MASI - Earnings call transcript Q3 2017

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Operator

Good afternoon, ladies and gentlemen, and welcome to Masimo's Third Quarter 2017 Earnings Conference Call. The company's press release is available at www.masimo.com. At this time, all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

As a reminder, this conference call is being recorded. Eli Relations. Vice introduce Development of to Investor and pleased Kammerman, President Masimo's Business I'm

Eli Kammerman

Hello, you. Thank everyone.

Chief Young. today performance. Joe statements of Vice and our Kiani; me which and Officer, Joining are judgment, fiscal Executive President Chairman reflect Masimo's expectations of including contain regarding call will This and current CEO, Financial forward-looking Micah certain Finance financial XXXX

actual that results to to our However, uncertainties actual our in materially. and our and from XX-K subject materially discussed projections results recent XX-Q. including most cause risks forecasts to they could Risk our factors are could that differ SEC are filings, Form Form cause detail differ and in

Joe these You our Investors I'll Kiani. in of to section the will now find website. call pass the

Joe E. Kiani

and for Masimo's you Eli. Thank joining afternoon you, quarter third Good for review. us thank

the As months on years to public successful we be of are commitments initial the XXXX, ago we gratified of delivering final made XX stage our the we in enter after final offering.

double share no it while earnings adjusted XX%, gain. quarter this above which this and growth exercise realized without benefits the at or matter product were with again revenue per at rate a was results how product rate our was Our you year we the at portfolio. diversification broadened the innovative revenues fastest of a growth expectations, rate the in geographic as grew The look stock once options,

technologies many the quarters of in that the as business in their recognize oximetry contracts we costs. terms more a for as than is most care best of more is and the history year of for versus and exemplified finger strength systems our The importantly, their one our oximeters quarter oximeters prominent business both excluding reduce and to and to by reach capabilities installed in excellent hand-held work base winning patient shipments, to OEM all; achieved hospital our direct rose This evidence is realized other XX,XXX X,XXX,XXX fruit new with the clear row, hospitals, a of second our last as well estimated superior our them, fact clinicians, over also and that We us, XX,XXX the by new our pulse patients. OEM as partners of XX% hospitals with in hospitals improve Philips, oximetry. shipments bearing yield

has joined weeks Micah move me. of to warm attended as Boston immersed business you on invite we a our Masimo quarter the extend all CFO, well week, I'd Before to our in of investors fully like welcome details in meeting two Boston and third with Masimo to in just our ago. some Young become who new activities the Anesthesiologists results, with Society as of Micah last American to Conference

will de the comments As in business with at years is be end XX closing retiring I'll than additional year some well. you with Mark of Masimo, updates Mark as today know for the more us some call later this Raad discuss later. after and

in results more and XXXX a Micah? update our Now, final detail on to QX guidance. Micah you ask our provide I'll review with financial

Micah Young

Thank everyone. you, And Joe. afternoon good

XX.X% reported For revenue which including excluding quarter other of revenue currency. XXXX or the of $XXX.X growth and total impact of royalty reflects third million, the of we XX.X%

continued due basis Saudi adoption by growth driven our on $XX.X the most XX% international with delivered connectivity This was which XX% XX% increased primarily to business. strength ship of double-digit NomoLine the aggregate XX% grew represents to to OX revenue revenue to for to Root Saudi markets, we and recent quarter. the strong as quarter million tender with a $XX oximetry along revenue our strong platform Monitoring approximately performance and million another SpHb SedLine both Function currency grew technologies. product of begin Brain Our revenue capnography, the Rainbow against quarter product for of reported newer the complemented for across grew $XXX.X a from the again cerebral by to award. constant million, our related quarter. growth,

end which sales XX% million. user worldwide grew to just-in-time through Our distributors, for $XXX.X business, direct includes

