MASI - Earnings call transcript Q3 2018

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Operator

Good afternoon, ladies and gentlemen, and welcome to Masimo's Third Quarter 2018 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. I'm pleased to introduce Eli Kammerman, Masimo's Vice President of Business Development and Investor Relations.

Eli Kammerman

you. Thank everyone. Hello,

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

projections materially. discussed risks to could that cause detail actual results subject However, that periodic the cause factors they to filings are are actual SEC. Risk could materially and from in our our differ uncertainties in and results forecasts to differ with our

section You'll include find these as these We of financial calculated in our measures. of accepted financial discussion non-GAAP with Also, the measures will GAAP. Investor accounting call accordance refer are or not Relations in generally this to certain that website. a generally principles

measures In an indicator in these addition release measure decisions. order together statements informed our to are filed as The make the provide company's third our website. financial for of transparency additional earnings business the better and directly ongoing measures financial to supplementary comparable to to today, non-GAAP measures these business. information reflect the the with company the performance with to same Investors consider to Management intended increase the Reconciliation financial underlying our the most and non-GAAP performance. included are GAAP in should the company's sees the operations. of financial of way budget, all with investment be quarter to XX-Q measures assess these and company's that financial of on results SEC these measures to enable assesses performance, evaluate, uses investors results, believes information operations and non-GAAP GAAP management the

have quarterly Joe pass covering to our In we a addition within issued call the Relations Investor to of Kiani. supplement the earnings be now. posted presentation I'll website the section today, we content the release to will

Joseph Kiani

excluding afternoon, double-digit our and XXXX a Good business. us attributable boards ago. technology quarter, quarter the Eli. oximeters demand which to XX,XXX call today. finger customer the shipments achieved Masimo's which monitors, an our and you, approximately third over quarter. for call. worldwide a I'll to handheld increase increase rose for XX.X% in joining more same reached million, growth the strong for and revenues, The non-invasive thank third direct units, for Thank again, the discuss Also you a year earnings of to product of is once growth compared prior-year in our quarter reflects XX% OEM and both record We, $XXX

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

Micah Young

and good afternoon, everyone. Joe, you, Thank

call unless information we release, covered information, supplemental financial today's on presentation basis, remind many otherwise. further quarterly Before you the regarding in investor of on let Please non-GAAP reconciliations. financial measures and to our masimo.com refer noted a get that started, for me non-GAAP are today's earnings the

technologies innovative to care. we our automate care mentioned, this improve patient systems, across our and adoption business As a Joe in enable of rising saw continuum to quarter increase management due the customers the which our meaningful patient of and

expansion, another operating line quarter growth continued results reflect earnings Our and non-GAAP growth, quarter per share. third double-digit our the of for margin in top XX%

quarter, the the prior-year in growth non-invasive that's exceptional over approximately XX,XXX record a quarter, shipped technology and XX% which of reflects also the growth boards We monitors during quarter. year-over-year

sales strong is growth a year-to-date basis, to growth direct very our demand accelerate technologies our on both growth efforts. Our driver and our for reflects OEM-based This XX%. rising a through continues and

royalty we over of of the growth prior-year total revenue X.X% XXXX, For and the quarter. revenue including third reflecting other $XXX.X reported of quarter million,

on XX.X% quarter, the revenues XX.X%, or product basis. $XXX.X million for currency Our were reflects a which constant of growth

for are strong quarter quarter, compared was $X.X prior-year $XX.X from We platform. million and to in compared of million revenue rainbow our XXXX. in million royalties, million included other to for the to third continuing current results the $X.X the quarter quarter. $X.X see growth Royalty The

the In included $XXX,XXX quarter last compared reduction our we $X.X amount rainbow quarter. revenue, the is prior-year in monitors. NRE NRE to revenues work into in current finished to The the addition, approximately technology integrate significant to year of of year-over-year NRE Philips revenue in the that due million primarily

our include OX technologies, Monitoring, Philips Function NomoLine integrate and including monitoring Our SedLine efforts platform. continuing partnership Brain Oximetry the Capnography, Philips newer activities with Regional to into

