UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________________________________________________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
___________________________________________________________________________________________
For the fiscal year ended June 30, 2023
Commission file number: 001-15317
___________________________________________________________________________________________
ResMed Inc.
(Exact name of registrant as specified in its charter)
___________________________________________________________________________________________
Delaware
(State or other jurisdiction of incorporation or organization)
98-0152841
(IRS Employer Identification No.)
9001 Spectrum Center Blvd.
San Diego, CA 92123
United States of America
(Address of principal executive offices, including zip code)
(858) 836-5000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.004 per share
Trading
Symbol(s)
RMD
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act
None
___________________________________________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2
of the Exchange Act.
Large Accelerated Filer
Non-accelerated Filer
Emerging Growth Company
x
¨
¨
Accelerated Filer
Smaller Reporting Company
¨
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. x
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect
the correction of an error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of
the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The aggregate market value of the voting and non-voting common equity held by non-affiliates of registrant as of December 31, 2022 (the last business day of the
registrant’s most recently completed second fiscal quarter), computed by reference to the closing sale price of such stock on the New York Stock Exchange, was
$30,200,969,929. All directors, executive officers, and 10% stockholders of registrant are considered affiliates. This determination of affiliate status with respect to
the foregoing calculation is not a determination for other purposes.
At August 7, 2023, the registrant had 147,071,404 shares of Common Stock, $0.004 par value, issued and outstanding. This number excludes 41,836,234 shares held
by the registrant as treasury shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement to be delivered to stockholders in connection with the registrant’s 2023 Annual Meeting of Stockholders, to be
filed within 120 days after the end of the fiscal year covered by this Form 10-K, are incorporated by reference into Part III of this report.
TABLE OF CONTENTS
Cautionary Note Regarding Forward Looking Statements
Part I
Item 1
Business
Item 1A Risk Factors
Item 1B Unresolved Staff Comments
Item 2
Item 3
Properties
Legal Proceedings
Item 4 Mine Safety Disclosures
Part II
Item 5
Item 6
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A Quantitative and Qualitative Disclosures About Market and Business Risks
Item 8
Item 9
Consolidated Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A Controls and Procedures
Item 9B Other Information
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Part III
Item 10 Directors, Executive Officers and Corporate Governance
Item 11
Item 12
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item 13 Certain Relationships and Related Transactions, and Director Independence
Item 14
Principal Accountant Fees and Services
Part IV Item 15
Exhibits and Consolidated Financial Statement Schedules
Item 16
Form 10-K Summary
Signatures
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As used in this 10-K, the terms “we”, “us”, “our” and “the Company” refer to ResMed Inc., a Delaware corporation, and its
subsidiaries, on a consolidated basis, unless otherwise stated.
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PART I
Item 1
Cautionary Note Regarding Forward-Looking Statements
This report contains or may contain certain forward-looking statements and information that are based on the beliefs of our
management as well as estimates and assumptions made by, and information currently available to, our management. All
statements other than statements regarding historical facts are forward-looking statements. The words “believe,” “expect,”
“intend,” “anticipate,” “will continue,” “will,” “estimate,” “plan,” “future” and other similar expressions, and negative
statements of such expressions, generally identify forward-looking statements, including, in particular, statements
regarding expectations of future revenue or earnings, expenses, new product development, new product launches, new
markets for our products, the integration of acquisitions, our supply chain, domestic and international regulatory
developments, litigation, tax outlook, the expected impact of COVID-19, its variants, and similar epidemics or pandemics,
and macroeconomic conditions 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 Part I, Item 1A
“Risk Factors” and elsewhere in this report. Information that is based on estimates, forecasts, projections, market research
or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially
from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry,
business, market, and other data from reports, research surveys, studies, and similar data prepared by market research firms
and other third parties, industry, medical and general publications, government data, and similar sources.
In addition, important factors to consider in evaluating such forward-looking statements include changes or developments
in healthcare reform, social, macroeconomic, market, legal or regulatory circumstances, including the impact of public
health crises such as COVID-19 and its variants; 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,
disruptions and delays in the supply chain, the actions or omissions of third parties, including suppliers, customers,
competitors and governmental authorities, geopolitical and economic conditions in foreign jurisdictions impacting our
business, 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.
ITEM 1 BUSINESS
General
We are a global leader in digital health and cloud-connected medical devices. We design innovative solutions to treat and
keep people out of the hospital, empowering them to live healthier, higher-quality lives. Our digital health technologies and
cloud-connected medical devices transform care for people with sleep apnea, chronic obstructive pulmonary disease, or
COPD, and other chronic diseases. Our comprehensive out-of-hospital software platforms support the professionals and
caregivers who help people stay healthy in the home or care setting of their choice. By enabling better care, our products
improve quality of life, reduce the impact of chronic disease, and lower costs for consumers and healthcare systems.
Following our formation in 1989, we commercialized a treatment for obstructive sleep apnea, or OSA. This treatment,
continuous positive airway pressure, or CPAP, was the first successful noninvasive treatment for OSA. CPAP systems
deliver pressurized air, typically through a mask, to prevent collapse of the upper airway during sleep.
Since the development of CPAP, we have expanded our business by developing or acquiring a number of innovative
products and solutions for a broad range of respiratory disorders including technologies to be applied in medical and
consumer products, ventilation devices, diagnostic products, mask systems for use in the hospital and home, headgear and
other accessories, and dental devices. We offer a comprehensive digital solution suite for patients with COPD or asthma,
including those using inhalers, as well as non-invasive or invasive ventilation. In addition, we are a leading provider of
cloud-based health applications, software and devices designed to provide connected care, enabling clinicians to manage
more patients efficiently and effectively, as well as enabling and encouraging patients’ long-term adherence to and
satisfaction with their therapy. We also provide management software to agencies providing out-of-hospital care, including
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but not limited to home medical equipment, or HME, home health and hospice, skilled nursing, life plan community, senior
living, and private duty services.
We employ over 10,140 people and sell our products in over 140 countries through a combination of wholly owned
subsidiaries and independent distributors.
Our website address is www.resmed.com. Information contained on our website is not part of or incorporated into this
report. We make our periodic reports, together with any amendments, available on our website, free of charge, as soon as
reasonably practicable after we electronically file or furnish the reports with the Securities and Exchange Commission, or
SEC. The SEC maintains an internet site, www.sec.gov, which contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the SEC.
Corporate History
Our Australian subsidiary, ResMed Holdings Limited, was originally organized in 1989 by Dr. Peter Farrell to acquire
from Baxter Center for Medical Research Pty Limited, or Baxter, the rights to certain technology relating to CPAP
treatment as well as Baxter’s existing CPAP device business. Baxter acquired the rights to the technology in 1987 and sold
CPAP devices in Australia from 1988 until our acquisition of the business.
ResMed Inc., a Delaware corporation, was formed in March 1994 as the ultimate holding company for our operating
subsidiaries. In June 1995, we completed an initial public offering of common stock and our common stock began trading
on the NASDAQ National Market. In September 1999, we transferred our principal listing to the New York Stock
Exchange, or NYSE, trading under the ticker symbol “RMD”. In November 1999, we established a secondary listing of our
common stock via Chess Depositary Instruments, or CDIs, on the Australian Stock Exchange (now known as the
Australian Securities Exchange), or ASX, also under the symbol “RMD”. Ten CDIs on the ASX represent one share of our
common stock on the NYSE.
Since formation we have acquired a number of businesses, including distributors, suppliers, developers of medical
equipment and related technologies, and software solution providers. For example, in the United States our sleep and
respiratory care products are sold by ResMed Corp. and our software is sold principally by our Brightree and MatrixCare
subsidiaries.
Segment Information
We operate in two segments, which are the Sleep and Respiratory Care segment and the Software as a Service, or SaaS,
segment. See Note 13 – Segment Information of the Notes to Financial Statements (Part II, Item 8) for financial
information regarding segment reporting. Financial information about our revenues from and assets located in foreign
countries is also included in the notes to our consolidated financial statements.
The Market
We are focused on sleep and related respiratory care, both of which we believe are globally underpenetrated, and where we
believe our products can improve patient outcomes, create efficiencies for our customers, help physicians and providers
better manage chronic disease and reduce overall healthcare system costs. Additionally, our software solutions are focused
on out-of-hospital care, which we believe is fragmented and underserved, and where we see significant opportunity to
transform and significantly improve out-of-hospital healthcare through a strategy of enabling better patient care, improving
clinical decision support, and driving interoperability across out-of-hospital care settings.
Sleep and Respiratory Care
Sleep
Sleep is a complex neurological process that includes two distinct states: rapid eye movement, or REM, sleep and non-
rapid eye movement, or non-REM, sleep. REM sleep, which is about 20-25% of total sleep experienced by adults, is
characterized by a high level of brain activity, bursts of rapid eye movement, increased heart and respiration rates, and
paralysis of many muscles. Non-REM sleep is subdivided into four stages that generally parallel sleep depth; stage 1 is the
lightest and stage 4 is the deepest.
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The upper airway has no rigid support and is held open by active contraction of upper airway muscles. Normally, during
REM sleep and deeper levels of non-REM sleep, upper airway muscles relax and the airway narrows. Individuals with
narrow upper airways or poor muscle tone are prone to temporary collapses of the upper airway during sleep, called
apneas, and to near closures of the upper airway called hypopneas. These breathing events result in a lowering of blood
oxygen concentration, causing the central nervous system to react to the lack of oxygen or increased carbon dioxide and
signaling the body to respond. Typically, the individual subconsciously arouses from sleep, causing the throat muscles to
contract, opening the airway. After a few gasping breaths, blood oxygen levels increase and the individual can resume a
deeper sleep until the cycle repeats itself. Sufferers of OSA typically experience ten or more such cycles per hour. While
these awakenings greatly impair the quality of sleep, the individual is not normally aware of these disruptions. OSA has
been recognized as a cause of hypertension and a significant comorbidity for heart disease, stroke, and type 2 diabetes.
A long-term epidemiology study published in 2013 estimated that 26% of adults age 30-70 have some form of obstructive
sleep apnea. Another study published in Lancet Respiratory Medicine in 2019 estimated that mild to severe OSA impacts
more than 936 million people worldwide, including 54 million Americans. Of those impacted, it was estimated that more
than 424 million would have moderate to severe sleep apnea. Despite the high prevalence of OSA, there is a general lack of
awareness of OSA among both the medical community and the general public. It is estimated that less than 20% of those
with OSA have been diagnosed or treated. Many healthcare professionals often do not diagnose OSA because they are
unaware that such non-specific symptoms as excessive daytime sleepiness, fatigue, snoring, hypertension, and irritability
are characteristic of OSA.
While sleep apnea has been diagnosed in a broad cross-section of the population, until recently, it has typically been
diagnosed among middle-aged men who are obese. However, we believe the importance of sleep apnea in women is
increasingly being recognized, with nearly 40% of new PAP patients being female. A strong association has been
discovered between sleep apnea and a number of cardiovascular and metabolic diseases. Studies have shown that sleep
apnea is present in approximately 83% of patients with drug-resistant hypertension, approximately 77% of patients with
obesity, approximately 76% of patients with chronic heart failure, and approximately 72% of patients with type 2 diabetes.
A study presented at the European Respiratory Society (ERS) International Congress in 2021 and later published in CHEST
in 2022 found that using PAP therapy as directed can significantly increase sleep apnea patients’ chances of living longer.
The study concluded that people with obstructive sleep apnea who continued PAP therapy were 39% more likely to survive
over a three-year period than OSA patients who did not. Researchers found that the survival rate gap remained significant
when accounting for patients’ ages, overall health, other pre-existing conditions, and causes of death.
Sleep-Disordered Breathing and Obstructive Sleep Apnea. Sleep-disordered breathing, or SDB, encompasses all
disease processes that cause abnormal breathing patterns during sleep. Manifestations include OSA, central sleep apnea, or
CSA, and hypoventilation syndromes that occur during sleep. Hypoventilation syndromes are generally associated with
obesity, chronic obstructive lung disease, and neuromuscular disease. OSA is the most common form of SDB.
Sleep fragmentation and the loss of the deeper levels of sleep caused by OSA can lead to excessive daytime sleepiness,
fatigue, reduced cognitive function, including memory loss and lack of concentration, depression, and irritability. OSA
sufferers also experience an increase in heart rate and an elevation of blood pressure during the cycle of apneas. Several
studies demonstrate that the oxygen desaturation, increased heart rate and elevated blood pressure caused by OSA may be
associated with increased risk of cardiovascular morbidity and mortality due to angina, stroke, and heart attack. Patients
with OSA have been shown to have impaired daytime performance in a variety of cognitive functions including problem-
solving, response speed, and visual motor coordination, and studies have linked OSA to increased occurrences of traffic
and workplace accidents.
Generally, an individual seeking treatment for the symptoms of OSA is referred by a general practitioner to a sleep
specialist for further evaluation. The diagnosis of OSA typically requires monitoring the patient during sleep at either a
sleep clinic or the patient’s home. During overnight testing, respiratory parameters and sleep patterns may be monitored,
along with other vital signs such as heart rate and blood oxygen levels. Simpler tests, using devices such as our ApneaLink
Air, NightOwl, or our automatic positive airway pressure devices, monitor airflow during sleep, and use computer
programs to analyze airflow patterns. These tests allow sleep clinicians to detect any sleep disturbances such as apneas,
hypopneas, or subconscious awakenings.
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Before 1981, the primary treatment for OSA was a tracheotomy, a surgical procedure to create a hole in the patient’s
windpipe. Alternative surgical treatments have involved either uvulopalatopharyngoplasty, or UPPP, in which surgery is
performed on the upper airway to remove excess tissue and streamline the shape of the airway or implant a device to add
support to the soft palate. UPPP alone has a poor success rate; however, when performed in conjunction with multi-stage
upper airway surgical procedures, a greater success rate has been claimed. These combined procedures, performed by
highly specialized surgeons, are expensive and involve prolonged and often painful recovery periods. Surgical treatments
are not considered first-line therapy for OSA. Other alternative treatments available today include nasal surgery,
mandibular advancement surgery, dental appliances, palatal implants, somnoplasty, nasal devices, and electrical
stimulation of the nerves or muscles. Alternative pharmaceutical therapy treatments are reported to be under development.
A variety of devices are marketed for the treatment of OSA. Most are only partially effective, but CPAP is a reliable
treatment for all severities of OSA and is considered first-line therapy. Use of mandibular advancement devices is
increasingly used as a second-line option in patients unable to use CPAP or those with mild OSA. These devices cause the
mandible and tongue to be pulled forward and improve the dimensions of the upper airway. CPAP is a non-invasive means
of treating OSA. CPAP was first used as a treatment for OSA in 1980 by Dr. Colin Sullivan, the past Chairman of our
Medical Advisory Board, and was commercialized for treatment of OSA in the United States, or U.S., in the mid-1980s.
During CPAP treatment, a patient sleeps with an interface connected to a small portable air device that delivers room air at
a positive pressure. The patient breathes in air from the device and breathes out through an exhaust port in the interface.
Continuous air pressure applied in this manner acts as a pneumatic splint to keep the upper airway open and unobstructed.
Interfaces include nasal masks and nasal pillows. Sometimes, when a patient leaks air through their mouth, a full-face mask
may need to be used, rather than a nasal interface.
CPAP is not a cure and, therefore, must be used nightly as long as treatment is required. Patient compliance has been a
major factor in the effectiveness of CPAP treatment. Early generations of CPAP units provided limited patient comfort and
convenience. Patients experienced soreness from the repeated use of nasal masks and had difficulty falling asleep with the
CPAP device operating at the prescribed pressure. In recent years, product innovations to improve patient comfort and
compliance have been developed. These include more comfortable patient interface systems; delay timers that gradually
increase air pressure allowing the patient to fall asleep more easily; bilevel air devices, including our AirCurve 10 Series
and Lumis devices, which provide different air pressures for inhalation and exhalation; heated humidification systems to
make the airflow more comfortable; and auto-titration devices that modulate the average pressure delivered during the
night.
Respiratory Care
Our aim is to provide respiratory care solutions to patients with COPD, asthma, and other chronic respiratory diseases, such
as overlap syndrome, obesity hypoventilation syndrome, or OHS, and neuromuscular disease, including amyotrophic
lateral sclerosis, or ALS. We aim to improve patient quality of life, slow down disease progression and reduce the costs of
patient management.
Our products cover patients ranging from those who only require therapy from CPAP systems at night to those who are
dependent on non-invasive or invasive ventilation for life-support. Our devices are predominantly used in the home and, to
a lesser extent, in general hospital wards and respiratory wards. We supply CPAP and bilevel device systems, high flow
therapy device systems (HFT), non-invasive and invasive ventilators, humidifiers, and accessories, including masks, nasal
cannula, and tubing. We also provide data management systems designed to improve the management of patients.
Chronic Obstructive Pulmonary Disease. COPD encompasses a group of lung diseases defined by persistent airflow
limitation, prolongation of exhalation and loss of elasticity in the lungs. It is a progressive and debilitating disease and is
associated with an increased inflammatory response in the airways. Symptoms encountered with COPD include shortness
of breath as well as chronic cough and increased sputum production. COPD includes diseases such as emphysema and
chronic bronchitis. A recent study based on recent epidemiology data estimates that there are approximately 480 million
people worldwide who suffer from COPD, the world’s third leading cause of death.
Patients with COPD can have different clinical presentations. Patients with chronic bronchitis present with low level of
oxygen (hypoxemia) and elevated levels of carbon dioxide (hypercapnia), a chronic productive cough, cor pulmonale, and
are commonly overweight. Patients with emphysema have more normal blood gases, are usually thin and hyperinflated and
have a decreased diffusion capacity. During sleep, chronic bronchitic patients display more severe hypoxemia. In general,
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the more hypoxic a COPD patient is during the day the more severe the hypoxemia experienced during sleep. Hypercapnia
as a consequence of hypoventilation also occurs in COPD patients and is more pronounced in REM sleep. Some COPD
patients may also suffer from comorbid OSA, a condition known as Overlap Syndrome.
Home non-invasive ventilation has the potential to reduce healthcare costs associated with the management of patients with
severe COPD by significantly increasing the time between hospital readmissions. Early research also suggests that home
HFT may help improve clinical outcomes in hypoxemic COPD patients that frequently have exacerbations.
Overlap Syndrome. In patients with COPD-OSA Overlap Syndrome, CPAP has been shown to provide benefits in
relation to reducing mortality, decreasing hospitalizations and improving lung function and gas exchange. Non-invasive
ventilation, or NIV, has been demonstrated to improve outcomes in patients with acute exacerbations of COPD through its
ability to improve respiratory acidosis and decrease dyspnea and work of breathing. It may also increase survival rates and
reduce length of hospital stays, as well as reducing complicating factors such as ventilator-associated pneumonia. In
patients with stable COPD, the advantages of home NIV are less clear, but clinical studies have shown improvements in
dyspnea scores and health-related quality-of-life measures and reductions in hospital readmissions and intensive care stays.
Obesity Hypoventilation Syndrome. OHS is characterized by the combination of obesity, chronic alveolar
hypoventilation leading to daytime hypercapnia and hypoxia and sleep apnea after the exclusion of other causes of alveolar
hypoventilation. An estimated 90% of patients with OHS also have OSA. In patients with OHS, positive airway therapy,
both CPAP and NIV, has been shown to effectively treat upper airway obstruction and reverse daytime respiratory failure
as well as reduce the work of breathing and improve respiratory drive.
Neuromuscular Disease. Neuromuscular disease is a broad term that encompasses many diseases that either directly (via
intrinsic muscle pathology) or indirectly (via nerve pathology) impair the functioning of muscles. Symptoms of
neuromuscular disease and respiratory failure include increasing generalized weakness and fatigue, dysphagia, dyspnoea on
exertion and at rest, sleepiness, morning headache, difficulties with concentration, and mood changes. Most neuromuscular
diseases are characterized by progressive muscular impairment leading to loss of ambulation, being wheelchair-bound,
swallowing difficulties, respiratory muscle weakness, and, eventually, death from respiratory failure. Neuromuscular
disorders can progress rapidly or slowly. Rapidly progressive conditions, such as ALS and Duchenne muscular dystrophy
in teenagers, are characterized by muscle impairment which worsens over months and can result in death within a few
years. Variable or slowly progressive conditions, such as myotonic muscular dystrophy, are characterized by muscle
impairment that worsens over years and may mildly reduce life expectancy.
NIV treatment to patients with neuromuscular disease may lead to improvements in respiratory failure symptoms and
daytime arterial blood gases. In ALS patients, NIV treatment has been associated with an improvement in quality of life
measures, sleep-related symptoms and survival. Studies have demonstrated that patients with Duchenne muscular
dystrophy may improve in quality of life measures and may increase chance of survival with NIV treatment.
Software as a Service
Due to multiple acquisitions, including Brightree in April 2016, HEALTHCAREfirst in July 2018, MatrixCare in
November 2018, and MEDIFOX DAN in November 2022, our operations now include software platforms that comprise
our SaaS business. Our SaaS strategy is to develop a portfolio that assists durable or home medical equipment (DME/
HME) providers, and other long-term care providers operate more effectively and efficiently across various out-of-hospital
care settings. With a comprehensive set of software and services offerings, our SaaS solutions enable providers to
streamline workflow and deliver an improved patient experience across our existing vertical markets including HME and
home infusion, facility-based organizations including skilled nursing, senior living, and life plan communities, home health
and hospice providers, and to adjacent providers through a growing portfolio of value-added solutions with broad
applicability. Our offerings can help providers perform analytics, manage documentation and implement new
reimbursement requirements as well as more effectively transfer data as patients move between different care settings.
Business Strategy
We believe the treatment of sleep apnea and respiratory care will continue to grow due to a number of factors, including
increasing awareness of OSA, CSA and COPD; improved understanding of the role of sleep apnea treatment in the
management of cardiac, neurologic, metabolic, and related disorders; improved understanding of the role of non-invasive
ventilation in the management of COPD; and an increase in the use of digital and product technology to improve patient
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outcomes and create efficiencies for customers and providers. Our strategy for expanding our business operations and
capitalizing on the growth of the sleep apnea and respiratory care, as well as growth in out-of-hospital care settings,
consists of the following key elements:
•
•
•
•
•
Continue Product Development and Innovation in Sleep Apnea and Respiratory Care Products. We are
committed to ongoing innovation in developing products for the diagnosis and treatment of sleep apnea. We have
been a leading innovator of products designed to treat sleep apnea more effectively, increase patient comfort,
convenience, and encourage compliance with prescribed therapy. We have introduced a full suite of masks in our
AirFit and AirTouch and other ranges, and we offer advanced and expanded integrations of our therapy-based
software solutions, including AirView, to promote greater patient adherence to therapy. Our acquisitions have
included adding a portfolio of sleep apnea products such as through our acquisition of Curative Medical in 2015.
Likewise, we are committed to ongoing innovation of our respiratory care products that serve the needs of patients
with COPD and neuromuscular diseases, providing advanced and expanded integrations of our therapy-based
software solutions including AirView for Respiratory Care, enabling clinicians to remotely monitor patients on
some ventilation devices and bilevel devices. We also acquired a digital health platform for inhalers through our
acquisition of Propeller Health in 2019, rounding out our portfolio to treat COPD patients through their therapy
journey across different stages of their disease.
Broaden our digital health technology foundation. Digital enablement is central to our strategy. Our cloud-
based digital health applications, along with our devices, are designed to provide connected care to improve
patient outcomes and efficiencies for our customers, allowing fewer professionals to manage more patients and
empowering patients to track their own health outcomes. We are expanding our cloud-based patient management
and engagement platforms, such as AirView, enabling remote monitoring, over-the-air trouble shooting and
changing of device settings, U-Sleep enabling automated patient coaching through a text, email or interactive
voice phone call and myAir, a patient engagement application that provides sleep coaching and a daily score based
on users' sleep data. In the United States we have released ResMed MaskSelector, an easy-to-use digital tool to
make ResMed mask selection and sizing easier for patients and more effective for providers.
We believe that the combination of continued product development, product and technology acquisitions and
innovation are key factors to our ongoing success. Approximately 17% of our employees are devoted to research
and development activities.
Expand SaaS Solutions in Out-of-Hospital Care Settings. Our vision is to transform and significantly improve
out-of-hospital (OOH) healthcare through a strategy of enabling better patient care, improving clinical decision
support, and driving interoperability across out-of-hospital healthcare settings. Since acquiring Brightree in 2016,
plus MatrixCare and HEALTHCAREfirst in 2018, we offer software solutions across multiple out-of-hospital
healthcare settings including HME, home health and hospice, skilled nursing, life plan communities, senior living,
and private duty. Our acquisition of MEDIFOX DAN in 2022, expanded ResMed’s SaaS business outside of the
U.S. to Germany, and added new out-of-hospital care sectors to the business’ ecosystem, including outpatient
therapy. We are connecting capabilities across the platforms in these out-of-hospital care settings to help our
customers be more efficient, better serve people, keep them out-of-hospital, and in lower-cost, higher-quality care
settings. Today, our SaaS solutions serve out of hospital providers combining over 139 million individual patient
accounts.
Expand Geographic Presence. We offer our products in more than 140 countries to sleep clinics, home
healthcare dealers, patients and third-party payors. We intend to increase our sales and marketing efforts in our
principal geographies, as well as expand the depth of our presence in other high-growth geographic regions. In
2015, we acquired Curative Medical to invest in China and expand our growth potential in sleep apnea, COPD and
respiratory care there. In 2019, we acquired HB Healthcare, a privately owned HME that serves both reimbursed
and cash-pay customers of sleep and respiratory care devices in South Korea. In 2021, we acquired Tong-il,
another leading sleep and respiratory care HME provider in South Korea, reinforcing both our commitment and
capability to serve millions of South Korean patients living with sleep apnea, COPD, and other chronic respiratory
diseases.
Increase Public and Clinical Awareness. We continue to expand our existing promotional activities to increase
awareness of sleep apnea, COPD, and other clinical conditions that can be treated with our industry-leading
solutions. These promotional activities target both the population predisposed to sleep apnea and medical
specialists, such as pulmonologists, sleep medicine specialists, primary care physicians, cardiologists,
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neurologists, and other medical subspecialists who treat these conditions and their associated comorbidities. We
target special interest groups, including the National Stroke Association, the American Heart Association, COPD
Foundation, and the National Sleep Foundation, to further increase awareness of the relationship between OSA,
COPD, neuromuscular disease, and comorbidities such as cardiac disease, diabetes, hypertension, and obesity.
The programs also support our efforts to inform the community of the dangers of sleep apnea with regard to
occupational health and safety, especially in the transport industry. We have helped establish a center for clinical
care and medical research at the University of California, San Diego, in the fields of sleep apnea and COPD.
Expand into New Clinical Applications. We continually seek to identify new applications of our technology for
significant unmet medical needs. Studies have established a clinical association between OSA and both stroke and
chronic heart failure and have recognized sleep apnea as a cause of hypertension or high blood pressure. Research
also indicates that sleep apnea is independently associated with glucose intolerance and insulin resistance.
Additionally, research supported by ResMed has demonstrated that the addition of non-invasive ventilation to
patients with severe COPD who are receiving oxygen therapy provides meaningful clinical benefits to the patient
and the broader healthcare system. We maintain close working relationships with prominent physicians to explore
new medical applications for our products and technology.
Leverage the Experience of our Management Team. Our senior team has extensive experience in the medical
device industry in general, and in the fields of sleep apnea, respiratory care and healthcare informatics in
particular. We intend to continue to leverage the experience and expertise of these individuals to maintain our
innovative approach to the development of products and solutions and to increase awareness of the serious
medical problems caused by sleep apnea and the use of non-invasive ventilation, and in-home life-support
ventilation to treat COPD and other chronic respiratory diseases.
•
•
Products
Our portfolio of products includes devices, diagnostic products, mask systems, headgear and other accessories, dental
devices, and cloud-based software and informatics solutions. For purposes of the following discussion, we refer to our air
flow generators and ventilators collectively as devices.
Devices
We produce cloud-connected CPAP, automatic positive airway pressure, or APAP, bilevel, adaptive servo-ventilation, or
ASV, and HFT devices that deliver positive airway pressure through a patient interface, either a mask or cannula. Our
APAP, devices, known as AutoSet, are based on a patented technology to monitor breathing and can also be used in the
diagnosis, treatment and management of OSA in some countries. During fiscal year 2017, we launched AirMini, a small
portable CPAP combining the same proven therapy modes used in the AirSense 10 with waterless humidification enabling
portable convenience. During fiscal year 2021, we launched our new platform of connected CPAP and APAP devices,
AirSense 11, which introduced new features such as a touch screen, algorithms for patients new to therapy, and digital
enhancements, such as over-the-air update capabilities. Devices in total accounted for approximately 54%, 52%, and 50%
of our net revenues in fiscal years 2023, 2022, and 2021, respectively.
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The tables below provide a selection of devices, as known by our trademarks.
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CPAP, APAP & BILEVEL
͏PRODUCTS
AirSense 11
– AutoSet
– CPAP
– Elite
AirSense 10
– AutoSet
– AutoSet for Her
– CPAP
– Elite
AirCurve 10 Bilevel
– AirCurve 10 S
– AirCurve 10 VAuto
– AirCurve 10 ASV
AirMini portable CPAP
VENTILATION
͏PRODUCTS
Stellar 150
Astral 100 and 150
AirCurve 10 ST-A
DESCRIPTION
Combining enhanced digital health technology with effective therapy modes, AirSense™ 11 APAP and CPAP machines
are designed to make starting sleep apnea therapy, and adhering to it, easier and more convenient than ever before. Our
newest device, AirSense 11 includes new features like Personal Therapy Assistant and Care Check-In designed to
provide tailored guidance to PAP users, helping ease them into therapy and comfortable nightly use. Other features
include the availability of remote software updates so users can enjoy the latest version of these tools every night.
AirSense™ 10 is one of the world’s most widely used series of CPAP and APAP machines, each designed to deliver
high-quality therapy for a better night’s sleep. Features include a built-in humidifier, Climate Control Auto setting to
provide breathing comfort, AutoRamp™ with sleep onset detection, and expiratory pressure relief (EPR™).
AirCurve™ 10 bilevel machines include two pressure level settings: a higher pressure when you inhale, and a lower
pressure that makes it easier to exhale. AirCurve 10 S and AirCurve 10 VAuto both treat obstructive sleep apnea, while
AirCurve 10 ASV treats central sleep apnea. All machines include a built-in humidifier and Climate Control Auto setting
to provide breathing comfort.
The smallest portable CPAP on the market today, AirMini features the same auto-adjusting therapy modes used in the
AirSense™ 10 Auto. The device also features built-in Bluetooth connectivity and effective waterless humidification
enabled by HumidX technology.
DESCRIPTION
ResMed Stellar™ 150 ventilator is suitable for invasive and non-invasive ventilation, either at home or in a healthcare
setting. It is not a life support ventilator. Stellar 150 also includes iVAPS™ (intelligent Volume-Assured Pressure
Support) 1 technology to adjust to your changing respiratory needs.
ResMed Astral™ 100 and Astral 150 provide personalized care every step of the way. With both invasive and non-
invasive options, they offer a lightweight design, exceptional battery life and adaptive technologies to provide greater
mobility and peace of mind.
Designed for people with respiratory conditions that affect breathing such as restrictive lung disorders, severe COPD and
hypoventilation, AirCurve™ 10 ST-A combines user-friendly controls, an intuitive interface and automatic features to
make ventilation therapy effective, comfortable and hassle-free.
Mask Systems, Diagnostic Products, Accessories and Other Products
Masks, diagnostic products and accessories together accounted for approximately 34%, 37%, and 38% of our net revenues
in fiscal years 2023, 2022, and 2021, respectively.
Mask Systems
Mask systems are one of the most important elements of sleep apnea treatment systems. Masks are a primary determinant
of patient comfort and as such may drive or impede patient compliance with therapy. We have been a consistent innovator
in small nasal, nasal pillows, and full-face masks, by improving patient comfort while minimizing size and weight.
The table below provides an of overview of our mask systems by category.
CATEGORY
DESCRIPTION
Minimalist
Freedom
Ultra Soft
Universal Fit
AirFit F30, AirFit P10, and AirFit N30 minimalist masks feature our lightest, lowest profile designs. The features of
these masks are focused on minimizing contact with the patient’s face to reduce red marks and irritation.
AirFit N30i, AirFit P30i, and AirFit F30i freedom masks, which feature top-of-head tubing design allowing flexibility to
easily switch sleep positions.
The AirTouch F20 and AirTouch N20 masks feature a soft and breathable AirTouch cushion designed to enhance CPAP
mask comfort.
AirFit F20 and AirFit N20 masks are designed to fit a wide range of faces due to the InfinitySeal silicone cushion that
adapts to unique facial contours, which increases comfort, improves the fit and reduces leakage.
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Diagnostic Products
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We market sleep recorders for the diagnosis and titration of sleep apnea in sleep clinics, hospitals, and at home. These
diagnostic systems record relevant respiratory and sleep data, which can be analyzed by a sleep specialist or physician who
can then tailor an appropriate OSA treatment regimen for the patient.
PRODUCTS
ApneaLink Air
NightOwl
A portable diagnostic device that measures oximetry, respiratory effort, pulse, nasal flow and snoring. It works with
AirView Diagnostics to provide comprehensive diagnostic solution to clinicians.
A portable, cloud-connected, fully disposable diagnostic device that measures AHI based on peripheral arterial tone,
actigraphy, and oximetry over several nights.
DESCRIPTION
Connected Solutions and Other Products
We have a suite of products that are designed to allow fewer professionals to manage more patients and empower patients
to track their own health outcomes. We are expanding our cloud-based patient management and engagement platforms,
such as AirView, enabling remote monitoring, over-the-air trouble shooting, and changing of device settings, U-Sleep
enabling automated patient coaching through a text, email, or interactive voice phone call and myAir, a patient engagement
application that provides sleep data and a daily score based on a user's previous night’s data.
PRODUCTS
DESCRIPTION
AirView
myAir
U-Sleep
A cloud-based system enabling remote monitoring and changing of patients’ device settings. AirView also makes it
easier to simplify workflows and collaborate more efficiently across the patient’s care network.
A personalized therapy management application for patients with sleep apnea providing support, education and
troubleshooting tools for increased patient engagement and improved compliance.
A compliance monitoring solution that enables HMEs to streamline their sleep programs to achieve better business and
patient outcomes.
Connectivity Module
A module providing a seamless cellular connection between our compatible ventilation devices (e.g., Astral, Stellar) and
our AirView™ system.
Propeller
Propeller's inhaler sensors track medication usage and pair with a companion smartphone application, giving people with
asthma or COPD a better understanding of their disease and promoting increased adherence to treatment. The Propeller
Provider Portal gives clinicians timely and accurate information they need to make better treatment decisions.
SaaS Products
Following multiple acquisitions, including Brightree in 2016, HEALTHCAREfirst and MatrixCare in 2018, and
MEDIFOX DAN in November 2022, we now provide out-of-hospital software products designed to support the
professionals and caregivers helping people stay healthy in the home or care setting of their choice. SaaS revenue
accounted for approximately 12%, 11%, and 12% of our net revenue in fiscal years 2023, 2022, and 2021, respectively.
PRODUCTS
Brightree solutions
Brightree enables out-of-hospital care organizations to improve their business performance and deliver better health
outcomes. As an industry-leading cloud-based healthcare IT company, Brightree provides solutions and services for
thousands of organizations in home medical equipment and pharmacy, orthotic and prosthetic, and home infusion.
DESCRIPTION
HEALTHCAREfirst
solutions
HEALTHCAREfirst offers electronic health record, or EHR, software, billing and coding services, and advanced
analytics that enable home health and hospice agencies to optimize their clinical, financial and administrative processes.
MatrixCare solutions
MatrixCare’s EHR software as a service solutions are used by skilled nursing and senior living providers, life plan
communities (CCRCs), and home health and hospice organizations to improve efficiencies and promote a better quality
of life for the people they serve.
MEDIFOX DAN solutions MEDIFOX DAN’s software solutions are used by out-of-hospital care providers in Germany, especially home health and
nursing home providers, and enable providers to achieve operating efficiencies and deliver better patient care and
outcomes.
Product Development and Clinical Trials
We have a strong track record of innovation in the sleep and respiratory care markets. In 1989, we introduced our first
CPAP device. Since then, we have been committed to an ongoing program of product advancement and development.
Currently, our product development and clinical trial efforts are focused on not only improving our current product
offerings and usability, but also expanding into new digital product applications.
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We continually seek to identify new applications of our technology for significant unmet medical needs. Sleep apnea is
associated with a number of symptoms beyond excessive daytime sleepiness, fatigue and irritability. Studies have
established a clinical association between untreated sleep apnea and systemic hypertension, diabetes, coronary artery
disease, stroke, atrial fibrillation, chronic heart failure, and mortality.
Across the sleep and respiratory care platforms, we support clinical trials in many countries including the United States,
Germany, Netherlands, France, Japan, the United Kingdom, Switzerland, China, Spain, Canada, Singapore, and Australia
to develop new clinical applications for our technology. We also continue to support some of the largest sleep apnea studies
in history by performing advanced statistical analyses on millions of real-world, de-identified, clinical data points collected
through our cloud-connected devices and patient engagement tools. These studies provide clinical insights around patient
management, device settings, and predictors of patient adherence that inform our product development efforts. Some of the
more recent real-world studies point to a link between PAP adherence and lower health care resource utilization.
