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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
______________________________________________________________________________________________
FORM 10-Q
______________________________________________________________________________________________
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______to _______
Commission File Number: 001-15317
______________________________________________________________________________________________
ResMed Inc.
(Exact name of registrant as specified in its charter)
______________________________________________________________________________________________
Delaware
(State or other jurisdiction of incorporation or organization)
98-0152841
(I.R.S. Employer Identification No.)
9001 Spectrum Center Blvd.
San Diego, CA 92123
United States of America
(Address of principal executive offices, including zip code)
(858) 836-5000
(Registrant’s telephone number, including area code)
______________________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.004 per shareRMDNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large Accelerated FilerxAccelerated Filero
Non-Accelerated FileroSmaller Reporting Companyo
Emerging Growth Companyo
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
At October 24, 2022 there were 146,483,650 shares of Common Stock ($0.004 par value) outstanding. This number excludes 41,836,234 shares held by the registrant as treasury shares.


RESMED INC. AND SUBSIDIARIES
INDEX
Part I
  
Item 1
  
 
  
 
  
 
  
 
  
 
  
 
  
  
  
  
  
  
  
  
  
  
  
  
 


2

PART I – FINANCIAL INFORMATIONItem 1
Item 1. Financial Statements
RESMED INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(In US$ and in thousands, except share and per share data)
 September 30,
2022
June 30,
2022
Assets
Current assets:
Cash and cash equivalents$207,163 $273,710 
Accounts receivable, net of allowances of $23,867 and $23,259 at September 30, 2022 and June 30, 2022, respectively
620,483 575,950 
Inventories (note 3)864,852 743,910 
Prepaid expenses and other current assets (note 3)341,199 337,908 
Total current assets2,033,697 1,931,478 
Non-current assets:
Property, plant and equipment, net (note 3)487,376 498,181 
Operating lease right-of-use assets125,319 132,314 
Goodwill (note 4)1,938,843 1,936,442 
Other intangible assets, net (note 3)338,151 345,944 
Deferred income taxes80,745 79,746 
Prepaid taxes and other non-current assets173,429 171,748 
Total non-current assets3,143,863 3,164,375 
Total assets$5,177,560 $5,095,853 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$181,485 $159,245 
Accrued expenses324,055 344,722 
Operating lease liabilities, current21,076 21,856 
Deferred revenue108,195 108,667 
Income taxes payable (note 6)47,942 44,893 
Short-term debt, net (note 8)9,906 9,916 
Total current liabilities692,659 689,299 
Non-current liabilities:
Deferred revenue97,620 95,455 
Deferred income taxes11,830 9,714 
Operating lease liabilities, non-current 114,214 120,453 
Other long-term liabilities5,838 5,974 
Long-term debt, net (note 8)785,436 765,325 
Long-term income taxes payable (note 6)37,076 48,882 
Total non-current liabilities1,052,014 1,045,803 
Total liabilities1,744,673 1,735,102 
Commitments and contingencies (note 10)
Stockholders’ equity:
Preferred stock, $0.01 par value, 2,000,000 shares authorized; none issued
  
Common stock, $0.004 par value, 350,000,000 shares authorized; 188,295,266 issued and 146,459,032 outstanding at September 30, 2022 and 188,246,955 issued and 146,410,721 outstanding at June 30, 2022
586 586 
Additional paid-in capital1,701,902 1,682,432 
Retained earnings3,759,783 3,613,736 
Treasury stock, at cost, 41,836,234 shares at September 30, 2022 and June 30, 2022
(1,623,256)(1,623,256)
Accumulated other comprehensive loss(406,128)(312,747)
Total stockholders’ equity3,432,887 3,360,751 
Total liabilities and stockholders’ equity$5,177,560 $5,095,853 
See the accompanying notes to the unaudited condensed consolidated financial statements.

3

PART I – FINANCIAL INFORMATIONItem 1
RESMED INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(In US$ and in thousands, except per share data)
 Three Months Ended
September 30,
 20222021
Net revenue - Sleep and Respiratory Care products$844,443 $806,499 
Net revenue - Software as a Service105,851 97,516 
Net revenue950,294 904,015 
 
Cost of sales - Sleep and Respiratory Care products363,844 349,681 
Cost of sales - Software as a Service39,266 36,986 
Cost of sales (exclusive of amortization shown separately below)403,110 386,667 
 
Amortization of acquired intangible assets - Sleep and Respiratory Care products1,228 900 
Amortization of acquired intangible assets - Software as a Service5,146 10,159 
Amortization of acquired intangible assets6,374 11,059 
Total cost of sales409,484 397,726 
Gross profit540,810 506,289 
 
Selling, general, and administrative193,933 176,719 
Research and development 63,188 59,950 
Amortization of acquired intangible assets7,950 7,707 
Total operating expenses265,071 244,376 
Income from operations275,739 261,913 
Other income (loss), net:
Interest (expense) income, net(7,134)(5,360)
Loss attributable to equity method investments (note 5)(2,028)(1,386)
Gain (loss) on equity investments (note 5)(3,280)5,612 
Other, net(1,504)(1,991)
Total other income (loss), net(13,946)(3,125)
Income before income taxes261,793 258,788 
Income taxes51,315 55,175 
Net income$210,478 $203,613 
Basic earnings per share (note 9)$1.44 $1.40 
Diluted earnings per share (note 9)$1.43 $1.39 
Dividend declared per share$0.44 $0.42 
Basic shares outstanding (000's)146,431 145,680 
Diluted shares outstanding (000's)147,134 146,860 
See the accompanying notes to the unaudited condensed consolidated financial statements.

4

PART I – FINANCIAL INFORMATIONItem 1
RESMED INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(In US$ and in thousands)
 Three Months Ended
September 30,
 20222021
Net income$210,478 $203,613 
Other comprehensive income (loss):
Foreign currency translation (loss) gain adjustments(93,381)(23,516)
Comprehensive income$117,097 $180,097 
See the accompanying notes to the unaudited condensed consolidated financial statements.

5

PART I – FINANCIAL INFORMATIONItem 1
RESMED INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Equity (Unaudited)
(In US$ and in thousands)
 Common Stock
Additional
Paid-in
Capital
Treasury Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
 SharesAmountSharesAmount
Balance, June 30, 2022
188,247 $586 $1,682,432 (41,836)$(1,623,256)$3,613,736 $(312,747)$3,360,751 
Common stock issued on exercise of options
45 — 2,610 — — — — 2,610 
Common stock issued on vesting of restricted stock units, net of shares withheld for tax3 — (59)— — — — (59)
Stock-based compensation costs— 16,919 — — — — 16,919 
Other comprehensive income (loss)— — — — — — (93,381)(93,381)
Net income— — — — — 210,478 — 210,478 
Dividends declared ($0.44 per common share)
— — — — — (64,431)— (64,431)
Balance, September 30, 2022
188,295 $586 $1,701,902 (41,836)$(1,623,256)$3,759,783 $(406,128)$3,432,887 
See the accompanying notes to the unaudited condensed consolidated financial statements.

