01—Abstract
Summary
Summary of the 10-K filed August 8, 2019. Cited figures are marked; the original filing is the authoritative source.
ResMed Inc. reported fiscal 2019 (year ended June 30, 2019) net revenue of $2,606.6 milliona, up 11% from $2,340.2 million in fiscal 2018 (13% on a constant currency basis).
Gross profit rose to $1,536.6 millionb, a gross margin of 59.0% compared with 58.2% a year earlier. Net income was $404.6 million, or $2.80 per diluted share, versus $315.6 million, or $2.19 per diluted share, in fiscal 2018. Growth was led by the Software as a Service (SaaS) segment, whose revenue rose 76% to $275.8 million, largely from the MatrixCare and HEALTHCAREfirst acquisitions.
Sleep and Respiratory Care revenue increased 7% to $2,330.8 millionc. The company's balance sheet shifted materially toward debt during the year. Total assets grew to $4.11 billion from $3.06 billion, goodwill rose to $1.86 billion, and total debt reached $1,274.0 million, driven by $951.4 million paid for business acquisitions, mainly funded by its credit facility.
Subsequent to year end, on July 10, 2019, ResMed issued $500.0 milliond of senior notes (3.24% due 2026 and 3.45% due 2029) and used the proceeds to pay down the revolving credit facility. Investors should also note regulatory and legal exposure. ResMed has tentatively agreed to pay $39.5 million to resolve government investigations of its business practices, and has reserved $41.2 million.
The Australian Taxation Office asserts $151.7 million in additional income tax, $38.4 million in interest and $75.9 million in penalties for tax years 2009 to 2013; the company disputes these assessments and has recorded no expense for them. Cash flow from operations declined to $459.1 million from $505.0 million, mainly due to higher inventories and tax payments.
02—Key points
Key Highlights
- Net revenue rose 11% to $2,606.6 million; constant currency growth was 13%.
- Diluted EPS was $2.80, up from $2.19 in fiscal 2018, though fiscal 2018 included $138.0 million of U.S. Tax Act expense; the effective tax rate fell to 22.0% from 39.5%.
- SaaS revenue increased 76% to $275.8 million, driven by the MatrixCare and HEALTHCAREfirst acquisitions; the SaaS segment is now reported separately.
- Gross margin improved to 59.0% from 58.2%, reflecting manufacturing and procurement efficiencies, the MatrixCare acquisition and product mix, partly offset by lower average selling prices.
- Total debt rose to $1,274.0 million from $281.5 million after roughly $951.4 million of acquisition spending, and $500.0 million of senior notes were issued in July 2019.
- Tentative $39.5 million settlement with the government over industry offerings, with $41.2 million reserved; the Australian Taxation Office assessments of $151.7 million in tax are disputed.
- Operating cash flow fell to $459.1 million from $505.0 million, and the company paid $211.7 million in dividends.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, ResMed kept $0.16.
- Revenue$2.61B100.0%
- Cost of revenue−$1.11B42.7%
- Gross profit$1.49B57.3%
- Operating costs−$914.8M35.1%
- Operating income$579.3M22.2%
- Interest, other & tax−$174.7M6.7%
- Net income$404.6M15.5%
Where FY2019 revenue went
$2.61B- Cost of revenue: $1.11B, 43% of revenue
- SG&A: $645.0M, 25% of revenue
- Net income: $404.6M, 16% of revenue
- R&D: $180.7M, 6.9% of revenue
- Other operating costs: $89.1M, 3.4% of revenue
- Interest, other & tax: $174.7M, 6.7% of revenue
Kept 16% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed August 8, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $2.61B$2.34B | +11.4% |
| Cost of Revenue | $1.11B$1.01B | +10.7% |
| Gross Profit | $1.49B$1.33B | +11.9% |
| R&D Expenses | $180.65M$155.15M | +16.4% |
| SG&A Expenses | $645.01M$600.37M | +7.4% |
| Operating Expenses | $914.81M$793.07M | +15.4% |
| Operating Income | $579.26M$541.83M | +6.9% |
| Interest Expense | $36.16M$28.36M | +27.5% |
| Net Income | $404.59M$315.59M | +28.2% |
| EPS (Basic) | $2.83$2.21 | +28.1% |
| EPS (Diluted) | $2.80$2.19 | +27.9% |
| Shares Outstanding (Basic) | 143.11M142.76M | +0.2% |
| Shares Outstanding (Diluted) | 144.48M143.99M | +0.3% |
05—Questions
Frequently Asked Questions
How did ResMed perform financially in fiscal 2019?
Net revenue grew 11% to $2,606.6 million and net income rose to $404.6 million, or $2.80 per diluted share, from $315.6 million, or $2.19 per diluted share, in fiscal 2018. Gross profit increased to $1,536.6 million, and operating income increased to $579.3 million from $541.8 million.
What drove growth in the SaaS business?
SaaS revenue increased to $275.8 million from $157.0 million, an increase of $118.8 million or 76%. The filing attributes this mainly to the acquisitions of MatrixCare, completed November 13, 2018, which contributed $79.2 million, and HEALTHCAREfirst, completed July 6, 2018.
How much debt does ResMed carry and what changed after year end?
Total debt was $1,274.0 million at June 30, 2019, up from $281.5 million a year earlier, largely to fund acquisitions. On July 10, 2019, ResMed issued $250.0 million of 3.24% senior notes due 2026 and $250.0 million of 3.45% senior notes due 2029, and used the proceeds to pay down its revolving credit facility.
What are the main legal and tax risks disclosed?
ResMed has tentatively agreed to pay $39.5 million to civilly resolve government investigations of its business practices, with $41.2 million reserved, though final terms are not yet negotiated. The Australian Taxation Office asserted $151.7 million in additional income tax, $38.4 million in accrued interest and $75.9 million in penalties for tax years 2009 to 2013. The company disputes these assessments and believes it is more likely than not to prevail, so it has recorded no expense for them.
06—Continue