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x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 2022 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 9001 Spectrum Center Blvd. offices, including zip code) Title of each class Name of each exchange on which registered Common Stock, par value $0.004 per share RMD New York Stock Exchange Yes x No Large Accelerated Filer x Accelerated Filer o Non-Accelerated Filer o Smaller Reporting Company o Emerging Growth Company o RESMED INC. AND SUBSIDIARIES Item 1. Financial Statements March 31, June 30, Assets Current assets: Cash and cash equivalents $ 230,635 $ 463,156 Accounts receivable, net of allowances of $32,811 and $28,508 525,014 474,643 Inventories (note 3) 484,061 416,915 Prepaid expenses and other current assets 226,440 168,745 Total current assets 1,466,150 1,523,459 Non-current assets: Property, plant and equipment, net (note 3) 455,106 417,335 Operating lease right-of-use assets 128,755 118,348 Goodwill (note 4) 1,925,991 1,890,324 Other intangible assets, net (note 3) 409,559 448,168 Deferred income taxes 49,936 41,065 Prepaid taxes and other non-current assets 150,227 148,677 Total non-current assets 3,119,574 3,063,917 Total assets $ 4,585,724 $ 4,587,376 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 117,222 $ 135,786 Accrued expenses 304,693 270,353 Operating lease liabilities, current 22,499 21,263 Deferred revenue 105,342 98,617 Income taxes payable (note 6) 314,795 64,755 Short-term debt, net (note 8) 11,990 11,987 Total current liabilities 876,541 602,761 Non-current liabilities: Deferred revenue 86,898 87,307 Deferred income taxes 12,474 13,011 Operating lease liabilities, non-current 115,266 101,880 Other long-term liabilities 6,067 8,347 Long-term debt, net (note 8) 719,046 1,164,133 Long-term income taxes payable (note 6) 60,198 112,910 Total non-current liabilities 999,949 1,487,588 Total liabilities 1,876,490 2,090,349 Commitments and contingencies (note 10) Stockholders’ equity: Preferred stock, $0.01 par value, 2,000,000 shares authorized; NaN issued - - Common stock, $0.004 par value, 350,000,000 shares authorized; 582 580 Additional paid-in capital 1,586,545 1,570,694 Retained earnings 2,941,336 2,832,991 Treasury stock, at cost, 41,836,234 shares at March 31, 2021 and June 30, 2020 (1,623,256) (1,623,256) Accumulated other comprehensive loss (195,973) (283,982) Total stockholders’ equity 2,709,234 2,497,027 Total liabilities and stockholders’ equity $ 4,585,724 $ 4,587,376 RESMED INC. AND SUBSIDIARIES Three Months Ended Nine Months Ended 2021 2020 2021 2020 Net revenue - Sleep and Respiratory Care products $ 674,931 $ 679,895 $ 2,042,909 $ 1,923,513 Net revenue - Software as a Service 93,836 89,560 277,813 263,156 Net revenue 768,767 769,455 2,320,722 2,186,669 Cost of sales - Sleep and Respiratory Care products 270,351 277,065 833,203 790,858 Cost of sales - Software as a Service 40,234 30,592 105,050 89,775 Cost of sales (exclusive of amortization shown separately below) 310,585 307,657 938,253 880,633 Amortization of acquired intangible assets - Sleep and Respiratory Care products 900 2,152 3,995 6,609 Amortization of acquired intangible assets - Software as a Service 10,024 9,984 30,071 31,015 Amortization of acquired intangible assets 10,924 12,136 34,066 37,623 Total cost of sales 321,509 319,793 972,319 918,256 Gross profit 447,258 449,662 1,348,403 1,268,413 Selling, general, and administrative 160,446 172,441 488,904 511,304 Research and development 55,941 51,449 165,409 149,425 Amortization of acquired intangible assets 7,445 8,272 23,377 21,872 Restructuring expenses (note 11) - - 8,673 - Litigation settlement expenses - - - (600) Total operating expenses 223,832 232,162 686,363 682,001 Income from operations 223,426 217,500 662,040 586,412 Other income (loss), net: Interest income 55 116 303 766 Interest expense (5,878) (9,968) (18,644) (31,180) Loss attributable to equity method investments (note 5) (4,969) (5,295) (9,895) (19,082) Other, net 5,371 (10,698) 10,647 (15,922) Total other income (loss), net (5,421) (25,845) (17,589) (65,418) Income before income taxes 218,005 191,655 644,451 520,994 Income taxes 296,486 28,518 365,046 77,155 Net income (loss) $ (78,481) $ 163,137 $ 279,405 $ 443,839 Basic earnings (loss) per share (note 9) $ (0.54) $ 1.13 $ 1.92 $ 3.08 Diluted earnings (loss) per share (note 9) $ (0.54) $ 1.12 $ 1.91 $ 3.05 Dividend declared per share $ 0.39 $ 0.39 $ 1.17 $ 1.17 Basic shares outstanding (000's) 145,513 144,638 145,217 144,112 Diluted shares outstanding (000's) 145,513 145,680 146,394 145,490 RESMED INC. AND SUBSIDIARIES Three Months Ended Nine Months Ended 2021 2020 2021 2020 Net income (loss) $ (78,481) $ 163,137 $ 279,405 $ 443,839 Other comprehensive income (loss): Foreign currency translation (loss) gain adjustments (32,822) (120,318) 88,009 (113,427) Comprehensive income (loss) $ (111,303) $ 42,819 $ 367,414 $ 330,412 RESMED INC. AND SUBSIDIARIES Common Stock Additional Treasury Stock Retained Accumulated Shares Amount Capital Shares Amount Earnings Income (Loss) Total Balance, June 30, 2020 186,723 $ 580 $ 1,570,694 (41,836) $ (1,623,256) $ 2,832,991 $ (283,982) $ 2,497,027 Common stock issued on exercise of options 18 - 1,026 - - - - 1,026 Common stock issued on vesting of restricted stock units, net of shares withheld for tax 3 - 227 - - - - 227 Stock-based compensation costs - - 16,071 - - - - 16,071 Other comprehensive income - - - - - - 43,791 43,791 Cumulative effect adjustment from adoption of the credit loss standard, net of tax - - - - - (1,143) - (1,143) Net income - - - - - 178,372 - 178,372 Dividends declared - - - - - (56,511) - (56,511) Balance, September 30, 2020 186,744 $ 580 $ 1,588,018 (41,836) $ (1,623,256) $ 2,953,709 $ (240,191) $ 2,678,860 Common stock issued on exercise of options 29 - 1,857 - - - - 1,857 Common stock issued on vesting of restricted stock units, net of shares withheld for tax 451 2 (46,734) - - - - (46,732) Common stock issued on employee stock purchase plan 116 - 15,729 - - - - 15,729 Stock-based compensation costs - - 15,370 - - - - 15,370 Other comprehensive income - - - - - - 77,040 77,040 Net income - - - - - 179,514 - 179,514 Dividends declared - - - - - (56,654) - (56,654) Balance, December 31, 2020 187,340 $ 582 $ 1,574,240 (41,836) $ (1,623,256) $ 3,076,569 $ (163,151) $ 2,864,984 Common stock issued on exercise of options 1 - 139 - - - - 139 Common stock issued on vesting of restricted stock units, net of shares withheld for tax 12 - (3,431) - - - - (3,431) Common stock issued on employee stock purchase plan - - 6 - - - - 6 Stock-based compensation costs - - 15,591 - - - - 15,591 Other comprehensive income (loss) - - - - - - (32,822) (32,822) Net income (loss) - - - - - (78,481) - (78,481) Dividends declared - - - - - (56,752) - (56,752) Balance, March 31, 2021 187,353 $ 582 $ 1,586,545 (41,836) $ (1,623,256) $ 2,941,336 $ (195,973) $ 2,709,234 RESMED INC. AND SUBSIDIARIES Common Stock Additional Treasury Stock Retained Accumulated Shares Amount Capital Shares Amount Earnings Income (Loss) Total Balance, June 30, 2019 185,491 $ 575 $ 1,511,473 (41,836) $ (1,623,256) $ 2,436,410 $ (253,009) $ 2,072,193 Common stock issued on exercise of options 110 - 5,609 - - - - 5,609 Common stock issued on vesting of restricted stock units, net of shares withheld for tax 4 - (327) - - - - (327) Stock-based compensation costs - - 13,256 - - - - 13,256 Other comprehensive income (loss) - - - - - - (37,576) (37,576) Net income - - - - - 120,148 - 120,148 Dividends declared - - - - - (56,052) - (56,052) Balance, September 30, 2019 185,605 $ 575 $ 1,530,011 (41,836) $ (1,623,256) $ 2,500,506 $ (290,585) $ 2,117,251 Common stock issued on exercise of options 117 - 6,498 - - - - 6,498 Common stock issued on vesting of restricted stock units, net of shares withheld for tax 576 3 (40,764) - - - - (40,761) Common stock issued on employee stock purchase plan 137 - 12,190 - - - - 12,190 Stock-based compensation costs - - 14,057 - - - - 14,057 Other comprehensive income - - - - - - 44,467 44,467 Net income - - - - - 160,554 - 160,554 Dividends declared - - - - - (56,150) - (56,150) Balance, December 31, 2019 186,435 $ 578 $ 1,521,992 (41,836) $ (1,623,256) $ 2,604,910 $ (246,118) $ 2,258,106 Common stock issued on exercise of options 34 1 1,815 - - - - 1,816 Common stock issued on vesting of restricted stock units, net of shares withheld for tax 30 - (4,014) - - - - (4,014) Stock-based compensation costs - - 14,112 - - - - 14,112 Other comprehensive income (loss) - - - - - - (120,318) (120,318) Net income - - - - - 163,137 - 163,137 Dividends declared - - - - - (56,408) - (56,408) Balance, March 31, 2020 186,499 $ 579 $ 1,533,905 (41,836) $ (1,623,256) $ 2,711,639 $ (366,436) $ 2,256,431 RESMED INC. AND SUBSIDIARIES Nine Months Ended 2021 2020 Cash flows from operating activities: Net income $ 279,405 $ 443,839 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 120,034 116,341 Amortization of right-of-use assets 25,805 19,524 Stock-based compensation costs 47,032 41,421 Loss attributable to equity method investments (note 5) 9,895 19,082 (Gain) loss on equity investments (note 5) (9,442) 14,519 Restructuring expenses (note 11) 8,673 - Changes in fair value of business combination contingent consideration - (7) Changes in operating assets and liabilities: Accounts receivable (39,899) (34,140) Inventories (48,393) (22,564) Prepaid expenses, net deferred income taxes and other current assets (41,036) (68,724) Accounts payable, accrued expenses and other 158,119 (57,301) Net cash provided by operating activities 510,193 471,990 Cash flows from investing activities: Purchases of property, plant and equipment (74,805) (77,360) Patent registration costs (11,149) (7,391) Business acquisitions, net of cash acquired (30,704) (27,910) Purchases of investments (note 5) (20,038) (31,616) Proceeds on maturity of foreign currency contracts 26,306 (32,177) Net cash used in investing activities (110,390) (176,454) Cash flows from financing activities: Proceeds from issuance of common stock, net 18,759 26,112 Taxes paid related to net share settlement of equity awards (49,938) (45,106) Payments of business combination contingent consideration (3,500) (302) Proceeds from borrowings, net of borrowing costs 90,000 990,000 Repayment of borrowings (536,000) (883,012) Dividends paid (169,917) (168,610) Net cash used in financing activities (650,596) (80,918) Effect of exchange rate changes on cash 18,272 (8,885) Net increase (decrease) in cash and cash equivalents (232,521) 205,733 Cash and cash equivalents at beginning of period 463,156 147,128 Cash and cash equivalents at end of period $ 230,635 $ 352,861 Supplemental disclosure of cash flow information: Income taxes paid, net of refunds $ 180,307 $ 150,801 Interest paid $ 18,644 $ 31,180 Fair value of assets acquired, excluding cash $ 15,992 $ 14,922 Liabilities assumed (3,309) (4,294) Goodwill on acquisition 24,202 20,550 Deferred payments (1,681) 232 Fair value of contingent consideration - (3,500) Cash paid for acquisitions $ 35,204 $ 27,910 PART I – FINANCIAL INFORMATION Item 1 RESMED INC. AND SUBSIDIARIES 2022. 2021. Three Months Ended Nine Months Ended 2021 2020 2021 2020 U.S., Canada and Latin America Devices $ 192,897 $ 196,497 $ 595,287 $ 586,907 Masks and other 209,984 197,052 637,507 584,901 Total Sleep and Respiratory Care $ 402,881 $ 393,549 $ 1,232,794 $ 1,171,808 Software as a Service 93,836 89,560 277,813 263,156 Total $ 496,717 $ 483,109 $ 1,510,607 $ 1,434,964 Combined Europe, Asia and other markets Devices $ 172,838 $ 195,038 $ 536,856 $ 509,274 Masks and other 99,212 91,308 273,259 242,431 Total Sleep and Respiratory Care $ 272,050 $ 286,346 $ 810,115 $ 751,705 Global revenue Devices $ 365,735 $ 391,535 $ 1,132,143 $ 1,096,181 Masks and other 309,196 288,360 910,766 827,332 Total Sleep and Respiratory Care $ 674,931 $ 679,895 $ 2,042,909 $ 1,923,513 Software as a Service 93,836 89,560 277,813 263,156 Total $ 768,767 $ 769,455 $ 2,320,722 $ 2,186,669 Performance obligations and contract balances March 31, June 30, Balance sheet caption Contract assets Accounts receivable, net $ 525,014 $ 474,643 Accounts receivable, net Unbilled revenue, current 12,540 9,452 Prepaid expenses and other current assets Unbilled revenue, non-current 5,404 6,957 Prepaid taxes and other non-current assets Contract liabilities Deferred revenue, current (105,342) (98,617) Deferred revenue (current liabilities) Deferred revenue, non-current (86,898) (87,307) Deferred revenue (non-current liabilities) Lease Revenue Three Months Ended Nine Months Ended 2021 2020 2021 2020 Sales-type lease revenue $ 2,031 $ 3,784 $ 5,854 $ 9,110 Operating lease revenue 22,746 22,720 72,551 65,672 Total lease revenue $ 24,777 $ 26,504 $ 78,405 $ 74,782 2021-08 “Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (2) Segment Information Three Months Ended Nine Months Ended 2021 2020 2021 2020 Net revenue by segment Total Sleep and Respiratory Care $ 674,931 $ 679,895 $ 2,042,909 $ 1,923,513 Software as a Service 93,836 89,560 277,813 265,258 Deferred revenue fair value adjustment (1) - - - (2,102) Total Software as a Service 93,836 89,560 277,813 263,156 Total $ 768,767 $ 769,455 $ 2,320,722 $ 2,186,669 Depreciation and amortization by segment Sleep and