Summary of Masimo's Conference Call Company Overview - **Company**: Masimo - **Industry**: Medical Devices Key Points and Arguments Leadership and Strategic Focus - Masimo is undergoing a leadership transition with a new CEO, aiming to realign and optimize its cost structure while focusing on core growth areas within hospital settings [2][4] - The company plans to concentrate on its flagship product, pulse oximetry, which accounts for over 70% of revenues, alongside growth in rainbow hemodynamics, brain monitoring, capnography, gas monitoring, and automation [2][3] Financial Performance and Growth Expectations - Masimo expects a long-term revenue growth of 7% to 10% with aspirations to achieve 30% operating margins [4] - In Q1, capital growth was reported at 32%, significantly higher than the expected flat to mid-single-digit growth, attributed to a large tender order from a long-term customer [8][9] - Consumable growth is anticipated to be in the high single-digit to low double-digit range, with Q1 showing strong underlying growth despite some lumpiness in orders [10] Operational Challenges and Cyber Incident - The company is recovering from a cyber incident, with critical systems being prioritized for restoration. There is no expected impact on annual guidance, although some near-term disruptions are anticipated [15][17] - The company is quantifying the cost impact of the cyber incident, with insurance expected to cover a significant portion of the expenses [19] Tariffs and Cost Management - Masimo sources about 5% of its cost of goods from China, with a potential reduction in tariff exposure due to recent changes in tariff rates [26][27] - The company is focusing on cost mitigation strategies, including pricing adjustments and optimizing supply chains, particularly in Mexico and Malaysia [32][35] Margin Expansion and Future Outlook - Operating margins in Q1 were reported at 28.8%, with a goal to maintain margins between 28% and 28.5% for the year [41] - The long-term goal is to achieve gross margins closer to 66%, with aspirations for 70% despite setbacks from COVID-19 and inflationary pressures [40][43] Litigation Updates - Ongoing litigation with Apple includes patent infringement cases, with significant developments expected in the coming months [52][54] Capital Deployment Strategy - The company plans to prioritize share buybacks and improve liquidity while evaluating opportunities for tuck-in technologies to enhance its core business [48][49] Conclusion - Masimo is optimistic about its position for the year, emphasizing strong fundamentals and a commitment to margin expansion and reinvestment for growth [56][57]

Core Viewpoint - Growth investors are focused on stocks with above-average financial growth, which can lead to solid returns, but finding such stocks is challenging due to inherent volatility and risks [1] Group 1: Growth Stock Identification - The Zacks Growth Style Score system aids in identifying promising growth stocks by analyzing real growth prospects beyond traditional metrics [2] - Masimo (MASI) is currently highlighted as a recommended stock due to its favorable Growth Score and top Zacks Rank [2] Group 2: Earnings Growth - Earnings growth is a critical factor for growth investors, with double-digit growth seen as a strong indicator of future stock price gains [4] - Masimo's projected EPS growth for this year is 20%, significantly higher than the industry average of 14.2% [5] Group 3: Cash Flow Growth - Higher-than-average cash flow growth is essential for growth-oriented companies, allowing them to expand without relying on external funding [6] - Masimo's year-over-year cash flow growth is currently 13%, compared to an industry average of -0.4% [6] - The company's annualized cash flow growth rate over the past 3-5 years is 10.7%, exceeding the industry average of 6.5% [7] Group 4: Earnings Estimate Revisions - Positive trends in earnings estimate revisions correlate strongly with near-term stock price movements [8] - Recent upward revisions in Masimo's current-year earnings estimates have seen a 0.8% increase in the Zacks Consensus Estimate over the past month [9] Group 5: Overall Positioning - Masimo has achieved a Growth Score of A and a Zacks Rank of 2, indicating strong potential for outperformance based on the discussed metrics [11]

Group 1 - Samsung Electronics' subsidiary Harman International announced the acquisition of Masimo's audio business for $350 million (approximately 500 billion KRW), signaling expectations for further mergers and acquisitions by Samsung [1] - Industry experts view this acquisition as the beginning of large-scale mergers for Samsung, with potential targets in AI, automotive electronics, and biomedical equipment [1][2] - Samsung's recent shareholder meeting emphasized the importance of acquiring new technologies for sustained growth, indicating that more significant mergers may be forthcoming [1] Group 2 - In the automotive electronics sector, companies producing automotive communication and power system semiconductors are seen as primary targets for acquisition [2] - Samsung has been eyeing major automotive semiconductor companies like NXP and Infineon as potential acquisition targets, which could enhance its semiconductor foundry business [2] - The establishment of a future business planning group within Samsung aims to discover new business opportunities that align with its operational model, with a focus on biomedical devices and robotics [2]

