MASI - Earnings call transcript Q1 2020

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Operator

Good afternoon, ladies and gentlemen, and welcome to Masimo First Quarter 2020 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

everyone. hello, and you Thank

Joining me Executive Officer, Joe and and Young. are President of Chairman Vice Financial CEO, Finance Kiani; today and Micah Chief

This fiscal XXXX Masimo's non-operating income. which of forward-looking expectations non-GAAP call including our in judgment, certain reflect trends regarding will contain current statements

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

the You these Relations find website. will our in Investor section of

Also financial a accordance measures with call measures. to GAAP. of in that accounting accepted certain refer principles, or this financial will include generally We calculated non-GAAP are as not generally discussion these

to such are these in information addition the GAAP additional provide to assesses measures results company's enable operating to management results. financial to way non-GAAP intended investors the same assess results, In

GAAP non-GAAP and measures budget, uses The measure supplementary results financial business and that of company's and company evaluate indicator measures measures these the website. believes performance performance. the underlying comparable these an business. ongoing sees included the of are measures financial and information reflect to on most earnings directly Management of transparency the release non-GAAP these company's performance to within the increase better the Reconciliation as financial financial our

the SEC, to most decisions. of all order consider investment our our statements filed today, including should with our Form Investors XX-Q, informed with XX-K together recent make in and reports

the within the our section to afternoon. be a have release earnings In website content presentation posted covering will of the this today, we Relations we earnings addition to supplement issued Investor quarterly

Joe the Kiani. I'll to now call pass

Joe Kiani

Masimo's afternoon for and you, first thank for you Thank XXXX earnings Eli. call. quarter us joining Good

walks but many nurses, the pandemic. of frontline challenging leadership, many by professionals extremely healthcare and providers: take and resilience I'd past to the COVID-XX no courage doctors, They providers the life, are heroes. to group the real world for behalf team witnessed our patients and EMS of therapists, the few like months, people others. moment also healthcare Masimo a We've respiratory On more witnessed thank around we the them. than situations and entire in related During incredible

the COVID-XX been, And contagious of weather pulse to foul a hope just challenge SET but was time to today, At major oximetry, we Masimo weather no is extremely innovation and with and been pulse friend, in our our delivered. years. damages also weather ago, be friend the we of as XX know just more our lungs. and not When our invention a value the apparent. millions has for And continued oximetry it foul patients, we SET years first had but founded address not make friend. a clinicians I has many been Massimo weather it fair this lifetimes. for will will foulest the objective

didn't outside work oximetry's who room. we pulse this called the friend. technology, sickest oximeters It often Swan too And Before Dr. as single pulse patients false on the fair weather first at were rates invent operating XX% XX% to alarm pulse oximeters of all. was extraction conventional

these of most alarm button and clinicians where silence oximeters to the the button patients areas ratio low in alarms, by areas continuously false were the watching oximeters worn resulted due oximeters the way, effectively false the alarms clinician-to-patient use as of pulse the excessive couldn't oximeters pulse to use pulse in in were settings. alarms, -- abandoning the the the on the due other clinicians clinicians Outside pulse all out

the as of are in occurring such of be, today the general of the oximeter including ratio low less than our places has homes. SET anywhere of which pulse patients like enabled clinician-to-patient introduction may remote Since time, alarms X% patient wards settings the and false monitoring

the SET allows false dying monitored Masimo continuously postsurgical opioid-induced with patients from depression, dying without patients it patients excessive where reliable because alarms. were monitoring aren't respiratory ward In of active

a published that study unfortunately over from this opioid whereas opioids third Patient without Dartmouth-Hitchcock of the it overdose. series opioid monitoring patients period from from showed did XXXX pulse monitored SET and since pulse of March studies a die postsurgical patients died no SET with SafetyNet some oximeters fact, oximeter and In on XX-year overdose,

had costs two since ICU studies $X use XX%. Dartmouth million over by and a response from also prior team the SafetyNet that activations transfers the their In SET of by showed dropped and rapid Patient year, reduced wards

do other happened. sights our COVID-XX home Knowing been to able what we and many set lives saving at patients' on then and on for Dartmouth had hospitals, we opioids

of affects arterial years blood oxygen for inventing and moment oximetry easily and making the an XX us be but pulse usual hospital for that SET for and gymnasium, anywhere, where settings, prepared and not most in accurate hotels, remote that this history deployable as such improving new monitoring home. reliable the affordable comfortable required effectively place a in pulse systems oximeter disease settings patients just stadiums saturation deployed could cost

call I'll activities our additional let's quarter and COVID-XX about but now have results. on move commentary address first the pandemic, report later our to for in the