Respiratory Care $ 13,589 $ 14,134 $ 39,979 $ 43,012 Software as a Service 1,491 1,025 3,599 2,844 Amortization of acquired intangible assets and corporate assets 24,908 24,105 76,456 70,485 Total $ 39,988 $ 39,264 $ 120,034 $ 116,341 Net operating profit by segment (2) Sleep and Respiratory Care (2) $ 253,693 $ 250,209 $ 763,534 $ 678,468 Software as a Service (2) 23,052 18,738 70,929 63,874 Total $ 276,745 $ 268,947 $ 834,463 $ 742,342 Reconciling items Corporate costs $ 34,950 $ 31,039 $ 106,307 $ 94,933 Amortization of acquired intangible assets 18,369 20,408 57,443 59,495 Restructuring expenses - - 8,673 - Litigation settlement expenses - - - (600) Deferred revenue fair value adjustment (1) - - - 2,102 Interest expense (income), net 5,823 9,852 18,341 30,414 Loss attributable to equity method investments 4,969 5,295 9,895 19,082 Other, net (5,371) 10,698 (10,647) 15,922 Income before income taxes $ 218,005 $ 191,655 $ 644,451 $ 520,994 Inventories March 31, June 30, Raw materials $ 145,444 $ 128,096 Work in progress 3,750 2,807 Finished goods 334,867 286,012 Total inventories $ 484,061 $ 416,915 PART I – FINANCIAL INFORMATION Item 1 Property, Plant and Equipment March 31, June 30, Property, plant and equipment, at cost $ 1,056,004 $ 969,166 Accumulated depreciation and amortization (600,898) (551,831) Property, plant and equipment, net $ 455,106 $ 417,335 Other Intangible Assets March 31, June 30, Developed/core product technology $ 383,124 $ 382,806 Accumulated amortization (227,793) (197,670) Developed/core product technology, net 155,331 185,136 Customer relationships 278,196 279,370 Accumulated amortization (91,550) (80,922) Customer relationships, net 186,646 198,448 Other intangibles 196,415 177,091 Accumulated amortization (128,833) (112,507) Other intangibles, net 67,582 64,584 Total other intangibles, net $ 409,559 $ 448,168 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. Nine Months Ended March 31, 2021 Sleep and SaaS Total Balance at the beginning of the period $ 614,448 $ 1,275,876 $ 1,890,324 Business acquisitions 4,707 19,495 24,202 Foreign currency translation adjustments 11,465 - 11,465 Balance at the end of the period $ 630,620 $ 1,295,371 $ 1,925,991 Measurement category March 31, June 30, Fair value $ 24,011 $ - Measurement alternative 23,002 30,033 Equity method 16,714 14,109 Total $ 63,727 $ 44,142 The following Nine Months Ended Non-marketable securities Marketable securities Equity method investments Total Balance at the beginning of the period $ 30,033 $ - $ 14,109 $ 44,142 Investments 2,538 5,000 12,500 20,038 Observable price adjustments on non-marketable equity securities 1,000 - - 1,000 Ongoing mark-to-market adjustments on marketable equity securities - 8,442 - 8,442 Reclassifications (1) (10,569) 10,569 - - Loss attributable to equity method investments - - (9,895) (9,895) Carrying value at the end of the period $ 23,002 $ 24,011 $ 16,714 $ 63,727 Nine Months Ended Non-marketable securities Marketable securities Equity method investments Total Balance at the beginning of the period $ 30,436 $ - $ 21,667 $ 52,103 Investments 14,116 - 17,500 31,616 Impairment of investments (14,519) - - (14,519) Loss attributable to equity method investments - - (19,082) (19,082) Carrying value at the end of the period $ 30,033 $ - $ 20,085 $ 50,118 Net unrealized losses recognized for equity investments in non-marketable and marketable securities held as of March 31, 2022 for the three and nine months ended March 31, 2022 were $1.7 million and $4.5 million, respectively. Net unrealized gains recognized for equity investments in non-marketable and marketable securities held as of March 31, 2021 for the three and nine months ended March 31, 2021 were $4.7 million and $9.4 million, respectively. PART I – FINANCIAL INFORMATION Item 1 The final net impact of the ATO settlement was $238.7 million, which represents a gross amount of $381.7 million, including interest and penalties $96.9 million. Nine Months Ended 2021 2020 Balance at the beginning of the period $ 21,132 $ 19,625 Warranty accruals for the period 11,521 10,879 Warranty costs incurred for the period (11,253) (9,620) Foreign currency translation adjustments 1,566 (1,650) Balance at the end of the period $ 22,966 $ 19,234 March 31, June 30, Short-term debt $ 12,000 $ 12,000 Deferred borrowing costs (10) (13) Short-term debt, net 11,990 11,987 - Long-term debt $ 722,000 $ 1,168,000 Deferred borrowing costs (2,954) (3,867) Long-term debt, net $ 719,046 $ 1,164,133 Total debt $ 731,036 $ 1,176,120 The Revolving Credit Agreement and Term Credit Agreement each terminate on April 17, 2023, when all unpaid principal and interest under the loans must be repaid. Amounts borrowed under the Term Credit Agreement Basic and diluted earnings Three Months Ended Nine Months Ended 2021 2020 2021 2020 Numerator: Net income (loss) $ (78,481) $ 163,137 $ 279,405 $ 443,839 Denominator: Basic weighted-average common shares outstanding 145,513 144,638 145,217 144,112 Effect of dilutive securities: Stock options and restricted stock units - 1,042 1,177 1,378 Diluted weighted average shares 145,513 145,680 146,394 145,490 Basic earnings (loss) per share $ (0.54) $ 1.13 $ 1.92 $ 3.08 Diluted earnings (loss) per share $ (0.54) $ 1.12 $ 1.91 $ 3.05 Litigation make a reasonable estimate of loss or range of losses, if any, arising from matters that remain open. restructure was completed as of June 30, 2021. PART I – FINANCIAL INFORMATION Item 2 . PART I – FINANCIAL INFORMATION Item 2 Overview PART I – FINANCIAL INFORMATION Item 2 business. PART I – FINANCIAL INFORMATION Item 2 Results of Operations 2021 Three Months Ended 2021 2020 % Change Constant Currency* U.S., Canada and Latin America Devices $ 192,897 $ 196,497 (2) % Masks and other 209,984 197,052 7 Total Sleep and Respiratory Care $ 402,881 $ 393,549 2 Software as a Service 93,836 89,560 5 Total $ 496,717 $ 483,109 3 Combined Europe, Asia and other markets Devices $ 172,838 $ 195,038 (11) % (18) % Masks and other 99,212 91,308 9 0 Total Sleep and Respiratory Care $ 272,050 $ 286,346 (5) (13) Global revenue Devices $ 365,735 $ 391,535 (7) % (10) % Masks and other 309,196 288,360 7 4 Total Sleep and Respiratory Care $ 674,931 $ 679,895 (1) (4) Software as a Service 93,836 89,560 5 5 Total $ 768,767 $ 769,455 (0) (3) devices and masks, including increased demand following a recent product recall by one of our competitors. competitors. Nine Months Ended 2021 2020 % Change Constant Currency* U.S., Canada and Latin America Devices $ 595,287 $ 586,907 1 % Masks and other 637,507 584,901 9 Total Sleep and Respiratory Care $ 1,232,794 $ 1,171,808 5 Software as a Service 277,813 263,156 6 Total $ 1,510,607 $ 1,434,964 5 Combined Europe, Asia and other markets Devices $ 536,856 $ 509,274 5 % (1) % Masks and other 273,259 242,431 13 6 Total Sleep and Respiratory Care $ 810,115 $ 751,705 8 2 Global revenue Devices $ 1,132,143 $ 1,096,181 3 % 0 % Masks and other 910,766 827,332 10 8 Total Sleep and Respiratory Care $ 2,042,909 $ 1,923,513 6 4 Software as a Service 277,813 263,156 6 6 Total $ 2,320,722 $ 2,186,669 6 4 Net revenue in combined Europe, Asia and other markets increased for the competitors. 2022 increased by 23%. 2021. our HME and Home Health and Hospice segments, in addition to stabilizing patient flow in our out-of-hospital care settings. Gross Profit and Gross Margin 2021. favorable changes in product mix and average selling prices. 2021. Financial Condition and Results of Operations 2021. 2021. 2021. 2021. 2021. 2021. Amortization of Acquired Intangible Assets after March 31, 2021. three months ended March 31, 2021. nine months ended March 31, 2021. PART I – FINANCIAL INFORMATION Item 2 Australian Tax Office ("ATO") transfer pricing dispute, outlined below. tax, if repatriated. an increase of 108%. PART I – FINANCIAL INFORMATION Item 2 These non-GAAP measures are reconciled to their most directly comparable GAAP financial measures below (in thousands, except percentages): Three Months Ended Nine Months Ended March 31, March 31, March 31, March 31, GAAP Net revenue $ 768,767 $ 769,455 $ 2,320,722 $ 2,186,669 Add back: Deferred revenue fair value adjustment - - - 2,102 Non-GAAP revenue $ 768,767 $ 769,455 $ 2,320,722 $ 2,188,771 GAAP Cost of sales $ 321,509 $ 319,793 $ 972,319 $ 918,256 Less: Amortization of acquired intangibles (10,924) (12,136) (34,066) (37,623) Less: Restructuring - cost of sales - - (5,232) - Non-GAAP cost of sales $ 310,585 $ 307,657 $ 933,021 $ 880,633 GAAP gross profit $ 447,258 $ 449,662 $ 1,348,403 $ 1,268,413 GAAP gross margin 58.2 % 58.4 % 58.1 % 58.0 % Non-GAAP gross profit $ 458,182 $ 461,798 $ 1,387,701 $ 1,308,138 Non-GAAP gross margin 59.6 % 60.0 % 59.8 % 59.8 % Three Months Ended Nine Months Ended March 31, March 31, March 31, March 31, GAAP income from operations $ 223,426 $ 217,500 $ 662,040 $ 586,412 Amortization of acquired intangibles - cost of sales 10,924 12,136 34,066 37,623 Amortization of acquired intangibles - operating expenses 7,445 8,272 23,377 21,872 Restructuring - cost of sales - - 5,232 - Restructuring - operating expenses - - 8,673 - Deferred revenue fair value adjustment - - - 2,102 Litigation settlement expenses - - - (600) Non-GAAP income from operations $ 241,795 $ 237,908 $ 733,388 $ 647,409 Three Months Ended Nine Months Ended March 31, March 31, March 31, March 31, GAAP net income (loss) $ (78,481) $ 163,137 $ 279,405 $ 443,839 Amortization of acquired intangibles - cost of sales, net of tax 8,395 9,287 26,136 28,765 Amortization of acquired intangibles - operating expenses, net of tax 5,721 6,330 17,936 16,723 Reserve for disputed tax positions 254,776 - 254,776 - Restructuring - cost of sales, net of tax - - 4,663 - Restructuring - operating expenses, net of tax - - 7,730 - (Gain) loss on equity investments - - (8,476) - Fair value impairment of investment - 9,100 - 9,100 Deferred revenue fair value adjustment, net of tax - - - 1,610 Litigation settlement expenses, net of tax - - - (528) Non-GAAP net income $ 190,411 $ 187,854 $ 582,170 $ 499,509 GAAP diluted shares outstanding 145,513 145,680 146,394 145,490 Anti-dilutive shares excluded from GAAP 858 - - - Non-GAAP diluted shares outstanding 146,371 145,680 146,394 145,490 GAAP diluted earnings (loss) per share $ (0.54) $ 1.12 $ 1.91 $ 3.05 Non-GAAP diluted earnings per share $ 1.30 $ 1.29 $ 3.98 $ 3.43 PART I – FINANCIAL INFORMATION Item 2 These non-GAAP measures are reconciled to their most directly comparable GAAP financial measures below (in thousands, except for per share amounts): beyond. PART I – FINANCIAL INFORMATION Item 2 Payments Due by March 31, Total 2022 2023 2024 2025 2026 Thereafter Debt $ 734,000 $ 12,000 $ 12,000 $ 210,000 $ - $ - $ 500,000 Interest on debt 122,274 20,602 20,602 17,048 16,725 16,725 30,572 Operating leases 130,293 26,835 22,487 16,709 12,936 10,937 40,389 Purchase obligations 547,101 546,028 576 497 - - - Total $ 1,533,668 $ 605,465 $ 55,665 $ 244,254 $ 29,661 $ 27,662 $ 570,961 Amount of Commitment Expiration Per Period Total 2022 2023 2024 2025 2026 Thereafter Standby letter of credit $ 17,162 $ 3,759 $ 47 $ 480 $ - $ - $ 12,876 Guarantees* 5,813 2,266 75 62 73 36 3,301 Total $ 22,975 $ 6,025 $ 122 $ 542 $ 73 $ 36 $ 16,177 Senior Notes Additionally, on April 17, 2018, ResMed Limited entered into a Syndicated Facility Agreement (the “Term Credit Agreement”) On November 5, 2018, we entered into a first amendment to the Revolving Credit Agreement to, among other things, increase the size of our senior unsecured revolving credit facility from $800.0 million to $1.6 billion, with an uncommitted option to increase the revolving credit facility by an additional $300.0 million. The Revolving Credit Agreement and Term Credit Agreement each terminate on April 17, 2023, when all unpaid principal and interest under the loans must be repaid. 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 (“Senior Notes”). 2021. PART I – FINANCIAL INFORMATION Item 3 U.S. Canadian Chinese Dollar Euro Dollar Yuan (USD) (EUR) (CAD) (CNY) AUD Functional: Assets 477,966 90,639 - 19,615 Liability (348,159) (122,920) - (602) Foreign Currency Hedges (130,000) - - (24,417) Net Total (193) (32,281) - (5,404) USD Functional: Assets - - 22,290 - Liability - (442) (2,546) - Foreign Currency Hedges - - (15,909) - Net Total - (442) 3,835 - SGD Functional: Assets 553,939 96,503 - 886 Liability (242,185) (62,948) - - Foreign Currency Hedges (275,000) - - - Net Total 36,754 33,555 - 886 PART I – FINANCIAL INFORMATION Item 3 The table below provides information about our material foreign currency derivative financial instruments and presents the information in U.S. dollar equivalents. The table summarizes information on instruments and transactions that are sensitive to foreign currency exchange rates, including foreign currency call options, collars and forward contracts held at March 31, Fair Value Assets / (Liabilities) Foreign Exchange Contracts Year 1 Year 2 Total March 31, June 30, AUD/USD Contract amount 130,000 - 130,000 (5,271) - Ave. contractual exchange rate AUD 1 = AUD 1 = AUD/Euro Contract amount 46,974 23,487 70,461 2,312 886 Ave. contractual exchange rate AUD 1 = AUD 1 = AUD 1 = SGD/Euro Contract amount 41,102 - 41,102 170 126 Ave. contractual exchange rate SGD 1 = - SGD 1 = SGD/USD Contract amount 275,000 - 275,000 (1,852) (183) Ave. contractual exchange rate SGD 1 = SGD 1 = AUD/CNY Contract amount 24,417 - 24,417 321 (161) Ave. contractual exchange rate AUD 1 = AUD 1 = USD/CAD Contract amount 15,909 - 15,909 (1,305) (83) Ave. contractual exchange rate USD 1 = USD 1 = Item 4 Controls and Procedures PART II. OTHER INFORMATION factors. Item 6 Exhibits 3.1 3.2 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 101 The following financial statements from ResMed Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibit 32 hereto are deemed to accompany this Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference. Signatures 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 28, 2022 ResMed Inc. Michael J. Farrell Chief executive officer (Principal Executive Officer) /s/ BRETT A. SANDERCOCK Brett A. Sandercock Chief financial officer (Principal Financial Officer)______________________________________________________________________________________________2021¨o____________________________________________________________________________________________________________________________________________________________________________________________offices)______________________________________________________________________________________________¨oand post such files). ¨o (Check one):¨¨¨¨¨o¨o No x26, 2021,25, 2022 there were 145,517,832146,284,655 shares of Common Stock ($0.004 par value) outstanding. This number excludes 41,836,234 shares held by the registrant as treasury shares.Index
