Q3 2021 Masimo Corp Earnings Call
Good afternoon, ladies and gentlemen, and welcome to Massimo third quarter 2021 earnings conference call.
Company's press release is available at three Paul W. E Dot Massimo dotcom.
At this time all of that.
Lines have been placed on mute to prevent any background noise.
After the speakers remarks, there will be question and answer session.
I am pleased to introduce Mr. Eli cameraman.
Maximus Vice President of business development, and Investor Relations, Sir the floor is yours. Thank you and Hello, everybody. Joining me today are chairman and CEO, Joe Kiani, and executive Vice President and Chief Financial Officer Micah Young.
This call will contain forward looking statements, which reflect management's current judgment, including certain of our expectations regarding fiscal year 2021 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 forecasts are discussed in detail in our periodic filings with the SEC you will find these in the Investor Relations section of our website. Also this call will include a discussion of certain financial measures that are not calculated in accordance with generally accepted it.
Turning 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 assess the company's operating results in the same way management assesses such results management uses non-GAAP measures to budget evaluate and measure the company's performance.
And sees these results as an indicator of the company's ongoing business performance. The company believes that these non-GAAP financial measures increase transparency and better reflect the underlying financial performance of the business reconciliation of these measures. 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 app.
Afternoon, I'll now pass the call to Joe Kiani. Thanks, Sheila Good afternoon, everyone and thank you for joining us for Massimo <unk> third quarter 2021 earnings call.
While COVID-19 last year brought us record breaking growth, we are happy to see COVID-19 related hospitalizations recede and hospitals return to traditional practices.
Our revenues increased by 10% due to many factors, including a 27% increase in single patient use sensor volume.
In addition, our <unk>.
Shipments of technology boards and monitors were very strong as we saw strong demand from hospitals for monitors, especially our set pulse oximetry and Rainbow pulse co oximetry.
I'm also happy to report the third quarter with double digit revenue growth helped us achieve an 18% increase in our non-GAAP earnings per share.
Now I'll ask Micah to review, our third quarter results in more detail and provide you with an update on our 2021 financial guidance.
You, Joe and good afternoon, everyone. Our third quarter results came in above expectations as we shipped a record breaking volume of single patient use sensors and our driver shipments significantly exceeded our pre COVID-19 run rate by more than 20%.
These results demonstrate the high regard for our differentiated technologies and a consistent demand from hospitals to expand patient monitoring and two additional care areas.
These new monitors going into lower acuity settings are driving increased sensor volumes that contributed to our strong revenue performance this quarter.
During the quarter, we shipped 74600 technology boards and instruments, which exceeded expectations.
As a result, we have now shipped approximately $2 3 million technology boards, and there's technology boards and instruments over the last 10 years.
As of the end of the third quarter, we estimate that our installed base has grown 7% over and over our installed base at the end of the third quarter of 2020, which is a notable increase considering the surge in our installed base a year ago.
For the third quarter of 2021, we reported product revenue of $307 million representing growth of 10, 5% on a reported basis and 10, 1% growth on a constant currency basis, you may recall from our earnings call last July that we delivered 21, 5% product.
Revenue growth in the third quarter of 2020 due to higher than usual demand for our technology boards and instruments as hospitals address the potential shortage of monitor beds for COVID-19 patients.
Despite this very tough year over year comparison, we delivered double digit revenue growth that exceeded expectations for the third quarter of 2021, our worldwide sales of technology boards and instruments were higher than in normal years, but down 17% versus the prior year period due to COVID-19 related purchases in 2012.
That I just mentioned.
Fortunately this decline was more than offset by a strong rebound in sensor sales in fact, our worldwide sales of single patient use sensors were up 27% versus the prior year period.
Driven by strong demand for our set sensors, most encouragingly our sensor revenues increased by 2% sequentially versus the second quarter of 2021 in contrast to the typical seasonal decline we've experienced for the same sequential periods in prior years. This represents another sign of a rebound in sensor volumes associated.
With the ongoing recovery in hospital census in combination with increased sensor utilization coming from our large and growing installed base.
Moving down the P&L, our non-GAAP gross margin for the third quarter increased 200 basis points to 66, 5% compared to 64, 5% in the prior year period.
The year over year improvement was primarily driven by a more favorable revenue mix as we delivered strong revenue performance from our higher margin sensors in combination with the anticipated decline in sales for our lower margin technology boards and instruments.
