Masimo (MASI -0.03%), a global leader in noninvasive monitoring technologies, reported third-quarter financial results on Tuesday, Nov. 5, that suggested mixed outcomes. Revenue of $504.6 million for the quarter fell within management's guidance and non-GAAP earnings per share beating internal expectations at $0.98. The report, however, noted concerns within the non-healthcare sector alongside ongoing legal challenges.
Overall, the quarter was marked by strong performance in the healthcare segment counterbalanced by pressures in other areas.
| Metric | Q3 2024 | Management Guidance | Q3 2023 | Change (YOY) |
|---|---|---|---|---|
| Consolidated revenue | $504.6 million | $495 million-$515 million | $478.9 million | 5.4% |
| Healthcare revenue | $343.3 million | $335 million-$345 million | $307.8 million | 11.5% |
| Non-Healthcare revenue | $161.3 million | $160 million-$170 million | $171.1 million | (5.7%) |
| GAAP EPS | $0.18 | $0.22-$0.27 | $0.20 | (10%) |
| Non-GAAP EPS | $0.98 | $0.81-$0.86 | $0.75 | 31% |
Source: Masimo. Note: Expectations based on management's guidance provided on Aug. 6, 2024. YOY = Year over year. GAAP = Generally accepted accounting principles.
An Overview of Masimo's Business
Masimo is a pioneering company in the field of healthcare technology, renowned for its noninvasive monitoring systems and commitment to addressing healthcare needs through technological innovation. It is recognized for its Masimo SET Pulse Oximetry, a technology that significantly improves accuracy in measuring a patient's oxygen saturation and pulse even in the presence of motion. Masimo's recent business focuses on deepening its roots in technological leadership and expanding its market presence through innovation. The firm seeks to optimize its operations by diversifying sales channels and enhancing direct-to-consumer outreach, key factors in sustaining and boosting growth.
Quarterly Performance: An In-Depth Look
Masimo's healthcare segment, a crucial growth driver, dispelled market concerns with its robust showing, growing 11.5% year over year to $343.3 million. This growth was driven partially by increased hospital admissions and successful hospital conversions, marked by $134 million in new contracts.
The non-healthcare segment contributed $161.3 million, underperforming relative to management's expectations. Economic pressures related to luxury consumer products and housing challenges contributed to this, as the segment saw a 5.7% year-over-year revenue decline.
Profitability metrics showed variance between GAAP and non-GAAP results. GAAP net income per diluted share was $0.18, missing the anticipated $0.22 to $0.27 range. However, non-GAAP earnings per share exceeded forecasts, highlighting operational efficiencies and targeted resource allocation, reaching $0.98.
The quarter also highlighted the ongoing legal conflict with Apple (AAPL -1.32%) over its smartwatches' use of certain technologies Masimo claims patent rights on. This has created significant uncertainty due to litigation costs, impacting financial performance. Management addressed this by adjusting financial definitions to capture all litigation-associated expenses.
Looking beyond immediate figures, Masimo has been reallocating its resources efficiently, such as moving sensor manufacturing to Malaysia, a strategic decision that improved gross margins by 240 basis points.
A Forward Outlook
Moving ahead, Masimo revised its full-year guidance for non-GAAP EPS upward to the range of $3.95 to $4.10. This uptick reflects the company's confidence in maintaining operational efficacy and strategic resource deployment. Masimo plans to focus strategically on sharpening its healthcare business model, potentially reshaping its consumer segment for optimized performance and profitability.
Investors should note the company's intent to separate the consumer division, coupled with management's ambition to potentially double earnings per share in five years. An impressive goal designed to bolster financial health and value.
As part of its long-term strategy, Masimo's continued technological innovation and global market expansion will be pivotal. In light of ongoing legal considerations and segment diversification, stakeholders will need to keep a watchful eye on developments, particularly in navigating non-healthcare market challenges and pending legal outcomes. The healthcare sales trajectory is promising with a reinforced market presence and evolving product catalog.