Group 1 - Li Auto's founder and CEO Li Xiang's reported salary of 639 million RMB for 2024 is inaccurate, consisting of 2.665 million RMB in salary, 160,000 RMB in retirement contributions, and 636.309 million RMB in stock-based compensation [1][2] - Li Auto has set a target for Li Xiang to achieve annual sales of 500,000 vehicles and for the company's stock price to significantly exceed $29.26 to realize stock compensation, with a current stock price of $25.68 requiring Li Xiang to pay the company $32 million, equivalent to 230 million RMB [2] Group 2 - Geely Auto plans to acquire all outstanding shares of Zeekr, aiming for a complete merger, as Geely currently holds approximately 65.7% of Zeekr's shares [1] - Geely's chairman Li Shufu emphasized the need for business integration and innovation to enhance long-term value in a competitive market [1] Group 3 - Douyin's VP Li Liang commented on the recent incident involving complaints against a brand, advocating for legal action as a more effective means of protecting corporate rights [1] - He highlighted the challenges platforms face in proactively addressing infringement without sufficient information from affected parties [1] Group 4 - Nayuki Tea is undergoing a brand upgrade, introducing a new logo and name as part of its tenth-anniversary celebration [3][5] - This marks the second name change for Nayuki in three years, having previously simplified its name from "Nayuki no Cha" to "Nayuki Tea" [5] Group 5 - JD's customer service acknowledged delays in food delivery during peak times, attributing issues to various factors including city conditions and weather [1] - The platform is currently offering a promotion for free orders if delivery exceeds 20 minutes [1] Group 6 - Nvidia announced the release of the RTX 5060 graphics card, priced at 2499 RMB, with availability starting on May 20 [1] Group 7 - Xiaopeng Motors is considering an IPO for its flying car subsidiary, Xiaopeng Huitian, with plans to list in Hong Kong or the US [1][9] - The company has invited multiple banks to participate in the IPO process [9] Group 8 - Tesla's sales in Europe saw a significant decline in April, with a drop of 81% in Sweden and 46% in Germany, attributed to increased competition and consumer backlash against Elon Musk's political stance [16] - This decline led to a 1.75% drop in Tesla's stock price [16] Group 9 - OpenAI plans to reduce its revenue-sharing ratio with Microsoft by at least half by the end of the decade [16] - Apple is exploring AI-driven search options for its Safari browser, potentially challenging Google's dominance in search [16] Group 10 - TikTok announced a new data center project in Finland with an investment of 1 billion euros, part of a broader initiative to enhance data security in Europe [16] Group 11 - Uber is set to invest an additional 100 million USD in WeRide, marking its largest investment in the autonomous driving sector to date [17] - Samsung's Harman International has acquired Masimo's audio business for 350 million USD [17]