6

PART I – FINANCIAL INFORMATIONItem 1
RESMED INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Equity (Unaudited)
(In US$ and in thousands)
 Common Stock
Additional
Paid-in
Capital
Treasury Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
 SharesAmountSharesAmount
Balance, June 30, 2021
187,485 $583 $1,622,199 (41,836)$(1,623,256)$3,079,640 $(193,487)$2,885,679 
Common stock issued on exercise of options
61 — 4,354 — — — — 4,354 
Common stock issued on vesting of restricted stock units, net of shares withheld for tax1 — (195)— — — — (195)
Stock-based compensation costs— — 17,303 — — — — 17,303 
Other comprehensive income (loss)— — — — — — (23,516)(23,516)
Net income— — — — — 203,613 — 203,613 
Dividends declared ($0.42 per common share)
— — — — — (61,189)— (61,189)
Balance, September 30, 2021
187,547 $583 $1,643,661 (41,836)$(1,623,256)$3,222,064 $(217,003)$3,026,049 
See the accompanying notes to the unaudited condensed consolidated financial statements.

7

PART I – FINANCIAL INFORMATIONItem 1
RESMED INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In US$ and in thousands)
 Three Months Ended
September 30,
 20222021
Cash flows from operating activities:
Net income $210,478 $203,613 
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization36,273 39,102 
Amortization of right-of-use assets7,761 8,517 
Stock-based compensation costs16,919 17,303 
Loss attributable to equity method investments (note 5)2,028 1,386 
(Gain) loss on equity investments (note 5)3,280 (5,612)
Changes in operating assets and liabilities:
Accounts receivable(56,238)33,704 
Inventories(147,096)(55,976)
Prepaid expenses, net deferred income taxes and other current assets(36,784)(14,391)
Accounts payable, accrued expenses, income taxes payable and other8,041 (293,303)
Net cash (used in) / provided by operating activities
44,662 (65,657)
Cash flows from investing activities:
Purchases of property, plant and equipment(29,056)(27,340)
Patent registration and acquisition costs(3,317)(4,453)
Business acquisitions, net of cash acquired(19,100) 
Purchases of investments (note 5)(4,291)(6,600)
(Payments) / proceeds on maturity of foreign currency contracts(3,042)(3,481)
Net cash used in investing activities(58,806)(41,874)
Cash flows from financing activities:
Proceeds from issuance of common stock, net2,610 4,354 
Taxes paid related to net share settlement of equity awards(59)(195)
Proceeds from borrowings, net of borrowing costs50,000 150,000 
Repayment of borrowings(30,000) 
Dividends paid(64,431)(61,189)
Net cash (used in) / provided by financing activities
(41,880)92,970 
Effect of exchange rate changes on cash(10,523)(4,568)
Net decrease in cash and cash equivalents(66,547)(19,129)
Cash and cash equivalents at beginning of period273,710 295,278 
Cash and cash equivalents at end of period$207,163 $276,149 
Supplemental disclosure of cash flow information:
Income taxes paid, net of refunds$53,437 $345,909 
Interest paid$7,134 $5,360 
Fair value of assets acquired, excluding cash$9,506 $ 
Liabilities assumed(3,975) 
Goodwill on acquisition19,281  
Deferred payments
(2,856) 
Fair value of contingent consideration
(2,856)$ 
Cash paid for acquisitions$19,100 $ 
See the accompanying notes to the unaudited condensed consolidated financial statements.

8

PART I – FINANCIAL INFORMATIONItem 1
RESMED INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
(1)    Summary of Significant Accounting Policies
Organization and Basis of Presentation
ResMed Inc. (referred to herein as “we”, “us”, “our” or the “Company”) is a Delaware corporation formed in March 1994 as a holding company for the ResMed Group. Through our subsidiaries, we design, manufacture and market equipment for the diagnosis and treatment of sleep-disordered breathing and other respiratory disorders, including obstructive sleep apnea. Our manufacturing operations are located in Australia, Singapore, Malaysia, France, China and the United States. Major distribution and sales sites are located in the United States, Germany, France, the United Kingdom, Switzerland, Australia, Japan, China, Finland, Norway and Sweden. We also operate a Software as a Service (“SaaS”) business in the United States that includes out-of-hospital software platforms designed to support the professionals and caregivers who help people stay healthy in the home or care setting of their choice.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and the rules of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all necessary adjustments, which consisted only of normal recurring items, have been included in the accompanying financial statements to present fairly the results of the interim periods. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2023.
The condensed consolidated financial statements for the three months ended September 30, 2022 and September 30, 2021 are unaudited and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K (our “Form 10-K”) for the year ended June 30, 2022.
Revenue Recognition
In accordance with Accounting Standard Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers”, we account for a contract with a customer when there is a legally enforceable contract, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. We have determined that we have two operating segments, which are the sleep and respiratory disorders sector of the medical device industry (“Sleep and Respiratory Care”) and the supply of business management software as a service to out-of-hospital health providers (“SaaS”). Our Sleep and Respiratory Care revenue relates primarily to the sale of our products that are therapy-based equipment. Some contracts include additional performance obligations such as the provision of extended warranties and provision of data for patient monitoring. Our SaaS revenue relates to the provision of software access with ongoing support and maintenance services as well as professional services such as training and consulting.
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PART I – FINANCIAL INFORMATIONItem 1
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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Disaggregation of revenue
The following table summarizes our net revenue disaggregated by segment, product and region (in thousands):
Three Months Ended
September 30,
20222021
U.S., Canada and Latin America
Devices$339,545 $275,932 
Masks and other238,560 215,106 
Total Sleep and Respiratory Care$578,105 $491,038 
Software as a Service105,851 97,516 
Total$683,956 $588,554 
Combined Europe, Asia and other markets
Devices$178,032 $218,226 
Masks and other88,306 97,235 
Total Sleep and Respiratory Care$266,338 $315,461 
Global revenue
Devices$517,577 $494,158 
Masks and other326,866 312,341 
Total Sleep and Respiratory Care$844,443 $806,499 
Software as a Service105,851 97,516 
Total$950,294 $904,015 
Performance obligations and contract balances
Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied; generally, this occurs with the transfer of risk and/or control of our products at a point in time. For products in our Sleep and Respiratory Care business, we transfer control and recognize a sale when products are shipped to the customer in accordance with the contractual shipping terms. For our SaaS business, revenue associated with professional services are recognized as they are provided. We defer the recognition of a portion of the consideration received when performance obligations are not yet satisfied. Consideration received from customers in advance of revenue recognition is classified as deferred revenue. Performance obligations resulting in deferred revenue in our Sleep and Respiratory Care business relate primarily to extended warranties on our devices and the provision of data for patient monitoring. Performance obligations resulting in deferred revenue in our SaaS business relate primarily to the provision of software access with maintenance and support over an agreed term and material rights associated with future discounts upon renewal of some SaaS contracts. Generally, deferred revenue will be recognized over a period of one year to five years. Our contracts do not contain significant financing components.
The following table summarizes our contract balances (in thousands):
 September 30,
2022
June 30,
2022
Balance sheet caption
Contract assets
Accounts receivable, net$620,483 $575,950 Accounts receivable, net
Unbilled revenue, current23,615 25,692 Prepaid expenses and other current assets
Unbilled revenue, non-current8,106 8,840 Prepaid taxes and other non-current assets
 
