Masimo FY Conference Summary Company Overview - **Company**: Masimo (NasdaqGS:MASI) - **Industry**: Patient Monitoring Technology - **Global Reach**: Serves over 200 million patients annually in over 150 countries [2][3] - **Revenue**: Over $1.5 billion with a strong installed base of 2.6 million units [3] - **Employee Retention**: High retention rate for engineers, with over 350 engineers [3] Financial Performance - **Q4 Growth**: Achieved over 9% growth for the year and over 11% for the quarter [3] - **Margin Expansion**: Expanded operating margin by 500 basis points and achieved over 30% EPS growth [4] - **Long-term Guidance**: Anticipates 7-10% growth over the next three years, aiming for a 30% operating margin and approaching $8 EPS by 2028 [4] Growth Strategy - **Masimo Growth Algorithm**: Focused on four key components driving growth: 1. U.S. Pulse Ox growth (40% of growth) 2. International growth (20%) 3. Advanced monitoring (one-third of growth) 4. New product introductions [6] - **Market Share**: Holds approximately 55% market share in the U.S. Pulse Ox market, growing at twice the market rate [7] - **Continuous Monitoring Opportunity**: Identified a $2 billion total addressable market for continuous monitoring of patients [9] Product Innovation - **Wearable Technology**: Launching Radius VSM, a first-generation wearable technology for continuous monitoring [18] - **Next-Gen Monitors**: New high and low acuity monitors expected by the end of 2027, with advanced features and AI algorithms [20] - **AI Integration**: Developing algorithms for opioid-induced respiratory depression and atrial fibrillation detection, enhancing patient care [22][24] Partnerships and Collaborations - **Strategic Partnerships**: Expanded agreements with Philips and GE Healthcare to enhance product offerings and market reach [16] - **Focus on Japan and Asia-Pacific**: Appointed a leader to grow business in these regions, which represent significant growth potential [15] Market Dynamics - **Untapped Market**: Continuous monitoring in low acuity settings is currently underutilized, presenting a growth opportunity as hospitals shift towards preventive care [34][36] - **Telehealth Solutions**: Enabling hospitals to provide telehealth services rather than direct-to-consumer sales, focusing on technology that supports hospital systems [53] Key Takeaways - **Momentum for 2026**: Strong performance in 2025 sets a solid foundation for growth in 2026, with a focus on innovation and market expansion [45][49] - **Patient-Centric Approach**: Emphasis on improving patient care through continuous monitoring and advanced technology solutions [29][36] This summary encapsulates the key points from the Masimo FY Conference, highlighting the company's strategic direction, financial performance, and innovative product pipeline.

Core Insights - Masimo Corporation (MASI) is positioned for growth due to strong demand for innovative technology and R&D efforts, supported by a solid Q3 2025 performance and product portfolio [2][4] - The company has faced a 21.6% decline in shares over the past six months, contrasting with a 12.9% growth in the S&P 500 [3] - Masimo's market capitalization stands at $6.84 billion, with projected earnings growth of 6.28% year-over-year for 2026 [4] Key Drivers - The healthcare business of Masimo focuses on non-invasive patient monitoring technologies, hospital automation, and consumer health products, which are encouraging for future growth [6] - In August, Masimo received FDA 510(k) clearance to expand the uses of delta hemoglobin measurements with its O3 Regional Oximetry technology, enhancing its monitoring capabilities [7][10] - The company reported strong Q3 2025 results driven by demand for non-invasive monitoring and a solid product portfolio, while also renewing a long-term partnership with Philips [9][13] - Masimo's strategic growth initiatives include enhancing commercial excellence, accelerating intelligent monitoring, and innovating wearables, with a focus on advanced monitoring categories [11] - Ongoing R&D efforts are crucial for Masimo's success, with a focus on AI and machine learning to upgrade sensors and develop next-generation monitors [14] Financial Performance - R&D expenses declined by 18.2% year-over-year to $30.5 million during Q3 [15] - The Zacks Consensus Estimate for Masimo's earnings per share (EPS) for 2026 has increased by 1.2% to $5.75, with first-quarter revenue estimates at $1.62 billion, indicating a 6.6% improvement from the previous year [18] Challenges - Masimo's revenue heavily relies on its SET and Rainbow SET monitoring platforms, creating risks associated with market acceptance and competition from existing systems [16] - The company faces reimbursement headwinds, as sales depend on coverage decisions by insurers, which could impact product adoption and pricing [17]