Core Viewpoint - Masimo Corporation reported strong financial results for the first quarter of 2025, with significant year-over-year growth in adjusted earnings per share (EPS) and revenues, indicating robust performance in its healthcare segment and a positive outlook for the year ahead [1][2][12]. Financial Performance - Adjusted EPS for Q1 2025 was $1.36, a 56.3% increase year over year, surpassing the Zacks Consensus Estimate by 9.7% [1] - GAAP EPS for the quarter was 86 cents, reflecting a 45.8% increase from 59 cents in the same period last year [1] - Revenues reached $372 million, up 9.5% year over year, exceeding the Zacks Consensus Estimate by 1.3% [2] - At constant exchange rates, revenues were $375.2 million, marking a 10.5% increase year over year [2] Revenue Breakdown - Revenue excluding related party revenues was $340.2 million, up 10.1% year over year, while related party revenues were $31.8 million, up 3.9% year over year [4] - Healthcare revenues totaled $371 million, a 9.2% increase on a reported basis and 10% at constant exchange rates year over year [5] - Consumable and service revenues grew by 8%, while capital equipment and other revenues surged by 32% year over year [5] Margin Analysis - Gross profit increased by 13.3% year over year to $234 million, with a gross margin expansion of 207 basis points to 62.9% [6] - Total adjusted operating profit was $80.7 million, reflecting a 51.9% increase from the previous year, with an adjusted operating margin of 21.7%, up 606 basis points [7] Financial Position - Cash and cash equivalents at the end of Q1 2025 were $130.8 million, up from $123.6 million at the end of 2024 [9] - Long-term debt decreased to $636 million from $714.3 million at the end of 2024 [9] - Net cash provided by operating activities was $37.9 million, slightly down from $38.6 million a year ago [9] Guidance - For 2025, total revenues are expected to be in the range of $1,500 million to $1,530 million, representing an 8-11% increase at constant exchange rates from 2024 [10] - Adjusted EPS for 2025 is projected to be between $5.30 and $5.60, reflecting a growth of 22-29% from 2024 figures [11] Strategic Developments - Masimo has entered into an agreement to sell its Sound United consumer audio business to HARMAN International, focusing on its core professional healthcare segment [13] - Management anticipates an increasing impact of tariffs each quarter for the remainder of the year, which may affect future performance [14]

Group 1 - Masimo announced the final agreement to sell its Sound United audio business to Samsung's subsidiary Harman International for $350 million in cash, with potential adjustments [1] - The transaction is expected to be completed by the end of this year [1]

Company Performance - Masimo reported quarterly earnings of $1.36 per share, exceeding the Zacks Consensus Estimate of $1.24 per share, and up from $0.77 per share a year ago, representing an earnings surprise of 9.68% [1] - The company posted revenues of $372 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 1.29%, but down from $492.8 million year-over-year [2] - Over the last four quarters, Masimo has consistently surpassed consensus EPS and revenue estimates [2] Future Outlook - The sustainability of Masimo's stock price movement will depend on management's commentary during the earnings call and future earnings expectations [3][4] - The current consensus EPS estimate for the upcoming quarter is $1.27 on revenues of $372.12 million, and for the current fiscal year, it is $5.28 on revenues of $1.52 billion [7] - The estimate revisions trend for Masimo is currently favorable, leading to a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Medical - Instruments industry, to which Masimo belongs, is currently ranked in the top 25% of over 250 Zacks industries, suggesting a positive outlook for stocks within this sector [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Data and Key Metrics Changes - The company reported Healthcare revenue of $371 million, reflecting a 10% growth on a constant currency basis, with operating margin expansion of 750 basis points [9][18] - Non-GAAP earnings per share (EPS) was $1.36, representing a 56% growth year-over-year, while GAAP net income from continuing operations was $47 million or $0.86 per share [19][20] - The net loss from discontinued operations was $218 million or $4.4 per share, including an impairment charge of $295 million related to the Audio business [20] Business Line Data and Key Metrics Changes - Consumable and service revenue grew by 8%, while capital equipment and other revenue surged by 32% due to the timing of shipments related to a large tender contract renewal [18] - The company shipped over 72,000 technology boards and monitors during the quarter, exceeding expected ranges [18] Market Data and Key Metrics Changes - The company anticipates revenue growth for fiscal 2025 to be in the range of $1.5 billion to $1.53 billion, reflecting an 8% to 11% constant currency growth compared to the previous year [20][21] - The updated guidance for operating margins is set at 28% to 28.5% excluding new tariffs, with EPS guidance of $5.3 to $5.6 [21] Company Strategy and Development Direction - The company plans to invest in its core Healthcare business to accelerate revenue growth beyond the long-standing target of 7% to 10% [13] - Strategic initiatives include upgrading existing sensors, leveraging leadership in pulse oximetry, and restructuring sales forces to be regionally focused [14] - The divestiture of the Consumer Audio business is aimed at refocusing on the Professional Healthcare business and enhancing shareholder value [10][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong performance and the ability to navigate macro uncertainties, highlighting the high recurring revenue and durable growth profile [16] - The CEO emphasized the commitment to innovation and the potential for improvement in commercial excellence [8][9] Other Important Information - The company is actively assessing the impact of potential tariffs and has developed mitigation plans to address these challenges [15][22] - A new Chief Human Resources Officer has joined the team to enhance company culture and talent development [11] Q&A Session Summary Question: Impact of large tender on revenues and margins - Management indicated that excluding the large tender, the rest of the business is performing well, with double-digit growth in consumables and services [29][30] Question: Future sales expectations - Management expects normal seasonality, with Q2 typically being flat to slightly down sequentially [32] Question: Long-term operating margin goals amid tariffs - Management remains confident in achieving long-term margin goals despite tariff impacts, with ongoing plans to mitigate these effects [42][43] Question: Use of proceeds from the sale of Sound United - The company plans to prioritize share repurchases with the proceeds from the sale, reflecting a focus on returning value to shareholders [47] Question: Hospital CapEx spending and demand - Management noted strong underlying demand and no signs of softness in the market, emphasizing the low dependency on capital equipment revenue [52] Question: Mitigation options for tariffs - Management is evaluating near-term and long-term mitigation strategies, including altering product sourcing and pricing opportunities [56][58] Question: Hemodynamic monitoring market potential - The company aims to enhance its presence in the hemodynamic monitoring market with new product launches planned for 2026 [66][68]

