Q3 2023 Masimo Corp Earnings Call

Okay.

Speaker 1: Good afternoon, ladies and gentlemen, and welcome to Massimo's third quarter, 2023 earnings conference call. The company's press release is available at www.massimo.com. At this time, all lines have been placed on mute to prevent any background noise. After the speakers are marked, there will be a question and answer session.

Good afternoon, ladies and gentlemen, and welcome to Massimo <unk> third quarter 2023 earnings Conference call.

The company's press release is available at Www Dot Massimo dotcom.

At this time all lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

Speaker 1: I'm pleased to introduce the Eli Cameron M. Massimo's Vice President of Business Development and Investor Relations.

I am pleased to introduce you I cant remember Massimo with ice president of business development and Investor Relations.

Speaker 2: Thank you. Hello, everyone. Joining me today are Chairman and CEO Jo Kiani, an Executive Vice President and Chief Financial Officer Micah Young.

Thank you Hello, everyone. Joining me today are chairman and CEO, Joe Kiani, and executive Vice President and Chief Financial Officer Micah Young.

Speaker 2: This call will contain forward-looking statements which reflect management's current judgment, including certain of our expectations regarding fiscal year 2023 financial performance.

This call will contain forward looking statements, which reflect management's current judgment, including certain of our expectations regarding fiscal year 2023 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.

Speaker 2: 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.

<unk> 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 accounting principles or GAAP.

Speaker 2: 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 .

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 <unk>.

Speaker 2: In addition to gap 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.

Speaker 2: 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.

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.

Speaker 2: The company believes that these non-GAF financial measures increase transparency and better reflect the underlying financial performance of the business.

Speaker 2: Therefore, the financial measures we will be covering today will be primarily on a non-gap basis unless noted otherwise. Further, we will also be referencing pro forma financial measures, which include historical results for sound united prior to the acquisition date of April 11, 2022. In our presentation today, we will once again be referring to this business as our non-health care segment.

Therefore, the financial measures, we will be covering today will be primarily on a non-GAAP basis unless noted otherwise further we will also be referencing pro forma financial measures, which include historical results for sound United Prior to the acquisition date of April 11th 2022.

In our presentation today, we will once again be referring to this business as our non health care segment.

Speaker 2: 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 10K and 10Q in order to make informed investment decision.

Reconciliation of these measures to the most directly comparable GAAP financial measures are included within the earnings release and the 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.

Speaker 2: 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 Chiani. Thank you, Eli.

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 Kiani. Thank you Eli.

Speaker 3: Good afternoon and thank you for joining us for Massimo's third quarter 2023 earnings call.

Good afternoon, and thank you for joining us for Massimo <unk> third quarter 2023 earnings call.

Speaker 3: Our performance for the third quarter was within our guidance range communicated last quarter and was highlighted by record market share gains in hospitals with a record level of new customer contracts for our set pulse oximetry and other solutions.

Our performance for the third quarter was within our guidance range communicated last quarter and was highlighted by record market share gains in hospitals with.

Our record level of new customer contracts for our set pulse oximetry and other solutions.

That said, our health care business is navigating a clear transition away from Covid era conditions.

Speaker 3: That said, our healthcare businesses navigating a clear transition away from COVID era conditions.

Speaker 3: Despite sequential improvements from the second quarter, sensor utilization remains below prior trend, and hospital budget pressures have continued to slow the pace of equipment installation.

Slight sequential improvement from the second quarter sensor utilization remains below prior trend and hospital budget pressures have continued to slow the pace of equipment installations.

Speaker 3: This is keeping sensory utilization below our expectations for the second half of the year.

Keeping CECI utilization below our expectations for the second half of the year.

Speaker 3: As we continue to gather more data on hospital utilization of our sensors, we're beginning to see that customer behavior and sensor purchasing patterns are transitioning back to the pre-pandemic growth trend line we saw from 2017 to 2019.

As we continue to gather more data on hospital utilization of our sensors.

We're beginning to see that customer behavior and sensor purchasing patterns are transitioning back to the pre pandemic growth trend line, we saw from 2017 to 2019.

Speaker 3: Michael will have more to say about these observations later in the call. But together with our record contracting performance this year to date, this data reinforces our conviction and underlying long-term growth rate for our healthcare business.

Michael will have more to say about these observations later in the call, but together with a record contracting performance. This year to date. This data reinforces our conviction and the underlying long term growth rate for our health care business.

Speaker 3: On the consumer side, we continue to realize strong growth for herables, which remains a key focus area for us.

On the consumer side, we continue to realize strong growth for <unk>, which remains a key focus area for us.

Speaker 3: The rapid uptake of our hearables products is helping to partially offset the challenging consumer environment that our premier audio brands are facing for audio components and home entertainment systems.

The rapid uptake of our <unk> products is helping to partially offset the challenging consumer environment that our premier audio brands are facing for audio components and home Entertainment systems.

I will share updates on some of our exciting new products and opportunities later in the call, but now I'll ask Micah to review our third quarter results in more detail and provide an update on our 2023 financial guidance. Thank you Joe for the third quarter, we achieved consolidated revenue of $479 million and.

Speaker 3: I will share updates on some of our exciting new products and opportunities later in the call, but now I will ask Micah to review our third quarter results in more detail and provide an update on our 2023 financial guidance. Thank you, Joe. For the third quarter, we achieved consolidated revenue of $479 million and non-GAAP earnings per share of $0.63.

non-GAAP earnings per share of <unk> 63.

Speaker 4: Our performance for the third quarter was within our guidance range communicated last quarter with revenue at the low end of the range and earnings at the high end of the range.

Our performance for the third quarter was within our guidance range communicated last quarter with revenue at the low end of the range and earnings at the high end of the range.

Speaker 4: For our healthcare segment, third quarter revenues were $308 million, reflecting a 6% year-over-year decline.

For our healthcare segment third quarter revenues were $308 million, reflecting a 6% year over year decline.

Speaker 4: As with last quarter, the decline was driven by lower sensor utilization, which continues to suppress growth from our record level of new customer conversions.

As with last quarter. The decline was driven by lower sensor utilization, which continues to suppress growth from a record level of new customer conversions and.

Speaker 4: In addition, the elevated backlog of new equipment installations by our OEM partners and constrained capital budgets at hospitals also impacted cells.

In addition, the elevated backlog of new equipment installations by our OEM partners and constrained capital budgets at hospitals also impacted sales.

Speaker 4: We shipped over 63,000 drivers during the quarter, which was in line with the second quarter level.

We shipped over 63000 drivers during the quarter, which was in line with the second quarter level.

Speaker 4: During the third quarter, we saw a slower-than-expected pace of recovery and sensor utilization.

During the third quarter, we saw a slower than expected pace of recovery and sensor utilization.

Speaker 4: Further, the pace of equipment installations from new hospital conversions remains slower than expected, leading us to reduce our guidance for the healthcare business for the year.

Further the pace of equipment installations from new hospital conversions remains slower than expected, leading us to reduce our guidance for the health care business for the year.

Despite these near term headwinds, we did see a 10% sequential increase in revenue in what is normally our seasonally slowest quarter due in part to a rebound in sensor orders from customers, who had been working down inventory.

Speaker 4: Despite these near term headwinds, we did see a 10% sequential increase in revenue in what is normally our seasonally slowest quarter, doing part to a rebound in sensor orders from customers who have been working down inventory. This dynamic bolsters our confidence that customer behavior and sensor purchasing patterns are returning to pre-pandemic trends.

This dynamic bolsters, our confidence at customer behavior and sensor purchasing patterns are returning to pre pandemic trends.

As we move past the difficult comparisons, we expect sensor purchasing patterns to shift back to the growth trend line. We saw from 2017 to 2019 and believe our health care business will resume annual growth from our updated guidance level for 2023.