Our non-GAAP selling general and administrative expenses as a percentage of revenue decreased 20 basis points to 32% compared to 32, 2% in the prior year quarter.
And our non-GAAP research and development expenses as a percentage of revenue increased 110 basis points to 11, 5% compared to 10, 4% in the same quarter last year.
As a result, our non-GAAP operating margin improved 110 basis points.
23% compared to 21, 9% in the prior year period.
Moving further down the P&L, our non-GAAP tax rate was 23, 5% and our weighted average shares outstanding for the quarter was $57 7 million.
For the third quarter, our non-GAAP net income was $54 3 million or <unk> 94 cents per diluted share in comparison third quarter 2020, and non-GAAP net income was $46 8 million or <unk> 80 per diluted share. This reflects non-GAAP EPS growth of 18.
Percent over the prior year quarter.
Turning to our GAAP results GAAP net income for the third quarter of 2021 was $57 8 million or $1 per diluted share.
In comparison third quarter 2020, GAAP net income was $49 4 million or <unk> 85 per diluted share.
To summarize the third quarter, we delivered strong performance across the business that exceeded expectations with double digit revenue growth operating margin expansion of 110 basis points and EPS growth of 18%.
And our driver shipments exceeded pre coat, our pre COVID-19 run rate by 20% even after the large surge in driver shipments we experienced last year.
Most importantly, our recurring revenue stream of single patient use sensors has increased significantly over the last two years as a result of record new customer wins increased utilization across our install base and the expansion of patient monitoring and hospitals.
To provide some perspective on the increased driver utilization.
We estimate that our installed base has grown by 25% over the past two years from the third quarter of 2019 to the third quarter of 2021.
While our single patient use sensor revenues have increased by 35% over the same two year period.
As a result, our sensor growth has outpaced our installed base growth leading to higher revenues per driver.
And related to the expansion of patient monitoring in hospitals the <unk>.
<unk> sensor growth rate for our top 30 U S customers, who had the highest number of monitor installations last year has continued to outpace the adhesive growth rate for our overall customer base over the last two years.
It's clear that we are realizing higher utilization across our install base is monitoring practices have can have expanded within hospitals.
We're realizing success with our hospital automation business as well our solutions for increasing productivity and streamlining workflows have been well received by hospitals with overextended staff, especially where there are certain shortages of available nurses and.
In fact, our hospital automation revenues contributed half of a percentage point to our revenue growth this quarter.
I'm also happy to report that the number of beds connected via patient safety net and Iris gateway has grown by 50% over the past two years from the third quarter of 2019 to the third quarter of 2021.
And our installed base growth for our route connectivity platform has more than doubled over the same two year period.
Now I'd like to provide an update on our full year 2021 financial guidance.
Okay.
As a result of our strong performance in the third quarter.
We are increasing our revenue guidance to $1 billion $230 million, which reflects year over year growth of seven 5% on a reported basis and six 8% on a constant currency basis.
This represents an increase of $14 million above our prior guidance, which is comprised of a $15 million increased due to strong stronger sales performance, partially offset by a $1 million reduction in foreign exchange benefits.
It is also important to note that our revenue guidance implies a growth rate of 8% in the fourth quarter of 2021, if you recall from last year. Our fourth quarter 2020 results included an extra week of revenue, which added roughly three percentage points to our growth rate for that period. Therefore, if you exclude the extra week extra week from.
Last year.
Our guidance implies a double digit revenue growth rate in the fourth quarter of 2021.
Further we are now projecting to ship at least 280000 technology boards and instruments this year.
Our non-GAAP gross margin guidance remains unchanged at 66%.
And our and our non-GAAP operating margin guidance remains unchanged at 23, 8%.
Moving further down the P&L.
For the full year, our non-GAAP non operating income is expected to be negligible.
Our non-GAAP tax rate remains unchanged at 23, 4% and our weighted average shares outstanding is unchanged at $57 7 million.
Based on all of these assumptions, we are increasing our non-GAAP EPS guidance to $3 88, which represents an increase of <unk> <unk> above our prior guidance of $3 85.
And from a GAAP perspective, we are projecting a GAAP tax rate of 18% and GAAP earnings per share of $3 88 for the year, which represents an increase of five cents above our prior guidance of $3 83.
For additional details on our full year 2021 financial guidance for GAAP and non-GAAP earnings per share. Please refer to today's earnings release and supplemental financial information within the Investor Relations section of our website at Massimo Dot com with that I will turn the call back to Joe. Thanks, Mike. Thank you.
