Masimo Reports Fourth Quarter 2007 and Full Year 2007 Financial Results

February 26, 2008
Record results mark 18th consecutive quarter of revenue growth 2007 Highlights: * Product revenues increased 29% to a record $199.7 million * Masimo SET pulse oximeter units increase 20% to 116,300 units
IRVINE, Calif., Feb 26, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- Masimo Corporation (Nasdaq: MASI), the inventor of Pulse CO-Oximetry and Measure-Through Motion & Low Perfusion pulse oximetry, today announced its financial results for both the quarter and year ended December 29, 2007.

For the fiscal fourth quarter, Masimo reported product revenues of $55.2 million representing a 29% increase over $42.9 million for the fourth quarter of 2006. Including royalty revenues, Masimo reported total fourth quarter revenues of $69.3 million compared to $61.6 million for the fourth quarter of 2006. Net income for the quarter was $12.1 million representing $0.20 earnings per common share, including $0.02 per common share relating to a year-to-date tax benefit recorded in the fourth quarter. Masimo also reported that it shipped 29,400 Masimo SET and Masimo Rainbow SET oximetry units, excluding handheld units, during the fourth quarter of 2007, up 10% from 26,700 in the comparable prior year period, resulting in a new estimated worldwide installed base of 470,000 Masimo SET pulse oximeters.

For the year ended December 29, 2007, Masimo's product revenues were $199.7 million, up 29% from $155.1 million in 2006. Including royalty revenues, Masimo's total revenues were $256.3 million for the year ended December 29, 2007, up from $224.3 million in 2006. In the year ended December 29, 2007, Masimo shipped 116,300 Masimo SET and Masimo Rainbow SET pulse oximeter units, excluding handheld pulse oximeters, compared to 96,600 in 2006, representing a 20% increase in new pulse oximeter and Pulse CO- Oximeter shipments.

Net income for the year ended December 29, 2007, was $42.3 million compared to $181.8 million in 2006, which included $262.6 million in net patent litigation settlement proceeds and various one-time stock option based bonus payments related to a January 2006 patent litigation settlement. For the year ended December 29, 2007, Masimo's reported net income attributable to common stockholders was $23.1 million, or $0.60 per common share, as compared to $3.04 per common share for the year ended December 31, 2006.

Cash, cash equivalents and short-term investments rose to $96.7 million at December 29, 2007 up from $88.6 million at September 29, 2007 and from $55.4 million at December 31, 2006.

Financial Guidance

For the full year 2008, Masimo expects total revenues to be approximately $292 million and total product revenues to be approximately $246 million. Masimo also expects full year 2008 earnings per common share to be approximately $0.52 per share. Included in the $0.52 per common share projection is approximately $11.0 million in expected 2008 non cash stock based compensation charges, up from $3.9 million in 2007. Stock based compensation charges are expected to increase due principally to the increase in the market price of our common stock and to due to the increase in the number of options granted consistent with the increase in our total employee headcount. The projections and guidance set forth above are estimates only and actual performance could differ.

Conference Call

Masimo will hold a conference call today at 2:00 p.m. PT (5:00 p.m. ET) to discuss the results. The dial-in numbers are (800) 295-4740 for domestic callers and (617) 614-3925 for international callers. The reservation number for both dial-in numbers is 39491099. A live web cast of the conference call will be available online from the "investor relations" page of the Company's corporate web site at http://www.masimo.com.

After the live web cast, the call will remain available on Masimo's web site through March 26, 2008. In addition, a telephonic replay of the call will be available until March 10, 2008. The replay dial-in numbers are (888) 286-8010 for domestic callers and (617) 801-6888 for international callers. Please use reservation code 89834871.

The financials results included in this release are unaudited. The complete audited financial statements of the company for the year ended December 29, 2007 will be included in the Masimo Annual Report on Form 10-K, to be filed with the SEC early next month.

