EX-99.1 2 masi-2017x0214xex991.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
masimologopressreleaseq416.jpg
Masimo Reports Fourth Quarter and Fiscal Year 2016 Financial Results
Q4 2016 Highlights (compared to Q4 2015):
 
■
 
Total revenue, including royalties, rose 9.5% to $183.2 million
 
■
 
Product revenue rose 10.0% to $175.7 million
 
■
 
Masimo rainbow® revenue declined 11.6% to $16.9 million
 
■
 
48,600 SET® and rainbow SET™ oximeters were shipped
 
■
 
Net income of $215.3 million, or $3.97 per diluted share versus $24.1 million, or $0.46 per diluted share, in the year-ago period
FY 2016 Highlights (compared to FY 2015):
 
■
 
Total revenue, including royalties, rose 10.2% to $694.6 million
 
■
 
Product revenue rose 10.8% to $663.8 million
 
■
 
Masimo rainbow® revenue rose 7.8% to $66.7 million
 
■
 
186,000 SET® and rainbow SET™ oximeters were shipped
 
■
 
Net income of $300.7 million, or $5.65 per diluted share versus $83.3 million, or $1.55 per diluted share, in the year-ago period
Irvine, California, February 14, 2017 - Masimo (NASDAQ: MASI) today announced its financial results for the fourth quarter and full year ended December 31, 2016.
Fourth quarter 2016 product revenues rose 10.0% to $175.7 million, compared to $159.8 million for the fourth quarter of fiscal year 2015, and total revenue, including royalties, rose 9.5% to $183.2 million, up from $167.3 million for the fourth quarter of fiscal year 2015.
The Company’s worldwide direct product revenue in the fourth quarter of 2016 rose by 10.8% compared to the same period in 2015 and represented 87.0% of product revenue. OEM sales, which accounted for 13.0% of product revenue, rose by 4.8% to $22.9 million in the fourth quarter of 2016 compared to the same period in 2015. Revenue from sales of Masimo rainbow® products declined by 11.6% to $16.9 million in the fourth quarter of 2016, compared to the same period in 2015.
Net income for the fourth quarter of 2016 was $215.3 million, or $3.97 per diluted share, compared to net income of $24.1 million, or $0.46 per diluted share, in the fourth quarter of 2015. Included in the fourth quarter 2016 earnings per share was $3.43 per diluted share related to the $270.0 million gain we recognized on the Philips Settlement Agreement and $0.09 per diluted share related to the impact of the new stock option gain accounting rule, ASU 2016-09, which were partially offset by $0.06 per diluted share related to a $5.0 million charitable contribution to the Masimo Foundation. During the fourth quarter of 2016, the Company shipped approximately 48,600 SET® Pulse Oximeters and rainbow SET™ Pulse CO-Oximeters, excluding handheld units. Masimo estimates its worldwide installed base as of December 31, 2016 to be 1,504,000 units, up 6.4% from 1,414,000 units as of January 2, 2016.
Joe Kiani, Chairman and Chief Executive Officer of Masimo, said, “We are happy to report that we were able to finish the year on a very strong note as demand for our products throughout the world continues to increase with an especially strong fourth quarter in the U.S. Healthy product revenue growth, coupled with continued product margin expansion and controlled operating expenses has allowed Masimo to achieve the highest quarterly operating income in our history. We are also very happy to report that our estimate of total worldwide installed base has for the first time ever exceeded 1.5 million SET® Pulse Oximeters and rainbow SET™ Pulse CO-Oximeters.”
As of December 31, 2016, total cash and cash investments were $306.0 million compared to $132.3 million as of January 2, 2016. During the year ended December 31, 2016, the Company generated $416.8 million in cash from operations, including $300.0 million from the Philips Settlement Agreement and received $37.3 million in proceeds from stock option exercises. In




