MASI - Earnings call transcript Q4 2018

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Operator

Good afternoon ladies and gentlemen and welcome to Masimo's Fourth 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

Relations You will will to these find GAAP. section certain not these of financial discussion Generally non-GAAP a as accordance website. in financial call or the Accepted this in generally that Principles are Investor calculated We Also refer of measures. measures our include with Accounting

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

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

Joe Kiani

quarter Eli. our call. as for was Thank dynamic and fourth a business. XXXX earnings thank in for Masimo's strong Masimo you, you XXXX momentum for afternoon Good we saw joining us year

Our business. efficiencies happy strategy fourth year our extremely above to drive the quarter on expectations. throughout organization to results market growth We're operational and report and exceeded global executed that full deliver

For the fourth grew product EPS XX% $X.XX and XX% per non-GAAP increased quarter, share. to reach our $XXX to revenue our million

We I'll also finger which technology XX,XXX record shipped a and quarter today. in and non-invasive our discuss monitors oximeters. the handheld boards more call during the exclude

review you year to quarter detail results update and Micah? full XXXX to more financial Micah ask fourth our will guidance. and I in provide Now, with an our

Micah Young

you, Joe good and everyone. afternoon Thank

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

As we're Joe in momentum we very seeing happy our business. that the strong with are mentioned,

than our step-up fourth XX% continued expansion, share. growth revenue growth, margin the results Our more reflect our for operating per sequential and in quarter earnings in non-GAAP another product

we quarter, and growth boards prior quarter. the XX,XXX shipped the During XX.X% of noninvasive monitors, over which reflects year technology

attributable our OEM year, to XXX,XXX. and direct increased full in driver reach The customer is the our shipments demand For our XX.X% growth strong both business. to

of reported we revenue total $XXX.X other royalty fourth the For quarter revenue million. including and of XXXX,

quarter other the $X.X were revenue basis. non-recurring growth Royalty the or for quarter, revenues for for the $XX.X million and constant was $XXX.X of of growth million product Our quarter XX.X% a engineering on XX.X% reflects million fourth compared currency XXXX. which to

million in million year to compared $X.X in royalties prior $X included results the period. quarter fourth Our

Despite experienced the quarter. in we NRE significant strong In revenue year-over-year non-recurring compared still X in revenues of the $X.X in on the and to of NRE the engineering addition of for revenues, expiration million XXXX. XXX,XXX reduction very royalty and approximately the the in fourth of growth fourth quarter October included earnings revenue XXXX quarter both

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

the in quarter, and non-GAAP XX.X% was margin fourth NRE gross year including royalty prior compared to the total revenue our For period. XX.X%

year gross product the driven efficiencies, improvement implemented Non-GAAP prior XX.X% basis revenue quarter we've XX.X% Once fourth new increased total compared administrative to well XX.X% to customers selling, Our additional and XXX favorable for our increased to upgrading period. quarter again, the reduction as sensor margins. of general, cost from the prior expenses the compared in manufacturing benefits line, points as for XX.X% to were in mix margin was quarter. to activities year improve by fourth the

write-down our If of of basis SG&A spending XX revenue, to period. and SG&A of to asset to of decreased royalty expenses primarily XX.X% was XX.X% lower to the impact prior improvement due the quarter. points basis you that revenue XXX year year prior in NRE product in and The recorded compared XXX year-over-year related we points operational the an a basis points favorable comparison exclude

compared year, of expenses the related you an X.X% Non-GAAP from year which of in million of government foreign research an unpaid former to in balance agent were XXXX X.X% prior $XX.X our earnings asset quarter. call was and the write-down to total recorded If in a tender. we recall with from revenue last connection development our fourth quarter

continue the NRE as technologies If period. X.X% to to to year primarily in of spend to R&D you marketplace. innovative the due in compared our to was and points revenue, basis R&D the expenses increased product and invest project-related higher levels The of prior royalty increased staffing impact revenue delivering costs exclude X.X% we XX higher

margins total the prior operating XX.X% quarter. For quarter, non-GAAP XX.X% in year our were compared the fourth to

and revenue, royalty the period. XXX XX.X% the increased you in non-GAAP prior product If points XX.X% impact NRE exclude margins to compared of operating our to basis year

asset operational write-down recorded XXX the basis operating prior to that comparison product in driven basis points by was points favorable expansion and year-over-year of we the Our related margin improvements year quarter. XXX of a