Contract liabilities
Deferred revenue, current(108,195)(108,667)Deferred revenue (current liabilities)
Deferred revenue, non-current(97,620)(95,455)Deferred revenue (non-current liabilities)
Transaction price determination
Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. In our Sleep and Respiratory Care segment, the amount of consideration received and revenue recognized varies
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PART I – FINANCIAL INFORMATIONItem 1
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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
with changes in marketing incentives (e.g. rebates, discounts, free goods) and returns offered to our customers and their customers. When we give customers the right to return eligible products and receive credit, returns are estimated based on an analysis of historical experience. However, returns of products, excluding warranty-related returns, are infrequent and insignificant. We adjust the estimate of revenue at the earlier of when the most likely amount of consideration can be estimated, the amount expected to be received changes, or when the consideration becomes fixed.
We offer our Sleep and Respiratory Care customers cash or product rebates based on volume or sales targets measured over quarterly or annual periods. We estimate rebates based on each customer’s expected achievement of its targets. In accounting for these rebate programs, we reduce revenue ratably as sales occur over the rebate period by the expected value of the rebates to be returned to the customer. Rebates measured over a quarterly period are updated based on actual sales results and, therefore, no estimation is required to determine the reduction to revenue. For rebates measured over annual periods, we update our estimates on a quarterly basis based on actual sales results and updated forecasts for the remaining rebate periods.
We participate in programs where we issue credits to our Sleep and Respiratory Care distributors when they are required to sell our products below negotiated list prices if we have preexisting contracts with the distributors' customers. We reduce revenue for future credits at the time of sale to the distributor, which we estimate based on historical experience using the expected value method.
We also offer discounts to both our Sleep and Respiratory Care as well as our SaaS customers as part of normal business practice and these are deducted from revenue when the sale occurs.
When Sleep and Respiratory Care or SaaS contracts have multiple performance obligations, we generally use an observable price to determine the stand-alone selling price by reference to pricing and discounting practices for the specific product or service when sold separately to similar customers. Revenue is then allocated proportionately, based on the determined stand-alone selling price, to each performance obligation. An allocation is not required for many of our Sleep and Respiratory Care contracts that have a single performance obligation, which is the shipment of our therapy-based equipment.
Accounting and practical expedient elections
We have elected to account for shipping and handling activities associated with our Sleep and Respiratory Care segment as a fulfillment cost within cost of sales, and record shipping and handling costs collected from customers in net revenue. We have also elected for all taxes assessed by government authorities that are imposed on and concurrent with revenue-producing transactions, such as sales and value added taxes, to be excluded from revenue and presented on a net basis. We have elected two practical expedients including the “right to invoice” practical expedient, which is relevant for some of our SaaS contracts as it allows us to recognize revenue in the amount of the invoice when it corresponds directly with the value of performance completed to date. The second practical expedient adopted permits relief from considering a significant financing component when the payment for the good or service is expected to be one year or less.
Lease Revenue
We lease Sleep and Respiratory Care medical devices to customers primarily as a means to comply with local health insurer requirements in certain foreign geographies. Device rental contracts include operating leases, and contract terms vary by customer and include options to terminate or extend the contract. When lease contracts also include the sale of masks and accessories, we allocate contract consideration to those items on a relative standalone price basis and recognize revenue when control transfers to the customer. Operating lease revenue was $23.7 million for the three months ended September 30, 2022 and $25.2 million for the three months ended September 30, 2021.
Provision for Warranty
We provide for the estimated cost of product warranties on our Sleep and Respiratory Care products at the time the related revenue is recognized. We determine the amount of this provision by using a financial model, which takes into consideration actual historical expenses and potential risks associated with our different products. We use this financial model to calculate the future probable expenses related to warranty and the required level of the warranty provision. Although we engage in product improvement programs and processes, our warranty obligation is affected by product failure rates and costs incurred to correct those product failures. Should actual product failure rates or estimated costs to repair those product failures differ from our estimates, we would be required to revise our estimated warranty provision.
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PART I – FINANCIAL INFORMATIONItem 1
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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
(2)    Segment Information
We have quantitatively and qualitatively determined that we operate in two operating segments, which are the Sleep and Respiratory Care segment and the SaaS segment.
We evaluate the performance of our segments based on net revenues and income from operations. The accounting policies of the segments are the same as those described in note 2 of our consolidated financial statements included in our Form 10-K for the year ended June 30, 2022. Segment net revenues and segment income from operations do not include inter-segment profits and revenue is allocated to a geographic area based on where the products are shipped to or where the services are performed.
Certain items are maintained at the corporate level and are not allocated to the segments. The non-allocated items include corporate headquarters costs, stock-based compensation, amortization expense from acquired intangibles, net interest expense (income), loss attributable to equity method investments, gains and losses on equity investments, and other, net. We neither discretely allocate assets to our operating segments, nor does our Chief Operating Decision Maker evaluate the operating segments using discrete asset information.
