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Masimo Reports Fourth Quarter and Full Year 2008 Financial Results
Date:3/3/2009

Record results mark 22nd consecutive quarter and 14th year of consecutive product revenue growth. Company also announces international realignment to better support growing non-US business.

Q4 2008 Highlights:

- Product revenues increased 29.4% to $71.4 million

- Rainbow revenues increased 161% to $4.7 million

- Over 31,700 Masimo SET and Masimo Rainbow SET pulse oximeter units were shipped in Q4 2008

- International realignment results in a Q4 2008 tax charge of $0.25 per share and a Q4 2008 net loss of $0.01 per share; Q4 2008 earnings per share, excluding the tax charge, was $0.24 per share

Full Year 2008 Highlights:

- Product revenues increased 29.7% to $258.9 million

- Rainbow revenues increased 91% to $13.4 million

- Over 120,000 Masimo SET and Masimo Rainbow SET pulse oximeter units were shipped in 2008

- International realignment results in a Q4 2008 tax charge of $0.25 per share and full year 2008 earnings per share of $0.53; full year 2008 earnings per share, excluding the Q4 tax charge, was $0.78 per share

IRVINE, Calif., March 3 /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 both the quarter and year ended January 3, 2009.

For the fiscal fourth quarter, Masimo reported product revenues of $71.4 million representing a 29.4% increase over $55.2 million for the fourth quarter of 2007. Including royalty revenues, Masimo reported total 2008 fourth quarter revenues of $83.1 million compared to $69.3 million for the fourth quarter of 2007. For the fourth quarter, Masimo reported a loss of $0.01 per share, resulting from a $14.9 million, or $0.25 per share, tax charge related to the implementation of its new international business organization and structure. Excluding this tax charge, fourth quarter net income would have been $14.4 million, or $0.24 per diluted share, compared to $0.20 per common share for the fourth quarter of 2007. In addition, higher research and development tax credits added $0.03 per share in the fourth quarter of 2008 and $0.02 in the fourth quarter of 2007. Masimo also reported that it shipped 31,700 Masimo SET and Masimo Rainbow SET oximetry units, excluding handheld units, during the fourth quarter of 2008, up from 29,400 in the comparable prior year period, resulting in a new estimated worldwide installed base of 567,000 Masimo SET and Masimo Rainbow SET pulse oximeters.

During the fourth quarter of 2008, Masimo implemented a new international business organization and structure designed to better serve and support Masimo's growing international business. By centralizing its international operations, including sales management, marketing, customer support, planning, logistics and administrative functions, Masimo believes it will be able to develop a more efficient and scalable international organization - capable of being even more responsive to the business needs of its international customers - all under one centralized management structure. As result of this realignment, in Q4 2008, Masimo incurred a one-time tax charge related to expenses for sharing in the costs of our ongoing research and development efforts as well as the prepayment of licensing commercial rights to utilize pre-existing intangibles. As a result of this new international business structure, Masimo believes that its future income tax rates will decline although future income tax rates will depend on various factors, including profits (losses) before taxes, changes to tax law and the geographic composition of pre-tax income.

For the fiscal year ended January 3, 2009, Masimo reported product revenues of $258.9 million, up 29.7% from $199.7 million in 2007. Including royalty revenues, Masimo's total revenues were $307.1 million for the year ended January 3, 2009, up from $256.3 million in 2007. For the year ended January 3, 2009, Masimo reported earnings of $31.9 million or $0.53 per share, including the $14.9 million tax charge related to the implementation of its new international business organization and structure. Excluding the Q4 2008 tax charge, net income would have been $46.8 million, or $0.78 per share compared to $0.60 per share in 2007. In the year ended January 3, 2009, Masimo shipped 120,100 Masimo SET and Masimo Rainbow SET pulse oximeter units, excluding handheld pulse oximeters, compared to 116,300 in 2007.

