Bulletin
Investor Alert

April 29, 2022, 6:14 a.m. EDT

10-Q: RESMED INC

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

or Cancel Already have a watchlist? Log In

(EDGAR Online via COMTEX) -- Management's Discussion and Analysis of Financial Condition and Results of Operations

.

Special Note Regarding Forward-Looking Statements

This report contains or may contain certain forward-looking statements and information that are based on the beliefs of our management as well as estimates and assumptions made by, and information currently available to, our management. All statements other than statements regarding historical facts are forward-looking statements. The words "believe," "expect," "intend," "anticipate," "will continue," "will," "estimate," "plan," "future" and other similar expressions, and negative statements of such expressions, generally identify forward-looking statements, including, in particular, statements regarding expectations of future revenue or earnings, expenses, new product development, new product launches, new markets for our products, litigation, tax outlook and the effects of competition and public health crises (including the COVID-19 pandemic) on our business. These forward-looking statements are made in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on these forward-looking statements. Forward-looking statements reflect the views of our management at the time the statements are made and are subject to a number of risks, uncertainties, estimates and assumptions, including, without limitation, and in addition to those identified in the text surrounding such statements, those identified in our annual report on Form 10-K for the fiscal year ended June 30, 2021 and elsewhere in this report. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources.

In addition, important factors to consider in evaluating such forward-looking statements include changes or developments in healthcare reform, social, economic, market, legal or regulatory circumstances, including the impact of public health crises such as the novel strain of coronavirus (COVID-19) that has spread globally, changes in our business or growth strategy or an inability to execute our strategy due to changes in our industry or the economy generally, the emergence of new or growing competitors, the actions or omissions of third parties, including suppliers, customers, competitors and governmental authorities and various other factors. If any one or more of these risks or uncertainties materialize, or underlying estimates or assumptions prove incorrect, actual results may vary significantly from those expressed in our forward-looking statements, and there can be no assurance that the forward-looking statements contained in this report will in fact occur.

Before deciding to purchase, hold or sell our common stock, you should carefully consider the risks described in our annual report on Form 10-K for the fiscal year ended June 30, 2021, in addition to the other cautionary statements and risks described elsewhere in this report and in our other filings with the Securities and Exchange Commission ("SEC"), including our subsequent reports on Forms 10-Q and 8-K. These risks and uncertainties are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business. If any of these known or unknown risks or uncertainties actually occurs with material adverse effects on us, our business, financial condition and results of operations could be seriously harmed. In that event, the market price for our common stock will likely decline and you may lose all or part of your investment.







        Table of Contents
        


PART I - FINANCIAL INFORMATION Item 2

RESMED INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

The following is an overview of our results of operations for the three and nine months ended March 31, 2022. Management's discussion and analysis of financial condition and results of operations ("MD&A") is intended to help the reader understand our results of operations and financial condition. Management's discussion and analysis is provided as a supplement to, and should be read in conjunction with, the condensed consolidated financial statements and notes included in this report.

We are a global leader in the development, manufacturing, distribution and marketing of medical devices and cloud-based software applications that diagnose, treat and manage respiratory disorders, including sleep disordered breathing ("SDB"), chronic obstructive pulmonary disease, neuromuscular disease and other chronic diseases. SDB includes obstructive sleep apnea and other respiratory disorders that occur during sleep. Our products and solutions are designed to improve patient quality of life, reduce the impact of chronic disease and lower healthcare costs as global healthcare systems continue to drive a shift in care from hospitals to the home and lower cost settings. Our cloud-based software digital health applications, along with our devices, are designed to provide connected care to improve patient outcomes and efficiencies for our customers.

Since the development of continuous positive airway pressure therapy, we have expanded our business by developing or acquiring a number of products and solutions for a broader range of respiratory disorders including technologies to be applied in medical and consumer products, ventilation devices, diagnostic products, mask systems for use in the hospital and home, headgear and other accessories, dental devices, and cloud-based software informatics solutions to manage patient outcomes and customer and provider business processes. Our growth has been fueled by geographic expansion, our research and product development efforts, acquisitions and an increasing awareness of SDB and respiratory conditions like chronic obstructive pulmonary disease as significant health concerns.