Additionally, effective in the first quarter of fiscal year 2023, we updated the extent of allocation and method of attribution of certain shared costs that are principally managed at the corporate level as part of our evaluation of segment operating performance. As a result, certain shared administrative costs, including shared IT, legal and other administrative functions, which were previously included in segment operating results, are now reported in Corporate costs within our reconciliation of segment operating profit to income before income taxes. The financial information presented herein reflects the impact of the preceding reporting change for all periods presented.
The table below presents a reconciliation of net revenues and net operating profit by reportable segments (in thousands):
Three Months Ended
September 30,
20222021
Net revenue by segment
Total Sleep and Respiratory Care$844,443 $806,499 
Software as a Service105,851 97,516 
Total$950,294 $904,015 
Depreciation and amortization by segment
Sleep and Respiratory Care$19,767 $18,017 
Software as a Service1,913 1,701 
Amortization of acquired intangible assets and corporate assets14,593 19,384 
Total$36,273 $39,102 
Net operating profit by segment
Sleep and Respiratory Care$352,560 $336,996 
Software as a Service24,441 21,907 
Total$377,001 $358,903 
Reconciling items
Corporate costs$86,938 $78,224 
Amortization of acquired intangible assets14,324 18,766 
Interest expense (income), net7,134 5,360 
Loss attributable to equity method investments2,028 1,386 
(Gain) loss on equity investments3,280 (5,612)
Other, net1,504 1,991 
Income before income taxes$261,793 $258,788 
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PART I – FINANCIAL INFORMATIONItem 1
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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
(3)    Supplemental Balance Sheet Information
Components of selected captions in the condensed consolidated balance sheets consisted of the following (in thousands):
InventoriesSeptember 30,
2022
June 30,
2022
Raw materials$398,520 $355,225 
Work in progress4,491 3,077 
Finished goods461,841 385,608 
Total inventories$864,852 $743,910 
Prepaid expenses and other current assetsSeptember 30,
2022
June 30,
2022
Prepaid taxes$92,226 $99,352 
Prepaid inventories122,839 107,291 
Other prepaid expenses and current assets126,134 131,265 
Total prepaid expenses and other current assets$341,199 $337,908 
Property, Plant and EquipmentSeptember 30,
2022
June 30,
2022
Property, plant and equipment, at cost$1,107,564 $1,131,295 
Accumulated depreciation and amortization(620,188)(633,114)
Property, plant and equipment, net$487,376 $498,181 
Other Intangible Assets September 30,
2022
June 30,
2022
Developed/core product technology$354,770 $350,671 
Accumulated amortization(244,255)(239,647)
Developed/core product technology, net110,515 111,024 
Customer relationships258,312 257,034 
Accumulated amortization(97,143)(91,731)
Customer relationships, net161,169 165,303 
Other intangibles194,970 204,580 
Accumulated amortization(128,503)(134,963)
Other intangibles, net66,467 69,617 
Total other intangibles, net$338,151 $345,944 
Intangible assets consist of developed/core product technology, trade names, non-compete agreements, customer relationships, and patents, which we amortize over the estimated useful life of the assets, generally between two years to fifteen years. There are no expected residual values related to these intangible assets.
(4)    Goodwill
A reconciliation of changes in our goodwill by reportable segment is as follows (in thousands):
Three Months Ended September 30, 2022
Sleep and
Respiratory Care
SaaSTotal
Balance at the beginning of the period$641,724 $1,294,718 $1,936,442 
Business acquisitions19,281  19,281 
Foreign currency translation adjustments(16,880) (16,880)
Balance at the end of the period$644,125 $1,294,718 $1,938,843 
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PART I – FINANCIAL INFORMATIONItem 1
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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
(5)    Investments
We have equity investments in privately and publicly held companies that are unconsolidated entities. The following discusses our investments in marketable equity securities, non-marketable equity securities, and investments accounted for under the equity method.
Our marketable equity securities are publicly traded stocks measured at fair value and classified within Level 1 in the fair value hierarchy because we use quoted prices for identical assets in active markets. Marketable equity securities are recorded in prepaid expenses and other current assets on the condensed consolidated balance sheets.
Non-marketable equity securities consist of investments in privately held companies without readily determinable fair values and are recorded in prepaid taxes and other non-current assets on the condensed consolidated balance sheets. Non-marketable equity securities are reported at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. We assess non-marketable equity securities at least quarterly for impairment and consider qualitative and quantitative factors including the investee's financial metrics, product and commercial outlook and cash usage. All gains and losses on marketable and non-marketable equity securities, realized and unrealized, are recognized in gain (loss) on equity investments as a component of other income (loss), net on the condensed consolidated statements of operations.
Equity investments whereby we have significant influence, but not control over the investee and are not the primary beneficiary of the investee’s activities, are accounted for under the equity method. Under this method, we record our share of gains or losses attributable to equity method investments as a component of other income (loss), net on the condensed consolidated statements of operations.
Equity investments by measurement category were as follows (in thousands):
Measurement categorySeptember 30,
2022
June 30,
2022
Fair value$5,887 $9,167 
Measurement alternative43,581 39,290 
Equity method7,890 9,918 
Total$57,358 $58,375 
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PART I – FINANCIAL INFORMATIONItem 1
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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
The following tables show a reconciliation of the changes in our equity investments (in thousands):
 Three Months Ended September 30, 2022
 Non-marketable securitiesMarketable securitiesEquity method investmentsTotal
Balance at the beginning of the period$39,290 $9,167 $9,918 $58,375 
Additions to investments4,291 — — 4,291 
Unrealized losses on marketable equity securities— (3,280)— (3,280)
Loss attributable to equity method investments— — (2,028)(2,028)
Carrying value at the end of the period$43,581 $5,887 $7,890 $57,358 

