Year-over-year revenue grows 9%, operating profit up 12%, non-GAAP operating profit up 16%

Revenue increased 9% to $800.0 million; up 7% on a constant currency basis

GAAP gross margin of 57.8%; non-GAAP gross margin expanded 20 bps to 59.9%

Net operating profit increased 12%; non-GAAP operating profit up 16%

GAAP diluted earnings per share of $1.23; non-GAAP diluted earnings per share of $1.41

Revenue

Gross margin ^(B)

Non-GAAP gross margin ^(B)

Selling, general, and administrative expenses

Research and development expenses

Income from operations

Non-GAAP income from operations ^(B)

Net income

Non-GAAP net income ^(B)

Diluted earnings per share

Non-GAAP diluted earnings per share ^(B)

Revenue

Gross margin ^(B)

Non-GAAP gross margin ^(B)

Selling, general, and administrative expenses

Research and development expenses

Income from operations

Non-GAAP income from operations ^(B)

Net income

Non-GAAP net income ^(B)

Diluted earnings per share

Non-GAAP diluted earnings per share ^(B)

In order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency fluctuations, we provide certain financial information on a “constant currency” basis, which is in addition to the actual financial information presented. In order to calculate our constant currency information, we translate the current period financial information using the foreign currency exchange rates that were in effect during the previous comparable period. However, constant currency measures should not be considered in isolation or as an alternative to U.S. dollar measures that reflect current period exchange rates, or to other financial measures calculated and presented in accordance with U.S. GAAP.

See the reconciliation of non-GAAP financial measures in the table at the end of the press release.

Revenue in the U.S., Canada, and Latin America, excluding Software as a Service, grew by 5 percent, driven by strong sales across our mask product portfolio.

Revenue in Europe, Asia, and other markets grew by 10 percent on a constant currency basis, primarily driven by sales across our device and mask product portfolio.

Software as a Service revenue increased by 6 percent, due to continued growth in resupply service offerings and stabilizing patient flow in out-of-hospital care settings.

Gross margin contracted by 20 basis points mainly due to restructuring expenses associated with the cessation of our portable oxygen concentrator business. Non-GAAP gross margin expanded by 20 basis points, mainly due to benefits from manufacturing efficiencies, product mix changes, and foreign exchange rates, partially offset by declines in average selling prices.

Selling, general, and administrative expenses decreased by 3 percent on a constant currency basis. SG&A expenses improved to 21.2 percent of revenue in the quarter, compared with 23.3 percent in the same period of the prior year. These changes in SG&A expenses were mainly due to savings in travel and other cost management as a result of the COVID-19 pandemic.

Income from operations increased by 12 percent and non-GAAP income from operations increased by 16 percent.

Net income grew by 12 percent and diluted earnings per share grew by 12 percent. Non-GAAP net income grew by 17 percent and non-GAAP diluted earnings per share grew by 17 percent, predominantly attributable to strong sales and controlled operating costs.

Cash flow from operations for the quarter was $169.9 million, compared to net income in the current quarter of $179.5 million. During the quarter we paid $56.7 million in dividends.

Net revenue

Cost of sales

Amortization of acquired intangibles ⁽¹⁾

Restructuring - cost of sales ⁽¹⁾

Total cost of sales

Gross profit

Selling, general, and administrative

Research and development

Amortization of acquired intangibles ⁽¹⁾

Restructuring - operating expenses ⁽¹⁾

Litigation settlement expenses ⁽¹⁾

Total operating expenses

Income from operations

Other income (expenses), net:

Interest income (expense), net

Loss attributable to equity method investments

Other, net

Total other income (expenses), net

Income before income taxes

Income taxes

Net income

Basic earnings per share

Diluted earnings per share

Non-GAAP diluted earnings per share ⁽¹⁾

Basic shares outstanding

Diluted shares outstanding

See the reconciliation of non-GAAP financial measures in the table at the end of the press release.

