Masimo Corporation (MASI)

Investor Day 2019

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May 16, 2019

Okay, everybody. Let's begin. For those of you who don't know me, my name is Eli Cameron. Welcome to the 2019 Masimo Investor Day. We're very glad to see everybody here, and we've got a very full day full of important information to share with you. First, let's go over the agenda very quickly. Next slide. All right, here's our agenda. We've got a break coming up at 9:40, not too far away. We need to keep the break to a very strict 10 minutes. So please be mindful of your time out of the room. We're going to be taking another break at 11 At that time, half of you will have an opportunity to eat lunch and the other half of you will go on small group demo tours to a few different stations we have throughout the building. And then halfway through that period, the groups will switch. And we'll give you more detail on that at 11 o'clock. Next slide. These are our forward looking statements. Today, we will be presenting information that has various risks and uncertainties associated with it. You can read more about these risks and uncertainties in our SEC filings, which are posted on our website. Please review those. Next slide. Also today, we will be discussing non GAAP financial measures. You can read the details and the reconciliation of these measures with our GAAP financials on our website and supplemental financial information that's posted there. Next slide. All right, we're ready to begin. Now I'd like to introduce our Founder, Chairman and CEO, Joe Kiani. Good morning. Thank you so much all for coming today. Really appreciate it. I know some of you have traveled pretty far away and we're grateful to that. And thanks for, I guess, the rain. Last time we had the Analyst Day here, we also had rain. Given how many days a year it rains here, I'm beginning to think anytime we need rain, we just call for an Analyst Day and we'll have some rain. But sorry for some of you who escaped the rain and we're wishing for sunshine, but I think we've got some really good stuff here that will give you some light and we hope this will be a trip that you'll say was worth your while. I think to start off with, I always want to go back to our mission, improve patient outcomes and reduce cost of care. And we do that by following a set of guiding principles that has helped steer us well over the past 30 years, remaining faithful to our promises and responsibilities, thriving on fascination and accomplishment, not power and greed, making everything as fast as possible, improving ourselves annually, and last but not least, is what's best for patient care. This happens to be our 30th anniversary and also this month is the 30th anniversary of our incorporation, which we did in California at the time. Since 1989, we've had an incredible history of innovation, starting with SET, signal extraction technology, pulse oximetry, which changed the way pulse oximeters worked. It changed the expectations of pulse oximeters. Pulse oximeters gave false alarms 70% to 90% of the time. Because when the patient moved, just whether it's shivering or baby moving, tugging or squeezing, the pulse oximeters would read low oxygen saturation following the venous blood saturation rather than arterial blood. And we came up with a technology that enabled us to separate arterial from venous in real time, measuring through the noise. Now at the time, we were also the 1st company to have to get accuracy specifications for motion, during motion with pulse oximetry and that was at 3%. I'm really proud that 30 years later, we improved that by 100%. Now our accuracy during motion is 1.5%. You'll notice up until 2007 when we went public, we were really focused on getting off the ground with set pulse oximetry. But since our IPO, you can see the myriad of innovations that have come from Masimo. The rainbow technology starting with SPCO, carbon monoxide, red hemoglobin, PBI, SPHB, respiration rate measured from acoustic probe instead of either capnography or ECG types of probes. New measurement, oxygen reserve index, not so new internationally, but still not launched in the U. S. 3, cerebral oximetry or organ oximetry, FED line, brain function monitoring and you see the myriad of technologies below things like halo index, which is a predictive algorithm that takes all the data that it can have access to and helps clinicians assess the level of illness of the patient to multiple products like Patient Safety Net, Root, Radius 7 and very recently we just announced this morning the FDA clearance of Radius PPG, which we'll talk about more later. Since we went public, we've grown from a $200,000,000 revenue company to now projecting $918,000,000 in 2019. And last time we were together at our 2nd Analyst Day, the first one here, in gray, you see what we projected our growth to be over the next several years with our new long term plan. As you know, when we went public, we did something that most companies don't do. We had a 10 year business plan instead of a quarterly plan. And I know