Q4 2019 Earnings Call
In earnings Conference call the company's press releases available at Www Dot Massimo Dot com.
At this time all lines have been placed on mute to prevent the background noise. After the speaker's remarks, there'll be a question and answer session. Please.
We used to introduce Eli Kammerman mass, most vice president of business development and Investor Relations.
Thank you and Hello, everyone. Joining me today, our chairman and CEO, Joe Kiani and executive Vice President of financing Chief Financial Officer, Mike a young this call will contain forward looking statements, which reflect massive most current judgment, including certain of our expectations regarding fiscal 2020 financial performance. However, they are.
Subject to risks and uncertainties that could cause actual results to differ materially risk factors that could cause our actual results to differ materially from our projections and forecast are discussed in detail in our periodic filings with the FCC you will find these in the Investor Relations section of our website <unk>.
Also this call will include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles were gap. We generally refer to these as non-GAAP financial measures. In addition to GAAP results. These non-GAAP financial measures are intended to provide additional information to enable investors to assess the company.
<unk> operating results in the same way management assesses such results.
Management uses non-GAAP measures to budget evaluate a measure of the company's performance and seize these results as an indicator of the company's ongoing business performance. The company believes that these non-GAAP financial measures increased transparency and better reflect the underlying financial performance of the business reconciliation of these measures to the most directly comparable GAAP financial measures.
Are included within the earnings release, and supplementary financial information on our website investors should consider all of our statements today together with our reports filed with the FCC, including our most recent form 10-K in 10-Q in order to make informed investment decisions. In addition to the earnings release issued today, we have posted a quarterly.
Earnings presentation within the Investor Relations section of our website to supplement the content, we will be covering this afternoon I'll now pass the call to Joe County.
Thank you you like.
Good afternoon, and thank you for joining us for Massimo fourth quarter, and 2019 yearend earnings call.
We achieved many important objectives in 2019, including another year of double digit revenue and earnings growth.
29 team was a record breaking gear in nearly every category.
Toward delight, we saw a promising acceleration in the adoption of patient Safetynet and post surgical wards together with hospital wide adoption of S.P.H.B. and prestigious leading hospitals.
Our ability to help our customers improve outcomes and significantly reduce overall cost of care has enabled us to achieve these records.
Clinical studies have shown that only.
Reduces oral Pete and neonatal intensive care units.
Reliably detects C C H D in newborns and maternal awards.
In combination with patient Safetynet save lives from opioid overdose, while dramatically, reducing I see you transfers and rapid response team Activations and post surgical awards.
In addition studies have shown that Rainbow S.P.H.B. and PV I help clinicians reduce blood transfusions.
On a recent landmark study in France showed SBH be NPV I decrease mortality by 30%.
We are seeing hospitals actual experience with our set and Rainbow technology reinforce these objective and independent clinical study findings.
At the same time or worldwide team continues to succeed and improving our operational efficiencies, while expanding our portfolio of life saving products.
We are happy to report fourth quarter and full year results that exceeded expectations and set the stage for a promising year ahead.
For the fourth quarter, our product revenues increased 12% to $247 million on our non-GAAP EPS grew 12% to reach 91 cents per share.
And for the full year, we delivered nearly 14% constant currency product revenue growth at 22% non-GAAP EPS growth.
I'll discuss more and the call today.
Now I'll ask Mike to review, our Q4 and full year results in more detail and provide you with an overview of our 2020 financial guidance.
Thank you Joe and good afternoon, everyone before we get started let me remind you that financial measures I will be covered today will be primarily on a non-GAAP basis unless noted otherwise.
Please refer to our website for today's earnings release supplemental financial information and the quarterly earnings presentation as well as the form 8-K, we filed with the FCC for further information regarding our non-GAAP financial measures and reconciliations.
Throughout 2019.
We saw steady growth in our business across multiple product segments in multiple geographies.