addition, during the year ended December 31, 2016, the Company repurchased 1.5 million shares of Masimo common stock at a total cost of $63.4 million and made $185.0 million in net repayments on the Company’s line-of-credit.
2017 Financial Guidance
Masimo today is providing 2017 financial guidance. Masimo expects total fiscal 2017 revenues to be approximately $752.0 million, including $721.0 million in product and other revenues and $31.0 million in royalty revenues. Masimo expects fiscal 2017 earnings per diluted share to be approximately $2.30 per diluted share. 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 64276572. After the live webcast, the call will be available on Masimo’s website through February 28, 2017. In addition, a telephonic replay of the call will be available through March 14, 2017. The replay dial-in numbers are (855) 859-2056 for domestic callers and +1 (404) 537-3406 for international callers. Please use reservation code 64276572.
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 2017 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)

 
December 31,
2016
 
January 2,
2016
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
305,970

 
$
132,317

Accounts receivable, net of allowance for doubtful accounts
101,720

 
80,960

Inventories
72,542

 
62,038

Prepaid income taxes
981

 
2,404

Other current assets
26,014

 
21,423

Total current assets
507,227

 
299,142

Deferred cost of goods sold
79,948

 
66,844

Property and equipment, net
135,996

 
132,466

Intangible assets, net
29,376

 
27,556

Goodwill
19,780

 
20,394

Deferred income taxes
38,975

 
44,320

Other assets
9,223

 
11,013

Total assets
$
820,525

 
$
601,735

LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable
$
31,125

 
$
25,865

Accrued compensation
43,180

 
38,415

Accrued liabilities
31,476

 
44,222

Income taxes payable
76,316

 
2,777

Deferred revenue
38,198

 
21,280

Current portion of capital lease obligations
71

 
74

Total current liabilities
220,366

 
132,633

Deferred revenue
25,336

 
298

Long-term debt
—

 
185,071

Other liabilities
14,587

 
8,021

Total liabilities
260,289

 
326,023

Commitments and contingencies
 
 
 
Equity
 
 
 
Masimo Corporation stockholders’ equity:
 
 
 
Preferred stock
—

 
—

Common stock
50

 
50

Treasury stock
(404,276
)
 
(340,873
)
Additional paid-in capital
382,263

 
332,417

Accumulated other comprehensive (loss) income
(7,027
)
 
(4,739
)
Retained earnings
589,226

 
288,560

Total Masimo Corporation stockholders’ equity
560,236

 
275,415

Noncontrolling interest
—

 
297

Total equity
560,236

 
275,712

Total liabilities and equity
$
820,525

 
$
601,735






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

 
Three Months Ended
 
Twelve Months Ended
 
December 31,
2016
 
January 2,
2016
 
December 31,
2016
 
January 2,
2016
Revenue:
 
 
 
 
 
 
 
Product
$
175,663

 
$
159,762

 
$
663,846

 
$
599,334

Royalty
7,538

 
7,511

 
30,779

 
30,777

Total revenue
183,201

 
167,273

 
694,625

 
630,111

Cost of goods sold
58,872

 
65,528

 
230,826

 
220,128

Gross profit
124,329

 
101,745

 
463,799

 
409,983

Operating expenses:
 
 
 
 
 
 
 
Selling, general and administrative
69,423

 
70,653

 
253,667

 
252,725

Research and development
14,506

 
13,809

 
59,362

 
56,617

Litigation settlement, award and/or defense costs
(270,000
)
 
(19,609
)
 
(270,000
)
 
(19,609
)
Total operating (income) expenses
(186,071
)
 
64,853

 
43,029

 
289,733

Operating income
310,400

 
36,892

 
420,770

 
120,250

Non-operating expense
2,852

 
1,883

 
2,429

 
3,905

Income before provision for income taxes
307,548

 
35,009

 
418,341

 
116,345

Provision for income taxes
92,255

 
9,956

 
117,675

 
34,845

Net income including noncontrolling interest
215,293

 
25,053

 
300,666

 
81,500

Net income (loss) attributable to the noncontrolling interest
—

 
952

 
—

 
(1,800
)
Net income attributable to Masimo Corporation stockholders
$
215,293

 
$
24,101

 
$
300,666

 
$
83,300

 
 