it felt rough at the beginnings, but I think you've seen that it helped build an incredible foundation that we can now all appreciate. But once again, to assure our future, we have a new long term plan, this one is 7 years rather than 10 years. And you can see in red where we are tracking today to that plan. Now at the time also 2 years ago, we kind of told you where we see our growth happening in our set pulse oximetry, rainbow pulse co oximetry and some of the new measurements. And kind of in the white bubbles, you see what we projected and in red, you see what we've delivered to date. Since a couple of years ago, the stock has done well. In fact, I think it's done a little bit better today, but it's grown well. And what I really love is our success is tied hand in hand to what we do for patients. It's a fantastic opportunity we have. The more we do for patients, the better we do. So the new long term plan, as you know, we talked about a couple of years ago is to grow 8% to 10%, have our operating margins hit 30%, have our EPS grow roughly twice our growth revenue growth rate. And at the time, we said create free cash flow of $200,000,000 We now see that we can create free cash flow of 300,000,000 dollars in the coming years. And it's all about innovation. Innovation never stops at Massimo, just something we're grateful for as well as proud of. Some of the new innovations we're going to talk about today are hospital automation. We have a simulationdemo room to show you what we mean by that. I think once you see it, you really get to appreciate the power of it and what it can hopefully do for care around the world. The other area, opioid safety. We've been deep into opioid safety in the hospitals, mainly in the general force monitoring patients that are on opioids. But now we're seeing an opportunity to do as much as good we did in the hospitals, do it at home, which we'll talk about. As far as how we hope to deploy our capital, number 1 is reinvest in innovation. We think the way to assure our future is to continue to make long term plans from technology perspective, make the commitment, take the risk, and hopefully the more we do that, the better we'll do. But we're also come to a situation where we do have cash, we do have the ability to look at acquisitions in a new way that we haven't before and we don't want to just put our heads down so much that we forget some opportunities that may be around us. So we're looking for strategic acquisitions and selective share repurchases when we think it makes sense to get back in the market and buy back some of our shares. So this is how people in anesthesiology, especially over the last almost 3 decades have told us they wish their ORs would look like. They always say, why can't a system work as good as airplanes? Forget the MAX 7 37 problems right now. But they've been wanting this cockpit, they've been wanting this work area where they can focus on what matters, not get distracted by what doesn't. But this is the way the environment looks today. This is an actual picture of one of our customers' operating rooms. So this challenge has been thrown at us over many years of help us with this. Some of them said, be Boeing, go build us an airplane. Well, we don't build hospitals. So we started thinking, what can we do to give them what they're asking for? And literally, this has been about a 15 year project. And what we decided to do is to build on this. It started with Root. It started with making this open architecture, high connectivity platform that can become ubiquitous, but ultimately creating what we call this cockpit or Uniview and given clinicians the freedom to look at what they need to, to focus on what needs to be focused, so that hopefully these cognitive overload and errors of mission will go away. Hopefully, there will be commission errors, if any, which have been shown to be less deadly to patients. And there will be not we don't have the burnout, We have efficiency. And these hospitals that are forced to take care of many patients, especially as aging population increases, we'll be able to do it more efficiently. And the data can be harnessed. The data can be turned into useful data for them in a way that computers can do things people can't do, which is to look at data short term, long term, compared to other patterns of other data, both in real time and historical information about the patient and help predict where the patient's going. Plus assist in this new patient centered team approach. Years ago, care was focused through one set of eyes, the physician. Over time, it's been shown that a team approach does better for patients. But the team is expanding beyond just the doctors and the nurses and it's moving into the families and getting families engaged. So part of what we hope to do with hospital automation is to get the families engaged more intelligently in their own care and the care of their loved ones and be part of the team. So, opioid safety. We launched Patient SafetyNet in 2007 and the enabling feature of Patient SafetyNet is Masimo SET, because think