Masimo plans to shave $300M from full-year revenue forecast after possible 20% drop in Q2

After a tumultuous few months sent Masimo’s second-quarter earnings on a downward spiral, the company is tempering expectations for the rest of the year.

In preliminary results published Monday afternoon, Masimo suggested that its total revenues for the quarter will land somewhere between $453 million and $457 million—miles below analyst estimates that had placed the quarter’s earnings much closer to the $565 million total it saw during the same period last year. Instead, those predicted results will add up to a year-over-year drop of at least 19%.

Masimo attributed the revenue decline to delays in large orders and lower demand for patient sensors—thanks to a reduced number of hospital inpatients and excess inventory—as well as ongoing hospital labor shortages and budget constraints, which may be keeping healthcare facilities from purchasing new equipment.

At the same time, however, Masimo saw the value of its healthcare contracts increase throughout the first half of the year.

“While we are disappointed in our revenue results this quarter, our hospital business is strong, as our growth in contracting shows,” CEO Joe Kiani said in the release. “We do believe sensor utilization and sensor revenue growth rates will return to normal levels.”

In the wake of the lower-than-expected preliminary tally for the quarter, Masimo is planning to trim down its full-year forecasts. It said in the release that it expects to shave about $150 million from the lower end of its previous guidance for the healthcare business, bringing it down to $1.3 billion. The company didn’t provide an update for the upper end of the guidance, noting that it could still be “materially higher” than the lower end; the original forecast capped healthcare revenues at $1.47 billion.

Masimo will cut another $150 million from the predicted annual revenues for its non-healthcare business, lowering those earnings from an expected range of $965 million to $995 million to fall somewhere between $800 million to $850 million.

Those updates bring the lower end of Masimo’s total forecasted revenues for 2023 to $2.1 billion compared to previous estimates that it would rake in at least $2.42 billion for the year. In fact, even if its earnings end up at the high ends of the updated forecasts, reaching around $2.32 billion, they’ll still be below the previously predicted threshold—albeit modestly higher than last year’s $2 billion total.

The official results for the quarter are slated for release on Aug. 8, when Masimo will also lay out a cost-cutting plan to offset the lower-than-expected earnings.

After Masimo published the preliminary results at the end of the day Monday, the company’s share price proceeded to plummet in after-hours trading. After closing at around $147, it immediately dropped 25% Monday evening, then trickled down even further Tuesday morning to open at $107.15, a low not seen since early 2019.

In a research note sent to Fierce Medtech, BTIG’s Marie Thibault maintained a “buy” rating for Masimo, citing lasting demand for its monitoring devices and “the possibility of near-term improvements.” At the same time, however, Thibault acknowledged the company’s “loss of management credibility”—as evidenced by its recent loss of two board members in a proxy fight waged by activist investor Politan Capital Management—and suggested that the stock price “may take months to regain footing.”