Q2 2018 Highlights
-
Total revenue, including royalty and other revenue, was $211.6 million;
-
Product revenue increased 12.4% to $202.0 million, or 11.2% on a
constant currency basis;
-
Shipments of noninvasive technology boards and monitors were 58,700;
and
-
GAAP net income per diluted share of $0.79. Non-GAAP net income per
diluted share increased 32.7% to $0.73.
IRVINE, Calif.--(BUSINESS WIRE)--Aug. 1, 2018--
Masimo (NASDAQ: MASI) today announced its financial results for the
second quarter ended June 30, 2018.
Second Quarter 2018 Results:
Second quarter 2018 total revenue, including royalty and other revenue,
was $211.6 million. Product revenues for the second quarter 2018
increased 12.4% to $202.0 million, or 11.2% on a constant currency basis.
During the second quarter of 2018, the Company shipped approximately
58,700 noninvasive technology boards and monitors.
The Company’s worldwide direct product revenue, which accounted for
85.4% of total product revenue, increased to $172.5 million in the
second quarter 2018. OEM sales, which accounted for 14.6% of total
product revenue, increased to $29.5 million for the second quarter 2018.
For the second quarter 2018, GAAP net income was $43.9 million or $0.79
per diluted share. Non-GAAP net income was $41.0 million, or $0.73 per
diluted share.
Total cash and cash equivalents increased by $60.1 million during the
quarter to $429.6 million, as of June 30, 2018.
As a result of the strong performance in the second quarter, Masimo is
raising its guidance for fiscal year 2018. The Company now expects
product revenues of $822 million, which reflects reported growth of
11.3% and constant currency growth of 10.8%. Masimo is also raising its
GAAP EPS guidance to $3.07 and its non-GAAP EPS guidance to $2.90.
Joe Kiani, Chairman and Chief Executive Officer of Masimo, said, “Our
second quarter results reflect the broad-based success we are realizing
for our innovative technologies and systems solutions to optimize
patient care. We had a record quarter for shipments of our technology
boards and monitors, at 58,700, a clear illustration of the rising
demand for our high-value products. We are once again raising guidance
for revenue and earnings in 2018 as we continue to grow our customer
base and expand our product portfolio.”
Furthermore, today, Masimo is also announcing the Board’s authorization
of a new stock repurchase program (2018 Repurchase Program), whereby the
Company may purchase up to 5.0 million shares of its common stock over a
period of up to three years. The 2018 Repurchase Program will be
effective upon the expiration of the current stock repurchase program on
September 11, 2018. The 2018 Repurchase Program may be carried out at
the discretion of a committee comprised of the Company’s Chief Executive
Officer and Chief Financial Officer through open market purchases, one
or more Rule 10b5-1 trading plans, block trades and in privately
negotiated transactions.
2018 Financial Guidance
The Company provided the following updated estimates for its full year
2018 guidance:
|
|
2018 Updated Guidance1 |
|
Prior 2018 Guidance1 |
| (in millions, except percentages and earnings per share) |
|
GAAP |
|
Non-GAAP |
|
GAAP |
|
Non-GAAP |
|
Total revenue, including royalty and other revenue
|
|
$
|
850
|
|
|
$
|
850
|
|
|
$
|
846
|
|
|
$
|
846
|
|
|
Product revenue
|
|
$
|
822
|
|
|
$
|
822
|
|
|
$
|
818
|
|
|
$
|
818
|
|
|
Percentage growth - as reported
|
|
11.3
|
%
|
|
11.3
|
%
|
|
10.8
|
%
|
|
10.8
|
%
|
|
Percentage growth - constant currency
|
|
N/A
|
|
10.8
|
%
|
|
N/A
|
|
9.9
|
%
|
|
Royalty and other revenue
|
|
$
|
28
|
|
|
$
|
28
|
|
|
$
|
28
|
|
|
$
|
28
|
|
|
Operating margin
|
|
24.2
|
%
|
|
24.4
|
%
|
|
24.2
|
%
|
|
24.4
|
%
|
|
Diluted earnings per share
|
|
$
|
3.07
|
|
|
$
|
2.90
|
|
|
$
|
3.01
|
|
|
$
|
2.88
|
|
|
EBITDA
|
|
26.8
|
%
|
|
29.9
|
%
|
|
26.8
|
%
|
|
29.9
|
%
|
|
Estimated tax rate
|
|
19.3
|
%
|
|
24.0
|
%
|
|
20.2
|
%
|
|
24.0
|
%
|
______________
1 Updated guidance provided August 1, 2018. Prior guidance
provided May 2, 2018.
