Masimo Corporation (MASI)
Q3 2009 Earnings Call
November 3, 2009; 4:30 pm ET
Joe Kiani - Chairman & Chief Executive Officer
Mark de Raad - Executive Vice President of Finance & Chief Financial Officer
Bill Quirk - Piper Jaffray
Tao Levy - Deutsche Bank
Sara Michelmore - Cowen and Company
Matthew Dodds - Citigroup
Peter Lawson - Thomas Weisel & Partner
Joanne Wuensch - BMO Capital Markets
Brian Weinstein - William Blair
Spencer Nam - Summer Street
Previous Statements by MASI
» Masimo Corporation MASI Q2 2009 Earnings Call Transcript
» Masimo Q1 2009 Earnings Call Transcript
» Masimo Corporation Q4 2008 Earnings Call Transcript
I would now like to turn the call over to your host for today, Mr. Mark de Raad, Executive Vice President, Finance and Chief Financial Officer of Masimo. Sir, you may begin your conference.
Mark de Raad
Thank you. I’d like to welcome you all to Masimo’s third fiscal quarter 2009 earnings release conference call. Our press release was distributed about 30 minutes ago. If you have not seen the release and you would like to, a copy is posted on the Investor Relations page of our website at www.masimo.com.
Joining me today on the call is Joe Kiani, Masimo’s Chairman and Chief Executive Officer. In just a few moments, Joe and I will deliver remarks on our financial results for the 2009 third fiscal quarter and general comments regarding our business. After we complete our prepared remarks, there will be a question-and-answer session in which we will answer as many questions as time permits.
Before we begin, let me remind you that this call may contain forward-looking statements. While these forward-looking statements reflect Masimo’s best current judgment, they are subject to risks and uncertainties that could cause our actual results to vary. Risk factors that could cause Masimo’s actual results to materially differ from our forecast are discussed in detail in our filings with the Securities and Exchange Commission.
With that, I would like to turn the call over to Joe Kiani, Chairman and CEO.
Thank you Mark, and thank you ladies and gentlemen for joining us today. Our third fiscal quarter product revenues increased 14% to $75.1 million up from $66.1 million in the same prior year quarter and up sequentially from $70 million in the immediately preceding second quarter 2009.
Despite the still challenging business environment for new product procurement we were able to ship 26,200 new Masimo SET and Masimo Rainbow SET monitors during the third quarter and our Rainbow revenues doubled to $6 million compared to $3 million in the third quarter of 2008.
In our second quarter earnings call we expressed confidence that our third-quarter and fourth quarter product revenues will grow sequentially. Nothing has happened to change our expectations for sequential growth in the fourth quarter.
Despite a rough market, our business is growing. In fact our direct business grew by 22% year-over-year due to strong demand for Masimo SET and Masimo Rainbow SET. These results underline both the power of our innovations and noninvasive monitoring which is helping our customers improve to save life and our business model.
Mark will now provide you with a more detailed summary of our third quarter 2009 financial results. After Mark’s review, I would like to share with you some important recent milestone events during the third quarter. We will then be happy to answer your questions. Thank you.
Mark de Raad
Thank you Joe. And hello, good afternoon to everybody. Earlier today we reported total fiscal 2009 third quarter revenues up $87.4 million, which consisted of product revenues of $75.1 million and royalty revenues of approximately $12.3 million. This represented a 12% year-over-year increase in total revenues and a 14% increase in year-over-year product revenue growth.
The beneficial impact of foreign exchange rates on third quarter of fiscal 2009 revenues as compared to the prior year quarter, was relatively insignificant at a $179,000. For the nine month period ended October 3, 2009 total revenues rose to $256.5 million, up 15% from $224 million, while total product revenues rose 17% to $219.7 million, up from $188 million in the same prior year period.
Also in the fiscal third quarter, excluding handheld monitors, we shipped 26,200 new Pulse Oximeters and Pulse CO-Oximeter monitors into the marketplace and based on these shipments we now estimate that our total worldwide installed base net of estimated retirements to be at least 621,00 drivers, up from 540,000 drives or about 15% just one year ago.
We have recently completed an internal review of the useful field life of our products and based upon input from both our OEM and direct customers, we believe that the appropriate range of the true useful field life of our Pulse Oximeters and Pulse CO-Oximeter monitors is from 7 to 15 years. As you recall, we’ve traditionally assumed a seven year life.
As a result of this recently completed analysis beginning in the first quarter of 2010, we intend to change our useful field life assumption from 7 years to 10 years. In the first quarter, we will provide a revised set of historical driver data reflecting the new 10 year life assumption.
This change will have the impact of both increasing the number of drivers in the field and at the same time decreasing the average dollar per driver which is a measurement used by many of our analysts in their models. We’re providing this notice now so that when we provide the revised driver data in Q1 2010 the rationale for the change will already be understood.