We consult with physicians at major medical centers throughout the world to identify clinical and technological trends in
the treatment of sleep apnea, COPD, and the other conditions associated with these diseases. New product ideas are also
identified by our marketing staff, direct sales force, and clinicians.
Sales and Marketing
We currently market our products in more than 140 countries through a network of distributors and direct sales staff. We
attempt to tailor our marketing approach to each major geography, often based on regional awareness of sleep apnea as a
health problem, physician referral patterns, consumer preferences, and local reimbursement policies. See Note 13 –
Segment Information of the Notes to Consolidated Financial Statements (Part II, Item 8) for financial information about
our geographic areas.
United States, Canada, and Latin America. Our products are typically purchased by a home healthcare dealer who then
sells the products to the patient. The decision to purchase our products, as opposed to those of our competitors, is made or
influenced by one or more of the following individuals or organizations: prescribing practitioners; home healthcare dealers;
insurers (both private and public); and patients. In the United States, Canada, and Latin America, our sales and marketing
activities are conducted through a field sales organization made up of regional territory representatives, program
development specialists and regional sales directors. Our field sales organization markets and sells products to home
healthcare dealer branch locations throughout the United States, Canada, and Latin America.
We also directly educate physicians and sleep clinics about our products. Patients who are diagnosed with OSA or another
respiratory condition and prescribed our products are typically referred by the diagnosing physician or sleep clinic to a
home healthcare dealer to fill the prescription. The home healthcare dealer, in consultation with the referring practitioner,
will assist the patient in selecting the equipment, fit the patient with the appropriate mask and set the device pressure to the
prescribed level.
Our SaaS solutions are sold to providers of healthcare in various out-of-hospital settings. We market and sell our Brightree
business management software and service solutions to providers in the United States. Our primary markets are HME,
pharmacy, home infusion, orthotics and prosthetics. Our sales activities for Brightree products are conducted through a
sales organization made up of strategic account managers, sales engineers and sales directors. We develop, market, and sell
our MatrixCare care management and related ancillary solutions to providers in the U.S. and our primary customers are
senior living; skilled nursing; life plan communities; home health, home care, and hospice agencies as well as related
accountable care organizations. Our MatrixCare management solutions are primarily sold through direct sales and ancillary
solutions are sold both through direct sales and channel sellers.
Combined Europe, Asia, and other markets. We market our products in most major countries in combined Europe, Asia
and other geographies. We have wholly owned subsidiaries in Australia, Austria, China, Czech Republic, Denmark,
Finland, France, Germany, India, Ireland, Japan, Korea, Netherlands, New Zealand, Norway, Poland, Sweden, Switzerland,
Taiwan, Thailand, and the United Kingdom. We use a combination of our direct sales force and independent distributors to
sell our products in combined Europe, Asia, and other regions. We select independent distributors in each country based on
their knowledge of respiratory medicine and a commitment to sleep apnea therapy. In countries where we sell our products
direct, a local senior manager is responsible for direct national sales. In many countries, we sell our products to home
healthcare dealers or hospitals who then sell the products to the patients. In Germany, Australia, New Zealand, and South
Korea, we also operate home healthcare businesses, providing products and services directly to patients.
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We only sell our SaaS products in the United States and Germany.
Manufacturing
We operate a globally distributed manufacturing network designed to optimize quality, control costs, reduce time to market
for new product introduction, and generate supply chain resilience. Our manufacturing operations consist of specialist
component production as well as technical assembly and testing of our devices, masks, and accessories. Of the numerous
raw materials, parts and components purchased for our therapeutic and diagnostic sleep disorder products, many are
available from multiple vendors. We also purchase uniquely configured components from various suppliers, including
some who are single-source suppliers for us. Any reduction or halt in supply from one of these suppliers could limit our
ability to manufacture our products or devices until a replacement supplier is found and qualified. We generally
manufacture to our internal sales forecasts and fill orders as received. We strive for continuous improvement in
manufacturing processes to deliver year-on-year improvement in output, cost, and product quality. Each manufacturing site
and team are responsible for the quality of their product group and decisions are based on performance and quality
measures, including customer feedback.
The most disruptive effects of the COVID-19 pandemic are largely behind us. We continue to be impacted, however, by
supply constraints on certain raw materials and electronic components, including semiconductor chips. These constraints
have impacted and may continue to impact our ability to manufacture products in quantities necessary to satisfy customer
demand, which could negatively impact our results of operations. We are actively working to mitigate the impact of supply
constraints by multi-sourcing and qualifying alternate materials.
Our quality management system is based upon the requirements of ISO 9001, ISO 13485, FDA Quality System Regulation
for Medical Devices, European Medical Device Regulation (“MDR”), the Medical Device Directive (93/42/EEC) and other
applicable regulations for the markets in which we sell. Our main manufacturing sites are certified to ISO 13485 and are
audited at regular intervals by a Notified Body. Additionally, our Sydney, Tuas, San Diego, Atlanta, and Moreno Valley
sites are certified under the Medical Device Single Audit Program or MDSAP, an audit of medical device manufacturers’
quality management system to satisfy multiple regulatory requirements. MDSAP audits are conducted by a MDSAP
recognized auditing organization and can fulfill the needs of multiple regulatory jurisdictions (e.g., Australia, Brazil,
Canada, Japan, and the United States of America). Our Sydney manufacturing operation operates an Environmental
Management System (EMS) certified to ISO 14001:2015. We are progressively extending the EMS across our
manufacturing network.
Our main manufacturing facilities for ResMed-branded products are located in Tuas, Singapore; Sydney, Australia;
Chatsworth, California; Johor Bahru, Malaysia; and Atlanta, Georgia. The principal factory for our Curative-branded
products is in Suzhou, China. Our Narval-branded products are manufactured in Lyon, France. Refer to Item 2 for
additional details on these properties. We will continue to expand and balance volume across our network to meet scale,
cost, resilience, and environmental performance objectives, and to meet the needs of customers and patients.
Third-Party Coverage and Reimbursement
The cost of medical care in many of the countries in which we operate is funded in substantial part by government and
private insurance programs. In Germany and Korea, we receive payments directly from these payors. While we do not
generally receive direct payments for our products from payors in other countries, our success depends on the ability of
patients to obtain coverage and our customers to obtain adequate reimbursement from those payors.
In the United States, our products are purchased primarily by home healthcare dealers, health systems, or sleep clinics, who
invoice third-party payors directly for reimbursement. Domestic third-party payors include government payors such as
Medicare and Medicaid and commercial health insurance plans. These payors may deny coverage and reimbursement if
they determine that a device is not used in accordance with certain covered treatment methods, or is experimental, or not
deemed reasonable and necessary. The long-term trend towards cost-containment, through managed healthcare, or other
legislative proposals to reform healthcare, could control or significantly influence the purchase of healthcare services and
products and could result in lower prices for our products. In some foreign markets, such as France, Germany, and Japan,
government reimbursement is currently available for the purchase or rental of our products, subject to constraints such as
price controls or unit sales limitations. In Australia, China, and some other foreign countries, there is currently limited or
no reimbursement for devices that treat OSA.
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Healthcare reform in the United States continues to bring significant changes to the third-party payor landscape. The
DMEPOS Competitive Bidding Program was mandated by Congress through the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (MMA). In 2011, the Centers for Medicare & Medicaid Services, or CMS,
implemented the Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) competitive bidding
program, which included DME that we manufacture and develop, specifically, CPAP and respiratory assist devices (or
bilevel devices), and related supplies and accessories. CMS is required by law to recompete these contracts at least once
every three years and to roll out the competitive bidding process nationally or adjust prices in non-competitive bidding
areas to match competitive bidding prices. The implementation of the competitive bidding program has resulted in reduced
Medicare payment for CPAP and respiratory assist devices, and related supplies and accessories in both competitive
bidding areas and non-competitive bidding areas.
The last round of competitive bid contracts lapsed, effective January 1, 2019. CMS then removed 13 product categories,
including CPAP and respiratory assist devices (or bilevel devices), from the Round 2021 Competitive Bidding Program
competition. As a result, these products are currently subject to a temporary gap period during which any Medicare-
enrolled DMEPOS supplier may furnish DMEPOS items and services to patients. CMS stated in rulemaking that it will be
paying the single payment amounts established during the DMEPOS Competitive Bidding Program updated by an inflation
adjustment factor on an annual basis for products furnished in the competitive bidding areas. CMS will start bidding for the
next round of the DMEPOS Competitive Bidding Program after the agency completes the formal public notice and
comment rulemaking process.
In non-competitive bidding and non-rural areas, the Coronavirus Aid, Relief, and Economic Security (CARES) Act
mandated that the fee schedule amounts for certain items furnished in rural and non-contiguous non-competitive bidding
areas be based on a 50/50 blend of adjusted and unadjusted fee schedule amounts through the duration of the Public Health
Emergency (PHE). Through final rulemaking in December 2021, CMS finalized policy that they will continue paying
suppliers the 50/50 blend of adjusted and unadjusted fee schedule rates for furnishing items and services in rural and non-
contiguous areas regardless of the PHE.
The CARES Act also required payment in non-competitively bid areas other than rural or non-contiguous areas be based
on a 75/25 blend of adjusted and unadjusted fee schedule amounts through the duration of the PHE, which ended on May
11, 2023. The Consolidated Appropriations Act, 2023, requires that this 75/25 blended payment in non-competitively bid
areas other than rural or non-contiguous areas continue beyond the end of PHE, through December 31, 2023.
Other legislative changes have been proposed and adopted since the ACA was enacted. On August 2, 2011, the Budget
Control Act of 2011 was signed into law, which, among other things, resulted in reductions to Medicare payments to
providers of 2% per fiscal year, which went into effect on April 1, 2013 but were subject to a temporary suspension. The
Protecting Medicare and American Farmers From Sequester Cuts Act was signed into law December 10, 2021. The law
extended the 2% Medicare sequester moratorium through March 31, 2022, adjusted the sequester to 1% between April 1,
2022, and June 30, 2022, and reinstated the full 2% sequestration cut which began on July 1, 2022, and is extended through
the first six months of 2032. The payment reduction applicable to healthcare providers applies to the approved Medicare
payment amount, after the deductible and coinsurance are applied. The reduction in payment does not affect the 20%
coinsurance owed by the patient.
The legislative landscape is complex, and changes with the influence of one party or the other. We expect that the ACA,
these new laws and other healthcare reform measures that may be adopted in the future may result in additional reductions
in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional
downward pressure on the price that we receive for our products and services. Any reduction in reimbursement from
Medicare or other government programs may result in a similar reduction in payments from private payors. The
implementation of cost containment measures or other healthcare reforms may have a material adverse impact on our
revenues, profit margins, profitability, operating cash flows and results of operations.
Service and Warranty
We generally offer either one-year or two-year limited warranties on our devices. In some regions and for certain
customers we also offer extended warranties on our devices for one to three years in addition to our limited warranty.
Warranties on mask systems are typically 90 days. Our distributors either repair our products with parts supplied by us or
arrange shipment of products to our facilities for repair or replacement. We receive returns of our products from the field
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for various reasons. We believe that the level of returns experienced to date is consistent with levels typically experienced
by manufacturers of similar devices. We provide for warranties and returns based on historical data.
Competition
Global competition for sales of our products and services is intense. We believe that the principal competitive factors are
product features, value-added solutions, quality, reliability and price. Customer support, reputation and efficient
distribution are also important factors. We compete in various geographies, each with different competitors, and some of
our competitors are affiliates of our customers, which may make it difficult to compete with them.
Our primary Sleep and Respiratory Care competitors include Philips BV; Fisher & Paykel Healthcare Corporation Limited;
DeVilbiss Healthcare; Apex Medical Corporation; BMC Medical Co. Ltd.; React Health Corporation; and Lowenstein plus
regional and new-entrant manufacturers. Finally, our products compete with surgical procedures, nerve stimulation devices,
and dental appliances designed to treat OSA and other sleep apnea-related respiratory conditions. The development of new
or innovative procedures, devices, or therapies, such as pharmaceuticals, by others could result in our products becoming
obsolete or noncompetitive, which would harm our revenues and financial condition.
For our SaaS business, competition is also intense, rapidly evolving, and subject to changing technology, low barriers to
entry, shifting customer needs, and frequent introductions of new products and services. Many of our customers use
systems developed in-house to run their businesses. The development of new or innovative solutions by others could result
in our solutions becoming obsolete or noncompetitive, which would harm our revenues and financial condition.
Any product developed by us will have to compete for market acceptance and sales. An important factor in such
competition may be the timing of market introduction of competitive products and solutions. Accordingly, the speed with
which we can develop products and solutions, complete clinical testing and regulatory clearance processes, and provide
commercial supply of products and solutions to the market are important competitive factors. In addition, our ability to
compete will continue to be dependent on successfully protecting our patents and other intellectual property.
Patents and Proprietary Rights and Related Litigation
We rely on a combination of patents, designs, trademarks, trade secrets, copyrights, and non-disclosure agreements to
protect our proprietary technology and rights. Some of these patents, patent applications, and designs relate to significant
aspects and features of our products. We believe the combination of these rights, in aggregate, are of material importance to
each of our businesses. Through our various subsidiaries, as of the date of this report, we own or have licensed rights to
approximately 9,700 pending, allowed or granted patents and designs. Patents and designs have various statutory terms
based on the legislation in individual jurisdictions which may be subject to change. Of our patents, 619 U.S. patents and
1,472 foreign patents are due to expire in the next five years. We believe that the expiration of these patents will not have a
material adverse impact on our competitive position.
Litigation has been necessary in the past and may be necessary in the future to enforce patents issued to us, to protect our
rights, or to defend third-party claims of infringement by us of the proprietary rights of others. The defense and prosecution
of patent claims, including pending claims, as well as participation in other inter-party proceedings, can be expensive and
time-consuming, even in those instances in which the outcome is favorable to us. Patent laws regarding the enforceability
of patents vary from country to country. We have in the past, and may in the future, be required to license patents and other
intellectual property rights owned by other parties. Therefore, there can be no assurance that patent issues will be uniformly
resolved, or that local laws will provide us with consistent rights and benefits.
Government Regulations
FDA
Our products are subject to extensive regulation particularly as to safety, efficacy and adherence to FDA Quality System
Regulation, and related manufacturing standards. Medical device products are subject to rigorous FDA and other
governmental agency regulations in the United States and similar regulations of foreign agencies abroad. The FDA
regulates the design, development, research, preclinical and clinical testing, introduction, manufacture, advertising,
labeling, marking, packaging, marketing, distribution, import and export, and record keeping for such products, in order to
ensure that medical products distributed in the United States are safe and effective for their intended use. In addition, the
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FDA is authorized to establish special controls to provide reasonable assurance of the safety and effectiveness of most
devices. Non-compliance with applicable requirements can result in import detentions, fines, civil and administrative
penalties, injunctions, suspensions or losses of regulatory approvals, recall or seizure of products, operating restrictions,
refusal of the government to approve product export applications or allow us to enter into supply contracts, and criminal
prosecution.
Unless an exemption applies, the FDA requires that a manufacturer introducing a new medical device or a new indication
for use of an existing medical device obtain either a Section 510(k) premarket notification clearance, a premarket approval,
or PMA, or a de novo approval, and pay a user fee, before introducing it into the U.S. market. The type of marketing
authorization is generally linked to the classification of the device, as well as whether or not a similar or “predicate” device
exists to support a 510(k) application. The FDA classifies medical devices into one of three classes (Class I, II or III) based
on the degree of risk the FDA determines to be associated with a device and the level of regulatory control deemed
necessary to ensure the device’s safety and effectiveness. Certain SaaS applications may be classified as a medical device.
Our devices currently marketed in the United States are marketed pursuant to 510(k) pre-marketing clearances and are
either Class I or Class II devices. Certain of our SaaS products may be classified as medical devices requiring a pre-
marketing clearance or approval while other SaaS products may not be medical devices or will be commercialized under
FDA’s current policy of enforcement discretion. The process of obtaining a Section 510(k) clearance generally requires the
submission of performance data and may require clinical data, which in some cases can be extensive, to demonstrate that
the device is “substantially equivalent” to a predecessor device that was (a) legally marketed in the U.S. before the 1976
Medical Device Amendments that established the 510(k) pathway or (b) brought to market after 1976 pursuant to the
510(k) pathway. Such a predecessor device is referred to as “predicate device.” Devices that do not have such a predicate
are typically classified as Class III by default and are required to undergo the stringent PMA pathway that includes
provision of clinical evidence and trials. The PMA process, which is reserved for new devices that are not substantially
equivalent to any predicate device and for high-risk devices or those that are used to support or sustain human life, may
take several years and require the submission of extensive performance and clinical information. However, a sponsor may
apply to the FDA to reclassify devices that do not have predicates to Class I or II if the device is of low to moderate risk. If
the FDA grants the application, such a device is termed a “de novo” device and is evaluated through the somewhat more
flexible de novo approval pathway. As a result, FDA clearance and approval requirements may extend the development
process for a considerable length of time. In addition, in some cases, the FDA may require additional review by an advisory
panel, which can further lengthen the process. Finally, there may be instances where the products we sell as a result of an
acquisition are subject to further FDA review and clearance.
Medical devices can be marketed only for the indications for which they are cleared or approved. After a device has
received 510(k) clearance for a specific intended use, any change or modification that significantly affects its safety or
effectiveness, such as a significant change in the design, materials, method of manufacture or intended use, may require a
new or approval and payment of an FDA user fee. The determination as to whether or not a modification could
significantly affect the device’s safety or effectiveness is initially left to the manufacturer using available FDA guidance;
however, the FDA may review this determination to evaluate the regulatory status of the modified product at any time and
may require the manufacturer to cease marketing and recall the modified device until clearance or approval is obtained.
The manufacturer may also be subject to significant regulatory fines or penalties.
Any devices we manufacture and distribute pursuant to clearance or approval by the FDA are subject to pervasive and
continuing regulation by the FDA and certain state agencies. These include product listing and establishment registration
requirements, which help facilitate FDA inspections and other regulatory actions. As a medical device manufacturer, all of
our manufacturing facilities are subject to inspection on a routine basis by the FDA. We are required to adhere to
applicable regulations setting forth detailed cGMP requirements, as set forth in the QSR, which require, manufacturers,
including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance
procedures during all phases of the design and manufacturing process. Noncompliance with these standards can result in,
among other things, fines, injunctions, civil penalties, recalls or seizures of products, total or partial suspension of
production, refusal of the government to grant clearance or approval of devices, withdrawal of marketing approvals and
criminal prosecutions. We believe that our design, manufacturing and quality control procedures are in compliance with the
FDA’s regulatory requirements.
We must also comply with post-market surveillance regulations, including medical device reporting or MDR requirements
which require that we review and report to the FDA any incident in which our products may have caused or contributed to
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a death or serious injury. We must also report any incident in which our product has malfunctioned if that malfunction
would likely cause or contribute to a death or serious injury if it were to recur.
Labeling and promotional activities are subject to scrutiny by the FDA and, in certain circumstances, by the Federal Trade
Commission. Medical devices approved or cleared by the FDA may not be promoted for unapproved or uncleared uses,
otherwise known as “off-label” promotion. The FDA and other agencies actively enforce the laws and regulations
prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may
be subject to significant liability, including substantial monetary penalties and criminal prosecution.
Sales of medical devices outside the United States are subject to regulatory requirements that vary widely from country to
country.
EEA
In the European Economic Area, (which is comprised of the 27 member states of the European Union plus Norway, Iceland
and Liechtenstein), or EEA, medical devices need to comply with specific requirements. These requirements were
previously known as “Essential Requirements” under the former EU Medical Devices Directive (Council Directive 93/42/
EEC, or MDD) and are now defined “General Safety and Performance Requirements (GSPR)” under the new EU Medical
Devices Regulation (Regulation (EU) 2017/745, or MDR). While the requirements set forth in the MDR are generally
consistent with those laid out in the MDD (with a few exceptions), the GSPR are described more in detail compared to the
Essential Requirements. Compliance with the Essential Requirements (under the MDD) or the GSPR (under the MDR) is a
prerequisite to be able to affix the CE marking to medical devices, without which they cannot be marketed or sold in the
EEA. To demonstrate compliance with the Essential Requirements/GSPR and affix the CE marking, manufacturers of
medical devices must undergo a conformity assessment procedure, which varies according to the type of medical device
and its classification. Except for low-risk medical devices (Class I with no measuring function and which are not sterile),
where the manufacturer can issue an EC Declaration of Conformity based on a self-assessment of the conformity of its
products with the Essential Requirements/GSPR, a conformity assessment procedure requires the intervention of a Notified
Body, which is a third-party organization designated by a competent authority of an EEA country to conduct conformity
assessments. Depending on the relevant conformity assessment procedure, the Notified Body would audit and examine the
Technical File and the quality system for the manufacture, design and final inspection of the devices. The Notified Body
issues a CE Certificate of Conformity following successful completion of a conformity assessment procedure conducted in
relation to the medical device and its manufacturer and their conformity with the Essential Requirements/GSPR. This
Certificate entitles the manufacturer to affix the CE marking to its medical devices after having prepared and signed a
related EC Declaration of Conformity.
As a general rule, demonstration of conformity of medical devices and their manufacturers with the Essential
Requirements/GSPR must be based, among other things, on the evaluation of clinical data supporting the safety and
performance of the products during normal conditions of use. Specifically, a manufacturer must demonstrate that the device
achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse
events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims
made about the performance and safety of the device are supported by suitable evidence.
All manufacturers placing medical devices into the market in the EEA must comply with the EU Medical Device Vigilance
System. Under the MDR, incidents must be reported centrally in the European EUDAMED database (although transitional
provisions are in place until EUDAMED is fully functional), and manufacturers are required to take Field Safety Corrective
Actions, or FSCAs, to prevent or reduce a risk of death or serious deterioration in the state of health associated with the use
of a medical device that is already placed on the market. An incident is defined as any malfunction or deterioration in the
characteristics and/or performance of a device, as well as any inadequacy in the labeling or the instructions for use. The
MDR considers “serious incidents” those incidents which, directly or indirectly, led, might lead to or might have led to the
death of a patient or user or of other persons, a serious deterioration in their state of health, or a serious public health threat.
An FSCA may include the recall, modification, exchange, destruction or retrofitting of the device. FSCAs must be
communicated by the manufacturer or its legal representative to its customers and/or to the end users of the device through
Field Safety Notices. Where appropriate, our products commercialized in Europe are CE marked and classified as either
Class I or Class II.
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On April 5, 2017, the European Parliament passed the MDR, which repeals and replaces the MDD. Unlike directives,
which must be implemented into the national laws of the EEA member states, the regulations would be directly applicable
(i.e., without the need for adoption of EEA member State laws implementing them) in all EEA member states and are
intended to eliminate current differences in the regulation of medical devices among EEA member States. The MDR,
among other things, is intended to establish a uniform, transparent, predictable and sustainable regulatory framework across
the EEA for medical devices and ensure a high level of safety and health while supporting innovation. Regulation (EU)
2017/746 (IVDR), applicable as of May 26, 2022, provides for the regulatory framework applicable to in vitro diagnostic
medical devices.
The MDR was meant to become applicable three years after publication (in May 2020). However, on April 23, 2020, to
allow EEA national authorities, notified bodies, manufacturers and other actors to focus fully on urgent priorities related to
the COVID-19 pandemic, the European Council and Parliament adopted Regulation 2020/561, postponing the date of
application of the MDR by one year. The MDR thus became applicable on May 26, 2021. The MDR transitional provisions
allow the placing on the market of devices with a CE Certificate issued in accordance with the MDD until May 26, 2024,
under certain conditions. Moreover, the MDR provides that the following medical devices with a CE Certificate issued in
accordance with the MDD may continue to be made available on the market or put into service until May 26, 2025.
•
•
Devices placed on the market in compliance with the MDD prior to May 26, 2021; and
Devices placed on the market after May 26, 2021, benefiting from the described MDR transitional provisions.
The European Commission further extended provision of the MDR and IVDR through Regulation (EU) 2023/607, whereby
manufacturers and notified bodies are given sufficiently more time to carry out, in accordance with the MDR, the
conformity assessment of devices covered by a certificate or a declaration of conformity issued in accordance with
Directive 90/385/EEC or Directive 93/42/EEC. Moreover, the deletion of the ‘sell off’ date in the MDR and the IVDR aims
to prevent unnecessary disposal of safe devices. These provisions extend the transition period of devices through to
December 31, 2027 or December 31, 2028 depending on device risk classification.
The MDR, among other things:
•
•
•
•
•
strengthens the rules on placing devices on the market and reinforces surveillance once they are available;
establishes explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and
safety of devices placed on the market;
improves the traceability of medical devices throughout the supply chain to the end-user or patient through a
unique identification number;
sets up a central database to provide patients, healthcare professionals and the public with comprehensive
information on products available in the EU; and
strengthens rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an
additional check by experts before they are placed on the market.
We have received certification at several locations, including Sydney, Australia; San Diego, California; and Lyon, France.
We continue to transition our certification profile to meet the new MDR requirements.
Other regulatory bodies
Our devices are sold in multiple countries and often need to be registered with local regulatory bodies such as the
Therapeutic Goods Administration in Australia, Health Canada in Canada and CFDA in China.
Other Healthcare Laws
We are subject to a number of laws and regulations that may restrict our business practices, including, without limitation,
anti-kickback, false claims and transparency laws with respect to payments and other transfers of value made to physicians
and other healthcare providers. The government has interpreted these laws broadly to apply to the marketing and sales
activities of manufacturers and distributors like us.
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The federal Anti-Kickback Statute is a criminal statute that prohibits, among other things, persons or entities from
knowingly and willfully soliciting, receiving, offering or providing remuneration, directly or indirectly, in cash or in kind,
in exchange for or to induce either the referral of an individual for, or the purchase, lease, order or recommendation of, any
good, facility, item or service for which payment may be made, in whole or in part, under federal healthcare programs such
as Medicare and Medicaid. In addition, a person or entity does not need to have actual knowledge of this statute or specific
intent to violate it in order to have committed a violation. Due to the breadth of the federal Anti-Kickback Statute,
Congress set forth certain exceptions and authorized the Secretary of the Department of Health and Human Services to
issue regulations that set forth certain safe harbors to protect arrangements that while implicating the federal Anti-Kickback
Statute, would generally not cause harm to federal health care programs or patients. Satisfaction of all elements of a
particular Anti-Kickback Statute statutory exception or regulatory safe harbor will provide immunity from prosecution
under the Anti-Kickback Statute to the parties to such remunerative arrangement. Failure to satisfy all elements of an
exception or safe harbor, however, does not necessarily lead to a violation of the federal Anti-Kickback Statute. Because
the Anti-Kickback Statute is an intent-based statute, each arrangement is subject to a facts and circumstances analysis to
determine whether the requisite intent under the statute is present.
The federal civil False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or
causing to be presented, a false or fraudulent claim for payment or approval to the federal government or knowingly
making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal
government. A claim includes “any request or demand” for money or property presented to the U.S. government. The civil
False Claims Act also applies to false submissions that cause the government to be paid less than the amount to which it is
entitled, such as a rebate. Intent to deceive is not required to establish liability under the civil False Claims Act. In addition,
a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or
fraudulent claim for purposes of the federal civil False Claims Act. Private suits filed under the civil False Claims Act,
known as qui tam actions, can be brought by individuals on behalf of the government. These individuals may share in any
amounts paid by the entity to the government in fines, judgement, or settlement.
The federal Civil Monetary Penalties Law prohibits, among other things, the offering or transferring of remuneration to a
Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the
beneficiary’s selection of a particular provider, practitioner, or supplier of items or services reimbursable by Medicare or a
state healthcare program, unless an exception applies.
Additionally, there has been a recent trend of increased federal and state regulation of payments and transfers of value
provided to healthcare professionals or entities.
The federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, biologicals, and medical
devices or supplies that require premarket approval by or notification to the FDA, and for which payment is available under
Medicare, Medicaid or the Children’s Health Insurance Program, to report annually to CMS information related to (i)
payments and other transfers of value to teaching hospitals, physicians (as defined by statute) and, as of 2022, physician
assistants, nurse practitioners and other practitioners, and (ii) ownership and investment interests held by such providers
and their immediate family members. Applicable manufacturers are required to submit annual reports to CMS.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created federal criminal statutes that
prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any
healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a
healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and
willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent
statement in connection with the delivery of or payment for healthcare benefits, items or services. Like the Anti-Kickback
Statute, a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them in
order to have committed a violation.
Also, many U.S. states and countries outside the U.S. have similar fraud and abuse statutes or regulations that may be
broader in scope and may apply regardless of payor, in addition to items and services reimbursed under government
programs. In addition, in the U.S., certain states also mandate implementation of commercial compliance programs, impose
restrictions on device manufacturer marketing practices and/or require the tracking and reporting of gifts, compensation
and other remuneration to healthcare professionals and entities.
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FCPA and Other Anti-Bribery and Anti-Corruption Laws
The U.S. Foreign Corrupt Practices Act, or FCPA, prohibits U.S. corporations and their representatives from offering,
promising, authorizing or making payments to any foreign government official, government staff member, political party
or political candidate in an attempt to obtain or retain business abroad. The scope of the FCPA would include interactions
with certain healthcare professionals in many countries, either directly or through our contracted distributors. Our present
and future business has been and will continue to be subject to various other U.S. and foreign laws, rules and/or
regulations. The shifting commercial compliance environment and the need to build and maintain robust systems to comply
with different compliance or reporting requirements in multiple jurisdictions increase the possibility that a healthcare
company may fail to comply fully with one or more of these requirements. If our operations are found to be in violation of
any of the health regulatory laws described above or any other laws that apply to us, we may be subject to penalties,
including potentially significant criminal, civil and administrative penalties, damages, fines, disgorgement, imprisonment,
exclusion from participation in government healthcare programs, additional integrity oversight and reporting obligations,
contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, and the curtailment
or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of
operations.
Data Privacy and Security Laws
Under HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or
HITECH, which we collectively refer to as HIPAA, the Department of Health and Human Services, or HHS, has issued
regulations, including the HIPAA Privacy, Security and Breach Notification Rules, to protect the privacy and security of
protected health information, or PHI, used or disclosed by covered entities and their business associates, as well as covered
subcontractors. HIPAA also regulates standardization of data content, codes and formats used in health care transactions
and standardization of identifiers for health plans and providers. Penalties for violations of HIPAA regulations include
significant civil and criminal penalties for each violation. In addition to federal privacy and security regulations, there are a
number of state laws governing confidentiality and security of personal information that are applicable to our business. For
example, the California Consumer Privacy Act, effective on January 1, 2020, as amended by the California Privacy Rights
Act (collectively, the “CCPA”), was the first of a series of state privacy laws designed to provide California residents
expanded rights with regard to their personal information. The CCPA provides for civil penalties for violations, as well as a
private right of action for data breaches that is expected to increase data breach litigation. Although the law includes
limited exceptions, including for “protected health information” maintained by a covered entity or business associate, it
may regulate or impact our processing of personal information depending on the context. CCPA’s implementation
standards and enforcement practices are likely to remain uncertain for the foreseeable future, and the CCPA may increase
our compliance costs and potential liability. Further, since 2020, approximately ten U.S. states have adopted—and other
states are proposing to adopt— their own comprehensive data protection laws, with varying implementation dates starting
January 1, 2023. The application of the laws and the requirements contained therein is not uniform. Although the majority
of the state laws exclude business data, we may be required to undertake additional compliance investment and potentially
change our business processes to evaluate the application of these laws to our business and to implement compliance
measures. If we are subject to or affected by HIPAA or other domestic privacy and data protection laws, any liability from
failure to comply with the requirements of these laws could adversely affect our financial condition.
In addition to these comprehensive data protection laws, to date, at least three states have adopted laws specifically
regulating the collection, use, storage, and disclosure of biometrics, and additional states are seeking to regulate—and/or
restrict the use of—biometrics in the future. Certain of our products use, or permit the use of, information that could be
classified as a biometric under these or other laws. If we are subject to or affected by these or other laws, we may be
required to modify the way in which we make available our product or certain features of our product. We also may be
required to implement additional practices or processes or otherwise invest our resources to comply with these and other
regulations.
In some of our operations, such as those involving our cloud-based software digital health applications, we are a business
associate under HIPAA and therefore are required to comply with the HIPAA Security Rule, Breach Notification Rule and
certain provisions of the HIPAA Privacy Rule, as well as the terms of our business associate agreements that we enter into
with our covered entity customers, and are subject to significant civil and criminal penalties for failure to do so.
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In addition, the European Union General Data Protection Regulation, or GDPR, went into effect in May 2018. The United
Kingdom has adopted the UK General Data Protection Regulation ("UK GDPR"); the EU GDPR and UK GDPR are herein
referred to as GDPR. The GDPR imposes stringent data protection requirements for the processing of personal data,
whenever GDPR applies to such processing, such as processing in the European Economic Area (EEA), or in the UK. The
GDPR increased our obligations, for example, by requiring more robust disclosures to individuals, strengthening individual
data rights, instituting procedures for mandatory data breach notifications to regulators within a short timeframe, limiting
retention periods and secondary use of information (including for research purposes), increasing requirements pertaining to
health data and pseudonymized (i.e., key-coded) data and imposing additional obligations when we contract with third
party processors in connection with the processing of the personal data. The GDPR also imposes strict rules on the transfer
of personal data out of the EEA or UK, including to the United States; recent legal developments in Europe have created
complexity regarding such transfers of personal data from the EEA to the United States. For example, the European
Commission and the United Kingdom have adopted new standard contractual clauses under which entities may transfer
personal data from the European Union and the United Kingdom, which we may be required to implement. We must
evaluate such data transfers on a case-by-case basis to ensure continued permissibility under current law and consistent
with new standard contractual clauses. GDPR provides that EEA member states and the UK may make their own further
laws and regulations limiting the processing of genetic, biometric or health data, which could limit our ability to use and
share personal data or could cause our costs to increase and harm our business and financial condition. EEA member states
and the UK may modify or impose additional conditions to be able to transmit electronic marketing communications.
Failure to comply with the requirements of GDPR and the applicable national data protection and marketing laws of the
EEA member states may result in fines of up to €20.0 million or up to 4% of the total worldwide annual turnover of the
preceding financial year, whichever is higher, and other administrative penalties as well as individual claims for
compensation.
Further, the UK GDPR also provides for significant data protection fines up to the greater of £17.5 million or 4% of global
turnover.
Numerous other state, federal and foreign laws, including consumer protection laws and regulations, govern the collection,
dissemination, use, access to, confidentiality and security of patient health information and other personal information. In
addition, Congress and some states are considering new laws and regulations that further protect the privacy and security of
medical records or medical information. All 50 states have passed laws regulating the actions that a business must take if it
experiences a data breach, such as prompt disclosure to affected customers. The Federal Trade Commission, or FTC, and
states’ Attorneys General have also brought enforcement actions and prosecuted some data breach cases as unfair and/or
deceptive acts or practices under the FTC Act. In addition to data breach notification laws, some states have enacted
statutes and rules requiring businesses to reasonably protect certain types of personal information they hold or to otherwise
comply with certain specified data security requirements for personal information. These laws may apply directly to our
business or indirectly by contract when we provide services to other companies. The FTC also has focused on the use of
online tracking technologies that collect personal information as well as artificial intelligence (AI) and the potential bias in
AI as one of its enforcement and policy priorities, including the use of both online tracking tools and AI in the healthcare
space. Our services and products may use AI now or in the future. We intend to continue to comprehensively protect all
personal information and to comply with all applicable laws regarding the protection of such information, including with
respect to online tracking, as well as to monitor developments regarding the use of AI that could be relevant to our products
and services.
Compliance with these and any other applicable privacy and data security laws and regulations is a rigorous and time-
intensive process, and we may be required to put in place additional mechanisms ensuring compliance with the new data
protection rules. If we fail to comply with any such laws or regulations, we may face significant fines and penalties that
could adversely affect our business, financial condition and results of operations, damage our reputation and customers’
trust.
Human Capital
At ResMed, our mission of transforming patient care in the out-of-hospital setting through innovative solutions and
technology-driven integrated care is achieved by our commitment and efforts in fostering an inclusive environment that
creates a strong sense of belonging, which unlocks the potential, passion and creativity of our people. Our Code of
Business Conduct & Ethics, Diversity and Inclusion practice and other practices and policies on workplace behavior,
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discrimination and harassment, health and safety, and employee benefits reinforce this environment and facilitate talent
attraction, retention, and development.
Our board of directors and its committees provide general oversight on a range of our human capital management efforts.
These efforts include general oversight of our environmental, social, governance, and sustainability efforts as addressed
below.
As of June 30, 2023, we had approximately 10,140 employees or contingent workers, of which approximately 4,310 were
employed in cost of sales activities including areas such as warehousing and manufacturing, 1,750 in research and
development and 4,080 in sales, marketing and administration. Of our employees and contingent workers, approximately
3,490 (34%) were located in the United States, Canada and Latin America, 2,740 (27%) in Asia, 1,590 (16%) in Australia
and 2,320 (23%) in Europe. We believe that the success of our business will depend, in part, on our ability to attract and
retain diverse, qualified personnel. ResMed’s global turnover rate for fiscal year 2023 was approximately 14%.