XX% and increased first boards our the XX,XXX For $XXX quarter shipped monitors. product million to technology we revenues and

continued products which into has seeing OEM April. month from increased for both our of direct customers We've demand the and

last yesterday, quarter worldwide of second sales up versus In XX% are as orders including backlog fact year. the approximately our for

so COVID-XX April above know what know thrown last boards pattern business monitors and since rate times decided the far you to sharing run And XXX,XXX of guidance we're we today we how we over X.X we for know that, out orders since has and is phenomena our this don't quarter. in is The normal will is will our withdraw wanted happen. what reason long to technology which for our we normal have what happening and

agreements as SET elective for hospitals have and the surgeries renewals staffs Nearly of agreements, everything we for hospitals things protection. for is and down hunkered such Automation of slowed for sensors to track or which positive, COVID-XX patients existing contracts their either Hospital as as except new conversion own as well

that the orders from board and mentioned, technology coming imagine our can majority you of I in the is monitor orders purchases. As from sales capital increase just

four year. For versus of the up approximately the XXX% worldwide last are orders quarter, second backlog capital our weeks including first

our and And last April. disposable backlog in approximately XX% sensor orders, sensor including versus year worldwide up are last down disposable up XX% U.S. approximately year with versus approximately XX% orders OUS

for With detail first that more I'll our context results ask in to guidance more to year XXXX. our decision and now background, review offer quarter no fiscal longer provide for Micah

Micah Young

during safe time. I afternoon Thank this challenging good you you're and Joe healthy everyone. staying hope that and

financial reminder otherwise. be basis, today I'll covering be will on a a measures the non-GAAP As primarily unless noted

as can Investor results our Relations GAAP to Our of reconciliations GAAP section as website. well and found earnings release today's in the be

For basis. our a quarter on were constant growth the product $XXX.X revenues million first XX.X% currency growth or reflecting XX.X% of

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

compared reduction stronger improve our monitoring first see which basis due period. continue implemented revenues prior Also, year-over-year Our cost to quarter in margin activities we've from mix XX% margins technology XXX have to increased XX.X% to non-GAAP year the of to we to equipment. margins. than positive results boards gross the the higher was and points a sensor substantially for The improvement

The selling, revenue driven XX.X% to product stock-based to SG&A quarter. points a increased the XX.X% in Connected Care and incremental iSirona XX acquisition. non-GAAP compared prior basis related Our charitable spend sales investment compensation force and general of year was administrative the expansion, expense, by expenses higher percentage as to primarily contributions

X.X% project-related related a acquisition. incremental percentage to as expenses development last due and and increased iSirona to research Connected the to R&D in points was and year. basis XX of higher the compared non-GAAP to our investment XX.X% The staffing And spend revenue quarter increased costs Care same product primarily reach

period. As a operating non-GAAP in XX.X% result, the to XXX to prior margin increased basis compared XX% our points reach year

down the further P&L. Moving

investments. comprised Our decrease XX% interest of non-GAAP is primarily primarily short-term and the quarter by million was our driven income, invested on $X.X income, decreased period. in non-operating year prior million for cash The yields interest compared $X.X the to lower to realized which

the driven quarter year rate a effective non-GAAP was million, tax expense a compared The XX.X% our in non-GAAP was which a by when in a the federal, non-GAAP state prior in tax And combining to $XX.X effective effective rate local of overall first are tax higher rate stronger mix primarily U.S. subject rate of and XX.X% period. OUS business of the profits resulting tax in taxes. to tax higher our than

million Our increased for period. weighted the compared million the to shares $XX.X in to year prior XX.X average quarter shares X.X% outstanding

year quarter. non-GAAP $XX of For the income diluted share. per $XX.X diluted was share. XX.X% comparison net reflects first XXXX income This net million million quarter or our growth or $X.XX prior per non-GAAP the In over $X.XX EPS was first non-GAAP quarter,

$XX.X global by Turning EPS margin GAAP per points of currency our was income quarter per quarter XXXX or to of million $XX.X our XXX $X.XX very delivered diluted well basis of income quarter non-GAAP $X.XX GAAP the achieved operating net first revenue during executed diluted growth Overall, In results. comparison constant as product first we expanded the share. XX.X%, share. for organization our or and non-GAAP million growth XX%. XXXX, net first GAAP was

provide our financial can our the in year an so XXXX update decision current understand drove business withdraw Now like to what to the you I'd seeing ultimately we on are that better full trends guidance.

