Q2 2025 Masimo Corp Earnings Call
Good afternoon, ladies and gentlemen, and welcome to vascular <unk> second quarter 2025 earnings Conference call.
<unk> press release is available at triple-double you'd that Massimo Dot com at this time all lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session I'm pleased to introduce Eli Cam Cameron was vice President of business development and Investor Relations. Please go ahead.
Thank you Hello, everyone. Joining me today are CEO, Katie Simon and CFO Michael Yung.
Before we begin I would like to inform you that this call will contain forward looking statements actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are described in detail in our periodic filings with the SEC also this call will include a discussion of certain fine.
<unk> measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP or adjusted 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.
It is important to note that the Sam United business is now being classified as held for sale and reported in discontinued operations. As a result, our non-GAAP financial measures have been updated to reflect the continuing operations of mass most health care business for both current and historical reporting periods. Therefore, the financial measures, we will be covering today will.
Primarily on a non-GAAP basis, unless noted otherwise reconciliation of these measures to the most directly comparable GAAP financial measures are included within the earnings release earnings presentation, and supplementary financial information on our web site 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 I'll now pass the call to Katie's Island.
Thank you Elaine and good afternoon, everyone for the second quarter, our core healthcare business delivered strong growth in earnings performance revenue was $370 million and we achieved earnings per share of $1 33, with 600 basis points of operating margin expansion.
This exceptional performance reflects the continuation of the effective cost structure actions taken last year and as a result of hard work and strong execution across the entire organization.
I have spoken repeatedly about the incredible talent and innovation, we have at Nashville.
On that foundation, we've undertaken a thoughtful effort to expand our leadership team and key focus areas.
First we added the role of Chief commercial officer with Greg Marken.
Greg brings over 25 years of experience building and optimizing commercial organizations in the medical technology industry, where he delivered double digit growth and improve profit margins by building high performance teams.
Second we added our president of the Japan, and Asia Pacific Region. Dr. Cayman Wang came in and this is an anesthesiologist and business development leader with over 30 years of experience overseeing growth oriented sales and marketing organizations in the region.
Next we have a new chief marketing and strategy Officer, Tim Bennett.
Tim has an impressive track record of overseeing the launch and commercialization of transformational therapy, such as Mitraclip caviar and AI based platforms for market leading companies.
Tim joined Us from minority medical where he led global sales global marketing and market access across the company's category leading portfolio.
We also added an executive vice president of quality and regulatory Lynette Torres.
That brings over 20 years of deep expertise in shaping global quality and regulatory compliance strategies and most recently led these efforts at Integra Lifesciences.
Lastly, we have a new chief information Technology Officer, Gary Charter.
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Gary is it with an icy expert with a proven track record of driving large scale digital transformations and developing tech enabled products to support business growth and enhance enterprise cyber security.
These hirings followed the earlier addition of our Chief Human Resource Officer, Lisa Hillman, who led human resources that whole logic, a leading women's medical technology company.
All of these leaders share a deep commitment to the patient experience and each of them is highly qualified to help us drive our next chapter of growth and innovation.
It's a testament to the exceptional talent, we already have as well as our leading industry position that we have been able to attract such skills and dynamic conditions to our team.
With this new structure, we now have the key pillars in place to augment commercial and operating excellence to execute our growth strategy. The.
The prior responsibilities of our Chief operating officer have been redistributed across other roles, including the elevation of our engineering and operations team leaders to my executive staff.
Omar Amit has been promoted to chief technology and innovation officer.
Non some pops has been elevated to my staff as the executive Vice President of operation we.
We do not anticipate further substantial additions to leadership aside from the eventual appointment of a permanent general counsel.
Now, let me turn to our strategic and financial goals and what we're doing to achieve that.
As we have stated we are focused on investing in our core healthcare business to achieve our goals and accelerate our long term revenue growth.
Im excited about the opportunities we have to accomplish this goal and we'd like to briefly recap our growth strategy.
As I've mentioned before we are focused on three waves of growth.
<unk> commercial excellence accelerating intelligent monitoring and innovating wearable technologies.
First I'd like to address our focus on elevating commercial excellence globally.
As I mentioned, we've added key leaders to bring a strong focus on commercial execution, including our new Chief commercial officer, our new leader in Japan, and Asia Pacific and our Chief marketing and strategy Officer.