Diversity & Inclusion
Our values of belonging, inclusion and diversity for success (“BIDS”) enable us to unlock the strengths of our people to
transform healthcare and improve lives. We are in our third year of having a BIDS team that strives to impact and develop
our people, patients, and products. Our objectives include expanding our community of Employee Resource Groups
(“ERGs”) globally, creating and delivering learning and development opportunities, identifying new and different sourcing
practices and measurements, emphasizing accessibility and disability inclusion, promoting inclusive leadership behaviors
and practices, and exploring new community partnerships.
Employee Resource Groups. We continue to place a high value on inclusion-building initiatives that create opportunities
around cultural awareness and social learnings. We maintain our ERGs worldwide and currently have seventeen groups
that engage over 1,000 people with weekly learning opportunities: African and African-American, Asia-American-Pacific
Islander, LGBTQIA+, Hispanic and Latin, Veterans, Women in San Diego, Women in Sales, Women in SaaS, Women in
Canada, Women in Tech Sydney, Parents, Caregivers, All Abilities, Australian Indigenous, and Mosaics in Ireland,
Germany and France that collectively focus on local and culturally appropriate inclusion-building needs.
Learning & Development of D&I Values. Our leaders across the organization work directly with our Head of Diversity
and Inclusion to identify and provide relevant trainings for their teams. This year, the team launched a BIDS Certificate
program focusing on inclusive leadership and psychological safety. The team also delivered many trainings on allyship, the
value of diversity on teams, and disability etiquette.
Strategic Inclusive Development. A Global Council of employees meets every two months to review and provide
feedback on BIDS developments and programs as well as sharing feedback on ongoing diversity and inclusion efforts.
Further, our Employee Handbook has been updated to formalize certain inclusivity initiatives. Additionally, we have
assessed the language within the source code of our products and platforms to ensure that it is inclusive and does not
perpetuate racist stereotypes.
Leadership Engagement. C-Suite Executives, alongside the COO and CEO, receive quarterly updates on diversity data
and inclusion-building efforts. Additionally, the CEO and senior leaders across the organization have diversity and
inclusion objectives embedded in their annual and quarterly goals. Each ERG/Mosaic is supported by an Executive
Sponsor.
Sourcing & Recruiting. We train our recruiting workforce on the value of hiring diverse teams and diversity sourcing
strategies, and we partner with external organizations that develop and supply diverse talent. In addition, we are building a
diversity dashboard to better understand our metrics around applicants, candidates, and the current workforce. In 2022, we
launched campaigns focused on collecting internal data and gathering diverse prospective candidates.
Talent Development & Retention
Building and strengthening our talent pipeline is imperative to our success. Our approach to talent and performance is
designed to ensure employees and managers have regular feedback conversations about performance goals and
development, to enable our high-performance culture, and to create an environment where we achieve our strategy.
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At ResMed, we have specific career and development pathways designed for specific roles in consultation with operational
management, human resources, and learning and development specialists. We provide online courses that are role-specific,
with formal tracking of employee completion and performance. Online and face-to-face courses on operational compliance
issues are developed and delivered in-house. Online compliance courses on ResMed’s Code of Business Conduct and
Ethics, diversity and inclusion, US Foreign Corrupt Practices Act, and health & safety are developed by our Learning and
Development team with external subject-matter advisers.
Compensation & Benefits
Our compensation philosophy is to reinforce and align with our mission, business strategy, and financial needs as we grow.
We provide market-competitive compensation and benefits based on benchmarking surveys we conduct regularly for all
position levels against relevant peer companies. Our annual and long-term incentive packages are linked directly to
business and individual performance, with a balance of short- and long-term financial and strategic objectives. We have an
employee stock purchase plan, in addition to formal service awards internally. Eligibility for non-salary benefits such as
salary continuance, life insurance, health insurance, and similar benefits, follows local regulations and practices. Equal
opportunity and pay equity are integral to our pay philosophy, and we have processes in place to identify and address any
potential pay equity issues where appropriate.
Employee Health & Safety
We believe maintaining a physically safe and mentally healthy working environment is essential in supporting our people
to deliver their best work. We employ global standards to provide the framework for our locally compliant, integrated and
effective health and safety management systems which enable the capability, autonomy & accountability of the leaders to
manage local sites. Our approach is to place health & safety as a positive contributor to innovation, continuous
improvement and business sustainability through focusing on making work easier, which in turn makes work safer and
more efficient.
Employee Engagement & Wellbeing
We regularly seek employee feedback and sentiment about our workplace through global engagement surveys that enable
our people to comment on matters related to their employment experience. We openly share the survey results throughout
the company and encourage teams to put in place action plans at global and local levels to address priority issues. Where
benchmarks are available, our results are evaluated against comparable peer groups.
We are committed to improving the quality of life of our employees and their families. Our health and wellbeing programs
differ by country and may include company-sponsored health insurance, retirement savings plans, sleep apnea screening
and treatment, smoking cessation, gym membership discounts, seasonal flu vaccinations, mental health assistance, and
many other programs to drive healthy behaviors and awareness. Additionally, we have implemented a company-wide
ResMed Day - taken at the employee's election - for our people to focus on mental, social and physical health.
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Item 1A
Before deciding to purchase, hold or sell our common stock, you should carefully consider the risks described below in
addition to the other cautionary statements and risks described elsewhere, and the other information contained, in this
Report and in our other filings with the SEC, including our subsequent reports on Forms 10-Q and 8-K. The risks and
uncertainties described below 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.
Summary of Risk Factors
The following is a summary of the risks that are more fully described in the following section below:
Risks Related to Our Business and Industry
•
•
•
•
Our inability to compete successfully in our markets may harm our business.
Consolidation in the health care industry could have an adverse effect on our revenues and results of operations.
Global macroeconomic conditions, including inflation, supply chain disruptions, and fluctuations in foreign
currency exchange rates, could continue to adversely affect our operations and profitability.
Our business, financial condition and results of operations could continue to be harmed by the effects of outbreaks
of COVID-19 or similar public health crises.
• We are subject to various risks relating to international activities that could affect our overall profitability.
•
Our products are the subject of clinical trials conducted by us, our competitors, or other third parties, the results of
which may be unfavorable, or perceived as unfavorable, and could have a material adverse effect on our business,
financial condition, and results of operations.
• We are subject to potential product liability claims that may exceed the scope and amount of our insurance
coverage, which would expose us to liability for uninsured claims.
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Our intellectual property may not protect our products, and/or our products may infringe on the intellectual
property rights of third parties.
If we fail to source, develop and retain key employees our business may suffer.
Our leverage and debt service obligations could adversely affect our business.
Risks Related to Manufacturing, IT Systems, Commercial Operations and Plans for Future Growth
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Disruptions in the supply of components from our suppliers could result in a significant reduction in sales and
profitability.
• We are increasingly dependent on information technology systems and infrastructure.
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Actual or attempted breaches of security, unauthorized disclosure of information, attacks such as denial of service,
or the perception that personal and/or other sensitive or confidential information in our possession is not secure,
could result in a material loss of business, substantial legal liability or significant harm to our reputation.
• We may not be able to realize the anticipated benefits from acquisitions, which could adversely affect our
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operating results.
If we are unable to support our continued growth, our business could suffer.
Our business depends on our ability to market effectively to dealers of home healthcare products and sleep clinics.
Our SaaS business depends substantially on customers entering into, renewing, upgrading and expanding their
agreements for cloud services, term licenses, and maintenance and support agreements with us. Any decline in our
customer renewals, upgrades or expansions could adversely affect our future operating results.
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If our SaaS products fail to perform properly or if we fail to develop enhancements, we could lose customers,
become subject to service performance or warranty claims and our market share could decline.
If there are interruptions or performance problems associated with our technology or infrastructure, our existing
SaaS customers may experience service outages, and our new customers may experience delays in the deployment
of our platforms.
Climate change and related natural disasters, or other events beyond our control, could negatively impact our
business operations and financial condition.
Risks Related to Non-Compliance with Laws, Regulations and Healthcare Industry Shifts
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Healthcare reform may have a material adverse effect on our industry and our results of operations.
Government and private insurance plans may not adequately reimburse our customers for our products, which
could result in reductions in sales or selling prices for our products.
• We are subject to various risks relating to our compliance with fraud and abuse laws and transparency laws
relating to our interactions with our customers, health care providers, and patients, which could subject us to
government investigation, litigation, or other penalties to the extent our activities or relationships are found not to
comply, and could result in changes in our business operations that could harm our ability to successfully market
and sell our products and services.
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Our use and disclosure of personal information, including health information, is subject to federal, state and
foreign privacy and security regulations, and our failure to comply with those regulations or to adequately secure
the information we hold could result in significant liability or reputational harm.
Our business activities are subject to extensive regulation, and any failure to comply could have a material adverse
effect on our business, financial condition, or results of operations.
Product sales, introductions or modifications may be delayed or canceled as a result of FDA regulations or similar
foreign regulations, which could cause our sales and profits to decline.
• We are subject to substantial regulation related to quality standards applicable to our manufacturing and quality
processes. Our failure to comply with these standards could have an adverse effect on our business, financial
condition, or results of operations.
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Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns
could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or
modified products from being developed, cleared or approved or commercialized in a timely manner or at all,
which could negatively impact our business.
Off-label marketing of our products could result in substantial penalties.
Laws regulating consumer contacts could adversely affect our business operations or create liabilities.
Tax laws, regulations, and enforcement practices are evolving and may have a material adverse effect on our
results of operations, cash flows and financial position.
• We are subject to tax audits by various tax authorities in many jurisdictions.
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Environmental, social, and corporate governance (ESG) issues may have an adverse effect on our business,
financial condition and results of operations and reputation.
Risks Related to the Securities Markets and Ownership of Our Common Stock
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Our quarterly operating results are subject to fluctuation for a variety of reasons.
Delaware law and provisions in our charter could make it difficult for another company to acquire us.
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Risk Factors
Item 1A
Risks Related to Our Business and Industry
Our inability to compete successfully in our markets may harm our business. The markets for our products, which
encompass Sleep and Respiratory Care products and SaaS offerings, are highly competitive and are characterized by
frequent product improvements and evolving technology. Our ability to compete successfully depends, in part, on our
ability to develop, manufacture and market innovative new products and enhance existing products. For our Sleep and
Respiratory Care business, the development of innovative new products by our competitors or the discovery of alternative
treatments or potential cures for the conditions that our products treat could make our products noncompetitive or obsolete.
Current competitors, new entrants, academics, and others currently may be developing, or may develop, new devices,
alternative treatments or cures, and targeted or indirect pharmaceutical solutions to the conditions our products treat that
could provide better features, clinical outcomes or economic value than those that we currently offer or subsequently
develop. For SaaS, the market for business management software is highly competitive, rapidly evolving, subject to
changing technology, with low barriers to entry, shifting customer needs and frequent introductions of new products and
services. Many prospective customers have invested substantial personnel and financial resources to create, implement and
integrate their current business management software into their operations and, therefore, may be reluctant or unwilling to
change from their current in-house solution or provider to one of our platforms or products.
Additionally, some of our competitors have greater financial, research and development, manufacturing and marketing
resources than we do. The past several years have seen a trend towards consolidation in the healthcare industry and in the
markets for our products. Industry consolidation could result in greater competition if our competitors combine their
resources, if our competitors are acquired by other companies with greater resources than ours, or if our competitors
become affiliated with customers of ours. Conversely, the health care space is attractive to many companies, particularly
new entrants interested in developing digital health models to compete with offerings of more established companies like
us. Additionally, one of our competitors, Philips, has an ongoing product recall. We cannot predict the timing or nature of
their substantial return to the market or the impact to our business, financial condition, and results of operations.
Continuing competition could increase pressure on us to reduce the selling prices of our products or could cause us to
increase our spending on research and development and sales and marketing. If we are unable to develop innovative new
products, maintain competitive pricing, enhance existing products, and offer products that consumers perceive to be as
good as those of our competitors, our sales and gross margins could decrease which would harm our business.
Consolidation in the health care industry could have an adverse effect on our revenues and results of operations.
Many home health care dealers and out-of-hospital health providers are consolidating, which may result in greater
concentration of purchasing power. Numerous initiatives and reforms by legislators, regulators, and third-party payers to
curb the rising cost of healthcare have catalyzed a consolidation of aggregate purchasing power within the markets in
which we sell our products. As the health care industry consolidates, competition to provide goods and services to industry
participants may become more intense. These industry participants may try to use their market power to negotiate price
concessions or reductions for medical devices and components produced by us. If we are forced to reduce our prices
because of consolidation in the health care industry, our revenues may decrease and our consolidated earnings, financial
condition, and/or cash flows may suffer.
Global macroeconomic conditions, including inflation, supply chain disruptions, and fluctuations in foreign
currency exchange rates, could continue to adversely affect our operations and profitability. The global decline in
economic conditions, geopolitical instability, and other macroeconomic factors, including inflation, supply chain
disruptions, interest rate and foreign currency rate fluctuations, and volatility in the capital markets could continue to
negatively impact our business, financial condition, and results of operations. The growth of our business and demand for
our products are affected by changes in the health of the overall global economy. Deterioration in the global economic
environment may cause decreased demand for our products which could result in lower product sales, lower prices for our
products, and reduced reimbursement rates by third-party payers, while increasing the cost of operating our business.
Macroeconomic conditions have impacted our global supply chain, primarily through constraints on raw materials and
electronic components. These constraints on raw materials and electronic components are also impacting companies
outside of our direct industry, which has and continues to result in a competitive supply environment causing higher costs,
requiring us to commit to minimum purchase obligations as well as make upfront payments to our suppliers. These
disruptions have impacted and may continue to impact our ability to produce and supply products in quantities necessary to
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satisfy customer demand, which could negatively impact our results of operations. These highly competitive and
constrained supply chain conditions are increasing our cost of sales, which has and may continue to adversely impact our
profitability.
Global economic conditions have also impacted foreign currency exchange rates relative to the U.S. dollar. Although the
majority of our net sales and cash generation have been made in the U.S., as our business in markets outside of the U.S.
continues to increase, our exposure to foreign currency exchange risk related to our foreign sales and operations will
increase. Fluctuations in the rate of exchange between the U.S. dollar and foreign currencies, primarily the Australian
Dollar, Singapore Dollar, Euro, Chinese Yuan, and Canadian Dollar, have had and could continue to have an adverse effect
on our financial results, including our net sales, margins, gains and losses, as well as on the values of our assets and
liabilities.
Our business, financial condition and results of operations could continue to be harmed by the effects of outbreaks
of COVID-19 or similar public health crises. We are subject to risks associated with public health threats, including
outbreaks associated with COVID-19 and its variants, which have had and may continue to have an adverse impact on
certain aspects of our business. While most countries have removed or reduced the restrictions initially implemented in
response to COVID-19, the extent to which the COVID-19 pandemic or another public health crisis impact our business,
results of operations, and financial condition will depend on future developments which are highly uncertain and are
difficult to predict. These developments include, but are not limited to, future resurgences of the virus and its variants,
actions taken to contain the virus or address its impact, the timing, distribution, and efficacy of vaccines and other
treatments, and the imposition of government lockdowns, quarantine and physical distancing requirements.
We are subject to various risks relating to international activities that could affect our overall profitability. We
manufacture substantially all of our products outside the United States and sell a significant portion of our products in non-
U.S. markets. Sales in combined Europe, Asia and other markets accounted for approximately 36% and 37% of our net
revenues in the years ended June 30, 2023 and June 30, 2022, respectively. Our sales and operations outside of the U.S. are
subject to several difficulties and risks that are separate and distinct from those we face in the U.S., including:
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fluctuations in currency exchange rates;
economic conditions such as inflation or recession;
tariffs and other trade barriers;
compliance with foreign medical device manufacturing regulations;
difficulty in enforcing agreements and collecting receivables through foreign legal systems;
reduction in third-party payor reimbursement for our products;
inability to obtain import licenses;
the impact of public health epidemics/pandemics on the global economy;
the impact of global geopolitical tensions and/or conflicts;
changes in trade policies and in U.S. and foreign tax policies;
possible changes in export or import restrictions;
the modification or introduction of other governmental policies with potentially adverse effects; and
limitations on our ability under local laws to protect our intellectual property.
In December 2021, the United States adopted the Uyghur Forced Labor Prevention Act (“UFLPA”) which creates a
rebuttable presumption that any goods, wares, articles, and merchandise mined, produced, or manufactured in whole or in
part in the Xinjiang Uyghur Administrative Region of China or that are produced by certain entities are prohibited from
importation into the United States and are not entitled to entry. These import restrictions came into effect in June 2022.
Additionally, the military conflict between Russia and Ukraine has resulted in the implementation of sanctions by the U.S.
and other governments against Russia and has caused significant volatility and disruptions to the global markets. While we
are not presently aware of any direct impacts these restrictions have had on our suppliers’ supply chains, disruptions
resulting from the conflict in Ukraine and the UFLPA may materially and negatively impact our suppliers’ ability to obtain
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a sufficient supply of raw materials necessary to meet the quantity and/or timing of our product demands. Further, it is not
possible to predict the short- and long-term implications of this conflict, which could include but are not limited to further
sanctions, uncertainty about economic and political stability, increases in inflation rate and energy prices, cyber-attacks,
supply chain challenges and adverse effects on currency exchange rates and financial markets. We are continuing to
monitor the situation in China, Ukraine, and globally as well as assess its potential impact on our business. Although our
sales into Russia and Ukraine did not constitute a material portion of our total revenue in fiscal year 2023, further
escalation of geopolitical tensions, or new geopolitical tensions, could have a broader impact that expands into other
markets where we do business, which could adversely affect our business and/or our supply chain, business partners or
customers in the broader region.
Any of the above factors may have a material adverse effect on our ability to increase or maintain our sales or otherwise
have a material adverse impact on our business, financial condition, and results of operations.
Our products are the subject of clinical trials conducted by us, our competitors, or other third parties, the results of
which may be unfavorable, or perceived as unfavorable, and could have a material adverse effect on our business,
financial condition, and results of operations. As a part of the regulatory process to obtain marketing clearance for new
products and new indications for existing products, or for other reasons, we conduct and participate in numerous clinical
trials with a variety of study designs, patient populations, and trial endpoints. We, our competitors, or other third parties
may also conduct clinical trials involving our commercially marketed products. The results of clinical trials may be
unfavorable or inconsistent with previous findings, or could identify safety signals associated with our products. Current or
future clinical trials may not meet primary endpoints, may reveal disadvantages of our products and solutions for various
markets we address, or could generate unfavorable or inconsistent clinical data. Clinical data, or the market’s or regulatory
bodies’ perception of the clinical data, may adversely impact our ability to obtain product clearances or approvals, and our
position in, and share of, the markets in which we participate. Moreover, if these clinical trials identify serious safety issues
associated with our marketed products, potentially adverse consequences could result, including that regulatory authorities
could withdraw clearances or approvals of our products, we could be required to halt the marketing and sales of our
products or recall our products, we could be required to update our product labeling with additional warnings, we could be
sued and held liable for harm caused to patients, and our reputation may suffer. Any of these could have a material adverse
impact on our business, financial condition, and results of operations.
We are subject to potential product liability claims that may exceed the scope and amount of our insurance
coverage, which would expose us to liability for uninsured claims. We are subject to potential product liability claims as
a result of the design, manufacture and marketing of medical devices. Any product liability claim brought against us, with
or without merit, could result in the increase of our product liability insurance rates. In addition, we would have to pay any
amount awarded by a court in excess of our policy limits. Our insurance policies have various exclusions, and thus we may
be subject to a product liability claim for which we have no insurance coverage, in which case, we may have to pay the
entire amount of any award. We cannot assure you that our insurance coverage will be adequate or that all claims brought
against us will be covered by our insurance and we cannot assure you that we will be able to obtain insurance in the future
on terms acceptable to us or at all. A successful product liability claim brought against us in excess of our insurance
coverage, if any, may require us to pay substantial amounts, which could harm our business. We may also be affected by
the product recalls and other risks associated with the products of our competitors if customers and patients are uncertain if
issues affecting our competitors may also affect us.
Our intellectual property may not protect our products, and/or our products may infringe on the intellectual
property rights of third parties. We rely on a combination of owned and licensed patents, trade secrets and non-
disclosure agreements to protect our intellectual property. Our success depends, in part, on our ability to obtain and
maintain U.S. and foreign patent protection for our products, their uses and our processes to preserve our trade secrets and
to operate without infringing on the proprietary rights of third-parties. We have in the past and may in the future be
required to license patents and other intellectual property rights owned by other parties. We have a number of pending
patent applications, and we do not know whether any patents will issue from any of these applications. We do not know
whether any of the claims in our issued patents or pending applications will provide us with any significant protection
against competitive products or otherwise be commercially valuable. Legal standards regarding the validity of patents and
the proper scope of their claims are still evolving, and there is no consistent law or policy regarding the valid breadth of
claims. Additionally, there may be third-party patents, patent applications and other intellectual property held by entities
much larger than us, that are relevant to our products and technology which are not known to us and that block or compete
with our products. We face the risks that:
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third-parties will infringe our intellectual property rights;
our non-disclosure agreements will be breached;
we will not have adequate remedies for infringement;
our trade secrets will become known to or independently developed by our competitors;
third-parties will be issued patents that may prevent the sale of our products or require us to license and pay fees
or royalties in order for us to be able to market some of our products; or
third-parties may assert patents and other intellectual property rights against our suppliers, causing interruption in
supply of components or other essential inputs.
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Litigation may be necessary to enforce patents issued to us, to protect our proprietary rights, or to defend third-party claims
that we have infringed on proprietary rights of others. If the outcome of any litigation, proceeding or claim brought against
us were adverse, we could be subject to significant liabilities to third-parties, could be required to obtain licenses from
third-parties, could be forced to design around the patents at issue or could be required to cease sales of the affected
products. If we become involved in any intellectual property litigation, we may be required to pay substantial damages,
including but not limited to treble damages, attorneys’ fees and costs, for past infringement if it is ultimately determined
that our products infringe a third party’s intellectual property rights. Even if infringement claims against us are without
merit, defending a lawsuit takes significant time, may be expensive and may divert management’s attention from other
business matters. In addition, a license may not be available at all or on commercially viable terms, and we may not be able
to redesign our products to avoid infringement. Additionally, the laws regarding the enforceability of patents vary from
country to country, and we cannot provide assurance that any patent issues we face will be uniformly resolved, or that local
laws will provide us with consistent rights and benefits.
If we fail to source, develop and retain key employees our business may suffer. Our ability to compete effectively
depends on our ability to source and retain key employees, including people in senior management, sales, marketing,
technology, and research and development positions. Competition for top talent in the healthcare, technology and SaaS
industries can be intense. Our ability to recruit and retain such talent will depend on a number of factors, including hiring
practices of our competitors, compensation and benefits, flexibility regarding virtual and hybrid work arrangements, work
location, work environment, industry economic conditions, and corporate culture. If we cannot effectively recruit, develop
and retain qualified employees to drive our strategic goals, our business could suffer.
Our leverage and debt service obligations could adversely affect our business. As of June 30, 2023, our total
consolidated debt was $1.4 billion and we may incur additional indebtedness in the future. Our indebtedness could have
adverse consequences, including:
• making it more difficult to satisfy our financial obligations;
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increasing our vulnerability to adverse economic, regulatory and industry conditions;
limiting our ability to compete and our flexibility in planning for, or reacting to, changes in our business and the
industry in which we operate;
limiting our ability to borrow additional funds for working capital, capital expenditure, acquisitions and general
corporate or other purposes; and
exposing us to greater interest rate risk.
Our debt service obligations will require us to use a portion of our operating cash flow to pay interest and principal in
indebtedness, which could impede our growth. Our ability to make payments on, and to refinance, our indebtedness, and to
fund capital expenditures will depend on our ability to generate cash in the future. This is subject to general economic,
financial, competitive, legislative, regulatory, and other factors, many of which are beyond our control.
Risks Related to Manufacturing, IT Systems, Commercial Operations and Plans for Future Growth
Disruptions in the supply of components from our suppliers could result in a significant reduction in sales and
profitability. We purchase configured components for our devices from various suppliers, including some who are single-
source suppliers for us. Disruptions to our suppliers may limit our ability to manufacture our devices in a timely or cost-
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effective manner, which could result in a significant reduction in sales and profitability. We cannot assure you that a
replacement supplier would be able to configure its components for our devices on a timely basis or, in the alternative, that
we would be able to reconfigure our devices to integrate the replacement part. A reduction, delay or halt in supply while a
replacement supplier reconfigures its components, or while we reconfigure our devices for the replacement part, would
limit our ability to manufacture our devices in a timely or cost-effective manner, which could result in a significant
reduction in sales and profitability. We cannot assure you that our inventories would be adequate to meet our production
needs during any prolonged interruption of supply.
In particular, a global semiconductor supply shortage has had and continues to have wide-ranging effects across multiple
industries, and it has impacted suppliers that incorporate semiconductors into the parts they supply to us. High demand and
shortages of supply have adversely affected and could materially adversely affect our ability to obtain sufficient quantities
of semiconductors and electronic components on commercially reasonable terms or at all. While we have entered into
agreements for the supply of many components, there can be no assurance we will be able to extend or renew these
agreements on similar terms or that suppliers will fulfill their commitments under existing agreements. Furthermore, in
order to secure such necessary components, we may be obligated to purchase them at prices that are higher than those
available in the current market and/or may incur significant price increases from these suppliers in the future. In addition,
we have and may continue to be required to commit to greater purchase volumes and/or make prepayments to our
suppliers. Purchase obligations, extended lead times, and decreased availability of key components may also cause an
adverse effect on our financial condition or results of operations. Delays in our ability to produce and deliver our devices
could cause our customers to purchase alternative products from our competitors.
In response to the global semiconductor supply shortage, we expanded our global offering of devices to include Card-to-
Cloud (C2C) versions of our prior model AirSense 10 and AirCurve 10 offerings that do not incorporate a communications
module. We introduced C2C models to address the growing backlog of patients waiting for therapy with our devices during
and after the COVID-19 pandemic. Because C2C devices do not include communications capability they are not as
appealing to our customers creating a risk that we will be forced to liquidate inventory of those devices as communications
modules become available for our AirSense 10 and AirSense 11 devices.
Additionally, substantial increases in product demand, including in response to a product recall by one of our competitors,
Philips, have resulted and could continue to result in higher costs for materials and components, and increased expenditures
for freight and other expenses, which have and could continue to negatively impact our profit margins. If supply constraints
continue, our ability to meet increased demand and our corresponding ability to sell affected products may be materially
reduced. Alternatively, the reintroduction of products by Philips could lead to reduced demand for our products.
We are increasingly dependent on information technology systems and infrastructure. Our technology systems are
potentially vulnerable to breakdown or other interruption by fire, power loss, system malfunction, unauthorized access and
other events. Likewise, data privacy breaches by employees and others with both permitted and unauthorized access to our
systems may pose a risk that sensitive data may be exposed to unauthorized persons or to the public, or may be
permanently lost. While we have invested heavily in the protection of data and information technology and in related
training, there can be no assurance that our efforts will prevent significant breakdowns, breaches in our systems or other
cyber incidents that could have a material adverse effect upon the reputation, business, operations or financial condition of
the company. In addition, significant implementation issues may arise as we continue to consolidate and outsource certain
computer operations and application support activities.
Actual or attempted breaches of security, unauthorized disclosure of information, attacks such as denial of service,
or the perception that personal and/or other sensitive or confidential information in our possession is not secure,
could result in a material loss of business, substantial legal liability or significant harm to our reputation. Despite the
implementation of security measures, our internal computer and information technology systems and those of our vendors
and customers are vulnerable to attack and damage from computer viruses, malware, denial of service attacks, unauthorized
access, or other harm, including from threat actors seeking to cause disruption to our business. We face risks related to the
protection of information that we maintain—or engage a third-party to maintain on our behalf—including unauthorized
access, acquisition, use, disclosure, or modification of such information. Cyberattacks are increasing in their frequency,
sophistication and intensity and have become increasingly difficult to detect. Cyberattacks could include the deployment of
harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability
and threaten the confidentiality, integrity and availability of information. A material cyberattack or security incident could
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cause interruptions in our operations and could result in a material disruption of our business operations, damage to our
reputation, financial condition, results of operations, cash flows and prospects.
We receive, collect, process, use and store a large amount of information from our clients, our patients and our own
employees, including personal information, protected health and other sensitive and confidential information. This data is
often accessed by us through transmissions over public and private networks, including the Internet. The secure
transmission of such information over the Internet and other mechanisms is essential to maintain confidence in our
information technology systems. We have implemented security measures, technical controls and contractual precautions
designed to identify, detect and prevent unauthorized access, alteration, use or disclosure of our clients’, patients’ and
employees’ data. However, the techniques used in these attacks change frequently and may be difficult to detect for periods
of time and we may face difficulties in anticipating and implementing adequate preventative measures. We may face
increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working
remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. Beyond external criminal
activity, systems that access or control access to our services and databases may be compromised as a result of human
error, fraud or malice on the part of employees or third parties, or may result from accidental technological failure. Because
the techniques used to circumvent security systems can be highly sophisticated and change frequently, often are not
recognized until launched against a target and may originate from less regulated and remote areas around the world, we
may be unable to proactively address all possible threats or implement adequate preventive measures for all situations.
If threat actors are able to circumvent or breach our security systems, they could steal any information located therein or
cause serious and potentially long-lasting disruption to our operations. Security breaches or attempts thereof could also
damage our reputation and expose us to a risk of monetary loss and/or litigation, fines and sanctions. We also face risks
associated with security breaches affecting third parties that conduct business with us or our clients and others who interact
with our data. While we maintain insurance that covers certain security incidents, we may not carry appropriate insurance
or maintain sufficient coverage to compensate for all potential liability.
We are subject to diverse laws and regulations relating to data privacy and security, including HIPAA and European data
privacy laws. Complying with these numerous and complex regulations is expensive and difficult, and failure to comply
with these regulations could result in regulatory scrutiny, fines, civil liability or damage to our reputation. In addition, any
security breach or attempt thereof could result in liability for stolen assets or information, additional costs associated with
repairing any system damage, incentives offered to clients or other business partners to maintain business relationships
after a breach, and implementation of measures to prevent future breaches, including organizational changes, deployment
of additional personnel and protection technologies, employee training and engagement of third-party experts and
consultants. Additionally, the costs incurred to remediate any security incident could be substantial. In addition, on July 26,
2023, the SEC issued a new proposed rule intended to enhance and standardize disclosures regarding cybersecurity risk
management, strategy, governance and cybersecurity incident reporting, which will require us to develop additional
policies and procedures to comply with these new rules and provide additional disclosure on our Annual Report on Form
10-K for the fiscal year ended June 30, 2024.
We cannot assure you that any of our third-party service providers with access to our, or our clients, patients and/or
employees’ personally identifiable and other sensitive or confidential information will not experience security breaches or
attempts thereof, which could have a corresponding effect on our business.
We may not be able to realize the anticipated benefits from acquisitions, which could adversely affect our operating
results. Part of our growth strategy includes acquiring businesses consistent with our commitment to innovation in
developing products for the diagnosis and treatment of sleep apnea and respiratory care as well as our SaaS business. For
example, we acquired MatrixCare in November 2018, Propeller Health in January 2019, and MEDIFOX DAN in
November 2022. The success of our acquisitions depends, in part, on our ability to successfully integrate the business and
operations of the acquired companies. Additionally, our management may have their attention diverted while trying to
integrate these businesses. If we are not able to successfully integrate the operations, we may not realize the anticipated
benefits of the acquisitions fully or at all, or may take longer to realize than expected. Acquisitions involve numerous risks
and could create unforeseen operating difficulties and expenditures. There can be no assurance that any of the acquisitions
we make will be successful or will be, or will remain, profitable.
Moreover, we have recorded intangible assets, including goodwill, in connection with our acquisitions. At least on an
annual basis, we must evaluate whether facts and circumstances indicate any impairment of the intangible assets’ values.
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The qualitative and quantitative analysis used to test goodwill is dependent upon various considerations and assumptions,
including macroeconomic conditions, industry and market characteristics, projections of acquired companies’ future
revenue, discount rates, and expectations of future cash flows. While we have made such assumptions in good faith and
believe them to be reasonable, the assumptions may turn out to be materially inaccurate, including for reasons beyond our
control. Changes in such assumptions may cause a change in circumstances indicating that the carrying value of intangible
assets may be impaired. Consequently, we may be required to record a significant charge to earnings in the financial
statements during the period in which any impairment of intangible assets is determined.
If we are unable to support our continued growth, our business could suffer. As we continue to grow, the complexity
of our operations increases, placing greater demands on our management. Our ability to manage our growth effectively
depends on our ability to implement and improve our financial and management information systems on a timely basis and
to effect other changes in our business including the ability to monitor and improve manufacturing systems, information
technology, and quality and regulatory compliance systems, among others. Unexpected difficulties during expansion, the
failure to attract and retain qualified employees, the failure to successfully replace or upgrade our management information
systems, the failure to manage costs or our inability to respond effectively to growth or plan for future expansion could
cause our growth to stop. If we fail to manage our growth effectively and efficiently, our costs could increase faster than
our revenues and our business results could suffer.
Our business depends on our ability to market effectively to dealers of home healthcare products and sleep clinics.
We market our products primarily to home healthcare dealers and to sleep clinics that diagnose OSA and other sleep
disorders, as well as to non-sleep specialist physician practices that diagnose and treat sleep disorders. We believe that
these groups play a significant role in determining which brand of product a patient will use. The success of our business
depends on our ability to market effectively to these groups to ensure that our products are properly marketed and sold by
these third-parties.
We have limited resources to market to physicians, sleep clinics, home healthcare dealer branch locations and to the non-
sleep specialists, most of whom use, sell or recommend several brands of products. We are limited under applicable fraud
and abuse laws in the ways in which we market and sell to customers and patients. In addition, home healthcare dealers
have experienced price pressures as government and third-party reimbursement has declined for home healthcare products,
and home healthcare dealers are requiring price discounts and longer periods of time to pay for products purchased from
us. We cannot assure you that physicians will continue to prescribe our products, or that home healthcare dealers or
patients will not substitute competing products when a prescription specifying our products has been written.
We have expanded our marketing activities in some markets to target the population with a predisposition to sleep-
disordered breathing as well as primary care physicians and various medical specialists. We cannot assure you that these
marketing efforts will be successful in increasing awareness or sales of our products.
Our SaaS business depends substantially on customers entering into, renewing, upgrading and expanding their
agreements for cloud services, term licenses, and maintenance and support agreements with us. Any decline in our
customer renewals, upgrades or expansions could adversely affect our future operating results. We typically enter
into term-based agreements for our licensed on-premises offerings, cloud services, and maintenance and support services,
which customers have discretion to renew or terminate at the end of the initial term. In order for us to improve our
operating results, it is important that new customers enter into renewable agreements, and our existing customers renew,
upgrade and expand their term-based agreements when the initial contract term expires. Our customers have no obligation
to renew, upgrade or expand their agreements with us after the terms have expired. Our customers’ renewal, upgrade and
expansion rates may decline or fluctuate as a result of a number of factors, including their satisfaction or dissatisfaction
with our offerings, our pricing, the effects of general economic conditions, competitive offerings or alterations or
reductions in our customers’ spending levels. If our customers do not renew, upgrade or expand their agreements with us or
renew on terms less favorable to us, our revenues may decline.
If our SaaS products fail to perform properly or if we fail to develop enhancements, we could lose customers,
become subject to service performance or warranty claims and our market share could decline. Our SaaS operations
are dependent upon our ability to prevent system interruptions and, as we continue to grow, we will need to devote
additional resources to improving our infrastructure in order to maintain the performance of our products and solutions.
The applications underlying our SaaS products are inherently complex and may contain material defects or errors, which
may cause disruptions in availability or other performance problems. We have from time to time found defects in our
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products and may discover additional defects in the future that could result in data unavailability, unauthorized access to,
loss, corruption or other harm to our customers’ data. While we implement bug fixes and upgrades as part of our regularly
scheduled system maintenance, we may not be able to detect and correct defects or errors before implementing our
products and solutions. Consequently, we or our customers may discover defects or errors after our products and solutions
have been deployed. If we fail to perform timely maintenance, or if customers are otherwise dissatisfied with the frequency
and/or duration of our maintenance services and related system outages, our existing customers could elect not to renew
their contracts, delay or withhold payment, or potential customers may not adopt our products and solutions and our brand
and reputation could be harmed. In addition, the occurrence of any material defects, errors, disruptions in service or other
performance problems with our software could result in warranty or other legal claims against us and diversion of our
resources. The costs incurred in addressing and correcting any material defects or errors in our software and expanding our
infrastructure and architecture in order to accommodate increased demand for our products and solutions may be
substantial and could adversely affect our operating results. Further, if we fail to innovate or adequately invest in new
technologies, we could lose our competitive position in the markets that we serve. To the extent that we fail to introduce
new and innovative products, or such products are not accepted in the market or suffer significant delays in development,
our financial results may suffer. An inability, for technological or other reasons, to successfully develop and introduce new
products on a timely basis could reduce our growth rate or otherwise have an adverse effect on our business.
