RESMED, INC. SAN DIEGO, Jan. 23, 2017 /PRNewswire/ -- ResMed Inc. (NYSE: RMD) today announced results for its quarter ended December 31, 2016. Revenue for the quarter was $530.4 million, a 17 percent increase compared to the same period of the prior year. Excluding the contribution from the Brightree business acquired in April 2016, revenue for the quarter was $496.6 million, a 9 percent increase.
"We had a strong quarter with 18 percent constant currency revenue growth led by solid growth in our Brightree software offerings and global device sales," said Mick Farrell, ResMed's chief executive officer. "We continue to pioneer game-changing products and create value with our solutions. This quarter we announced: FDA clearance for the world's smallest travel CPAP; the creation of SleepScore Labs to focus on consumer sleep wellness; reaching the milestone of one billion nights of sleep data; and new research demonstrating that the use of myAir(TM) significantly improves patient adherence to sleep therapy in Europe."
Farrell concluded, "We are focused on our goal of changing the lives of 20 million patients by 2020 and we continue to lead the industry through an exciting pipeline of new products and connected care solutions that improve patient outcomes, create efficiencies for our homecare customers, and help physicians and providers better manage chronic disease and lower healthcare costs."
Analysis of second quarter results
Second quarter revenue in the Americas was $326.8 million, a 21 percent increase over the same period of the prior year. This included Brightree revenue of $33.8 million. Excluding Brightree, revenue in the Americas was $293.0 million, a 9 percent increase over the prior year. Revenue in combined EMEA and APAC was $203.6 million, an increase of 13 percent on a constant currency basis, compared to the same period of the prior year.
Gross margin in the second quarter was 58.3 percent, higher than the prior year's quarter gross margin of 58.1 percent, excluding the prior year release of $2.4 million in accrued expenses associated with the SERVE-HF field safety notice. The improvement in gross margin compared to prior year's quarter was due to manufacturing and procurement efficiencies and an incremental contribution from the Brightree acquisition, partly offset by changes in product mix and declines in average selling prices.
Income from operations for the quarter was $96.9 million, a 10 percent decline compared with the quarter ended December 31, 2015. Non-GAAP income from operations for the quarter was $131.6 million, a 13 percent increase compared to the same period of the prior year.
Selling, general and administrative expenses were $139.3 million, an 18 percent increase over the same period in the prior year, also an 18 percent increase on a constant currency basis. SG&A expenses increased to 26.3 percent of revenue in the quarter, compared with 26.0 percent reported in the quarter ended December 31, 2015.
Research and development expenses were $38.2 million, or 7.2 percent of revenue. R&D expenses increased by 32 percent compared with the same period last year, or a 28 percent increase on a constant currency basis.
Amortization of acquired intangible assets was $11.7 million during the quarter, an increase of $7.3 million compared with the same period last year. The increase in amortization of acquired intangible assets was primarily due to the amortization expense associated with the Brightree and Inova acquisitions. Stock-based compensation costs incurred during the quarter of $10.8 million consisted of expenses associated with employee equity grants, and our employee stock purchase plan.
Net income for the quarter was $76.7 million, a 20 percent decrease compared to the same period of the prior year. Non-GAAP net income was $103.3 million, a 1 percent increase compared to the prior year.
Non-GAAP measures adjust for amortization of acquired intangibles, litigation settlement expenses, acquisition related expenses associated with additional contingent consideration on recent acquisitions and restructuring expenses.
GAAP diluted earnings per share for the quarter decreased 21 percent to $0.54. Non-GAAP diluted earnings per share of $0.73 were consistent with the same period of the prior year.
Cash flow from operations for the quarter was $119.9 million compared to net income in the current quarter of $76.7 million.
Dividend program
The ResMed board of directors today declared a quarterly cash dividend of $0.33 per share. The dividend will have a record date of February 9, 2017, payable on March 16, 2017. 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 8, 2017 for common stock holders 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 7, 2017 through February 9, 2017 inclusive.
Webcast details
ResMed will discuss its financial and business results and outlook 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 2017 earnings webcast" to register and listen to the live webcast. The online archive of the broadcast will be available on ResMed's website after the live call. In addition, a telephone replay of the conference call will be available approximately two hours after the call by dialing 855-859-2056 (U.S.) and +1 404-537-3406 (international) and entering a passcode of 40778584. The telephone replay will be available until February 6, 2017.
