Business Wire | Aug 5, 2020 04:06PM EDT

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

Aug. 05, 2020

SAN DIEGO--(BUSINESS WIRE)--Aug. 05, 2020--ResMed Inc. (NYSE: RMD, ASX: RMD), a world-leading digital health company, today announced results for its quarter ended June 30, 2020.

Fourth Quarter 2020 Highlights

All comparisons are to the prior year period

* Revenue increased 9% to $770.3 million; up 10% on a constant currency basis * GAAP gross margin of 58.3%; non-GAAP gross margin expanded 60 bps to 59.9% * Net operating profit increased 84%; non-GAAP operating profit up 24% * GAAP diluted earnings per share of $1.22; non-GAAP diluted earnings per share of $1.33

Full Year 2020 Highlights

All comparisons are to the prior year period

* Revenue increased 13% to $3.0 billion; up 15% on a constant currency basis * GAAP gross margin of 58.1%; non-GAAP gross margin expanded 80 bps to 59.8% * Net operating profit increased 40%; non-GAAP operating profit up 24% * GAAP diluted earnings per share of $4.27; non-GAAP diluted earnings per share of $4.76

"Our fourth quarter results reflect the strength and resiliency of our business in today's uncertain environment. We finished fiscal year 2020 with double-digit revenue growth to $3.0 billion and operating profit up 24% on a non-GAAP basis," said Mick Farrell, ResMed's CEO. "Throughout our fiscal fourth quarter, we continued to support the COVID-19 pandemic response through increased manufacturing of our ventilators, including bilevels, and ventilation mask systems while also supporting our customers with digital health solutions and other innovative tools to enable remote care for patients. Looking ahead, we are confident in our ability to navigate through the ongoing challenging clinical and economic environment to deliver for all our stakeholders. Sleep labs and physician practices are reopening across many geographies, and we're seeing accelerated adoption of digital health solutions which supports our long-term strategy. We remain vigilant and thoughtful about the outlook for our business as we continue to serve our customers, and we believe our strong foundation will accelerate our growth over the longer term."

Financial Results and Operating Metrics

Unaudited; $ in millions, except for per share amounts



Three Months Ended



June 30, June 30, % Constant 2020 2019 Change Currency^ (A)

Revenue $ 770.3 $ 705.0 9 % 10 %

Gross margin ^(B) 58.3 % 57.1 % 2

Non-GAAP gross margin ^(B) 59.9 % 59.3 % 1

Selling, general and 165.4 171.6 (4) 0 administrative expenses

Research and development 52.5 51.1 3 4 expenses

Income from operations 223.2 121.1 84

Non-GAAP income from operations 243.4 196.2 24 ^(B)

Net income 177.8 68.8 158

Non-GAAP net income^ (B) 193.3 137.6 40

Diluted earnings per share $ 1.22 $ 0.48 154

Non-GAAP diluted earnings per $ 1.33 $ 0.95 40 share ^(B)





Twelve Months Ended



June 30, June 30, % Constant 2020 2019 Change Currency^ (A)

Revenue $ 2,957.0 $ 2,606.6 13 % 15 %

Gross margin ^(B) 58.1 % 57.3 % 1

Non-GAAP gross margin ^(B) 59.8 % 59.0 % 1

Selling, general and 676.7 645.0 5 7 administrative expenses

Research and development 201.9 180.7 12 14 expenses

Income from operations 809.7 579.3 40

Non-GAAP income from operations 890.9 716.3 24 ^(B)

Net income 621.7 404.6 54

Non-GAAP net income^ (B) 692.8 526.4 32

Diluted earnings per share $ 4.27 $ 2.80 53

Non-GAAP diluted earnings per $ 4.76 $ 3.64 31 share ^(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(A) 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 Fourth 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 4 percent, driven by strong sales across our mask product portfolio and increased demand for our ventilators due to COVID-19, partially offset by a decrease in demand for our sleep devices. * Revenue in combined Europe, Asia, and other markets grew by 22 percent on a constant currency basis, primarily driven by sales across our device product portfolio, including increased demand for our ventilators due to COVID-19. * Software as a Service revenue increased by 7 percent, due to continued growth in resupply service offerings and stabilizing patient flow in out-of-hospital care settings. * Gross margin expanded by 120 basis points while non-GAAP gross margin expanded by 60 basis points. These expansions were primarily due to benefits from product mix changes, partially offset by declines in manufacturing and procurement efficiencies driven by higher air freight costs. * Selling, general, and administrative expenses decreased by 4 percent or consistent on a constant currency basis. SG&A expenses improved to 21.5 percent of revenue in the quarter, compared with 24.3 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 84 percent and non-GAAP income from operations increased by 24 percent. * Net income grew by 158 percent and diluted earnings per share grew by 154 percent, largely attributable to the impact of legal settlement expenses in the prior year. Non-GAAP net income grew by 40 percent and non-GAAP diluted earnings per share grew by 40 percent, predominantly attributable to strong ventilator device sales and controlled operating costs. * Cash flow from operations for the quarter was $330.3 million, compared to net income in the current quarter of $177.8 million. During the quarter we paid $56.5 million in dividends.