Our period. direct in approximately revenue, versus total the business prior XX% the XX% total quarter represented of product revenue in year

our $XXX.X in representing sales $XX.X revenue XX% million OEM X% approximately grew, While revenue grew to XX% year million quarter as By product third the compared revenue geography, period. for to of XXXX. of million, compared our the declined unit to product X% prior OEM U.S. to $XXX.X

constant and grew growth or Saudi solid other includes $X quarter, in more came across of East at had we expected for product $XX the revenue product strong the to line $XXX,XXX Middle In Royalty some $XX.X by to driven international Europe, approximately million period. for XX% million year of $X.X third currency million the shifting XX% of compared than approximately results, contributions revenue, approximately total of Philips quarter NRE current approximately to compared these prior was the the product Africa of tender this quarter, region. rest deliverables. international revenue due in strong million XXXX. on to slight XX% the which and a as Our basis, our XX% quarter in revenue Based on the and represented from revenues

million our the increased $X.X million to for reach royalty $X.X addition, In revenue quarter.

let's P&L. to Now, the turn rest the of

third and compared was For year to prior including royalty quarter the total other XX.X%, margin the gross period. as XXXX, revenue in XX.X% of

gross for the the XX.X% Our in quarter XX.X% third product period. margin compared was to prior

higher which gross our cost of year-over-year nice be to planned. we than monitors to customers, placements expected below than caused improvement, was with margin Although amortization product due expectations higher saw our some

sold are expected to RD of as result long-term in gross expense execute of roughly product are revenue front NRE opportunities to sensor Mexico the line cost our plan. of our please manufacturing and of new an the related the facility $XXX,XXX monitor in we sensor related higher Overall, Also that to project note the our further we for us Philips. placements capability these other includes excited Over very goods expenses from large in total and margin in drive we revenues. have scale expansion

As quarter reported, in administrative of fourth the the prior was in was expenses year XX.X% selling, total, third $XX.X $XX.X the revenue, XX now Research prior operating quarter, In XX.X% compared revenue shifted development expense of driven total points expenses $XX.X third the total third million in our decreasing in the and in R&D were and revenue, $XX.X related expenses, were from in decrease in period. year. points in of X.X% other expenses trial quarter. for or million quarter million the or from a versus XX.X% period. basis general XXX million clinical have totaled delay slight the XX.X% XXXX. primarily X.X% prior-year quarter and to QX by some which project in decreasing The total spend into the basis

Our revenue. XXX lower period, an of improvement from to largely of revenue operating the due percentage a the our prior operating of margin XX% XX.X% product the versus total basis product scale year expenses reflected points benefits growth, of margins and as gross XX.X% in higher

$XXX,XXX Non-operating $XXX,XXX, compared in income Moving approximately for non-operating approximately quarter was further of expense the to the the period. prior-year down P&L.

of approximately and gain. interest interest $XXX,XXX income we approximately $XXX,XXX offset net loss. of compares to re-measurement re-measurement a FX the a $XXX,XXX, This During third $XXX,XXX expense realized by quarter, prior-year

the quarter XXXX XX% a stock rate the $X.X year third tax a tax compared benefit new rule, accounting QX from XXXX period. period. prior prior-year million in as The benefit to XX.X%, Our compared was $X.X included in million tax rate the option to

exercises the the the quarter. Our the visible to increase the the method. average impact shares were average reduction stock in the in for million, share option year approximately is in share of is period. over the our this dilutive million entirely shares end The that weighted price repurchased quarter, period, so prior of the the has shares stock in mostly higher due period our of not count XX.X approximately impact from outstanding under treasury results XXX,XXX year-ago XX.X X.X% a quarter toward during and both benefit the We up

$X.XX related diluted share stock exercises. million was $XX.X the share, income per to benefit net $X.XX a The period. to compared GAAP diluted quarter option year in $X.XX or Third includes $X.XX prior per

This were that the to without prior QX earnings So benefit a in year. $X.XX compares net $X.XX. XXXX benefit,

So earnings without share were benefit, per XXXX diluted QX that $X.XX.