In the fourth quarter of 2008, revenues from Masimo Rainbow SET products increased to $4.7 million or 161% from $1.8 million in the same prior year quarter. For the year ended January 3, 2009, revenues from Masimo Rainbow SET products were $13.4 million, an increase of 91% compared to 2007. As a result, 2008 Masimo Rainbow SET revenues accounted for 5.2% of total product revenues up from 3.7% in 2007.

Joe E. Kiani, Chairman and Chief Executive Officer of Masimo, said, "We have been fortunate that, despite the very challenging economic environment, hospitals and physicians continue to focus on the quality and efficiency of their patients' care and, as a result, continue to migrate to Masimo's gold standard SET pulse oximetry and Rainbow SET Pulse CO-Oximetry platforms. Our on-going business model, which is based on both new product innovation and a recurring revenue stream, is continuing to show resilience in this difficult worldwide economic climate."

As of January 3, 2009, cash and cash equivalents totaled $146.9 million, up from $96.7 million at December 29, 2007, including the previously announced first quarter 2008 repayment in full of a $26.7 million debt obligation which had been established in early fiscal 2007.

Financial Guidance

While providing financial guidance in this economic environment is more difficult than in prior periods, Masimo expects 2009 product revenues will be between $310 million and $315 million. Masimo also expects 2009 royalty revenues to be between $42 million to $46 million. As a result of these ranges, Masimo expects total 2009 revenues to be between $352 million and $361 million. For the full year 2009, Masimo expects its GAAP earnings per share to be between $0.83 and $0.87 per common share. Included in these 2009 earnings per share ranges are an expected reduction in year over year royalty payments, an expected increase in 2009 non-cash stock based compensation expenses of $11.9 million, up from $7.7 million in 2008 and the expected benefits from our new international business structure. The projections and guidance set forth above are estimates only and actual performance could differ.

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 (888) 520-7182 for domestic callers and +1 (706) 679-9937 for international callers. The reservation number for both dial-in numbers is 84029998. 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 www.masimo.com. After the live web cast, the call will remain available on Masimo's website through April 3, 2009. In addition, a telephonic replay of the call will be available until March 17, 2009. The replay dial-in numbers are (800) 642-1687 for domestic callers and +1 (706) 645-9291 for international callers. Please use reservation code 84029998.

Non-GAAP Measures

Masimo prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, or U.S. GAAP. In an effort to provide investors with additional information regarding the Company's results and to provide a meaningful period-over-period comparison of the Company's financial performance, the Company uses non-GAAP financial measures as defined by the Securities and Exchange Commission. The differences between the U.S. GAAP and non-GAAP financial measures are reconciled below. In presenting comparable results, the Company discloses non-GAAP financial measures when it believes such measures will be useful to investors, analysts and other interested parties in evaluating the Company's underlying business performance on a comparable basis with past and future reported earnings per share and with the financial guidance provided in this release. Management uses the non-GAAP financial measures to evaluate the Company's financial performance against internal budgets and targets. Importantly, management believes non-GAAP financial measures should be considered in addition to, and not in lieu of, U.S. GAAP financial measures. These non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and may be different from non-GAAP financial measures used by other companies.

About Masimo

Masimo (NASDAQ: MASI) develops, manufactures and markets 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 clinical and laboratory 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(R)), oxygen content (SpOC(TM)), carboxyhemoglobin (SpCO(R) ), methemoglobin (SpMet(R)) and plethysmograph variability index (PVI(R)), 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 www.masimo.com. Any information contained in, or that can be accessed through, our website is not incorporated by reference into, nor is it in any way a part of, this release.

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 royalty revenues, product revenues and Rainbow revenues, non-cash stock based compensation charges, GAAP earnings per share and non-GAAP pro forma earnings per share for the full fiscal year 2009. 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 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 risk that the implementation of our international realignment, even if timely implemented, will not produce the anticipated operational and financial benefits, including a 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 impact of the decline in the worldwide 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 September 27, 2008 filed with the Securities and Exchange Commission ("SEC") on October 29, 2008, 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 or the risk factors contained in our Quarterly Report on Form 10-Q for the fiscal quarter ended September 27, 2008, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

