Q3 2020 Masimo Corp Earnings Call
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Good afternoon, ladies and gentlemen, and welcome to pass them on third quarter 2020 earnings Conference call. The company's press release is available at Www Massimo Dot 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.
To answer your question.
I'm pleased to introduce Eli Kammerman Mcconnell Vice President.
Business development and Investor Relations.
Thank you and Hello, everyone. Joining me today are chairman and CEO, Joe Kiani, and executive Vice President of Finance and Chief Financial Officer, Mike Young This call will contain forward looking statements, which reflect management's current judgment, including certain of our expectations regarding trends in 2020.
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 forecasts are discussed in detail in our periodic filings with the SEC.
You will find these in the Investor Relations section of our web site.
Also this call will include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. 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 us.
Yes, the company's 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 Ccs 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 SEC, including our most recent form 10-K and 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, So I feel.
Good afternoon, and thank you for joining us for Massimo US third quarter 2020 earnings call.
As we progressed through the third quarter and into October.
We've been encouraged by the increased stability of caregivers to treat covered patients more effectively than when the pandemic first emerged.
In many cases Massimo team members and product have contributed to these achievements as our breakthrough technology have been more broadly deployed in hospital and in the whole setting.
It's gratifying to have our products such as a group and safety has been used to increase the effectiveness of practitioners and.
Streamline their workloads to improve patient care at much lower cost than historically possible.
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As for the numbers for the third quarter, our product revenues increased by 21% to $278 million and we shipped 151700 technology boards and instruments.
Similar to the second quarter, we once again realized over two times the typical demand for our technology boards and monitoring equipment.
Accompanied by a rebound in our single patient use sensor volume in lockstep with the rebound in surgical procedure volumes.
Now I'll ask Michael to review, our third quarter results in more detail. Thank.
Thank you Joe and good afternoon, everyone. As a reminder, the financial measures I will be covering today will be primarily on a non-GAAP basis unless noted otherwise.
Our GAAP results and reconciliations to non-GAAP can be found in todays earnings release as well as the Investor Relations section of our website.
For the third quarter, our product revenues were 278 million, reflecting growth of 21.5% or 21.1% growth on a constant currency basis.
Worldwide sales of technology boards in instruments were up 76% due to increased demand from both our direct and OEM customers.
Also our worldwide sales of single patient use adhesive sensors rebounded and were up 6%.
As elective procedures further recovered compared to the decline of 8% in the second quarter.
Our worldwide direct and distribution business revenues grew 11% to reach $219 million for the quarter.
And our OEM business revenues grew 91% to reach $59 million, which represented 21% of our total product revenues in the quarter compared to 13% in the prior year quarter.
For the third quarter, we shipped 151700 technology boards in instruments, which is roughly two and half times, our normal run rate and as a result, we have now shipped over one $2.1 million technology boards in instruments over the last 10 years at.
At the end of the third quarter of 2020, we estimate that our installed base has grown approximately 17% over our installed base at the end of the third quarter 2019.
Moving onto the rest of the PNM.
Our non-GAAP gross margin for the third quarter decreased 380 basis points to 64.5% compared to 68.3% in the prior year period.
The year over year decline was primarily due to a higher than usual proportion of revenue coming from our technology boards and its instruments.
Which have lower margins than our adhesive sensors.
Also we have experienced higher covered related costs to fill the increased demand from our customers and to protect our global workforce manufacturing and distribution during the pandemic.
Our non-GAAP selling general and administrative expenses as a percentage of product revenue decreased 250 basis points to 32.2% compared to 34.7% in the prior year quarter.
The year over year improvement was driven by our strong sales growth, which enabled us to leverage our operating expenses, while at the same time, increasing our investments in marketing and advertising.
Our non-GAAP research and development expenses as a percentage of product revenue decreased 20 basis points to 10.4% compared to 10.6% in the same period last year.
And our non-GAAP operating margin decreased 110 basis points to 21.9% compared to 23% in the prior year period.
Despite the gross margin headwinds our operating profit dollars grew 16% in the third quarter.
Moving further down the PNM, our non-GAAP non operating income, which is comprised primarily of interest income decreased 80% to approximately 700000 for the quarter compared to $3.6 million in the prior year period.