About Masimo

Masimo (Nasdaq: MASI) develops innovative monitoring technologies that significantly improve patient care-helping solve "unsolvable" problems. In 1995, the Company debuted Measure-Through Motion and Low Perfusion pulse oximetry, known as Masimo SET, and with it virtually eliminated false alarms and increased pulse oximetry's ability to detect life-threatening events. More than 100 independent and objective studies demonstrate Masimo SET provides the most trustworthy SpO2 and pulse rate measurements even under the most difficult clinical conditions, including patient motion and low peripheral perfusion. In 2005, Masimo introduced Masimo Rainbow SET, a breakthrough noninvasive blood constituent monitoring platform that can measure many blood constituents that previously required invasive procedures. Rainbow SET continuously and noninvasively measures total hemoglobin (SpHb(TM)), pending regulatory approval, carboxyhemoglobin (SpCO(TM)) and methemoglobin (SpMet(TM)), pleth variability index (PVI(TM)), in addition to oxyhemoglobin (SpO2), perfusion index (PI) and pulse rate, allowing early detection and treatment of potentially life-threatening conditions. Founded in 1989, Masimo has the mission of "Improving Patient Outcomes and Reducing Cost of Care by Taking Noninvasive Monitoring to New Sites and Applications." Additional information about Masimo and its products may be found at http://www.masimo.com

Forward-Looking Statements

This press release includes 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 plans, objectives and prospects regarding, among other things, our financial condition, results of operations, prospects and business generally; the market acceptance of our technologies and products; the value of measuring new parameters; expectations regarding our ability to design and deliver innovative new noninvasive technologies, such as the recently introduced total hemoglobin measurement, and our assumption of total hemoglobin's timely regulatory clearing by appropriate regulatory bodies, if ever, and our assumption to expand into additional areas of vital signs monitoring and measurements; and expectations for total revenues, product revenues, GAAP earnings per share, non-GAAP earnings per share and stock based compensation expenses for the full fiscal year 2008. 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 from those described in the forward-looking statements. These risks include, but are not limited to, those related to: our reliance on Masimo SET and related 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; the failure to continue developing innovative products and technologies; the introduction of competing products; the lack of acceptance of any new products and technologies, including the recently announced total hemoglobin measurement and including whether regulatory clearances will be obtained, the loss of our customers; increases in prices for raw materials or the loss of key supplier contracts; the failure to retain and recruit senior management and manage expected growth; 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; and other factors discussed in the "Risk Factors" section of our quarterly report on Form 10-Q for the quarter ended September 29, 2007, filed with the Securities and Exchange Commission on November 1, 2007. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. All forward-looking statements included in this press release are expressly qualified in their entirety by the foregoing cautionary statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to update, amend or clarify these forward-looking statements or the risk factors contained in our quarterly report on Form 10-Q for the quarter ended September 29, 2007, whether as a result of new information, future events or otherwise, except as may be required under the applicable securities laws.

Masimo, SET, Signal Extraction Technology, Improving Outcomes and Reducing Cost of Care by Taking Noninvasive Monitoring to New Sites and Applications, Rainbow, SpHb, SpCO, SpMet, PVI and Pulse CO-Oximeter are trademarks or registered trademarks of Masimo Corporation.

                              MASIMO CORPORATION
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                (in thousands)
                                 (unaudited)

                                      December 31, 2006      December 29, 2007

    ASSETS
    Current assets
      Cash and cash equivalents             $55,382              $96,733
      Accounts receivable, net of allowance
       for doubtful accounts                 22,350               26,970
      Royalties receivable                    1,289               13,866
      Inventories                            17,135               23,110
      Prepaid expenses                        2,021                3,837
      Prepaid income taxes                       -                 3,247
      Deferred tax assets                    18,116               14,334
      Other current assets                    1,022                1,543
        Total current assets                117,315              183,640
    Deferred cost of goods sold              21,899               26,249
    Property and equipment, net              10,290               11,164
    Deferred tax assets                       3,163                5,332
    Restricted cash                             507                  513
    Intangible assets, net                    4,592                5,589
    Goodwill                                    448                  448
    Other assets                                859                2,576