If there are interruptions or performance problems associated with our technology or infrastructure, our existing
SaaS customers may experience service outages, and our new customers may experience delays in the deployment of
our platforms. We depend on services from various third parties as well as our own technical operations infrastructure to
distribute our SaaS products via the Internet. If a service provider fails to provide sufficient capacity to support our
platform or otherwise experiences service outages, such failure could interrupt our customers’ access to our service, which
could adversely affect their perception of our platform’s reliability and our revenues. Any disruptions in these services,
including as a result of actions outside of our control, would significantly impact the continued performance of our SaaS
products. In the future, these services may not be available to us on commercially reasonable terms, or at all. Any loss of
the right to use any of these services could result in decreased functionality of our SaaS products until equivalent
technology is either developed by us or, if available from another provider, is identified, obtained and integrated into our
infrastructure.
To meet our business needs, we must maintain sufficient excess capacity in our operations infrastructure to ensure that our
SaaS products are accessible. Design and mechanical errors, spikes in usage volume and failure to follow system protocols
and procedures could cause our systems to fail, resulting in interruptions in our SaaS products. Any interruptions or delays
in our service, whether or not caused by our products, or as a result of third-party error, our own error, natural disasters or
security breaches, whether accidental or willful, could harm our relationships with customers and cause our revenue to
decrease and/or our expenses to increase.
Any of the above circumstances or events may harm our reputation, cause customers to terminate their agreements with us,
impair our ability to obtain contract renewals from existing customers, impair our ability to grow our customer base, result
in the expenditure of significant financial, technical and engineering resources, subject us to financial penalties and
liabilities under our service level agreements, and otherwise harm our business, results of operations and financial
condition.
Climate change and related natural disasters, or other events beyond our control, could negatively impact our
business operations and financial condition. Natural disasters and other business disruptions could adversely affect our
business and financial condition, and global climate change could result in certain types of natural disasters occurring more
frequently or with more intense effects. The impacts of climate change may include physical risks (such as frequency and
severity of extreme weather conditions), social and human effects (such as population dislocations or harm to health and
well-being), compliance costs and transition risks, shifts in market trends and other adverse effects. Such impacts may
disrupt parties in our supply chain, our customers, and our operations. For example, if a natural disaster strikes our
manufacturing facilities, we will be unable to manufacture our products for a substantial amount of time and our sales and
profitability will decline. Our facilities and the manufacturing equipment we use to produce our products would be costly
to replace and could require substantial lead-time to repair or replace. In the event our facilities were affected by natural or
man-made disasters, we could be forced to rely on third-party manufacturers. Although we believe we possess adequate
insurance for the disruption of our business from causalities, such insurance may not be sufficient to cover all of our
potential losses and may not continue to be available to us on acceptable terms, or at all.
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In addition, the increasing concern over climate change has resulted and may continue to result in more legal and
regulatory requirements designed to mitigate the effects of climate change on the environment, including regulating
greenhouse gas emissions, alternative energy policies and sustainability initiatives. If such laws or regulations are more
stringent than current legal or regulatory requirements, we may experience increased compliance burdens and costs to meet
the regulatory obligations.
Risks Related to Non-Compliance with Laws, Regulations and Healthcare Industry Shifts
Healthcare reform may have a material adverse effect on our industry and our results of operations. In March 2010,
the ACA was signed into law in the United States. The ACA made changes, effective over time, that significantly impacted
the healthcare industry, including medical device manufacturers. One of the principal purposes of the ACA was to expand
health insurance coverage to millions of Americans who were uninsured. The ACA required adults not covered by an
employer or government-sponsored insurance plan to maintain health insurance coverage or pay a penalty, a provision
commonly referred to as the individual mandate.
The ACA also contained a number of provisions designed to generate the revenues necessary to fund the coverage
expansions. This included new fees or taxes on certain health-related industries, including medical device manufacturers.
Beginning in 2013, entities that manufacture, produce or import medical devices were required to pay an excise tax in an
amount equal to 2.3% of the price for which such devices are sold in the United States. This excise tax was applicable to
our products that are primarily used in hospitals and sleep labs, which includes the ApneaLink, VPAP Tx and certain
Respiratory Care products. Through a series of legislative amendments, the tax was suspended beginning in 2016, and
permanently repealed effective January 1, 2020. In addition to the competitive bidding changes discussed above, the ACA
also included, among other things, directions to develop organizations that are paid under a new payment methodology for
voluntary coordination of care by groups of providers, such as physicians and hospitals, and the establishment of a new
Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical
effectiveness research. The increased funding and focus on comparative clinical effectiveness research, which compares
and evaluates the risks and benefits, clinical outcomes, effectiveness and appropriateness of products, may result in lower
reimbursements by payors for our products and decreased profits to us.
Other federal legislative changes have been proposed and adopted since the ACA was enacted. These changes included an
aggregate reduction in Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013. The
CARES Act, which was signed into law in March 2020 and subsequently amended, suspended the payment reductions
from May 1, 2020 through December 31, 2020, and extended the sequester by one additional year, through 2030. In
addition, on January 2, 2013, the American Taxpayer Relief Act of 2012, was signed into law, which, among other things,
further reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period
for the government to recover overpayments to providers from three to five years.
The full impact on our business of the ACA and other new laws is uncertain. Nor is it clear whether other legislative
changes will be adopted, if any, or how such changes would affect the demand for our products. Future actions by the
administration and the U.S. Congress including, but not limited to, repeal or replacement of the ACA could have a material
adverse impact on our results of operations or financial condition. Additionally, all or a portion of the ACA and related
subsequent legislation may be modified, repealed or otherwise invalidated through other judicial challenge. On June 17,
2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without
specifically ruling on the constitutionality of the ACA. Prior to the Supreme Court’s decision, President Biden issued an
executive order to initiate a special enrollment period for purposes of obtaining health insurance coverage through the ACA
marketplace, which began on February 15, 2021 and remained open through August 15, 2021. The executive order also
instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to
healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work
requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through
Medicaid or the ACA. It is unclear how other healthcare reform measures of the Biden administration or other efforts, if
any, to challenge, repeal or replace the ACA will impact the ACA or our business.
Various healthcare reform proposals have also emerged at the state level within the United States. The ACA as well as
other federal and/or state healthcare reform measures that may be adopted in the future, singularly or in the aggregate,
could have a material adverse effect on our business, financial condition and results of operations.
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Government and private insurance plans may not adequately reimburse our customers for our products, which
could result in reductions in sales or selling prices for our products. Our ability to sell our products depends in large
part on the extent to which coverage and adequate reimbursement for our products will be available from government
health administration authorities, private health insurers and other organizations. These third-party payers are increasingly
challenging the prices charged for medical products and services and can, without notice, deny or reduce coverage for our
products or treatments that may include the use of our products. Therefore, even if a product is approved for marketing, we
cannot make assurances that coverage and reimbursement will be available for the product, that the reimbursement amount
will be adequate or that the reimbursement amount, even if initially adequate, will not be subsequently reduced. For
example, in some markets, such as Spain, France and Germany, government coverage and reimbursement are currently
available for the purchase or rental of our products but are subject to constraints such as price controls or unit sales
limitations. In other markets, such as Australia, there is currently limited or no reimbursement for devices that treat sleep
apnea conditions. As we continue to develop new products, those products will generally not qualify for coverage and
reimbursement until they are approved for marketing, if at all.
In the United States, we sell our products primarily to home healthcare dealers, health systems and sleep clinics.
Reductions in reimbursement to our customers by third-party payers, if they occur, may have a material impact on our
customers and, therefore, may indirectly affect our pricing and sales to, or the collectability of receivables we have from,
those customers. A development negatively affecting reimbursement stems from the Medicare competitive bidding
program mandated by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). Under the
program, our customers who provide DME must compete to offer products in designated competitive bidding areas, or
CBAs. We cannot predict the impact the competitive bidding program and the developments in the competitive bidding
program will have on our business and financial condition. If changes are made to this program in the future, it could affect
amounts being recovered by our customers.
In addition, our products are the subject of periodic studies by third party agencies, including the Agency for Healthcare
Research and Quality (AHRQ) in the United States, intended to review the comparative effectiveness of different
treatments of the same illness. In October 2022, the AHRQ concluded that randomized controlled clinical trials do not
provide sufficient evidence that CPAP affects long-term clinically important outcomes. We believe that the AHRQ
methodology was too restrictive, that retrospective and prospective observational studies should have been included, that
real world evidence should have been considered, and that CPAP therapy does have long-term positive effects on health
outcomes. Although the results of comparative effectiveness studies are not intended to mandate any reimbursement
policies for public or private payers, it is not clear what, if any, effect such research will have on the sales of our products.
To date, the AHRQ assessment has not impacted CMS or private payor reimbursement. Decreases in third-party
reimbursement for our products or a decision by a third-party payer to not cover our products as a result of a third-party
study could have a material adverse effect on our sales, results of operations and financial condition.
We are subject to various risks relating to our compliance with fraud and abuse laws and transparency laws
relating to our interactions with our customers, health care providers, and patients, which could subject us to
government investigation, litigation, or other penalties to the extent our activities or relationships are found not to
comply, and could result in changes in our business operations that could harm our ability to successfully market
and sell our products and services. We are subject to various risks relating to our compliance with fraud and abuse laws
and transparency laws relating to our interactions with our customers, health care providers, and patients, which could
subject us to government investigation, litigation, or other penalties to the extent our activities or relationships are found
not to comply, and could result in changes in our business operations that could harm our ability to successfully market and
sell our products and services We are subject to healthcare fraud and abuse regulation and enforcement by federal, state and
foreign governments, which could significantly impact our business. We also are subject to foreign fraud and abuse laws,
which vary by country.
In the United States, the laws that may affect our ability to operate include, but are not limited to:
•
the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and
willfully soliciting, receiving, offering, or paying remuneration, directly or indirectly, in cash or in kind, in
exchange for or to induce either the referral of an individual for, or the purchase, lease, order or recommendation
of, any good, facility, item or service for which payment may be made, in whole or in part, under federal
healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge
of this statute or specific intent to violate the Anti-Kickback Statute itself to have committed a violation. The U.S.
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•
•
•
•
•
government has interpreted this law broadly to apply to the marketing and sales activities of manufacturers and
distributors like us. Violations of the federal Anti-Kickback Statute may result in significant civil monetary
penalties for each violation, plus up to three times the remuneration involved. Violations of the Federal Anti-
Kickback Statute can also result in significant criminal penalties and imprisonment;
federal civil and criminal false claims laws, including the False Claims Act, and civil monetary penalty laws, that
prohibit, among other things, knowingly presenting, or causing to be presented, claims for payment or approval to
the federal government that are false or fraudulent, knowingly making a false statement material to an obligation
to pay or transmit money or property to the federal government or knowingly concealing or knowingly and
improperly avoiding or decreasing an obligation to pay or transmit money or property to the federal government.
These laws may apply to manufacturers and distributors who provide information on coverage, coding, and
reimbursement of their products to persons who do bill third-party payors. In addition, the government may assert
that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes
a false or fraudulent claim for purposes of the federal civil False Claims Act. Violations can result in debarment,
suspension or exclusion from participation in government healthcare programs, including Medicare and Medicaid.
When an entity is determined to have violated the federal civil False Claims Act, the government may impose
significant civil fines and penalties for each false claim, plus treble damages, and exclude the entity from
participation in Medicare, Medicaid and other federal healthcare programs.
HIPAA, which created federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit
program or making false statements relating to healthcare matters. A person or entity does not need to have actual
knowledge of these statutes or specific intent to violate them to have committed a violation;
the federal Physician Sunshine Act requirements under the ACA, which impose reporting and disclosure
requirements on device and drug manufacturers for any “transfer of value” made or distributed by certain
manufacturers of drugs, devices, biologics, and medical supplies to physicians (including doctors, dentists,
optometrists, podiatrists and chiropractors), teaching hospitals, non-physician practitioners such as nurse
practitioners, physician assistants, clinical nurse specialists, certified nurse anesthetists, anesthesiology assistants
and certified nurse midwives, and ownership and investment interests held by physicians and their immediate
family members;
federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and
activities that potentially harm customers; and
state and foreign law equivalents of each of the above federal laws, such as state anti-kickback and false claims
laws that may apply to items or services reimbursed by any third-party payor, including commercial insurers; state
laws that require device companies to comply with the industry’s voluntary compliance guidelines and the
relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that may be
made to healthcare providers and other potential referral sources; state laws that require device manufacturers to
report information related to payments and other transfers of value to physicians and other healthcare providers or
marketing expenditures.
The scope and enforcement of these laws are uncertain and subject to rapid change in the current environment of healthcare
reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have
recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a
number of investigations, prosecutions, convictions and settlements in the healthcare industry. Responding to
investigations can be time-and resource-consuming and can divert management’s attention from the business. Additionally,
as a result of these types of investigations, healthcare providers and entities may face litigation or have to agree to
settlements that can include monetary penalties and onerous compliance and reporting requirements as part of a consent
decree or corporate integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an
adverse effect on our business.
If our operations are found to be in violation of any of the laws described above or any other governmental regulations that
apply to us now or in the future, we may be subject to penalties, including civil and criminal penalties, damages, fines,
disgorgement, exclusion from governmental health care programs, additional compliance and reporting obligations,
imprisonment and the curtailment or restructuring of our operations, any of which could adversely affect our ability to
operate our business and our financial results.
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In December 2019, we entered into a settlement agreement with the U.S. Department of Justice and the U.S. Attorneys’
Offices for the District Court of South Carolina, the Southern District of California, the Northern District of Iowa and the
Eastern District of New York. The agreement resolved five lawsuits originally brought by whistleblowers under the qui
tam provisions of the False Claims Act and allegations that we: (a) provided DME companies with free telephone call
center services and other free patient outreach services that enabled these companies to order resupplies for their patients
with sleep apnea, (b) provided sleep labs with free and below-cost positive airway pressure masks and diagnostic machines,
as well as free installation of these machines, (c) arranged for, and fully guaranteed the payments due on, interest-free loans
that DME supplies acquired from third-party financial institutions for the purchase of our equipment, and (d) provided non-
sleep specialist physicians free home sleep testing devices referred to as “ApneaLink.” We agreed with the government to
civilly resolve these matters for a payment of $39.5 million ($37.5 million to the federal government and $2 million to the
various states) and we incurred additional fees and administrative costs that typically accompany such a resolution
amounting to $1.1 million. The specific allegations and the resolution of those allegations are contained in the Company’s
settlement agreement with the adverse parties. The total final costs relating to these matters was $40.6 million.
Contemporaneous with the civil settlement, we also entered into a five-year Corporate Integrity Agreement, or CIA, with
the Department of Health and Human Services Office of Inspector General. The CIA required, among other things, that we
implement additional controls around our product pricing and sales and that we conduct internal and external monitoring of
our arrangements with referrals sources. The settlement agreement with the government and the CIA could result in
reputational harm or the curtailment or restructuring of our operations, any of which could materially adversely affect our
financial results and our ability to operate our business. In addition, our failure to comply with our obligations under the
CIA could result in monetary penalties and our exclusion from participating in federal healthcare programs. The costs
associated with compliance with the CIA, or any liability or consequences associated with its breach, could have an adverse
effect on our operations, liquidity and financial condition.
Our use and disclosure of personal information, including health information, is subject to federal, state and foreign
privacy and security regulations, and our failure to comply with those regulations or to adequately secure the
information we hold could result in significant liability or reputational harm. The appropriate privacy and security of
personal information whether stored, maintained, received or transmitted electronically or in paper form is a key regulatory
issue in the United States and abroad. While we strive to comply with all applicable privacy and security laws and
regulations, as well as our own posted privacy policies, legal standards for privacy, including but not limited to
“unfairness” and “deception,” as enforced by the FTC and state attorneys general, continue to evolve and any failure or
perceived failure to comply may result in proceedings or actions against us by government entities or others, or could cause
us to lose audience and customers, which could have a material adverse effect on our business. Recently, there has been an
increase in public awareness of privacy issues in the wake of revelations about the activities of various government
agencies and in the number of private privacy-related lawsuits filed against companies. Concerns about our practices with
regard to the collection, use, disclosure, security or deletion of personal information or other privacy-related matters, even
if unfounded and even if we are in compliance with applicable laws, could damage our reputation and harm our business.
Numerous foreign, federal and state laws and regulations govern collection, dissemination, use and confidentiality of
personally identifiable health information, including (i) state privacy and confidentiality laws (including state laws
requiring disclosure of breaches); (ii) HIPAA; and (iii) European and other foreign data protection laws, including the EU
GDPR and the UK GDPR.
HIPAA establishes a set of national privacy and security standards for the protection of individually identifiable health
information, or protected health information, by health plans, healthcare clearinghouses and healthcare providers that
submit certain covered transactions electronically, collectively referred to as “covered entities,” and their “business
associates,” which are persons or entities that perform certain services for, or on behalf of, a covered entity that involve
creating, receiving, maintaining or transmitting protected health information, as well as their covered subcontractors.
Certain portions of our business, such as the cloud-based software digital health applications, are subject to HIPAA as a
business associate of our covered entity clients. To provide our covered entity clients with services that involve access to
PHI, HIPAA requires us to enter into business associate agreements that require us to safeguard PHI in accordance with
HIPAA. As a business associate, we are also directly liable for compliance with HIPAA. Penalties for violations of HIPAA
regulations include civil and criminal penalties.
HIPAA authorizes state attorneys’ general to file suit under HIPAA on behalf of state residents. Courts can award
damages, costs and attorneys’ fees related to violations of HIPAA in such cases. While HIPAA does not create a private
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right of action allowing individuals to sue us in civil court for HIPAA violations, its standards have been used as the basis
for a duty of care claim in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.
HIPAA further requires business associates like us to notify our covered entity clients “without unreasonable delay and in
no case later than 60 calendar days after discovery of the breach.” Covered entities must notify affected individuals
“without unreasonable delay and in no case later than 60 calendar days after discovery of the breach” if their unsecured
PHI is subject to an unauthorized access, use or disclosure. If a breach affects 500 patients or more, covered entities must
report it to HHS and local media without unreasonable delay, and HHS will post the name of the breaching entity on its
public website. If a breach affects fewer than 500 individuals, the covered entity must log it and notify HHS at least
annually.
If we are unable to properly protect the privacy and security of health information entrusted to us, our solutions may be
perceived as not secure, we may incur significant liabilities and customers may curtail their use of or stop using our
solutions. In addition, if we fail to comply with the terms of our business associate agreements with our clients, we are
liable not only contractually but also directly under HIPAA.
In addition, the California Consumer Privacy Act of 2018, or CCPA, as amended by the California Privacy Rights Act
(collectively, “CCPA”), became effective on January 1, 2020. The CCPA gives California residents expanded rights to
access and delete their personal information, opt out of certain personal information sharing and receive detailed
information about how their personal information is used by requiring covered companies to provide new disclosures to
California consumers (as that term is broadly defined) and provide such consumers new ways to opt-out of certain sales of
personal information. The CCPA includes civil penalties for violations, as well as a private right of action for data
breaches. Although the law includes limited exceptions, including for “protected health information” maintained by a
covered entity or business associate, it may regulate or impact our processing of personal information depending on the
context. A To date, approximately ten additional US states have implemented comprehensive data privacy laws, certain of
which became effective starting in January 1, 2023. Although the majority of these laws are directed to consumer, not
business, data, if we are subject to or affected by these state laws, HIPAA, or other domestic privacy and data protection
law, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.
In addition to these comprehensive data protection laws, to date, at least three states have adopted laws specifically
regulating the collection, use, storage, and disclosure of biometrics, and additional states may seek to regulate—and/or
restrict the use of—biometrics in the future. Certain of our products use, or permit the use of, information that could be
classified as a biometric under these or other laws. If we are subject to or affected by these or other laws, including
potential damages for improper use of biometrics, we may be subject to damages claims, required to modify the way in
which we make available our product or certain features of our product. More recently, the FTC and the Office for Civil
Rights (OCR, the agency that enforces HIPAA) have taken interest in the use of online tracking technologies that collect,
use, and disclose personal information about users, including use of such online tracking tools to gather information to be
used for redirected marketing. FTC has taken enforcement actions against companies that have used online tracking tools
either in a misleading or deceptive manner. In response to this new area of enforcement, we have been assessing our
websites and applications to assess any online tracking and to ensure compliance with privacy and security standards. We
also may be required to implement additional practices or processes or otherwise invest our resources to comply with these
and other regulations. If we are unable to comply with these laws, or if these laws require us to change our products or
services, we may encounter liability that could adversely affect our financial condition.
We are also subject to laws and regulations in non-U.S. countries covering data privacy and the protection of health-related
and other personal information. For example, EU member states, the United Kingdom, and other jurisdictions have adopted
data protection laws and regulations, which impose significant compliance obligations. Laws and regulations in these
jurisdictions apply broadly to the collection, use, storage, disclosure and security of personal information that identifies or
may be used to identify an individual, such as names, contact information, and sensitive personal data such as health data.
These laws and regulations are subject to frequent revisions and differing interpretations and have generally become more
stringent over time.
In addition, the EU GDPR and UK GDPR went into effect in May 2018. The GDPR imposes stringent data protection
requirements for the processing of personal data in the EEA or UK. The GDPR imposes several stringent requirements for
controllers and processors of personal data, and increased our obligations, for example, by imposing higher standards for
obtaining consent from individuals to process their personal data, requiring more robust disclosures to individuals,
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strengthening individual data rights, shortening timelines for data breach notifications, limiting retention periods and
secondary use of information (including for research purposes), increasing requirements pertaining to health data and
pseudonymized (i.e., key-coded) data and imposing additional obligations when we contract with third party processors in
connection with the processing of the personal data. The GDPR also imposes strict rules on the transfer of personal data out
of the EEA and, including to the United States, and recent legal developments in Europe have created complexity regarding
such transfers of personal data from the EEA and UK to the United States. For example, the European Commission and the
United Kingdom have adopted new standard contractual clauses under which entities may transfer personal data from the
European Union and the United Kingdom, which we may be required to implement. We must evaluate such data transfers
on a case-by-case basis to ensure continued permissibility under current law and consistent with the new standard
contractual clauses. GDPR provides that EEA member states and the UK may make their own further laws and regulations
limiting the processing of genetic, biometric or health data, which could limit our ability to use and share personal data or
could cause our costs to increase, and harm our business and financial condition. Failure to comply with the requirements
of GDPR and the applicable national data protection and marketing laws of the EEA member states may result in fines of
up to €20.0 million or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher,
and other administrative penalties as well as individual claims for compensation. EU Member States and the UK also have
established laws pertaining to electronic monitoring, which could require us to take additional compliance measures.
Failure to comply with such laws may subject us to penalties.
The UK GDPR mirrors the fines under the EU GDPR, i.e., fines up to the greater of £17.5 million or 4% of global
turnover.
Compliance with these and any other applicable privacy and data security laws and regulations is a rigorous and time-
intensive process, and we may be required to put in place additional mechanisms ensuring compliance with the new data
protection rules. Any failure or perceived failure by us to comply with privacy or security laws, policies, legal obligations
or industry standards or any security incident that results in the unauthorized release or transfer of personally identifiable
information may also result in governmental enforcement actions and investigations, fines and penalties, litigation and/or
adverse publicity, including by consumer advocacy groups, and could cause our customers to lose trust in us, which could
have an adverse effect on our reputation and business. Such failures could have a material adverse effect on our financial
condition and operations. If the third parties we work with violate applicable laws, contractual obligations or suffer a
security incident, such violations may also put us in breach of our obligations under privacy laws and regulations and/or
could in turn have a material adverse effect on our business.
Our business activities are subject to extensive regulation, and any failure to comply could have a material adverse
effect on our business, financial condition, or results of operations. We are subject to extensive U.S. federal, state, local
and international regulations regarding our business activities. Failure to comply with these regulations could result in,
among other things, recalls of our products, substantial fines and criminal charges against us or against our employees.
Furthermore, certain of our products could be subject to recall if the Food and Drug Administration, or the FDA, other
regulators or we determine, for any reason, that those products are not safe or effective. Any recall or other regulatory
action could increase our costs, damage our reputation, affect our ability to supply customers with the quantity of products
they require and materially affect our operating results. Certain of our products and services include the use of artificial
intelligence (AI), which is intended to enhance the operation of our products and services. AI innovation presents risks and
challenges that could impact our business. AI algorithms may be flawed. Datasets may be insufficient or contain biased
information. Ineffective AI development and deployment practices could subject us to competitive harm, regulatory action,
increased cyber risks and legal liability, including under new proposed AI regulation in the European Union. The FTC has
issued a report expressing a concern regarding AI and bias across industry sectors, including in the healthcare space, and
has suggested that such bias could lead to unfair and deceptive practices, among other concerns. Any changes to our ability
to use AI or concerns about bias could require us to modify our products and services or could have other negative
financial impact on our business.
Product sales, introductions or modifications may be delayed or canceled as a result of FDA regulations or similar
foreign regulations, which could cause our sales and profits to decline. Unless a product is exempt or may be
commercialized based on current FDA enforcement discretion policies, before we can market or sell a new medical device
in the United States, we must obtain FDA clearance or approval, which can be a lengthy and time-consuming process. We
generally receive clearance from the FDA to market our products in the United States under Section 510(k) of the Federal
Food, Drug, and Cosmetic Act or our products are exempt from the Section 510(k) clearance process. The 510(k) clearance
process can be expensive, time-consuming and uncertain. In the 510(k) clearance process, the FDA must determine that a
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proposed device is “substantially equivalent” to a predicate device with respect to intended use, technology and safety and
effectiveness, in order to clear the proposed device for marketing. The FDA has a high degree of latitude when evaluating
submissions and may seek additional information before clearing a proposed device or may ultimately determine that a
proposed device submitted for 510(k) clearance is not substantially equivalent to a predicate device. After a device receives
510(k) premarket notification clearance from the FDA, any modification that could significantly affect its safety or
effectiveness, or that would constitute a major change in the intended use of the device, technology, materials, packaging,
and certain manufacturing processes may require a new 510(k) clearance or premarket approval. We have modified some
of our Section 510(k) approved products without submitting new Section 510(k) notices, which we do not believe were
required. However, if the FDA disagrees with us and requires us to submit new Section 510(k) notifications for
modifications to our existing products, we may be required to stop marketing the products while the FDA reviews the
Section 510(k) notification.
Any new product introduction or existing product modification could be subjected to a lengthier, more rigorous FDA
examination process. For example, in certain cases we may need to conduct clinical trials of a modified or new product
before submitting a 510(k) notice. We may also be required to obtain premarket approvals for certain of our products.
Indeed, recent trends in the FDA’s review of premarket notification submissions suggest that the FDA is often requiring
manufacturers to provide new, more expansive, or different information regarding a particular device than what the
manufacturer anticipated upon 510(k) submission. This has resulted in increasing uncertainty and delay in the premarket
notification review process. For example, in November 2018, FDA officials announced steps that the FDA intended to take
to modernize the 510(k) premarket notification pathway. Among other things, the FDA announced that it planned to
develop proposals to drive manufacturers utilizing the 510(k) pathway toward the use of newer predicates. These proposals
included plans to potentially sunset certain older devices that were used as predicates under the 510(k) clearance pathway,
and to potentially publish a list of devices that have been cleared on the basis of demonstrated substantial equivalence to
predicate devices that are more than 10 years old. In September 2019, the FDA also issued revised final guidance
establishing a “Safety and Performance Based Pathway” for “manufacturers of certain well-understood device types”
allowing manufacturers to rely on objective safety and performance criteria recognized by the FDA to demonstrate
substantial equivalence, obviating the need for manufacturers to compare the safety and performance of their medical
devices to specific predicate devices in the clearance process. The FDA has developed and maintains a list of device types
appropriate for the “safety and performance based” pathway and continues to develop product-specific guidance documents
that identify the performance criteria and recommended testing methodologies for each such device type, where feasible.
Some of these proposals have not yet been finalized or adopted, although the FDA may work with Congress to implement
such proposals through legislation. Accordingly, it is unclear the extent to which any proposals, if adopted, could impose
additional regulatory requirements on us that could delay our ability to obtain new 510(k) clearances, increase the costs of
compliance, or restrict our ability to maintain our current clearances, or otherwise create competition that may negatively
affect our business.
The FDA’s ongoing review of the 510(k) program may make it more difficult for us to make modifications to our
previously cleared products, either by imposing stricter requirements on when a manufacturer must submit a new 510(k)
for a modification to a previously cleared product, or by applying more onerous review criteria to such submissions. FDA
continues to review its 510(k) clearance process which could result in additional changes to regulatory requirements or
guidance documents which could increase the costs of compliance or restrict our ability to maintain current clearances. The
requirements of the more rigorous premarket approval process and/or significant changes to the 510(k) clearance process
could delay product introductions and increase the costs associated with FDA compliance. Marketing and sale of our
products outside the United States are also subject to regulatory clearances and approvals, and if we fail to obtain these
regulatory approvals, our sales could suffer. We cannot assure you that any new products we develop will receive required
regulatory approvals from U.S. or foreign regulatory agencies.
The definition of “device” in the Federal Food, Drug, and Cosmetic Act (FD&C Act) was amended in 2016 to exclude
certain software functions. Our software offerings may include functions that fall under FDA’s jurisdictional definition of a
medical device, while there may be software offerings that are considered exempt from the “device” definition even when
utilizing data coming from an FDA regulated medical device. Our determination of the appropriate classification of our
digital offerings may lead to regulatory inquiry and the expenditure of time and resources to meet FDA feedback as to the
appropriate category for particular digital offerings.
We are subject to substantial regulation related to quality standards applicable to our manufacturing and quality
processes. Our failure to comply with these standards could have an adverse effect on our business, financial
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condition, or results of operations. The FDA regulates the approval, manufacturing, and sales and marketing of many of
our products in the United States. Significant government regulation also exists in Canada, Japan, Europe, and other
countries in which we conduct business. As a device manufacturer, we are required to register with the FDA and are
subject to periodic inspection by the FDA for compliance with the FDA’s Quality System Regulation requirements, which
require manufacturers of medical devices to adhere to certain regulations, including testing, quality control and
documentation procedures. In addition, the federal Medical Device Reporting regulations require us to provide information
to the FDA whenever there is evidence that reasonably suggests that a device may have caused or contributed to a death or
serious injury or, if a malfunction were to occur, could cause or contribute to a death or serious injury. Compliance with
applicable regulatory requirements is subject to continual review and is rigorously monitored through periodic inspections
by the FDA. In the European Union, we are required to maintain certain ISO certifications in order to sell our products and
must undergo periodic inspections by notified bodies to obtain and maintain these certifications. Failure to comply with
current governmental regulations and quality assurance guidelines could lead to temporary manufacturing shutdowns,
product recalls or related field actions, product shortages or delays in product manufacturing. Efficacy or safety concerns,
an increase in trends of adverse events in the marketplace, and/or manufacturing quality issues with respect to our products
could lead to product recalls or related field actions, withdrawals, and/or declining sales.
Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could
hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or
modified products from being developed, cleared or approved or commercialized in a timely manner or at all, which
could negatively impact our business. The ability of the FDA to review and clear or approve new products can be
affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes,
the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise
affect the FDA’s ability to perform routine functions. Average review times at the FDA have fluctuated in recent years as a
result. In addition, government funding of other government agencies that fund research and development activities is
subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies may
also slow the time necessary for medical devices or modifications to cleared or approved medical devices to be reviewed
and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last
several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times
and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.
Separately, in response to the COVID-19 pandemic, on March 10, 2020, the FDA announced its intention to postpone most
foreign inspections of manufacturing facilities, and subsequently, on March 18, 2020, the FDA temporarily postponed
routine surveillance inspections of domestic manufacturing facilities. Regulatory authorities outside the United States
adopted similar restrictions or other policy measures in response to the COVID-19 pandemic. On July 10, 2020, the FDA
announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based
prioritization system. During the COVID emergency, the FDA issued numerous guidances providing for enforcement
discretion or processes for issuance of Emergency Use Authorizations (EUAs) for certain devices that had the effect of
relaxing certain regulatory requirements with respect to selected devices during the pendency of the COVID emergency.
Recently, in anticipation of the termination of the COVID emergency effective May 11, 2023, on March 27, 2023, the FDA
released two final guidance documents to assist with transitioning medical devices: (i) that were subject to certain
enforcement policies issued during the COVID emergency, and (ii) that were issued emergency use authorizations (EUAs).
These guidance documents finalize the corresponding draft guidance documents that were issued on December 23, 2021.
The guidances call for a “phased transition process” with respect to devices that fell within the expiring COVID
enforcement policies. To the extent our devices have been authorized for market based on COVID-related enforcement
discretion or EUAs, we may need to implement a transition plan for such devices, the outcome of which may be uncertain
and could potentially affect our ability to market such devices in the post-COVID regulatory environment. If a prolonged
government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from
conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the
FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material
adverse effect on our business.
Off-label marketing of our products could result in substantial penalties. The FDA strictly regulates the promotional
claims that may be made about FDA-cleared products. In particular, clearance under Section 510(k) only permits us to
market our products for the uses indicated on the labeling cleared by the FDA. We may request additional label indications
for our current products, and the FDA may deny those requests outright, require additional expensive clinical data to
support any additional indications or impose limitations on the intended use of any cleared products as a condition of
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clearance. If the FDA determines that we have marketed our products for off-label use, we could be subject to fines,
injunctions or other penalties. It is also possible that other federal, state or foreign enforcement authorities might take
action if they consider our business activities to constitute promotion of an off-label use, which could result in significant
penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, exclusion
from participation in government healthcare programs, and the curtailment of our operations. Any of these events could
significantly harm our business and results of operations and cause our stock price to decline.
Laws regulating consumer contacts could adversely affect our business operations or create liabilities. Our business
activities include contacts with consumers in different parts of the world. Certain laws, such as the U.S. Telephone
Consumer Protection Act, regulate telemarketing practices and certain automated outbound contacts with consumers, such
as phone calls, texts or emails. Our use of outbound contacts may be restricted by existing laws, or by laws, regulations, or
regulatory decisions that may be adopted in the future. Similarly, certain data privacy laws, including CCPA, and
subsequently CPRA, and the GDPR require disclosure of our privacy practices to consumers. If we are found to have
violated these laws or regulations, we may be subjected to substantial fines, penalties, or liabilities to consumers.
Tax laws, regulations, and enforcement practices are evolving and may have a material adverse effect on our results
of operations, cash flows and financial position. Tax laws, regulations, and administrative practices in various
jurisdictions are evolving and may be subject to significant changes due to economic, political, and other conditions. There
are many transactions that occur during the ordinary course of business for which the ultimate tax determination is
uncertain, and significant judgment is required in evaluating and estimating our provision and accruals for taxes.
Governments are increasingly focused on ways to increase tax revenues, particularly from multinational corporations,
which may lead to an increase in audit activity and aggressive positions taken by tax authorities.
Changes or clarifications to U.S. tax laws could materially affect the tax treatment of our domestic and foreign earnings.
The Organisation for Economic Co-operation and Development, an international association of 34 countries, including the
United States, released the final reports from its Base Erosion and Profit Shifting, or BEPS, Action Plans, which aim to
standardize and modernize global tax policies. The BEPS Action Plans propose revisions to numerous tax rules, including
country-by-country reporting, permanent establishment, hybrid entities and instruments, transfer pricing, and tax treaties.
The BEPS Action Plans have been or are being enacted by countries where we have operations. Additionally, the U.S.
Treasury department recently proposed the adoption of a global minimum corporate tax rate of at least 15%, which, if
enacted, could negatively impact our effective tax rate.
Developments in relevant tax laws, regulations, administrative practices and enforcement practices could have a material
adverse effect on our operating results, financial position and cash flows, including the need to obtain additional financing.
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.
On September 19, 2021, we concluded the settlement agreement with the Australian Taxation Office (“ATO”) in relation to
the previously disclosed transfer pricing dispute for the tax years 2009 through 2018 (“ATO settlement”). The ATO
settlement fully resolved the dispute for all prior years, with no admission of liability and provides clarity in relation to
certain future taxation principles.
The final net impact of the ATO settlement was recorded during the years ended June 30, 2021 and 2022 in the amount of
$238.7 million, which represents a gross amount of $381.7 million, including interest and penalties of $48.1 million, and
adjustments for credits and deductions of $143.0 million. As a result of the ATO settlement and due to movements in
foreign currencies, we recorded a benefit of $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 settlement, we reversed our previously
recorded uncertain tax position.
On September 28, 2021, we remitted final payment to the ATO of $284.8 million, consisting of the agreed settlement
amount of $381.7 million less prior remittances made to the ATO of $96.9 million.
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Tax years 2018 to 2022 remain subject to future examination by the major tax jurisdictions in which we are subject to tax.
In addition, the taxing authorities of the jurisdictions in which we operate may challenge our positions and methodologies
related to transfer pricing, including valuing developed technology, intercompany arrangements and intellectual property
transfers. If challenged by tax authorities, ResMed will vigorously defend our positions and methodologies. 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.
