Masimo Corporation

Good afternoon, ladies and gentlemen, and welcome to Mossimo's second quarter 2023 earnings conference call. The company's press release is available at www.mossimo.com. At this time, all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. I'm pleased to introduce Eli Kammerman, Mossimo's Vice President of Business Development and Investor Relations.

Thank you. Hello, everyone. Joining me today are Chairman and CEO Joe Chiani and Executive Vice President and Chief Financial Officer Micah Young. This call will contain forward-looking statements which reflect management's current judgment, including certain of our expectations regarding fiscal year 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 projections and forecasts are discussed in detail in our periodic filings with the SEC. You will find these in the investor relations section of our website. Also, this call will include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP financial measures. In addition to GAAP results, these non-GAAP financial measures are intended to provide additional information to enable investors to assess the company's operating results in the same way management assesses such results. Management uses non-GAAP measures to budget, evaluate, and measure the company's performance and sees these results as an indicator of the company's ongoing business performance. The company believes that these non-GAAP financial measures increase transparency and better reflect the underlying financial performance of the business. 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 11, 2022. In our presentation today, we will once again be referring to this business as our non-healthcare segment. Reconciliation of these measures to the most directly comparable GAAP financial measures are included within the earnings release and supplementary financial information on our website. Investors should consider all of our statements today together with our reports filed with the SEC, including our most recent form 10-K and 10-Q, in order to make informed investment decisions. In addition to the earnings release issued today, we have posted a quarterly earnings presentation within the investor relations section of our website to supplement the content we will be covering this afternoon. I'll now pass the call to Joe Chiani.

Thank you, Eli. Good afternoon and thank you for joining us for Massimo's second quarter 2023 earnings call. As we discussed four weeks ago, we are disappointed with the level of sales we achieved in the second quarter in both segments of our business and have reduced our revenue and earnings outlook for 2023. Micah will provide a detailed review of the quarter and our updated guidance shortly. but I want to share our view of prevailing trends in our key markets, how Massimo is doing in this environment, and how we're responding to them. In healthcare, we believe inpatient volumes this year remain close to flat relative to 2019, while our original 2023 guidance contemplated a step up in inpatient volumes above those pre-COVID levels. we provided our guidance, we also had large new product orders in the pipeline that we hoped would help us exceed our guidance. And if patient census growth was lower than expected, these large orders would offset the lower than expected growth. Unfortunately, we did not see the inpatient census growth, and those large orders have not come in yet. The forecast we are giving you today assumes we will not get most of the large orders, and inpatient census growth will not return in the second half of 2023. If the rebound and inpatient census growth does not return, then we have reset our baseline this year and will expect our normal growth to return in 2024, given our strong hospital wins over the last two years. If inpatient census growth does return, then we could exceed our updated guidance this year. In the meantime, we're taking action to mitigate the impact of the shortfall in revenues. Notably, we will reduce our expenses by over $100 million. We're also refocused our field resources to speed up new customer conversions as customer scheduling and OAM equipment availability improves. On the consumer side, we are refocusing the team on hearables, wearables, stork, and heels, while we continue to support the iconic Marantz, Denon, Bowers & Wilkins, and Pope brands and products. This focus should help us grow the business despite the challenges in the consumer audio markets. I'll provide you with updates on some of these new products, but now I will ask Micah to review our second quarter results in more detail and provide an update on our 2023 financial guidance.