Fourth Quarter 2021 Highlights:

• Product revenue increased 11.0% to $327.6 million,
• GAAP net income per diluted share was $1.18; and
• Non-GAAP net income per diluted share was $1.21.

Full-Year 2021 Highlights:

• Product revenue increased 8.3% to $1,239.2 million,
• GAAP net income per diluted share was $3.98; and
• Non-GAAP net income per diluted share was $3.99.

Masimo (Nasdaq: MASI) today announced its financial results for the fourth quarter and full-year ended January 1, 2022.

Fourth Quarter 2021 Results:

Product revenue increased 11.0% to $327.6 million, or 11.5% on a constant currency basis, compared to $295.1 million in the fourth quarter of 2020. Excluding handheld and fingertip pulse oximeters, shipments of noninvasive technology boards and instruments were 76,000 in the fourth quarter of 2021.

For the fourth quarter 2021, GAAP operating margin was 23.6%, compared to 22.0% in the fourth quarter of 2020. Fourth quarter 2021 non-GAAP operating margin was 25.7%, compared to 23.1% in the fourth quarter of 2020.

For the fourth quarter 2021, GAAP net income was $68.3 million, or $1.18 per diluted share, compared to GAAP net income of $70.6 million or $1.21 per diluted share, in the fourth quarter 2020. Fourth quarter 2021 non-GAAP net income was $70.1 million, or $1.21 per diluted share, compared to net income of $57.3 million, or $0.98 per diluted share, in the fourth quarter 2020.

Full-Year 2021 Results:

Product revenue increased 8.3% to $1,239.2 million, or 7.6% on a constant currency basis, compared to $1,143.7 million for the full-year 2020. Excluding handheld and fingertip pulse oximeters, shipments of noninvasive technology boards and instruments were 289,000 for the full-year 2021.

For the full-year of 2021, GAAP operating margin was 22.3%, compared to 22.4% in the prior year period. Full-year 2021 non-GAAP operating margin was 23.8%, compared to 23.1% in the prior year period.

For the full-year of 2021, GAAP net income was $229.6 million, or $3.98 per diluted share, compared to net income of $240.3 million, or $4.14 per diluted share, in 2020. Non-GAAP net income was $230.4 million, or $3.99 per diluted share, compared to net income of $209.2 million, or $3.60 per diluted share, in 2020.

Joe Kiani, Chairman and Chief Executive Officer of Masimo, said, “While 2021 was a very challenging year in global healthcare and for millions of patients, we were able to help ease the burden on hospitals and caregivers by providing them with our breakthrough technologies. Our team truly demonstrated our commitment to our mission and guiding principles by putting our customers and patients’ priorities first. We manufactured and installed record amounts of innovative products last year, building on our reputation for innovation, responsiveness and dedication to customers. As we enter 2022, we look forward to introducing new innovations and solutions to improve patient outcomes and reduce the cost of care.”

2022 Financial Guidance

The Company provided the following estimates for its full-year 2022 guidance:

• Product revenue increasing to $1,350.0 million, which reflects reported growth of 8.9% and constant currency growth of 9.5%;
• GAAP earnings per diluted share increasing to $4.27;
• Non-GAAP earnings per diluted share increasing to $4.34; and
• Included in our full-year 2022 revenue guidance is approximately $7.0 million of year-over-year currency headwinds.

Sound United Transaction

The Company has entered into a definitive merger agreement to acquire Viper Holdings Corporation, which owns Sound United (“Sound United”), a consumer technology company that owns a portfolio of premium brands, including Bowers & Wilkins, Denon, Polk Audio and Marantz. Pursuant to the merger agreement, Masimo will pay approximately $1.025 billion, subject to adjustments, for the acquisition. Masimo intends to finance the acquisition through a combination of cash on hand and borrowings under a new credit facility, and expects the transaction to close in the middle of 2022, subject to customary closing conditions. The transaction is expected to be immediately accretive to Masimo’s non-GAAP earnings per share upon closing. Please refer to the “Masimo Q4 2021 Supplemental Presentation to the Earnings Press Release” for more information about the transaction.