Three Months Ended September 30, 2021
Non-marketable securitiesMarketable securitiesEquity method investmentsTotal
Balance at the beginning of the period$23,002 $29,084 $17,154 $69,240 
Additions to investments3,000 3,600 — 6,600 
Observable price adjustments on non-marketable equity securities
5,367 — — 5,367 
Unrealized gains on marketable equity securities— 454 — 454 
Impairment of investments
(209)— — (209)
Loss attributable to equity method investments— — (1,386)(1,386)
Carrying value at the end of the period$31,160 $33,138 $15,768 $80,066 
Net unrealized losses recognized for equity investments in non-marketable and marketable securities held as of September 30, 2022 for the three months ended September 30, 2022 were $3.3 million. Net unrealized gains recognized for equity investments in non-marketable and marketable securities held as of September 30, 2021 for the three months ended September 30, 2021 were $5.6 million.
(6)    Income Taxes
In accordance with ASC 740 Income Taxes, each interim reporting period is considered integral to the annual period, and tax expense is measured using an estimated annual effective tax rate. An entity is required to record income tax expense each quarter based on its annual effective tax rate estimated for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis, adjusted for discrete taxable events that occur during the interim period.
On September 19, 2021, we concluded the settlement agreement with the Australian Taxation Office (“ATO”) in relation to the previously disclosed transfer pricing dispute for the tax years 2009 through 2018 (“ATO settlement”). The ATO settlement fully resolved the dispute for all prior years, with no admission of liability and provides clarity in relation to certain future taxation principles.
On September 28, 2021, we remitted final payment to the ATO of $284.8 million, consisting of the agreed settlement amount of $381.7 million less prior remittances made to the ATO of $96.9 million.
(7)    Product Warranties
Changes in the liability for warranty costs, which is included in accrued expenses in our condensed consolidated balance sheets, are as follows (in thousands):
Three Months Ended
September 30,
20222021
Balance at the beginning of the period$25,889 $22,032 
Warranty accruals for the period2,088 5,413 
Warranty costs incurred for the period (2,612)(3,972)
Foreign currency translation adjustments(1,272)(513)
Balance at the end of the period$24,093 $22,960 
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PART I – FINANCIAL INFORMATIONItem 1
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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
(8)    Debt
Debt consisted of the following (in thousands):
September 30,
2022
June 30,
2022
Short-term debt $10,000 $10,000 
Deferred borrowing costs$(94)$(84)
Short-term debt, net$9,906 $9,916 
Long-term debt$790,000 $770,000 
Deferred borrowing costs(4,564)(4,675)
Long-term debt, net$785,436 $765,325 
Total debt$795,342 $775,241 
Credit Facility
On June 29, 2022, we entered into a second amended and restated credit agreement (the “Revolving Credit Agreement”), as borrower, with lenders MUFG Union Bank, N.A., as administrative agent, joint lead arranger, sole book runner, swing line lender and letter of credit issuer, Westpac Banking Corporation, as syndication agent and joint lead arranger, HSBC Bank USA, National Association, as syndication agent and joint lead arranger, and Wells Fargo Bank, National Association, as documentation agent. The Revolving Credit Agreement, among other things, provided a senior unsecured revolving credit facility of $1,500.0 million, with an uncommitted option to increase the revolving credit facility by an additional amount equal to the greater of $1,000.0 million and 1.00 times the EBITDA (as defined in the Revolving Credit Agreement) for the trailing twelve-month measurement period. The Revolving Credit Agreement amends and restates that certain Amended and Restated Credit Agreement, dated as of April 17, 2018, among ResMed, MUFG Union Bank, N.A., Westpac Banking Corporation and the lenders party thereto.
Additionally, on June 29, 2022, ResMed Pty Limited entered into a Second Amendment to the Syndicated Facility Agreement and First Amendment to Unconditional Guaranty Agreement (the “Term Credit Agreement”), as borrower, with lenders MUFG Union Bank, N.A., as administrative agent, joint lead arranger and joint book runner, and Westpac Banking Corporation, as syndication agent, joint lead arranger and joint book runner, which amends that certain Syndicated Facility Agreement dated as of April 17, 2018. The Term Credit Agreement, among other things, provides ResMed Pty a senior unsecured term credit facility of $200.0 million.
Our obligations under the Revolving Credit Agreement are guaranteed by certain of our direct and indirect U.S. subsidiaries, and ResMed Pty Limited’s obligations under the Term Credit Agreement are guaranteed by us and certain of our direct and indirect U.S. subsidiaries. The Revolving Credit Agreement and Term Credit Agreement contain customary covenants, including, in each case, a financial covenant that requires that we maintain a maximum leverage ratio of funded debt to EBITDA (as defined in the Revolving Credit Agreement and Term Credit Agreement, as applicable). The entire principal amounts of the revolving credit facility and term credit facility, and, in each case, any accrued but unpaid interest may be declared immediately due and payable if an event of default occurs, as defined in the Revolving Credit Agreement and the Term Credit Agreement, as applicable. Events of default under the Revolving Credit Agreement and the Term Credit Agreement include, in each case, failure to make payments when due, the occurrence of a default in the performance of any covenants in the respective agreements or related documents, or certain changes of control of us, or the respective guarantors of the obligations borrowed under the Revolving Credit Agreement and Term Credit Agreement.
The Revolving Credit Agreement and Term Credit Agreement each terminate on June 29, 2027, when all unpaid principal and interest under the loans must be repaid. Amounts borrowed under the Term Credit Agreement will also amortize on a semi-annual basis, with a $5.0 million principal payment required on each such semi-annual amortization date. The outstanding principal amounts will bear interest at a rate equal to the Adjusted Term SOFR (as defined in the Revolving Credit Facility) plus 0.75% to 1.50% (depending on the then-applicable leverage ratio) or the Base Rate (as defined in the Revolving Credit Agreement and the Term Credit Agreement, as applicable) plus 0.0% to 0.50% (depending on the then-applicable leverage ratio). At September 30, 2022, the interest rate that was being charged on the outstanding principal amounts was 3.5%. An applicable commitment fee of 0.075% to 0.150% (depending on the then-applicable leverage ratio) applies on the unused portion of the revolving credit facility. As of September 30, 2022, we had $1.4 billion available for draw down under the revolving credit facility.
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PART I – FINANCIAL INFORMATIONItem 1
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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
We are required to disclose the fair value of financial instruments for which it is practicable to estimate the value, even though these instruments are not recognized at fair value in the consolidated balance sheets. As the Revolving Credit and Term Credit Agreements’ interest rate is calculated as Adjusted Term SOFR plus the spreads described above, its carrying amount is equivalent to its fair value as at September 30, 2022 and June 30, 2022, which was $300.0 million and $280.0 million, respectively. Quoted market prices in active markets for similar liabilities based inputs (Level 2) were used to estimate fair value.
Senior Notes
On July 10, 2019, we entered into a Note Purchase Agreement with the purchasers to that agreement, in connection with the issuance and sale of $250.0 million principal amount of our 3.24% senior notes due July 10, 2026, and $250.0 million principal amount of our 3.45% senior notes due July 10, 2029 (collectively referred to as the “Senior Notes”). Our obligations under the Note Purchase Agreement and the Senior Notes are unconditionally and irrevocably guaranteed by certain of our direct and indirect U.S. subsidiaries. The net proceeds from this transaction were used to pay down borrowings on our Revolving Credit Agreement.