In addition to another quarter of double digit revenue growth. Our fourth quarter results also included significant margin operating margin expansion and double digit growth in our non-GAAP earnings per share.
During the quarter, we shipped 61400, noninvasive technology boards and monitors, which is consistent with our expectations of 60000 plus drivers per quarter.
For the fourth quarter, our product revenues were 247.4 million, reflecting growth of 11.8% or 12% growth on a constant currency basis.
Please note that our product revenues for the quarter included approximately 3 million of monitored monitoring equipment revenue recognized under AMC 842, which contributed roughly one percentage point to our revenue growth this quarter.
Moving moving down the PNM, our non-GAAP product gross margin for the fourth quarter increased 110 basis points to 67.5% compared to 66.4% in the prior year period.
This improvement was primarily driven by favorable customer and product mix increased manufacturing assist the efficiencies and other cost reduction activities, we've implemented to improve margins.
Our non-GAAP selling general and administrative expenses as a percentage of product revenue decreased 90 basis points to 32.3% compared to 33.2, 32.3% compared to 33.2% and the prior year quarter.
And our non-GAAP research and development expenses as a percentage of product revenue increased 10 basis points to 9.5 per cent compared to 9.4% and the same quarter last year.
As a result, our non-GAAP operating margin increased 190 basis points.
25.7% compared to 23.8% in the prior year period.
We're very pleased with the operating leverage that we are achieving our global organization continues to demonstrate the operational discipline required to deliver increased productivity across the company, which enabled us to reinvest in further innovation that fueled the growth we're seeing in the business.
Moving further down the PL non operating income on a non-GAAP basis was approximately 3.1 million for the quarter compared to $2.9 million in the prior year period.
And our non-GAAP tax expense in the fourth quarter is 14.6 million, resulting in a non-GAAP effective tax rate of 21.9% compared to a non-GAAP effective tax rate of 18.2% in the prior year period.
The low rate in the prior year led to a difficult year over year comparison, if you recall from our earnings call last year. The U.S. government issued regulations in November 2018, which provided clarification on the methodology for determining foreign tax credits.
This resulted in a 1.6 million reduction to our tax provision for the fiscal year 2018, which we recorded in the fourth quarter 2018.
Our weighted average shares outstanding for the quarter increased 1.4%.
Two 757.3 million compared to 56.4 million in the prior year period.
For the fourth quarter. Our non-GAAP net income was 52.1 million were 91 cents per diluted share in comparison fourth quarter 2018, non-GAAP net income was 45.5 million or 81 cents per diluted share.
This reflects non-GAAP EPS growth of 12.3% over the prior year quarter.
Turning to our GAAP results GAAP net income for the fourth quarter of 2019 was 52.9 million or 92 cents per diluted share and comparison fourth quarter 2019, GAAP net income was 46.9 million or 83 cents per diluted share.
Overall 2019 was a great year from Massimo as we achieve constant currency product revenue growth of 13.6% expanded our non-GAAP operating profit margin by 200 basis points to reach our goal of 24% and delivered non-GAAP EPS growth of 21.5%.
The results we delivered for 2019, clearly illustrate the gains we have made and an increasing our operational efficiencies to drive progress towards our long term goal of 30% operating profit margin.
We are proud to achieve these gains and profitability while at the same time, increasing our R&D investment and recording double digit revenue growth in the overall business.
Now I'd like to go into more detail on our full year 2020, 2020 financial guidance that we outlined in our press release last month.
For 2020, we are projecting product revenues of $1.035 billion, which reflects year over year growth of 10.5% on a reported basis were 11% growth on a constant currency basis.
Included in our product revenue guidance is approximately 4 million of year over year currency headwinds offset by roughly $7 million of additional revenue related to an extra holiday shorten selling week at the end of the fourth quarter.
And we are expecting that the connected care transaction will contribute roughly one percentage point towards our full year 2020 revenue guidance growth rate of 11% on a constant currency basis.