Speaker 4: As we move past the difficult comparisons, we expect sensor purchasing patterns to shift back to the growth trend line we saw from 2017 to 2019, and believe our healthcare business will resume annual growth from our updated guidance level for 2023.

Let me take a few minutes to share some additional data that informs our perspective as you can see in our supplemental slides for today's results. When you step back and look at the longer term growth trends, we are seeing healthy online.

Speaker 4: Let me take a few minutes to share some additional data that informs our perspective. As you can see in our supplemental slides for today's results, when you step back and look at the longer-term growth trends, we are seeing healthy on-trend line performance from our products on a year-to-date basis.

On trend line performance from our products on a year to date basis.

Speaker 4: From 2017 to 2023, our average annual growth rate for total consumables revenue is 10%, which is in line with the pre-COVID growth rate.

From 2017 to 2023, our average annual growth rate for total consumables revenue was 10%, which is in line with our pre COVID-19 growth rate.

Speaker 4: Further, the average annual growth rate for rainbow and hemodynamics revenue is 20% and the average annual growth rates for our brain monitoring and capnography and gas revenues are 27% and 16% respectively.

Further the average annual growth rate for Rainbow in Hemodynamics revenue is 20% and the average annual growth rates for our brain monitoring and kept RFE and gas revenues are 27% and 16% respectively.

This longer timeframe makes a distortions of the COVID-19 years clear and together with the recent rebound in purchasing from our customers who previously had elevated inventories supports our belief that the business is tracking well with its pre COVID-19 growth rate and that our targeted long term growth rate remains achievable.

Speaker 4: This longer timeframe makes the distortions of the COVID years clearer. And together with the recent rebound in purchasing from our customers, who previously had elevated inventories, supports our belief that the business is tracking well with its pre-COVID growth rate, and that our targeted long-term growth rate remains achievable.

Speaker 4: Our strong performance in converting new customers also reinforces our optimism about our long-term growth trajectory.

Our strong performance in converting new customers also reinforces our optimism about our long term growth trajectory.

We achieved another record breaking level of new hospital contracts in the third quarter. These new contracts include sensor sales for new customers that reflect our continued market share gains in fact, our unrecognized contract revenues for the third quarter increased 16% over the prior year period.

Speaker 4: We achieved another record-breaking level of new hospital contracts in the third quarter. These new contracts include sensor cells for new customers that reflect our continued market-shared gains. In fact, our unrecognized contract revenue for the third quarter increased 16% over the prior year period.

And was up 4% sequentially from the prior quarter to reach $1 4 billion.

Speaker 4: and was up 4% sequentially from the prior quarter to reach $1.4 billion.

For our non healthcare segment third quarter revenues were $171 million, representing a year over year decline of 24% on a constant currency basis, a difficult environment for consumer discretionary purchases is adversely affecting the market for high end audio systems.

Speaker 4: For our non-healthcare segment, third quarter revenues were 171 million, representing a year-to-year decline of 24% on a constant currency basis. A difficult environment for consumer discretionary purchases is adversely affecting the market for high-end audios.

Speaker 4: With non-healthcare overall, while non-healthcare overall is suffering from the negative macro environment, we again realize strong growth for our hearables category, which increased by more than 130% year over year, and now represents 10% of segment cells.

With non health care overall.

Non health care overall is suffering from the negative macro environment, we again realized strong growth for our <unk> category, which increased by more than 130% year over year and now represents 10% of segment sales.

The positive momentum in <unk> has helped to partially offset the macro conditions weighing on the market for high end audio systems.

Speaker 4: The positive momentum in hearables has helped to partially offset the macro conditions weighing on the market for high-end audio systems.

Now moving down the P&L for.

Speaker 4: For the third quarter of 2023, we realized consolidated non-gap gross margin of 50%. This includes gross margins of 60% for our healthcare business and 33% for our non-healthcare business.

For the third quarter of 2023, we realized consolidated non-GAAP gross margin of 50%. This includes gross margins of 60% for our health care business and 33% for our non health care business.

Speaker 4: As we saw in the second quarter, gross margins were again affected by the de-leveraging impact of lower cells on our fixed overhead costs and an unfavorable segment and product mix.

As we saw in the second quarter gross margins were again affected by the deleveraging impact of lower sales on our fixed overhead costs and an unfavorable segment and product mix.

Speaker 4: For our consolidated business, our non-GAAP operating profit was $57 million versus $81 million in the prior year, as decreased profits from lower revenues were partially offset by the benefits realized from reducing operating expenses, including performance-based compensation.

For our consolidated business, our non-GAAP operating profit was $57 million versus $81 million in the prior year.

As decreased profits from lower revenues were partially offset by the benefits realized from reducing operating expenses, including performance based compensation.

And our non-GAAP earnings were <unk> 63 per diluted share versus $1 per share in the year ago period.

Speaker 4: And our non-gap earnings were 63 cents per diluted share versus $1 per share in the year ago period. Despite the year we're here to-

Despite the year over year decline in our third quarter results.

Speaker 4: Our record levels of hospital contracting and continued traction high growth categories are positive signals for sustainable growth over the long term. In addition, we are partially offsetting lower revenues in 2023 with the expense control measures we have implemented.

Our record levels of hospital contracting and continued traction in high growth categories are positive signals for sustainable growth over the long term and.

In addition, we are partially offsetting lower revenues in 2023 with the expense control measures we have implemented.

Speaker 4: Now I'd like to provide an update on our 2023 financial guidance.

Now I'd like to provide an update on our 2023 financial guidance.

Speaker 4: For the fourth quarter, we are projecting consolidated revenue of 526 to 576 million, with healthcare revenue of 320 to 345 million, and non-healthcare revenue of 206 to 231 million.

For the fourth quarter, we are projecting consolidated revenue of $526 million to $576 million with health care revenue of 320 to 345 million and non health care revenue of $206 million to $231 million. Further we are projecting non-GAAP operating profit of 65 to 79 million and non-GAAP.

Speaker 4: Further, we are projecting non-GAP operating profit of 65 to 79 million and non-GAP EPS of 74 cents to 94 cents.

<unk> EPS of <unk> 74.

94.

For the full year, we are projecting consolidated revenues of $2 billion 25 million to $2 billion $75 million.

Speaker 4: For the full year, we are projecting consolidated revenues of $2,025,000,000 to $2,075,000,000.

Speaker 4: For our healthcare segment, we are projecting revenues of $1,255,000,000 to $1,280,000,000, which now includes $6 million of year-over-year currency headwinds. This represents a 3-5% reduction from our prior guidance on a constant currency basis.

For our healthcare segment, we are projecting revenues of $1 $255 million to $1.280 billion, which now includes $6 million a year over year currency headwinds. This represents a 3% to 5% reduction from our prior guidance on a constant currency basis.

For the non healthcare segment, our full year revenue guidance is now $770 million to $795 million.

Speaker 4: For the non-health care segment, our full year revenue guidance is now 770 to 795 million. Which now includes 9 million of year-

Which now includes $9 million a year over year currency headwinds.

Speaker 4: This represents a 2 to 5% reduction from our prior guidance on a constant currency base.

This represents a 2% to 5% reduction from our prior guidance on a constant currency basis.

Speaker 4: We've incrementally reduced fourth quarter revenue guidance to reflect softer demand. Our guidance range also reflects a seasonal sales step up typically seen in the fourth quarter.

We've incrementally reduced fourth quarter revenue guidance to reflect softer demand our guidance range also reflects the seasonal sales step up typically seen in the fourth quarter.

Okay.

Speaker 4: We are now projecting non-gap operating profit of 256 to 270 million compared to prior guidance of 296 to 312 million. At the midpoint, we are lowering our operating profit guidance by 41 million, which is this is comprised of a 51 million dollar impact from lower revenues, a $9 million impact from incremental currency headwinds, and a $3 million impact from increased litigation costs.

