EX-99.1 2 masi-2016x1102xex991.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
masimologopressreleaseq216.jpg
Masimo Reports Third Quarter 2016 Financial Results
Q3 2016 Highlights (compared to Q3 2015):
 
■
 
Total revenue, including royalties, rose 9.9% to $167.6 million
 
■
 
Product revenue rose 10.8% to $160.3 million
 
■
 
Masimo rainbow® revenue rose 5.0% to $18.0 million
 
■
 
45,800 SET® and rainbow® SET® oximeters were shipped
 
■
 
GAAP net income of $27.8 million, or $0.52 per diluted share versus $19.3 million, or $0.36 per diluted share in the year-ago period
Irvine, California, November 2, 2016 - Masimo (NASDAQ: MASI) today announced its financial results for the third quarter ended October 1, 2016.
Third quarter 2016 product revenues rose 10.8% to $160.3 million, compared to $144.6 million for the third quarter of fiscal year 2015, and total revenue, including royalties, rose 9.9% to $167.6 million, up from $152.6 million for the third quarter of fiscal year 2015.
The company’s worldwide direct product revenue in the third quarter of 2016 rose by 14.3% compared to the same period in 2015 and represented 85.7% of product revenue. OEM sales, which accounted for 14.3% of product revenue, declined by 6.1% to $22.9 million in the third quarter of 2016 compared to the same period in 2015. Revenue from sales of Masimo rainbow® products rose by 5.0% to $18.0 million in the third quarter of 2016, compared to the same period in 2015.
GAAP net income for the third quarter of 2016 was $27.8 million, or $0.52 per diluted share, compared to GAAP net income of $19.3 million, or $0.36 per diluted share, in the third quarter of 2015. Included in the third quarter 2016 earnings per share was $0.05 per diluted share related to the impact of the new stock option gain accounting rule, ASU 2016-09. During the third quarter of 2016, the company shipped approximately 45,800 SET® Pulse Oximeters and rainbow SET™ Pulse CO-Oximeters, excluding handheld units. Masimo estimates its worldwide installed base as of October 1, 2016 to be 1,482,000 units, up 6.6% from 1,390,000 units as of October 3, 2015.
Joe Kiani, Chairman and Chief Executive Officer of Masimo, said, “We are happy to report third quarter product revenues and earnings per share that exceeded our projections. Product revenues benefited from continued strength in our consumable business and new product sales. We continue to believe that these results are due to both our superior technologies and the increasing awareness of both hospitals and clinicians who recognize that our technologies can both improve patient care and reduce the cost of delivering that care. Because of our strong Q3 results and the increased demand we continue to see for our products, I am happy that we will be able to once again increase our financial guidance for the year.”
As of October 1, 2016, total cash and cash investments were $126.0 million compared to $132.3 million as of January 2, 2016. During the nine month period ended October 1, 2016, the company generated $87.8 million in cash from operations and received $26.1 million in proceeds from stock option exercises. During the same nine month period, the company repurchased 1.5 million shares at total cost of $63.4 million and made $77.5 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 $692 million, up from $689 million. Total fiscal 2016 product revenues are now expected to be approximately $661 million, up from $658 million, while royalty revenues expectations remain unchanged at approximately $31 million. Masimo now also expects its fiscal 2016 GAAP earnings per diluted share to be $2.13, up from $2.01. 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 1397285. After the live webcast, the call will be available on Masimo’s website through November 16, 2016. In addition, a telephonic replay of the call will be available through November 30, 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 1397285.
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)

 
October 1,
2016
 
January 2,
2016
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
125,988

 
$
132,317

Accounts receivable, net of allowance for doubtful accounts
94,374

 
80,960

Inventories
67,047

 
62,038

Other current assets
37,213

 
23,827

Total current assets
324,622

 
299,142

Deferred cost of goods sold
83,066

 
71,718

Property and equipment, net
133,150

 
132,466

Intangible assets, net
29,816

 
27,556

Goodwill
20,252

 
20,394

Deferred tax assets
39,403

 
44,320

Other non-current assets
9,144

 
6,139

Total assets
$
639,453

 
$
601,735

LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable
$
32,232

 
$
25,865

Accrued compensation
37,099

 
38,415

Accrued and other current liabilities
42,867

 
47,073

Deferred revenue
32,137

 
21,280

Total current liabilities
144,335

 
132,633

Long term debt
152,500

 
185,071

Other non-current liabilities
9,431

 
8,319

Total liabilities
306,266

 
326,023

Commitments and contingencies
 
 
 
Equity
 
 
 
Masimo Corporation stockholders’ equity:
 
 
 
Common stock
50

 
50

Treasury stock
(404,276
)
 
(340,873
)
Additional paid-in capital
368,501

 
332,417

Accumulated other comprehensive loss
(5,019
)
 
(4,739
)
Retained earnings
373,931

 
288,560

Total Masimo Corporation stockholders’ equity
333,187

 
275,415

Noncontrolling interest
—

 
297

Total equity
333,187

 
275,712

Total liabilities and equity
$
639,453

 
$
601,735






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

 
Three Months Ended
 
Nine Months Ended
 
October 1,
2016
 
October 3,
2015
 
October 1,
2016
 
October 3,
2015
Revenue:
 
