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

• Year-over-year revenue grows 13%, non-GAAP operating profit up 21%
• Balanced growth across product portfolio, software solutions, 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

SAN DIEGO--(BUSINESS WIRE)-- ResMed Inc. (NYSE: RMD) (ASX: RMD), a world-leading digital health company, today announced results for its quarter ended December 31, 2019.

Second Quarter 2020 Highlights

• Revenue increased 13% to $736.2 million; up 14% on a constant currency basis
• GAAP gross margin of 58.0%; non-GAAP gross margin expanded 60 bps to 59.7%
• Net operating profit increased 26%; non-GAAP operating profit up 21%
• GAAP diluted earnings per share of $1.10; non-GAAP diluted earnings per share of $1.21

“We had a strong December quarter with double-digit top-line growth and further gross margin expansion, as well as continued fiscal discipline that resulted in improvements in operating leverage and double-digit growth at the bottom line,” said Mick Farrell, ResMed’s CEO. “We are seeing continued strong customer demand for our new products, particularly in masks and accessories with another quarter of high-teens growth in that category. ResMed is continuing to lead in digital health as we transform lives in out-of-hospital healthcare, leading the innovation of medical devices and software that improve health outcomes, create efficiencies, and reduce overall healthcare system costs. With over 100 million lives improved in 2019, and strong growth ahead, we’re well on our way to improving 250 million lives in out-of-hospital healthcare in 2025.”

(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

• Revenue in the U.S., Canada, and Latin America, excluding Software as a Service, grew by 14 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, primarily driven by strong mask sales.
• Software as a Service revenue increased by 37 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 50 basis points over the prior year. Non-GAAP gross margin expanded by 60 basis points over the prior year period, primarily due to benefits from product mix changes and manufacturing and procurement efficiencies, partially offset by declines in average selling prices.
• Selling, general, and administrative expenses increased by 6 percent compared to the prior year period, or by 8 percent on a constant currency basis. Excluding the impact of recent acquisitions, selling, general, and administrative expenses increased by 2 percent on a constant currency basis. SG&A expenses improved to 23.3 percent of revenue in the quarter, compared with 24.8 percent in the same period of the prior year.
• Income from operations increased by 26 percent and non-GAAP income from operations increased by 21 percent compared to the prior year period.
• Net income grew by 29 percent and diluted earnings per share grew by 28 percent compared to the prior year quarter. Non-GAAP net income grew by 22 percent and non-GAAP diluted earnings per share grew by 21 percent compared with the prior year quarter, predominantly attributable to strong sales, particularly in masks, coupled with controlled operating costs.
• Cash flow from operations for the quarter was $69.9 million, compared to net income in the current quarter of $160.6 million. Cash flow from operations included tax payments of $111.0 million and legal settlement payments of $40.6 million. During the quarter we paid $56.1 million in dividends.

Other Business and Operational Highlights

• Announced a collaboration agreement with Cerner Corporation (NASDAQ: CERN), designating ResMed’s Brightree Home Health and Hospice platform as its preferred solution to integrate with its Cerner Millenium® electronic health record.
• Introduced AirFit N30, the world’s first tube-down nasal cradle CPAP mask with a front-facing tube, a brand new option for sleep apnea treatment. Other key features include an adjustable elastic headgear, a nasal cradle cushion that sits under the nasal bridge to eliminate soreness, and a curved design to provide a secure seal regardless of how the wearer sleeps or moves.
• Announced an upgraded AirView for Respiratory program that provides HMEs and physicians with quicker access to essential respiratory patient data, including more granular clinical data and respiration trends, and management by exception, allowing them to provide better care.
• Agreed in January to acquire SnapWorx, a privately held software company providing patient contact management and workflow optimization for the sleep apnea resupply market. SnapWorx’s software platform automates workflow and document retrieval in ways that complement Brightree’s industry-leading, multi-channel resupply solution. The combination of Brightree ReSupply’s technology and live call services with SnapWorx creates the most comprehensive set of resupply solutions in the industry. The transaction is expected to close shortly. It is expected to be initially neutral to non-GAAP earnings per share, and accretive to non-GAAP earnings per share in fiscal year 2021.

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 February 13, 2020, payable on March 19, 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 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 February 12, 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 February 12, 2020, through February 13, 2020, inclusive.

Webcast details

ResMed will discuss its second 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 “Q2 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 +1 800-585-8367 (U.S.) or +1 416-621-4642 (outside U.S.) and entering the passcode 8829576. The telephone replay will be available until February 13, 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 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.

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