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

to Turning taxes.

changes we million the our to rate favorable expense laws to tax fourth was a rate tax non-GAAP U.S. quarter the as reflected period. international rate compared year scale resulting non-GAAP once effective well in the Our XX.X% in as non-GAAP in $XX.X continue lower mix as profits tax effective The of tax XX.X% of of again the recent in tax prior business.

fiscal further November XXXX determining for provided This tax million issued the some a proposed tax methodology impact of XXXX year $X.X which the reduction clarification in the we on recorded In addition the provision government fourth in U.S. foreign credits. which our full in regulations quarter. to for resulted

income diluted growth fourth $XX.X reflects XXXX prior was share. non-GAAP per for non-GAAP in income quarter. million quarter $X.XX XX.X per diluted the $X.XX over million or or quarter prior Our net share. comparison, weighted million XXXX, outstanding to average compared year was period. In the total $X.XX EPS net XX.X shares million year of quarter Fourth the This XX% total was $XX.X or

revenue, share. This $XX.X reflects XX% million NRE income diluted increase of $XX.X over share quarter. $X.XX If royalty non-GAAP million you comparison EPS share. $X.XX and diluted net or product $X.XX fourth the exclude or per or In the was prior non-GAAP product XXXX income our per of impact per growth product an quarter was net year of

prior approximately Our of and earnings growth related $X.XX was a comparison asset that quarter. revenue year of the driven strong margin operating product favorable quarter we write-down year-over-year in expansion by the another growth, recorded significant to

the year. write-down non-cash represents to XX.X% in Turning which U.S. In fourth the net of of was reported compensation of million comparison and the the to margin tax which for XX.X% asset the per reform non-GAAP turning to quarter both GAAP loss the income primarily was XXXX, related to last $XX.X by our fourth same we excludes diluted XXX of share. a Adjusted impact GAAP results. or XXXX improvement -- driven or recorded the million quarter share-based quarter $X.XX $X.XX a net point diluted our which quarter per of fourth GAAP This of $X.X for nonrecurring share for XXXX. were in EBITDA basis XXXX. quarter fourth was compared charges

Our days terms. which the days are quarter strong These improved year. due improved last outstanding of we end in payment cash where fourth was results the to sales have the U.S. XX XX longer outside days primarily to collections typically

which Our in fourth improved XX was XXX the year. end to quarter days compared of on last the inventory days hand days

performance in represents power we capital As working cash million a the the cash-generating full result the $XXX and our improvement end XXXX. for of Furthermore, year. business of the strong generated $XXX.X our of as during cash a our free short-term year fourth XXXX. into This earnings flow to revenue significant increased at million cash our of $XXX.X of of investments quarter million the at to XX% converted compared we our and end improvements,

EPS for of improvement points we Looking XXX of non-GAAP an basis was back, incredible margin XX%. as delivered of non-GAAP product operating revenue XX%, Masimo growth total XXXX growth and year total

the revenues NRE growth points improvements product of product XXX we significant in allow not certainly improvement our non-GAAP capital And which operating If and XX% of we basis to margin you royalty XXXX. cash us least, of EPS impact exclude of XX%. convert drove revenue, but last, non-GAAP working delivered into

drive to steps significant efficiencies importantly, XX% our overall XXXX demonstrates operational profit the accelerating progress further R&D in take Most of margins. achieving business growth performance are at while business. are time front operating making throughout long-term we the the making the this towards on investment increasing progress the strong and profitability profile same Our our and goal of the that we

