8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________

FORM 8-K

__________________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 31, 2018

_______________________

MASIMO CORPORATION

(Exact name of registrant as specified in its charter)

_______________________

Delaware	001-33642	33-0368882
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

52 Discovery Irvine, California	92618
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (949) 297-7000

Not Applicable

(Former name or former address, if changed since last report)

 _______________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2 (b))
o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933(§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
	Emerging growth company	o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.		o

Item 2.02. Results of Operations and Financial Condition.

On October 31, 2018, Masimo Corporation (the “Company”) issued a press release announcing its financial results for the quarter ended September 29, 2018. A copy of the press release is furnished as Exhibit 99.1 to this Current Report.

In accordance with General Instructions B.2 of Form 8-K, the information in Item 2.02 of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended (“the Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 7.01. Regulation FD Disclosure.

In connection with the Company’s conference call scheduled to be held on October 31, 2018, the Company’s Chief Financial Officer will review supplemental information regarding the Company’s financial results for the quarter ended September 29, 2018, as well as the updated Company’s outlook for fiscal 2018. The Company’s supplemental information is furnished as Exhibit 99.2 to this Current Report.

In addition, the Company is making available to investors supplemental financial information for fiscal 2016, fiscal 2017 and the third quarter of fiscal 2018 pursuant to the materials furnished as Exhibit 99.3 to this Current Report.

In accordance with General Instructions B.2 of Form 8-K, the information in Item 7.01 of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.

(d) The following items are filed as exhibits to the Current Report on Form 8-K.

Exhibit  No.	Description
99.1	Press Release, dated October 31, 2018, Reporting Third Quarter 2018 Financial Results
99.2	Masimo Third Quarter 2018 Supplemental Presentation to Earnings Press Release
99.3	Masimo Supplemental Non-GAAP Financial Information

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Masimo Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	MASIMO CORPORATION
Date: October 31, 2018	By:	/s/ MICAH YOUNG
		Micah Young
		Executive Vice President & Chief Financial Officer
		(Principal Financial Officer)

EX-99.1

Exhibit 99.1

Masimo Reports Third Quarter 2018 Financial Results

Q32018 Highlights

■ Total revenue, including royalty and other revenue, was $210.6 million;

■ Product revenue increased 12.4% to $202.1 million, or 12.8% on a constant currency basis;

■ Shipments of noninvasive technology boards and monitors were 59,100; and

■ GAAP net income per diluted share of $1.02. Non-GAAP net income per diluted share increased 26.8% to $0.71.

Irvine, California, October 31, 2018- Masimo (NASDAQ: MASI) today announced its financial results for the third quarter ended September 29, 2018.

Third Quarter 2018 Results:

Third quarter 2018 total revenue, including royalty and other revenue, was $210.6 million. Product revenue for the third quarter 2018increased12.4% to $202.1 million, or 12.8% on a constant currency basis.

During the third quarter of 2018, the Company shipped approximately 59,100 noninvasive technology boards and monitors.

The Company’s worldwide direct product revenue, which accounted for 86.0% of total product revenue, increased to $173.8 million in the third quarter 2018. OEM sales, which accounted for 14.0% of total product revenue, increased to $28.3 million for the third quarter 2018.

For the third quarter 2018, GAAP net income was $57.1 million or $1.02 per diluted share. Non-GAAP net income was $40.1 million, or $0.71 per diluted share.

Total cash and cash equivalents increased by $63.8 million during the quarter to $493.5 million, as of September 29, 2018.

As a result of the strong performance in the third quarter, Masimo is raising its guidance for fiscal year 2018. The Company now expects product revenues of $826 million, which reflects reported growth of 11.9% and constant currency growth of 11.3%. Masimo is also raising its GAAP EPS guidance to $3.37 and its non-GAAP EPS guidance to $2.92.

Joe Kiani, Chairman and Chief Executive Officer of Masimo, said, “We are happy to report results for the third quarter that exceeded expectations. Our product revenue increased 12.8% on a constant currency basis to reach $202 million for the quarter. We also shipped a record 59,100, noninvasive technology boards and monitors. Our strong growth is the result of increasing demand for our innovative technologies and systems solutions, which enable our customers to automate patient management across the continuum of care and improve patient safety. We are once again raising guidance for revenue and earnings in 2018 as we continue to grow due to our life saving and life improving technologies.”

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2018 Financial Guidance

The Company provided the following updated estimates for its full year 2018 guidance:

	2018 Updated Guidance1						Prior 2018 Guidance1
(in millions, except percentages and earnings per share)	GAAP			Non-GAAP			GAAP			Non-GAAP
Total revenue, including royalty and other revenue	$	854		$	854		$	850		$	850
Product revenue	$	826		$	826		$	822		$	822
Percentage growth - as reported	11.9		%	11.9		%	11.3		%	11.3		%
Percentage growth - constant currency	N/A			11.3		%	N/A			10.8		%
Royalty and other revenue	$	28		$	28		$	28		$	28
Operating margin	24.2		%	24.4		%	24.2		%	24.4		%
Diluted earnings per share	$	3.37		$	2.92		$	3.07		$	2.90
EBITDA	26.7		%	29.9		%	26.8		%	29.9		%
Estimated tax rate	11.0		%	24.0		%	19.3		%	24.0		%

______________

¹  Updated guidance provided October 31, 2018. Prior guidance provided August 1, 2018.

• Total revenue, including royalty and other revenue, increasing to $854 million;

• Product revenue increasing to $826 million, which reflects reported growth of 11.9% and constant currency growth of 11.3%;

• GAAP diluted earnings per share increasing to $3.37;

• Non-GAAP diluted earnings per share increasing to $2.92; and

• Included in our full year revenue guidance is approximately $4 million of year-over-year currency benefits.

Impact of Adoption of New Revenue Accounting Standard:

During the first quarter of 2018, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update No. 2014-09, Revenue (Topic 606): Revenue from Contracts with Customers (ASU 2014-09). The new revenue recognition standard requires the Company to make numerous assumptions that are based upon historical trends and management judgment. These assumptions may change over time and may have a material impact on our revenue recognition, guidance and results of operations. In accordance with the full retrospective method of adoption, the Company has adjusted certain amounts previously reported in its unaudited condensed consolidated financial statements to comply with the new standard, as indicated by the notation, “As Adjusted”. For additional information with respect to the impact of the adoption of this new accounting standard and reconciliations to the prior reported amounts, please reference Note 2 to our condensed consolidated financial statements that will be included in Part I, Item 1 of our Quarterly Report on Form 10-Q (Form 10-Q) for the quarter ended September 29, 2018 once filed with the Securities and Exchange Commission (SEC) and Exhibit 99.3 that was included in our Current Report on Form 8-K that was filed with the SEC today.

Supplementary Non-GAAP Financial Information

For additional non-GAAP financial details, please visit the Investor Relations section of the Company’s website at www.masimo.com to access Supplementary Financial Information.

Non-GAAP Financial Measures

The non-GAAP financial measures contained herein are a supplement to the corresponding financial measures prepared in accordance with U.S. GAAP. The non-GAAP financial measures presented exclude the items described below. Management believes that adjustments for these items assist investors in making comparisons of period-to-period operating results. Furthermore, management also believes that these items are not indicative of the Company’s on-going core operating performance. These non-GAAP financial measures have certain limitations in that they do not reflect all of the costs associated with the operations of the Company’s business as determined in accordance with GAAP.

Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. The non-GAAP financial measures presented by the Company may be different from the non-GAAP financial measures used by other companies.

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The Company has presented the following non-GAAP measures to assist investors in understanding the Company’s core net operating results on an on-going basis: (i) non-GAAP product revenue growth %, (ii) non-GAAP net income, (iii) non-GAAP diluted earnings per share, (iv) non-GAAP gross profit, (v) non-GAAP operating income and (vi) adjusted EBITDA. These non-GAAP financial measures may also assist investors in making comparisons of the Company’s core operating results with those of other companies. Management believes non-GAAP product revenue growth %, non-GAAP gross profit, non-GAAP operating income, non-GAAP net income, non-GAAP net income per diluted share and adjusted EBITDA are important measures in the evaluation of the Company’s performance and uses these measures to better understand and evaluate our business.

The non-GAAP financial measures reflect adjustments for the following items, as well as the related income tax effects thereof:

Constant currency adjustments.

Some of our sales agreements with foreign customers provide for payment in currencies other than the U.S. Dollar. These foreign currency revenues, when converted into U.S. Dollars, can vary significantly from period to period depending on the average and quarter-end exchange rates during a respective period. We believe that comparing these foreign currency denominated revenues by holding the exchange rates constant with the prior year period is useful to management and investors in evaluating our product revenue growth rates on a period-to-period basis. We anticipate that fluctuations in foreign exchange rates and the related constant currency adjustments for calculation of our product revenue growth rate will continue to occur in future periods.