The decrease was driven by lower interest yields realized on our invested cash resulting from federal reserve actions to cut interest rates during the pandemic.
Our non-GAAP tax expense in the third quarter was $14.9 million, resulting in a non-GAAP effective tax rate of 24.2% compared to a non-GAAP tax effective tax rate of 22.4% in the prior year period.
Our weighted average shares outstanding for the quarter increased 2% to $58.3 million compared to 57.3 million in the prior year period.
For the third quarter, our non-GAAP net income was $46.8 million or 80 cents per diluted share in comparison third quarter 2019, non-GAAP net income was $43.7 million or 76 cents per diluted share. This reflects non-GAAP EPS growth of 5% over the prior year quarter.
Turning to our GAAP results GAAP net income for the third quarter of 2020 was $49.4 million or 85 cents per diluted share in comparison third quarter 2019, GAAP net income was $49.1 million or 86 cents per diluted share.
Now I'd like to provide you with an update on our full year 2020 financial guidance as a result of achieving the high end of the third quarter revenue range that we provided in our pre announcement. We are now projecting product revenues of 1.128 billion for fiscal year, 2020, which reflects growth of 20.5%.
And over the prior year.
Our non-GAAP product gross margin guidance is 65.7%, which represents a 140 basis point decrease over our 2019 results.
While our full year guidance reflects the impact of unfavorable product mix and increased costs related to COVID-19. It is important to note that we are projecting a sequential improvement for the third for the fourth quarter as we expect to see our product mix returning towards traditional levels over time.
Our non-GAAP operating expense guidance for fiscal year, 2020 is 42.7% of product revenue, which reflects a 40 basis point improvement over the prior year.
And our full year 22020 guidance for operating profit is approximately $260 million or 23% operating margin. Despite the gross margin headwinds our guidance reflects operating profit dollar growth of 16% over our full year 2019 results.
Moving further down the PNM, we expect to generate approximately $5 million in non-GAAP non operating income in 2020, which.
Which is comprised primarily comprised of interest income this.
This represents a $9 million reduction from the prior year, resulting from the lower interest rate environment.
We are also projecting a non-GAAP tax rate of 23.8% and we estimate that our weighted average shares outstanding for the year will be $58.2 million.
Based on all of these assumptions, we are projecting non-GAAP EPS of $3.46, which reflects EPS growth of 7%.
This is driven by operating profit dollar growth of 16%, partially offset by the significant reduction in interest income.
To conclude our third quarter results reflect a recognition by our customers of our ability to rapidly address their needs in today's challenging healthcare environment.
We remain steadfast in our commitment to achieving our long term objectives and creating shareholder value.
With that I will turn the call back to Joe. Thank you Michael.
While the pandemic is by no means over it's clear that things have been steadily improving as medical knowledge increases and infection control practices are instituted.
Vessel has been consistently assisting clinicians on the front lines with a highly dedicated team of professionals, who have been exceptionally responsive to our customers' immediate needs.
We have repeatedly proven that our technologies deliver great value for improving patient outcomes and reducing the cost of care.
One of those technologies that has lived up to our mission of improving patient outcomes and reducing cost of care. This PV.
In Q3, we received FDA clearance for the labeling and promotion of our proprietary PBM measurement has a continuous noninvasive dynamic indicator of fluid responsiveness and mechanically ventilated adult patients.
Before the availability of PD.
Data for fluid responsiveness is typically acquired using expensive and invasive arterial line catheters.
Now with TV.
Clinicians can obtain this essential data using Massimo pulse oximeter core pulse co oximeters sensors.
Hospital protocols, such as enhanced recovery after surgery and goal directed therapy recommend fluid management as part of larger initiatives designed to improve patient care and safety.
Blood management protocols look to balance fluids by identifying when patients may be fluid responsive.
The utility EPS TV as a fluid responsiveness indicator has been demonstrated in more than 100 independent published studies.
As a valuable indicator of fluid responsiveness, Massimo PV I can increase patient safety and physician confidence in managing fluid infusions for patients to surgery.
