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Masimo Reports Third Quarter 2008 Financial Results
Date:10/27/2008

Record results mark 21st consecutive quarter of revenue growth

Q3 2008 Highlights:

- Product revenues increased 29% to a record $66.0 million

- Direct (Non-OEM) Business revenues increased by 48%

- Shipped 30,700 new pulse oximeters and Pulse CO-Oximeters

IRVINE, Calif., Oct. 27 /PRNewswire-FirstCall/ -- Masimo Corporation (Nasdaq: MASI), the inventor of Pulse CO-Oximetry and Measure-Through Motion and Low Perfusion pulse oximetry, today announced its financial results for the 2008 third fiscal quarter.

For the third quarter of 2008, Masimo reported product revenues of $66.0 million representing a 29% increase over $51.1 million for the third quarter of 2007. Including royalty revenues, Masimo reported total 2008 third quarter revenues of $78.1 million compared to $64.4 million for the third quarter of 2007. Net income for the 2008 third quarter was $13.1 million or $0.22 per common share compared to $6.9 million or $0.16 per common share for the third quarter of 2007.

During the third quarter of 2008, Masimo also reported that it shipped 30,700 Masimo SET and Masimo Rainbow SET oximetry units, excluding handheld units, compared to 30,800 units in the same prior year quarter. For the first nine months of 2008, Masimo has shipped 88,400 new units representing an annualized increase of 25% over the estimated 470,000 Masimo units in the market as of December 2007 and has now increased its total worldwide net installed base to 540,000 units.

In the third quarter of 2008, revenues from Masimo Rainbow SET products increased by 85% from the same prior year quarter to $3.0 million. For the first nine months of 2008, revenues from Masimo Rainbow SET products were $8.7 million, an increase of 71% compared to the first nine months of 2007.

Joe E. Kiani, Chairman and Chief Executive Officer of Masimo, said, "We are happy with the continued strength in our core pulse oximetry business and growth in Rainbow SET product revenues. Our business model, which is based on innovation and recurring revenue from our installed base, is showing resilience in a difficult economic environment."

As of September 27, 2008, cash and cash equivalents totaled $122.6 million, an increase from December 29, 2007 of $96.7 million. As previously announced, during the 2008 first fiscal quarter, Masimo repaid in full a $26.7 million debt obligation, the majority of which was established in early fiscal 2007.

Financial Guidance

Based on the information available as of October 27, 2008, relating to the results of the first nine months of fiscal year 2008, Masimo now expects its total fiscal year 2008 product revenues to be approximately $256 million and total revenues, including royalties, to be approximately $303 million. These figures are up from the previously released guidance of $253 million and $300 million, respectively. Masimo also now expects earnings per common share for fiscal year 2008 to be approximately $0.71 per share, up from the previously released guidance of $0.64 per share.

Conference Call

Masimo will hold a conference call today at 2:00 p.m. PT (5:00 p.m. ET) to discuss the results. The dial-in numbers are (800) 399-7902 for domestic callers and (706) 634-0949 for international callers. The reservation number for both dial-in numbers is 68032269. A live web cast of the conference call will be available online from the "Investor Relations" page of the Company's corporate web site at http://www.masimo.com. After the live web cast, the call will remain available on Masimo's website through November 27, 2008. In addition, a telephonic replay of the call will be available until November 9, 2008. The replay dial-in numbers are (800) 642-1687 for domestic callers and (706) 645-9291 for international callers. Please use reservation code 68032269. Our financial guidance will be limited to the statements made in this press release.

About Masimo

Masimo (Nasdaq: MASI) develops innovative monitoring technologies that significantly improve patient care-helping solve "unsolvable" problems. In 1995, the company debuted Measure-Through Motion and Low Perfusion pulse oximetry, known as Masimo SET, which virtually eliminated false alarms and increased pulse oximetry's ability to detect life-threatening events. More than 100 independent and objective studies demonstrate Masimo SET provides the most reliable SpO2 and pulse rate measurements even under the most challenging clinical conditions, including patient motion and low peripheral perfusion. In 2005, Masimo introduced Masimo Rainbow SET, a breakthrough noninvasive blood constituent monitoring platform that can measure many blood constituents that previously required invasive procedures. Rainbow SET continuously and noninvasively measures total hemoglobin (SpHb(TM)), oxygen content (SpOC(TM)), carboxyhemoglobin (SpCO(R)), methemoglobin (SpMet(R)), and PVI(TM), in addition to oxyhemoglobin (SpO2), pulse rate (PR), and perfusion index (PI), allowing early detection and treatment of potentially life-threatening conditions. Founded in 1989, Masimo has the mission of "Improving Patient Outcomes and Reducing Cost of Care by Taking Noninvasive Monitoring to New Sites and Applications." Additional information about Masimo and its products may be found at http://www.masimo.com.

