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Katie Szyman says her move to lead Masimo Corp. in February was as much of a surprise to her as it was to everyone else.
Six months prior, she became worldwide president of BD Advanced Patient Monitoring, the former Critical Care unit of Edwards Lifesciences Corp. that was acquired by Becton, Dickinson and Co. for $4.2 billion.
“I was very happy there, and it was going very well,” Szyman, chief executive of Masimo, told the Business Journal.
“Then, all of a sudden, this opened up, and this doesn’t open up every day—an opportunity that’s in the same city, that’s in the same adjacent space and that is a fantastic growth opportunity. I just felt like I had to answer the call and look at it.”
On May 6, Irvine-based Masimo reported first quarter revenue increasing 10% to $372 million. The maker of noninvasive patient monitoring devices notably reported results excluding its controversial consumer unit, which was championed by founder and prior CEO Joe Kiani.
The company reaffirmed its full-year revenue guidance of $1.5 billion to $1.53 billion, implying an 8% to 11% increase on a constant currency basis.
It also forecasts earnings per share of between $5.30 and $5.60, excluding the potential impacts of tariffs. Including tariffs, the impact may cut its EPS to $4.80 to $5.15.
“We’re weighted a bit towards China, so we’ll have some big benefit if the Chinese tariffs can get resolved to a more reasonable level,” Szyman said.
The company said it will share its tariff mitigation strategies next quarter.
Shares fell 7% to $150.11 each in the trading session following the earnings announcement; by press time, the shares recovered to $169.80 and an $9.2 billion market cap. Shares traded around $173 on Jan. 21, the day Szyman’s appointment was announced (Nasdaq: MASI).
$350M Sound United Sale
Szyman says her focus is for the company to concentrate on its core healthcare business that sells to hospitals.
Last month, Masimo announced that it has agreed to sell its consumer audio business Sound United to Harman International, a wholly owned subsidiary of Samsung Electronics Co., for $350 million. The transaction is expected to close by the end of this year.
Szyman said they had over 50 bidders for the unit.
“It was a really rigorous process, and so for me, we did what we said we were going to do,” she said.
It’s well below the $1 billion Masimo initially paid in 2022 to acquire the unit. Kiani had envisioned combining Masimo’s hospital grade technology with consumer devices like hearing aids and watches.
The controversial acquisition became the source of a two year-long proxy battle that resulted in Kiani being ousted from the board and subsequently resigning as CEO.
At one point, the company received an offer from an undisclosed bidder of between $850 million and $950 million when it was still considering spinning out the unit.
Spinning off or selling the unit has been a priority for the company since activist investor Politan Capital Management won control of the board of directors last September.
Analysts say the price was in line with expectations given the current macroeconomic environment with analysts in agreement.
“This deal was expected, and the value is roughly in-line with our thinking given the erosion in the business over the last few years,” Raymond James analyst Jayson Bedford wrote in a note to investors on May 6.
Proceeds from the transaction are anticipated to go toward share buybacks and paying off debt; it has $636 million in long-term debt as of March 31.
Adding AI to Existing,
New Sensors
Besides the Sound United sale, Szyman said Masimo is targeting acute care and post-acute care environments as part of its redirection.
“So, taking a lot of those technologies that were developed for the consumer market and redeploying them into the hospital market,” she said.
The company plans to upgrade its existing sensors and create next-generation monitors with its artificial intelligence-based algorithms.
The company is in the midst of getting its algorithms for opioid-induced respiratory depression and atrial fibrillation detection that were developed for home-use relabeled to be sold in hospitals, according to Szyman.
Another part of its strategy is to gain more market presence in other advanced monitoring categories, including capnography, brain monitoring and hemodynamics.
Next year, Masimo is launching a new hemodynamic system. This will come five years after it acquired LiDCO Group, a U.K.-based provider of advanced blood circulation monitors.
“What we’re really doing is just kind of putting the ability to do hemodynamic monitoring onto our mainline monitors,” Szyman said during the May 6 earnings call.
Masimo’s redirection has led some analysts to reiterate a buy rating for the company.
“We think management has been on the right track, and so far, are giving us confidence that the company’s focus is back on its core fundamentals, innovating within the hospital,” BTIG analysts Marie Thibault, Sam Eiber and Alexandra Pang wrote in a note to investors two weeks ago.
Changing Monitoring Policies
Szyman has spoken publicly about how she has personally benefitted from Masimo’s technologies, that include products that reduce faulty readings on the oxygen levels of newborn babies.
When Szyman’s daughter was just nine months old, she got pneumonia and had to be admitted to the pediatric intensive care unit for five days.
“I spent all five days just looking at the Masimo monitor, seeing if her pulse ox was going to come up above to a point where it would be safe to come home,” Szyman said.
On the fifth day, her oxygen level finally got above the ideal minimum of 90% and quickly went up to 96%, allowing them to be discharged.
“I really learned the importance of our technology and what it does for patients and clinicians,” Szyman said.
About only 30% of patients, however, are monitored in the hospital or ICU, Szyman said.
Currently, patients are monitored with intermittent spot checks by nurses every four to eight hours.
Szyman drew similarities between Masimo’s and Edwards’ technologies, saying that both companies are aligned in the belief that more patients should be continuously monitored.
She said that a long-term goal of hers is getting laws changed so that there is mandatory monitoring for all patients.
“I think to get the laws changed, we have to find very cost-effective, low-cost solutions to monitor patients continuously that don’t significantly increase liability for hospitals, but also help to save patient lives,” Szyman said. “So that’s what we’re trying to find is a technology that does all of that.”
Improving Employee Engagement
One challenge since her arrival in February has been employee engagement, Szyman said.
“As you can imagine, the whole organization’s been going through a lot of change,” Szyman said. “So that is something that was not a surprise to me, but it was an area of focus for us.”
As a response, Masimo in April hired Lisa Hellmann as its first-ever chief human resource officer.
Before Masimo, Hellman led HR at consulting firm Kotter International Inc. and Hologic Inc., a biotechnology company in San Diego.
Her addition to Masimo will help strengthen company culture and bring more direction to employees, Szyman said.
Szyman said they’re also going to bring in a new chief marketing officer to help with the expansion into new adjacent markets.
“The thing about Massimo is it’s really great at innovation, but maybe not so much at making sure there was an end market for some of their technologies,” she said.