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

X the of royalty any XXXX. on year, royalty As for in are expiration result anticipating other a additional revenues not October we of last

reflects for which in purposes. So around from guidance revenues and of focusing impact excludes our I product NRE be our to operating the prior XXXX, finish increasing the we strong XXXX periods performance will the Due comparison product constant to now XX.X% increase million royalty are discussion above which on of reported prior million. basis guidance issued was an million a currency $X This a basis. in guidance or $XXX which of year-over-year our growth represents approximately January X.X% revenue $XXX on

operating XX.X% profit expense guidance remains to revenue. project unchanged Our remains guidance margins non-GAAP of continuing at operating our we're non-GAAP assumptions, XX.X% unchanged at product these on XX%. Based non-GAAP and margin of gross

and in of the this margins point a improvement XXX our represents Excluding in XXXX. operating royalty impact basis NRE,

tax the is to as well as of a recent the XX% of impact improvement rate guidance primarily assumptions, changes compared for to our to in U.S. OUS estimating clarification repurchases favorable mentioned are not non-operating XX%. that Also, reflect to approximately tax be This income. still million does income is in I in on are additional which weighted had $XX in non-GAAP approximately Moving law non-GAAP XXXX. million prior share increasing now generate we will of P&L, interest we a January of of rate shares XXXX are approximately primarily all to comprised which EPS guidance average earlier. these an above further Based projecting represents guidance we profits in $X.XX our expect our related increase of $X.XX. prior the down issued of we any our due which XX And of which $X.XX tax our the now non-GAAP year outstanding the mix

the share royalty XX% perspective prior NRE rate a of And XX% projecting in of Excluding a EPS up approximately for $X.XX. grow and non-GAAP now and of per tax projected revenue, of GAAP are from guidance $X.XX the impact our from to GAAP our GAAP is we year earnings XXXX

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

Joe Kiani

you. you, Thank Micah. Thank

Our fourth patient clinical solutions products of illustrate systems our improving adoption for growing quarter unmatched and results care.

success realizing pulse more been of we difference the to gain our customers clinical from shown significant to while and a neonates care for traction as products importantly technology win We oximetry SET to our newer more a patients adults. in significant that's financial are continue make

having the infusion reactions positive of to and patient the all is devices ward from for can Root critical EMR sent Masimo a not UniView reduce of patient hospital very pumps the initiative The with of by customizable also caused unique to experienced relevant that see in devices and the that our to various ability screen display automation. display use to patient initiative scan remotely ventilators be on as we for so overload cognitive settings measurements. involves different such ICU the but by quarter, or so monitors canXX these from general and connect single a devices to the fourth the on data anywhere machines multiple integrated all designed of clinicians large During seeing and This anesthesia OR data variety only Replica. screens to

of innovative our display hospital the SCCM as Replica were and customers at attendees software critical automation Arab with patient Health, Our UniView suite these ASA to to improve such and information clinicians, to greeted look flow of for of were with conferences. applications We to by the working enthusiasm and HIMSS outcomes. aid optimize forward on

The second improve post and our which technology Masimo monitoring for initiative opioid is major innovative both for surgical to safety recently intensified via home has wards program use.

hospitals pain and In and and opioids years committed resuscitation morphine you us in administered over of we IV these prescribed unexpected for control. deaths are postoperative have events via heard from fentanyl who post-surgical include the the reducing many As wards patients are typically to opioids dosing.

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caregiver of antidote details member, responder administer opioid valuable to remote even and for can or will that awaken the still family that are can I have first While patients alert an this device the potentially confidential, features overdose. device as tell notification alarm such a you a

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for Even with accuracy SpOX in improved sensor's SET the for specifications the and specifications patients grams. performance technology The standard advantage only at during one unmatched, as the neonates, at lives all accuracy for RD retinopathy received infants compared proven detect reduce costs fourth accuracy general motion in deviation. CCHD which pediatrics quarter, we in sensors X% FDA and of X,XXX SpOX prior specification prematurity or during was improved was to our in clearance newborns with While adults, deviation, RD our SET pulse to performance, one new standard oximetry to X.X% previous and patient our increased over for SET save use ward.