Our non-GAAP product gross margin guidance is 68%.
Which represents a 90 basis point increase over our 2019 results.
And our non-GAAP operating expense guidance is approximately 43.2% of product revenue, which reflects a 10 basis point increase over the prior year.
Our operating expense guidance includes continued investments in R&D as well as Salesforce expansion increased legal costs, an incremental expenses related to the connected care business, which are largely being offset by our ongoing.
Efforts to deliver increased operational efficiencies.
Our guidance for non-GAAP operating profit margin is 24.7%, which reflects a 70 basis point improvement over the prior year.
Included in our guidance is approximately 120 basis points of operational improvements and leverage from our existing business, which is offset by roughly 50 basis points of headwinds related to the connected care transaction.
Moving further down the piano.
We expect to generate approximately $12 million and non-GAAP non-GAAP operating income in 2020, which is primarily comprised of interest income.
This would represent this represents a 1.5 million reduction from the prior year as a result of the lower interest rate environment heading into 2020.
We're also projecting a non-GAAP tax rate of roughly 23.3% and we are estimating that our weighted average shares outstanding for the year will be approximately 58 million, which reflects an increase of roughly 1% over the prior year.
Based on all these assumptions, we are projecting non-GAAP EPS of 3056 cents, which reflects year over year growth of approximately 11%. It is important to note that our projected earnings growth reflects continued leverage with operating profit dollar growth of 14%. This is products, partially offset by roughly three percentage points of headwinds to our.
EPS growth rate, mostly due to lower interest income and a higher share count.
And from a GAAP perspective, we are projecting a GAAP tax rate of approximately 19% and GAAP earnings per share of $3.64 for the year.
For additional details on our full year 2020 financial guidance for GAAP and non-GAAP earnings per share. Please refer to todays earnings release and supplemental financial information within the Investor Relations section of our website at Massimo Dot com.
In summary, we're very excited about our 2020 outlook of 11% product revenue growth.
And 14% operating profit dollar growth and most importantly, we remain steadfast in our commitment to delivering on our long term plan for both revenue growth and operating margin expansion as we drive towards our long term goal of 30% operating margin with that I'll turn the call back to Joe. Thank you Mike.
At the beginning of this call I mentioned, the great record breaking gear, we had and discuss some of the highlights.
Further in 2019.
We contracted the most incremental new business in our history.
Thanks in part to SBH Pete.
Some of the significant new customers, we can discuss from the fourth quarter of 2019 include Baptist health and the us.
And hospital version still unevenness in Spain.
In addition, we won new business in Turkey, and Saudi Arabia from three new hospitals under construction. We also captured a significant renewal with image age Hanover Hospital in Germany, and renewed and expanded our contract with Seattle Children's Hospital.
Our proprietary Rainbow platform achieved full year revenue growth above our long term growth goal of 10%.
Also 2019 was a record year for us business in terms of winning new customers for SBH be technology, which measures total hemoglobin continuously and noninvasively.
This technology is being more broadly adopted by hospitals, let's see the clinical benefit and expense reduction from continuous hemoglobin monitoring.
For 2019, our Sedline brain function monitoring normalized kept Naga peeing gas monitoring and owed three organ oximetry monitoring grew well above our long term growth goal of 20%.
We're seeing strong adoption of these three technologies.
In the fourth quarter, we also installed five more customers for our hospital automation systems, bringing our total customer installs to 13 since we launched this category of products in 2019.
Our suite of innovative software applications for hospital automation, such as Uniview and replica are being well received by potential users because they streamline workflow and contribute to better patient management.
One of our strategic priorities is to hospital automation to reduce cognitive overload for physicians and reduce errors of a mission.
Through.
The high Voracity set pulse oximetry.
And our unique noninvasive measurements.
Activity predictive algorithms and decision support we hope to improve the continuum of great care.
As we announced in January we acquired the connectivity assets from Nap help.