We are now projecting non-GAAP operating profit of $256 million to $270 million compared to prior guidance of $296 million to $312 million at the midpoint. We are lowering our operating profit guidance by $41 million, which is this is comprised of a $51 million impact from lower revenues and $9 million impact from incremental currency headwinds and a $3 million.

Packed from increased litigation costs.

Speaker 4: We expect to partially offset these headwinds with $22 million in cost reduction.

We expect to partially offset these headwinds with $22 million in cost reductions.

Speaker 4: Excluding the incremental currency headwinds our revised operating profit guidance represents a 10% reduction from our prior guidance at the midpoint

Excluding the incremental currency headwinds our revised operating profit guidance represents a 10% reduction from our prior guidance at the midpoint.

Hi.

Speaker 4: Lastly, we are now projecting non-GAPEPS of $2.85 to $3.05 down from our prior guidance of $3.35 to $3.05.

Lastly, we are now projecting non-GAAP EPS of $2 85 to.

To $3 <unk> down from our prior guidance of $3 35 to $3 55.

Speaker 4: In summary, although this has been a challenging post-COVID transition year for our business, we believe there are many reasons to be positive about our long-term outlook. Over the last quarter, we have gained a better understanding of the transition in customer behavior and ordering patterns. We've had consistent success in winning new customers over the last three years, and Joe will share more about the exciting potential of recent FDA clearances and upcoming new product launches to extend that track record.

In summary, although this has been a challenging year challenging post COVID-19 transition year for our business. We believe there are many reasons to be positive about our long term outlook over the last quarter. We have gained a better understanding of the transition and customer behavior in ordering patterns. We've had consistent success in winning new customers over the last three years and Joe will share.

More about the exciting potential of recent FDA clearances and upcoming new product launches to extend that track record or.

Speaker 4: Our market share for patient monitoring and hospitals is steadily rising as we win new customer contracts at a record pace.

Our market share for patient monitoring and hospitals are steadily rising as we win new customer contracts at a record pace.

Speaker 3: We believe a return to long-term growth rate targets for our healthcare segment will be more visible next year as we complete the transition back to pre-COVID trends. With that, I'll turn the call back to Joe. Thank you, Micah. As you just mentioned, our innovative new products are driving our record contract wins and sustaining our ability to grow over the long term.

We believe a return to long term growth rate targets for our healthcare segment will be more visible next year as we complete the transition back to pre COVID-19 trends with that I'll turn the call back to Joe. Thank you Mike.

As you just mentioned our innovative new products are driving a record contract wins and sustaining our ability to grow over the long term.

<unk> has built a track record of achievements over the past 30 years that is unsurpassed in the field of patient monitoring.

Speaker 3: Massimo has built a track record of achievements over the past 30 years that is unsurpassed in the field of patient monitoring.

Speaker 3: We're extending these accomplishments with a combination of innovation and responsiveness to patient needs, then it enables us to create high value products that truly make it difficult.

We're extending these accomplishments with a combination of innovation and responsiveness to patient needs.

April's us to create high value products that truly make a difference.

Speaker 3: A great example is one of our fastest growing products, our oxygen reserve index parameter. The oxygen reserve index parameter.

A great example is one of our fastest growing products are oxygen reserve index premature.

The oxygen reserve index parameter oreille.

Speaker 3: has accounted for over 20% of our worldwide sales of Rainbow Products year to date.

Has accounted for over 20% of our worldwide sales of Rainbow products year to date.

Speaker 3: despite the fact that it has not been available in the U.S.

Despite the fact that it has not been available in the U S.

Speaker 3: We just received FDA clearance for RI last month and are launching it in the US this quarter.

<unk> received FDA clearance for Oreille last month and are launching it in the U S. This quarter.

I'm excited about the prospects for <unk> in the U S. Because it has clear and well established clinical benefits and as the first noninvasive technology for analysis that are currently done through invasive procedures.

Speaker 3: I'm excited about the prospects for R.I. in the U.S. because it has clear and well-established clinical benefits and is the first non-invasive technology for analysis that are currently done through invasive procedures.

Speaker 3: ORI has great utility for detecting moderate hyperoxia. ORI is useful for determining when to stop the intubation involving a difficult airway, provide additional supplemental oxygen, and attempt the intubation again prior to surgery.

Ray has great utility for detecting moderate hyperoxia.

Ray is useful for determining when to stop the intubation involving a difficult airway provide additional supplemental oxygen and attempt to intubation again prior to surgery.

Speaker 3: or I'd also use school to avoid overoxygenating patients in the ICU and other places where oxygen is prescribed.

Or is also useful to avoid over oxygenating patients in the ICU and other places where oxygen is prescribed.

Speaker 3: We expect to realize a similar traction for RRI in the US as we have overseas, which should boost rainbow revenues over time.

We expect to realize similar traction for or are in the U S. As we have overseas, which should boost rainbow revenues over time.

Speaker 3: For context, the US market typically accounts for 2 3rds of our global health care product sales.

For context, the U S market typically accounts for two thirds of our global health care product sales.

Speaker 3: In conjunction with the US clearance of ORI, we have introduced our four LED rainbow sensor.

In conjunction with the U S clearance of ROI, we have introduced are for Leds Rainbow sensor.

Speaker 3: In some countries where the four LED rainbow sensors have been available, many customers have switched from our two LED set sensors to our four LED rainbow set sensors.

In some countries, where the four led Rainbow sensors has been available many customers have switched from our two lead.

Set sensors to our four lead Rainbow set sensors.

We also have combined SP HB with litho cardiac output monitoring to provide for the first time indication of oxygen delivery of patients to care providers.

Speaker 3: We also have combined SPHB with LITCO cardiac output monitoring to provide for the first time indication of oxygen delivery of patients to care providers. Both ROI and oxygen delivery were received incredibly well at the American Society of Anesthesiologists Conference in October , and we expect both to help improve patient care and drive our rainbow sensor revenue.

Both oreille and oxygen delivery will received incredibly well at the American Society of Anesthesiologists Conference in October and we expect both to help improve patient care and drive our Rainbow sensor revenues.

Speaker 3: Building on our precision measurements, hospital automation solutions and telemonitoring platforms, Massimo is empowering clinicians with Halo. Our AI-powered clinical decision support tools designed to drive transformation from episodic and reactive care models to care enriched by continuous and predictive insights.

Building on our precision measurements hospital automation solutions and tell them monitoring platforms Massimo is empowering clinicians with Halo.

Our AI powered clinical decision support tools designed to drive transformation from episodic and reactive care models to cure enriched by continuous and predictive insights.

Deterioration prediction tools will proactively prompt clinicians, helping them make more informed decisions and navigate their clinical pathways more effectively.

Speaker 3: Deterioration, prediction tools, will proactively prompt clinicians, helping them make more informed decisions and navigate their clinical pathways more effective.

Speaker 3: Our AI-powered clinical decision support tools are helping clinicians improve care across a multitude of disciplines, including respiratory care, cardiovascular care, and neurology and brain health. And soon, HALO will help clinicians improve care in infectious disease treatment, hemodynamics, and hand hygiene compliance.

Our AI powered clinical decision support tools are helping clinicians improve care across a multitude of disciplines, including respiratory care cardiovascular care and neurology and brain health as soon Halo will help clinicians improve care and infectious disease treatment cable a dime.

<unk> and hand hygiene compliance.

Speaker 3: In Consumer Health, we launched our Stork Baby Monitor in late August in both brick and mortar and online retailers, including Target, Best Buy, Amazon, and BabyList.com.

In consumer health, we launched our Stork baby monitor in late August in both brick and mortar and online retailers, including target best buy Amazon and baby less dot com.

Speaker 3: We are wrapping up distribution and will be in 250 outlets by year end with plans to quadruple that in 2024.

We are ramping up distribution and will be in 250 outlets by year end with plans to quadruple that in 2024.