Acquisition-related costs, including depreciation and amortization.

Depreciation and amortization related to the revaluation of assets and liabilities (primarily intangible assets, property, plant and equipment adjustments, inventory revaluation, lease liabilities, etc.) to fair value through purchase accounting related to value created by the seller prior to the acquisition rather than ongoing costs of operating our core business. As a result, we believe that exclusion of these costs in presenting non-GAAP financial measures provides management and investors a more effective means of evaluating historical performance and projected costs and the potential for realizing cost efficiencies within our core business. Depreciation and amortization related to the revaluation of acquisition related assets and liabilities will generally recur in future periods.

Litigation damages, awards and settlements.

In connection with litigation proceedings arising in the course of our business, we have recorded expenses as a defendant in such proceedings in the form of damages, as well as gains as a plaintiff in such proceedings in the form of litigation awards and settlement proceeds; most recently in connection with our November 2016 settlement agreement with Koninklijke Philips N.V. We believe that exclusion of these gains and losses is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis. In this regard, we note that these expenses and gains are generally unrelated to our core business and/or infrequent in nature.

Realized and unrealized gains or losses from foreign currency transactions.

We are exposed to foreign currency gains or losses on outstanding foreign currency denominated receivables and payables related to certain customer sales agreements, product costs and other operating expenses. As the Company does not actively hedge these currency exposures, changes in the underlying currency rates relative to the U.S. Dollar may result in realized and unrealized foreign currency gains and losses between the time these receivables and payables arise and the time that they are settled in cash. Since such realized and unrealized foreign currency gains and losses are the result of macro-economic factors and can vary significantly from one period to the next, we believe that exclusion of such realized and unrealized gains and losses are useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis. Realized and unrealized foreign currency gains and losses are likely to recur in future periods.

Excess tax benefits from stock-based compensation.

Current authoritative accounting guidance requires that excess tax benefits or costs recognized on stock-based compensation expense be reflected in our provision for income taxes rather than paid-in capital. Since we cannot control or predict when stock option awards will be exercised or the price at which such awards will be exercised, the impact of such guidance can create significant volatility in our effective tax rate from one period to the next. We believe that exclusion of these excess tax benefits or costs is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis. These excess tax benefits or costs will generally recur in future periods as long as we continue to issue equity awards to our employees.

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Tax impacts that may not be representative of the ongoing results of our core operations.

The Tax Cuts and Jobs Act of 2017 (2017 Tax Act) was signed into law in December 2017, and became effective January 1, 2018. The 2017 Tax Act included a number of changes to existing U.S. federal tax law impacting businesses including, among other things, a permanent reduction in the corporate income tax rate from 35% to 21%, a one-time transition tax on the “deemed repatriation” of cumulative undistributed foreign earnings as of December 31, 2017 and changes in the prospective taxation of the foreign operations of U.S. multinational companies.

From time to time, we record tax benefits relating to the derecognition of uncertain tax positions due to the expiration of the statutes of limitations. During the three months ended September 29, 2018, we recorded a significant tax benefit due to the expiration of the applicable statutes of limitations related to certain non-recurring transactions.

We believe that exclusion of the tax charges related to the 2017 Tax Act and the tax benefit resulting from the expiration of certain statutes of limitations related to non-recurring transactions is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis. In this regard, we note that these tax items are unrelated to our core business and non-recurring in nature.

Third Quarter 2018 Actuals versus Third Quarter 2017 Actuals:

RECONCILIATION OF GAAP TO NON-GAAP CONSTANT CURRENCY PRODUCT REVENUE:
				Three Months Ended
(in thousands, except percentages)				September 29, 2018			September 30, 2017 As Adjusted
GAAP product revenue				$	202,068		$	179,696
Non-GAAP constant currency adjustments:
	Constant currency F/X adjustments			658			N/A
		Total non-GAAP constant currency adjustments		658			N/A
			Non-GAAP (constant currency) product revenue	$	202,726		$	179,696
Product revenue growth %:
	GAAP			12.4		%
	Non-GAAP (constant currency)			12.8		%

				Nine Months Ended
(in thousands, except percentages)				September 29, 2018			September 30, 2017 As Adjusted
GAAP product revenue				$	608,461		$	541,889
Non-GAAP constant currency adjustments:
	Constant currency F/X adjustments			(5,363		)	N/A
		Total non-GAAP constant currency adjustments		(5,363		)	N/A
			Non-GAAP (constant currency) product revenue	$	603,098		$	541,889
Product revenue growth %:
	GAAP			12.3		%
	Non-GAAP (constant currency)			11.3		%

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RECONCILIATION OF GAAP TO NON-GAAP NET INCOME AND NET INCOME PER DILUTED SHARE:
		Three Months Ended
		September 29, 2018						September 30, 2017 As Adjusted
(in thousands, except per share amounts)		$			Per Diluted Share			$			Per Diluted Share
GAAP net income, as originally reported		$	57,126		$	1.02		$	39,235		$	0.70
ASC 606 adjustments		—			—			(3,382		)	(0.06		)
GAAP net income, as adjusted		57,126			1.02			35,853			0.64
Non-GAAP adjustments:
	Acquisition related depreciation and amortization	361			—			390			—
	Litigation damages, awards and settlements	500			0.01			—			—
	Non-operating other (income) expense	1,311			0.02			448			0.01
	Tax impact of above items	(376		)	(0.01		)	(137		)	—
	Excess tax benefits from stock-based compensation	(14,647		)	(0.26		)	(4,867		)	(0.09		)
	Expiration of certain statutes of limitations related to unique and non-recurring tax positions	(4,169		)	(0.07		)	—			—
	Remeasurement of deferred taxes	(16		)	—			—			—
	Total non-GAAP adjustments	(17,036		)	(0.31		)	(4,166		)	(0.08		)
Non-GAAP net income		$	40,090		$	0.71		$	31,687		$	0.56
Weighted average shares outstanding - diluted					56,237						56,163

		Nine Months Ended
		September 29, 2018						September 30, 2017 As Adjusted
(in thousands, except per share amounts)		$			Per Diluted Share			$			Per Diluted Share
GAAP net income, as originally reported		$	146,609		$	2.59		$	131,248		$	2.35
ASC 606 adjustments		—			—			1,276			0.02
GAAP net income, as adjusted		146,609			2.59			132,524			2.37
Non-GAAP adjustments:
	Acquisition related depreciation and amortization	1,082			0.02			1,207			0.02
	Litigation damages, awards and settlements	500			0.01			—			—
	Non-operating other (income) expense	764			0.01			239			—
	Tax impact of above items	(134		)	(0.01		)	(374		)	(0.01		)
	Excess tax benefits from stock-based compensation	(21,742		)	(0.38		)	(35,093		)	(0.62		)
	Expiration of certain statutes of limitations related to unique and non-recurring tax positions	(4,169		)	(0.07		)	—			—
	Remeasurement of deferred taxes	—			—			—			—
	Total non-GAAP adjustments	(23,699		)	(0.42		)	(34,021		)	(0.61		)
Non-GAAP net income		$	122,910		$	2.17		$	98,503		$	1.76
Weighted average shares outstanding - diluted					56,555						55,967

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Full Year 2018 Guidance versus Full Year 2017 Actuals:

RECONCILIATION OF GAAP PRODUCT REVENUE GROWTH % TO CONSTANT CURRENCY PRODUCT REVENUE GROWTH %:
			Full Year 2018 Updated Guidance1			Full Year 2017 Actuals As Adjusted
GAAP product revenue			$	826,000		$	738,242
Non-GAAP constant currency adjustments:
	Constant currency F/X adjustments		(4,000		)	N/A
		Total non-GAAP constant currency adjustments	(4,000		)	N/A
Non-GAAP (constant currency) product revenue			$	822,000		$	738,242
Product revenue growth %:
	GAAP		11.9		%
	Non-GAAP (constant currency)		11.3		%

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME AND NET INCOME PER DILUTED SHARE:
		Full Year 2018 Updated Guidance1						Full Year 2017 Actuals As Adjusted
(in thousands, except per share amounts)		$			Per Diluted Share			$			Per Diluted Share
GAAP net income, as originally reported		$	189,300		$	3.37		$	131,616		$	2.36
ASC 606 adjustments		—			—			(6,827		)	(0.13		)
GAAP net income as adjusted		189,300			3.37			124,789			2.23
Non-GAAP adjustments:
	Acquisition related depreciation and amortization	1,500			0.03			1,597			0.03
	Litigation damages, awards and settlements	500			0.01			—			—
	Non-operating other (income) expense	800			0.01			270			0.01
	Tax impact of above items	(231		)	(0.01		)	(456		)	(0.01		)
	Excess tax benefits from stock-based compensation	(23,400		)	(0.42		)	(39,241		)	(0.70		)
	Tax impact of U.S. tax reform2, 3	—			—			41,392			0.74
	Expiration of certain statutes of limitation related to unique and non-recurring tax positions	(4,169		)	(0.07		)	—			—
	Total non-GAAP adjustments	(25,000		)	(0.45		)	3,562			0.07
Non-GAAP net income		$	164,300		$	2.92		$	128,351		$	2.30
Weighted average shares outstanding - diluted					56,200						55,874

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¹  Estimated effective tax rate of 11.0% applied to GAAP earnings and 24.0% applied to non-GAAP earnings.

