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Masimo Reports Second Quarter 2017 Financial Results

08/02/17

Q2 2017 Highlights (compared to Q2 2016):

  • Total revenue, including royalties, rose 11.8% to $192.9 million
  • Product revenue rose 11.1% to $182.8 million
  • Masimo rainbow® revenue rose 14.6% to $17.1 million
  • 50,000 SET® and rainbow SET oximeters were shipped
  • Net income of $46.7 million, or $0.83 per diluted share, versus $30.0 million, or $0.57 per diluted share, in the year-ago period

IRVINE, Calif.--(BUSINESS WIRE)--Aug. 2, 2017-- Masimo (NASDAQ: MASI) today announced its financial results for the second quarter ended July 1, 2017.

Second quarter 2017 product revenues rose 11.1% to $182.8 million, compared to $164.6 million for the second quarter of fiscal year 2016, and total revenue, including royalties, rose 11.8% to $192.9 million, up from $172.6 million for the second quarter of fiscal year 2016.

The Company’s worldwide direct product revenue in the second quarter of 2017 rose by 13.8% compared to the same period in 2016 and represented 87.7% of product revenue. Revenue from sales of Masimo rainbow® products rose by 14.6% to $17.1 million in the second quarter of 2017, compared to the same period in 2016. OEM sales, which accounted for 12.3% of product revenue, declined by 5.4% to $22.4 million in the second quarter of 2017 compared to the same period in 2016.

Net income for the second quarter of 2017 was $46.7 million, or $0.83 per diluted share, compared to net income of $30.0 million, or $0.57 per diluted share, in the second quarter of 2016.

During the second quarter of 2017, the Company shipped approximately 50,000 SET® Pulse Oximeters and rainbow SET Pulse CO-Oximeters, excluding handheld and finger oximeters. Masimo estimates its worldwide installed base of oximetry as of July 1, 2017 to be 1,545,000 units, up 5.9% from 1,459,000 units as of July 2, 2016.

Joe Kiani, Chairman and Chief Executive Officer of Masimo, said, “Our second quarter results exceeded our expectations and continue to illustrate the strength in our business. I am very happy to be able to report that for the first time ever, excluding handheld and finger oximeters, we shipped 50,000 SET® Pulse Oximeters and rainbow SET Pulse CO-Oximeters in the quarter as we continue to see broad adoption of our products throughout the world. Our outlook for the remainder of 2017 remains strong and we are happy to be able to increase our financial guidance for fiscal 2017.”

As of July 1, 2017, total cash and cash investments were $331.4 million compared to $306.0 million as of December 31, 2016. During the second quarter of 2017, the Company used $14.4 million in cash from operations, and received $48.2 million in proceeds from stock option exercises.

2017 Financial Guidance

Masimo today is updating its 2017 financial guidance. Masimo now expects fiscal 2017 total revenues to be approximately $769.0 million, up from $759.0 million. Total fiscal 2017 product and other revenues are now expected to be approximately $736.0 million, up from $727.0 million, while royalty revenues are now expected to be approximately $33.0 million, up from $32.0 million. Masimo now expects fiscal 2017 earnings per diluted share to be approximately $2.80, up from $2.65 per diluted share. Masimo will provide additional financial information during the conference call today. Each of the components of Masimo’s guidance set forth above is an estimate only and actual performance could differ.

Conference Call

Masimo will hold a conference call today at 1:30 p.m. PT (4:30 p.m. ET) to discuss the results. A live webcast of the call will be available online from the investor relations page of the Company’s website at www.masimo.com. The dial-in numbers are (888) 520-7182 for domestic callers and +1 (706) 758-3929 for international callers. The reservation code for both dial-in numbers is 58757783. After the live webcast, the call will be available on Masimo’s website through August 30, 2017. In addition, a telephonic replay of the call will be available through August 16, 2017. The replay dial-in numbers are (855) 859-2056 for domestic callers and +1 (404) 537-3406 for international callers. Please use reservation code 58757783.