Joe Kiani, Chairman and Chief Executive Officer of Masimo, said “Sound United is a company with a premium consumer technology platform and iconic, universally-recognized brands like Bowers and Wilkins, Denon, Polk Audio and Marantz, as well as an integrated wireless software platform, HEOS, connecting devices and networks in the home. The Sound United transaction aligns with Masimo’s priorities, objectives and vision by advancing our strategy of enabling connected monitoring across both the hospital and home. We see significant opportunities to cross-leverage technologies, bringing Masimo’s clinically superior solutions into the home and on-the-go as well as bringing Sound United’s premium technologies into the hospital to advance our hospital automation connectivity and cloud-based technologies. The technology and expertise within Sound United will serve us well as we aim to augment our Masimo SafetyNet strategy. Their well-established reputation and presence in the home can help us accelerate adoption of our wearables, and integrated, home-based telemedicine solutions.”

Following completion of the transaction, the current CEO and President of Sound United, Kevin Duffy, and his leadership team are expected to continue to lead the Sound United business under Masimo, as well as support Masimo’s consumer health business.

Citi is serving as the exclusive financial advisor to Masimo and Paul Hastings LLP is serving as legal counsel.

Supplementary Non-GAAP Financial Information

For additional non-GAAP financial details, please visit the Investor Relations section of the Company’s website at www.masimo.com to access Supplementary Financial Information.

Non-GAAP Financial Measures

The non-GAAP financial measures contained herein are a supplement to the corresponding financial measures prepared in accordance with U.S. GAAP. The non-GAAP financial measures presented exclude the items described below. Management believes that adjustments for these items assist investors in making comparisons of period-to-period operating results. Furthermore, management also believes that these items are not indicative of the Company’s on-going core operating performance. These non-GAAP financial measures have certain limitations in that they do not reflect all of the costs associated with the operations of the Company’s business as determined in accordance with GAAP.

Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. The non-GAAP financial measures presented by the Company may be different from the non-GAAP financial measures used by other companies.

The Company has presented the following non-GAAP measures to assist investors in understanding the Company’s core net operating results on an on-going basis: (i) constant currency product revenue growth percentage, (ii) non-GAAP net income, (iii) non-GAAP (net income) earnings per diluted share and (iv) non-GAAP operating income/margin. These non-GAAP financial measures may also assist investors in making comparisons of the Company’s core operating results with those of other companies. Management believes constant currency product revenue growth, non-GAAP operating income/margin, non-GAAP net income and non-GAAP earnings per diluted share are important measures in the evaluation of the Company’s performance and uses these measures to better understand and evaluate our business.

The non-GAAP financial measures reflect adjustments for the following items, as well as the related income tax effects thereof:

Constant currency revenue adjustments

Some of our sales agreements with foreign customers provide for payment in currencies other than the U.S. Dollar. These foreign currency revenues, when converted into U.S. Dollars, can vary significantly from period-to-period depending on the average and quarter-end exchange rates during a respective period. We believe that comparing these foreign currency denominated revenues by holding the exchange rates constant with the prior year period is useful to management and investors in evaluating our product revenue growth rates on a period-to-period basis. We anticipate that fluctuations in foreign exchange rates and the related constant currency adjustments for calculation of our product revenue growth rate will continue to occur in future periods.

Royalty and other revenue, net of related costs

We derive royalty and other revenue, net of related costs, from certain non-recurring contractual arrangements that we do not expect to continue in the future. We believe the exclusion of royalty and other revenue, net of related costs, associated with these non-recurring revenue streams is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis.

Acquisition, integration and related costs

These transactions represent gains, losses, and other related costs associated with acquisitions, integrations, investments and divestitures. These items also include, but are not limited to, amortization and depreciation of intangible assets, asset impairments, and in-process research and development. We believe that the exclusion of these items is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis.