about the active patients in the post surgical ward. The false alarm rates are far higher than any other setting. Massachusetts General Hospital years ago tried to do continuous monitoring in the post surgical ward, but they had 10,000 false alarms per month. That's what every 4 minutes. So it was not used and many hospitals who tried it had to abandon it. But the difference now is with SENT, not only they don't abandon it, service have shown nursing who initially didn't want it because of their previous experiences will literally say it's the last thing I'm going to give up this technology. And the results have been incredible. A study done at Dartmouth Hitchcock showed something we had not expected, rapid response team activation to go down by 60%, transfers back to the ICU down by 50%. And in this orthopedic ward when they did the study in 2,008 and published it in 2010, they showed they saved $1,500,000 a year and they had no more debt in bed for the past few years that they had been in the middle of this evaluation. Fast forward now 10 years later and they're about to publish their data, it hasn't changed. Knock on wood, no more dead in bed. They deployed it fully in every bed in the hospital. When a patient doesn't want it, they make them sign a waiver. That's how strongly they feel about it. And now the savings have gone to $7,000,000 a year. Now 400 hospitals plus now have deployed Patient SafetyNet and are reporting similar results. So we thought, you know what, maybe this technology can be used wherever opioids are used, including the whole whole. And we submitted this new platform, which we're going to show you later, we call Opioid SafetyNet to the FDA as part of the challenge the FDA put out for dealing with the opioid epidemic. Over 250 companies had submitted, 8 companies, we were one of them got selected to fast track their technology out and we got the breakthrough technology designation. And we are now fast in great cooperation with the FDA to get this technology out. Now we expect this to save thousands of lives a year as it's been doing in the hospital. So let's look at kind of a macro level of where we are today. Today, we are in a $3,000,000,000 market, approaching $900,000,000 of revenue. We believe by 2025, the same products we have today will be a $4,500,000,000 market. This is pulse oximetry, pulse clock oximetry, capnography, brain function monitoring and regional oximetry, telehealth, consumer products and global health. But take a look at some of the new things we're bringing out. We think hospital automation is over $1,500,000,000 market. We believe Allscripts safety net will be a $4,000,000,000 plus market. And we have products in our innovation pipeline that we believe will address another $5,000,000,000 market. So we believe by the year 2025, we'll be addressing a $15,000,000,000 market. And at the earnings call, I said there'll be a couple of surprises. At the end, I'm going to show you a couple of these surprises. So you'll see we're going to unveil some of these products we have in the pipeline. So our key takeaways, our relentless pursuit to improve patient safety has not only benefited patients, clinicians and hospitals, but it's benefited us, the shareholders. We have an incredibly dedicated and talented team that have consistently delivered our commitment. I always say the only thing better than our technology is the level of service our team provides our customers. And while we have the long term revenue growth that's good, 8% to 10%, as you can see, we've delivered better than that. We've got things in our pipeline from hospital automation, opioid safety net and as well as new other new things that we expect and hope that we'll do even better than that. So with that, I'm going to ask Bilal Morsen, our Chief Operating Officer, to join me. Bilal joined us at Masimo when he was a co op engineer almost 20 years ago and recently applied as our Chief Operating Officer. Bilal, welcome. Thank you, Joe. Thank you. Appreciate it. Thank you very much. Thank you, everybody. Thank you for taking time out of your schedule to be here with us today. I'm going to be going through our current product portfolio with our current opportunities, also touching on our new opportunities when it comes to hospital automation and patient safety and opioid safety. Currently, we're in over 150 countries touching more than 100,000,000 patients a year. All right, we have now a large installed base of our own technology boards and monitors, but we're also strengthening our OEM partnerships. What Masimo builds for our OEMs are these technology boards. These technology boards are currently integrated in over 200 monitors and devices of our OEMs. You see some of our OEMs here and we're in 70 of the leading brands today. We've had in the field now over the last 10 years, 1,700,000 of these technology boards. That includes the ones that we produce in our monitors, but also what's included in our OEM partners as well. The pulse oximetry market, which Joe talked about, is about a $1,700,000,000 market. As you can see, for