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Tuesday, Jul 16, 2024

Masimo CFO’s Mantra: Over Deliver on Wall Street

Micah Young remembers well Feb. 15, 2022, when Masimo Corp. announced it would spend $1 billion to acquire Sound United, a Carlsbad-based maker of high-end sound equipment.

The Masimo chief financial officer and executive vice president had arranged the deal’s financing, including scoring a new credit facility that was 25 basis points better than the average market rate at that time.

Then he watched in horror as the Irvine-based company’s stock (Nasdaq: MASI) dropped 37% in one day, wiping about $5 billion in market cap off the value of the maker of oxygen monitoring devices, largely erasing the gains the medical device maker had seen since the onset of the pandemic.

“I didn’t expect as big as that drop,” Young told the Business Journal.

“I think investors understood that we were heading into the consumer space; I don’t think that they understood that we needed a channel.”

Still, Young last year oversaw a 57% increase in revenue to $2 billion and a 23% increase in adjusted profit to $362 million. He helped steer the company into new markets like watches and baby monitors (see story, this page).

Last year, he onboarded more than 800 new employees, bringing the company’s total to more than 7,000 employees.

He’s forecasting sales will rise about 19%-20% this year to $2.415 billion to $2.46 billion. Revenue has tripled since he became CFO in 2017.

Better yet, the stock’s recuperated about 19% since that fateful February day. In the six years since he became CFO, the stock has more than doubled, easily beating the 64% gain for the S&P 500 during the same period.

With a nearly $9 billion market cap, Masimo is now Orange County’s fifth-most valuable public company.

For all these reasons, Young was honored in the public company category at the Business Journal’s CFO of the Year Awards, during a May 11 ceremony at the Irvine Marriott.

“In his six years with Masimo, he has quickly proved himself to be an invaluable asset to our company and one of my most trusted advisors,” Masimo founder and Chief Executive Joe Kiani said in a statement.

“He’s helped propel us to new heights, delivering impressively for our shareholders and helping steer Masimo’s finances through a period of rapid growth and exciting expansion into new markets.”

The QB

Young was born and raised in southern Ohio, where he was a quarterback in high school and a strong safety in college.

He originally wanted to pursue a career in law enforcement agencies like the FBI, following in the footsteps of his relatives. That explains why he earned a Bachelor of Science in criminal justice as well as accounting at Indiana Wesleyan University.

“I worked at Deloitte, enjoyed it and went into the healthcare industry,” Young said.

“I always thought it interesting to work for a company and industry that helps people. I never looked back at the criminal law pathway.”

At Masimo, he oversees all areas of finance, such as completing an interest rate swap on the credit facility that is projected to deliver more than $5 million of savings through lower interest payments.

Young is known for providing guidance that the company beat in 20 out of 21 quarters. On the most recent conference call, CEO Kiani told analysts that Young was “conservative” in forecasting revenue for new products like watches.

“I think it’s absolutely important to under-promise and overdeliver,” Young said. “It’s important to manage and provide credibility to that forecast. Investors do not like surprises.”

In his spare time, he’s been treasurer of both the Masimo Foundation for Ethics, Innovation and Competition in Healthcare as well as the Patient Safety Movement Foundation, which is working to eliminate more than 200,000 preventable hospital deaths annually in the U.S.

Pandemic Boost

When the pandemic began in 2020, the company saw revenue boom, as demand exploded for its oxygen equipment, which included the capability of remotely monitoring patients, a winning attribute for safely treating COVID-19.

Still, the company, like others, had to navigate the supply chain and update investors with accurate expectations.

“The past three years have been extremely challenging,” Young said.

One of his favorite investor days was last December, when company executives outlined their plans to take their technology made for hospitals and put it into devices for consumers such as watches, hearing aids, telehealth and baby monitors.

The company is expanding from its $9 billion total addressable market to a TAM of more than $170 billion.

“We’ve got great opportunities to enter large markets,” Young said. “It’s important to understand that last year was a transformational year.

“I’m most proud of being a strategic business partner—­to help guide our leadership team company through complex business times.”

Masimo Gears Up for Consumer Market

Masimo Corp. (Nasdaq: MASI), best known for selling oxygen monitoring equipment to hospitals, is unveiling a slew of consumer devices this year.

“We intend to grow Masimo by making a real difference in people’s lives in hospitals and homes,” Chief Executive Joe Kiani told analysts on a May 9 conference call with analysts to discuss first-quarter results.

During that call, the company founder discussed these products:

• On May 3, it launched its baby monitoring system called Stork at the 2023 Kids Expo in Las Vegas.

“We had very strong interest from major retailers, including one of Masimo Consumer’s largest customers, which will carry Stork and give it a very prominent display location in stores,” Kiani said. “We’re currently selling different configurations of Stork on the masimostork.com website and expect to announce important retail channel presence as well as large online baby registries for Stork over the next six months.”

• It will soon launch its first hearables based on its “adaptive acoustic technology” platform, also known as AAT.

It will create “personalized listening profiles for each user, customizing the sound spectrum for each person’s unique ear architecture and tearing sensitivities to ensure that no instrumental detail or sound goes unheard,” Kiani said.

These next-generation earbuds will be marketed as a Denon Pearl and Pearl Pro to leverage Denon’s heritage of world-class acoustics, Kiani said.

Denon is a unit of Sound United, the high-end sound equipment company Masimo bought last year.

“We have already received very strong interest from retailers that gives us confidence in a rapid sales ramp.”

• Its inaugural W1 watch, which is initially marketed toward the hospital industry, is gaining traction as Cambridge University Hospital in the U.K. and Charité German Health Center in Berlin have expanded their telehealth programs featuring the watch.

The next generation, called Masimo Freedom Watch, has an Android operating system and is slated for sale in the second half of the year.

• Kiani said the Freedom sleep band addresses a range of distinct consumer health needs at various price points; the goal is to display it in retail stores by the Christmas holiday season.

• The company is building a home entertainment operating system, HEOS, that connects wearables and remote monitoring products to its secure “Health Cloud.”

The number of HEOS connected devices grew approximately 180,000 in the first quarter. Masimo is aiming to make the system available to more than 4 million HEOS-enabled Sound United devices.

• In April, Masimo received approval for its Opioid Halo, making it the first and only FDA-cleared monitoring solution for detecting opioid-induced respiratory depression, the leading cause of death from opioid overdose.

On May 1, Masimo began marketing the product to drugstores and addiction treatment centers. With the transition of naloxone brands to over-the-counter status, large retailers are creating display areas that promote opioid safety and awareness within their stores, Kiani said.

He noted 80,000 people die annually due to opioid overdoses.

“We intend to play an active role in reducing these deaths by alerting patients and their loved ones when opioid-induced respiratory depression occurs,” Kiani said.

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