In closing we are determined to continue providing our essential technologies to our customers. Despite today's challenges.
We have a large and growing installed base and an expanding portfolio of technologies and solutions.
We are making great progress on many fronts from our set pulse oximetry business to Rainbow pulse clock cemetery, and our hospital automation businesses.
We are working with the FDA to obtain clearance of Massimo Safetynet to help save tens of thousands of lives from opioid induced respiratory depression at home.
Massimo products have been proven many times over to improve patient care and streamlined the workload for healthcare professionals.
Our global organization is committed to effectively serving our customers and patients during this difficult time we.
We will continue to dedicate ourselves to our mission of improving patient outcomes and reducing the cost of care.
With that we'll open the call to questions operator.
Thank you. Thanks for your question you need to press Star one on your telephone to withdraw your question. Please press the pound or hash key please stand by we can pass culinary roster.
Your first question comes from the line of Florent.
From Raymond James Your line is open.
Thanks, Good afternoon, everyone.
Joe just a couple of questions maybe to start.
I may have missed it but.
Just was hoping to get an update on how you're thinking about technology boards and monitors for.
2020, I know that you had been thinking that it might.
Get towards 500000.
Time to you and I just want to see how you're thinking about that now.
Yes, Thank you Lori as Mike.
David in the prepared comments, we expect in Q4, two had a more normal mix of instruments boards and sensors, which means losses. These a little bit better than they usually that would be 60000 boards in instruments were expecting now about $80000 in instruments in Q.
For which would bring us up to about $470000 both in instruments.
Some of the as you know the last time, we mentioned 500 down from 550 and Thats been mostly on the back of cancellation of ventilators as clinic.
Clinicians are seeing that putting people on high flow ventilation.
What's best for them. So the good news is.
As Michael mentioned as of Q3 2019 was 17%.
Higher from an installed base perspective than we were at the end of Q3 last year, which really helped put us in a great position for next year assuming.
More normal.
Volume of procedures, which is what we're seeing now so I hope that helps.
And by the way the good news is again that reduction.
552, now with safe place for 70 is vastly on the backs of ventilators, which we had stated at the very beginning are most likely to be shelved after coal with but we don't expect the rest of these drivers to be shelved.
And and again at 470 that puts us nearly two fold better than our normal volume of instruments and boards.
Okay, Great that was super helpful. Just a couple other ones dovetailing off of that so.
One thing that I've been thinking about as we start to consider 2021.
Yes, some of the content that the company will face and and granted again I know that last.
Lots of those products are very beneficial.
Treating Colgate and so you know those tough comps are in place for a good reason, but how are you planning maybe for Joe and and then Mike. How are you planning is we get into 21.
Now being investors understand some of those comps, particularly you get to Q3.
Threeq doing.
Do you have any I guess at this point any initial observations as we should start to be thinking about 21.
Yes, Larry Great question.
Well, obviously, it's earlier too early to be providing 2021 guidance as we just re establish our guidance for this year.
We're still working through that planning process, but we hope to provide that outlook consistent with how we normally do on our year end call, but at a high level I think what we're expecting to see is an improving growth rates from our single patient use sensors as Joe mentioned elective procedures continue continue to recover.
And with our large and growing installed base of newly installed monitors generating incremental sensor revenues and as you mentioned it's.
That's going to be offset to some extent by tougher comparisons due to our stronger demand this year from technology boards in instruments.
But we're expecting to see things.
Joe mentioned trending back to more traditional levels.
Next year, and Thats kind of how we're thinking about it we'll have more information on the fourth quarter call, but I think the the other question you had was.
How will we inform investors of kind of the dynamics next year with those comps and I think.
What we can say there is that we.
Our goal is to continue to provide you with information that is helpful. And this year, we've we've really broken out the sensor growth separate from the instruments on board and we believe that we'll still be helpful. As we move into next year. So you can understand some of those comparisons.
Okay, and so forth. So for this year, what we're seeing now if it holds up is that.
The elective procedures are not.
Stopping in places, where they're seeing a surge like France, Germany, Switzerland. So that trend continues the going back to how can we help you. All think ahead, we intend to give guidance for 2021 at the fourth quarter.
