01—Abstract
Summary
Summary of the 10-Q filed October 27, 2023. Cited figures are marked; the original filing is the authoritative source.
ResMed Inc. reported net revenue of $1,102.3 milliona for the three months ended September 30, 2023, up 16% from $950.3 million a year earlier (15% on a constant currency basis).
Sleep and Respiratory Care revenue rose 14% to $963.0 millionb, with devices up 9% and masks and other up 22%. Software as a Service (SaaS) revenue rose 32% to $139.3 million, which the filing attributes predominantly to the MEDIFOX DAN acquisition; excluding that acquisition, SaaS revenue increased 7%. Profitability was mixed.
Gross margin declined to 54.4% from 56.9%, due primarily to a $7.9 millionc provision for expected costs of an Astral ventilation device field safety notification, along with higher component and manufacturing costs. Income from operations was $289.0 million, net income was $219.4 million (up 4%), and diluted earnings per share were $1.49 compared with $1.43. Non-GAAP diluted earnings per share were $1.64 versus $1.51.
Net cash provided by operating activities was $286.3 milliond, compared with $44.7 million a year earlier, driven mainly by lower inventory outflows and higher customer collections. The balance sheet reflects acquisition activity and debt. Goodwill increased to $2.81 billion, and cash used for business acquisitions, net of cash acquired, was $103.2 million, mainly for Somnoware.
Total debt was $1.36 billion at September 30, 2023, with $825.0 million available under the revolving credit facility. Interest expense, net, rose to $15.0 million from $7.1 million, attributed to borrowings used for MEDIFOX DAN. The company declared a $0.48 quarterly dividend and, in October 2023, announced its board had reactivated share repurchases, with 12.9 million shares remaining under the authorization.
02—Key points
Key Highlights
- Net revenue rose 16% to $1,102.3 million; Sleep and Respiratory Care grew 14% to $963.0 million and SaaS grew 32% to $139.3 million.
- Gross margin fell to 54.4% from 56.9%, including a $7.9 million Astral field safety notification provision; non-GAAP gross margin was 56.0% versus 57.6%.
- Net income increased 4% to $219.4 million; diluted EPS was $1.49 versus $1.43, and non-GAAP diluted EPS was $1.64 versus $1.51.
- Net cash provided by operating activities was $286.3 million, up from $44.7 million, primarily from lower inventory outflows and greater customer payment inflows.
- Cash and cash equivalents were $209.1 million, and $825.0 million was available for draw down under the revolving credit facility.
- Total debt was $1,361.4 million, and interest expense, net, increased to $15.0 million from $7.1 million due to borrowings for the MEDIFOX DAN acquisition.
- The board declared a $0.48 per share dividend payable December 14, 2023, and reactivated share repurchases in October 2023, with 12.9 million shares remaining under the program.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, ResMed kept $0.20.
- Revenue$1.10B100.0%
- Cost of revenue−$502.3M45.6%
- Gross profit$600.1M54.4%
- Operating costs−$311.1M28.2%
- Operating income$289.0M26.2%
- Interest, other & tax−$69.6M6.3%
- Net income$219.4M19.9%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed October 27, 2023Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $1.10B$950.29M | +16.0% |
| Cost of Revenue | $502.26M$409.48M | +22.7% |
| Gross Profit | $600.06M$540.81M | +11.0% |
| R&D Expenses | $75.71M$63.19M | +19.8% |
| SG&A Expenses | $222.87M$193.93M | +14.9% |
| Operating Expenses | $311.06M$265.07M | +17.4% |
| Operating Income | $289.00M$275.74M | +4.8% |
| Net Income | $219.42M$210.48M | +4.2% |
| EPS (Basic) | $1.49$1.44 | +3.5% |
| EPS (Diluted) | $1.49$1.43 | +4.2% |
| Shares Outstanding (Basic) | 147.07M146.43M | +0.4% |
| Shares Outstanding (Diluted) | 147.49M147.13M | +0.2% |
05—Questions
Frequently Asked Questions
What drove the growth in revenue this quarter?
Net revenue increased $152.0 million, or 16%, to $1,102.3 million. Sleep and Respiratory Care revenue rose 14%, with the filing citing increased demand and unit sales for devices and masks. SaaS revenue rose 32%, predominantly due to the MEDIFOX DAN acquisition, and grew 7% excluding that acquisition.
Why did gross margin decline?
Gross margin was 54.4% compared with 56.9% a year earlier. The filing attributes the decline primarily to a $7.9 million provision for expected costs of a field safety notification on certain Astral ventilation devices manufactured from 2013 to 2019, and to higher component and manufacturing costs, partially offset by favorable product mix and favorable foreign currency movements.
How did the company's cash flow and liquidity change?
Operating cash flow was $286.3 million, compared with $44.7 million in the prior-year quarter. Cash and cash equivalents ended the period at $209.1 million. Investing outflows of $149.0 million were mainly for the Somnoware acquisition, and financing outflows of $151.1 million included $70.6 million of dividends and net debt repayments. The company stated it believes its liquidity is sufficient for the next 12 months and beyond.
Are there material legal or regulatory risks disclosed?
The filing describes several patent matters, including a New York University infringement suit and a Cleveland Medical Devices suit, as well as a Philips case in which ResMed is not a party but sells products incorporating the relevant communications modules. Management stated it is unable to make a reasonable estimate of loss or range of losses from open matters and does not expect the outcomes to have a material adverse effect on the consolidated financial statements taken as a whole.
What is the company's capital return policy outlook?
The board declared a cash dividend of $0.48 per share on October 26, 2023, payable December 14, 2023. In October 2023 the board elected to reactivate share repurchases under the program, which is authorized through June 30, 2024, with 12.9 million shares remaining. No shares were repurchased during the quarter, and future dividends remain subject to board approval.
06—Continue