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Masimo Reports Fourth Quarter and Full-Year 2019 Financial Results

02/19/2020

Fourth Quarter 2019 Highlights:

  • Total revenue, including royalty and other revenue, was $247.5 million;
  • Product revenue increased 11.8% to $247.4 million, or 12.0% on a constant currency basis;
  • GAAP net income per diluted share was $0.92; and
  • Non-GAAP net income per diluted share was $0.91.

Full-Year 2019 Highlights:

  • Total revenue, including royalty and other revenue, was $937.8 million;
  • Product revenue increased 12.8% to $936.4 million, or 13.6% on a constant currency basis;
  • GAAP net income per diluted share of $3.44; and
  • Non-GAAP net income per diluted share was $3.22.

 

IRVINE, Calif.--(BUSINESS WIRE)-- Masimo (Nasdaq: MASI) today announced its financial results for the fourth quarter and full-year ended December 28, 2019.

Fourth Quarter 2019 Results:

Total revenue, including royalty and other revenue, was $247.5 million. Product revenues increased 11.8% to $247.4 million, or 12.0% on a constant currency basis. Shipments of noninvasive technology boards and monitors increased 1.8% to 61,400 in the fourth quarter of 2019, compared to 60,300 in the fourth quarter of 2018.

Fourth quarter 2019 GAAP operating margin was 24.9%, compared to 24.2% in the prior year period. Fourth quarter 2019 non-GAAP operating margin was 25.7%, compared to 23.8% in the prior year period.

For the fourth quarter of 2019, GAAP net income was $52.9 million, or $0.92 per diluted share. Non-GAAP net income was $52.1 million, or $0.91 per diluted share.

Full-Year 2019 Results:

Total revenue, including royalty and other revenue, was $937.8 million. Product revenue increased 12.8% to $936.4 million, or 13.6% on a constant currency basis. Shipments of noninvasive technology boards and monitors increased 6.3% to 246,200 for the full-year 2019, compared to 231,700 for the full-year 2018.

Full-year 2019 GAAP operating margin was 23.6%, compared to 24.2% in the prior year period. Full-year 2019 non-GAAP operating margin was 24.0%, compared to 22.0% in the prior year period.

For the full-year of 2019, GAAP net income was $196.2 million, or $3.44 per diluted share. Non-GAAP net income was $183.9 million, or $3.22 per diluted share.

Total cash, cash equivalents and short term investments increased $135.2 million during the year to $687.7 million as of December 28, 2019.

Joe Kiani, Chairman and Chief Executive Officer of Masimo, said, “In 2019, we advanced our mission to improve patient outcomes while reducing the cost of care. To mark our 30th anniversary, we delivered a new product to care providers in every month of 2019, while we also grew our product revenue 12.8%, or 13.6% on a constant currency basis. We once again delivered above market growth and improved our non-GAAP operating margins by 200 basis points through disciplined execution of our strategy. For 2020, we are projecting product revenues of $1.035 billion, GAAP earnings per share of $3.64 and non-GAAP earnings per share of $3.56.”

2020 Financial Guidance

The Company provided the following estimates for its full-year 2020 guidance:

(in millions, except percentages and earnings per share)

 

2020

Updated Guidance(1)

 

 

GAAP

 

Non-GAAP

Total revenue, including royalty and other revenue

 

$

1,035

 

 

$

1,035

 

Product revenue

 

$

1,035

 

 

$

1,035

 

Percentage growth - as reported

 

10.5

%

 

N/A

Percentage growth - constant currency

 

N/A

 

11.0

%

Royalty and other revenue

 

$

 

 

$

 

Gross margin

 

67.7

%

 

68.0

%

Operating margin

 

24.0

%

 

24.7

%

Earnings per diluted share

 

$

3.64

 

 

$

3.56

 

Estimated tax rate

 

19.1

%

 

23.3

%

______________
(1) Consistent with prior guidance provided on January 14, 2020.

  • Product revenue of $1.035 billion, which reflects growth of 10.5% and constant currency growth of 11.0%;
  • GAAP earnings per diluted share of $3.64;
  • Non-GAAP earnings per diluted share of $3.56;
  • Included in our full-year 2020 revenue guidance is approximately $4 million of year-over-year currency headwinds.