Total earnings call in February so.
So I think that will be helpful. Now, we need to see to three more months of.
Just to think it's a pattern, but if that continues we should be able to give you guidance for the year.
Okay, Perfect and then last Super fast for me just on sensors.
Thank you.
Mentioned to us number for growth, but if you could just give us the worldwide U.S. and will you estimate that helpful.
Yes, Larry the.
The worldwide number was 6% growth overall compared to the 8% decline in Q2.
And our US I believe is right right near that number you'd like to make sense with only the revenue primarily from Larry to sensor growth sensor yet growth, yes sensor growth worldwide, 6% and the US was very close to that same growth similar to okay.
Got it okay. Thanks, guys appreciate it.
Q.
Your next question comes from line of Rick Wise from Stifel. Your line is open.
Hi, Good afternoon, Hi, Joe hadn't FICA.
Just back to the third quarter.
This might be helpful helpful to us better.
Better understand the trends as the quarter unfolded.
Thank you the question is what when the well or right.
I remember correctly on the second quarter call sort of the mid July use clearly said don't extrapolate second quarter results the third quarter.
Hi by always appreciate your.
And then careful thinking and we're in a volatile environment just trying to understand one what surprise.
Got it.
Continue or accelerate through the quarter and how we are stepping into the fourth quarter does that now or certain print flowing or accelerated if you could frame it that way.
I understand the trajectory a little better and be great.
Absolutely. Thank you Rick.
One of the things that we saw that.
Was better than expected was our us and our worldwide sensor volumes were up 6%.
Which compared to being down 8% in the second quarter and I think we.
Whenever we were looking at it back in.
In May June and then coming off the last call.
We saw in our early order is indicated.
Since our volumes were down and may be improved and started to improve over the rest of the quarter and were seeing trends to where now we're starting to see.
As Joe mentioned those drivers.
What we're shipping in the fourth quarter, we think that thats going to be more normal.
Closer to traditional levels.
As seen in the past.
And then of course sensor volumes, we were expecting in our implied in our guidance is those will steadily improve as we move throughout the rest of the year. So I think the mix, we're starting to see that getting back to.
The levels, we saw pre coded.
Most of our product mix.
Thats what helped was held go ahead growth Rick is.
There are noticing when they were the masks when they wash our hands.
It's really helping the physician space. So I think that learning has allowed them to open up the hospitals and have more elective procedure, which when we gave our guidance platform. We were uncertain, it's going to happen on.
Okay got you thanks, Joe.
Just thinking about the the the excellent board numbers.
Again, it is the high level maybe.
Maybe help me understand better.
Did the board you sold was it's pulling forward or you would have sold and 22 and 23 and so.
What's the message here is that it's going to be a key for that.
I'm not so much a tough comp now but.
Or are we going to see more challenging or an outlook and 22 or three for years result.
Okay.
And after a couple of follow ups, if I could thank you.
Well as far as Michael said, obviously will feel much better about our numbers and projections for 2021 at the end of Q4. However.
Certainly our best estimate does kind of go through our normal volumes, which has been roughly 60000 boards in instruments, a quarter, maybe slightly better than that so I think that kind of what we were expecting but despite the very healthy 2025.
Mike what we normally do we think next year will be normal it wont decline from our normal.
Thank you that's very helpful.
Yeah.
Last quarter, and we scored you've talked to Joe about ethanol state account I think the second quarter. You mentioned that you have 120 account now.
Without entering into any update there give us there.
Our account.
Interest to do just any color on the safety net.
Sure sure. We now have 140 customers utilizing Massimo safety net.
So the number has increased we expect as the search Unfortunately on flows.
Once again, there will be a lot of interest.
New customers for the maximal Safetynet system, we have nearly 2000 customers are evaluating it so.
I don't know what the hope for.
But thats all I can tell you.
Okay, and just last quick one from me on the cap not great for you Brian.
Maybe just update us on your initiatives there has it been performing during covert as you've expected what's next.
Just it and the launch of Nagase consumables have you offer is it being sold now your entire installed base.
What's next in cap not perfect. Thanks, so much.
Well, our cap lagasse business grew very strong.