I Sirona portfolio.
Sirona as an established leader in providing connectivity solutions to hospitals, enabling streamline collection and storage of medical device data through a vendor agnostic platform connecting to electronic health records or other clinical information systems.
I Sirona acquisition.
Not only provides us with products that complement our current portfolio, but also increases our customer footprint and expands our commercial presence by adding a successful team of sales marketing field implementation and technical service professionals.
We believe the combination of Basketball's hospital automation technology with Sirona products will accelerate our growth in this area.
We're also happy to report that we have submitted our opioid safetynet monitoring system called Massimo Safetynet to the Ft April clearance.
We have high hopes for what this product may do for people taken opioids at home.
And 2017 it was reported at over 20000 people died from prescription opioid overdose at home.
We believe even more people died from illicit opioid use perhaps up to 50000 people in the same year.
While it is believed that fewer people died from opioid use in 2019, thanks to increased awareness of the dangers of opioid use the number of people to die from opioid use is still two large.
Based on the near perfect sensitivity and specificity upset pulse oximetry.
The data from the Dartmouth Hitchcock clinical studies on set and patient Safetynet on patients and post surgical awards on opioids.
The experience upset with patient Safetynet and approximately 5500 hospitals post surgical awards.
And the use of set on patients with prescription opioid at home in Utah sensor groundbreaking law recommending pulse oximetry for patients on prescription opioids. We are confident we will make a difference in many people's lives.
In closing as we enter 2020, we can't help but be optimistic and our outlook I'm proud of our abilities to fulfill our mission to improve patient outcomes and reduce the cost of care.
With that we'll open the call to questions operator.
If you ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key please stand by what we compile the Q and a roster.
Your first question comes from Rick Wise from Stifel.
Hi, guys.
It's actually drew on for for Rick Tonight, Hi, Joe and Mike.
Just wanted to start.
On the long range plan first just asked most consistently delivered towards the upper end of your LLP.
You have another year of high and our peak gross on tap excluding the acquisition just putting aside maybe some of the initiatives you have like cost automation opioid safety for a moment just as you look at the business today, why shouldn't 10% plus be the new kinds of growth baseline for Massimo going forward.
Yes.
Hi, Andrew.
Yes, as we think about our core business with the without even layering in.
Our initiatives for half automation or mass most safety net.
You know we've been we have been delivering at the upper end of that range or better.
If you know as as we think about Youve got a couple of years of how understanding how our GAAP guidance philosophy is and we also don't it's a long range plan. So we don't want to get ahead of ourselves and we want to provide guidance that we're we have a high confidence in both going into year, but also over over a multiyear plan.
Dan.
And we drive the business to a much.
Higher growth rate number internally and.
But as far as how we prepare guidance and provide guidance, we we want to be thoughtful and prudent about it and give guidance that we have high confidence in achieving.
Got it and then just touching on capital allocation for a moment.
You just closed the reason acquisition the balance sheet still remains very solid how are you thinking about approaching capital allocation priorities in 2020 could we see additional M&A and just on M&A for a moment.
Should we think potential deals could mirror. The recent transaction that you just did or maybe even something something larger.
I think.
Thinking about 2020, we see more things in our pipelines similar to the size and type of deal you just saw with the NAND help acquisition, we have a few things in the pipeline I think there will be.
Complementary and.
Digestible.
But we're also looking at things slightly bigger I don't think it's a 2020 thing it could be 2021.
Early stages, so it's hard to tell what's going to happen too so something like that but yes. We're.
We think the best way to use our capital is currently towards M&A.
Got it and then just with hospital automation.
You mentioned the new recent transaction should accelerate initiatives. There you have 13.
It sounded like you have 13 and your pilot program now so does that does that double in 2020, just kind of what are your expectations.
For your hospital animation program and in 2020.
One of the fun things preparing for this call was that.
Wasn't given account.