2021
2020
at March 31, 2021 and June 30, 2020, respectively
187,352,828 issued and 145,516,594 outstanding at March 31, 2021 and
186,723,407 issued and 144,887,175 outstanding at June 30, 2020 March 31,
2022June 30,
2021Assets Current assets: Cash and cash equivalents $ 201,769 $ 295,278 Accounts receivable, net of allowances of $24,411 and $32,138 at March 31, 2022 and June 30, 2021, respectively 508,580 614,292 Inventories (note 3) 664,943 457,033 Prepaid taxes 108,898 72,409 Prepaid expenses and other current assets 220,110 135,745 Total current assets 1,704,300 1,574,757 Non-current assets: Property, plant and equipment, net (note 3) 513,250 463,490 Operating lease right-of-use assets 141,173 128,575 Goodwill (note 4) 1,946,317 1,927,901 Other intangible assets, net (note 3) 355,984 392,582 Deferred income taxes 74,840 79,904 Prepaid taxes and other non-current assets 169,400 160,916 Total non-current assets 3,200,964 3,153,368 Total assets $ 4,905,264 $ 4,728,125 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 149,797 $ 138,008 Accrued expenses 326,276 320,599 Operating lease liabilities, current 24,130 23,585 Deferred revenue 112,449 109,611 Income taxes payable (note 6) 42,646 307,963 Short-term debt, net (note 8) 11,967 12,000 Total current liabilities 667,265 911,766 Non-current liabilities: Deferred revenue 94,094 91,496 Deferred income taxes 10,711 11,319 Operating lease liabilities, non-current 127,254 114,779 Other long-term liabilities 5,103 6,802 Long-term debt, net (note 8) 668,735 643,351 Long-term income taxes payable (note 6) 53,298 62,933 Total non-current liabilities 959,195 930,680 Total liabilities 1,626,460 1,842,446 Commitments and contingencies (note 10) 0 0 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; 188,102,293 issued and 146,266,059 outstanding at March 31, 2022 and 187,484,592 issued and 145,648,358 outstanding at June 30, 2021 585 583 Additional paid-in capital 1,645,453 1,622,199 Retained earnings 3,480,163 3,079,640 Treasury stock, at cost, 41,836,234 shares at March 31, 2022 and June 30, 2021 (1,623,256) (1,623,256) Accumulated other comprehensive loss (224,141) (193,487) Total stockholders’ equity 3,278,804 2,885,679 Total liabilities and stockholders’ equity $ 4,905,264 $ 4,728,125
March 31,
March 31, 0
Three Months Ended
March 31,Nine Months Ended
March 31, 2022 2021 2022 2021 Net revenue - Sleep and Respiratory Care products $ 763,358 $ 674,931 $ 2,365,697 $ 2,042,909 Net revenue - Software as a Service 101,142 93,836 297,693 277,813 Net revenue 864,500 768,767 2,663,390 2,320,722 Cost of sales - Sleep and Respiratory Care products 324,618 270,351 1,017,494 833,203 Cost of sales - Software as a Service 37,703 40,234 110,820 105,050 Cost of sales (exclusive of amortization shown separately below) 362,321 310,585 1,128,314 938,253 Amortization of acquired intangible assets - Sleep and Respiratory Care products 1,071 900 3,043 3,995 Amortization of acquired intangible assets - Software as a Service 9,911 10,024 30,228 30,071 Amortization of acquired intangible assets 10,982 10,924 33,271 34,066 Total cost of sales 373,303 321,509 1,161,585 972,319 Gross profit 491,197 447,258 1,501,805 1,348,403 Selling, general, and administrative 182,401 160,446 544,483 488,904 Research and development 66,801 55,941 189,258 165,409 Amortization of acquired intangible assets 7,730 7,445 23,175 23,377 Restructuring expenses (note 11) — — — 8,673 Total operating expenses 256,932 223,832 756,916 686,363 Income from operations 234,265 223,426 744,889 662,040 Other income (loss), net: Interest (expense) income, net (5,462) (5,823) (16,770) (18,341) Loss attributable to equity method investments (note 5) (2,627) (4,969) (5,927) (9,895) Gain (loss) on equity investments (note 5) (1,735) 4,666 (527) 9,442 Other, net 1,878 705 729 1,205 Total other income (loss), net (7,946) (5,421) (22,495) (17,589) Income before income taxes 226,319 218,005 722,394 644,451 Income taxes 47,307 296,486 138,018 365,046 Net income (loss) $ 179,012 $ (78,481) $ 584,376 $ 279,405 Basic earnings (loss) per share (note 9) $ 1.22 $ (0.54) $ 4.00 $ 1.92 Diluted earnings (loss) per share (note 9) $ 1.22 $ (0.54) $ 3.97 $ 1.91 Dividend declared per share $ 0.42 $ 0.39 $ 1.26 $ 1.17 Basic shares outstanding (000's) 146,240 145,513 145,969 145,217 Diluted shares outstanding (000's) 146,962 145,513 147,034 146,394
March 31,
March 31, Three Months Ended
March 31,Nine Months Ended
March 31, 2022 2021 2022 2021 Net income (loss) $ 179,012 $ (78,481) $ 584,376 $ 279,405 Other comprehensive income (loss): Foreign currency translation (loss) gain adjustments (1,046) (32,822) (30,654) 88,009 Comprehensive income (loss) $ 177,966 $ (111,303) $ 553,722 $ 367,414 Common Stock Treasury Stock Total Shares Amount Shares Amount 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 tax 1 — (195) — — — — (195) Stock-based compensation costs — — 17,303 — — — — 17,303 Other comprehensive income — — — — — — (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 Common stock issued on exercise of options 39 — 2,378 — — — — 2,378 Common stock issued on vesting of restricted stock units, net of shares withheld for tax 361 2 (49,832) — — — — (49,830) Common stock issued on employee stock purchase plan 101 — 16,723 — — — — 16,723 Stock-based compensation costs — — 16,101 — — — — 16,101 Other comprehensive income — — — — — — (6,092) (6,092) Net income — — — — — 201,751 — 201,751 Dividends declared ($0.42 per common share) — — — — — (61,245) — (61,245) Balance, December 31, 2021 188,048 $ 585 $ 1,629,031 (41,836) $ (1,623,256) $ 3,362,570 $ (223,095) $ 3,145,835 Common stock issued on exercise of options 49 — 2,814 — — — — 2,814 Common stock issued on vesting of restricted stock units, net of shares withheld for tax 5 — (2,253) — — — — (2,253) Stock-based compensation costs — — 15,861 — — — — 15,861 Other comprehensive income — — — — — — (1,046) (1,046) Net income — — — — — 179,012 — 179,012 Dividends declared ($0.42 per common share) — — — — — (61,419) — (61,419) Balance, March 31, 2022 188,102 $ 585 $ 1,645,453 (41,836) $ (1,623,256) $ 3,480,163 $ (224,141) $ 3,278,804
Paid-in
Other
Comprehensive
Paid-in
Other
Comprehensive Common Stock Treasury Stock Total Shares Amount Shares Amount Balance, June 30, 2020 186,723 $ 580 $ 1,570,694 (41,836) $ (1,623,256) $ 2,832,991 $ (283,982) $ 2,497,027 Common stock issued on exercise of options 18 — 1,026 — — — — 1,026 Common stock issued on vesting of restricted stock units, net of shares withheld for tax 3 — 227 — — — — 227 Stock-based compensation costs — — 16,071 — — — — 16,071 Other comprehensive income (loss) — — — — — — 43,791 43,791 Cumulative effect adjustment from adoption of the credit loss standard, net of tax — — — — — (1,143) — (1,143) Net income — — — — — 178,372 — 178,372 Dividends declared ($0.39 per common share) — — — — — (56,511) — (56,511) Balance, September 30, 2020 186,744 $ 580 $ 1,588,018 (41,836) $ (1,623,256) $ 2,953,709 $ (240,191) $ 2,678,860 Common stock issued on exercise of options 29 — 1,857 — — — — 1,857 Common stock issued on vesting of restricted stock units, net of shares withheld for tax 451 2 (46,734) — — — — (46,732) Common stock issued on employee stock purchase plan 116 — 15,729 — — — — 15,729 Stock-based compensation costs — — 15,370 — — — — 15,370 Other comprehensive income — — — — — — 77,040 77,040 Net income — — — — — 179,514 — 179,514 Dividends declared ($0.39 per common share) — — — — — (56,654) — (56,654) Balance, December 31, 2020 187,340 $ 582 $ 1,574,240 (41,836) $ (1,623,256) $ 3,076,569 $ (163,151) $ 2,864,984 Common stock issued on exercise of options 1 — 139 — — — — 139 Common stock issued on vesting of restricted stock units, net of shares withheld for tax 12 — (3,431) — — — — (3,431) Common stock issued on employee stock purchase plan — — 6 — — — — 6 Stock-based compensation costs — — 15,591 — — — — 15,591 Other comprehensive income — — — — — — (32,822) (32,822) Net income (loss) — — — — — (78,481) — (78,481) Dividends declared ($0.39 per common share) — — — — — (56,752) — (56,752) Balance, March 31, 2021 187,353 $ 582 $ 1,586,545 (41,836) $ (1,623,256) $ 2,941,336 $ (195,973) $ 2,709,234
March 31, Nine Months Ended
March 31, 2022 2021 Cash flows from operating activities: Net income $ 584,376 $ 279,405 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 122,198 120,034 Amortization of right-of-use assets 26,636 25,805 Stock-based compensation costs 49,265 47,032 Loss attributable to equity method investments (note 5) 5,927 9,895 (Gain) loss on equity investments (note 5) 527 (9,442) Restructuring expenses (note 11) — 8,673 Changes in operating assets and liabilities: Accounts receivable 98,158 (39,899) Inventories (209,476) (48,393) Prepaid expenses, net deferred income taxes and other current assets (127,977) (41,036) Accounts payable, accrued expenses, income taxes payable and other (277,973) 158,119 Net cash provided by operating activities 271,661 510,193 Cash flows from investing activities: Purchases of property, plant and equipment (106,192) (74,805) Patent registration and acquisition costs (17,449) (11,149) Business acquisitions, net of cash acquired (35,915) (30,704) Purchases of investments (note 5) (16,614) (20,038) Proceeds from sale of investment 6,802 — (Payments) / proceeds on maturity of foreign currency contracts (5,309) 26,306 Net cash used in investing activities (174,677) (110,390) Cash flows from financing activities: Proceeds from issuance of common stock, net 26,269 18,759 Taxes paid related to net share settlement of equity awards (52,278) (49,938) Payments of business combination contingent consideration — (3,500) Proceeds from borrowings, net of borrowing costs 160,000 90,000 Repayment of borrowings (136,000) (536,000) Dividends paid (183,853) (169,917) Net cash used in financing activities (185,862) (650,596) Effect of exchange rate changes on cash (4,631) 18,272 Net decrease in cash and cash equivalents (93,509) (232,521) Cash and cash equivalents at beginning of period 295,278 463,156 Cash and cash equivalents at end of period $ 201,769 $ 230,635 Supplemental disclosure of cash flow information: Income taxes paid, net of refunds $ 432,268 $ 180,307 Interest paid $ 16,770 $ 18,644 Fair value of assets acquired, excluding cash $ 8,986 $ 15,992 Liabilities assumed (2,492) (3,309) Goodwill on acquisition 33,499 24,202 Previously held equity interest (4,078) — Deferred payments — (1,681) Cash paid for acquisitions $ 35,915 $ 35,204 RESMED INC. AND SUBSIDIARIESNotes to the Condensed Consolidated Financial Statements(Unaudited)2021.20212022 and March 31, 20202021 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, 2020.PART I – FINANCIAL INFORMATION Item 1
March 31,
March 31,PART I – FINANCIAL INFORMATIONItem 1RESMED INC. AND SUBSIDIARIESNotes to the Condensed Consolidated Financial Statements(Unaudited)Three Months Ended
March 31,Nine Months Ended
March 31,2022 2021 2022 2021 U.S., Canada and Latin America Devices $ 250,768 $ 192,897 $ 771,475 $ 595,287 Masks and other 224,665 209,984 681,803 637,507 Total Sleep and Respiratory Care $ 475,433 $ 402,881 $ 1,453,278 $ 1,232,794 Software as a Service 101,142 93,836 297,693 277,813 Total $ 576,575 $ 496,717 $ 1,750,971 $ 1,510,607 Combined Europe, Asia and other markets Devices $ 182,307 $ 172,838 $ 608,268 $ 536,856 Masks and other 105,618 99,212 304,151 273,259 Total Sleep and Respiratory Care $ 287,925 $ 272,050 $ 912,419 $ 810,115 Global revenue Devices $ 433,075 $ 365,735 $ 1,379,743 $ 1,132,143 Masks and other 330,283 309,196 985,954 910,766 Total Sleep and Respiratory Care $ 763,358 $ 674,931 $ 2,365,697 $ 2,042,909 Software as a Service 101,142 93,836 297,693 277,813 Total $ 864,500 $ 768,767 $ 2,663,390 $ 2,320,722 are provided 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.