-
Total revenue, including royalty and other revenue, increasing to $850
million;
-
Product revenue increasing to $822 million; which reflects reported
growth of 11.3% and constant currency growth of 10.8%;
-
GAAP diluted earnings per share increasing to $3.07;
-
Non-GAAP diluted earnings per share increasing to $2.90; and
-
The Company expects foreign currency movements to favorably impact
2018 revenues by approximately $4 million, compared with our prior
expectations of approximately $7 million.
Impact of Adoption of New Revenue Accounting Standard:
During the first quarter of 2018, the Company adopted Financial
Accounting Standards Board (FASB) Accounting Standards Update No.
2014-09, Revenue (Topic 606): Revenue from Contracts with
Customers (ASU 2014-09). The new revenue recognition standard
requires the Company to make numerous assumptions that are based upon
historical trends and management judgment. These assumptions may change
over time and may have a material impact on our revenue recognition,
guidance and results of operations. In accordance with the full
retrospective method of adoption, the Company has adjusted certain
amounts previously reported in its unaudited condensed consolidated
financial statements to comply with the new standard, as indicated by
the notation, “As Adjusted”. For additional information with respect to
the impact of the adoption of this new accounting standard and
reconciliations to the prior reported amounts, please reference Note 2
to our condensed consolidated financial statements that will be included
in Part I, Item 1 of our Quarterly Report on Form 10-Q (Form 10-Q) for
the quarter ended June 30, 2018 once filed with the Securities and
Exchange Commission (SEC) and Exhibit 99.3 that was included in our
Current Report on Form 8-K that was filed with the SEC today.
Supplementary Non-GAAP Financial Information
For additional non-GAAP financial details, please visit the Investor
Relations section of the Company’s website at www.masimo.com
to access Supplementary Financial Information.
Non-GAAP Financial Measures
The non-GAAP financial measures contained herein are a supplement to the
corresponding financial measures prepared in accordance with U.S. GAAP.
The non-GAAP financial measures presented exclude the items described
below. Management believes that adjustments for these items assist
investors in making comparisons of period-to-period operating results.
Furthermore, management also believes that these items are not
indicative of the Company’s on-going core operating performance. These
non-GAAP financial measures have certain limitations in that they do not
reflect all of the costs associated with the operations of the Company’s
business as determined in accordance with GAAP.
Therefore, investors should consider non-GAAP financial measures in
addition to, and not as a substitute for, or as superior to, measures of
financial performance prepared in accordance with GAAP. The non-GAAP
financial measures presented by the Company may be different from the
non-GAAP financial measures used by other companies.
The Company has presented the following non-GAAP measures to assist
investors in understanding the Company’s core net operating results on
an on-going basis: (i) non-GAAP product revenue growth %, (ii) non-GAAP
net income, (iii) non-GAAP diluted earnings per share, (iv) non-GAAP
gross profit, (v) non-GAAP operating income and (vi) adjusted EBITDA.
These non-GAAP financial measures may also assist investors in making
comparisons of the Company’s core operating results with those of other
companies. Management believes non-GAAP product revenue growth %,
non-GAAP gross profit, non-GAAP operating income, non-GAAP net income,
non-GAAP net income per diluted share and adjusted EBITDA are important
measures in the evaluation of the Company’s performance and uses these
measures to better understand and evaluate our business.
The non-GAAP financial measures reflect adjustments for the following
items, as well as the related income tax effects thereof:
Constant currency foreign currency adjustments.
Some of our sales agreements with foreign customers provide for payment
in currencies other than the U.S. Dollar. These foreign currency
revenues, when converted into U.S. Dollars, can vary significantly from
period to period depending on the average and quarter-end exchange rates
during a respective period. We believe that comparing these foreign
currency denominated revenues by holding the exchange rates constant
with the prior year period is useful to management and investors in
evaluating our product revenue growth rates on a period-to-period basis.
We anticipate that fluctuations in foreign exchange rates and the
related constant currency adjustments for calculation of our product
revenue growth rate will continue to occur in future periods.
Acquisition-related costs, including
depreciation and amortization.