An important topic on many people's mind as the ongoing impact of the Covid pandemic on businesses in general and for Massimo from disruptions in the supply chain to hospital admissions and our sensor volumes.
Our team has done a superb job mitigating supply chain disruptions on the recent hospitalizations due to COVID-19 have been geographically concentrated and therefore have had a smaller effect on our sensor volumes than what we experienced in 2020.
In addition to temporary reduction of sensor volumes due to postpone surgeries in certain geographies has been offset by increased utilization in other geographies.
You can see this in our results for the third quarter.
Our performance exceeded expectations.
After securing record new contracts for any first half year period in our history, we won sizeable new contracts this quarter and also secured contract renewals for many of our existing customers.
Nearly setting new records and for the first nine months setting New records.
Another noteworthy milestone for us in the third quarter was the commercial release in Europe of our Rainbow Super sensor, which incorporates 12 light emitting diodes to simultaneously monitor told blood constituent parameters noninvasively.
S P O T S.
SP HP SBC OSP met or I P V. I R. P V. I P. R. R. P. P. I S P a po to an spo.
Previously our customers could have either SPC or SP met in our Rainbow sensors by.
By making SP met SP and its appeal to available on the same sensor we are able to measure a fractional oxygen saturation known as <unk> two <unk>.
<unk> provides a more complete picture of arterial blood oxygenation and the presence of this hemoglobin <unk>.
Glenn just similar Golden levels are elevated due to carbon monoxide poisoning or methemoglobin EMEA.
Fractional oxygen saturation is more representative of the total oxygen carrying capacity of hemoglobin than standard functional SPL to.
Massimo is the only company in the world that offers fractional oxygen saturation as well as 11 other parameters.
On one sensor.
And the current pandemic environment Methemoglobin Nemea poisoning is more prevalent due to some of the drugs that are being given to treat COVID-19 such as inhaled nitric oxide therapy.
Without S. P. F O two in SP met this deadly poisoning may go unnoticed.
Also by having SBA HP and S. P. F O. Two we can now provide clinicians with a view of not just saturation of oxygen in the blood.
But the amount of oxygen in the blood SP Oc or oxygen content.
Oxygen content.
POC and fractional oxygen saturation, SPF, though too can help identify the source of diminished oxygen delivery.
It's due to just hemoglobin that can result from mezzanine book will be anemia for carbon monoxide poisoning.
Or low hemoglobin that can result from blood loss or anemia.
The Rainbow Super sensor has not receive FDA clearance, but is now available in CE countries, such as France, UK, Germany, Italy, Switzerland, Sweden and Spain.
With C clearance, we also launched Massimo safety net alert for opioid overdose and Covid monitoring at home in eight countries in Europe.
France, U K, Germany, Italy, Switzerland, Sweden, the Netherlands and Spain.
Here in the U S. We submitted to FDA de Novo application for Massimo safety net for opioid and it is currently under review at the FDA.
From the studies, we conducted and post op patients on opioids.
People, who were taking opioids illicitly.
We expect Massimo safety net alert to be a life saving system for those experiencing an opioid overdose.
Also in the third quarter, we announced the release of the Amex Seven board our latest and most advanced Rainbow set board designed for integration into the more than 200 multi parameter monitors available from our more than 90 OEM partners.
That makes seven has the ability to support.
All 12 of Rainbow Super sensor parameters, and additionally, rainbow acoustic monitoring and an advanced module reengineered to reduce power needs.
Our new product pipeline is strong our engineering and clinical development teams have been very productive. Despite the challenges presented by the pandemic and we are excited about the future.
I'd like to take this opportunity to thank our entire team at Massimo our team has been working passionately to ensure that we deliver our lifesaving products to our customers and patients despite supply chain interruptions and delays.
In closing, we expect a strong finish to 2021 as the pandemic related hospitalizations subside.
And hospitals provide more elective surgeries, we're committed to our mission of improving patient outcomes, reducing the cost of care and taking noninvasive monitoring to new sites and applications.
With that we'll open the call to questions operator.
Thank you Sir.
At this time as a reminder to ask a question you will need to press star one on your telephone keypad.
Again that is star one to ask a question, we'll pause for just a moment to compile the Q&A.
Our first question comes from the line of Rick Wise from Stifel. Your line is open.
Hi, Good afternoon, Joe Good afternoon, everybody.
Thank you for another excellent quarter, great to see it.
And.
I'd like to start off.
On a big picture perspective.