Financial Data and Key Metrics Changes - The company reported an 8% revenue growth for the quarter, with adjusted earnings per share increasing by 38% year over year [4][16] - Operating margin expanded by 450 basis points, driven by higher revenue and cost efficiencies [4][19] - Gross margin was 62.2%, a decline of 70 basis points year over year due to tariff impacts [18] Business Line Data and Key Metrics Changes - Healthcare revenue reached $371 million, representing an 8% growth [16] - Consumables grew by 1% this quarter, compared to a 20% growth in the same quarter last year [16] - Capital equipment and other revenues grew by 67% this quarter, rebounding from a 33% decline last year [16] Market Data and Key Metrics Changes - Incremental value of new contracts secured in the third quarter was $124 million, marking a 48% year-over-year increase [17] - Unrecognized contract revenue expected to be realized within the next 12 months was $507 million, a 17% year-over-year increase [17] Company Strategy and Development Direction - The company is focusing on three waves of growth: elevating commercial excellence, accelerating intelligent monitoring, and innovating wearables [9][10] - A strategic partnership with Philips was expanded, aiming to increase market share within Philips' installed base [5][32] - The company is investing in AI and machine learning to enhance its monitoring technologies and develop next-gen wearables [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the technology's performance, particularly in critical care settings [9] - The company anticipates a strong finish for the year, driven by continued demand and new customer installations [15] - Adjusted EPS guidance was raised, reflecting strong operational improvements and share repurchases [20][22] Other Important Information - The sale of Sound United's assets was completed, with net proceeds of $328 million used for debt repayment and share repurchases [19] - The company plans to provide more details on its product pipeline and long-term financial outlook at the upcoming Investor Day on December 3rd [69] Q&A Session Summary Question: What can be expected for the rest of the year and potential for further outperformance? - Management highlighted strong contracting performance and expected a strong finish in Q4, which would drive consumable growth [25] Question: How does the share buyback impact profitability? - The increase in EPS guidance was partly due to share buybacks and operational improvements, contributing to margin expansion [27] Question: What is the status of enhancing commercial excellence? - The company is focusing on enhancing resources for specialty categories and expects to see momentum pick up into next year [29] Question: Can you provide details on share gains with Philips? - The company noted that it still has a low market share within Philips' installed base and sees significant growth opportunities [32] Question: What is the outlook for consumables growth? - Management indicated that unusual year-over-year comparisons affected consumables growth, but they expect normalization and acceleration in Q4 [40][41] Question: What is the impact of the distributor model shift? - The shift to a distributor model in some international markets is expected to create a $6 million revenue headwind but is seen as a long-term growth strategy [42][44] Question: What is the broader capital allocation framework post-Sound United sale? - The company plans to focus on share repurchases and tuck-in technologies to augment its portfolio [63]

Core Insights - Philips and Masimo have renewed their strategic partnership to enhance patient care solutions, focusing on improving access to monitoring and measurement technologies for better patient outcomes across the continuum of care [1][2] Group 1: Partnership Details - The collaboration will integrate Masimo's sensor technologies, including SET pulse oximetry and Radius PPG tools, into Philips' multi-parameter patient monitoring platforms [2] - This integration aims to provide clinicians with reliable data and insights across various monitoring solutions, enhancing interoperability and continuity of patient care [2][3] Group 2: Leadership Comments - Masimo's CEO, Katie Szyman, emphasized that the partnership allows for the expansion of their innovative technologies to reach more patients [3] - Philips' executive vice president, Julia Strandberg, highlighted the company's commitment to helping clinicians deliver optimal care by staying ahead of market trends [4] Group 3: Market Context - Philips has also renewed a partnership with Medtronic to develop a more comprehensive patient monitoring solution [4] - The global remote patient monitoring market is projected to grow at a CAGR of 2.1%, reaching nearly $26 billion by 2034, up from $20.9 billion in 2024 [5]