days the international cycle. due primarily at Our days The XXXX. sales of end XX has outstanding longer from was our was collection the second a for quarter, up strength the of in of business, which DSO quarter XX to increase the

fourth QX the sensor inventory for XXXX. of quarter rose end in from turns stock for strong X.X by $XX million the we quarter. of the preparation the were level, the traditionally approximately at X.X volumes seasonal as quarter compared {times] Our second Inventory increased in the to

like related on Act tax update year as here Congress. corporate by financial we in we Care which financial characterized this as an in financial said, based best environment the are policies the Now guidance our that be to XXXX changes is well economic updated XXXX uncertainties conditions, fiscal guidance. guidance, consideration Note updated future I'd to discuss our available overall in business of final Affordable including general the have to information continues significant With providing U.S. is that and potential under to us. that for

revenue, $XXX new revenue, prior are including $XXX outlook to This other projecting be in revenue, product guidance $XXX includes versus million. compared $XXX to royalty of prior million total million We and now of approximately guidance million.

Philips We prior or new includes from quarter are of a our $XX of projecting also $X as $XX estimate in NRE guidance million, compared the million versus royalty guidance to million. $X million revenue of other prior the of approximately which revenue in current and partnership

projecting product costs quarters XX.X%. royalty placed total with XX% equipment of guidance have of We XX.X%, due approximately down the three including from that our XXXX. we expect prior other associated and a now be record primarily full to amortization during to margins higher slightly revenue amount also are year We margin of approximately to first gross be gross

which approximately call Joe. our estimates, of I up of QX be $X.XX. are effective now We line With estimate the prior the we guidance. tax year, from in We're that, approximately expenses prior revised for EPS full on to expect $XXX XX% rate rate our is operating $X.XX our XXXX turn with our approximately for these assumes Based be our to back in million, will XXXX. year at XX.X% GAAP tax to GAAP an which estimating annual total projecting

Joe E. Kiani

you. you Thank much, so Micah. Thank

growth. double-digit revenues that and QX are EPS for rate for double more happy We than report to product growth

time As have Micah described, third our year full us led quarter for year. the this our guidance third results to increase

history. to XX XX% nearly We to won the rewarding in our business foresaw our see best realize the had ability booking Our XX we In years margin top leverage QX. we ago as we climb U.S. another profit is quarter our that potential in contract operating in QX

& a Luke's new Report customer, Best Pennsylvania. a Hospital World also NYU, News Hospital with in while St. as contract winning major Bethlehem,

strong customers, which In quarter addition pulse Kaiser proud renewal new our a oximetry had very are contract quarter also we biggest renewing getting to agreement ever of. our for including we

leading unit important is expanding presently for factor our healthy relationship this business. Our with customers. an XX,XXX of on focused level our mutual achieving record indicator is volume providing to Oximetry for in QX rainbow which is a critical oximetry units A future new set our Philips

efforts such or Over and in as Monitoring organ oximetry, Philips cerebral availability two monitors. oximetry partnership Function our Masimo capnography of with the next Brain technologies include Philips additional SedLine NomoLine years, will OX

monitor Rad-XX we compact QX, market. some U.S. new the products launched During into our noteworthy including

sensor Trace and other respiration our charting patients pediatric analyzing acoustic monitors. oximetry and RAS-XX from and Our for data our for and Software adult

us has into earlier, retirement too more future. that time contributions to after end making me Mark year what His great will but you with positioning is estimating join this role it to us Masimo a today, Raad in critical the wishing this I XX joining relax suffice in taxes. hope ago. I say, are time played to a call while will a Masimo Mark numerous retiring less at for from and de As to Mark on mention of mentioned Masimo be years now,

comments closing to So Mark? here's Mark everyone. some to offer

Mark de Raad

to once includes type again that consistently have call and reported, Joe. good Masimo recently. of report earnings we especially with Thanks, my happy I'm last XXth results the that

success. confident years past over While its fond and Masimo, had for to Massimo to been be providing that I'd Masimo will impact opportunity thank growth care. quarterly a on I able Masimo of with I I me be the that XX continued patient part experience, wonderful also farewell will will discussions to continue My at I'm certainly Joe miss tradition. you forward and Micah an Masimo's has the time wish exceptional be looking like the all and to our has a