Other Business and Operational Highlights

* Accelerated the launch of cloud-based remote monitoring software for ventilators and Lumis devices across Europe, via the AirView platform. Through the new release, clinicians and care providers can remotely monitor patients' respiratory rate and blood oxygen saturation, two key indicators to track changes in a respiratory patient's condition. * Launched ResMed MaskSelector, a digital tool to make remote patient mask selection and sizing easier and more effective, helping patients receive the care they need from home. ResMed MaskSelector creates personalized ResMed mask recommendations based on a patient's sleep attributes and facial measurements enabling HMEs to support patients when they can't physically set them due to physical distancing.

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 August 20, 2020, payable on September 24, 2020. 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 August 19, 2020, 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 August 19, 2020, through August 20, 2020, inclusive.

Webcast details

ResMed will discuss its fourth 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 "Q4 2020 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 +1 833-241-4253 (U.S.) or +1 647-689-4204 (outside U.S.) and entering the passcode 2498310. The telephone replay will be available until August 19, 2020.

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 Twelve Months Ended



June 30, June 30, June 30, June 30, 2020 2019 2020 2019



Net revenue $ 770,343 $ 704,964 $ 2,957,013 $ 2,606,572



Cost of sales 308,991 287,114 1,189,624 1,069,987

Amortization of acquired 11,980 15,418 49,603 42,514 intangibles ^(1)

Total cost of sales $ 320,971 $ 302,532 $ 1,239,227 $ 1,112,501

Gross profit $ 449,372 $ 402,432 $ 1,717,786 $ 1,494,071



Selling, general and 165,385 171,600 676,689 645,010 administrative

Research and development 52,520 51,138 201,946 180,651

Amortization of acquired 8,220 8,019 30,092 32,424 intangibles ^(1)

Restructuring expenses ^ - 9,401 - 9,401 (1)

Litigation settlement - 41,199 (600) 41,199 expenses ^(1)

Acquisition-related - - - 6,123 expenses ^(1)

Total operating expenses $ 226,125 $ 281,357 $ 908,127 $ 914,808

Income from operations 223,247 121,075 809,659 579,263



Other income (expenses), net:

Interest income $ (8,942) $ (12,264) $ (39,356) $ (33,857) (expense), net

Loss attributable to (5,976) (6,463) (25,058) (15,833) equity method investments

Other, net 3,765 (6,587) (12,157) (10,726)

Total other income (11,153) (25,314) (76,571) (60,416) (expenses), net

Income before income $ 212,094 $ 95,761 $ 733,088 $ 518,847 taxes

Income taxes 34,259 26,964 111,414 114,255

Net income $ 177,835 $ 68,797 $ 621,674 $ 404,592



Basic earnings per share $ 1.23 $ 0.48 $ 4.31 $ 2.83

Diluted earnings per $ 1.22 $ 0.48 $ 4.27 $ 2.80 share

Non-GAAP diluted earnings $ 1.33 $ 0.95 $ 4.76 $ 3.64 per share ^(1)



Basic shares outstanding 144,792 143,435 144,338 143,111

Diluted shares 145,866 144,687 145,652 144,484 outstanding

(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)



June 30, June 30, 2020 2019

ASSETS

Current assets:

Cash and cash equivalents $ 463,156 $ 147,128

Accounts receivable, net 474,643 528,484

Inventories 416,915 349,641

Prepayments and other current assets 168,745 120,113

Total current assets $ 1,523,459 $ 1,145,366

Non-current assets:

Property, plant and equipment, net $ 417,335 $ 387,460

Operating lease right-of-use assets 118,348 -

Goodwill and other intangibles, net 2,338,492 2,378,399

Deferred income taxes and other non-current 189,742 196,457 assets

Total non-current assets $ 3,063,917 $ 2,962,316

Total assets $ 4,587,376 $ 4,107,682

LIABILITIES AND STOCKHOLDERS' EQUITY:

Current liabilities:

