01—Abstract
Summary
Summary of the 10-K filed August 13, 2020. Cited figures are marked; the original filing is the authoritative source.
ResMed Inc. reported fiscal 2020 (year ended June 30, 2020) net revenue of $2.96 billiona, up from $2.61 billion in fiscal 2019, an increase of $350.4 million or 13% (15% on a constant currency basis).
Net income rose to $621.7 millionb, or $4.27 per diluted share, compared with $404.6 million, or $2.80 per diluted share, a year earlier. Income from operations was $809.7 million versus $579.3 million. Growth was driven primarily by higher unit sales of devices and masks, including increased demand for ventilators due to COVID-19, and by the SaaS business, where revenue rose to $354.6 million from $275.8 million, mainly due to MatrixCare.
Gross margin was 58.1%c compared with 57.3% the prior year. The filing describes the company as a global leader in digital health and cloud-connected medical devices, operating two segments: Sleep and Respiratory Care and Software as a Service. Management states that COVID-19 is expected to temporarily reduce demand for sleep devices from new patients for some or all of fiscal 2021, while it expects lower demand for ventilators in fiscal 2021.
Operating cash flow was $802.3 milliond and cash and cash equivalents were $463.2 million at June 30, 2020. Total debt was $1.2 billion, and the company suspended its share repurchase program during the year.
The filing also highlights ongoing regulatory and legal exposure, including a $266 million Australian Taxation Office assessment for tax years 2009 to 2013, for which the company has recorded no expense because it believes it is more likely than not to prevail, and a December 2019 settlement with the U.S. Department of Justice totaling $40.6 million together with a five-year Corporate Integrity Agreement. Competitive bidding changes to U.S. Medicare reimbursement remain a key risk factor.
02—Key points
Key Highlights
- Net revenue rose 13% to $2,957.0 million in fiscal 2020 (15% on a constant currency basis), with Sleep and Respiratory Care revenue at $2,602.4 million and SaaS revenue at $354.6 million.
- Net income increased to $621.7 million, or $4.27 per diluted share, from $404.6 million, or $2.80 per diluted share, in fiscal 2019.
- Gross margin improved to 58.1% from 57.3%, driven primarily by favorable product mix.
- Increased demand for ventilators due to COVID-19 drove growth, but the company expects lower ventilator demand in fiscal 2021 and a temporary decline in new-patient sleep device demand.
- Operating cash flow was $802.3 million, up from $459.1 million, and cash and cash equivalents rose to $463.2 million.
- Total debt was $1.2 billion at June 30, 2020, and the share repurchase program was temporarily suspended with no shares repurchased during the year.
- The Australian Taxation Office asserted $151.7 million in additional tax and $38.4 million in interest for 2009 to 2013, and the company has recorded no expense for this matter, believing it is more likely than not to succeed.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, ResMed kept $0.21.
- Revenue$2.96B100.0%
- Cost of revenue−$1.24B41.9%
- Gross profit$1.72B58.1%
- Operating costs−$908.1M30.7%
- Operating income$809.7M27.4%
- Interest, other & tax−$188.0M6.4%
- Net income$621.7M21.0%
Where FY2020 revenue went
$2.96B- Cost of revenue: $1.24B, 42% of revenue
- SG&A: $676.7M, 23% of revenue
- Net income: $621.7M, 21% of revenue
- R&D: $201.9M, 6.8% of revenue
- Other operating costs: $29.5M, 1.0% of revenue
- Interest, other & tax: $188.0M, 6.4% of revenue
Kept 21% as net incomeOther operating costs $29.5M · 1.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed August 13, 2020Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $2.96B$2.61B | +13.4% |
| Cost of Revenue | $1.24B$1.11B | +11.4% |
| Gross Profit | $1.72B$1.49B | +15.0% |
| R&D Expenses | $201.95M$180.65M | +11.8% |
| SG&A Expenses | $676.69M$645.01M | +4.9% |
| Operating Expenses | $908.13M$914.81M | −0.7% |
| Operating Income | $809.66M$579.26M | +39.8% |
| Interest Expense | $40.38M$36.16M | +11.7% |
| Net Income | $621.67M$404.59M | +53.7% |
| EPS (Basic) | $4.31$2.83 | +52.3% |
| EPS (Diluted) | $4.27$2.80 | +52.5% |
| Shares Outstanding (Basic) | 144.34M143.11M | +0.9% |
| Shares Outstanding (Diluted) | 145.65M144.48M | +0.8% |
05—Questions
Frequently Asked Questions
How did ResMed perform financially in fiscal 2020?
Net revenue increased 13% to $2,957.0 million, and net income rose to $621.7 million, or $4.27 per diluted share, from $404.6 million, or $2.80 per diluted share, in fiscal 2019. Income from operations increased to $809.7 million from $579.3 million.
What drove revenue growth in fiscal 2020?
The filing attributes the Sleep and Respiratory Care increase primarily to higher unit sales of devices and masks, including increased demand for ventilators due to COVID-19. The SaaS segment grew 29% to $354.6 million, predominantly due to revenue from MatrixCare, acquired in November 2018.
How is COVID-19 expected to affect future results?
The company expects a temporary decrease in demand from new patients for its sleep devices and masks for some or all of fiscal 2021, and lower demand for ventilator products for the fiscal year ending June 30, 2021. Management says the pandemic has not negatively impacted its liquidity position.
What are the main legal and tax risks disclosed?
The company is under audit by the Australian Taxation Office for tax years 2009 to 2013, with assessments of $151.7 million in additional tax and $38.4 million in interest, and it paid $75.9 million in April 2018. The company disagrees with the assessments and has recorded no expense. It also settled with the U.S. Department of Justice for a total of $40.6 million and entered into a Corporate Integrity Agreement.
What is the company's capital position and debt profile?
At June 30, 2020, cash and cash equivalents were $463.2 million, working capital was $920.7 million, and total debt was $1.2 billion. The company issued $500.0 million of senior notes in July 2019 and has $1.1 billion available under its revolving credit facility. Share repurchases were temporarily suspended, with 12.9 million shares remaining under the authorization.
06—Continue