Joe E. Kiani

much so you Thank Mark.

equally Mark. Micah to going Thank we we to As you are excited you. join miss are us, as have

Mark de Raad

you, Joe. Thank

Joe E. Kiani

all for Thank you done. that you've

enter to we we committed final As results to delivering XXXX, two happy the deliver of more maybe are the we ago. or XX – years few precisely months to be well-positioned

We the at history. than with scale increasing our in exit for will our year more any potential point

broadening care our innovative technologies to us from Operator? portfolio committed showing what our our the have ever with and questions. of ever, Our than that, More steadily and a to With remain reduce of it helped the to our is healthcare. body to outcomes steer today. call growing data, enable that us guiding patients Massimo the benefits we'll to product mission impact should patient principles the improve to cost to open increasing combined use of continue clinical we

Operator

from comes the question Tao of line Levy, Wedbush. first Our

is Your line open.

Joe E. Kiani

Tao. Hi,

Tao L. Levy

you How Hey, you. doing? Thank

Joe E. Kiani

are doing? you how Good,

Tao L. Levy

I'll welcome there Mark, on your congratulations Micah. retirement. and start off

Micah Young

Tao. you, Thank

Mark de Raad

Tao. you, Thank

Tao L. Levy

So maybe know could at order, large quarters? Saudi the off tender next with, over the that is if you start is how how at few look predictable that you look you if we the – and

Joe E. Kiani

sure. Okay

do repeat and exact We give year. number, of but we grow in that are should out a not some believe, perhaps position catastrophe, the in business short to the coming

Tao L. Levy

it. Got

Saudi driver international the been lumpy historically of for why about I little last couple the asking been And and contribution you Okay. kind a business quarters. the a has growth was big that's obviously guys because bit that's

the than Is be that should how seen international in think might predictable so more about the little And past. we've that possible? investors maybe business a

Joe E. Kiani

think so new and softer relying in predicted census I in year had a the international business in heavily we're coming fact the Saudi. into we U.S. Tao, more our including

expected, what I they they here. the Prince, time we new able there's the to So back in we an West around were first with always very oil the the with year, because cut – guess Saudi last unusual Saudi, business got year it going they prices predictable. year more expected I to we were with they business the a what to surprise believe to independent. think doing, they getting history until change their so unusual the don't I are and doing I But doing of for going that not had decided And they King become Saudi every were kind what XX% has – spending they and were oil was was last of company by on XX% going on so with arms been was how been

predictability I Arabia. think we've gone back to a Saudi mode with of

Tao L. Levy

Great. And then just a couple more.

of is, sockets about a talk number viewed ship be You the indicator. oximeters that should how as you leading

installed wondering placed. few the are do more sense geographically, of sockets quarters it U.S.? international those I So, than was have you where last being or if a Is

Joe E. Kiani

has is growth of from from share growth, because international Philips of U.S. direct installed the of marketplace has Well, that as from business market in come direct all the not and Saudi, the perspective. places our know in that shipping quarter some from bulk Masimo like seen volume this base more has who but and our comes in I XX% the OEM the And between business, to U.S. had mainly abroad, XX% in other and U.S., parts more world. the our

Tao L. Levy

increased Got that nicely Are the you. you've has talked seeing get that a ship signed in the Philips. domestic, partnership that's in since when you – Thanks. last international it? about revenues agreement. And how just product question, you the you Does past and or then to recorded

Joe E. Kiani

based I out revenue I it based I the the OEM reports depending side. Philips think out the on think company believe where and U.S., the of revenue of, U.S. comes business is Sure. the is

either some maybe unit last revenue our had as sales that we said, at increase drivers is we clear where business, the OEMs this coming business and other we're nice this point. that high-quality of Masimo not or quarter-over-quarter, can year were in that's some to seeing OEM year, we U.S. has OEMs took Philips you through if And even because tell the Now consumables happen placing look census of But did volume of types is going but of that potentially foresaw volume that that the actually all. of not where the whether some them world in the direct I a socket and decreased. are or to that with slower going in wise, parts per we're what at the we more expect Micah not that sensor institutions, me and do get at are not you not to

Tao L. Levy

Great.