Speaker 3: And in consumer audio, the Denon Pro Pro earbuds continue to see strong demand as we head into the holiday season.

And in consumer audio that denim Pearl Pro ear buds continue to see strong demand as we head into the holiday season.

Speaker 3: In telemonitoring, we continue to wait for FDA clearance of W-1. In countries where we have been able to offer W-1 for hospital-to-home telemonitoring, we have seen strong interest in using the W-1 in telehealth programs, making us believe that the availability of W-1 will improve patient care in the U.S. and advance our hospital-to-home strategy.

And tell them monitoring we continue to wait for FDA clearance of W. One in countries, where we have been able to offer <unk> for hospital to home <unk>, we have seen strong interest in using the <unk> and telehealth programs, making us believe that the availability of <unk>.

<unk> will improve patient care in the U S and advance our hospital to home strategy.

Finally, I want to comment briefly on the landmark ITC victory, we won over Apple the decision validates our ongoing efforts to hold Apple accountable for unlawfully mis appropriating our intellectual properties.

Speaker 3: Finally, I want to comment briefly on the landmark ITC victory with one over Apple. The decision validates our ongoing efforts to hold Apple accountable for unlawfully misappropriating our intellectual property.

Speaker 3: Just as importantly, it advances our mission to improve lives by protecting the incentives to innovate and ensuring that products that really work are able to compete on a level playing field.

Just as importantly, it advances our mission to improve lives by protecting the incentives to innovate and ensuring that products that really work are able to compete on a level playing field.

Speaker 3: To conclude today's comments, we are encouraged by the stabilization of sensor orders.

To conclude today's comments, we are encouraged by the stabilization of sensor orders.

Speaker 3: and record new hospital cost customer wins.

And record New hospital cost customer wins.

Speaker 3: which reflect the superiority of our products and give us confidence in the long-term growth trajectory for our healthcare business.

Which reflect the superiority of our products and give us confidence in the long term growth trajectory for our health care business we.

Speaker 3: We have a healthy portfolio of new and rapidly growing products and are excited about the potential contributions they can make, not just to our business, but to people's health and reducing the cost of care.

We have a healthy portfolio of new and rapidly growing products and are excited about the potential contributions. They can make not just to our business, but to people's health and reducing the cost of care.

Speaker 3: We remain dedicated to pursuing our mission to improve life, improve patient outcomes, reduce the cost of care, and take non-invasive monitoring to new sites and applications. With that, we'll open the call to questions. Operator.

We remain dedicated to pursuing our mission to improve life improve patient outcomes reduce the cost of care and take noninvasive monitoring to new sites and applications with that we'll open the call to questions operator.

Yes.

Speaker 1: Thank you. If you would like to ask a question, please press star and the number one on your telephone keypad.

Thank you if you would like to ask a question. Please press Star then the number one on your telephone keypad.

Speaker 1: Your first question comes from the line of Rick Wise with Stifle.

Your first question comes from the line of Rick Wise with Stifel.

Rick Please go ahead.

Speaker 5: Good afternoon, everybody. Apologize for the background noise. I'm at an airport. Let me start by talking about the order stabilization that you're seeing. I just want to be clear in my mind, how, where are inventories?

Good afternoon, everybody, we apologize for the background noise I'm in an airport.

Let me start to.

Talking about.

The order stabilization.

We're seeing.

I just wanted to be clear in my mind.

Where are inventories.

Speaker 5: Now it's from your perspective relative to the last time you spoke to us three months ago and when you're talking about this order stabilization, is this something that you've seen throughout the quarter or you've felt that for the last month? And or is it something you're just starting to see now as you head into the fourth quarter?

Now from your perspective.

Relative to the last time, you spoke to us.

Months ago and.

You are talking about this order stabilization is this something that you've seen throughout the quarter or you felt that for the last month.

Or is it something you are just starting to see now as you head into the fourth quarter.

Well this.

Rick.

Speaker 3: Rick, even though we have a really good relationship with our customers, they don't share their inventory levels with us. So, what we consider as order stabilization is the increase we're seeing in sensor purchases.

Even though we have a really good relationship with our customers they don't share their inventory levels with us. So what we consider as order stabilization is to increase we're seeing in sensor purchases.

Speaker 3: And that has continued through today. Michael, do you want to add anything to that?

And that has continued through today.

Michael do you want to add anything to that.

Speaker 4: Yeah, so Rick, we've been monitoring, we've got another three months of data points here to look at purchasing patterns. We've been monitoring it very closely. The trends are encouraging, they're heading the right direction. I think the slope of that recovery, we thought was a bit, you know, a steeper recovery than that we'd return back. And that's why we're lowered guidance for the year.

So Rick we've been monitoring we've got another three months of data points here to look at purchasing patterns, we've been monitoring it very closely.

The trends are encouraging their head in the right direction I think the slope of that recovery.

We thought was a bit.

Steeper recovery then in that we've returned back and Thats why we are lowering guidance for the year, but.

Speaker 4: In terms of where we are today and what we've seen through the first five weeks of this quarter, the trends are heading the right direction. We are seeing things stabilizing to more kind of that pre-COVID utilization trend and things are recovering. It's just not the pace of recovery that we expected with the data that we were looking at in the last quarter.

In terms of where we are today and what we've seen through the first five weeks of this quarter.

The trends are heading the right direction.

Are seeing things stabilizing.

To more kind of that pre COVID-19 utilization trend.

And things are recovering its just not the the pace of recovery that we expected.

With the data that we were looking at in the last quarter.

Speaker 5: And Mike, I know how conservatively you approach things, and I'm sure you thought in giving us the prior guidance range for the year that you were being thoughtful about the low end and the high end of the range. Why are you feeling today in giving this new range that you've, now you're getting it right? Or why should we hope you're getting it right? Is it because of this pickup in orders? Is it just that straightforward?

And Mike I know, how conservatively you approach things and I'm sure, you've thought and giving us the prior guidance range for the year and that you were being.

Paul about the low end and the high end of the range.

Why are you feeling today and giving this new range.

Okay. Now you are getting it right and why should we hope that you are getting it right is it because of this pickup in orders it just that straightforward.

Speaker 4: Yeah, I think it's multiple things. I mean, first of all, you know, we...

Yes, I think it's multiple things I mean first of all.

We've gained market share through strong contracting that continues so that's encouraging.

Speaker 4: We've gained market share through a strong contract, and that continues, so that's encouraging. We haven't kept pace in terms of equipment and installations with the gains we've had on contract, and we're still behind on getting those caught up.

<unk>.

We haven't kept pace with the.

In terms of equipment installations with the gains we've had on contract and we're still.

Behind on getting those caught up but.

Speaker 4: We still have strong numbers in terms of installations that we are going to help us grow, not only in Q4, but grow into Q4, but also as we move in the next year. The biggest...

We still have strong.

And numbers in terms of installations that we are going to are going to help us grow not only in Q4, but grow into Q4, but also.

As we move into next year, the biggest thing that we see though right now is like I said, we've been monitoring those weekly revenue trends. We've got another three months of data points and especially when you look at October.

Speaker 4: thing that we see, though, right now is, like I said, we've been monitoring those weekly revenue trends. We've got another three months of data points. And especially when you look at October , you know, we've got a lot more clarity today than we did last quarter. We like, you know, like you mentioned, we gave you the best.

We've got a lot more clarity today than we did last quarter. We like like you mentioned, we gave you the best.

Speaker 4: Guidance range we could with the data we had at the time now that we got another quarter of data We believe that we have a very you know, we're back to Providing a higher high confidence guidance range You know as we move into q4

Guidance range, we could with the data we had at the time now that we got another quarter of data. We believe that we have a very we're back to providing a higher high confidence guidance range.

As we move into Q4.

