Fourth Quarter 2018 Highlights (compared to Fourth
Quarter 2017):
- Total revenue, including royalty and
other revenue, was $223.1 million;
- Product revenue increased 12.8% to
$221.4 million, or 13.5% on a constant currency basis;
- Shipments of noninvasive technology
boards and monitors increased 11.5% to 60,300;
- GAAP net income per diluted share of
$0.83; and
- Non-GAAP net income per diluted share
increased 53.7% to $0.83.
Full Year 2018 Highlights (compared to Full Year
2017):
- Total revenue, including royalty and
other revenue, was $858.3 million;
- Product revenue increased 12.4% to
$829.9 million, or 11.9% on a constant currency basis;
- Shipments of noninvasive technology
boards and monitors increased 14.1% to 231,700;
- GAAP net income per diluted share of
$3.45; and
- Non-GAAP net income per diluted share
increased 31.7% to $3.03.
Masimo (Nasdaq: MASI) today announced its financial results for
the fourth quarter and full year ended December 29, 2018.
Fourth Quarter 2018 Results (compared to Fourth Quarter
2017):
Total revenue, including royalty and other revenue was $223.1
million. Product revenues increased 12.8% to $221.4 million, or
13.5% on a constant currency basis. The company shipped
approximately 60,300 noninvasive technology boards and
monitors.
GAAP operating margin was 24.2%. Non-GAAP operating margin
increased 260 basis points to 24.3%, compared to 21.7%. Excluding
the impact of royalty and other revenue, non-GAAP product operating
margin increased 640 basis points to 23.8%, compared to 17.4% in
the prior year period.
GAAP net income per diluted share was $0.83. Non-GAAP net income
per diluted share increased 53.7% to $0.83, compared to $0.54 in
the prior year period. Excluding the impact of royalty and other
revenue, non-GAAP product net income per diluted share increased
97.6% to $0.81, compared to $0.41 in the prior year period.
Full Year 2018 Results (compared to Full Year 2017):
Total revenue, including royalty and other revenue was $858.3
million. Product revenue increased 12.4% to $829.9 million, or
11.9% on a constant currency basis. The Company shipped
approximately 231,700 noninvasive technology boards and
monitors.
GAAP operating margin was 24.2%. Non-GAAP operating margin
increased 100 basis points to 24.5%, compared to 23.5% in the prior
year period. Excluding the impact of royalty and other revenue,
non-GAAP product operating margin increased 340 basis points to
22.0%, compared to 18.6% in the prior year period.
GAAP net income per diluted share was $3.45. Non-GAAP net income
per diluted share increased 31.7% to $3.03, compared to $2.30 in
the prior year period. Excluding the impact of royalty and other
revenue, non-GAAP product net income per diluted share increased
53.2% to $2.65, compared to $1.73 in the prior year period.
Total cash and cash equivalents increased $237.2 million during
the year to $552.5 million as of December 29, 2018.
Joe Kiani, Chairman and Chief Executive Officer of Masimo, said,
“2018 was a dynamic year for Masimo as we are seeing strong
momentum in our business. Our global organization executed on our
strategy to deliver above-market growth and drive operational
efficiencies throughout the business. We are extremely happy to
report fourth quarter and full year results that exceeded
expectations. Due to the strong finish in 2018, we are now
increasing our 2019 product revenue guidance to $912 million and
our 2019 non-GAAP earnings per diluted share guidance to
$3.08.”
2019 Financial Guidance
The Company provided the following estimates for its full year
2019 guidance:
(in millions, except percentages and earnings per share)
2019
Updated Guidance(1)
GAAP Non-GAAP Total revenue, including royalty and other
revenue $ 912 $ 912 Product revenue $ 912 $ 912 Percentage growth -
as reported 9.9 % N/A Percentage growth - constant currency N/A
10.7 % Royalty and other revenue $ — $ — Product gross margin N/A
66.8 % Product operating margin(2) N/A 24.0 % Product diluted
earnings per share(3) N/A $ 3.08 EBITDA 26.4 % 30.4 % Estimated tax
rate 19.8 % 23.2 % ______________ (1) Updated guidance
provided February 26, 2019. (2) Product operating margin excludes
the impact of royalty and other revenue and associated costs. (3)
Total diluted earnings per share excludes the impact of royalty and
other revenue and associated costs.
- Total revenue, including other revenue,
of $912 million;
- Product revenue of $912 million, which
reflects growth of 9.9% and constant currency growth of 10.7%;
- Non-GAAP product operating margin of
24.0%, increasing 200 basis points over prior year period;
- Non-GAAP product earnings per diluted
share of $3.08, increasing 16.2% over the prior year period;
and
- Included in our full year revenue
guidance is approximately $7.0 million of year-over-year currency
headwinds.
Impact of Adoption of New Revenue Accounting
Standard:
During the first quarter of 2018, the Company adopted Financial
Accounting Standards Board (FASB) Accounting Standards Update (ASU)
No. 2014-09, Revenue (Topic 606): Revenue from Contracts with
Customers (ASU 2014-09). The Company’s adoption of ASU 2014-09
generally resulted in (a) the acceleration of when the Company
recognizes certain revenue, and (b) the deferral of certain
incremental costs associated with obtaining a customer contract. In
accordance with the full retrospective method of adoption for ASU
2014-09, the Company has adjusted certain amounts previously
reported in its condensed consolidated financial statements to
comply with the new standard, as indicated by the notation, “As
Adjusted”. For additional information with respect to the impact of
the adoption of this new accounting standard and reconciliations to
the prior reported amounts, please reference Note 2 to our
consolidated financial statements that will be included in Part IV,
Item 15(a)(1) and 15(a)(2), respectively, of our Annual
Report on Form 10-K for the fiscal period ended December 29, 2018
that will be filed with the Securities and Exchange Commission on
or about February 26, 2019.
Impact of Adoption of New Lease Accounting Standard:
In February 2016, the Financial Accounting Standards Board
issued a new standard for leases, Accounting Standards Codification
(ASC) Topic 842, Leases (ASC 842). This standard will become
effective for the Company on December 30, 2018. The Company is
continuing to evaluate the expected impact of ASC 842 on its
consolidated financial statements, but anticipates that, among
other things, the required recognition by a lessee of a lease
liability and related right-of-use asset for operating leases will
increase both the assets and liabilities recognized and reported on
its balance sheet as of the adoption date. In addition, ASC 842
will also change the classification of certain leases for which the
Company is the lessor, resulting in the acceleration of revenue
under certain contracts, as well as the immediate expensing of
certain costs that are currently deferred and expensed over the
life of the lease. The Company is continuing to evaluate the
available practical expedients and its adoption method for this new
standard.
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 diluted earnings
per share, (iv) non-GAAP gross profit/margin, (v) non-GAAP
operating income/margin, (vi) non-GAAP product net income, (vii)
non-GAAP product diluted earnings per share, (viii) non-GAAP
product gross profit/margin, (ix) non-GAAP product operating
income/margin and (x) adjusted EBITDA. 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 non-GAAP product revenue growth %, non-GAAP
gross profit, non-GAAP operating income, non-GAAP net income,
non-GAAP net income per diluted share and adjusted EBITDA 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.
Acquisition-related costs, including
depreciation and amortization.
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
rather than ongoing costs of operating our core business. As a
result, we believe that exclusion of these 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 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 record tax benefits relating to the
derecognition of uncertain tax positions due to the expiration of
the statutes of limitations. We believe that exclusion of the tax
benefit resulting from the expiration of certain statutes of
limitations related to non-recurring transactions 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 this tax item is unrelated to our core business and
non-recurring in nature.
Fourth Quarter and Full Year 2018 Actuals
versus Fourth Quarter 2017 and Full Year Actuals:
RECONCILIATION OF
GAAP TO CONSTANT CURRENCY PRODUCT REVENUE:
Three Months Ended (in thousands, except percentages)
December 29,
2018
December 30,
2017
As Adjusted
GAAP product revenue $ 221,413 $ 196,353 Non-GAAP constant currency
adjustments: Constant currency F/X adjustments 1,360
N/A Total non-GAAP product revenue adjustments 1,360
N/A Constant currency product revenue $ 222,773 $ 196,353
Product revenue growth %: GAAP 12.8 % Constant currency 13.5 %
RECONCILIATION OF
GAAP TO CONSTANT CURRENCY PRODUCT REVENUE:
Twelve Months Ended (in thousands, except percentages)
December 29,
2018
December 30,
2017
As Adjusted
GAAP product revenue $ 829,874 $ 738,242 Non-GAAP constant currency
adjustments: Constant currency F/X adjustments (4,015 ) N/A
Total non-GAAP product revenue adjustments (4,015 ) N/A
Constant currency product revenue $ 825,859 $ 738,242
Product revenue growth %: GAAP 12.4 % Constant currency 11.9 %
RECONCILIATION OF
GAAP TO NON-GAAP NET INCOME AND NET INCOME PER DILUTED
SHARE:
Three Months Ended
December 29, 2018
December 30, 2017
As Adjusted
(in thousands, except earnings per share) $
Per Diluted
Share
$
Per Diluted
Share
GAAP net income $ 46,934 $ 0.83 $ (7,735 ) $ (0.15 ) Non-GAAP
adjustments: Acquisition-related depreciation and amortization 360
0.01 390 0.01 Litigation damages, awards and settlements (75 ) — —
— Realized and unrealized foreign currency gains and losses 1,263
0.02 31 — Tax impact of pre-tax non-GAAP adjustments above (662 )
(0.01 ) (82 ) — Excess tax benefits from stock-based compensation
(294 ) (0.01 ) (4,148 ) (0.07 ) 2017 U.S. Tax Reform (878 )
(0.01 ) 41,392 0.74 Total
non-GAAP adjustments (286 ) — 37,583 0.68
GAAP anti-dilutive effect given the net
loss (basic and diluted EPS are the same in the period)
— — — 0.01
Non-GAAP net income $ 46,648 $ 0.83 $ 29,848 $
0.54 Weighted average shares outstanding - basic 53,043
51,656 Weighted average shares outstanding – diluted 56,449 55,595
RECONCILIATION OF
GAAP TO NON-GAAP NET INCOME AND NET INCOME PER DILUTED
SHARE:
Twelve Months Ended December 29, 2018
December 30, 2017
As Adjusted
(in thousands, except earnings per share) $
Per Diluted
Share
$
Per Diluted
Share
GAAP net income $ 193,543 $ 3.45 $ 124,789 $ 2.23 Non-GAAP
adjustments: Acquisition-related depreciation and amortization
1,442 0.02 1,597 0.03 Litigation damages, awards and settlements
425 0.01 — — Realized and unrealized foreign currency gains and
losses 2,027 0.03 270 0.01 Tax impact of pre-tax non-GAAP
adjustments above (796 ) (0.01 ) (456 ) (0.01 ) Excess tax benefits
from stock-based compensation (22,036 ) (0.39 ) (39,241 ) (0.70 )
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 (878 ) (0.01 ) 41,392
0.74 Total non-GAAP adjustments (23,985 )
(0.42 ) 3,562 0.07 Non-GAAP net
income $ 169,558 $ 3.03 $ 128,351 $ 2.30
Weighted average shares outstanding - diluted 56,039 55,874
RECONCILIATION OF
GAAP NET INCOME AND NET INCOME PER DILUTED SHARE TO
NON-GAAP PRODUCT
NET INCOME AND PRODUCT NET INCOME PER DILUTED SHARE:
Three Months Ended December 29, 2018
December 30, 2017
As Adjusted
(in thousands, except per share amounts) $
Per Diluted
Share
$
Per Diluted
Share
Product net income(1) $ 45,547 $ 0.81 $ (13,379 ) $ (0.25 ) Royalty
and NRE net income(2) 1,387 0.02
5,644 0.10 GAAP net income $ 46,934 $ 0.83 $
(7,735 ) $ (0.15 ) Non-GAAP adjustments to product net
income: Acquisition-related depreciation and amortization 360 0.01
390 0.01 Litigation damages, awards and settlements (75 ) — — —
Realized and unrealized foreign currency gains and losses 1,263
0.02 31 — Tax impact of pre-tax non-GAAP adjustments above (662 )
(0.01 ) (82 ) — Excess tax benefits from stock-based compensation
(294 ) (0.01 ) (4,148 ) (0.07 ) Tax impact of expiration of certain
statutes of limitations related to unique and non-recurring tax
positions — — — — 2017 U.S. Tax Reform(3) (675 )
(0.01 ) 39,815 0.71 Total non-GAAP
adjustments to product net income (83 ) — 36,006 0.65
GAAP anti-dilutive effect given the net
loss (basic and diluted EPS are the same in the period)
— — — 0.01
Non-GAAP product net income $ 45,464 $ 0.81 $ 22,627
$ 0.41 Weighted average shares outstanding - basic
53,043 51,656 Weighted average shares outstanding - diluted 56,449
55,595
RECONCILIATION OF
GAAP NET INCOME AND NET INCOME PER DILUTED SHARE TO
NON-GAAP PRODUCT
NET INCOME AND PRODUCT NET INCOME PER DILUTED SHARE:
Twelve Months Ended December 29, 2018
December 30, 2017
As Adjusted
(in thousands, except per share amounts) $
Per Diluted
Share
$
Per Diluted
Share
Product net income(1) $ 172,166 $ 3.07 $ 94,538 $ 1.69 Royalty and
NRE net income(2) 21,377 0.38
30,251 0.54 GAAP net income $ 193,543 $ 3.45 $
124,789 $ 2.23 Non-GAAP adjustments to product net income:
Acquisition-related depreciation and amortization 1,442 0.02 1,597
0.03 Litigation damages, awards and settlements 425 0.01 — —
Realized and unrealized foreign currency gains and losses 2,027
0.03 270 0.01 Tax impact of pre-tax non-GAAP adjustments above (796
) (0.01 ) (456 ) (0.01 ) Excess tax benefits from stock-based
compensation (22,036 ) (0.39 ) (39,241 ) (0.70 ) 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(3) (675 ) (0.01 ) 39,815
0.71 Total non-GAAP adjustments to product net income
(23,782 ) (0.42 ) 1,985 0.04
Anti-dilutive effect given the net loss
(basic and diluted EPS are the same) in the period
— — — —
Non-GAAP product net income $ 148,384 $ 2.65 $ 96,523
$ 1.73 Weighted average shares outstanding - diluted
56,039 55,874 ________________ (1) Product net income =
total net income less amounts related to royalty and other revenue
net of associated costs and income taxes. (2) Royalty and NRE net
income = royalty and other revenue less associated costs and income
taxes. (3) Excludes 2017 U.S. Tax Reform charges related to royalty
and other revenue net of associated costs.
RECONCILIATION OF
GAAP OPERATING INCOME/MARGIN % TO
NON-GAAP PRODUCT
OPERATING INCOME/MARGIN % AND TOTAL OPERATING INCOME/MARGIN
%:
Three Months Ended December
29, 2018
December 30, 2017
As Adjusted
(in thousands, except percentages) $
% of Revenue $ % of Revenue Product operating
income/margin(1) $ 52,370 23.7 % $ 33,804 17.2 % Royalty and NRE
gross profit/margin 1,536 89.4 10,922
94.3 GAAP total operating income/margin 53,906 24.2 44,726
21.5 Non-GAAP adjustments to product operating income/margin:
Acquisition related depreciation and amortization 360 0.1 390 0.2
Litigation damages, awards and settlements (75 ) —
— — Total non-GAAP adjustments to product operating
income/margin 285 0.1 390 0.2
Non-GAAP product operating income/margin(1) 52,655 23.8 34,194 17.4
Royalty and other operating income/margin 1,536 89.4
10,922 94.3 Non-GAAP total operating
income/margin $ 54,191 24.3 % $ 45,116 21.7 %
RECONCILIATION OF
GAAP OPERATING INCOME/MARGIN % TO
NON-GAAP PRODUCT
OPERATING INCOME/MARGIN % AND TOTAL OPERATING INCOME/MARGIN
%:
Twelve Months Ended December 29, 2018
December 30, 2017
As Adjusted
(in thousands, except percentages) $
% of Revenue $ % of Revenue Product operating
income/margin(1) $ 180,339 21.7 % $ 135,402 18.4 % Royalty and NRE
gross profit/margin 27,705 97.5 48,385
93.0 GAAP total operating income/margin 208,044 24.2 183,787
23.3 Non-GAAP adjustments to product operating income/margin:
Acquisition-related depreciation and amortization 1,442 0.3 1,597
0.2 Litigation damages, awards and settlements 425 —
— — Total non-GAAP adjustments to product
operating income/margin 1,867 0.3 1,597
0.2 Non-GAAP product operating income/margin(1) 182,206 22.0
136,999 18.6 Royalty and other operating income/margin
27,705 97.5 48,385 93.0 Non-GAAP total
operating income/margin $ 209,911 24.5 % $ 185,384 23.5 %
______________ (1) Product operating income/margin = total
operating income/margin less amounts related to royalty and other
revenue net of associated costs.
Full Year 2018 Actuals versus Full Year
2019 Guidance:
RECONCILIATION OF
GAAP PRODUCT REVENUE GROWTH % TO
CONSTANT CURRENCY
PRODUCT REVENUE GROWTH %:
Full Year 2019
Guidance
Full Year 2018
Actuals
GAAP product revenue $ 912,000 $ 829,874 Non-GAAP constant currency
adjustments: Constant currency F/X adjustments 7,000
— Total non-GAAP constant currency adjustments
7,000 — $ 919,000 $ 829,874
Product revenue growth %: GAAP 9.9 % Non-GAAP (constant currency)
10.7 %
RECONCILIATION OF
GAAP NET INCOME AND NET INCOME PER DILUTED SHARE TO
NON-GAAP PRODUCT
NET INCOME AND PRODUCT NET INCOME PER DILUTED SHARE:
Full Year 2019
Guidance(1)
Full Year 2018
Actuals
(in thousands, except earnings per share) $
Per Diluted
Share
$
Per Diluted
Share
Product net income(2) $ 184,126 $ 3.19 $ 172,166 $ 3.07 Royalty and
NRE net income(3) — — 21,377
0.38 GAAP net income $ 184,126 $ 3.19 $
193,543 $ 3.45 Non-GAAP product net income adjustments:
Acquisition-related depreciation and amortization 1,426 0.03 1,442
0.02 Litigation damages, awards and settlements — — 425 0.01
Realized and unrealized foreign currency gains and losses — — 2,027
0.03 Tax impact of pre-tax non-GAAP adjustments above (236 ) — (796
) (0.01 ) Excess tax benefits from stock-based compensation (8,000
) (0.14 ) (22,036 ) (0.39 ) Expiration of certain statutes of
limitations related to unique and non-recurring tax positions — —
(4,169 ) (0.07 ) Tax impact of U.S. tax reform(4) —
— (675 ) (0.01 ) Total non-GAAP
adjustments (6,810 ) (0.11 ) (23,782 )
(0.42 ) Non-GAAP product net income $ 177,316 $ 3.08
$ 148,384 $ 2.65 Weighted average shares outstanding
- diluted 57,700 56,039 ________________ (1) Estimated
effective tax rate of 19.8% applied to GAAP earnings and 23.2%
applied to non-GAAP earnings. (2) Product net income = total net
income less amounts related to royalty and other revenue net of
associated costs and income taxes. (3) Royalty and NRE net income =
royalty and other revenue less associated costs and income taxes.
(4) Excludes 2017 U.S. Tax Reform charges related to royalty and
other revenue net of associated costs.
RECONCILIATION OF
GAAP GROSS PROFIT/MARGIN AND GAAP OPERATING INCOME/MARGIN
TO
NON-GAAP PRODUCT
GROSS PROFIT/MARGIN AND NON-GAAP OPERATING PRODUCT INCOME/MARGIN
%:
Full Year 2019
Guidance
Full Year 2018
Actuals
(in thousands, except percentages) $
% of Revenue
$ % of Revenue Product gross profit/margin(1)
$ 608,758 66.7 % $ 547,187 65.9 % Royalty and NRE gross
profit/margin(2) — — 27,705 97.5 GAAP
product gross profit/margin $ 608,758 66.7 % $ 574,892 67.0 %
Non-GAAP product gross profit/margin adjustments:
Acquisition-related depreciation and amortization 458 0.1
458 0.1 Total non-GAAP adjustments 458
0.1 458 0.1 Non-GAAP product gross
profit/margin $ 609,216 66.8 % $ 575,350 67.1 % Product
operating income/margin(3) $ 217,454 23.8 % $ 180,339 21.7 %
Royalty and other NRE gross profit/margin(2) — —
27,705 97.5 GAAP operating income/margin $ 217,454
23.8 % $ 208,044 24.2 % Non-GAAP product operating income/margin
adjustments: Acquisition-related depreciation and amortization
1,426 0.2 1,867 0.3 Total non-GAAP
adjustments 1,426 0.2 1,867 0.3
Non-GAAP product operating income/margin $ 218,880 24.0 % $ 182,206
22.0 % ________________ (1) Product gross profit/margin =
total gross profit/margin less amounts related to royalty and other
revenue net of associated COGS. (2) Royalty and NRE gross
profit/margin = royalty and other revenue less associated COGS. (3)
Product operating income/margin = total net income less amounts
related to royalty and other revenue net of associated costs.
RECONCILIATION OF
EBITDA TO ADJUSTED EBITDA
Full Year 2019
Guidance
Full Year 2018
Actuals
(in thousands, except earnings per share) $
% of Revenue $
% of Revenue GAAP net income $ 184,126 20.2 % $ 193,543 22.5
% Other (income)/expense(1) (12,000 ) (1.3 ) (5,732 ) (0.7 )
Provision for income taxes 45,329 5.0 20,233 2.4 Depreciation and
amortization 22,857 2.5 21,127
2.5 EBITDA 240,312 26.4 229,171 26.7 Add: Litigation
damages, awards and settlements — — 425 — Add: Non-cash stock-based
compensation expense 37,326 4.0 27,416
3.2 Adjusted EBITDA $ 277,638 30.4 % $ 257,012
29.9 % ______________ (1) Other (income)/expense
consists primarily of interest (income)/expense and net foreign
currency (gains)/losses.
RECONCILIATION OF
FREE CASH FLOW TO ADJUSTED FREE CASH FLOW:
Three Months Ended (in thousands, except
percentages)
December 29,
2018
December 30,
2017 As
Adjusted
GAAP total revenue $ 223,132 $ 207,939
Net cash provided by operating activities 63,222 48,681 Purchases
of property and equipment, net (4,827 ) (5,854 ) Free
cash flow 58,395 42,827 Tax payments related to litigation awards
and damages — 3,050 Adjusted free cash
flow $ 58,395 $ 45,877 % of total revenue 26.2
% 22.1 %
Twelve Months Ended (in thousands, except
percentages)
December 29,
2018
December 30,
2017 As
Adjusted
GAAP total revenue $ 858,289 $ 790,248 Net
cash provided by operating activities 239,527 56,062 Purchases of
property and equipment, net (17,126 ) (43,684 ) Free
cash flow 222,401 12,378 Tax payments related to litigation awards
and damages — 74,201 Adjusted free cash
flow $ 222,401 $ 86,579 % of total revenue
25.9 % 11.0 %
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 6889465.
After the live webcast, the call will be available on Masimo’s
website through March 27, 2019. In addition, a telephonic replay of
the call will be available through March 6, 2019. The replay
dial-in numbers are (855) 859-2056 for domestic callers and +1
(404) 537-3406 for international callers. Please use reservation
code 6889465.
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. 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®), Pleth
Variability Index (PVi®) and more recently, 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
mobile health applications (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 GAAP and non-GAAP 2019 total, product, royalty and other
revenues, gross profit/margin, earnings per diluted share, product
earnings per diluted share, operating margin, product operating
income/margin, net income, product net income, EBITDA, adjusted
EBITDA , free cash flow, 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: 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 29,
2018
December 30,
2017
As Adjusted
ASSETS Current assets Cash and cash equivalents $ 552,490 $
315,302 Accounts receivable, net of allowance for doubtful accounts
109,629 118,532 Inventories 93,751 92,259 Other current assets
29,227 33,602 Total current assets
785,097 559,695 Deferred costs and other contract assets 127,086
109,256 Property and equipment, net 165,972 164,096 Intangible
assets, net 27,924 27,123 Goodwill 23,297 20,617 Deferred tax
assets 21,210 19,981 Other assets 4,232 4,668
Total assets $ 1,154,818 $ 905,436
LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities
Accounts payable $ 40,388 $ 33,780 Accrued compensation 49,486
39,515 Deferred revenue and other contract liabilities, current
33,106 32,105 Other current liabilities 24,627
24,254 Total current liabilities 147,607 129,654 Other
liabilities 38,146 51,757 Total
liabilities 185,753 181,411 Commitments and contingencies
Stockholders’ equity: Common stock 53 52 Treasury stock (489,026 )
(472,536 ) Additional paid-in capital 533,164 461,494 Accumulated
other comprehensive loss (6,199 ) (2,941 ) Retained earnings
931,073 737,956 Total stockholders’ equity
969,065 724,025 Total liabilities and
stockholders’ equity $ 1,154,818 $ 905,436
MASIMO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(unaudited, in thousands, except per
share amounts)
Three Months Ended Twelve Months
Ended
December 29,
2018
December 30,
2017
As Adjusted
December 29,
2018
December 30,
2017
As Adjusted
Revenue: Product $ 221,413 $ 196,353 $ 829,874 $ 738,242 Royalty
and other revenue 1,719 11,586
28,415 52,006 Total revenue 223,132 207,939
858,289 790,248 Cost of goods sold 74,801
69,287 283,397 268,216 Gross
profit 148,331 138,652 574,892 522,032 Operating expenses: Selling,
general and administrative 74,693 77,832 289,456 276,292 Research
and development 19,807 16,094 76,967 61,953 Litigation settlement,
award and/or defense costs (75 ) — 425
— Total operating expenses 94,425
93,926 366,848 338,245
Operating income 53,906 44,726 208,044 183,787
Non-operating expense
(1,652 ) (694 ) (5,732 ) (2,013 )
Income before provision for income taxes 55,558 45,420 213,776
185,800 Provision for income taxes 8,624
53,155 20,233 61,011
Net income (loss)
$ 46,934 $ (7,735 ) $ 193,543 $ 124,789 Other
comprehensive gain (loss), net of tax: Foreign currency translation
gains (losses) (382 ) (184 ) (3,258 ) 4,201 Unrealized loss on
marketable securities — — —
(115 )
Total comprehensive income (loss)
$ 46,552 $ (7,919 ) $ 190,285 $ 128,875
Net income per share: Basic $ 0.88 $ (0.15 ) $ 3.70 $
2.42 Diluted $ 0.83 $ (0.15 ) $ 3.45 $ 2.23
Weighted-average shares used in per share
calculations: Basic 53,043 51,656
52,296 51,516 Diluted 56,449
55,595 56,039 55,874
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 29,
2018
December 30,
2017
December 29,
2018
December 30,
2017
Cost of goods sold $ 94 $ 94 $ 334 $ 351 Selling, general and
administrative 6,081 4,588 21,391 13,272 Research and development
1,547 1,313 5,692
3,564 Total $ 7,722 $ 5,995 $ 27,417 $
17,187
MASIMO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(unaudited, in thousands)
Twelve Months Ended
December 29,
2018
December 30,
2017
Cash flows from operating activities: Net income $ 193,543 $
124,789 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 21,127 20,061
Stock-based compensation 27,417 17,187 Loss on disposal of
equipment, intangibles and other assets 949 522 Provision for
doubtful accounts (439 ) 251 Provision for amount due from former
foreign agent (2,016 ) 10,477 (Benefit) provision from deferred
income taxes (8,274 ) 17,276 Changes in operating assets and
liabilities: Decrease (increase) in trade accounts receivable
10,826 (19,772 ) Increase in inventories (1,885 ) (24,014 )
Decrease (increase) in other current assets 3,843 (2,908 ) Increase
in deferred cost of goods sold (17,935 ) (14,102 ) Increase in
prepaid income taxes — (2,498 ) Decrease (increase) in other assets
407 (10,771 ) Increase (decrease) in accounts payable 5,211 (4,057
) Increase (decrease) in accrued compensation 10,195 (4,292 )
Increase (decrease) in deferred revenue and other contract
liabilities 1,420 (13,295 ) Decrease in income taxes payable (1,208
) (72,087 ) Increase in other current liabilities 3,923 5,282
(Decrease) increase in other liabilities (7,577 )
28,013 Net cash provided by operating activities
239,527 56,062
Cash flows from investing
activities: Purchases of property and equipment (17,126 )
(43,684 ) Increase in intangible assets (5,557 ) (3,079 ) Business
combination, net of cash acquired (3,922 ) — Acquisitions of equity
investments — (1,145 ) Other 453 — Net
cash used in investing activities (26,152 ) (47,908 )
Cash flows from financing activities: Proceeds from issuance
of common stock 44,748 62,205 Repurchases of common stock (18,478 )
(66,272 ) Other (490 ) (71 ) Net cash provided by
(used in) financing activities 25,780 (4,138 )
Effect of foreign currency exchange rates on cash (1,997 )
3,269 Net increase in cash, cash equivalents
and restricted cash 237,158 7,285 Cash, cash equivalents and
restricted cash at beginning of period 315,483
308,198 Cash, cash equivalents and restricted cash at end of
period $ 552,641 $ 315,483
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190226006161/en/
Investor Contact: Eli Kammerman(949)
297-7077ekammerman@masimo.com
Media Contact: Irene Paigah(858)
859-7001irenep@masimo.com
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