Depreciation and amortization related to the revaluation of assets and
liabilities (primarily intangible assets, property, plant and equipment
adjustments, inventory revaluation, lease liabilities, etc.) to fair
value through purchase accounting related to value created by the seller
prior to the acquisition rather than ongoing costs of operating our core
business. As a result, we believe that exclusion of these costs in
presenting non-GAAP financial measures provides management and investors
a more effective means of evaluating historical performance and
projected costs and the potential for realizing cost efficiencies within
our core business. Depreciation and amortization related to the
revaluation of acquisition related assets and liabilities will generally
recur in future periods.
Litigation damages, awards and settlements.
In connection with litigation proceedings arising in the course of our
business, we have recorded expenses as a defendant in such proceedings
in the form of damages, as well as gains as a plaintiff in such
proceedings in the form of litigation awards and settlement proceeds;
most recently in connection with our November 2016 settlement agreement
with Koninklijke Philips N.V. We believe that exclusion of these
expenses and gains is useful to management and investors in evaluating
the performance of our ongoing operations on a period-to-period basis.
In this regard, we note that these expenses and gains are generally
unrelated to our core business and/or infrequent in nature.
Realized and unrealized gains or losses from
foreign currency transactions.
We are exposed to foreign currency gains or losses on outstanding
foreign currency denominated receivables and payables related to certain
customer sales agreements, product costs and other operating expenses.
As the Company does not actively hedge these currency exposures, changes
in the underlying currency rates relative to the U.S. Dollar may result
in realized and unrealized foreign currency gains and losses between the
time these receivables and payables arise and the time that they are
settled in cash. Since such realized and unrealized foreign currency
gains and losses are the result of macro-economic factors and can vary
significantly from one period to the next, we believe that exclusion of
such realized and unrealized gains and losses are useful to management
and investors in evaluating the performance of our ongoing operations on
a period-to-period basis. Realized and unrealized foreign currency gains
and losses are likely to recur in future periods.
Excess tax benefits from stock-based
compensation.
Current authoritative accounting guidance requires that excess tax
benefits or costs recognized on stock-based compensation expense be
reflected in our provision for income taxes rather than paid-in capital.
Since we cannot control or predict when stock option awards will be
exercised or the price at which such awards will be exercised, the
impact of such guidance can create significant volatility in our
effective tax rate from one period to the next. We believe that
exclusion of these excess tax benefits or costs is useful to management
and investors in evaluating the performance of our ongoing operations on
a period-to-period basis. These excess tax benefits or costs will
generally recur in future periods as long as we continue to issue equity
awards to our employees.
Tax impacts that may not be representative of
the ongoing results of our core operations.
The Tax Cuts and Jobs Act of 2017 (2017 Tax Act) was signed into law in
December 2017, and became effective January 1, 2018. The 2017 Tax Act
included a number of changes to existing U.S. federal tax law impacting
businesses including, among other things, a permanent reduction in the
corporate income tax rate from 35% to 21%, a one-time transition tax on
the “deemed repatriation” of cumulative undistributed foreign earnings
as of December 31, 2017 and changes in the prospective taxation of the
foreign operations of U.S. multinational companies. We believe that
exclusion of the tax charges related to the 2017 Tax Act is useful to
management and investors in evaluating the performance of our ongoing
operations on a period-to-period basis. In this regard, we note that
this tax charge is unrelated to our core business and non-recurring in
nature.