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) constant currency product revenue growth %, (ii) non-GAAP net income, (iii) non-GAAP earnings per diluted share, (iv) non-GAAP gross profit/margin and (v) non-GAAP operating income/margin. 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 constant currency product revenue growth, non-GAAP gross profit/margin, non-GAAP operating income/margin, non-GAAP net income and non-GAAP earnings per diluted share 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 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.

Royalty and other revenue, net of related costs.

We derive royalty and other revenue, net of related costs, from certain non-recurring contractual arrangements that we do not expect to continue in the future. We believe the exclusion of royalty and other revenue, net of related costs, associated with these non-recurring revenue streams is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis.

Acquisition-related costs, including depreciation and amortization.

In the event the Company acquires, invests in or divests certain business operations, there may be non-recurring gains, losses or expenses that will be recognized related to the assets and/or liabilities sold or acquired that are not representative of normal on-going cash flows. Furthermore, there may be 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/strategic investment that does not reflect the normal on-going costs of operating our core business. We believe that exclusion of these gains, losses or 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. We believe that exclusion of these gains (net of any related costs incurred in the period the award or settlement is recognized) and losses 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.

From time-to-time, we may experience significant non-recurring tax events, such as changes in tax laws and regulations or the derecognition of uncertain tax positions related to non-recurring transactions due to the expiration of the statutes of limitations. We believe that exclusion of such tax charges or benefits 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 tax items are unrelated to our core business and generally unique and non-recurring in nature.

Fourth Quarter and Full-Year 2019 Actuals versus Fourth Quarter 2018 and Full-Year Actuals:

RECONCILIATION OF GAAP TO CONSTANT CURRENCY PRODUCT REVENUE (1):

 

 

Quarter Ended

(in thousands, except percentages)

 

December 28,
2019

 

December 29,
2018

GAAP product revenue

 

$

247,434

 

 

$

221,413

 

Non-GAAP constant currency adjustments:

 

 

 

 

 

Constant currency F/X adjustments

 

571

 

 

 

 

 

Total non-GAAP product revenue adjustments

 

571

 

 

 

 

 

 

Constant currency product revenue

 

$

248,005

 

 

$

221,413

 

Product revenue growth %:

 

 

 

 

 

GAAP

 

11.8

%

 

 

 

Constant currency

 

12.0

%

 

 

______________
(1) May not foot due to rounding.

RECONCILIATION OF GAAP TO CONSTANT CURRENCY PRODUCT REVENUE (1):

 

 

Year Ended

(in thousands, except percentages)

 

December 28,
2019

 

December 29,
2018

GAAP product revenue

 

$

936,408

 

 

$

829,874

 

Non-GAAP constant currency adjustments:

 

 

 

 

 

Constant currency F/X adjustments

 

6,702

 

 

 

 

 

Total non-GAAP product revenue adjustments

 

6,702

 

 

 

 

 

 

Constant currency product revenue

 

$

943,110

 

 

$

829,874

 

Product revenue growth %:

 

 

 

 

 

GAAP

 

12.8

%

 

 

 

Constant currency

 

13.6

%

 

 

______________
(1) May not foot due to rounding.

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME AND NET INCOME PER DILUTED SHARE (1):

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

 

 

 

December 28, 2019

 

December 29, 2018

(in thousands, except earnings per share)

 

$

 

Per Diluted Share

 

$

 

Per Diluted Share

GAAP net income

 

$

52,921

 

 

$

0.92

 

 

$

46,934

 

 

$

0.83

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Royalty and other revenue, net of related costs

 

(45

)

 

 

 

(1,535

)

 

(0.03

)

 

Acquisition/strategic investment related costs

 

2,135

 

 

0.04

 

 

361

 

 

0.01

 

 

Litigation damages, awards and settlements

 

 

 

 

 

(75

)

 

 

 

Non-operating other (income) expense

 

