What changed in this filing

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Item 1. Financial Statements

2023-01-27 compared with 2022-10-28 · 460 added, 195 removed, 739 unchanged (47% of the section changed)

3 unchanged sentences

(In US$ and in thousands, except share and per share data)

September 30,

2022 June 30,

1 unchanged sentence

Cash and cash equivalents $ 253,199 $ 273,710

Accounts receivable, net of allowances of $ 23,867 and $ 23,259 at September 30, 2022 and June 30, 2022, respectively

Accounts receivable, net of allowances of $ 27,118 and $ 23,259 at December 31, 2022 and June 30, 2022, respectively

672,271 575,950

33 unchanged sentences

Common stock, $ 0.004 par value, 350,000,000 shares authorized;

188,295,266 issued and 146,459,032 outstanding at September 30, 2022 and 188,246,955 issued and 146,410,721 outstanding at June 30, 2022

188,737,368 issued and 146,901,134 outstanding at December 31, 2022 and 188,246,955 issued and 146,410,721 outstanding at June 30, 2022

Additional paid-in capital 1,710,766 1,682,432

Retained earnings 3,920,197 3,613,736

Treasury stock, at cost, 41,836,234 shares at September 30, 2022 and June 30, 2022

Treasury stock, at cost, 41,836,234 shares at December 31, 2022 and June 30, 2022

( 1,623,256 ) ( 1,623,256 )

8 unchanged sentences

Three Months Ended

September 30,

December 31, Six Months Ended

2022 2021 2022 2021

Net revenue - Sleep and Respiratory Care products $ 916,981 $ 795,840 $ 1,761,424 $ 1,602,339

12 unchanged sentences

Amortization of acquired intangible assets 9,563 7,738 17,513 15,445

Acquisition related expenses 8,412 — 9,157 —

Total operating expenses 299,521 255,607 564,592 499,984

20 unchanged sentences

Three Months Ended

September 30,

December 31, Six Months Ended

2022 2021 2022 2021

Net income $ 224,914 $ 201,751 $ 435,392 $ 405,364

Other comprehensive income (loss):

Other comprehensive income (loss), net of taxes:

Unrealized losses on designated hedging instruments ( 20,203 ) — ( 20,203 ) —

Foreign currency translation (loss) gain adjustments 156,163 ( 6,092 ) 62,782 ( 29,608 )

22 unchanged sentences

188,295 $ 586 $ 1,701,902 ( 41,836 ) $ ( 1,623,256 ) $ 3,759,783 $ ( 406,128 ) $ 3,432,887

Common stock issued on exercise of options 77 5,120 — — — — 5,120

Common stock issued on vesting of restricted stock units, net of shares withheld for tax 265 1 ( 29,655 ) — — — — ( 29,654 )

Common stock issued on employee stock purchase plan 100 1 16,935 — — — — 16,936

Stock-based compensation costs — — 16,464 — — — — 16,464

Other comprehensive income — — — — — — 135,960 135,960

Net income — — — — — 224,914 — 224,914

Dividends declared ($ 0.44 per common share)

— — — — — ( 64,500 ) — ( 64,500 )

Balance, December 31, 2022

188,737 $ 588 $ 1,710,766 ( 41,836 ) $ ( 1,623,256 ) $ 3,920,197 $ ( 270,168 ) $ 3,738,127

See the accompanying notes to the unaudited condensed consolidated financial statements.

20 unchanged sentences

187,547 $ 583 $ 1,643,661 ( 41,836 ) $ ( 1,623,256 ) $ 3,222,064 $ ( 217,003 ) $ 3,026,049

Common stock issued on exercise of options 39 — 2,378 — — — — 2,378

Common stock issued on vesting of restricted stock units, net of shares withheld for tax 361 2 ( 49,832 ) — — — — ( 49,830 )

Common stock issued on employee stock purchase plan 101 — 16,723 — — — — 16,723

Stock-based compensation costs — — 16,101 — — — — 16,101

Other comprehensive income — — — — — — ( 6,092 ) ( 6,092 )

Net income — — — — — 201,751 — 201,751

Dividends declared ($ 0.42 per common share)

— — — — — ( 61,245 ) — ( 61,245 )

Balance, December 31, 2021

188,048 $ 585 $ 1,629,031 ( 41,836 ) $ ( 1,623,256 ) $ 3,362,570 $ ( 223,095 ) $ 3,145,835

See the accompanying notes to the unaudited condensed consolidated financial statements.

3 unchanged sentences

(In US$ and in thousands)

Three Months Ended

September 30,

Six Months Ended

Cash flows from operating activities:

11 unchanged sentences

Accounts payable, accrued expenses, income taxes payable and other ( 9,230 ) ( 305,694 )

Net cash (used in) / provided by operating activities

Net cash provided by operating activities

173,298 154,222

2 unchanged sentences

Patent registration and acquisition costs ( 7,636 ) ( 13,737 )

Business acquisitions, net of cash acquired ( 19,100 ) —

Business acquisitions, net of cash acquired (note 12) ( 1,011,225 ) ( 35,915 )

Purchases of investments (note 5) ( 17,132 ) ( 12,364 )

19 unchanged sentences

Goodwill on acquisition 800,003 33,499

Previously held equity interest — ( 4,078 )

Deferred payments

12 unchanged sentences

Major distribution and sales sites are located in the United States, Germany, France, the United Kingdom, Switzerland, Australia, Japan, China, Finland, Norway and Sweden.

We also operate a Software as a Service (“SaaS”) business in the United States that includes out-of-hospital software platforms designed to support the professionals and caregivers who help people stay healthy in the home or care setting of their choice.

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.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S.

6 unchanged sentences

The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2023.

The condensed consolidated financial statements for the three months ended September 30, 2022 and September 30, 2021 are unaudited and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K (our “Form 10-K”) for the year ended June 30, 2022.

The condensed consolidated financial statements for the three and six months ended December 31, 2022 and December 31, 2021 are unaudited and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K (our “Form 10-K”) for the year ended June 30, 2022.

Revenue Recognition

In accordance with Accounting Standard Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers”, we account for a contract with a customer when there is a legally enforceable contract, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable.

We have determined that we have two operating segments, which are the sleep and respiratory disorders sector of the medical device industry (“Sleep and Respiratory Care”) and the supply of business management software as a service to out-of-hospital health providers (“SaaS”).

Our Sleep and Respiratory Care revenue relates primarily to the sale of our products that are therapy-based equipment.

7 unchanged sentences

Three Months Ended

September 30,

December 31, Six Months Ended

2022 2021 2022 2021

U.S., Canada and Latin America

1 unchanged sentence

Masks and other 269,733 242,032 508,293 457,139

Total Sleep and Respiratory Care $ 578,105 $ 491,038

Software as a Service 105,851 97,516

Total $ 683,956 $ 588,554

Total U.S., Canada and Latin America

$ 615,258 $ 486,807 $ 1,193,363 $ 977,846

Combined Europe, Asia and other markets

1 unchanged sentence

Masks and other 104,448 101,297 192,756 198,532

Total Sleep and Respiratory Care $ 266,338 $ 315,461

Total Combined Europe, Asia and other markets

$ 301,723 $ 309,033 $ 568,061 $ 624,493

Global revenue

Devices $ 517,577 $ 494,158

Masks and other 326,866 312,341

Total Devices

$ 542,800 $ 452,511 $ 1,060,375 $ 946,668

Total Masks and other

374,181 343,329 701,049 655,671

Total Sleep and Respiratory Care $ 916,981 $ 795,840 $ 1,761,424 $ 1,602,339

5 unchanged sentences

For products in our Sleep and Respiratory Care business, we transfer control and recognize a sale when products are shipped to the customer in accordance with the contractual shipping terms.

For our SaaS business, revenue associated with professional services are recognized as they are provided.

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.

5 unchanged sentences

The following table summarizes our contract balances (in thousands):

September 30,

2022 June 30,

9 unchanged sentences

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

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

PART I – FINANCIAL INFORMATION Item 1

1 unchanged sentence

Notes to the Condensed Consolidated Financial Statements

with changes in marketing incentives (e.g.

rebates, discounts, free goods) and returns offered to our customers and their customers.