Speaker 5: And just last for me, I apologize for asking, but I have to ask about the year ahead. Thinking about 2024, Micah, if you've got the right picture right now, it seems to me, one, you've got relatively easy comps, two, back to trend line, base business growth, and you're launching all these new products. Can you sort of...

And just last for me.

What I mean.

I apologize for asking but I have to ask you about the year ahead thinking about 'twenty 'twenty four Mike.

If you're if you've got the right picture right now it seems to me one you've got relatively easy comps to back to trend line based business growth and you're launching all these new products can you sort of.

Speaker 5: help us think through, I'm not asking for guidance today, but just, we have to come up with numbers. How would you frame a reasonable starting place for us?

Help us think you im not asking for guidance today, but I, just we have to come up with numbers.

How would you frame a reasonable starting place for us.

Speaker 5: So to help you start to set the stage for expectations for the year ahead. Thank you very much.

To help you set the stage for.

Our start to set the stage for our expectations for the year ahead. Thank you very much.

Yeah, absolutely so Rick I mean, we'll share more details on our expectations for 2024 on the year end call, but as I mentioned before and even in my prepared remarks based on the underlying trends, we're seeing in the business with the new customer conversions, we expect a return to annual annual growth next year.

Speaker 4: Yeah, absolutely. So, Rick, I mean, we'll share more details on our expectations for 2024 on the year in call, but as I mentioned before, and even in my prepared remarks, based on the underlying trends, we're seeing the business with the new customer conversions. We expect to return to annual annual growth next year. And and, you know, there will be some.

And in.

There will be some.

Speaker 4: some comps that change in the first half. I mean, we've got some tougher comps in the first quarter, easier comps in the second quarter and those comps start to normalize in the back half. So, you know, we expected return to growth. You know, we'll have to...

Some comps that change in the first half I mean, we've got some tougher comps in the first quarter easier comps in the second quarter and those comps start to normalize in the back half so.

We expected return to growth.

Well, we'll have to.

Speaker 4: to work through and finalize our plans for next year. But we believe we're back on that growth trend heading into next year. Thank you. Thank you.

To work through and finalize our plans for next year.

But we believe we're back on that on that growth trend heading into next year.

Thank you.

Yes.

Sure.

Okay.

Next caller please.

Speaker 1: Your next question comes in a line of Matt Taylor with Jeffery. Matt, please go ahead.

Your next question comes from the line of Matt Taylor with Jefferies.

Please go ahead.

Hey, Thanks for taking the question.

Speaker 6: Hey, thanks for taking the question. Um, so I guess I wanted to try to, uh, work through some of the disconnect between what you're talking about with center sensor utilization, but obviously your, your contract when showing the backlog and the growth there. Helping us understand how those things come together.

So I guess I wanted to try to work through some of the disconnect between what you are talking about with sensor sensor utilization, but obviously your contract wins, showing the backlog and the growth there.

Just to understand how those things come together.

Speaker 6: to actually recognize revenue next year and grow strongly over this new baseline. So that's the setup for the question. But the real question is, A, are you seeing any success with some of the actions that you've taken to activate folks to actually get

We recognize revenue next year and grow strongly over this new baseline.

So thats the setup for the question, but the real question is.

Are you seeing any success with some of the actions that you've taken to activate folks to actually get it.

Speaker 6: installations into the recommended sensor revenues so that we can see that rev rack going forward. When do you think you can call this trend, a real trend, it seems like a bit of a divergence from last couple quarters in terms of how people are using sensors? I guess one more you need to know whether that's durable or it's kind of a short-term change.

Installations incident recognize sensor revenues that we can see that Rev rec going forward.

And when do you think you can call this new trends real trend it seems like a bit of a divergence from last couple of quarters in terms of how people are using.

<unk> and I guess, what more do you need to know whether that's durable or.

It's kind of a short term change.

Yes.

Speaker 3: Well, we have seen more of our installations, just not at the level that we had hoped by this time. We also did go back to the ambulatory surgery centers that are seeing more surgeries now than before and have been successful in getting many of them to switch to single patient use sensors.

Well, we have seen more of our installations.

Not at the level that we had hoped by this time.

We also did go back to the ambulatory surgery centers.

Are you seeing more surgery style than before.

And had been successful in getting many of them to switch to single patient use sensors.

Speaker 3: As I indicated before, we believe roughly 70, 80% of the Advertroise Surgery Center is used in Massimo. So they've just been historically using reusable. So we think we can hopefully make that change because it's better for everyone, especially the patient.

As I've indicated before we believe.

Roughly 70% to 80% of ambulatory surgery centers use Massimo.

So they've just been historically using reusable. So we think we can hopefully make that change because it's better for everyone, especially the patients.

Speaker 3: So yeah, we believe as we look into 2024, um,

Yes, we will.

Believe as we look into 2024.

We believe the worst is behind us.

Speaker 3: We believe the worst is behind us. We believe the...

We believe the.

Speaker 3: Even if trends and census growth doesn't occur, we believe it should be stable. And because of our increase in market share, we should be growing anyway. And that's why I think Micah and his preferred remarks stated that we think we'll be seeing normal growth next year.

Even if trends and census growth doesn't occur.

We believe it should be stable and because of our increase in market share we should be growing anyway, and that's why I think Mike in his prepared remarks stated that we think we'll be seeing normal growth next year.

Got you.

Speaker 6: And maybe it's a follow-up, assess, and separate questions and graphs on the IPC win. Can you help us understand what this could actually mean in some different scenarios for you going forward, assuming that does get finalized? And there is an injunction, you'll have some leverage. But what can you do with that in the context of some of the other, I guess, battles that you're going to have with Apple going forward?

And maybe as a follow up it's just a separate question congrats on the ITC win.

Can you help us understand what this could actually mean in some different scenarios for you going forward, assuming that does get finalized and there is an injunction youll have some leverage but what can you do with that in the context of some of the other.

I guess battles that youre going to have with Apple going forward.

Well I think the most important and maybe more consequential.

Speaker 3: I think the most important and maybe most consequential

Speaker 3: result that a patent holder looks for is an injunction.

That.

Patent holder looks for is an injunction.

Speaker 3: So if indeed then junction goes into place, I think we'll be benefited no matter what. If we can't come...

So.

If indeed, the injunction goes into place I think will be benefited no matter what.

If we can't come.

To deal with Apple, where we can work together for the benefit of their customers.

Speaker 3: to a deal with Apple where we can work together for the benefit of their customers.

Speaker 3: we will do better as a result of having a monopoly over our intellectual property while that monopoly lasts, which isn't that long. It's got maybe five more years left in it. So we think it's very positive and we hope to share good news regarding either one moment in time or hopefully many moments in time in the future.

We will do better as a result of having a monopoly over our intellectual property, while debt monopoly left which isn't that long. It's got maybe five four years left in it. So so we think it's very positive and we we hope.

To share good news regarding either one moment in time or hopefully many moments in time in the future.

Great. Thanks, Joe.

Yes.

Your next question comes from the line of Jason Bednar with Piper Sandler Jason go ahead.

Speaker 1: Your next question comes in the line of Jason Bedner with Paper Sandler. Jason, go ahead.

Speaker 5: Hey, good afternoon. Thanks for taking my questions, guys. Joe and Mike, I want to pick up a bit on Rick's question looking at 2024 and really, you know, ask about some of the commentary in your release today, some of your remarks, really focusing on the the element where you're setting, you say you're setting the stage for a strong 2024, you know, not just revenue as Rick asked, but what about EPS as well as we consider some of those variable

Hey, good afternoon, thanks for taking my questions guys.

Joe and Mike I wanted to pick up a bit on Rick's question looking at 2024.

And really asking about some of the commentary in your release today. Some of your remarks really focusing on the key element, where you're setting you say you are setting the stage for a strong 2024.

Not just revenue as Rick asked but what about EPS as well as we consider some of those variable comp items normalizing higher next year I think you're also shifting some manufacturing out of Mexico over to Malaysia, Mike I don't know if you want a comment on what we should think about for like duplicative costs or what that means for gross margins next year I'm just trying to.