Litigation related expenses, settlements and awards

These transactions represent gains, losses, and other related costs associated with certain litigation matters, which can vary in their characteristics, frequency and significance to our operating results. We believe that the exclusion of these items is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis.

Other adjustments

In the event there are gains, losses and other adjustments which impact period-to-period comparability and do not represent the underlying ongoing results of the business, the Company may choose to exclude these from non-GAAP earnings.

Realized and unrealized gains or losses

These transactions represent gains, losses, and other related costs associated with foreign currency denominated transactions and investments. As the Company does not actively hedge these currency exposures, changes in the underlying currency rates relative to the U.S. Dollar may result in realized and unrealized foreign currency gains and losses between the time these receivables and payables arise and the time that they are settled in cash. Unrealized and realized gains and losses on investments may impact the Company’s reported results of operations for a period. These items are highly variable, difficult to predict and outside the control of those responsible for the underlying operations of the business. We believe that exclusion of these items is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis.

Tax impact of non-GAAP adjustments

In order to reflect the tax effected impact of the non-GAAP adjustments, the Company will adjust the non-GAAP earnings by the approximate tax impact of these adjustments.

Excess tax benefits from stock-based compensation expense

GAAP requires that excess tax benefits recognized on stock-based compensation expense be reflected in our provision for income taxes rather than paid-in capital. As these excess tax benefits may be highly variable from period-to-period, the Company may choose to exclude these tax benefits from non-GAAP earnings to facilitate comparability between periods and with peers.

Fourth Quarter and Full-Year 2021 Actuals versus Fourth Quarter and Full-Year 2020 Actuals:

Full-Year 2022 Guidance versus Full-Year 2021 Actuals:

Conference Call:

The conference call to review Masimo’s complete financial results for the fourth quarter and full-year ended January 1, 2022 will begin at 1:30 p.m. PT (4:30 p.m. ET) on February 15, 2022 and will be hosted by Joe Kiani, Chairman and Chief Executive Officer, and Micah Young, Executive Vice President and Chief Financial Officer. A live webcast of the conference call will be available online from the investor relations page of the Company’s corporate website at www.masimo.com.

To register for the conference call and receive the dial-in number, please use the link below. Upon registering, each participant will be provided with call details and a registrant ID number.

Conference Call Registration Link: https://conferencingportals.com/event/nUSpRIEm

A replay of the webcast and conference call will be available shortly after the conclusion of the call and will be archived on the Company’s website.

About Masimo

Masimo (Nasdaq: MASI) is a global medical technology company that develops and produces a wide array of industry-leading monitoring technologies, including innovative measurements, sensors, patient monitors, and automation and connectivity solutions. Our mission is to improve patient outcomes, reduce the cost of care and take noninvasive monitoring to new sites and applications. Masimo SET^® Measure-through Motion and Low Perfusion^™ pulse oximetry, introduced in 1995, has been shown in over 100 independent and objective studies to outperform other pulse oximetry technologies. Masimo SET^® has also been shown to help clinicians reduce severe retinopathy of prematurity in neonates, improve CCHD screening in newborns, and, when used for continuous monitoring with Masimo Patient SafetyNet^™ in post-surgical wards, reduce rapid response team activations, ICU transfers, and costs. Masimo SET^® is estimated to be used on more than 200 million patients in leading hospitals and other healthcare settings around the world, and is the primary pulse oximetry at 9 of the top 10 hospitals as ranked in the 2021-22 U.S. News and World Report Best Hospitals Honor Roll. Masimo continues to refine SET^® and in 2018, announced that SpO2 accuracy on RD SET^® sensors during conditions of motion has been significantly improved, providing clinicians with even greater confidence that the SpO2 values they rely on accurately reflect a patient’s physiological status. In 2005, Masimo introduced rainbow^® Pulse CO-Oximetry technology, allowing noninvasive and continuous monitoring of blood constituents that previously could only be measured invasively, including total hemoglobin (SpHb^®), oxygen content (SpOC^™), carboxyhemoglobin (SpCO^®), methemoglobin (SpMet^®), Pleth Variability Index (PVi^®), RPVi™ (rainbow^® PVi), and Oxygen Reserve Index (ORi^™). In 2013, Masimo introduced the Root® Patient Monitoring and Connectivity Platform, built from the ground up to be as flexible and expandable as possible to facilitate the addition of other Masimo and third-party monitoring technologies; key Masimo additions include Next Generation SedLine^® Brain Function Monitoring, O3^® Regional Oximetry, and ISA^™ Capnography with NomoLine^® sampling lines. Masimo’s family of continuous and spot-check monitoring Pulse CO-Oximeters^® includes devices designed for use in a variety of clinical and non-clinical scenarios, including tetherless, wearable technology, such as Radius-7^® and Radius PPG^™, portable devices like Rad-67^®, fingertip pulse oximeters like MightySat^® Rx, and devices available for use both in the hospital and at home, such as Rad-97^®. Masimo hospital automation and connectivity solutions are centered around the Masimo Hospital Automation^™ platform, and include Iris^® Gateway, iSirona™, Patient SafetyNet, Replica^™, Halo ION^™, UniView^®, UniView :60^™, and Masimo SafetyNet^™. Additional information about Masimo and its products may be found at www.masimo.com. Published clinical studies on Masimo products can be found at www.masimo.com/evidence/featured-studies/feature/.

