Masimo (NASDAQ:MASI) is a relatively unknown mid-cap medical technology player which focuses on the development, manufacturing and marketing of non-invasive patient monitoring technologies. Founded in 1989, Masimo is a leading player in this niche market. The company develops and produces a wide array of monitoring technologies, measurements devices, sensors, patient monitors and automation and connectivity solutions.
The companys product lineup includes pulse oximetry readers, acute care patient monitoring, advanced home temperature monitoring devices, hemodynamic monitoring systems (blood flow), brain monitoring devices and airway management systems. The company went public in 2007, has a market capitalization of $7.5 billion and generated $1.24 billion in revenues in 2021.
Sound United acquisition
In April 2022, the company closed on the $1.0 billion acquisition of Sound United, which is a consumer technology company specializing in premium audio and home entertainment brands. Sound United operates iconic consumer audio brands such as Bowers & Wilkins, Denon, Polk Audio, Marantz and Boston Acoustics.
On the surface, the acquisition makes no sense as their products are not related to the medical device business. Investors are confused about this, resulting in the share price dropping.
However, Masimo's management stated that its legacy product line, which involves advanced signal processing, biosensing and photonics technologies, may bring advancements to Sound Uniteds products. In addition, Sound United's established expertise across consumer channels may accelerate their legacy portfolio of consumer facing health care products. These include pulse oximetry readers, continuous thermometer devices and sleep monitors.
The company stated that for the second quarter of 2022, it expects Sound United will generate revenues in the $180 million to $190 million range and gross margins of approximately 35%. For the full year, Sound United is expected to generate revenues of approximately $680 million at the midpoint of company guidance and operating profits in the $33 million to $49 million range.
Financial review
The company has show decent revenue growth over the past three years as well as good profitability. Counting backwards, net profit margins over the past three years have been 18.4%, 21.0% and 20.9%.
For the first quarter of 2022, the company was not immune to the macro issues affecting most businesses in the U.S. Revenue growth slowed down to 2.0% and earnings per share grew 3.0%. The company stated they encountered shortages of critical components (mainly semiconductors) as well as supply chain issues and labor availability problems.