    Investor Contact:
    Mark P. de Raad
    Executive Vice President, Finance 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)

                                                     January 3,   December 29,
                                                        2009          2007
                                                        ----          ----
      ASSETS
      Current assets
            Cash and cash equivalents                  $146,910       $96,733
            Accounts receivable, net of allowance
             for doubtful accounts                       30,715        26,970
            Royalties receivable                         11,375        13,866
            Inventories                                  27,400        23,110
            Prepaid expenses                              4,780         7,084
            Deferred tax assets                          10,511        14,334
            Other current assets                            551         1,543
                                                            ---         -----
                Total current assets                    232,242       183,640
      Deferred cost of goods sold                        28,431        26,249
      Property and equipment, net                        12,979        11,164
      Deferred tax assets                                 8,781         5,332
      Intangible assets, net                              7,410         5,589
      Other assets                                        3,505         3,537
                                                          -----         -----
                Total assets                           $293,348      $235,511
                                                       ========      ========


      LIABILITIES AND STOCKHOLDERS' EQUITY
      Current liabilities
            Accounts payable                            $15,914       $14,640
            Accrued compensation                         15,607        12,409
            Accrued liabilities                           5,566         6,394
            Income taxes payable                         10,862           -
            Deferred revenue                             17,233        16,827
            Current portion of long-term debt               465        11,539
                                                            ---        ------
                Total current liabilities                65,647        61,809
      Long-term debt, less current portion                  157        19,502
      Other liabilities                                   8,153         4,134
                                                          -----         -----
                Total liabilities                        73,957        85,445

      Commitments and contingencies

      Stockholders' equity
            Common stock                                     57            55
            Treasury stock                               (1,209)       (1,209)
            Additional paid-in capital                  179,666       143,297
            Accumulated other comprehensive loss             (7)       (1,034)
            Retained earnings                            40,884         8,957
                                                         ------         -----
                Total stockholders' equity              219,391       150,066
                                                        -------       -------

                Total liabilities and stockholders'
                 equity                                $293,348      $235,511
                                                       ========      ========



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

                               Three Months Ended      Twelve Months Ended
                               ------------------      -------------------
                            January 3,   December 29, January 3, December 29,
                               2009          2007        2009       2007
                               ----          ----        ----       ----
                           (Unaudited)   (Unaudited)
      Revenue:
            Product          $71,371       $55,171    $258,895   $199,684
            Royalty and
             license fee      11,695        14,105      48,179     56,602
                              ------        ------      ------     ------
      Total revenue           83,066        69,276     307,074    256,286
      Cost of goods sold      24,537        19,976      89,454     73,606
                              ------        ------      ------     ------
      Gross profit            58,529        49,300     217,620    182,680
      Operating
       expenses:
            Research and
             development       7,197         5,505      25,495     22,960
            Selling, general
             and
             administrative   31,007        26,659     120,069     91,234
            Antitrust
             litigation          215           555         706      1,537
                                 ---           ---         ---      -----
      Total operating
       expenses               38,419        32,719     146,270    115,731
                              ------        ------     -------    -------

      Operating income        20,110        16,581      71,350     66,949
      Non-operating
       income (expense):
            Interest income      176         1,091       2,305      2,361
            Interest expense     (31)         (644)       (753)    (2,475)
            Other               (276)          517        (511)     1,287
                                ----           ---        ----      -----
      Total non-operating
       income (expense)         (131)          964       1,041      1,173
                                ----           ---       -----      -----

      Income before
       provision for
       income taxes           19,979        17,545      72,391     68,122
      Provision for income
       taxes                  20,509         5,490      40,464     25,867
                              ------         -----      ------     ------
      Net income
       (loss)                   (530)       12,055      31,927     42,255
      Accretion of
       preferred stock             -             -           -     (4,837)
      Undistributed income
       attributable
       to preferred
       stockholders                -             -           -    (14,339)
                                 ---           ---         ---    -------
      Net income (loss)
       attributable
       to common
       stockholders            $(530)      $12,055     $31,927    $23,079
                               =====       =======     =======    =======

