Revenue increased 14% to $518.6 million; up 15% on a constant currency basis
GAAP diluted earnings per share of $0.59; non-GAAP diluted earnings per share of $0.74 Operating cash flow of $143.0 million in the fourth quarter
Quarterly dividend increased by 10% to $0.33 per share
Completed $800 million acquisition of Brightree in the fourth quarter
San Diego, July 28, 2016 – ResMed Inc. (NYSE: RMD) today announced results for its quarter ended June 30, 2016. Revenue for the quarter was $518.6 million, a 14 percent increase compared to the same period of the prior year, or a 15 percent increase on a constant currency basis. Excluding the contribution from the Brightree acquisition, revenue for the quarter was $489.7 million, an 8 percent increase.
“We finished the year with double-digit constant currency revenue growth, fueled by solid performance in masks, devices, and our first quarter of software-as-a-service revenue from Brightree. Our board of directors has declared a 10 percent increase in our dividend this quarter, reflecting confidence in our long-term strategy and outlook,” said Mick Farrell, ResMed’s chief executive officer.
“We are the world’s largest provider of remote connected care solutions with over 2 million patients using ResMed cloud-connected devices on bedside tables; we provide actionable information every day for patients, physicians, providers and payors. During the year, we continued to demonstrate the value of our solutions through clinical research, while transforming how healthcare is delivered through cloud-based offerings that are shaping a new frontier in connected care.”
Farrell concluded, “Our global team ended fiscal year 2016 with $1.8 billion in revenue as we continue to drive towards our goal of changing 20 million lives by 2020. ResMed is on a trajectory to be the world’s leading tech-driven medical device company; we deliver innovative cloud-connected products and solutions that improve patient outcomes, create efficiencies for our customers, help physicians and providers better manage chronic disease, and lower overall healthcare system costs.”
Analysis of fourth quarter results
Fourth quarter revenue in the Americas was $324.5 million, a 19 percent increase over the same period of the prior year. This included Brightree revenue of $28.9 million. Excluding Brightree, revenue in the Americas was $295.6 million, an 8 percent increase over the prior year. Revenue in combined EMEA and APAC was $194.1 million, an increase of 8 percent on a constant currency basis compared to the same period of the prior year.
Gross margin in the fourth quarter was 58.1 percent. Non-GAAP gross margin in the fourth quarter was 58.2 percent. This excludes a one-time purchase accounting adjustment of $2.3 million associated with
Brightree’s deferred revenue, partially offset by a benefit relating to the release of $0.4 million in accrued expenses associated with the SERVE-HF field safety notice. Gross margin for the quarter was lower compared with the same period last year, mainly due to declines in average selling prices and changes in product mix largely offset by manufacturing and procurement efficiencies and an incremental contribution from the Brightree acquisition.
Income from operations for the quarter was $118.6 million, a 19 percent increase compared with the quarter ended June 30, 2015. Non-GAAP income from operations for the quarter was $135.1 million, a 20 percent increase compared to the same period of the prior year.
Selling, general and administrative expenses were $133.9 million, a 9 percent increase over the same period in the prior year, or a 10 percent increase on a constant currency basis. SG&A expenses improved to 25.8 percent of revenue in the quarter, compared with 27.2 percent reported in the quarter ending June 30, 2015.
Research and development expenses were $34.4 million, or 6.6 percent of revenue. R&D expenses increased by 21 percent compared with the same period last year, or a 24 percent increase on a constant currency basis.
Amortization of acquired intangible assets was $12.6 million during the quarter, an increase of $10.5 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 our recent acquisitions, in particular Brightree, Curative and Inova. Stock-based compensation costs incurred during the quarter of $11.6 million consisted of expenses associated with employee equity grants, and our employee stock purchase plan.