Environmental, social, and corporate governance (ESG) issues may have an adverse effect on our business, financial
condition and results of operations and reputation. There is an increasing focus from certain investors, regulators,
legislators, customers, consumers, employees and other stakeholders concerning ESG matters. Additionally, public interest
and legislative pressure related to public companies’ ESG practices continue to grow. If our ESG practices fail to meet
regulatory requirements or stakeholders' evolving expectations and standards for responsible corporate citizenship in areas
including environmental stewardship, support for local communities, Board of Director and employee diversity, human
capital management, employee health and safety practices, product quality, supply chain management, corporate
governance and transparency, our reputation, brand, and employee attraction and retention may be negatively impacted,
and our customers and suppliers may be unwilling to continue to do business with us. In addition, a failure to comply with
new laws, regulations, or reporting requirements, could negatively impact our reputation and our business. Our adoption of
certain standards or mandated compliance to certain requirements could necessitate additional investments that could
impact our profitability.
Risks Related to the Securities Markets and Ownership of Our Common Stock
Our quarterly operating results are subject to fluctuation for a variety of reasons. Our operating results have, from
time to time, fluctuated on a quarterly basis and may be subject to similar fluctuations in the future. These fluctuations may
result from a number of factors, including:
•
•
•
•
•
•
•
•
•
•
•
•
•
the introduction of new products by us or our competitors;
the geographic mix of product sales;
the success and costs of our marketing efforts in new regions;
changes in third-party payor reimbursement;
timing of regulatory clearances and approvals;
costs associated with acquiring and integrating new businesses, technologies and product offerings;
timing of orders by distributors;
inventory write downs, which may result from maintaining significant inventories of raw materials, components,
and finished goods;
expenditures incurred for research and development;
competitive pricing in different regions;
the effect of foreign currency transaction gains or losses;
other activities, including product recalls, by our competitors; and
general economic conditions, including rising interest rates, inflationary pressures, recessions, consumer sentiment
and demand, global political conflict and industry factors unrelated to our actual performance.
Fluctuations in our quarterly operating results may cause the market price of our common stock to fluctuate.
Delaware law and provisions in our charter could make it difficult for another company to acquire us. Provisions of
our certificate of incorporation may have the effect of delaying or preventing changes in control or management which
might be beneficial to us or our security holders. In particular, our board of directors has the authority to issue up to 2.0
million shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting
rights, of those shares without further vote or action by the stockholders. The rights of the holders of our common stock
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will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in
the future. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control,
may discourage bids for our common stock at a premium over the market price of our common stock and may adversely
affect the market price of our common stock and the voting and other rights of the holders of our common stock.
ITEM 1B UNRESOLVED STAFF COMMENTS
None.
ITEM 2 PROPERTIES
We conduct our operations in both owned and leased properties. Our principal executive offices and U.S. sales facilities
consist of approximately 230,000 square feet and are located on Spectrum Center Boulevard in San Diego, California, in a
building we own. We have our primary research and development facilities, as well as office and manufacturing facilities at
our owned site in Sydney, Australia. Other facilities are in Atlanta, Georgia, Moreno Valley, California, Chatsworth,
California, and Bloomington, Minnesota, U.S.A.; Singapore; Munich, Germany; Lyon, France; Suzhou, China; Halifax,
Canada; and Johor Bahru, Malaysia.
We believe that our facilities are adequate to meet the needs of our current business operations. At June 30, 2023, our
principal owned and leased properties were as follows:
Location
San Diego, California
Sydney, Australia
Suzhou, China
Atlanta, Georgia
Singapore
Moreno Valley, California
Johor, Malaysia
Chatsworth, California
Munich, Germany
Lyon, France
Ownership Status
͏(Owned / Leased)
Owned
Owned
Owned
Leased
Leased
Leased
Leased
Leased
Leased
Leased
ITEM 3 LEGAL PROCEEDINGS
Square
͏footage
Primary Usage
230,000 Corporate headquarters, engineering, research and development, sales and
administration
437,000 Manufacturing, engineering, research and development, sales and administration
53,000 Manufacturing, warehouse, engineering, research and development
522,000 Manufacturing, warehouse and distribution, SaaS sales and administration,
engineering, research and development
305,000 Manufacturing, engineering, research and development, sales and administration
244,000 Warehouse and distribution
155,000 Manufacturing, engineering, research and development
72,000 Manufacturing, engineering, research and development
61,000 Sales and distribution
52,000 Sales, manufacturing and distribution
We are involved in various legal proceedings, claims, investigations and litigation that arise in the ordinary course of our
business. See Note 15 – Legal Actions, Contingencies and Commitments of the Notes to Consolidated Financial
Statements (Part II, Item 8) included in this report, which is incorporated by reference herein.
Litigation is inherently uncertain. Accordingly, we cannot predict with certainty the outcome of these matters. But we do
not expect the outcome of these matters to have a material adverse effect on our consolidated financial statements when
taken as a whole.
ITEM 4 MINE SAFETY DISCLOSURES
Not Applicable.
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PART II
Item 5
ITEM 5 MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is traded on the NYSE under the symbol “RMD”. As of July 31, 2023, there were 28 holders of record
of our common stock, although the actual number of stockholders of our common stock is greater than this number of
holders of record and many of these holders of record own shares as nominees on behalf of other beneficial owners.
Securities Authorized for Issuance Under Equity Compensation Plans
The information included under Item 12 of Part III of this Report, “Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters,” is hereby incorporated by reference into this Item 5 of Part II of this
Report.
Purchases of Equity Securities
On February 21, 2014, our board of directors approved our current share repurchase program, authorizing us to acquire up
to an aggregate of 20.0 million shares of our common stock. The program allows us to repurchase shares of our common
stock from time to time for cash in the open market, or in negotiated or block transactions, as market and business
conditions warrant and subject to applicable legal requirements. 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. All
share repurchases after February 21, 2014 have been executed under this program.
We suspended our share repurchase program in fiscal year 2019. As a result, we did not repurchase any shares during the
twelve months ended June 30, 2023. 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. June 30, 2023, 12.9 million additional shares can be
repurchased under the approved share repurchase program.
Dividends
While we have historically paid dividends to holders of our common stock on a quarterly basis, the declaration and
payment of future dividends will depend on many factors, including, but not limited to, our earnings, financial condition,
business development needs and regulatory considerations, and are at the discretion of our board of directors.
PERFORMANCE GRAPH
This performance graph is furnished and shall not be deemed “filed” with the SEC or subject to Section 18 of the Exchange
Act, nor shall it be deemed incorporated by reference in any of our filings under the Securities Act of 1933, as amended.
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The following graph compares the cumulative total stockholders return on our common stock from June 30, 2018 through
June 30, 2023, with the comparable cumulative return of the S&P 500 index, the S&P 500 Health Care index, and the Dow
Jones U.S. Select Medical Equipment index. The graph assumes that $100 was invested in our common stock and each
index on June 30, 2018. In addition, the graph assumes the reinvestment of all dividends paid. The stock price performance
on the following graph is not necessarily indicative of future stock price performance.
The following table shows total indexed return of stock price plus reinvestments of dividends, assuming an initial
investment of $100 at June 30, 2018, for the indicated periods.
Index
ResMed Inc.
S&P 500
S&P 500 Health Care
Dow Jones U.S. Select Medical Equipment
ITEM 6 SELECTED FINANCIAL DATA
As of June 30,
2018
100
100
100
100
2019
119
108
111
120
2020
190
114
121
133
2021
246
158
152
182
2022
210
139
155
152
2023
221
164
160
171
The following table summarizes certain selected consolidated financial data for, and as of the end of, each of the fiscal
years in the five-year period ended June 30, 2023. The data set forth below should be read together with Item 7 of Part II of
this report, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8 of Part
II of this report, “Consolidated Financial Statements and Supplementary Data”, and related notes included elsewhere in this
report. The consolidated statement of income data for the years ended June 30, 2023, 2022 and 2021 and the consolidated
balance sheet data as of June 30, 2023 and 2022 are derived from our audited consolidated financial statements included
elsewhere in this report. The consolidated statement of income data for the years ended June 30, 2020 and 2019 and the
consolidated balance sheet data as of June 30, 2021, 2020 and 2019 are derived from our audited consolidated financial
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ResMed Inc.S&P 500S&P 500 Health CareDow Jones U.S Select Medical EquipmentJune 30, 2018June 30, 2019June 30, 2020June 30, 2021June 30, 2022June 30, 2023$0$50$100$150$200$250$300 Table of Contents
PART II
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Item 6
statements not included in this report. Historical results do not necessarily indicate the results to be expected in the future,
and the results for the years presented should not be considered to indicate our future results of operations.
Consolidated Statement of Income Data
(In thousands, except per share data):
2023
2022
2021
2020
2019
Years Ended June 30,
Net revenue
$
4,222,993 $
3,578,127 $
3,196,825 $
2,957,013 $
2,606,572
Cost of sales (exclusive of amortization shown separately
below)
Amortization of acquired intangible assets
Total cost of sales
Gross profit
Selling, general and administrative expenses
Research and development expenses
Amortization of acquired intangible assets
Restructuring expenses
Litigation settlement expenses
Acquisition related expenses
Total operating expenses
Income from operations
Other income:
Interest income (expense), net
Loss attributable to equity method investments
Gain on insurance recoveries
Other, net
Total other income (loss), net
Income before income taxes
Income taxes
Net income
Basic earnings per share
Diluted earnings per share
Dividends per share
Weighted average:
Basic shares outstanding
Diluted shares outstanding
1,836,935
1,514,166
1,312,598
1,189,624
1,069,987
30,396
1,867,331
2,355,662
874,003
287,642
42,020
9,177
—
10,949
1,223,791
1,131,871
(47,379)
(7,265)
20,227
4,210
(30,207)
1,101,664
204,108
39,650
1,553,816
2,024,311
737,508
253,575
31,078
—
—
1,864
1,024,025
1,000,286
(22,312)
(8,486)
—
(9,005)
(39,803)
960,483
181,046
45,127
1,357,725
1,839,100
670,387
225,284
31,078
8,673
—
—
935,422
903,678
(23,627)
(11,205)
—
14,816
(20,016)
883,662
409,157
49,603
1,239,227
1,717,786
676,689
201,946
30,092
—
(600)
—
908,127
809,659
(39,356)
(25,058)
—
(12,157)
(76,571)
733,088
111,414
$
$
$
$
897,556 $
779,437 $
474,505 $
621,674 $
6.12 $
6.09 $
1.76 $
5.34 $
5.30 $
1.68 $
3.27 $
3.24 $
1.56 $
4.31 $
4.27 $
1.56 $
42,514
1,112,501
1,494,071
645,010
180,651
32,424
9,401
41,199
6,123
914,808
579,263
(33,857)
(15,833)
—
(10,726)
(60,416)
518,847
114,255
404,592
2.83
2.80
1.48
146,765
147,455
146,066
147,043
145,313
146,451
144,338
145,652
143,111
144,484
Consolidated Balance Sheet Data (In thousands):
2023
2022
2021
2020
2019
Working capital
Total assets
Long-term debt, less current maturities
Total stockholders’ equity
$
1,609,297 $
1,242,179 $
662,991 $
920,698 $
589,375
6,751,708
1,431,234
5,095,853
4,728,125
765,325
643,351
4,587,376
1,164,133
4,107,682
1,258,861
$
4,129,903 $
3,360,751 $
2,885,679 $
2,497,027 $
2,072,193
As of June 30,
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PART II
Item 7
RESMED INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
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. It is provided as a supplement to, and should be read in
conjunction with the selected financial data and consolidated financial statements and notes included in this report.
We are a global leader in the development, manufacturing, distribution and marketing of medical devices and cloud-based
software applications that diagnose, treat and manage respiratory disorders, including sleep disordered breathing (“SDB”),
chronic obstructive pulmonary disease, neuromuscular disease and other chronic diseases. SDB includes obstructive sleep
apnea and other respiratory disorders that occur during sleep. Our products and solutions are designed to improve patient
quality of life, reduce the impact of chronic disease and lower healthcare costs as global healthcare systems continue to
drive a shift in care from hospitals to the home and lower cost settings. Our cloud-based digital software health
applications, along with our devices, are designed to provide connected care to improve patient outcomes and efficiencies
for our customers.
Since the development of continuous positive airway pressure therapy, we have expanded our business by developing or
acquiring a number of products and solutions for a broader range of respiratory disorders including technologies to be
applied in medical and consumer products, ventilation devices, diagnostic products, mask systems for use in the hospital
and home, headgear and other accessories, dental devices, and cloud-based software informatics solutions to manage
patient outcomes and customer and provider business processes. Our growth has been fueled by geographic expansion, our
research and product development efforts, acquisitions and an increasing awareness of SDB and other respiratory
conditions like chronic obstructive pulmonary disease as significant health concerns.
We are committed to ongoing investment in research and development and product enhancements. During fiscal year 2023,
we invested $287.6 million on research and development activities, which represents 6.8% 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 fiscal year 2023 we continued the launch of AirSense 11, which introduces new features such as a
touch screen, algorithms for patients new to therapy and digital enhancements and over-the-air update capabilities as well
as continued our global offering of devices including Card-to-Cloud ("C2C") versions of our prior model AirSense 10 and
AirCurve 10 products that do not incorporate a communications module. Due to multiple acquisitions, including Brightree
in 2016, HEALTHCAREfirst and MatrixCare in 2018, and MEDIFOX DAN in November 2022, 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 and along with our cloud-
based remote monitoring and therapy management system, and a robust product pipeline, should continue to provide us
with a strong platform for future growth.
We have determined that we have two operating segments, which are the sleep and respiratory disorders sector of the
medical device industry (“Sleep and Respiratory Care”) and the supply of business management software as a service to
out-of-hospital health providers (“SaaS”).
Net revenue in fiscal year 2023 increased to $4,223.0 million, an increase of 18% compared to fiscal year 2022. Gross
profit increased for the year ended June 30, 2023 to $2,355.7 million, from $2,024.3 million for the year ended June 30,
2022, an increase of $331.4 million or 16%. Our net income for the year ended June 30, 2023 was $897.6 million or $6.09
per diluted share compared to net income of $779.4 million or $5.30 per diluted share for the year ended June 30, 2022.
Total operating cash flow for fiscal year 2023 was $693.3 million and at June 30, 2023, our cash and cash equivalents
totaled $227.9 million. At June 30, 2023, our total assets were $6.8 billion and our stockholders’ equity was $4.1 billion.
We paid a quarterly dividend of $0.44 per share during fiscal 2023 with a total amount of $258.3 million paid to
stockholders.
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PART II
Item 7
RESMED INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations
In order to provide a framework for assessing how our underlying businesses performed, excluding the effect of foreign
currency fluctuations, we provide certain financial information on a “constant currency basis”, which is in addition to the
actual financial information presented. In order to calculate our constant currency information, we translate the current
period financial information using the foreign currency exchange rates that were in effect during the previous comparable
period. However, constant currency measures should not be considered in isolation or as an alternative to U.S. dollar
measures that reflect current period exchange rates, or to other financial measures calculated and presented in accordance
with accounting principles generally accepted in the United States (“GAAP”).
For discussion related to the results of operations and changes in financial condition for the fiscal year ended June 30, 2022
compared to fiscal year June 30, 2021, please refer to Item 7 of Part II, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the Year Ended June 30, 2022,
which was filed with the United States Securities and Exchange Commission on August 12, 2022.
Fiscal Year Ended June 30, 2023 Compared to Fiscal Year Ended June 30, 2022
Net Revenues
Net revenue for the year ended June 30, 2023 increased to $4,223.0 million from $3,578.1 million for the year ended
June 30, 2022, an increase of $644.9 million or 18% (a 21% increase on a constant currency basis). The following table
summarizes our net revenue disaggregated by segment, product and region for the year ended June 30, 2023 compared to
the year ended June 30, 2022 (in thousands):
U.S., Canada and Latin America
Devices
Masks and other
Total U.S., Canada and Latin America
Combined Europe, Asia and other markets
Devices
Masks and other
Total Combined Europe, Asia and other markets
Global revenue
Devices
Masks and other
Total Sleep and Respiratory Care
Software as a Service
Total
Year Ended June 30,
2023
2022
% Change
Constant
Currency*
$
$
$
$
$
$
1,444,361 $
1,070,420
1,039,026
911,387
2,483,387 $
1,981,807
826,341 $
415,289
796,488
399,003
1,241,630 $
1,195,491
2,270,702 $
1,454,315
3,725,017 $
1,866,908
1,310,390
3,177,298
497,976
400,829
$
4,222,993 $
3,578,127
35 %
14
25
4 %
4
4
22 %
11
17
24
18
11 %
12
11
25 %
14
20
21
*
Constant currency numbers exclude the impact of movements in international currencies.
Sleep and Respiratory Care
Net revenue from our Sleep and Respiratory Care business for the year ended June 30, 2023 increased to $3,725.0 million
from $3,177.3 million for the year ended June 30, 2022, an increase of $547.7 million or 17%. Movements in international
currencies against the U.S. dollar negatively impacted net revenues by approximately $95.6 million for the year ended
June 30, 2023. Excluding the impact of currency movements, total net revenue from our Sleep and Respiratory Care
business for the year ended June 30, 2023 increased by 20% compared to the year ended June 30, 2022. The increase in net
revenue associated with devices was primarily attributable to increased demand, reduced competitive supply, increases in
average selling prices, and incremental sales of the C2C devices. The increase in masks was primarily due to an increase in
unit sales.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
Net revenue from our Sleep and Respiratory Care business in the United States, Canada and Latin America for the year
ended June 30, 2023 increased to $2,483.4 million from $1,981.8 million for the year ended June 30, 2022, an increase of
$501.6 million or 25%. The increase in net revenue associated with our devices was primarily attributable to increased
demand, reduced competitive supply, and incremental sales of the C2C devices. The increase in masks was primarily due
to an increase in unit sales.
Net revenue from our Sleep and Respiratory Care business in combined Europe, Asia and other markets increased for the
year ended June 30, 2023 to $1,241.6 million from $1,195.5 million for the year ended June 30, 2022, an increase of $46.1
million or 4% (an 11% increase on a constant currency basis). The constant currency increase in device sales in combined
Europe, Asia and other was primarily attributable to increased demand as well as reduced competitive supply. The increase
in masks was primarily due to an increase in unit sales.
Net revenue from devices for the year ended June 30, 2023 increased to $2,270.7 million from $1,866.9 million for the year
ended June 30, 2022, an increase of $403.8 million or 22%, including an increase of 35% in the United States, Canada and
Latin America and an increase of 4% in combined Europe, Asia and other markets (an 11% increase on a constant currency
basis). Excluding the impact of foreign currency movements, device sales for the year ended June 30, 2023 increased by
25%.
Net revenue from masks and other for the year ended June 30, 2023 increased to $1,454.3 million from $1,310.4 million
for the year ended June 30, 2022, an increase of 11%, including an increase of 14% in the United States, Canada and Latin
America and an increase of 4% in combined Europe, Asia and other markets (a 12% increase on a constant currency basis).
Excluding the impact of foreign currency movements, masks and other sales increased by 14%, compared to the year ended
June 30, 2022.
Software as a Service
Net revenue from our SaaS business for the year ended June 30, 2023 was $498.0 million, compared to $400.8 million for
the year ended June 30, 2022, an increase of $97.1 million or 24%. The increase was predominantly due to our recent
acquisition of MEDIFOX DAN, which was acquired on November 21, 2022. Excluding the MEDIFOX DAN acquisition,
SaaS revenue increased 8% and was driven by continued growth in the HME vertical within our SaaS business.
Gross Profit and Gross Margin. Gross profit increased for the year ended June 30, 2023 to $2,355.7 million from
$2,024.3 million for the year ended June 30, 2022, an increase of $331.4 million or 16%. Gross margin, which is gross
profit as a percentage of net revenue, was 55.8% for the year ended June 30, 2023, compared with the 56.6% for the year
ended June 30, 2022. The decrease in gross margin was due primarily to unfavorable product mix, higher component and
manufacturing costs, higher warehouse related costs, and unfavorable foreign currency movements, partially offset by
increases in average selling prices and a decrease in the amortization of acquired intangible assets.
Operating Expenses
The following table summarizes our operating expenses (in thousands):
Year Ended June 30,
2023
2022
Change
% Change
Selling, general, and administrative
$
874,003
$
737,508
$
136,495
as a % of net revenue
Research and development
as a % of net revenue
Amortization of acquired intangible assets
20.7 %
287,642
6.8 %
42,020
20.6 %
253,575
7.1 %
31,078
34,067
10,942
19 %
13 %
35 %
Constant
Currency
22 %
16 %
34 %
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased for the year ended June 30, 2023 to $874.0 million from $737.5
million for the year ended June 30, 2022, an increase of $136.5 million or 19%. Selling, general and administrative
expenses, as reported in U.S. dollars, were favorably impacted by the movement of international currencies against the U.S.
dollar, which decreased our expenses by approximately $27.9 million. Excluding the impact of foreign currency
movements, selling, general and administrative expenses for the year ended June 30, 2023 increased by 22% compared to
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Item 7
RESMED INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations
the year ended June 30, 2022. As a percentage of net revenue, selling, general and administrative expenses for the year
ended June 30, 2023 increased to 20.7% compared to 20.6% for the year ended June 30, 2022.
The constant currency increase in selling, general and administrative expenses for the year ended June 30, 2023 compared
to the year ended June 30, 2022 was primarily due to increases in employee-related costs, increases in travel and
entertainment expenses, and additional expenses associated with the consolidation of recent acquisitions.
Research and Development Expenses
Research and development expenses increased for the year ended June 30, 2023 to $287.6 million from $253.6 million for
the year ended June 30, 2022, an increase of $34.1 million or 13%. Research and development expenses were favorably
impacted by the movement of international currencies against the U.S. dollar, which decreased our expenses by
approximately $6.5 million, as reported in U.S. dollars. Excluding the impact of foreign currency movements, research and
development expenses for the year ended June 30, 2023 increased by 16% compared to the year ended June 30, 2022. As a
percentage of net revenue, research and development expenses were 6.8% for the year ended June 30, 2023 compared to
7.1% for the year ended June 30, 2022.
The constant currency increase in research and development expenses was primarily due to increased investment in our
digital health technologies and SaaS solutions as well as additional expenses associated with the consolidation of recent
acquisitions.
Amortization of Acquired Intangible Assets
Amortization of acquired intangible assets for the year ended June 30, 2023 was $42.0 million compared to $31.1 million
for the year ended the year ended June 30, 2022. The increase in amortization expense was primarily attributable to our
acquisition of MEDIFOX DAN.
Restructuring Expenses
During the year ended June 30, 2023, we incurred restructuring expenses of $9.2 million associated with the reorganization
and rationalization of our operations. We recorded the full amount of $9.2 million during the year ended June 30, 2023, of
which $6.7 million related to our Sleep and Respiratory Care segment and $2.5 million related to our SaaS segment. The
restructuring expenses consisted primarily of severance to employees.
Total Other Income (Loss), Net
The following table summarizes our other income (loss) (in thousands):
Interest (expense) income, net
Loss attributable to equity method investments
Gain (loss) on equity investments
Gain on insurance recoveries
Other, net
Total other income (loss), net
Year Ended June 30,
2023
2022
Change
$
(47,379) $
(22,312) $
(25,067)
(7,265)
9,922
20,227
(5,712)
(8,486)
(12,202)
—
3,197
$
(30,207) $
(39,803) $
1,221
22,124
20,227
(8,909)
9,596
Total other income (loss), net for the year ended June 30, 2023 was a loss of $30.2 million, compared to a loss of $39.8
million for the year ended June 30, 2022. Interest expense, net, increased to $47.4 million for the year ended June 30, 2023
compared to $22.3 million for the year ended June 30, 2022 due to higher debt levels associated with the acquisition of
MEDIFOX DAN, which was funded by our Revolving Credit Facility. Increases in interest expense, net, were partially
offset by gains associated with our investments in marketable and non-marketable equity securities, which were a gain of
$9.9 million for the year ended June 30, 2023 compared to a loss of $12.2 million or the year ended June 30, 2022. In
addition, we recognized recoveries from business interruption insurance for $20.2 million for the year ended June 30, 2023.
We recorded lower losses attributable to equity method investments for the year ended June 30, 2023 of $7.3 million
compared to $8.5 million for the year ended June 30, 2022.
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PART II
Item 7
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
Income Taxes
Our effective income tax rate decreased to 18.5% for the year ended June 30, 2023 from 18.8% for the year ended June 30,
2022. Our effective rate of 18.5% for the year ended June 30, 2023 differs from the statutory rate of 21.0% primarily due to
research credits, foreign operations and windfall tax benefits related to the vesting or settlement of employee share-based
awards. The decrease in our effective tax rate for the year ended June 30, 2023 was primarily due to a shift in the
geographic mix of earnings and an increase in research credits.
Our Singapore operations operate under certain tax holidays and tax incentive programs that will expire in whole or in part
at various dates through June 30, 2030. As a result of the U.S. Tax Cuts and Jobs Act of 2017, we treated all non-U.S.
historical earnings as taxable during the year ended June 30, 2018. Therefore, future repatriation of cash held by our non-
U.S. subsidiaries will generally not be subject to U.S. federal tax, if repatriated.
Net Income and Earnings per Share
As a result of the factors discussed above, our net income for the year ended June 30, 2023 was $897.6 million compared to
net income of $779.4 million for the year ended June 30, 2022. Our earnings per diluted share for the year ended June 30,
2023 was $6.09 compared to $5.30 for the year ended June 30, 2022, an increase of 15%.
Summary of Non-GAAP Financial Measures
In addition to financial information prepared in accordance with GAAP, our management uses certain non-GAAP financial
measures, such as non-GAAP cost of sales, non-GAAP gross profit, non-GAAP gross margin, non-GAAP income from
operations, non-GAAP net income, and non-GAAP diluted earnings per share, in evaluating the performance of our
business. We believe that these non-GAAP financial measures, when reviewed in conjunction with GAAP financial
measures, can provide investors better insight when evaluating our performance from core operations and can provide more
consistent financial reporting across periods. For these reasons, we use non-GAAP information internally in planning,
forecasting, and evaluating the results of operations in the current period and in comparing it to past periods. These non-
GAAP financial measures should be considered in addition to, and not superior to or as a substitute for, GAAP financial
measures. We strongly encourage investors and shareholders to review our financial statements and publicly-filed reports
in their entirety and not to rely on any single financial measure. Non-GAAP financial measures as presented herein may not
be comparable to similarly titled measures used by other companies.
The measure “non-GAAP cost of sales” is equal to GAAP cost of sales less amortization of acquired intangible assets
relating to cost of sales. The measure “non-GAAP gross profit” is the difference between GAAP net revenue and non-
GAAP cost of sales, and “non-GAAP gross margin” is the ratio of non-GAAP gross profit to GAAP net revenue.
These non-GAAP measures are reconciled to their most directly comparable GAAP financial measures below (in
thousands, except percentages):
GAAP Net revenue
GAAP Cost of sales
Less: Amortization of acquired intangibles
Non-GAAP cost of sales
GAAP gross profit
GAAP gross margin
Non-GAAP gross profit
Non-GAAP gross margin
-50-
Year Ended June 30,
2023
2022
$
4,222,993
$
3,578,127
$
$
$
$
1,867,331
(30,396)
1,836,935
2,355,662
55.8 %
2,386,058
$
$
$
$
1,553,816
(39,650)
1,514,166
2,024,311
56.6 %
2,063,961
56.5 %
57.7 %
Table of Contents
PART II
Item 7
RESMED INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The measure “non-GAAP income from operations” is equal to GAAP income from operations once adjusted for
amortization of acquired intangibles, restructuring expenses and acquisition-related expenses. Non-GAAP income from
operations is reconciled with GAAP income from operations below (in thousands):
GAAP income from operations
Amortization of acquired intangibles - cost of sales
Amortization of acquired intangibles - operating expenses
Restructuring expenses
Acquisition-related expenses
Non-GAAP income from operations
Year Ended June 30,
2023
2022
$
1,131,871 $
1,000,286
30,396
42,020
9,177
10,949
39,650
31,078
—
1,864
$
1,224,413 $
1,072,878
The measure “non-GAAP net income” is equal to GAAP net income once adjusted for amortization of acquired
intangibles, restructuring expenses, acquisition-related expenses, gain on insurance recoveries, (gain) loss on equity
investments, reserve for disputed tax positions, and associated tax effects. 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):
GAAP net income
Amortization of acquired intangibles - cost of sales
Amortization of acquired intangibles - operating expenses
Restructuring expenses
Acquisition-related expenses
Gain on insurance recoveries
(Gain) loss on equity investments
Reserve for disputed tax positions
Income tax effect on non-GAAP adjustments
Non-GAAP net income
Diluted shares outstanding
GAAP diluted earnings per share
Non-GAAP diluted earnings per share
Liquidity and Capital Resources
Year Ended June 30,
2023
2022
$
897,556 $
30,396
42,020
9,177
10,949
(20,227)
—
—
(20,114)
949,757 $
147,455
6.09 $
6.44 $
$
$
$
779,437
39,650
31,078
—
1,864
—
11,675
4,111
(17,044)
850,771
147,043
5.30
5.79
Our principal sources of liquidity are our existing cash and cash equivalents, cash generated from operations and access to
our revolving credit facility. Our primary uses of cash have been for research and development activities, selling and
marketing activities, capital expenditures, strategic acquisitions and investments, dividend payments and repayment of debt
obligations. We expect that cash provided by operating activities may fluctuate in future periods as a result of several
factors, including fluctuations in our operating results, which include supply chain disruptions, working capital
requirements and capital deployment decisions.
Our future capital requirements will depend on many factors including our growth rate in net revenue, third-party
reimbursement of our products for our customers, the timing and extent of spending to support research development
efforts, the expansion of selling, general and administrative activities, the timing of introductions of new products, the
expenditures associated with possible future acquisitions, investments or other business combination transactions. As we
assess inorganic growth strategies, we may need to supplement our internally generated cash flow with outside sources. If
we are required to access the debt market, we believe that we will be able to secure reasonable borrowing rates. As part of
our liquidity strategy, we will continue to monitor our current level of earnings and cash flow generation as well as our
ability to access the market considering those earning levels.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
As of June 30, 2023 and June 30, 2022, we had cash and cash equivalents of $227.9 million and $273.7 million,
respectively. Our cash and cash equivalents held within the United States at June 30, 2023 and June 30, 2022 were $49.3
million and $70.0 million, respectively. Our remaining cash and cash equivalent balances at June 30, 2023 and June 30,
2022, were $178.6 million and $203.7 million, respectively. Our cash and cash equivalent balances are held at highly rated
financial institutions.
As of June 30, 2023, we had $745.0 million available for draw down under the revolving credit facility and a combined
total of $972.9 million in cash and available liquidity under the revolving credit facility.
We repatriated $445.0 million and $100.0 million to the United States during the years ended June 30, 2023 and 2022,
respectively, from earnings generated in each of those years. The amount of the current year foreign earnings that we have
repatriated to the United States in the past has been determined, and the amount that we expect to repatriate during fiscal
year 2023 will be determined, based on a variety of factors, including current year earnings of our foreign subsidiaries,
foreign investment needs and the cash flow needs we have in the United States, such as for the repayment of debt, dividend
distributions, and other domestic obligations.
As a result of the U.S. Tax Act, we treated all non-U.S. historical earnings as taxable, which resulted in additional tax
expense of $126.9 million which was payable over the proceeding eight years. Therefore, future repatriation of cash held
by our non-U.S. subsidiaries will generally not be subject to U.S. federal tax if repatriated, except as discussed in Note 12 –
Income Taxes of the Notes to the Consolidated Financial Statements (Part II, Item 8).
We believe that our current sources of liquidity will be sufficient to fund our operations, including expected capital
expenditures, for the next 12 months and beyond.
Revolving Credit Agreement, Term Credit Agreement and Senior Notes
On June 29, 2022, we entered into a second amended and restated credit agreement (as amended from time to time, the
“Revolving Credit Agreement”). The Revolving Credit Agreement, among other things, provided a senior unsecured
revolving credit facility of $1,500.0 million, with an uncommitted option to increase the revolving credit facility by an
additional amount equal to the greater of $1,000.0 million or 1.0 times the EBITDA for the trailing twelve-month
measurement period. Additionally, on June 29, 2022, ResMed Pty Limited entered into a Second Amendment to the
Syndicated Facility Agreement (the “Term Credit Agreement”). The Term Credit Agreement, among other things, provides
ResMed Limited a senior unsecured term credit facility of $200.0 million. The Revolving Credit Agreement and Term
Credit Agreement each terminate on Jun 29, 2027, when all unpaid principal and interest under the loans must be repaid.
As of June 30, 2023, we had $745.0 million available for draw down under the revolving credit facility.
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”).
On June 30, 2023, there was a total of $1,445.0 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.
Cash Flow Summary
The following table summarizes our cash flow activity (in thousands):
Net cash provided by operating activities
Net cash used in investing activities
Net cash (used in) / provided by financing activities
Effect of exchange rate changes on cash
Net decrease in cash and cash equivalents
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Year Ended June 30,
2023
2022
$
693,299 $
(1,159,845)
422,874
(2,147)
$
(45,819) $
351,147
(229,918)
(128,363)
(14,434)
(21,568)
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
Operating Activities
Cash provided by operating activities was $693.3 million for the year ended June 30, 2023, compared to cash provided of
$351.1 million for the year ended June 30, 2022. The $342.2 million increase in cash flow from operations was primarily
due to the payment of our tax settlement with the ATO of $284.8 million during the year ended June 30, 2022 and an
increase in operating profit for the year ended June 30, 2023.
Investing Activities
Cash used in investing activities was $1,159.8 million for the year ended June 30, 2023, compared to cash used of $229.9
million for the year ended June 30, 2022. The $929.9 million increase in cash flow used in investing activities was
primarily due to the cash used to acquire MEDIFOX DAN.
Financing Activities
Cash provided by in financing activities was $422.9 million for the year ended June 30, 2023, compared to cash used of
$128.4 million for the year ended June 30, 2022. The $551.2 million increase in cash flow provided by financing activities
was primarily due to the borrowing activity under our Revolving Credit Agreement in order to finance our acquisition of
MEDIFOX DAN.
Dividends
During the year ended June 30, 2023, we paid cash dividends of $1.76 per common share totaling $258.3 million. On
August 3, 2023, our board of directors declared a cash dividend of $0.48 per common share, to be paid on September 21,
2023, to shareholders of record as of the close of business on August 17, 2023. Future dividends are subject to approval by
our board of directors.
Contractual Obligations and Commitments
Details of contractual obligations at June 30, 2023 are as follows (in thousands):
Total
2024
2025
2026
2027
2028
Thereafter
$
1,447,164 $
12,164 $
10,000 $
10,000 $
1,165,000 $
— $
250,000
Payments Due by June 30,
Debt
Interest on debt
Operating leases
Purchase obligations
1,390,640
1,034,859
306,715
190,723
75,003
27,879
74,344
23,246
345,033
73,723
18,995
10,013
65,676
17,661
735
8,625
16,678
—
9,344
86,264
—
Total
$
3,335,242 $
1,149,905 $
452,623 $
112,731 $
1,249,072 $
25,303 $
345,608
Details of other commercial commitments at June 30, 2023 are as follows (in thousands):
Total
2024
2025
2026
2027
2028
Thereafter
Standby letter of credit
Guarantees*
Total
$
$
16,416 $
3,969 $
103 $
593 $
3,569
3,039
87
75
19,985 $
7,008 $
190 $
668 $
— $
330
330 $
— $
11,751
—
38
— $
11,789
Amount of Commitment Expiration Per Period
*
These guarantees mainly relate to requirements under contractual obligations with insurance companies transacting with our German subsidiaries
and guarantees provided under our facility leasing obligations.
Refer to Note 15 - Legal Actions, Contingencies and Commitments of the Notes to the Consolidated Financial Statements
(Part II, Item 8) for details of our contingent obligations under recourse provisions.
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PART II
Item 7
RESMED INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Segment Information
We have determined that we have two operating segments, which are the Sleep and Respiratory Care segment and the SaaS
segment. See Note 13 – Segment Information of the Notes to the Consolidated Financial Statements (Part II, Item 8) for
financial information regarding segment reporting. Financial information about our revenues from and assets located in
foreign countries is also included in the notes to the consolidated financial statements included in this report.
Critical Accounting Principles and Estimates
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that
affect our reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and
liabilities. On an ongoing basis we evaluate our estimates, including those related to allowance for doubtful accounts,
inventory reserves, warranty obligations, goodwill, potentially impaired assets, intangible assets, income taxes and
contingencies.
We state these accounting policies in the notes to the financial statements and at relevant sections in this discussion and
analysis. The estimates are based on the information that is currently available to us and on various other assumptions that
we believe to be reasonable under the circumstances. Actual results could vary from those estimates under different
assumptions or conditions.
We believe that the following critical accounting policies affect the more significant judgments and estimates used in the
preparation of our consolidated financial statements:
(1)
Valuation of Goodwill, Intangible and Other Long-Lived Assets. We make assumptions in establishing the
carrying value, fair value and estimated lives of our goodwill, intangibles and other long-lived assets. Our goodwill
impairment tests are performed at our reporting unit level, which is one level below our operating segments. The criteria
used for these evaluations include management’s estimate of the asset’s continuing ability to generate positive income from
operations and positive cash flow in future periods compared to the carrying value of the asset, as well as the strategic
significance of any identifiable intangible asset in our business objectives. If assets are considered to be impaired, we
recognize as an impairment the amount by which the carrying value of the assets exceeds their fair value, and for goodwill
is limited to the value of goodwill allocated to the impaired reporting unit, as described in Step 1 below. Factors that would
influence the likelihood of a material change in our reported results include significant changes in the asset’s ability to
generate positive cash flow, loss of legal ownership or title to the asset, a significant decline in the economic and
competitive environment on which the asset depends, significant changes in our strategic business objectives, utilization of
the asset, and a significant change in the economic and/or political conditions in certain countries.