When we give customers the right to return eligible products and receive credit, returns are estimated based on an analysis of historical experience.

However, returns of products, excluding warranty-related returns, are infrequent and insignificant.

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.

3 unchanged sentences

Rebates measured over a quarterly period are updated based on actual sales results and, therefore, no estimation is required to determine the reduction to revenue.

For rebates measured over annual periods, we update our estimates on a quarterly basis based on actual sales results and updated forecasts for the remaining rebate periods.

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.

13 unchanged sentences

When lease contracts also include the sale of masks and accessories, we allocate contract consideration to those items on a relative standalone price basis and recognize revenue when control transfers to the customer.

Operating lease revenue was $ 23.7 million for the three months ended September 30, 2022 and $ 25.2 million for the three months ended September 30, 2021.

Operating lease revenue was $ 20.4 million and $ 44.1 million for the three and six months ended December 31, 2022 and $ 24.4 million and $ 49.6 million for the three and six months ended December 31, 2021.

Provision for Warranty

13 unchanged sentences

Certain items are maintained at the corporate level and are not allocated to the segments.

The non-allocated items include corporate headquarters costs, stock-based compensation, amortization expense from acquired intangibles, net interest expense (income), loss attributable to equity method investments, gains and losses on equity investments, and other, net.

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.

4 unchanged sentences

Three Months Ended

September 30,

December 31, Six Months Ended

2022 2021 2022 2021

Net revenue by segment

14 unchanged sentences

Amortization of acquired intangible assets 16,868 18,969 31,193 37,734

Acquisition related expenses

8,412 — 9,157 —

Interest expense (income), net 10,338 5,948 17,472 11,308

8 unchanged sentences

Components of selected captions in the condensed consolidated balance sheets consisted of the following (in thousands):

Inventories September 30,

Inventories December 31,

2022 June 30,

3 unchanged sentences

Total inventories $ 988,955 $ 743,910

Prepaid expenses and other current assets September 30,

Prepaid expenses and other current assets December 31,

2022 June 30,

3 unchanged sentences

Total prepaid expenses and other current assets $ 410,731 $ 337,908

Property, Plant and Equipment September 30,

Property, Plant and Equipment December 31,

2022 June 30,

2 unchanged sentences

Property, plant and equipment, net $ 522,745 $ 498,181

Other Intangible Assets September 30,

Other Intangible Assets December 31,

2022 June 30,

12 unchanged sentences

A reconciliation of changes in our goodwill by reportable segment is as follows (in thousands):

Three Months Ended September 30, 2022

Six Months Ended December 31, 2022

Respiratory Care SaaS Total

18 unchanged sentences

Equity investments by measurement category were as follows (in thousands):

Measurement category September 30,

Measurement category December 31,

2022 June 30,

3 unchanged sentences

Total $ 134,776 $ 58,375

PART I – FINANCIAL INFORMATION Item 1

AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

The following tables show a reconciliation of the changes in our equity investments (in thousands):

Three Months Ended September 30, 2022

Six Months Ended December 31, 2022

Non-marketable securities Marketable securities Equity method investments Total

1 unchanged sentence

Additions to investments (1)

17,132 — 57,233 74,365

Observable price adjustments on non-marketable equity securities 9,275 — — 9,275

Unrealized losses on marketable equity securities — ( 4,187 ) — ( 4,187 )

Loss attributable to equity method investments — — ( 4,853 ) ( 4,853 )

Foreign currency translation adjustments — — 1,801 1,801

Carrying value at the end of the period $ 65,697 $ 4,980 $ 64,099 $ 134,776

Three Months Ended September 30, 2021

(1) Includes equity method investment acquired and measured at fair value via our acquisition of MEDIFOX DAN.

Refer to Note 12 herein.

PART I – FINANCIAL INFORMATION Item 1

AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

Six Months Ended December 31, 2021

Non-marketable securities Marketable securities Equity method investments Total

Balance at the beginning of the period $ 23,002 $ 29,084 $ 17,154 $ 69,240

Additions to investments 3,000 3,600 — 6,600

Net additions (reductions) to investments (2)

4,665 ( 3,213 ) — 1,452

Observable price adjustments on non-marketable equity securities

5,367 — — 5,367

Unrealized gains on marketable equity securities — 454 — 454

Unrealized losses on marketable equity securities

— ( 7,942 ) — ( 7,942 )

Realized gains on marketable and non-marketable equity securities 2,355 1,637 — 3,992

Impairment of investments

2 unchanged sentences

Carrying value at the end of the period $ 35,180 $ 19,566 $ 13,854 $ 68,600

Net unrealized losses recognized for equity investments in non-marketable and marketable securities held as of September 30, 2022 for the three months ended September 30, 2022 were $ 3.3 million.

Net unrealized gains recognized for equity investments in non-marketable and marketable securities held as of September 30, 2021 for the three months ended September 30, 2021 were $ 5.6 million.

(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 recognized for equity investments in non-marketable and marketable securities held as of December 31, 2022 for the three and six months ended December 31, 2022 were $ 8.4 million and $ 5.1 million.

Net unrealized losses recognized for equity investments in non-marketable and marketable securities held as of December 31, 2021 for the three and six months ended December 31, 2021 were $ 6.9 million and $ 2.8 million.

(6) Income Taxes

6 unchanged sentences

Changes in the liability for warranty costs, which is included in accrued expenses in our condensed consolidated balance sheets, are as follows (in thousands):

Three Months Ended

September 30,

Six Months Ended

Balance at the beginning of the period $ 25,889 $ 22,032

7 unchanged sentences

Debt consisted of the following (in thousands):

September 30,

2022 June 30,

21 unchanged sentences

The outstanding principal amounts will bear interest at a rate equal to the Adjusted Term SOFR (as defined in the Revolving Credit Facility) plus 0.75 % to 1.50 % (depending on the then-applicable leverage ratio) or the Base Rate (as defined in the Revolving Credit Agreement and the Term Credit Agreement, as applicable) plus 0.0 % to 0.50 % (depending on the then-applicable leverage ratio).

At September 30, 2022, the interest rate that was being charged on the outstanding principal amounts was 3.5 %.

At December 31, 2022, the interest rate that was being charged on the outstanding principal amounts was 5.2 %.

An applicable commitment fee of 0.075 % to 0.150 % (depending on the then-applicable leverage ratio) applies on the unused portion of the revolving credit facility.

As of September 30, 2022, we had $ 1.4 billion available for draw down under the revolving credit facility.

As of December 31, 2022, we had $ 390.0 million available for draw down under the revolving credit facility.

PART I – FINANCIAL INFORMATION Item 1

2 unchanged sentences

We are required to disclose the fair value of financial instruments for which it is practicable to estimate the value, even though these instruments are not recognized at fair value in the consolidated balance sheets.

As the Revolving Credit and Term Credit Agreements’ interest rate is calculated as Adjusted Term SOFR plus the spreads described above, its carrying amount is equivalent to its fair value as at September 30, 2022 and June 30, 2022, which was $ 300.0 million and $ 280.0 million, respectively.

Quoted market prices in active markets for similar liabilities based inputs (Level 2) were used to estimate fair value.

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 December 31, 2022 and June 30, 2022, which was $ 1,305.0 million and $ 280.0 million, respectively.

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”).

6 unchanged sentences

As of September 30, 2022 and June 30, 2022, the Senior Notes had a carrying amount of $ 500.0 million, excluding deferred borrowing costs, and an estimated fair value of $ 455.7 million and $ 477.7 million, respectively.

As of December 31, 2022 and June 30, 2022, the Senior Notes had a carrying amount of $ 500.0 million, excluding deferred borrowing costs, and an estimated fair value of $ 460.9 million and $ 477.7 million, respectively.

Quoted market prices in active markets for similar liabilities based inputs (Level 2) were used to estimate fair value.