We are committed to ongoing investment in research and development and product enhancements. During the three months ended March 31, 2022, we invested $66.8 million on research and development activities, which represents 7.7% of net revenues, with a continued focus on the development and commercialization of new, innovative products and solutions that improve patient outcomes, create efficiencies for our customers and help physicians and providers better manage chronic disease and lower healthcare costs. During the three months ended March 31, 2022 we continued the launch of AirSense 11, which introduces new features such as a touch screen, algorithms for patients new to therapy and digital enhancements and over-the-air update capabilities. Due to multiple acquisitions, including Brightree in April 2016, HEALTHCAREfirst in July 2018 and MatrixCare in November 2018, our operations now include out-of-hospital software platforms designed to support the professionals and caregivers who help people stay healthy in the home or care setting of their choice. These platforms comprise our SaaS business. These products, our cloud-based remote monitoring and therapy management system, and a robust product pipeline, should continue to provide us with a strong platform for future growth.

We have determined that we have two operating segments, which are the sleep and respiratory disorders sector of the medical device industry ("Sleep and Respiratory Care") and the supply of business management software as a service to out-of-hospital health providers ("SaaS").

Net revenue for the three months ended March 31, 2022 was $864.5 million, an increase of 12% compared to the three months ended March 31, 2021. Gross margin was 56.8% for the three months ended March 31, 2022 compared to 58.2% for the three months ended March 31, 2021. Diluted earnings per share was $1.22 for the three months ended March 31, 2022, compared to diluted loss per share of $0.54 for the three months ended March 31, 2021.

At March 31, 2022, our cash and cash equivalents totaled $201.8 million, our total assets were $4.9 billion and our stockholders' equity was $3.3 billion.

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 accounting principles generally accepted in the United States ("GAAP").







        Table of Contents
        


PART I - FINANCIAL INFORMATION Item 2

RESMED INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations

Key Trends and Economic Factors Affecting Our Business

Supply Chain Disruptions

The COVID-19 pandemic has continued to impact the global supply chain, primarily through a lack of availability of raw materials and electronic components. The lack of raw materials and electronic components is also impacting companies outside of our direct industry, which is resulting in a competitive supply environment causing higher costs, requiring us to commit to minimum purchase obligations as well as make upfront payments to our suppliers. Additionally, we have observed a reduction in both inbound and outbound transportation capacity as a result of port closures and delays associated with the pandemic, which is causing longer lead times in receiving raw materials into and distributing finished goods out of our manufacturing facilities, in addition to increased freight costs. These highly competitive and constrained supply chain conditions are increasing our cost of sales, which has and may continue to decrease our gross margin. Given the ongoing uncertainty regarding the duration and extent of the COVID-19 pandemic, we are uncertain as to the duration and extent of constraint on our supply chain.

Competitor Recall

An ongoing product recall by one of our competitors, Philips, has resulted in increased demand for our sleep and respiratory care devices. The supply chain disruptions outlined above have constrained and restricted our ability to meet this increased demand and we expect these constraints will continue for the remainder of the fiscal year ending June 30, 2022.

COVID-19

Although there is still substantial uncertainty associated with the COVID-19 pandemic, we believe the global demand for ventilators and other respiratory support devices used to treat COVID-19 patients has largely been met. We did not observe material incremental demand for our ventilator devices and masks associated with the pandemic during the three months ended March 31, 2022 and do not expect material COVID-19-generated demand for our ventilator products for the remainder of the fiscal year ending June 30, 2022.