About Masimo

Masimo (NASDAQ: MASI) is a global leader in innovative noninvasive monitoring technologies. Our mission is to improve patient outcomes and reduce the cost of care by taking noninvasive monitoring to new sites and applications. In 1995, the Company debuted Masimo SET® Measure-through Motion and Low Perfusion pulse oximetry, which has been shown in multiple studies to significantly reduce false alarms and accurately monitor for true alarms. Masimo SET® is estimated to be used on more than 100 million patients in leading hospitals and other healthcare settings around the world. In 2005, Masimo introduced rainbow® Pulse CO-Oximetry technology, allowing noninvasive and continuous monitoring of blood constituents that previously could only be measured invasively, including total hemoglobin (SpHb®), oxygen content (SpOC), carboxyhemoglobin (SpCO®), methemoglobin (SpMet®), Pleth Variability Index (PVi®) and more recently, Oxygen Reserve Index (ORi), in addition to SpO2, pulse rate and perfusion index (PI). In 2014, Masimo introduced Root®, an intuitive patient monitoring and connectivity platform with the Masimo Open Connect (MOC-9) interface. Masimo is also taking an active leadership role in mobile health applications (mHealth) with products such as the Radius-7 wearable patient monitor and the MightySat fingertip pulse oximeter. Additional information about Masimo and its products may be found at www.masimo.com.

Forward-Looking Statements

All statements other than statements of historical facts included in this press release that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements including, in particular, the statements about our expectations for full fiscal year 2017 total, product and royalty revenues and GAAP earnings per diluted share; demand for our products; anticipated revenue and earnings growth; our financial condition, results of operations and business generally; expectations regarding our ability to design and deliver innovative new noninvasive technologies and reduce the cost of care; and demand for our technologies. These forward-looking statements are based on management’s current expectations and beliefs and are subject to uncertainties and factors, all of which are difficult to predict and many of which are beyond our control and could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to, those related to: our dependence on Masimo SET® and Masimo rainbow SET products and technologies for substantially all of our revenue; any failure in protecting our intellectual property exposure to competitors’ assertions of intellectual property claims; the highly competitive nature of the markets in which we sell our products and technologies; any failure to continue developing innovative products and technologies; the lack of acceptance of any of our current or future products and technologies; obtaining regulatory approval of our current and future products and technologies; the risk that the implementation of our international realignment will not continue to produce anticipated operational and financial benefits, including a continued lower effective tax rate; the loss of our customers; the failure to retain and recruit senior management; product liability claims exposure; a failure to obtain expected returns from the amount of intangible assets we have recorded; the maintenance of our brand; the amount and type of equity awards that we may grant to employees and service providers in the future; our ongoing litigation and related matters; and other factors discussed in the “Risk Factors” section of our most recent periodic reports filed with the Securities and Exchange Commission (“SEC”), including our most recent Form 10-K and Form 10-Q, all of which you may obtain for free on the SEC’s website at www.sec.gov. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, even if subsequently made available by us on our website or otherwise. We do not undertake any obligation to update, amend or clarify these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. Masimo, SET, Signal Extraction Technology, Improving Patient Outcome and Reducing Cost of Care... by Taking Noninvasive Monitoring to New Sites and Applications, rainbow, SpHb, SpOC, SpCO, SpMet, PVI and ORI are trademarks or registered trademarks of Masimo Corporation

 
MASIMO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 
  July 1,   December 31,
2017 2016
ASSETS
Current assets
Cash and cash equivalents $ 331,448 $ 305,970
Accounts receivable, net of allowance for doubtful accounts 104,159 101,667
Inventories 88,458 72,542
Other current assets   41,929     27,048  
Total current assets 565,994 507,227
Deferred cost of goods sold 93,936 79,948
Property and equipment, net 137,723 135,996
Intangible assets, net 28,099 29,376
Goodwill 20,388 19,780
Deferred tax assets 39,012 38,975
Other non-current assets   10,516     9,223  
Total assets $

895,668

  $ 820,525  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 38,270 $ 34,334
Accrued compensation 31,871 43,180
Accrued and other current liabilities 36,677 104,654
Deferred revenue   38,526     38,198  
Total current liabilities 145,344 220,366
Deferred revenue 24,652 25,336
Other non-current liabilities   16,268     14,587  
Total liabilities 186,264 260,289
Commitments and contingencies
Stockholders’ equity
Common stock 52 50
Treasury stock (404,276 ) (404,276 )
Additional paid-in capital 436,549 382,263
Accumulated other comprehensive loss (4,161 ) (7,027 )
Retained earnings   681,240     589,226  
Total stockholders’ equity   709,404     560,236  
Total liabilities and stockholders’ equity $ 895,668   $ 820,525  
 