312

 

 

0.01

 

 

1,263

 

 

0.02

 

 

Tax impact of pre-tax non-GAAP adjustments above

 

(566

)

 

(0.01

)

 

(513

)

 

(0.01

)

 

Excess tax benefits from stock-based compensation

 

(2,631

)

 

(0.05

)

 

(294

)

 

(0.01

)

 

2017 U.S. Tax Reform

 

 

 

 

 

(675

)

 

(0.01

)

 

 

Total non-GAAP adjustments

 

(796

)

 

(0.01

)

 

(1,468

)

 

(0.03

)

Non-GAAP net income

 

$

52,126

 

 

$

0.91

 

 

$

45,465

 

 

$

0.81

 

Weighted average shares outstanding-diluted

 

 

 

57,267

 

 

 

 

56,449

 

______________
(1) May not foot due to rounding.

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME AND NET INCOME PER DILUTED SHARE (1):

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

 

 

 

December 28, 2019

 

December 29, 2018

(in thousands, except earnings per share)

 

$

 

Per Diluted Share

 

$

 

Per Diluted Share

GAAP net income

 

$

196,216

 

 

$

3.44

 

 

$

193,543

 

 

$

3.45

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Royalty and other revenue, net of related costs

 

(1,262

)

 

(0.02

)

 

(27,704

)

 

(0.49

)

 

Acquisition/strategic investment related costs

 

4,729

 

 

0.08

 

 

1,442

 

 

0.03

 

 

Litigation damages, awards and settlements

 

 

 

 

 

425

 

 

0.01

 

 

Non-operating other (income) expense

 

627

 

 

0.01

 

 

2,027

 

 

0.04

 

 

Tax impact of pre-tax non-GAAP adjustments above

 

(689

)

 

(0.01

)

 

5,532

 

 

0.10

 

 

Excess tax benefits from stock-based compensation

 

(15,692

)

 

(0.27

)

 

(22,036

)

 

(0.39

)

 

Tax impact of expiration of certain statutes of limitations related to unique and non-recurring tax positions

 

 

 

 

 

(4,169

)

 

(0.07

)

 

2017 U.S. Tax Reform

 

 

 

 

 

(675

)

 

(0.01

)

 

 

Total non-GAAP adjustments

 

(12,286

)

 

(0.22

)

 

(45,157

)

 

(0.81

)

Non-GAAP net income

 

$

183,930

 

 

$

3.22

 

 

$

148,385

 

 

$

2.65

 

Weighted average shares outstanding-diluted

 

 

 

57,100

 

 

 

 

56,039

 

______________
(1) May not foot due to rounding.

RECONCILIATION OF GAAP TO NON-GAAP OPERATING INCOME/MARGIN % (1):

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

 

 

 

December 28, 2019

 

December 29, 2018

(in thousands, except percentages)

 

$

 

$

GAAP operating income/margin

 

$

61,557

 

 

$

53,906

 

Non-GAAP adjustments:

 

 

 

 

 

Royalty and other revenue, net of related costs

 

(45

)

 

(1,535

)

 

Acquisition/strategic investment related costs

 

2,135

 

 

361

 

 

Litigation damages, awards and settlements

 

 

 

(75

)

 

 

Total non-GAAP adjustments

 

2,090

 

 

(1,250

)

Non-GAAP operating income/margin

 

$

63,647

 

 

$

52,655

 

 

GAAP operating income/margin %

 

24.9

%

 

24.2

%

 

Non-GAAP operating income/margin %

 

25.7

%

 

23.8

%

______________
(1) May not foot due to rounding.

RECONCILIATION OF GAAP OPERATING INCOME/MARGIN % (1):

 

 

 

 

 

 

 

 

 

Year Ended

 

 

 

 

December 28, 2019

 

December 29, 2018

(in thousands, except percentages)

 

$

 

$

GAAP operating income/margin

 

$

221,216

 

 

$

208,044

 

Non-GAAP adjustments to product operating income/margin:

 

 

 

 

 

Royalty and other revenue, net of related costs

 