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

was including margin, gross non-GAAP period. revenue, XX.X% quarter in royalty NRE versus and third XX.X% Our the prior-year

to invest related to higher last points gross was driven margin continue Once staffing our total sensor improvement SG&A driven customers third costs Non-GAAP rise mix efficiencies, increased share basis the was we've and administrative price. as by XXX upgrading higher product for activities our compared total same spend XX.X%. substantial increased by marketplace. the compensation, to development increase well quarter in the to delivering to higher we again, basis increased reduction compared newer to a the cost in year. XXX research technologies quarter expenses of and additional from to The year. expenses Non-GAAP in Our general, due manufacturing R&D share-based to project X.X% to X.X% selling, quarter revenue, implemented the line, primarily due basis primarily an in benefits by was as spend revenue to points to rose gross and increased improve of in XX.X%, as points last primarily innovative margins. percentage XX.X% which the same XX The was levels as

at to the on to Most accelerating time future profit profile bearing The that operating in making the margin we increased to drive improvement XXX progress drive especially our points profitability meaningful, basis R&D with XX.X% considering are basis XX.X% we overall as non-GAAP in increasing by the third XXX compared improvements business. we while are of same Our points, same growth. year. quarter, investment last the importantly, growth XXX fruit this invest opportunities front, efforts profitability quarter was the point in basis to to continue the

non-operating further the cash. to the a invested increase by Moving in approximately income associated higher driven period increase stronger the million $X.X with net compared interest much year. was was for same on primarily in $XXX,XXX a due The cash having an down basis the last and interest yields non-GAAP quarter, position to the income P&L,

Turning to tax expense. our

was once Our in to rate lower The the a tax changes non-GAAP laws. XX.X% resulting U.S. recent of quarter $XX.X a year-ago in tax XX.X%, reflected effective period. the tax non-GAAP the in compared in of rate tax million, effective expense third again, tax rate, non-GAAP

shares was quarter average level weighted for the XX.X Our prior-year approximately outstanding was the million, with which period.

$X.XX a period. per and share. quarter performance non-GAAP net income this quarter share. strong In earnings the income $XX.X profitability increased quarter, million, XX.X% was Third diluted per XXXX third net $XX.X million, was our share revenue per diluted non-GAAP non-GAAP With or comparison, or prior-year XXXX $X.XX over

a the $X.XX turning the option the quarter results. the third net XX.X% EBITDA This or exercises. operating stock earnings same quarter XXX to XX.X% share, non-cash and related of option to our $XX.X excludes year for stock were earnings Now tax or benefit per third GAAP were a related In quarter million tax quarter of in third XXXX. GAAP improvement net to million, $X.XX included leverage $X.XX to benefit $X.XX which margin, exercises. basis XXXX GAAP comparison, represents share, diluted which for compared Adjusted last reflects of impact in which share-based XXXX a diluted included point significant the $XX.X per was business. compensation,

longer at quarter, which due end end Our strong last days sales we third year. days outstanding second are of payment terms. was down typically improved at the from in of These XX significantly results up was days quarter, XX from where U.S., slightly outside XX cash the days but collections primarily to the the the have

XXX inventory XXX the last the third on in at down hand end days the days from XXX was quarter, which Our from quarter up end of year. at was but days the of second days

revenue $XXX and flow As a strong you of converted That's million when performance increased year. during last result result have we've million incredible months an at by to first end cash Furthermore, third $XXX we million of quarter, our end the year. of of free XX% to the of this XXXX. the compared generated short-term of $XXX consider cash earnings the working investments and our cash nine $XXX improvements, approximately at into capital million our that

financial Now I'd like to our you full-year on update XXXX guidance.

revenue million, other we now $XXX million. projecting approximately $XXX prior guidance up including total to and revenue XXXX, be For of royalty are from

above our our basis. an on $XXX guidance are guidance revenue growth a $XXX a represents of We reported year-over-year product approximately currency on increasing $X of reflects increase of million which million, This now basis, XX.X% or XX.X% constant million. prior to

still unchanged, the royalty revenue are for other and year. for guidance anticipating million approximately remains Our we $XX as

including unchanged other and Our expectation revenue the for gross for margins total royalty remains at year. XX.X% non-GAAP

Our all project on of total we non-GAAP expense gross margins at these And of continuing remains assumptions at revenue. non-GAAP revenue. Based remains guidance non-GAAP profit total product operating XX.X%. guidance margin total of our XX.X% unchanged approximately total are to unchanged operating XX.X%

non-operating Based and generate This are income any our from repurchases to which XX%. does average perspective, for increasing in reflects above non-GAAP up year-over-year of remainder Also tax at XX%, XX million XX%. the $X.XX estimating approximately guidance and of unchanged outstanding tax now we we year, share non-GAAP weighted shares rate represents rate we our assumptions, remains share this guidance million, further growth P&L, Moving GAAP year. of these the for which projecting the guidance $X.XX, in will $X of from an increase $X.XX. are on all of per approximately for EPS XXXX are we our prior year of that still down And be expect $X.XX approximately reflect approximately to approximately a of earnings not our the additional prior GAAP $X.XX. $X.XX of our non-GAAP a GAAP

please For release additional within the today's Investor on I per XXXX back financial guidance Joe. section call to masimo.com. our With at details that, turn to the earnings our non-GAAP share, refer website GAAP for and will of Relations earnings full-year

