B&W, Marantz 'Holding Up Well' Amid Inflation, Says Masimo CEO
Bowers & Wilkins and Marantz are “holding up well” in a challenging macroeconomic environment, said Masimo CEO Joe Kiani on the medical device company’s Q3 earnings call Tuesday.
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Revenue in the company’s non-healthcare segment, comprising Sound United’s consumer brands, was $222 million, down 2% year on year. The audio business faced a tough year-on-year comparison due to an “exceptionally strong" Q3 a year ago, which was “above trend line” due to fulfillment of backordered products, said Chief Financial Officer Micah Young.
Masimo's consolidated revenue was $549 million, with 6% year-on-year growth in the company’s healthcare revenue. Shares reached a 52-week low Wednesday at $108.89 before closing down 9.9% at $110.88.
Full-year non-healthcare guidance is $675 million-$690 million from April 11, the date of the Sound United acquisition, through fiscal year-end, an increase of $5 million at the midpoint, Young said. While audio brands achieved “better-than-expected results” in Q3 by “navigating a difficult supply chain environment, we are being prudent in our fourth quarter outlook due to ongoing component shortages and challenging economic conditions,” Young said. For Q4, Masimo projects non-healthcare revenue of $245 million-$260 million, incorporating $32 million of year-on-year currency headwinds, that imply 5%-10% constant currency growth, Young said.
Commenting in Q&A on whether Masimo still sees high-single-digit growth for the audio portfolio in a recessionary environment, Kiani said that’s the company’s intent, “but it’s hard at this point to give assurances that we will.” B&W, Marantz and Denon brands “seem to be products that are purchased by people who are not as impacted as maybe most people are with the economic downturn,” he said. The three brands are “probably as iconic” and as “solid as you can get in any consumer industry,” he said.
Masimo will give a clearer view of 2023 projections at its Dec. 13 investor day, Young said. He cited “good durability” with the premium Sound United brands, noting “softness” in more mass consumer audio categories including sound bars. "But over the past couple of quarters, even while we’ve seen that, we’ve seen good strength in those premium brands that have driven solid growth and performance," he said.
On the company's strategy for price increases to counter inflation, Kiani said Masimo resisted raising prices over the past couple of years “because we weren’t sure if the inflation was going to be permanent.” It looks like “at least certain parts of inflation are permanent, such as labor rates,” he said, so the company has begun hiking prices.
Young said Masimo has been navigating inflationary challenges by raising prices on the consumer side. “If we start to see some of the headwinds ease up, we should see some nice improvement moving forward,” he said, "but we’re trying to be thoughtful and prudent about how we reflect that in our guidance.” Executives didn't give more detail on the amount of price hikes, but the Series 700 speakers, launched in September, topped out at $7,000 per pair vs. a previous top-end price of $6,000 a pair (see 2209210007).
The company’s healthcare and consumer teams are working “independently and collaboratively on multiple projects to create exciting new consumer products and professional healthcare products as well as innovative consumer health products,” Kiani said. These products will incorporate technology and design from both teams that will be "highly differentiated" in their target markets, he said.