Q1 2020 Highlights
- Product revenue increased 16.9% to $269.6 million, or 17.5% on
a constant currency basis;
- GAAP net income per diluted share was $1.12; and
- Non-GAAP net income per diluted share was $0.97.
Masimo (Nasdaq: MASI) today announced its financial results for
the first quarter ended March 28, 2020.
First Quarter 2020 Results:
Total revenue, including royalty and other revenue, increased
16.4% to $269.6 million, compared to $231.7 million in the first
quarter of 2019. Product revenue increased 16.9% to $269.6 million,
or 17.5% on a constant currency basis, compared to $230.5 million
in the first quarter of 2019. Shipments of noninvasive technology
boards and monitors increased approximately 13.2% to 72,100 in the
first quarter of 2020, compared to 63,700 in the first quarter of
2019.
GAAP operating margin for the first quarter 2020 was 25.6%
compared to 24.2% in the first quarter of 2019. First quarter 2020
non-GAAP operating margin was 26.3% compared to 24.0% in the first
quarter of 2019.
For the first quarter of 2020, GAAP net income was $64.5 million
or $1.12 per diluted share. Non-GAAP net income was $55.9 million
or $0.97 per diluted share. Total cash and short-term investments
was $655.9 million as of March 28, 2020.
Joe Kiani, Chairman and Chief Executive Officer of Masimo, said
“I am extremely proud of our team and feel fortunate that we were
able to respond to the demand of our customers during the first
quarter and the month of April. We were there for our customers as
they were on the front lines of the worldwide response to the
COVID-19 pandemic. The passion of our team was on full display as
we helped our customers save lives. Thanks to strong cooperation
between the clinical community, local officials, federal
regulators, our suppliers and our team, we were able to not only
meet the high demand for our existing products, but also develop,
manufacture and deliver an important new solution, Masimo
SafetyNet, to deal with the COVID-19 surge in a transformative way.
Hospitals can now monitor and manage their patients remotely
anywhere, in any bed, including their own beds at home. Given the
uncertainties around the COVID-19 pandemic and its potential impact
on our business, we are no longer offering guidance for 2020. The
potential positive impacts include increased demand for our
products from both direct and OEM customers, which has continued
into the first month of the second quarter. The potential negative
impacts include potential interruptions in our manufacturing
operation and our suppliers’ manufacturing operations, and
potential reductions in future demand if there has been overbuying
of our products due to the pandemic.”
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 (net income)
earnings per diluted share and (iv) 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 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/Strategic investment-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.
First Quarter 2020 Actuals versus First
Quarter 2019 Actuals
RECONCILIATION OF GAAP TO NON-GAAP CONSTANT CURRENCY
PRODUCT REVENUE(1):
Three Months Ended
(in thousands, except
percentages)
March 28, 2020
March 30, 2019
GAAP product revenue
$
269,625
$
230,548
Non-GAAP constant currency
adjustments:
Constant currency F/X adjustments
1,247
N/A
Total non-GAAP constant currency
adjustments
1,247
N/A
Non-GAAP constant currency product
revenue
$
270,872
$
230,548
Product revenue growth %:
GAAP
16.9
%
Non-GAAP constant currency
17.5
%
__________________
(1) May not foot due to rounding.
RECONCILIATION OF GAAP TO
NON-GAAP NET INCOME AND NET INCOME PER DILUTED SHARE(1):
Three Months Ended
March 28, 2020
March 30, 2019
(in thousands, except per share
amounts)
$
Per Diluted Share
$
Per Diluted Share
GAAP net income
$
64,456
$
1.12
$
49,322
$
0.87
Non-GAAP adjustments:
Royalty and other revenue, net of related
costs
—
—
(1,048
)
(0.02
)
Acquisition/strategic investment-related
costs
2,447
0.04
361
0.01
Litigation settlement awards
(499
)
(0.01
)
—
—
Net realized and unrealized gains from
foreign currency transactions
(588
)
(0.01
)
(534
)
(0.01
)
Tax impact of pre-tax non-GAAP adjustments
above
(318
)
(0.01
)
359
0.01
Excess tax benefits from stock-based
compensation
(9,609
)
(0.17
)
(3,432
)
(0.06
)
Total non-GAAP adjustments
(8,568
)
(0.15
)
(4,294
)
(0.08
)
Non-GAAP net income
$
55,889
$
0.97
$
45,027
$
0.79
Weighted average shares outstanding -
diluted
57,585
56,799
__________________
(1) May not foot due to rounding.
RECONCILIATION OF GAAP TO
NON-GAAP OPERATING MARGIN(1):
Three Months Ended
March 28, 2020
March 30, 2019
(in thousands, except
percentages)
$
$
GAAP operating income/margin
$
69,010
$
56,023
Non-GAAP adjustments:
Royalty and other revenue, net of related
costs
—
(1,048
)
Acquisition/strategic investment-related
costs
2,447
361
Litigation settlement awards
(499
)
—
Total non-GAAP adjustments
1,948
(688
)
Non-GAAP operating income/margin
$
70,958
$
55,334
GAAP operating income/margin %
25.6
%
24.2
%
Non-GAAP operating income/margin %
26.3
%
24.0
%
__________________
(1) May not foot due to rounding.
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 (833) 227-5837
for domestic callers and +1 (825) 312-2551 for international
callers. The reservation code for both dial-in numbers is 9649388.
After the live webcast, the call will be available on Masimo’s
website through May 26, 2020. In addition, a telephonic replay of
the call will be available through May 12, 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
9649388.