Joseph Kiani

Thank Micah. you,

to safety. patient Our cognitive We're hospital our patient institute at portfolio versatility from upgrade innovative and customers hospital to and application. to desire a software any again, implemented a workflow value signs history. integrated our of We're for point testing systems than workflows. Root's communication processes realizing of collection and Vital automation maximize of and today in showed automate minimize technologies consists team augments for through third quarter helping an to our overload data that their results, is progress Check who our products clinicians steady addition broader introduced Signs solutions. the solutions connectivity driving and enables improve by advancing vital in also once and This a Check. QX, platform for monitoring In data Signs automate patient Vital product the to Root Root with collection, we hospitals growth

products clearance this our the expanded newborns range of in the with nickel. higher has infant our minute very on monitoring. Similarly so respiration the weighs solution it clearance size still we growth an a has barely approximately Sales than its should been the skin and make breath The pediatric breaths this RAS-XX for as making be adult smaller sensor smaller significantly well-suited X set sensor quarter, only for minus During or our a received centimeters, delicate to providing particularly version XX diameter facilitating it The above plus one for accuracy neonates. and oximetry while respiratory grams that presence use of per version the sensor and further be neonatal, continues XXX and rate of at advantages to larger neonates, SET population. slightly for the expanded measurement acoustic per of infants this rainbow minute, market of rate. growth noticeable. little FDA itself up is accuracy acoustic sensors for the an than pulse weight With RAS and and accurate stature

product as such ORi. certain Perfusion of FDA being are technology differentiated Motion is a clearance ORi, the PVi, timely Low now advantages We're can't the by in highly our our embedded overseas. rainbow and technology it SpHb, successfully sold complemented receiving imminently, happen products that will the and but about hopeful As for although Measure-through be

of undergoing ORi than correlated patients decreased to such in desaturation days hyperoxemia ventilation. and These from of monitoring a reduction well significantly XXX-second These ICU to warning hypoxemia. prone other days with research early Congress an of help studies by as PaOX. Medical assessed In for ORi, significant SpOX with of ORi this detection as alone on patients at XXX-seconds presented allow decreased monitoring ventilation. hyperoxemia, In percentage found at might Morioka, Dr. was the new evaluate one a Paris percentage use whether the reduce technology ORi impact CHU SpOX of clinicians XX% clinical median a In deterioration mean in risk serve French France this Resuscitation research days patients one-lung investigators of from concluded lower to often strong could the published versus a They while ventilation then the that SpOX. than of to in may an during and were ventilation fact, of SpOX ventilation number also evaluating versus ORi of has ORi control the reduce in that mechanical Iwate study, one-lung ability abstract earlier and They the on investigated monitoring experience the significantly ORi of additional of in correlation XXXX useful the in the one-lung that the at whether decreased Angers Japan with invasive colleagues morbidity and quarter. positive study the contributing Society at two complications the group patients. earlier found in Anesthesia PaOX to of sought one-lung Koishi University has of during found the studies a be ORi hyperoxemia mean patients' clinicians help of how a between evaluated researchers are the suggesting group. XX% of concluded may and that the of The in of mortality researches The ORi with ventilation, measurement. in of ORi blood exposure that that one-lung ORi oxygenation of earlier adding the start recent

we in of state our care period automation. had enable to we final closing, continue another customers. that XXXX excited of happy strong the we entered new existing potential I'm about In and Lastly, and as solutions our quarter customers expanding getting improve innovative renewing be hospital to to the

as greater of value the we're questions. even their Our entering and care help year XXXX practices the associated of forward with positive outlook potential the open to the caregivers shareholder as looking reducing With we deliver patient for that, is and as improve to Operator? cost care. remainder to increasing well outcomes we'll call

Operator

you. Thank

question comes Rick from first of Stifel. Our Wise

open. now is line Your

Rick Wise

numbers we be great deal given and like momentum quarter. visible afternoon, instantly let be went Good about truly the basically and fiscal show $X.XX, You great congrats, year everybody beat, in fourth again, yet Hi. by a excellent Micah, the the couldn't – better? it that on of a wouldn't more roughly why by Why robust? another and seems what and year-to-date think momentum could ask number third up quarter. me But my and bit even full-year maybe quarter ingratitude beat guidance even

