EX-99.1 2 masi-20160803x8kxex991.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
Masimo Reports Second Quarter 2016 Financial Results
Q2 2016 Highlights (compared to Q2 2015):
 
■
 
Total revenue, including royalties, rose 10.9% to $172.6 million
 
■
 
Product revenue rose 11.5% to $164.6 million
 
■
 
Masimo rainbow® revenue rose 10.6% to $14.9 million
 
■
 
45,300 SET® and rainbow® SET® oximeters were shipped
 
■
 
GAAP net income of $30.0 million, or $0.57 per diluted share versus $19.4 million, or $0.36 per diluted share in the year-ago period
Irvine, California, August 3, 2016 - Masimo (NASDAQ: MASI) today announced its financial results for the second quarter ended July 2, 2016.
Second quarter 2016 product revenues rose 11.5% to $164.6 million, compared to $147.6 million for the second quarter of fiscal year 2015, and total revenue, including royalties, rose 10.9% to $172.6 million, up from $155.7 million for the second quarter of fiscal year 2015.
The company’s worldwide direct product revenue in the second quarter of 2016 rose by 12.7% compared to the same period in 2015 and represented 85.6% of product revenue. OEM sales, which accounted for 14.4% of product revenue, rose by 5.1% to $23.7 million in the second quarter of 2016 compared to the same period in 2015. Revenue from sales of Masimo rainbow® products rose by 10.6% to $14.9 million in the second quarter of 2016, compared to the same period in 2015.
GAAP net income for the second quarter of 2016 was $30.0 million, or $0.57 per diluted share, compared to GAAP net income of $19.4 million, or $0.36 per diluted share, in the second quarter of 2015. Included in the second quarter 2016 earnings per share was $0.08 per diluted share related to the impact of the new stock option gain accounting rule, ASU 2016-09. During the second quarter of 2016, the company shipped 45,300 SET® Pulse Oximeters and rainbow SET™ Pulse CO-Oximeters, excluding handheld units. Masimo estimates its worldwide installed base as of July 2, 2016 to be 1,459,000 units, up 7.1% from 1,362,000 units as of July 4, 2015.
Joe Kiani, Chairman and Chief Executive Officer of Masimo, said, “We are happy with the stronger than anticipated fiscal second quarter sales growth which was the result of better than expected US and OUS sensor revenues. In addition, higher than projected gross profit margins and a continuation of our control over operating expenses have allowed us to deliver better than expected operating income. As a result, we are once again increasing our full year 2016 financial guidance.”
As of July 2, 2016, total cash and cash investments were $116.1 million compared to $132.3 million as of January 2, 2016. During the six month period ended July 2, 2016, the company generated $56.7 million in cash from operations and received $19.0 million in proceeds from stock option exercises. During the same six month period, the company repurchased 1.5 million shares at total cost of $63.4 million and made $10.0 million in repayments on the company’s line-of-credit.
2016 Financial Guidance
Masimo today is updating its 2016 financial guidance. Masimo now expects fiscal 2016 total revenues to be approximately $689 million, up from $677 million. Total fiscal 2016 product revenues are now expected to be approximately $658 million, up from $647 million, while royalty revenues are now expected to be $31 million, up from $30 million. Masimo now also expects its fiscal 2016 GAAP earnings per diluted share to be $2.01, up from $1.83. Masimo will provide additional financial information during the conference call today. Each of the components of Masimo’s guidance set forth above is an estimate only and actual performance could differ.




