Segment Information

9 Months Ended

Mar. 31, 2024

Segment Reporting [Abstract]

Segment Information

Segment Information

In November 2023, we announced a new operating model including changes to our executive leadership team and reporting structure. We have quantitatively and qualitatively determined that we continue to operate in two operating segments, which are the Sleep and Respiratory Care segment and the SaaS segment, following these changes.

We evaluate the performance of our segments based on net revenues and income from operations. The accounting policies of the segments are the same as those described in note 2 of our consolidated financial statements included in our Form 10-K for the fiscal year ended June 30, 2023. Segment net revenues and segment income from operations do not include inter-segment profits and revenue is allocated to a geographic area based on where the products are shipped to or where the services are performed.

Certain items are maintained at the corporate level and are not allocated to the segments. The non-allocated items include corporate headquarters costs, stock-based compensation, amortization expense from acquired intangibles, restructuring expenses, field safety notification expenses, acquisition related expenses, net interest expense (income), gains and losses attributable to equity method investments, gains and losses on equity investments, and other, net. We neither discretely allocate assets to our operating segments, nor does our Chief Operating Decision Maker evaluate the operating segments using discrete asset information.

Additionally, effective in the third quarter of fiscal year 2024, we updated the method of attribution of certain costs that are principally managed at the segment level as part of our evaluation of segment operating performance. As a result, certain costs relating to quality and regulatory assurance, commercial legal, operations, sales and marketing, customer service, information technology, and other administrative costs, which were previously included in Corporate costs within our reconciliation of segment operating profit to income before income taxes, are now reported in segment operating results. The financial information presented herein reflects the impact of the preceding reporting change for all periods presented.

The table below presents a reconciliation of net revenues and net operating profit by reportable segments (in thousands):

	Three Months Ended March 31,				Nine Months Ended March 31,
	2024		2023		2024		2023
Net revenue by segment
Sleep and Respiratory Care	$	1,049,023	$	980,116	$	3,029,915	$	2,741,541
Software as a Service	147,957		136,782		432,187		359,395
Total	$	1,196,980	$	1,116,898	$	3,462,102	$	3,100,936
Depreciation and amortization by segment
Sleep and Respiratory Care	$	21,832	$	21,201	$	64,307	$	59,501
Software as a Service	2,358		2,375		7,843		6,385
Amortization of acquired intangible assets and corporate assets	19,284		20,780		61,042		52,510
Total	$	43,474	$	44,356	$	133,192	$	118,396
Net operating profit by segment
Sleep and Respiratory Care	$	456,182	$	381,143	$	1,240,061	$	1,079,682
Software as a Service (1)	38,754		32,201		111,846		85,908
Total	$	494,936	$	413,344	$	1,351,907	$	1,165,590
Reconciling items
Corporate costs	$	101,336	$	92,163	$	274,505	$	248,129
Amortization of acquired intangible assets	19,016		20,510		60,235		51,702
Restructuring expenses	—		—		64,228		—
Masks with magnets field safety notification expenses (2)	—		—		6,351		—
Astral field safety notification expenses (3)	—		—		7,911		—
Acquisition related expenses	—		—		—		9,157
Interest expense (income), net	11,026		14,964		39,787		32,436
(Gain) Loss attributable to equity method investments	(440)		183		2,716		5,037
(Gain) loss on equity investments	(13,919)		(6,418)		(11,429)		(11,506)
Other, net	2,496		2,564		537		5,773
Income before income taxes	$	375,421	$	289,378	$	907,066	$	824,862

(1)    During the three and nine months ended March 31, 2024, we recorded $2.0 million of operating lease right-of-use asset impairments within our SaaS segment. The impairments related to leases for office space and were recorded within net operating profit.

(2)    The masks with magnets field safety notification expenses relate to estimated costs to provide alternative masks to patients in response to updated contraindications for use of masks that incorporate magnets.

(3)    The Astral field safety notification expenses relate to estimated costs associated with the replacement of a certain component in some of our Astral ventilation devices that were manufactured between 2013 to 2019.