Micah Young

guiding look growth rate you it constant in product our revenues. QX about to our are now at And on XX.X% our constant full is growth look that have implies if product quarter basis fourth about if Rick, we grown in XX.X% year, a revenues very you so at of on the a the so currency, Yes strong currency constant currency guidance basis. year-to-date for for

headwind we year basis tailwind had fourth points – point the that and to mind XX about of a currency going points currency. XXX about basis quarter a the a in first months in we're have the keep in nine So XX basis in

look saw being we're year-to-date. growth But XX.X% of we're U.S. forecasting at with very results in we product that thoughtful strengthening you our that line the dollar. it's So about if

that about that, better rate expecting even we're and to be than we full-year. do goals the we same the we but So want for growth thoughtful how guide

Rick Wise

No.

Any we appreciate growth And through be type you this it's sustained early not it recent guide, seem wouldn't growth to you're than sure. For this reason that year? think higher next on trends. like of does I why XXXX, about think when trajectory is would but a

Joseph Kiani

it Well, will Rick, hope I certainly that be.

little because I higher. excitement XX:XX) to (XX:XX know we has historical more trying yours, manage growth just want recently Difficulty] lower to that or And a been we think see been own had maybe it before... – of most bit our we're [Technical the just

Joseph Kiani

there on lose the we call? Did call? anyone the Is

Micah Young

Hello.

Rick Wise

Sorry about that.

out Somehow only second, for us whether not we a something it's cut else. or

So I didn't Joe. I on apologize. catch that, your answer

Joseph Kiani

stronger ourselves. it Sure. Well, see than long just get trying (XX:XX ahead seeing just to I of much just try obviously We – of will had recently story make and before... more XX:XX) a historically to short not we [Technical we growth Difficulty] were we're

Rick Wise

go better Thanks, catch our on. you later. with wrong maybe. apologize think we'll we I Joe, I something's line

Joseph Kiani

All right, Rick, you. thank

Micah Young

you, Difficulty] – (XX:XX Rick. [Technical Thank XX:XX)

Operator

And you resume. conference the we are back may in

Joseph Kiani

sure it wise can that. But we we'll give we're bigger a more going. we happening. is going going keeps us, numbers And if numbers. I landline. We're all Thank phone from problem with you hope better make ago, If percentage just certainly just to mobile if to to obviously it it's optimistic, still But more in time grow to to to years if to about bigger we're know calling harder you being be guided I trust – And the then the hard just happening obviously continue we few get actually listening, keep case continue want to want now. us project us we you. growth you than better working cautiously also the remember as can Rick, to just questions. see hear being our with bigger And XX% let's X% seeing have this numbers. we're you're we're two quarters.

to let's go the please. So next question,

Operator

you. Thank

from Our Needham of Mike & next comes Company. Matson question

open. now is line Your

Mike Matson

Masimo. I new I'm somewhat guess to Hi. for my Thanks questions. taking

been headlines, at if the asked tariffs all about past. question have the But was of from or the sort given whether And so just I talk has in you China? apologize exposure I any you could in if this all tariff wondering not

Joseph Kiani

Hi, almost I Thanks is zero we the Mike. good for news whole most for saw it's joining. $X,XXX think and maybe The at quarter.

We paid ago that we we other in planned looks now. to years how we So have on reasons, much for don't exposure. has what relied like and China manufactured minimize off China,

Mike Matson

us planning, to about And talked not you things been cliff this one exactly things then royalty I I the proposed what know know know And to you're next is offset of M&A. various you're there's Thanks. But I Okay. tell that kind of year. if anything. going

if I financial give an update so need And was to and M&A thinking something? on just wondering about M&A maybe for looking could of you you would thresholds terms to for? what kind What of see us kind of criteria you're your in do

Joseph Kiani

our X. first XX.X Sure. that shareholders It years issue and suffered want to who've royalties ended this royalties of of through receiving quarterly Medtronic Well, I October and after from congratulate before analysts Covidien.