longer its the guidance impacts potential to our around a provide of we and high and Given no with us. accuracy is the confidence, uncertainties on COVID-XX degree can pandemic important very which business,

potential for our impacts pandemic. reductions customers. been and our positive impacts demand, include if The of has our there manufacturing products future and overbuying interruptions potential due manufacturing operations increased the direct both to products demand in our and negative potential potential OEM operations The in suppliers' include from

these duration, potential results. of the and magnitude make The timing financial COVID-XX challenging and uncertainty forecast on around impact our to of operating it the impacts

coming During saw higher-than-expected margins. sensors, resulted revenue adhesive first from in mix of gross the our a we quarter, which stronger-than-usual

sensors. equipment, much we our of technology second quarter mix year and margins compared and gross for expecting this we're orders seeing monitoring to stronger of see prior our Now both lower which adhesive than a are margins first substantially to carries our results. lower gross quarter the Because in boards

It's to the even that to in longer-term stronger also the organization an years. will invest us over important these with continuing a we make view several are that note next during uncertain times business

and force increased sales expanded enhanced we investment R&D, our quarter first the our business. During Automation Hospital in our

quarter, our wireless of we second sensors the monitoring into and awareness are remote business technologies. to and invest increased planning to For drive adoption our more

this are available of products for COVID-XX. during keep hospitals disease pandemic the protective of keeping in reduce some to and patients beds supplies equipment transmission home embraced order being the limited cases as These risk, severe they manage see by global of more at value

our have pandemic resulted item to to cutting Due by provide actions important points. year and generate is original and non-operating January. in non-GAAP invested the on million lower million in interest during we guidance note provided to rates This Another in represents from Reserve short-term approximately percentage investments, we the that earning a Federal in XXXX. now cash to XX% the interest the that $XX are we reduction relief the X.X yields of income $X back by fiscal are stability taken expecting

stocking of your please of cross around the estimates Given a currents April XXXX. admissions, performance first do potential hospital remainder and orders extrapolate the quarter increased into uncertainties and including COVID-XX number our not demand lower for from

the uniquely solutions for Masimo part pandemic. global duration the combating outbreak, this is to around frontline of be and of remains uncertainty COVID-XX severity a While positioned

achieving remain and to steadfast Our all increased long-term stronger stakeholders. in plan our our and global organization we commitment is to delivering ever value than

the With will that back call to turn Joe. I

Joe Kiani

patients In COVID-XX Micah. to our greater our the and access addressing and community, improve best have pandemic, available so focused have on with the customers you, to that Thank entire organization and caregivers our care outcomes. partnership solutions we

customers with their technologies, care strength pandemic. to this combined signal enhancing to the for ability and and in being health rapidly way partnering we our system, We've care. on them any high-volume been quality ability can development ensure management assist patient sensors, develop stress to the with while leveraged relieve in blood manufacturing to technology, our Our safety hardware are software new solutions processing, and

care the patients pandemic. home; including include the pandemic, Masimo patient this and efforts oximetry such PPG surge We've Radius as enabling our to monitors respiration locations COVID-XX support patients limited COVID-XX additional our Patient undertaken a SafetyNet, management in in to response offering Rad-XX, given many pulse customers actions blood and licenses rainbow during managing clinicians better manage aid which and wireless this product at charge the to and sensors solution COVID-XX during supplies and recently no Root, for settings; hospital constituent rate offering in remote kits, and help monitoring effort wearable SafetyNet surge creating set help hemoglobin blood of to non-invasive the monitoring

COVID-XX read availability many their the staff, patient's of the protective need avoiding for reduced model, Radius nature use of and our equipment hallway, and PPE gowns. and to of given helpful using change hospitals while of sensor patient's tetherless also the contagious room very for into and monitoring moved the One outside the wireless room monitor. reduces PPG insufficient a caregivers values infectious This on to health care to enter masks patients risks clinicians' the supplies extending exposure patient

patients is system we wards. we different our the system the home in of enlarging, providing a with ability home, have for allows with which equipment, mild-to-moderate have for remote pandemic rate Together rate. SafetyNet monitor home, experienced increased SafetyNet for new SafetyNet physicians monitored existing now SpOX designed to during while pulse patient demand to hospitals Masimo and COVID-XX which other return new capital from being respiration installations post-surgical for still our hospitals direct Masimo and to patients our sold is the new for at also settings, Patient designed Using

radius our sent app available signs sensors to safely smartphone wireless elsewhere. life, view patients patients their protocol scarce devices, hospitals a home of and more a wearable data Replacement days with By PPG sensors for are beds can The the save they require COVID, four-day vital capacity tracking than patients' preserving kit includes a SafetyNet or severe clinicians to battery Masimo for more while with of have for eight able over implementing the monitoring. be data. along SafetyNet cases watching Masimo who two their