2021
2020 March 31,
2022June 30,
2021Balance sheet caption Contract assets Accounts receivable, net $ 508,580 $ 614,292 Accounts receivable, net Unbilled revenue, current 25,653 10,893 Prepaid expenses and other current assets Unbilled revenue, non-current 7,018 6,214 Prepaid taxes and other non-current assets Contract liabilities Deferred revenue, current (112,449) (109,611) Deferred revenue (current liabilities) Deferred revenue, non-current (94,094) (91,496) Deferred revenue (non-current liabilities) PART I – FINANCIAL INFORMATION Item 1 , 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.PART I – FINANCIAL INFORMATIONItem 1RESMED INC. AND SUBSIDIARIESNotes to the Condensed Consolidated Financial Statements(Unaudited)sleepSleep and respiratoryRespiratory Care medical devices to customers primarily as a means to comply with local health insurer requirements in certain foreign geographies. Device rental contracts include sales-type and 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.Three Months Ended
March 31,Nine Months Ended
March 31,2022 2021 2022 2021 Sales-type lease revenue $ 946 $ 2,031 $ 6,598 $ 5,854 Operating lease revenue 19,797 22,746 69,380 72,551 Total lease revenue $ 20,743 $ 24,777 $ 75,978 $ 78,405
March 31,
March 31,PART I – FINANCIAL INFORMATION Item 1 New Accounting Pronouncements(a) Recently issued accounting standards not yet adopted2020-04 “Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting”March 2020,October 2021, the FASB issued ASU No. 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting”2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (Topic 848)805), which provides optional expedientsrequires contract assets and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expectedcontract liabilities acquired in a business combination to be discontinued because of reference rate reform.recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. This approach differs from the current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. The guidance is effective for us asbeginning in the first quarter of March 12, 2020 through December 31,the year ending June 30, 2024 and early adoption is permitted. We elected to early adopt this standard in the second quarter of our fiscal year ending June 30, 2022. We are currently evaluatingdo not expect the impact that this guidance, if elected, will have on our consolidated financial statements.(b) Recently adopted accounting pronouncementsASU No. 2016-13 “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments”In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments” (Topic 326), which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The guidance was adopted effective July 1, 2020 using the modified retrospective approach. We recognized the cumulative effect of adopting this guidance as an adjustment to the opening balance of retained earnings of $1.1 million, net of tax, related to our allowance for credit losses for accounts receivable. The adoption of this ASU did not2021-08 to have a material impact on our condensed consolidated financial statements.ASU No. 2018-15 “Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract”In August 2018, the FASB issued ASU No. 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance was adopted effective July 1, 2020 and will be applied prospectively. Under the new ASU, capitalized implementation costs are presented as other non-current assets on our consolidated balance sheets and within operating cash flows on our consolidated statements of cash flows. The adoption of this ASU did not have a material impact on our condensed consolidated financial statements.PART I – FINANCIAL INFORMATIONItem 1RESMED INC. AND SUBSIDIARIESNotes to the Condensed Consolidated Financial Statements(Unaudited)2020.2021. 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.restructuring expenses, litigation settlement expenses, deferred revenue fair value adjustment,net interest income, 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.PART I – FINANCIAL INFORMATION Item 1
March 31,
March 31,Three Months Ended
March 31,Nine Months Ended
March 31,2022 2021 2022 2021 Net revenue by segment Total Sleep and Respiratory Care $ 763,358 $ 674,931 $ 2,365,697 $ 2,042,909 Software as a Service 101,142 93,836 297,693 277,813 Total $ 864,500 $ 768,767 $ 2,663,390 $ 2,320,722 Depreciation and amortization by segment Sleep and Respiratory Care $ 21,008 $ 13,589 $ 58,372 $ 39,979 Software as a Service 1,863 1,491 5,421 3,599 Amortization of acquired intangible assets and corporate assets 19,435 24,908 58,405 76,456 Total $ 42,306 $ 39,988 $ 122,198 $ 120,034 Net operating profit by segment Net operating profit by segment Sleep and Respiratory Care Sleep and Respiratory Care $ 267,808 $ 253,693 $ 847,589 $ 763,534 Software as a Service Software as a Service 23,649 23,052 68,668 70,929 Total $ 291,457 $ 276,745 $ 916,257 $ 834,463 Reconciling items Corporate costs $ 38,480 $ 34,950 $ 114,922 $ 106,307 Amortization of acquired intangible assets 18,712 18,369 56,446 57,443 Restructuring expenses — — — 8,673 Interest expense (income), net 5,462 5,823 16,770 18,341 Loss attributable to equity method investments 2,627 4,969 5,927 9,895 (Gain) loss on equity investments (Gain) loss on equity investments 1,735 (4,666) 527 (9,442) Other, net (1,878) (705) (729) (1,205) Income before income taxes $ 226,319 $ 218,005 $ 722,394 $ 644,451 (1) The deferred revenue fair value adjustment is a purchase price accounting adjustment related to MatrixCare which was acquired on November 13, 2018.(2)During the three and nine months ended March 31, 2021, we recorded $0.0 million and $2.8 million of impairment for our operating lease right-of-use asset, respectively. The impairment related to leases for office space and was recorded within net operating profit. The impairment for the nine months ended March 31, 2021 attributable to Sleep and Respiratory Care was $1.6 million and $1.2 million for SaaS.
2021
2020Inventories March 31,
2022June 30,
2021Raw materials $ 340,335 $ 155,419 Work in progress 4,481 4,647 Finished goods 320,127 296,967 Total inventories $ 664,943 $ 457,033 Property, Plant and Equipment March 31,
2022June 30,
2021Property, plant and equipment, at cost $ 1,165,391 $ 1,085,629 Accumulated depreciation and amortization (652,141) (622,139) Property, plant and equipment, net $ 513,250 $ 463,490 RESMED INC. AND SUBSIDIARIESNotes to the Condensed Consolidated Financial Statements(Unaudited)Other Intangible Assets March 31,
2022June 30,
2021Developed/core product technology $ 352,304 $ 383,319 Accumulated amortization (234,540) (239,049) Developed/core product technology, net 117,764 144,270 Customer relationships 251,693 272,703 Accumulated amortization (86,212) (90,976) Customer relationships, net 165,481 181,727 Other intangibles 211,227 197,662 Accumulated amortization (138,488) (131,077) Other intangibles, net 72,739 66,585 Total other intangibles, net $ 355,984 $ 392,582
2021
2020
2021
2020Nine Months Ended March 31, 2022
Respiratory CareSleep and
Respiratory CareSaaS Total Balance at the beginning of the period $ 633,183 $ 1,294,718 $ 1,927,901 Business acquisitions 33,499 — 33,499 Foreign currency translation adjustments (15,083) — (15,083) Balance at the end of the period $ 651,599 $ 1,294,718 $ 1,946,317 gains and losses on marketable and non-marketable equity securities, as well as our equity securitiesinvestments accounted for under the equity method.estimate the fair value of ourassess non-marketable equity investments using Level 3 inputs to assess whethersecurities at least quarterly for impairment losses shall be recorded.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.PART I – FINANCIAL INFORMATION Item 1
2021
2020PART I – FINANCIAL INFORMATIONItem 1RESMED INC. AND SUBSIDIARIESNotes to the Condensed Consolidated Financial Statements(Unaudited)Measurement category March 31,
2022June 30,
2021Fair value $ 17,842 $ 29,084 Measurement alternative 38,180 23,002 Equity method 12,477 17,154 Total $ 68,499 $ 69,240 table showstables show a reconciliation of the changes in our equity investments (in thousands):
March 31, 2021 Nine Months Ended March 31, 2022 Non-marketable securities Marketable securities Equity method investments Total Balance at the beginning of the period $ 23,002 $ 29,084 $ 17,154 $ 69,240 7,665 (3,202) 1,250 5,713 Observable price adjustments on non-marketable equity securities 5,367 — — 5,367 Unrealized losses on marketable equity securities Unrealized losses on marketable equity securities — (9,666) — (9,666) Realized gains on marketable and non-marketable equity securities Realized gains on marketable and non-marketable equity securities 2,355 1,626 — 3,981 Impairment of investments Impairment of investments (209) — — (209) Loss attributable to equity method investments — — (5,927) (5,927) Carrying value at the end of the period $ 38,180 $ 17,842 $ 12,477 $ 68,499 Nine Months Ended March 31, 2021 Non-marketable securities Marketable securities Equity method investments Total Balance at the beginning of the period $ 30,033 $ — $ 14,109 $ 44,142 Additions to investments 2,538 5,000 12,500 20,038 Observable price adjustments on non-marketable equity securities 1,000 — — 1,000 Unrealized gains on marketable equity securities — 8,442 — 8,442 (10,569) 10,569 — — Loss attributable to equity method investments — — (9,895) (9,895) Carrying value at the end of the period $ 23,002 $ 24,011 $ 16,714 $ 63,727
March 31, 2020respectively, which related to publicly traded marketable equity securities and privately held non-marketable securities. Net unrealized losses recognized for equity investments held as of March 31, 2020 for the three and nine months ended March 31, 2020 were $9.1 million and $14.5 million, respectively, which related to impairments of privately held non-marketable securities.Our income tax returns are based on calculations and assumptions subject to audit by various tax authorities. In addition,calculation of our tax liabilities involves dealingsettlement agreement with uncertainties in the application of complex tax laws. We regularly assess the potential outcomes of examinations by tax authorities in determining the adequacy of our provision for income taxes. Any final assessment resulting from tax audits may result in material changes to our past or future taxable income, tax payable or deferred tax assets, and may require us to pay penalties and interest that could materially adversely affect our financial results.Our effective income tax rate for the three and nine months ended March 31, 2021 was 136.0% and 56.6%, respectively, as compared to 14.9% and 14.8% for the three and nine months ended March 31, 2020, respectively. The increase in our effective tax rate was primarily due to an increase in unrecognized tax benefits as outlined below. Additionally, the increase in our effective tax rate was impacted by the geographic mix of earnings and lower windfall tax benefits related to the vesting or settlement of employee share-based awards, which reduced our income tax expense by $0.6 million and $12.6 million for the three and nine months ended March 31, 2021, respectively, as compared to $2.4 million and $24.8 million for the three and nine months ended March 31, 2020, respectively.We are under audit by the Australian Taxation Office (the “ATO”(“ATO”) forin relation to the years 2009 to 2018 (the “Audit Period”). The audits primarily involve apreviously disclosed transfer pricing dispute in which the ATO asserts we should have paid additional Australian taxes on income derived from our Singapore operations. The ATO issued Notices of Amended Assessments for the tax years 2009 to 2013 seeking a totalthrough 2018 (“ATO settlement”). The ATO settlement fully resolved the dispute for all prior years, with no admission of $266.0 million, consisting of $151.7 million in additional income taxliability and $114.3 million in penalties and interest. The 2014 to 2018 periods are still under audit and we have not yet received any Notices of Amended Assessments relative to those periods. A total of $98.8 million in tax has been prepaidprovides clarity in relation to the Audit Period, which is consistent with ATO procedural audit practice.We do not agree with the ATO’s assessments and continue to believe we are more likely than not to be successful in defending our position if the matter progresses to litigation. However, if we are not successful, we will be required to pay some or all of the additional income tax, accrued interest and penalties, including potential additional amounts relating to the 2014 to 2018 periods. To that end, we are engaged in ongoing discussions with the ATO to resolve the dispute for the entire Audit Period. Given the stage of those discussions, during the three and nine months ended March 31, 2021, we recorded $395.9 million of gross unrecognized tax benefits, including $53.3 million of accruedRESMED INC. AND SUBSIDIARIESNotes to the Condensed Consolidated Financial Statements(Unaudited)associated with the ATO auditsof $48.1 million, and adjustments for the Audit Period. This amount reflects our estimate of the potential tax liability and is subject to change. If recognized, we estimate that approximately $254.8 million, of unrecognized tax benefits would affect our effective tax rate, which represents the $395.9 million of gross unrecognized tax benefits noted previously, adjusted for tax credits and deductions of $141.1 million. We have elected to recognize interest and penalties related to unrecognized tax benefits as$143.0 million. As a component of income taxes. The timing and resolutionresult of the ATO audits are inherently uncertain,settlement and the amountsdue to movements in foreign currencies, we might ultimately pay, if any, upon resolutionrecorded a benefit of issues raised by$14.1 million within other comprehensive income, and a $4.1 million reduction of tax credits, which was recorded to income tax expense. As a result of the ATO may differ materially fromsettlement, we reversed our previously recorded uncertain tax position.amounts accrued. Although it is expected thatATO of $284.8 million, consisting of the agreed settlement amount of unrecognized tax benefits may change in$381.7 million less prior remittances made to the next 12 months, an estimateATO of the range of the possible change cannot be made.