Second Quarter 2018 Actuals versus Second Quarter
2017 Actuals:
| RECONCILIATION OF GAAP TO NON-GAAP NET INCOME AND NET
INCOME PER DILUTED SHARE: |
|
|
|
|
|
|
|
|
Three Months Ended |
|
(in thousands, except percentages)
|
|
June 30, 2018 |
|
July 1, 2017
As Adjusted |
|
GAAP product revenue
|
|
$
|
202,004
|
|
|
$
|
179,727
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
Constant currency F/X adjustments
|
|
(2,198
|
)
|
|
—
|
|
|
Total non-GAAP product revenue adjustments
|
|
(2,198
|
)
|
|
—
|
|
|
|
Non-GAAP product revenue
|
|
$
|
199,806
|
|
|
$
|
179,727
|
|
Product revenue growth %:
|
|
|
|
|
|
GAAP
|
|
12.4
|
%
|
|
|
|
Non-GAAP (constant currency)
|
|
11.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
(in thousands, except percentages)
|
|
June 30, 2018 |
|
July 1, 2017
As Adjusted |
|
GAAP product revenue
|
|
$
|
406,393
|
|
|
$
|
362,193
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
Constant currency F/X adjustments
|
|
(5,980
|
)
|
|
—
|
|
|
Total non-GAAP product revenue adjustments
|
|
(5,980
|
)
|
|
—
|
|
|
|
Non-GAAP product revenue
|
|
$
|
400,413
|
|
|
$
|
362,193
|
|
Product revenue growth %:
|
|
|
|
|
|
GAAP
|
|
12.2
|
%
|
|
|
|
Non-GAAP (constant currency)
|
|
10.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF GAAP TO NON-GAAP NET
INCOME AND NET INCOME PER DILUTED SHARE:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, 2018 |
|
July 1, 2017
As Adjusted |
| (in thousands, except per share amounts) |
|
$ |
|
Per Diluted Share |
|
$ |
|
Per Diluted Share |
|
GAAP net income, as originally reported
|
|
$
|
43,853
|
|
|
$
|
0.79
|
|
|
$
|
46,680
|
|
|
$
|
0.83
|
|
|
ASC 606 adjustments
|
|
—
|
|
|
—
|
|
|
(1,542
|
)
|
|
(0.03
|
)
|
|
GAAP net income, as adjusted
|
|
43,853
|
|
|
0.79
|
|
|
45,138
|
|
|
0.80
|
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
Acquisition related depreciation and amortization
|
|
361
|
|
|
—
|
|
|
390
|
|
|
0.01
|
|
|
Litigation damages, awards and settlements
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Non-operating other (income) expense
|
|
566
|
|
|
0.01
|
|
|
348
|
|
|
0.01
|
|
|
Tax impact of above items
|
|
122
|
|
|
—
|
|
|
(135
|
)
|
|
—
|
|
|
Excess tax benefits from stock-based compensation
|
|
(3,947
|
)
|
|
(0.07
|
)
|
|
(15,079
|
)
|
|
(0.27
|
)
|
|
Remeasurement of deferred taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total non-GAAP adjustments
|
|
(2,898
|
)
|
|
(0.06
|
)
|
|
(14,476
|
)
|
|
(0.25
|
)
|
|
Non-GAAP net income
|
|
$
|
40,955
|
|
|
$
|
0.73
|
|
|
$
|
30,662
|
|
|
$
|
0.55
|
|
|
Weighted average shares outstanding - diluted
|
|
|
|
55,742
|
|
|
|
|
56,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, 2018 |
|
July 1, 2017
As Adjusted |
| (in thousands, except per share amounts) |
|
$ |
|
Per Diluted Share |
|
$ |
|
Per Diluted Share |
|
GAAP net income, as originally reported
|
|
$
|
89,483
|
|
|
$
|
1.60
|
|
|
$
|
92,014
|
|
|
$
|
1.65
|
|
|
ASC 606 adjustments
|
|
|
|
—
|
|
|
4,657
|
|
|
0.08
|
|
|
GAAP net income, as adjusted
|
|
89,483
|
|
|
1.60
|
|
|
96,671
|
|
|
1.73
|
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
Acquisition related depreciation and amortization
|
|
721
|
|
|
0.01
|
|
|
817
|
|
|
0.01
|
|
|
Litigation damages, awards and settlements
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Non-operating other (income) expense
|
|
(547
|
)
|
|
(0.01
|
)
|
|
(209
|
)
|
|
—
|
|
|
Tax impact of above items
