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spk04: prevent any background noise. After the speaker's remarks, there will be a question and answer session. I'm pleased to introduce Eli Kammerman-Massimos, Vice President of Business Development and Investors Religions.
spk01: Eli Kammerman- 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 2024 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. Please note we have updated our non-GAAP definitions to exclude all legal expenses associated with our ongoing litigation with Apple. 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 issue 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.
spk05: Thank you, Eli. Good afternoon, and thank you for joining us for Massimo's 2023 year-end earnings call. We exited 2023 with growing momentum driven by record contract wins for the year in our healthcare business, important FDA clearances for innovative new products, and strong growth in our hearables business. With stabilization of hospital census and operations post-pandemic, our healthy contract backlog, and our cutting-edge innovations in growing markets, Massimo is well positioned for 2024. In addition to sensor utilization having stabilized, our hospital contract wins have more than doubled from four years ago within our target markets, which has resulted in meaningful gains in market share. The engine of our growth continues to be innovation, and in Q4, we received numerous FDA clearances for innovative products to improve outcomes and reduce the cost of care, some of which I will discuss later. Outside of healthcare, we are investing in the Massimo consumer brand and intend to realize rapid growth for hearables and wearables as we launch a steady stream of unique products containing our proprietary technologies, a few of which I'll talk about later. In fact, starting this quarter, we are providing visibility into our hearables and wearables revenue so that you can see how we are performing in these strategic growth categories. For our financial performance in fiscal year 2023, Consolidated revenues exceeded $2 billion. With healthcare revenues reaching $1.28 billion, the non-healthcare segment exceeded $770 million in revenues for the year. The challenges of 2023 have forged a stronger, more resilient Massimo, and we have a bright future ahead. We are making a positive impact for healthcare across the world and improving Massimo's long-term position. In the past six months, I toured many parts of the world visiting our customers and meeting our team. I can tell you resoundingly that our customers love what we are doing and where we are taking noninvasive monitoring. Our team is proud and excited to contribute to these bold efforts. With that, I'll pass it to Micah to review our fourth quarter and full year results in more detail and provide an update on our 2024 financial guidance.
spk07: Thank you, Joe, and good afternoon, everyone. For the fourth quarter, our consolidated revenue was $549 million. Our health care revenues were $340 million, which was near the upper end of our guidance range and represent a 4% decline on a constant currency basis versus Q4 2022. Our consumable and service revenues grew 1%, partially offset by a 24% reduction in capital equipment and other revenues versus the prior year period. More importantly, our healthcare revenues increased 10% sequentially driven by expected seasonal increases and improved sensor volumes. Further, our strong hospital conversions in 2023 have resulted in unrecognized contract revenue increasing 4% sequentially and 16% over the prior year to reach $1.5 billion. This gives us confidence in our growth outlook for the healthcare business. For our non-healthcare segment, fourth quarter revenues were $209 million, down 23% on a constant currency basis versus prior year. This business segment increased sequentially due to the holiday season, but declined year on year due primarily to challenging macroeconomic conditions, including high interest rates, which weighed on consumer spending. Now moving down the P&L, For the fourth quarter of 2023, we reported consolidated non-GAAP gross margin of 50%. This included gross margins of 61% for our healthcare business and 32% for our non-healthcare business. For our consolidated business, our non-GAAP operating profit was $92 million, and our non-GAAP earnings per share was $1.25 for the fourth quarter. Finally, through focused improvement in working capital and optimizing cash flow, we generated significant operating cash of $77 million, which allowed us to pay down a portion of our debt. Overall, 2023 was a year marked by uneven financial performance as we addressed shifting environments for both business segments. However, we made significant progress strengthening our market position, which gives us confidence for 2024 and beyond. We also had significant new customer wins and a growing contract backlog in healthcare that positions us well for growth this year. Now, I'd like to provide more detail on our full year 2024 financial guidance that we initially outlined in our pre-announcement in January. For the full year 2024, we are projecting a consolidated revenue range of $2.45 billion to $2.165 billion. For our healthcare segment, we are projecting revenues of $1,345,000,000 to $1,385,000,000, representing 6% to 9% constant currency growth. For the non-healthcare segment, we are projecting revenues of $700,000,000 to $780,000,000, representing a 4% decline at the midpoint in constant currency. We believe gross margins will steadily improve throughout the year. For fiscal 2024, we are projecting consolidated non-GAAP gross margin of 52%, comprised of 62% for our healthcare segment and 33% to 35% for our non-healthcare segment. We are intensely focused on improving our gross margin as the largest driver of earnings leverage for us. Our plan to transition a large portion of our sensor manufacturing