March 31,Nine Months Ended
March 31,2022 2021 Balance at the beginning of the period $ 22,032 $ 21,132 Warranty accruals for the period 14,653 11,521 Warranty costs incurred for the period (9,689) (11,253) Foreign currency translation adjustments 41 1,566 Balance at the end of the period $ 27,037 $ 22,966
2021
2020March 31,
2022June 30,
2021Short-term debt $ 11,967 $ 12,000 Long-term debt $ 670,000 $ 646,000 Deferred borrowing costs (1,265) (2,649) Long-term debt, net $ 668,735 $ 643,351 Total debt $ 680,702 $ 655,351 PART I – FINANCIAL INFORMATION Item 1 PART I – FINANCIAL INFORMATIONItem 1RESMED INC. AND SUBSIDIARIESNotes to the Condensed Consolidated Financial Statements(Unaudited)will also amortize on a semi-annual basis, with a $6.0 million principal payment required on each such semi-annual amortization date. The outstanding principal amounts will bear interest at a rate equal to LIBOR 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 March 31, 2021,2022, the interest rate that was being charged on the outstanding principal amounts was 1.0%1.1%. An applicable commitment fee of 0.100% to 0.175% (depending on the then-applicable leverage ratio) applies on the unused portion of the revolving credit facility. As of March 31, 2021,2022, we had $1.5$1.6 billion available for draw down under the revolving credit facility.20212022 and June 30, 2020,2021, which was $234.0$182.0 million and $680.0$158.0 million, respectively. Quoted market prices in active markets for identicalsimilar liabilities based inputs (Level 1)2) were used to estimate fair value.subsidiaries, including ResMed Corp., ResMed Motor Technologies Inc., Birdie Inc., Inova Labs, Inc., Brightree LLC, Brightree Home Health & Hospice LLC, Brightree Patient Collections LLC, ResMed Operations Inc., HEALTHCAREfirst Holding Company, HCF Holdco Company, HEALTHCAREfirst, Inc., CareFacts Information Systems, LLC and Lewis Computer Services, LLC, MatrixCare Holdings Inc., MatrixCare, Inc., Reciprocal Labs Corporation and ResMed SaaS Inc., under a Subsidiary Guaranty Agreement dated as of July 10, 2019.subsidiaries. The net proceeds from this transaction were used to pay down borrowings on our Revolving Credit Agreement.havehad a carrying amount of $500.0 million, excluding deferred borrowing costs, and an estimated fair value of $519.3 million.$495.9 million and $530.4 million, respectively. Quoted market prices in active markets for identicalsimilar liabilities based inputs (Level 1)2) were used to estimate fair value.2021,2022, we were in compliance with our debt covenants and there was $734.0$682.0 million outstanding under the Revolving Credit Agreement, Term Credit Agreement and Senior Notes. (loss) available to common stockholders by the weighted average number of shares of common stock outstanding. For purposes of calculating diluted earnings (loss) 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.PART I – FINANCIAL INFORMATION Item 1 225,580307,368 and 267,556225,580 for the three months ended March 31, 20212022 and 2020,2021, respectively, and 200,34152,599 and 128,789200,341 for the nine months ended March 31, 20212022 and 2020,2021, respectively, as the effect would have been anti-dilutive.PART I – FINANCIAL INFORMATIONItem 1RESMED INC. AND SUBSIDIARIESNotes to the Condensed Consolidated Financial Statements(Unaudited) (loss) per share are calculated as follows (in thousands except per share data):
March 31,
March 31,Three Months Ended
March 31,Nine Months Ended
March 31,2022 2021 2022 2021 Numerator: Net income (loss) $ 179,012 $ (78,481) $ 584,376 $ 279,405 Denominator: Basic weighted-average common shares outstanding 146,240 145,513 145,969 145,217 Effect of dilutive securities: Stock options and restricted stock units 722 — 1,065 1,177 Diluted weighted average shares 146,962 145,513 147,034 146,394 Basic earnings (loss) per share $ 1.22 $ (0.54) $ 4.00 $ 1.92 Diluted earnings (loss) per share $ 1.22 $ (0.54) $ 3.97 $ 1.91 Taxation MattersWeauditthe Supreme Court and Federal Circuit precedent. The motion to dismiss was granted in part, and denied in part. The matter is proceeding to discovery.ATOfull International Trade Commission, and the Commission is expected to issue its final determination on or about August 1, 2022. On December 17, 2020, Philips filed companion cases for patent infringement against the same defendants in three different cycles: tax years 2009the 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 defendants. The district court cases have been stayed pending the resolution of the ITC proceedings. ResMed is not a party to 2013, tax years 2014the ITC investigation or the district court cases but sells products that incorporate some of the communications modules at issue in the cases.PART I – FINANCIAL INFORMATION Item 1 2017the Condensed Consolidated Financial Statementstax year 2018. Please referfalse advertising complaint filed by Itamar Medical Ltd. in the district court for the Southern District of Florida, case no. 20-cv-60719-WPD, based on Ectosense’s description of the NightOwl’s measurement of peripheral arterial tone and use of the acronym “PAT” in its advertising. Ectosense filed a counterclaim for cancellation of Itamar’s “PAT” trademark and for false advertising by Itamar. Each party seeks damages and injunctive relief against the other. The matter was resolved on April 5, 2022, in a confidential settlement agreement to note 6 – Income Taxes, wherethe mutual satisfaction of the parties.have provided an update in relationare unable to this tax dispute in accordance with ASC 740 Income Taxes.20212022 and March 31, 2020,2021, receivables sold with limited recourse were $112.2$126.2 million and $99.8$112.2 million, respectively. As of March 31, 2022, the maximum exposure on outstanding receivables sold with recourse and contingent provision were $47.0 million and $3.4 million, respectively. As of June 30, 2021, the maximum exposure on outstanding receivables sold with recourse and contingent provision were $26.5$30.2 million and $7.9$8.2 million, respectively. As of June 30, 2020, the maximum exposure on outstanding receivables sold with recourse and contingent provision were $22.8 million and $6.6 million, respectively.2020,2021, the inventory write-down of $5.2 million is presented within cost of sales and the remaining $8.7 million in restructuring costs is separately disclosed as restructuring expenses on the condensed consolidated statements of operations. The restructure was substantially completed as of March 31, 2021 and we doincome. We did not expect to incur additional material expenses in connection with this activity inafter March 31, 2021, and the future.tax outlook.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, 20202021 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.globally;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.2020,2021, 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.
2021.2022. 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.portable oxygen concentrators 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.2021,2022, we invested $55.9$66.8 million on research and development activities, which represents 7.3%7.7% 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 March 31, 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. Due to multiple acquisitions, including Brightree in April 2016, HEALTHCAREfirst in July 2018 and MatrixCare in November 2018, 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.During2021, our net revenue2022 was consistent with$864.5 million, an increase of 12% compared to the three months ended March 31, 2020.2021. Gross margin was 56.8% for the three months ended March 31, 2022 compared to 58.2% for the three months ended March 31, 2021 compared to 58.4%2021. Diluted earnings per share was $1.22 for the three months ended March 31, 2020. Diluted2022, compared to diluted loss per share wasof $0.54 for the three months ended March 31, 2021, compared to diluted earnings per share of $1.12 for the three months ended March 31, 2020. Unrecognized tax benefits as described at note 6 – Income Taxes impacted our diluted loss per share by $1.74 per share for the three months ended March 31, 2021.2021,2022, our cash and cash equivalents totaled $230.6$201.8 million, our total assets were $4.6$4.9 billion and our stockholders’ equity was $2.7$3.3 billion.ImpactKey Trends and Economic Factors Affecting Our BusinessCOVID-19In March 2020, the World Health Organization declared the outbreakavailability of raw materials and electronic components. The lack of raw materials and electronic components is also impacting companies outside of our direct industry, which is resulting in a novel strain of coronavirus (“COVID-19”)competitive supply environment causing higher costs, requiring us to commit to minimum purchase obligations as well as make upfront payments to our suppliers. Additionally, we have observed a reduction in both inbound and outbound transportation capacity as a pandemic. Our primary goal duringresult of port closures and delays associated with the pandemic, which is causing longer lead times in receiving raw materials into and distributing finished goods out of our manufacturing facilities, in addition to increased freight costs. These highly competitive and constrained supply chain conditions are increasing our cost of sales, which has and may continue to decrease our gross margin. Given the ongoing uncertainty regarding the duration and extent of the COVID-19 pandemic, iswe are uncertain as to the preservationduration and extent of life. We have prioritized protecting the health and safetyconstraint on our supply chain.employees and continuing to use our employees’ talents and our resources to help society meet and overcome the challenges the pandemic poses.During the three months ended March 31, 2021, we did not observe material incrementalcompetitors, Philips, has resulted in increased demand for our ventilator devicessleep and masks associated with respiratory care devices. The supply chain disruptions outlined above have constrained and restricted our ability to meet this increased demand and we expect these constraints will continue for the remainder of the fiscal year ending June 30, 2022. pandemic. As such, weWe did not observe material incremental demand for our ventilator devices and masks associated with the pandemic during the three months ended March 31, 2022 and do not expect material COVID-19-generated demand for our ventilator products for the remainder of the fiscal year ending June 30, 2021.Diagnostic2022.HME suppliersphysician practices, home medical equipment (“HME”) distributors, and sleep clinics have been impactedlargely recovered towards pre-pandemic levels as vaccines and in some instances, been required, or in the future may be required, to temporarily close due to governments’ “shelter-in-place” orders, quarantines or similar orders or restrictions enacted to control the spread of COVID-19. In some countries, new patients are prescribed sleep apnea treatment through hospitals that are directing their resources to critical care, including COVID-19 treatment. The impact on these diagnostic and prescription pathways has resulted in a decrease in demand from new patients for our products designed to treat sleep apnea. Given the ongoing uncertainty regarding the duration and extent of the COVID-19 pandemic and measures taken to control the spread of COVID-19, we are uncertain as to the duration and extent of the impact on demand for our sleep devices. However, due to the nature of the installed base of existing patients using our devices,boosters roll out globally. Likewise, we have not seen any significant adverse impact on demand for re-supply ofcontinued to observe stabilizing patient flow in our masks.Our SaaS business has also been affected by COVID-19 and measures taken to control the spread of COVID-19. Some of our existing and potential SaaS customers are HME distributors and, therefore, have been impacted, or may be impacted, by the same temporary business closures noted above. We also have existing and potential SaaS customers that operateout-of-hospital care facilities and are either receiving and treating patients infected with COVID-19 or are implementing significant measures to safeguard their facilities against a potential COVID-19 outbreak. Given these challenging business conditions and the uncertain economic environment, we believe businesses have been less willing to adopt new or change SaaS platforms, which has adversely impacted our ability to engage new customers forsettings within our SaaS businesses, or expand the services used by existing customers.but since COVID-19 was declared a pandemic in March 2020,as we were able to broadly maintain our operations, and we are beginning the slow and careful process of progressively returning to work in some ofreopen our offices around the world. The pandemic has not negatively impacted our liquidity position.
