Masimo cut its full-year revenue and profit forecasts Tuesday for the second straight quarter, attributing lower use of its patient monitoring sensors to hospital budget pressures that have slowed equipment installations.
The weakness came despite market share gains amid the addition of new customer contracts, the company said.
The pulse oximetry specialist reported a 6% decline in healthcare revenue, to $308 million, and a 23% drop in non-healthcare revenue, to $171 million, in the third quarter.
Masimo last year branched out in a new direction with the $1 billion acquisition of consumer audio products company Sound United. The transaction sparked a proxy contest led by activist investor Politan Capital Management, which ultimately succeeded in getting two candidates elected to Masimo’s board in June.
CEO Joe Kiani said on the Tuesday earnings call that the audio brands Masimo gained are facing a challenging economic environment, but he defended the acquisition in response to an analyst’s question, saying the combination is supporting the company’s move into the consumer health market. “I more than ever believe in it,” Kiani said.
“Please hang in there,” he said, stressing that innovations in the pipeline will benefit patients and reduce healthcare costs, while reiterating that it will take three years to see the full benefits of the transaction.
Win against Apple
On the heels of last month’s favorable ruling by the U.S. International Trade Commission in Masimo’s intellectual property battle with Apple, Kiani characterized the decision as a “landmark ITC victory.”
The ruling, which the Biden administration has 60 days to review, could result in an import ban on Apple Watches with pulse oximetry functions that Masimo alleges infringe its patents. If the injunction goes into effect, Masimo will benefit either by gaining a monopoly in the market, or by coming to a deal with Apple “for the benefit of their customers,” Kiani said.
“The decision validates our ongoing efforts to hold Apple accountable for unlawfully misappropriating our intellectual properties,” he said.
New board members
Masimo announced that Rolf Classon, former chairman of the executive committee of Bayer HealthCare and president of its diagnostics business, has been appointed to Masimo’s board of directors.
The company plans to add “at least one more” director to its board, Kiani said in response to an analyst’s question.
“We’re working through it,” Kiani said. “We have new members, and they’re vocal, and we’re trying our best to manage a process in the midst of all of it, but we’re eager to add more.”
Outlook
Masimo lowered its forecast for 2023 consolidated revenue to a range of from $2.03 billion to $2.08 billion. It had previously forecast consolidated revenue of from $2.1 billion to $2.2 billion.
It reduced its forecast range for consolidated operating income from $138 million to $152 million, from its previous range of from $184 million to $200 million.
“As we emerge from this transition year, these trends, along with our new product launches and rapid growth in our hearables category, are setting the stage for a strong 2024,” Kiani said in the company’s earnings release.