University about where how Hospitals, their had Pronovost's has to use UH including Masimo first masses, which cases the doing to an us webinar SafetyNet product SafetyNet. been to pilot patients' were joint helping saved in this experience was the technology. citing partner has and Masimo Under clinicians success, bring excellent due tremendous lives a the leadership, including to Dr. teach to

hospitals Since weeks market two Masimo rollout. the so. never SafetyNet release in pipeline had XX deployed more successful the are XXX a product over full have hospitals ago, to do We've and

perceived continuous who trying our valuable hemoglobin unnecessary decrease intraoperative Another donations patients, SpHb remain pandemic date during for technology Masimo being Many that's in blood developing are need this Every as related to now rainbow monitoring blood is might their hospitals as transfusions. surgical conserve that to because reduces outcome supply, home. shown blood blood shortage a a of to large has transfusion. people blood at study SpHb

monitoring of during the our time SpHb is licenses no this Masimo pandemic, while to SpHb During a the have this hospital providing with discounted software budgets to providing strain at them who sensors, charge for monitors price ease disruptive also customers, additional at period. rainbow-ready on

into Germany flow full-blown high cannula therapy. the need we TNI therapy patients patients the which higher care through April, than nasal Medical, company may reach ventilator for therapy. oxygen mechanical carries extended In risks High further help significantly in for COVID-XX a our high acquisition flow flow therapy, respiratory avoid of producing

hospitals increase flow both cleared acquired to, we TNI high We is product production capacity. home to and TNI's their than help use. expected had earlier them for

We order expect soon our magnitude. an by to of increased production have

to expanded Despite prepare the keep and realized scenarios our coronavirus for in our When due other factories facilities our to and have we China able we and unexpected we in products both have saw demands, customers' among we for began fulfill shutdown, to needs. been capacity. numbers worst-case initiatives up manufacturing

risk critical undertaken reduce products. possible We've production to measures interruption in of concrete the of

to our the Irvine to with also COVID-XX $XX and around over our for support centers million Mexico the risk capacity world. facility. workforce redundancy distribution new our We've production reduce invested build taken health from providing Amsterdam, expand also to We measures us in to

future us testing patients. the the will able whole into population acute closing, springboard innovative the and vaccines for In more our than a has been ever. beyond believe to from Masimo and an need reliable will brighter respond now which and relevant monitors We our of technologies come to to COVID-XX for help call after systematically. patient their quarantining made customers we doing are availability or has work

to patient thank relentless I wish for again care we my team pursuit serve helping and clinicians health outcomes. their the We to thank improve want frontline of workers

With the Operator? we'll questions. that open to call

Operator

Instructions] [Operator the Keusch Your from comes of first James. from question you. Larry Thank line Raymond

line open. Your is

Larry Keusch

everyone. good afternoon Hi,

guess, first I in -- question the challenges ask to the stocking. So, orders wanted was ascertain preparedness that what or I to I recognize trying is

wrap be related the of the been XQ around yet? you So, XQ have activity you the really what could either able that I question arms first potentially in or of to the to guess, think part impact stocking your order is

Joe Kiani

hard Well, projections it's on unfortunately future. give for why the not you and us to that's

XXX,XXX have As by year that I mainly shipped our could boards our that basically we're have the the over to so about even expected sales mentioned, we OEMS, shipped. number the or either already technology our but numbers far we And of monitors demand putting for sold for think to-date, and own hit be not XXX,XXX the monitors we is year. forecast,

The those for that and ordered have is then of the in most those used the them are certainty and be of likely military. going with ventilators surge only know our to stored. by for for Those them numbers are thing some been monitoring with we XXX,XXX technology

be used say let's we XXX,XXX continuously future. know XXX,XXX unlikely for the So, year, in the is to the

they're you the monitors don't used. other know materializes be assuming The In monitoring. as have don't wards small clinical to right postsurgical a know continuous know. fraction XXX,XXX, less if of for now it We them too, going settings we on

monitoring continuous a hard know. And don't forecast or storage. occur they're end us may Larry the because that's in of to it's why into may put we so for give you leading We know. up to buying for might gap excess closing get monitors is what they the don't this So, finally some wards

Larry Keusch

Okay. -- totally that understand. I is color helpful. That And really

said caught U.S. about down think I caught to-date, correctly and you seeing I this XX% OUS, XQ sensors I it if in up you're XX%. think if correctly, the that I