(1,262

)

 

(27,704

)

 

Acquisition/strategic investment related costs

 

4,729

 

 

1,442

 

 

Litigation damages, awards and settlements

 

 

 

425

 

 

 

Total non-GAAP adjustments

 

3,467

 

 

(25,837

)

Non-GAAP operating income/margin

 

$

224,683

 

 

$

182,206

 

 

GAAP operating income/margin %

 

23.6

%

 

24.2

%

 

Non-GAAP operating income/margin %

 

24.0

%

 

22.0

%

______________
(1) May not foot due to rounding.

Full-Year 2020 Guidance versus Full-Year 2019 Actuals:

RECONCILIATION OF GAAP PRODUCT REVENUE GROWTH % TO CONSTANT CURRENCY PRODUCT REVENUE GROWTH %(1):

 

 

 

 

Full-Year 2020
Updated Guidance(2)

 

Full-Year 2019
Actuals

GAAP product revenue

 

$

1,035,000

 

 

$

936,408

 

Non-GAAP constant currency adjustments:

 

 

 

 

 

Constant currency F/X adjustments

 

4,000

 

 

 

 

 

Total non-GAAP constant currency adjustments

 

4,000

 

 

 

 

 

Non-GAAP constant currency product revenue

 

$

1,039,000

 

 

$

936,408

 

Product revenue growth %:

 

 

 

 

 

GAAP

 

10.5

%

 

 

 

Non-GAAP constant currency

 

11.0

%

 

 

 

________________

(1) May not foot due to rounding.

(2) Consistent with prior guidance provided on January 14, 2020.

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME AND NET INCOME PER DILUTED SHARE (1):

 

 

 

 

 

 

 

 

 

 

 

Full-Year 2020
Guidance(2)

 

Full-Year 2019
Actuals

(in thousands, except earnings per share)

 

$

 

Per Diluted Share

 

$

 

Per Diluted Share

GAAP net income

 

$

210,500

 

 

$

3.64

 

 

$

196,216

 

 

$

3.44

 

Non-GAAP net income adjustments:

 

 

 

 

 

 

 

 

 

Royalty and other revenue, net of related costs

 

 

 

 

 

(1,262

)

 

(0.02

)

 

Acquisition/strategic investment related costs

 

8,000

 

 

0.14

 

 

4,729

 

 

0.08

 

 

Non-operating other (income) expense

 

 

 

 

 

627

 

 

0.01

 

 

Tax impact of pre-tax non-GAAP adjustments above

 

(1,900

)

 

(0.03

)

 

(689

)

 

(0.01

)

 

Excess tax benefits from stock-based compensation

 

(11,000

)

 

(0.19

)

 

(15,692

)

 

(0.27

)

 

 

Total non-GAAP adjustments

 

(4,900

)

 

(0.08

)

 

(12,286

)

 

(0.22

)

Non-GAAP net income

 

$

205,600

 

 

$

3.56

 

 

$

183,930

 

 

$

3.22

 

Weighted average shares outstanding-diluted

 

 

 

57,800

 

 

 

 

57,100

 

________________
(1) May not foot due to rounding.
(2) Consistent with prior guidance provided on January 14, 2020.

RECONCILIATION OF GAAP TO NON-GAAP GROSS PROFIT/MARGIN AND OPERATING INCOME/MARGIN (1):

 

 

 

 

 

 

 

 

 

 

 

Full-Year 2020
Guidance(2)

 

Full-Year 2019
Actuals

(in thousands, except earnings per share)

 

 

 

 

GAAP gross profit/margin

 

$

700,400

 

 

$

629,172

 

Non-GAAP adjustments:

 

 

 

 

 

Royalty and other revenue, net of related costs

 

 

 

(1,262

)

 

Acquisition/strategic investment related costs

 

3,000

 

 

511

 

 

 

Total non-GAAP adjustments

 

3,000

 

 

(751

)

Non-GAAP gross profit/margin

 

$

703,400

 

 

$

628,421

 

 

GAAP gross profit/margin %

 

67.7

%

 

