ResMed Inc. — Form 10-Q summary
Reporting period: The filing covers the quarter and nine months ended March 31, 2021, the third quarter of fiscal 2021—not 2020 Q3 as stated in the request metadata. Amounts below are U.S. dollars.
Business context and financial performance
ResMed designs, manufactures and markets sleep and respiratory care products and provides software-as-a-service (SaaS) platforms for out-of-hospital care providers. Its reportable segments are Sleep and Respiratory Care and SaaS.
| Metric | Three months ended March 31, 2021 | Year-over-year change | Nine months ended March 31, 2021 | Year-over-year change |
|---|---|---|---|---|
| Revenue | $768.8 million | Down 0.1% reported; down 3% constant currency | $2,320.7 million | Up 6% reported; up 4% constant currency |
| Gross profit / margin | $447.3 million / 58.2% | Margin down 0.2 percentage points | $1,348.4 million / 58.1% | Margin up 0.1 percentage points |
| Operating income | $223.4 million | Up from $217.5 million | $662.0 million | Up from $586.4 million |
| Net income (loss) | $(78.5) million | Compared with $163.1 million income | $279.4 million | Down 37% |
| Diluted EPS | $(0.54) | Compared with $1.12 | $1.91 | Down from $3.05 |
Quarterly product revenue was mixed: devices fell 7% reported (10% constant currency), while masks and other products rose 7% reported (4% constant currency). SaaS revenue increased 5% to $93.8 million. For the nine-month period, Sleep and Respiratory Care revenue rose 6% reported and SaaS revenue rose 6%.
Quarterly operating expenses included $160.4 million of selling, general and administrative costs and $55.9 million of research and development. SG&A declined 7% reported, while R&D increased 9%. The nine-month period included $8.7 million of separately presented restructuring expenses; an additional $5.2 million inventory write-down was included in cost of sales.
Cash flow, debt and liquidity
- Operating cash flow for the nine months was $510.2 million, versus $472.0 million a year earlier. Capital expenditures were $74.8 million; dividends paid were $169.9 million.
- Cash and equivalents were $230.6 million at March 31, 2021, down from $463.2 million at June 30, 2020. Working capital was $589.6 million, versus $920.7 million.
- Debt was $731.0 million net on the balance sheet; the filing reports $734.0 million of principal outstanding under the credit agreements and senior notes. ResMed had $1.5 billion available on its revolver and reported $1.7 billion of cash plus available revolving capacity.
- Management said operating cash generation and available credit were sufficient for operations and expected capital expenditures for the next 12 months and beyond. The company was in compliance with debt covenants at quarter-end.
- Inventories rose 16% from June 30, 2020, to $484.1 million, which management attributed to greater supply-chain complexity and longer lead times related to COVID-19. Receivables were $525.0 million; days outstanding improved to 60 from 65.
Material changes, outlook and risks
- Unusual tax item: Quarterly income tax expense was $296.5 million despite $218.0 million of pretax income, producing a 136.0% effective tax rate and a net loss. The filing attributes the increase primarily to the Australian Taxation Office (ATO) dispute. Management said the unrecognized tax benefits reduced quarterly diluted EPS by $1.74; excluding that item, the reported loss would not represent underlying operating results on the company’s stated non-GAAP basis.
- ATO dispute: The ATO issued assessments for 2009–2013 seeking $266.0 million, including tax, penalties and interest; 2014–2018 remain under audit. ResMed prepaid $98.8 million, disputes the assessments and believes it is more likely than not to prevail if litigated. It recorded $395.9 million of gross unrecognized tax benefits, including $53.3 million of interest and penalties; the amount and outcome remain uncertain, and additional amounts could relate to later audit years.
- COVID-19: Management observed no material incremental ventilator demand in the quarter and did not expect material pandemic-generated ventilator demand for the remainder of fiscal 2021. Disrupted sleep-apnea diagnostic and prescription pathways continued to weigh on new-patient device demand; mask resupply demand had not been significantly affected. SaaS customer acquisition and expansion were also affected by customer caution and operating challenges. Management said the pandemic had not negatively affected liquidity.
- Other items: ResMed closed its portable oxygen concentrator business in November 2020. The restructuring was substantially complete by March 31, and management did not expect further material costs. The share-repurchase program remained suspended; the quarterly dividend declared was $0.39 per share.
- The filing provides no specific quantitative revenue or earnings guidance. Forward-looking results remain subject to COVID-19 uncertainty, foreign-exchange movements, supply-chain conditions, tax audits and other risks described in the filing and prior annual report.
Key facts for investors to verify
- Whether the ATO dispute, related tax accruals and possible exposure for 2014–2018 change in subsequent filings.
- Underlying revenue and margin trends excluding currency effects, especially device demand versus masks and SaaS growth.
- Whether higher inventory and extended supply-chain lead times normalize, and the effect on cash conversion.
- Debt repayment, revolver availability and covenant compliance, alongside continued dividends and the suspended buyback.
- How non-GAAP results reconcile to GAAP, particularly the tax reserve and restructuring adjustments.