 
 
 
 
 
 
Product
$
160,286

 
$
144,603

 
$
488,183

 
$
439,572

Royalty
7,335

 
7,972

 
23,241

 
23,266

Total revenue
167,621

 
152,575

 
511,424

 
462,838

Cost of goods sold
57,499

 
50,343

 
171,954

 
154,600

Gross profit
110,122

 
102,232

 
339,470

 
308,238

Operating expenses:
 
 
 
 
 
 
 
Selling, general and administrative
57,845

 
59,607

 
184,244

 
182,072

Research and development
15,673

 
14,485

 
44,856

 
42,808

Total operating expenses
73,518

 
74,092

 
229,100

 
224,880

Operating income
36,604

 
28,140

 
110,370

 
83,358

Non-operating income (expense)
(546
)
 
(1,050
)
 
423

 
(2,022
)
Income before provision for income taxes
36,058

 
27,090

 
110,793

 
81,336

Provision for income taxes
8,285

 
9,161

 
25,420

 
24,889

Net income including noncontrolling interest
27,773

 
17,929

 
85,373

 
56,447

Net loss attributable to the noncontrolling interest
—

 
1,396

 
—

 
2,752

Net income attributable to Masimo Corporation stockholders
$
27,773

 
$
19,325

 
$
85,373

 
$
59,199

 
 
 
 
 
 
 
 
Net income per share attributable to Masimo Corporation stockholders:
 
 
 
 
 
 
 
Basic
$
0.56

 
$
0.38

 
$
1.73

 
$
1.15

Diluted
$
0.52

 
$
0.36

 
$
1.62

 
$
1.10

 
 
 
 
 
 
 
 
Weighted-average shares used in per share calculations:
 
 
 
 
 
 
 
Basic
49,477

 
50,974

 
49,386

 
51,653

Diluted
53,565

 
53,686

 
52,837

 
53,946

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
 
Nine Months Ended
 
October 1,
2016
 
October 3,
2015
 
October 1,
2016
 
October 3,
2015
Cost of goods sold
$
122

 
$
79

 
$
269

 
$
270

Selling, general and administrative
2,540

 
1,985

 
7,314

 
6,052

Research and development
827

 
639

 
2,110

 
1,810

Total
$
3,489

 
$
2,703

 
$
9,693

 
$
8,132






MASIMO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
Nine Months Ended
 
October 1,
2016
 
October 3,
2015
Cash flows from operating activities:
 
 
 
Net income including noncontrolling interest
$
85,373

 
$
56,447

Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities:
 
 
 
Depreciation and amortization
12,355

 
11,603

Stock-based compensation
9,693

 
8,132

Loss on disposal of property, equipment and intangibles
478

 
423

Gain on deconsolidation of variable interest entity
(273
)
 
—

Provision for doubtful accounts
127

 
506

Provision for deferred income taxes
5,002

 
—

Changes in operating assets and liabilities:
 
 
 
Increase in accounts receivable
(13,525
)
 
(5,048
)
Increase in inventories
(5,092
)
 
(3,755
)
Increase in other current assets
(12,911
)
 
(5,003
)
Increase in deferred cost of goods sold
(11,278
)
 
(1,007
)
Increase in other non-current assets
(2,317
)
 
(3,661
)
Increase (decrease) in accounts payable
9,232

 
(4,179
)
Decrease in accounts payable to related party
(1,092
)
 
—

Decrease in accrued compensation
(810
)
 
(1,436
)
Increase (decrease) in accrued liabilities
862

 
(482
)
Increase in deferred revenue
10,857

 
3,465

Increase (decrease) in other non-current liabilities
1,149

 
(272
)
Net cash provided by operating activities
87,830

 
55,733

Cash flows from investing activities:
 
 
 
Purchases of property and equipment, net
(13,697
)
 
(40,520
)
Increase in intangible assets
(3,969
)
 
(3,486
)
Reduction in cash resulting from deconsolidation of variable interest entity
(763
)
 
—

Net cash used in investing activities
(18,429
)
 
(44,006
)
Cash flows from financing activities:
 
 
 
Borrowings under line of credit
45,000

 
107,500

Repayments on line of credit
(77,500
)
 
(42,500
)
Debt issuance costs
(621
)
 
—

Repayments of capital lease obligations
(72
)
 
(81
)
Proceeds from issuance of common stock
26,063

 
24,942

Payroll tax withholdings on behalf of employees for stock options
—

 
(472
)
Repurchases of common stock
(68,218
)
 
(130,157
)
Issuance of equity by noncontrolling interest, net of equity issued
—

 
4

Net cash used in financing activities
(75,348
)
 
(40,764
)
Effect of foreign currency exchange rates on cash
(382
)
 
(1,835
)
Net decrease in cash and cash equivalents
(6,329
)
 
(30,872
)
Cash and cash equivalents at beginning of period
132,317

 
134,453

Cash and cash equivalents at end of period
$
125,988

 
$
103,581