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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________
FORM 10-Q
________________________________________________
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(Mark One) |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended October 1, 2022
OR
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________ to _________
Commission File Number 001-33642
________________________________________________
MASIMO CORPORATION
(Exact Name of Registrant as Specified in its Charter)
________________________________________________
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Delaware | | | | | | 33-0368882 |
(State or Other Jurisdiction of Incorporation or Organization) | | | | | | (I.R.S. Employer Identification Number) |
52 Discovery | | Irvine, | | California | | | | | | 92618 |
(Address of Principal Executive Offices) | | | | | | (Zip Code) |
| | | | | | (949) | | 297-7000 | | | | | | | | | |
(Registrant’s Telephone Number, Including Area Code) |
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Securities Registered pursuant to Section 12(b) of the Act: | | |
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Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, $0.001 par value | | MASI | | The Nasdaq Stock Market LLC |
Rights to Purchase Series A Junior Participating Preferred Stock | | N/A | | The Nasdaq Stock Market LLC |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | | Yes | | ☒ | No | | ☐ |
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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). | | Yes | | ☒ | No | | ☐ |
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. |
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Large accelerated filer | | ☒ | | | | | | | | Accelerated filer | | | | ☐ | | | |
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Non-accelerated filer | | ☐ | | | | | | | | Smaller reporting company | | | | ☐ | | | |
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| | | | | | | | | | Emerging growth company | | | | ☐ | | | |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) | | Yes | | ☐ | No | | ☒ |
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Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: | | |
Class | | | | | | | | Number of Shares Outstanding as of October 1, 2022 |
Common stock, $0.001 par value | | | | | | | | 52,564,663 |
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MASIMO CORPORATION
FORM 10-Q FOR THE QUARTER ENDED OCTOBER 1, 2022
TABLE OF CONTENTS
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Item 1. | | |
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Item 2. | | |
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Item 3. | | |
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Item 4. | | |
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Item 1. | | |
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Item 1A. | | |
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Item 6. | | |
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MASIMO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in millions, except par values)
| | | | | | | | | | | |
| October 1, 2022 | | January 1, 2022 |
ASSETS | | | |
Current assets | | | |
Cash and cash equivalents | $ | 219.5 | | | $ | 745.3 | |
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Trade accounts receivable, net of allowance for credit losses of $3.8 million and $2.2 million at October 1, 2022 and January 1, 2022, respectively | 371.6 | | | 200.8 | |
Inventories | 495.4 | | | 201.4 | |
Other current assets | 159.1 | | | 91.0 | |
Total current assets | 1,245.6 | | | 1,238.5 | |
Lease receivable, noncurrent | 79.6 | | | 73.6 | |
Deferred costs and other contract assets | 37.0 | | | 28.1 | |
Property and equipment, net | 372.2 | | | 272.8 | |
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Customer relationships, net - (Note 9) | 204.5 | | | 15.3 | |
Acquired technologies, net - (Note 9) | 163.9 | | | 19.7 | |
Other intangible assets, net | 78.2 | | | 37.5 | |
Trademarks - (Note 9) | 262.0 | | | — | |
Goodwill | 446.3 | | | 100.3 | |
Deferred tax assets | 56.5 | | | 52.6 | |
Other non-current assets | 110.6 | | | 48.6 | |
Total assets | $ | 3,056.4 | | | $ | 1,887.0 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities | | | |
Accounts payable | $ | 267.8 | | | $ | 75.5 | |
Accrued compensation | 90.4 | | | 70.8 | |
Deferred revenue and other contract liabilities, current | 77.6 | | | 50.9 | |
Other current liabilities | 151.5 | | | 70.4 | |
Total current liabilities | 587.3 | | | 267.6 | |
Long-term debt | 951.4 | | | — | |