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the to renewing year existing renewal of for was successful in XXXX Masimo customers. of most entire second winning our our customers successful agreements. our SET SET new We customers in highlights our new conversion One history of and had existing and

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the Mount now also technology. Sinai on We are SET business their our Masimo in York. with system Health System They expanded New whole standardizing

In wins contract X,XXX While pediatric Other to technologies we Ministry of hospital NHS we'll we a others. outlook. we cost financial XXth the Health overview improve to call the to hospital the and our Irvine with closing, more XXXX, include Operator? with quarter include business our care all With of as include UCLA, Hospital UMCG innovative fulfill our of in questions. demonstration hope abilities the as on open the will as Groningen which you automation and of important our outcomes for monitors the we and England at well in The Masimo won in outside Leeds fourth May enter amongst significant to the to that, renewed founding, with technology. in our XX U.S. our anniversary products many new Netherlands. our in than Overseas, see We comprehensive Day, mission confident systems. are business the and Investor of reduce our Turkish

Operator

you. Matt Thank our UBS. Taylor the [Operator from of comes question And with line first Instructions]

Your line is open. now

Matt Taylor

bit I new my of congrats about great. Hi. on that terms to the ask if developments guess, wondering little in to the come of the can you this address one or the Thanks which could think FDA about expect question. your And was commercially taking I of about our us help you model? of for and size around opportunity from to thing parameters to a be to a development you lot any the system would what guess, was detailed you more talked wanted if timelines about a is or how good I program here. incorporate issue, I opioid disclosures that to give

Joe Kiani

do Matt. best. I'll Sure, my

the Given right new category year new it's that know, has ever not before, and But done product assume imagine that lot into opioid now. from occurred of XX,XXX have there's a were were a overdose that of two that prescription within business. last or opioids better that prescription opioids. deaths last million XX year, to year guess, just I filled. we And to due We'll a a been XX,XXX

FDA. assuming XX for possibly over-the-counter is So to least get use a discussions opioid this that with with system users, list the million of and by review and the new FDA under we're clearance the at is of opportunity opioids allowed prescription

Micah Young

the you May have look on a a and of But We're working next Day, on opportunity And to here this to is more days see And opportunity add over to as that far on just FDA. learn the hopefully, us, the as with we this out as new also I more continuing Joe's XX kind and about an what been if we'll little May update and it want of XX, an with Matt, this the for update we size we've Micah. you're bit more comment. up especially, landscape. at provide market again Investor so. is

Matt Taylor

going working out you're like have in the here Or the something on the it to longer? commercially year? timelines, just end going of near is take could toward out to And term, there be the Thanks. you

Joe Kiani

efforts, depends on but FDA's it the Well, our work. not obviously just

and at the to sure to hopefully been expedited While to have we're make there proud by FDA go safeties an are things in the really and FDA the excited proper is all will selected this eager XXXX. well, precautions. on know review, If come this look out I

we'll probably either We'll might could in think projected in not have I it's to extremely in revenue a our that It have We or real first successful see. revenues year our business not. And XXXX. digital. it see be XXXX. of And very be

it. year. We're the hard it. about third-parties we'll excited So, more and know Obviously, after about this But launch on launch we're it. hopefully excited we'll working it are

Matt Taylor

I’ll jump Well, for queue. in back color. Great. the thanks the

Joe Kiani

you, Matt. Thank

Operator

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

is line Your now open.