So, down? again about -- which OUS? U.S. versus going how And the the those in A, think jotted are I numbers of secondly, accurate we do first, what's dynamics on

Joe Kiani

I the reduction seeing put that given is to surgeries a seeing sensors world are the patient numbers and been which buying that infections use part the around accurate. predominantly has elective have what's most Those in single-patient that volume minimize happening sensor to from you're on natural patient hold, U.S. And in for think clinicians. you're been

-- outside they'll growth is a the of What the to sensors. reusable there's But a U.S. been reason sensors. of disposable most world migration COVID-XX outside the sensors a U.S. there's switch of single-patient lot neonatal using the after Whether to ICU don't has pandemic over for outside the the COVID-XX use But we continue use now, the hospitals disposables made know. is large

Larry Keusch

last for then me. And Okay, perfect. one

a I getting on currently? short quarter And curious period, just terms in observations out? the many much Maybe customers that's that for Thank again albeit the there hospitals how and rainbow really had going in contracting Just know base inventories line SpHb? or I are on ready is usage? from the of to utilize interest actually the time playing transfusion should any how blood How help used you. program all managing installed just to us is for strong remind so I is fourth you recognize ability say again of with their enabled SpHb. being

Joe Kiani

We've shipping small part. they for rainbow low rainbow require for all been rainbow-ready customers most very transitioned the size since and to XXXX is majority have and products very a ready. The Sure. Sure. power that except

first first -- answer. So, that's your the

is So rainbow the majority ready.

increase to rainbow able of business revenues of last implement hospital question, Secondly, our equipment volume of answer using bad a news. we've whole those and -- as quickly in due XX% is, year, of and are rate. had places lockdown to contracts fact adoption end first is improving as sensor continuous your to rainbow it that switched the news that them That's volume the rainbow our to were been the hospitals. this at part some and far not up the the have and rainbow-ready of we're The seeing good or using in sensor it already

Larry Keusch

Okay. Very much. Appreciate good. very you Thank it.

Joe Kiani

you. Thank

Operator

Your next question Wise Stifel. Rick from of comes from the line

open. Your line is

Rick Wise

Hi Joe. afternoon, everybody. Good

Joe Kiani

Hi.

Micah Young

Hi, Rick.

Rick Wise

it this to From of just this view, we a off think about wearable how evolve more the XX expansive And the say the rate maybe device, exactly to to I up sooner -- point either Masimo in incremental clearly SafetyNet opportunity as here? acceleration? an mean number let's your hospitals phrase with the Joe, just of well? sure how help both of the from incremental I'm SafetyNet, you're like more for the the is technology not and from signed start your going little story Can run has seems that's I this process view. from months you how number rapidly of potential and negative coming on the through guess point think obviously pervasively hospitals of a to but big us evolved and hospitals that's revenue from comments it, benefit opportunity a highlighting deploying. in opportunity patients of detail, --

Joe Kiani

Rick, big could it’s a have how our wouldn't have it’s positively Well this we trajectory. no negative. way, matter Overall, our pandemic, net we impacted it if

fast that able a FDA we We're or people can the market nobody thinking. it. fast, frankly this are a that everything trust. allow have. respiratory-based they product cardiac-based us the wear. really us only pandemic We're and we're product thinking However, tell begin real to only what has definition even telehealth there's taking wafer how And to this reflective the to And diabetes-based from technology out is else, of changed there customers to of up its how get our

you product thinking could opioid made for what, the with help safety really started we we surge. where meeting staff know a in sitting were We this

our work it even us And if appetite for allow And get SafetyNet. that vacation on Dr. opioid the before he release have literally though from the Pronovost, after with with to responded. actually the week to clearance contacted Let's time, contact team from we it. the what FDA they FDA within decided also two and I to understand FDA see a the from to the Peter help market us hours was person out

began pilot time of going demand COVID-XX is that a and to product. just the the see say But at for continued monitoring safety. of That Luke's hopefully the and history. intention opioid the at we UH was come We St. I'd after And rest the regardless COVID-XX. lung what's is

helping obviously we're to for that. pursue think opioids while people still them. helped we've But go us they monitoring now wrinkles of they've nurses been of because biggest people doctors still or the we're and just remains own on all indication. with this under people, the when at XX/X the So, going out But working useful home been and it without the I their technology helping have of taking opportunity us safety FDA using incredibly wring are someone it been and that later to what's clear supervision

Rick Wise

Yeah.

think you give complicated Let It's things understand But two it. complicated me with to this if could. guidance. obviously wanted I a I to why come mean, I way. is at this year. about pulled I another you

One, think because and ex the a environment, think extraordinary safety again -- about upsides if growth differently? opioid this these and optimistically from opportunities? should rate follow new be think more it, will X% more Joe, we that about maybe -- your -- of period Or Masimo's revenue that could growth now to we long-established with if long-term know you Hospital about of big think some given are softer, a the you about Micah Automation Masimo's noise do question picture just don't period -- given trajectory of new these potential opportunities XX% we thinking we

Joe Kiani

place And what you I get Rick. interesting I into people you could that what -- to go to catholics do forgiveness do call call -- ask that get that it's for wish said Well, where you place?