²  As previously reported in May 2018, the 2017 Tax Act resulted in an unfavorable charge of $43.5 million in the fourth quarter of 2017. The amount recognized was a provisional estimate and subject to change, possibly materially, due to, among other things, refinements of the Company’s calculations, changes in interpretations and assumptions the Company has made or additional guidance issued by the U.S. Treasury, Securities and Exchange Commission or Financial Accounting Standards Board.

³  Includes adjustments related to the full retrospective application of ASC 606 of $2.1 million, or $0.04 per diluted share, in the first quarter of 2018.

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RECONCILIATION OF GAAP TO NON-GAAP GROSS PROFIT AND OPERATING INCOME:
		Full Year 2018 Updated Guidance				Full Year 2017 Actuals As Adjusted
(in thousands, except percentages)		$		% of Revenue		$			% of Revenue
GAAP gross profit, as originally reported		$	570,000	66.7	%	$	535,100		67.0	%
ASC 606 adjustments		—		—		(13,068		)	(1.0	)
GAAP gross profit, as adjusted		570,000		66.7		522,032			66.0
Non-GAAP adjustments:
	Acquisition related depreciation and amortization	500		0.1		500			0.1
	Total non-GAAP adjustments	500		0.1		500			0.1
Non-GAAP gross profit		$	570,500	66.8	%	$	522,532		66.1	%
GAAP operating income		$	206,300	24.2	%	$	197,361		24.7	%
ASC 606 adjustments		—		—		(13,573		)	(1.4	)
GAAP operating income, as adjusted		206,300		24.2		183,788			23.3
Non-GAAP adjustments:
	Acquisition related depreciation and amortization	1,500		0.2		1,597			0.2
	Litigation damages, awards and settlements	500		—		—			—
	Total non-GAAP adjustments	2,000		—		1,597			—
Non-GAAP operating income		$	208,300	24.4	%	$	185,385		23.5	%

RECONCILIATION OF EBITDA TO ADJUSTED EBITDA:
		Full Year 2018 Updated Guidance					Full Year 2017 Actuals As Adjusted
(in thousands, except percentages)		$			% of Revenue		$			% of Revenue
GAAP net income, as originally reported		$	189,300		22.2	%	$	131,616		16.7	%
ASC 606 adjustments		—			—		(6,827		)	(0.9	)
GAAP net income, as adjusted		189,300			22.2		124,789			15.8
	Other (income)/expense1	(6,400		)	(0.7	)	(2,013		)	(0.3	)
	Provision for income taxes	23,400			2.7		61,011			7.8
	Depreciation and amortization	21,300			2.5		20,061			2.5
EBITDA		227,600			26.7		203,848			25.8
	Add: Non-cash stock-based compensation expense	26,800			3.1		17,187			2.2
	Add: Litigation damages, awards and settlements	500			0.1		—			—
Adjusted EBITDA		$	254,900		29.9	%	$	221,035		28.0	%

______________

¹  Other (income)/expense consists primarily of interest (income)/expense and net foreign currency (gains)/losses.

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Conference Call

Masimo will hold a conference call today at 1:30 p.m. PT (4:30 p.m. ET) to discuss the results. A live webcast of the call will be available online from the investor relations page of the Company’s website at www.masimo.com. The dial-in numbers are (888) 520-7182 for domestic callers and +1 (706) 758-3929 for international callers. The reservation code for both dial-in numbers is 2368156. After the live webcast, the call will be available on Masimo’s website through November 28, 2018. In addition, a telephonic replay of the call will be available through November 7, 2018. The replay dial-in numbers are (855) 859-2056 for domestic callers and +1 (404) 537-3406 for international callers. Please use reservation code 2368156.

About Masimo

Masimo (NASDAQ: MASI) is a global leader in innovative noninvasive monitoring technologies. Our mission is to improve patient outcomes and reduce the cost of care by taking noninvasive monitoring to new sites and applications. In 1995, the Company debuted Masimo SET^® Measure-through Motion and Low Perfusion^® pulse oximetry, which has been shown in multiple studies to significantly reduce false alarms and accurately monitor for true alarms. Masimo SET^® is estimated to be used on more than 100 million patients in leading hospitals and other healthcare settings around the world. In 2005, Masimo introduced rainbow^® Pulse CO-Oximetry technology, allowing noninvasive and continuous monitoring of blood constituents that previously could only be measured invasively, including total hemoglobin (SpHb^®), oxygen content (SpOC), carboxyhemoglobin (SpCO^®), methemoglobin (SpMet^®), Pleth Variability Index (PVi^®) and more recently, Oxygen Reserve Index (ORi^™), in addition to SpO2, pulse rate and perfusion index (PI). In 2014, Masimo introduced Root^™, an intuitive patient monitoring and connectivity platform with the Masimo Open Connect^® (MOC-9^®) interface. Masimo is also taking an active leadership role in mobile health applications (mHealth) with products such as the Radius-7^® wearable patient monitor and the MightySat^™fingertip pulse oximeter. Additional information about Masimo and its products may be found at www.masimo.com.

Forward-Looking Statements

All statements other than statements of historical facts included in this press release that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements including, in particular, the statements about our expectations for full fiscal year GAAP and non-GAAP 2018 total, product, royalty and other revenues, earnings per diluted share, operating margin, EBITDA, and estimated tax rate, and our long-term outlook; demand for our products; anticipated revenue and earnings growth; our financial condition, results of operations and business generally; expectations regarding our ability to design and deliver innovative new noninvasive technologies and reduce the cost of care; and demand for our technologies. These forward-looking statements are based on management’s current expectations and beliefs and are subject to uncertainties and factors, all of which are difficult to predict and many of which are beyond our control and could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to, those related to: our dependence on Masimo SET^® and Masimo rainbow SET^™ products and technologies for substantially all of our revenue; any failure in protecting our intellectual property exposure to competitors’ assertions of intellectual property claims; the highly competitive nature of the markets in which we sell our products and technologies; any failure to continue developing innovative products and technologies; the lack of acceptance of any of our current or future products and technologies; obtaining regulatory approval of our current and future products and technologies; the risk that the implementation of our international realignment will not continue to produce anticipated operational and financial benefits, including a continued lower effective tax rate; the loss of our customers; the failure to retain and recruit senior management; product liability claims exposure; a failure to obtain expected returns from the amount of intangible assets we have recorded; the maintenance of our brand; the amount and type of equity awards that we may grant to employees and service providers in the future; our ongoing litigation and related matters; and other factors discussed in the “Risk Factors” section of our most recent periodic reports filed with the Securities and Exchange Commission (“SEC”), including our most recent Form 10-K and Form 10-Q, all of which you may obtain for free on the SEC’s website at www.sec.gov. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, even if subsequently made available by us on our website or otherwise. We do not undertake any obligation to update, amend or clarify these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

# # #

Investor Contact: Eli Kammerman	Media Contact: Irene Paigah
(949) 297-7077	(858) 859-7001
ekammerman@masimo.com	irenep@masimo.com

Masimo, SET, Signal Extraction Technology, Improving Patient Outcome and Reducing Cost of Care... by Taking Noninvasive Monitoring to New Sites and Applications, rainbow, SpHb, SpOC, SpCO, SpMet, PVI and ORI are trademarks or registered trademarks of Masimo Corporation.