        Total assets                       $159,073             $235,511

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities
      Accounts payable                      $10,142              $14,640
      Accrued compensation                   12,207               12,409
      Accrued liabilities                     4,655                6,211
      Dividends payable                      37,533                  183
      Income taxes payable                    1,245                   -
      Deferred revenue                       13,880               16,827
      Current portion of long-term debt       7,528               11,539
        Total current liabilities            87,190               61,809
    Deferred revenue                            490                  366
    Long-term debt, less current portion     13,514               19,502
    Other liabilities                           918                3,768
        Total liabilities                   102,112               85,445

    Commitments and contingencies                -                    -

    Stockholders' equity
      Convertible preferred stock            88,328                   -
      Common stock                               17                   55
      Treasury stock                           (628)              (1,209)
      Additional paid-in capital                 -               143,297
      Accumulated other comprehensive loss     (317)              (1,034)
      Retained earnings (deficit)           (30,439)               8,957

        Total stockholders' equity           56,961              150,066

        Total liabilities and
         stockholders' equity              $159,073             $235,511



                              MASIMO CORPORATION
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands, except per share information)
                                 (unaudited)

                            Three Months Ended            Year Ended
                         December 31,  December 29, December 31, December 29,
                            2006          2007         2006         2007

    Revenue:
      Product              $42,852       $55,171     $155,131     $199,684
      Royalty and license
       fee                  18,760        14,105       69,207       56,602

    Total revenue           61,612        69,276      224,338      256,286
    Cost of goods sold      15,842        19,976       61,640       73,606

    Gross profit            45,770        49,300      162,698      182,680
    Operating expenses:
      Research and
       development           5,608         5,505       24,875       22,960
      Selling, general
       and administrative   21,922        26,659       91,384       91,234
      Patent litigation
       proceeds                 (4)           -      (262,605)          -
      Antitrust
       litigation                6           555          109        1,537

    Total operating
     expenses               27,532        32,719     (146,237)     115,731

    Operating income        18,238        16,581      308,935       66,949
    Non-operating
     income (expense):
      Interest income          805         1,091        6,741        2,361
      Interest expense        (411)         (644)      (1,824)      (2,475)
      Other                    230           517          551        1,287

    Total non-operating
     income                    624           964        5,468        1,173

    Income before
     provision for
     income taxes           18,862        17,545      314,403       68,122
    Provision for
     income taxes            7,952         5,490      132,577       25,867

    Net income              10,910        12,055      181,826       42,255
    Preferred stock
     dividend              (19,215)           -       (77,785)          -
    Accretion of
     preferred stock        (1,956)           -        (7,985)      (4,837)
    Undistributed
     income
     attributable to
     preferred
     stockholders               -             -       (34,275)     (14,339)

    Net income (loss)
     attributable to
     common
     stockholders         $(10,261)      $12,055      $61,781      $23,079

    Net income (loss)
     per common share:

      Basic                 $(0.62)        $0.22        $3.79        $0.71
      Diluted               $(0.62)        $0.20        $3.04        $0.60


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

                              Three Months Ended           Year Ended
                           December 31, December 29, December 31, December 29,
                              2006         2007         2006         2007

    Cost of goods sold        $364         $130        $2,379        $264
    Research and development   887          204         9,378         670
    Selling, general and
     administrative          1,612          966        23,313       2,958



                              MASIMO CORPORATION
        Reconciliation of GAAP to Non-GAAP Diluted Earnings per Share
                                 (unaudited)

    We prepare our consolidated financial statements in conformity with
    accounting principles generally accepted in the United States of America,
    or U.S. GAAP. In an effort to provide investors with additional
    information regarding our results of operations and to provide a
    meaningful period-over-period comparison of our financial performance, we
    use non-GAAP financial measures as defined by the Securities and Exchange
    Commission. The differences between the U.S. GAAP and non-GAAP financial
    measures are reconciled below.

    The following tables provide a comparison of our diluted earnings per
    share calculated under Emerging Issues Task Force Issue No. 03-6,
    "Participating Securities and the Two-Class Method under FASB Statement
    No. 128", or EITF 03-6, and Financial Accounting Standards Board No. 128
    "Earnings per Share", or FASB 128, in accordance with GAAP and the
    non-GAAP if converted method based upon FASB 128. The non-GAAP if
    converted method assumes conversion of all shares of the Company's
    preferred stock into common stock as of December 31, 2005.