Micah Young

Confessional. Confessional?

Joe Kiani

without just I in with can't feel And future. numbers, of to all about trying got and to we middle optimistic we plans that. I evening long-term came hours team yes. we even away not our kudos could. we we deal realize to about But they there, we but speaking do an COVID-XX, we're the if you thinking in mean. to our very And so think through the I'm quickly started and spent late one-on-one know what Confessional, giving

any COVID-XX, we we figure away Taking a are before out future see COVID-XX. ever those can we yes, did what revenues, than one-time if for brighter

doesn't at COVID-XX and how know looking that Now don't XXXX We what do today. best we end. will as stick. We're our don't know include it yard what will

by time hoping yet. XXX it we don't of hoping it and to science better to this trajectory, same progress, over we're year So doesn't be next any be but will the seem years follow I'm with. have

yes, it's no come a into assuming, So had better we we're future think that, worse going to than this I going out stronger, than with it.

Rick Wise

Or can recover? likely the way that impacted start I through clearly. one quantify, picture big the in that's procedures. doing across Hospitals in the Joe, you Okay. the obviously these possible questions non-emergent to drag big business about little April, picture, in at side be as make on procedures reversal aspect And that that fewer anesthesia we May, a quarter? is other is Less one are being administered. and States Can as us slowdown you go But first impact I mean, of think last elective are of place we sure with sort in some Masimo the questions understood. one procedures June impact point a on each potential bit I apologize. we in by I non-COVID help United think suppose I to want

Joe Kiani

that XX% are peers of because that yet putting of and many just right less them down hard-working hear are I some correlated which think from and of drives number to who furloughed, letting need be lives paid the problem we may to is XX% more towards because now. when we to in are different run getting that the me their what And elective them, insane, we're danger go From we products have the expect Yes. don't them being are procedures my which between procedures, is clinicians irony that elective topic.

hospitals elective that we'll procedures and to maybe got demand inventory bad happen hold I a XX% and were saw capacity for guess that are back shortages a feel then to July inventory, in going June, are hospitals probably if August, have case start by we masks pent-up time don't that come say papers, in on given purchased are they But elective that in for procedures. to to benefit if or like maybe they And know What know for up from September then always XX% a what if by normal to day while come toilet gowns whatever there's going to we XXX%. don't needed those using because they'll going again and people that, thinking frame inventory. to to is because might same I they're from

how will either think assumes get the that depending are an for surgeries fall revenue a of talk move, a to from to you'll But most or our immediate I there wave to in especially hospitals going second to because while, them on time. everybody quite going what they to digestion they hold we're their And bought. elective period be increase response they see people when a of inventory

increased elective be back again. answer volume on we as there demand as soon sensor us your will procedures to on So question, turn expect

Rick Wise

Got sir. it. Thank you,

Joe Kiani

you, Rick. Thank

Operator

UBS. Your comes from the from line next of Taylor Matt question

open. is line Your

Matt Taylor

Hi. Thank you for taking question. the

better without? I monitoring here to disposable much to or whether sensors more the just across broadly the with kind what is of the COVID it's couple their wanted of utilization seeing with solutions to during patterns on of just So hospital customers Are patients about hearing stay. this how your you this remote time, from and assess ask a you're

Joe Kiani

not I'm you Would please your I question? sure, got it. repeat

Matt Taylor

through the trying confirm could post-COVID to anecdotes whether seeing you're data Yes. utilization can more you actually and through that help would be either you monitoring or better change understand patterns if that broad? your I'm understand,

Joe Kiani

I has see. anything I'm concrete, trend I Yes. become be if will to more I only. more made was think for I hospitals short more beds critical there seeing, broad. a already care From believe And COVID-XX, what it -- be term. think that

care. of who think the care be critical a will and monitoring outside remote on So yes more there I will the hospitals patients broad focus type need bigger hospitals

Matt Taylor

Okay.

I had that the mentioned, look for XXX,XXX think said current there's then, year you is you boards in XXX,XXX and other I mentioned the government. your the which backlog. guess you the ordered you at boards you forecast XXX,XXX When And that this Okay. current by

what have a assuming can XXX,XXX? date you talk you to orders get the you're about from So to to little

Joe Kiani

Sure. Sure.