Rick Wise

Micah. Hi, Joe. afternoon, Good

Joe, numbers XXXX? of off I top drivers, the continue? this the now, just with and like is you of level broad will. about do about you Just in think and seems everything if line. the the didn't entire run new impressive. be start very more talked kind drivers the adoption -- of kind than modeling of you know, is me us seeing that's products thinking that year be the portfolio. about your Driver -- you driver you How to Let the you're disappointed we some range? maybe the numbers that if the how think It exit growth should drivers, we about Would mid-XXs and going the help rate XX,XXX-ish mean, across

Micah Young

look more and XX,XXX think range. this that seen I getting three about high and as it now. the high-XXs the think And seeing for in quarters would more we quarter. in low confident seeing I we that now. could at XXs even I you be reached range will before Micah. expect is expect it We somewhere -- that We're XXs -- around saying This Rick. high level in Yeah, XXs this XXs, were we've the

Rick Wise

R&D. But of gross SG&A volume improvements the And which efficiency, in cost Okay. redeployed seems helped the and into very Micah, turning reduction visibly to margins really operating mean, like part P&L, mix helpful I you margin. manufacturing were gross you. clearly, to

of So cost we assume focus what early and terms of to the in R&D? to side in inning continue that that excess are inning opportunities spend you'll in, of Still reduction things? efficiency some we more should

Micah Young

Yeah.

around in we which a think maintain it. having investment is of I X% R&D, Rick, good to very we're level believe kind

this to improvements to it of that XX% always improvements think range. were gross would the also this is accelerate year. expect rise said said I And We that that over year at some through and in able you least SG&A our seen basis as to we You've there per expenses X% And reduction our margin, well. like some of accelerate through our maintain think margins. course so continue the to level, We cost efforts that we've leveraged at way investment X% XXX R&D as drive try we that X% points XXXX. year will always improvement towards about the cadence we've

actually XXXX. Of in of basis XXX points we're improvement course, guiding

put number in reduction cost place that had given of XXXX grow us margins year XX% a confidence the next of to XXX and basis points. we have some out And the in efforts operating

margin that about basis expenses. improvement of points XX operating you our improvement points basis down If breaks of XXX in think in it and gross

because we're are But to drive from commit year of So, as we that this the continuing towards acceleration seeing beyond points next improvement efforts XX%. year. XXX per though, year basis of we

Rick Wise

we the Thanks do Okay. point? sizable XXXX priorities this me, so in -- much use impressive. generation quarter. for excellent cash one really think last your cash at increasingly quickly. about One and cash Free priorities congrats How flow on is

Micah Young

be be it in is open answer also and we're share Yeah, that trying on what like And on just we just can you. question we're continue going -- purchases. relative to also We maintain that be to if into at those also We're looking terms in smaller to to Thank of If as those we're -- forward whether sheet, Rick, the return market flexibility cash. -- to -- being evaluate opportunistic about arise, opportunities. investment be And to and repurchases digestible about move where as the we look we're different we're to price XXXX. have also the flexible share things flexible basically companies across. we're more balance we M&A continue it, want think of XXbX-X to we trying come sure plan. through but in invest our things continue make opportunistic to terms we type

Rick Wise

much. so Thanks

Operator

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

is Your now open. line

Bill Quirk

Thank Great. everybody. afternoon, you. Good

Joe Kiani

Bill. Hi,

Micah Young

Hi, Bill.

Bill Quirk

Hi.

First question initially. is Matt's question on following-up -- it was

scheme, term or if for writing In in terms commercialization you some about will? it You or kind with script device, track the us? reimburse prescription, cash we commercialization the as there Joe, device, tying would some of maybe a if suggest you which kind of payment pay. would of the OTC opportunity for of well? write you the think scenarios longer mentioned maybe you device ultimately the paint -- How are opioid of for help sort can guys monitoring Is thinking an about here

Joe Kiani

Sure.