These leaders are dedicated to driving growth across our portfolio.
As described on our last earnings call, we strategically aligned our U S sales force moving from specialty teams centralized by product category to regionally led groups within our pulse oximetry infrastructure. We believe we have the best pulse Oximetry sales force in the industry and we wanted to leverage the strength of that team to pull through.
Other categories and increase our market position across all categories long term.
Looking at categories, such as kept Nagra, <unk> Brean monitoring hemodynamics and automation and those markets are were somewhere between one and $2 billion and in aggregate are growing by high single digits.
To date, our market share is less than 20% in each of those segments. The sales team alignment allows us to increase the sales representation in each U S region, such that each region now has a dedicated representative for each of the specialties, which in turn how it should help us capture more pull through because we ideally would have the same large market.
Sure in those areas as we do on pulse oximetry.
In summary, we are leveraging our leadership position in pulse oximetry to broaden our impact on patients and to broaden our market presence across other advanced monitoring category. Our goal is to achieve growth in those adjacent markets of 10% to 20%.
Now, let's turn to our second wave of growth accelerating the adoption of intelligent monitoring in this area. We are working to upgrade our sensors and create nextgen monitors featuring advanced AI based algorithms we.
We expect this will help us to continue to grow our market share, while creating greater value as customers pay for the innovation we deliver.
In the past our team developed incredibly advanced algorithms for the consumer market and we are now redeploying those innovations into sensors for use in hospitals one.
One example is our ability to detect cardiac dysfunction, such as atrial fibrillation using just the pulse oximetry sensor.
This will enable the detection of patients who are in distress earlier and it will allow conditions clinicians to take remedial action very quickly.
Our third wave of growth will come from innovating wearables longer term we continue.
To evaluate our significant opportunities to change the way patients are monitored around the world. We have a strong portfolio of wearable technology and telemarketing solutions that we are piloting today. There are numerous unmet patient needs that we are well positioned to address and we have strong capabilities and momentum behind us to do so through further innovation of our <unk>.
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Third wave of innovation will expand our long term growth potential.
In recent months I visited our employees and customers around the world. So far I visited customers regional officers and our major manufacturing locations across the United States, Saudi Arabia, Mexicali, Japan, Korea, and Malaysia in fact, I don't know where I wasn't this last quarter in total I've met more than 90% of our.
Our incredible team I've been impressed by their passion for Massimo and the patients we serve as well as their creativity and commitment to innovation. This commitment is what will drive our continued growth and I have great confidence in the team's ability to execute on our strategic growth priorities.
Just a few words on tariffs our operations and finance teams have worked relentlessly to reduce our exposure to new tariffs by implementing highly effective mitigation measures I'm very proud of our team and want to highlight that their efforts have played a big part in our ability to guide to a tariff impact that is more than 50% less than our original estimate.
Michael will expand on this more and provide updated guidance, but I do want to highlight that our updated EPS guidance now exceeds our original projections provided at the beginning of the year before the tariff situation had even started.
Despite the impact of tariffs, we are projecting 24% to 30% EPS growth this year.
I'd really like to thank our entire global team for delivering another excellent quarter, our products and technologies continue to impact millions of patients around the world I am honored to be a part of this team with that I'll turn it over to Micah.
Thank you Katie and good afternoon, everyone.
I want to begin by expressing how proud I am of our global team for their outstanding efforts. This quarter. We successfully managed the challenges of the cyber security of the supplement.
Implemented measures that reduced our tariff burdened by more than 50%.
We need to deliver strong results with revenue beating expectations.
EPS growing by 46%.
For the second quarter Health care revenue was $370 million up seven 4% on a constant currency basis.
Our consumable and service revenue grew eight 4% and our capital equipment and other revenue declined 2%.
As I mentioned earlier this year, we are observing a transitioning from capital leases to operating lease accounting under ASC 42.
This shift created more than a 1% headwind for our total growth revenue growth and as the reasons for the decrease in capital and other revenues.
Notably revenues are on track to reach our full year guidance as we are seeing more normal seasonality this year compared to last.
We also shipped 63100 technology boards and monitors this quarter, which is within our expected range.
Moving down the P&L, our gross margin of 62, 9% improved 40 basis points year over year.
Driven by 90 basis points of operational improvement.
Partially offset by 50 basis points of tariff impact.
Tariffs increased cost of sales by $2 million this quarter, which was in line with our expectations.