Speaker 5: items normalizing higher next year. I think you're also shifting some manufacturing out of Mexico over to Malaysia. Mike, I don't know if you want to comment on, you know, what we should think about for like duplicative costs or what that means for gross margins next year. I'm just trying to understand, you know, does that 24 strength extend not just to revenue growing, but also EPS growing year over year?

Understand there's 'twenty does that 24 strength extend not just to revenue growing but also EPS growing year over year.

Yeah. So so Jason let me, let me kind of step through that.

Speaker 4: So, so Jason, let me let me kind of step through that, you know, in terms of we talked about the revenue growth, you know, we're getting a lot more confidence going into next year to turn return to annual growth on the year, barring some of those comps throughout the year, but.

No.

Terms of we talked about the revenue growth, we're getting a lot more confidence going into next year to turn return to <unk>.

Annual growth on a year.

Barring some of those comps throughout the year, but.

If you look at where we're at today the opportunity we have in front of US is to drive gross margins and that's been something we're very focused on as we exit this year and move into next year and we've got several initiatives around that including.

Speaker 4: If you look at where we're at today, the opportunity we have in front of us is to drive gross margins and that's been something we're very focused on as we exit this year and move into next year and we've got several initiatives around that, including shifting more and more volume to Malaysia.

Shifting more and more volume in Malaysia in.

And some other cost reduction initiatives that we have for certain products.

Speaker 4: and some other cost reduction initiatives that we have for certain products.

Speaker 4: The other thing is, is our consumable growth that we're seeing now and carrying it in next year, even though capital continues to be suppressed, we should see some good mixed benefits that flow through in gross margins as we move into 2024.

The other thing is is our consumable growth that we're seeing now and carrying into next year, even with even though capital continues to be suppressed we shouldnt see some good mixed benefits that flow through in gross margins.

As we move into 2024.

In terms of your comments on your question around operating expenses, I think where we expect to get the margin improvement is going to be mostly through gross margin. We're trying to do everything we can to offset the add back of variable comp.

Speaker 4: In terms of your comments on your question around operating expenses, I think where we expect to get the margin improvement is going to be mostly through Gross Margin. We're trying to do everything we can to offset the addback of variable comp to try to deliver good bottom line EPS growth. We still have a lot to work through through our planning process that we're going to be wrapping up in December and as we exit the year and provide guidance.

To try to deliver good bottom line EPS growth.

Still have a lot to work through through our planning process that we're going to be wrapping up in December and as we exit the year and provide guidance early next year, but.

Speaker 4: early next year. But, you know, we're trying to take the right expense actions. We've been taking that through the last two quarters.

We're trying to take the right expense actions, we've been taking that through the last two quarters.

Speaker 4: to try to offset that add back on variable expenses. I think I referred to last quarter.

To try to offset that add back on.

Variable expenses, I think I referred to last quarter.

Speaker 4: that we had around 74 million or so of variable combat coming back into the P&L.

That we had around 70 $474 million or so of our variable comp add back coming back into the P&L. So, but we've also been very diligent on getting after expenses to try to offset some of that but where youll see more outweighed benefit will be through gross margins and it will in opex.

Speaker 4: But we've also been very diligent on getting after expenses to try to offset some of that, but where you'll see a more outweighed benefit will be through gross margins and it will and op-ex.

Yes.

Speaker 5: Okay, so maybe to put a finer point, I mean, does the margins expand EPS grow next year and then the follow up would be kind of a separate topic here. You know, when we, when we think about sensor utilization and trying to model that forward.

Okay. So maybe just put a finer point I mean, the margins expand EPS grow next year and then the follow up would be kind of a separate topic here.

When we think about sensor utilization.

And the model that forward.

Speaker 4: You know, coupled with the massive amount of boards that we've seen placed or installed over the past few years during the pandemic and Meal after the pandemic, you know, what's the right utilization level? We should be considering as board use normalizes. I guess as I think through those drivers shipment over the past few years

Coupled with the massive amount of boards that we've seen placed are installed over the past few years during the pandemic and immediately after the pandemic whats the right utilization level, we should be considering as board used normalizes and I guess as I think through those driver shipments over the past few years youre covering a lot of general ward beds.

Speaker 5: You're covering a lot of general ward beds that you weren't covering before. They have lower utilization.

You werent covering before they have lower utilization per driver, presumably so does the average consumption per driver actually need to be lower than the 2017 to 2019 trend you're quoting I guess I'm just trying to figure out kind of kind of how Rick was like how do we model forward considering that we're looking at a different massimo today than we were in.

Speaker 5: per driver, presumably. So, does the average consumption per driver actually need to be lower than the 2017 to 2019 trend, you're quoting, I guess I'm just trying to figure out, you know, kind of how Rick was, like, how do we model forward, you know, considering that we're looking at a different Massimo today than we were in like 2018 or 2019.

Like 2018 or 2019.

Speaker 4: Yeah, so so Jason, I would say that, you know, through.

Yes, so Jason I would say that through the.

Speaker 4: some of the COVID years we saw a step up in terms of the revenue per driver. I think we're seeing it settle back into to kind of the utilization from 2019. But we also believe that we'll be able to grow that and improve the revenue per driver move, back again going forward. So I think we're seeing a settle back in to kind of what we were seeing back in 2019.

Some of the Covid years, we saw a step up.

In terms of the revenue.

For driver I think we're seeing it settled back into kind of the utilization.

2019, but we also believe that that will be able to grow that and improve the revenue per driver.

Back again going forward. So I think we're seeing a settled back in to kind of what we were seeing back in 2019.

Speaker 3: But again, as we start to drive additional revenues from these new customer conversions, we've got a lot of equipment installations we've done that we're not fully leveraging at this point. So, we should see improvements moving forward. And as we mentioned earlier on the call, with the launch of the four LED rainbow sensor,

But again as we start to.

Drive.

Additional revenues from these new customer conversions, we've got a lot of equipment installations, we've done that we're not fully leveraging at this point. So we should see improvements moving forward.

Mentioned earlier on the call with the launch of the four led <unk>.

Our Rainbow sensor, which will carry about a 50% premium to our standard <unk> set sensor that many customers are a whole whole half switching to <unk>.

Speaker 3: which will carry about a 50% premium to a standard to LED set sensor that many customers are all half switching to.

Speaker 3: and hopefully with more sales of rainbow hemoglobin sensor, not just to track hemoglobin, but to allow for measurement of oxygen delivery with our cardiac output monitor.

And hopefully with more sales of Rainbow hemoglobin sensor not just to track hemoglobin, but to allow for measurement of oxygen delivery with our cardiac output monitor.

Speaker 3: We think, as Mike has said, while the volume of sensors per socket per year might be the same as it used to be in 2019, the revenue per socket will be greater.

I think as Mike has said.

While the volume of sensors per socket per year might be the same as it used to be in 2019, the revenue per socket will be greater.

Okay.

Back in queue guys. Thank you.

Okay.

Speaker 1: Your next question comes in the line of Marie Tivo with DTIG. Marie, please go ahead.

Your next question comes from the line of Marie Thibault with <unk> Murray. Please go ahead.

Speaker 7: Good evening, thanks for taking the questions. Wanted to check in on one of the headwinds that you had discussed earlier this year. I think it was, you know, you had a number of large orders that didn't come through on the time that you'd hoped. Where are we with those? Did we see any of those recognized in the quarter or could we see those in Q4? And then as part of that, can you help me understand exactly why the equipment installation backlog has gotten so bad with the OEMs? Are they short on labor? Is it just sort of too much workload? Is it something the hospitals are telling them?

Good evening, Thanks for taking the questions I wanted to check in on one of the headwinds that you had discussed earlier this year I think it was.