to Malaysia is well underway, and we expect to reap the benefits of increased efficiencies and lower production costs over the next few years. We are also projecting consolidated non-GAAP operating profit of $307 million to $322 million. We expect to benefit from the improvements in gross margin and disciplined spending, partially offset by the return of performance-based compensation to normalized levels. Moving further down the P&L, we are now projecting non-operating expense of $51 million, a tax rate of 26% to 27%. and weighted average shares outstanding of $55 million. Based on these assumptions, we are projecting a non-GAAP EPS range of $3.44 to $3.60. Turning briefly to our first quarter outlook, we are projecting consolidated revenue of $476 million to $501 million, non-GAAP operating profit of $63 to $69 million, and non-GAAP earnings per share of $0.67 to $0.74. Please reference the earnings presentation on our investor website for further details. In summary, our outlook for 2024 assumes a rebound in revenue growth for our healthcare segment. There are many reasons to be positive about our prospects this year. Over the last two quarters, we have gained a better understanding of the shift in customer ordering patterns and have confidence that sensor volumes have stabilized. We have a strong contract backlog thanks to a record year for converting new customers and expanding our footprint with existing customers. With that, I'll turn the call back to Joe.
spk05: Thank you, Michael. With a deeper understanding of post-pandemic market conditions and a strong start to the year for our healthcare business, we're confident in our guidance and look forward to reestablishing our track record of consistency and predictability. Besides strong sensor orders, our record customer conversions in 2023 provide the foundation for that confidence. and show how our commitment to delivering innovative technologies into the marketplace sustains not only our long-term future, but the short-term growth potential. I'd like to share a few new highlights on products that we have gotten approval by the FDA in late 2023 that we expect to contribute to growth over the next few years. The US approval and launch in October of our Oxygen Reserve Index, or ORI, was an important milestone that will add to the growth of our Rainbow products. ORI has already gained significant traction outside the U.S., with ORI-equipped sensors becoming the routine option for pulse oximetry monitoring in some countries, and now accounts for approximately 20% of Rainbow sales. ORI gives our customers the ability to see declines in oxygen before pulse oximeters can detect some changes, which is important in the OR. It is just as important to know when the patient has been given more oxygen than they need, and ORI can help them determine that. For a business, not only ORI is yet another clear differentiator But every pulse oximeter sensor conversion to a rainbow ORI-equipped sensor adds a price premium of at least 30% per sensor, depending on whether a customer has deployed ORI with our four LED rainbow sensor or with our eight or 12 LED rainbow sensors. Another important FDA clearance for us last year was for the medical version of our W1 watch, which was cleared in November. We can now promote W1 to U.S. healthcare institutions for use with patients before and after surgery, as well as for long-term monitoring of chronic conditions. As we've shared in the past, we see great market potential for these applications and have received multiple indications of interest from hospitals. Hospital-at-home initiatives continue to gain traction with healthcare systems. which see large opportunities to reduce costs and improve outcomes. We view our remote monitoring technologies as unique key enablers for these programs to deliver care safely and efficiently. We also received FDA clearance in December for our Stork Baby Monitor with alarms and alert functions to be activated based on a physician's prescription. STORK is the only product to help parents monitor SpO2 pulse rate and temperature for sick and healthy babies. In addition, the optional AI-based camera already helps detect babies who roll over on their stomach, with many more applications to come. Outside of healthcare, we are leveraging our core healthcare technologies and signal processing capabilities to deliver differentiated products that will profitably take share in the large and growing markets for hearables and wearables. Our hearables category grew 115% last year due to the combination of focused investment and the launch of new products. For example, last fall, we launched a Denim Pearl earbuds with AAT, Adaptive Acoustic Technology. Massimo AAT enables customization of the sound spectrum for an individual's unique hearing profile and provides a truly optimized listening experience. As I mentioned earlier, hearables and wearables are strategic growth categories for Massimo as we undertake our hospital-to-home initiative. In 2023, we increased our revenues for these products by more than 90%. to reach $90 million. With products such as Stork OTC pending FDA clearance, W1, and Pearl with AAT, along with other new product introductions, we expect to see significant growth in this category in 2024 and beyond. We have three product launches planned for 2024 to celebrate our 35th anniversary. Freedom, H1, and the next generation version of our Root connectivity platform. We are excited about what the Freedom Biosensing Watch and the H1 hearing enhancement device will do for consumer health and what our next generation Root platform will do for healthcare in terms of improving patient care as well as hospital finances. In closing, our ability to translate our core technologies and competencies into products that deliver better outcomes for consumers, patients, and providers continue to be the engine for long-term growth across all our businesses.