20212022 Compared to the Three Months Ended March 31, 20202021 decreased2022 increased to $768.8$864.5 million from $769.5$768.8 million for the three months ended March 31, 2020, a decrease2021, an increase of $0.7$95.7 million or consistent on a percentage basis12% (a 3% decrease14% increase on a constant currency basis). The following table summarizes our net revenue disaggregated by segment, product and region for the three months ended March 31, 2021 compared to March 31, 2020 (in thousands):
March 31,Three Months Ended
March 31,% Change Constant Currency* 2022 2021 U.S., Canada and Latin America Devices $ 250,768 $ 192,897 30 % Masks and other 224,665 209,984 7 Total Sleep and Respiratory Care $ 475,433 $ 402,881 18 Software as a Service 101,142 93,836 8 Total $ 576,575 $ 496,717 16 Combined Europe, Asia and other markets Devices $ 182,307 $ 172,838 5 % 10 % Masks and other 105,618 99,212 6 13 Total Sleep and Respiratory Care $ 287,925 $ 272,050 6 11 Global revenue Devices $ 433,075 $ 365,735 18 % 21 % Masks and other 330,283 309,196 7 9 Total Sleep and Respiratory Care $ 763,358 $ 674,931 13 15 Software as a Service 101,142 93,836 8 8 Total $ 864,500 $ 768,767 12 14 20212022 was $674.9$763.4 million, a decreasean increase of 1%13% compared to net revenue for the three months ended March 31, 2020.2021. Movements in international currencies against the U.S. dollar positivelynegatively impacted net revenue by approximately $23.1$14.4 million for the three months ended March 31, 2021.2022. Excluding the impact of currency movements, total Sleep and Respiratory Care net revenue for the three months ended March 31, 2021 decreased2022 increased by 4%15% compared to the three months ended March 31, 2020.2021. The decreaseincrease in net revenue was primarily attributable to a decrease in unit sales of our devices, including as a result of decreased COVID-19-related demand for our ventilators, partially offset by an increase in unit sales of our masks.20212022 increased to $402.9$475.4 million from $393.5$402.9 million for the three months ended March 31, 2020,2021, an increase of $9.3$72.6 million or 2%18%. The increase was primarily due to an increase in unit sales of our devices and masks, partially offsetincluding increased demand following a recent product recall by a decrease in unit salesone of our devices.Net revenue in combined Europe, Asia and other markets decreased for the three months ended March 31, 2021 to $272.1 million from $286.3 million for the three months ended March 31, 2020, a decrease of $14.3 million or 5% (a 13% decrease on a constant currency basis). The constant currency decrease in sales in combined Europe, Asia and other markets predominantly reflects a decrease in unit sales of our devices, including as a result of decreased COVID-19-related demand for our ventilators, partially offset by an increase in unit sales of our masks.Net revenue from devices for the three months ended March 31, 2021 decreased to $365.7 million from $391.5 million for the three months ended March 31, 2020, a decrease of $25.8 million or 7%, including a decrease of 2% in the U.S., Canada and Latin America and a decrease of 11% in combined Europe, Asia and other markets (a 18% decrease on a constant currency basis). Excluding the impact of foreign currency movements, device sales for the three months ended March 31, 2021 decreased by 10%.Net revenue from masks and other for the three months ended March 31, 2021 increased to $309.2 million from $288.4 million for the three months ended March 31, 2020, an increase of $20.8 million or 7%, including an increase of 7% in the U.S., Canada and Latin America and an increase of 9% in combined Europe, Asia and other markets (consistent with the prior year on a constant currency basis). Excluding the impact of foreign currency movements, masks and other sales increased by 4%, compared to the three months ended March 31, 2020.Software as a ServiceNet revenue from our SaaS business for the three months ended March 31, 2021 was $93.8 million, an increase of 5% compared to the three months ended March 31, 2020. The increase was predominantly due to continued growth in resupply service offerings.PART I – FINANCIAL INFORMATIONItem 2RESMED INC. AND SUBSIDIARIESManagement’s Discussion and Analysis of Financial Condition and Results of OperationsNine Months Ended March 31, 2021 Compared to the Nine Months Ended March 31, 2020Net RevenueNet revenue for the nine months ended March 31, 2021 increased to $2,320.7 million from $2,186.7 million for the nine months ended March 31, 2020, an increase of $134.1 million or 6% (a 4% increase on a constant currency basis). The following table summarizes our net revenue disaggregated by segment, product and region for the nine months ended March 31, 2021 compared to March 31, 2020 (in thousands):
March 31,*Constant currency numbers exclude the impact of movements in international currencies.Sleep and Respiratory CareNet revenue from our Sleep and Respiratory Care business for the nine months ended March 31, 2021 was $2,042.9 million, an increase of 6% compared to net revenue for the nine months ended March 31, 2020. Movements in international currencies against the U.S. dollar positively impacted net revenues by approximately $47.7 million for the nine months ended March 31, 2021. Excluding the impact of currency movements, total Sleep and Respiratory Care net revenue for the nine months ended March 31, 2021 increased by 4% compared to the nine months ended March 31, 2020. 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 nine months ended March 31, 2021 increased to $1,232.8 million from $1,171.8 million for the nine months ended March 31, 2020, an increase of $61.0 million or 5%. The increase was primarily due to an increase in unit sales of our masks.ninethree months ended March 31, 2022 to $287.9 million from $272.1 million for the three months ended March 31, 2021, to $810.1 million from $751.7 million for the nine months ended March 31, 2020, an increase of $58.4$15.9 million or 8% (a 2%6% (an 11% increase on a constant currency basis). The constant currency increase in sales in combined Europe, Asia and other markets predominantly reflects an increase in unit sales of our devices and masks, partially offsetincluding increased demand following a recent product recall by decreased COVID-19-related demand forone of our ventilators.ninethree months ended March 31, 2022 increased to $433.1 million from $365.7 million for the three months ended March 31, 2021, increased to $1,132.1 million from $1,096.2 million for the nine months ended March 31, 2020, an increase of $36.0$67.3 million or 3%18%, including an increase of 1%30% in the U.S., Canada and Latin America and an increase of 5% in combined Europe, Asia and other markets (a 1% decrease10% increase on aPART I – FINANCIAL INFORMATION Item 2 PART I – FINANCIAL INFORMATION Item 2 Nine Months Ended
March 31,% Change Constant Currency* 2022 2021 U.S., Canada and Latin America Devices $ 771,475 $ 595,287 30 % Masks and other 681,803 637,507 7 Total Sleep and Respiratory Care $ 1,453,278 $ 1,232,794 18 Software as a Service 297,693 277,813 7 Total $ 1,750,971 $ 1,510,607 16 Combined Europe, Asia and other markets Devices $ 608,268 $ 536,856 13 % 15 % Masks and other 304,151 273,259 11 14 Total Sleep and Respiratory Care $ 912,419 $ 810,115 13 15 Global revenue Devices $ 1,379,743 $ 1,132,143 22 % 23 % Masks and other 985,954 910,766 8 9 Total Sleep and Respiratory Care $ 2,365,697 $ 2,042,909 16 16 Software as a Service 297,693 277,813 7 7 Total $ 2,663,390 $ 2,320,722 15 15 PART I – FINANCIAL INFORMATION Item 2 2021 were consistent with the nine months ended March 31, 2020.20212022 increased to $910.8$986.0 million from $827.3$910.8 million for the nine months ended March 31, 2020,2021, an increase of $83.4$75.2 million or 10%8%, including an increase of 9%7% in the U.S., Canada and Latin America and an increase of 13%11% in combined Europe, Asia and other markets (a 6%14% increase on a constant currency basis). Excluding the impact of foreign currency movements, masks and other sales increased by 8%9%, compared to the nine months ended March 31, 2020.20212022 was $277.8$297.7 million, an increase of 6%7% compared to the nine months ended March 31, 2020. 2021. The increase was predominantly due to continued growth in resupply service offerings.PART I – FINANCIAL INFORMATIONItem 2RESMED INC. AND SUBSIDIARIESManagement’s Discussion and Analysis of Financial Condition and Results of Operationsdecreasedincreased for the three months ended March 31, 2022 to $491.2 million from $447.3 million for the three months ended March 31, 2021, to $447.3 million from $449.7 million for the three months ended March 31, 2020, a decreasean increase of $2.4$43.9 million or 1%10%. Gross margin, which is gross profit as a percentage of net revenue, for the three months ended March 31, 20212022 was 58.2%56.8% compared to 58.4%58.2% for the three months ended March 31, 2020.20212022 compared to the three months ended March 31, 20202021 was due primarily to additionalhigher logistics and manufacturing costs, associated with our new Singapore site commencing operations during the quarter, higher freight costs and geographic mix changes, partially offset by lower amortization of acquired intangibles.20212022 to $1,348.4$1,501.8 million from $1,268.4$1,348.4 million for the nine months ended March 31, 2020,2021, an increase of $80.0$153.4 million or 6%11%. Gross margin, which is gross profit as a percentage of net revenue, for the nine months ended March 31, 20212022 was 58.1%56.4% compared to 58.0%58.1% for the nine months ended March 31, 2020.increasedecrease in gross margin for the nine months ended March 31, 20212022 compared to the nine months ended March 31, 20202021 was due primarily to favorable product mix, foreign currency movementshigher logistics and lower amortization of acquired intangibles,manufacturing costs, partially offset by restructuring expensefavorable changes in product mix and average selling prices.Three Months Ended
March 31,Change % Change Constant Currency 2022 2021 Selling, general, and administrative $ 182,401 $ 160,446 $ 21,955 14 % 17 % as a % of net revenue 21.1 % 20.9 % Research and development 66,801 55,941 10,860 19 % 22 % as a % of net revenue 7.7 % 7.3 % Amortization of acquired intangible assets 7,730 7,445 285 4 % 4 % Nine Months Ended
March 31,Change % Change Constant Currency 2022 2021 Selling, general, and administrative $ 544,483 $ 488,904 $ 55,579 11 % 13 % as a % of net revenue 20.4 % 21.1 % Research and development 189,258 165,409 23,849 14 % 15 % as a % of net revenue 7.1 % 7.1 % Amortization of acquired intangible assets 23,175 23,377 (202) (1) % (1) % PART I – FINANCIAL INFORMATION Item 2 the POC business.decreasedincreased for the three months ended March 31, 2022 to $182.4 million from $160.4 million for the three months ended March 31, 2021, to $160.4 million from $172.4 million for the three months ended March 31, 2020, a decreasean increase of $12.0$22.0 million or 7%14%. Selling, general, and administrative expenses were unfavorablyfavorably impacted by the movement of international currencies against the U.S. dollar, which increaseddecreased our expenses by approximately $7.0$5.7 million, as reported in U.S. dollars. Excluding the impact of foreign currency movements, selling, general, and administrative expenses for the three months ended March 31, 2021 decreased2022 increased by 11%17% compared to the three months ended March 31, 2020.2021. As a percentage of net revenue, selling, general, and administrative expenses were 21.1% for the three months ended March 31, 2022, compared to 20.9% for the three months ended March 31, 2021, compared to 22.4% for the three months ended March 31, 2020.decreaseincrease in selling, general, and administrative expenses was primarily due to decreasesincreases in travel, marketing and bad debt expensesemployee-related costs during the three months ended March 31, 20212022 compared to the three months ended March 31, 2020.decreasedincreased for the nine months ended March 31, 2022 to $544.5 million from $488.9 million for the nine months ended March 31, 2021, to $488.9 million from $511.3 million for the nine months ended March 31, 2020, a decreasean increase of $22.4$55.6 million or 4%11%. Selling, general, and administrative expenses were unfavorablyfavorably impacted by the movement of international currencies against the U.S. dollar, which increaseddecreased our expenses by approximately $13.5$5.7 million, as reported in U.S. dollars. Excluding the impact of foreign currency movements, selling, general, and administrative expenses for the nine months ended March 31, 2021 decreased2022 increased by 7%13% compared to the nine months ended March 31, 2020.2021. As a percentage of net revenue, selling, general, and administrative expenses were 20.4% for the nine months ended March 31, 2022, compared to 21.1% for the nine months ended March 31, 2021, compared to 23.4% for the nine months ended March 31, 2020.decreaseincrease in selling, general, and administrative expenses was primarily due to decreasesincreases in travel, marketing and bad debt expensesemployee-related costs during the nine months ended March 31, 20212022 compared to the nine months ended March 31, 2020.20212022 to $55.9$66.8 million from $51.4$55.9 million for the three months ended March 31, 2020,2021, an increase of $4.5$10.9 million, or 9%19%. Research and development expenses were unfavorablyfavorably impacted by the movement of international currencies against the U.S. dollar, which increaseddecreased our expenses by approximately $3.0$1.5 million for the three months ended March 31, 2021,2022, as reported in U.S. dollars. Excluding the impact of foreign currency movements, research and development expenses increased by 3%22% compared to the three months ended March 31, 2020.2021. As a percentage of net revenue, research and development expenses were 7.7% for the three months ended March 31, 2022, compared to 7.3% for the three months ended March 31, 2021, compared to 6.7% for the three months ended March 31, 2020.20212022 to $165.4$189.3 million from $149.4$165.4 million for the nine months ended March 31, 2020,2021, an increase of $16.0$23.8 million, or 11%14%. Research and development expenses were unfavorablyfavorably impacted by the movement of international currencies against the U.S. dollar, which increaseddecreased our expenses by approximately $5.3$0.9 million for the nine months ended March 31, 2021,2022, as reported in U.S. dollars. Excluding the impact of foreign currency movements, research and development expenses increased by 7%15% compared to the nine months ended March 31, 2020.2021. As a percentage of net revenue, research and development expenses were 7.1% for the nine months ended March 31, 2021,2022, compared to 6.8%7.1% for the nine months ended March 31, 2020.PART I – FINANCIAL INFORMATIONItem 2RESMED INC. AND SUBSIDIARIESManagement’s Discussion and Analysis of Financial Condition and Results of Operations20212022 totaled $7.4$7.7 million compared to $8.3$7.4 million for the three months ended March 31, 2020. 2021.20212022 totaled $23.4$23.2 million compared to $21.9$23.4 million for the nine months ended March 31, 2020.2021.PART I – FINANCIAL INFORMATION Item 2 POCPortable Oxygen Concentrator business, which was part of the Sleep and Respiratory Care segment. During the three and nine months ended March 31, 2021, we recognized restructuring expenses of $13.9 million primarily related to inventory write-downs of $5.2 million, accelerated amortization of acquired intangible assets of $5.1 million, asset impairments of $2.3 million, employee-related costs of $0.7 million and contract cancellation costs of $0.6 million. Of the total expense recognized during the ninethree and six months ended MarchDecember 31, 2021,2020, the inventory write-down of $5.2 million is presented within cost of sales and the remaining $8.7 million in restructuring costs is separately disclosed as restructuring expenses on the condensed consolidated statements of operations.income. We dodid not expect to incur additional material expenses in connection with this activity in the future.Three Months Ended