|
|
242
|
|
|
0.01
|
|
|
(237
|
)
|
|
—
|
|
|
Excess tax benefits from stock-based compensation
|
|
(7,095
|
)
|
|
(0.13
|
)
|
|
(30,226
|
)
|
|
(0.54
|
)
|
|
Remeasurement of deferred taxes
|
|
16
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total non-GAAP adjustments
|
|
(6,663
|
)
|
|
(0.12
|
)
|
|
(29,855
|
)
|
|
(0.53
|
)
|
|
Non-GAAP net income
|
|
$
|
82,820
|
|
|
$
|
1.48
|
|
|
$
|
66,816
|
|
|
$
|
1.20
|
|
|
Weighted average shares outstanding - diluted
|
|
|
|
55,842
|
|
|
|
|
55,868
|
|
|
|
|
|
|
|
|
|
|
|
|
Full Year 2018 Guidance versus Full Year 2017
Actuals:
|
|
|
RECONCILIATION OF GAAP PRODUCT REVENUE
GROWTH % TO NON-GAAP PRODUCT REVENUE GROWTH %:
|
|
|
|
|
|
|
|
Full Year 2018
Updated Guidance1 |
|
Full Year 2017
Actuals As Adjusted |
|
GAAP product revenue
|
|
$
|
822,000
|
|
|
$
|
738,242
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
Constant currency F/X adjustments
|
|
(4,000
|
)
|
|
—
|
|
|
Total non-GAAP product revenue adjustments
|
|
(4,000
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
Non-GAAP product revenue
|
|
$
|
818,000
|
|
|
$
|
738,242
|
|
|
Product revenue growth %:
|
|
|
|
|
|
GAAP
|
|
11.3
|
%
|
|
|
|
Non-GAAP (constant currency)
|
|
10.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF GAAP TO NON-GAAP NET
INCOME AND NET INCOME PER DILUTED SHARE:
|
|
|
|
|
|
|
|
|
|
|
|
Full Year 2018
Updated Guidance1 |
|
Full Year 2017
Actuals As Adjusted |
| (in thousands, except per share amounts) |
|
$ |
|
Per Diluted Share |
|
$ |
|
Per Diluted Share |
|
GAAP net income, as originally reported
|
|
$
|
171,500
|
|
|
$
|
3.07
|
|
|
$
|
131,616
|
|
|
$
|
2.36
|
|
|
ASC 606 adjustments
|
|
—
|
|
|
—
|
|
|
(6,827
|
)
|
|
(0.13
|
)
|
|
GAAP net income as adjusted
|
|
171,500
|
|
|
3.07
|
|
|
124,789
|
|
|
2.23
|
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
Acquisition related depreciation and amortization
|
|
1,500
|
|
|
0.03
|
|
|
1,597
|
|
|
0.03
|
|
|
Litigation damages, awards and settlements
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Non-operating other (income) expense
|
|
(600
|
)
|
|
(0.01
|
)
|
|
270
|
|
|
—
|
|
|
Tax impact of above items
|
|
100
|
|
|
—
|
|
|
(455
|
)
|
|
(0.01
|
)
|
|
Excess tax benefits from stock-based compensation
|
|
(10,300
|
)
|
|
(0.19
|
)
|
|
(39,242
|
)
|
|
(0.70
|
)
|
|
Tax impact of U.S. tax reform2, 3 |
|
—
|
|
|
—
|
|
|
41,392
|
|
|
0.74
|
|
|
Total non-GAAP adjustments
|
|
(9,300
|
)
|
|
(0.17
|
)
|
|
3,562
|
|
|
0.06
|
|
|
Non-GAAP net income
|
|
$
|
162,200
|
|
|
$
|
2.90
|
|
|
$
|
128,351
|
|
|
$
|
2.29
|
|
|
Weighted average shares outstanding - diluted
|
|
|
|
55,900
|
|
|
|
|
55,874
|
|
______________
| 1 |
|
Estimated effective tax rate of 19.3% applied to GAAP earnings and
24.0% applied to non-GAAP earnings.
|
|
|
|
| 2 |
|
As previously reported in May 2018, the 2017 Tax Act resulted in an
unfavorable charge of $41.4 million in the first quarter of 2018.
The amount recognized was a provisional estimate and subject to
change, possibly materially, due to, among other things, refinements
of the Company’s calculations, changes in interpretations and
assumptions the Company has made or additional guidance issued by
the U.S. Treasury, Securities and Exchange Commission or Financial
Accounting Standards Board.
|
|
|
|
| 3 |
|
Includes adjustments related to the full retrospective application
of ASC 606 of $2.1 million, or $0.04 per diluted share.