Net income for the quarter was $83.1 million, a 5 percent decrease compared to the same period of the prior year. Non-GAAP net income was $104.4 million, an 8 percent increase compared to the prior year. Non-GAAP measures adjust for amortization of acquired intangibles, the one-time deferred revenue fair value adjustment, acquisition and integration related expenses associated with our acquisitions of Inova and Brightree, the SERVE-HF accrual release and the cumulative income tax benefit associated with the adoption of ASU 2016-09. GAAP diluted earnings per share for the quarter decreased 3 percent to $0.59. Non-GAAP diluted earnings per share increased 9 percent to $0.74.
Cash flow from operations for the quarter was $143.0 million compared to net income in the current quarter of $83.1 million.
Impact to income tax expense with the adoption of ASU 2016-09
During the quarter we adopted ASU 2016-09 “Improvements to Employee Share-Based Payment Accounting”, and in accordance with this standard we recognized additional income tax benefits of $1.3 million and $11.2 million in the quarter and year ended June 30, 2016, respectively. This benefit would have previously been recorded as a reduction to Additional Capital. Under the new standard, we are required to report the impact as though the standard had been adopted on July 1, 2015, the beginning of our fiscal year. As such, the full year income tax impact includes the fourth quarter fiscal year 2016 tax benefit of $1.3 million and the reclassification of $9.9 million originally recognized in Additional Capital during the nine months ended March 31, 2016. For our fourth quarter non-GAAP tax expense we have reflected the full year tax benefit of $11.2 million. The income tax benefit associated with the adoption of ASU 2016-09 was predominantly offset by an additional tax expense recognized in our fourth quarter associated with an increase in our foreign cash repatriation to the United States.
Analysis of fiscal year 2016 results
Revenue for the year increased 10 percent over the prior year to $1.8 billion, or a 13 percent increase on a constant currency basis.
Income from operations for the year was $429.0 million, a 5 percent increase over the prior year. Non-GAAP income from operations for the year was $464.8 million, an 8 percent increase compared to the prior year. Non-GAAP measures exclude amortization of acquired intangibles, the one-time deferred revenue fair value adjustment, acquisition and integration related expenses, the SERVE-HF accrual, restructuring expenses and donations.
Net income for the year was $352.4 million, consistent with the same period in the prior year. Non-GAAP net income was $379.4 million, a 3 percent increase compared to the prior year. Diluted earnings per share increased 1 percent to $2.49. Non-GAAP diluted earnings per share for the year was $2.68, a 4 percent increase compared with the prior year.
Cash flow from operations for the year was $547.9 million. During the year we paid $168.1 million in dividends and repurchased $102.1 million of shares under our share repurchase program. During the year we completed acquisitions for a total net cash consideration of $1.0 billion.
Share repurchase program
As previously announced, we have temporarily suspended our share repurchase program due to recent acquisitions. We did not repurchase any shares during the fourth quarter, however we may, at any time, elect to reinitiate the share repurchase program.
The ResMed board of directors today declared a quarterly dividend of $0.33 per share, a 10 percent increase from the previous dividend. The dividend will have a record date of August 18, 2016, payable on September 22, 2016. 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 August 16, 2016 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 August 16, 2016 through August 18, 2016 inclusive.
ResMed will discuss its financial and business results and outlook on its webcast at 1:30 p.m. U.S. Pacific Standard Time today. The live webcast of the call can be accessed on ResMed's Investor Relations website at investors.resmed.com. Please go to this section of the website and click on the icon for the “Q4 2016 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 45507665. The telephone replay will be available until August 11, 2016.
The global team at ResMed (NYSE:RMD) is united in the commitment to change millions of lives with every breath. With more than 5,000 employees and a presence in over 100 countries, the company has been pioneering new and innovative devices and treatments for sleep-disordered breathing, chronic obstructive pulmonary disease, and other chronic diseases for more than 25 years. ResMed's world-leading products and innovative solutions improve the quality of life for millions of patients worldwide, reduce the impact of chronic disease, and save healthcare costs. For more information about ResMed and its businesses, visit www.resmed.com or follow @resmed on Twitter.
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.
Senior Director, Investor Relations
Director, Global Corporate Communications