So royalty longer no have we a discussion.

have We some small will NRE much. but future, in not the number,

flow years all planning as royalties. you number were was I just multiple we've getting been be lot of this And the added want that a just that P/E as given we a everyone But cash day of that to should to So as from have It the we credit did, on different analyst not and know, loss. do ourselves our to we mitigate number. to were discounted – a try for come. opportunities for many to remind

that a going is we're hit. we be news the is optimize we that to levers to one few good to for them. able minimize many have the So created do Acquisition of years had

flow. incredible bank. million we're have about $XXX in cash now creating the We positive And

pan And looking a that we due them our So out. we're or one do diligence, companies of few radar there's about our dozen may in at. as

of the we also have have as more just interest cash rising, in fortune bank. the We good

looking buyback, trying is and do stock maybe we with to to But do shareholders. for we're trust at stock So aligned that, cash And best interests. and me, whatever optimize are what between our we're very plus yields shareholders' going buyback. investment we

Mike Matson

can you for financial understand. would what to deal? have guess Okay. acquisitions, talk kind more just prospective I anything you looking that? in I of bit like about specifically a little any be with though hurdles you just a kind if And regard or of

Joseph Kiani

course. of yes, Well,

one we're for that we to at these diversify stronger that which company I think will potential at. acquisitions. make that growing that marketplace. help different we've we're as looking we we That's always the looking are also them solution plus, is for addressing. player might reinforce forward that markets given have had we're One always before, opportunistically type Masimo. a from But acquisition, articulated looking the markets two for our be But types strengths to opportunities current helps acquisitions looking tuck-in. become could something done, we're That that synergistic are bring acquired we that is think we're the billion-dollar – in of double-digits

piece we're at. what you, in I products or the the to roughly you person least closer very And the the more that being purchased making that's it, not hospitals. to gets but process. get maybe either know at of So consumer decisions looking helpful about what last it's are

Mike Matson

helpful. And with so we're the RD quite margin final question margin, a mix, is good Okay. just the gross And really part improvement. seeing product sensor. particularly that of on gross to regard That's actually then

I we that. And over So know customers runway do converted disclose how of much if don't can you you have about how the much And... to talk have RD? there?

Micah Young

Yeah.

Mike Matson

margins ...can gross a see basis we at points of improving to year? continue hundreds

Micah Young

is This Mike. Yeah, Micah.

to want question. address Just that

in So first out it customers, we're call low inning to – of new if really is the – still look you the converted call today. there we're conversion XX% so of that the at said what nine, we've XX% it

there's cost. So sensor higher much runway with lot It's quality of a lower a yet.

sensor to years convert we years renew the sensor new the benefit we to on margins So line, to at the we try – next contracts, to seven as and that's as put to them renew gross we continue or look this something contracts going for customers help our new line. five

some cost integrate as to next efficiencies to the better So also tailwind plan in continue this is – got activities our we early years but manufacturing a our in new the as years. And vertically sensors something we're that the five in We've innings. driving Mexico. reduction future over us us benefit some we're in seven in then driving gives very well, should plant that the also still down were

Mike Matson

Okay.

Joseph Kiani

did didn't in Mike, talk better also we you it release Obviously, statements, FDA And that our saw to in recently. an press it add. was our about Because I the previous was recently than but we want clearance QX for accuracy twice we accuracy. got

So an of RD has now, motion. during specification of accuracy X.X% saturation oxygen

Mike Matson

Great. Okay. you. Thank

Joseph Kiani

you. Thank

Operator

you. Thank

Joseph Kiani

you so much. Thank

Next question? Yeah.

Operator

Perfect.

next from Your Bill comes Quirk question of Piper Jaffray.

Your line is now open.

William R. Quirk

Great. nice Thanks. quarter, Good guys. And afternoon.

Joseph Kiani

you, Thank Bill.

Micah Young

Bill. Thank you,

William R. Quirk

First on the driver question, quarters XQ that a and this We've or came Micah the up thinking a just in a of high-XXs. row but the call, fair amount Joe, sustainability couple in about number. had

historically be and how tend Now, I about before start you thinking guys sustainability like there? you are endorsing But overall you that that. know cautious bigger a performance numbers driver little to

Micah Young

I Yeah, is Bill, this Micah. think

as we'd of to the quarters. quarters taking last the continue more two far number We As drivers stronger it, where three call call mention quarters we to like longer-term. did before position we the to that see, a want are start on few or we see

been in normalized to we'd range expect we continue as high-XXs, closer now, mid-XXs evaluate. see and to range. that said have We've We that's but the range right in the that probably a somewhere we'll running

saw we're last talked a on helping also If that's getting numbers. driver call what about the strength from the our all just big saw Philips. we shipments we've we we contract of large year, step a that was a in with you products which And more have military look coming improve the late increase we last ones at OEMs integrated it's just those across rainbow up and the broader whenever

much OEMs at So our with if look you broader now. it's

a but before it we across seeing to quarters see increase expectation. up of more would the board, step that we're that we So like couple

William R. Quirk

then And one there second quick question. a follow-up maybe Understood. then and

selective how So getting about that or this product? that we're Joe, you about then separate characterize part contract, before think broader could to And you maybe right accounts a approval. the the way to you as close the ORi we should long And should that Micah? that, to this assumed when from think of the Is as starts see top that to more win line? compared duration How it we impact deployment new of hopefully we've – rollout.