|
|
|
|
RECONCILIATION OF GAAP TO NON-GAAP GROSS
PROFIT AND OPERATING INCOME:
|
|
|
|
|
|
|
|
|
|
|
|
|
Full Year 2018
Updated Guidance |
|
Full Year 2017
Actuals As Adjusted |
| (in thousands, except percentages) |
|
$ |
|
% of Revenue |
|
$ |
|
% of Revenue |
|
GAAP gross profit, as originally reported
|
|
$
|
567,200
|
|
|
66.7
|
%
|
|
$
|
535,100
|
|
|
67.0
|
%
|
|
ASC 606 adjustments
|
|
—
|
|
|
—
|
|
|
(13,068
|
)
|
|
(1.0
|
)
|
|
GAAP gross profit, as adjusted
|
|
567,200
|
|
|
66.7
|
|
|
522,032
|
|
|
66.0
|
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
Acquisition related depreciation and amortization
|
|
500
|
|
|
0.1
|
|
|
500
|
|
|
0.1
|
|
|
Total non-GAAP adjustments
|
|
500
|
|
|
0.1
|
|
|
500
|
|
|
0.1
|
|
|
Non-GAAP gross profit
|
|
$
|
567,700
|
|
|
66.8
|
%
|
|
$
|
522,532
|
|
|
66.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating income
|
|
$
|
205,600
|
|
|
24.2
|
%
|
|
$
|
197,361
|
|
|
24.7
|
%
|
|
ASC 606 adjustments
|
|
—
|
|
|
—
|
|
|
(13,573
|
)
|
|
(1.4
|
)
|
|
GAAP operating income, as adjusted
|
|
205,600
|
|
|
24.2
|
|
|
183,788
|
|
|
23.3
|
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
Acquisition related depreciation and amortization
|
|
1,500
|
|
|
0.2
|
|
|
1,597
|
|
|
0.2
|
|
|
Total non-GAAP adjustments
|
|
1,500
|
|
|
0.2
|
|
|
1,597
|
|
|
0.2
|
|
|
Non-GAAP operating income
|
|
$
|
207,100
|
|
|
24.4
|
%
|
|
$
|
185,385
|
|
|
23.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF EBITDA TO ADJUSTED
EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
Full Year 2018
Updated Guidance |
|
Full Year 2017
Actuals As Adjusted |
| (in thousands, except percentages) |
|
$ |
|
% of Revenue |
|
$ |
|
% of Revenue |
|
GAAP net income, as originally reported
|
|
$
|
171,500
|
|
|
20.2
|
%
|
|
$
|
131,616
|
|
|
16.7
|
%
|
|
ASC 606 adjustments
|
|
—
|
|
|
—
|
|
|
(6,827
|
)
|
|
(0.9
|
)
|
|
GAAP net income, as adjusted
|
|
171,500
|
|
|
20.2
|
|
|
124,789
|
|
|
15.8
|
|
|
Other (income)/expense1 |
|
(7,000
|
)
|
|
(0.8
|
)
|
|
(2,013
|
)
|
|
(0.3
|
)
|
|
Provision for income taxes
|
|
41,100
|
|
|
4.8
|
|
|
61,011
|
|
|
7.8
|
|
|
Depreciation and amortization
|
|
21,900
|
|
|
2.6
|
|
|
20,072
|
|
|
2.5
|
|
|
EBITDA
|
|
227,500
|
|
|
26.8
|
|
|
203,859
|
|
|
25.8
|
|
|
Add: Non-cash stock-based compensation expense
|
|
27,000
|
|
|
3.1
|
|
|
17,187
|
|
|
2.2
|
|
|
Adjusted EBITDA
|
|
$
|
254,500
|
|
|
29.9
|
%
|
|
$
|
221,046
|
|
|
28.0
|
%
|
______________
1 Other (income)/expense consists primarily of interest
(income)/expense and net foreign currency (gains)/losses.
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 7397909. After the live webcast, the call will be
available on Masimo’s website through August 29, 2018. In addition, a
telephonic replay of the call will be available through August 8, 2018.
The replay dial-in numbers are (855) 859-2056 for domestic callers and
+1 (404) 537-3406 for international callers. Please use reservation code
7397909.