At September 30, 2022, we were in compliance with our debt covenants and there was $ 800.0 million outstanding under the Revolving Credit Agreement, Term Credit Agreement and Senior Notes.

At December 31, 2022, we were in compliance with our debt covenants and there was $ 1,805.0 million outstanding under the Revolving Credit Agreement, Term Credit Agreement and Senior Notes.

(9) Earnings Per Share

1 unchanged sentence

For purposes of calculating diluted earnings per share, the denominator includes both the weighted average number of shares of common stock outstanding and the number of dilutive common stock equivalents such as stock options and restricted stock units.

The weighted average number of outstanding stock options and restricted stock units not included in the computation of diluted earnings per share were 113,167 and 1,322 for the three months ended September 30, 2022 and 2021, respectively, as the effect would have been anti-dilutive.

The weighted average number of outstanding stock options and restricted stock units not included in the computation of diluted earnings per share were 293,796 and 49,762 for the three months ended December 31, 2022 and 2021, respectively, and 270,100 and 25,470 for the six months ended December 31, 2022 and 2021, respectively, as the effect would have been anti-dilutive.

PART I – FINANCIAL INFORMATION Item 1

3 unchanged sentences

Three Months Ended

September 30,

December 31, Six Months Ended

2022 2021 2022 2021

Net income $ 224,914 $ 201,751 $ 435,392 $ 405,364

18 unchanged sentences

The matter is proceeding to discovery while the court considers our request.

We have also filed petitions for inter partes review with the Patent Trial and Appeal Board (“PTAB”) of the United States Patent and Trademark Office seeking to invalidate the asserted claims of the patents-in-suit.

A determination by the PTAB whether to institute the petitions is expected by early December 2022.

If the petitions are instituted by the PTAB, a final written decision determining the invalidity of the challenged claims is expected by December 2023.

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 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.

14 unchanged sentences

1:20-cv-01707, 01708, 01709, 01710, 01711, and 01713 (CFC) seeking damages, an injunction, and a declaration from the court on the amount of a fair reasonable and non-discriminatory license rate for the standard essential patents it is asserting against the communications module defendants.

The district court cases have been stayed pending the resolution of the ITC proceedings.

Philips has not yet moved to lift

The district court cases were stayed pending the resolution of the ITC proceedings.

The parties have returned to the district

PART I – FINANCIAL INFORMATION Item 1

1 unchanged sentence

Notes to the Condensed Consolidated Financial Statements

the stay following the termination of the ITC Investigation.

We are not a party to the ITC investigation or the district court cases, but we sell products that incorporate some of the communications modules at issue in the cases.

court for further proceedings.

We are not a party to the ITC investigation or the district court cases, but we sell products that incorporate some of the communications modules at issue in the district court case.

On June 16, 2022, Cleveland Medical Devices Inc.

14 unchanged sentences

This is applied to receivables sold with recourse and is recorded in accrued expenses.

During the three months ended September 30, 2022 and September 30, 2021, receivables sold with limited recourse were $ 39.9 million and $ 49.5 million, respectively.

As of September 30, 2022, the maximum exposure on outstanding receivables sold with recourse and contingent provision were $ 22.4 million and $ 1.2 million, respectively.

During the six months ended December 31, 2022 and December 31, 2021, receivables sold with limited recourse were $ 84.3 million and $ 94.2 million, respectively.

As of December 31, 2022, the maximum exposure on outstanding receivables sold with recourse and contingent provision were $ 24.1 million and $ 1.0 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.

In June 2022 we signed a definitive agreement to acquire MEDIFOX DAN which is expected to close during our fiscal year 2023.

The MEDIFOX DAN acquisition remains subject to regulatory clearances and other customary closing conditions.

Upon closing, acquisition consideration of EUR 950 million will be paid, in part, with funds available for draw under our Revolving Credit Agreement.

(11) Derivative Instruments and Hedging Activities

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 condensed consolidated statement of operations.

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

PART I – FINANCIAL INFORMATION Item 1

AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

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 $ 1,028.8 million at December 31, 2022.

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 $ 976.2 million and $ 602.0 million at December 31, 2022 and June 30, 2022, respectively.

These contracts mature at various dates prior to June 30, 2024.

Fair Values of Derivative Instruments

The following table presents our assets and liabilities related to derivative instruments on a gross basis within the condensed consolidated balance sheets (in thousands):

2022 June 30,

2022 Balance Sheet Caption

Derivative Assets

Not Designated as Hedging Instruments

Foreign currency hedging instruments $ 13,944 $ 151 Prepaid expenses and other current assets

Foreign currency hedging instruments 672 9 Prepaid taxes and other non-current assets

Total derivative assets $ 14,616 $ 160

Derivative Liabilities

Designated as Hedging Instruments

Foreign cross-currency swaps – Fair Value Hedge $ 13,747 $ — Other long-term liabilities

Foreign cross-currency swaps – Net Investment Hedge 22,831 — Other long-term liabilities

Not Designated as Hedging Instruments

Foreign currency hedging instruments 2,079 1,947 Accrued expenses

Foreign currency hedging instruments 1,364 — Other long-term liabilities

Total derivative liabilities $ 40,021 $ 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):

Three Months Ended

December 31, Six Months Ended

2022 2021 2022 2021

Gain (loss) recognized in other comprehensive income (loss) $ ( 4,610 ) $ — $ ( 4,610 ) $ —

Gain (loss) recognized on cross-currency swap in interest (expense) income, net (amount excluded from effectiveness testing) 847 — 847 —

Gain (loss) recognized on cross-currency swap in other, net ( 9,137 ) — ( 9,137 ) —

Gain (loss) recognized on long-term debt in other, net 9,137 — 9,137 —

PART I – FINANCIAL INFORMATION Item 1

AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

Net Investment Hedge Gains (Losses)

We recognized the following gains (losses) on the foreign cross currency swaps designated as net investment hedges (in thousands):

Three Months Ended

December 31, Six Months Ended

2022 2021 2022 2021

Gain (loss) recognized in cumulative translation adjustment within other comprehensive income (loss) $ ( 22,831 ) $ — $ ( 22,831 ) $ —

Gain (loss) recognized from the excluded components in interest (expense) income, net 2,126 — 2,126 —

Non-designated Derivative Gains (Losses)

We recognized the following gains (losses) in the condensed consolidated statement of operations on derivatives not designated as hedging instruments (in thousands):

Three Months Ended

December 31, Six Months Ended

2022 2021 2022 2021

Gain (loss) recognized on foreign currency hedging instruments in other, net $ 40,090 $ ( 52 ) $ 19,568 $ ( 4,000 )

Gain (loss) recognized on other foreign-currency-denominated transactions in other, net ( 41,795 ) 549 ( 22,705 ) 2,535

Total $ ( 1,705 ) $ 497 $ ( 3,137 ) $ ( 1,465 )

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.

(12) Business Combinations

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 condensed consolidated financial statements from November 21, 2022.

The acquisition was paid for using funds drawn down from our Revolving Credit Agreement.

PART I – FINANCIAL INFORMATION Item 1

AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

The total purchase price was allocated to MEDIFOX DAN's tangible and identifiable intangible assets and liabilities based upon preliminary estimated fair values as of the November 21, 2022 closing date, as follows (in thousands):

Preliminary Intangible assets - useful life

Accounts receivable 16,096

Property, plant and equipment 7,731

Equity method investment 57,298

Other assets 18,523

Accounts payable and accrued expenses ( 19,826 )

Deferred revenue ( 18,349 )

Other liabilities ( 11,623 )

Identifiable intangible assets:

Developed technology 43,081 6 - 7 years

Customer relationships 175,445 11 - 13 years

Trade names 32,050 10 years

Deferred tax liabilities ( 91,004 )

Goodwill 780,722

Purchase price $ 997,516

We have not finalized the purchase price allocation in relation to this acquisition as certain appraisals associated with the valuation of intangible assets and income tax positions are not yet complete.

We do not believe that the completion of this work will materially modify the preliminary purchase price allocation.

