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ResMed Inc. Announces Results for the First Quarter of Fiscal Year 2019
~ Strong year-over-year growth in revenue, net income, and earnings per share ~
~ Growth balanced across the entire product portfolio ~

Note: A webcast of ResMed’s conference call will be available at 4:30 p.m. EDT today at http://investor.resmed.com

SAN DIEGO, October 25, 2018 – ResMed Inc. (NYSE: RMD, ASX: RMD), a world-leading connected health company, today announced results for its quarter ended September 30, 2018.

First Quarter 2019 Highlights

  • Revenue increased 12% to $588.3 million; up 13% on a constant currency basis
  • Net income increased by 23%; non-GAAP net income up 23%
  • GAAP diluted earnings per share of $0.73; non-GAAP diluted earnings per share of $0.81

“Our first quarter 2019 results demonstrate continued strong performance across our business with 13 percent top-line revenue growth, driven by growth across our entire portfolio of offerings,” said Mick Farrell, ResMed’s chief executive officer. “We also delivered another quarter of improving operating leverage resulting in double-digit growth at the bottom line.”

Farrell continued, “During the quarter we expanded our product portfolio with new masks and made ongoing upgrades to our digital health solutions, separating ResMed from the competition. We provide customers with services and solutions to help improve patient outcomes, create efficiencies, and reduce overall healthcare system costs.”

Financial Results and Operating Metrics

Unaudited; $ in millions, except for per share amounts

 

                           

 

 

 

Three Months Ended

 

 

 

                           

 

September 30, 2018

 

September 30, 2017

 

% Change

 

Constant Currency (A)

 

 

                           

Revenue

$

 588.3

 

 

$

 523.7

 

 

 12

%

 

 13

%

 

Gross margin

 

58.3

%

 

 

58.4

%

 

 -

 

 

 

 

 

Selling, general and administrative expenses

 

 147.3

 

 

 

 143.8

 

 

 2

 

 

 4

 

 

Research and development expenses

 

 38.8

 

 

 

 37.4

 

 

 4

 

 

 8

 

 

Income from operations

 

 144.1

 

 

 

 112.6

 

 

 28

 

 

 

 

 

Net income

 

 105.7

 

 

 

 86.1

 

 

 23

 

 

 

 

 

Non-GAAP net income

 

 116.3

 

 

 

 94.1

 

 

 23

 

 

 

 

 

Diluted earnings per share

$

 0.73

 

 

$

 0.60

 

 

 22

 

 

 

 

 

Non-GAAP diluted earnings per share

$

 0.81

 

 

$

 0.66

 

 

 23

 

 

 

 

 

                                     

 

  1. 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 First Quarter Results

  • Revenue in 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 16 percent on a constant currency basis compared to the same period of the prior year, primarily driven by strong device sales. Software as a Service revenue increased 25 percent, compared to the prior year period due to continued growth in our Brightree service offerings and incremental contribution from the acquisition of HEALTHCAREfirst, which closed early in the first quarter.
  • Gross margin was slightly lower than the prior year quarter mainly due to declines in average selling prices, which were partially offset by manufacturing and procurement efficiencies.
  • Selling, general and administrative expenses increased by 2 percent compared to the prior year period, or by 4 percent on a constant currency basis, due to continued improvements in operating leverage. SG&A expenses improved to 25.0 percent of revenue in the quarter, compared with 27.5 percent in the same period of the prior year.
  • Income from operations increased by 28 percent and non-GAAP income from operations increased by 26 percent compared to the prior year period.  
  • Net income increased by 23 percent and non-GAAP net income increased by 23 percent compared to the prior year period. Non-GAAP measures adjust for amortization of acquired intangibles and impact of U.S. tax reform on income tax expense.
  • GAAP diluted earnings per share increased by 22 percent and non-GAAP diluted earnings per share were 23 percent higher compared with the same period of the prior year. 
  • Cash flow from operations for the quarter was $48.1 million, compared to net income in the current quarter of $105.7 million. Cash flow from operations included tax payments of $125.0 million compared with $30.2 million in the same period of the prior year. During the quarter we paid $52.8 million in dividends.

Other Business and Operational Highlights

  • Completed the acquisition of HEALTHCAREfirst, a provider of software solutions and services for home health and hospice agencies, for consideration of $126.3 million.
  • Announced a joint venture with Verily, combining ResMed’s expertise in sleep apnea and Verily’s advanced health data analytics technologies, to study the health and financial impacts of undiagnosed and untreated sleep apnea, and to develop software solutions that enable healthcare providers to more efficiently identify, diagnose, treat and manage individuals with sleep apnea and other breathing-related sleep disorders.
  • Introduced key upgrades to the Astral life support ventilator, including AutoEPAP functionality along with customizable program names and easily changeable interfaces.
  • Introduced AirFit F30, ResMed’s first minimal-contact full face CPAP mask, expanding the mask product portfolio to meet the needs of a select group of PAP users who need a full face mask but are looking for the flexibility to wear glasses in bed or to reduce facial contact with a full face mask.

Share repurchase program

During the quarter, we repurchased 200,000 shares at a cost of $22.8 million, as part of our ongoing capital management program.