critical care beds, it's about 100% penetrated today. But we do have opportunity when it comes to the general board and long term care facilities where the penetration is down at 10%, and that's where we see the growth. Joe talked about the power of Masimo SET and what it brings for clinicians. And he touched on 2 points, which is read through motion and low perfusion. Before Masimo SET, like Joe said, pulse oximeters would fail in these critical conditions and produce high rates of false alarms. Masimo introduced these algorithms with parallel engines and advanced algorithms to be able to separate that signal from the noise. And now you see this technology being deployed in all different care areas with its success. Over 100 published independent studies show the power of Masimo SET and the powers and the sensitivity of specificity and be able to monitor during those conditions. Now all these independent studies demonstrate that application in the NICU, the ICU, the OR and the general care board. What happens is, it's easy actually to mask out alarms, right? If you add delays to products, you can reduce the rate of false alarms. However, the magic of Masimo SET not only reduces false alarms, but does not miss true alarms. And that's the power of actually going down to the signal and extracting that noise to make sure you have the most accurate reading. In this study here compared to our competitor, Masimo SET missed only 3% of true alarms versus 43% for our competitor. And the rate of false alarms was down at 5% versus 28% for the competitor device, truly showing the power of Masimo SET when it relates to alarms during motion and low perfusion. Now to the NICU. These newborn babies, low birth weight, this was a study that was conducted back in 1991 it started. So 1997 is when it started through 2,001 for 5 years. There's a condition where these babies where if their oxygen titration is not properly applied and the oxygen starts to rise, they can go blind and that's called ROP, retinal 3 of pure prematurity. Now it's critical to monitor these patients and monitor the saturation to make sure they don't do that, they don't fall into that state. This study here was done at Cedars Cyanide and it's compared against 1200 hospital network in terms of ROP rates. You can see here in the red, you can see the rates actually rose across that 1200 hospital network, where at Cedars Cyanide where it was implemented, it dropped from 12.5% all the way down to 2.5%. Now they did 2 things here. They updated the technology to use Masimo SET and they changed the protocol. This was a huge study that triggered a massive, what we call the BOOST studies that came after it in terms of how to titrate oxygen for patients, for these neonatal patients. Now because this study did 2 things, it updated the protocol and it updated the technology, People questioned whether it was the technology that made the impact or the protocol. A follow on study that looked at that specifically. Now if you see here, there are 2 centers, Center A and Center B, and these are 2 different care areas within the same hospital using the exact same medical staff and the exact same protocol. Now in period 2 here, in the first period, you can see the rates of ROP, sorry, there's a lag, of 13% in center A and 12% in center B. Now in period 2, the only thing changed was they changed the technology that was being used. Same clinical staff, same protocol. You see the ROP rates drop from 13 sorry, from 12% down to 5%. That is the impact of Masimo SET. In period 3, we go back now and we look at that same Center A that did not change before the implementing MASMOSAT, applying that technology now to Center A drops its rate down from 13% down to 6%, respectively. Again, truly showing the impact on the outcomes of ROP and for these babies. CCHD screening. This is screening for critical congenital heart defects in babies when they're first born. They found an amazing way Doctor. Grunelli and a few of her colleagues found a way of screening these babies. Typically, they'd have to go for an echo to determine if they had any type of heart issues. They found a way of using pulse oximetry and monitoring the pre ductal and post ductal reading and determining whether they need to go for additional screening based on a delta of their SpO2 readings from the pre duct on the post ductal limb or a too low of a reading on oximetry. Now what's amazing is she started this huge study and during the study she was using 2 different types of pulse oximeters. She was using Masimo and our competitive device, a competitive device. Midway through her study, she determined the only way she's going to be successful for these patients in getting the results is to use Masimo SET and she abandoned the competitive device. Now this study I'm showing you is not a unique study. We have over 5 studies that are all greatly powered showing the impact of Masimo SET for CCHD screening. This has become a standard across the 50 states in the United States and now is being adopted worldwide by countries in terms of screening. In