We expect to complete our purchase price allocation during the quarter ending 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.

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 condensed consolidated statements of operations.

During the three and six months ended December 31, 2022, we recorded acquisition related expenses of $ 8.4 million and $ 9.2 million, respectively, related to the MEDIFOX DAN acquisition.

We did no t have material acquisition related expenses during the three and six months ended December 31, 2021.

PART I – FINANCIAL INFORMATION Item 2

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is an overview of our results of operations for the three months ended September 30, 2022.

The following is an overview of our results of operations for the three and six months ended December 31, 2022.

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition.

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We are committed to ongoing investment in research and development and product enhancements.

During the three months ended September 30, 2022, we invested $63.2 million on research and development activities, which represents 6.6% of net revenues, with a continued focus on the development and commercialization of new, innovative products and solutions that improve patient outcomes, create efficiencies for our customers and help physicians and providers better manage chronic disease and lower healthcare costs.

During the three months ended September 30, 2022 we continued the launch of AirSense 11, which introduces new features such as a touch screen, algorithms for patients new to therapy and digital enhancements and over-the-air update capabilities as well as continued to expand our global offering of devices to include Card-to-Cloud ("C2C") versions of our prior model AirSense 10 and AirCurve 10 products that do not incorporate a communications module.

During the three months ended December 31, 2022, we invested $69.9 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 the three months ended December 31, 2022 we continued the launch of AirSense 11, which introduces new features such as a touch screen, algorithms for patients new to therapy and digital enhancements and over-the-air update capabilities as well as continued to expand our global offering of devices to include Card-to-Cloud ("C2C") versions of our prior model AirSense 10 and AirCurve 10 products that do not incorporate a communications module.

We introduced these C2C models to address the growing backlog of patients waiting for therapy with our devices due to the global semiconductor supply shortage.

Due to multiple acquisitions, including Brightree in April 2016, HEALTHCAREfirst in July 2018 and MatrixCare in November 2018, and our pending acquisition of MEDIFOX DAN which is expected to close during fiscal year 2023 subject to regulatory clearances, our operations now include out-of-hospital software platforms designed to support the professionals and caregivers who help people stay healthy in the home or care setting of their choice.

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 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.

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Net revenue for the three months ended September 30, 2022 was $950.3 million, an increase of 5% compared to the three months ended September 30, 2021.

Gross margin was 56.9% for the three months ended September 30, 2022 compared to 56.0% for the three months ended September 30, 2021.

Diluted earnings per share was $1.43 for the three months ended September 30, 2022, compared to diluted loss per share of $1.39 for the three months ended September 30, 2021.

At September 30, 2022, our cash and cash equivalents totaled $207.2 million, our total assets were $5.2 billion and our stockholders’ equity was $3.4 billion.

Net revenue for the three months ended December 31, 2022 was $1,033.7 million, an increase of 16% compared to the three months ended December 31, 2021.

Gross margin was 56.1% for the three months ended December 31, 2022 compared to 56.4% for the three months ended December 31, 2021.

Diluted earnings per share was $1.53 for the three months ended December 31, 2022, compared to diluted earnings per share of $1.37 for the three months ended December 31, 2021.

At December 31, 2022, our cash and cash equivalents totaled $253.2 million, our total assets were $6.7 billion and our stockholders’ equity was $3.7 billion.

In order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency fluctuations, we provide certain financial information on a “constant currency” basis, which is in addition to the actual financial information presented.

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Results of Operations

Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021

Net revenue for the three months ended September 30, 2022 increased to $950.3 million from $904.0 million for the three months ended September 30, 2021, an increase of $46.3 million or 5% (a 9% increase on a constant currency basis).

Three Months Ended December 31, 2022 Compared to the Three Months Ended December 31, 2021

Net revenue for the three months ended December 31, 2022 increased to $1,033.7 million from $894.9 million for the three months ended December 31, 2021, an increase of $138.9 million or 16% (a 20% increase on a constant currency basis).

The following table summarizes our net revenue disaggregated by segment, product and region (in thousands):

Three Months Ended

September 30, % Change Constant Currency*

December 31, % Change Constant Currency*

U.S., Canada and Latin America

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Masks and other 269,733 242,032 11

Total U.S., Canada and Latin America

$ 615,258 $ 486,807 26

Combined Europe, Asia and other markets

Devices $ 197,275 $ 207,736 (5) % 5 %

Masks and other 104,448 101,297 3 14

Total Combined Europe, Asia and other markets

$ 301,723 $ 309,033 (2) 8

Global revenue

Total Devices $ 542,800 $ 452,511 20 % 25 %

Total Masks and other 374,181 343,329 9 13

Total Sleep and Respiratory Care $ 916,981 $ 795,840 15 20

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Total $ 1,033,744 $ 894,874 16 20

Combined Europe, Asia and other markets

* Constant currency numbers exclude the impact of movements in international currencies.

Sleep and Respiratory Care

Net revenue from our Sleep and Respiratory Care business for the three months ended December 31, 2022 was $917.0 million, an increase of 15% compared to net revenue for the three months ended December 31, 2021.

Movements in international currencies against the U.S.

dollar negatively impacted net revenue by approximately $35.8 million for the three months ended December 31, 2022.

Excluding the impact of currency movements, total Sleep and Respiratory Care net revenue for the three months ended December 31, 2022 increased by 20% compared to the three months ended December 31, 2021.

The increase in net revenue was primarily attributable to an increase in unit sales of our devices and masks.

Net revenue from our Sleep and Respiratory Care business in the U.S., Canada and Latin America for the three months ended December 31, 2022 increased to $615.3 million from $486.8 million for the three months ended December 31, 2021, an increase of $128.5 million or 26%.

The increase was primarily due to an increase in unit sales of our devices, including incremental sales of the C2C devices, and masks.

Net revenue in combined Europe, Asia and other markets decreased for the three months ended December 31, 2022 to $301.7 million from $309.0 million for the three months ended December 31, 2021, a decrease of $7.3 million or 2% (an 8% increase on a constant currency basis).

The constant currency increase in sales in combined Europe, Asia and other markets predominantly reflects an increase in unit sales of our devices and masks.

PART I – FINANCIAL INFORMATION Item 2

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Net revenue from devices for the three months ended December 31, 2022 increased to $542.8 million from $452.5 million for the three months ended December 31, 2021, an increase of $90.3 million or 20%, including an increase of 41% in the U.S., Canada and Latin America and a decrease of 5% in combined Europe, Asia and other markets (a 5% increase on a constant currency basis).

Excluding the impact of foreign currency movements, device sales for the three months ended December 31, 2022 increased by 25%.

Net revenue from masks and other for the three months ended December 31, 2022 increased to $374.2 million from $343.3 million for the three months ended December 31, 2021, an increase of $30.9 million or 9%, including an increase of 11% in the U.S., Canada and Latin America and an increase of 3% in combined Europe, Asia and other markets (a 14% increase on a constant currency basis).

Excluding the impact of foreign currency movements, masks and other sales for the three months ended December 31, 2022 increased by 13%.

Software as a Service

Net revenue from our SaaS business for the three months ended December 31, 2022 increased to $116.8 million from $99.0 million for the three months ended December 31, 2021, an increase of $17.7 million or 18%.

The constant currency increase was predominantly due to our recent acquisition of MEDIFOX DAN, which was acquired on November 21, 2022, in addition to continued growth in the HME vertical within our SaaS business.

Six Months Ended December 31, 2022 Compared to the Six Months Ended December 31, 2021

Net revenue for the six months ended December 31, 2022 increased to $1,984.0 million from $1,798.9 million for the six months ended December 31, 2021, an increase of $185.1 million or 10% (a 14% increase on a constant currency basis).