 
MASIMO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)
 
  Three Months Ended   Six Months Ended
July 1,   July 2, July 1,   July 2,
2017 2016 2017 2016
Revenue:
Product $ 182,802 $ 164,607 $ 360,899 $ 327,897
Royalty and other revenue 10,131   8,029   18,336   15,906
Total revenue 192,933 172,636 379,235 343,803
Cost of goods sold 64,496   57,501   126,664   114,455
Gross profit 128,437 115,135 252,571 229,348
Operating expenses:
Selling, general and administrative 66,377 63,888 131,949 126,399
Research and development 15,192   14,818   30,559   29,183
Total operating expenses 81,569   78,706   162,508   155,582
Operating income 46,868 36,429 90,063 73,766
Non-operating income 158   471   1,032   969
Income before provision for income taxes 47,026 36,900 91,095 74,735
(Benefit) provision for income taxes 346   6,877   (919 ) 17,135
Net income $ 46,680   $ 30,023   $ 92,014   $ 57,600
 
Net income per share:
Basic $ 0.90   $ 0.61   $ 1.80   $ 1.17
Diluted $ 0.83   $ 0.57   $ 1.65   $ 1.10
 
Weighted-average shares used in per share calculations:
Basic 51,677   49,256   51,164   49,340
Diluted 56,173   52,703   55,867   52,404
 

The following table presents details of the stock-based compensation expense that is included in each functional line item in the condensed consolidated statements of operations (in thousands):

   
Three Months Ended Six Months Ended
July 1,   July 2, July 1,   July 2,
2017 2016 2017 2016
Cost of goods sold $ 72 $ 56 $ 165 $ 147
Selling, general and administrative 2,564 2,527 4,635 4,774
Research and development 617   594   1,342   1,283
Total $ 3,253   $ 3,177   $ 6,142   $ 6,204
 
 
MASIMO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
  Six Months Ended
July 1,   July 2,
2017 2016
Cash flows from operating activities:
Net income $ 92,014 $ 57,600
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization 9,462 8,132
Stock-based compensation 6,142 6,204
Loss on disposal of property, equipment and intangibles 365 401
Gain on deconsolidation of variable interest entity (273 )
Provision for doubtful accounts (193 ) (51 )
Provision for deferred income taxes 5,001
Changes in operating assets and liabilities:
Increase in accounts receivable (2,094 ) (3,739 )
Increase in inventories (15,554 ) (297 )
Increase in other current assets (14,694 ) (7,462 )
Increase in deferred cost of goods sold (13,700 ) (1,566 )
Increase in other non-current assets (1,288 ) (6,596 )
Increase in accounts payable 3,139 7,943
Decrease in accrued compensation (11,679 ) (3,937 )
Decrease in accrued liabilities (67,641 ) (13,807 )
Increase in deferred revenue 327 5,263
Increase in other non-current liabilities 985   3,875  
Net cash (used in) provided by operating activities (14,409 ) 56,691  
Cash flows from investing activities:
Purchases of property and equipment, net (8,512 ) (10,734 )
Increase in intangible assets (1,574 ) (1,349 )
Reduction in cash resulting from deconsolidation of variable interest entity   (763 )
Net cash used in investing activities (10,086 ) (12,846 )
Cash flows from financing activities:
Borrowings under line of credit 45,000
Repayments on line of credit (55,000 )
Debt issuance costs (621 )
Repayments of capital lease obligations (70 ) (69 )
Proceeds from issuance of common stock 48,218 18,997
Repurchases of common stock   (68,218 )
Net cash provided by (used in) financing activities 48,148   (59,911 )
Effect of foreign currency exchange rates on cash 1,825   (196 )
Net increase in cash and cash equivalents 25,478 (16,262 )
Cash and cash equivalents at beginning of period 305,970   132,317  
Cash and cash equivalents at end of period $ 331,448   $ 116,055  
 

Source: Masimo

Masimo
Investor Contact:
Eli Kammerman
(949) 297-7077
ekammerman@masimo.com
or
Media Contact:
Irene Paigah
(858) 859-7001
irenap@masimo.com