First health us. of relatively consumer business for all, new is

of for in we're digital new a it MightySat just about And it's -- know, success answer passed, one to consumer we model, now there's business us a the advantage for how for which opioids. that like bill just are There's way. about of the and we it's I seem you catches iSpOX earlier, marketing an we've thinking to might prescription reimbursement thing and in take it's us. or mentioned had my more question me incredible To to and whole kind all, for doesn't. towards healthcare your positive consumers of monitoring athletes. As digital of new coming But that because been either marketing things for first a kind reason on in the able feel it world well, have be things

with had cost-effective can so old, up. couple thousand device sensors. to Secondly, get one doing will OTC, related of a four never and that in afford to XX young profile hoping man buying home now, be deaths. affordable very or that Right home bed it. new goes and woke Parker, high go of can and would they're with He buy a which hospital went people that they this is they're to Utah, if was opioid in sending grade the develop years we given our half costs because of dollars many we're was and few a Rad-XX to There tonsillectomy adhesive system foot opioids they're a and for And some for pain. pill took six a

to community a an been since So was there others did be except the our not related got they refused do another unfortunately was with who woman technology which they prescribing that away terrible. different. ever along which monitored pushed to she outcome they've say to we case a death opioid have few something for pass had And --

at on So, to we we the at make you us at a new be you May. price in can it if think have revolutionary this really looking going when things, way. that side affordable and it makes a keeps cool done, design can all be we show it cost-effective done able be that We can we think margin, our we're hopefully to see in us consumer that, looking of normal but

Bill Quirk

there's and in on kind front appreciate could Separately, staying products Thanks maybe couple you. bigger details we a pace that how so color in know latest the you And I forth additional of think approval, should and of FDA what's approval? of avenues products here Thank a commercial you kind new the some us give for certainly or anyway, of adoption upon of just with commercial maybe of FDA? also guys picture great. different is kind then That's but about back are awaiting into on the Certainly, you. the development ORI? Joe

Joe Kiani

Thank you, Bill.

communication we with of them. the received after application with We dialogue FDA couple to a for over comments. response in the years are XXX(k) submitted We comments We're on ORI. on of it. it those And our recently working

getting going So, Outside marketing well. the we'll crossed. ORI, traction. We're we U.S. keep lot are our fingers a where very of it's

states which sensors between all warning of adults this nice but unit measurement. as event of people been you're it For especially think Lite intensive in chunk both already example, to to-date are allows of to to LED have where is where or rainbow oxygen, SpOX optimize giving Japan hypoxemia seconds to and SET toxicity before beginning but the ORI in minutes And business it's issue version to our could for neonates for in XX well trying the positive very OR, measurement, new but anesthesiologists, amazingly be getting big the for a rainbow sensors a that care not just of switched a occurs, overdose. ORI, on beneficial not has oxygen

Bill Quirk

for about And for Is for adoption would market some it an Understood. larger applicable of of like less the the standpoint then color, anything last Thanks U.S. Joe. curve other one markets make example? Japanese just the kind that there me. your to from

Joe Kiani

don't believe so. I

U.S. think because issues happened in keeping began that in of all, we I Masimo were Japan eventually as the in started First again happened you'll as Japan, actually us of first, of when FDA GPO the remember the time out market. clearance first what well contracts exclusionary And

are they they And doctors are happens and the U.S. in capable Japan getting more Now more the of technology of are want. they control in what

us an used in easily indicator and more neonatologists voice that like eventually gets everyone world But of follows. early adopt more what just So needs kind are -- in have general under around technology patients. new but to the

to country of for Japan after Japan our terms a the U.S. think in actually our market we the healthy is products. So second example. happens be largest

it's always following quite closely. So the been U.S.

Bill Quirk

guys. Very Thanks good.

Joe Kiani

you. Thank

Operator

the Thank you. And Company. Needham Mike & our with question next line from Matson of comes

Your line is now open.