The following table summarizes our net revenue disaggregated by segment, product and region (in thousands):

Six Months Ended

December 31, % Change Constant Currency*

U.S., Canada and Latin America

Devices $ 685,070 $ 520,707 32 %

Masks and other 508,293 457,139 11

Total Sleep and Respiratory Care $ 266,338 $ 315,461 (16) (6)

Global revenue

Total U.S., Canada and Latin America

$ 1,193,363 $ 977,846 22

Combined Europe, Asia and other markets

Devices $ 375,305 $ 425,961 (12) % (2) %

Masks and other 192,756 198,532 (3) 9

Total Combined Europe, Asia and other markets

$ 568,061 $ 624,493 (9) 2

Global revenue

Total Devices $ 1,060,375 $ 946,668 12 % 17 %

Total Masks and other 701,049 655,671 7 11

Total Sleep and Respiratory Care $ 1,761,424 $ 1,602,339 10 14

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Total $ 1,984,038 $ 1,798,890 10 14

* Constant currency numbers exclude the impact of movements in international currencies.

Sleep and Respiratory Care

Net revenue from our Sleep and Respiratory Care business for the three months ended September 30, 2022 was $844.4 million, an increase of 5% compared to net revenue for the three months ended September 30, 2021.

Net revenue from our Sleep and Respiratory Care business for the six months ended December 31, 2022 was $1,761.4 million, an increase of 10% compared to net revenue for the six months ended December 31, 2021.

Movements in international currencies against the U.S.

dollar negatively impacted net revenue by approximately $36.2 million for the three months ended September 30, 2022.

Excluding the impact of currency movements, total Sleep and Respiratory Care net revenue for the three months ended September 30, 2022 increased by 9% compared to the three months ended September 30, 2021.

dollar negatively impacted net revenue by approximately $72.3 million for the six months ended December 31, 2022.

Excluding the impact of currency movements, total Sleep and Respiratory Care net revenue for the six months ended December 31, 2022 increased by 14% compared to the six months ended December 31, 2021.

The increase in net revenue was primarily attributable to an increase in unit sales of our devices and masks.

Net revenue from our Sleep and Respiratory Care business in the U.S., Canada and Latin America for the three months ended September 30, 2022 increased to $578.1 million from $491.0 million for the three months ended September 30, 2021, an increase of $87.1 million or 18%.

The increase was primarily due to an increase in unit sales of our devices, including incremental sales of the C2C devices, and masks.

Net revenue in combined Europe, Asia and other markets decreased for the three months ended September 30, 2022 to $266.3 million from $315.5 million for the three months ended September 30, 2021, a decrease of $49.1 million or 16% (a 6% decrease on a constant currency basis).

The constant currency decrease in sales in combined Europe, Asia and other

PART I – FINANCIAL INFORMATION Item 2

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

markets predominantly reflects a decrease in unit sales of our devices, which have been negatively impacted by the continued shortages in electronic components.

Net revenue from devices for the three months ended September 30, 2022 increased to $517.6 million from $494.2 million for the three months ended September 30, 2021, an increase of $23.4 million or 5%, including an increase of 23% in the U.S., Canada and Latin America and a decrease of 18% in combined Europe, Asia and other markets (a 10% decrease on a constant currency basis).

Excluding the impact of foreign currency movements, device sales for the three months ended September 30, 2022 increased by 9%.

Net revenue from masks and other for the three months ended September 30, 2022 increased to $326.9 million from $312.3 million for the three months ended September 30, 2021, an increase of $14.5 million or 5%, including an increase of 11% in the U.S., Canada and Latin America and a decrease of 9% in combined Europe, Asia and other markets (a 3% increase on a constant currency basis).

Excluding the impact of foreign currency movements, masks and other sales increased by 8%, compared to the three months ended September 30, 2021.

Net revenue from our Sleep and Respiratory Care business in the U.S., Canada and Latin America for the six months ended December 31, 2022 increased to $1,193.4 million from $977.8 million for the six months ended December 31, 2021, an increase of $215.5 million or 22%.

The increase was primarily due to an increase in unit sales of our devices, including incremental sales of the C2C devices, and masks.

Net revenue in combined Europe, Asia and other markets decreased for the six months ended December 31, 2022 to $568.1 million from $624.5 million for the six months ended December 31, 2021, a decrease of $56.4 million or 9% (a 2% increase on a constant currency basis).

The constant currency increase in sales in combined Europe, Asia and other markets predominantly reflects an increase in unit sales of our masks, partially offset by a decrease in our unit sales of devices.

Net revenue from devices for the six months ended December 31, 2022 increased to $1,060.4 million from $946.7 million for the six months ended December 31, 2021, an increase of $113.7 million or 12%, including an increase of 32% in the U.S., Canada and Latin America and a decrease of 12% in combined Europe, Asia and other markets (a 2% decrease on a constant currency basis).

Excluding the impact of foreign currency movements, device sales for the six months ended December 31, 2022 increased by 17%.

Net revenue from masks and other for the six months ended December 31, 2022 increased to $701.0 million from $655.7 million for the six months ended December 31, 2021, an increase of $45.4 million or 7%, including an increase of 11% in the U.S., Canada and Latin America and a decrease of 3% in combined Europe, Asia and other markets (a 9% increase on a constant currency basis).

Excluding the impact of foreign currency movements, masks and other sales increased by 11%, compared to the six months ended December 31, 2021.

Software as a Service

Net revenue from our SaaS business for the three months ended September 30, 2022 was $105.9 million, an increase of 9% compared to the three months ended September 30, 2021.

The increase was predominantly due to continued growth in the HME vertical within our SaaS business.

Net revenue from our SaaS business for the six months ended December 31, 2022 was increased to $222.6 million from $196.6 million for the six months ended December 31, 2021, an increase of $26.1 million or 13%.

The increase was predominantly due to our recent acquisition of MEDIFOX DAN, which was acquired on November 21, 2022, in addition to continued growth in the HME vertical within our SaaS business.

Gross Profit and Gross Margin

Gross profit increased for the three months ended September 30, 2022 to $540.8 million from $506.3 million for the three months ended September 30, 2021, an increase of $34.5 million or 7%.

Gross margin, which is gross profit as a percentage of net revenue, for the three months ended September 30, 2022 was 56.9% compared to 56.0% for the three months ended September 30, 2021.

The increase in gross margin for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was due primarily to increases in average selling prices and a decrease in the amortization of acquired intangible assets, partially offset by unfavorable product mix and foreign currency movements.

Gross profit increased for the three months ended December 31, 2022 to $579.7 million from $504.3 million for the three months ended December 31, 2021, an increase of $75.4 million or 15%.

Gross margin, which is gross profit as a percentage of net revenue, for the three months ended December 31, 2022 was 56.1% compared to 56.4% for the three months ended December 31, 2021.

The decrease in gross margin for the three months ended December 31, 2022 compared to the three months ended December 31, 2021 was due primarily to unfavorable product mix, higher distribution and 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.

Gross profit increased for the six months ended December 31, 2022 to $1,120.5 million from $1,010.6 million for the six months ended December 31, 2021, an increase of $109.9 million or 11%.

Gross margin for the six months ended December 31, 2022 was 56.5% compared to 56.2% for the six months ended December 31, 2021.

The increase in gross margin for the six months ended December 31, 2022 compared to the six months ended December 31, 2021 was due primarily to favorable average selling prices and a decrease in the amortization of acquired intangible assets, partially offset by unfavorable product mix changes and higher distribution and warehouse related costs.

PART I – FINANCIAL INFORMATION Item 2

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Operating Expenses

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Three Months Ended

September 30, Change % Change Constant Currency

December 31, Change % Change Constant Currency

Selling, general, and administrative $ 211,672 $ 185,362 $ 26,310 14 % 20 %

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Amortization of acquired intangible assets 9,563 7,738 1,825 24 % 24 %

Six Months Ended

December 31, Change % Change Constant Currency

Selling, general, and administrative $ 404,860 $ 362,082 $ 42,778 12 % 17 %

as a % of net revenue 20.4 % 20.1 %

Research and development 133,062 122,457 10,605 9 % 12 %

as a % of net revenue 6.7 % 6.8 %

Amortization of acquired intangible assets 17,513 15,445 2,068 13 % 14 %

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses increased for the three months ended September 30, 2022 to $193.9 million from $176.7 million for the three months ended September 30, 2021, an increase of $17.2 million or 10%.