Under the terms of the Note Purchase Agreement, we agreed to customary covenants including with respect to our corporate existence, transactions with affiliates, and mergers and other extraordinary transactions. We also agreed that, subject to limited exceptions, we will maintain a ratio of consolidated funded debt to consolidated EBITDA (as defined in the Note Purchase Agreement) of no more than 3.50 to 1.00 as of the last day of any fiscal quarter, and will not at any time permit the amount of all priority secured and unsecured debt of us and our subsidiaries to exceed 10% of our consolidated tangible assets, determined as of the end of our most recently ended fiscal quarter. This ratio is calculated at the end of each reporting period for which the Note Purchase Agreement requires us to deliver financial statements, using the results of the 12 consecutive month period ending with such reporting period.
We are required to disclose the fair value of financial instruments for which it is practicable to estimate the value, even though these instruments are not recognized at fair value in the consolidated balance sheets. As of September 30, 2022 and June 30, 2022, the Senior Notes had a carrying amount of $500.0 million, excluding deferred borrowing costs, and an estimated fair value of $455.7 million and $477.7 million, respectively. Quoted market prices in active markets for similar liabilities based inputs (Level 2) were used to estimate fair value.
At September 30, 2022, we were in compliance with our debt covenants and there was $800.0 million outstanding under the Revolving Credit Agreement, Term Credit Agreement and Senior Notes.
(9)    Earnings Per Share
Basic earnings per share is computed by dividing the net income available to common stockholders by the weighted average number of shares of common stock outstanding. For purposes of calculating diluted earnings per share, the denominator includes both the weighted average number of shares of common stock outstanding and the number of dilutive common stock equivalents such as stock options and restricted stock units.
The weighted average number of outstanding stock options and restricted stock units not included in the computation of diluted earnings per share were 113,167 and 1,322 for the three months ended September 30, 2022 and 2021, respectively, as the effect would have been anti-dilutive.
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PART I – FINANCIAL INFORMATIONItem 1
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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Basic and diluted earnings per share are calculated as follows (in thousands except per share data):
Three Months Ended
September 30,
20222021
Numerator:
Net income$210,478 $203,613 
Denominator:
Basic weighted-average common shares outstanding146,431 145,680 
Effect of dilutive securities:
Stock options and restricted stock units703 1,180 
Diluted weighted average shares 147,134 146,860 
Basic earnings per share$1.44 $1.40 
Diluted earnings per share$1.43 $1.39 
(10)    Legal Actions, Contingencies and Commitments
Litigation
In the normal course of business, we are subject to routine litigation incidental to our business. While the results of this litigation cannot be predicted with certainty, we believe that their final outcome will not, individually or in aggregate, have a material adverse effect on our consolidated financial statements taken as a whole.
On June 2, 2021, New York University ("NYU") filed a complaint for patent infringement in the United States District Court, District of Delaware against ResMed Inc., case no. 1:21-cv-00813 (JPM). The complaint alleges that the AutoSet or AutoRamp features of ResMed’s AirSense 10 AutoSet flow generators infringe one or more claims of various NYU patents, including U.S. Patent Nos. 6,988,994; 9,108,009; 9,168,344; 9,427,539; 9,533,115; 9,867,955; and 10,384,024. According to the complaint, the NYU patents are directed to systems and methods for diagnosis and treating sleeping disorders during different sleep states. The complaint seeks monetary damages and attorneys’ fees. We answered the complaint on September 30, 2021 and filed a motion to dismiss the complaint on the basis that the patents are invalid because the subject matter of the patents is not patentable under the Supreme Court and Federal Circuit precedent. The motion to dismiss was granted in part and denied in part. We have also requested that the court dismiss the case based on NYU’s license of the patents to Fisher & Paykel and Fisher & Paykel’s prior settlement with us. The matter is proceeding to discovery while the court considers our request. We have also filed petitions for inter partes review with the Patent Trial and Appeal Board (“PTAB”) of the United States Patent and Trademark Office seeking to invalidate the asserted claims of the patents-in-suit. A determination by the PTAB whether to institute the petitions is expected by early December 2022. If the petitions are instituted by the PTAB, a final written decision determining the invalidity of the challenged claims is expected by December 2023.
On January 27, 2021, the International Trade Commission ("ITC") instituted In Re Certain UMTS and LTE Cellular Communications Modules and Products Containing the Same, Investigation No. 337-TA-1240, by complainants Philips RS North America, LLC and Koninklijke Philips N.V. (collectively “Philips”) against Quectel Wireless Solutions Co., Ltd; Thales DIS AIS USA, LLC, Thales DIS AIS Deutschland GmbH; Telit Wireless Solutions, Inc., Telit Communications PLC, CalAmp. Corp., Xirgo Technologies, LLC, and Laird Connectivity, Inc. (collectively “respondents”). In the ITC investigation, Philips seeks an order excluding communications modules, and products that contain them, from importation into the United States based on alleged infringement of 3G and 4G standard essential patents held by Philips. On October 6-14, 2021, the administrative law judge held a hearing on the merits. The administrative law judge issued an initial determination on April 1, 2022, finding no violation of any of the Philips' patents asserted in the ITC. Philips sought review by the full ITC. On July 6, 2022, the Commission affirmed the administrative law judge’s determination that there was no violation of asserted Philips' patents. The Commission terminated the ITC proceedings. Philips did not appeal the ITC’s decision. On December 17, 2020, Philips filed companion cases for patent infringement against the same defendants in the United States District Court for the District of Delaware, case nos. 1:20-cv-01707, 01708, 01709, 01710, 01711, and 01713 (CFC) seeking damages, an injunction, and a declaration from the court on the amount of a fair reasonable and non-discriminatory license rate for the standard essential patents it is asserting against the communications module defendants. The district court cases have been stayed pending the resolution of the ITC proceedings. Philips has not yet moved to lift
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PART I – FINANCIAL INFORMATIONItem 1
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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
the stay following the termination of the ITC Investigation. We are not a party to the ITC investigation or the district court cases, but we sell products that incorporate some of the communications modules at issue in the cases.
On June 16, 2022, Cleveland Medical Devices Inc. ("Cleveland Medical") filed suit for patent infringement against ResMed Inc. in the United States District Court for the District of Delaware, case no. 1:22-cv-00794. Cleveland Medical asserts that numerous ResMed connected devices, when combined with certain ResMed data platforms and/or software, including AirView and ResScan, infringe one or more of eight Cleveland Medical patents, including U.S. Patent Nos. 10,076,269; 10,426,399; 10,925,535; 11,064,937; 10,028,698; 10,478,118; 11,202,603; and 11,234,637. We have moved to dismiss the action because Cleveland Medical sued the wrong ResMed entity. We have also moved to dismiss all claims based on U.S. Patent No. 10,076,269, as well as indirect and willful infringement allegations as to the remaining patents asserted against ResMed.
Based on currently available information, we are unable to make a reasonable estimate of loss or range of losses, if any, arising from matters that remain open.
Contingent Obligations Under Recourse Provisions