this study here, it's over 122,000 patients, right? These are newborn babies And you can see the sensitivity went from 77% to 93% by using Masimo SET technology. Again, truly highlighting the impact of what MASMOSET can do in terms of outcome. This is a study that Joe alluded to. When we I worked on this project actually back in 2007 and the magic here is Masimo SET and its ability to distinguish that signal and make sure that the rate of alarms stay consistent, only reporting true alarms. So when that nurse receives a notification, she needs she knows she needs to go attend to that patient. Again, the nurses love the product and the outcomes that Joe highlighted are phenomenal. Reduction in rapid response teams, reduction ICU transfers, saving money, but most importantly, 0 dead embed. And these patients are in the post ortho ward and they're on PCA pumps, right. So they're delivering opioids to themselves. Every customer we go to when we present, they want to know more about this study because of what they see today on the general care ward. So this is a true impactful study. And as Joe said, it's been repeated many times. I think you recently saw St. Luke's also doing a nice publication related to this. Our RD sensor and its improvements. We never stop innovation at Masimo. Whether it's Masimo SET technology or any of our parameters, we continue to innovate and look at improving the accuracy and how it can affect outcomes for clinicians and patients. We've improved our motion accuracy from 3% down to 1.5% and our no motion accuracy from 2% down to 1.5%. Now we did this through a huge innovation project where we went and made the best sensor we could make from a technology standpoint. The amount of investment we've made to do that comprises from everything from growing our own LEDs to manufacturing this entire through the entire process to manufacture these sensors. That's the way we can get to the accuracy we have there for clinicians. And we're not going to stop there. We're going to continue to innovate and improve with this product. Now that impact of going from 3% to 1.5%, we believe should show an impact on all those outcome studies if they're repeated with RD, and that's what we're hoping will happen as well. You guys saw today Radius PPG was announced for 510 clearance. Now the magic here again is Masimo SET. It's not the fact that you can create a wireless sensor, it's the fact that you can take Masimo SET technology with all its signal processing algorithms that you need and being able to embed that in a wearable device. Now this device comes in 2 pieces. There's a reusable piece and a disposable piece, all right. It has a very nice workflow capability where you simply grab the reusable piece, you tap the monitor that it's going to associate with, you hear a beep and now you know that association has occurred. You come back, snap that into the patient's arm or wrist, I should say, and now the patient is monitored and associated. Now what's unique about this technology, it also has 4 days of battery life. Then you dispose of both the battery and the sensor when you're done and you keep that chip that you can reuse from patient to patient. What's also really cool here is that this solution applies to our installed base with a software upgrade, not just to our monitors, but also to our OEM monitors. We have a table outside that you'll be able to play with this device afterwards and see it working. PVI, plus variability index. This is a parameter that also exists on the same set platform that we're talking about coming again from the same sensor that is applied to the patient. PVI, as Doctor. Kanesan says here, can predict fluid responsiveness for non mechanically ventilated I'm sorry, for mechanically ventilated patients during anesthesia. Now what hospitals are trying to do today is with ERAS protocols and goal directed therapy protocols, they're trying to get the patient fluid before surgery and providing them with fluid after surgery and making sure they titrate that appropriately to get them out of the door as quickly as possible and into their homes where they can recover. I'm sure you guys have all heard of it. Currently, they use an invasive method to do that, right? You have to buy approximately $200 catheter to be able to measure this. With the same sensor that Masimo SET provides today, we provide this parameter called PVI. On the right here, we show a rock curve, right, which is looking at the sensitivity and specificity. If you haven't seen one of these before, the ideal situation is if you go up the log curve from the sensitivity and all the way across. Now the red here is PVI. You can see it does pretty well. You see this next light gray line behind it? That's the invasive method of the arterial PPV. So very capable in terms of monitoring this. Now there's over 100 published studies and they've all been positive related to this parameter. And now we're introducing dynamic PVI. What I talked to you about on the invasive is this green line right here. This is the invasive PPV, all right? In blue is PVI. You