March 31,2022 2021 Change Interest (expense) income, net $ (5,462) $ (5,823) $ 361 Loss attributable to equity method investments (2,627) (4,969) 2,342 Gain (loss) on equity investments (1,735) 4,666 (6,401) Other, net 1,878 705 1,173 Total other income (loss), net $ (7,946) $ (5,421) $ (2,525) Nine Months Ended
March 31,2022 2021 Change Interest (expense) income, net $ (16,770) $ (18,341) $ 1,571 Loss attributable to equity method investments (5,927) (9,895) 3,968 Gain (loss) on equity investments (527) 9,442 (9,969) Other, net 729 1,205 (476) Total other income (loss), net $ (22,495) $ (17,589) $ (4,906) 20212022 was a loss of $5.4$7.9 million compared to a loss of $25.8$5.4 million for the three months ended March 31, 2020.2021. The decreaseincrease in loss was partiallyprimarily due to losses associated with our investments in marketable and non-marketable equity securities, which were a decrease in interest expense to $5.9loss of $1.7 million for the three months ended March 31, 20212022 compared to $10.0a gain of $4.7 million for the three months ended March 31, 2020. Additionally, we recognized an unrealized gain of $4.7 million on our marketable and non-marketable equity securities for the three months ended March 31, 2021, whereas during the three months ended March 31, 2020, we recorded an impairment of $9.1 million on our non-marketable equity securities. We also recorded2021. This was offset by lower losses attributable to equity method investments for the three months ended March 31, 20212022 of $5.0$2.6 million compared to $5.3$5.0 million for the three months ended March 31, 2020. The losses attributable2021. Additionally, interest expense, net, decreased to equity method investments relate$5.5 million for the three months ended March 31, 2022 compared to our joint venture with Verily, which is accounted$5.8 million for using the equity method, whereby we recognize our share of the joint venture’s losses.20212022 was a loss of $17.6$22.5 million compared to a loss of $65.4$17.6 million for the nine months ended March 31, 2020.2021. The decreaseincrease in loss was partiallyprimarily due to losses associated with our investments in marketable and non-marketable equity securities, which were a decrease in interest expense to $18.6loss of $0.5 million for the nine months ended March 31, 20212022 compared to $31.2a gain of $9.4 million for the nine months ended March 31, 2020. Additionally, we recognized an unrealized gain of $9.4 million on our marketable and non-marketable securities for the nine months ended March 31, 2021, whereas during the nine months ended March 31, 2020, we recorded an impairment of $14.5 million on our non-marketable equity securities. We also recorded2021. This was offset by lower losses attributable to equity method investments for the nine months ended March 31, 20212022 of $9.9$5.9 million compared to $19.1$9.9 million for the nine months ended March 31, 2020. The losses attributable2021. Additionally, interest expense, net, decreased to equity method investments relate$16.8 million for the nine months ended March 31, 2022 compared to our joint venture with Verily, which is accounted$18.3 million for using the equity method, whereby we recognize our share of the joint venture’s losses.20212022 was 20.9% and 19.1% as compared to 136.0% and 56.6%, respectively, as compared to 14.9% and 14.8% for the three and nine months ended March 31, 2020, respectively. The increase to our2021. Our effective tax rate was primarily the result of an increase in unrecognized tax benefits as outlined below.Excluding the impact of the unrecognized tax benefit, our effective income tax rate19.1% for the three and nine months ended March 31, 2021 was 19.1% and 17.1%, respectively. The increase in our effective taxdiffers from the statutory rate excluding the impact of the unrecognized tax benefit, was21.0% primarily due to the geographic mix of earningsresearch credits, foreign operations and lower windfall tax benefits related to the vesting or settlement of employee share-based awards, which reducedawards. The decrease in our incomeeffective tax expense by $0.6 million and $12.6 million for the three and nine months ended March 31, 2021, respectively, as compared to $2.4 million and $24.8 million for the three and nine months ended March 31, 2020, respectively.We are under audit by the Australian Taxation Office (the “ATO”) for the years 2009 to 2018 (the “Audit Period”). The audits primarily involve a transfer pricing dispute in which the ATO asserts we should have paid additional Australian taxes on income derived from our Singapore operations. The ATO issued Notices of Amended Assessments for the tax years 2009 to 2013 seeking a total of $266.0 million, consisting of $151.7 million in additional income tax and $114.3 million in penalties and interest. The 2014 to 2018 periods are still under audit and we have not yet received any Notices of Amended Assessments relative to those periods. A total of $98.8 million in tax has been prepaid in relation to the Audit Period, which is consistent with ATO procedural audit practice.We do not agree with the ATO’s assessments and continue to believe we are more likely than not to be successful in defending our position if the matter progresses to litigation. However, if we are not successful, we will be required to pay some or all of the additional income tax, accrued interest and penalties, including potential additional amounts relating to the 2014 to 2018 periods. To that end, we are engaged in ongoing discussions with the ATO to resolve the disputerate for the entire Audit Period. Given the stage of those discussions, during the three and nine months ended March 31, 2021, we recorded $395.9 million of gross2022 was primarily related to the decrease in unrecognized tax benefits including $53.3 million of accrued interest and penalties, associatedrecorded in connection with the ATO audits for the Audit Period. This amount reflects our estimate of the potential tax liability and is subject to change. If recognized, we estimate that approximately $254.8 million of unrecognized tax benefits would affect our effective tax rate, which represents the $395.9 million of gross unrecognized tax benefits noted previously, adjusted for tax credits and deductions of $141.1 million. We have elected to recognize interest and penalties related to unrecognized tax benefits as a component of income taxes. The timing and resolution of the ATO audits are inherently uncertain, and the amounts we might ultimately pay, if any, upon resolution of issues raised by the ATO may differ materially from the amounts accrued. Although it is expected that the amount of unrecognized tax benefits may change in the next 12 months, an estimate of the range of the possible change cannot be made.effective as ofduring the year ended June 30, 2018. Therefore, future repatriation of cash held by our non-U.S. subsidiaries if any, will generally not be subject to U.S. federal tax.was $78.5 million compared to net incomean increase of $163.1 million for the three months ended March 31, 2020, a decrease of 148%.$257.5 million. Our net income for the nine months ended March 31, 20212022 was $279.4$584.4 million compared to net income of $443.8$279.4 million for the nine months ended March 31, 2020, a decrease2021, an increase of 37%$305.0 million, or 109%.lossearnings per share for the three months ended March 31, 20212022 was $0.54$1.22 per diluted share compared to diluted earningsloss per share of $1.12$0.54 for the three months ended March 31, 2020, a decrease of 148%.2021. Our diluted earnings per share for the nine months ended March 31, 20212022 was $1.91$3.97 per diluted share compared to $3.05 for the nine months ended March 31, 2020, a decrease of 37%. Unrecognized tax benefits as described at note 6 – Income Taxes impacted our diluted loss per share for the three months ended March 31, 2021 and diluted earnings per share of $1.91 for the nine months ended March 31, 2021, by $1.74 per share.The measure “non-GAAP revenue” is equal to GAAP net revenue once adjusted for deferred revenue fair value adjustments applied in the purchase accounting for previous business combinations. POCportable oxygen concentrator business. The measure “non-GAAP gross profit” is the difference between non-GAAPGAAP net revenue and non-GAAP cost of sales, and “non-GAAP gross margin” is the ratio of non-GAAP gross profit to non-GAAPGAAP net revenue.Three Months Ended
March 31,Nine Months Ended
March 31,
2021
2020
2021
20202022 2021 2022 2021 GAAP Net revenue $ 864,500 $ 768,767 $ 2,663,390 $ 2,320,722 GAAP Cost of sales $ 373,303 $ 321,509 $ 1,161,585 $ 972,319 (10,982) (10,924) (33,271) (34,066) — — — (5,232) Non-GAAP cost of sales $ 362,321 $ 310,585 $ 1,128,314 $ 933,021 GAAP gross profit $ 491,197 $ 447,258 $ 1,501,805 $ 1,348,403 GAAP gross margin 56.8 % 58.2 % 56.4 % 58.1 % Non-GAAP gross profit $ 502,179 $ 458,182 $ 1,535,076 $ 1,387,701 Non-GAAP gross margin 58.1 % 59.6 % 57.6 % 59.8 % POC business, deferred revenue fair value adjustments applied in the purchase accounting for previous business combinations and litigation settlement expenses.portable oxygen concentrator business. Non-GAAP income from operations is reconciled with GAAP income from operations below (in thousands):Three Months Ended
March 31,Nine Months Ended
March 31,
2021
2020
2021
20202022 2021 2022 2021 GAAP income from operations $ 234,265 $ 223,426 $ 744,889 $ 662,040 Amortization of acquired intangibles - cost of sales 10,982 10,924 33,271 34,066 Amortization of acquired intangibles - operating expenses 7,730 7,445 23,175 23,377 Restructuring - cost of sales — — — 5,232 Restructuring - operating expenses — — — 8,673 Non-GAAP income from operations $ 252,977 $ 241,795 $ 801,335 $ 733,388 (loss) once adjusted for amortization of acquired intangibles (net of tax), reserve for disputed tax positions, restructuring expense associated with the closure of the POC (net of tax), (gain) loss on marketable equity securities, fair value adjustments recognized on non-marketable equity securities, deferred revenue fair value adjustments applied in the purchase accounting for previous business combinationsexpenses (net of tax) and litigation settlement expenses (net of tax).(gain) loss on equity investments. The measure “non-GAAP diluted earnings per share” is the ratio of non-GAAP net income to diluted shares outstanding. These non-GAAP measures are reconciled to their most directly comparable GAAP financial measures below (in thousands, except for per share amounts):
2021
2020
2021
2020 Three Months Ended
March 31,Nine Months Ended