We use independent financing institutions to offer some of our customers financing for the purchase of some of our products. Under these arrangements, if the customer qualifies under the financing institutions’ credit criteria and finances the transaction, the customers repay the financing institution on a fixed payment plan. For some of these arrangements, the customer’s receivable balance is with limited recourse whereby we are responsible for repaying the financing company should the customer default. We record a contingent provision, which is estimated based on historical default rates. This is applied to receivables sold with recourse and is recorded in accrued expenses.
During the three months ended September 30, 2022 and September 30, 2021, receivables sold with limited recourse were $39.9 million and $49.5 million, respectively. As of September 30, 2022, the maximum exposure on outstanding receivables sold with recourse and contingent provision were $22.4 million and $1.2 million, respectively. As of June 30, 2022, the maximum exposure on outstanding receivables sold with recourse and contingent provision were $24.2 million and $2.1 million, respectively.
Commitments
In June 2022 we signed a definitive agreement to acquire MEDIFOX DAN which is expected to close during our fiscal year 2023. The MEDIFOX DAN acquisition remains subject to regulatory clearances and other customary closing conditions. Upon closing, acquisition consideration of EUR 950 million will be paid, in part, with funds available for draw under our Revolving Credit Agreement.
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Special Note Regarding Forward-Looking Statements
This report contains or may contain certain forward-looking statements and information that are based on the beliefs of our management as well as estimates and assumptions made by, and information currently available to, our management. All statements other than statements regarding historical facts are forward-looking statements. The words “believe,” “expect,” “intend,” “anticipate,” “will continue,” “will,” “estimate,” “plan,” “future” and other similar expressions, and negative statements of such expressions, generally identify forward-looking statements, including, in particular, statements regarding expectations of future revenue or earnings, expenses, new product development, new product launches, new markets for our products, litigation, tax outlook and the effects of competition and public health crises (including the COVID-19 pandemic) on our business. These forward-looking statements are made in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on these forward-looking statements. Forward-looking statements reflect the views of our management at the time the statements are made and are subject to a number of risks, uncertainties, estimates and assumptions, including, without limitation, and in addition to those identified in the text surrounding such statements, those identified in our annual report on Form 10-K for the fiscal year ended June 30, 2022 and elsewhere in this report. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources.
In addition, important factors to consider in evaluating such forward-looking statements include changes or developments in healthcare reform, social, economic, market, legal or regulatory circumstances, including the impact of public health crises such as the novel strain of coronavirus (COVID-19) that has spread globally, changes in our business or growth strategy or an inability to execute our strategy due to changes in our industry or the economy generally, the emergence of new or growing competitors, the actions or omissions of third parties, including suppliers, customers, competitors and governmental authorities and various other factors. If any one or more of these risks or uncertainties materialize, or underlying estimates or assumptions prove incorrect, actual results may vary significantly from those expressed in our forward-looking statements, and there can be no assurance that the forward-looking statements contained in this report will in fact occur.
Before deciding to purchase, hold or sell our common stock, you should carefully consider the risks described in our annual report on Form 10-K for the fiscal year ended June 30, 2022, in addition to the other cautionary statements and risks described elsewhere in this report and in our other filings with the Securities and Exchange Commission (“SEC”), including our subsequent reports on Forms 10-Q and 8-K. These risks and uncertainties are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business. If any of these known or unknown risks or uncertainties actually occurs with material adverse effects on us, our business, financial condition and results of operations could be seriously harmed. In that event, the market price for our common stock will likely decline and you may lose all or part of your investment.
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Overview
The following is an overview of our results of operations for the three months ended September 30, 2022. Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. Management’s discussion and analysis is provided as a supplement to, and should be read in conjunction with, the condensed consolidated financial statements and notes included in this report.
We are a global leader in the development, manufacturing, distribution and marketing of medical devices and cloud-based software applications that diagnose, treat and manage respiratory disorders, including sleep disordered breathing (“SDB”), chronic obstructive pulmonary disease, neuromuscular disease and other chronic diseases. SDB includes obstructive sleep apnea and other respiratory disorders that occur during sleep. Our products and solutions are designed to improve patient quality of life, reduce the impact of chronic disease and lower healthcare costs as global healthcare systems continue to drive a shift in care from hospitals to the home and lower cost settings. Our cloud-based software digital health applications, along with our devices, are designed to provide connected care to improve patient outcomes and efficiencies for our customers.
Since the development of continuous positive airway pressure therapy, we have expanded our business by developing or acquiring a number of products and solutions for a broader range of respiratory disorders including technologies to be applied in medical and consumer products, ventilation devices, diagnostic products, mask systems for use in the hospital and home, headgear and other accessories, dental devices, and cloud-based software informatics solutions to manage patient outcomes and customer and provider business processes. Our growth has been fueled by geographic expansion, our research and product development efforts, acquisitions and an increasing awareness of SDB and respiratory conditions like chronic obstructive pulmonary disease as significant health concerns.
We are committed to ongoing investment in research and development and product enhancements. During the three months ended September 30, 2022, we invested $63.2 million on research and development activities, which represents 6.6% of net revenues, with a continued focus on the development and commercialization of new, innovative products and solutions that improve patient outcomes, create efficiencies for our customers and help physicians and providers better manage chronic disease and lower healthcare costs. During the three months ended September 30, 2022 we continued the launch of AirSense 11, which introduces new features such as a touch screen, algorithms for patients new to therapy and digital enhancements and over-the-air update capabilities as well as continued to expand our global offering of devices to include Card-to-Cloud ("C2C") versions of our prior model AirSense 10 and AirCurve 10 products that do not incorporate a communications module. We introduced these C2C models to address the growing backlog of patients waiting for therapy with our devices due to the global semiconductor supply shortage. Due to multiple acquisitions, including Brightree in April 2016, HEALTHCAREfirst in July 2018 and MatrixCare in November 2018, and our pending acquisition of MEDIFOX DAN which is expected to close during fiscal year 2023 subject to regulatory clearances, our operations now include out-of-hospital software platforms designed to support the professionals and caregivers who help people stay healthy in the home or care setting of their choice. These platforms comprise our SaaS business. These products, our cloud-based remote monitoring and therapy management system, and a robust product pipeline, should continue to provide us with a strong platform for future growth.