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 November 8, 2018, payable on December 13, 2018. 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 7, 2018 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 7, 2018 through November 8, 2018, inclusive. 

Webcast details

ResMed will discuss its first 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 “Q1 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 800-585-8367 (U.S.) or +1 416-621-4642 (outside U.S.), and entering the passcode 6686709. The telephone replay will be available until November 8, 2018.

About ResMed

ResMed (NYSE: RMD, ASX: RMD), a world-leading connected health company with more than 6 million cloud-connected devices for daily remote patient monitoring, changes lives with every breath. Its award-winning devices and software solutions help treat and manage sleep apnea, chronic obstructive pulmonary disease and other respiratory conditions. Its 6,000-member team strives to improve patients’ quality of life, reduce the impact of chronic disease and save healthcare costs in more than 120 countries.

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, 2018

 

September 30, 2017

 

 

           

Net revenue

$

 588,279

 

$

 523,659

 

Cost of sales

 

 245,186

 

 

 218,054

 

Gross profit

$

 343,093

 

$

 305,605

 

 

           

Operating expenses:

 

 

 

 

 

 

Selling, general and administrative

 

 147,303

 

 

 143,849

 

Research and development

 

 38,791

 

 

 37,415

 

Amortization of acquired intangible assets (1)

 

 12,867

 

 

 11,783

 

Total operating expenses

$

 198,961

 

$

 193,047

 

Income from operations (1)

 

 144,132

 

 

 112,558

 

 

           

Other income (expenses), net:

 

 

 

 

 

 

Interest income (expense), net

$

 (2,786)

 

$

 (2,915)

 

Other, net

 

 (2,465)

 

 

 (1,158)

 

Total other income (expenses), net

 

 (5,251)

 

 

 (4,073)

 

Income before income taxes

$

 138,881

 

$

 108,485

 

Income taxes

 

 33,144

 

 

 22,360

 

Net income (1)

$

 105,737

 

$

 86,125

 

 

           

Basic earnings per share

$

 0.74

 

$

 0.61

 

Diluted earnings per share

$

 0.73

 

$

 0.60

 

Non-GAAP diluted earnings per share (1)

$

 0.81

 

$

 0.66

 

 

           

Basic shares outstanding

 

 142,668

 

 

 142,247

 

Diluted shares outstanding

 

 144,030

 

 

 143,480

 

 

  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, 2018

 

June 30,

2018

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

$

 230,188

 

$

 188,701

 

Accounts receivable, net

 

 463,743

 

 

 483,681

 

Inventories

 

 282,555

 

 

 268,701

 

Prepayments and other current assets

 

 111,757

 

 

 124,634

 

Total current assets

$

 1,088,243

 

$

 1,065,717

 

Non-current assets:

 

 

 

 

 

 

Property, plant and equipment, net

$

 381,822

 

$

 386,550

 

Goodwill

 

 1,192,030

 

 

 1,068,944

 

Other intangibles, net

 

 242,193

 

 

 215,184

 

Deferred income taxes and other non-current assets

 

 163,250

 

 

 327,528

 

Total non-current assets

$

 1,979,295

 

$

 1,998,206

 

Total assets

$

 3,067,538

 

$

 3,063,923

 

LIABILITIES AND STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

$

 98,709

 

$

 92,723

 

Accrued expenses

 

 169,465

 

 

 185,805

 

Deferred revenue

 

 64,822

 

 

 60,828

 

Income taxes payable

 

 76,137

 

 

 160,427

 

Short-term debt

 

 11,975

 

 

 11,466

 

Total current liabilities

$

 421,108

 

$

 511,249

 

Non-current liabilities:

 

 

 

 

 

 

Deferred revenue

$

 73,810

 

$

 71,596

 

Deferred income taxes

 

 16,091

 

 

 13,084

 

Other long term liabilities

 

 534

 

 

 924

 

Long-term debt

 

 517,637

 

 

 269,988

 

Long-term income taxes payable

 

 138,102

 

 

 138,102

 

Total non-current liabilities

$

 746,174

 

$

 493,694

 

Total liabilities

$

 1,167,282

 

$

 1,004,943

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

Common stock

$

 570

 

$

 571

 

Additional paid-in capital

 

 1,463,669

 

 

 1,450,821

 

Retained earnings

 

 2,296,473

 

 

 2,432,328

 

Treasury stock

 

 (1,623,256)

 

 

 (1,600,412)

 

Accumulated other comprehensive income

 

 (237,200)

 

 

 (224,328)

 

Total stockholders’ equity

$

 1,900,256

 

$

 2,058,980

 

Total liabilities and stockholders' equity

$

 3,067,538

 

$

 3,063,923

 

ResMed Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited; $ in thousands)

 

           

 

Three Months Ended

 

 

           

 

September 30, 2018

 

September 30, 2017

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

$

 105,737

 

$

 86,125

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 30,424

 

 

 29,571

 

Stock-based compensation costs

 

 12,477

 

 

 11,948

 

Impairment of equity investments

 

 1,711

 

 

 962

 