Selling, general, and administrative expenses increased for the three months ended December 31, 2022 to $211.7 million from $185.4 million for the three months ended December 31, 2021, an increase of $26.3 million or 14%.

Selling, general, and administrative expenses were favorably impacted by the movement of international currencies against the U.S.

dollar, which decreased our expenses by approximately $10.3 million, as reported in U.S.

Excluding the impact of foreign currency movements, selling, general, and administrative expenses for the three months ended September 30, 2022 increased by 16% compared to the three months ended September 30, 2021.

As a percentage of net revenue, selling, general, and administrative expenses were 20.4% for the three months ended September 30, 2022, compared to 19.5% for the three months ended September 30, 2021.

Excluding the impact of foreign currency movements, selling, general, and administrative expenses for the three months ended December 31, 2022 increased by 20% compared to the three months ended December 31, 2021.

As a percentage of net revenue, selling, general, and administrative expenses were 20.5% for the three months ended December 31, 2022, compared to 20.7% for the three months ended December 31, 2021.

The constant currency increase in selling, general, and administrative expenses during the three months ended December 31, 2022 compared to the three months ended December 31, 2021 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.

Selling, general, and administrative expenses increased for the six months ended December 31, 2022 to $404.9 million from $362.1 million for the six months ended December 31, 2021, an increase of $42.8 million or 12%.

Selling, general, and administrative expenses were favorably impacted by the movement of international currencies against the U.S.

dollar, which decreased our expenses by approximately $20.5 million, as reported in U.S.

Excluding the impact of foreign currency movements, selling, general, and administrative expenses for the six months ended December 31, 2022 increased by 17% compared to the six months ended December 31, 2021.

As a percentage of net revenue, selling, general, and administrative expenses were 20.4% for the six months ended December 31, 2022, compared to 20.1% for the six months ended December 31, 2021.

The constant currency increase in selling, general, and administrative expenses during the six months ended December 31, 2022 compared to the six months ended December 31, 2021 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 three months ended December 31, 2022 to $69.9 million from $62.5 million for the three months ended December 31, 2021, an increase of $7.4 million, or 12%.

Research and development expenses were favorably impacted by the movement of international currencies against the U.S.

dollar, which decreased

PART I – FINANCIAL INFORMATION Item 2

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

The constant currency increase in selling, general, and administrative expenses was primarily due to increases in employee-related costs and travel and entertainment expenses during the three months ended September 30, 2022 compared to the three months ended September 30, 2021.

Research and Development Expenses

Research and development expenses increased for the three months ended September 30, 2022 to $63.2 million from $60.0 million for the three months ended September 30, 2021, an increase of $3.2 million, or 5%.

our expenses by approximately $2.2 million for the three months ended December 31, 2022, as reported in U.S.

Excluding the impact of foreign currency movements, research and development expenses increased by 15% compared to the three months ended December 31, 2021.

As a percentage of net revenue, research and development expenses were 6.8% for the three months ended December 31, 2022 compared to 7.0% for the three months ended December 31, 2021.

The increase in research and development expenses in constant currency terms 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.

Research and development expenses increased for the six months ended December 31, 2022 to $133.1 million from $122.5 million for the six months ended December 31, 2021, an increase of $10.6 million, or 9%.

Research and development expenses were favorably impacted by the movement of international currencies against the U.S.

dollar, which decreased our expenses by approximately $2.0 million for the three months ended September 30, 2022, as reported in U.S.

Excluding the impact of foreign currency movements, research and development expenses increased by 9% compared to the three months ended September 30, 2021.

As a percentage of net revenue, research and development expenses were consistent at 6.6% for the three months ended September 30, 2022 and September 30, 2021.

dollar, which decreased our expenses by approximately $4.2 million for the six months ended December 31, 2022, as reported in U.S.

Excluding the impact of foreign currency movements, research and development expenses increased by 12% compared to the six months ended December 31, 2021.

As a percentage of net revenue, research and development expenses were 6.7% for the six months ended December 31, 2022, compared to 6.8% for the six months ended December 31, 2021.

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets for the three months ended September 30, 2022 totaled $8.0 million compared to $7.7 million for the three months ended September 30, 2021.

Amortization of acquired intangible assets for the three months ended December 31, 2022 totaled $9.6 million compared to $7.7 million for the three months ended December 31, 2021.

The increase in amortization expense was primarily attributable to our acquisition of MEDIFOX DAN.

Amortization of acquired intangible assets for the six months ended December 31, 2022 totaled $17.5 million compared to $15.4 million for the six months ended December 31, 2021.

The increase in amortization expense was primarily attributable to our acquisition of MEDIFOX DAN.

Total Other Income (Loss), Net

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Three Months Ended

September 30,

2022 2021 Change

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Total other income (loss), net $ (6,503) $ (11,425) $ 4,922

Total other income (loss), net for the three months ended September 30, 2022 was a loss of $13.9 million compared to a loss of $3.1 million for the three months ended September 30, 2021.

The increase in loss was primarily due to losses associated with our investments in marketable and non-marketable equity securities, which were a loss of $3.3 million for the three months ended September 30, 2022 compared to a gain of $5.6 million for the three months ended September 30, 2021.

We recorded higher losses attributable to equity method investments for the three months ended September 30, 2022 of $2.0 million compared to $1.4 million for the three months ended September 30, 2021.

Additionally, interest expense, net, increased to $7.1 million for the three months ended September 30, 2022 compared to $5.4 million for the three months ended September 30, 2021.

Our effective income tax rate for the three months ended September 30, 2022 was 19.6% as compared to 21.3% for the three months ended September 30, 2021.

Our effective rate of 19.6% for three months ended September 30, 2022 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 three months ended September 30, 2022 was primarily related to a change in the Company’s global mix of earnings.

Six Months Ended

2022 2021 Change

Interest (expense) income, net (17,472) (11,308) $ (6,164)

Loss attributable to equity method investments (4,853) (3,300) (1,553)

Gain (loss) on equity investments 5,088 1,208 3,880

Other, net (3,211) (1,150) (2,061)

Total other income (loss), net $ (20,448) $ (14,550) $ (5,898)

Total other income (loss), net for the three months ended December 31, 2022 was a loss of $6.5 million compared to a loss of $11.4 million for the three months ended December 31, 2021.

The decrease in loss was primarily due to gains associated with our investments in marketable and non-marketable equity securities, which were a gain of $8.4 million for the three months ended December 31, 2022 compared to a loss of $4.4 million for the three months ended December 31, 2021.

PART I – FINANCIAL INFORMATION Item 2

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

gain in investments for the three months ended December 31, 2022 is primarily attributable to observable price adjustments on non-marketable equity securities.

We recorded higher losses attributable to equity method investments for the three months ended December 31, 2022 of $2.8 million compared to $1.9 million for the three months ended December 31, 2021.

Additionally, interest expense, net, increased to $10.3 million for the three months ended December 31, 2022 compared to $5.9 million for the three months ended December 31, 2021 due to higher debt levels associated with the acquisition of MEDIFOX DAN, which was funded by our Revolving Credit Agreement.

Total other income (loss), net for the six months ended December 31, 2022 was a loss of $20.4 million compared to a loss of $14.6 million for the six months ended December 31, 2021.

Interest expense, net, increased to $17.5 million for the six months ended December 31, 2022 compared to $11.3 million for the six months ended December 31, 2021 due to higher debt levels associated with the acquisition of MEDIFOX DAN, which was funded by our Revolving Credit Agreement.

In addition, we recorded higher losses attributable to equity method investments for the six months ended December 31, 2022 of $4.9 million compared to $3.3 million for the six months ended December 31, 2021.

These losses were partially offset by gains associated with our investments in marketable and non-marketable equity securities, which were a gain of $5.1 million for the six months ended December 31, 2022 compared to a gain of $1.2 million for the six months ended December 31, 2021.