NYU. Okay. congratulations Thank and much you the on so

certainly about You happy know be my that. son will

Joe E. Kiani

if visit your you to be do, Thank NYU, now there. have you. I but hope doesn't son we'll

Operator

Thank comes Stifel. with Wise Rick you. from And our next question

is now open. line Your

Frederick Wise

Good afternoon. Hi, Joe.

Joe E. Kiani

Hi, Rick.

Frederick Wise

going of margin because product product highlighted we than message and because about expected. of the the And thinking the margins because product the like gross pieces that reason a placement months, How from suggested, of cost et margins specifically, it of over related gross volume, the moving of think you mix, margins because in Analyst greater go reductions. monitors was But the Just good here gross the are next you gross as quarters, XX few and to sounds clearly, to Day, improve, general, were for do where cetera? less amortization. back all

Joe E. Kiani

with thesis. Great question, Nothing's changed Rick. our

from We from increase volume revenue year-over-year expect a well the with expansion factors, gross our all X.X% our Philips and sensor as increased line as our RD including margin agreement. rollout,

not should change. that So that

monitor than seeing deals some had placements we anticipated. with are equipment major heavier or We

our in broad, temporary, think manufacturing these macro has we you'll improving facility positive caused kept exercise margins flow Also of gross given facility, things in the is then we to manufacturing scaling X.X gross option a stock But QX. that annually. that So second cash remember, are kind the view margins we I I of which point from the gains, think received of in the us. some temporary check percentage also if speed Mexico, hit anticipate increased all

Frederick Wise

And up Right. good about to the – in a you of up your your XXXX the XXXX you're Do ahead? better? guidance growth Many end organic you here. – at providing of sort looking locked not look us certainly good. that X% feeling more – certainly But was pieces growth upper you so, set for moving I and potentially a – quarter. range and to looking Does yet, just of this but as know when confident this are kind like XX% goals conceptually feel set up that you're

Joe E. Kiani

Rick, we annually still to the is can future attainable. believe do everything are to course X% growth for rate we to beat that rate. XX% going We foreseeable of

Some regional And Monitoring – faster like international faster oximetry OX capnography, than to growing we Function products our new the of Nomoline we've are and had introduced Brain we be business SedLine anticipated. growing seems anticipated. than have

in countries all we direct upon. hopefully we invested XX% of think in But growth everything beat rate it can our quarter. can should this of to and we'll kind an bear And have that We be that to X% fruit. also that's rely do more part strategy we we have should what like

Frederick Wise

should role critical think job. priorities I been new or you What a call mean as Micah, about an Micah to and has perspectives over is maybe I Two have all how or fantastic hurricanes at impact, weather didn't this since bring last exciting it thoughts out? – our quick Should time? very ones Thank professional take any Mark And that that from we but the we assume know, going perspectives you to me. you. didn't for some

Joe E. Kiani

Rick. you, Thank

that. answers Micah Before

our of customers were what the or regarding We did like your Let hospitals census, maybe some think do the actually hospital part hurricane the our question me answer HCA. hurricane. first impact of you saying

an think but because didn't So it have it. of feel fortunately we stronger on we did impact international business, census,

people especially uncertainties census hopefully Affordable a we I light Care Micah, following the As comment quarter in regarding a XXXX of but new normal do in and was better new yeah Act, census hurricane, said hospitals that and on of the no part. hurricanes year, the in had rate hopefully to second for we where get earlier, without anticipated of slowing you their going unbelievable surgeries. more to want saw likelihood there elective because should the down, increase