Our operating margin of 27, 5% improved 600 basis points year over year, driven by 650 basis points of operational improvements.
Partially offset by 50 basis points of tariff impact.
The cost structure optimization measures implemented in 2020 for literally delivering margin benefits.
Our non-GAAP earnings per share was $1 33, representing 46% versus the prior year.
In addition to our improved operating margin, we realized a lower tax rate in the quarter as we are seeing greater profits from outside of the U S, which carry a lower tax rate.
Operating cash flow for the health care business was $62 million, which allowed us to repay $38 million of debt and repurchased $14 million worth of common stock.
Now moving to our updated fiscal 2005 financial guidance.
We are projecting revenue of $1.505 billion.
The 1.535 billion, which reflects 8% to 11% growth on a constant currency basis.
Excluding the impact of new tariffs are updated guidance implies operating margins.
Of 28, 3%.
The 28, 7%, reflecting a year over year improvement 460 to 500 basis points.
Further our updated guidance, excluding tariff implies earnings per share of $5 45.
The $5 77.
Reflecting year over year growth of 30% to 36%.
Including the impact of new tariffs, we are updating our guidance for operating margins to be in the range of 27% to 27, 5%.
Representing an increase of 130 basis points at the midpoint versus prior guidance.
This is being driven by 25 basis points of operational improvements and 105 basis points of tariff expense reduction versus our prior assumption.
Further we are updating our guidance for earnings per share, including fares to be in the range of $5 20.
The $5 45, representing an increase of 35 at the midpoint versus prior guidance.
This was driven by <unk> <unk> of operational improvement.
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Our updated guidance now incorporates $17 million to $19 million, a pair of impact from new tariffs compared to our prior guidance of $33 million to $37 million.
This represents a $17 million reduction in tariffs at the midpoint versus prior guidance with over 60% of the reduction coming from our extensive efforts to mitigate the impact.
Breaking down our updated guidance range assumptions.
Assumptions for Paris.
<unk> manufactured in Mexico, and not currently eligible for U S. MCA exemptions now represents 2% of our total cost of sales and we are assuming a 30% tariff rate.
Product manufactured in Malaysia that are subject to U S. Tariffs now represent 18% of our total cost of sales.
We are assuming a 19%.
Patient table sourcing China represent 4% of our total cost of sales and we are.
Assuming a 59% tariff rate, which combines the new tariff rate of 34% with the preexisting section 301 tariff rate of 25%.
And we are now, including the potential impact of new tariffs on copper.
Copper raw materials represent up to 4% of our total cost of sales and we are assuming a tariff rate of 50%.
Although this is still a very fluid situation with all the changes in tariff rates and assumptions. It's important to note that a majority of the improvements in care.
Being driven by our mitigation actions.
These actions involve adjustments to our supply chain as well as an incentive administrative effort to qualify our products for example.
Putting those under U S MCA.
I'd like to take a moment to thank our operations and finance teams for their hard work implementing mitigation plans.
As shown in our earnings presentation materials today, we have already executed a variety of actions.
That are contributing to more than 50% reduction in the gross tariff impact.
<unk> last quarter.
We don't view our mitigation efforts is fully complete and we have already identified additional medium term mitigation measures to reduce the tariff burden even further over time.
Moving on to the cyber security related.
We reported last quarter and the second quarter, we incurred net expenses.
Senses of approximately $4 5 million to recover and fortify our systems with it.
From a team of outside experts.
These expenses are excluded from our non-GAAP results as they are nonrecurring in nature and expect it to be recovered growth insurance policy.
Finally, the divestiture of sound United announced last quarter remains on track to close by the end of the year.
To obtain necessary regulatory clearances.
Regarding the use of proceeds we anticipate share repurchase will be our priority as we believe it will be more accretive at our current share price.
Looking ahead capital deployment strategy might involve a mix of share buybacks debt reduction and tuck in acquisitions of technologies that enhance and hospital monitoring capabilities and as.
As a reminder, our 2025 financial guidance does not reflect any benefit from the use of proceeds themselves.
In closing our second quarter results clearly highlight the exceptional earnings power of our health care business.
Notably we have more than compensated for the impact of tariffs this year as our revised EPS guidance now exceed the original projections coming into the year.
Our global team has demonstrated consistent execution successfully navigating challenges such as the now network outage and new tariffs, while still delivering another outstanding quarter with that we'll open the call to questions operator.