-8-

MASIMO CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited, in thousands)
	September 29, 2018			December 30, 2017 As Adjusted
ASSETS
Current assets
Cash and cash equivalents	$	493,488		$	315,302
Accounts receivable, net of allowance for doubtful accounts	101,024			118,532
Inventories	92,952			92,259
Other current assets	48,283			33,601
Total current assets	735,747			559,694
Deferred costs and other contract assets	119,523			109,256
Property and equipment, net	164,605			164,096
Intangible assets, net	28,462			27,123
Goodwill	23,454			20,617
Deferred tax assets	20,209			19,981
Other non-current assets	3,859			4,668
Total assets	$	1,095,859		$	905,435
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	38,940		$	33,780
Accrued compensation	41,293			39,515
Accrued and other current liabilities	27,802			24,254
Deferred revenue and other contract-related liabilities, current	35,592			32,105
Total current liabilities	143,627			129,654
Other non-current liabilities	39,834			51,757
Total liabilities	183,461			181,411
Commitments and contingencies
Stockholders’ equity
Common stock	53			52
Treasury stock	(489,026		)	(472,536		)
Additional paid-in capital	523,051			461,494
Accumulated other comprehensive loss	(5,818		)	(2,941		)
Retained earnings	884,138			737,955
Total stockholders’ equity	912,398			724,024
Total liabilities and stockholders’ equity	$	1,095,859		$	905,435

-9-

MASIMO CORPORATION  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands, except per share amounts)
	Three Months Ended					Nine Months Ended
	September 29, 2018			September 30, 2017 As Adjusted		September 29, 2018		September 30, 2017 As Adjusted
Revenue:
Product	$	202,068		$	179,696	$	608,461	$	541,889
Royalty and other revenue	8,515			13,664		26,696		40,420
Total revenue	210,583			193,360		635,157		582,309
Cost of goods sold	69,830			69,295		208,596		198,929
Gross profit	140,753			124,065		426,561		383,380
Operating expenses:
Selling, general and administrative	72,670			65,704		215,263		198,460
Research and development	19,442			15,300		57,160		45,859
Total operating expenses	92,112			81,004		272,423		244,319
Operating income	48,641			43,061		154,138		139,061
Non-operating income	1,028			287		4,080		1,319
Income before provision (benefit) for income taxes	49,669			43,348		158,218		140,380
Provision (benefit) for income taxes	(7,457		)	7,495		11,609		7,856
Net income	$	57,126		$	35,853	$	146,609	$	132,524
Net income per share:
Basic	$	1.09		$	0.69	$	2.78	$	2.57
Diluted	$	1.02		$	0.64	$	2.59	$	2.37
Weighted-average shares used in per share calculations:
Basic	52,432			52,079		52,726		51,469
Diluted	56,237			56,163		56,555		55,967

The following table presents details of the stock-based compensation expense that is included in each functional line item in the condensed consolidated statements of operations (in thousands):

	Three Months Ended				Nine Months Ended
	September 29, 2018		September 30, 2017		September 29, 2018		September 30, 2017
Cost of goods sold	$	89	$	93	$	240	$	258
Selling, general and administrative	5,981		4,049		15,310		8,683
Research and development	1,573		909		4,145		2,251
Total	$	7,643	$	5,051	$	19,695	$	11,192

-10-

MASIMO CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands)
	Nine Months Ended
	September 29, 2018			September 30, 2017 As Adjusted
Cash flows from operating activities:
Net income	$	146,609		$	132,524
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	15,959			14,384
Stock-based compensation	19,695			11,192
Loss on disposal of property, equipment and intangibles	641			420
Benefit from doubtful accounts	(401		)	—
Benefit from deferred income taxes	(6,747		)	—
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable	17,384			(17,277		)
Increase in inventories	(1,069		)	(26,354		)
Increase in other current assets	(15,606		)	(9,095		)
Increase in deferred costs and other contract assets	(10,400		)	(9,175		)
Decrease (increase) in other non-current assets	496			(3,525		)
Increase in accounts payable	4,090			3,748
Increase (decrease) in accrued compensation	1,919			(9,094		)
Increase in accrued liabilities	5,695			393
Increase (decrease) in income tax payable	410			(71,177		)
Increase (decrease) in deferred revenue and other contract-related liabilities	3,981			(11,039		)
(Decrease) increase in other non-current liabilities	(6,351		)	1,456
Net cash provided by operating activities	176,305			7,381
Cash flows from investing activities:
Purchases of property and equipment, net	(12,299		)	(37,830		)
Increase in intangible assets	(4,718		)	(2,220		)
Business combination, net of cash acquired, and acquisitions of equity investments	(4,000		)	(1,145		)
Proceeds from sale of equity investments	453			—
Net cash used in investing activities	(20,564		)	(41,195		)
Cash flows from financing activities:
Repayments of capital lease obligations	—			(71		)
Proceeds from issuance of common stock	42,297			55,709
Payroll tax withholdings on behalf of employees for vested equity awards	(168		)	—
Repurchases of common stock	(18,478		)	(42,608		)
Net cash provided by financing activities	23,651			13,030
Effect of foreign currency exchange rates on cash	(1,230		)	3,112
Net increase in cash, cash equivalents, and restricted cash	178,162			(17,672		)
Cash, cash equivalents and restricted cash at beginning of period	315,483			308,198
Cash, cash equivalents and restricted cash at end of period	$	493,645		$	290,526

-11-

EX-99.2

Q3 2018 Results Supplemental Presentation to Earnings Press Release October 31, 2018 © 2018 Masimo. All Rights Reserved.

Forward-Looking Statements All statements other than statements of historical facts contained herein that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements including, in particular, the statements about our expectations for full fiscal year 2018 total, product, royalty revenues and other, GAAP earnings per diluted share and our long-term outlook; demand for our products; anticipated revenue and earnings growth; our financial condition, results of operations and business generally; expectations regarding our ability to design and deliver innovative new noninvasive technologies and reduce the cost of care; and demand for our technologies. These forward-looking statements are based on management’s current expectations and beliefs and are subject to uncertainties and factors, all of which are difficult to predict and many of which are beyond our control and could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to, those related to: our dependence on Masimo SET® and Masimo rainbow SET™ products and technologies for substantially all of our revenue; any failure in protecting our intellectual property; exposure to competitors’ assertions of intellectual property claims; the highly competitive nature of the markets in which we sell our products and technologies; any failure to continue developing innovative products and technologies; the lack of acceptance of any of our current or future products and technologies; obtaining regulatory approval of our current and future products and technologies; the risk that the implementation of our international realignment will not continue to produce anticipated operational and financial benefits, including a continued lower effective tax rate; the loss of our customers; the failure to retain and recruit senior management; product liability claims exposure; a failure to obtain expected returns from the amount of intangible assets we have recorded; the maintenance of our brand; the amount and type of equity awards that we may grant to employees and service providers in the future; our ongoing litigation and related matters; and other factors discussed in the “Risk Factors” section of our most recent periodic reports filed with the Securities and Exchange Commission (“SEC”), including our most recent Form 10-K and Form 10-Q, all of which you may obtain for free on the SEC’s website at www.sec.gov. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, even if subsequently made available by us on our website or otherwise. We do not undertake any obligation to update, amend or clarify these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. © 2018 Masimo. All Rights Reserved.

Non-GAAP Financial Measures The non-GAAP financial measures contained herein are a supplement to the corresponding financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP). The non-GAAP financial measures presented exclude the items that are more fully described below. Management believes that adjustments for these items assist investors in making comparisons of period-to- period operating results and that these items are not indicative of the company’s on-going core operating performance. These non- GAAP financial measures have certain limitations in that they do not reflect all of the costs associated with the operations of the company’s business as determined in accordance with GAAP. Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. The non-GAAP financial measures presented by the company may be different from the non-GAAP financial measures used by other companies. The company has presented the following non-GAAP measures to assist investors in understanding the company’s core net operating results on an on-going basis: (i) non-GAAP net income, (ii) non-GAAP product revenue, (iii) non-GAAP gross profit, (iv) non-GAAP operating expenses, (v) non-GAAP non-operating income (expense), and (vi) non-GAAP net income per diluted share. These non- GAAP financial measures may also assist investors in making comparisons of the company’s core operating results with those of other companies. Management believes non-GAAP product revenue, non-GAAP gross profit, non-GAAP net income and non-GAAP net income per diluted share are important measures in the evaluation of the company’s performance and uses these measures to better understand and evaluate our business. The non-GAAP financial measures reflect adjustments for the following items, as well as the related income tax effects thereof: acquisition-related depreciation and amortization, realized and unrealized gains or losses from foreign currency transactions, excess tax benefits from stock-based compensation and tax impacts that may not be representative of the ongoing results of our core operations. For additional financial details, please visit the Investor Relations section of the Company’s website at www.masimo.com to access Supplementary Financial Information. © 2018 Masimo. All Rights Reserved.