We have so much in our product pipeline there wasn't an easy number to just quickly grabbing give to me but.
It's really strong both the new deals we've signed up that haven't been installed as well as a pipeline of business that our team is working on closing.
We are really excited about the success, we had in the first year and the reaction we get every day from people that come through and ceded discovery labs, where we showcased what hospital automation can do for hospitals.
Thanks for taking my questions.
Thank you drew integer.
Your next question comes from the line of Matt Taylor from you've yes.
Hi, Thanks for taking the question.
Just wanted to ask you now that you've submitted the opioid product.
Any difference in your thoughts about how that could develop this year do you still hoping it could be cash payers and possibly on gen get reimbursement for it.
Hi, Matt, Yes, we think the same way, we think number one.
We're excited about what we submitted we hope that FDA finds its adequate.
We are.
Through our data collection for the FDA more confident about what this technology can do for people on opioids at home as far as reimbursement there is some discussion that breakthrough technologies.
May get reimbursement immediately and then re looked at in three years, but we havent seen that yet become concrete.
So therefore, our first line of revenue expectation is from cash patients.
And then second line from some reimbursement for.
Tele presence telemonitoring reimbursement codes that were developed last year that we hope we can use but the more specific reimbursement for our product until something gets concrete we have to assume it's going to take two to three years.
Thanks, and then I was hoping you'd just talking about.
How material the.
The automation contracts are good they grow.
Well I believe they are material and that they are.
Happening all around the world.
From North America to Europe, Middle East even Africa.
And they are significant and that hospitals are.
Not just I mean, obviously they are piloting a way because they are having done the entire system and most of these locations, but they are investing in Ed and expect to invest more heavily into it and just about every other customer we've met with about it wants to do it so.
We we think this is going to become significant now we have not taken approach of the capital based model, we've taken a more of a SaaS model.
Which means you're not going to see bolus revenue, but hopefully that you're going to see a stable growing revenue base like we've built our pulse oximetry.
Technology.
Thank you.
Q. Your next question comes from the line of Bill Quirk from Piper Sandler.
Great. Thanks, and good afternoon everybody.
Hi, Bill Bill.
Hi, Joe.
So my first question is it does anything and I appreciate that the situation in China maybe.
There's some some news it suggests that we may be settling down a little bit but is there anything to worry about with respect to supply chain over there and then Conversely, given the products that you're providing or are you seeing any potential lift from off from that situation.
On the supply chain side, we do worry about it however, we've not seen any problems yet.
Just in case, there might become problems in the future we're planning to build up more inventory from things, we get from China. Fortunately, what we get from China is very limited.
And it's really is just our cables and enclosure for some of our monitors the plastic so which we've already made plans to do the plastic internally anyway here.
But but nonetheless, just to be safe, we are getting additional inventory as far as revenue enhancements from what's happening there we've not seen any we know of some of our Oems who have seen that but we have not seen any yet our business is just.
The normal business, we see and the flu season.
Okay got it. Thank you Joe and then secondly question for Mike.
We should the comments around the connected care and the slight dilution to 20 earnings I. Appreciate you want to get too far ahead of ourselves here, but is there any way to think about yeah. The magnitude of the accretion in 21 is breakeven. Mike. This is something that can help and move the needle for the company just trying to just trying to get a rough idea of how we should.
Think about that in our model.
Yes, Bill so.
As we think about it we look at we mentioned the 50 basis points of headwinds on operating margin slightly dilutive on earnings per share.
And that's in this year year, one, but we believe that it's going to be neutral to positive as we move into 2021. So we will have an opportunity to to drive some additional leverage there as we grow that business.
Okay got it perfect. Thanks, yes.
Thank you Bill.
Your next question comes from Larry Keusch from Raymond James.
Thanks, Good afternoon, everyone.
Joe You you mentioned SBH be multiple times in the prepared script and so it's certainly stood out that that's that's gaining traction can you talk a little bit about what do you think is is driving that.