About ResMed
ResMed (NYSE:RMD) changes lives with award-winning medical devices and cutting-edge cloud-based software applications that better diagnose, treat and manage sleep apnea, chronic obstructive pulmonary disease (COPD) and other chronic diseases. ResMed is a global leader in connected care, with more than 2 million patients remotely monitored every day. Our 5,000-strong team is committed to creating the world's best tech-driven medical device company - improving quality of life, reducing the impact of chronic disease, and saving healthcare costs in more than 100 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 and new markets for its products and the integration of acquisitions - 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 per share data)
Three Months Ended Six Months Ended
December 31, December 31,
2016 2015 2016 2015
---- ---- ---- ----
Net revenue $530,397 $454,540 $995,846 $866,187
Cost of sales 221,326 190,433 412,522 363,461
Astral field
safety
notification
expenses (1) - - 5,070 -
SERVE-HF accrual
release (1) - (2,402) - (2,402)
Gross profit 309,071 266,509 578,254 505,128
------------ ------- ------- ------- -------
Operating expenses:
Selling, general
and
administrative 139,307 118,219 268,158 229,314
Research and
development 38,190 28,970 72,637 56,162
Restructuring
expenses (1) 4,413 6,914 4,413 6,914
Litigation
settlement
expenses (1) 8,500 - 8,500 -
Acquisition
related expenses
(1) 10,076 - 10,076 -
Amortization of
acquired
intangible
assets (1) 11,690 4,429 23,431 6,736
Total operating
expenses 212,176 158,532 387,215 299,126
--------------- ------- ------- ------- -------
Income from
operations (1) 96,895 107,977 191,039 206,002
--------------- ------ ------- ------- -------
Other income (expenses), net:
Interest income
(expense), net (2,437) 2,476 (4,929) 5,898
Other, net 1,749 3,242 3,021 1,239
Total other
income
(expenses), net (688) 5,718 (1,908) 7,137
---------------- ---- ----- ------ -----
Income before
income taxes 96,207 113,695 189,131 213,139
------------- ------ ------- ------- -------
Income taxes
excluding ASU
2016-09 (2) 19,439 23,178 38,735 42,220
Income taxes
relating to ASU
2016-09 (2) 25 (5,059) (2,453) (7,574)
Total income
taxes 19,464 18,119 36,282 34,646
------------ ------ ------ ------ ------
Net income (1) $76,743 $95,576 $152,849 $178,493
------------- ------- ------- -------- --------
Basic earnings
per share $0.54 $0.68 $1.08 $1.27
Diluted earnings
per share $0.54 $0.68 $1.08 $1.26
Non-GAAP diluted
earnings per
share (1) $0.73 $0.73 $1.34 $1.32
Basic shares
outstanding 141,310 139,926 141,048 140,118
Diluted shares
outstanding 142,097 141,423 141,982 141,837
-------------- ------- ------- ------- -------
(1) See the reconciliation of non-GAAP
financial measures in the table at
the end of the press release.
(2) As a result of the adoption of ASU
2016-09 "Improvements to Employee
Share-Based Payment Accounting"
during the quarter ended June 30, 2016
we now recognize an income tax impact
relating to share-based payment
transactions. The income taxes for the
three and six months ended December
31, 2015 have been restated to reflect
the adoption of the standard as the
benefit was previously recorded as a
reduction to Additional Capital.
RESMED INC AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited - In thousands)
December 31, June 30,
2016 2016
---- ----
ASSETS:
Current assets:
Cash and cash equivalents $788,146 $731,434
Accounts receivable, net 383,992 382,086
Inventories 253,108 224,456
Prepayments and other current
assets 95,028 81,743
Total current assets 1,520,274 1,419,719
-------------------- --------- ---------
Property, plant and
equipment, net 375,928 384,276
Goodwill 1,046,304 1,059,245
Other intangibles, net 275,422 299,808
Deferred income taxes and
other non-current assets 104,642 93,657
Total non-current assets 1,802,296 1,836,986
------------------------ --------- ---------
Total assets $3,322,570 $3,256,705
------------ ---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $94,100 $92,571
Accrued expenses 216,225 156,805
Deferred revenue 46,389 50,009
Income taxes payable 25,869 39,166
Short-term debt 299,812 299,438
Total current liabilities 682,395 637,989
------------------------- ------- -------
Non-current liabilities:
Deferred income taxes 13,789 9,061
Deferred revenue 46,682 40,281
Other long term liabilities 864 1,211
Long-term debt 868,690 873,332
Total non-current liabilities 930,025 923,885
----------------------------- ------- -------
Total liabilities 1,612,420 1,561,874
----------------- --------- ---------
STOCKHOLDERS' EQUITY:
Common stock 566 563
Additional paid-in capital 1,335,895 1,303,238
Retained earnings 2,220,283 2,160,299
Treasury stock (1,546,611) (1,546,611)
Accumulated other
comprehensive income (299,983) (222,658)