Forward-Looking Statements

This press release includes 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 financial condition, results of operations, prospects and business generally; expectations regarding our ability to design and deliver innovative new noninvasive technologies; and expectations for total revenues, including royalties, product revenues and GAAP earnings per share for the full fiscal year 2008. 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 reliance on Masimo SET and related 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; the failure to continue developing innovative products and technologies; the lack of acceptance of any new products and technologies of ours; obtaining regulatory approval of our current and future products and technologies, including the recently announced total hemoglobin measurement; 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 impact of the decline in the U.S. credit markets on us and our customers; the amount and type of equity awards that we may grant to employees and service providers in the future; and other factors discussed in the "Risk Factors" section of our Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 2008 filed with the Securities and Exchange Commission on August 5, 2008. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. All forward-looking statements included in this press release are expressly qualified in their entirety by the foregoing cautionary statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to update, amend or clarify these forward-looking statements or the risk factors contained in our Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 2008, whether as a result of new information, future events or otherwise, except as may be required under the applicable securities laws.

Masimo Corporation

Investor Contact:

Mark P. de Raad

Executive Vice President and Chief Financial Officer

Masimo Corporation

(949) 297-7080

mderaad@masimo.com

Media Contact:

Dana Banks

Manager, Public Relations

Masimo Corporation

(949) 297-7348

dbanks@masimo.com

Masimo, SET, Signal Extraction Technology, Improving Outcomes and Reducing Cost of Care by Taking Noninvasive Monitoring to New Sites and Applications, Rainbow, SpHb, SpCO, SpMet, PVI, Pulse CO-Oximetry and Pulse CO-Oximeter are trademarks or registered trademarks of Masimo Corporation.

MASIMO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

December 29, September 27,

2007 2008

(Unaudited)

ASSETS

Current assets

Cash and cash equivalents $96,733 $122,603

Accounts receivable, net of allowance

for doubtful accounts 26,970 29,511

Royalties receivable 13,866 11,375

Inventories 23,110 29,261

Prepaid expenses 7,084 7,998

Deferred tax assets 14,334 14,334

Other current assets 1,543 873

Total current assets 183,640 215,955

Deferred cost of goods sold 26,249 27,031

Property and equipment, net 11,164 12,816

Deferred tax assets 5,332 5,332

Intangible assets, net 5,589 7,289

Other assets 3,537 2,809

Total assets $235,511 $271,232

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable $14,640 $14,510

Accrued compensation 12,409 13,404

Accrued liabilities 6,394 6,105

Deferred revenue 16,827 18,606

Current portion of long-term debt 11,539 548

Total current liabilities 61,809 53,173

Long-term debt, less current portion 19,502 202

Other liabilities 4,134 4,048

Total liabilities 85,445 57,423

Commitments and contingencies

Stockholders' equity

Common stock 55 57

Treasury stock (1,209) (1,209)

Additional paid-in capital 143,297 174,245

Accumulated other comprehensive loss (1,034) (698)

Retained earnings 8,957 41,414

Total stockholders' equity 150,066 213,809

Total liabilities and stockholders'

equity $235,511 $271,232

MASIMO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share information)

(unaudited)

Three Months Ended Nine Months Ended

September September September September

29, 27, 29, 27,

2007 2008 2007 2008

Revenue:

Product $51,122 $66,001 $144,513 $187,524

Royalty and license fee 13,254 12,131 42,497 36,484

Total revenue 64,376 78,132 187,010 224,008

Cost of goods sold 18,809 22,393 53,630 64,917

Gross profit 45,567 55,739 133,380 159,091

Operating expenses:

Research and development 6,540 6,020 17,455 18,298

Selling, general and

administrative 21,594 29,167 64,575 89,062

Antitrust litigation 508 46 982 491

Total operating expenses 28,642 35,233 83,012 107,851

Operating income 16,925 20,506 50,368 51,240

Non-operating income (expense):

Interest income 726 545 1,270 2,129

Interest expense (719) (19) (1,831) (722)

Other 559 (413) 770 (235)

Total non-operating income (expense) 566 113 209 1,172

Income before provision for income

taxes 17,491 20,619 50,577 52,412

Provision for income taxes 6,941 7,554 20,377 19,955

Net income 10,550 13,065 30,200 32,457

Accretion of preferred stock (925) - (4,837) -

Undistributed income attributable to

preferred stockholders (2,739) - (13,526) -

Net income attributable to common

stockholders $6,886 $13,065 $11,837 $32,457

Net income per common share:

Basic $0.18 $0.23 $0.49 $0.58

Diluted $0.16 $0.22 $0.40 $0.54

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 income above (in thousands):

Three Months Ended Nine Months Ended

September September September September

29, 27, 29, 27,

2007 2008 2007 2008

Cost of goods sold $56 $55 $134 $159

Research and development 191 608 466 1,627

Selling, general and administrative $697 $1,328 $1,992 $3,952

MASIMO CORPORATION

Reconciliation of GAAP to Non-GAAP Earnings per Share

(unaudited)

The following tables provide a comparison of our earnings per share

calculated under Emerging Issues Task Force Issue No. 03-6, or EITF 03-6,

"Participating Securities and the Two-Class Method under FASB Statement

No. 128", and Statement of Financial Accounting Standards No. 128, or

SFAS 128, "Earnings per Share", in accordance with GAAP and the non-GAAP

if-converted method based solely upon SFAS 128. The non-GAAP

if-converted method assumes conversion of all shares of our preferred

stock into common stock as of December 31, 2006.