spk06: With that, we'll open the call to questions. Operator?
spk04: The floor is now open for questions, so to ask a question this time, please press star, then number one in your telephone feedback. Our first line of questions comes from Mary DeVault with BTIG. Please go ahead.
spk00: Hi. Thank you. Good afternoon. Thanks for taking the questions. I wanted to start here, I think, on a standard one on guidance. I just want to understand what's included on the high and low ends of the guidance ranges for both healthcare and non-healthcare. And if you can help us think about the Q1 cadence, the quarterly cadence throughout the year. That would help me understand particularly on the non healthcare side if you can Absolutely.
spk07: Yes. So Marie for the start of the healthcare business the 1 billion 345 to 1 billion 385 If you look at the the low end of the range, we'll start there that assumes 0% census as far as any contribution from from inpatient admissions and It also assumes the weak capital environment that we're seeing. We're seeing good strength in our consumables products, but the capital has continued to be a very difficult environment for us, as well as others. If you look at the higher end of the range, that assumes more of closer to a 1% census growth, and it also assumes that we see improvement in coming from a lot of the installations that we expect throughout the year as we continue to gain new customers and win new customers. And it also assumes that we're going to have some improvement in the capital environment at the high end of the range. We also have stripped out any large orders, so those would be to the guidance for this year. Those are completely stripped out of that range. If I turn to the non-health care business, probably the best way to describe that is we expect the hearables growth to continue. That we expect to be at least 50% growth off of this year after a very strong growth last year. So that implies that the range of 700 million to 780 million, at the low end of the range, it would imply high teens decline in the core audio business. And the upper end of the range, it would imply a mid-single-digit decline in the upper end of that range. So, again, the hearable strength in that business has now become over 10% of the revenues for non-health care. It continues to grow, offsetting softness in the core.
spk00: Okay. So that hearable strength is disguising a bit some of the softness you're expecting in consumer services. And then as a follow-up on that, the Q1 cadence for consumer may be a little bit lighter than we were looking for. Can you help us understand kind of the seasonality of that business as you understand it today?
spk07: Yeah, so we went back and looked historically with the team and just tried to understand kind of their seasonality, you know, prior to the acquisition and kind of back in more normalized years. And that seasonality is about 21%. It can hover between 21% and 22% of revenues for the full year. That guidance is in that zone for Q1. And typically, a third of the revenues come in Q4 with a stronger holiday season. So that's how we're thinking about both businesses kind of getting back onto that normal seasonality. And again, we're getting into new channels and new markets with the hearables, so that's going to continue to be growth throughout the year. That gives us more confidence in that guidance range for non-healthcare.
spk00: Okay, that's really helpful, Micah. If I can ask a question here for more detail on the healthcare side, I want to understand what you're seeing today on the hospital census, on some of the dynamics you've discussed in the past, like the shift to ambulatory surgical centers and patients reusing sensors. What are kind of the latest that you're seeing on some of those trends that we know impacted results last year?