Conference Call
Masimo will hold a conference call today at 1:30 p.m. PT (4:30 p.m. ET) to discuss the results. A live webcast of the call will be available online from the investor relations page of the company’s website at www.masimo.com. The dial-in numbers are (888) 520-7182 for domestic callers and +1 (706) 758-3929 for international callers. The reservation code for both dial-in numbers is 52627919. After the live webcast, the call will be available on Masimo’s website through August 17, 2016. In addition, a telephonic replay of the call will be available through August 31, 2016. The replay dial-in numbers are (855) 859-2056 for domestic callers and +1 (404) 537-3406 for international callers. Please use reservation code 52627919.
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®), and more recently, Pleth Variability Index (PVI®) and 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 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 2016 total, product and royalty revenues and GAAP earnings per diluted share; demand for our products; anticipated revenue and earnings growth; our financial condition, results of operations and business generally; expectations regarding our ability to design and deliver innovative new noninvasive technologies and reduce the cost of care; and demand for our technologies. These forward-looking statements are based on management’s current expectations and beliefs and are subject to uncertainties and factors, all of which are difficult to predict and many of which are beyond our control and could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to, those related to: our dependence on Masimo SET® and Masimo rainbow® SET® products and technologies for substantially all of our revenue; any failure in protecting our intellectual property exposure to competitors’ assertions of intellectual property claims; the highly competitive nature of the markets in which we sell our products and technologies; any failure to continue developing innovative products and technologies; the lack of acceptance of any of our current or future products and technologies; obtaining regulatory approval of our current and future products and technologies; the risk that the implementation of our international realignment will not continue to produce anticipated operational and financial benefits, including a continued lower effective tax rate; the loss of our customers; the failure to retain and recruit senior management; product liability claims exposure; a failure to obtain expected returns from the amount of intangible assets we have recorded; the maintenance of our brand; the amount and type of equity awards that we may grant to employees and service providers in the future; our ongoing litigation and related matters; and other factors discussed in the “Risk Factors” section of our most recent periodic reports filed with the Securities and Exchange Commission (“SEC”), including our most recent Form 10-K and Form 10-Q, all of which you may obtain for free on the SEC’s website at www.sec.gov. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, even if subsequently made available by us on our website or otherwise. We do not undertake any obligation to update, amend or clarify these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.



# # #
 
 
 
Investor Contact: Eli Kammerman
 
Media Contact: Irene Paigah
(949) 297-7077
 
(858) 859-7001
ekammerman@masimo.com
 
irenap@masimo.com
Masimo, SET, Signal Extraction Technology, Improving Patient Outcome and Reducing Cost of Care... by Taking Noninvasive Monitoring to New Sites and Applications, rainbow, SpHb, SpOC, SpCO, SpMet, PVI and ORI are trademarks or registered trademarks of Masimo Corporation





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

 
July 2,
2016
 
January 2,
2016
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
116,055

 
$
132,317

Accounts receivable, net of allowance for doubtful accounts
84,805

 
80,960

Inventories
62,312

 
62,038

Prepaid income taxes
9,803

 
2,404

Other current assets
22,995

 
21,423

Total current assets
295,970

 
299,142

Deferred cost of goods sold
73,362

 
71,718

Property and equipment, net
133,037

 
132,466

Intangible assets, net
28,264

 
27,556

Goodwill
20,384

 
20,394

Deferred tax assets
39,410

 
44,320

Other assets
12,256

 
6,139

Total assets
$
602,683

 
$
601,735

LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable
$
30,710

 
$
25,865

Accrued compensation
33,956

 
38,415

Accrued liabilities
26,781

 
44,222

Income taxes payable
2,304

 
2,777

Deferred revenue
26,622

 
21,280

Current portion of capital lease obligations
75

 
74

Total current liabilities
120,448

 
132,633

Deferred revenue
219

 
298

Long term debt
175,001

 
185,071

Other liabilities
11,866

 
8,021

Total liabilities
307,534

 
326,023

Commitments and contingencies
 
 
 
Equity
 
 
 
Masimo Corporation stockholders’ equity:
 
 
 
Common stock
49

 
50

Treasury stock
(404,276
)
 
(340,873
)
Additional paid-in capital
357,766

 
332,417

Accumulated other comprehensive loss
(4,549
)
 
(4,739
)
Retained earnings
346,159

 
288,560

Total Masimo Corporation stockholders’ equity
295,149

 
275,415

Noncontrolling interest
—

 
297

Total equity
295,149

 
275,712

Total liabilities and equity
$
602,683

 
$
601,735



3


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

 
Three Months Ended
 
Six Months Ended
 
July 2,
2016
 
July 4,
2015
 
July 2,
2016
 
July 4,
2015
Revenue:
 
 
 
 
 
 
 
Product
$
164,607

 
$
147,612

 
$
327,897

 
$
294,969

Royalty
8,029

 
8,114

 
15,906

 
15,294

Total revenue
172,636

 
155,726

 
343,803

 
310,263

Cost of goods sold
57,501

 
52,825

 
114,455

 
104,257

Gross profit
115,135

 
102,901

 
229,348

 
206,006

Operating expenses:
 
 
 
 
 
 
 
Selling, general and administrative
63,888

 
61,666

 
126,399

 
122,465

Research and development
14,818

 
13,394

 
29,183

 
28,323

Total operating expenses
78,706

 
75,060

 
155,582

 
150,788

Operating income
36,429

 
27,841

 
73,766

 
55,218

Non-operating income (expense)
471

 
(1,125
)
 