ASSETS

Current assets:

Cash and cash equivalents

Accounts receivable, net

Inventories

Prepayments and other current assets

Total current assets

Non-current assets:

Property, plant, and equipment, net

Operating lease right-of-use assets

Goodwill and other intangibles, net

Deferred income taxes and other non-current assets

Total non-current assets

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY:

Current liabilities:

Accounts payable

Accrued expenses

Operating lease liabilities, current

Deferred revenue

Income taxes payable

Short-term debt

Total current liabilities

Non-current liabilities:

Deferred revenue

Deferred income taxes

Operating lease liabilities, non-current

Other long term liabilities

Long-term debt

Long-term income taxes payable

Total non-current liabilities

Total liabilities

STOCKHOLDERS’ EQUITY:

Common stock

Additional paid-in capital

Retained earnings

Treasury stock

Accumulated other comprehensive income

Total stockholders’ equity

Total liabilities and stockholders’ equity

Cash flows from operating activities:

Net income

Adjustment to reconcile net income to cash provided by operating activities:

Depreciation and amortization

Amortization of right-of-use assets

Stock-based compensation costs

Loss attributable to equity method investments

(Gain) loss on equity investment

Restructuring expenses

Changes in fair value of business combination contingent consideration

Changes in operating assets and liabilities:

Accounts receivable, net

Inventories, net

Prepaid expenses, net deferred income taxes, and other current assets

Accounts payable, accrued expenses, and other

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of property, plant, and equipment

Patent registration costs

Business acquisitions, net of cash acquired

Purchases of investments

Proceeds / (Payments) on maturity of foreign currency contracts

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from issuance of common stock, net

Taxes paid related to net share settlement of equity awards

Payment of business combination contingent consideration

Proceeds from borrowings, net of borrowing costs

Repayment of borrowings

Dividends paid

Net cash used in financing activities

Effect of exchange rate changes on cash

Net increase / (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Revenue

Add back: Deferred revenue fair value adjustment ^(A)

Non-GAAP Revenue

GAAP Cost of sales

Less: Amortization of acquired intangibles ^(A)

Less: Restructuring - cost of sales ^(A)

Non-GAAP cost of sales

GAAP gross profit

GAAP gross margin

Non-GAAP gross profit

Non-GAAP gross margin

GAAP income from operations

Amortization of acquired intangibles - cost of sales ^(A)

Amortization of acquired intangibles - operating expenses ^(A)

Restructuring - cost of sales ^(A)

Restructuring - operating expenses ^(A)

Deferred revenue fair value adjustment ^(A)

Litigation settlement expenses ^(A)

Non-GAAP income from operations

GAAP net income

Amortization of acquired intangibles - cost of sales, net of tax ^(A)

Amortization of acquired intangibles - operating expenses, net of tax ^(A)

Restructuring - cost of sales, net of tax ^(A)

Restructuring - operating expenses, net of tax ^(A)

Deferred revenue fair value adjustment, net of tax ^(A)

Litigation settlement expenses, net of tax ^(A)

(Gain) loss on equity investments ^(A)

Non-GAAP net income ^(A)

Diluted shares outstanding

GAAP diluted earnings per share

Non-GAAP diluted earnings per share ^(A)

ResMed adjusts for the impact of the amortization of acquired intangibles, restructuring expenses, deferred revenue fair value adjustment, litigation settlement expenses, and the (gain) loss on equity investments from their evaluation of ongoing operations, and believes that investors benefit from adjusting these items to facilitate a more meaningful evaluation of current operating performance.

U.S., Canada, and Latin America

Devices

Masks and other

Total Sleep and Respiratory Care

Software as a Service

Total

Combined Europe, Asia, and other markets

Devices

Masks and other

Total Sleep and Respiratory Care

Global revenue

Devices

Masks and other

Total Sleep and Respiratory Care

Software as a Service

Total

U.S., Canada, and Latin America

Devices

Masks and other

Total Sleep and Respiratory Care

Software as a Service

Total

Combined Europe, Asia, and other markets

Devices

Masks and other

Total Sleep and Respiratory Care

Global revenue

Devices

Masks and other

Total Sleep and Respiratory Care

Software as a Service

Total

Totals and subtotals may not add due to rounding.

In order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency fluctuations, we provide certain financial information on a “constant currency basis,” which is in addition to the actual financial information presented. In order to calculate our constant currency information, we translate the current period financial information using the foreign currency exchange rates that were in effect during the previous comparable period. However, constant currency measures should not be considered in isolation or as an alternative to U.S. dollar measures that reflect current period exchange rates, or to other financial measures calculated and presented in accordance with U.S. GAAP.