Q3, again and on I believe.
We have a lot of room for growth there given given that we came into the late we have the best technology.
And we expect to continue increasing our footprint with category.
But it was.
Very strong for the whole year, especially in Q3.
Thank you.
In Q.
Your next question comes from the line of Matt Taylor from you'd be at your line is open.
Hi, Good afternoon, guys. Thank you for taking the question.
So developer Reclass when there I guess I'm just wondering physicians in absolute safety that can you talk about the materiality of that.
In some of the other new product offerings that you have like hospital automation, especially I think the word in the plan and how much was contributing to your growth now and.
Next year could be material, if you could offer any thoughts on that.
We have not chosen to break it out yet.
I apologize I am not going to get more granular on those.
I can tell you Massimo safetynet consist of radius PPG, which is a wearable.
Ill finish with sensor could offset technology and thats been pretty strong.
We can look at Massimo business, probably the bulk of it is from Seth then its Rainbow and hospital automation and then Capnography normal line three.
Okay. Okay got you.
I guess the other question I had was you talked about this a little bit in the past.
The installed base growth you are seeing us as more additive those boards potentially being productive and broader hospital monitoring I wonder if you're still seeing.
In that trend and if you think that the excess forward that you're placing this year will be.
As productive years, similarly productive to ones that you've had in the past and I see you and go our static.
Tom will tell obviously doing.
The ones that we were particularly concerned about the ventilators.
And.
That.
At Fortunately a.
Dropping the boards of expected.
In the midst of the coal that it could drop income from that business, which we were suspicious of them being.
Regular consuming sockets so.
Best of all our prediction right now we think these drivers that were shipping are going to go into normal use even after cobot.
Okay, great. Thanks, a lot John Thanks.
Thank you.
Your next question comes from the line of Jason.
From Piper Sandler Your line is open.
Thank you hi, good afternoon, hi, there and maybe a bit.
Thanks, and then just a bit of a real time question here to get started as Youve seen kind of this latest coated wave unfold and you see a pickup in activity or pull on your business from your OEM partners and I guess the same goes whether you've seen any change on the margin in procedure trends or sensor utilization as a result from this latest wave really picking up either here in the us are over in Europe.
Yes, we have seen in Europe demand, but more from a direct business perspective, So, Switzerland, France, Germany, Italy.
Italy.
We've seen a strong pickup in demand.
The us is just picking up were seeing east coast hospitals once.
Once again getting.
Bombarded with patients and requiring more of a.
Attention and products and also wanting to limit.
Salesforce interactions.
Because they want to focus on the patients and minimized.
Cross contamination so yes.
Yes, Unfortunately, it seems to be picking up again.
Okay. All right. That's helpful. Thank you and then just a couple more from me.
Been running some DTC ads here promoting in establishing that national brand.
Presumably as a precursor to a bigger move into the home based medical care market over time will just get your your assessment, Joe where Mike on how these early efforts have landed and how you plan to measure success with the build out this channel over time.
Yes, I think you know for years, we were.
Working on the consumer market, we say, we're not sure if it's an oasis or Mirage, but we're beginning to see that it's becoming an oasis and so we have already a few products in the market started off that icefield too that might be stat, and now Massimo fleet and our latest product radius key.
Which is a continuous thermometer that lasts for eight days and allows for trending as well as picking up signs of Stephens spikes for all patients, especially I think parents, where kids probably worry about that a lot and I think it could be very useful we do have other products on our roadmap.
For the consumer market, which I I can't get into right now for competitive reasons, but you're right the.
The National AD campaign that from.
Together and hospital together at home.
The campaign to get.
Consumers.
Become aware of our outperformance in the hospital and our brand as we continue a big in more products into that market place.
Alright, Thanks, Thats really helpful. And then just last one for me Mike just wondering if I may try to Peel back.
Any acquisition contribution you had in the quarter, just maybe a more of an organic growth number that if you'd be willing to provide that.
Yes, I think coming into the year, Jason we we had communicated roughly 1% contribution from from acquisitions. So.
Yes.
It's right in that ballpark in terms of contribution in the quarter.