 
 
 
 
 
 
Net income per share attributable to Masimo Corporation stockholders:
 
 
 
 
 
 
 
Basic
$
4.31

 
$
0.48

 
$
6.07

 
$
1.62

Diluted
$
3.97

 
$
0.46

 
$
5.65

 
$
1.55

 
 
 
 
 
 
 
 
Weighted-average shares used in per share calculations:
 
 
 
 
 
 
 
Basic
49,964

 
50,286

 
49,530

 
51,311

Diluted
54,166

 
52,944

 
53,195

 
53,707

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
 
Twelve Months Ended
 
December 31,
2016
 
January 2,
2016
 
December 31,
2016
 
January 2,
2016
Cost of goods sold
$
86

 
$
78

 
$
355

 
$
348

Selling, general and administrative
2,129

 
2,087

 
9,443

 
8,139

Research and development
595

 
528

 
2,705

 
2,338

Total
$
2,810

 
$
2,693

 
$
12,503

 
$
10,825






MASIMO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
Twelve Months Ended
 
December 31,
2016
 
January 2,
2016
Cash flows from operating activities:
 
 
 
Net income including noncontrolling interest
$
300,666

 
$
81,500

Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities:
 
 
 
Depreciation and amortization
16,817

 
15,684

Share-based compensation
12,503

 
10,825

Loss on disposal of property, equipment and intangibles
658

 
608

Provision for doubtful accounts
259

 
342

Gain on deconsolidation of variable interest entity
(273
)
 
—

Benefit from deferred income taxes
5,405

 
(1,974
)
Changes in operating assets and liabilities:
 
 
 
Increase in accounts receivable
(21,243
)
 
(9,900
)
(Increase) decrease in inventories
(10,831
)
 
7,505

Increase in deferred cost of goods sold
(8,251
)
 
(78
)
Decrease (increase) in prepaid income taxes
1,355

 
(1,992
)
Increase in other assets
(7,314
)
 
(3,012
)
Increase (decrease) in accounts payable
7,816

 
(4,319
)
Decrease in accounts payable to related party
(1,092
)
 
—

Increase in accrued compensation
5,675

 
5,334

(Decrease) increase in accrued liabilities
(7,605
)
 
19,902

Increase in income taxes payable
73,755

 
1,316

Increase in deferred revenue
41,900

 
58

Increase (decrease) in other liabilities
6,642

 
(4,587
)
Net cash provided by operating activities
416,842

 
117,212

Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(19,707
)
 
(50,393
)
Increase in intangible assets
(4,644
)
 
(4,201
)
Reduction in cash resulting from deconsolidation of variable interest entity
(763
)
 
—

Net cash used in investing activities
(25,114
)
 
(54,594
)
Cash flows from financing activities:
 
 
 
Borrowings under revolving line of credit
45,000

 
130,000

Repayments under revolving line of credit
(230,000
)
 
(70,000
)
Debt issuance costs
(621
)
 
—

Repayments on capital lease obligations
(75
)
 
(80
)
Proceeds from issuance of common stock
37,290

 
28,285

Payroll tax withholdings on behalf of employee for stock options
—

 
(472
)
Repurchases of common stock
(68,218
)
 
(150,152
)
Net equity issuances (repurchases) by noncontrolling interest
—

 
346

Net cash used in by financing activities
(216,624
)
 
(62,073
)
Effect of foreign currency exchange rates on cash
(1,451
)
 
(2,681
)
Net increase (decrease) in cash and cash equivalents
173,653

 
(2,136
)
Cash and cash equivalents at beginning of period
132,317

 
134,453

Cash and cash equivalents at end of period
$
305,970

 
$
132,317