67.1

%

 

Non-GAAP gross profit/margin %

 

68.0

%

 

67.1

%

 

 

 

 

 

 

GAAP operating income/margin

 

$

248,000

 

 

$

221,216

 

Non-GAAP adjustments:

 

 

 

 

 

Royalty and other revenue, net of related costs

 

 

 

(1,262

)

 

Acquisition/strategic investment related costs

 

8,000

 

 

4,729

 

 

Litigation damages, awards and settlements

 

 

 

 

 

 

Total non-GAAP adjustments

 

8,000

 

 

3,467

 

Non-GAAP operating income/margin

 

$

256,000

 

 

$

224,683

 

 

GAAP operating income/margin %

 

24.0

%

 

23.6

%

 

Non-GAAP operating income/margin %

 

24.7

%

 

24.0

%

________________
(1) May not foot due to rounding.
(2) Consistent with prior guidance provided on January 14, 2020.

Conference Call

The conference call to review Masimo’s complete financial results for the fourth quarter and full-year ended December 28, 2019 will begin at 1:30 p.m. PT (4:30 p.m. ET) on February 19, 2020 and will be hosted by Joe Kiani, Chairman and Chief Executive Officer, and Micah Young, Executive Vice President and Chief Financial Officer. A live webcast of the conference call will be available online from the investor relations page of the Company’s corporate website at www.masimo.com.

The dial-in numbers are (833) 227-5837 for domestic callers and +1 (825) 312-2251 for international callers. The reservation code for both dial-in numbers is 2862927. After the live webcast, the call will be available on Masimo’s website through March 19, 2020. In addition, a telephonic replay of the call will be available through March 4, 2020. The replay dial-in numbers are (800) 585-8367 for domestic callers and +1 (416) 621-4642 for international callers. Please use reservation code 2862927 .

About Masimo

Masimo (NASDAQ: MASI) is a global medical technology company that develops and produces a wide array of industry-leading monitoring technologies, including innovative measurements, sensors, patient monitors, and automation and connectivity solutions. Our mission is to improve patient outcomes and reduce the cost of care. Masimo SET® Measure-through Motion and Low Perfusion™ pulse oximetry, introduced in 1995, has been shown in over 100 independent and objective studies to outperform other pulse oximetry technologies.1 Masimo SET® has also been shown to help clinicians reduce severe retinopathy of prematurity in neonates,2 improve CCHD screening in newborns,3 and, when used for continuous monitoring with Masimo Patient SafetyNet™ in post-surgical wards, reduce rapid response team activations, ICU transfers, and costs.4-6 Masimo SET® is estimated to be used on more than 100 million patients in leading hospitals and other healthcare settings around the world,7 and is the primary pulse oximetry at 9 of the top 10 hospitals according to the 2019-20 U.S. News and World Report Best Hospitals Honor Roll.8 Masimo continues to refine SET® and in 2018, announced that SpO2 accuracy on RD SET® sensors during conditions of motion has been significantly improved, providing clinicians with even greater confidence that the SpO2 values they rely on accurately reflect a patient’s physiological status. 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®), RPVi™ (rainbow® PVi), and Oxygen Reserve Index (ORi™). In 2013, Masimo introduced the Root® Patient Monitoring and Connectivity Platform, built from the ground up to be as flexible and expandable as possible to facilitate the addition of other Masimo and third-party monitoring technologies; key Masimo additions include Next Generation SedLine® Brain Function Monitoring, O3® Regional Oximetry, and ISA™ Capnography with NomoLine® sampling lines. Masimo’s family of continuous and spot-check monitoring Pulse CO-Oximeters® includes devices designed for use in a variety of clinical and non-clinical scenarios, including tetherless, wearable technology, such as Radius-7® and Radius PPG™, portable devices like Rad-67™, fingertip pulse oximeters like MightySat® Rx, and devices available for use both in the hospital and at home, such as Rad-97®. Masimo hospital automation and connectivity solutions are centered around the Iris® platform, and include Iris Gateway®, Patient SafetyNet, Replica™, Halo ION™, UniView™, and Doctella™. Additional information about Masimo and its products may be found at www.masimo.com. Published clinical studies on Masimo products can be found at www.masimo.com/evidence/featured-studies/feature/.