can see there's a little bit of variability and sometimes we would get some dropouts. Now we've improved both of those capabilities. And today with dynamic PVI, you will see the red line here and how closely that tracks to the invasive method, hopefully improving what they're trying to do non invasively. Now as we know more and more surgeries are not requiring A lines, making this even a more effective tool to be able to monitor this non invasively and continuously. Still with Masimo SET and the SET technology board, we offer RRP, respiratory rate from the pleth. We're all used to seeing a pleth that looks something like this, as you can see on the monitor, where it's flat line on the bottom and it goes up and down, right? In reality, the plaque actually undulates like this. And what that is, that's actually the breathing, the inhale and the exhale of the chest going up and down that affects the signal at the periphery. And from that, we can extract RRP, respiratory rate from the plant. This is done in a spot check modality. So think of when they typically want to collect respiratory rate in a spot check modality, a nurse would come, either place her hand or try to count and the error rates that we've seen from our studies are tremendous when they're trying to do that. Now you have an accurate way of quickly grabbing a respiratory rate from the same sensor that's applied on the finger. We've touched on Masimo SET and the 2 LED technologies that we have, and now we'll go through Rainbow and what it comes with. So Rainbow applies multi wavelength technology using 7 plus LEDs. And as you can see here, we expand the parameter set for blood constituents, everything from ORI, SPHB, RPVI, SP MET, CO, acoustic respiratory rate and oxygen content. Now one of the most important parameters is our continuous hemoglobin. You can get continuous non invasive hemoglobin and you can use this and have that visibility in your OR and your ICU between your blood draws, how long does it take to get a blood draw typically in the hospital? Let's say a surgeon's in a case and an anesthesiologist wants to know where the hemoglobin is, they'll call for a blood draw that heads to the lab and the fastest it can come back is probably 15 minutes later. This is a dynamic parameter that changes in real time. If you're only drawing blood at certain events and you're receiving results 15 minutes later, that can have an effect on what you're doing. If you had an indication of where hemoglobin is heading during these periods of episodes of when you're doing blood draws, it truly has an impact on your clinical decision making. Here's a study on low blood loss cases out of Mass General. They looked at 327 patients. And as you can see here with low blood loss settings on a post ortho ward, it dropped transfusions for 4.5% down 0.6%, 87% reduction in blood transfusion frequency. This is on low blood loss cases. Moving to high blood loss cases, AWADA out of Cairo, Egypt, showing out of 166 patients on neurosurgical patients again showed units transfused dropped from 1.9 down to 1.0, 0.9 reduction of units per patient. Truly impactful in what they're trying to do in terms of decision making. Here's a really important study. This is a study out of Limoges France. And they took the combination of PVI and SBHB and they monitored 18,000 patients through the OR, ICU and through recovery. This study showed tremendous results. After 30 days, it had a reduction of 30% in mortality and after 90 days it showed a 25% reduction in mortality. This is soon to be published in full manuscript, very, very powerful study. Now we're trying to repeat this study in a multicenter study and actually multi country study as well, trying to repeat the study to show these same results hopefully. We feel very optimistic about that and that study should launch soon. Yes? Of 1800 patients, sorry, 3,500 patients compared to a cohort of 1800 patients 18,000 patients, I'm sorry. Now all the studies you guys just saw in SPHB was done with our Rev E revision or mostly on the Rev E vision, some even older. This is Rev O that will be shipping with us at the end of the month. You can see we've improved the linearity of the trend, so we can follow even greater to the invasive measure. We're hoping to see better outcome results as well once this is introduced. So we're very hopeful for that. Impactful parameter. Again, a very impactful parameter. Pulse oximetry is limited in the visibility of the oxygenation to the patient. It caps out at 100% And it's great for anybody that's breathing room air. But as soon as they start to apply supplemental oxygen to that patient, SpO2 will not help. It will cap out at 100 and it won't tell you any additional information. ORI brings visibility to the oxygenation. It's an index that's comparable to PeiO2 in the ranges of 100 to 200, giving you that additional visibility that you've never seen before. So let's walk through this. As they administered oxygen this is tricky, as they administered oxygen, you can see OIs and index starts to rise, giving you an indication of