Our effective income tax rate for the three and six months ended December 31, 2022 was 17.8% and 18.7% as compared to 15.0% and 18.3% for the three and six months ended December 31, 2021.

Our effective rate of 17.8% for the three months ended December 31, 2022 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 increase in our effective tax rate for the three and six months ended December 31, 2022 was primarily due to a reduction in the windfall tax benefits related to the vesting or settlement of employee share-based awards.

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 Act, we treated all non-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.

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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.

PART I – FINANCIAL INFORMATION Item 2

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

Net Income and Earnings per Share

As a result of the factors above, our net income for the three months ended September 30, 2022 was $210.5 million compared to a net income of $203.6 million for the three months ended September 30, 2021, an increase of $6.9 million, or 3%.

Our diluted earnings per share for the three months ended September 30, 2022 was $1.43 per diluted share compared to diluted earnings per share of $1.39 for the three months ended September 30, 2021, an increase of 3%.

As a result of the factors above, our net income for the three months ended December 31, 2022 was $224.9 million compared to $201.8 million for the three months ended December 31, 2021, an increase of $23.2 million, or 11%.

Our net income for the six months ended December 31, 2022 was $435.4 million compared to $405.4 million for the six months ended December 31, 2021, an increase of $30.0 million, or 7%.

Our diluted earnings per share for the three months ended December 31, 2022 was $1.53 per diluted share compared to $1.37 for the three months ended December 31, 2021, an increase of 12%.

Our diluted earnings per share for the six months ended December 31, 2022 was $2.95 per diluted share compared to $2.76 for the six months ended December 31, 2021, an increase of 7%.

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 revenue, 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.

We believe that these non-GAAP financial measures, when reviewed in conjunction with

PART I – FINANCIAL INFORMATION Item 2

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

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Three Months Ended

September 30,

December 31, Six Months Ended

2022 2021 2022 2021

GAAP Net revenue $ 1,033,744 $ 894,874 $ 1,984,038 $ 1,798,890

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Non-GAAP gross margin 56.8 % 57.6 % 57.2 % 57.4 %

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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 and acquisition-related expenses.

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Three Months Ended

September 30,

December 31, Six Months Ended

2022 2021 2022 2021

GAAP income from operations $ 280,194 $ 248,711 $ 555,932 $ 510,624

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Non-GAAP income from operations $ 305,474 $ 267,680 $ 596,282 $ 548,358

The measure “non-GAAP net income” is equal to GAAP net income once adjusted for amortization of acquired intangibles (net of tax), acquisition-related expenses and reserve for disputed tax positions.

The measure “non-GAAP net income” is equal to GAAP net income once adjusted for amortization of acquired intangibles (net of tax), acquisition related expenses (net of tax) and reserve for disputed tax positions.

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):

These non-GAAP measures

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

are reconciled to their most directly comparable GAAP financial measures below (in thousands, except for per share amounts):

Three Months Ended

September 30,

December 31, Six Months Ended

2022 2021 2022 2021

GAAP net income $ 224,914 $ 201,751 $ 435,392 $ 405,364

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Amortization of acquired intangibles - operating expenses, net of tax 7,192 5,901 13,222 11,780

Acquisition-related expenses 745 —

Acquisition related expenses, net of tax 6,782 — 7,527 —

Reserve for disputed tax positions — — — 4,111

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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 impacts from 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, and the expenditures associated with possible future acquisitions, investments or other business combination transactions, including our pending acquisition of MEDIFOX DAN.

As we assess inorganic growth strategies, we may need to supplement our internally generated cash flow with outside sources.

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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.

As of September 30, 2022 and June 30, 2022, we had cash and cash equivalents of $207.2 million and $273.7 million, respectively.

Our cash and cash equivalents held within the United States at September 30, 2022 and June 30, 2022 were $60.6 million and $70.0 million, respectively.

Our remaining cash and cash equivalent balances at September 30, 2022 and June 30, 2022, were $146.6 million and $203.7 million, respectively.

As of December 31, 2022 and June 30, 2022, we had cash and cash equivalents of $253.2 million and $273.7 million, respectively.

Our cash and cash equivalents held within the United States at December 31, 2022 and June 30, 2022 were $72.6 million and $70.0 million, respectively.

Our remaining cash and cash equivalent balances at December 31, 2022 and June 30, 2022, were $180.6 million and $203.7 million, respectively.

Our cash and cash equivalent balances are held at highly rated financial institutions .

PART I – FINANCIAL INFORMATION Item 2

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

As of September 30, 2022, we had $1.4 billion available for draw down under the revolver credit facility and a combined total of $1.6 billion in cash and available liquidity under the revolving credit facility.

As of December 31, 2022, we had $390.0 million available for draw down under the revolver credit facility and a combined total of $643.2 million in cash and available liquidity under the revolving credit facility.

As a result of the U.S.

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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 and 1.00 times the EBITDA for the trailing twelve-month measurement period.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

additional amount equal to the greater of $1,000.0 million and 1.00 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”).

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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.

As of September 30, 2022, we had $1.4 billion available for draw down under the revolving credit facility.

As of December 31, 2022, we had $390.0 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 September 30, 2022, there was a total of $800.0 million outstanding under the Revolving Credit Agreement, Term Credit Agreement and Senior Notes.

On December 31, 2022, there was a total of $1,805.0 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.

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The following table summarizes our cash flow activity (in thousands):

Three Months Ended

September 30,

Net cash (used in) / provided by operating activities $ 44,662 $ (65,657)

Six Months Ended

Net cash provided by operating activities $ 173,298 $ 154,222

Net cash used in investing activities (1,085,218) (125,182)

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Operating Activities

Cash provided by operating activities was $44.7 million for the three months ended September 30, 2022, compared to cash used of $65.7 million for the three months ended September 30, 2021.

The $110.3 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 three months ended September 30, 2021, partially offset by greater purchases of inventory to secure adequate components for increasing sales demand and other net changes in working capital balances during the three months ended September 30, 2022 compared to the three months ended September 30, 2021.

Cash provided by operating activities was $173.3 million for the six months ended December 31, 2022, compared to cash provided of $154.2 million for the six months ended December 31, 2021.

The $19.1 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 six months ended December 31, 2021, partially offset by greater purchases of inventory to secure adequate components for increasing sales demand and other net changes in working capital balances during the six months ended December 31, 2022 compared to the six months ended December 31, 2021.

Investing Activities

Cash used in investing activities was $58.8 million for the three months ended September 30, 2022, compared to cash used of $41.9 million for the three months ended September 30, 2021.

The $16.9 million decrease in cash flow from investing activities was primarily due to cash used to acquire Germany-based digital health company mementor.

Cash used in investing activities was $1,085.2 million for the six months ended December 31, 2022, compared to cash used of $125.2 million for the six months ended December 31, 2021.

The $960.0 million decrease in cash flow from investing activities was primarily due to cash used to acquire MEDIFOX DAN.

Financing Activities

Cash provided by financing activities was $891.0 million for the six months ended December 31, 2022, compared to cash used of $125.0 million for the six months ended December 31, 2021.

The $1,016.0 million increase in cash flow from financing activities was primarily due to borrowing activity under our Revolving Credit Agreement in order to finance our acquisition of MEDIFOX DAN.

During the three months ended December 31, 2022, we paid cash dividends of $0.44 per common share totaling $64.5 million.

On January 26, 2023, our board of directors declared a cash dividend of $0.44 per common share, to be paid on March 16, 2023, to shareholders of record as of the close of business on February 9, 2023.

Future dividends are subject to approval by our board of directors.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

Financing Activities

Cash used in financing activities was $41.9 million for the three months ended September 30, 2022, compared to cash provided of $93.0 million for the three months ended September 30, 2021.

The $134.9 million decrease in cash flow from financing activities was primarily due to borrowing activity under our Revolving Credit Agreement.

During the three months ended September 30, 2022, we paid cash dividends of $0.44 per common share totaling $64.4 million.