ORi and RPVi have not received FDA 510(k) clearance and are not available for sale in the United States. The use of the trademark Patient SafetyNet is under license from University HealthSystem Consortium.

Forward-Looking Statements

All statements other than statements of historical facts included in this press release that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements including, in particular, the statements about our expectations for full-year 2022 financial guidance; including with respect to product revenue, product revenue growth and constant currency revenue growth, gross margin, operating margin, GAAP earnings per diluted share, Non-GAAP earnings per diluted share, estimated tax rate and year-over-year currency headwinds; our long-term outlook; our ability to continue in our leadership in delivering innovative solutions to clinicians and patients worldwide; demand for our products; anticipated revenue and earnings growth; our financial condition, results of operations and business generally; expectations regarding our ability to design and deliver innovative new noninvasive technologies and reduce the cost of care; and demand for our technologies. These forward-looking statements are based on management’s current expectations and beliefs and are subject to uncertainties and factors, all of which are difficult to predict and many of which are beyond our control and could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to, those related to: our dependence on Masimo SET^® and Masimo rainbow SET^™ products and technologies for substantially all of our revenue; any failure in protecting our intellectual property exposure to competitors’ assertions of intellectual property claims; the highly competitive nature of the markets in which we sell our products and technologies; any failure to continue developing innovative products and technologies; the lack of acceptance of any of our current or future products and technologies; obtaining regulatory approval of our current and future products and technologies; the risk that the implementation of our international realignment will not continue to produce anticipated operational and financial benefits, including a continued lower effective tax rate; the loss of our customers; the failure to retain and recruit senior management; product liability claims exposure; a failure to obtain expected returns from the amount of intangible assets we have recorded; the maintenance of our brand; the amount and type of equity awards that we may grant to employees and service providers in the future; our ongoing litigation and related matters; risks related to global economic and marketplace uncertainties related to the impact of the COVID-19 pandemic; and other factors discussed in the “Risk Factors” section of our most recent periodic reports filed with the Securities and Exchange Commission (“SEC”), including our most recent Form 10-K and Form 10-Q, all of which you may obtain for free on the SEC’s website at www.sec.gov. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, even if subsequently made available by us on our website or otherwise. We do not undertake any obligation to update, amend or clarify these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Masimo, SET, Signal Extraction Technology, Improving Patient Outcome and Reducing Cost of Care... by Taking Noninvasive Monitoring to New Sites and Applications, rainbow, SpHb, SpOC, SpCO, SpMet, PVI and ORI are trademarks or registered trademarks of Masimo Corporation.

The following table presents details of the stock-based compensation expense that is included in each functional line item in the condensed consolidated statements of operations (in thousands):

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