Impact of Adoption of New Accounting Standard (ASC 606) During the first quarter of 2018, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update No. 2014-09, Revenue (Topic 606): Revenue from Contracts with Customers (ASU 2014-09). The new revenue recognition standard requires the Company to make numerous assumptions that are based upon historical trends and management judgment. These assumptions may change over time and may have a material impact on our revenue recognition, guidance and results of operations. In accordance with the full retrospective method of adoption, the Company has adjusted certain amounts previously reported in its unaudited condensed consolidated financial statements to comply with the new standard, as indicated by the notation, “As Adjusted”. For additional information with respect to the impact of the adoption of this new accounting standard and reconciliations to the prior reported amounts, please reference Note 2 to our condensed consolidated financial statements that will be included in Part I, Item 1 of our Quarterly Report on Form 10-Q (Form 10-Q) for the quarter ended September 30, 2018 once filed with the Securities and Exchange Commission (SEC) and Exhibit 99.3 that was included in our Current Report on Form 8-K that was filed with the SEC today. © 2018 Masimo. All Rights Reserved.

Masimo Today ~$826M >100 Million annual product patients revenue 1 impacted each year 2 >140 countries Innovator Leader in noninvasive in pulse patient oximetry monitoring Primary pulse oximetry technology at 17 of the top 20 hospitals listed in the 2017-2018 U.S. News & technologies World Report Best Hospitals Honor Roll 3 1 Masimo 2018 financial guidance as of October 31, 2018 2 Estimate: Masimo data on file 3 http://health.usnews.com/health-care/best-hospitals/articles/best-hospitals-honor-roll-and-overview © 2018 Masimo. All Rights Reserved.

Seven Year Plan ► Our customers and partners are embracing us ► Targeting long-term revenue growth of 8%-10% ► Targeting long-term operating profit margin of 30% ► Targets do not include contributions from products in pipeline or M&A ► We are a 29 year-old company that has the passion of a start-up ► Our technologies provide meaningful clinical benefits and reduce costs of care © 2018 Masimo. All Rights Reserved.

Q3 2018 Highlights ► Total revenue, including royalty and other revenue, of $210.6 million ► Product revenue increased 12.4% to $202.1 million, up 12.8% on a constant currency basis ► Shipped 59,100 noninvasive technology boards and monitors ► GAAP operating profit margin of 23.1%; Non-GAAP operating profit margin increased 100 basis points to 23.5% ► GAAP diluted earnings per share of $1.02; Non-GAAP diluted earnings per share increased 26.8% to $0.71 © 2018 Masimo. All Rights Reserved.

Q3 2018 Financial Performance GAAP Non-GAAP Measures 1 $ in millions, except EPS Q3 2018 Q3 2018 vs. Prior Year YoY Performance Highlights Total revenue growth of 8.9% driven by product revenue growth of 12.4%; offset by a reduction of Total Revenue $210.6 $210.6 8.9% $5.1M in royalty and other NRE revenue. Product Revenue $202.1 $202.1 12.4% Product revenue growth of 12.4% reported or 12.8% excluding FX. 270 bps YoY improvement driven by a 360 bps improvement in product gross margin; offset by a 90 Total Gross Margin 66.8% 66.9% 270 bps bps headwind related to the reduction in royalty and other NRE revenue, which has a higher gross margin profile. 360 bps YoY improvement driven by manufacturing efficiencies and favorable mix benefits from customers Product Gross Margin 65.5% 65.6% 360 bps upgrading to the newer RD sensor line. Increased R&D investment and higher share based compensation (primarily driven by the higher Operating Expenses 43.7% 43.4% 160 bps share price). Operating Margin 23.1% 23.5% 100 bps 100 bps YoY improvement driven by manufacturing efficiencies and favorable product mix. 26.8% growth driven by strong revenue performance, gross margin improvements and a lower tax EPS $1.02 $0.71 26.8% rate. EBITDA Margin 25.6% 29.4% 200 bps 200 bps YoY improvement driven by manufacturing efficiencies and favorable product mix. Tax Rate -15.0% 22.7% -560 bps 560 bps YoY improvement due to the recent changes in U.S. tax laws. 1 Please refer to our Non-GAAP financial measures and definitions as previously described in this document. During the first quarter of 2018, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update No. 2014-09, Revenue (Topic 606): Revenue from Contracts with Customers (ASU 2014-09). In accordance with the full retrospective method of adoption, the Company has adjusted certain amounts previously reported in its unaudited condensed consolidated financial statements to comply with the new standard. Reconciliation of these measures to the most directly comparable GAAP financial measures are included within the earnings release and supplemental financial information on our website. © 2018 Masimo. All Rights Reserved.

2018 Full-Year Financial Guidance 1 GAAP Non-GAAP Measures 2 $ in millions, except EPS FY 2018 FY 2018 vs. Prior Year YoY Performance Highlights Total revenue growth of ~8.0% driven by product revenue growth of ~11.9%; offset by a reduction of Total Revenue $854 $854 8.0% ~$24M in royalty and other NRE revenue. Product Revenue $826 $826 11.9% Product revenue growth of ~11.9% reported or ~11.3% excluding FX. ~70 bps YoY improvement driven by ~160 bps of improvement in product gross margin; offset by ~90 Total Gross Margin 66.7% 66.8% 70 bps bps of headwinds related to the reduction in royalty and other NRE revenue, which has a higher gross margin profile. ~160 bps YoY improvement driven by manufacturing efficiencies and favorable mix benefits from customers Product Gross Margin 65.8% 65.8% 160 bps upgrading to the newer RD sensor line. ~30 bps YoY improvement due to SG&A expenses growing at a much lower rate than our product Operating Expenses 42.6% 42.4% -30 bps revenue growth; offset by higher R&D expenses as we continue to invest in delivering innovative technologies to the marketplace. ~90 bps YoY improvement driven by manufacturing efficiencies, favorable product mix and operating Operating Margin 24.2% 24.4% 90 bps expense leverage. ~27% growth driven by strong revenue performance, gross margin improvements, operating expense EPS $3.37 $2.92 27.0% leverage and a lower tax rate. ~190 bps YoY improvement driven by manufacturing efficiencies, favorable product mix and EBITDA Margin 26.7% 29.9% 190 bps operating expense leverage. Tax Rate 11.0% 24.0% -760 bps ~760 bps YoY improvement due to the recent changes in U.S. tax laws. 1 Masimo 2018 financial guidance as of October 31, 2018 2 Please refer to our Non-GAAP financial measures and definitions as previously described in this document. During the first quarter of 2018, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update No. 2014-09, Revenue (Topic 606): Revenue from Contracts with Customers (ASU 2014-09). In accordance with the full retrospective method of adoption, the Company has adjusted certain amounts previously reported in its unaudited condensed consolidated financial statements to comply with the new standard. Reconciliation of these measures to the most directly comparable GAAP financial measures are included within the earnings release and supplemental financial information on our website. © 2018 Masimo. All Rights Reserved.

Driving Shareholder Value Through Growth and Profitability Product Revenue 2 Adjusted EBITDA 2 Non-GAAP EPS 2 (in Millions) (in Millions) ($ per share) 1 1 1 1 Masimo 2018 financial guidance as of October 31, 2018 2 Please refer to our Non-GAAP financial measures and definitions as previously described in this document. During the first quarter of 2018, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update No. 2014-09, Revenue (Topic 606): Revenue from Contracts with Customers (ASU 2014-09). In accordance with the full retrospective method of adoption, the Company has adjusted certain amounts previously reported in its unaudited condensed consolidated financial statements to comply with the new standard. Reconciliation of these measures to the most directly comparable GAAP financial measures are included within the earnings release and supplemental financial information on our website. © 2018 Masimo. All Rights Reserved.

Investment Highlights Improve Patient Care and Reduce Cost of Care through Innovation-Ultimate Way to Drive Shareholder Value #3  #1  #2  #4  #5  Tax Rate  Grow Revenues Expand Margins EPS Growth Free Cash Flow Improvement Grow revenues at Target long-term Optimizing tax structure Targeting double digit Equipped to generate multiples of the gross product beyond domestic tax reform long-term EPS growth significant increases in market margins of ~70% and free cash flow (8-10% growth) operating profit margins of ~30% © 2018 Masimo. All Rights Reserved.

© 2018 Masimo. All Rights Reserved.

