ResMed Inc. — Form 10-K Summary
Reporting period: Fiscal year ended June 30, 2022. The filing is not for calendar 2021 Q4; it also reports fourth-quarter FY2022 results and comparative FY2021 quarters.
Business context
ResMed develops and sells sleep and respiratory care devices, masks, accessories and connected-care products, alongside out-of-hospital healthcare software. It reports two segments: Sleep and Respiratory Care, and Software as a Service (SaaS). Products are sold in more than 140 countries.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $3.578 billion | $3.197 billion |
| Gross profit / margin | $2.024 billion / 56.6% | $1.839 billion / 57.5% |
| Operating income | $1.000 billion | $904 million |
| Net income | $779 million | $475 million |
| Diluted EPS | $5.30 | $3.24 |
| Operating cash flow | $351 million | $737 million |
| Cash and equivalents at year-end | $274 million | $295 million |
| Total debt at year-end | $775 million | $655 million |
FY2022 operating cash flow fell primarily because of the $284.8 million Australian Taxation Office (ATO) settlement payment and higher inventory purchases and supplier prepayments. Working capital was $1.242 billion; the company reported $1.4 billion available under its revolving facility, or $1.7 billion of cash and available facility liquidity combined. Dividends paid were $245 million, or $1.68 per share.
Changes versus the prior year
- Revenue rose 12% reported and 13% at constant currency. Sleep and Respiratory Care revenue increased 13%; SaaS revenue increased 7% to $401 million.
- Device revenue grew 16%, while masks and other revenue grew 8%. Growth reflected recovery in sleep-care patient flow and added demand following a competitor product recall; lower COVID-related ventilator demand partly offset gains.
- Gross margin declined 0.9 percentage points to 56.6%, mainly due to higher manufacturing and logistics costs, partly offset by product mix and higher average selling prices.
- Net income increased substantially, but the comparison is affected by FY2021’s $248.8 million reserve for disputed tax positions. Management said that item reduced FY2021 diluted EPS by $1.70; FY2021 effective tax rate was 46.3%, versus 18.8% in FY2022.
- Inventory increased to $744 million from $457 million as ResMed secured components amid supply constraints. Debt rose by about $120 million year over year.
Outlook, risks and unusual items
- No quantified revenue or earnings guidance is provided. Management expects component and supply constraints to continue into FY2023 and says demand exceeded its ability to supply during FY2022. Orders were prioritized for higher-acuity patients.
- COVID-related demand for ventilators had largely normalized, while sleep-care patient pathways and SaaS patient flow were recovering or stabilizing. Management said the pandemic had not materially harmed liquidity.
- ResMed signed an agreement to acquire MEDIFOX DAN for approximately $994 million, subject to regulatory clearances and other closing conditions, with completion expected in FY2023. The company anticipated using available revolving-credit capacity in part to fund the purchase.
- Key risks include semiconductor and other component shortages, higher freight and input costs, allocation of products, dependence on some single-source suppliers, reimbursement and healthcare-policy changes, foreign exchange, cybersecurity and privacy exposure, regulatory compliance, competition, and acquisition integration.
- The ATO settlement resolved the transfer-pricing dispute for tax years 2009–2018. The filing reports a $238.7 million net impact and a $284.8 million final cash payment in FY2022; tax years 2018–2021 remained open to examination.
- Patent suits by New York University and Cleveland Medical Devices remained pending; the company said it could not reasonably estimate potential losses for open matters. It did not expect routine litigation, taken as a whole, to materially adversely affect its consolidated financial statements.
- KPMG issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective.
Fourth-quarter FY2022 snapshot
Revenue was $915 million, gross profit $523 million, net income $195 million and diluted EPS $1.33. In Q4 FY2021, revenue was $876 million, gross profit $491 million, net income $195 million and diluted EPS $1.33.
Most important facts for investors to verify
- Whether supply availability improves and ResMed can convert unmet demand—particularly following the competitor recall—into shipments without further margin deterioration.
- How FY2023 cash generation and inventory levels develop after the ATO payment and elevated supplier commitments.
- MEDIFOX DAN’s final closing terms, funding, integration progress and contribution to SaaS growth.
- The sustainability of earnings growth after separating operating performance from FY2021’s exceptional tax charge and investment-related gains or losses.
- Developments in the pending patent litigation, reimbursement policy and major privacy, cybersecurity or regulatory matters.