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Deferred tax liabilities | 139.2 | | | 5.1 | |
Other non-current liabilities | 125.9 | | | 64.0 | |
Total liabilities | 1,803.8 | | | 336.7 | |
Commitments and contingencies - (Note 24) | | | |
Stockholders’ equity | | | |
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Preferred stock, $0.001 par value; 5.0 million shares authorized; 0 shares issued and outstanding | — | | | — | |
Common stock, $0.001 par value; 100.0 million shares authorized; 52.6 million and 55.3 million shares issued and outstanding at October 1, 2022 and January 1, 2022, respectively | 0.1 | | | 0.1 | |
Treasury stock, 19.5 million and 16.5 million shares at October 1, 2022 and January 1, 2022, respectively | (1,169.1) | | | (767.7) | |
Additional paid-in capital | 775.0 | | | 752.5 | |
Accumulated other comprehensive loss | (26.9) | | | (5.5) | |
Retained earnings | 1,673.5 | | | 1,570.9 | |
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Total stockholders’ equity | 1,252.6 | | | 1,550.3 | |
Total liabilities and stockholders’ equity | $ | 3,056.4 | | | $ | 1,887.0 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
MASIMO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in millions, except per share amounts)
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| Three Months Ended | | Nine Months Ended |
| October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
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Revenue | $ | 549.3 | | | $ | 307.4 | | | $ | 1,418.8 | | | $ | 911.6 | |
Cost of goods sold | 266.8 | | | 103.8 | | | 673.4 | | | 318.1 | |
Gross profit | 282.5 | | | 203.6 | | | 745.4 | | | 593.5 | |
Operating expenses: | | | | | | | |
Selling, general and administrative | 174.6 | | | 100.6 | | | 471.6 | | | 291.2 | |
Research and development | 53.1 | | | 35.4 | | | 137.1 | | | 103.9 | |
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Total operating expenses | 227.7 | | | 136.0 | | | 608.7 | | | 395.1 | |
Operating income | 54.8 | | | 67.6 | | | 136.7 | | | 198.4 | |
Non-operating (loss) income | (2.8) | | | — | | | 1.0 | | | (0.7) | |
Income before provision for income taxes | 52.0 | | | 67.6 | | | 137.7 | | | 197.7 | |
Provision for income taxes | 14.1 | | | 9.8 | | | 35.1 | | | 36.3 | |
Net income | $ | 37.9 | | | $ | 57.8 | | | $ | 102.6 | | | $ | 161.4 | |
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Net income per share: | | | | | | | |
Basic | $ | 0.72 | | | $ | 1.05 | | | $ | 1.90 | | | $ | 2.93 | |
Diluted | $ | 0.70 | | | $ | 1.00 | | | $ | 1.85 | | | $ | 2.80 | |
| | | | | | | |
Weighted-average shares used in per share calculations: | | | | | | | |
Basic | 52.5 | | | 55.1 | | | 54.0 | | | 55.1 | |
Diluted | 54.1 | | | 57.7 | | | 55.6 | | | 57.7 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
MASIMO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in millions)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Net income | $ | 37.9 | | | $ | 57.8 | | | $ | 102.6 | | | $ | 161.4 | |
Other comprehensive income, net of tax: | | | | | | | |
Unrealized losses from foreign currency translation adjustments | (17.8) | | | (3.2) | | | (34.7) | | | (4.9) | |
Change in pension benefits | (0.7) | | | — | | | (1.4) | | | — | |
Unrealized gains on cash flow hedges (1) | 14.7 | | | — | | | 14.7 | | | — | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total comprehensive income | $ | 34.1 | | | $ | 54.6 | | | $ | 81.2 | | | $ | 156.5 | |
______________
(1) See Note 17, “Derivative Instruments and Hedging Activities”, for further details.
The accompanying notes are an integral part of these condensed consolidated financial statements.
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| | | | | |
MASIMO CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in millions) |
| Three and Nine Months Ended October 1, 2022 |
| Common Stock | | Treasury Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Retained Earnings | | | | Total Stockholders’ Equity |
Shares | | Amount | | Shares | | Amount | |
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Balance at January 1, 2022 | 55.3 | | | $ | 0.1 | | | 16.5 | | | $ | (767.7) | | | $ | 752.5 | | | $ | (5.5) | | | $ | 1,570.9 | | | | | $ | 1,550.3 | |
Stock options exercised | 0.1 | | | — | | | — | | | — | | | 2.7 | | | — | | | — | | | | | 2.7 | |
Restricted/Performance stock units vested | 0.2 | | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | |
Shares paid for tax withholding | (0.1) | | | — | | | — | | | — | | | (25.4) | | | — | | | — | | | | | (25.4) | |
Stock-based compensation | — | | | — | | | — | | | — | | | 10.9 | | | — | | | — | | | | | 10.9 | |