--------------------- -------- --------
Total stockholders' equity $1,710,150 $1,694,831
-------------------------- ---------- ----------
Total liabilities and
stockholders' equity $3,322,570 $3,256,705
RESMED INC AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited - In thousands)
Six Months Ended
December 31,
2016 2015
---- ----
Cash flows from operating activities:
Net income $152,849 $178,493
Adjustment to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 55,504 39,920
Impairment of long-lived asset - 2,815
Stock-based compensation costs 22,802 23,841
Changes in fair value of business
combination contingent
consideration 10,076 -
Impairment of cost-method
investments 206 750
Changes in operating assets and liabilities, net of effect of
acquisitions:
Accounts receivable, net (7,080) 24,533
Inventories, net (36,104) 8,751
Prepaid expenses, net deferred
income taxes and other current
assets (15,197) 14,398
Accounts payable, accrued expenses
and other 23,086 (13,279)
Net cash provided by operating
activities 206,142 280,222
------------------------------ ------- -------
Cash flows from investing activities:
Purchases of property, plant and
equipment (29,247) (30,934)
Patent registration costs (4,603) (4,902)
Business acquisitions, net of cash
acquired (3,184) (152,118)
Investments in cost-method
investments (3,867) (7,582)
Proceeds /(Payments) on maturity
of foreign currency contracts 8,209 (28,326)
Net cash used in investing
activities (32,692) (223,862)
-------------------------- ------- --------
Cash flows from financing activities:
Proceeds from issuance of common
stock, net 9,816 8,066
Purchases of treasury stock - (102,058)
Payment of business combination
contingent consideration - (1,120)
Proceeds from borrowings, net of
borrowing costs 75,000 200,000
Repayment of borrowings (80,000) (100,160)
Dividends paid (92,865) (84,054)
-------------- ------- -------
Net cash (used in) /provided by
financing activities (88,049) (79,326)
------------------------------- ------- -------
Effect of exchange rate changes on
cash (28,689) (35,479)
---------------------------------- ------- -------
Net increase /(decrease) in cash
and cash equivalents 56,712 (58,445)
Cash and cash equivalents at
beginning of period 731,434 717,249
Cash and cash equivalents at end of
period $788,146 $658,804
----------------------------------- -------- --------
Reconciliation of Non-GAAP Financial Measures (Unaudited)
(In US$ thousands, except share and per share data)
The measure, "non-GAAP income from operations" is reconciled with GAAP income from operations below:
Three Months Ended Six Months Ended
December 31 December 31,
2016 2015 2016 2015
---- ---- ---- ----
GAAP income from
operations $96,895 $107,977 $191,039 $206,002
SERVE-HF accrual
release (A) - (2,402) - (2,402)
Astral battery
field safety
notification
expenses (A) - - 5,070 -
Restructuring
expenses (A) 4,413 6,914 4,413 6,914
Litigation
settlement
expenses (A) 8,500 - 8,500 -
Acquisition related
expenses (A) 10,076 - 10,076 -
Amortization of
acquired
intangible assets
(A) 11,690 4,429 23,431 6,736
Non-GAAP income
from operations $131,574 $116,918 $242,529 $217,250
---------------- -------- -------- -------- --------
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, December 31,
2016 2015 2016 2015
---- ---- ---- ----
GAAP net income $76,743 $95,576 $152,849 $178,493
SERVE-HF accrual
release, net of
tax (A) - (1,682) - (1,682)
Astral battery
field safety
notification
expenses (A) - - 3,549 -
Restructuring
expenses, net of
tax (A) 3,085 5,204 3,085 5,204
Litigation
settlement
expenses, net of
tax (A) 5,392 - 5,392 -
Acquisition related
expenses (A) 10,076 - 10,076 -
Amortization of
acquired
intangible assets,
net of tax (A) 7,968 3,439 15,975 5,156
Non-GAAP net
income (A) $103,264 $102,537 $190,926 $187,171
Diluted shares
outstanding 142,097 141,423 141,982 141,837
GAAP diluted
earnings per share $0.54 $0.68 $1.08 $1.26
------------------- ----- ----- ----- -----
Non-GAAP diluted
earnings per share
(A) $0.73 $0.73 $1.34 $1.32
------------------- ----- ----- ----- -----
(A) ResMed adjusts for the impact of
the Astral battery field safety
notification expenses, release
of SERVE-HF accrual,
restructuring expenses,
litigation settlement expenses,
acquisition related expenses and
amortization of acquired
intangible assets from their
evaluation of ongoing operations
and believes 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 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.
Our use of non-GAAP measures is
intended to supplement, and not
to replace, our 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.
Contacts:
For Investors For News Media
Agnes Lee Alison Graves
O: 858-836-5971 O: 858-836-6789
investorrelations@resmed.com news@resmed.com
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SOURCE ResMed Inc.
