Masimo(MASI) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q2 2021, product revenues increased to $305 million compared to $301 million in the prior year period, reflecting strong revenue performance despite tough year-over-year comparisons [16] - Non-GAAP EPS grew by 11% to $0.94 per diluted share, up from $0.85 in the prior year quarter [22] - Non-GAAP gross margin increased by 80 basis points to 64.7% compared to 63.9% in the prior year period, driven by a favorable revenue mix [19][20] - GAAP net income for Q2 2021 was $50.2 million, or $0.88 per diluted share, down from $55.8 million, or $0.96 per diluted share in Q2 2020 [23] Business Line Data and Key Metrics Changes - Worldwide sales of single-patient use adhesive sensors were up 35% versus the prior year period, indicating a strong rebound in sensor sales [18] - Shipments of technology boards and instruments were 72,500, exceeding the estimate of 60,000 for the quarter [15] - The installed base grew approximately 11% compared to the end of Q2 2020, indicating strong growth in monitor installations [15] Market Data and Key Metrics Changes - The company observed a substantial increase in hospital census and steady expansion of monitoring in hospitals, leading to increased sensor sales [13] - The recovery in elective surgeries is expected to continue as COVID hospitalizations recede, contributing to higher sensor volumes [10][33] Company Strategy and Development Direction - The company is focused on long-term sustainable growth through increased sensor sales and improved patient care [11] - Management anticipates that investments in equipment under new contracts will lead to higher sensor volumes and increased margins over time [20] - The company plans to launch new innovations over the next 12 months, aiming to enhance its product offerings and market position [38] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in hospital sensor usage and the return to normalcy in most markets by year-end [33] - The company is cautious about the impact of the Delta variant but does not anticipate significant disruptions to elective surgeries [52] - Guidance for 2021 was increased to $1.216 billion in product revenue, reflecting a year-over-year growth of 6.3% [25] Other Important Information - The company is facing gross margin pressures due to the adoption of ASC 842 accounting standards, which impacts the recognition of margins upon equipment installation [20][41] - The company is involved in legal proceedings against Apple, with projected legal expenses related to this case expected to be around $5 million for the year [90] Q&A Session Summary Question: Impact of accounting change on gross margins - Management indicated that the headwinds from the accounting change were over 160 basis points for the quarter, affecting gross margins [42] Question: Concerns about COVID and future guidance - Management noted that the Delta variant is not significantly impacting vaccinated individuals, and they expect continued recovery in elective surgeries [52] Question: Future gross margin expectations - Management suggested that gross margins could approach 70% if no new customers are signed, but new customer installations may create temporary pressure [49] Question: Contribution of new products to revenue - New product launches, including the opioid SafetyNet, are expected to contribute positively, although initial revenues are negligible [63] Question: International expansion and new contracts - The company is making progress in international markets, with recent reimbursement successes in Korea [120]