In most markets, diagnostic pathways for sleep apnea treatment, including physician practices, home medical equipment ("HME") distributors, and sleep clinics have largely recovered towards pre-pandemic levels as vaccines and boosters roll out globally. Likewise, we have continued to observe stabilizing patient flow in our out-of-hospital care settings within our SaaS business.

Our ability to continue to operate without any significant negative impacts will in part depend on our ability to protect our employees. We have endeavored and continue to follow recommended actions of government and health authorities to protect our employees worldwide as we progressively reopen our offices around the world. The pandemic has not negatively impacted our liquidity position.

Impact on Our Business

As a result of these trends, we were not able to meet all the demand available in the market during the three months ended March 31, 2022. We are being allocated components from our suppliers, particularly semiconductor chips, and we are thus being forced to allocate our outbound products to our customers. We have established an allocation process with clear guiding principles that give priority to the production and delivery of devices to meet the needs of the highest acuity patients first. In addition to component supply issues, the ongoing freight challenges are impacting our ability to respond as rapidly as we would like to the demand for our products.







        Table of Contents
        


PART I - FINANCIAL INFORMATION Item 2

RESMED INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021







        Net Revenue
        Net revenue for the three months ended March 31, 2022 increased to $864.5
        million from $768.8 million for the three months ended March 31, 2021, an
        increase of $95.7 million or 12% (a 14% increase on a constant currency basis).
        The following table summarizes our net revenue disaggregated by segment, product
        and region (in thousands):
                                                       Three Months Ended
                                                            March 31,
                                                     2022               2021                % Change            Constant Currency*
        U.S., Canada and Latin America
        Devices                                  $ 250,768          $ 192,897                       30  %
        Masks and other                            224,665            209,984                        7
        Total Sleep and Respiratory Care         $ 475,433          $ 402,881                       18
        Software as a Service                      101,142             93,836                        8
        Total                                    $ 576,575          $ 496,717                       16
        Combined Europe, Asia and other markets
        Devices                                  $ 182,307          $ 172,838                        5  %                     10  %
        Masks and other                            105,618             99,212                        6                        13
        Total Sleep and Respiratory Care         $ 287,925          $ 272,050                        6                        11
        Global revenue
        Devices                                  $ 433,075          $ 365,735                       18  %                     21  %
        Masks and other                            330,283            309,196                        7                         9
        Total Sleep and Respiratory Care         $ 763,358          $ 674,931                       13                        15
        Software as a Service                      101,142             93,836                        8                         8
        Total                                    $ 864,500          $ 768,767                       12                        14
        


*Constant currency numbers exclude the impact of movements in international currencies.

Sleep and Respiratory Care

Net revenue from our Sleep and Respiratory Care business for the three months ended March 31, 2022 was $763.4 million, an increase of 13% compared to net revenue for the three months ended March 31, 2021. Movements in international currencies against the U.S. dollar negatively impacted net revenue by approximately $14.4 million for the three months ended March 31, 2022. Excluding the impact of currency movements, total Sleep and Respiratory Care net revenue for the three months ended March 31, 2022 increased by 15% compared to the three months ended March 31, 2021. The increase in net revenue was primarily attributable to an increase in unit sales of our devices and masks, including increased demand following a recent product recall by one of our competitors.

Net revenue from our Sleep and Respiratory Care business in the U.S., Canada and Latin America for the three months ended March 31, 2022 increased to $475.4 million from $402.9 million for the three months ended March 31, 2021, an increase of $72.6 million or 18%. The increase was primarily due to an increase in unit sales of our devices and masks, including increased demand following a recent product recall by one of our competitors.

Net revenue in combined Europe, Asia and other markets increased for the three months ended March 31, 2022 to $287.9 million from $272.1 million for the three months ended March 31, 2021, an increase of $15.9 million or 6% (an 11% increase on a constant currency basis). The constant currency increase in sales in combined Europe, Asia and other markets predominantly reflects an increase in unit sales of our devices and masks, including increased demand following a recent product recall by one of our competitors.