Thank you.
Ladies and gentlemen, we will now begin the question and answer session I would like to remind everyone to ask a question. Please press the star button, followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press star one again one moment. Please for your first question.
Our first question comes from the line of Maria <unk> with BTG. Please go ahead.
Hi, good afternoon. Thanks for taking the questions I wanted to start here with the guidance update nice to see that now.
Just a bit higher Mike if you could tell us a little bit about how you're considering what the.
Inputs into that guidance range any details on kind of hospital census, the capital equipment environment.
Any impact you saw from cyber security in the quarter all of the things that went into thinking about that guidance range.
Yes, Thank you Murray.
As you can see some of it is also the quarter we've.
We came in line with our expectation.
We are seeing some benefit from foreign exchange.
And through this year.
During the quarter.
And we're holding to that 11% constant currency growth rate for the year.
Really our assumptions for the full year.
Haven't really changed and we're still assuming.
Strong consumable growth for the full year Civil service revenues.
We're assuming capital sale.
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And those were all of those companies at the end of the year.
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Everything's come pretty much in line I think the only thing is we.
As we are seeing some.
If you look at kind of a shift and a 42 that's contemplated this year, we assumed a headwind coming into the year.
And the full year and it's playing out as expected. So everything is really lining up for US right now and we feel real good about where we landed for the quarter and we were tracking for the year.
Okay very helpful.
And then I guess I wanted to ask a little bit about the sales force alignment and the progress there understand thats, obviously going to take a little bit of time, but any.
Early feedback that youre seeing from that.
New structure and any timelines that we should think about.
In terms of seeing increased adoption of these advanced parameters.
Yes, so thanks for the question.
I think really for us having a dedicated specialty sales rep for each pulse ox sales territory and really for the major regions across the U S. As is so far the feedback has been really positive that we're having better follow through in each of the regions.
But because our business is tied to committed contracts and the changes only happened in the mid middle of Q2, it's too early for US right now to quantify changes in the growth outlook or to kind of know exactly when the impact is going to happen, but we would expect to see the impact more into 2026.
Very helpful. Thank you so much Katie.
Thank you Mark Thanks Marie.
Your next question comes from the line of Jason Bednar with Piper Sandler. Please go ahead.
Hey, good afternoon, everyone.
I want to start.
With maybe the status of our relationship with Philips Big customer and partner of yours in the patient monitoring side.
A pretty deep into what was a 10 year contract to national had with Philips. There was a recent announcement of one of your competitors regarding expanded and enhanced partnership with Philips that raised some questions from investors just about your own standing with Philip So just given the kind of the platform today and with that preamble out there whats the status of mass in those relationship with.
Philips what does the opportunity set for revenue growth within that Philips customer base look like over the next decade relative to the past decade.
Will it still be growth accretive for Nashville.
Jason Yes, thanks for the question so.
As you know the Philips agreement is still in place between basketball and Philips and over time, obviously, we need to evolve that agreement. So personally I've been involved in a lot of meetings and conversations with Philips.
And even though we saw as you said a competitive press release about our relationship with Philips the national relationship with Philips remained very strong and we are in conversations to continue that partnership well into the future really two major market leaders working together, we see that as a really important for us going forward.
And strategically I.
Personally I have known the Philips organization for.
Long time in the industry for a long long period of time, and so and personally engaging in the kind of conversations about our continued partnership if you look over the last 10 years to your point, we've seen a significant increase in the maximal presence inside the fill ups kind of installed base and we would anticipate that that should continue.
Perfect. Thanks, Katie Mike one for you I think you mentioned still having some path on or having a path in front of you and just medium term mitigation.
To further alleviate some of the pressures you're feeling this year on the tariff front.
I know, it's early but do you have any early comments about how we should be thinking about the annual impact as we look ahead to 2006 from tariffs like on a net basis got a lot of moving parts here and the positive and negative columns. I think youre also confident about securing 100 basis points of core margin improvement each year. So just trying to make sure we're all appropriately calibrated.
Look ahead to next year. So any comments you have there would be great.
Yes, Thank you Jason so.
This year, our guidance implies $17 million to $19 million of tariff impacts.
And Thats really some that hit us in Q2, but then.
Stepping kind of stepping up in the back half.