And can you can you give us some sense of growth because it again it from from your comments sounds like things are starting to pick up there.
Yes, yes. They are we are.
It's been 10 years, I think maybe more since we launched hemoglobin and it's great to see hospitals.
Commit to especially those with study that nearly for 10 years as was new ones that are looking at it.
I think.
What's nice that we're seeing is hospitals the signing up.
For their operating rooms recovery rooms, and I see use to be fully equipped with SP HP and be used on practically every patient.
Versus at the early days, where there are buying a handful of devices and using it on patients they thought they might need it for.
Too wide. This phenomena is occurring now I think part of it is.
The.
The industry, where it takes about 10 to 15 years for adoption of a technology. This been proven earlier to make a clinical difference.
I think secondly, it has to do with our.
Some of the additional baby body of evidence has come about I mentioned earlier the study in France.
Were it was.
A pleasant surprise, we've seen we've heard reports of people using SBH began saving lives.
Because they caught bleeding that was hidden.
But the most who use it for one year on practically every patient saw 30% reduction in mortality 30 in 90 days after surgery.
And then one day.
This installed for de installed the technology, because they didnt have budget to use it.
Clinically for the future the following year mortality and morbidity mortality shut up back to where it was.
And so I think that that data that was published last year, probably has had an impact.
We're repeating that study at several additional hospitals to.
Hopefully confirmed its magnitude of.
Oh results, but.
But yeah I think it's just the finally time is catching up and people are beginning to see this is real and and they need to use it.
Okay.
Perfect. Thanks for that Joe I guess, two two other ones.
First off just coming back to hospital automation again I talk from your comments that the installations have been a variety of the feature sets that you guys offer.
But if you come back to the one I think in your local neck of the woods that was the first installation I think that was more comprehensive.
Maybe you could talk about sort of the experience to date, it's probably approaching six months now longer.
So just ask question in that I guess for Mike.
Again, you you indicated your confidence in the 30% operating margin.
Over.
Over the long term, but again I just want to sort of get a sense of.
Is that five years out or just any brackets around how we should be thinking about when you might achieve that 30% margin. Thanks very much.
Sure Let me deal with the first question on della Mico deal with your second question.
Experience on the initial customer that has installed hospital automation has been excellent in fact.
They have agreed to be reference accounts and customers. We just had customers are yesterday that are visiting some of these installations. So.
So all in.
So it's been so far so good no. We're obviously all over this because it's an important initiative for us to make sure. It stays good and as we expand to more and more hospitals the experience.
Uhhuh.
From the products to continue coming out of that group. It continues enhancing the product, making it more useful for the clinicians more useful for the patients.
So I have no doubt.
About that will continue delighting our customers.
Okay great.
Larry the.
Second question in terms of getting the 30% operating margins over a long term plan.
We still look at that is committing to 100 basis points per year of course, we had.
We had originally the existing business build up to about 120 basis points for 2020 and that was offset by the acquisition of the connected care business by about 50 basis points. So that puts us a 70 basis points improvement this year, but as we think about marching towards that 30%. We still are committed to that 100 basis points of improvement for.
And we may see.
Some tailwinds coming from the connected care business as we go into 2021.
As I mentioned earlier on Bill's question that what was.
Headwinds this year should start to flip and become more of a tailwind as we move into 2021.
Okay terrific. Thanks, very much guys appreciate it.
Q.
Your next question comes from the line of Mike Matson from Needham and company.
[noise], yes, thanks, thanks for taking.
Hey, how is gone.
Thanks for taking my questions I guess.
Just back to hospital automation will be these deals can you maybe just walk us through Haldol revenue sort of works with that as there is there an upfront capital purchase and then subsequent service or subscription fees on an annual basis or is it all just kind of on the back end up in terms of the feeds.
Well.
We give options to our customers. So they can do a capital acquisition of it or we provide them the SaaS model.