We conduct an annual review for goodwill impairment at our reporting unit level based on the following steps:
Step 0 or Qualitative assessment – Evaluate qualitative factors to determine whether it is more likely than not that
the fair value of a reporting unit is less than its carrying amount, including goodwill. The factors we consider
include, but are not limited to, macroeconomic conditions, industry and market considerations, cost factors,
overall financial performance or events-specific to that reporting unit. If or when we determine it is more likely
than not that the fair value of a reporting unit is less than the carrying amount, including goodwill, we would move
to Step 1 of the quantitative method.
Step 1 – Compare the fair value for each reporting unit to its carrying value, including goodwill. Fair value is
determined based on estimated discounted cash flows. A goodwill impairment charge is recognized for the amount
that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount
of goodwill allocated to that reporting unit. If a reporting unit’s fair value exceeds the carrying value, no further
work is performed and no impairment charge is necessary.
During the annual reviews for the years ended June 30, 2023, 2022 and 2021, we completed a Step 0 or Qualitative
assessment and determined it was more likely than not that the fair value of our reporting units exceeded their carrying
amounts, including goodwill, and therefore goodwill was not impaired.
Income Tax. We assess our income tax positions and record tax benefits for all years subject to audit based upon
(2)
management’s evaluation of the facts, circumstances and information available at the reporting date. If we determine that it
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Item 7
RESMED INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations
is not more likely than not that we would be able to realize all or part of our net deferred tax assets in the future, an
adjustment to the deferred tax assets would be charged to income tax expense in the period such determination is made.
Alternatively, if we determine that it is more likely than not that the net deferred tax assets would be realized, any
previously provided valuation allowance is reversed. These changes to the valuation allowance and resulting increases or
decreases in income tax expense may have a material effect on our operating results.
Our income tax returns are based on calculations and assumptions 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
recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for
recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will
be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure
the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While we believe we
have appropriate support for the positions taken on our tax returns, we regularly assess the potential outcomes of
examinations by tax authorities in determining the adequacy of our provision for income taxes. Based on our regular
assessment, we may adjust the income tax provision and deferred taxes in the period in which the facts that give rise to a
revision become known.
On September 19, 2021, we concluded the settlement agreement with the Australian Taxation Office (“ATO”) in relation to
the previously disclosed transfer pricing dispute for the tax years 2009 through 2018 (“ATO settlement”). The ATO
settlement fully resolved the dispute for all prior years, with no admission of liability and provides clarity in relation to
certain future taxation principles.
The final net impact of the ATO settlement was recorded during the years ended June 30, 2021 and 2022 in the amount of
$238.7 million, which represents a gross amount of $381.7 million, including interest and penalties of $48.1 million, and
adjustments for credits and deductions of $143.0 million. As a result of the ATO settlement and due to movements in
foreign currencies, we recorded a benefit of $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 settlement, we reversed our previously
recorded uncertain tax position.
On September 28, 2021, we remitted final payment to the ATO of $284.8 million, consisting of the agreed settlement
amount of $381.7 million less prior remittances made to the ATO of $96.9 million.
Tax years 2018 to 2022 remain subject to future examination by the major tax jurisdictions in which we are subject to tax.
Revenue Recognition. We have determined that we have two operating segments, which are the sleep and
(3)
respiratory disorders sector of the medical device industry (“Sleep and Respiratory Care”) and the supply of business
management software as a service to out-of-hospital health providers (“SaaS”). 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 cloud-hosted 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 to five years. Our contracts do not contain significant financing
components.
Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing
services. In our Sleep and Respiratory Care segment, the amount of consideration received and revenue recognized varies
with changes in marketing incentives (e.g. rebates, discounts, free goods) and returns offered to our customers and their
customers. When we give customers the right to return eligible products and receive credit, returns are estimated based on
an analysis of our historical experience. However, returns of products, excluding warranty-related returns, have historically
been 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.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
We offer our Sleep and Respiratory Care customers cash or product rebates based on volume or sales targets measured over
quarterly or annual periods. We estimate rebates based on each customer’s expected achievement of its targets. In
accounting for these rebate programs, we reduce revenue ratably as sales occur over the rebate period by the expected value
of the rebates to be returned to the customer. Rebates measured over a quarterly period are updated based on actual sales
results and, therefore, no estimation is required to determine the reduction to revenue. For rebates measured over annual
periods, we update our estimates each quarter based on actual sales results and updated forecasts for the remaining rebate
periods.
We participate in programs where we issue credits to our Sleep and Respiratory Care distributors when they are required to
sell our products below negotiated list prices if we have preexisting contracts with the distributors' customers. We reduce
revenue for future credits at the time of sale to the distributor, which we estimate based on historical experience using the
expected value method.
We also offer discounts to both our Sleep and Respiratory Care as well as our SaaS customers as part of normal business
practice and these are deducted from revenue when the sale occurs.
When Sleep and Respiratory Care or SaaS contracts have multiple performance obligations, we generally use an observable
price to determine the stand-alone selling price by reference to pricing and discounting practices for the specific product or
service when sold separately to similar customers. Revenue is then allocated proportionately, based on the determined
stand-alone selling price, to each performance obligation. An allocation is not required for many of our Sleep and
Respiratory Care contracts that have a single performance obligation, which is the shipment of our therapy-based
equipment.
(4)
Business Combinations. The MEDIFOX DAN acquisition was accounted for using the acquisition method of
accounting in accordance with ASC Topic 805, Business Combinations. The acquisition method of accounting involved the
allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed. This allocation
process involves the use of estimates and assumptions made in connection with determining the fair value of assets
acquired and liabilities assumed including cash flows expected to be derived from the use of the asset, the timing of such
cash flows, the remaining useful life of assets and applicable discount rates. We have finalized our allocation of
consideration to net tangible and intangible assets acquired as of June 30, 2023.
In the event that actual results vary from the estimates or assumptions used in the valuation or allocation process, we may
be required to record an impairment charge or an increase in depreciation or amortization in future periods, or both. Refer
to Note 17, Business Combinations, to the accompanying consolidated financial statements for additional information
about accounting for the MEDIFOX DAN acquisition.
Recently Issued Accounting Pronouncements
None
Off-Balance Sheet Arrangements
As of June 30, 2023, 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.
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Quantitative and Qualitative Disclosures About Market and Business Risks
Item 7A
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET AND BUSINESS RISKS
Foreign Currency Market Risk
Our reporting currency is the U.S. dollar, although the financial statements of our non-U.S. subsidiaries are maintained in
their respective local currencies. We transact business in various foreign currencies, including a number of major European
currencies as well as the Australian and Singapore dollars. We have significant foreign currency exposure through our
Australian and Singapore manufacturing activities and our international sales operations.
Net Investment and Fair Value Hedging
On November 17, 2022, we executed foreign cross-currency swaps as net investment hedges and fair value hedges in
designated hedging relationships with either the foreign denominated net asset balances or the foreign denominated
intercompany loan as the hedged items. All derivatives are recorded at fair value as either an asset or liability. Cash flows
associated with derivative instruments are presented in the same category on the consolidated statements of cash flows as
the hedged item.
The purpose of the cross-currency swaps for the fair value hedge is to mitigate foreign currency risk associated with
changes in spot rates on foreign denominated intercompany debt between USD and EUR. For these hedges, we excluded
certain components from the assessment of hedge effectiveness that are not related to spot rates. For fair value hedges that
qualify and are designated for hedge accounting, the change in fair value of the derivative is recorded in the same line item
as the hedged item, Other, net, in the condensed consolidated statement of income. The initial fair value of hedge
components excluded from the assessment of effectiveness is recognized in the statement of operations under a systematic
and rational method over the life of the hedging instrument and is presented in interest (expense) income, net. Any
difference between the change in the fair value of the hedge components excluded from the assessment of effectiveness and
the amounts recognized in earnings is recorded as a component of other comprehensive income.
The purpose of the cross-currency swaps for the net investment hedge is to mitigate foreign currency risk associated with
changes in spot rates on the net asset balances of our foreign functional subsidiaries. For net investment hedges that qualify
and are designated for hedge accounting, the change in fair value of the derivative is recorded in cumulative translation
adjustment within other comprehensive loss and reclassified into earnings when the hedged net investment is either sold or
substantially liquidated. The initial fair value of components excluded from the assessment of hedge effectiveness will be
recognized in interest (expense) income, net.
The notional value of outstanding foreign cross-currency swaps was $1,046.6 million at June 30, 2023. These contracts
mature at various dates prior to December 31, 2029.
Non-Designated Hedges
We transact business in various foreign currencies, including a number of major European currencies as well as the
Australian and Singapore dollars. We have foreign currency exposure through both our Australian and Singapore
manufacturing activities, and international sales operations. We have established a foreign currency hedging program using
purchased foreign currency call options, collars and forward contracts to hedge foreign-currency-denominated financial
assets, liabilities and manufacturing cash flows. The terms of such foreign currency hedging contracts generally do not
exceed three years. The purpose of this hedging program is to economically manage the financial impact of foreign
currency exposures denominated mainly in Euros, and Australian and Singapore dollars. Under this program, increases or
decreases in our foreign currency denominated financial assets, liabilities, and firm commitments are partially offset by
gains and losses on the hedging instruments. We do not designate these foreign currency contracts as hedges. All
movements in the fair value of the foreign currency instruments are recorded within other, net in our condensed
consolidated statements of income.
The notional value of the outstanding non-designated hedges was $954.7 million and $602.0 million at June 30, 2023 and
June 30, 2022, respectively. These contracts mature at various dates prior to December 15, 2024.
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Quantitative and Qualitative Disclosures About Market and Business Risks
Item 7A
Fair Values of Derivative Instruments
The table below provides information (in U.S. dollars) on our significant foreign-currency-denominated financial assets by
legal entity functional currency as of June 30, 2023 (in thousands):
AUD Functional:
Net Assets/(Liabilities)
Foreign Currency Hedges
Net Total
USD Functional:
Net Assets/(Liabilities)
Foreign Currency Hedges
Net Total
SGD Functional:
Net Assets/(Liabilities)
Foreign Currency Hedges
Net Total
U.S.
Dollar
(USD)
Euro
(EUR)
Canadian
Dollar
(CAD)
Chinese
Yuan
(CNY)
339,015
(335,000)
4,015
—
—
—
274,049
(240,000)
34,049
(115,192)
114,636
(556)
311,950
(305,697)
6,253
102,676
(76,424)
26,252
—
—
—
23,719
(30,219)
(6,500)
—
—
—
20,452
(11,029)
9,423
—
—
—
1,323
—
1,323
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Quantitative and Qualitative Disclosures About Market and Business Risks
Item 7A
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, forward contracts and cross-currency
swaps held at June 30, 2023. 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).
AUD/USD
Contract amount
Total
335,000
Ave. contractual exchange rate
AUD 1 = USD 0.6708
AUD/Euro
Contract amount
Ave. contractual exchange rate
SGD/Euro
Contract amount
Ave. contractual exchange rate
SGD/USD
Contract amount
Ave. contractual exchange rate
AUD/CNY
Contract amount
Ave. contractual exchange rate
USD/EUR
Contract amount
Ave. contractual exchange rate
USD/CAD
Contract amount
Ave. contractual exchange rate
Interest Rate Risk
212,896
AUD 1 = EUR 0.6419
125,554
SGD 1 = Euro 0.7022
240,000
SGD 1 = USD 0.7566
11,029
AUD 1 = CNY 4.7507
1,046,572
USD 1 = EUR 1.0406
30,219
CAD 1 = USD 0.7594
Fair Value Assets / (Liabilities)
June 30,
2023
June 30,
2022
(1,064)
(915)
(1,760)
(190)
(413)
71
(4,133)
(1,172)
(31)
(60,546)
156
(37)
—
(46)
We are exposed to risk associated with changes in interest rates affecting the return on our cash and cash equivalents and
debt. At June 30, 2023, we held cash and cash equivalents of $227.9 million principally comprising of bank term deposits
and at-call accounts and are invested at both short-term fixed interest rates and variable interest rates. At June 30, 2023,
there was $945.0 million outstanding under the revolving credit and term loan facilities, which were subject to variable
interest rates. A hypothetical 10% change in interest rates during the year ended June 30, 2023, would not have had a
material impact on pretax income. We have no interest rate hedging agreements. On July 10, 2019, we entered into the
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. The interest rate on these notes is fixed and not subject to fluctuation.
Inflation
Inflationary factors such as increases in the cost of our products, freight, overhead costs or wage rates may adversely affect
our operating results. Sustained inflationary pressures in the future may have an adverse effect on our ability to maintain
current levels of gross margin and operating expenses as a percentage of net revenue if we are unable to offset such higher
costs through price increases.
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Item 8
ITEM 8 CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference to the financial statements set forth in Item 15 of Part IV
of this report, “Exhibits and Consolidated Financial Statement Schedules.”
(a) Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (KPMG LLP, San Diego, CA, Auditor Firm ID:
185)
Consolidated Balance Sheets as of June 30, 2023 and 2022
Consolidated Statements of Income for the years ended June 30, 2023, 2022 and 2021
Consolidated Statements of Comprehensive Income for the years ended June 30, 2023, 2022 and 2021
Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2023, 2022 and 2021
Consolidated Statements of Cash Flows for the years ended June 30, 2023, 2022 and 2021
Notes to Consolidated Financial Statements
Schedule II – Valuation and Qualifying Accounts and Reserves
(b) Supplementary Data
61
64
65
66
67
68
69
95
Quarterly Financial Information (unaudited)—The quarterly results for the years ended June 30, 2023 and 2022 are
summarized below (in thousands, except per share amounts):
2023
Net revenue
Gross profit
Net income
Basic earnings per share
Diluted earnings per share
2022
Net revenue
Gross profit
Net income
Basic earnings per share
Diluted earnings per share
First
͏Quarter
Second
͏Quarter
Third
͏Quarter
Fourth
͏Quarter
Fiscal
͏Year
$
950,294 $
1,033,744 $
1,116,898 $
1,122,057 $
540,810
210,478
1.44
1.43
579,715
224,914
1.53
1.53
617,752
232,500
1.58
1.58
617,386
229,664
1.56
1.56
4,222,993
2,355,662
897,556
6.12
6.09
First
͏Quarter
Second
͏Quarter
Third
͏Quarter
Fourth
͏Quarter
Fiscal
͏Year
$
904,015 $
894,874 $
864,500 $
914,737 $
506,289
203,613
1.40
1.39
504,318
201,751
1.38
1.37
491,197
179,012
1.22
1.22
522,506
195,061
1.33
1.33
3,578,127
2,024,311
779,437
5.34
5.30
Note: the amounts for each quarter are computed independently and, due to the computation formula, the sum of the four quarters may not equal the year.
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Report of Independent Registered Public Accounting Firm
Item 8
To the Stockholders and Board of Directors
͏ResMed Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of ResMed Inc. and subsidiaries (the Company) as of June
30, 2023 and 2022, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash
flows for each of the years in the three-year period ended June 30, 2023, and the related notes and financial statement
schedule II (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company as of June 30, 2023 and 2022, and the results
of its operations and its cash flows for each of the years in the three-year period ended June 30, 2023, in conformity with
U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of June 30, 2023, based on criteria established
in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated August 10, 2023 expressed an unqualified opinion on the effectiveness of the
Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated
financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they
relate.
Evaluation of goodwill triggering events
As discussed in Notes 2(i) and 4 to the consolidated financial statements, the Company’s goodwill balance was
$2,770 million as of June 30, 2023. The Company performs goodwill impairment testing on an annual basis and
whenever events or changes in circumstances indicate that the carrying value of a reporting unit, including
goodwill, might exceed the fair value of the reporting unit. In the current year, the Company performed
qualitative, or Step 0, assessments to determine whether there was a greater than 50 percent likelihood that the fair
value of each reporting unit was less than its carrying value. After completing Step 0, the Company determined
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Item 8
that goodwill was not more likely than not impaired and, therefore, no Step 1, or quantitative assessment, was
necessary.
We identified the evaluation of goodwill triggering events as a critical audit matter. The evaluation of potential
triggering events, including macroeconomic conditions, industry and market considerations, cost factors, overall
financial performance, market capitalization and events specific to the entity and reporting units, required a higher
degree of auditor judgment. These potential triggering events could have a significant effect on the Company’s
Step 0 assessment and the determination of whether further quantitative analysis of goodwill impairment was
required.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of certain internal controls related to the evaluation of goodwill
impairment. This included a control related to the Company’s assessment of potential goodwill triggering events.
We evaluated the Company’s Step 0 assessment for its reporting units by:
•
•
•
considering macroeconomic conditions including gross domestic product, labor market, and inflation by
key regions around the world for negative indicators
evaluating information from analyst reports in the enterprise software and sleep and respiratory care
industries, which were compared to industry and market considerations used by the Company
analyzing information including changes in the costs of raw materials and labor, the financial
performance of the reporting units, the Company’s market capitalization, and other entity and reporting-
unit specific events.
Evaluation of acquisition-date fair value of intangible assets
As discussed in Note 17 to the consolidated financial statements, the Company acquired MediFox-Dan Investment
GmbH and its subsidiaries (MEDIFOX DAN) on November 21, 2022, for a total purchase price of $997.5 million,
which is net of cash acquired and debt assumed. In connection with the transaction, the Company recorded
customer relationships, developed technology, and trade names intangible assets (collectively, the intangible
assets). The acquisition-date fair value for the intangible assets was $250.6 million as of June 30, 2023.
We identified the evaluation of the acquisition-date fair value of certain intangible assets acquired in the
MEDIFOX DAN transaction as a critical audit matter. Due to limited observable market information, a high
degree of subjective auditor judgment was required to evaluate key assumptions used to determine the fair value
of the intangible assets, specifically the forecasted revenue growth rates, forecasted earnings before interest, tax,
depreciation, and amortization (EBITDA) margins, and weighted-average cost of capital (WACC), including the
discount rate. In addition, valuation professionals with specialized skills and knowledge were required to assist in
performing certain audit procedures related to evaluating the WACC and discount rate.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date
valuation process, including controls over the development of the key assumptions. We evaluated the Company’s
forecasted revenue growth rates by comparing forecasted growth assumptions to those of MEDIFOX DAN peers
and industry reports, as well as historical results of MEDIFOX DAN. We assessed the Company’s ability to
accurately forecast by comparing the Company’s forecasted revenue growth rates and EBITDA margins of the
acquired business to actual results subsequent to the acquisition date. In addition, we involved valuation
professionals with specialized skills and knowledge, who assisted in:
•
•
evaluating the Company’s discount rate by comparing it against a discount rate range that was
independently developed using publicly available market data for comparable peers
assessing the Company’s WACC by comparing it against an independently developed WACC based on
inputs obtained through published surveys and studies.
/s/ KPMG LLP
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PART II
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Item 8
We have served as the Company’s auditor since 1994.
San Diego, California
͏August 10, 2023
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PART II
Item 8
RESMED INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 2023 and 2022
(In US$ and in thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net of allowances of $23,603 and $23,259 ͏at June 30, 2023 and June 30, 2022,
respectively
Inventories (note 3)
Prepaid expenses and other current assets (note 3)
Total current assets
Non-current assets:
Property, plant and equipment, net (note 3)
Operating lease right-of-use assets (note 9)
Goodwill (note 4)
Other intangible assets, net (note 4)
Deferred income taxes (note 12)
Prepaid taxes and other non-current assets
Total non-current assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued expenses (note 6)
Operating lease liabilities, current (note 9)
Deferred revenue
Income taxes payable (note 12)
Short-term debt, net (note 8)
Total current liabilities
Non-current liabilities:
Deferred revenue
Deferred income taxes (note 12)
Operating lease liabilities, non-current (note 9)
Other long-term liabilities
Long-term debt, net (note 8)
Long-term income taxes payable (note 12)
Total non-current liabilities
Total liabilities
Commitments and contingencies (note 15)
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; ͏188,900,583 issued and 147,064,349
outstanding at June 30, 2023 and ͏188,246,955 issued and 146,410,721 outstanding at June 30, 2022
Additional paid-in capital
Retained earnings
Treasury stock, at cost, 41,836,234 shares at June 30, 2023 and June 30, 2022
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
June 30,
2023
June 30,
2022
$
227,891 $
273,710
704,909
998,012
437,018
2,367,830
537,856
127,955
2,770,299
552,341
132,974
262,453
4,383,878
6,751,708 $
150,756 $
365,660
21,919
138,072
72,224
9,902
758,533
119,186
90,650
116,853
68,166
1,431,234
37,183
1,863,272
2,621,805
575,950
743,910
337,908
1,931,478
498,181
132,314
1,936,442
345,944
79,746
171,748
3,164,375
5,095,853
159,245
344,722
21,856
108,667
44,893
9,916
689,299
95,455
9,714
120,453
5,974
765,325
48,882
1,045,803
1,735,102
—
—
588
1,772,083
4,253,016
(1,623,256)
(272,528)
4,129,903
6,751,708 $
586
1,682,432
3,613,736
(1,623,256)
(312,747)
3,360,751
5,095,853
$
$
$
See accompanying notes to consolidated financial statements.
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PART II
Item 8
RESMED INC. AND SUBSIDIARIES
Consolidated Statements of Income
Years Ended June 30, 2023, 2022 and 2021
(In US$ and in thousands, except share and per share data)
Net revenue - Sleep and Respiratory Care products
$
3,725,017 $
3,177,298 $
2,823,235
June 30, 2023
June 30, 2022
June 30, 2021
Net revenue - Software as a Service
Net revenue
Cost of sales - Sleep and Respiratory Care products
Cost of sales - Software as a Service
Cost of sales (exclusive of amortization shown separately below)
Amortization of acquired intangible assets - Sleep and Respiratory Care products
Amortization of acquired intangible assets - Software as a Service
Amortization of acquired intangible assets
Total cost of sales
Gross profit
Selling, general, and administrative
Research and development
Amortization of acquired intangible assets
Restructuring expenses (note 18)
Acquisition related expenses
Total operating expenses
Income from operations
Other income (loss), net:
Interest (expense) income, net
Loss attributable to equity method investments (note 5)
Gain (loss) on equity investments (note 5)
Gain on insurance recoveries
Other, net
Total other income (loss), net
Income before income taxes
Income taxes (note 12)
Net income
Basic earnings per share (note 11)
Diluted earnings per share (note 11)
Dividend declared per share
Basic shares outstanding (000's)
Diluted shares outstanding (000's)
497,976
4,222,993
1,662,957
173,978
1,836,935
5,340
25,056
30,396
1,867,331
2,355,662
874,003
287,642
42,020
9,177
10,949
1,223,791
1,131,871
(47,379)
(7,265)
9,922
20,227
(5,712)
(30,207)
1,101,664
204,108
400,829
3,578,127
1,365,421
148,745
1,514,166
4,105
35,545
39,650
1,553,816
2,024,311
737,508
253,575
31,078
—
1,864
1,024,025
1,000,286
(22,312)
(8,486)
(12,202)
—
3,197
(39,803)
960,483
181,046
$
$
$
$
897,556 $
779,437 $
6.12 $
6.09 $
1.76 $
5.34 $
5.30 $
1.68 $
146,765
147,455
146,066
147,043
373,590
3,196,825
1,177,309
135,289
1,312,598
4,895
40,232
45,127
1,357,725
1,839,100
670,387
225,284
31,078
8,673
—
935,422
903,678
(23,627)
(11,205)
14,515
—
301
(20,016)
883,662
409,157
474,505
3.27
3.24
1.56
145,313
146,451
See accompanying notes to consolidated financial statements.
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PART II
Item 8
RESMED INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
Years Ended June 30, 2023, 2022 and 2021
(In US$ and in thousands)
Net income
Other comprehensive income (loss):
Unrealized losses on designated hedging instruments
Foreign currency translation (loss) gain adjustments
Comprehensive income
2023
2022
2021
$
897,556 $
779,437 $
474,505
(35,596)
75,815
—
(119,260)
$
937,775 $
660,177 $
—
90,495
565,000
See accompanying notes to consolidated financial statements.
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PART II
Item 8
RESMED INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
Years ended June 30, 2023, 2022 and 2021
(In US$ and in thousands)
Common Stock
Shares
Amount
Additional
͏Paid-in
Capital
Treasury Stock
Shares
Amount
Retained
Earnings
Accumulated
͏Other
͏Comprehensive
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 (note 10)
Common stock issued on vesting of restricted stock units, net of shares
withheld for tax (note 11)
Common stock issued on employee stock purchase plan (note 10)
Stock-based compensation costs
Other comprehensive income (loss)
Net income
Cumulative effect adjustment from adoption of the credit loss standard,
net of tax
Dividends declared ($1.56 per common share)
64
469
229
—
—
—
—
—
—
2
1
—
—
—
—
—
3,954
(50,209)
33,833
63,927
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
474,505
(1,143)
(226,713)
—
—
—
—
90,495
—
—
—
3,954
(50,207)
33,834
63,927
90,495
474,505
(1,143)
(226,713)
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 (note 10)
Common stock issued on vesting of restricted stock units, net of shares
withheld for tax (note 10)
Common stock issued on employee stock purchase plan (note 10)
Stock-based compensation costs
Other comprehensive income (loss)
Net income
Dividends declared ($1.68 per common share)
177
369
216
—
—
—
—
—
2
1
—
—
—
—
11,205
(52,408)
36,179
65,257
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
779,437
(245,341)
—
—
—
—
(119,260)
—
—
11,205
(52,406)
36,180
65,257
(119,260)
779,437
(245,341)
Balance, June 30, 2022
188,247 $
586 $
1,682,432
(41,836) $
(1,623,256) $
3,613,736 $
(312,747) $
3,360,751
Common stock issued on exercise of options (note 10)
Common stock issued on vesting of restricted stock units, net of shares
withheld for tax (note 10)
Common stock issued on employee stock purchase plan (note 10)
Stock-based compensation costs
Other comprehensive income (loss)
Net income
Dividends declared ($1.76 per common share)
157
277
220
—
—
—
—
—
1
1
—
—
—
—
9,696
(30,632)
39,445
71,142
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
897,556
(258,276)
—
—
—
—
40,219
—
—
9,696
(30,631)
39,446
71,142
40,219
897,556
(258,276)
Balance, June 30, 2023
188,901 $
588 $
1,772,083
(41,836) $
(1,623,256) $
4,253,016 $
(272,528) $
4,129,903
See accompanying notes to consolidated financial statements.
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PART II
Item 8
RESMED INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended June 30, 2023, 2022 and 2021
(In US$ and in thousands)
Cash flows from operating activities:
Net income
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Amortization of right-of-use assets
Stock-based compensation costs (note 10)
Loss attributable to equity method investments, net of dividends received (note 5)
(Gain) loss on equity investments (note 5)
Restructuring expenses (note 18)
Gain on insurance recoveries
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses, net deferred income taxes and other current assets
Accounts payable, accrued expenses and other
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property, plant and equipment
Patent registration costs
Business acquisitions, net of cash acquired
Purchases of investments (note 5)
Proceeds from sale of investment (note 5)
Proceeds / (payments) on maturity of foreign currency contracts
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of common stock, net
Taxes paid related to net share settlement of equity awards
Payments of business combination contingent consideration
Proceeds from borrowings, net of borrowing costs
Repayment of borrowings
Dividends paid
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosure of cash flow information:
Income taxes paid, net of refunds
Interest paid
Fair value of assets acquired, excluding cash
Liabilities assumed
Goodwill on acquisition
Previously held equity interest
Deferred payments
Fair value of contingent consideration
Cash paid for acquisitions
June 30, 2023
June 30, 2022
June 30, 2021
$
897,556 $
779,437 $
474,505
165,156
32,406
71,142
10,138
(9,922)
9,177
(20,227)
(106,511)
(248,833)
(138,125)
31,342
693,299
(119,672)
(14,328)
(1,012,749)
(32,229)
3,937
15,196
(1,159,845)
49,142
(30,631)
(2,361)
1,070,000
(405,000)
(258,276)
422,874
(2,147)
(45,819)
273,710
159,609
34,232
65,257
8,486
12,202
—
—
19,346
(311,681)
(168,109)
(247,632)
351,147
(134,835)
(21,201)
(42,784)
(20,724)
6,802
(17,176)
(229,918)
47,384
(52,406)
—
288,000
(166,000)
(245,341)
(128,363)
(14,434)
(21,568)
295,278
227,891 $
273,710 $
156,758
34,760
63,927
11,205
(14,515)
8,673
—
(129,195)
(21,954)
(58,154)
210,708
736,718
(102,712)
(14,114)
(39,067)
(21,788)
—
19,219
(158,462)
37,790
(50,209)
(3,500)
90,000
(612,000)
(226,713)
(764,632)
18,498
(167,878)
463,156
295,278
478,120 $
221,359
$
$
$
$
216,866 $
47,379 $
359,730 $
(131,765)
786,990
—
2,542
(2,387)
22,312 $
15,648 $
(4,672)
38,953
(4,078)
(3,067)
—
$
1,015,110 $
42,784 $
23,989
16,671
(1,543)
24,671
—
3,768
—
43,567
See accompanying notes to consolidated financial statements.
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Notes to the Consolidated Financial Statements
Item 8
(1) Organization and Basis of Presentation
ResMed Inc. (referred to herein as “we”, “us”, “our” or the “Company”) is a Delaware corporation formed in March 1994
as a holding company for the ResMed Group. Through our subsidiaries, we design, manufacture and market equipment for
the diagnosis and treatment of sleep-disordered breathing and other respiratory disorders, including obstructive sleep apnea.
Our manufacturing operations are located in Australia, Singapore, Malaysia, France, China and the United States. Major
distribution and sales sites are located in the United States, Germany, France, the United Kingdom, Switzerland, Australia,
Japan, China, Finland, Norway and Sweden. We also operate a Software as a Service (“SaaS”) business in the United
States and Germany that includes out-of-hospital software platforms designed to support the professionals and caregivers
who help people stay healthy in the home or care setting of their choice.
(2) Summary of Significant Accounting Policies
(a) Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany transactions and balances have been eliminated in consolidation. The preparation of financial
statements in conformity with U.S. generally accepted accounting principles requires management estimates and
assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. Certain prior
period amounts have been reclassified to conform to the current period presentation. Actual results could differ from
management’s estimates.
(b) Revenue Recognition
In accordance with Accounting Standard Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers”, we
account for a contract with a customer when there is a legally enforceable contract, the rights of the parties are identified,
the contract has commercial substance, and collectability of the contract consideration is probable. We have determined
that we have two operating segments, which are the sleep and respiratory disorders sector of the medical device industry
(“Sleep and Respiratory Care”) and the supply of business management software as a service to out-of-hospital care
providers (“SaaS”). Our Sleep and Respiratory Care revenue relates primarily to the sale of our products that are therapy-
based equipment. Some contracts include additional performance obligations such as the provision of extended warranties
and provision of data for patient monitoring. Our SaaS revenue relates to the provision of software access with ongoing
support and maintenance services as well as professional services such as training and consulting.
Disaggregation of revenue
See Note 13 – Segment Information for our net revenue disaggregated by segment, product and region for the years ended
June 30, 2023, 2022 and 2021.
Performance obligations and contract balances
Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied; generally,
this occurs with the transfer of risk and/or control of our products at a point in time. For products in our Sleep and
Respiratory Care business, we transfer control and recognize a sale when products are shipped to the customer in
accordance with the contractual shipping terms. For our SaaS business, revenue associated with cloud-hosted 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.
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PART II
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Notes to the Consolidated Financial Statements
Item 8
The following table summarizes our contract balances as of June 30, 2023 and 2022 (in thousands):
Contract assets
Accounts receivable, net
Unbilled revenue, current
Unbilled revenue, non-current
Contract liabilities
Deferred revenue, current
Deferred revenue, non-current
Transaction price determination
2023
2022
Balance sheet caption
$
704,909 $
575,950 Accounts receivable, net
31,521
10,078
25,692 Prepaid expenses and other current assets
8,840 Prepaid taxes and other non-current assets
(138,072)
(119,186)
(108,667) Deferred revenue (current liabilities)
(95,455) Deferred revenue (non-current liabilities)
Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing
services. In our Sleep and Respiratory Care segment, the amount of consideration received and revenue recognized varies
with changes in marketing incentives (e.g. rebates, discounts, free goods) and returns offered to our customers and their
customers. When we give customers the right to return eligible products and receive credit, returns are estimated based on
an analysis of our historical experience. However, returns of products, excluding warranty-related returns, have historically
been infrequent and insignificant. We adjust the estimate of revenue at the earlier of when the most likely amount of
consideration can be estimated, the amount expected to be received changes, or when the consideration becomes fixed.
We offer our Sleep and Respiratory Care customers cash or product rebates based on volume or sales targets measured over
quarterly or annual periods. We estimate rebates based on each customer’s expected achievement of its targets. In
accounting for these rebate programs, we reduce revenue ratably as sales occur over the rebate period by the expected value
of the rebates to be returned to the customer. Rebates measured over a quarterly period are updated based on actual sales
results and, therefore, no estimation is required to determine the reduction to revenue. For rebates measured over annual
periods, we update our estimates each quarter based on actual sales results and updated forecasts for the remaining rebate
periods.
We participate in programs where we issue credits to our Sleep and Respiratory Care distributors when they are required to
sell our products below negotiated list prices if we have preexisting contracts with the distributors' customers. We reduce
revenue for future credits at the time of sale to the distributor, which we estimate based on historical experience using the
expected value method.
We also offer discounts to both our Sleep and Respiratory Care as well as our SaaS customers as part of normal business
practice and these are deducted from revenue when the sale occurs.
When Sleep and Respiratory Care or SaaS contracts have multiple performance obligations, we generally use an observable
price to determine the stand-alone selling price by reference to pricing and discounting practices for the specific product or
service when sold separately to similar customers. Revenue is then allocated proportionately, based on the determined
stand-alone selling price, to each performance obligation. An allocation is not required for many of our Sleep and
Respiratory Care contracts that have a single performance obligation, which is the shipment of our therapy-based
equipment.
Accounting and practical expedient elections
We have elected to account for shipping and handling activities associated with our Sleep and Respiratory Care segment as
a fulfillment cost within cost of sales, and record shipping and handling costs collected from customers in net revenue. We
have also elected for all taxes assessed by government authorities that are imposed on and concurrent with revenue-
producing transactions, such as sales and value added taxes, to be excluded from revenue and presented on a net basis. We
have adopted two practical expedients including the “right to invoice” practical expedient, which allows us to recognize
revenue in the amount of the invoice when it corresponds directly with the value of performance completed to date and
which is relevant for some of our SaaS contracts. The second practical expedient adopted permits relief from considering a
significant financing component when the payment for the good or service is expected to be one year or less.
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Notes to the Consolidated Financial Statements
(c) Concentration of Credit Risk and Significant Customers
Item 8
Financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash and cash
equivalents, marketable securities, derivatives and trade receivables. Our cash and cash equivalents are generally held with
large, diverse financial institutions to reduce the amount of exposure to any single financial institution. Our derivative
contracts are transacted with various financial institutions with high credit standings and any exposure to counterparty
credit-related losses in these contracts is largely mitigated with collateralization and master-netting agreements. The risk
with respect to trade receivables is mitigated by credit evaluations we perform on our customers, the short duration of our
payment terms for the significant majority of our customer contracts and by the diversification of our customer base. No
single customer accounted for 10% or more of our total revenues for any of the periods presented.
(d) Fair Value of Financial Instruments
The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. We measure our financial instruments at fair
value at each reporting period using a fair value hierarchy that requires that we maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair
value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of
inputs may be used to measure fair value:
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active
markets.
Level 2 - Other inputs that are directly or indirectly observable in the marketplace.
Level 3 - Unobservable inputs that are supported by little or no market activity.
The carrying value of cash equivalents, accounts receivable and accounts payable, approximate their fair value because of
their short-term nature. The carrying value of long-term debt related to our Revolving Credit and Term Credit Agreements
approximates its fair value as the principal amounts outstanding are subject to variable interest rates that are based on
market rates which are regularly reset. The carrying value of long-term debt related to our Senior Notes can differ to its fair
value as the principal amounts outstanding are subject to fixed interest rates as outlined in Note 8 - Debt. Foreign currency
hedging instruments are marked to market and therefore reflect their fair value. In addition, we measure investments in
publicly held equity securities and privately held equity securities for which there has been an observable price change in
an identical or similar security, at fair value. We do not hold or issue financial instruments for trading purposes.
(e) Cash and Cash Equivalents
Cash equivalents include certificates of deposit and other highly liquid investments and we state them at cost, which
approximates market. We consider investments with original maturities of 90 days or less to be cash equivalents for
purposes of the consolidated statements of cash flows.
(f)
Inventories
We state inventories at the lower of cost (determined principally by the first-in, first-out method) or net realizable value.