David Saxon

for David Mike. on is Saxon This Micah. Thanks taking and Joe for question. Hi, our

SedLine think opportunity Philips mid-year. monitors was So the you talk Is there? market just expectation that and you'd to first, NomoLine, the about the parameters can into this still I by expectation? OX And integrate able the be

Joe Kiani

as and the as market of both measurements well. still this a monitoring we expectation It's for for those be year huge will out those being their middle by least they of have Philips by XX% it's the of markets if recognition think not uptake well other hospitals XX% Yes. in opportunity that at patient as

excited very closely we're of on those with working products. So them the we're launch

out will of the hopefully middle and it no will So be XXXX. or hopefully there be snags delays in

David Saxon

then year what just to And prepared contributed second and customers converting ones. is? existing year you how remarks it that said the talk was Thanks. and successful your about Okay. you Can renewing repeatable in for most this

Joe Kiani

renewal XX%. other nicely allowed to I've we we're it, for to you is been except the the I been this is really Kaiser have aiding all our it's aggressive hundreds but articles believe where of growing bundling, oximeter. Times if access very recognition Net million renewed Well, before, they after not And level, investment monopolistic And competitor New the undeniable. be pulse year. York our over won reduction we've The improves a we've saved biggest sometimes are But to babies, post Safety -- so see -- due System of what a lost of cost costs we the $X.X first And the customer and converted contracts unrelated on ICU good year first in a Kaiser year the not done things ward, studies with we you wards it's when were in and to There and products that team is forth. rapid mentioned dramatic in ever. business saves U.S. -- pricing it, the study over we've they Masimo to not they're $X one don't they that reduction. practices that the bundling of response for they bottom-line, our and they studies lives in Patient just But regarding but our like GPOs the are But prove except performance, all, for year customers. the whenever for said XXXX and happy rate it's what I is our what year, think keeping it's never of since think data. you'd track been due continued did call, only with in that of reduces activation. said million independent of morally they their SET, only I technology in showed postsurgical Dartmouth eyesights just reduction postsurgical transfers a XXXX, saved

I just existing to a our ones. customers Obviously, our it's think so are technology team, introducing our job and And salesforce, I'm of good and doing a specialists both servicing lot phenomenal new grateful clinical who stuff. anyway to our

David Saxon

the congrats Great. on quarter. And Thank you.

Joe Kiani

Thank you.

Micah Young

you. Thank

Operator

And with Keusch you. of question line James. Lawrence from our Thank next comes the Raymond

Your line is open. now

John Hsu

John Hsu It's Micah. for Larry. and Joe on afternoon Good

Joe Kiani

Hi John.

John Hsu

Hey guys.

expect than I the to just so part quarter? shipments, question were in little if continue trend going was XXXX? just bit was back talk front-loading contract? there forward the obviously, you And the what guess do or about higher And first to DoD from of expecting. So, that maybe early a pull any in that you But can you the

Joe Kiani

have working DoD but from their were planning not their we replace to DoD all DoD, monitor/defibrillator a of the volumes existing Well, company they've never known be. business. since of strong XXXX. been monitors with ZOLL EMS ZOLL, -- I think combination to has the hospital a going was we've what with their When with only the gone you business very

a not our obviously, for units has tipping the the I our I most help ZOLL think Their to couple guess would have been going volumes of quarter. So, a been thousand with big been us DoD the drivers. improvement in in scale. have if at But was would

and and days, doing well strong. our as who's I going more GE more these more our doing direct OEMs us which all very think own is more, Philips such with doing of and it's business

Micah Young

just definitely seen concentrated to handful quarters. OEMs with we've a opposed broad Joe's Yes more seeing John add in to shipments across we're as other our to some more of like

are of the terms well with and business So, -- direct very things shipments. driver in our both going OEM

John Hsu

Great. as outlook. you rather And revenue think or maybe capnography growth. core versus some help help well? the and on growth pretty some the maybe us then then the maybe us sub-components front talked for you underlying SedLine of aspirations of that think which you've OX about opportunities one some Just about Can of of assumptions I as guess XXXX about in maybe nice perhaps rainbow

Joe Kiani

to Well, to know to you're come that? have Day the I going don't do talk to Analyst us about Micah to you get that. want