    Upon the closing of our initial public offering on August 13, 2007, all
    outstanding shares of our prior Series A through Series G convertible
    preferred stock were converted into an aggregate of 34,612,503 shares of
    common stock. Therefore, effective August 13, 2007, we transitioned from
    computing diluted earnings per share from the two class method in
    accordance with EITF 03-6 to the if converted method in accordance with
    FASB 128. Net income for the year ended December 29, 2007 was allocated
    between the periods during which two classes of equity securities were
    outstanding and during which a single class of equity securities was
    outstanding based on the respective number of days.    For the year ended
    December 29, 2007, two classes of equity securities were outstanding for
    224 days and a single class of equity securities was outstanding for 139
    days, or 61.7% and 38.3% of the total days in the twelve month reporting
    period, respectively.  For the three months ended December 29, 2007, a
    single class of equity securities was outstanding for the entire period.

    We believe that the following non-GAAP diluted earnings per share
    information is relevant and useful information that can be used by
    analysts, investors and other interested parties to assess our performance
    on a comparable basis to future reported diluted earnings per share.
    Accordingly, we are disclosing this information to permit additional
    analysis of our performance (in thousands, except share data):

                           Three Months Ended            Year Ended
                        December 31,  December 29, December 31, December 29,
                           2006          2007         2006         2007
    Numerator:
      GAAP: Net income
       (loss)
       attributable
       to common
       stockholders      $(10,261)      $12,055      $61,781      $23,079
      Less: Net income
       (loss)
       attributable
       to common
       stockholders
       during which
       two classes
       of equity
       securities were
       outstanding (A)    (10,261)           -        61,781        6,899
      Net income
       attributable
       to common
       stockholders
       during which a
       single class of
       equity
       securities was
       outstanding (B)        $-        $12,055          $-       $16,180

      GAAP: Net income
       (loss)
       attributable to
       common
       stockholders (2)  $(10,261)      $12,055      $61,781      $23,079
      Preferred stock
       dividend (2)        19,215            -        77,785           -
      Accretion of
       preferred stock      1,956            -         7,985        4,837
      Undistributed
       income
       attributable to
       preferred
       stockholders            -             -        34,275       14,339
      Non-GAAP:
       Net income
       attributable to
       common
       stockholders (C)   $10,910       $12,055     $181,826      $42,255

    Denominator:
      Weighted average
       number of common
       shares
       outstanding
       under the two
       class method -
       Diluted (D)      16,549,901           -    20,302,872   20,732,872
      Weighted average
       number of common
       shares outstanding
       under the single
       class method -
       Diluted (E)              -    59,985,371           -    59,829,198

      Non-GAAP:
       Weighted
       average common
       shares
       outstanding -
       Diluted (F)      55,135,822   59,985,371   54,915,375   57,227,507

    Earnings (loss)
     per share -
     Diluted:
      Earnings (loss)
       per share -
       Two class
       (A)/(D) (2)          $(0.62)         $-         $3.04        $0.33
      Earnings per
       share -
       Single
       class (B)/(E)            -          0.20           -          0.27

      GAAP: Earnings
       (loss) per
       share -
        Diluted             $(0.62)       $0.20        $3.04       $ 0.60

      Non-GAAP:
       Earnings per
       share -
       Diluted
       (C)/(F) (1)           $0.20        $0.20        $3.31        $0.74


    (1) For the three months ended December 29, 2007, the amount indicated as
        Non-GAAP: Earnings per share is equal to the GAAP: Earnings per share,
        and is shown here for comparison purposes only.

    (2) In December 2006, we declared a dividend to preferred stockholders
        that was more than the net income for the three months ended
        December 31, 2006.  This resulted in a net loss attributable to common
        stockholders during the three months ended December 31, 2006.  As a
        result, for the three months ended December 31, 2006, the earnings
        (loss) per share reported herein is different from amounts previously
        reported due to a  correction of a prior period calculation.

SOURCE Masimo Corporation

http://www.masimo.com