spk07: Yeah, I think what we're seeing now, and I think that that's what's being seen out there in the broader market, is those inpatient trends and census trends are probably around that one to two percent kind of hovering in that zone. If that continues, that will be a positive for us in 2024. And then in terms of just sensor utilization for the business, we see that's back and stabilized. We think that any inventory destocking is behind us, and that gives us confidence. That's why we came out early in January to provide that guidance as we started to see those trends heading in the right direction in the second half of the year.
spk00: All right, very good to hear. Thanks for taking the questions.
spk07: You're welcome.
spk04: Our next question comes from the line of Mike Pollard with Wolff Research. Please, go ahead.
spk02: Hey, good afternoon. Thank you for taking the question. I want to drill down on this capital commentary. Micah and Joey just mentioned maybe kind of a little choppy soft. What's going on here? still working through kind of the exceptional capital placements you had during COVID and we're coming off of that sugar high and there's just time for that to work its way through. Is there something else? And I guess I'll lead you here, obviously, as you probably know, one of your competitors, your key competitors decided to keep the monitoring business and they called out a change in competitive position as a reason for choosing that position. Have you seen any different behavior out of your key competitor, and do you agree with their assessment about the landscape?
spk05: Yeah, let me maybe try to address that high level. It doesn't matter, Mike, if you have anything to add. So first of all, yeah, I think we're getting over the sugar high of capital purchases during COVID. It's a good thing we're not in capital business because it would be really rough, but For some companies, you've seen it. It's really stopped them in their tracks. But the good news is for us, because we're getting so much of our growth from new conversions, from new hospitals switching to Massimo, and for us to almost exclusively keep all of our customers. The only time we've lost any is when they were purchased by a larger system. That was our competitor's account. So for those reasons, our outlook is very positive regardless of the capital. And then as far as our competitor, I heard that they're saying they're keeping monitoring because it's competitive. You know, they're probably competing well in our leftovers because in the markets that we're targeting, we are winning really strongly the order of magnitude more Then we then we lose so yeah, there are markets that we're not focusing on and Those are the low-end markets where you know the countries can't afford the kind of performance and technologies that we have but in America's US Canada in Europe Japan Korea Middle East we are just taking market share and and about 2x the rate of our normal. So while I don't know what they're doing, I'm glad they're full on our leftovers.
spk02: Helpful. Follow-up on margin, you know, nice to see the guide kind of smooth out here at 15%. Obviously, lots of puts and takes in there. The incentive comp reset is a limiting factor year on year. The question is beyond 24, kind of, How do you feel about margin? What's the direction of it? Do you feel like margin expansion is a core part of the algorithm as you kind of restart the growth here? And specifically on Mexico to Malaysia, kind of how impactful is that? I'm curious for any quantification and timing of that benefit. Thank you so much.
spk07: Yeah, thanks, Mike. Great question. Growth margin leverage is a key area for us, as well as just overall operating margin leverage over the coming years. We still want to drive, and I'll really hit on the health care side here. Our focus is to get back up in the high 60s margins again. We've got a very good path to get to the mid 60s, just with things we're doing in Malaysia, with some of the key product cost reduction efforts that we're undertaking right now, and the focus by our engineering and manufacturing teams. We also will see leverage in our equipment placements. We have a heavy amount of equipment placements right now due to all these customer conversions that we have that will leverage over time. So between those things, we feel good about getting up in that mid-60s margin over the next few years. And then we just got to continue that path and leverage the business and get back up into the high 60s. So that's gonna be a great lever for us as we move forward and really deliver additional growth and earnings as well.
spk01: Operator, next question, please.
spk04: Yes, our next question comes from the line of Mike Mattson with Needham & Company. Please go ahead.
spk10: Yeah, thanks. So I wanted to ask one. Joe, you mentioned you were launching the H1 hearing assistance product this year. And I know that's an area you kind of talked about sort of indirectly being interested in, but you hadn't really mentioned much specifics around products or timing. So it sounds kind of interesting to me. So I was just wondering if you could provide any more detail around that, maybe the kind of market opportunity and so forth.