Micah Young

answer to just so Rick. question, your Yeah,

is out I've much I'm And focus think for drive business continue a profitability to trying right mentioned just Mark with growth learn and focus deeply It's today. really the business. as stage has that's drive very in I similar financial I'm with to job line that's as at with me that to as prior So, left drive on, work on I'm here can. them. excited and prepared to based Joe going building more operational financially something know the Mark off here coming where top you team. over involved also the Mark with to executive a experiences of I I've the diving to continue in position his and – team have I'll prior not a healthcare my that something prior Joe Joe setting only team equipped remarks, and organization companies executive kind that even very, done trying but been improvement time. tremendous this in, and into of really operationally the device deep had tremendous it now, and the to medical getting companies, my same on just company where And as

line I we've execute as margin vertically sensor make in some that got that facility the we great to well opportunities terms as of project can on gross to RD continue improvements continuing in think new Mexico. we integrate as

well. great do and some some things I and get to think the can into there's as opportunities ahead other of improvements operating expense make we the are there that business those So

Joe E. Kiani

you. Thank Micah. you, thank So

Next question.

Operator

our with James. And Keusch from Thank next Raymond comes Larry you. question

is open. line now Your

Lawrence Keusch

Thanks. Okay. Good everyone. afternoon, Great.

Joe E. Kiani

Hi, Larry.

Lawrence Keusch

Hi.

that revenue the growth Saudi that on the of contract? sequential sequential that the I to touch right growth. think just So about to way due wanted majority the is that SpHb Is to

Joe E. Kiani

Asia, East, very Latin strong; the not due our international case, Middle is That Africa, America growth No. Europe, was it's No. - to

Micah Young

Australia.

Joe E. Kiani

Australia. –

called being out growth really why had case. part we that's international it a nice but, no, piece not So, nice that is helped EMEA Saudi there's of no, business, we of that and and the a

Lawrence Keusch

did I in quarter? it provide Saudi the Okay. great – miss the actually color. And a sense of how revenues you did were That's guys big Joe,

Joe E. Kiani

No. No.

provided can excluding We but no, don't that, We Saudi, you, very I business not in position assure have the internationally revenue. think a do the we're actual nicely. to grew

Lawrence Keusch

Okay. Great. And just R&D just then two on other the side. ones,

had R&D year to you we do you as XQ the second you move up in do up think and in think how the about that that into spending through going quarters, know half you I now fourth quarter? indicated the but – I do guess of you that I expected forward the just had step the called out you some in fourth or anticipate ramps delays,

Joe E. Kiani

do. We in do fact. We

we you way at the going that guided, year. we as money in spend didn't earnings down spend know to year, our R&D under And beat we in We guided feeding consistently R&D $X.XX we're and our keep delivered, the Masimo one If forward. fully beat because that QX. not going place for for we're in R&D we going to we'll QX numbers for guided slow look has our you the think the is it at revenue shy so full

Lawrence Keusch

then one, great. Joe. last Okay, that's And

markets at were types amount asked Obviously, markets double-digit M&A, those rates. aren't to and So, billion or an in talking when tremendous about call specifically, of about you of growing you're that $X that are about near on opportunity, at a were the talked $X looking sitting there. out last there you billion

give updated directionally around you us you about where might about, going? be can thoughts So, how and be you M&A any might thinking

Joe E. Kiani

Sure. Sure.

know in But also current that in unexpected disruptive an stage with the fortified sensor I this seven about. to of like years, We're diluting problems without know, on have any products we business businesses we solid we five moment, capable that the had franchise space makes of can don't little foundation Massimo, revenue built get I it, bit growing to upper company, we diversifies think unforeseen. have a from that that's at kind having a superior buy are afford broadly yet to believe at But that to we find, we double if be at want you – we're as I hand, a a very requires the know to for next what's organically condition dilute where the build we with five over to their more And our speaking growing hard said kind get amazing have own seven we same it at market, know clinically that space. – look you our without in how to of of hope Big a than the trajectory. which in that, of that in get our so greater case we only will but Kodak time, well. years, already to talk goals; acquiring as we us company have digits, not even to acquiring us we fixer hopefully two technologies as you so not businesses very of about can Kodak joke it. what company left to