We include material, labor and manufacturing overhead costs in finished goods and work-in-process inventories. We
review and provide for any product obsolescence in our manufacturing and distribution operations by assessing throughout
the year individual products and components (based on estimated future usage and sales).
(g) Property, Plant and Equipment
We record property, plant and equipment, including rental and demonstration equipment at cost. We compute depreciation
expense using the straight-line method over the estimated useful lives of the assets. Useful lives are generally two years to
ten years except for buildings which are depreciated over an estimated useful life of forty years and leasehold
improvements, which we amortize over the shorter of the useful life or the lease term. We charge maintenance and repairs
to expense as we incur them.
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PART II
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Notes to the Consolidated Financial Statements
Item 8
Depreciation expense for property, plant, and equipment was $84.7 million, $81.0 million, and $78.4 million for the years
ended June 30, 2023, 2022 and 2021, respectively.
(h) Intangible Assets
We capitalize the registration costs for new patents and amortize the costs over the estimated useful life of the patent,
which is generally ten years. If a patent is superseded or a product is retired, any unamortized costs are written off
immediately.
We amortize all of our other intangible assets on a straight-line basis over their estimated useful lives, which range from
two years to fifteen years. We take into account events or circumstances that warrant revised estimates of useful lives or
that indicate that impairment exists and, at least annually, evaluate the recoverability of intangible assets. We have not
identified any impairment of intangible assets during any of the periods presented.
(i) Goodwill
We conduct our annual review for goodwill impairment during the final quarter of the fiscal year. Our goodwill impairment
review is performed at our reporting unit level, which is one level below our operating segments and involves the following
steps:
Step 0 or Qualitative assessment – Evaluate qualitative factors to determine whether it is more likely than not that
the fair value of a reporting unit is less than its carrying amount, including goodwill. The factors we consider
include, but are not limited to, macroeconomic conditions, industry and market considerations, cost factors,
overall financial performance or events-specific to that reporting unit. If or when we determine it is more likely
than not that the fair value of a reporting unit is less than the carrying amount, including goodwill, we would move
to Step 1 of the quantitative method.
Step 1 – Compare the fair value for each reporting unit to its carrying value, including goodwill. Fair value is
determined based on estimated discounted cash flows. A goodwill impairment charge is recognized for the amount
that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount
of goodwill allocated to that reporting unit. If a reporting unit’s fair value exceeds the carrying value, no further
work is performed and no impairment charge is necessary.
During the annual reviews for the years ended June 30, 2023, 2022 and 2021, we completed a Step 0 or Qualitative
assessment and determined it was more likely than not that the fair value of our reporting units exceeded their carrying
amounts, including goodwill, and therefore goodwill was not impaired.
(j) Equity investments
We have equity investments in privately and publicly held companies that are unconsolidated entities. The following
discusses our accounting for investments in marketable equity securities, non-marketable equity securities, and investments
accounted for under the equity method.
Our marketable equity securities are publicly traded stocks measured at fair value and classified within Level 1 in the fair
value hierarchy because we use quoted prices for identical assets in active markets. Marketable equity securities are
recorded in prepaid expenses and other current assets on the consolidated balance sheets.
Non-marketable equity securities consist of investments in privately held companies without readily determinable fair
values and are recorded in prepaid taxes and other non-current assets on the consolidated balance sheets. Non-marketable
equity securities are reported at cost, minus impairment, if any, plus or minus changes resulting from observable price
changes in orderly transactions for the identical or similar investment of the same issuer. We assess non-marketable equity
securities at least quarterly for impairment and consider qualitative and quantitative factors including the investee's
financial metrics, product and commercial outlook and cash usage. All gains and losses on marketable and non-marketable
equity securities, realized and unrealized, are recognized in gain (loss) on equity investments as a component of other
income (loss), net on the consolidated statements of income.
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Notes to the Consolidated Financial Statements
Item 8
Equity investments whereby we have significant influence but not control over the investee and are not the primary
beneficiary of the investee’s activities, are accounted for under the equity method. Under this method, we record our share
of gains or losses attributable to equity method investments as a component of other income (loss), net on the consolidated
statements of income.
(k) Research and Development
We record all research and development expenses in the period we incur them.
(l) Foreign Currency
The consolidated financial statements of our non-U.S. subsidiaries, whose functional currencies are other than the U.S.
dollar, are translated into U.S. dollars for financial reporting purposes. We translate assets and liabilities of non-U.S.
subsidiaries whose functional currencies are other than the U.S. dollar at period end exchange rates but translate revenue
and expense transactions at average exchange rates for the period. We recognize cumulative translation adjustments as part
of comprehensive income, as detailed in the consolidated statements of comprehensive income, and include those
adjustments in accumulated other comprehensive income in the consolidated balance sheets until such time the relevant
subsidiary is sold or substantially or completely liquidated. We reflect gains and losses on transactions denominated in
other than the functional currency of an entity in our results of operations.
(m) Foreign Exchange Risk Management
We may use derivative financial instruments, specifically foreign cross-currency swaps, purchased foreign currency call
options, collars and forward contracts to mitigate exposure from certain foreign currency risk. No derivatives are used for
trading or speculative purposes. We do not require or are not required to pledge collateral for the derivative instruments.
Fair Value and Net Investment Hedging
On November 17, 2022, we executed foreign cross-currency swaps as net investment hedges and fair value hedges in
designated hedging relationships with either the foreign denominated net asset balances or the foreign denominated
intercompany loan as the hedged items. All derivatives are recorded at fair value as either an asset or liability. Cash flows
associated with derivative instruments are presented in the same category on the consolidated statements of cash flows as
the hedged item.
The purpose of the cross-currency swaps for the fair value hedge is to mitigate foreign currency risk associated with
changes in spot rates on foreign denominated intercompany debt between USD and EUR. For these hedges, we excluded
certain components from the assessment of hedge effectiveness that are not related to spot rates. For fair value hedges that
qualify and are designated for hedge accounting, the change in fair value of the derivative is recorded in the same line item
as the hedged item, other, net, in the consolidated statement of income. The initial fair value of hedge components excluded
from the assessment of effectiveness is recognized in the statement of income under a systematic and rational method over
the life of the hedging instrument and is presented in interest (expense) income, net. Any difference between the change in
the fair value of the hedge components excluded from the assessment of effectiveness and the amounts recognized in
earnings is recorded as a component of other comprehensive income.
The purpose of the cross-currency swaps for the net investment hedge is to mitigate foreign currency risk associated with
changes in spot rates on the net asset balances of our foreign functional subsidiaries. For net investment hedges that qualify
and are designated for hedge accounting, the change in fair value of the derivative is recorded in cumulative translation
adjustment within other comprehensive loss and reclassified into earnings when the hedged net investment is either sold or
substantially liquidated. The initial fair value of components excluded from the assessment of hedge effectiveness will be
recognized in interest (expense) income, net.
The notional value of outstanding foreign cross-currency swaps was $1,046.6 million at June 30, 2023. These contracts
mature at various dates prior to December 31, 2029.
Non-Designated Hedges
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PART II
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Notes to the Consolidated Financial Statements
Item 8
We transact business in various foreign currencies, including a number of major European currencies as well as the
Australian and Singapore dollars. We have foreign currency exposure through both our Australian and Singapore
manufacturing activities, and international sales operations. We have established a foreign currency hedging program using
purchased foreign currency call options, collars and forward contracts to hedge foreign-currency-denominated financial
assets, liabilities and manufacturing cash flows. The terms of such foreign currency hedging contracts generally do not
exceed two years. The purpose of this hedging program is to economically manage the financial impact of foreign currency
exposures denominated mainly in Euros, and Australian and Singapore dollars. Under this program, increases or decreases
in our foreign currency denominated financial assets, liabilities, and firm commitments are partially offset by gains and
losses on the hedging instruments. We do not designate these foreign currency contracts as hedges. All movements in the
fair value of the foreign currency instruments are recorded within other, net in our consolidated statements of income.
The notional value of the outstanding non-designated hedges was $954.7 million and $602.0 million at June 30, 2023 and
June 30, 2022, respectively. These contracts mature at various dates prior to December 15, 2024.
We classified the fair values of all hedging instruments as Level 2 measurements within the fair value hierarchy.
We are exposed to credit-related losses in the event of non-performance by counter parties to financial instruments. We
minimize counterparty credit risk by entering into derivative transactions with major financial institutions and we do not
expect material losses as a result of default by our counterparties.
(n) Income Taxes
We account for income taxes under the asset and liability method. We recognize deferred tax assets and liabilities for the
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. We measure deferred tax assets and liabilities using the enacted tax rates we expect
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the
enactment date.
We recognize the impact of a tax position in the consolidated financial statements only if that position is more likely than
not of being sustained upon examination by taxing authorities, based on the technical merits of the position. Any interest
and penalties related to uncertain tax positions are reflected in income tax expense.
(o) Provision for Warranty
We provide for the estimated cost of product warranties on our Sleep and Respiratory Care products at the time the related
revenue is recognized. We determine the amount of this provision by using a financial model, which takes into
consideration actual historical expenses and potential risks associated with our different products. We use this financial
model to calculate the future probable expenses related to warranty and the required level of the warranty provision.
Although we engage in product improvement programs and processes, our warranty obligation is affected by product
failure rates and costs incurred to correct those product failures. Should actual product failure rates or estimated costs to
repair those product failures differ from our estimates, we would be required to revise our estimated warranty provision.
(p) Allowance for Credit Losses
We maintain an allowance for credit losses on customer receivables based on our historical write-off experience, an
assessment of our customers’ financial conditions and available information that is relevant to assessing the collectability
of cash flows, which includes current conditions and forecasts about future economic conditions. Customer receivables are
charged against the allowance when they are deemed uncollectible.
We are also contingently liable, within certain limits, in the event of a customer default, to independent financing
companies in connection with customer financing programs. We monitor the collection status of these installment
receivables and provide for estimated losses separately under accrued expenses within our consolidated balance sheets
based upon our historical collection experience with such receivables and a current assessment of our credit exposure.
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Notes to the Consolidated Financial Statements
Item 8
(q) Impairment of Long-Lived Assets
We periodically evaluate the carrying value of long-lived assets to be held and used, including certain identifiable
intangible assets, when events and circumstances indicate that the carrying amount of an asset may not be recovered.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net
cash flows expected to be generated by the asset. If assets are considered to be impaired, we recognize as the impairment
the amount by which the carrying amount of the assets exceeds the fair value of the assets. We report assets to be disposed
of at the lower of the carrying amount or fair value less costs to sell. We did not recognize impairment charges in relation
to long-lived assets during the fiscal years ended June 30, 2023, 2022 and 2021.
(r) Contingencies
We record a liability in the consolidated financial statements for loss contingencies when a loss is known or considered
probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range,
and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is
reasonably possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is
disclosed. When determining the estimated loss or range of loss, significant judgment is required to estimate the amount
and timing of a loss to be recorded.
(3) Supplemental Balance Sheet Information
Components of selected captions in the consolidated balance sheets consisted of the following as of June 30, 2023 and
June 30, 2022 (in thousands):
Inventories
Raw materials
Work in progress
Finished goods
Total inventories
Prepaid expenses and other current assets
Prepaid taxes
Prepaid inventories
Other prepaid expenses and current assets
Total prepaid expenses and other current assets
Property, plant and equipment
Machinery and equipment
Computer equipment and software
Furniture and fixtures
Vehicles and aircraft
Clinical, demonstration and rental equipment
Leasehold improvements
Land
Buildings
Property, plant and equipment, at cost
Accumulated depreciation and amortization
Property, plant and equipment, net
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2023
2022
459,126 $
3,956
534,930
998,012 $
355,225
3,077
385,608
743,910
2023
2022
114,009 $
143,084
179,925
437,018 $
99,352
107,291
131,265
337,908
2023
2022
443,781 $
189,568
61,663
20,587
115,696
91,499
52,055
231,019
390,634
199,671
54,098
19,231
105,440
80,855
51,864
229,502
1,205,868 $
1,131,295
(668,012)
537,856 $
(633,114)
498,181
$
$
$
$
$
$
$
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PART II
RESMED INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Item 8
(4) Goodwill and Other Intangible Assets, net
Goodwill
For each of the years ended June 30, 2023 and June 30, 2022, we have not recorded any goodwill impairments. Changes in
the carrying amount of goodwill is comprised of the following for the year ended June 30, 2023 (in thousands):
Balance at the beginning of the period
Business acquisitions
Foreign currency translation adjustments
Balance at the end of the period
Other Intangible Assets
Sleep and
͏Respiratory Care
$
641,724 $
19,281
9,115
2023
SaaS
Total
1,294,718 $
1,936,442
767,709
37,752
786,990
46,867
$
670,120 $
2,100,179 $
2,770,299
Other intangibles, net are comprised of the following as of June 30, 2023 and June 30, 2022 (in thousands):
Developed/core product technology
Accumulated amortization
Developed/core product technology, net
Customer relationships
Accumulated amortization
Customer relationships, net
Other intangibles
Accumulated amortization
Other intangibles, net
Total other intangibles, net
2023
2022
$
398,740 $
(265,802)
132,938
443,652
(124,220)
319,432
244,373
(144,402)
99,971
$
552,341 $
350,671
(239,647)
111,024
257,034
(91,731)
165,303
204,580
(134,963)
69,617
345,944
Intangible assets consist of developed/core product technology, trade names, non-compete agreements, customer
relationships, and patents, and we amortize them over the estimated useful life of the assets, generally between two years
and fifteen years. There are no expected residual values related to these intangible assets.
Amortization expense related to identified intangible assets for the years ended June 30, 2023 and June 30, 2022 was $72.4
million and $70.7 million, respectively. Amortization expense related to patents for the years ended June 30, 2023 and
June 30, 2022 was $7.0 million and $6.2 million, respectively. Total estimated annual amortization expense for the years
ending June 30, 2024 through June 30, 2028, is shown below (in thousands):
Estimated amortization expense
$
86,633 $
82,227 $
77,005 $
58,127 $
23,175
2024
2025
2026
2027
2028
Fiscal Years Ending June 30
(5) Investments
Equity investments by measurement category as of June 30, 2023 and June 30, 2022 were as follows (in thousands):
Measurement category
Fair value
Measurement alternative
Equity method
Total
2023
2022
$
$
12,423 $
68,748
65,366
146,537 $
9,167
39,290
9,918
58,375
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PART II
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Notes to the Consolidated Financial Statements
Item 8
The following table shows a reconciliation of the changes in our equity investments for the year ended June 30, 2023 (in
thousands):
Non-marketable
securities
Marketable
securities
Equity method
investments
Total
Balance at the beginning of the period
Additions to investments (1)
Observable price adjustments on non-marketable equity securities
Impairment of investments
Realized gains on marketable and non-marketable equity securities
Proceeds from exits of investments
Unrealized losses on marketable equity securities
Loss attributable to equity method investments
Dividends received
Foreign currency translation adjustments
Carrying value at the end of the period
$
39,290 $
21,738
12,612
(4,892)
3,937
(3,937)
—
—
—
—
9,167 $
4,991
9,918 $
62,733
—
—
—
—
(1,735)
—
—
—
—
—
—
—
—
(7,265)
(2,873)
2,853
58,375
89,462
12,612
(4,892)
3,937
(3,937)
(1,735)
(7,265)
(2,873)
2,853
$
68,748 $
12,423 $
65,366 $
146,537
(1)
Includes additions from purchases and an equity method investment acquired and measured at fair value via our acquisition of MEDIFOX DAN.
Refer to Note 17 herein.
The following table shows a reconciliation of the changes in our equity investments for the year ended June 30, 2022 (in
thousands):
Non-marketable
securities
Marketable
securities
Equity method
investments
Total
Balance at the beginning of the period
Net additions (reductions) to investments (2)
Observable price adjustments on non-marketable equity securities
Impairment of investments
Realized gains on marketable and non-marketable equity securities
Unrealized losses on marketable equity securities
Loss attributable to equity method investments
11,775
5,367
(3,209)
2,355
—
—
—
—
1,626
(18,341)
—
$
23,002 $
29,084 $
17,154 $
(3,202)
1,250
69,240
9,823
5,367
(3,209)
3,981
(18,341)
(8,486)
58,375
—
—
—
—
(8,486)
9,918 $
Carrying value at the end of the period
$
39,290 $
9,167 $
(2) Net additions (reductions) to investments includes additions from purchases, reductions due to exits of securities, or reclassifications due to our
acquisition of an investee in which we held a prior equity interest.
Net unrealized gains and losses recognized in the years ended June 30, 2023, 2022 and 2021 for equity investments in non-
marketable and marketable securities still held as of those respective dates were a gain of $6.0 million, a loss of $16.2
million, and a gain of $14.5 million, respectively.
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PART II
(6) Accrued Expenses
RESMED INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Item 8
Accrued expenses at June 30, 2023 and June 30, 2022 consist of the following (in thousands):
Product warranties (note 7)
Consulting and professional fees
Value added taxes and other taxes due
Employee related costs
Promotional and marketing
Foreign currency hedging instruments
Accrued interest
Logistics and occupancy costs
Inventory in transit
Other
Total accrued expenses
(7) Product Warranties
2023
2022
$
27,621 $
26,148
23,636
220,785
9,366
9,558
9,375
16,278
10,034
12,859
25,889
25,073
26,340
194,736
6,485
1,947
7,983
32,160
11,554
12,555
$
365,660 $
344,722
We include the liability for warranty costs in accrued expenses in our consolidated balance sheets. Changes in the liability
for product warranty for the years ended June 30, 2023 and June 30, 2022 are as follows (in thousands):
Balance at the beginning of the period
Warranty accruals for the period
Warranty costs incurred for the period
Foreign currency translation adjustments
Balance at the end of the period
(8) Debt
Debt at June 30, 2023 and June 30, 2022 consists of the following (in thousands):
Short-term debt
Deferred borrowing costs
Short-term debt, net
Long-term debt
Deferred borrowing costs
Long-term debt, net
Total debt
Credit Facility
2023
2022
$
25,889 $
15,628
(13,734)
(162)
$
27,621 $
22,032
17,442
(12,124)
(1,461)
25,889
2023
2022
$
10,000 $
(98)
9,902
$
$
$
1,435,000 $
(3,766)
1,431,234 $
1,441,136 $
10,000
(84)
9,916
770,000
(4,675)
765,325
775,241
On June 29, 2022, we entered into a second amended and restated credit agreement (the “Revolving Credit Agreement”), as
borrower, with lenders MUFG Union Bank, N.A., as administrative agent, joint lead arranger, sole book runner, swing line
lender and letter of credit issuer, Westpac Banking Corporation, as syndication agent and joint lead arranger, HSBC Bank
USA, National Association, as syndication agent and joint lead arranger, and Wells Fargo Bank, National Association, as
documentation agent. The Revolving Credit Agreement, among other things, provided a senior unsecured revolving credit
facility of $1,500.0 million, with an uncommitted option to increase the revolving credit facility by an additional amount
equal to the greater of $1,000.0 million or 1.0 times the EBITDA (as defined in the Revolving Credit Agreement) for the
trailing twelve-month measurement period. The Revolving Credit Facility amends and restates that certain Amended and
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PART II
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Notes to the Consolidated Financial Statements
Item 8
Restated Credit Agreement, dated as of April 17, 2018, among ResMed, MUFG Union Bank, N.A., Westpac Banking
Corporation and the lenders party thereto.
Additionally, on June 29, 2022, ResMed Pty Limited entered into a Second Amendment to the Syndicated Facility
Agreement and First Amendment to Unconditional Guaranty Agreement (the “Term Credit Agreement”), as borrower, with
lenders MUFG Union Bank, N.A., as administrative agent, joint lead arranger and joint book runner, and Westpac Banking
Corporation, as syndication agent, joint lead arranger and joint book runner, which amends that certain Syndicated Facility
Agreement dated as of April 17, 2018. The Term Credit Agreement, among other things, provides ResMed Pty a senior
unsecured term credit facility of $200.0 million.
Our obligations under the Revolving Credit Agreement are guaranteed by certain of our direct and indirect U.S.
subsidiaries, and ResMed Pty Limited’s obligations under the Term Credit Agreement are guaranteed by us and certain of
our direct and indirect U.S. subsidiaries. The Revolving Credit Agreement and Term Credit Agreement contain customary
covenants, including, in each case, a financial covenant that requires that we maintain a maximum leverage ratio of funded
debt to EBITDA (as defined in the Revolving Credit Agreement and Term Credit Agreement, as applicable). The entire
principal amounts of the revolving credit facility and term credit facility, and, in each case, any accrued but unpaid interest
may be declared immediately due and payable if an event of default occurs, as defined in the Revolving Credit Agreement
and the Term Credit Agreement, as applicable. Events of default under the Revolving Credit Agreement and the Term
Credit Agreement include, in each case, failure to make payments when due, the occurrence of a default in the performance
of any covenants in the respective agreements or related documents, or certain changes of control of us, or the respective
guarantors of the obligations borrowed under the Revolving Credit Agreement and Term Credit Agreement.
The Revolving Credit Agreement and Term Credit Agreement each terminate on June 29, 2027, when all unpaid principal
and interest under the loans must be repaid. Amounts borrowed under the Term Credit Agreement will also amortize on a
semi-annual basis, with a $5.0 million principal payment required on each such semi-annual amortization date. The
outstanding principal amounts will bear interest at a rate equal to the Adjusted Term SOFR (as defined in the Revolving
Credit Facility) plus 0.75% to 1.50% (depending on the then-applicable leverage ratio) or the Base Rate (as defined in the
Revolving Credit Agreement and the Term Credit Agreement, as applicable) plus 0.0% to 0.50% (depending on the then-
applicable leverage ratio). At June 30, 2023, the interest rate that was being charged on the outstanding principal amounts
was 6.07%. An applicable commitment fee of 0.075% to 0.150% (depending on the then-applicable leverage ratio) applies
on the unused portion of the revolving credit facility. As of June 30, 2023, we had $745.0 million available for draw down
under the revolving credit facility.
We are required to disclose the fair value of financial instruments for which it is practicable to estimate the value, even
though these instruments are not recognized at fair value in the consolidated balance sheets. As the Revolving Credit and
Term Credit Agreements’ interest rate is calculated as Adjusted Term SOFR plus the spreads described above, its carrying
amount is equivalent to its fair value as at June 30, 2023 and June 30, 2022, which was $945.0 million and $280.0 million,
respectively.
Senior Notes
On July 10, 2019, we entered into a Note Purchase Agreement with the purchasers to that agreement, in connection with
the issuance and sale of $250.0 million principal amount of our 3.24% senior notes due July 10, 2026, and $250.0 million
principal amount of our 3.45% senior notes due July 10, 2029 (collectively referred to as the “Senior Notes”). Our
obligations under the Note Purchase Agreement and the Senior Notes are unconditionally and irrevocably guaranteed by
certain of our direct and indirect U.S. subsidiaries. The net proceeds from this transaction were used to pay down
borrowings on our Revolving Credit Agreement.
Under the terms of the Note Purchase Agreement, we agreed to customary covenants including with respect to our
corporate existence, transactions with affiliates, and mergers and other extraordinary transactions. We also agreed that,
subject to limited exceptions, we will maintain a ratio of consolidated funded debt to consolidated EBITDA (as defined in
the Note Purchase Agreement) of no more than 3.50 to 1.00 as of the last day of any fiscal quarter, and will not at any time
permit the amount of all priority secured and unsecured debt of us and our subsidiaries to exceed 10.0% 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.
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Notes to the Consolidated Financial Statements
Item 8
We are required to disclose the fair value of financial instruments for which it is practicable to estimate the value, even
though these instruments are not recognized at fair value in the consolidated balance sheets. As of June 30, 2023 and
June 30, 2022, the Senior Notes had a carrying amount of $500.0 million, excluding deferred borrowing costs, and an
estimated fair value of $462.2 million and $477.7 million, respectively. Quoted market prices in active markets for
identical liabilities based inputs (Level 2) were used to estimate fair value.
At June 30, 2023, we were in compliance with our debt covenants and there was $1,445.0 million outstanding under the
Revolving Credit Agreement, Term Credit Agreement and Senior Notes.
(9) Leases
(a) Leases where ResMed is the Lessee
We determine whether a contract is, or contains, a lease at inception. Right of Use, or ROU, assets represent our right to
use an underlying asset during the lease term, and lease liabilities represent our obligation to make lease payments arising
from the lease. ROU assets and lease liabilities are recognized at lease commencement based upon the estimated present
value of unpaid lease payments over the lease term. We use our incremental borrowing rate based on the information
available at lease commencement in determining the present value of unpaid lease payments. ROU assets also include any
lease payments made at or before lease commencement and any initial direct costs incurred, and exclude any lease
incentives received.
We determine the lease term as the non-cancellable period of the lease, and may include options to extend or terminate the
lease when it is reasonably certain that we will exercise that option. Leases with a term of 12 months or less are not
recognized on the balance sheet. Some of our leases include variable lease payments that are based on costs incurred or
actual usage, or adjusted periodically based on an index or a rate. Our leases do not contain any residual value guarantees
and we do not account for lease and non-lease components as a single lease component. Operating leases are included in
operating lease right-of-use assets and operating lease liabilities on our consolidated balance sheets. We lease certain office
space, warehouses and distribution centers, manufacturing facilities, vehicles, and equipment with remaining lease terms
ranging from less than 1 year to 13 years, some of which include options to extend or terminate the leases.
Operating lease costs for the years ended June 30, 2023, 2022 and 2021 were $33.6 million, $35.3 million and $35.5
million, respectively. Short-term and variable lease costs were not material for the years ended June 30, 2023, 2022 and
2021.
Future lease payments under non-cancellable operating leases as of June 30, 2023 are as follows (in thousands):
Minimum lease payments
$
155,299 $
24,754 $
20,087 $
18,199 $
17,004 $
16,584 $
58,671
Total
2024
2025
2026
2027
2028
Thereafter
Less: imputed interest
Total lease liabilities
(16,527)
$
138,772
As of June 30, 2023, we had additional operating lease commitments of $57.3 million for manufacturing and office space
that have not yet commenced. These leases will commence during the years ended June 30, 2024 and June 30, 2025 with
lease terms of 10 years to 15 years.
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PART II
RESMED INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Item 8
The supplemental information related to operating leases for the years ended June 30, 2023 and June 30, 2022 was as
follows (in thousands):
Weighted-average inputs:
Weighted-average remaining lease term (years)
Weighted-average discount rate
Cash flow information:
2023
2022
8.2
2.7 %
8.8
2.8 %
Operating cash flows paid for amounts included in the measurement of lease liabilities
Right of use assets obtained in exchange for new lease liabilities:
$
$
29,047
16,803
$
$
26,462
41,382
(b) Leases where ResMed is the Lessor
We lease sleep and respiratory medical devices to customers primarily as a means to comply with local health insurer
requirements in certain foreign geographies. Contract terms for operating lease contracts vary by customer and include
options to terminate or extend the contract. When lease contracts also include the sale of masks and accessories, we
allocate contract consideration to those items on a relative standalone price basis and recognize revenue when control
transfers to the customer. Operating lease revenue was $88.6 million, $90.1 million and $93.4 million for the years ended
June 30, 2023, 2022 and 2021, respectively.
(10) Stockholders’ Equity
Common Stock. On February 21, 2014, our board of directors approved a new share repurchase program, authorizing us to
acquire up to an aggregate of 20.0 million shares of our common stock. The program allows us to repurchase shares of our
common stock from time to time for cash in the open market, or in negotiated or block transactions, as market and business
conditions warrant and subject to applicable legal requirements. The 20.0 million shares the program authorizes us to
purchase are in addition to the shares we repurchased on or before February 21, 2014 under our previous programs. 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. All share repurchases since February 21, 2014 have been executed in accordance
with this program.
We have temporarily suspended our repurchase program and, accordingly, did not repurchase any shares during fiscal
years 2023 or 2022. As of June 30, 2023, we have repurchased a total of 41.8 million shares at a cost of $1.6 billion. Shares
that are repurchased are classified as “treasury stock pending future use” and reduce the number of shares outstanding used
in calculating earnings per share. At June 30, 2023, 12.9 million additional shares can be repurchased under the approved
share repurchase program.
Preferred Stock. In April 1997, our board of directors authorized 2.0 million shares of 0.01 par value preferred stock. No
such shares were issued or outstanding at June 30, 2023.
Stock Options and Restricted Stock Units. We have granted stock options, restricted stock units (“RSUs”) and
performance restricted stock units (“PRSUs”) to personnel, including officers and directors, in accordance with the
ResMed Inc. 2009 Incentive Award Plan (the “2009 Plan”). Options and restricted stock units vest over one year to four
years and the options have expiration dates of seven years from the date of grant. We have granted the options with an
exercise price equal to the market value as determined at the date of grant. We have granted PRSUs that are subject to a
market condition, with the ultimate realizable number of PRSUs dependent on relative total stockholder return over a
period of three years. The maximum amounts to be issued under the awards range from 200% to 225% of the original
grant.
At the annual meeting of our stockholders in November 2017, our stockholders approved an amendment and restatement to
the 2009 Plan to increase the number of shares of common stock that may be issued or transferred pursuant to awards under
the 2009 Plan by 7.4 million. The amendment and restatement imposes a maximum award amount which may be granted
under the 2009 Plan to non-employee director in a calendar year, which when taken together with any other cash fees
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PART II
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Notes to the Consolidated Financial Statements
Item 8
earned for services as a non-employee director during the calendar year, has a total value of $0.7 million, or $1.2 million in
the case of a non-employee director who is also serving as chairman of our board of directors. The amendment and
restatement also increased the maximum amount payable pursuant to cash-denominated performance awards granted in any
calendar year from $3.0 million to $5.0 million. In addition, the amendment and restatement extended the existing
prohibition on the payment of dividends or dividend equivalents on unvested awards to apply to all awards, including time-
based restricted stock, deferred stock and stock payment. The term of the 2009 Plan was extended by four years so that the
plan expires on September 11, 2027.
The maximum number of shares of our common stock authorized for issuance under the 2009 Plan is 51.1 million. The
number of securities remaining available for future issuance under the 2009 Plan at June 30, 2023 is 14.4 million. The
number of shares of our common stock available for issuance under the 2009 Plan will be reduced by (i) 2.8 shares for each
one share of common stock delivered in settlement of any “full-value award,” which is any award other than a stock option,
stock appreciation right or other award for which the holder pays a purchase price and (ii) one share for each share of
common stock delivered in settlement of all other awards. The maximum number of shares, which may be subject to
awards granted under the 2009 Plan to any individual during any calendar year, may not exceed 3 million shares of our
common stock (except in a participant’s initial year of hiring up to 4.5 million shares of our common stock may be
granted).
In certain regions, shares are withheld on behalf of employees to satisfy statutory tax withholding requirements upon
exercise or vesting of awards. The number of shares withheld is based upon the closing price of our common stock on the
trading day of the applicable settlement date. The remaining shares are delivered to the recipient as shares of our common
stock. The amount remitted to the tax authorities for the employees’ tax obligation is reflected as a financing activity on our
consolidated statements of cash flows. Shares withheld by us as a result of the net settlement are not considered issued and
outstanding and are added to the reserves of the 2009 Plan.
The total fair value of RSUs and PRSUs that vested during the years ended June 30, 2023, 2022 and 2021, was $66.8
million, $65.5 million and $59.6 million, respectively.
The following table summarizes the activity of RSUs, including PRSUs, during year ended June 30, 2023 (in thousands,
except years and per share amounts):
Outstanding at beginning of period
Granted
Vested*
Performance factor adjustment
Forfeited
Outstanding at end of period
* Includes 139 thousand shares netted for tax.
Restricted
͏Stock
͏Units
Weighted
͏Average
͏Grant-Date
͏Fair Value
681 $
434
(416)
115
(52)
762 $
203.46
224.02
160.50
—
216.75
227.82
Weighted
͏Average
͏Remaining
͏Contractual
͏Term in Years
1.6
1.7
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PART II
RESMED INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Item 8
The following table summarizes option activity during the year ended June 30, 2023 (in thousands, except years and per
share amounts):
Outstanding at beginning of period
Granted
Exercised
Forfeited
Outstanding at end of period
Options exercisable at end of period
Options vested and expected to vest at end of period
Weighted
͏Average
͏Exercise
͏Price
Options
938 $
100
(157)
—
881 $
734 $
873 $
112.91
223.94
62.07
—
134.52
115.37
133.56
Weighted
͏Average
͏Remaining
͏Contractual
͏Term in Years
3.2
3.0
2.4
3.0
The aggregate intrinsic value of options exercised during the fiscal years 2023, 2022 and 2021, was $25.4 million, $33.7
million and $8.9 million, respectively. As at June 30, 2023, the aggregate intrinsic value of options outstanding,
exercisable, and vested and expected to vest were $76.8 million, $76.6 million and $76.8 million respectively.
Employee Stock Purchase Plan (the “ESPP”). Under the ESPP, we offer participants the right to purchase shares of our
common stock at a discount during successive offering periods. Each offering period under the ESPP will be for a period of
time determined by the board of directors’ compensation committee of no less than 3 months and no more than 27 months.
The purchase price for our common stock under the ESPP will be the lower of 85% of the fair market value of our common
stock on the date of grant or 85% of the fair market value of our common stock on the date of purchase. An individual
participant cannot subscribe for more than $25,000 in common stock during any calendar year. At June 30, 2023, the
number of shares remaining available for future issuance under the ESPP is 1.3 million shares.
During years ended June 30, 2023, 2022 and 2021, we issued 220,000, 216,000 and 229,000 shares to our employees in
two offerings and we recognized $11.5 million, $11.0 million and $10.9 million, respectively, of stock compensation
expense associated with the ESPP.
Stock–based Employee compensation. We measure the compensation expense of all stock-based awards at fair value on
the grant date. We estimate the fair value of stock options and purchase rights granted under the ESPP using the Black-
Scholes valuation model. The fair value of restricted stock units is equal to the market value of the underlying shares as
determined at the grant date less the fair value of dividends that holders are not entitled to, during the vesting period. The
fair value of performance restricted stock units is measured using a Monte-Carlo simulation valuation model. We recognize
the fair value as compensation expense using the straight-line method over the service period for awards expected to vest.
We estimate the fair value of stock options granted under our stock option plans and purchase rights granted under the
ESPP using the assumptions in the following tables. The risk-free interest rate is estimated using the U.S. Treasury yield
curve and is based on the term of the award. The expected term of awards is estimated from the vesting period of the
award, as well as historical exercise behavior, and represents the period of time the awards granted are expected to be
outstanding. Expected volatility is estimated based upon the historical volatility of ResMed stock.
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Table of Contents
PART II
RESMED INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Item 8
We estimate the fair value of stock options granted under our stock option plans and purchase rights granted under the
ESPP using the following assumptions for the years ended June 30, 2023, 2022 and 2021:
Stock options:
Weighted average grant date fair value
Weighted average risk-free interest rate
Expected life in years
Dividend yield
Expected volatility
ESPP purchase rights:
Weighted average grant date fair value
Weighted average risk-free interest rate
Expected life in years
Dividend yield
Expected volatility
2023
2022
2021
$74.95
3.85%
4.9
0.78%
34%
$72.16
1.29%
4.9
0.66%
32%
$53.67
0.37%
4.9
0.75%
31%
$52.38
3.6%
6 months
$50.46
0.3%
6 months
$48.18
0.1%
6 months
0.75% - 0.84%
0.63% - 0.98%
0.79% - 0.98%
27% - 34%
20% - 34%
30% - 60%
The following table summarizes the total stock-based compensation costs incurred and the associated tax benefit
recognized during the years ended June 30, 2023, 2022 and 2021 (in thousands):
Cost of sales
Selling, general and administrative expenses
Research and development expenses
Stock-based compensation costs
Tax benefit
Stock-based compensation costs, net of tax benefit
2023
2022
2021
$
6,465 $
5,218 $
53,049
11,628
71,142
50,791
9,248
65,257
(24,860)
(29,262)
$
46,282 $
35,995 $
4,153
51,727
8,047
63,927
(23,346)
40,581
At June 30, 2023, there was $133.5 million in unrecognized compensation costs related to unvested stock-based
compensation arrangements. This is expected to be recognized over a weighted average period of 2.6 years.
(11) Earnings Per Share
We compute basic earnings per share by dividing the net income available to common stockholders by the weighted
average number of shares of common stock outstanding. For purposes of calculating diluted earnings per share, the
denominator includes both the weighted average number of shares of common stock outstanding and the number of dilutive
common stock equivalents such as stock options and restricted stock units. The weighted average number of outstanding
stock options and restricted stock units not included in the computation of diluted earnings per share were 272,104, 67,000
and 141,000 for the years ended June 30, 2023, 2022 and 2021, respectively, as the effect would have been anti-dilutive.
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PART II
RESMED INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Item 8
Basic and diluted earnings per share for the years ended June 30, 2023, 2022 and 2021 are calculated as follows (in
thousands except per share data):
Numerator:
Net income
Denominator:
2023
2022
2021
$
897,556 $
779,437 $
474,505
Basic weighted-average common shares outstanding
146,765
146,066
145,313
Effect of dilutive securities:
Stock options and restricted stock units
Diluted weighted average shares
Basic earnings per share
Diluted earnings per share
(12) Income Taxes
690
147,455
6.12 $
6.09 $
977
147,043
5.34 $
5.30 $
1,138
146,451
3.27
3.24
$
$
Income before income taxes for the years ended June 30, 2023, 2022 and 2021, was taxed under the following jurisdictions
(in thousands):
U.S.