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 GAAP and non-GAAP 2018
total, product, royalty and other revenues, earnings per diluted share,
operating margin, EBITDA, and estimated tax rate, and our long-term
outlook; 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) |
|
|
June 30,
2018 |
|
December 30,
2017
As Adjusted |
| ASSETS |
|
|
|
|
|
Current assets
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
429,647
|
|
|
$
|
315,302
|
|
|
Accounts receivable, net of allowance for doubtful accounts
|
|
98,290
|
|
|
118,532
|
|
|
Inventories
|
|
90,848
|
|
|
92,259
|
|
|
Other current assets
|
|
35,085
|
|
|
33,601
|
|
|
Total current assets
|
|
653,870
|
|
|
559,694
|
|
|
Deferred costs and other contract assets
|
|
116,986
|
|
|
109,256
|
|
|
Property and equipment, net
|
|
164,027
|
|
|
164,096
|
|
|
Intangible assets, net
|
|
27,979
|
|
|
27,123
|
|
|
Goodwill
|
|
19,914
|
|
|
20,617
|
|
|
Deferred tax assets
|
|
20,259
|
|
|
19,981
|
|
|
Other non-current assets
|
|
4,281
|
|
|
4,668
|
|
|
Total assets
|
|
$
|
1,007,316
|
|
|
$
|
905,435
|
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Accounts payable
|
|
$
|
34,892
|
|
|
$
|
33,780
|
|
|
Accrued compensation
|
|
36,670
|
|
|
39,515
|
|
|
Accrued and other current liabilities
|
|
22,832
|
|
|
24,254
|
|
|
Deferred revenue and other contract-related liabilities, current
|
|
34,990
|
|
|
32,105
|
|
|
Total current liabilities
|
|
129,384
|
|
|
129,654
|
|
|
Other non-current liabilities
|
|
52,742
|
|
|
51,757
|
|
|
Total liabilities
|
|
182,126
|
|
|
181,411
|
|
|
Commitments and contingencies
|
|
|
|
|
|
Stockholders’ equity
|
|
|
|
|
|
Common stock
|
|
52
|
|
|
52
|
|
|
Treasury stock
|
|
(489,027
|
)
|
|
(472,536
|
)
|
|
Additional paid-in capital
|
|
493,149
|
|
|
461,494
|
|
|
Accumulated other comprehensive loss
|
|
(5,997
|
)
|
|
(2,941
|
)
|
|
Retained earnings
|
|
827,013
|
|
|
737,955
|
|
|
Total stockholders’ equity
|
|
825,190
|
|
|
724,024
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
1,007,316
|
|
|
$
|
905,435
|
|
|
|
|
|
|
|
|
|
|
|
|
| MASIMO CORPORATION |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| (unaudited, in thousands, except per share amounts) |
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30,
2018 |
|
July 1,
2017
As Adjusted |
|
June 30,
2018 |
|
July 1,
2017
As Adjusted |
|
Revenue:
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
202,004
|
|
|
$
|
179,727
|
|
|
$
|
406,393
|
|
|
$
|
362,193
|
|
Royalty and other revenue
|
|
9,617
|
|
|
12,579
|
|
|
18,181
|
|
|
26,756
|
|
Total revenue
|
|
211,621
|
|
|
192,306
|
|
|
424,574
|
|
|
388,949
|
|
Cost of goods sold
|
|
69,474
|
|
|
65,405
|
|
|
138,766
|
|
|
129,634
|
|
Gross profit
|
|
142,147
|
|
|
126,901
|
|
|
285,808
|
|
|
259,315
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
71,418
|
|
|
66,670
|
|
|
142,593
|
|
|
132,756
|
|
Research and development
|
|
19,117
|
|
|
16,382
|
|
|
37,718
|
|
|
30,559
|
|
Total operating expenses
|
|
90,535
|
|
|
83,052
|
|
|
180,311
|
|
|
163,315
|
|
Operating income
|
|
51,612
|
|
|
43,849
|
|
|
105,497
|
|
|
96,000
|
|
Non-operating income
|
|
1,405
|
|
|
158
|
|
|
3,052
|
|
|
1,032
|
|
Income before provision (benefit) for income taxes
|
|
53,017
|
|
|
44,007
|
|
|
108,549
|
|
|
97,032
|
|
Provision (benefit) for income taxes
|
|
9,164
|
|
|
(1,131
|
)
|
|
19,066
|
|
|
361
|
|
Net income
|
|
$
|
43,853
|
|
|
$
|
45,138
|
|
|
$
|
89,483
|
|
|
$
|
96,671
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.84
|
|
|
$
|
0.87
|
|
|
$
|
1.72
|
|
|
$
|
1.89
|
|