spk05: Sure. Thank you. Yeah, I... I think I've mentioned before, one of the reasons we acquired Sound United was for their audio engineers as we were planning to get into the hearing aid market for low to moderate hearing loss. So with the help of that team, the help of the Neuro team in Australia, and our own engineering team here at Irvine, we are developing what I hope will be a revolutionary hearing aid And we call that H1 for now. That might stick as a final name. But I think H1 should be available for sale this year.
spk10: Okay. And do you have any feel for the TAM or pricing or anything like that at this point?
spk05: Yeah, my understanding, the TAM is $35 billion roughly. And our pricing is probably going to be around $1,500.
spk04: Okay.
spk05: In that area. That's what we're planning. Now, we, to sell that over-the-counter, which now we can with the new regulatory guidelines that have been changed, we still have to get FDA clearance, so we're going to have to submit H1 for FDA approval for sale in the U.S., but many countries will be able to sell it under a CE mark.
spk10: Okay, got it. And then just on the, you know, all the contract wins are obviously positive. Just wondering to what degree has kind of this uncertainty around your primary competitor, Medtronic's, you know, separation and now kind of retention of their monitoring business. Do you think that contributed to customer willingness to kind of switch to Massimo or?
spk05: I don't think so. I think what really changed our market share gains was COVID. I think when pulse oximetry and its accuracy really meant a lot, people started thinking, well, why am I not using masks at all? And on top of that, we created the Radius PPG, which is a tetherless wearable monitor that changed things. We created the COVID system for patients at home, remotely monitoring them at the hospital. All of that just made us really the company to go to for pulse oximetry. I think that's one reason if you look at 2019, we were doing about $170 million in TI, true incremental, and now we're doing about $400 million. So, yeah, we don't think it had anything to do with their spinoff or not. We really think it's just finally made people think, why are we resisting it? As you know already, no other pulse oximetry has been shown to have a positive clinical outcome, despite the fact that they became ubiquitous before we even entered the market. But ever since Massimo said pulse ox has been introduced, because it works accurately during motion and low perfusion, because it works on dark as well as light pigmented patients. During other challenges, the studies have been incredible. Blindness in the neonatal ICU has dropped. Detection of CCHD is not possible with newborns. And people on opioids are now dying from overdose on the general floors after their surgeries. And all of that, by the way, comes with reduced costs. We calculate that On average, a 250-bed hospital can save about $4 million to $5 million a year by switching to Massimo. So it really makes our pulse oximeter sensor prices irrelevant because we could charge 5x more and we'd still be showing cost savings to the hospital. So the competitive advantage we have is really big, and I think customers during COVID finally decided to take advantage of it.
spk10: Okay, great. Thanks. Bye.
spk05: Thank you. Sorry for the long answer, but I just want you to understand this isn't just two companies competing with similar technologies. There's a huge difference, and that's why we're winning continuously, and it's become even bigger in the past few years.
spk04: Our next question comes from the line of Jason Bednar.
spk02: with Piper Sandler please go ahead hey good afternoon uh thanks for taking the questions um yeah Joe Mike I wanted to start with that driver number um it's definitely lighter than our model I think they're probably lighter than where most estimates were we're sitting here I think the lowest absolute figure you've had since the first quarter of 18. I guess we can look at this two ways I mean, you put up good results in spite of those driver sales being lower. You're tapping into that large install base, really driving better utilization. So maybe the driver figure means less today than what it has historically. But I guess the alternative here is that drivers have fallen for poor consecutive quarters. And I guess I'm just having a hard time reconciling this against like that record contracting that we continue to hear about. So I guess the question here is whether investors need to be concerned with the driver decel. And then what's the outlook for this line as we look ahead? Do drivers grow in 24? Does this need to decline further? Any help there would be great.