You had a number of large orders that didn't come through on the time that you would hope where are we with those did we see any of those recognized in the quarter or could we see those in Q4 and then as part of that can you help me understand exactly why the equipment installation backlog has gotten so bad with the Oems are they short on labor or is it just sort of too much workload.

Is it something that hospitals are telling them any more detail.

Speaker 8: Any more detail on that? Sure, Marie.

Sure Murray.

No.

Speaker 3: First of all, I just want to say on the hospital installations, the OEMs are loosening and giving us the pieces we need for the installation, but the hospital's nursing shortage, staff shortage is delaying some of our installations. I think your first question.

First of all I, just want to say on the hospital installations.

Yes.

The Oems are loosening and giving us the pieces, we need for the installation, but the hospitals nursing shortage staff shortage is delaying some of our installations.

I think your first question was on <unk>.

Speaker 3: Large orders. Yeah, I've already forgotten about those. Yeah, the large orders did not come in again in Q3 and we're not projecting them in our Q4 numbers. We haven't lost them, they're still there, but it's getting frustrating as quarter after quarter we anticipate them and they don't come in. So no, they did not come in.

Large orders large orders yeah, yeah, I've already forgotten about those yes, the large orders did not come in again in Q3.

Not projecting them in our Q4 numbers.

We haven't lost him there is still there, but it's getting frustrating us quarter after quarter.

We anticipate them and they don't come in so no they did not come in.

Speaker 7: Okay, and just to be clear, they included an in-cure for guide.

Okay, and just to be clear are they included in Q forget.

They are not included in the Q4 guidance note. Okay. That's really helpful. Thank you for that and then one kind of high level question.

Speaker 7: They're not included in the Q4 guidance, no. OK, that's really helpful. Thank you for that. And then one kind of high-level question. You know, we've seen a competitor of yours in the headlines for potential spin-out of the business unit or possibly an acquisition. Are you seeing any impact at this point in the field? I know that there's kind of an ongoing discussion, but curious if that's helping with market share at all.

A competitor of yours in the headline for central spin out of the business unit or possibly an acquisition are you seeing any impact at this point in the field I know that there's kind of an ongoing discussions but curious if that's.

Helping with market share at all.

Well.

Speaker 3: Well, Marie, we have been getting market share against the Nellcore division of the metronic floor.

Marie we have been gaining market share against the Nellcor division of Medtronic for.

I think couple of decades, and nothing has changed and sometimes I hear them, saying something to the contrary and it is not true.

Speaker 3: I think a couple of decades and nothing has changed. And sometimes I hear them saying something to the contrary and it is not true. As far as their transition or their spin off, I've heard rumors that the buyer can't get the money together to buy them. So I don't know even if it's happening, but assuming it happens, we think it should be positive for us and not negative. Okay.

As far as their transition or spinoff I've heard rumors that the buyer can get the money together to buy them. So I don't know if it's happening, but assuming it happens we think it should be positive for us and not negative.

Okay very interesting thank you Frank.

Thank you.

Yeah.

Speaker 1: Your next question comes from the line of Michael Pilar with Wolf Research. Michael, please go ahead.

Your next question comes from the line of Michael <unk> with Wolfe Research. Please go ahead.

Thank you.

Speaker 9: Another one of the callouts from last quarter was excess inventory at certain customers. Micah had sounded like in your prepare remark that you're seeing order patterns there, return towards normal. And I know the visibility on your end is not super high, but

Another one of the callouts from last quarter was.

Excess inventory at certain customers might get it sounded like in your prepared remark that.

You know youre seeing order patterns there.

Return towards normal.

And I know the visibility on your end is not.

Not super high, but can you say confidently.

Now that you feel like the channel is.

As you.

Speaker 9: feeling more correct in that these customers that had excess might might no longer any other color that you can provide on that topic.

Feeling more correct and that these customers that had excess might might no longer any other color that you can provide on that topic would be great.

Speaker 4: Yeah, Mike, so from the ordering patterns that I see of the customers, I feel like we've got the worst behind us. Can I predict every customer and how they manage inventory in this tight environment with capital budgets and capital and constrained operating budgets and how they utilize their sensors and their inventories? It's not easy to do that. But I can say that where things are trending, it's...

Yes, Mike so from the ordering patterns that I see of the customers I feel like we've got the worst behind us.

Can I predict every customer and how they manage inventories in this tight environment with capital budgets, and captain and constrained operating budgets and how they utilize their sensors and their inventories.

Not easy to do that so.

But I can say that where things are trending.

I am more encouraged than a lot more encourage this quarter than I was last quarter, just because we had limited data points in and I think it gives us the confidence for this this new guidance range.

Speaker 4: I'm more encouraged than a lot more encouraged this quarter than I was last quarter, just because we had limited data points. And and I think, you know, it gives us the confidence for this this new guidance range. Last quarter, like I like I mentioned, we were we just did not have.

Last quarter like I mentioned, we were we just did not have as much of the view is what I would have liked.

Speaker 10: as much of a view as what I would have liked. And now that we do and the trends are continuing to step up and improve sequentially, it's given us a confidence that we're through the worst of it. And I think now we're encouraged that we can get back to growth.

And now that we do and the trends are continuing to step up and improved sequentially.

It's given us the confidence that we're through the worst of it and.

I think now we're encouraged that we can get back to growth.

Speaker 10: So yeah, I feel much better at this moment.

So, yes, I feel much better at this moment.

And then as a follow up.

Speaker 9: And then to follow up for Joe, perhaps just kind of a fresh reflection on Sound United.

For Joe, perhaps just kind of a fresh reflection on.

Sound United is it.

Speaker 9: You know, relative to your expectations, how do you feel about it? Is it is it proving a distraction? Is it creating opportunities that, do you think it's the position to deliver the opportunities that you saw in it?

Relative to your expectations, how do you feel about it is it is improving distraction as it creating opportunities that.

Do you think it's still positioned to deliver the opportunities.

That that you saw in Ed as you as a consumer products closer to Prime time, just how youre feeling about.

Speaker 9: consumer products closer to prime time. Just how you're feeling about running that business today would be great.

At running that business today would be great. Thank you.

Speaker 3: Thank you. As we announced when we announced we were going to acquire Sound United, I said give us three years, and if in three years it's not working, we'll get rid of it. Since then, it has been constantly.

Thank you.

We announced when we.

Announced we're going to acquire stone United.

Said give us three years and it's been three years it is not working well.

We will get rid of it.

Since then.

It has been.

Constantly.

Reminding us what a good thing we did to acquire it because one it has allowed our health care business to stay focused on the health care business as we make this attempt.

Speaker 3: Reminding us that what a good thing we did to acquire it because one it has allowed our health care Business to stay focused on the health care business as we make this attempt for consumer health, which isn't Something that I think we could ever ignore because health is moving to the home Healthcare is moving to the home. And so it's something we had to do, but I didn't want to lose focus in our normal Hospital business

For consumer health.

Isn't something that I think we could ever ignore because health is moving to the home health care is moving to the home and so its something we had to do but I didn't want to lose focus and our normal hospital business. Secondly, the other positive is that the management team.

Speaker 3: Secondly, the other positive is that the management team, the employees, they're excited about the consumer health products that we're getting into.

<unk>. They are excited about the consumer health products that were getting into.

<unk>.

Speaker 3: We did not hear from them. Hey, leave us alone. We just want to sell speakers and AVRs and the contrary. They're excited about being part of Massimo, helping people live better lives.

We did not hear from them. He leave US alone. We just wanted to sell speakers and <unk> on the contrary. They are excited about being part of Massimo helping people live better lives.

Speaker 3: In addition, our focus on their business has put them in the segment where the market is growing where they have a good reason to be there, which is the hearables that has grown over 100% since a year ago. And last but not least, the launch of Stork.

In addition.