Okay perfect. Thanks, Mike maybe slightly above the debt. Thank you okay. Thanks.
Your next question comes from the line of Brian Robbie Mcgrath from Burnham for capital markets. Your line is open.
Hi, Good afternoon, I guess I'll put my two questions. Both upfront. The first one just wanted to build on that real time commentary, how should we think about potential impact to your your guidance and your board numbers that you've given Joe that 470.
Yes, okay to start picking up and have hospitals kind of adjusted for that capacity or do you think there might be upside to that.
Secondly, Mike if you could just help us break out the impact of the kind of manufacturing complexity you mentioned on the gross margin versus the sensor demand to help us understand what might go away as Colgate normalizes. Thanks.
Sure Let me, let me touch on the first one.
Yes, I'll walk there could be some additional drivers or come out as the search continues.
I think the bulk of that demand will be met by mass from a safety net.
Which is a radically.
Different way of dealing with the problem by putting a wearable imitation whether they want to keep them in the journal for or they want to move them into a hotel or back to their home it really cuts down on the need of new sockets and new drivers new.
By just allowing the sensor to communicate directly.
To the cloud to a central monitoring system. So therefore as I mentioned about a couple of thousand hospitals are looking at it and I think a search for a cold is worldwide will probably be met with some more demand on national say cement as for your manufacturing question I'll, let Mike answer that.
Yes, great question. So if you look at our margins for the quarter and I think the question. You asked was what was the contribution from the coated related costs and if you think about those costs.
We put a lot of measures in place with our manufacturing distribution.
Social distancing measures as well as just overall safety measures to protect the workforce and then there is other co related costs due to two shipping costs and things that are really.
Indirectly related to our manufacturing.
So if you look at those costs I would estimate roughly maybe 1% of those costs are hitting right now through our margins our gross margins and.
And the rest is primarily due to mix the mix impact.
Okay.
And to think about the mix impact of being somewhere between call. It 200 to 250 basis points.
Your next question comes from the line of Mike come back.
And even then company your line is open.
Hi, Thanks for taking my questions I guess I would start with the the Apple patent litigation.
Can you provide any sort of update there I understand appear reluctant to comment on it in this forum, but I thought I would try.
Certainly we sued Apple for trade secret and Patton.
Infringement.
On the trade secret side, the moves on a preliminary injunction to stop further.
A further issuance of patents from our ex engineers, who are there that we believe that taken our trade secrets at the judge did not grant us up from the injunction because he felt we would not be irreparably harmed, but the judge did find that it's likely we will prove that our Tracy fits where.
Take it.
The second thing as.
Thanks, Tracy could cases moving forward normally on the patent side Apple moved to stay our patent case, while they filed Interparty reexamination.
On our patents, which was probably going to delay the patent case by about 18 months. The court granted to stay while we work through that process apples currently filed 17, IP ours against our patents and though we're going to be dealing with that so.
I think these cases as we said from the beginning takes a long time because were not looking for.
Well looking for just a little thing were looking to stop Apple for what they've done like we did previously with Philips and Medtronic. So so stay tuned and we will continue.
Okay. Thanks Thats helpful.
And then just.
Your question about Europe, So I think.
During the height of the pandemic previously our day.
Switch more to your disposable sensors from being a reasonable sensors.
And I was curious if you've seen them continue to use the disposable sensors.
Over the summer when the the pandemic kind of used and going forward obviously there.
Infection rates are going up again, but do you think that they are going to continue.
Continued to use disposable sensors, even once we get a vaccine to kind of move on past the pandemic.
Quick question I wish I had an answer for you, but at this point I don't I will try to do some more homework on that and next time.
A question for you.
I do believe because of the wearable tell us.
Sensor radius PPG, we're going to see more people using.
The single patient use of pro worldwide looks versus where historically they use reusable pros.
Given the growth we've had in Q3 of our sensor volume business.
At least for now we believe the continued to using debt leases as far as what will they do in the future I'll get back to you.
Okay fair enough. Thank you.
Q.
Your next question comes from the line of Michael Polack from Baird. Your line is open.
Hi.
Good evening I heard in the prepared remarks, the comment on continuing to work with the FDA on the Ob.