Joseph Kiani

think of with I Yes, Defense. the contract of the Department the on terms

years. I over think it several was

hopefully we'll the next of two. or more So see at year that in least

Although, you lot I coming of the money think a been to know there's military.

ahead their of of they schedule. wanted a be XXX% might insight. they with did to But have in to they technology the products fleet lot the buying product So that convert our ZOLL

FDA is Up As really has desperately we great now awaiting of as doing with give we're you clearance, of really for call RPVi, it a it's PVi, they ORi, what and and I clearance them can want it for four you lot sensor can version planning rollout a give ORi, well SpOX rate rate. LED respiration them responsiveness fluid benefit, which worked potential think that just think well to FDA it pending new because improved pulse give well PVi perfusion clearance. as on we're we to as as we new a it

high. versus the sensors, not LED four product. delta system it's So SET is the between to be that LED is a going The the dynamite two which

So, hopefully of new a end sensor, this X parameters, standardize we or to which our new customers to hemoglobin people go most we some see and want hope on lot standard XX which may consider the of whereas for at for on will the you But LEDs what other and out get going game we it's prediction system. rise, report were the will hemoglobin – doing predict and I to to trying with given it. how up I'm the beginning that oximetry

traction. getting excited it clinical We're is where The community places very a we're selling very it. like about in we're So excited. lot Japan of

the research So, of know the early of were you were main to would OPTOS some the in-dwelling about to were these been carbon sensors primary, information looking And of development biosensors, we're don't I lot and (XX:XX) that for we XXXXs. was that oxygen, catheters to designed I to create There are a were late pH. one partial it. around these and PaOX. was old enough have And on be $XXX optimistic or think XXXXs, going I measure in that dioxide, mean invasive inserted. other pressure

not $XXX seen discussing studies from you product been of PaOX the that well for a a ORi, fraction So costs number. we've pretty non-invasive as exactly gets to you've it that close

So make it care. impact a expect, should if we in, critical things go really in as big

William R. Quirk

Thanks. Thanks I that good. prediction of appreciate stay all your hope I Joe. and appreciate guys. But regarding orders. enthusiasm certainly hope trying out Very contents No. – translates business, comments I of certainly to the more the into certainly

Joseph Kiani

Happy Thank you. Thank And Halloween. you.

Micah Young

you, Thank Bill.

Joseph Kiani

else? Anyone

Operator

Yes. We do have...

Joseph Kiani

questions? Do we have

Operator

Yes. question. Yes, have We we another do do.

Joseph Kiani

Go Okay. ahead.

Operator

question of next Sean Lavin BTIG. Our is from

now Your line is open.

Marie Thibault

How Marie Sean. Thank on It's you. are you? Thibault for

Joseph Kiani

How you doing? Good. are

Marie Thibault

good. I I Philips know wanted technology. publicly, on right Good, of the but you mentioned integration what ask one for the little the in wanted I doing you can you're you're Thanks say agreement. taking limited the a some cliché are to us to just questions. newer maybe now how a Philips. get you co-marketing of innings but of of alongside hospitals kind doing sense I you of that it's are. in you know of where kind to sense into something terms like give use a could selling or of

Joseph Kiani

think the fan I baseball inning a Micah, guess we're right. All game, third of nine as a And – as but in in not I'm would right. I good inning.

do we're that is how we new had been that the we the instantly believe In ways exceeded. ways, that quarter. in new integration targets, were out together I we been when What done on of delayed there we by goals last of expectations. I we're some – delayed, some we're should our some collaboration So have I parameters. created They commercially by our exceeded They on schedule. have this of ahead that set mean when

is at rainbow, we with mentioned of that where about looking then as next parameters them going company we're with, only the these helpful you of year. are clinicians about middle doing. be when all before you the parameters Now to think types when we're algorithms, are helping and knowing And in orthogonal front, at we're But algorithms and It's and data great. has to support. patient and think beginning. the co-marketing just can really it. the We Masimo. Masimo big predictive overall with integration is it the And what predictive to on team in does come been data understand how recently They leadership. They with proponents their these the really of this assist just met senior data have that's there up our and for Philips new the clinically both impact going is decision that get the

course So a think are and great be that they delighted to that that. we're working what's relationship. of I they We through going get get