EX-99.3

MASIMO CORPORATION SUPPLEMENTAL NON-GAAP INFORMATION (unaudited in thousands, except per share amounts) RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME: Q1 2016 (6) Q2 2016 (6) Q3 2016 (6) Q4 2016 (6) YTD 2016 Q1 2017 (6) Q2 2017 (6) Q3 2017 (6) Q4 2017 (6) YTD 2017 Q1 2018 Q2 2018 Q3 2018 YTD 2018 GAAP net income, as previously reported under ASC 605 $ 27,577 $ 30,023 $ 27,773 $ 215,293 $ 300,666 $ 45,334 $ 46,680 $ 39,235 $ 367 $ 131,616 $ 45,630 $ 43,853 $ 57,126 $ 146,609 ASC 606 adjustments 2,102 (194) 2,473 6,050 10,431 6,199 (1,542) (3,382) (8,102) (6,827) - - - - GAAP net income, as adjusted (1) 29,679 29,829 30,246 221,343 311,097 51,533 45,138 35,853 (7,735) 124,789 45,630 43,853 57,126 146,609 Non-GAAP adjustments: - Acquisition-related depreciation and amortization: - Cost of goods sold 159 159 159 159 636 152 116 116 116 500 114 115 115 344 Operating expenses 274 274 274 275 1,097 275 274 274 274 1,097 246 246 246 738 Subtotal - acquisition-related depreciation and amortization 433 433 433 434 1,733 427 390 390 390 1,597 360 361 361 1,082 Litigation awards and damages: - Operating expenses - - - (270,000) (270,000) - - - - - - - 500 500 Non-operating other (income) expense: - Realized and unrealized foreign currency gains or losses (891) (1,456) (293) 2,537 (103) (557) 348 448 31 270 (1,113) 566 1,311 764 9803 Tax impact of non-GAAP adjustments (95) (11) (82) 84,002 83,814 (102) (135) (137) (82) (456) 120 122 (376) ( 134) 0 Tax impact of expiration of certain statues of limitation related to unique and non-recurring tax positions - - - - - - - - - - - - (4,169) (4,169) 9800 Excess tax benefits from stock-based compensation (1,010) (4,091) (2,638) (5,263) (13,002) (15,147) (15,079) (4,867) (4,148) (39,241) (3,148) (3,947) (14,647) (21,742) (2)(3) 2017 U.S. Tax Reform - - - - - - - - 41,392 41,392 16 - (16) - Total non-GAAP net income adjustments (1,563) (5,125) (2,580) (188,290) (197,558) (15, 379) 2 (14,476) (4,166) 37,583 3,562 (3,765) (2,898) (17,036) (23, 699) Non-GAAP net income attributable to Masimo Corporation stockholders $ 28,116 $ 24,704 $ 27,666 $ 33,053 $ 113,539 $ 36,154 $ 30,662 $ 31,687 $ 29,848 $ 128,351 $ 41,865 $ 40,955 $ 40,090 $ 122,910 Net income per diluted share: attributable to Masimo Corporation stockholders: GAAP net income per diluted share $ 0.57 $ 0.57 $ 0.56 $ 4.09 $ 5.85 $ 0.93 $ 0.80 $ 0.64 $ (0.15) $ 2.23 $ 0.82 $ 0.79 $ 1.02 $ 2.59 (4) Non-GAAP net income per diluted share $ 0.54 $ 0.47 $ 0.52 $ 0.61 $ 2.13 $ 0.65 $ 0.55 $ 0.56 $ 0.54 $ 2.30 $ 0.75 $ 0.73 $ 0.71 $ 2.17 RECONCILIATION OF GAAP NET INCOME PER DILUTED SHARE TO NON-GAAP NET INCOME PER DILUTED SHARE: Q1 2016 (6) Q2 2016 (6) Q3 2016 (6) Q4 2016 (6) YTD 2016 Q1 2017 (6) Q2 2017 (6) Q3 2017 (6) Q4 2017 (6) YTD 2017 Q1 2018 Q2 2018 Q3 2018 YTD 2018 GAAP net income per diluted share, as previously reported under ASC 605tributable to Masimo Corporation stockholders $ 0.53 $ 0.57 $ 0.52 $ 3.97 $ 5.65 $ 0.82 $ 0.83 $ 0.70 $ 0.01 $ 2.36 0.82 0.79 1.02 $ 2.59 ASC 606 adjustments 0.04 (0.00) 0.04 0.12 0.20 0.11 (0.03) (0.06) (0.16) (0.13) - - - - (1) GAAP net income, as adjusted 0.57 0.57 0.56 4.09 5.85 0.93 0.80 0.64 (0.15) 2.23 0.820 0.790 1.020 2.59 Non-GAAP adjustments: Acquisition-related depreciation and amortization 0.01 0.01 0.01 0.01 0.03 (0.00) 0.01 (0.00) 0.01 0.03 0.01 (0.00) - 0.02 Realized and unrealized foreign currency gains or losses (0.02) (0.03) (0.00) 0.04 (0.01) (0.01) 0.01 0.01 0.00 0.01 (0.02) 0.01 0.02 0.01 Litigation awards and damages - - - (4.98) (5.08) - - - - - - - 0.01 0.01 Tax Impact of Pre-Tax Non-GAAP Adjustment (0.00) (0.00) (0.00) 1.55 1.58 (0.00) (0.00) (0.00) (0.00) (0.01) 0.00 0.00 (0.01) (0.01) Tax impact of expiration of certain statues of limitation related to unique and non-recurring tax positions - - - - - - - - - - - - (0.07) (0.07) 9800 Excess tax benefits from stock-based compensation (0.02) (0.08) (0.05) (0.10) (0.24) (0.27) (0.27) (0.09) (0.07) (0.70) (0.06) (0.07) (0.26) (0.38) 2017 U.S. Tax Reform (2)(3) - - - - - - - - 0.74 0.74 0.00 0.00 0.00 0.00 Total non-GAAP net income per diluted share adjustments (0.03) (0.10) (0.04) (3.48) (3.72) (0.28) (0.25) (0.08) 0.68 0.07 (0.07) (0.06) (0.31) (0.42) Anti-dilutive effect given the net loss (basic and diluted EPS are the same) in the period - - - - - - - - 0.01 - - - - - Non-GAAP net income per diluted share attributable to Masimo Corporation stockholders (2) $ 0.54 $ 0.47 $ 0.52 $ 0.61 $ 2.13 $ 0.65 $ 0.55 $ 0.56 $ 0.54 $ 2.30 $ 0.75 $ 0.73 $ 0.71 $ 2.17 RECONCILIATION OF GAAP PRODUCT REVENUE TO NON-GAAP PRODUCT REVENUE: Q1 2016 (6) Q2 2016 (6) Q3 2016 (6) Q4 2016 (6) YTD 2016 Q1 2017 (6) Q2 2017 (6) Q3 2017 (6) Q4 2017 (6) YTD 2017 Q1 2018 Q2 2018 Q3 2018 YTD 2018 GAAP product revenue, as previously reported under ASC 605$ 163,290 $ 164,607 $ 160,286 $ 175,663 $ 663,846 $ 178,097 $ 182,802 $ 181,271 $ 199,154 $ 741,324 $ 204,389 $ 202,004 $ 202,068 $ 608,461 ASC 606 adjustments 4,872 395 4,839 10 10,116 4,369 (3,075) (1,575) (2,801) (3,082) - - - - GAAP roduct revenue, as adjusted (1) 168,162 165,002 165,125 175,673 673,962 182,466 179,727 179,696 196,353 738,242 204,389 202,004 202,068 608,461 Non-GAAP adjustments: None - - - - - - - - - - - - - - Total non-GAAP product revenue adjustments - - - - - - - - - - - - - - Non-GAAP Product revenue $ 168,162 $ 165,002 $ 165,125 $ 175,673 $ 673,962 $ 182,466 $ 179,727 $ 179,696 $ 196,353 $ 738,242 $ 204,389 $ 202,004 $ 202,068 $ 608,461 RECONCILIATION OF GAAP TOTAL REVENUE TO NON-GAAP TOTAL REVENUE: Q1 2016 (6) Q2 2016 (6) Q3 2016 (6) Q4 2016 (6) YTD 2016 Q1 2017 (6) Q2 2017 (6) Q3 2017 (6) Q4 2017 (6) YTD 2017 Q1 2018 Q2 2018 Q3 2018 YTD 2018 GAAP total revenue, as previusly reported under ASC 605 $ 171,167 $ 172,636 $ 167,621 $ 183,201 $ 694,625 $ 186,302 $ 192,933 $ 193,692 $ 225,181 $ 798,108 212,953 211,621 210,583 $ 635,157 ASC 606 adjustments 4,872 395 4,839 8,167 18,273 10,341 (627) (332) (17,242) (7,860) - - - - GAAP total revenue, as adjusted (1) 176,039 173,031 172,460 191,368 712,898 196,643 192,306 193,360 207,939 790,248 212,953 211,621 210,583 635,157 Non-GAAP adjustments: None - - - - - - - - - - - - - - Total non-GAAP revenue adjustments - - - - - - - - - - - - - - Non-GAAP revenue $ 176,039 $ 173,031 $ 172,460 $ 191,368 $ 712,898 $ 196,643 $ 192,306 $ 193,360 $ 207,939 $ 790,248 $ 212,953 $ 211,621 $ 210,583 $ 635,157 RECONCILIATION OF GAAP GROSS PROFIT TO NON-GAAP GROSS PROFIT: Q1 2016 (6) Q2 2016 (6) Q3 2016 (6) Q4 2016 (6) YTD 2016 Q1 2017 (6) Q2 2017 (6) Q3 2017 (6) Q4 2017 (6) YTD 2017 Q1 2018 Q2 2018 Q3 2018 YTD 2018 GAAP gross profit, as previously reported under ASC 605 Product gross profit $ 106,336 $ 107,106 $ 102,787 $ 116,791 $ 433,020 $ 115,929 $ 118,372 $ 116,889 $ 130,007 $ 481,197 $ 135,271 $ 132,732 $ 132,389 $ 400,392 Royalty and other revenue gross profit 7,877 8,029 7,335 7,538 30,779 8,205 10,066 11,776 23,856 53,903 8,390 9,415 8,364 26,169 Total GAAP gross profit 114,213 115,135 110,122 124,329 463,799 124,134 128,438 128,665 153,863 535,100 143,661 142,147 140,753 426,561 ASC 606 adjustments: Product gross profit 3,983 169 3,873 33 8,058 3,499 (3,258) (5,514) (2,277) (7,550) - - - - Royalty & other revenue gross profit - - - 6,481 6,481 4,781 1,721 914 (12,934) (5,518) - - - - GAAP gross profit, as adjusted (1) 118,196 115,304 113,995 130,843 478,338 132,414 126,901 124,065 138,652 522,032 143,661 142,147 140,753 426,561 GAAP product gross profit % 65.6% 65.0% 64.6% 66.5% 65.4% 65.5% 64.0% 62.0% 65.1% 64.2% 66.2% 65.7% 65.5% 65.8% GAAP total gross profit % 67.1% 66.6% 66.1% 68.4% 67.1% 67.3% 66.0% 64.2% 66.7% 66.1% 67.5% 67.2% 66.8% 67.2% Non-GAAP product gross profit adjustments: Acquisition-related depreciation and amortization 159 159 159 159 636 152 116 116 116 500 114 115 115 344 Non-GAAP gross profit Product gross profit 110,478 107,434 106,819 116,983 441,714 119,580 115,230 111,491 127,846 474,147 135,385 132,847 132,504 400,736 Royalty and other revenue gross profit 7,877 8,029 7,335 14,019 37,260 12,986 11,787 12,690 10,922 48,385 8,390 9,415 8,364 26,169 Total Non-GAAP gross profit $ 118,355 $ 115,463 $ 114,154 $ 131,002 $ 478,974 $ 132,566 $ 127,017 $ 124,181 $ 138,768 $ 522,532 $ 143,775 $ 142,262 $ 140,868 $ 426,905 Non-GAAP product gross profit % 65.7% 65.1% 64.7% 66.6% 65.5% 65.5% 64.1% 62.0% 65.1% 64.2% 66.2% 65.8% 65.6% 65.9% Non-GAAP total gross profit % 67.2% 66.7% 66.2% 68.5% 67.2% 67.4% 66.0% 64.2% 66.7% 66.1% 67.5% 67.2% 66.9% 67.2% RECONCILIATION OF GAAP OPERATING INCOME TO NON-GAAP OPERATING INCOME: Q1 2016 (6) Q2 2016 (6) Q3 2016 (6) Q4 2016 (6) YTD 2016 Q1 2017 (6) Q2 2017 (6) Q3 2017 (6) Q4 2017 (6) YTD 2017 Q1 2018 Q2 2018 Q3 2018 YTD 2018 GAAP operating income, as previously reported under ASC 605$ 37,337 $ 36,429 $ 36,604 $ 310,400 $ 420,770 $ 43,195 $ 46,868 $ 47,975 $ 59,323 $ 197,361 $ 53,885 $ 51,612 $ 48,641 $ 154,138 ASC 606 adjustments 3,256 (323) 3,861 8,381 15,175 8,956 (3,019) (4,913) (14,597) (13,573) - - - - GAAP operating income, as adjusted (1) 40,593 36,106 40,465 318,781 435,945 52,151 43,849 43,062 44,726 183,788 53,885 51,612 48,641 154,138 Non-GAAP adjustments: Acquisition-related depreciation and amortization 433 433 433 434 1,733 427 390 390 390 1,597 360 361 361 1,082 Litigation awards and damages - - - (270,000) (270,000) - - - - - - - 500 500 Total non-GAAP operating income adjustments 433 433 433 (269,566) (268,267) 427 390 390 390 1,597 360 361 861 1,582 Non-GAAP operating income $ 41,026 $ 36,539 $ 40,898 $ 49,215 $ 167,678 $ 52,578 $ 44,239 $ 43,452 $ 45,116 $ 185,385 $ 54,245 $ 51,973 $ 49,502 $ 155,720 RECONCILIATION OF GAAP OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES: Q1 2016 (6) Q2 2016 (6) Q3 2016 (6) Q4 2016 (6) YTD 2016 Q1 2017 (6) Q2 2017 (6) Q3 2017 (6) Q4 2017 (6) YTD 2017 Q1 2018 Q2 2018 Q3 2018 YTD 2018 GAAP selling, general and administrative operating expenses, as previously reported under ASC 605$ 62,511 $ 63,888 $ 57,845 $ 69,423 $ 253,667 $ 65,572 $ 66,377 $ 65,390 $ 78,447 $ 275,786 $ 71,175 $ 71,418 $ 72,170 $ 214,763 ASC 606 adjustments 728 492 12 (192) 1,040 515 292 314 (615) 506 - - - - GAAP selling, general and administrative operating expenses, as adjusted (1) 63,239 64,380 57,857 69,231 254,707 66,087 66,669 65,704 77,832 276,292 71,175 71,418 72,170 214,763 Non-GAAP adjustments: Acquisition-related depreciation and amortization (274) (274) (274) (274) (1,096) (275) (274) (274) (274) (1,097) (246) (246) (246) (738) Non-GAAP selling, general and administrative operating expenses $ 62,965 $ 64,106 $ 57,583 $ 68,957 $ 253,611 $ 65,812 $ 66,395 $ 65,430 $ 77,558 $ 275,195 $ 70,929 $ 71,172 $ 71,924 $ 214,025 GAAP research and development operating expenses, as previously reported under ASC 605$ 14,365 $ 14,818 $ 15,673 $ 14,506 $ 59,362 $ 15,367 $ 15,192 $ 15,300 $ 16,094 $ 61,953 $ 18,601 $ 19,117 $ 19,442 $ 57,160 ASC 606 adjustments - - - (1,676) (1,676) (1,191) 1,191 - - - - - - - GAAP research and development operating expenses, as adjusted (1) 14,365 14,818 15,673 12,830 57,686 14,176 16,383 15,300 16,094 61,953 18,601 19,117 19,442 57,160 Non-GAAP adjustments: Acquisition-related depreciation and amortization (0) (0) (0) (1) (1) (0) (0) (0) (0) (0) - - - - Non-GAAP research and development operating expenses $ 14,365 $ 14,818 $ 15,673 $ 12,829 $ 57,685 $ 14,176 $ 16,383 $ 15,300 $ 16,094 $ 61,953 $ 18,601 $ 19,117 $ 19,442 $ 57,160 GAAP litigation settlement, award and/or defense costs $ - $ - $ - $ (270,000) $ (270,000) $ - $ - $ - $ - $ - $ - $ - $ 500 $ 500 Non-GAAP adjustments: Litigation awards and damages - - - 270,000 270,000 - - - - - - - (500) (500) Non-GAAP litigation settlement, award and/or defense costs $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Total non-GAAP operating expenses $ 77,330 $ 78,924 $ 73,256 $ 81,786 $ 311,296 $ 79,988 $ 82,778 $ 80,730 $ 93,652 $ 337,148 $ 89,530 $ 90,289 $ 91,366 $ 271,185 RECONCILIATION OF GAAP NON-OPERATING INCOME (EXPENSE) TO NON-GAAP NON-OPERATING INCOME (EXPENSE): Q1 2016 (6) Q2 2016 (6) Q3 2016 (6) Q4 2016 (6) YTD 2016 Q1 2017 (6) Q2 2017 (6) Q3 2017 (6) Q4 2017 (6) YTD 2017 Q1 2018 Q2 2018 Q3 2018 YTD 2018 GAAP non-operating income (expense), as previously reported under ASC 605$ 498 $ 471 $ (546) $ (2,852) $ (2,429) $ 874 $ 158 $ 287 $ 694 $ 2,013 $ 1,647 $ 1,405 $ 1,028 $ 4,080 Non-GAAP adjustments: Realized and unrealized foreign currency gains or losses (891) (1,456) (293) 2,537 (103) (557) 348 448 31 270 (1,113) 566 1,311 764 Non-GAAP non-operating income (expense) $ (393) $ (985) $ (839) $ (315) $ (2,532) $ 317 $ 506 $ 735 $ 725 $ 2,283 $ 534 $ 1,971 $ 2,339 $ 4,844 RECONCILIATION OF GAAP PROVISION FOR INCOME TAXES TO NON-GAAP PROVISION FOR INCOME TAXES: Q1 2016 (6) Q2 2016 (6) Q3 2016 (6) Q4 2016 (6) YTD 2016 Q1 2017 (6) Q2 2017 (6) Q3 2017 (6) Q4 2017 (6) YTD 2017 Q1 2018 Q2 2018 Q3 2018 YTD 2018 GAAP provision for income taxes, as previously reported under ASC 605$ 10,258 $ 6,877 $ 8,285 $ 92,255 $ 117,675 $ (1,265) $ 346 $ 9,027 $ 59,650 $ 67,758 $ 9,902 $ 9,164 $ (7,457) $ 11,609 ASC 606 adjustments 1,154 (129) 1,388 2,331 4,744 2,757 (1,477) (1,532) (6,495) (6,747) - - - - GAAP provision for income taxes, as adjusted (1) 11,412 6,748 9,673 94,586 122,419 1,492 (1,131) 7,495 53,155 61,011 9,902 9,164 (7,457) 11,609 Non-GAAP adjustments: Excess tax benefits from stock-based compensation 1,010 4,091 2,638 5,263 13,002 15,147 15,079 4,867 4,148 39,241 3,148 3,947 14,647 21,742 Tax impact of pre-tax non-GAAP adjustments 95 11 82 (84,002) (83,814) 102 135 137 82 456 (120) (122) 376 134 Tax impact of expiration of certain statues of limitation related to unique and non-recurring tax positions - - - - - - - - - - - - 4,169 4,169 2017 U.S. Tax Reform (2)(3) - - - - - - - - (41,392) (41,392) (16) - 16 - Total non-GAAP provision for income tax adjustments 1,105 4,102 2,720 (78,739) (70,812) 15,249 15,214 5,004 (37,162) (1,695) 3,012 3,825 19,208 26,045 Non-GAAP provision for income taxes $ 12,517 $ 10,850 $ 12,393 $ 15,847 $ 51,607 $ 16,741 $ 14,083 $ 12,499 $ 15,993 $ 59,316 $ 12,914 $ 12,989 $ 11,751 $ 37,654 RECONCILIATION OF EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTIZATION TO ADJUSTED EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTIZATION: Q1 2016 (6) Q2 2016 (6) Q3 2016 (6) Q4 2016 (6) YTD 2016 Q1 2017 (6) Q2 2017 (6) Q3 2017 (6) Q4 2017 (6) YTD 2017 Q1 2018 Q2 2018 Q3 2018 YTD 2018 GAAP net income, as previously reported under ASC 605 $ 27,577 $ 30,023 $ 27,773 $ 215,293 $ 300,666 $ 45,334 $ 46,680 $ 39,235 $ 367 $ 131,616 $ 45,630 $ 43,853 $ 57,126 $ 146,609 ASC 606 adjustments 2,102 (194) 2,473 6,050 10,431 6,199 (1,542) (3,382) (8,102) (6,827) - - - - GAAP net income, as adjusted (1) 29,679 29,829 30,246 221,343 311,097 51,533 45,138 35,853 (7,735) 124,789 45,630 43,853 57,126 146,609 Other (income) expense (498) (471) 546 2,852 2,429 (874) (158) (287) (694) (2,013) (1,647) (1,405) (1,028) (4,080) Provision for income taxes 11,412 6,748 9,673 94,586 122,419 1,492 (1,131) 7,495 53,155 61,011 9,902 9,164 (7,457) 11,609 Depreciation and amortization 4,051 4,081 4,223 4,462 16,817 4,736 4,726 4,922 5,677 20,061 5,241 5,553 5,166 15,960 Earnings before interest, tax, depreciation and amortization 44,644 40,187 44,688 323,243 452,762 56,887 48,575 47,983 50,403 203,848 59,126 57,165 53,807 170,098 Litigation awards and damages - - - (270,000) (270,000) - - - - - - - 500 500 Non-cash stock based compensation 3,026 3,178 3,489 2,810 12,503 2,889 3,253 5,052 5,993 17,187 5,332 6,720 7,643 19,695 Adjusted earnings before interest, tax, depreciation and amortization $ 47,670 $ 43,365 $ 48,177 $ 56,053 $ 195,265 $ 59,776 $ 51,828 $ 53,035 $ 56,396 $ 221,035 $ 64,458 $ 63,885 $ 61,950 $ 190,293 Adjusted earnings before interest, tax, depreciation and amortization % 27.1% 25.1% 27.9% 29.3% 27.4% 30.4% 27.0% 27.4% 27.1% 28.0% 30.3% 30.2% 29.4% 30.0% RECONCILIATION OF EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTIZATION TO ADJUSTED EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTIZATION AS A PERCENTAGE: Q1 2016 (6) Q2 2016 (6) Q3 2016 (6) Q4 2016 (6) YTD 2016 Q1 2017 (6) Q2 2017 (6) Q3 2017 (6) Q4 2017 (6) YTD 2017 Q1 2018 Q2 2018 Q3 2018 YTD 2018 GAAP net income as a percentage, as previously reported under ASC 605 15.7% 17.4% 16.1% 112.5% 42.2% 23.1% 24.3% 20.3% 0.2% 16.7% 21.4% 20.7% 27.1% 23.1% ASC 606 adjustments 1.2% 1.2% 1.2% 1.2% 1.5% 3.1% (0.8%) (1.7%) (3.9%) (0.9%) 0.0% 0.0% 0.0% 0.0% GAAP net income, as adjusted (1) 16.9% 17.3% 17.5% 115.7% 43.7% 26.2% 23.5% 18.6% (3.7%) 15.8% 21.4% 20.7% 27.1% 23.1% Other (income) expense (0.3%) (0.3%) 0.3% 1.5% 0.3% (0.4%) (0.1%) (0.1%) (0.3%) (0.3%) (0.7%) (0.6%) (0.5%) (0.6%) Provision for income taxes 6.5% 3.9% 5.6% 49.4% 17.2% 0.8% (0.6%) 3.9% 25.6% 7.8% 4.6% 4.3% (3.5%) 1.8% Depreciation and amortization 2.3% 2.4% 2.4% 2.3% 2.4% 2.4% 2.5% 2.5% 2.6% 2.5% 2.4% 2.6% 2.5% 2.5% Earnings before interest, tax, depreciation and amortization 25.4% 23.3% 25.8% 168.9% 63.6% 29.0% 25.3% 24.9% 24.2% 25.8% 27.7% 27.0% 25.6% 26.8% Litigation awards and damages 0.0% 0.0% 0.0% (141.1%) (37.9%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.1% Non-cash stock based compensation 1.7% 1.7% 2.1% 1.5% 1.7% 1.4% 1.7% 2.5% 2.9% 2.2% 2.6% 3.2% 3.6% 3.1% Adjusted earnings before interest, tax, depreciation and amortization 27.1% 25.1% 27.9% 29.3% 27.4% 30.4% 27.0% 27.4% 27.1% 28.0% 30.3% 30.2% 29.4% 30.0% (1) Certain information presented for periods ending prior to December 31, 2017 have been adjusted to reflect the full retrospective application of the new revenue accounting standard, Accounting Standards Update (ASU) No. 2014-09, Revenue (Topic 606): Revenue from Contracts with Customers (ASU 2014-09). (2) As previously reported in February 2018, the 2017 Tax Act resulted in an unfavorable charge of $43.5 million in the fourth quarter of 2017. The amount recognized was a provisional estimate and subject to change, possibly materially, due to, among other things, refinements of the Company’s calculations, changes in interpretations and assumptions the Company has made or additional guidance issued by the U.S. Treasury, Securities and Exchange Commission or Financial Accounting Standards Board. (3) Includes adjustments related to the full retrospective application of ASC 606 of $2.1 million, or $0.4 per diluted share. (4) In the period of a net loss, diluted net loss per share excludes the effects of common stock equivalents that are anti-dilutive. (5) Due to the significant impact of the Philips Settlement Agreement on the fourth quarter results, the sum of the diluted earnings per share numbers for each quarter will not equal the diluted earnings per share number for the entire year. (6) Quarterly reported amounts may vary from amounts previously reported due to rounding conventions.