Opioid product.
Hoping perhaps you could just unpack that a little more for us any updated expectations on your timeline.
Any.
Better sense.
About FDA bandwidth I know they've had a lot on their plate to share any color there would be helpful.
Yes, sure I think you know the history FTD chose our opioids safina product not.
Suddenly a breakthrough technology, but one of a product that can deal with the opioid epidemic potentially.
Out of over 250, we've been working with the FDA for nearly two years on on this project and were so great working relationship where were we know they know about our capabilities and on how uniquely we can help deal with this issue.
But the FDA has some additional data they wish to get from us, which we're working on and we.
We're working with them I think.
Said the coated of situation has delayed things slightly I don't know how much but it definitely has I know the examiners and people literally will send us the sponsors at 10 11 o'clock at night. So I don't think is from lack of effort just a lot on their plate, but we feel pretty good.
That.
The past is essentially going to succeed when I cant tell Stifel.
So, but but we're we're hopeful so.
And then maybe pretty follow up the balance sheet is still.
Fortress like we're.
We're seeing some M&A.
M&A events to return to the market as we all have learned to live in this new normal Masonite did a series of smaller deals earlier. This year and has hinted that may be interested in and continuing the M&A.
Program, perhaps looking at some things a little bit bigger.
What we saw earlier this year I'd be curious for your updated thoughts there or just generally how you're thinking about capital deployment here.
Approaching the end of the year and then looking at 2021.
Yes, Thank you Mike.
So.
In terms of capital deployment, one of our priorities is of course M&A, we believe that Thats, where we will get some of the greatest returns back.
And if you look at how we're thinking about it.
Two great. Examples are the connected care acquisition from net net health as well as the TNF Medical acquisition is are two great. Examples that you saw.
Of our strategy and if you think about it where we're looking to grow the business more strategically is in the areas of hospital automation in the hospital to home and I think that those are going to be some similar type.
Companies that will be interested in moving forward as far as technologies that can really augment those two areas of our business moving forward.
Okay.
I said have time for one more question operator please.
Your next question comes from the line of Marine Cabal from BC King Your line is open.
Hi, Thanks for squeezing me in this evening I really appreciate it.
Next question.
Sure.
I wanted to ask a little bit about sensor piece and the recent trends there I know that you've been seeing hiring people. Some of these newer monitoring parameters. So wondering how that played in TV on 6% I believe that with the volume number that you would want to make any impact on ASP on overall revenue.
Hey, Steve how can you say, if you're seeing a rise in them, it's because of increased demand for our radius TPG wearable sensor for our for Ltd.
And Eylea Rainbow.
Rainbow sensors so.
But no there's no decline we had a very compelling.
Case to make with hospitals, we show a 250 bed hospital saving three $4 million a year by using our technology. So because of that we have with the disciplined I think you know when we entered the market even though we had the technology that was an order of magnitude better than what was out there we price.
That 30% lower and when the competition began trying.
Trying to compete with us on price we did not go there we thought that was a fair price, especially given what our technology can do not just to help save patients' lives and help reduce blindness and babies, but what it can do for them for cost reduction.
Great to hear last one then on Safetynet I know you've spoken in the past about using nothing new market, perhaps keep frequent flyers at home instead of being read Medicare Hospital anything you can correct fair about kind of your working in the housing market.
Yes, I think you've seen our national AD campaign, I think coal was put a spotlight on demand for not just the heart, but the long and pulse oximetry, how it can help.
Keep track of both for the severely ill patients obviously.
That problem is real for patients a seal PD patient.
Patients that get the flu and turned into an ammonia. So we are.
Our.
Using the opportunity that was given to us and how both clinicians and tech companies and consumers said, you're the only real thing out there and we need you and lets get it out and all that good.
Good Karma.
Calmer around the product to further drive our consumer business home and we're going to keep augmenting.
That product line with new apps as well as new sensors that we think will.
Will serve our customers and and Massimo well.
Thank you.
Thank you so much I appreciate everyone getting on call anode busy schedules and Crazy times out here.
Happy election day next week happy Halloween This weekend and look forward to seeing you guys.
These talking to you in February thank you so much.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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