Non-U.S.
Income before income taxes
The provision for income taxes is presented below (in thousands):
Current:
Deferred:
Federal
State
Non-U.S.
Federal
State
Non-U.S.
2023
2022
2021
$
$
128,589 $
(85,919) $
973,075
1,046,402
1,101,664 $
960,483 $
71,867
811,795
883,662
2023
2022
2021
$
36,631 $
4,376 $
(115,109)
14,142
198,767
249,540
(21,721)
(2,389)
(21,322)
(45,432)
10,700
177,788
192,864
(12,612)
(2,773)
3,567
(11,818)
9,041
531,812
425,744
(22,791)
(4,205)
10,409
(16,587)
409,157
Provision for income taxes
$
204,108 $
181,046 $
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Table of Contents
PART II
RESMED INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Item 8
The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. federal
income tax rate of 21% for the years ended June 30, 2023, 2022 and 2021, to pretax income as a result of the following (in
thousands):
Taxes computed at statutory U.S. rate
Increase (decrease) in income taxes resulting from:
State income taxes, net of U.S. tax benefit
Research and development credit
Change in valuation allowance
Effect of non-U.S. tax rates
Foreign tax credits
Stock-based compensation expense
Uncertain tax position
Other
Provision for income taxes
2023
2022
2021
$
231,349 $
201,701 $
185,569
9,448
(21,481)
(5,007)
(3,982)
(3,988)
(6,282)
—
4,051
5,703
(17,517)
858
(4,384)
(2,299)
(11,294)
—
8,278
$
204,108 $
181,046 $
4,836
(20,257)
(3,785)
(12,130)
(7,210)
(4,498)
248,773
17,859
409,157
We reported net deferred tax assets and liabilities in our consolidated balance sheets at June 30, 2023 and June 30, 2022, as
follows (in thousands):
Non-current deferred tax asset
Non-current deferred tax liability
Net deferred tax asset
2023
2022
$
$
132,974 $
(90,650)
42,324 $
79,746
(9,714)
70,032
The components of our deferred tax assets and liabilities at June 30, 2023 and June 30, 2022, are as follows (in thousands):
Deferred tax assets:
Employee liabilities
Tax credit carry overs
Inventories
Provision for warranties
Provision for doubtful debts
Net operating loss carryforwards
Capital loss carryover
Stock-based compensation expense
Deferred revenue
Research and development capitalization
Lease liabilities
Hedging contracts
Other
Less valuation allowance
Deferred tax assets
Deferred tax liabilities:
Goodwill and other intangibles
Right of use assets
Property, plant and equipment
Deferred tax liabilities
Net deferred tax asset
-86-
2023
2022
$
34,314 $
6,051
13,212
5,348
6,103
22,387
917
8,670
23,908
111,704
21,347
27,666
454
282,081
(8,536)
273,545
(198,418)
(20,501)
(12,302)
(231,221)
$
42,324 $
28,556
7,723
10,570
4,814
5,096
27,490
4,715
6,425
25,748
82,074
21,702
—
(3,395)
221,518
(13,572)
207,946
(108,078)
(20,345)
(9,491)
(137,914)
70,032
Table of Contents
PART II
RESMED INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Item 8
As of June 30, 2023, we had $15.6 million of U.S. federal and state net operating loss carryforwards and $6.1 million of
non-U.S. net operating loss carryforwards, which expire in various years beginning in 2024 or carry forward indefinitely.
The valuation allowance at June 30, 2023 relates to a provision for uncertainty of the utilization of net operating loss
carryforwards of $0.8 million and capital loss and other items of $7.8 million. We believe that it is more likely than not that
the benefits of deferred tax assets, net of any valuation allowance, will be realized.
A substantial portion of our manufacturing operations and administrative functions in Singapore operate under certain tax
holidays and tax incentive programs that will expire in whole or in part at various dates through June 30, 2030. The end of
certain tax holidays may be extended if specific conditions are met. The net impact of these tax holidays and tax incentive
programs increased our net income by $40.5 million ($0.27 per diluted share) for the year ended June 30, 2023, $38.0
million ($0.26 per diluted share) for the year ended June 30, 2022, and $33.6 million ($0.23 per diluted share) for the year
ended June 30, 2021.
As a result of the Tax Cuts and Jobs Act of 2017 (the “U.S. Tax Act”), we have treated all non-U.S. historical earnings as
taxable. Therefore, future repatriation of cash held by our non-U.S. subsidiaries will generally not be subject to U.S. federal
tax if repatriated. The total amount of these undistributed earnings at June 30, 2023 amounted to approximately $4.2
billion. In the event our non-U.S. earnings had not been permanently reinvested, approximately $5.5 million in U.S. state
deferred taxes would have been recognized in the consolidated financial statements.
The U.S. Tax Act also introduced U.S. taxation on certain global intangible low-taxed income (“GILTI”). We have elected
to account for tax expense attributable to GILTI tax as a period cost when incurred.
In accounting for uncertainty in income taxes, we recognize a tax benefit in the financial statements for an uncertain tax
position only if management’s assessment is that the position is “more likely than not” (that is, a likelihood greater than 50
percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position”
refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in
measuring current or deferred income tax assets and liabilities for annual periods. We recognize interest and penalties
related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated statements of
income. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheets.
Based on all known facts and circumstances and current tax law, we believe the total amount of unrecognized tax benefits
on June 30, 2023 is not material to our results of operations, financial condition or cash flows, and if recognized, would not
have a material impact on our effective tax rate.
Our income tax returns are based on calculations and assumptions 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. 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.
On September 19, 2021, we concluded the settlement agreement with the Australian Taxation Office (“ATO”) in relation to
the previously disclosed transfer pricing dispute for the tax years 2009 through 2018 (“ATO settlement”). The ATO
settlement fully resolved the dispute for all prior years, with no admission of liability and provides clarity in relation to
certain future taxation principles.
The final net impact of the ATO settlement was recorded during the years ended June 30, 2021 and 2022 in the amount of
$238.7 million, which represents a gross amount of $381.7 million, including interest and penalties of $48.1 million, and
adjustments for credits and deductions of $143.0 million. As a result of the ATO settlement and due to movements in
foreign currencies, we recorded a benefit of $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 settlement, we reversed our previously
recorded uncertain tax position.
On September 28, 2021, we remitted final payment to the ATO of $284.8 million, consisting of the agreed settlement
amount of $381.7 million less prior remittances made to the ATO of $96.9 million.
Tax years 2018 to 2022 remain subject to future examination by the major tax jurisdictions in which we are subject to tax.
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Table of Contents
PART II
(13) Segment Information
RESMED INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Item 8
We have two operating segments, which are the Sleep and Respiratory Care segment and the SaaS segment. We evaluate
the performance of our segments based on net sales and income from operations. The accounting policies of the segments
are the same as those described in note 2 – Summary of Significant Accounting Policies. Segment net sales and segment
income from operations do not include inter-segment profits and revenue is allocated to a geographic area based on where
the products are shipped to or where the services are performed.
Certain items are maintained at the corporate level and are not allocated to the segments. The non-allocated items include
corporate headquarters costs, stock-based compensation, amortization expense from acquired intangibles, acquisition
related expenses, net interest expense (income), loss attributable to equity method investments, gains and losses on equity
investments, and other, net. We neither discretely allocate assets to our operating segments, nor does our Chief Operating
Decision Maker evaluate the operating segments using discrete asset information.
Additionally, effective in the first quarter of fiscal year 2023, we updated the extent of allocation and method of attribution
of certain shared costs that are principally managed at the corporate level as part of our evaluation of segment operating
performance. As a result, certain shared administrative costs, including shared IT, legal and other administrative functions,
which were previously included in segment operating results, are now reported in Corporate costs within our reconciliation
of segment operating profit to income before income taxes. The financial information presented herein reflects the impact
of the preceding reporting change for all periods presented.
The table below presents a reconciliation of net revenues, depreciation and amortization and net operating profit by
reportable segments for the years ended June 30, 2023, 2022 and 2021 (in thousands):
Net revenue by segment
Sleep and Respiratory Care
Software as a Service
Total
Depreciation and amortization by segment
Sleep and Respiratory Care
Software as a Service
Amortization of acquired intangible assets and corporate assets
Total
Net operating profit by segment
Sleep and Respiratory Care
Software as a Service
Total
Reconciling items
Corporate costs
Amortization of acquired intangible assets
Restructuring expenses
Acquisition related expenses
Interest expense (income), net
Loss attributable to equity method investments
(Gain) loss on equity investments
Gain on insurance recoveries
Other, net
Income before income taxes
-88-
$
$
$
$
$
$
$
2023
2022
2021
3,725,017 $
3,177,298 $
2,823,235
497,976
400,829
373,590
4,222,993 $
3,578,127 $
3,196,825
82,544 $
79,367 $
9,119
73,493
7,315
72,927
73,151
5,230
78,377
165,156 $
159,609 $
156,758
1,502,475 $
1,311,559 $
1,170,305
115,529
93,044
92,357
1,618,004 $
1,404,603 $
1,262,662
393,591 $
331,725 $
72,416
9,177
10,949
47,379
7,265
(9,922)
(20,227)
5,712
70,728
—
1,864
22,312
8,486
12,202
—
(3,197)
268,874
76,205
13,905
—
23,627
11,205
(14,515)
—
(301)
$
1,101,664 $
960,483 $
883,662
Table of Contents
PART II
RESMED INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Item 8
The following table summarizes our net revenue disaggregated by segment, product and region for the years ended
June 30, 2023, 2022 and 2021 (in thousands):
U.S., Canada and Latin America
Devices
Masks and other
Total U.S., Canada and Latin America
Combined Europe, Asia and other markets
Devices
Masks and other
Total Combined Europe, Asia and other markets
Global revenue
Devices
Masks and other
Total Sleep and Respiratory Care
Software as a Service
Total
2023
2022
2021
1,444,361 $
1,070,420 $
1,039,026
911,387
863,661
841,452
2,483,387 $
1,981,807 $
1,705,113
826,341 $
796,488 $
415,289
399,003
746,379
371,743
1,241,630 $
1,195,491 $
1,118,122
2,270,702 $
1,866,908 $
1,454,315
1,310,390
3,725,017 $
3,177,298 $
497,976
400,829
1,610,040
1,213,195
2,823,235
373,590
4,222,993 $
3,578,127 $
3,196,825
$
$
$
$
$
$
$
Revenue information by geographic area for the years ended June 30, 2023, 2022 and 2021 is summarized below (in
thousands):
United States
Rest of the World
Total
2023
2022
2021
$
$
2,719,923 $
2,249,381 $
1,503,070
1,328,746
4,222,993 $
3,578,127 $
1,962,721
1,234,104
3,196,825
Long-lived assets of geographic areas are those assets used in our operations in each geographical area, and excludes
goodwill, other intangible assets, and deferred tax assets. Long-lived assets by geographic area as of June 30, 2023 and
2022 is summarized below (in thousands):
Australia
United States
Singapore
Rest of the World
Total
(14) Employee Retirement Plans
2023
2022
$
200,752 $
164,448
83,711
88,945
$
537,856 $
192,833
169,090
72,821
63,437
498,181
We contribute to a number of employee retirement plans for the benefit of our employees. Details of the main plans are as
follows:
Australia We contribute to defined contribution plans for each employee resident in Australia at the rate of approximately
10.5% of salaries. Employees may contribute additional funds to the plans. All Australian employees, after serving a
qualifying period, are entitled to benefits on retirement, disability or death. Our total contributions to the plans for the years
ended June 30, 2023, 2022 and 2021, were $13.0 million, $11.8 million and $10.7 million, respectively.
United States We sponsor a defined contribution plan available to substantially all domestic employees. Company
contributions to this plan are based on a percentage of employee contributions to a maximum of 4.0% of the employee’s
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Notes to the Consolidated Financial Statements
Item 8
salary. Our total contributions to the plan were $12.7 million, $11.9 million and $9.6 million in fiscal 2023, 2022 and 2021,
respectively.
Singapore We sponsor a defined contribution plan available to substantially all domestic employees. Company
contributions to this plan are based on a percentage of employee contributions to a maximum of 17.0% of the employee’s
salary. Our total contributions to the plan were $3.6 million, $3.1 million and $2.5 million in fiscal 2023, 2022 and 2021,
respectively.
(15) Legal Actions, Contingencies and Commitments
Litigation
In the normal course of business, we are subject to routine litigation incidental to our business. While the results of this
litigation cannot be predicted with certainty, we believe that their final outcome will not, individually or in aggregate, have
a material adverse effect on our consolidated financial statements taken as a whole.
On June 2, 2021, New York University ("NYU") filed a complaint for patent infringement in the United States District
Court, District of Delaware against ResMed Inc., case no. 1:21-cv-00813 (JPM). The complaint alleges that the AutoSet or
AutoRamp features of ResMed’s AirSense 10 AutoSet flow generators infringe one or more claims of various NYU
patents, including U.S. Patent Nos. 6,988,994; 9,108,009; 9,168,344; 9,427,539; 9,533,115; 9,867,955; and 10,384,024.
According to the complaint, the NYU patents are directed to systems and methods for diagnosis and treating sleeping
disorders during different sleep states. The complaint seeks monetary damages and attorneys’ fees. We answered the
complaint on September 30, 2021 and filed a motion to dismiss the complaint on the basis that the patents are invalid
because the subject matter of the patents is not patentable under the Supreme Court and Federal Circuit precedent. The
motion to dismiss was granted in part and denied in part. We have also requested that the court dismiss the case based on
NYU’s license of the patents to Fisher & Paykel and Fisher & Paykel’s prior settlement with us; that request is pending. In
December 2022, the Patent Trial and Appeals Board (“PTAB”) of the Patent and Trademark Office granted our request to
review the validity of the claims in the patents asserted by NYU against us, determining that there is a reasonable
likelihood that we will prevail. The PTAB’s final written decisions on the validity of the asserted claims is expected by
December 2023. On April 10, 2023, the district court granted our request to stay the case pending the PTAB’s decision on
the validity of the patents asserted by NYU.
On January 27, 2021, the International Trade Commission ("ITC") instituted In Re Certain UMTS and LTE Cellular
Communications Modules and Products Containing the Same, Investigation No. 337-TA-1240, by complainants Philips RS
North America, LLC and Koninklijke Philips N.V. (collectively “Philips”) against Quectel Wireless Solutions Co., Ltd;
Thales DIS AIS USA, LLC, Thales DIS AIS Deutschland GmbH; Telit Wireless Solutions, Inc., Telit Communications
PLC, CalAmp. Corp., Xirgo Technologies, LLC, and Laird Connectivity, Inc. (collectively “respondents”). In the ITC
investigation, Philips seeks an order excluding communications modules, and products that contain them, from importation
into the United States based on alleged infringement of 3G and 4G standard essential patents held by Philips. On October
6-14, 2021, the administrative law judge held a hearing on the merits. The administrative law judge issued an initial
determination on April 1, 2022, finding no violation of any of the Philips' patents asserted in the ITC. Philips sought review
by the full ITC. On July 6, 2022, the Commission affirmed the administrative law judge’s determination that there was no
violation of asserted Philips' patents. The Commission terminated the ITC proceedings. Philips did not appeal the ITC’s
decision. On December 17, 2020, Philips filed companion cases for patent infringement against the same defendants in the
United States District Court for the District of Delaware, case nos. 1:20-cv-01707, 01708, 01709, 01710, 01711, and 01713
(CFC) seeking damages, an injunction, and a declaration from the court on the amount of a fair reasonable and non-
discriminatory license rate for the standard essential patents it is asserting against the communications module defendants.
The district court cases were stayed pending the resolution of the ITC proceedings. The parties have returned to the district
court for further proceedings. We were not a party to the ITC investigation, and we are not a party to the district court
cases, but we sell products that incorporate communications modules at issue in the district court case.
On June 16, 2022, Cleveland Medical Devices Inc. ("Cleveland Medical") filed suit for patent infringement against
ResMed Inc. in the United States District Court for the District of Delaware, case no. 1:22-cv-00794. Cleveland Medical
asserts that numerous ResMed connected devices, when combined with certain ResMed data platforms and/or software,
including AirView and ResScan, infringe one or more of eight Cleveland Medical patents, including U.S. Patent Nos.
10,076,269; 10,426,399; 10,925,535; 11,064,937; 10,028,698; 10,478,118; 11,202,603; and 11,234,637. We have moved to
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Notes to the Consolidated Financial Statements
Item 8
dismiss the action because Cleveland Medical sued the wrong ResMed entity. We have also moved to dismiss all claims
based on U.S. Patent No. 10,076,269, as well as indirect and willful infringement allegations as to the remaining patents
asserted against ResMed; that motion is pending. On March 23, 2023, we filed a petition with the Patent Trial and Appeals
Board (“PTAB”) of the Patent and Trademark Office seeking review of the validity of Cleveland Medical U.S. Patent
10,076,269. The PTAB will decide whether to review the validity of the ‘269 patent by September 2023. The parties are
engaged in discovery in the Delaware action. The case is set for trial in August 2024.
On March 23, 2023, ResMed Corp. filed suit in the Southern District of California, case no. 23-cv-00500-TWR-JLB,
seeking a declaration that it does not infringe U.S. patent number 11,602,284 recently issued to Cleveland Medical.
Cleveland Medical has asked the court to dismiss the California case or to move it to Delaware.
Based on currently available information, we are unable to make a reasonable estimate of loss or range of losses, if any,
arising from matters that remain open.
Contingent Obligations Under Recourse Provisions
We use independent financing institutions to offer some of our customers financing for the purchase of some of our
products. Under these arrangements, if the customer qualifies under the financing institutions’ credit criteria and finances
the transaction, the customers repay the financing institution on a fixed payment plan. For some of these arrangements, the
customer’s receivable balance is with limited recourse whereby we are responsible for repaying the financing company
should the customer default. We record a contingent provision, which is estimated based on historical default rates. This is
applied to receivables sold with recourse and is recorded in accrued expenses.
During the year ended June 30, 2023 and 2022, receivables sold with limited recourse were $181.2 million and $157.6
million, respectively. As of June 30, 2023, the maximum exposure on outstanding receivables sold with recourse and
contingent provision were $32.6 million and $0.6 million, respectively. As of June 30, 2022, the maximum exposure on
outstanding receivables sold with recourse and contingent provision were $24.2 million and $2.1 million, respectively.
Commitments
In the normal course of business, we enter into agreements to purchase goods or services that are not cancelable without
penalty, primarily related to supply arrangements. Obligations under our purchase agreements at June 30, 2023 were as
follows (in thousands):
Minimum purchase obligations
$ 1,390,640 $ 1,034,859 $ 345,033 $
10,013 $
735 $
— $
—
Total
2024
2025
2026
2027
2028
Thereafter
Fiscal Years Ending June 30
(16) Derivative Instruments and Hedging Activities
Fair Values of Derivative Instruments
The following table presents our assets and liabilities related to derivative instruments on a gross basis within the
consolidated balance sheets (in thousands):
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Notes to the Consolidated Financial Statements
June 30,
2023
June 30,
2022
Balance Sheet Caption
Item 8
Derivative Assets
Not Designated as Hedging Instruments
Foreign currency hedging instruments
Foreign currency hedging instruments
Total derivative assets
Derivative Liabilities
Designated as Hedging Instruments
Foreign cross-currency swaps – Fair Value Hedge
Foreign cross-currency swaps – Net Investment Hedge
Not Designated as Hedging Instruments
Foreign currency hedging instruments
Foreign currency hedging instruments
$
$
$
2,126 $
151 Prepaid expenses and other current assets
279
9 Prepaid taxes and other non-current assets
2,405 $
160
19,743 $
40,803
— Other long-term liabilities
— Other long-term liabilities
9,558
595
1,947 Accrued expenses
— Other long-term liabilities
Total derivative liabilities
$
70,699 $
1,947
Fair Value Hedge Gains (Losses)
We recognized the following gains (losses) on the foreign cross currency swaps designated as fair value hedges (in
thousands):
Twelve Months Ended
June 30,
2023
2022
2021
Gain (loss) recognized in other comprehensive income (loss)
$
(5,414) $
— $
Gain (loss) recognized on cross-currency swap in interest (expense) income, net (amount
excluded from effectiveness testing)
Gain (loss) recognized on cross-currency swap in other, net
Gain (loss) recognized on intercompany debt in other, net
3,754
(14,329)
14,329
—
—
—
—
—
—
—
Net Investment Hedge Gains (Losses)
We recognized the following gains (losses) on the foreign cross currency swaps designated as net investment hedges (in
thousands):
Twelve Months Ended
June 30,
2023
2022
2021
Gain (loss) recognized in cumulative translation adjustment within other comprehensive
income (loss)
$
(40,803) $
Gain (loss) recognized from the excluded components in interest (expense) income, net
9,482
— $
—
—
—
Non-designated Derivative Gains (Losses)
We recognized the following gains (losses) in the consolidated statement of operations on derivatives not designated as
hedging instruments (in thousands):
Gain (loss) recognized on foreign currency hedging instruments in other, net
$
8,576 $
(19,511) $
Gain (loss) recognized on other foreign-currency-denominated transactions in other, net
Total
(12,780)
(4,204)
22,320
2,809
Twelve Months Ended
June 30,
2022
2023
2021
18,544
(19,297)
(753)
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(17) Business Combinations
RESMED INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Item 8
On November 21, 2022, we completed our acquisition of 100% of the shares in MediFox-Dan Investment GmbH and its
subsidiaries (“MEDIFOX DAN”), a German leader in software solutions for a wide variety of out-of-hospital care
providers, for $997.5 million. This acquisition has been accounted for as a business combination using purchase accounting
and included in our consolidated financial statements from November 21, 2022. The acquisition was paid for using funds
drawn down from our Revolving Credit Agreement.
The total purchase price was allocated to MEDIFOX DAN's tangible and identifiable intangible assets and liabilities based
upon estimated fair values as of the November 21, 2022 closing date, as follows (in thousands):
Cash
Accounts receivable
Property, plant and equipment
Equity method investment
Other assets
Accounts payable and accrued expenses
Deferred revenue
Other liabilities
Identifiable intangible assets:
Developed technology
Customer relationships
Trade names
Deferred tax liabilities
Goodwill
Purchase price
Final
Intangible assets
- useful life
7,372
16,096
7,731
57,298
18,523
(19,359)
(18,349)
(11,623)
43,081
6 - 7 years
175,445
11 - 13 years
10 years
32,050
(78,458)
767,709
997,516
$
$
We completed the purchase price allocation in relation to this acquisition during the quarter ended June 30, 2023. The cost
of the acquisition was allocated to the assets acquired and liabilities assumed based on estimates of their fair values at the
date of acquisition. Key assumptions used to determine the fair value of intangible assets acquired included forecast
revenue growth rates, forecast earnings before interest, tax, depreciation, and amortization, and weighted average cost of
capital. The goodwill recognized as part of the acquisition is reflected in our SaaS segment and is not deductible for tax
purposes. It mainly represents the synergies that are unique to our combined businesses and the potential for new products
and services to be developed in the future.
Pro forma results of operations have not been presented because the effects of this acquisition were not material to our
consolidated statements of income.
We recorded acquisition related expenses of $10.9 million and $1.9 million during the years ended June 30, 2023 and
June 30, 2022, respectively. We did not have material acquisition related expenses during the year ended June 30, 2021.
(18) Restructuring Expenses
During the year ended June 30, 2023, we incurred restructuring expenses of $9.2 million associated with the reorganization
and rationalization of our operations. We recorded the full amount of $9.2 million during the year ended June 30, 2023, of
which $6.7 million related to our Sleep and Respiratory Care segment and $2.5 million related to our SaaS segment. The
restructuring expenses consisted primarily of severance to employees and were separately disclosed within our operating
expenses. We had $7.8 million remaining in our accruals at year end which will be paid during the year ended June 30,
2024.
We did not incur material restructuring expenses during the year ended June 30, 2022.
During the year ended June 30, 2021, we closed our Portable Oxygen Concentrator business, which was part of the Sleep
and Respiratory Care segment. We recognized restructuring expenses of $13.9 million primarily related to inventory write-
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Notes to the Consolidated Financial Statements
Item 8
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 year ended June 30, 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 consolidated
statements of income. The restructure was completed as of June 30, 2021.
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PART II
Item 8
SCHEDULE II
RESMED INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
June 30, 2023, 2022 and 2021
(in thousands)
Year ended June 30, 2023
Applied against asset account
Allowance for trade accounts receivable
Year ended June 30, 2022
Applied against asset account
Allowance for trade accounts receivable
Year ended June 30, 2021
Applied against asset account
Allowance for trade accounts receivable (1)
Balance at
͏Beginning
͏of Period
Charged to costs
and expenses
Other
͏(deductions)
Balance at
͏End of
͏Period
$
$
$
23,259 $
5,770 $
(5,426) $
23,603
32,138 $
2,620 $
(11,499) $
23,259
30,013 $
7,805 $
(5,680) $
32,138
(1) Beginning balance is adjusted to reflect the cumulative pre-tax effect of adopting Accounting Standards Update No. 2016-13, “Financial Instruments
- Credit Losses: Measurement of Credit Losses on Financial Instruments” (Topic 326), effective July 1, 2021.
See accompanying report of independent registered public accounting firm.
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Items 9 – 9C
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our
Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules
and forms and that such information is accumulated and communicated to our management, including our chief executive
officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing
and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and
management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and
procedures.
As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our
management, including our chief executive officer and chief financial officer, of the effectiveness of the design and
operation of our disclosure controls and procedures as of June 30, 2023. Based on the foregoing, our chief executive officer
and chief financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance
level as of June 30, 2023.
On November 21, 2022, we completed the acquisition of MEDIFOX DAN. Under guidelines established by the SEC,
companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during
the first year of an acquisition while integrating the acquired company. Based on those guidelines, our assessment of the
effectiveness of our internal control over financial reporting will exclude MEDIFOX DAN's internal control over financial
reporting associated with total assets of $65.0 million and total revenues of $64.5 million included in our consolidated
financial statements as of and for the year ended June 30, 2023. We are in the process of integrating MEDIFOX DAN into
our system of internal control over financial reporting.
Except as noted above, there has been no change in our internal control over financial reporting during our most recent
fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
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RESMED INC. AND SUBSIDIARIES
Items 9 – 9C
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over
financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the
United States of America. Our internal control over financial reporting includes those policies and procedures that:
(i) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets;
(ii) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are
being made only in accordance with authorizations of our management and directors; and
(iii) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2023. In making this
assessment, management used the framework in Internal Control-Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of
our internal control over financial reporting and testing of the operational effectiveness of our internal control over
financial reporting. Management reviewed the results of its assessment with the audit committee of our board of directors.
Based on that assessment under the framework in Internal Control-Integrated Framework (2013), management concluded
that the company’s internal control over financial reporting was effective as of June 30, 2023.
KPMG LLP, independent registered public accounting firm, who audited and reported on the consolidated financial
statements of ResMed Inc. included in this report, has issued an attestation report on the effectiveness of internal control
over financial reporting.
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PART II
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Report of Independent Registered Public Accounting Firm
Items 9 – 9C
To the Stockholders and Board of Directors
͏ResMed Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited ResMed Inc. and subsidiaries' (the Company) internal control over financial reporting as of June 30, 2023,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of June 30, 2023, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of June 30, 2023 and 2022, the related consolidated
statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year
period ended June 30, 2023, and the related notes and financial statement schedule II (collectively, the consolidated
financial statements), and our report dated August 10, 2023 expressed an unqualified opinion on those consolidated
financial statements.
The Company acquired MediFox-Dan Investment GmbH during November 2022, and management excluded from its
assessment of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2023, MediFox-
Dan Investment GmbH’s internal control over financial reporting associated with total assets of $65.0 million and total
revenues of $64.5 million included in the consolidated financial statements of the Company as of and for the year ended
June 30, 2023. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the
internal control over financial reporting of MediFox-Dan Investment GmbH.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
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Items 9 – 9C
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
San Diego, California
August 10, 2023
/s/ KPMG LLP
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PART II
ITEM 9B OTHER INFORMATION
RESMED INC. AND SUBSIDIARIES
Items 9 – 9C
During the quarterly period ended June 30, 2023, no director or officer adopted or terminated any Rule 10b5-1 trading
arrangement (as such terms are defined pursuant to Item 408(a) of Regulation S-K).
ITEM 9C DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
RESMED INC. AND SUBSIDIARIES
PART III
Items 10 – 14
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information required by this Item is premised on information that will be included in our definitive proxy statement for our
next annual meeting of stockholders, which will be filed with the Securities and Exchange Commission within 120 days
after June 30, 2023.
We have filed as exhibits to this report for the year ended June 30, 2023, the certifications of our chief executive officer
and chief financial officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
Code of Conduct
We have adopted a Code of Business Conduct & Ethics that applies to our board of directors and all of our employees,
including our chief executive officer and principal financial officer.
Our code of conduct is available at our website by visiting https://investor.resmed.com/ and clicking through “Investors,”
“Corporate Governance,” “Corporate Governance Documents,” and “Code of Conduct -English.” When required by the
rules of the NYSE, or the Securities and Exchange Commission, or SEC, we will disclose any future amendment to, or
waiver of, any provision of the code of conduct for our chief executive officer and principal financial officer or any
member or members of our board of directors on our website within four business days following the date of such
amendment or waiver
ITEM 11 EXECUTIVE COMPENSATION
Information required by this Item is incorporated by reference from our definitive proxy statement for our next annual
meeting of stockholders, which will be filed with the Securities and Exchange Commission within 120 days after June 30,
2023.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Information required by this Item is incorporated by reference from our definitive proxy statement for our next annual
meeting of stockholders, which will be filed with the Securities and Exchange Commission within 120 days after June 30,
2023.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information required by this Item is incorporated by reference from our definitive proxy statement for our next annual
meeting of stockholders, which will be filed with the Securities and Exchange Commission within 120 days after June 30,
2023.
ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information required by this Item is incorporated by reference from our definitive proxy statement for our next annual
meeting of stockholders, which will be filed with the Securities and Exchange Commission within 120 days after June 30,
2023.
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PART IV
RESMED INC. AND SUBSIDIARIES
PART IV
Items 15 – 16
ITEM 15 EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this report:
(a)
(b)
3.1
3.2
4.1
4.2
10.1*
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
Consolidated Financial Statements and Schedules – The index to our consolidated financial statements and
schedules are set forth in the “Index to Consolidated Financial Statements” under Item 8 of this report.
Exhibit Lists
First Restated Certificate of Incorporation of ResMed Inc., as amended. (Incorporated by reference to Exhibit
3.1 to the Registrant’s Report on Form 10-Q for the quarter ended September 30, 2013)
Seventh Amended and Restated Bylaws of ResMed Inc., a Delaware Corporation (as Approved and Adopted by
Board Resolution September 10, 2021) (Incorporated by reference to Exhibit 3.1 to the Registrant’s Report on
Form 8-K filed on September 13, 2021)
Form of certificate evidencing shares of Common Stock. (Incorporated by reference to Exhibit 4.1 to the
Registrant’s Registration Statement on Form S-1 (No. 33-91094) declared effective on June 1, 1995)
Description of ResMed Inc.’s securities registered pursuant to Section 12 of the Securities Exchange Act of
1934 (Incorporated by reference to Exhibit 4.2 to the Registrant’s Report on Form 10-K filed on August 13,
2020)
Form of Indemnification Agreements for our directors and officers. (Incorporated by reference to Exhibit 10.1
to the Registrant’s Report on Form 8-K filed on June 24, 2009)
Form of Access Agreement for directors. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Report
on Form 8-K filed on June 24, 2009)
Updated Form of Executive Agreement. (Incorporated by reference to Exhibit 10.3 to the Registrant’s Report on
Form 10-K filed on August 12, 2022)
Amendment and Restatement to the ResMed Inc. 2009 Incentive Award Plan. (Incorporated by reference to
Appendix B of ResMed Inc.’s Proxy Statement filed with the Securities and Exchange Commission on
September 25, 2017)
ResMed Inc. Deferred Compensation Plan. (Incorporated by reference to Exhibit 4.4 to the Registrant’s Report
on Form S-8 filed on May 21, 2021)
Form of Restricted Stock Unit Award Agreement for Directors. (Incorporated by reference to Exhibit 10.6 to
the Registrant’s Report on Form 10-K filed on August 12, 2022)
Form of Stock Option Grant for Executive Officers.
Form of Stock Option Grant for Directors. (Incorporated by reference to Exhibit 10.8 to the Registrant’s Report
on Form 10-K filed on August 12, 2022)
Form of Performance-Based Restricted Stock Unit Award Agreement for Executive Officers.
10.10*
Form of Executive Restricted Stock Unit Award Agreement for Executive Officers.
10.11
10.12
10.13
Second Amended and Restated Credit Agreement dated as of June 29, 2022, by and among ResMed Inc., as
borrower, MUFG Union Bank, N.A., as administrative agent, joint lead arranger, sole book runner, swing line
lender and letter of credit issuer, Westpac Banking Corporation, as syndication agent and joint lead arranger,
HSBC Bank Australia Limited, as syndication agent and joint lead arranger, HSBC Bank USA, National
Association, as syndication agent and joint lead arranger, Wells Fargo Bank, National Association, as
documentation agent, and each of the lenders identified therein. (Incorporated by reference to Exhibit 10.1 to
the Registrant’s Report on Form 8-K filed on June 29, 2022)
Second Amended and Restated Unconditional Guaranty dated as of June 29, 2022, by each of the Revolving
Facility Guarantors, in favor of MUFG Union Bank, N.A., in its capacity as administrative agent under the
Revolving Credit Agreement. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Report on Form 8-K
filed on June 29, 2022)
Second Amendment to Syndicated Facility Agreement and First Amendment to Unconditional Guaranty
Agreement, dated as of June 29, 2022, by and among ResMed Pty Limited, as borrower, ResMed, Inc., the other
parties party thereto, and MUFG Union Bank, N.A., as administrative agent. (Incorporated by reference to
Exhibit 10.3 to the Registrant’s Report on Form 8-K filed on June 29, 2022)
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PART IV
RESMED INC. AND SUBSIDIARIES
Items 15 – 16
10.14
10.15
10.16
21.1
23.1
31.1
31.2
32.1
101
104
Unconditional Guaranty dated as of April 17, 2018, by each of the guarantors identified on the Term Facility
Guaranty’s signature pages as a guarantor, in favor of MUFG Union Bank, N.A., in its capacity as
administrative agent under the Term Credit Agreement. (Incorporated by reference to Exhibit 10.4 to the
Registrant’s Report on Form 8-K filed on April 19, 2018).
The ResMed Inc. 2018 Employee Stock Purchase Plan. (Incorporated by reference to Appendix B of ResMed
Inc.’s Proxy Statement filed with the Securities and Exchange Commission on October 3, 2018.)
Note Purchase Agreement, dated July 10, 2019 by and among ResMed Inc. and the purchasers party to that
agreement (including form of 3.24% Series A Senior Note due 2026, form of Series B 3.45% Senior Note due
2029, and form of Subsidiary Guaranty Agreement). (Incorporated by reference to Exhibit 10.1 to the
Registrant’s Report on Form 8-K filed on July 15, 2019)
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
The following materials from ResMed Inc.’s Annual Report on Form 10-K for the fiscal year ended June 30,
2023 formatted in Inline XBRL (Inline Extensible Business Reporting Language): (i) the Consolidated Balance
Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive
Income, (iv) the Consolidated Statements of Stockholders' Equity, (v) the Consolidated Statements of Cash
Flows and (vi) related notes.
The cover page from ResMed Inc.’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023,
formatted in Inline XBRL and contained in Exhibit 101.
* Management contract or compensatory plan or arrangement
ITEM 16 FORM 10-K SUMMARY
None.
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PART IV
RESMED INC. AND SUBSIDIARIES
SIGNATURES
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DATED August 10, 2023
ResMed Inc.
/s/ MICHAEL J. FARRELL
Michael J. Farrell
Chief Executive Officer
(Principal Executive Officer)
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PART IV
RESMED INC. AND SUBSIDIARIES
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE
TITLE
DATE
/S/ MICHAEL J. FARRELL
Chief Executive Officer and Chairman
August 10, 2023
Michael J. Farrell
(Principal Executive Officer)
/S/ BRETT A. SANDERCOCK
Chief Financial Officer
August 10, 2023
Brett A. Sandercock
(Principal Financial Officer and
Principal Accounting Officer)
/S/ PETER C. FARRELL
Director and Chair Emeritus
August 10, 2023
Peter C. Farrell
/S/ CAROL J. BURT
Carol J. Burt
/S/ JAN De WITTE
Jan De Witte
Director
Director
August 10, 2023
August 10, 2023
/S/ KAREN DREXLER
Director
August 10, 2023
Karen Drexler
/S/ HARJIT GILL
Harjit Gill
Director
August 10, 2023
/S/ JOHN HERNANDEZ
Director
August 10, 2023
John Hernandez
/S/ RICHARD SULPIZIO
Director
August 10, 2023
Richard Sulpizio
/S/ DESNEY TAN
Desney Tan
/S/ RON TAYLOR
Ron Taylor
Director
Director
August 10, 2023
August 10, 2023
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