Given some of it.
Joe that you talked about that Micah highlighted about expanding.
Customer installed base.
Renewals greater utilization of flow of technology, the larger installed base expansion monitoring it's hard for me to.
As you're listening to you also talk about.
But the COVID-19 pressures, maybe easing or stabilizing or improving it.
Hard for me not to think about 2022.
Maybe just at a high level.
Your guidance, but that you will help us set us up well.
That will set us to think about 'twenty two some of the key drivers key themes.
Still early but.
Hi.
No.
Can we expect.
Continued.
Low double digit topline continued gross and operating margin expansion driven by all these factors you're talking about sorry for the long question.
Yeah.
Well no not at all Rick and thank you. It's good to have you on the call we believe.
2022 will be another strong year.
Believe it will be driven by not only our core business set.
We think it will be driven by also our work in hospital automation and home telehealth monitoring till the monitoring.
And and also some of the new products that are coming out.
Given that we've been having record.
Contract here, both in Ti will be called true incremental and renewals.
We're feeling pretty good about next year I think some of the unknowns that may make things.
Maybe even better would be if we get Massimo safety net for opioid cleared by the FDA.
Before end of the year, which we don't know and I think some of the potential.
Headwinds could come on our earnings as we want to get more.
More consumers to become aware of Massimo safety net alert so on the revenue side everything looks great on the earnings side, we have to see because we've got a kind of a.
Decide how much we want to put in and getting the message out for this new missionary sell we have never done before opioid safety monitoring at home.
Right. So you are saying.
Continued low double digit topline, but may be you might invest more in some of these.
To support some of these potential.
Potential opportunities if I'm hearing you correctly.
Correct and the good news is a lot of our business is driven by the hospitals, even outside the home, but at the same time, the only way to reach consumers through advertisement.
We have a wonderful sales force for hospitals, but there was no such thing for consumers. So so that's where we were going to look at our investment plans and we're going to watch it, but but yet topline we feel really good about it and at the Bottomline, we haven't done the numbers yet so I can't tell you, but the only difference.
See probably next year than what we normally spend is an advertisement.
Okay.
On gross margins.
They certainly came in better than I expected, but solid revenues and it sounds like mix was positive help us think through the go forward implications.
So is this where we sort of stay and again thinking about next year continue from here.
Yes, I think thats the way to think about it Rick if you look at our guidance for the year, even at 66% for the full year.
We had some.
[noise] compressed gross margins in the first half, especially Q2, where we had a high record installations are under contract of our equipment and that put pressure on our margins in the second quarter, but if you look at our guidance for the full year. It implies that our 66, 5% gross margin in the third quarter.
We're gonna be somewhere in line with that for the fourth quarter, it's not going to.
Be significant it shouldn't be significantly off that number based on our on our guidance. So.
In fact that implies about 66, 5% for the fourth quarter. So I think that's how you should think about it we continue to have some you know.
The COVID-19 related headwinds that we've experienced over the last 18 months.
With is as you know with some of the higher freight costs and those types of things that are are already incorporated into our guidance for this year. So we're already thinking those through and that's why.
We're guiding to 66% for this year, so yeah and just last from me Joe you, obviously highlighted some of the compelling innovation on the sensor side.
Last quarter I, just was as I read the transcript you you emphasized I think your words were exactly.
You can expect some exciting innovation in the next 12 months you highlighted a little bit.
It's three months later.
What are we going to see them when we're going to see it. Thank you Brian.
Thank you thank you Rick.
We are indeed excited about the products, we're going to announce in the next.
Several months.
But if you don't mind I prefer not to talk about our product pipeline.
We have competitors listening as well.
But still excited.
Very excited very excited.
Thank you.
Our next question comes from the line of Jason Bednar from Piper Sandler Your line is open.
Hey, good afternoon, congrats on another solid quarter here guys and thanks for all the details here a few questions from our end.
First Mike I wanted to ask on guidance when I look at the typical sequential progression for your business for looking third quarter to fourth quarter revenue typically rises in about an upper single digit pace, but it looks like your guidance imply something closer to low single digit growth over over third quarter levels.
There anything else, we should consider as like holding you back in the fourth quarter from the scene this normal sequential progression.
No I mean, Jason if you look at the fourth quarter and I mentioned in my prepared remarks, I mean, if you look at the growth rate year over year, and you strip out that extra week last year.
Our growth rate implies double digits actually about 10, 5% in the fourth quarter.
You adjust for that extra week last year. So we're still.