So generally obviously the capital is an upfront.
For.
The customer but overtime.
Model.
That being more to us.
More revenues for us, but we take an initial investment in getting that rolling.
And what we charge for it I don't want to say it because we have competitors. Although no. One yet has told US this a direct competitive do what we're doing I can tell you.
It seems like we're charging a billion reasonable price because from low resource countries to higher resource country Knowns as balked at well we're asking for.
Okay. That's helpful.
And then.
Just the.
Connected care acquisition can maybe just talk a little bit more about how that fits with the hospital automation business is that given you some.
Some products that you Didnt have all is it getting more into some legal counsel Paul.
Well.
The first of all I Sirona was the second largest.
Connected.
Care device out there.
So in that sense, it's nice to have that business secondly, they have a device to stand alone.
Small device for connecting things, where we do our connecting to route which of course has other features from monitoring to being a hub for unit view and so forth. So thats going to sell for certain installations in my makes sense to have in the whole are and I see you and.
The root device and other areas, maybe just a small hub device.
Really the biggest reason we found ourselves wanting to buy that business was the team that was there.
We are scaling very rapidly would hospital automation and frankly.
We could have more customers if we could have more.
People to help us support those.
Customers. So what we got from the ice thrown on that health acquisition is a fantastic team of installation experts sales and marketing people that can help us.
Not only with their previous products, but our total product portfolio with Hospira automation.
Okay. Thanks, and then finally, Joe I saw you were on CNBC kind of supporting these proposed HHS rules about keeping patients increased access to their their health data.
Just from a business perspective to Massimo what does that was that really mean in this does that create some kind of additional opportunities for new products and revenue for some basketball.
Well.
First of all.
For us all to benefit and ultimately the patients to benefit we all have to do a little bit of data philanthropy.
If we don't share data than none of us can really.
Create the type of a.
Decision support that could help patients so.
So, yes, or no. Yes, we think it will ultimately help us and especially for a hostile automation business and yes, we may have been able to sell our data before and now we can't.
But I think it's the right price to pay given that we are in that business of health care.
Okay. Thanks, a lot.
Thank you.
Your next question comes from a line of Rafi Misra from Berenberg capital.
Hi, good evening, Thanks for taking my questions can you hear me.
Yes, we can hi, Robert.
Great Hi, Joe Hi, My cuts. So just just one on one on Rainbow and then another couple on automation or Joe also color and other.
Line of someone who heard you speaking a little bit more confidently about P.S.P.H.B. opportunity.
Just curious you know full year above your long term growth prospects about 10%.
Yes, there's still a kind of a level of the guidance conservatism I think embedded in the question brawl asking here about 2020, so help us maybe think about you know the pushes and pulls with frame bonus that keeps going over 10% kind of.
Yes, and the business stays within those historical targets, what kind of upside.
Looking at in the model on the topline them and kind of related to that.
Are we looking at kind of the gross margin uptick as there's some mix shift over to that and then I have one on the automation more after that thanks.
Sure well I've always push for Christmas for a conservative CFO and God gave me way so that when you just you can't thank you more blame him for the conservatism.
Well it's appropriate.
Because obviously, we do our best to forecast and the and by nature, We're optimists or so, but we want to make sure we deliver.
As far as a our confidence in the business and the upside I think the same kind of upside you've seen before is.
Probable.
I think.
Our confidence in SBH be because revenues, we gain in 2019 did not even reflect.
The contract we signed up for US VHP, then I'm, so happy about you're going to start seeing them in 2020, and as an acceleration of that no. We just have to keep making sure.
Our customers get what they expected because word of mouth is the most important factor in our business.
So I'm.
I said I think in my prepared comments I can't help but be optimistic about the future.
And we hope to continue delivering beyond what we promise.
[noise], so I think thats.
First second.
One more sorry, just one follow up.
Don't mind.
Yeah.
