) 5,901   5,900   11,780   12,214 
Reserve for disputed tax position (A) -   -   4,111   - 
Restructuring - cost of sales, net of tax (A) -   4,663   -   4,663 
Restructuring - operating expenses, net of tax (A) -   7,730   -   7,730 
(Gain) loss on equity investments (A) -   -   -   (8,476)
Non-GAAP net income (A)$216,216  $206,373  $438,254  $391,759 
GAAP diluted shares outstanding 147,040   146,421   147,044   146,350 
GAAP diluted earnings per share$1.37  $1.23  $2.76  $2.45 
Non-GAAP diluted earnings per share (A)$1.47   $1.41   $2.98   $2.68  

(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.


RESMED INC. AND SUBSIDIARIES

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

            
 Three Months Ended
            
 December 31,
2021 (A)
 December 31,
2020 (A)
 % Change Constant Currency (B)
U.S., Canada, and Latin America           
Devices$244.8 $205.0 19%   
Masks and other 242.0  221.8 9    
Total Sleep and Respiratory Care$486.8 $426.8 14    
Software as a Service 99.0  91.8 8    
Total$585.8 $518.6 13    
            
Combined Europe, Asia, and other markets            
Devices$207.7 $188.0 11% 13%
Masks and other 101.3  93.4 8  11 
Total Sleep and Respiratory Care$309.0 $281.4 10  12 
            
Global revenue           
Devices$452.5 $393.0 15% 16%
Masks and other 343.3  315.2 9  10 
Total Sleep and Respiratory Care$795.8 $708.2 12  13 
Software as a Service 99.0  91.8 8  8 
Total$894.9 $800.0 12  13 
            
            
 Six Months Ended
            
 December 31,
2021 (A)
 December 31,
2020 (A)
 % Change  Constant Currency (B)
U.S., Canada, and Latin America           
Devices$520.7 $402.4 29%   
Masks and other 457.1  427.5 7    
Total Sleep and Respiratory Care$977.8 $829.9 18    
Software as a Service 196.6  184.0 7    
Total$1,174.4 $1,013.9 16    
            
Combined Europe, Asia, and other markets            
Devices$429.0 $364.0 18% 18%
Masks and other 195.5  174.0 12  13 
Total Sleep and Respiratory Care$624.5 $538.1 16  16 
            
Global revenue           
Devices$949.7 $766.4 24% 24%
Masks and other 652.6  601.6 8  8 
Total Sleep and Respiratory Care$1,602.3 $1,368.0 17  17 
Software as a Service 196.6  184.0 7  7 
Total$1,798.9 $1,552.0 16  16 
            

(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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