Marie Thibault

in. there it when any the different I initial possibility to kind that work that. Is could that agreements of there countries outlined to this be you'd progresses And of Great. together agreement. that know the comes that agreement five changes terms

instance, countries that? anything like For specific more or

Joseph Kiani

already good think think And to go to we news I have is Yeah about we're I so think, to I seven. the expanded countries. six it

we better. we're there, fact that help I and yeah, see think were entire our just think But that products going means countries So for – and channel focusing to felt it dictated. be I going in both strongest marketing But we limited the stopping. kind worldwide, available no are are the health get don't just attentions was way we markets innovations the care it's go to the to that that of their or by so where looking we're to to

than is helped even has Masimo make to our this relationship successful. more Philips with Our relationship goal make successful

to that. that relationship So the And we're towards of we've over had OEMs we're course going we other years excellent have with work that continuing.

list ZOLL, mean Atom, huge not patient like with a like just could like But together – of GE, for market the is is care. the do to but we relationship XX% us to Philips obviously companies. impact to Our what I XX XX%, with about

Marie Thibault

progress The color. in last may, speaking in on one Great China. and I various hear what countries is anything, just wanted if opportunities. at of about in quarter One that? newborn if this to terms talked screening else recently Masimo's announced role, last initiative that was of the Okay. initiative Anything you I that stage? the

Joseph Kiani

pulse you is that for reliability be technology. but masses, to and this screening for date, Masimo's our thank their What for been during CCHD its wouldn't sound that I asking. possible the without around allowed And can motion. Well, these anything done can't were screening become accuracy with technology. oximeter CCHD still the be other of scientific. have done wiggling newborns any even universal hope to doesn't

study they at too tried gave or In And pulse abandon original than other work to and the the technology oximetry readings. more ours had our technology, with failed to time. popular another fact, technology that many the of use either entirely false because it

definitely screening large some to participate easier we out continuing adopt say the companies Melinda lion's Bill and own. UK same resource going that not only to Gates screenings, Sweden getting funded China. being products in But in working customers the mid-resource that. we're countries get also I has new it like we're most universal share its the for to are on It's because China, three CCHD countries, partially And that CCHD other was get the by of message are scale And Unfortunately, and do and to the & And business. become in Rad-G the the there. trials unfortunately creating latest make results. So after low Foundation.

So the it's on forefront to stay that we're until of going everywhere.

Marie Thibault

Thank you, Joe. Wonderful. Micah. Thanks,

Micah Young

you. Thank

Joseph Kiani

Thank other you. question? Any

Operator

Yes.

comes Keusch Our Larry Raymond of question from James. next

Your line open. now is

Lawrence Keusch

afternoon, Good Thanks. Great. guys.

of Micah, hospital two – a automation. Joe, had start and you you. high-level questions you talk mention made that. comments I So about I of And to your just sort more Joe prepared in for

that what – what that? central of I think sort temperature be the So develops? And time kind products I do period going there? do what you your take or think what you to are wanted the over to to of just is vision And guess on

Joseph Kiani

joining thanks us. Larry. Thank you, And for

sat And And talked where just I've has a cognitive that went That as IV ICU. pumps with you machines pictures, array down conference less harm. and the caused over ideal than patient. and there caused of For the clutter the clinicians. looking I And all every in for are diagnosis have OR, hearing of displays long have in has or of is remember, a monitors just patient ventilators every alarms. and have caused the and about clinicians and array as anaesthesia at patient the clutter overload for the the about some the to doctor I seen medical may these

we with to we could And of us and began So coming years thinking us piece to asking ago we that necessary. it, XX frustrated clinicians with do thought ago. paper. elements came that about about over we were blank what years up a And with do by something we began

and automation automation, see, and build was they for show office the part they connected to it witnessing the everything first together clinicians, a that respond Savant central system command rid to can And data where or and service clutter has been them the control to that that is to – to Crestron like one get to with dramatically for react the a around that the home ability deploy is The their organization improve to support. with of a go predictive decision give are and patient. things want what's and help algorithms happening of

and and called Patient So for technology Root, Replica. the in SafetyNet Iris came technology the came in

the happy we'll began out now. pretty them to much stuff year, on of available. elements And lot our are say next a board. So have the middle drawing By of all key of that bulk I'm

it we're to live. ready. But go going and better. to Of improving be forever ready now we're making learning and right course, We're

several U.S., go to agreements live. us that in We East Middle have in customers are talked the with done Europe, – have

ours might versus closest out I BlackBerry. solution the probably analogy, think positive. closest has reaction to another our excited this to If from clinicians, this, they thing solution really could I an about been can't to maybe we're there. I universally there's countries can, don't believe the the think like is the thing iPhone probably use iPhone And that be countries So because afford from us certainly you

something we're their get not in we're that not with – ability happening many it care, the patients' what's hoping the and not be things help involvement will and burned this out matter. to clinicians' is that the So about over miss get both with ways, happy and excited that