spk07: Yeah, thanks, Jason. Yeah, I am less concerned about the driver numbers. We think this is more short-term in nature. The focus for us and what we really focus on internally is that incremental new business and contract wins. And that's what's giving us the confidence with our outlook. We are coming off a transition from years where there's a lot of monitoring that was put by the bedside and we think that replacement cycles of existing equipment have slowed temporarily. We believe that it will kind of trough, our expectation is it troughs in Q1 and then starts to improve back up to more normalized levels as we exit this year. So we think it's going to start heading the right direction based on our internal estimates, and that's less of a concern for us. Our concern is really getting after new business, converting customers to Massimo technologies, and placing the equipment in there in return for those recurring sensor revenues that's going to continue to help us grow in the outlook that we've provided for this year.
spk02: I guess, Michael, what's the disconnect between record contracting and new customers, which theoretically they need drivers to consume the sensors? Why isn't that translating into a better driver number, and we're seeing this driver number decel?
spk05: Let me maybe take this. So 20 years ago, every driver was a new driver for us, and it was growing our sensor business. Today, given that we have a significant market share, every new driver is not a new driver that you see. It's replacing an existing Massimo socket. So that's why that is not as important. Now, the second part of your question is, what's the disconnect? Well, it doesn't take as many drivers for us to secure these big TIs, $400 million worth of them. uh because it's basically we put the number of sockets that they need that have to be replaced to get that sensor contract so that's why it's not a one for one to see a double doubling of our contract wins with a doubling of our driver uh volumes okay okay yeah i'll probably follow up a little bit on some of this but just to maybe hear
spk02: I did want to ask one more maybe tough one here, so maybe apologize up front. But, you know, there's definitely a lot of interest here on this topic just with the latest developments with the board. You know, Joe, from your public commentary, it still sounds like there's maybe some difficulties in the boardroom, to put that maybe gently. The announced departure here recently of a board member, you didn't fill any of those vacated committee positions with board members that were elected during last year's shareholder vote cycle. Maybe help us through what the latest discussions have been regarding the business strategy with your board members that were elected last year, whether there's been any progress made on finding common ground between your position and where Collison currently stands. And then if you'll comment, I think a lot of investors would be interested to hear your thoughts with respect to, you know, the, you know, kind of the upcoming shareholder vote that we're all looking ahead to this summer.
spk05: Well, first of all, I won't lie. It's been a rough, rough start with the new board members. But, you know, we're managing. Things are getting better. We're getting along better. We're finding more common ground. And, yeah, we're sorry to see Adam Mickelson leave, but Adam had served exceptionally well. But he had a lot of personal things he had to attend to, including twins that were just recently born. We wish him well. He's going to miss all the fun here. But, you know, we intend to replace Adam, but we're going to find hopefully someone that is well-suited for that position. And the new board members from the ones that the shareholders voted in, the activists, which were Quinton and Michelle, who do sit on our committees, audit, comp, governance, but also the new board members, Bob Chapik and Rolf Klassen, They sit on many committees now. So look, before the election, we had board members that had been here for five to maybe 15 years. Well, me, I guess 35 years. But now I think we only have one board member left that has a tenure of more than one year. So the rest of them, I've been here now for just from a few weeks to a few months.
spk03: Okay. Thank you. You're welcome.
spk04: Our next question comes from the line of Jason Beckford from Raymond James. Please go ahead.
spk08: I'm sorry guys, this is Eric on for Jason today. Just a couple of clarifying questions. When you're talking about the wearables and hearables and STORC, I'm just trying to figure out, STORC is going to be reported under the healthcare revenue segment and wearables will be non-healthcare. And I guess where does W-1 fit in that?
spk05: Well, I'm glad you asked that because I want to make sure you understand our definitions on how we segment things. First of all, Yes, there's a healthcare segment and a consumer segment. So something like stork with prescription is certainly going to be under healthcare. But it doesn't mean that it's not considered a wearable. So our wearable definition is all of our sensors that attach to the body and do not have a cable connection to it for continuous monitoring. It started off with radius seven, And then radius PPG, radius VSM, and W1, radius T. So those are our definition of the wearables. And Stork, by the way, is a wearable. As far as other products that will enter the wearable category, it will be hopefully Freedom and the Freedom Band. And then there's a whole host of wearables we're working on for other measurement modalities. And on the hearables, it's the headphones, both in-ear and outer ear. And it will include not just our regular hearables that we have today, but the hearing aid as well.