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 2020 total, product, royalty and other revenues, earnings per diluted share, gross margin, 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: risks related to the integration of the acquisition of the Connected Care assets from NantHealth, Inc.; 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)

 

December 28,
2019

 

December 29,
2018

ASSETS

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

567,687

 

 

$

552,490

 

Short-term investments

120,000

 

 

 

Trade accounts receivable, net of allowance for doubtful accounts

132,433

 

 

109,629

 

Inventories

115,871

 

 

94,732

 

Other current assets

60,071

 

 

32,426

 

Total current assets

996,062

 

 

789,277

 

Lease receivable, noncurrent

49,936

 

 

 

Deferred costs and other contract assets

16,214

 

 

122,906

 

Property and equipment, net

219,552

 

 

165,972

 

Intangible assets, net

27,251

 

 

27,924

 

Goodwill

22,350

 

 

23,297

 

Deferred tax assets

35,972

 

 

21,210

 

Other non-current assets

28,791

 

 

4,232

 

Total assets

$

1,396,128

 

 

$

1,154,818

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities

 

 

 

Accounts payable

$

54,548

 

 

$

40,388

 

Accrued compensation

54,705

 

 

49,486

 

Deferred revenue and other contract-related liabilities, current

25,939

 

 

32,054

 

Other current liabilities

37,027

 

 

24,627

 

Total current liabilities

172,219

 

 

146,555

 

Other non-current liabilities

56,035

 

 

39,198

 

Total liabilities

228,254

 

 

185,753

 

Commitments and contingencies

 

 

 

Stockholders’ equity:

 

 

 

Common stock

54

 

 

53

 

Treasury stock

(526,580

)

 

(489,026

)

Additional paid-in capital

600,624

 

 

533,164

 

Accumulated other comprehensive loss

(6,718

)

 

(6,199

)

Retained earnings

1,100,494

 

 

931,073

 

Total stockholders’ equity

1,167,874

 

 

969,065

 

Total liabilities and stockholders’ equity

$

1,396,128

 

 

$

1,154,818

 

MASIMO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts)

 

Quarter Ended

 

Year Ended

 

December 28,
2019

 

December 29,
2018

 

December 28,
2019

 

December 29,
2018

Revenue:

 

 

 

 

 

 

 

Product

$

247,434

 

 

$

221,413

 

 

$

936,408

 

 

$

829,874

 

Royalty and other revenue

76

 

 

1,719

 

 

1,429

 

 

28,415

 

Total revenue

247,510

 

 

223,132

 

 

937,837

 

 

858,289

 

Cost of goods sold

80,587

 

 

74,801

 

 

308,665

 

 

283,397

 

Gross profit

166,923

 

 

148,331

 

 

629,172

 

 

574,892

 

Operating expenses:

 

 

 

 

 

 

 

Selling, general and administrative

81,943

 

 

73,713

 

 

314,661

 

 

285,417

 

Research and development

23,423

 

 

20,787

 

 

93,295

 

 

81,006

 

Litigation settlement, award and/or defense costs

 

 

(75

)

 

 

 

425

 

Total operating expenses

105,366

 

 

94,425

 

 

407,956

 

 

366,848

 

Operating income

61,557

 

 

53,906

 

 

221,216

 

 

208,044

 

Non-operating income

2,812

 

 

1,652

 

 

12,950

 

 

5,732

 

Income before provision for income taxes

64,369

 

 

55,558

 

 

234,166

 

 

213,776

 

Provision for income taxes

11,448

 

 

8,624

 

 

37,950

 

 

20,233

 

Net income

$

52,921

 

 

$

46,934

 

 

$

196,216

 

 

$

193,543

 

Other comprehensive gain (loss), net of tax:

 

 

 

 

 

 

 

Foreign currency translation gains (losses)

1,076

 

 

(382

)

 

(519

)

 

