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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________
FORM 10-Q
________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 2021
OR
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
masi-20211002_g1.jpg
________________________________________________
MASIMO CORPORATION
(Exact Name of Registrant as Specified in its Charter)
________________________________________________
Delaware33-0368882
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification Number)
52 DiscoveryIrvine,California92618
(Address of Principal Executive Offices)(Zip Code)
(949)297-7000
(Registrant’s Telephone Number, Including Area Code)
Securities Registered pursuant to Section 12(b) of the Act:
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
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
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
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.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
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
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 2, 2021
Common stock, $0.001 par value
55,221,689


MASIMO CORPORATION
FORM 10-Q FOR THE QUARTER ENDED OCTOBER 2, 2021
TABLE OF CONTENTS
 
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 6.

2

PART I. FINANCIAL INFORMATION
Item 1.     Financial Statements
MASIMO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except par values)
October 2,
2021
January 2,
2021
ASSETS
Current assets
Cash and cash equivalents$652,354 $641,447 
Trade accounts receivable, net of allowance for credit losses of $2,081 and $1,603 at October 2, 2021 and January 2, 2021, respectively
191,332 141,350 
Inventories202,328 215,952 
Other current assets91,772 102,416 
Total current assets1,137,786 1,101,165 
Lease receivable, noncurrent66,955 57,666 
Deferred costs and other contract assets22,599 20,076 
Property and equipment, net274,929 272,511 
Intangible assets, net74,089 73,923 
Goodwill101,242 103,206 
Deferred tax assets39,294 39,363 
Other non-current assets49,886 44,642 
Total assets$1,766,780 $1,712,552 
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities
Accounts payable$60,710 $64,061 
Accrued compensation69,785 71,601 
Deferred revenue and other contract liabilities, current46,641 44,935 
Other current liabilities51,118 53,239 
Total current liabilities228,254 233,836 
Other non-current liabilities70,377 71,076 
Total liabilities298,631 304,912 
Commitments and contingencies - (Note 21)
Stockholders’ equity
Preferred stock, $0.001 par value; 5,000 shares authorized; 0 shares issued and outstanding
  
Common stock, $0.001 par value; 100,000 shares authorized; 55,222 and 55,251 shares issued and outstanding at October 2, 2021 and January 2, 2021, respectively
55 55 
Treasury stock, 16,540 and 15,993 shares at October 2, 2021 and January 2, 2021, respectively
(767,653)(638,736)
Additional paid-in capital736,575 703,693 
Accumulated other comprehensive (loss) income(3,432)1,413 
Retained earnings1,502,604 1,341,215 
Total stockholders’ equity1,468,149 1,407,640 
Total liabilities and stockholders’ equity$1,766,780 $1,712,552 

The accompanying notes are an integral part of these condensed consolidated financial statements.
3

MASIMO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)
 
Three Months EndedNine Months Ended
October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
Product revenue$307,414 $278,112 $911,575 $848,690 
Cost of goods sold103,750 99,186 318,124 292,551 
Gross profit203,664 178,926 593,451 556,139 
Operating expenses:
Selling, general and administrative100,647 90,376 291,180 278,714 
Research and development35,406 28,852 103,860 86,971 
Litigation awards   (474)
Total operating expenses136,053 119,228 395,040 365,211 
Operating income67,611 59,698 198,411 190,928 
Non-operating (loss) income(78)1,357 (735)6,108 
Income before provision for income taxes67,533 61,055 197,676 197,036 
Provision for income taxes9,762 11,650 36,287 27,403 
Net income$57,771 $49,405 $161,389 $169,633 
Net income per share:
Basic$1.05 $0.90 $2.93 $3.11 
Diluted$1.00 $0.85 $2.80 $2.92 
Weighted-average shares used in per share calculations:
Basic55,143 54,997 55,125 54,543 
Diluted57,664 58,280 57,651 58,033 

The accompanying notes are an integral part of these condensed consolidated financial statements.
4

MASIMO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)
 
Three Months EndedNine Months Ended
October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
Net income$57,771 $49,405 $161,389 $169,633 
Other comprehensive income, net of tax:
Unrealized (losses) gains from foreign currency translation adjustments(3,165)2,653 (4,845)1,504 
Total comprehensive income$54,606 $52,058 $156,544 $171,137 

The accompanying notes are an integral part of these condensed consolidated financial statements.
5


MASIMO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
Three and Nine Months Ended October 2, 2021
Common StockTreasury StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
Stockholders’
Equity
SharesAmountSharesAmount
Balance at January 2, 202155,251 $55 15,993 $(638,736)$703,693 $1,413 $1,341,215 $1,407,640 
Stock options exercised61  — — 2,886 — — 2,886 
Restricted/Performance stock units vested303 — — — — — — — 
Shares paid for tax withholding(68)— — — (16,691)— — (16,691)
Stock-based compensation— — — — 12,708 — — 12,708 
Repurchases of common stock(547)— 547 (128,917)— — — (128,917)
Net income— — — — — — 53,383 53,383 
Foreign currency translation adjustment— — — — — (2,884)— (2,884)
Balance at April 3, 202155,000 55 16,540 (767,653)702,596 (1,471)1,394,598 1,328,125 
Stock options exercised52  — — 3,442 — — 3,442 
Restricted/Performance stock units vested4 — — — — — — — 
Shares paid for tax withholding1 — — — (33)— — (33)
Stock-based compensation— — — — 8,262 — — 8,262 
Net income— — — — — — 50,235 50,235 
Foreign currency translation adjustment— — — — — 1,204 — 1,204 
Balance at July 3, 202155,057 55 16,540 (767,653)714,267 (267)1,444,833 1,391,235 
Stock options exercised165  — — 9,748 — — 9,748 
Stock-based compensation— — — — 12,560 — — 12,560 
Net income— — — — — — 57,771 57,771 
Foreign currency translation adjustment— — — — — (3,165)— (3,165)
Balance at October 2, 202155,222 $55 16,540 $(767,653)$736,575 $(3,432)$1,502,604 $1,468,149 