      Net income (loss) per
       common share:
            Basic             $(0.01)        $0.22       $0.57      $0.71
                              ======         =====       =====      =====

            Diluted           $(0.01)        $0.20       $0.53      $0.60
                              ======         =====       =====      =====



    The following table presents details of the share-based compensation
    expense that is included in each functional line item in the condensed
    consolidated statements of operations above (in thousands):


                              Three Months Ended        Twelve Months Ended
                              ------------------        -------------------
                            January 3,  December 29,  January 3,  December 29,
                               2009         2007         2009        2007
                               ----         ----         ----        ----
      Cost of goods sold         $98          $130        $257       $264
      Research and
       development               609           204       2,236        670
      Selling, general and
       administrative         $1,271          $966      $5,223     $2,958



                                MASIMO CORPORATION
            Reconciliation of GAAP to Non-GAAP Diluted 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 SFAS No. 128 or SFAS 128, "Earnings per Share", in
    accordance with GAAP and the non-GAAP if-converted method based solely
    upon SFAS No. 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 twelve months ended December 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 twelve
    months ended January 3, 2009 and future reported earnings per share.
    Accordingly, we are disclosing this information to permit additional
    analysis of our performance (in thousands, except share data):


                                      Year Ended            Year Ended
                                   January 3, 2009       December 29, 2007
                                   ---------------       -----------------
                                     As Reported      As Reported    Non-GAAP
                                     -----------      -----------    --------

          Net income attributable to
           common stockholders:
          Net income - two class
           method (1)                     N/A             $26,075
          Accretion of preferred
           stock                          N/A              (4,837)
          Income attributable to
           preferred stockholders         N/A             (14,339)
                                                          -------
          Net income attributable to
           common stockholders            N/A              $6,899
                                          ---              ------

          Basic net income per
           common share:
          Weighted average
           common shares
           outstanding - two
           class method                   N/A          16,654,586

          Basic earnings per
           share for period
           during which two
           classes of equity
           securities were
           outstanding                    N/A               $0.41
                                          ---               -----

          Net income for
           period during
           which single
           class of equity
           securities was
           outstanding (1)              $31,927           $16,180     $42,255
                                        -------           -------     -------

          Weighted average
           common shares
           outstanding - single
           class (2)                 56,320,712        54,660,216  52,611,674
                                     ----------        ----------  ----------

          Basic net income
           per share for
           period during
           which single
           class of equity
           securities was
           outstanding                    $0.57             $0.30
                                          -----             -----

          Basic net income per
           common share                   $0.57             $0.71       $0.80
                                          =====             =====       =====


          Diluted net income per
           common share:
          Weighted average
           common shares
           outstanding - two
           class method                   N/A          16,654,586
          Diluted common share
           equivalent:
           stock options                  N/A           4,078,286
                                                        ---------

                                          N/A          20,732,872
                                          ---          ----------

          Diluted earnings
           per share for
           period during
           which two classes
           of equity
           securities were
           outstanding                    N/A               $0.33
                                                            -----

          Net income for
           period during
           which single
           class of equity
           securities was
           outstanding (1)              $31,927           $16,180     $42,255
                                        -------           -------     -------

          Weighted average
           common shares
           outstanding - single
           class (2)                 56,320,712        54,660,216  52,611,674
          Diluted common share
           equivalent:
           stock options              3,869,623         5,168,982   4,615,833
                                      ---------         ---------   ---------

                                     60,190,335        59,829,198  57,227,507
                                     ----------        ----------  ----------

          Diluted net income
           per share for
           period during
           which single
           class of equity
           securities was
           outstanding                    $0.53             $0.27
                                          -----             -----

          Diluted net income per
           common share                   $0.53             $0.60       $0.74
                                          =====             =====       =====



    (1) Net income for the year ended December 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 year ended December 29, 2007,
    two classes of equity securities were outstanding for 224 days and a
    single class of equity securities was outstanding for 139 days, or 61.7%
    and 38.3% 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
    December 29, 2007.


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SOURCE Masimo Corporation
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