Upon closing of our initial public offering on August 13, 2007, all of

the outstanding convertible preferred shares were converted into common

shares. Therefore, subsequent to this stock conversion, we use the

if-converted method under SFAS 128 to calculate earnings per share.

We believe that the following non-GAAP earnings per share information for

the three and nine months ended September 29, 2007 is relevant and useful

information that can be used by analysts, investors and other interested

parties to assess our performance on a comparable basis to the three and

nine months ended September 27, 2008 and future reported earnings per

share. Accordingly, we are disclosing this unaudited information to

permit additional analysis of our performance (in thousands, except share

data):

2007

As Reported Non-GAAP

Three Three Three Three

Months Months Months Months

Ended Ended Ended Ended

September September September September

29, 29, 29, 29,

2007 2007 2007 2007

Net income attributable to

common stockholders:

Net income - two class

method (1) $4,985 $24,871

Accretion of preferred

stock (925) (4,837)

Income attributable to

preferred stockholders (2,739) (13,526)

Net income attributable

to common stockholders $1,321 $6,508

Basic net income per

common share:

Weighted average common

shares outstanding -

two class method 16,704,285 16,654,586

Basic earnings per

share during which

two classes of equity

securities were

outstanding $0.08 $0.39

Net income for period

during which single

class of equity

securities was

outstanding (1) $5,565 $5,329 $10,550 $30,200

Weighted average

common shares

outstanding -

single class (2) 54,630,610 54,630,610 53,064,738 51,860,652

Basic net income

per share during

which single class

of equity securities

was outstanding $0.10 $0.10

Basic net income per

common share $0.18 $0.49 $0.20 $0.58

Diluted net income per

common share:

Weighted average

common shares

outstanding - two

class method 16,704,285 16,654,586

Diluted common

share equivalent:

stock options 4,221,224 4,078,314

20,925,509 20,732,900

Diluted earnings

per share for

period during

which two classes

of equity securities

were outstanding $0.06 $0.31

Net income for period

during which single

class of equity

securities was

outstanding (1) $5,565 $5,329 $10,550 $30,200

Weighted average

common shares

outstanding -

single class (2) 54,630,610 54,630,610 53,064,738 51,860,652

Diluted common share

equivalent: stock

options 4,747,848 4,747,848 4,527,282 4,231,074

59,378,458 59,378,458 57,592,020 56,091,726

Diluted net income per

share for period during

which single class of

equity securities was

outstanding $0.10 $0.09

Diluted net income per

common share $0.16 $0.40 $0.18 $0.54

2008

As Reported

Three Three

Months Months

Ended Ended

September September

27, 27,

2008 2008

Net income attributable to common stockholders:

Net income - two class method (1)

Accretion of preferred stock

Income attributable to preferred stockholders

Net income attributable to common stockholders

Basic net income per common share:

Weighted average common shares

outstanding - two class method

Basic earnings per share during which

two classes of equity securities

were outstanding

Net income for period during which

single class of equity securities

was outstanding (1) $13,065 $32,457

Weighted average common shares

outstanding - single class (2) 56,774,983 56,016,978

Basic net income per share during

which single class of equity

securities was outstanding

Basic net income per common share $0.23 $0.58

Diluted net income per common share:

Weighted average common shares

outstanding - two class method

Diluted common share equivalent:

stock options

Diluted earnings per share for period

during which two classes of equity

securities were outstanding

Net income for period during which

single class of equity securities

was outstanding (1) $13,065 $32,457

Weighted average common shares

outstanding - single class (2) 56,774,983 56,016,978

Diluted common share equivalent:

stock options 3,601,755 4,159,815

60,376,738 60,176,793

Diluted net income per share for

period during which single class of

equity securities was outstanding

Diluted net income per common share $0.22 $0.54

(1) Net income for the three months ended September 29, 2007 was

allocated between the periods during which two classes of equity

securities were outstanding and during which a single class of equity

securities was outstanding based on the respective number of days. The

convertible preferred stock was converted into common stock on

August 13, 2007, the closing date of the Company's initial public

offering. For the three months ended September 29, 2007, two classes

of equity securities were outstanding for 43 days and a single class

of equity securities was outstanding for 48 days, or 47.3% and 52.7%

of the total days in the reporting period, respectively. For the nine

months ended September 29, 2007, two classes of equity securities were

outstanding for 224 days and a single class of equity securities was

outstanding for 48 days, or 82.4% and 17.6% of the total days in the

reporting period, respectively.

(2) Weighted average shares outstanding used to compute basic net income

per share after conversion of convertible preferred stock; one class

of common shares was outstanding for the period from August 13, 2007

to September 29, 2007.


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SOURCE Masimo Corporation
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All rights reserved


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