We still have confidence in the business, we're seeing good good trends in terms of sensor volumes, we expect those trends to continue.
And we've implied double digit growth rate in the fourth quarter. So.
As you know we want to provide a guidance that we're confident in that.
Not only we can achieve but we can exceed.
Yeah Yeah.
I totally appreciate the year over year numbers and everything I was I guess I was asking more like quarter to quarter third quarter to fourth quarter.
Just understanding there's some variability here in the middle of a pandemic when I look historically third quarter to fourth quarter, just the progression looks a little bigger than past year. So maybe it's just conservatism but.
I guess, maybe bigger picture and following up on Rick's question. There regarding some of that elevated AD spending as we look forward to next year I mean.
Joe Mike are you are you willing to say today that you're willing to stay within the hour P. For next year at the earnings volume.
Look I I was giving high level view of things we have not looked at our numbers for 2022, I think Michael is cringing as I was.
So please let's not continue this dialogue and I'm, probably going to we'll give you our guidance for 2022 and February yes, Jason We will we've got a lot of work to do and we will.
You'll hear more from us at the end of the year.
Okay I appreciate that got it.
Alright, and maybe just one last one here.
Just I guess curious just because it's been topical here this year and you know it maybe even late in 2020.
Just wondering if you could maybe expand a bit more detail on what we can expect from these contracting wins I mean, I guess what does this mean for the business from a growth perspective. These are obviously all really good things longer term definitely playing into the strategy here.
When do we when do you think we see the full benefits from all of these contracted wins that we've seen for basketball here over the past year.
Yes, that's a good question because of course, you know that.
Our revenues, where they are separated from our contracts because typically our contracts take another six months to 12 months for installation and recognition. So the strong contract yeah. We've been we've been having this year so far.
Help us a lot in 2022.
So.
Yes, I think that's what you should expect to see the results in 2022.
Alright very helpful. Thanks, So much guys. Thank you.
Thanks, Jason.
Our next question comes from the line of Ravi Misra from Baron Berg Capital. Your line is open.
Hi, good afternoon, and thank you for taking the questions.
Just wanted to kind of probably a little bit on the install based commentary and driver shipment commentary.
Joe Micah you get into these lower acuity settings, I was hoping you could maybe help frame the opportunity here for us.
Where are we in terms of the penetration of the the new kind of bed opportunity or the new monitor opportunity both from a.
What's available out there and kind of what's your estimate of where you're kind of monitor partners are in those in those arenas and then maybe secondly.
You talked about the sensor growth outpacing the install base grows and to me I kind of think about okay, well a lot of the commentary has focused on the set kind of pull through there but are we also seeing similar dynamic in rainbow or maybe you can help quantify how much of that 35% growth is rainbow versus say.
Yeah.
The dust haven't quite cleared yet, but if I was gonna make educated.
Estimate I would say the post surgical ward.
Probably gone from 10% penetration to maybe 30% to 40% penetration in the U S. Now.
And that <unk>.
Increased happened basically last year.
People turn pretty much every bed into a monitoring bed.
As far as.
Our set and Rainbow.
<unk> consumables, they're walking pretty much hand in hand, the growth rate and where were.
Seeing more and more hospitals understand the benefit of.
<unk> continuous monitoring and the post surgical ward you may.
You may have seen the press release, we did a few weeks ago about our partnership with Ohio Health system, where they basically have now put made every bed into a monitored bed and not only because of the safety of the patient, which they made a video I think it's on Youtube, but also because it would reduce.
<unk>.
Workload on the nurses they didn't they no longer have to go short.
It'll happen automatically and in fact, one of the things that was happening some of those nurses.
Uhm, we're leaving you H to go to neighboring hospitals that have our system and for the post surgical wards. So we're beginning I think what happened last year it really.
Help the wall fall and people began seeing the.
Finally, the realization of.
Reliable.
Monitoring without all the false alarms and post surgical ward with Massimo set.
And then just I mean, just naturally I start thinking about automation as youre kind of getting deeper into these post surgical floors.
Is that also leading to a similar level of pull through of the automation portfolio I got to assume that's got to be the case.
Not one for one but absolutely it is pulling in more hospital automation.
But at this point, it's not for every safety net patient safety of the system. We've put out does it turn into a hospital automation.
Customer, but it is happening.
Great and then maybe just one last one.
On the <unk>.
The Rainbow Super sensor, that's Europe, only or is that Europe and the U S.