to that, at that radar us companies of in bill. that and and we're go come time a had having summer fit So after the – said we had there that companies I looking actually constantly I couple companies on we've thought my are that

past. I we of ones with, as went to due some meet now But – who up in you with to things not change we probably parameters that pans that in we're right or described the going also ended that we're companies have something our assumptions not not one moving One buy like for full we But that the looking. it keep out and those I've act the diligence we completed we whether to going laid you, forward or knows. doesn't in out haste our

find that past, So might like mean tuck-ins and may today. with we the which line in buy technology in or more been not we're – what buy and has we anything doing things

Lawrence Keusch

focused Right. in you've to Again larger that And little your a it words, diversify on you on if that's think go to is want to, you current your about it still the silos something the outside what right you will side. really you're of bit after way use the that, not extent to got?

Joe E. Kiani

I I thing the something you, that correct. correct to That's not now But getting we're right anticipating think big. for want only size our or

Lawrence Keusch

Sure. Sure.

Joe E. Kiani

as years We're in for something optimize from buying earnings looking could turn our we size that five our now. at we time into

So have years, are shiny we in fix that house into this it seven-year it's we neighborhood. the fit current But otherwise we beautiful to to to in five-year go it with won't be the got think we strategy. a parameters our do like turn in something can one five have within and such it and

Lawrence Keusch

Thanks was Great. helpful. that much, very very Okay.

Joe E. Kiani

you, Thank Larry.

Operator

from our the And Quirk comes question of Bill line Piper Jaffray. from next

Your open. is line now

William R. Quirk

Thanks. Good everybody. afternoon, Great.

First one. congratulations, you good Masimo, and Mark a and foremost, welcome to picked Micah,

Mark de Raad

Thank you.

Joe E. Kiani

Thanks, Bill.

Micah Young

Bill. Thanks,

William R. Quirk

is... question First

Joe E. Kiani

Are treating, way trick or to your Bill? on

William R. Quirk

No. later Joe, tonight, kids I'll A on out. take the little

Joe E. Kiani

Okay.

William R. Quirk

on although U.S. wrong, I'm think X% had it was question think did correctly in heard growth, a sequentially. guys, First it I if I you a comp, that quarter. fairly like bit me little I the tough Correct slipped look

than the comp? and there's if takes other curious any simply Just there puts

Joe E. Kiani

by not mean do What understand question. that, sure I'm I Bill? you your

William R. Quirk

I the in prepared heard was something comment U.S. incorrectly. the X% remarks think I growth, unless

Joe E. Kiani

yeah. Oh,

William R. Quirk

quarter? last I posted X% number think Whereas you an

Joe E. Kiani

yes. you. Thank Yes,

increase last we tough competitor census public. it last You're the U.S., seen for asking was Yes about whole year, have did been growth year. the had time biggest Because the our the we've in X%. a we really

nothing is positive follow. So But was everything yeah, – on tough a yeah, act that otherwise. to

William R. Quirk

such. Is up around on still it's since just the stable? couple relatively of a refurbished you renewals, Can what and us update then, I'm overall couple in a of you Thanks. it pricing? And is deal update trending called years any particular, you curious out. it. Joe, just overall there? we've maybe been Got Kaiser issues seen brought Obviously, that sensors Okay. sensor

Joe E. Kiani

Yes. Sure.

seeing are price stability. We

launched XX As better yet SET, Masimo we competition you competition, the time when XXX below they and competition. And than offered as went may XX% know began times forward, began at then the dropping. was it the matching, to it we

wait We For hey, a while matching. minute, said, we were finally here. stop

they as Masimo should our tool below be We've dropped we as though as very Masimo it's that compete clinical cost accounts, care. superiority from four with that ones oximetry the the ago a result, three, competing XX% at. pulse line. we yet in they're reduce and to valuable service accounts, fair but instituted care as threshold. that they business well us due we the compete the price that in oximetry, of us offer give. We competition technology our proven have sometimes And maybe against that priced that to set from as we they win been there's years are not to We not about And think XX% a with prices And for, improve of clinical a even not ours. SET