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. Masimo SET®has also been shown to help
clinicians reduce severe retinopathy of prematurity in neonates,
improve CCHD screening in newborns, and, when used for continuous
monitoring with Masimo Patient SafetyNet™in post-surgical wards,
reduce rapid response team activations, ICU transfers, and costs.
Masimo SET®is estimated to be used on more than 200 million
patients in leading hospitals and other healthcare settings around
the world, and is the primary pulse oximetry at 9 of the top 10
hospitals listed in the 2019-20 U.S. News and World Report Best
Hospitals Honor Roll.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 Masimo
SafetyNet™. 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 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; the impact of the COVID-19
pandemic; 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)
March 28, 2020
December 28, 2019
ASSETS
Current assets
Cash and cash equivalents
$
605,916
$
567,687
Short-term investments
50,000
120,000
Accounts receivable, net of allowance for
doubtful accounts
152,846
132,433
Inventories
115,982
115,871
Other current assets
55,412
60,071
Total current assets
980,156
996,062
Lease receivable, noncurrent
51,680
49,936
Deferred costs and other contract
assets
16,990
16,214
Property and equipment, net
253,156
219,552
Intangible assets, net
46,739
27,251
Goodwill
54,097
22,350
Deferred tax assets
36,152
35,972
Other non-current assets
35,575
28,791
Total assets
$
1,474,545
$
1,396,128
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities
Accounts payable
$
49,110
$
54,548
Accrued compensation
36,812
54,705
Deferred revenue and other contract
liabilities, current
34,478
25,939
Other current liabilities
36,892
37,027
Total current liabilities
157,292
172,219
Other non-current liabilities
63,975
56,035
Total liabilities
221,267
228,254
Commitments and contingencies
Stockholders’ equity
Common stock
54
54
Treasury stock
(526,951
)
(526,580
)
Additional paid-in capital
623,967
600,624
Accumulated other comprehensive loss
(9,181
)
(6,718
)
Retained earnings
1,165,389
1,100,494
Total stockholders’ equity
1,253,278
1,167,874
Total liabilities and stockholders’
equity
$
1,474,545
$
1,396,128
MASIMO CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited, in thousands,
except per share amounts)
Three Months Ended
March 28, 2020
March 30, 2019
Revenue:
Product
$
269,625
$
230,548
Royalty and other revenue
—
1,116
Total revenue
269,625
231,664
Cost of goods sold
83,996
80,022
Gross profit
185,629
151,642
Operating expenses:
Selling, general and administrative
89,877
74,204
Research and development
27,241
21,415
Litigation settlement awards
(499
)
—
Total operating expenses
116,619
95,619
Operating income
69,010
56,023
Non-operating income
3,346
3,886
Income before provision for income
taxes
72,356
59,909
Provision for income taxes
7,900
10,587
Net income
$
64,456
$
49,322
Net income per share:
Basic
$
1.20
$
0.93
Diluted
$
1.12
$
0.87
Weighted-average shares used in per share
calculations:
Basic
53,867
53,210
Diluted
57,585
56,799
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
March 28, 2020
March 30, 2019
Cost of goods sold
$
131
$
97
Selling, general and administrative
8,736
5,725
Research and development
2,405
1,495
Total
$
11,272
$
7,317
MASIMO CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited, in
thousands)
Three Months Ended
March 28, 2020
March 30, 2019
Cash flows from operating
activities:
Net income
$
64,456
$
49,322
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
6,379
5,419
Stock-based compensation
11,272
7,317
Loss on disposal of property, equipment
and intangibles
49
65
Provision for doubtful accounts
94
234
Benefit for deferred income taxes
—
(31
)
Changes in operating assets and
liabilities:
Increase in accounts receivable
(17,105
)
(8,531
)
Decrease in inventories
427
1,357
Decrease in other current assets
5,469
3,043
Increase in lease receivable, net
(1,747
)
(3,104
)
(Increase) decrease in deferred costs and
other contract assets
(796
)
7,120
Increase in other non-current assets
(51
)
(115
)
Decrease in accounts payable
(7,968
)
(6,097
)
Decrease in accrued compensation
(17,687
)
(19,364
)
Increase (decrease) in accrued
liabilities
1,704
(2,736
)
(Decrease) increase in income tax
payable
(2,041
)
5,566
(Decrease) increase in deferred revenue
and other contract-related liabilities
(676
)
2,377
Increase in other non-current
liabilities
576
626
Net cash provided by operating
activities
42,355
42,468
Cash flows from investing
activities:
Maturities (purchases) of short-term
investments, net
70,000
(180,000
)
Purchases of property and equipment,
net
(37,004
)
(6,963
)
Increase in intangible assets
(1,135
)
(1,040
)
Business combination, net of cash
acquired
(47,250
)
—
Net cash used in investing
activities
(15,389
)
(188,003
)
Cash flows from financing
activities:
Proceeds from issuance of common stock
13,044
6,288
Payroll tax withholdings on behalf of
employees for vested equity awards
(1,424
)
(123
)
Repurchases of common stock
(371
)
—
Net cash provided by financing
activities
11,249
6,165
Effect of foreign currency exchange rates
on cash
2
(261
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
38,217
(139,631
)
Cash, cash equivalents and restricted cash
at beginning of period
568,075
552,641
Cash, cash equivalents and restricted cash
at end of period
$
606,292
$
413,010
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200428005904/en/
Investor Contact: Eli Kammerman (949) 297-7077
ekammerman@masimo.com
Media Contact: Evan Lamb (949) 396-3376 elamb@masimo.com
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