Europe, only where we're going to be submitting to the FDA.
For FDA approval or FDA clearance the super sensor in the U S soup.
Thank you very much. Thank you. Thanks Ravi.
Our next question comes from the line of Mike Palmer from Baird.
Your line is open.
Hey, good evening. Thank you.
Two or three for me Big picture, Joe curious for your reaction to the Baxter Hill ROM transaction to those companies not really direct competitors, but hill ROM, especially doing interesting things on monitoring and connectivity.
Automation so.
I'd just be curious to get your for.
Second and third gut feel or got thoughts on that combination.
Well I think it's I think that combination seems like a good thing for both companies.
We don't really see ourselves competing yet.
With that entity Hill ROM as one of our OEM customers and Baxter, we have a relationship with where their infusion pumps are compatible with our hospital automation. So yeah. We may have a little bit of a co op petition.
But our full.
We will focus on the cooperation more.
Led co can you remind me on the timing or plans for the U S launch I haven't heard anything about it yet on today's call.
Oh, let's call. It has launched in the U S already.
We are planning a more streamlined version of Lyft code that goes hand in hand with route.
Hopefully before end of the year, but lets call is available in the U S. It has received.
Incredibly strong.
Support from the customer base, and we're really happy we brought that team on board.
Or do they have I remind me did they have their own I didn't think they had much of a commercial infrastructure in the U S is it.
The Masimo sales reps are now.
Selling lid cover.
How does the sales structure look for <unk> in the U S.
Youre right. They did not have much of the sales force in the U S.
But more importantly.
Lip coal was a superior technology without a backing of a company like Massimo. So I think one of the things. That's happened is besides us have begun.
<unk> clinical support team out there is the fact that NASA most behind Litco now has really put the wind in the sales of Litco and the cool thing about litho.
I mentioned in my comments about the oxygen.
Levels in the blood through SPL C. Austin content by knowing the cardiac output, we cannot even get into oxygen delivery.
Which is.
That's really something that anesthesiologist care greatly about.
Yeah.
Okay. That's it for me thank you.
Thank you.
Your next question comes from the line of Murray T bolt from BT <unk>. Your line is open hi, great. Thank you and thank you for taking the questions. This evening I wanted to ask a question on the strong driver of demand you saw this quarter and maybe if you could parse it.
For us how much of that was driven sort of by the underlying tailwind of expanded monitoring in and wanting to have more monitored beds and how much of it was coming from.
Guess immediate demand around the COVID-19 spiked during the quarter.
It was the first.
Covid has not been a big driver this year.
I think what we didn't.
Expect additional funding available to hospitals this year to continue perched.
Purchasing products that they need.
Post last year is more than double our normal rate of.
Driver shipments.
This so far this year, we have shipped.
Our normal run rate that we left in 2019 with.
Incredible given how many drivers that we sold last year. So yes, I think it's just.
I don't think it's Covid related anymore. I think this is really just hospitals expanding and the general floors hospitals moving to Massimo I think last year was a great year for Massimo to stand out when SPL two mattered. The most not only ours is the most accurate and most reliable but with.
Availability from Massimo safety net for Covid, where we are helping hundreds of hospitals manage their patients remotely.
Some of them weren't even our customers before I think that has helped us gain new customers gained new ground. So.
It's really.
Been a remarkable year on top of a year that we couldn't have anticipated last.
That's very helpful. Thank you for that color.
Okay, and then maybe I can ask a two part sort of on our new products. It was intrigued by the Rainbow Super sensor released you had the other day and then some of your detail you gave on the call I have to admit that I don't have anywhere near your level of expertise on some of this so if you could just sort of explain for us who this.
You know who the target customer would be for Rainbow Super sensor, which of your current installed base, what would sort of say hey, we want a Amazon who is at most ideal for.
We believe it's ideal for the or for the ICU and emergency departments.
I think you may have seen the announcement to society.
That's been our blood management.
After reviewing 10 years of research on hemoglobin came out in support of continuous hemoglobin monitoring and said it should help improve outcomes.
So there's a bigger demand now for hemoglobin, but now that we can deliver a hemoglobin without people deciding okay, what's more important carbon monoxide monitoring or detection or methemoglobin monitoring or detection now that they can have all of it in one sensor.
I think it reduces the dilemma.
<unk> hospitals at least on Europe to have the same product from the emergency Department.
The ore to the ICU and stepped down.
So I think I think really this this this is great we've seen customers who have been using <unk>.