969

 
(972
)
Income before provision for income taxes
36,900

 
26,716

 
74,735

 
54,246

Provision for income taxes
6,877

 
8,020

 
17,135

 
15,728

Net income including noncontrolling interest
30,023

 
18,696

 
57,600

 
38,518

Net loss attributable to the noncontrolling interest
—

 
655

 
—

 
1,356

Net income attributable to Masimo Corporation stockholders
$
30,023

 
$
19,351

 
$
57,600

 
$
39,874

 
 
 
 
 
 
 
 
Net income per share attributable to Masimo Corporation stockholders:
 
 
 
 
 
 
 
Basic
$
0.61

 
$
0.38

 
$
1.17

 
$
0.77

Diluted
$
0.57

 
$
0.36

 
$
1.10

 
$
0.74

 
 
 
 
 
 
 
 
Weighted-average shares used in per share calculations:
 
 
 
 
 
 
 
Basic
49,256

 
51,300

 
49,340

 
51,993

Diluted
52,703

 
53,675

 
52,404

 
53,908

The following table presents details of the stock-based compensation expense that is included in each functional line item in the condensed consolidated statements of operations (in thousands):
 
Three Months Ended
 
Six Months Ended
 
July 2,
2016
 
July 4,
2015
 
July 2,
2016
 
July 4,
2015
Cost of goods sold
$
56

 
$
70

 
$
147

 
$
191

Selling, general and administrative
2,527

 
2,019

 
4,774

 
4,067

Research and development
594

 
446

 
1,283

 
1,171

Total
$
3,177

 
$
2,535

 
$
6,204

 
$
5,429






MASIMO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
Six Months Ended
 
July 2,
2016
 
July 4,
2015
Cash flows from operating activities:
 
 
 
Net income including noncontrolling interest
$
57,600

 
$
38,518

Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities:
 
 
 
Depreciation and amortization
8,132

 
7,697

Stock-based compensation
6,204

 
5,429

Loss on disposal of property, equipment and intangibles
401

 
252

Gain on deconsolidation of variable interest entity
(273
)
 
—

Provision for doubtful accounts
(51
)
 
162

Provision for deferred income taxes
5,001

 
—

Changes in operating assets and liabilities:
 
 
 
Increase in accounts receivable
(3,739
)
 
(3,121
)
Increase in inventories
(297
)
 
(2,060
)
(Increase) decrease in deferred cost of goods sold
(1,566
)
 
1,987

Increase in prepaid income taxes
(7,462
)
 
(5,852
)
Increase in other assets
(6,596
)
 
(4,892
)
Increase (decrease) in accounts payable
8,084

 
(7,378
)
Decrease in accounts payable to related party
(1,092
)
 
—

Decrease in accrued compensation
(3,937
)
 
(4,271
)
(Decrease) increase in accrued liabilities
(12,534
)
 
3,805

Decrease in income tax payable
(322
)
 
(2,147
)
Increase in deferred revenue
5,263

 
836

Increase (decrease) in other liabilities
3,875

 
(342
)
Net cash provided by operating activities
56,691

 
28,623

Cash flows from investing activities:
 
 
 
Purchases of property and equipment, net
(10,734
)
 
(24,672
)
Increase in intangible assets
(1,349
)
 
(2,589
)
Reduction in cash resulting from deconsolidation of variable interest entity
(763
)
 
—

Net cash used in investing activities
(12,846
)
 
(27,261
)
Cash flows from financing activities:
 
 
 
Borrowings under line of credit
45,000

 
65,000

Repayments on line of credit
(55,000
)
 
(12,500
)
Debt issuance costs
(621
)
 
—

Repayments of capital lease obligations
(69
)
 
(77
)
Proceeds from issuance of common stock
18,997

 
15,178

Payroll tax withholdings on behalf of employees for stock options
—

 
(472
)
Repurchases of common stock
(68,218
)
 
(81,700
)
Issuance of equity by noncontrolling interest, net of equity issued
—

 
3

Net cash used in financing activities
(59,911
)
 
(14,568
)
Effect of foreign currency exchange rates on cash
(196
)
 
(1,850
)
Net decrease in cash and cash equivalents
(16,262
)
 
(15,056
)
Cash and cash equivalents at beginning of period
132,317

 
134,453

Cash and cash equivalents at end of period
$
116,055

 
$
119,397