Masimo Corporation

Good afternoon, ladies and gentlemen, and welcome to Massimo's second quarter 2024 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 speaker's remarks, there will be a question and answer session. I'm pleased to introduce Eli Kammerman, Massimo'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 2024 and 2025 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. This call will also include a discussion of the potential separation of our consumer business and a preliminary estimate of the financial impact of a potential separation. However, the estimate is being provided solely for illustrative and informational purposes. The company is currently evaluating the structure of any potential separation of its consumer business, and the method, structure, timing, and terms of any such potential separation are still under consideration and have not been determined, approved, or finalized. Please refer to slides two and three of our earnings presentation for additional factors to consider in evaluating and reviewing the information relating to the potential separation of our consumer business. 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. 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.

Thanks Eli. Good afternoon and thank you for joining us for Massimo's second quarter 2024 earnings call. I'm happy to report that our healthcare revenues rose sequentially and grew 23% versus last year. Our healthcare business is seeing increasing momentum driven by excellent execution by our healthcare team and our robust hospital census. We saw strong demand for maximum sensors due to the combination of strong hospital conversions over the past few years, normalization of installations, and after a tumultuous post-COVID environment, rising hospital admissions. Our sales team once again secured a record level of new hospital conversion contracts, amounting to $134 million in true incremental value for the quarter, representing a 28% increase versus last year. Not too long ago, we contracted $130 million of TI in the entire year. We believe our exceptional hospital conversion contracts point to a very bright multi-year future. Another standout item for the quarter was a substantial increase in gross margins. We committed to investors that this would be a key area of focus for us, and the team is delivering. Our healthcare business continues to benefit from initiatives to reduce product costs, including the recent relocation of most of our sensor manufacturing to Malaysia, which continues to be executed extremely well and ahead of schedule. In addition, we have an engineering team that focuses each year on product updates that reduce our cost of goods and increase margins. We have filled this team with some highly skilled talent, and the benefits are currently flowing through the P&F. The combination of strong conversions, new equipment installations, and increasing hospital census gives us the confidence to significantly increase our full-year guidance for healthcare revenues and earnings. I'm particularly proud of how well our global organization is performing. We remain committed to separating our consumer business. As previously announced on July 8, we received preliminary terms from a potential JV partner, and we have extended exclusivity until August 15 to accommodate their needs. We believe this option could offer shareholders the best outcome, but the completion of the transaction is not entirely in our control. In addition to the potential JV, we are considering all strategic options, including the sale of or spinoff of the audio business, either alone or together with the consumer health business. We will act decisively to execute on the option that best maximizes value for shareholders and puts us on the path to achieve our long-term goal of $8 earning per share, which would effectively double our EPS in five years. With that, I'll pass it over to Micah to review our second quarter results in more detail and provide an update on our 2024 outlook.