First Quarter 2025 Earnings May 6, 2025 3 1 Safe Harbor Statement Forward-Looking Statements: This presentation contains forward-looking statements within the meaning of federal securities laws, including, among others, statements about our expectations, plans, strategies or prospects. We generally use the words "may," "will," "expect," "believe," "anticipate," "plan," "estimate," "project," "assume," "guide," "target," "forecast," "see," "seek," "can," "should," "could," "would," "intend," "predict," "pote ...

Financial Data and Key Metrics Changes - The company reported Healthcare revenue of $371 million, reflecting a 10% growth on a constant currency basis, with operating margin expanding by 750 basis points [9][19] - Non-GAAP earnings per share (EPS) was $1.36, representing a 56% increase compared to the previous year [20] - The gross margin improved to 63.1%, an increase of 80 basis points year over year, while operating margin reached 28.8%, up 750 basis points year over year [20] Business Line Data and Key Metrics Changes - Consumable and service revenue grew by 8%, while capital equipment and other revenue surged by 32% [19] - The company shipped over 72,000 technology boards and monitors during the quarter, exceeding expectations due to strong core business performance [19] Market Data and Key Metrics Changes - The company anticipates revenue for fiscal 2025 to remain unchanged at a range of $1.5 billion to $1.53 billion, indicating an 8% to 11% constant currency growth compared to the prior year [21] - The impact of tariffs is projected to affect operating margins by 210 to 250 basis points and EPS by $0.45 to $0.50 [22][23] Company Strategy and Development Direction - The company aims to invest in its core Healthcare business to accelerate revenue growth beyond the long-standing target of 7% to 10% [13] - Plans include upgrading existing sensors and creating next-generation monitors with AI-based algorithms, leveraging leadership in pulse oximetry, and restructuring sales forces to be regionally focused [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong performance and ability to navigate macro uncertainties, highlighting the high recurring revenue and durable growth profile [16] - The CEO emphasized the commitment to innovation and the potential for improvement in commercial excellence [8][9] Other Important Information - The company announced the divestiture of its Consumer Audio business, Sound United, to refocus on its Professional Healthcare business [10][11] - A new Chief Human Resources Officer, Lisa Hellman, has joined the company to enhance culture and talent development [11] Q&A Session Summary Question: Impact of large tender on revenues and margins - Management clarified that excluding the large tender, the rest of the business is performing well, with double-digit growth in consumables and services [31][32] Question: Future sales expectations - Management indicated that Q2 is typically flat to slightly down sequentially, but they expect to maintain strong demand [35] Question: Long-term impact of tariffs on operating margins - Management remains optimistic about underlying business performance and expects to mitigate tariff impacts through various plans [45] Question: Valuation from the sale of Sound United - Management confirmed that the sale price was in line with expectations and that proceeds will primarily be used for share repurchases [49] Question: Hospital CapEx spending and OEM partners - Management noted strong underlying demand and low dependency on capital equipment, indicating no signs of softness in the market [54] Question: Mitigation options for tariffs - Management is evaluating near-term and long-term mitigation strategies, including altering product sourcing and pricing opportunities [59][60] Question: Changes in salesforce model - Management explained the shift to a generalist salesforce model to leverage broader knowledge across product categories, aiming for increased efficiency [88][89]