Masimo Corporation Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Katie's Perspective: Joined as CEO, emphasized Masimo's mission of patient impact, respect for innovation, commitment to talent development, and initial impressions of significant growth opportunities and strong team.
• Micah's Financial Review: Fourth quarter consolidated revenues were $601 million, +9% constant currency. Operating profit was $134 million, +46% y-o-y. Operating margin was 22.4%, +570bps y-o-y. Full-year 2024 consolidated revenues were $2.94 billion. Focused on cost optimization: rightsized corporate overhead, reduced non-core marketing, rationalized facilities, and reviewed R&D projects to focus on high-return areas.

Segment Performance

• Healthcare: In the fourth quarter of 2024, healthcare revenues grew 9% to $368 million. Full-year 2024 healthcare revenues were $1.395 billion, up 10% year-over-year. Shipped nearly 235,000 technology boards and monitors, with incremental new contracts of $432 million. Healthcare gross margin in the fourth quarter was 63%, and improved 190 basis points year-over-year.
• Non-healthcare: Fourth quarter non-healthcare revenues grew 11% to $232 million. Full-year 2024 non-healthcare revenues were $699 million. Non-healthcare gross margin in the fourth quarter was 35%.

Guidance

• Healthcare revenue projected $1.5 billion to $1.53 billion (8%-10% reported growth, 8%-11% constant currency).
• Expect to ship 240,000-260,000 technology boards and instruments in 2025.
• Non-GAAP operating profit range $413M-$428M (27.5%-28% margin).
• Non-GAAP EPS range $5.10-$5.40 (+22%-29% growth vs 2024, excluding Sound United).
• Sound United divestment in later stages, no further comment on call.

Risks

• Tariffs: Products sourced from Mexico (~25% of healthcare cost of goods sold) potentially subject to US tariffs, but contingency plans in place to shift manufacturing to Malaysia.
• Apple Litigation: Pending appeals and trials related to patent and trade secret issues, part of the healthcare business.

Question and Answer

• Q: Marie Thibault asked about operating margin guidance increase A: Micah Young responded that margin improvement was due to project portfolio rationalization, corporate cost consolidation, and reduced consumer health marketing.
• Q: Jason Bednar asked about applying skill set to execute guidance A: Katie Szyman emphasized focusing on expanding leadership in core markets and healthcare innovation.
• Q: Rick Wise asked about first quarter and margin guidance A: Micah Young explained that the extra week in the fiscal calendar affects seasonality, with historical seasonality considered in guidance.
• Q: Michael Polark asked about pulse ox growth vs competitor A: Micah Young cited strong contracting and respiratory illness timing as drivers of Masimo's pulse ox growth.
• Q: Vik Chopra asked about operating margin upside A: Micah Young deferred to new long-term plans with Katie but noted gross margin expansion potential.
• Q: Mike Matson asked about hospital automation and Apple litigation A: Micah Young provided updates on hospital automation growth and Apple litigation status, with Apple litigation remaining part of the healthcare business.