We have determined that we have two operating segments, which are the sleep and respiratory disorders sector of the medical device industry (“Sleep and Respiratory Care”) and the supply of business management software as a service to out-of-hospital health providers (“SaaS”).
Net revenue for the three months ended September 30, 2022 was $950.3 million, an increase of 5% compared to the three months ended September 30, 2021. Gross margin was 56.9% for the three months ended September 30, 2022 compared to 56.0% for the three months ended September 30, 2021. Diluted earnings per share was $1.43 for the three months ended September 30, 2022, compared to diluted loss per share of $1.39 for the three months ended September 30, 2021.
At September 30, 2022, our cash and cash equivalents totaled $207.2 million, our total assets were $5.2 billion and our stockholders’ equity was $3.4 billion.
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
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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 accounting principles generally accepted in the United States (“GAAP”).
Results of Operations
Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021
Net Revenue
Net revenue for the three months ended September 30, 2022 increased to $950.3 million from $904.0 million for the three months ended September 30, 2021, an increase of $46.3 million or 5% (a 9% increase on a constant currency basis). The following table summarizes our net revenue disaggregated by segment, product and region (in thousands):
Three Months Ended
September 30,
% ChangeConstant Currency*
20222021
U.S., Canada and Latin America      
Devices$339,545 $275,932 23 %
Masks and other238,560 215,106 11 
Total Sleep and Respiratory Care$578,105 $491,038 18 
Software as a Service105,851 97,516 
Total$683,956 $588,554 16 
Combined Europe, Asia and other markets
Devices$178,032 $218,226 (18)%(10)%
Masks and other88,306 97,235 (9)
Total Sleep and Respiratory Care$266,338 $315,461 (16)(6)
Global revenue
Devices$517,577 $494,158 %%
Masks and other326,866 312,341 
Total Sleep and Respiratory Care$844,443 $806,499 
Software as a Service105,851 97,516 
Total$950,294 $904,015 
*Constant currency numbers exclude the impact of movements in international currencies.
Sleep and Respiratory Care
Net revenue from our Sleep and Respiratory Care business for the three months ended September 30, 2022 was $844.4 million, an increase of 5% compared to net revenue for the three months ended September 30, 2021. Movements in international currencies against the U.S. dollar negatively impacted net revenue by approximately $36.2 million for the three months ended September 30, 2022. Excluding the impact of currency movements, total Sleep and Respiratory Care net revenue for the three months ended September 30, 2022 increased by 9% compared to the three months ended September 30, 2021. The increase in net revenue was primarily attributable to an increase in unit sales of our devices and masks.
Net revenue from our Sleep and Respiratory Care business in the U.S., Canada and Latin America for the three months ended September 30, 2022 increased to $578.1 million from $491.0 million for the three months ended September 30, 2021, an increase of $87.1 million or 18%. The increase was primarily due to an increase in unit sales of our devices, including incremental sales of the C2C devices, and masks.
Net revenue in combined Europe, Asia and other markets decreased for the three months ended September 30, 2022 to $266.3 million from $315.5 million for the three months ended September 30, 2021, a decrease of $49.1 million or 16% (a 6% decrease on a constant currency basis). The constant currency decrease in sales in combined Europe, Asia and other
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markets predominantly reflects a decrease in unit sales of our devices, which have been negatively impacted by the continued shortages in electronic components.
Net revenue from devices for the three months ended September 30, 2022 increased to $517.6 million from $494.2 million for the three months ended September 30, 2021, an increase of $23.4 million or 5%, including an increase of 23% in the U.S., Canada and Latin America and a decrease of 18% in combined Europe, Asia and other markets (a 10% decrease on a constant currency basis). Excluding the impact of foreign currency movements, device sales for the three months ended September 30, 2022 increased by 9%.
Net revenue from masks and other for the three months ended September 30, 2022 increased to $326.9 million from $312.3 million for the three months ended September 30, 2021, an increase of $14.5 million or 5%, including an increase of 11% in the U.S., Canada and Latin America and a decrease of 9% in combined Europe, Asia and other markets (a 3% increase on a constant currency basis). Excluding the impact of foreign currency movements, masks and other sales increased by 8%, compared to the three months ended September 30, 2021.
Software as a Service
Net revenue from our SaaS business for the three months ended September 30, 2022 was $105.9 million, an increase of 9% compared to the three months ended September 30, 2021. The increase was predominantly due to continued growth in the HME vertical within our SaaS business.
Gross Profit and Gross Margin
Gross profit increased for the three months ended September 30, 2022 to $540.8 million from $506.3 million for the three months ended September 30, 2021, an increase of $34.5 million or 7%. Gross margin, which is gross profit as a percentage of net revenue, for the three months ended September 30, 2022 was 56.9% compared to 56.0% for the three months ended September 30, 2021.
The increase in gross margin for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was due primarily to increases in average selling prices and a decrease in the amortization of acquired intangible assets, partially offset by unfavorable product mix and foreign currency movements.
Operating Expenses
The following table summarizes our operating expenses (in thousands):
Three Months Ended
September 30,
Change% ChangeConstant Currency
20222021
Selling, general, and administrative$193,933 $176,719 $17,214 10 %16 %
as a % of net revenue20.4 %19.5 %
Research and development 63,188 59,950 3,238 %%
as a % of net revenue6.6 %6.6 %
Amortization of acquired intangible assets7,950 7,707 243 %%
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses increased for the three months ended September 30, 2022 to $193.9 million from $176.7 million for the three months ended September 30, 2021, an increase of $17.2 million or 10%. Selling, general, and administrative expenses were favorably impacted by the movement of international currencies against the U.S. dollar, which decreased our expenses by approximately $10.2 million, as reported in U.S. dollars. Excluding the impact of foreign currency movements, selling, general, and administrative expenses for the three months ended September 30, 2022 increased by 16% compared to the three months ended September 30, 2021. As a percentage of net revenue, selling, general, and administrative expenses were 20.4% for the three months ended September 30, 2022, compared to 19.5% for the three months ended September 30, 2021.
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The constant currency increase in selling, general, and administrative expenses was primarily due to increases in employee-related costs and travel and entertainment expenses during the three months ended September 30, 2022 compared to the three months ended September 30, 2021.
Research and Development Expenses
Research and development expenses increased for the three months ended September 30, 2022 to $63.2 million from $60.0 million for the three months ended September 30, 2021, an increase of $3.2 million, or 5%. Research and development expenses were favorably impacted by the movement of international currencies against the U.S. dollar, which decreased our expenses by approximately $2.0 million for the three months ended September 30, 2022, as reported in U.S. dollars. Excluding the impact of foreign currency movements, research and development expenses increased by 9% compared to the three months ended September 30, 2021. As a percentage of net revenue, research and development expenses were consistent at 6.6% for the three months ended September 30, 2022 and September 30, 2021.
Amortization of Acquired Intangible Assets
Amortization of acquired intangible assets for the three months ended September 30, 2022 totaled $8.0 million compared to $7.7 million for the three months ended September 30, 2021.
Total Other Income (Loss), Net
The following table summarizes our other income (loss) (in thousands):