(3,258

)

Total comprehensive income

$

53,997

 

 

$

46,552

 

 

$

195,697

 

 

$

190,285

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

Basic

$

0.99

 

 

$

0.88

 

 

$

3.67

 

 

$

3.70

 

Diluted

$

0.92

 

 

$

0.83

 

 

$

3.44

 

 

$

3.45

 

 

 

 

 

 

 

 

 

Weighted-average shares used in per share calculations:

 

 

 

 

 

 

 

Basic

53,633

 

 

53,043

 

 

53,434

 

 

52,296

 

Diluted

57,267

 

 

56,449

 

 

57,100

 

 

56,039

 

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):

 

Quarter Ended

 

Year Ended

 

December 28,
2019

 

December 29,
2018

 

December 28,
2019

 

December 29,
2018

Cost of goods sold

$

106

 

 

$

94

 

 

$

445

 

 

$

334

 

Selling, general and administrative

7,417

 

 

6,081

 

 

30,450

 

 

21,391

 

Research and development

2,067

 

 

1,547

 

 

8,340

 

 

5,692

 

Total

$

9,590

 

 

$

7,722

 

 

$

39,235

 

 

$

27,417

 

MASIMO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

 

Year Ended

 

December 28, 2019

 

December 29, 2018

Cash flows from operating activities:

 

 

 

Net income

$

196,216

 

 

$

193,543

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

23,487

 

 

21,127

 

Stock-based compensation

39,233

 

 

27,417

 

Loss on disposal of equipment, intangibles and other assets

357

 

 

949

 

Provision (benefit) for doubtful accounts

687

 

 

(439

)

Benefit for amount due from former foreign agent

 

 

(2,016

)

Benefit from deferred income taxes

(5,965

)

 

(8,274

)

Changes in operating assets and liabilities:

 

 

 

(Increase) decrease in trade accounts receivable

(23,580

)

 

10,826

 

Increase in inventories

(21,257

)

 

(1,885

)

(Increase) decrease in other current assets

(8,536

)

 

3,843

 

Increase in lease receivable, net

(11,958

)

 

 

Decrease (increase) in deferred costs and other contract assets

3,308

 

 

(17,935

)

(Increase) decrease in other non-current assets

(226

)

 

407

 

Increase in accounts payable

9,934

 

 

5,211

 

Increase in accrued compensation

5,338

 

 

10,195

 

Increase in deferred revenue and other contract-related liabilities

7,739

 

 

1,420

 

Increase (decrease) in income taxes payable

4,079

 

 

(1,208

)

Increase in accrued liabilities

746

 

 

3,923

 

Increase (decrease) increase in other non-current liabilities

2,038

 

 

(7,577

)

Net cash provided by operating activities

221,640

 

 

239,527

 

Cash flows from investing activities:

 

 

 

Purchases of short-term investments

(120,000

)

 

 

Purchases of property and equipment

(68,375

)

 

(17,126

)

Increase in intangible assets

(4,117

)

 

(5,557

)

Business acquisition, net of cash acquired

 

 

(3,922

)

(Purchases of) proceeds from strategic investments

(5,189

)

 

453

 

Net cash used in investing activities

(197,681

)

 

(26,152

)

Cash flows from financing activities:

 

 

 

Proceeds from issuance of common stock

28,339

 

 

44,748

 

Repurchases of common stock

(37,555

)

 

(18,478

)

Other

(123

)

 

(490

)

Net cash provided by (used in) financing activities

(9,339

)

 

25,780

 

Effect of foreign currency exchange rates on cash

814

 

 

(1,997

)

Net increase in cash, cash equivalents and restricted cash

15,434

 

 

237,158

 

Cash, cash equivalents and restricted cash at beginning of period

552,641

 

 

315,483

 

Cash, cash equivalents and restricted cash at end of period

$

568,075

 

$

552,641

 

Investor Contact: Eli Kammerman
(949) 297-7077
ekammerman@masimo.com

Media Contact: Evan Lamb
(949) 396-3376
elamb@masimo.com

Source: Masimo

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