spk08: And sorry, just to make sure I understand. Anything that's wearables, that's healthcare? revenue and then the hearables is in the non-healthcare revenue? Just want to know just for looking at the growth.
spk05: No, the hearing aid, the hearing aid will be considered healthcare, but it'll be part of the hearables, just like RADIUS PPG is a healthcare product, but it's part of the wearables.
spk08: Okay. And just one other follow-up, specifically looking at STORK and W1, I know earlier last year, You had talked about, you know, obviously they were a little bit more delayed in getting FDA approval than we all hoped for, but you had mentioned an expectation about a 1% revenue contribution in 2023. Is that, I assume that didn't hit that number, but is that a number for 2024 to look towards?
spk05: Well, I don't know what all of our wearables did, but I think Stork did about $2 million of revenue last year. And while it was great that by the year end we got FDA clearance for Rx, That wasn't long enough to really take advantage of it last year, but also we still don't have FDA clearance for OTC. And until we get that, it'll impact our STORC business because we can't alert parents to alarms for SpO2 and pulse rate without a prescription. So once we get the OTC clearance, then we'll be able to alert parents even without a prescription for SpO2 and pulse rate dangers. Right now, we can only alert them on temperature dangers. And for those who've gotten a prescription for STORK, they can get alerted for SpO2 pulse rate as well.
spk06: Okay. Thanks a lot. Thank you. I think we have time for one more question.
spk04: Okay. And our last question comes from the line of Vic Chopra from Wells Fargo. Please go ahead.
spk09: Hi, this is Dino Weinstock on for Vic Topra. So you recently received a 510K approval for an over-the-counter version of MightySat, the fingertip pulse oximeter. Could you talk about how your launch plans for MightySat might address the market opportunity?
spk05: Yeah, thanks for asking. We just got that clearance in Q1. That's why I wasn't part of my statements for last year. But, yeah, we're really excited about that. Because right now, you know, people can't differentiate between a fingertip pulse oximeter that they can rely on and ones that they can't. So we're competing with $20 products at $200 price tag. So a lot of people think, well, why should I buy the $200 product? Now that we have FDA clearance as a medical product for MightySat, OTC, We have plans to hopefully make it available across all the major pharmacies and obviously online. You can buy it right now online. But the real, I think, push will be in the pharmacies. So I know at one point when we were expecting FDA clearance sooner than we got it, there was a major pharmacy system that wanted to provide it. So we're just picking up that conversation again. And hopefully in 2024, we will successfully deploy MightySat through all the major pharmacies.
spk09: Thank you. That's helpful. And then on the status of the Apple litigation, is there any updates you could provide?
spk05: Well, we were happy that we got our injunction. As a patent owner and a company that makes products that are competing in that space, that's ultimately what we wanted. We hope in the future to broaden our injunction, hopefully beyond just SPO2, as well as beyond the US, and hopefully get our damages for the infringement. So those cases are pending. We hope to have a trade secret case and patent case in California this year. The court in California just ruled that they're still pausing our patent cases in California because Apple is doing a Hail Mary with a federal court to try to have them hear what they lost. Assuming they lose that, which we think they will, hopefully we'll have the patent and the trade secret case together here in California before the year end. And in Delaware, we are making great progress. It's gone a lot faster than we expected. We do have a new federal judge. Our magistrate has become the judge in that case. She has a very busy schedule. So while we thought for sure we're going to be in trial in Delaware in 2024, we're not certain of that at this point. We might, but we might not. It might push to 2025. Thank you. Thank you so much, everyone, for your time. We appreciate it. We feel like we're back. We're looking forward to reporting to you our Q1 results soon, and hopefully it's going to be a great year.
spk06: Thank you so much.
spk03: This concludes today's conference call. You may now disconnect. conference call. You may now disconnect.
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