Lawrence Keusch

And That's physician, with what very elements the physician presumably with your that you about system Joe. it just customizable see interface have helpful, as know displays various interface, sounds depending the or an brought all on may some is it's like they thinking important? together

Joseph Kiani

real at call in with to first, Yes. we Number it's in right want But looking different to that gets Augmented as up. displays – system help Yes. many clinician connected different even patient time have the like the as everything that what's up be all so remote with with the it Reality devices heads the take you something room and including, remotely happening we're for at when device to can established by looking presence just they're there's that a Replica. want you to of displays the on be the And thanks the on room be what data – bringing becomes could that if city, even Android they're people room one and working it ways for tag, could phones or detection see. customized, multiple viewed or display it have many superset. to are will hospital what the rules can be it a in a gets clinician they gets in And room, to enter customize with walks it called the the carrying so iPhone they we create into or when who wherever

be see need from providers, So will useful patient. it of I of to to becomes what's think, lowest care care highest to do that, for to the level level best see they something providers the what the

you next Now going soon Masimo. to going inviting at one I'm – thing we're to Analyst the out Day to be guys

very appreciate you I see It's period. those hard things you it, with think to be around think it'll soon. explain Because of this to will it got but is Micah it. to May it you. the see get will I one

Lawrence Keusch

look one wanted to one, Terrific. little bit on very Okay. push understand you've M&A balance then you a got And one, and the earlier last fully I I just sheet. and just comments a strong

totally of But little words implying the you've why moves looks line those I certainly that struggle a bit get guess in of were what if of And the tuck-in like deals growth. of I is that use really diversifying it. so around when top of your M&A. bit. little sort when go I and go got away may core a runway You've comments from after you the get historically with you here may nature a done outside this it that sort I'm incredible sure is larger not side that strong or

on. of I'm in that's area take sort move much new. into trying sure make control very what's to I that. My You're going just and risk understand integration an on potential

Joseph Kiani

Yeah.

the I rich now right right. incredibly absolutely You're six with anything but doing in mean not make product we're by months, do. and far we XX and lot next is think because the we R&D coming tuck-ins, that just that's here, with the it. coming what's invest next developing. what's some ahead the our you'll mean ones about in pipeline far it ahead stuffs course tell what that in of out what hopefully a doing of I lives don't But except you'll The you we're we'll easier see work only years. could out didn't and see not we never

incredible point, incredible we're And of that an but all-star be bench the not team are I to to teams but people, mean diversify, only do solution, diversify. rich point, desperate we this product in rich by so And themselves. not and could have, we're what pipeline yes, in we this at ability at an

I we five if why were while we ago, block diversify. to ability photo and fast and should. mean there have film to was remember have been shops something printing we I see question (XX:XX) mean every think So Kodak Kodak. think could is for of interest money diversify, that we that years the everybody helps and and I

we the I thrive our job set so of to see quarter and come. years, this part what's as think while management to that the to next come continue up next is can to anything hopefully three So five right decades that the company years can I a and to for as for think company team may my the do job if and ahead,

Lawrence Keusch

very I perspective. the you for Perfect. much Thank appreciate it. Okay.

Joseph Kiani

one diluting in we're never not Thank feel ourselves. good I'll how our never tell you. want and But the own to thing you, interested business, of say because about I but we

comes really, really strategy resist, exercise. hard non-dilutive to should So diversification unless a up be something our that's

Operator

questions. further no are there And

Joseph Kiani

call hold next you. just for Well, we thank Thank habit to treating, forward on calls look of February. might be safe. or these happy XX, October I all little our you joining. made change having but in that your year, And trick so Halloween, from monsters we a know, we don't we

Micah Young

you. Thank

Operator

Ladies and great for does and program gentlemen, you a today's conclude in participating conference. now day. This Thank you may disconnect. today's Everyone, have

Masimo (MASI) 31 Oct 182018 Q3 Earnings call transcript