First not we had cancelable boards XX,XXX of this some shipped that shipped. boards have will by ordered QX. XXX,XXX that are And in all, I believe call, were shipping and that be already we we

roughly the that's of So XXX,XXX XXX,XXX.

them XX before of so are than which them. shipments Rad-XXs, right they cancel in shipments, XXX,XXX direct I included so of could also XX Radical-Xs out, any they that of our more demand is days to received other OEMs, not Roots, But I from so have our have delta days cancel The forecast that that XXX,XXX mentioned, some the have today forth. and we

So what I'm demand you only giving currently forecast. is we have

Matt Taylor

see. I

any That's And terms really well whether of you then Okay. overordered, cancellations date? All are in to being right. seen helpful. have understanding things

Joe Kiani

anything Not of. stuff. minor very any If major None. that I No. know

Matt Taylor

for Thanks feedback. Okay, the there. I'll stop cool.

Joe Kiani

Thank you.

Operator

question the comes Company. line of Needham from Your Mike & Matson next from

open. line Your is

Mike Matson

wanted ask I I Thanks just that for discount my rainbow the taking about offering. you're to Hi. guess questions.

result So can how that's you received? cases being a seen that? comment as incremental you've maybe on of adoption many how of And

Joe Kiani

most we've upwards COVID-XX We're in I'd prices charge. sold. price license, than paying sensors $XXXX I for have to rainbow the it the which discounted selling at lowest you, a the less And rainbow numbers of value Yes. hospitals otherwise software it's but I'm sorry, of about front could offering of to we're without don't be give are our during And me significantly today.

intend COVID-XX unless them. we Now to the to licenses is for pay and after keep the them want away the take customers over,

Mike Matson

quantify or opt you those discount? seen you've number customers can turn all the on at of hospitals to And given the

Joe Kiani

mentioned I And Well from volumes about already this but up XX earlier number a think I sensor advantage up XX%. of hospitals, our has believe our hospitals revenue taken been have of offer. I XX%,

Mike Matson

low million. little where like relative cash year. last at Okay. you were was looked to free your just your Thanks. And was then flow pretty high CapEx looks $XX It a --

is something? Connected or the that acquisition Care So to related

Micah Young

No. is some this made expansions It's our of the It's relate into facilities. -- Micah. to related we've

investments. footprint in Mexico expanding the in mentioned, during some We're we've Irvine. also -- quarter, we're been facilities and So making Joe our Switzerland as

us opportunity So expand footprint growing for to the business there's just there. is as our

Mike Matson

Make Okay. sense. Thank you.

Micah Young

Thank you.

Operator

of Capital Markets. Your from question comes from Berenberg line Ravi Misra next the

open. is Your line

Iris Long

Hi, taking this on Ravi. question. for is Thanks for my Iris

Patient So the on we questions few have a SafetyNet.

getting for So helpful. Just had on a reimbursement you. reimbursement expect status you a FDA on faster we Have the for under color environment be be whether perhaps any in any use, terms that of that you'll should are COVID-XX paid? Or is technology the Thank be breakthrough would with give you would cash those now? would it those discussion reimbursement? --

Joe Kiani

currently Well, hospitals Okay. from us. those buy

they're As doing we've as what various far reimbursement for things. heard

are it. Some seeking

Some their are it DRGs. just with mixing

a on have don't reimbursement concrete for we you So answer yet.

Iris Long

that when you what, versus launch, it first you the we other kind And plan of, tell launch do the then demand then of -- us to the you terms are in and in others? seeing about What's Can existing U.S. in your there? customers think Okay. plan regions?

are also about there the hospitals there then pipeline. XXX in mentioned And are over that you --

you a of Just process? the maybe of say how what how long is so means process the can the that tell bit you hospitals enrolling are much when What's about pipeline? the -- And hospital? those perhaps us these little in

Joe Kiani

interest Well, on for institutions. join Masimo our University we X,XXX for over countries webinar, clinical with clinicians over us the held webinar and roughly SafetyNet Hospitals' had XX representing we X,XXX the team, when

anyone offered only it No, for offering is use we're who to of existing the to earlier being it question our can As customers? it.

already have customers using competitors' it. our begun of Some

anyone trying Some of under we them may But them. to are it. can use restricted who are which offer to unfortunately prohibit contracts,

Iris Long

for the you Okay. And onboard process is to these long how hospitals?