If you if you look at the earnings presentation materials, we've put out there today, we put out the impact as you look at it on an annualized basis.
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If you look at it before any mitigation.
We were facing headwinds of about 390 to 540 basis points. The changes in tariff policy and rate assumptions that improved about 70 to 100 basis points.
And then if you look at the mitigation actions, we've implemented a lot of that I mentioned in my prepared remarks, where.
When we adjust our supply chain, we qualified exemptions from products.
Lot of administrative effort.
That's delivering about 120 <unk>.
190 basis points of tariff reduction on an annualized basis. So if you kind of do that.
Looked at it annualized after the mitigating actions we've implemented that.
That book is around 200 to 260 basis points.
Tariff impacted cost of goods sold.
And as you mentioned, we are continuing to work through medium term mitigation efforts that we've identified to date.
Those are opportunities that we'll be working through and those too.
It also contribute we're estimating at this point about 110 basis points of improvement and cut it down.
Nearly in half from where we were today, so that will take some time to implement and we're still working through evaluating all those measures that.
We're not giving up here, we're really trying to get after this we have seen the success, we've had in bringing that exposure down already.
We are working relentlessly to.
To mitigate this overtime.
Alright, thank you.
Youre welcome.
Your next question comes from the line of Michael Pollack of Wolfe Research. Please go ahead.
Hey, good afternoon.
On the true incremental I'm not sure if that is disclosed in the deck.
It was down over 20% in the first quarter it looks to be down year on year, 40% in the second quarter year to date of 33%. So I'm interested in more color on why this metric is the way that it is why might it get better from here and I guess, specifically I will ask the sales force changes that are being made is that an item that's for.
<unk> bookings performance in the first half and maybe.
<unk> in the back half any any feel here would be great. Thank you.
Yes, Thanks, Mike.
So the first half of the year or incremental value of these contracts.
$155 million.
We're on track for another solid year for contracting with a strong pipeline in the second half.
As we've talked about this before it's highly dependent on the timing of large deals that come up for bid throughout this year.
And we're still seeing good increase too.
No other.
Metrics like unrecognized contract revenues up 7% year over year.
We are of course.
<unk> shipments, we saw very strong consumables in the quarter.
And we're tracking well.
We do have a good pipeline for the second half.
And to execute on the full year.
And I guess, maybe just on the follow up that is the sales force changes not influence that you would call out as more deal deal timing.
Yes, yes, yes, definitely definitely related deal timing.
It's all about when certain contracts come up for bid.
And that can fluctuate from quarter to quarter year to year to year. So we feel we've got a very good pipeline ahead of us and.
We're <unk>.
<unk> X is very strong in the background.
Okay.
Thank you.
Thank you.
Your next question comes from the line of Rick Wise of Stifel. Please go ahead.
Good afternoon, everybody, Hi, Katy have micah.
Maybe to start off.
You could give us a little more color on.
Thinking about board shipments, obviously seemed like a solid number I think if I remember correctly you had talked about.
240000 to 60 for the year.
And just if I'm doing the math right I may not be.
That would imply sort of a based on first half numbers a deceleration in second half so anyway, how should we think about it how should we think about the second half.
Help set our expectations.
Yes, so Rick we're still kind of in that 60% to 65000 is what we will see.
<unk> per quarter. This year. So that's kind of how you should think about it as we move into Q3.
Q4 as well.
Right in that range and we came in at just above the midpoint of the range, where the upper part of the range for the year.
For the second quarter.
Yes, Rick I can just say kind of coming in that board shipments really vary depending on the Oems when they're ordering it's just very seasonal so it's hard to say that you can get a trend out of just a couple of quarters I mean, it's hard to hard to predict.
I think the overall year is as good to bank on.
And just a big picture question for you Kelly you've come in.
And.
No.
<unk> done obviously made some important additions and changes.
Thank you for being so clear about these initiatives.
But.
Yes.
Several people.
Asked about it let me ask it this way.
Yes.
Commercial excellence this adjacent market share there.
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The intelligent monitoring.
How do we think about it.
There's a lot of incremental sounding stuff and they are in a good way.
When do we really start when would you hope when would you want us to hold you accountable for.
For a potential acceleration in top line.
Sure.
Or however, you want to say it's related to these initiatives.
Thanks, a lot.