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Net income | — | | | — | | | — | | | — | | | — | | | — | | | 46.6 | | | | | 46.6 | |
Foreign currency translation adjustment | — | | | — | | | — | | | — | | | — | | | (2.9) | | | — | | | | | (2.9) | |
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Balance at April 2, 2022 | 55.5 | | | 0.1 | | | 16.5 | | | (767.7) | | | 740.7 | | | (8.4) | | | 1,617.5 | | | | | 1,582.2 | |
Stock options exercised | — | | | — | | | — | | | — | | | 1.2 | | | — | | | — | | | | | 1.2 | |
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Stock-based compensation | — | | | — | | | — | | | — | | | 17.3 | | | — | | | — | | | | | 17.3 | |
Repurchases of common stock | (3.0) | | | — | | | 3.0 | | | (401.4) | | | — | | | — | | | — | | | | | (401.4) | |
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Net income | — | | | — | | | — | | | — | | | — | | | — | | | 18.1 | | | | | 18.1 | |
Foreign currency translation adjustment | — | | | — | | | — | | | — | | | — | | | (14.0) | | | — | | | | | (14.0) | |
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Unrealized loss on pension plan | — | | | — | | | — | | | — | | | — | | | (0.7) | | | — | | | | | (0.7) | |
Balance at July 2, 2022 | 52.5 | | | 0.1 | | | 19.5 | | | (1,169.1) | | | 759.2 | | | (23.1) | | | 1,635.6 | | | | | 1,202.7 | |
Stock options exercised | 0.1 | | | — | | | — | | | — | | | 2.3 | | | — | | | — | | | | | 2.3 | |
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Stock-based compensation | — | | | — | | | — | | | — | | | 13.5 | | | — | | | — | | | | | 13.5 | |
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Net income | — | | | — | | | — | | | — | | | — | | | — | | | 37.9 | | | | | 37.9 | |
Foreign currency translation adjustment | — | | | — | | | — | | | — | | | — | | | (17.8) | | | — | | | | | (17.8) | |
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Unrealized loss on pension plan | — | | | — | | | — | | | — | | | — | | | (0.7) | | | — | | | | | (0.7) | |
Unrealized gain on cash flow hedge | — | | | — | | | — | | | — | | | — | | | 14.7 | | | — | | | | | 14.7 | |
Balance at October 1, 2022 | 52.6 | | | $ | 0.1 | | | 19.5 | | | $ | (1,169.1) | | | $ | 775.0 | | | $ | (26.9) | | | $ | 1,673.5 | | | | | $ | 1,252.6 | |
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| Three and Nine Months Ended October 2, 2021 |
| Common Stock | | Treasury Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | | | Total Stockholders’ Equity |
Shares | | Amount | | Shares | | Amount | |
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Balance at January 2, 2021 | 55.3 | | | $ | 0.1 | | | 16.0 | | | $ | (638.7) | | | $ | 703.7 | | | $ | 1.4 | | | $ | 1,341.2 | | | | | $ | 1,407.7 | |
Stock options exercised | — | | | — | | | — | | | — | | | 2.9 | | | — | | | — | | | | | 2.9 | |
Restricted/Performance stock units vested | 0.3 | | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | |
Shares paid for tax withholding | — | | | — | | | — | | | — | | | (16.7) | | | — | | | — | | | | | (16.7) | |
Stock-based compensation | — | | | — | | | — | | | — | | | 12.7 | | | — | | | — | | | | | 12.7 | |
Repurchases of common stock | (0.5) | | | — | | | 0.5 | | | (128.9) | | | — | | | — | | | — | | | | | (128.9) | |
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Net income | — | | | — | | | — | | | — | | | — | | | — | | | 53.4 | | | | | 53.4 | |
Foreign currency translation adjustment | — | | | — | | | — | | | — | | | — | | | (2.9) | | | — | | | | | (2.9) | |
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Balance at April 3, 2021 | 55.1 | | | 0.1 | | | 16.5 | | | (767.6) | | | 702.6 | | | (1.5) | | | 1,394.6 | | | | | 1,328.2 | |
Stock options exercised | — | | | — | | | — | | | — | | | 3.4 | | | — | | | — | | | | | 3.4 | |
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Stock-based compensation | — | | | — | | | — | | | — | | | 8.3 | | | — | | | — | | | | | 8.3 | |
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Net income | — | | | — | | | — | | | — | | | — | | | — | | | 50.2 | | | | | 50.2 | |
Foreign currency translation adjustment | — | | | — | | | — | | | — | | | — | | | 1.2 | | | — | | | | | 1.2 | |
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Balance at July 3, 2021 | 55.1 | | | 0.1 | | | 16.5 | | | (767.6) | | | 714.3 | | | (0.3) | | | 1,444.8 | | | | | 1,391.3 | |
Stock options exercised | 0.2 | | | — | | | — | | | — | | | 9.7 | | | — | | | — | | | | | 9.7 | |
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Stock-based compensation | — | | | — | | | — | | | — | | | 12.6 | | | — | | | — | | | | | 12.6 | |
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Net income | — | | | — | | | — | | | — | | | — | | |