William R. Quirk

And Got for then one last on it. you. Thank me is Philips.

think XX,XXX launch Officially of Tao Philips. with the But above it in I quarter. of couple sockets we've is the quarters now, asked earlier. seen on a this ahead

think, once just us a into see help expect socket we directionally, lot. I the so number Thanks to And guys, in could guess, higher? that we the partnership climb fourth formally get quarter, even

Joe E. Kiani

Bill. right, Sure. Sure. And you're

expected to order. the contract, Philips. they're not a be like of compared OEMs, we to are similar other Philips still how we fraction of to of they need now think with ahead relationship should have we just But because OEMs, where be because other customers be wise of volume naturally, that where I a our they and with or

schedule, So going see come. we're because going not to kind we that next as making more just growth much be time. the can you, quarter we think to you're to say I think I'm of march now of year. XX,XXX a same to XX,XXX, to Because we'll But over there's tell from ahead XX,XXX march the and XX,XXX to we overall boards of

William R. Quirk

Thank you much. it. very Got

Joe E. Kiani

Bill. you, Thank

trick kids. we my think I question so with to treating – last before or for go one I time have have

last one question. So

Operator

Brian next William Weinstein question our comes Blair. with And from

Your now is line open.

Andrew Brackmann

is This A start. Brackmann actually guys. today. to Hey, Andrew on Brian for questions couple

Joe E. Kiani

Hi, Andrew.

Andrew Brackmann

Hey.

you quarter. XX% So the up were said guys OX, SedLine and Root capnography, in

Thanks. outlook First, how terms? dollar those up businesses? outlook what's similarly, for the then that is XX%? with And And business the is SpHb that in what big the being for

Joe E. Kiani

Sure.

somewhere out year. haven't $X billion those organ monitoring to numbers capnography exact between the brain a $XXX or outlook million we oximetry and but for for So, given the is function

just – businesses. are So and we starting in those pretty much

as this what than we XX is work for a to think new noninvasive seen, compared and happy percent while So hemoglobin go. at we then needs been we've continuous, as after, be. new probably it a that a years – it to ways is what And hemoglobin with is long hemoglobin, we're less missionary far couple now we've have we're to

So it's got market. much, much will hemoglobin be day more to go. We hope one a billion about $X

Andrew Brackmann

wanted a Thanks. deal. willing like follow on up then to Got And it. you do sounds be would guys just dilutive commentary. the to I It M&A

deal? hearing am you'd you correctly? take then this And much to how be solution willing quantify to a be for would able First, I

Joe E. Kiani

Yes.

You're right.

if be deal shock as buying years of necessary we much And own have dilutive, want with flow, playing very rather down yes, go We deal to dilutive long-term don't long from how it'll short-term. don't of believe do be cash mind don't thinking as go a much. we to earnings line not as But, beyond we because course we our a the willing we for or to business the as us willing four want an than far three all does, perspective. like that are operating and to our to a positive and it, are private we company system but too

Andrew Brackmann

with one that. who Thanks. question And Would internally talking it. process? you M&A just then personnel running associated Got your is mind

Joe E. Kiani

people and today Yeah, McClenahan, of Jansen. and by Kammerman led Kammerman Eli Jansen Eli team our G.C. is Tom and Paul a Paul

in – M&A. looking actually are the for process. we're And we're Head of interviewing We

Andrew Brackmann

Thanks, guys.

Joe E. Kiani

Thank much us. joining you all for so

for will a on it Our evening with great so and apologies you did you joining have that us. Halloween. families. hope I we yourselves much guys Thank your

Micah Young

you. Thank

Operator

program. participating you This disconnect. have in for you conclude conference. does day. today's a thank may Everyone today's And gentlemen, wonderful and Ladies all

Masimo (MASI) 31 Oct 172017 Q3 Earnings call transcript