Core Insights - Royal Philips and Masimo have renewed their multi-year strategic collaboration to enhance patient monitoring solutions, focusing on innovation and access to high-quality care [1][5] - The partnership aims to integrate Masimo's advanced monitoring technologies into Philips' patient monitoring platforms, improving data reliability and clinician decision-making [2][5] - Both companies are committed to developing next-generation monitoring solutions that address emerging clinical needs and market demands, including AI algorithms for improved patient care [3][4] Group 1: Partnership Details - The renewed collaboration emphasizes the integration of Masimo's technologies, such as SET® pulse oximetry and Radius PPG, into Philips' monitoring systems [2][5] - The partnership seeks to reduce complexity and enhance interoperability within healthcare systems, allowing clinicians to utilize preferred measurement technologies [2][5] Group 2: Strategic Goals - The collaboration is focused on advancing smart, connected care and expanding access to innovative technologies, reflecting a shared commitment to meaningful innovation [3][5] - Both companies aim to deliver integrated, clinically validated solutions that meet the needs of healthcare providers, aligning with Philips' broader strategy for operational efficiency and vendor-neutral interoperability [5][6] Group 3: Company Background - Royal Philips is a leading health technology company with a focus on improving health and well-being through innovation, generating EUR 18 billion in sales in 2024 [7] - The company employs approximately 69,300 people and operates in over 100 countries, specializing in diagnostic imaging, monitoring, and personal health solutions [7]

Core Insights - Royal Philips and Masimo have renewed their multi-year strategic collaboration to enhance patient monitoring solutions, focusing on innovation and access to high-quality care [1][5] - The partnership aims to integrate Masimo's advanced monitoring technologies into Philips' platforms, improving data reliability and decision-making for clinicians [2][5] - Both companies are committed to developing next-generation monitoring solutions that address emerging clinical needs and market demands, including AI algorithms for better patient care [3][4] Group 1: Partnership Details - The collaboration will integrate Masimo's technologies, such as SET® pulse oximetry and Radius PPG, into Philips' multi-parameter monitoring systems [2][5] - This integration is designed to reduce complexity and enhance interoperability, providing clinicians with a unified system for patient monitoring [2][5] - The partnership reflects a shared commitment to innovation and improving patient care through clinically validated solutions [5][6] Group 2: Strategic Goals - The focus is on advancing smart, connected care and expanding access to innovative technologies that improve patient mobility and outcomes [3][4] - The collaboration aligns with Philips' broader strategy to enhance care delivery and operational efficiency while supporting vendor-neutral interoperability [5][7] - Both companies aim to empower clinicians with reliable, scalable solutions that respond to evolving clinical needs and market trends [4][5]

Economic Overview - Investors are concerned about the potential economic downturn due to new tariffs imposed by Trump, with Goldman Sachs raising its recession forecast from 20% to 35% [1][2] - Economists warn that these tariffs could lead to increased costs for businesses, a slowdown in hiring, and wage growth, prompting Wall Street firms to lower GDP growth projections [2] Medical Device Industry Outlook - The medical device industry is viewed as a stable investment during market volatility, with a promising long-term outlook despite short-term challenges such as tariffs and cost escalations [3] - Advancements in AI and predictive analytics are revolutionizing the medical device industry, enhancing diagnostics, patient monitoring, and personalized treatment [4] Company Highlights Masimo (MASI) - Masimo specializes in non-invasive patient monitoring systems and is benefiting from focused R&D efforts, with notable technologies like Measure-through Motion and Low Perfusion pulse oximetry [7] - MASI shares have increased by 1.4% year to date, outperforming the broader market, and the company is expected to report earnings growth of 20% in 2025 [8] Boston Scientific (BSX) - Boston Scientific is experiencing strength across its MedSurg and Cardiovascular lines, with strong demand and contributions from acquisitions driving growth [10] - BSX shares have risen 13.3% year to date, and the company is expected to report earnings growth of 13.6% in 2025 [12] Hims & Hers Health (HIMS) - Hims & Hers Health targets a $360 million U.S. total addressable market, focusing on mental health, weight loss, and dermatology, with over 2 million subscribers driving recurring revenues [15] - HIMS shares have surged 28.4% year to date, with an expected earnings growth of 133.3% in 2025 [16]