Accounts payable $ 135,786 $ 115,725

Accrued expenses 270,353 266,359

Operating lease liabilities, current 21,263 -

Deferred revenue 98,617 88,667

Income taxes payable 64,755 73,248

Short-term debt 11,987 11,992

Total current liabilities $ 602,761 $ 555,991

Non-current liabilities:

Deferred revenue $ 87,307 $ 81,143

Deferred income taxes 13,011 11,380

Operating lease liabilities, non-current 101,880 -

Other long term liabilities 8,347 2,058

Long-term debt 1,164,133 1,258,861

Long-term income taxes payable 112,910 126,056

Total non-current liabilities $ 1,487,588 $ 1,479,498

Total liabilities $ 2,090,349 $ 2,035,489

STOCKHOLDERS' EQUITY:

Common stock $ 580 $ 575

Additional paid-in capital 1,570,694 1,511,473

Retained earnings 2,832,991 2,436,410

Treasury stock (1,623,256) (1,623,256)

Accumulated other comprehensive income (283,982) (253,009)

Total stockholders' equity $ 2,497,027 $ 2,072,193

Total liabilities and stockholders' equity $ 4,587,376 $ 4,107,682

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited; $ in thousands)



Twelve Months Ended



June 30, June 30, 2020 2019

Cash flows from operating activities:

Net income $ 621,674 $ 404,592

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

Depreciation and amortization 154,850 150,795

Amortization of right-of-use-assets 26,523 -

Stock-based compensation costs 57,559 52,073

Loss attributable to equity method investments 25,058 15,833

Impairment of equity investments 14,519 15,007

Gain on previously held equity interest - (1,909)

Changes in fair value of business combination (7) (286) contingent consideration

Changes in operating assets and liabilities, net of effect of acquisitions:

Accounts receivable, net 54,383 (18,013)

Inventories, net (69,881) (84,188)

Prepaid expenses, net deferred income taxes and (58,999) (47,575) other current assets

Accounts payable, accrued expenses and other (23,424) (27,278)

Net cash provided by operating activities $ 802,255 $ 459,051

Cash flows from investing activities:

Purchases of property, plant and equipment (95,330) (68,710)

Patent registration costs (10,608) (8,632)

Business acquisitions, net of cash acquired (27,910) (951,383)

Purchases of investments (31,616) (46,717)

Proceeds / (Payments) on maturity of foreign (14,397) (264) currency contracts

Net cash used in investing activities $ (179,861) $ (1,075,706)

Cash flows from financing activities:

Proceeds from issuance of common stock, net 48,182 36,727

Taxes paid related to net share settlement of (46,061) (28,104) equity awards

Purchases of treasury stock - (22,844)

Payment of business combination contingent (302) (909) consideration

Proceeds from borrowings, net of borrowing 1,190,000 1,519,230 costs

Repayment of borrowings (1,284,012) (711,745)

Dividends paid (225,093) (211,712)

Net cash (used in) / provided by financing $ (317,286) $ 580,643 activities

Effect of exchange rate changes on cash $ 10,920 $ (5,561)

Net increase / (decrease) in cash and cash 316,028 (41,573) equivalents

Cash and cash equivalents at beginning of 147,128 188,701 period

Cash and cash equivalents at end of period $ 463,156 $ 147,128

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" excludesamortization expense from acquired intangibles related to cost of sales and arereconciled below:



Three Months Ended Twelve Months Ended



June 30, June 30, June 30, June 30, 2020 2019 2020 2019



Revenue $ 770,343 $ 704,964 $ 2,957,013 $ 2,606,572

Add back: Deferredrevenue fair value - 1,065 2,102 5,348 adjustment ^(A)

Non-GAAP Revenue $ 770,343 $ 706,029 $ 2,959,115 $ 2,611,920



GAAP Cost of sales $ 320,971 $ 302,532 $ 1,239,227 $ 1,112,501

Less: Amortizationof acquired (11,980) (15,418) (49,603) (42,514) intangibles ^(A)

Non-GAAP cost of $ 308,991 $ 287,114 $ 1,189,624 $ 1,069,987 sales



GAAP gross profit 449,372 402,432 1,717,786 1,494,071

GAAP gross margin 58.3 % 57.1 % 58.1 % 57.3 %

Non-GAAP gross 461,352 418,915 1,769,491 1,541,933 profit

Non-GAAP gross 59.9 % 59.3 % 59.8 % 59.0 %margin

The measure "non-GAAP income from operations" is reconciled with GAAP incomefrom operations below:



Three Months Ended Twelve Months Ended



June 30, June 30, June 30, June 30, 2020 2019 2020 2019



GAAP income from operations $ 223,247 $ 121,075 $ 809,659 $ 579,263

Amortization of acquiredintangibles - cost of sales 11,980 15,418 49,603 42,514^(A)

Amortization of acquiredintangibles - operating 8,220 8,019 30,092 32,424expenses ^(A)

Deferred revenue fair value - 1,065 2,102 5,348adjustment ^(A)

Restructuring expenses ^(A) - 9,401 - 9,401

Litigation settlement - 41,199 (600) 41,199expenses ^(A)

Acquisition related - - - 6,123expenses ^(A)

Non-GAAP income from $ 243,447 $ 196,177 $ 890,856 $ 716,272operations

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 thetable below:



Three Months Ended Twelve Months Ended



June 30, June 30, June 30, June 30, 2020 2019 2020 2019



GAAP net income $ 177,835 $ 68,797 $ 621,674 $ 404,592

Amortization of acquiredintangibles - cost of 9,167 11,447 37,933 32,477 sales, net of tax^ (A)

Amortization of acquiredintangibles - operating 6,290 5,954 23,012 24,769 expenses, net of tax^ (A)

Deferred revenue fairvalue adjustment, net of - 786 1,610 4,067 tax ^(A)

Restructuring expenses, - 7,205 - 7,205 net of tax ^(A)

Litigation settlement - 36,248 (528) 36,248 expenses, net of tax ^(A)

Fair value impairment of - 5,000 9,100 5,000 investment ^(A)

U.S. tax reform - 2,149 - 6,654

Acquisition-related - - - 5,362 expenses ^(A)

Non-GAAP net income ^(A) $ 193,292 $ 137,586 $ 692,801 $ 526,374

Diluted shares 145,866 144,687 145,652 144,484 outstanding

GAAP diluted earnings per $ 1.22 $ 0.48 $ 4.27 $ 2.80 share

Non-GAAP diluted earnings $ 1.33 $ 0.95 $ 4.76 $ 3.64 per share ^(A)

ResMed adjusts for the impact of the amortization of acquired intangibles, deferred revenue fair value adjustment, restructuring expenses, litigation settlement expenses, fair value impairment of investment, the impact of(A) U.S. tax reform on income tax expense and acquisition-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 millions, except for per share amounts)



Three Months Ended



June 30, June 30, Constant 2020 (A) 2019 (A) % Change Currency ^(B)

U.S., Canada and Latin America

Devices $ 205.9 $ 202.9 1 %

Masks and other 194.7 182.6 7

Total Sleep and Respiratory $ 400.5 $ 385.5 4 Care

Software as a Service 91.5 85.2 7

Total $ 492.0 $ 470.7 5



Combined Europe, Asia and other markets

Devices $ 205.8 $ 155.5 32 % 35 %

Masks and other 72.6 78.8 - 8 - 6

Total Sleep and Respiratory $ 278.3 $ 234.3 19 22 Care



Global revenue

Devices $ 411.6 $ 358.4 15 % 16 %

Masks and other 267.2 261.4 2 3

Total Sleep and Respiratory $ 678.9 $ 619.8 10 11 Care

Software as a Service 91.5 85.2 7 7

Total $ 770.3 $ 705.0 9 10





Twelve Months Ended



June 30, June 30, % Constant 2020 (A) 2019 (A) Change Currency ^(B)

U.S., Canada and Latin America

Devices $ 792.8 $ 743.1 7 %

Masks and other 779.6 677.4 15

Total Sleep and Respiratory $ 1,572.3 $ 1,420.5 11 Care

Software as a Service 354.6 275.8 29

Total $ 1,927.0 $ 1,696.3 14



Combined Europe, Asia and other markets

Devices $ 715.1 $ 618.5 16 % 19 %

Masks and other 315.0 291.8 8 11

Total Sleep and Respiratory $ 1,030.1 $ 910.3 13 16 Care



Global revenue

Devices $ 1,507.8 $ 1,361.6 11 % 12 %

Masks and other 1,094.6 969.2 13 14

Total Sleep and Respiratory $ 2,602.4 $ 2,330.8 12 13 Care

Software as a Service 354.6 275.8 29 29

Total $ 2,957.0 $ 2,606.6 13 15



(A) Totals and subtotals may not add due to rounding.

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(B) 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/20200805005938/en/

CONTACT: For investors Amy Wakeham +1 858-836-5000 investorrelations@resmed.com

CONTACT: For media Jayme Rubenstein +1 858-836-6798 news@resmed.com