Yeah. Thanks for great questions. So as you know, we're gonna be holding an investor conference in December of this year and at that time, we will have a lot more details available for like what is the timing of some of these new products with intelligent monitoring acceleration et cetera. So we know sort of the year et cetera right.
But we don't know the exact kind of quarter and so we'll have a lot more.
Clarity about that at that time, and then we'll be able to give more updated guidance. So I understand how it's like well when will we see this upside, but I think it's going to take us a little bit more time to do some of that detailed planning, but I would for sure say by the Investor Conference, we should be able to give you some clear expectations as we go into next year.
Great. Thanks, so much.
Thank you.
Your next question comes from the line of <unk> Chopra of Wells Fargo. Please go ahead.
Hey, good afternoon, and congrats on a nice quarter.
Just a quick question for me is can you provide an update on your progress with your hemodynamic monitoring technology do you still expect to launch in 2026, and maybe talk about your ability to compete in the market. Thanks.
Yes. So thanks for the question. So on hemodynamics, we really expect to launch so we already have some pilots out there with the litho technology that was acquired several years ago, using our smart cable connecting to our monitors our existing root monitor what youre hearing US talk about is that next year, we'll be creating a new.
Nextgen root monitor and that Nextgen mature will have.
Kind of even better technology, if you will with new screens et cetera related to hemodynamics. So you would see that coming out towards the back half of next year and we will continue to launch into using the smart cable onto our existing roof for piloting and forgetting kind of detailed patient feedback and customer feedback.
And so so that's sort of the status I don't know if that directly answers your question, but that's where we see us in the back half of next year with a kind of full product launch and with a dedicated team kind of going after that.
Great. That's helpful and just one quick follow up if I could.
Can you just let us know of the cyber attack.
If you expect any impact in Q3 are you back to normal operating levels. Thank you.
Yes, Thank you vivek.
So yes, we'll back fully operational we did.
Provide that update during the quarter the.
Second quarter of course as you saw we finished.
Right in line with where we were hoping to for the quarter. So.
So it was a great recovery by the team we don't.
Any material impact on the quarter a year.
We are fully operational.
All systems are running so manufacturing up.
Our order taking up and also our ability to shift out of our overseas that could be.
From warehouses so.
We're excited we're very thankful for all the hard work by the global team and being able to do.
To meet the quarter and get us on track for a great year, Yes, I think the only other additional comment is that as we brought our systems back up as anyone would do we tried to bring them up in a four to five way.
So that we would kind of be stronger honestly to prevent future attacks and so we feel really good about that and we've got some amazing expert help to make that happen and it was all kind of is as Mike had mentioned before within the context of the insurance and so on.
In fact, I mean, it's never great to have a cyber attack, but I think it really helped us get stronger as an organization.
Your next question comes from the line of Matt Taylor of Jefferies. Please go ahead.
Hi, Thanks for taking the question.
I just wanted to ask you about any change in competitive dynamics.
Your main competitor did call out on their last.
Earnings call and pressures from generic and reprocessing and I was wondering if you saw any of that increasing out in the marketplace.
Yeah. Thanks for the question. So what what we would say is that we have not experienced the same pressure I mean, theres always reprocessed sensors kind of out there in the marketplace, where we did not see it have a significant impact on us in the quarter and we just haven't seen any as much of an increase as we've seen.
As the competition was mentioning.
And maybe one follow up so could you give us any color on some of the product lines.
Side of pulse ox things like Rainbow Technography Oaktree any broad strokes in terms of how those are doing or anything new there.
Yes. Thank you Matt Yeah. So we'll give a more comprehensive update at the end of the year, but right now what we've seen year to date.
Tracking very well.
Our growth rates there across our advanced.
Kramer categories.
Rainbow is tracking well.
Strong growth from Technography brain monitoring there. Thank.
Think about it in line with our long range target growth rates for this category.
Great. Thank you so much Mike.
Youre welcome. Thank you thanks, Matt.
Your next question comes from the line of Mike Matson with Needham. Please go ahead.
Yeah. Thanks, a few I guess for Mike So the third quarter.
Seasonality looks like consensus has got sort of about flat about $370 million.
I know you don't give quarterly guidance, but just any color you can provide there in terms of what we should be expecting sequentially would be helpful.
Yes, yes, thanks, Mike.
If you look at you remember if you recall on the last earnings call I mentioned that.
Coming into the year with guidance.
Normal seasonality this year.
