01—Abstract
Summary
Summary of the 10-Q filed January 25, 2024. Cited figures are marked; the original filing is the authoritative source.
ResMed Inc. reported net revenue of $1,162.8 milliona for the three months ended December 31, 2023, up from $1,033.7 million a year earlier, an increase of $129.1 million or 12%.
Sleep and Respiratory Care revenue was $1,017.9 millionb, and Software as a Service revenue was $144.9 million, up 24%, driven mainly by the MEDIFOX DAN acquisition. Gross margin declined to 55.6% from 56.1%, reflecting a $6.4 million field safety notification provision for masks with magnets and higher amortization of acquired intangibles. Diluted EPS was $1.42, compared with $1.53, and net income was $208.8 million, down from $224.9 million.
Non-GAAP diluted EPS was $1.88c, compared with $1.66. The quarter included $64.2 million of restructuring expenses tied to a review of operations aimed at improving efficiency, comprising $28.6 million of severance and termination benefits and $33.2 million of intangible asset impairments from winding down certain businesses. Management also announced a new operating model that adds dedicated leadership in Product, Revenue, and Marketing.
For the six months, operating cash flow was $559.1 milliond, up from $173.3 million, and total debt outstanding was $1,230.0 million, with $955.0 million available under the revolving credit facility. Litigation includes the NYU patent case, where the PTAB invalidated the challenged NYU claims in December 2023, and the Cleveland Medical patent suits, which remain pending.
The company stated it cannot estimate a range of loss for open matters. The board declared a quarterly dividend of $0.48 per share, payable March 14, 2024.
02—Key points
Key Highlights
- Net revenue rose 12% to $1,162.8 million in the quarter, with constant currency growth of 11%; SaaS revenue increased 24%, largely from the MEDIFOX DAN acquisition.
- Gross margin fell to 55.6% from 56.1%, mainly due to a $6.4 million field safety notification provision for masks with magnets and higher acquired-intangible amortization.
- Restructuring expenses totaled $64.2 million, including $28.6 million of severance and $33.2 million of intangible asset impairments.
- Diluted EPS was $1.42 versus $1.53 a year earlier; non-GAAP diluted EPS was $1.88 versus $1.66.
- Six-month operating cash flow was $559.1 million, compared with $173.3 million in the prior-year period.
- Total debt was $1,226.7 million net, with $1,230.0 million outstanding under the revolving, term, and senior note facilities and $955.0 million available for draw down; the company was in covenant compliance.
- Share repurchases of $50.0 million (335,474 shares) were made in the six months, and the quarterly dividend was $0.48 per share.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, ResMed kept $0.18.
- Revenue$1.16B100.0%
- Cost of revenue−$515.9M44.4%
- Gross profit$646.9M55.6%
- Operating costs−$371.8M32.0%
- Operating income$275.1M23.7%
- Interest, other & tax−$66.3M5.7%
- Net income$208.8M18.0%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed January 25, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $1.16B$1.03B | +12.5% |
| Cost of Revenue | $515.87M$454.03M | +13.6% |
| Gross Profit | $646.93M$579.72M | +11.6% |
| R&D Expenses | $73.88M$69.87M | +5.7% |
| SG&A Expenses | $222.16M$211.67M | +5.0% |
| Operating Expenses | $371.84M$299.52M | +24.1% |
| Operating Income | $275.09M$280.19M | −1.8% |
| Net Income | $208.80M$224.91M | −7.2% |
| EPS (Basic) | $1.42$1.53 | −7.2% |
| EPS (Diluted) | $1.42$1.53 | −7.2% |
| Shares Outstanding (Basic) | 147.13M146.70M | +0.3% |
| Shares Outstanding (Diluted) | 147.54M147.41M | +0.1% |
05—Questions
Frequently Asked Questions
What drove revenue growth this quarter?
Net revenue increased $129.1 million, or 12%, to $1,162.8 million. Sleep and Respiratory Care grew 11% to $1,017.9 million, with devices up 12% and masks and other up 10%, attributed to increased demand and unit sales. SaaS revenue rose 24%, predominantly due to the MEDIFOX DAN acquisition, which the company completed on November 21, 2022.
Why did margins and earnings decline?
Gross margin fell to 55.6% from 56.1%, mainly because of a $6.4 million field safety notification provision for masks with magnets and higher amortization of acquired intangibles. Income from operations was $275.1 million, versus $280.2 million, and includes $64.2 million of restructuring expenses. Higher interest expense of $13.8 million, versus $10.3 million, also reduced pretax income.
What is the restructuring plan and how much will it cost?
The company recorded $64.2 million of restructuring charges from a review of existing operations to improve efficiency, lower costs, and raise profitability. The charges include $28.6 million of employee severance and termination benefits, $33.2 million of intangible asset impairments from winding down certain businesses, and $2.4 million of other asset impairments. The company expects to complete all actions by June 30, 2024, and does not expect the remaining expense to be material.
How is the company's liquidity and debt position?
Cash and cash equivalents were $210.2 million at December 31, 2023. Total debt outstanding was $1,230.0 million under the revolving credit, term credit, and senior notes, and $955.0 million was available under the revolving facility. Six-month operating cash flow was $559.1 million, and management believes current liquidity is sufficient for the next 12 months and beyond.
What are the key legal matters?
In the NYU patent case, the PTAB invalidated each challenged NYU patent claim in December 2023; NYU's appeal deadline was the week of February 5, 2024, and the district court stay continues. Cleveland Medical's patent suits remain pending, with an August 2024 trial date in the Delaware case. The company says it cannot estimate a loss or range of losses for matters still open.
06—Continue