Different parts of it like methemoglobin with hemoglobin and everything discover patients that had methemoglobin poisoning.
40 drugs that are given in hospitals cost methemoglobin EMEA.
Including all the nitrates.
As well as all the immune deficiency drugs and hydrochloric keen that was being used for a while and then of course C. O is usually what people come in with from poisoning from imperfect combustion from either their heaters at home or generators or even their cars. So so I think we.
This has been this has been a passionate pursuit of ours.
And that's why I wanted to spell out every parameter I remember when I first started Massimo the idea that one day on one sensor we could measure 12 parameters Noninvasively was a vision was a dream, we had and to finally make it available in the commercial.
Volumes.
Which by the way it is thanks to the acquisition, we made years ago in New Hampshire, when we bought spire semiconductor, which is now Massimo semiconductor that allowed us to make all of the specialty light emitting diodes, we needed at a price point and our mission and all the good stuff that allows us to make this product.
Make it available at a price that people can afford.
That's wonderful congrats on achieving that dream job wonderful one last one if I can topic does your supply chain, how are things going on on that front I know that we've heard some.
Commentary around kind of electronic components and things like that so would love to hear how Murphy is positioned there and thanks again for the questions.
Yeah, we have the same problems everybody else does.
But we have been able to.
Work around it I think in a way that not every company has been able to again, thanks and kudos to our team our entire team.
Engineering manufacturing.
Distribution, everyone, who really have pitched in to not let our customers feel any of it.
So far knock on wood.
Thank you.
Thank you.
Your next question comes from the line of Michael Madsen from Needham and company. Your line is open.
Yes. Good afternoon, thanks for taking my questions.
Wanted to ask a couple on <unk>.
Safety net or I guess, sorry opioid safety net.
So.
I just want to get your thoughts now that it looks like Medicare is trying to repeal the EMS.
CIT rule.
And maybe that's why your.
Seemingly hinting at the need to do some DTC advertising there when you do launch it.
Yeah Yeah.
Yes, yes, yes.
Yes. Unfortunately.
That's regrettable I thought that was really good policy too.
Breakthrough products said by definition are expected by the FDA to save lives to get reimbursement right away and then analyze it a few years later to decide if it should continue decrease or increase.
So seeing that.
Paul on the waste side is disappointing I know, they're talking about may be resurrecting, it I'm not optimistic, but but yes, that's unfortunate.
Yes, that's why we are going to probably have a heavier lift with that until we get reimbursement, which normally takes a few years post product availability.
Okay.
And in terms of.
Assuming you do end up getting the product approved in Q1.
Watch some sort of DTC upper what I've seen with other companies that typically there is some sort of like a pilot.
Where it's rolled out and kind of limited geographies to evaluate how it's performing and scaled up.
Over time, I mean is that kind of how it worked with you guys or you know because it sounded like you were almost calling out a fairly material impact to your margins from us.
Assuming that you go forward with it.
No I was not calling a material impact to our margins I was trying to be truthful and the positive and a negative when Rick asked me how do I see 2022, we have not yet analyzed this impact on our margins or profit about the level of advertising and we have to do so I just want to be clear with that but of course. It is a new expense that we haven't really.
It had before we did it a little bit of it if you remember during COVID-19, where we did that.
Commercial's put together with hospital together home, we feel like we've got to do more of that and not just on television, but social media.
But yet to kind of go back we see.
That we will need to prove the value not just clinically, but economically of Massimo safety net opioid.
In just the studies we've done.
To submit to the FDA, we've already been seeing it now we need to document all of it of course it was a large study from Dartmouth that shows in hospitals.
They say $7 million, a year and had no more dead in bed with a group that was being monitored with our technology. We have to repeat those I don't think it will take 10 years I think we should be able to get those types of results hopefully much much sooner than that.
Okay. Thanks, Thanks for clarifying that margin impact.
So then in terms of a couple more on the Super Center as well.
Kind of a hot topic here, but.
Is this intended to kind of go be a higher end sensor above like the regular rainbow sensor I assume that's the case.
Or would it replace the regular kind of Rainbow sensor.
Yeah, we actually that's another good question, we do anticipate.
Eventually having only the super sensor will have to see about that we're evaluating good as I mentioned, our costs have come down dramatically since we even made the eight LCD version of Rainbow sensors versus 12, so we're going to pass that savings to our customers.
And eventually maybe just have one sensor for all the all the Rainbow users.
Okay, and so I.