Last year was a little bit outside the norm where results Brook strengthen.
Hospital admissions growth in the second and third quarters last year.
This year, we're seeing kind of that normal seasonality of the business, which is.
Becoming a little bit more predictable for us.
But if you look at that we expected.
Revenues to step down in Q2, and then step down further in Q3, and then our seasonally strong Q4, so thats that.
Kind of how we're seeing it play out this year keep in mind, we do have an extra week of revenue in the fourth quarter. So if you adjust for that.
That's the best way to look at it.
Back into that normal seasonality that you've laid out.
For the year.
Okay got it and then just with the guidance for both revenue and EPS.
You raised the revenue range, a little bit if I was like $5 million I think.
But your constant currency growth is the same but I mean, the dollars weakened quite a bit I can't remember if you are hedging on the top line or something or.
And then maybe talk about what you are what are you expecting for currency impact both revenue and to your earnings.
EPS for the year.
Absolutely.
We're maintaining our range of 8% to 11% constant currency growth and basically.
The benefits of a more favorable exchange rates on our reported revenue.
That's how we're thinking about the guide so we raised the.
Reported revenues by $5 million at both ends of the range and held our constant currency guidance.
Okay, so how much of the.
What's the net currency benefit I guess for revenue.
5 million or $5.
Five yes, okay alright.
We're seeing it play out yes.
Then I guess, that's just not really material in terms of the bottom line.
It's contributing.
If it does drop through.
A little bit little bit above our overall operating margin rate so David.
Got it.
Okay got it thanks.
Thank you.
There are no further questions at this time and with that I will turn the call back to Katie Simon for closing remarks. Please go ahead.
Operator, I think we may still have one more question in the queue can you double check that please.
That as Stuart noted my apologies. Our next question comes from the line of Jayson Bedford of Raymond James. Please go ahead.
Good afternoon. Thanks Eli.
Beer for that.
Alright.
So maybe just a few cleanup questions here.
You mentioned the goal to improve share in your advanced parameters kept geography brain on entering.
And which of these markets do you think you have the best opportunity to gain share and can you. Just can you gain share with just more sales force focus or do you need.
Our new product story tied to these expected share gains.
Yes. Thanks for the question Great question.
So we would say that we have fantastic technologies. If you look at over the last five years seven years, we've acquired some great technologies in those spaces. So I would say, it's a combination so we're going to have better sales force focus and alignment and then the second thing is youll start to see us come out with.
Nextgen sensors that will play into those spaces as well as the nexgen monitors it will come out in the next couple of years that will actually help to supplement that so it's not going to be like overnight, but youre going to see it kind of gradually increasing but we do believe that we have fantastic technology in that category is just that.
We kind of come have come later into those markets and so we don't have as much of a socket installed base across the board, especially on some of the OEM.
Manufacturers presence. So that's another thing that we're kind of working on as well and so I would say if you look at across the space. We're pretty excited the way that we sort of lifted those adjacent markets would be kind of our order of excitement is the way to think about it.
Okay. Okay. That's helpful.
Mike.
Related to an earlier question just unrecognized contract revenue it looks like it was down sequentially for the second straight quarter I guess the easy question is why but is there a timing dynamic as well tied to that.
Yeah, there is so.
So we saw.
The consumable revenues up about 6% sequentially in Q1, Q2, which we expected and that was all five to where we are recognizing now the large U S. Tender awards. So we're seeing that.
The mix of the consumer.
Similar capital kind of normalizing.
Normalized in Q2 and.
That's what that is recognizing revenue on that contract. So that was a big positive for us this quarter.
Okay.
Okay, and then last question somewhat uninteresting.
Lower tax rate in <unk> I haven't gone through all of the guidance here, but what is the assumed tax rate for the year tied to the new EPS guidance.
Yes, so for the full year.
At the midpoint of our guidance range, we're about.
Around 23, 8% at the midpoint.
Okay.
Thank you.
Great. Thank you.
There are no further questions at this time I will now turn the call back to Katie Simon for closing remarks. Please go ahead.
So first of all thanks to everybody for joining the call today and for your interest and Massimo We look forward to joining you again on our next earnings call next quarter.
Thanks, everyone.
Ladies and gentlemen. This concludes today's conference call. We thank you for participating and ask that you. Please disconnect your lines.
Okay.
Yeah.
Yeah.
Okay.
Yeah.