RMD ResMed Inc

Fourth Quarter 2023 HighlightsAll comparisons are to the prior year period

• Revenue increased by 23% to $1.1 billion; up 23% on a constant currency basis 
• Gross margin contracted 210 bps to 55.0%; non-GAAP gross margin contracted 200 bps to 55.8%
• Income from operations increased 8%; non-GAAP operating profit up 13%
• Operating cash flow of $237.4 million
• Diluted earnings per share of $1.56; non-GAAP diluted earnings per share of $1.60

Full Year 2023 HighlightsAll comparisons are to the prior year period

• Revenue increased by 18% to $4.2 billion; up 21% on a constant currency basis 
• Gross margin contracted 80 bps to 55.8%; non-GAAP gross margin contracted 120 bps to 56.5%
• Income from operations increased 13%; non-GAAP operating profit up 14%
• Operating cash flow of $693.3 million
• Diluted earnings per share of $6.09; non-GAAP diluted earnings per share of $6.44

“ResMed’s fourth quarter and full-year 2023 results reflect strong double-digit growth as we continue to produce and deliver cloud-connected flow generator device volume to meet the ongoing strong global demand from patients, accompanied by high growth of our market-leading patient interface and software solutions,” said Mick Farrell, Chairman and CEO of ResMed. “The combined global supply of our cloud-connected platforms, AirSense10 and AirSense11, have enabled us to support all available customer demand for CPAP and APAP devices across the global market. The strong growth of our mask and patient interfaces business was supported by new patient setups as well as ongoing resupply activity as we focus on increasing therapy adherence to improve patient outcomes and quality-of-life. Our residential medicine software-as-a-service business continues to achieve high-single-digit growth organically expanding to solid double-digit growth including the contribution from MEDIFOX DAN. As we turn to fiscal year 2024, our focus remains on delivering world-leading therapy and digital health solutions so that even more people are able to sleep better, breathe better, and live higher-quality lives outside the hospital, preferably in their own home. We continue to significantly grow our impact each quarter, improving over 160 million lives in the last 12 months, well on our way to helping 250 million lives in 2025.”

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

(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 Fourth Quarter ResultsAll comparisons are to the prior year period unless otherwise noted

• Revenue grew by 23 percent on a constant currency basis, driven by increased demand for our sleep and respiratory care devices as well as reduced competitive supply.
  • Revenue in the U.S., Canada, and Latin America, excluding Software-as-a-Service, grew by 25 percent, primarily due to the factors discussed above.
  • Revenue in Europe, Asia, and other markets, excluding Software-as-a-Service, grew by 14 percent on a constant currency basis.
  • Software-as-a-Service revenue increased by 34 percent, reflecting incremental revenue from our acquisition of MEDIFOX DAN and continued organic growth in our SaaS portfolio.
• Gross margin decreased by 210 basis points and non-GAAP gross margin decreased by 200 basis points, mainly due to unfavorable product mix and higher component and manufacturing costs, partially offset by an increase in average selling prices.
• Selling, general, and administrative expenses increased by 26 percent on a constant currency basis. SG&A expenses increased to 21.5 percent of revenue in the quarter, compared with 21.1 percent in the same period of the prior year. These changes in SG&A expenses were mainly due to increases in employee-related expenses and incremental expense associated with our acquisition of MEDIFOX DAN.
• Income from operations increased by 8 percent and non-GAAP income from operations increased by 13 percent.
• Net income for the quarter was $229.7 million and diluted earnings per share was $1.56. Non-GAAP net income increased by 7% to $235.5 million, and non-GAAP diluted earnings per share increased by 7% to $1.60, predominantly attributable to strong sales, partially offset by gross margin contraction.
• Operating cash flow for the quarter was $237.4 million, compared to net income in the current quarter of $229.7 million and non-GAAP net income of $235.5 million. During the quarter we paid $64.7 million in dividends.

Other Business and Operational Highlights

• Announced the acquisition of privately held Somnoware, a leader in digital sleep and respiratory care diagnostics software for sleep labs and physicians. Somnoware is upstream of and complementary to ResMed’s current post-testing AirView and Brightree offerings and will remain an open platform. The transaction’s financial terms are not material to ResMed’s consolidated financial results and were not disclosed.
• Supported or presented 34 clinical study abstracts at the annual American Thoracic Society (24) and SLEEP (10) conferences, demonstrating the breadth and depth of ResMed’s real-world evidence that showed treating OSA with PAP lowered all-cause mortality, adaptive-servo ventilation (ASV) improved quality of life in central sleep apnea (CSA), and PAP adherence lowered ER visits 24-36% at 1-year for OSA patients with heart failure, among others.
• Announced the promotion of Michael Rider to Global General Counsel and Secretary, effective July 1, 2023 and Dawn Haake to Chief Quality Officer, effective May 1, 2023. Mr. Rider was previously ResMed’s Senior Vice President, Deputy Global General Counsel and has been with ResMed for over 10 years. Ms. Haake was previously ResMed’s Vice President, Quality Assurance and Regulatory Affairs and has been with ResMed for 8 years.

Dividend programThe ResMed board of directors today declared a quarterly cash dividend of $0.48 per share. The dividend will have a record date of August 17, 2023, payable on September 21, 2023. 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 16, 2023, 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 16, 2023, through August 17, 2023, inclusive. 

Webcast detailsResMed will discuss its fourth-quarter fiscal year 2023 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 2023 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 three hours after the webcast by dialing +1 877-660-6853 (U.S.) or +1 201-612-7415 (outside U.S.) and entering the passcode 13739812. The telephone replay will be available until August 17, 2023.

About ResMedAt 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 statementStatements 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, our supply chain, domestic and international regulatory developments, litigation, tax outlook, and macroeconomic conditions of our business – 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 Operations(Unaudited; $ in thousands, except for per share amounts)

(1) See the reconciliation of non-GAAP financial measures in the table at the end of the press release.

Condensed Consolidated Balance Sheets(Unaudited; $ in thousands)

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

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 and restructuring expense related to cost of sales and are reconciled below:

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

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:

(A) ResMed adjusts for the impact of the amortization of acquired intangibles, restructuring expenses, acquisition-related expenses, gain on insurance recoveries, (gain) loss on equity investments, reserves for disputed tax positions, and associated tax effects 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.

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

(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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