Net revenue from devices for the three months ended March 31, 2022 increased to $433.1 million from $365.7 million for the three months ended March 31, 2021, an increase of $67.3 million or 18%, including an increase of 30% in the U.S., Canada and Latin America and an increase of 5% in combined Europe, Asia and other markets (a 10% increase on a







        Table of Contents
        


PART I - FINANCIAL INFORMATION Item 2

RESMED INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations

constant currency basis). Excluding the impact of foreign currency movements, device sales for the three months ended March 31, 2022 increased by 21%.

Net revenue from masks and other for the three months ended March 31, 2022 increased to $330.3 million from $309.2 million for the three months ended March 31, 2021, an increase of $21.1 million or 7%, including an increase of 7% in the U.S., Canada and Latin America and an increase of 6% in combined Europe, Asia and other markets (a 13% increase on a constant currency basis). Excluding the impact of foreign currency movements, masks and other sales increased by 9%, compared to the three months ended March 31, 2021.

Software as a Service

Net revenue from our SaaS business for the three months ended March 31, 2022 was $101.1 million, an increase of 8% compared to the three months ended March 31, 2021. The increase was predominantly due to continued growth in our HME and Home Health and Hospice segments, in addition to stabilizing patient flow in our out-of-hospital care settings.







        Table of Contents
        


PART I - FINANCIAL INFORMATION Item 2

RESMED INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations

Nine Months Ended March 31, 2022 Compared to the Nine Months Ended March 31, 2021







        Net Revenue
        Net revenue for the nine months ended March 31, 2022 increased to $2,663.4
        million from $2,320.7 million for the nine months ended March 31, 2021, an
        increase of $342.7 million or 15% (a 15% increase on a constant currency basis).
        The following table summarizes our net revenue disaggregated by segment, product
        and region (in thousands):
                                                          Nine Months Ended
                                                              March 31,
                                                      2022                 2021                 % Change            Constant Currency*
        U.S., Canada and Latin America
        Devices                                  $   771,475          $   595,287                       30  %
        Masks and other                              681,803              637,507                        7
        Total Sleep and Respiratory Care         $ 1,453,278          $ 1,232,794                       18
        Software as a Service                        297,693              277,813                        7
        Total                                    $ 1,750,971          $ 1,510,607                       16
        Combined Europe, Asia and other markets
        Devices                                  $   608,268          $   536,856                       13  %                     15  %
        Masks and other                              304,151              273,259                       11                        14
        Total Sleep and Respiratory Care         $   912,419          $   810,115                       13                        15
        Global revenue
        Devices                                  $ 1,379,743          $ 1,132,143                       22  %                     23  %
        Masks and other                              985,954              910,766                        8                         9
        Total Sleep and Respiratory Care         $ 2,365,697          $ 2,042,909                       16                        16
        Software as a Service                        297,693              277,813                        7                         7
        Total                                    $ 2,663,390          $ 2,320,722                       15                        15
        


Sleep and Respiratory Care

Net revenue from our Sleep and Respiratory Care business for the nine months ended March 31, 2022 was $2,365.7 million, an increase of 16% compared to net revenue for the nine months ended March 31, 2021. Movements in international currencies against the U.S. dollar negatively impacted net revenue by approximately $14.3 million for the nine months ended March 31, 2022. Excluding the impact of currency movements, total Sleep and Respiratory Care net revenue for the nine months ended March 31, 2022 increased by 16% compared to the nine months ended March 31, 2021. The increase in net revenue was primarily attributable to an increase in unit sales of our devices and masks, including recovery of core sleep patient flow that was previously impacted by the pandemic and increased demand following a recent product recall by one of our competitors, partially offset by decreased COVID-19 related demand for our ventilators.

Net revenue from our Sleep and Respiratory Care business in the U.S., Canada and Latin America for the nine months ended March 31, 2022 increased to $1,453.3 million from $1,232.8 million for the nine months ended March 31, 2021, an increase of $220.5 million or 18%. The increase was primarily due to an increase in unit sales of our devices and masks, including recovery of core sleep patient flow that was previously impacted by the pandemic and increased demand following a recent product recall by one of our competitors, partially offset by decreased COVID-19 related demand for our ventilators.