March 31, 2022 2021 2022 2021 GAAP net income (loss) $ 179,012 $ (78,481) $ 584,376 $ 279,405 Amortization of acquired intangibles - cost of sales, net of tax 8,374 8,395 25,373 26,136 Amortization of acquired intangibles - operating expenses, net of tax 5,894 5,721 17,673 17,936 Reserve for disputed tax positions — 254,776 4,111 254,776 Restructuring - cost of sales, net of tax — — — 4,663 Restructuring - operating expenses, net of tax — — — 7,730 (Gain) loss on equity investments — — — (8,476) Non-GAAP net income $ 193,280 $ 190,411 $ 631,533 $ 582,170 GAAP diluted shares outstanding 146,962 145,513 147,034 146,394 Anti-dilutive shares excluded from GAAP — 858 — — Non-GAAP diluted shares outstanding 146,962 146,371 147,034 146,394 GAAP diluted earnings (loss) per share $ 1.22 $ (0.54) $ 3.97 $ 1.91 Non-GAAP diluted earnings per share $ 1.32 $ 1.30 $ 4.30 $ 3.98 20212022 and June 30, 2020,2021, we had cash and cash equivalents of $230.6$201.8 million and $463.2$295.3 million, respectively. In response to the uncertainty associated with the COVID-19 pandemic, we had previously increased ourOur cash and cash equivalents position by drawing down from our Revolving Credit Agreement. As we have not observed a significant impact to our cash flows due the pandemic, we have reduced our cash and cash equivalents and accordingly repaid our Revolving Credit Agreement. Working capital was $589.6 million and $920.7 million at March 31, 2021 and June 30, 2020, respectively. As of March 31, 2021, we had $0.7 billion of borrowings compared to $1.2 billion of borrowings at June 30, 2020. As of March 31, 2021, we had $1.5 billion available for draw down under the revolver credit facility and a combined total of $1.7 billion in cash and available liquidity under the revolving credit facility. We believe that cash generated from operations and available borrowings under our credit facility will be sufficient to fund our operations, including expected capital expenditures, for the next 12 months and beyond.As of March 31, 2021 and June 30, 2020, our cash and cash equivalent balances held within the United States amounted to $42.6at March 31, 2022 and June 30, 2021 were $57.2 million and $158.8$106.7 million, respectively. Our remaining cash and cash equivalent balances at March 31, 20212022 and June 30, 2020,2021, were $188.0$144.6 million and $304.4$188.6 million, respectively. Our cash and cash equivalent balances are held at highly rated financial institutions.Duringyear ended June 30, 2018, asrevolver credit facility and a combined total of $1.8 billion in cash and available liquidity under the revolving credit facility.Inventories at March 31, 2021 were $484.1 million, an increase$67.1 million or 16% from the June 30, 2020 balance of $416.9 million. The increase in inventories was requiredliquidity will be sufficient to respond to additional complexity and elongation offund our supply chain resulting from ongoing COVID-19 impacts.Accounts receivable at March 31, 2021 were $525.0 million, an increase of $50.4 million or 11% compared to the June 30, 2020, balance of $474.6 million. Accounts receivable days outstanding of 60 days at March 31, 2021, were lower than days outstanding of 65 days at June 30, 2020. Our allowance for doubtful accounts as a percentage of total accounts receivable at March 31, 2021, was 5.9%, compared to 5.7% at June 30, 2020.We recognize right-of-use assets and lease liabilities on the balance sheet for all operating leases except those that meet the definition of a short-term lease. As of March 31, 2021 and June 30, 2020, our right-of-use assets were $128.8 million and $118.3 million, respectively and our lease liabilities were $137.8 million and $123.1 million, respectively.During the nine months ended March 31, 2021, we generated cash of $510.2 million from operations, compared to $472.0 million for the nine months ended March 31, 2020. The increase in cash generated from operations during the nine months ended March 31, 2021, as compared to the nine months ended March 31, 2020 was primarily due to the increase in operating profit, partially offset by the increase in working capital driven by higher inventory levels. Movements in foreign currency exchange rates during the nine months ended March 31, 2021, had the effect of increasing our cash and cash equivalents by $18.3 million, as reported in U.S. dollars.We have temporarily suspended our share repurchase program due to acquisitions, and more recently, as a response to the COVID-19 pandemic. Accordingly, we did not repurchase any shares during the three and nine months ended March 31, 2021 and 2020. In addition, during the nine months ended March 31, 2021 and 2020, we paid dividends to holders of our common stock totaling $169.9 million and $168.6 million, respectively.Capital expenditures for the nine months ended March 31, 2021 and 2020, amounted to $74.8 million and $77.4 million, respectively. Theincluding expected capital expenditures, for the ninenext 12 months ended March 31, 2021, primarily reflected investment in production tooling, equipment and machinery, and computer hardware and software. At March 31, 2021, our balance sheet reflects net property, plant and equipment of $455.1 million compared to $417.3 million at June 30, 2020.Contractual ObligationsDetails of contractual obligations at March 31, 2021, are as follows (in thousands):Details of other commercial commitments at March 31, 2021, are as follows (in thousands):* The above guarantees mainly relate to requirements under contractual obligations with insurance companies transacting with our German subsidiariesRevolving Credit Agreement, Term Credit Agreement and guarantees provided under our facility leasing obligations.Credit Facility, as borrower, with lenders MUFG Union Bank, N.A., as administrative agent, joint lead arranger, joint book runner, swing line lender and letter of credit issuer, and Westpac Banking Corporation, as syndication agent, joint lead arranger and joint book runner.. The Revolving Credit Agreement, among other things, provided a senior unsecured revolving credit facility of $800.0 million, with an uncommitted option to increase the revolving credit facility by an additional $300.0 million., 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.. The Term Credit Agreement, among other things, provides ResMed Limited 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 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.Amounts borrowed under the Term Credit Agreement will also amortize on a semi-annual basis, with a $6.0 million principal payment required on each such semi-annual amortization date. The outstanding principal amounts will bear interest at a rate equal to LIBOR 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). On March 31, 2021, the interest rate that was being charged on the outstanding principal amounts was 1.0%. An applicable commitment fee of 0.100% to 0.175% (depending on the then-applicable leverage ratio) applies on the unused portion of the revolving credit facility. As of March 31, 2021,2022, we had $1.5$1.6 billion available for draw down under the revolving credit facility.PART I – FINANCIAL INFORMATIONItem 2RESMED INC. AND SUBSIDIARIESManagement’s Discussion and Analysis of Financial Condition and Results of OperationsSenior 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, including ResMed Corp., ResMed Motor Technologies Inc., Birdie Inc., Inova Labs, Inc., Brightree LLC, Brightree Home Health & Hospice LLC, Brightree Patient Collections LLC, ResMed Operations Inc., HEALTHCAREfirst Holding Company, HCF Holdco Company, HEALTHCAREfirst, Inc., CareFacts Information Systems, LLC and Lewis Computer Services, LLC, MatrixCare Holdings Inc., MatrixCare, Inc., Reciprocal Labs Corporation and ResMed SaaS Inc., under a Subsidiary Guaranty Agreement dated as of July 10, 2019. 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.2021, we were in compliance with our debt covenants and2022, there was a total of $734.0$682.0 million outstanding under the Revolving Credit Agreement, Term Credit Agreement and Senior Notes. We expect to satisfy all of our liquidity and long-term debt requirements through a combination of cash on hand, cash generated from operations and debt facilities. Nine Months Ended
March 31, 2022 2021 Net cash provided by operating activities $ 271,661 $ 510,193 Net cash used in investing activities (174,677) (110,390) Net cash used in financing activities (185,862) (650,596) Effect of exchange rate changes on cash (4,631) 18,272 Net decrease in cash and cash equivalents $ (93,509) $ (232,521) PART I – FINANCIAL INFORMATION Item 2 2021,2022, we have repurchased a total of 41.8 million shares for an aggregate of $1.6 billion. We have temporarily suspended our share repurchase program due to recent acquisitions, and more recently, as a response to the COVID-19 pandemic. Accordingly, we did not repurchase any shares during the three and nine months ended March 31, 20212022 and 2020.2021. Shares that are repurchased are classified as treasury stock pending future use and reduce the number of shares of common stock outstanding used in calculating earnings (loss) per share. There is no expiration date for this program, and the program may be accelerated, suspended, delayed or discontinued at any time at the discretion of our board of directors. At March 31, 2021,2022, 12.9 million additional shares can be repurchased under the approved share repurchase program.2020. Payments Due by March 31, Total 2023 2024 2025 2026 2027 Thereafter Purchase obligations 1,570,247 1,465,590 89,710 13,555 1,392 — — 2021,2022, we are not involved in any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC.20212022 (in thousands): U.S.
Dollar
(USD)Euro
(EUR)Canadian
Dollar
(CAD)Chinese
Yuan
(CNY)AUD Functional: Net Assets/(Liabilities) 49,745 (73,538) — 11,801 Foreign Currency Hedges (60,000) 55,478 — (12,616) Net Total (10,255) (18,060) — (815) USD Functional: Net Assets/(Liabilities) — — 21,041 — Foreign Currency Hedges — — (20,028) — Net Total — — 1,013 — SGD Functional: Net Assets/(Liabilities) 345,779 (24,829) — 931 Foreign Currency Hedges (330,000) — — — Net Total 15,779 (24,829) — 931 2021.2022. The table presents the notional amounts and weighted average exchange rates by contractual maturity dates for our foreign currency derivative financial instruments, including the forward contracts used to hedge our foreign currency denominated assets and liabilities. These notional amounts generally are used to calculate payments to be exchanged under the contracts (in thousands, except exchange rates).Fair Value Assets / (Liabilities)
2021
2020Foreign Exchange Contracts Year 1 Year 2 Total March 31,
2022June 30,
2021USD/AUD USD/AUD Contract amount 60,000 — 60,000 2,533 (652)
USD 0.7936
USD 0.7936Ave. contractual exchange rate USD 1 =
AUD 0.7196USD 1 =
AUD 0.7196AUD/Euro Contract amount 110,956 — 110,956 (128) 1,172
Euro 0.6239
Euro 0.6700
Euro 0.6385Ave. contractual exchange rate AUD 1 =
Euro 0.6864AUD 1 =
Euro 0.6864SGD/Euro Contract amount 22,191 — 22,191 (18) (88)
Euro 0.6353
Euro 0.6353Ave. contractual exchange rate SGD 1 =
Euro 0.7117— SGD 1 =
Euro 0.7117SGD/USD Contract amount 330,000 — 330,000 (641) (177)
USD 0.7489
USD 0.7489Ave. contractual exchange rate SGD 1 =
USD 0.7401SGD 1 =
USD 0.7401AUD/CNY Contract amount 12,616 — 12,616 (611) (130)
CNY 4.9450
CNY 4.9450Ave. contractual exchange rate AUD 1 =
CNY 5.0312AUD 1 =
CNY 5.0312USD/EUR USD/EUR Contract amount Contract amount — — 169 Ave. contractual exchange rate Ave. contractual exchange rate USD 1 =
EURUSD 1 =
EURUSD/CAD Contract amount 20,028 — 20,028 83 (44)
CAD 1.3695
CAD 1.3695Ave. contractual exchange rate USD 1 =
CAD 1.2431USD 1 =
CAD 1.24312021,2022, we held cash and cash equivalents of $230.6$201.8 million principally comprised of bank term deposits and at-call accounts and are invested at both short-term fixed interest rates and variable interest rates. At March 31, 2021,2022, there was $234.0$182.0 million outstanding under the Revolving Credit Agreement and Term Credit Agreement, which are subject to variable interest rates. A hypothetical 10% change in interest rates during the three and nine months ended March 31, 2021,2022, would not have had a material impact on pretax income. We have no interest rate hedging agreements.2021.2022.2020,2021, which was filed with the SEC and describe various material risks and uncertainties to which we are or may become subject. As of March 31, 2021,2022, there have been no further material changes to such risk factors, except as follows:We are subject to tax audits by various tax authorities in many jurisdictions. Our income tax returns are based on calculations and assumptions that require significant judgment, and are subject to audit by various tax authorities. In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws. We regularly assess the potential outcomes of examinations by tax authorities in determining the adequacy of our provision for income taxes.We are under audit by the Australian Taxation Office (the “ATO”) for the years 2009 to 2018 (the “Audit Period”). The audits primarily involve a transfer pricing dispute in which the ATO asserts we should have paid additional Australian taxes on income derived from our Singapore operations. The ATO issued Notices of Amended Assessments for the tax years 2009 to 2013 seeking a total of $266.0 million, consisting of $151.7 million in additional income tax and $114.3 million in penalties and interest. The 2014 to 2018 periods are still under audit and we have not yet received any Notices of Amended Assessments relative to those periods. A total of $98.8 million in tax has been prepaid in relation to the Audit Period, which is consistent with ATO procedural audit practice.We do not agree with the ATO’s assessments and continue to believe we are more likely than not to be successful in defending our position if the matter progresses to litigation. However, if we are not successful, we will be required to pay some or all of the additional income tax, accrued interest and penalties, including potential additional amounts relating to the 2014 to 2018 periods. To that end, we are engaged in ongoing discussions with the ATO to resolve the dispute for the entire Audit Period. Given the stage of those discussions, during the three and nine months ended March 31, 2021, we recorded $395.9 million of gross unrecognized tax benefits, including $53.3 million of accrued interest and penalties, associated with the ATO audits for the Audit Period. This amount reflects our estimate of the potential tax liability and is subject to change. If recognized, we estimate that approximately $254.8 million of unrecognized tax benefits would affect our effective tax rate, which represents the $395.9 million of gross unrecognized tax benefits noted previously, adjusted for tax credits and deductions of $141.1 million. We have elected to recognize interest and penalties related to unrecognized tax benefits as a component of income taxes. The timing and resolution of the ATO audits are inherently uncertain, and the amounts we might ultimately pay, if any, upon resolution of issues raised by the ATO may differ materially from the amounts accrued. Although it is expected that the amount of unrecognized tax benefits may change in the next 12 months, an estimate of the range of the possible change cannot be made, and more recently, as a response to the COVID-19 pandemic.pandemic. As a result, we did not repurchase any shares during the three months ended March 31, 2021.2022. However, there is no expiration date for this program, and we may, at any time, elect to resume the share repurchase program as the circumstances allow. Since the inception of the share buyback programs, we have repurchased 41.8 million shares at a total cost of $1.6 billion. At March 31, 2021,2022, 12.9 million additional shares of common stock can be repurchased under the approved share repurchase program.Item 3 Defaults Upon Senior SecuritiesNoneItem 4 Mine Safety DisclosuresNoneItem 5 Other InformationNone
3232*2021,2022, filed on April 29, 2021,28, 2022, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows, (v) the Notes to the Condensed Consolidated Financial Statements.104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). We have authorizedpersons whose signatures appear below to sign this report on our behalf, in accordance withrequirements of the Securities Exchange Act of 1934.29, 2021ResMed Inc.