Joe Kiani

they in literally and a with their less to really window the a load them, fairly patients remote a patients wherever can their go setting. for them home the hour. set customized hospital quick. to kits the up is dashboard, implement -- It central to We want, with them less one can It's than they monitoring software for easy want whether on app for with. give we And

Iris Long

Okay. That's helpful.

and model would be are bit -- on any you -- should revenue In the Is for terms are discount any think How of we more helpful. a charging provide it the can color giving you color perhaps Just you of pricing? little pricing that? that?

Joe Kiani

eight Sure. discounting in The even That's sensors part and we hope I part had time, kit it. that that on $XXX gets because with it's we're the which long mentioned there days the and can but that and price. with phone, returned a two everything per app last that would in be a the not kit reusable it used for

been over kits have far so purchased. And XX,XXX

Iris Long

Thank Okay. That's helpful. you.

Joe Kiani

You're welcome.

Operator

question line Thibault last from comes from the Your of Marie BTIG.

Your line is open.

Marie Thibault

team for Masimo thanks this Hi, the thanks you're and work taking good in question, crisis. for the doing

Joe Kiani

you. Thank

Marie Thibault

some one of shipments. quick on the A

shipments in the XX,XXX historically quarter have of already you and shipments? this demand to XXX,XXX us have over you now. comes right on the of in would can terms business any quarter breakdown per do direct what in is it your when You number Do remind feeling OEM and capacity? between you board usually And

Joe Kiani

Sure, sure.

First is OEM, shipments year. of direct. monitors is And are a XX% and boards XX% all, our overall typically XX,XXX about quarterly that's

OEMs. end of like boards call have get not we XXX,XXX and April now the skewed is number if my is full that's the can maybe over see you before can heavily The probably monitors. data already, As towards that XX/XX. it, more in we're I I right the you though but quarter understanding. And precise more believe XXX,XXX

right that's gave minus shipments can't. quarterly. forecast As our That's even as far what you the demand in from we numbers normal I why forecast, own the now our we monitor OEMs

Marie Thibault

in Absolutely. could this of capacity ship much the quarter terms Understood. how point? you at no And

Joe Kiani

We so some to things, more -- executed incredibly so we've far no, I been did don't the ourselves, to able creative Not importantly no, want jinx flawlessly. And meet the but demand. team really but good. so

Marie Thibault

TNI on acquisition. is you for question Last the Medical Great. Okay.

cleared and done? it's into the to plan use. you'd pandemic deploy get whether to curious or I'm to home it's too that that for that soon this mentioned both hospital if logistically -- during home You

Joe Kiani

direct By some last XXX,XXX I just granular week. as week the more question. to I total our which know boards If XX,XXX I is answer data. want -- of way the I your answer want last direct, number XXX,XXX own think of about end I boards as let I've you products. of of that gave your and monitors -- to got question I got is think today to

So kind the get don't granularity. giving way, to you this of by us used

You're forecast. getting can't so you as long it give a we

Marie Thibault

Hot the that. you for Thank Okay. off presses.

Joe Kiani

repeat presses. last your Hot question? you Would off the please

Marie Thibault

Yes of Medical. course. Yes. It was TNI on

soon? the and home logistically this too both I'm pandemic able something for during clearances you'd or hospital into use. if mentioned be deploy home curious, You it's to that's if

Joe Kiani

about to is for it know are during us. in deploy this you little that planning world we I Yes, home to a This this worldwide. we And pandemic want the very world. know new

experience, else with of -- we our unlike where everything have information can I this little. very -- give one So I years I you about a guess lot talked XX of

of to this product What we seems really to good same be doesn't for that, lungs. it cause the about amount and know is it damage the patient the

can a if you invasive mechanical much ventilator, off. better avoid full you're So

may which the We noninvasive who also raise a aerosol worries with risk healthcare ventilator patient. in the are there's with leaking know setting that providers, out of the a to

people we going trust not way this not no, do comes. me, us a be until advice scientific the We're it that to reason we're anyway, that getting anybody. promoting orders clinicians to want and from the to telling as cautiously that's reason. what taking product no fine. patients. go for for But as that -- We're It's for So as get of lot are evidence well tells or one aggressively And case. us

Marie Thibault

Perfect. Thank you.

Joe Kiani

Thank you. Welcome. much you for thank Well so joining. all

Thank wonderful can the future we wonderful, As you. we hope Have Micah And a where to look We time a you're bit well. we forward predict said, stay hope summer. a little well. all better. you

Operator

today's concludes call. Ladies and for participating. gentlemen this Thank conference you

disconnect. You now may

Masimo (MASI) 28 Apr 202020 Q1 Earnings call transcript