Kind of the customer installed base.
He said three in the fourth quarter, but can you just walk us through how long.
Thanks to on board, that's not only onboard we sign up a hospital and then onboard them and if I could just sneak one last one that 3 million of monitoring that Mike mentioned that related to <unk>.
Automation contracts or if you could just kind of define what's in that bucket that'd be great. Thanks a lot.
Well I can tell you that.
The installations were ahead of what we had expected for the year and I said earlier to the pipeline of contracts that we saw him for his deep and the number of customers that want to go at hospital admissions deeper as far as your question about 3 million, Mike would you want to.
Yes so.
Probably on the 3 million, that's really tied to.
Anytime that we provide equipment.
Two customers on contracts that are that our long term sensor based contracts.
Under assay 42 weeks so we.
Have have revenue that matches that equipment in terms of the cost. So that's really all thats change this year and it's caused us to recognize some revenue.
Accelerate some revenue within the quarters and that's why we kind of lay that out every quarter to you to too.
[music] investors so they can understand that.
You really strip that out to look at the core growth rate in the business. So for example, this year.
This past year growing 13.6% on a constant currency basis. In 2019, you had about one percentage point of contribution from assay 42, and that's really what that is it's not necessarily tied directly to hospitals automation.
Hopefully that answers your question since our call hits, our it's all done to pass the accounting rules were not to take the capitalized right version portion of the revenue and now you have to now given 2020, it's going to continue being that way over going to still.
Similar now we'll have similar comps so so year over year comps. The the ASV 42 revenues will be in both 2019 as well as we report going forward and right. Now just so you know, we're we're expecting that that revenue to be relatively flat year over year or slight growth out of that revenue but.
It should be consistent given that the comps are now the same going forward, we may or may not even call them out, but we call them out in 2019, because it was a new standard the 2019 compared to the prior years.
Yes.
Yep understood. Thanks, guys.
Thank you.
Pump for one more question.
And your next question comes from the line of Mary Tivo from B T G.
Great. Thanks for sneaking me in here I appreciate it.
What are you shipped 61 night I you shipped 61414 monitors and I know that last year, you set out the goal of at least 60000 or more shipments each quarter do you have a goal that you'd like to set out for 2020 and John.
On the same line should we continue to see that trend of higher ASP is the first shipments to the popularity of your advanced parameters.
Yes, yes, yes, yes. Thank you for that question, we believe any quarter for 2020 that we do 60000 more boards are more is a good quarter, that's what we're forecasting.
Yes, we expect a speeds built to continue increasing per socket because of the rainbow parameters from the formerly the sensor that does ROI and RPV to the eight internally decent do hemoglobin, a CEO and Sedline normal line and old feed that are.
Hi, HP products Jochen I, just had one thing Murray one thing to add there.
When we talk when we think about our installed base as well.
Our installed base has been growing this past in 2019, roughly 88% and that's up about 2% from a few years ago and then our revenue per driver is contributing growth that we're seeing in the business in 2019 of about 4% to 5%, which is just you know that 12 to 13.
I think growth we saw last year so.
That used to be rolled around 3% to 4% before so it's we're continuing to see more and more revenue should for drivers we move towards advanced premium base sensors and that's why you know, we're seeing that step up and the growth rates were continuing to drive growth to the through those advance parameters and Rainbow sensors.
That's great to see that's great to see and if I could I'm surprised that wasn't asked yet I'm on the flu season, we're seeing kind of a second peak a double hump to their season I'd love to hear any color you have so far on how that's looking this year.
Yeah, I've, often said, we should be the ones disclosing the.
Well the fluid going because we did one for one almost with the sensor volume yes. It has been a bad flu season, and yes, the sensor volumes are tracking higher than normal.
So we'll see that impact in Q1, which we'll be announcing.
April April timeframe yeah.
Thanks, so much.
Thank you so much. Thank you all for joining US we look forward to our next call.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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