Micah Young

just consistent rainbow seeing I with how of as that. course, No, I we SET talked growth want about we products, mean well to strong We're with can this year. neuro earnings. across be add our and John to

XX% an it's long-term about rainbow was talked SET we've XX% as got And it long-term growing you've And about described in it Our of has we got at revenues core to is said X% our plan then you've is long-term which our X% as to roughly X% which we this plan plan. the growth. business XX%. how been

And like then about SedLine categories business of get and you our newer growing those OX So, X% growth that said our there. another and XX%. capnography are we are point of

That growth. XXXX, of we you range. those consistently to point to And X% pretty growth another all adds that So saw of XX% categories. gets ahead

just would For to I XX.X%. say guiding XXXX, we're that

to seeing we're broad-based putting above us in that's So, that categories. XX% strength growth X% those rate

details. the easiest put without I think I that's can it the into probably way getting all

John Hsu

and analyst your No that's was maybe some for believe was one that the some showing more Day the of surpassing on actually parameters. growth the Analyst parameters rainbow definitely there, a the revenue I slide in last Root actually helpful. at And potential just -- there growth of differentials it newer the

think rainbow? few the is with new some parameters the guess still over prospects maybe about versus of I next Root fair way for near-term years to that So a say those

Joe Kiani

Root if hopefully think anything, And that But rainbow remember released, as you if it to from Yes. rainbow. is also to automation we continue a business is. going probably slide, that well. to to have climb bypass Yes we expect hospital grow serious I is as

Micah Young

right. That's

John Hsu

great. Okay,

Micah Young

have base here We'll about Investor in demonstration. we'll we'd discuss John, then And live you we're have And dive a going because love more on business. into automation. for especially to Day May safety lot XX categories our those opioid to more our a hospital

John Hsu

Excellent!

Joe Kiani

of you more those able last things where in the our we them believe be we you were we'll some to We'll Analyst pipeline new at Day, able I on remember -- gave share in talk and we five to areas had be that are And about. R&D.

John Hsu

our that just definitely thank is you circled gears We'll if make the I on could, that. I guess one, sure for calendar. Great, And last bit. shifting a little date

up maybe Rick's on there? pipeline and wanted uses cash, Following the to M&A your Thank you. earlier question just on any temperature on color for of take

Micah Young

Yes.

summarize. just Let me

share And pipeline very opportunistic through that how continue have of course cash course, coming are is we uses the innovation. process R&D I a looking investment M&A. strong about of third we and to mentioned talk then and we when M&A of repurchases, maintain So for vetting we things at our in being to want about are for and that

you financial opportunities have use different assess strategic as as that to we As targets. know we targets well

our core our we strengths clinical as a like We that's acquisitions presence we we have in at presence to that than and globally growing at one want find to capability our signal such wanted as we So the of we processing we strategic about, from our leverage just manufacturing clinical algorithm U.S. settings. then And look strong capability. our financial evaluate standpoint, companies we've and that hospital are talked about the think the growth a across better long-term rates. feel or

long-term give five-year period. operating to have margin going at on invested line. XX% be on to growth over three greater to accretive XX% for least and good top they a goal We are our the to to our a WAC that So capital things X% look for than return be us of that's

of look strategically. opportunities. a across more smaller lot that -- our are But more are at desks financially are coming are And Joe, of things the some those type So ahead. go we things

Joe Kiani

form to our take I exciting being target discussed on share safety margins selective operating opioid our said we're think efforts before per our ways we've what on maybe of looking very, also and and getting very as potential more goal as and we're Micah seeing our earnings look and hospital at. as automation we're

John Hsu

all color. Excellent! you Thank for the

Joe Kiani

look know and you. I all. thank I you come. you us hard today Thank forward come Thank support can a to you. seeing to just want you to hope you I for May. in for I you to look for and pitch your forward seeing all joining made We

Operator

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

Masimo (MASI) 26 Feb 192018 Q4 Earnings call transcript