6

Three and Nine Months Ended September 26, 2020
Common StockTreasury StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Total
Stockholders’
Equity
SharesAmountSharesAmount
Balance at December 28, 201953,696 $54 15,530 $(526,580)$600,624 $(6,718)$1,100,494 $1,167,874 
Stock options exercised384  — — 13,495 — — 13,495 
Restricted/Performance stock units vested46 — — — — — — — 
Shares paid for tax withholding(8)— — — (1,424)— — (1,424)
Stock-based compensation— — — — 11,272 — — 11,272 
Repurchases of common stock(3)— 3 (371)— — — (371)
Cumulative effect of adoption of ASU 2016-13— — — — — — 439 439 
Net income— — — — — — 64,456 64,456 
Foreign currency translation adjustment— — — — — (2,463)— (2,463)
Balance at March 28, 202054,115 54 15,533 (526,951)623,967 (9,181)1,165,389 1,253,278 
Stock options exercised825 1 — — 21,212 — — 21,213 
Restricted/Performance stock units vested9 — — — — — — — 
Stock-based compensation— — — — 13,188 — — 13,188 
Repurchases of common stock(1)— 1 (220)— — — (220)
Net income— — — — — — 55,772 55,772 
Foreign currency translation adjustment— — — — — 1,314 — 1,314 
Balance at June 27, 202054,948 55 15,534 (527,171)658,367 (7,867)1,221,161 1,344,545 
Stock options exercised107  — — 6,314 — — 6,314 
Restricted/Performance stock units vested1 — — — — — — — 
Shares paid for tax withholding(1)— — — (25)— — (25)
Stock-based compensation— — — — 11,912 — — 11,912 
Net income— — — — — — 49,405 49,405 
Foreign currency translation adjustment— — — — — 2,653 — 2,653 
Balance at September 26, 202055,055 $55 15,534 $(527,171)$676,568 $(5,214)$1,270,566 $1,414,804 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7

MASIMO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Nine Months Ended
October 2,
2021
September 26,
2020
Cash flows from operating activities:
Net income$161,389 $169,633 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization26,449 21,200 
Stock-based compensation33,530 36,372 
Loss on disposal of equipment, intangibles and other assets371 202 
Provision for credit losses647 5 
Provision for deferred income taxes 136 
Changes in operating assets and liabilities:
Increase in accounts receivable(50,967)(9,459)
Decrease (increase) in inventories12,329 (86,815)
Decrease (increase) in other current assets4,433 (23,461)
Increase in lease receivable, net(9,312)(6,279)
Increase in deferred costs and other contract assets(2,573)(1,964)
Increase in other non-current assets(144)(775)
(Decrease) increase in accounts payable(4,290)31,793 
(Decrease) increase in accrued compensation(1,298)3,654 
(Decrease) increase in accrued liabilities(3,969)4,691 
Decrease in income tax payable(1,456)(2,756)
Increase in deferred revenue and other contract-related liabilities1,378 9,973 
Increase in other non-current liabilities634 395 
Net cash provided by operating activities167,151 146,545 
Cash flows from investing activities:
Maturities of short-term investments 70,000 
Purchases of property and equipment, net(20,680)(60,017)
Increase in intangible assets(8,185)(5,763)
Business combinations, net of cash acquired (78,310)
Other strategic investing activities(2,600)(6,750)
Net cash used in investing activities(31,465)(80,840)
Cash flows from financing activities:
Proceeds from issuance of common stock18,975 40,994 
Payroll tax withholdings on behalf of employees for vested equity awards(16,724)(1,449)
Repurchases of common stock(128,917)(591)
Net cash (used in) provided by financing activities(126,666)38,954 
Effect of foreign currency exchange rates on cash(89)(294)
Net increase in cash, cash equivalents and restricted cash8,931 104,365 
Cash, cash equivalents and restricted cash at beginning of period645,004 568,075 
Cash, cash equivalents and restricted cash at end of period$653,935 $672,440 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8

MASIMO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1. Description of the Company
Masimo Corporation (the Company) is a global medical technology company that develops, manufactures and markets a variety of noninvasive patient monitoring technologies, hospital automation solutions, home monitoring devices and consumer products. The Company’s mission is to improve patient outcomes, reduce the cost of care and take noninvasive monitoring to new sites and applications. The Company’s patient monitoring solutions generally incorporate a monitor or circuit board, proprietary single-patient use or reusable sensors, software and/or cables. The Company primarily sells its products to hospitals, emergency medical service providers, home care providers, physician offices, veterinarians, long-term care facilities, and consumers through its direct sales force, distributors and original equipment manufacturer (OEM) partners.
Masimo’s core measurement technologies are based on Measure-through Motion and Low Perfusion pulse oximetry, known as Masimo Signal Extraction Technology® (SET®) pulse oximetry, and advanced rainbow® Pulse CO-Oximetry parameters such as noninvasive hemoglobin (SpHb®), alongside many other modalities, including brain function monitoring, hemodynamic monitoring, regional oximetry, acoustic respiration rate monitoring, capnography, nasal high-flow respiratory support therapy, patient position and activity tracking and neuromodulation technology for the reduction of symptoms associated with opioid withdrawal. Masimo’s measurement technologies are available on many types of devices, from bedside hospital monitors like the Root