On October 27, 2022, our board of directors declared a cash dividend of $0.44 per common share, to be paid on December 15, 2022, to shareholders of record as of the close of business on November 10, 2022.

Future dividends are subject to approval by our board of directors.

Since the inception of our share repurchase programs and through September 30, 2022, we have repurchased a total of 41.8 million shares for an aggregate of $1.6 billion.

Since the inception of our share repurchase programs and through December 31, 2022, we have repurchased a total of 41.8 million shares for an aggregate of $1.6 billion.

We have temporarily suspended our share repurchase program due to recent acquisitions and as a response to the COVID-19 pandemic.

Accordingly, we did not repurchase any shares during the three months ended September 30, 2022 and 2021.

Accordingly, we did not repurchase any shares during the three months ended December 31, 2022 and 2021.

Shares that are repurchased are classified as treasury stock pending future use and reduce the number of shares of common stock outstanding used in calculating earnings (loss) per share.

There is no expiration date for this program, and the program may be accelerated, suspended, delayed or discontinued at any time at the discretion of our board of directors.

At September 30, 2022, 12.9 million additional shares can be repurchased under the approved share repurchase program.

At December 31, 2022, 12.9 million additional shares can be repurchased under the approved share repurchase program.

Critical Accounting Principles and Estimates

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For a full discussion of our critical accounting policies, see our Annual Report on Form 10-K for the year ended June 30, 2022.

In addition to the critical accounting policies and estimates previously disclosed in our Form 10-K for the fiscal year ended June 30, 2022, due to recent transactions and events, we also consider the following to be part of our critical accounting policies and estimates due to the high degree of judgment and complexity in its application:

Business Combinations.

The MEDIFOX DAN acquisition was accounted for using the acquisition method of accounting, or acquisition 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.

Acquisition accounting allows up to one year to obtain the information necessary to finalize the fair value of all assets acquired and liabilities assumed on the November 21, 2022 acquisition date.

As of January 26, 2023, we have recorded a preliminary allocation of consideration to net tangible and intangible assets acquired, which is subject to revision as we obtain additional information necessary to complete the fair value studies and acquisition accounting.

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 12, Business Combinations, to the accompanying condensed consolidated financial statements for additional information about accounting for the MEDIFOX DAN acquisition.

Recently Issued Accounting Pronouncements

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Contractual Obligations and Commitments

Purchase obligations as of September 30, 2022 were as follows:

Payments Due by September 30,

Other than for purchase obligations, debt, interest on debt and MEDIFOX DAN acquisition consideration, there have been no material changes outside the ordinary course of business in our outstanding contractual obligations from those disclosed

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

Details of our purchase obligations, debt and associated interest as of December 31, 2022 were as follows:

Payments Due by December 31,

Total 2023 2024 2025 2026 2027 Thereafter

Purchase obligations $ 1,682,235 $ 1,445,813 $ 222,034 $ 10,857 $ 326 $ 1,367 $ 1,838

Debt 1,805,000 10,000 10,000 10,000 260,000 1,265,000 250,000

Interest on debt 275,630 59,828 59,557 59,285 55,639 27,665 13,656

MEDIFOX DAN acquisition consideration (1)

— — — — — — —

Total $ 3,762,865 $ 1,515,641 $ 291,591 $ 80,142 $ 315,965 $ 1,294,032 $ 265,494

PART I – FINANCIAL INFORMATION Item 2

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

Other than for purchase obligations, there have been no material changes outside the ordinary course of business in our outstanding contractual obligations from those disclosed within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

(1) Refer to Note 12, Business Combinations, to the accompanying condensed consolidated financial statements for additional information about our acquisition of MEDIFOX DAN, which completed on November 21, 2022.

Off-Balance Sheet Arrangements

As of September 30, 2022, we are not involved in any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC.

As of December 31, 2022, we are not involved in any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC.

PART I – FINANCIAL INFORMATION Item 3

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We have significant foreign currency exposure through our Australian and Singapore manufacturing activities and our international sales operations.

We have established a foreign currency hedging program using purchased currency options and forward contracts to hedge foreign-currency-denominated financial assets, liabilities and manufacturing cash flows.

The goal of this hedging program is to economically manage the financial impact of foreign currency exposures predominantly denominated in euros, Australian dollars and Singapore dollars.

Net Investment and Fair Value Hedging

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.

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 operations.

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 $1,028.8 million at December 31, 2022.

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.

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 enter into financial instruments for trading or speculative purposes.

The foreign currency derivatives portfolio is recorded in the condensed consolidated balance sheets at fair value and included in other assets or other liabilities.

All movements in the fair value of the foreign currency derivatives are recorded within other income, net, on our condensed consolidated statements of operations.

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 $976.2 million and $602.0 million at December 31, 2022 and June 30, 2022, respectively.

These contracts mature at various dates prior to June 30, 2024.

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Quantitative and Qualitative Disclosures About Market Risk

Fair Values of Derivative Instruments

The table below provides information (in U.S.

dollars) on our foreign currency denominated operating assets and liabilities and after considering our foreign currency hedging activities as of September 30, 2022 (in thousands):

dollars) on our foreign currency denominated operating assets and liabilities and after considering our foreign currency hedging activities as of December 31, 2022 (in thousands):

(EUR) Canadian

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dollar equivalents.

The table summarizes information on instruments and transactions that are sensitive to foreign currency exchange rates, including foreign currency call options, collars and forward contracts held at September 30, 2022.

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 December 31, 2022.

The table presents the notional amounts and weighted average exchange rates by contractual maturity dates for our foreign currency derivative financial instruments, including the forward contracts used to hedge our foreign currency denominated assets and liabilities.

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Fair Value Assets / (Liabilities)

Foreign Exchange Contracts Year 1 Year 2 Total September 30,

Total December 31,

2022 June 30,

Contract amount 210,000 2,216 (190)

contractual exchange rate USD 1 =

AUD 0.6897 USD 1 =

contractual exchange rate AUD 1 = USD 0.6756

Contract amount 128,788 (858) (413)

contractual exchange rate AUD 1 =

EUR 0.6933 AUD 1 =

contractual exchange rate AUD 1 = EUR 0.6821

Contract amount 107,323 (1,464) 71

contractual exchange rate SGD 1 =

Euro 0.7117 SGD 1 =

Euro 0.7435 SGD 1 =

contractual exchange rate SGD 1 = Euro 0.7177

Contract amount 500,000 10,206 (1,172)

contractual exchange rate SGD 1 =

USD 0.7176 SGD 1 =

contractual exchange rate SGD 1 = USD 0.7318

Contract amount 11,579 162 (37)

contractual exchange rate AUD 1 =

CNY 4.6449 AUD 1 =

contractual exchange rate AUD 1 = CNY 4.6449

Contract amount 1,028,796 (36,578) —

contractual exchange rate USD 1 =

CAD 1.2902 USD 1 =

contractual exchange rate USD 1 = EUR 1.0406

Contract amount 18,464 913 (46)

contractual exchange rate CAD 1 = USD 0.7751

Interest Rate Risk

We are exposed to risk associated with changes in interest rates affecting the return on our cash and cash equivalents and debt.

At September 30, 2022, we held cash and cash equivalents of $207.2 million, principally comprised of bank term deposits and at-call accounts, and are invested at both short-term fixed interest rates and variable interest rates.

At September 30, 2022, there was $300.0 million outstanding under the Revolving Credit Agreement and Term Credit Agreement, which are subject to variable interest rates.

A hypothetical 10% change in interest rates during the three months ended September 30, 2022, would not have had a material impact on pretax income.

At December 31, 2022, we held cash and cash equivalents of $253.2 million, principally comprised of bank term deposits and at-call accounts, and are invested at both short-term fixed interest rates and variable interest rates.

At December 31, 2022, there was $1,305.0 million outstanding under the Revolving Credit Agreement and Term Credit Agreement, which are subject to variable interest rates.

A hypothetical 10% change in interest rates during the three months ended December 31, 2022, would not have had a material impact on pretax income.

We have no interest rate hedging agreements.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements