Masimo Reports Third Quarter 2018 Financial Results

Q3 2018 Highlights

  • Total revenue, including royalty and other revenue, was $210.6 million;
  • Product revenue increased 12.4% to $202.1 million, or 12.8% on a constant currency basis;
  • Shipments of noninvasive technology boards and monitors were 59,100; and
  • GAAP net income per diluted share of $1.02. Non-GAAP net income per diluted share increased 26.8% to $0.71.

IRVINE, Calif.--()--Masimo (NASDAQ: MASI) today announced its financial results for the third quarter ended September 29, 2018.

Third Quarter 2018 Results:

Third quarter 2018 total revenue, including royalty and other revenue, was $210.6 million. Product revenue for the third quarter 2018 increased 12.4% to $202.1 million, or 12.8% on a constant currency basis.

During the third quarter of 2018, the Company shipped approximately 59,100 noninvasive technology boards and monitors.

The Company’s worldwide direct product revenue, which accounted for 86.0% of total product revenue, increased to $173.8 million in the third quarter 2018. OEM sales, which accounted for 14.0% of total product revenue, increased to $28.3 million for the third quarter 2018.

For the third quarter 2018, GAAP net income was $57.1 million or $1.02 per diluted share. Non-GAAP net income was $40.1 million, or $0.71 per diluted share.

Total cash and cash equivalents increased by $63.8 million during the quarter to $493.5 million, as of September 29, 2018.

As a result of the strong performance in the third quarter, Masimo is raising its guidance for fiscal year 2018. The Company now expects product revenues of $826 million, which reflects reported growth of 11.9% and constant currency growth of 11.3%. Masimo is also raising its GAAP EPS guidance to $3.37 and its non-GAAP EPS guidance to $2.92.

Joe Kiani, Chairman and Chief Executive Officer of Masimo, said, “We are happy to report results for the third quarter that exceeded expectations. Our product revenue increased 12.8% on a constant currency basis to reach $202 million for the quarter. We also shipped a record 59,100 noninvasive technology boards and monitors. Our strong growth is the result of increasing demand for our innovative technologies and systems solutions, which enable our customers to automate patient management across the continuum of care and improve patient safety. We are once again raising guidance for revenue and earnings in 2018 as we continue to grow due to our life saving and life improving technologies.”

2018 Financial Guidance

The Company provided the following updated estimates for its full year 2018 guidance:

  2018 Updated Guidance1   Prior 2018 Guidance1
(in millions, except percentages and earnings per share) GAAP     Non-GAAP GAAP     Non-GAAP
Total revenue, including royalty and other revenue $ 854 $ 854 $ 850 $ 850
Product revenue $ 826 $ 826 $ 822 $ 822
Percentage growth - as reported 11.9 % 11.9 % 11.3 % 11.3 %
Percentage growth - constant currency N/A 11.3 % N/A 10.8 %
Royalty and other revenue $ 28 $ 28 $ 28 $ 28
Operating margin 24.2 % 24.4 % 24.2 % 24.4 %
Diluted earnings per share $ 3.37 $ 2.92 $ 3.07 $ 2.90
EBITDA 26.7 % 29.9 % 26.8 % 29.9 %
Estimated tax rate 11.0 % 24.0 % 19.3 % 24.0 %

______________

1 Updated guidance provided October 31, 2018. Prior guidance provided August 1, 2018.

  • Total revenue, including royalty and other revenue, increasing to $854 million;
  • Product revenue increasing to $826 million, which reflects reported growth of 11.9% and constant currency growth of 11.3%;
  • GAAP diluted earnings per share increasing to $3.37;
  • Non-GAAP diluted earnings per share increasing to $2.92; and
  • Included in our full year revenue guidance is approximately $4 million of year-over-year currency benefits.

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 No. 2014-09, Revenue (Topic 606): Revenue from Contracts with Customers (ASU 2014-09). The new revenue recognition standard requires the Company to make numerous assumptions that are based upon historical trends and management judgment. These assumptions may change over time and may have a material impact on our revenue recognition, guidance and results of operations. In accordance with the full retrospective method of adoption, the Company has adjusted certain amounts previously reported in its unaudited 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 condensed consolidated financial statements that will be included in Part I, Item 1 of our Quarterly Report on Form 10-Q (Form 10-Q) for the quarter ended September 29, 2018 once filed with the Securities and Exchange Commission (SEC) and Exhibit 99.3 that was included in our Current Report on Form 8-K that was filed with the SEC today.

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) non-GAAP product revenue growth %, (ii) non-GAAP net income, (iii) non-GAAP diluted earnings per share, (iv) non-GAAP gross profit, (v) non-GAAP operating income and (vi) 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; most recently in connection with our November 2016 settlement agreement with Koninklijke Philips N.V. 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.

The Tax Cuts and Jobs Act of 2017 (2017 Tax Act) was signed into law in December 2017, and became effective January 1, 2018. The 2017 Tax Act included a number of changes to existing U.S. federal tax law impacting businesses including, among other things, a permanent reduction in the corporate income tax rate from 35% to 21%, a one-time transition tax on the “deemed repatriation” of cumulative undistributed foreign earnings as of December 31, 2017 and changes in the prospective taxation of the foreign operations of U.S. multinational companies.

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. During the three months ended September 29, 2018, we recorded a significant tax benefit due to the expiration of the applicable statutes of limitations related to certain non-recurring transactions.

We believe that exclusion of the tax charges related to the 2017 Tax Act and 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 these tax items are unrelated to our core business and non-recurring in nature.

Third Quarter 2018 Actuals versus Third Quarter 2017 Actuals:

 

RECONCILIATION OF GAAP TO NON-GAAP CONSTANT CURRENCY PRODUCT REVENUE:

 
          Three Months Ended
(in thousands, except percentages)   September 29, 2018   September 30, 2017
As Adjusted
GAAP product revenue

$

202,068

$ 179,696
Non-GAAP constant currency adjustments:
Constant currency F/X adjustments   658   N/A
Total non-GAAP constant currency adjustments   658   N/A
Non-GAAP (constant currency) product revenue

$

202,726

  $ 179,696
Product revenue growth %:
GAAP 12.4 %
Non-GAAP (constant currency) 12.8 %
 
 
 
Nine Months Ended
(in thousands, except percentages)   September 29, 2018 September 30, 2017
As Adjusted
GAAP product revenue

$

608,461

$ 541,889
Non-GAAP constant currency adjustments:
Constant currency F/X adjustments   (5,363 ) N/A
Total non-GAAP constant currency adjustments   (5,363 ) N/A
Non-GAAP (constant currency) product revenue

$

603,098

  $ 541,889
Product revenue growth %:
GAAP 12.3 %
Non-GAAP (constant currency) 11.3 %
 
 

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME AND NET INCOME PER DILUTED SHARE:

     
Three Months Ended
September 29, 2018 September 30, 2017
As Adjusted
(in thousands, except per share amounts) $  

Per Diluted
Share

$    

Per Diluted
Share

GAAP net income, as originally reported $ 57,126 $ 1.02 $ 39,235 $ 0.70
ASC 606 adjustments     (3,382 ) (0.06 )
GAAP net income, as adjusted 57,126 1.02 35,853 0.64
Non-GAAP adjustments:
Acquisition related depreciation and amortization 361 390
Litigation damages, awards and settlements 500 0.01
Non-operating other (income) expense 1,311 0.02 448 0.01
Tax impact of above items (376 ) (0.01 ) (137 )
Excess tax benefits from stock-based compensation (14,647 ) (0.26 ) (4,867 ) (0.09 )
Expiration of certain statutes of limitations related to unique and non-recurring tax positions (4,169 ) (0.07 )
Remeasurement of deferred taxes (16 )          
Total non-GAAP adjustments (17,036 ) (0.31 )   (4,166 )   (0.08 )
Non-GAAP net income $ 40,090   $ 0.71   $ 31,687   $ 0.56  
Weighted average shares outstanding - diluted 56,237 56,163
 
 
 
Nine Months Ended
September 29, 2018   September 30, 2017
As Adjusted
(in thousands, except per share amounts) $

Per Diluted
Share

  $  

Per Diluted
Share

GAAP net income, as originally reported $ 146,609 $ 2.59

$

 

131,248

$

2.35

ASC 606 adjustments       1,276     0.02  
GAAP net income, as adjusted 146,609 2.59 132,524 2.37
Non-GAAP adjustments:
Acquisition related depreciation and amortization 1,082 0.02 1,207 0.02
Litigation damages, awards and settlements 500 0.01
Non-operating other (income) expense 764 0.01 239
Tax impact of above items (134 ) (0.01 ) (374 ) (0.01 )
Excess tax benefits from stock-based compensation (21,742 ) (0.38 ) (35,093 ) (0.62 )
Expiration of certain statutes of limitations related to unique and non-recurring tax positions (4,169 ) (0.07 )
Remeasurement of deferred taxes            
Total non-GAAP adjustments (23,699 ) (0.42 )   (34,021 )   (0.61 )
Non-GAAP net income $ 122,910   $ 2.17  

$

 

98,503  

$

1.76

 
Weighted average shares outstanding - diluted 56,555 55,967
 

Full Year 2018 Guidance versus Full Year 2017 Actuals:

 

RECONCILIATION OF GAAP PRODUCT REVENUE GROWTH % TO

CONSTANT CURRENCY PRODUCT REVENUE GROWTH %:

 
      Full Year 2018
Updated Guidance1
  Full Year 2017
Actuals As Adjusted
GAAP product revenue $ 826,000 $ 738,242
 
Non-GAAP constant currency adjustments:
Constant currency F/X adjustments (4,000 ) N/A
Total non-GAAP constant currency adjustments (4,000 ) N/A
 
Non-GAAP (constant currency) product revenue $ 822,000   $ 738,242
Product revenue growth %:
GAAP 11.9 %
Non-GAAP (constant currency) 11.3 %
 

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME AND NET INCOME PER DILUTED SHARE:

             
Full Year 2018
Updated Guidance1
Full Year 2017
Actuals As Adjusted
(in thousands, except per share amounts) $  

Per Diluted
Share

$  

Per Diluted
Share

GAAP net income, as originally reported $ 189,300 $ 3.37 $ 131,616 $ 2.36
ASC 606 adjustments     (6,827 ) (0.13 )
GAAP net income as adjusted 189,300 3.37 124,789 2.23
Non-GAAP adjustments:
Acquisition related depreciation and amortization 1,500 0.03 1,597 0.03
Litigation damages, awards and settlements 500 0.01
Non-operating other (income) expense 800 0.01 270 0.01
Tax impact of above items (231 ) (0.01 ) (456 ) (0.01 )
Excess tax benefits from stock-based compensation (23,400 ) (0.42 ) (39,241 ) (0.70 )
Tax impact of U.S. tax reform2, 3 41,392 0.74
Expiration of certain statutes of limitation related to unique and non-recurring tax positions (4,169 ) (0.07 )    
Total non-GAAP adjustments (25,000 ) (0.45 ) 3,562   0.07  
Non-GAAP net income $ 164,300   $ 2.92   $ 128,351   $ 2.30  
Weighted average shares outstanding - diluted 56,200 55,874

______________

1 Estimated effective tax rate of 11.0% applied to GAAP earnings and 24.0% applied to non-GAAP earnings.

2 As previously reported in May 2018, the 2017 Tax Act resulted in an unfavorable charge of $43.5 million in the fourth quarter of 2017. The amount recognized was a provisional estimate and subject to change, possibly materially, due to, among other things, refinements of the Company’s calculations, changes in interpretations and assumptions the Company has made or additional guidance issued by the U.S. Treasury, Securities and Exchange Commission or Financial Accounting Standards Board.

3 Includes adjustments related to the full retrospective application of ASC 606 of $2.1 million, or $0.04 per diluted share, in the first quarter of 2018.

 

RECONCILIATION OF GAAP TO NON-GAAP GROSS PROFIT AND OPERATING INCOME:

           
Full Year 2018
Updated Guidance
Full Year 2017
Actuals As Adjusted
(in thousands, except percentages) $   % of Revenue $   % of Revenue
GAAP gross profit, as originally reported $ 570,000 66.7 % $ 535,100 67.0 %
ASC 606 adjustments     (13,068 ) (1.0 )
GAAP gross profit, as adjusted 570,000 66.7 522,032 66.0
Non-GAAP adjustments:
Acquisition related depreciation and amortization 500   0.1   500   0.1  
Total non-GAAP adjustments 500   0.1   500   0.1  
Non-GAAP gross profit $ 570,500   66.8 % $ 522,532   66.1 %
 
GAAP operating income $ 206,300 24.2 % $ 197,361 24.7 %
ASC 606 adjustments     (13,573 ) (1.4 )
GAAP operating income, as adjusted 206,300 24.2 183,788 23.3
Non-GAAP adjustments:
Acquisition related depreciation and amortization 1,500 0.2

 

1,597 0.2
Litigation damages, awards and settlements 500              
Total non-GAAP adjustments 2,000     1,597    
Non-GAAP operating income $ 208,300   24.4 % $ 185,385   23.5 %
 
 

RECONCILIATION OF EBITDA TO ADJUSTED EBITDA:

             
Full Year 2018
Updated Guidance
Full Year 2017
Actuals As Adjusted
(in thousands, except percentages) $   % of Revenue $   % of Revenue
GAAP net income, as originally reported $ 189,300 22.2 % $ 131,616 16.7 %
ASC 606 adjustments     (6,827 ) (0.9 )
GAAP net income, as adjusted 189,300 22.2 124,789 15.8
Other (income)/expense1 (6,400 ) (0.7 ) (2,013 ) (0.3 )
Provision for income taxes 23,400 2.7 61,011 7.8
Depreciation and amortization 21,300   2.5   20,061   2.5  
EBITDA 227,600 26.7 203,848 25.8
Add: Non-cash stock-based compensation expense 26,800 3.1 17,187 2.2
Add: Litigation damages, awards and settlements 500   0.1      
Adjusted EBITDA $ 254,900   29.9 % $ 221,035   28.0 %

______________

1 Other (income)/expense consists primarily of interest (income)/expense and net foreign currency (gains)/losses.

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 2368156. After the live webcast, the call will be available on Masimo’s website through November 28, 2018. In addition, a telephonic replay of the call will be available through November 7, 2018. The replay dial-in numbers are (855) 859-2056 for domestic callers and +1 (404) 537-3406 for international callers. Please use reservation code 2368156.

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®), 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 2018 total, product, royalty and other revenues, earnings per diluted share, operating margin, EBITDA, 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)

  September 29,
2018
  December 30,
2017
As Adjusted
ASSETS
Current assets
Cash and cash equivalents $ 493,488 $ 315,302
Accounts receivable, net of allowance for doubtful accounts 101,024 118,532
Inventories 92,952 92,259
Other current assets 48,283   33,601  
Total current assets 735,747 559,694
Deferred costs and other contract assets 119,523 109,256
Property and equipment, net 164,605 164,096
Intangible assets, net 28,462 27,123
Goodwill 23,454 20,617
Deferred tax assets 20,209 19,981
Other non-current assets 3,859   4,668  
Total assets $ 1,095,859   $ 905,435  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 38,940 $ 33,780
Accrued compensation 41,293 39,515
Accrued and other current liabilities 27,802 24,254
Deferred revenue and other contract-related liabilities, current 35,592   32,105  
Total current liabilities 143,627 129,654
Other non-current liabilities 39,834   51,757  
Total liabilities 183,461 181,411
Commitments and contingencies
Stockholders’ equity
Common stock 53 52
Treasury stock (489,026 ) (472,536 )
Additional paid-in capital 523,051 461,494
Accumulated other comprehensive loss (5,818 ) (2,941 )
Retained earnings 884,138   737,955  
Total stockholders’ equity 912,398   724,024  
Total liabilities and stockholders’ equity $ 1,095,859   $ 905,435  
 
 
MASIMO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts)

 
  Three Months Ended   Nine Months Ended
September 29,
2018
  September 30,
2017
As Adjusted
September 29,
2018
  September 30,
2017
As Adjusted
Revenue:
Product $ 202,068 $ 179,696 $ 608,461 $ 541,889
Royalty and other revenue 8,515   13,664   26,696   40,420
Total revenue 210,583 193,360 635,157 582,309
Cost of goods sold 69,830   69,295   208,596   198,929
Gross profit 140,753 124,065 426,561 383,380
Operating expenses:
Selling, general and administrative 72,670 65,704 215,263 198,460
Research and development 19,442   15,300   57,160   45,859
Total operating expenses 92,112   81,004   272,423   244,319
Operating income 48,641 43,061 154,138 139,061
Non-operating income 1,028   287   4,080   1,319
Income before provision (benefit) for income taxes 49,669 43,348 158,218 140,380
Provision (benefit) for income taxes (7,457 ) 7,495   11,609   7,856
Net income $ 57,126   $ 35,853   $ 146,609   $ 132,524
 
Net income per share:
Basic $ 1.09   $ 0.69   $ 2.78   $ 2.57
Diluted $ 1.02   $ 0.64   $ 2.59   $ 2.37
 
Weighted-average shares used in per share calculations:
Basic 52,432   52,079   52,726   51,469
Diluted 56,237   56,163   56,555   55,967
 

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
September 29,
2018
September 30,
2017
September 29,
2018
September 30,
2017
Cost of goods sold $ 89 $ 93 $ 240 $ 258
Selling, general and administrative 5,981 4,049 15,310 8,683
Research and development 1,573   909   4,145   2,251
Total $ 7,643   $ 5,051   $ 19,695   $ 11,192
 
 
MASIMO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

 
  Nine Months Ended
September 29,
2018
  September 30,
2017
As Adjusted
Cash flows from operating activities:
Net income $ 146,609 $ 132,524
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 15,959 14,384
Stock-based compensation 19,695 11,192
Loss on disposal of property, equipment and intangibles 641 420
Benefit from doubtful accounts (401 )
Benefit from deferred income taxes (6,747 )
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 17,384 (17,277 )
Increase in inventories (1,069 ) (26,354 )
Increase in other current assets (15,606 ) (9,095 )
Increase in deferred costs and other contract assets (10,400 ) (9,175 )
Decrease (increase) in other non-current assets 496 (3,525 )
Increase in accounts payable 4,090 3,748
Increase (decrease) in accrued compensation 1,919 (9,094 )
Increase (decrease) in accrued liabilities 5,695

393

 

Increase (decrease) in income tax payable

410 (71,177 )
Increase (decrease) in deferred revenue and other contract-related liabilities 3,981

(11,039

)
(Decrease) increase in other non-current liabilities (6,351 ) 1,456  
Net cash provided by operating activities 176,305   7,381  
Cash flows from investing activities:
Purchases of property and equipment, net (12,299 ) (37,830 )
Increase in intangible assets (4,718 ) (2,220 )
Business combination, net of cash acquired, and acquisitions of equity investments (4,000 ) (1,145 )
Proceeds from sale of equity investments 453    
Net cash used in investing activities (20,564 ) (41,195 )
Cash flows from financing activities:
Repayments of capital lease obligations (71 )
Proceeds from issuance of common stock 42,297 55,709
Payroll tax withholdings on behalf of employees for vested equity awards (168 )
Repurchases of common stock (18,478 ) (42,608 )
Net cash provided by financing activities 23,651   13,030  
Effect of foreign currency exchange rates on cash (1,230 ) 3,112  
Net increase in cash, cash equivalents, and restricted cash 178,162 (17,672 )
Cash, cash equivalents and restricted cash at beginning of period 315,483   308,198  
Cash, cash equivalents and restricted cash at end of period $ 493,645   $ 290,526  
 

Contacts

Masimo
Investor Contact: Eli Kammerman
(949) 297-7077
ekammerman@masimo.com
or
Media Contact: Irene Paigah
(858) 859-7001
irenep@masimo.com

Contacts

Masimo
Investor Contact: Eli Kammerman
(949) 297-7077
ekammerman@masimo.com
or
Media Contact: Irene Paigah
(858) 859-7001
irenep@masimo.com