I guess that leads to my question just on pricing I mean is that something that would have a price premium over your other you know rainbow sensor or is it it sounds like what you're saying is it will eventually be sort of priced at parity and just replace the old one but.
Well, we have right now I think just just maybe for reference we have our two Leds sensors, we have the four lead.
Rainbow light sensor, we have we've had eight leidy and now we have the <unk>. So what I think could what I kind of foresee and we haven't yet finalized all of this is we will continue with a two.
For OLED and maybe just have the 12 OLED and as far as pricing is concerned.
We believe we can market the 12, Billy D around where we've been market normally to eight leidy and as volumes are allow us to make more of it and make it for less than we can see a day, where we even charge less than what we charge today, even for the eight Leds.
Okay, great. Thank you.
Thank you.
Yes.
Your next question comes from the line of Jayson Bedford from Raymond James You May ask your question.
Good afternoon.
As much as I'd like to.
Dig deeper on the 248 and 12 Leds in terms of the installed base I feel like my head.
Be a little busy so I'll keep it simple here.
I think I heard I think I heard you mentioned 280.
<unk> thousand boards for the year.
That implies a bit of a step down in the fourth quarter I'm curious as to why and if I misheard you on the $2 80, let me know.
Yeah No Jason.
We're still.
Confident in the year, we look at our last guidance was about 270000.
We came in about 10000 above on the ship on the driver shipment number for the third quarter and we just kind of pass that through.
We expect to be at least 280000 for the year. So.
We're not seeing anything slowing down at all the demand is strong for all of our technology boards and instruments and we expect that to be kind of a floor for the year.
Okay.
I guess Micah.
Based on an earlier comment it sounds like there was no real.
Due to Covid in the third quarter in terms of boards, which would suggest to me that fourth quarter, probably shouldn't go down 10000 boards, that's kind of the thought.
<unk> 8000.
It's it implies 68000 for the fourth quarter.
We came in at 74000, so it's only 6000 above and we expect to at least be it at that 280000 for the year. So.
<unk>.
We're not seeing anything.
Out of the ordinary as far as demand in the quarter as Joe mentioned, it's continued expansion in hospitals that were seeing.
And we're kind of getting back to normal business patterns. So we expect.
That would be the floor and we would expect to do better than that number for the year.
Okay, Okay, and I apologize if I missed this but did you give a U S and international breakout in terms of revenue.
No, but it was about so for this quarter two thirds was U S. So about 67% and 33% was all U S.
Right.
And then I guess just.
Just lastly safety fixing that alert for opioids, just wondering if you can give us some of the initial feedback in Europe and I realize it's early but maybe some commentary on say early learnings about the launch and what you would do differently or improve ongoing forward.
Oh certainly.
Overall the launch in my opinion has been underwhelmed.
We we didn't make massive let's say to alert for Europe, we really made it for the U S. Because of the epidemic. That's recognized here, but we know Europe has its about the same amount of problems as we do so we would have expected more I think if anything it shows reimbursement might be.
More of an issue than we thought.
As far as the positives we see.
People didn't ask us for it for Covid.
Monitoring people at home because they like consumers to be able to buy it for Covid at home. We've also seen people being interested in it for.
Apnea monitoring at home after the monitoring.
So I think it's been.
Right.
Good experience as we hopefully prepared to launch in the U S.
I hope the U S.
We will be more robust as we launch.
I think some of the settlements with the opioid companies in the U S may help bolster.
Bolster that.
Even before reimbursement, but we'll have to see.
So Joe is it more just kind of sticker shock in pricing or is it just an awareness issue, that's probably a little lower in Europe than it is in the U S.
I believe it's an awareness issue I believe there's this mindset in Europe that if they prescribe bid it means they're doing something dangerous for the patient. So they are afraid of it.
But we're also going to test the pricing, we're going to offer some discounts to see if pricing makes a difference we are testing our survey that we did which.
Don't know how much to believe those but the in the surveys we did.
<unk> did not seem to be an issue at least at the prices we launched it.
But.
So I would say if I had to make a guess right now I think its lack of awareness.
And.
Just some fear about.
Recognizing that it's just going to tell a patient they have to be monitored.
You're telling them that they are in danger I think.
They might fear over there.
Okay. That's helpful. Thank you.
Thank you so much everyone for joining us today I hope that was a treat and the trick or treat season.
That we're in we show a happy Halloween and we'll talk next year.
And that concludes today's conference call. Thank you again for participating you may now disconnect.
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