Changes in fair value of business combination contingent consideration

 

 (183)

 

 

 -

 

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

 

 

 

 

 

 

Accounts receivable, net

 

 20,342

 

 

 23,317

 

Inventories, net

 

 (15,661)

 

 

 (26,942)

 

Prepaid expenses, net deferred income taxes and other current assets

 

 (7,703)

 

 

 (15,408)

 

Accounts payable, accrued expenses and other

 

 (99,025)

 

 

 (15,590)

 

Net cash provided by operating activities

$

 48,119

 

$

 93,983

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 (12,994)

 

 

 (16,030)

 

Patent registration costs

 

 (2,611)

 

 

 (2,242)

 

Business acquisitions, net of cash acquired

 

 (126,439)

 

 

 -

 

Investments in equity investments

 

 (2,467)

 

 

 (3,225)

 

Proceeds / (Payments) on maturity of foreign currency contracts

 

 (3,678)

 

 

 6,073

 

Net cash used in investing activities

$

 (148,189)

 

$

 (15,424)

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock, net

 

 389

 

 

 3,615

 

Purchases of treasury stock

 

 (19,399)

 

 

 -

 

Payment of business combination contingent consideration

 

 (240)

 

 

 -

 

Proceeds from borrowings, net of borrowing costs

 

 303,000

 

 

 50,000

 

Repayment of borrowings

 

 (86,133)

 

 

 (110,000)

 

Dividends paid

 

 (52,793)

 

 

 (49,698)

 

Net cash (used in) / provided by financing activities

$

 144,824

 

$

 (106,083)

 

Effect of exchange rate changes on cash

$

 (3,267)

 

$

 16,691

 

Net increase / (decrease) in cash and cash equivalents

 

 41,487

 

 

 (10,833)

 

Cash and cash equivalents at beginning of period

 

 188,701

 

 

 821,935

 

Cash and cash equivalents at end of period

$

 230,188

 

$

 811,102

 

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, 2018

 

September 30, 2017

 

GAAP income from operations

$

 144,132

 

$

 112,558

 

Amortization of acquired intangible assets (A)

 

 12,867

 

 

 11,783

 

Non-GAAP income from operations

$

 156,999

 

$

 124,341

 

 

           

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, 2018

 

September 30, 2017

 

GAAP net income

$

 105,737

 

$

 86,125

 

Amortization of acquired intangible assets, net of tax (A)

 

 9,987

 

 

 8,013

 

U.S. tax reform transition impact (A)

 

 534

 

 

 -

 

Non-GAAP net income (A)

$

 116,258

 

$

 94,138

 

Diluted shares outstanding

 

 144,030

 

 

 143,480

 

GAAP diluted earnings per share

$

 0.73

 

$

 0.60

 

Non-GAAP diluted earnings per share (A)

$

 0.81

 

$

 0.66

 

 

  1. ResMed believes that non-GAAP diluted earnings per share 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 in 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 adjusts for the impact of the amortization of acquired intangibles and impact of U.S. tax reform on income tax expense 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 Inc. and Subsidiaries

Revenue by Product and Region

(Unaudited; $ in thousands, except for per share amounts)

 

                       

 

Three Months Ended

 

 

                       

 

September 30, 2018

 

September 30, 2017

 

% Change

 

Constant Currency (A)

 

U.S., Canada and Latin America

 

 

 

 

 

 

 

 

 

 

 

 

Devices

$

 172.4 

 

$

 157.9 

 

 9 

%

 

 

 

 

Masks

 

 154.0 

 

 

 138.7 

 

 11 

 

 

 

 

 

Total devices and masks

$

 326.4 

 

$

 296.6 

 

 10 

 

 

 

 

 

Software as a Service

 

 47.5 

 

 

 38.1 

 

 25 

 

 

 

 

 

Total

$

 373.9 

 

$

 334.7 

 

 12 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Combined Europe, Asia and other markets

 

 

 

 

 

 

 

 

 

 

 

 

Devices

$

 151.7 

 

$

 128.3 

 

 18 

%

 

 20 

%

 

Masks

 

 62.7 

 

 

 60.7 

 

 3 

 

 

 6 

 

 

Total

$

 214.4 

 

$

 189.0 

 

 13 

 

 

 16 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global revenue

 

 

 

 

 

 

 

 

 

 

 

 

Devices

$

 324.1 

 

$

 286.2 

 

 13 

%

 

 14 

%

 

Masks

 

 216.7 

 

 

 199.4 

 

 9 

 

 

 10 

 

 

Total devices and masks

$

 540.8 

 

$

 485.6 

 

 11 

 

 

 12 

 

 

Software as a Service

 

 47.5 

 

 

 38.1 

 

 25 

 

 

 25 

 

 

Total

$

 588.3 

 

$

 523.7 

 

 12 

 

 

 13 

 

 

 

  1. 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.

– End –

INVESTORS: Amy Wakeham, 858.836.5000, investorrelations@resmed.com | MEDIA: Jayme Rubenstein, 858.836.6798, news@resmed.com

https://newsroom.resmed.com/resmed-announces-first-quarter-fiscal-year-2019-results