Diluted
|
|
$
|
0.79
|
|
|
$
|
0.80
|
|
|
$
|
1.60
|
|
|
$
|
1.73
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used in per share calculations:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
51,999
|
|
|
51,677
|
|
|
52,047
|
|
|
51,164
|
|
Diluted
|
|
55,742
|
|
|
56,173
|
|
|
55,842
|
|
|
55,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
June 30,
2018 |
|
July 1,
2017 |
|
June 30,
2018 |
|
July 1,
2017 |
|
Cost of goods sold
|
|
$
|
73
|
|
|
$
|
72
|
|
|
$
|
151
|
|
|
$
|
165
|
|
Selling, general and administrative
|
|
5,293
|
|
|
2,564
|
|
|
9,329
|
|
|
4,635
|
|
Research and development
|
|
1,354
|
|
|
617
|
|
|
2,572
|
|
|
1,342
|
|
Total
|
|
$
|
6,720
|
|
|
$
|
3,253
|
|
|
$
|
12,052
|
|
|
$
|
6,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| MASIMO CORPORATION |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (unaudited, in thousands) |
|
|
Six Months Ended |
|
|
June 30,
2018 |
|
July 1,
2017
As Adjusted |
| Cash flows from operating activities: |
|
|
|
|
|
Net income
|
|
$
|
89,483
|
|
|
$
|
96,671
|
|
|
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
10,794
|
|
|
9,462
|
|
|
Stock-based compensation
|
|
12,049
|
|
|
6,142
|
|
|
Loss on disposal of property, equipment and intangibles
|
|
632
|
|
|
365
|
|
|
Provision for doubtful accounts
|
|
(356
|
)
|
|
(193
|
)
|
|
Provision for deferred income taxes
|
|
(274
|
)
|
|
—
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Decrease (increase) in accounts receivable
|
|
20,209
|
|
|
(2,094
|
)
|
|
Decrease (increase) in inventories
|
|
1,075
|
|
|
(15,615
|
)
|
|
Increase in other current assets
|
|
(1,694
|
)
|
|
(14,121
|
)
|
|
Increase in deferred costs and other contract assets
|
|
(7,809
|
)
|
|
(12,871
|
)
|
|
Decrease in other non-current assets
|
|
430
|
|
|
871
|
|
|
Increase in accounts payable
|
|
1,820
|
|
|
3,138
|
|
|
Decrease in accrued compensation
|
|
(2,771
|
)
|
|
(11,679
|
)
|
|
Increase in accrued liabilities
|
|
1,776
|
|
|
3,600
|
|
|
Decrease in income tax payable
|
|
(895
|
)
|
|
(71,496
|
)
|
|
Increase (decrease) in deferred revenue and other contract-related
liabilities
|
|
3,397
|
|
|
(8,424
|
)
|
|
Increase in other non-current liabilities
|
|
33
|
|
|
985
|
|
| Net cash provided by (used in) operating activities |
|
127,899
|
|
|
(15,259
|
)
|
| Cash flows from investing activities: |
|
|
|
|
|
Purchases of property and equipment, net
|
|
(9,430
|
)
|
|
(8,512
|
)
|
|
Increase in intangible assets
|
|
(3,643
|
)
|
|
(1,574
|
)
|
| Net cash used in investing activities |
|
(13,073
|
)
|
|
(10,086
|
)
|
| Cash flows from financing activities: |
|
|
|
|
|
Repayments of capital lease obligations
|
|
—
|
|
|
(70
|
)
|
|
Proceeds from issuance of common stock
|
|
19,778
|
|
|
48,218
|
|
|
Payroll tax withholdings on behalf of employees for vested equity
awards
|
|
(168
|
)
|
|
—
|
|
|
Repurchases of common stock
|
|
(18,478
|
)
|
|
—
|
|
| Net cash provided by financing activities |
|
1,132
|
|
|
48,148
|
|
|
Effect of foreign currency exchange rates on cash
|
|
(1,647
|
)
|
|
1,825
|
|
|
Net increase in cash, cash equivalents, and restricted cash
|
|
114,311
|
|
|
24,628
|
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
|
315,483
|
|
|
308,198
|
|
|
Cash, cash equivalents and restricted cash at end of period
|
|
$
|
429,794
|
|
|
$
|
332,826
|
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20180801005949/en/
Source: Masimo
Masimo
Investor Contact: Eli Kammerman
(949) 297-7077
ekammerman@masimo.com
or
Media
Contact: Irene Paigah
(858) 859-7001
irenep@masimo.com