Our focus on their business has put them in the segment, where the market is growing where they have a good reason to be there, which is the hero bowls that has grown over 100% since a year ago and last but not least.

The launch of Stork.

Into the.

Speaker 3: stores, we wouldn't have known who to call, where to start, and hearing some of the stories we heard firsthand and how those were done, it would have taken us years to figure that stuff out.

Stores, we wouldn't have known who to call where to start.

And hearing some of the stories, we heard firsthand on how those were done it would have taken us years to figure that stuff out.

Speaker 3: So no, I'm more than ever believing it. There's some important products that have to get rolled out, like freedom.

So no more.

More than ever believe in it there's some important products that have to get rolled out like freedom.

Speaker 3: Obviously, that was the biggest reason. The Herobles was the second reason and Stork, which was the third. So please, please hang in there. I really think this is the right thing for Massimo. I really think it's the right thing for people and for even pairs. It's gonna help bend the cost curve of hospital and patient care.

Obviously that was the biggest reason to Hugo boss was a second reason and stork, which was the third so.

Please please hang in there I really think this is the right thing for Massimo I really think it's the right thing for people and for even payers is going to help bend the cost curve of the hospital in patient care.

Okay.

Yes.

Okay.

Yes.

Operator next question please.

Our final question comes from the line of Jayson Bedford with Raymond James Jason. Please go ahead.

Speaker 1: All right, your final question comes from the line of Jason Bedford with Raymond James. Jason, please go ahead.

Speaker 11: Good afternoon, maybe just a few cleanup questions here. Just on from sensor utilization, you've mentioned normalization post COVID a few times during the script here, but it didn't seem like COVID was much of a factor last year. So why don't you think you experienced slower utilization in sensors last year? Yes.

Good afternoon, maybe just a few clean up questions here.

On sensor utilization, you've mentioned normalization post COVID-19 a few times during the script here.

And it didn't seem like Covid was much of a factor last year. So why don't you think you experienced lower utilization than last year.

Well I think first of all there.

Speaker 3: There are certain provisions that went into effect with insurers that pushed patient care from the hospitals to surgery centers.

There are certain provisions that went into effect with insurers that pushed patient care from the hospitals to surgery centers.

Speaker 3: Secondly, as our sales force was, I think, trying to react to a lower census that was occurring, they did certain volume orders.

Secondly, as our Salesforce was.

Trying to react to a lower census that was occurring.

They did certain volume.

Orders.

Speaker 3: that by discounting our sensors to some large customers. So that I think helped continue our growth during that period. When I became aware of it, I stopped it because the sensor, where our razor blade business and providing discounts on sensors just did not make sense to me. And but...

That.

By discounting our sensors to some large customers.

So that I think helped continue our growth during that period.

When I became aware of it.

Topped it because the sensor where a razor razorblade business and.

Providing discounts on sensors, just did not make sense to me and.

But from what Im seeing out there.

Speaker 3: of from what I'm seeing out there, like everyone saw during COVID, we saw tremendous growth. We normally have grown $100 million a year. During COVID, we grew $200 million the first year of it. The next year, we still grew over $100 million. And now we're kind of catching up with that

Like everyone saw during Covid, we saw tremendous growth, we normally have grown $100 million a year during COVID-19, we grew $200 million.

The first year of it the next year, we still grew over $100 million and.

And now we're kind of catching up with that.

Speaker 3: bolus of growth and We're hopefully at a point where things should be as bad as it gets with purchasing patterns of sensors and because of our increase in Market share we should see growth next year regardless

Bolus of growth and for.

For hopefully at a point, where things should be as bad as it gets.

The purchasing patterns of sensors and because of our increase in.

Market share, we should see growth next year regardless.

Okay.

Speaker 11: And you have pretty good visibility. You've mentioned market share a few times. You have pretty good visibility that these are competitive wins.

And you have pretty good visibility you've mentioned market share at two times you have pretty good visibility that these are competitive wins.

Speaker 3: Absolutely. Our whole business for the last 1998 has been to target hospitals that don't have Massimo and fully convert them to Massimo. If you look at the

Absolutely.

Our whole business for the last 1998 has been to target hospitals that don't have Massimo and fully convert them to Massimo.

If you look at.

Speaker 3: The graphs that Michael put out there today, you can see kind of where we were for the first nine months of the year for the past several years. And we've seen incredible record growth.

The graph that Michael put out there today, you can see kind of where we were for the first nine months of the year for the past several years and we've seen incredible record growth.

Speaker 3: in COVID 2020, 2021, 2022, and this year, it's more than ever. So it is definitely a market share gain. It's definitely competitive wins. And I can't remember when we lost a customer. So it's not like we're winning some or we're losing some. The numbers we're giving you is what we believe to be the normalized wins and losses in terms of new incremental business.

Covid 2000, 22021, 2022, and this year, it's more than ever. So it is definitely a market share gain it's definitely competitive wins and I can't remember when we lost the customer. So it's not like we're winning some who were losing some the numbers, we're giving you.

Is what we believe to be the normalized wins and losses in terms of new incremental business.

Okay.

Speaker 11: Was there a contribution from Stork and if not maybe you can just kind of reframe the potential revenue contribution here.

Was there a contribution from stork and if not maybe you can just kind of reframe.

The potential revenue contribution here.

Speaker 10: I think it was minor, but yes, there was. Michael, do you want to speak to that? Yeah, so Jason, we've launched Stork in late August . Sales today have been modest. We're continuing to build out the distribution of Stork with expansion of retailers over the next year. I think we mentioned in prepared remarks that.

I think it was minor but yes, there was.

Michael do you want to speak to that.

Jason We've launched a store in late August sell today have been modest.

We're continuing to build out the distribution historic with expansion retailers over the next year I think we mentioned in prepared remarks that I think 250 stores with with target thats going to expand significantly over the course of the next year.

Speaker 10: I think we're in 250 stores with Target that's going to expand significantly over the course of the next year. We're also in Best Buy and Amazon retail as well.

We're also in best buy and Amazon.

Retail as well so.

Speaker 10: So sales to date have been modest, but we're still excited about this product and believe it'll achieve great success, especially when we get the regulatory clearance and we're able to really differentiate this product in the marketplace.

Sales to date have been modest, but we're still excited about this product and believe it will achieve great success, especially when we get the regulatory clearance.

And we're able to really differentiate this product in the marketplace.

Okay.

And then just maybe lastly.

Speaker 11: I may have missed it, but your thoughts on expanding the board.

I may have missed it but your thoughts on expanding the board.

Yeah actually today, we did an 8-K, we're happy to announce that Mr. Ralph Coffman will be joining our board.

Speaker 3: Yes, actually today we did an 8K. We're happy to announce that Mr. Ralph Clawson will be joining our board.

Yes.

Speaker 11: Okay, so you've added one or you're just wondering you're adding two.

Okay. So you've added one.

Just one are you adding to.

Speaker 3: Well, we're going to add at least one more, but we are.

Well, we're going to add at least one more but we are.

Speaker 3: We're working through it. The nominating committee has changed, the chair of the nominating committee is new, we have new members and they're vocal, and we're trying to, we're trying our best to manage a process in the midst of all of it, but we're eager to add more.

We're working through it the nominating committee has changed the chair of the nominating Committee is new.

We have new members and they're vocal and we're trying to.

We're trying our best to manage a process in the midst of all of it but we're eager to add more.

Okay. Thank you.

Speaker 3: Thank you very much. I think that was our last call. We appreciate your time and look forward to good days where we're back to, I think, meeting, beating, and raising. So thank you.

Thank you very much I think that was our last call. We appreciate your time and look forward to.

Good day, where we're back to I think meeting, beating and raising.

Thank you.

Speaker 1: Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect.

Ladies and gentlemen, this concludes today's call. Thank you for joining you may now disconnect.

Speaker 12: Please wait, the conference will begin shortly.

Please wait the conference will begin shortly.

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