SAN DIEGO, Jan. 23, 2017 -- ResMed Inc. (NYSE: RMD) today announced results for its quarter ended December 31, 2016. Revenue for the quarter was $530.4 million, a 17 percent increase compared to the same period of the prior year. Excluding the contribution from the Brightree business acquired in April 2016, revenue for the quarter was $496.6 million, a 9 percent increase.
"We had a strong quarter with 18 percent constant currency revenue growth led by solid growth in our Brightree software offerings and global device sales," said Mick Farrell, ResMed's chief executive officer. "We continue to pioneer game-changing products and create value with our solutions. This quarter we announced: FDA clearance for the world's smallest travel CPAP; the creation of SleepScore Labs to focus on consumer sleep wellness; reaching the milestone of one billion nights of sleep data; and new research demonstrating that the use of myAir™ significantly improves patient adherence to sleep therapy in Europe."
Farrell concluded, "We are focused on our goal of changing the lives of 20 million patients by 2020 and we continue to lead the industry through an exciting pipeline of new products and connected care solutions that improve patient outcomes, create efficiencies for our homecare customers, and help physicians and providers better manage chronic disease and lower healthcare costs."
Analysis of second quarter results
Second quarter revenue in the Americas was $326.8 million, a 21 percent increase over the same period of the prior year. This included Brightree revenue of $33.8 million. Excluding Brightree, revenue in the Americas was $293.0 million, a 9 percent increase over the prior year. Revenue in combined EMEA and APAC was $203.6 million, an increase of 13 percent on a constant currency basis, compared to the same period of the prior year.
Gross margin in the second quarter was 58.3 percent, higher than the prior year's quarter gross margin of 58.1 percent, excluding the prior year release of $2.4 million in accrued expenses associated with the SERVE-HF field safety notice. The improvement in gross margin compared to prior year's quarter was due to manufacturing and procurement efficiencies and an incremental contribution from the Brightree acquisition, partly offset by changes in product mix and declines in average selling prices.
Income from operations for the quarter was $96.9 million, a 10 percent decline compared with the quarter ended December 31, 2015. Non-GAAP income from operations for the quarter was $131.6 million, a 13 percent increase compared to the same period of the prior year.
Selling, general and administrative expenses were $139.3 million, an 18 percent increase over the same period in the prior year, also an 18 percent increase on a constant currency basis. SG&A expenses increased to 26.3 percent of revenue in the quarter, compared with 26.0 percent reported in the quarter ended December 31, 2015.
Research and development expenses were $38.2 million, or 7.2 percent of revenue. R&D expenses increased by 32 percent compared with the same period last year, or a 28 percent increase on a constant currency basis.
Amortization of acquired intangible assets was $11.7 million during the quarter, an increase of $7.3 million compared with the same period last year. The increase in amortization of acquired intangible assets was primarily due to the amortization expense associated with the Brightree and Inova acquisitions. Stock-based compensation costs incurred during the quarter of $10.8 million consisted of expenses associated with employee equity grants, and our employee stock purchase plan.
Net income for the quarter was $76.7 million, a 20 percent decrease compared to the same period of the prior year. Non-GAAP net income was $103.3 million, a 1 percent increase compared to the prior year.
Non-GAAP measures adjust for amortization of acquired intangibles, litigation settlement expenses, acquisition related expenses associated with additional contingent consideration on recent acquisitions and restructuring expenses.
GAAP diluted earnings per share for the quarter decreased 21 percent to $0.54. Non-GAAP diluted earnings per share of $0.73 were consistent with the same period of the prior year.
Cash flow from operations for the quarter was $119.9 million compared to net income in the current quarter of $76.7 million.
The ResMed board of directors today declared a quarterly cash dividend of $0.33 per share. The dividend will have a record date of February 9, 2017, payable on March 16, 2017. The dividend will be paid in U.S. currency to holders of ResMed's common stock trading on the New York Stock Exchange. Holders of Chess Depositary Instruments trading on the Australian Securities Exchange will receive an equivalent amount in Australian currency, based on the exchange rate on the record date, and reflecting the 10:1 ratio between CDIs and NYSE shares. The ex-dividend date will be February 8, 2017 for common stock holders and for CDI holders. ResMed has received a waiver from the ASX's settlement operating rules, which will allow ResMed to defer processing conversions between its common stock and CDI registers from February 7, 2017 through February 9, 2017 inclusive.
ResMed will discuss its financial and business results and outlook on its webcast at 1:30 p.m. U.S. Pacific Time today. The live webcast of the call can be accessed on ResMed's Investor Relations website at investor.resmed.com. Please go to this section of the website and click on the icon for the "Q2 2017 earnings webcast" to register and listen to the live webcast. The online archive of the broadcast will be available on ResMed's website after the live call. In addition, a telephone replay of the conference call will be available approximately two hours after the call by dialing 855-859-2056 (U.S.) and +1 404-537-3406 (international) and entering a passcode of 40778584. The telephone replay will be available until February 6, 2017.
ResMed (NYSE:RMD) changes lives with award-winning medical devices and cutting-edge cloud-based software applications that better diagnose, treat and manage sleep apnea, chronic obstructive pulmonary disease (COPD) and other chronic diseases. ResMed is a global leader in connected care, with more than 2 million patients remotely monitored every day. Our 5,000-strong team is committed to creating the world's best tech-driven medical device company – improving quality of life, reducing the impact of chronic disease, and saving healthcare costs in more than 100 countries.
Safe harbor statement
Statements contained in this release that are not historical facts are "forward-looking" statements as contemplated by the Private Securities Litigation Reform Act of 1995. These forward-looking statements – including statements regarding ResMed's projections of future revenue or earnings, expenses, new product development, new product launches and new markets for its products and the integration of acquisitions – are subject to risks and uncertainties, which could cause actual results to materially differ from those projected or implied in the forward-looking statements. Additional risks and uncertainties are discussed in ResMed's periodic reports on file with the U.S. Securities & Exchange Commission. ResMed does not undertake to update its forward-looking statements.