Net revenue in combined Europe, Asia and other markets increased for the nine months ended March 31, 2022 to $912.4 million from $810.1 million for the nine months ended March 31, 2021, an increase of $102.3 million or 13% (a 15% increase on a constant currency basis). The constant currency increase in sales in combined Europe, Asia and other markets predominantly reflects an increase in unit sales of our devices and masks, including recovery of core sleep patient flow that was previously impacted by the pandemic and increased demand following a recent product recall by one of our competitors, partially offset by decreased COVID-19-related demand for our ventilators.

Net revenue from devices for the nine months ended March 31, 2022 increased to $1,379.7 million from $1,132.1 million for the nine months ended March 31, 2021, an increase of $247.6 million or 22%, including an increase of 30% in the U.S., Table of Contents

PART I - FINANCIAL INFORMATION Item 2

RESMED INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations

Canada and Latin America and an increase of 13% in combined Europe, Asia and other markets (a 15% increase on a constant currency basis). Excluding the impact of foreign currency movements, device sales for the nine months ended March 31, 2022 increased by 23%.

Net revenue from masks and other for the nine months ended March 31, 2022 increased to $986.0 million from $910.8 million for the nine months ended March 31, 2021, an increase of $75.2 million or 8%, including an increase of 7% in the U.S., Canada and Latin America and an increase of 11% in combined Europe, Asia and other markets (a 14% increase on a constant currency basis). Excluding the impact of foreign currency movements, masks and other sales increased by 9%, compared to the nine months ended March 31, 2021.

Software as a Service

Net revenue from our SaaS business for the nine months ended March 31, 2022 was $297.7 million, an increase of 7% compared to the nine months ended March 31, 2021. The increase was predominantly due to continued growth in our HME and Home Health and Hospice segments, in addition to stabilizing patient flow in our out-of-hospital care settings.

Gross Profit and Gross Margin

Gross profit increased for the three months ended March 31, 2022 to $491.2 million from $447.3 million for the three months ended March 31, 2021, an increase of $43.9 million or 10%. Gross margin, which is gross profit as a percentage of net revenue, for the three months ended March 31, 2022 was 56.8% compared to 58.2% for the three months ended March 31, 2021.

The decrease in gross margin for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was due primarily to higher logistics and manufacturing costs, partially offset by favorable changes in product mix and average selling prices.

Gross profit increased for the nine months ended March 31, 2022 to $1,501.8 million from $1,348.4 million for the nine months ended March 31, 2021, an increase of $153.4 million or 11%. Gross margin, which is gross profit as a percentage of net revenue, for the nine months ended March 31, 2022 was 56.4% compared to 58.1% for the nine months ended March 31, 2021.

The decrease in gross margin for the nine months ended March 31, 2022 compared to the nine months ended March 31, 2021 was due primarily to higher logistics and manufacturing costs, partially offset by favorable changes in product mix and average selling prices.







        Operating Expenses
        The following table summarizes our operating expenses (in thousands):
                                                Three Months Ended
                                                     March 31,
                                              2022               2021              Change               % Change            Constant Currency
        Selling, general, and
        administrative                    $ 182,401          $ 160,446          $  21,955                       14  %                    17  %
        . . .
        


Apr 29, 2022

COMTEX_406428850/2041/2022-04-29T06:14:17

Is there a problem with this press release? Contact the source provider Comtex at editorial@comtex.com. You can also contact MarketWatch Customer Service via our Customer Center.

(c) 1995-2022 Cybernet Data Systems, Inc. All Rights Reserved

This Story has 0 Comments
Be the first to comment

Story Conversation

Commenting FAQs »

Partner Center

Link to MarketWatch's Slice.