what's happening in the oxygenation state. Now as that oxygen starts to deplete, you can see much earlier than SpO2, it starts to give you an indication that it is dropping, hopefully saving you from an episode of a desaturation. Think of intubation cases, right? They're trying to intubate a patient, They've oxygenated them. They don't know where they're at. They don't know if they have more time to try to intubate or they should pull out and reoxygenate that patient. This now can give them an indication of what's going on for them to make better clinical decision making. Very powerful parameter available in Europe right now and hopefully soon to be cleared by the FDA. With all of the parameters on the Rainbow platform, we have our Masimo SET 2 LED technology. Now we've added our 4 LED sensor, which provides ORI and RPVI in addition to the set parameters. We have our 8 LEDs, which includes SVHB and SV MET. And now also we have our 10 LED sensor, which combines all of the rainbow parameters, including CO and SPOC. On that same technology board, which we call the rainbow board, it also allows for an acoustic sensor to be applied. That acoustic sensor is smaller than a size of a quarter and is featherweight and can be placed on the neck for adults and on the chest for babies and neonates. Now this sensor here is designed like a stethoscope. Think of how a stethoscope typically works. This is a digital stethoscope that actually listens to the vibrations of the breathing as you inhale and exhale and determines the accurate respiratory rate. This is its comparison against capnography from a sensitivity and specificity perspective. 81% sensitivity versus 62% and both at 99% specificity. Truly showing the power of this technology to be able measure accurately for these patients. Now its biggest application will probably be on the smaller babies, where applying ECG for respiratory rate will be challenging because of how fast they move and when they twitch or trying to get a respiratory rate from capnography where these patients are not tolerant to that, right? So our acoustic respiratory rate is not only accurate, reliable, easy to use, but it's also very tolerated by patients. As you see here on the right, the tolerance of our acoustic respiratory rate was at 97.5% in the study versus 62.5% for the capnography. Now all of these technologies that we talked about have huge impacts and benefits for patients and clinical outcomes, but they also save money. And if you remember in our mission statement, we're here to improve patient outcomes and reduce cost of care. If you look at a typical 250 bed hospital model, we estimate that if you implement our Masimo SET and Rainbow SET technologies, you will have annual savings of greater than $3,000,000 right? And we did this through looking at types of surgeries, how they implement, where they implement to come up with this number. So it's truly impactful to the bottom line of the hospitals as well. Now moving from our Masimo SET and Rainbow technology to now our advanced parameter monitors. Joe touched on these a little bit. SedLine, brain function monitoring first, which is a depth of sedation monitor typically used during anesthesia. 3, regional oximetry and NOMALINE, our capnography and gas monitoring. Next generation SedLine is a product that we reintroduced a few years ago, maybe a couple of years ago now. It truly brought impact to how brain function monitoring was used. We like to say that it did what SED did to pulse oximetry, next generation SEDLINE did to brain function monitoring. Now I show you a graph here, and this is our older generation of SedLine as the black line. But in reality, this is representative of almost all brain function monitors out there today and how they react. We did a study in Groningen where we took subjects, 36 subjects through 4 different regiments of anesthetics. So we brought the same subject back 4 times. We mixed it with they had a propofol dose, propofol remi, propofol sibo, remisivo in order to make sure that there isn't a patient to patient variability. We're seeing the same drug on the same patients and how they react. Now you can see here in this protocol, we increased the dosage of the anesthetic and at the end, there's a bolus that is provided. And the response should be almost an inverse of this where it starts to drop, comes back up and at the end you see that response. If you see in the older cases or the black line there, that number was not always reliable. It would jump up for different reasons, giving indications that the patient may be waking up or they're not when they're actually fully sedated. And we'll go through some of those conditions and some of those improvements. On the right here, we displayed the most comprehensive image of the brain, looking at raw EEG, giving them the PSI value, which is an index that they can use to determine where the patient is in terms of depth and also showing them the DSA, the density spectral array. When they look at this, they can also see what we call burst suppression. Those are the black lines there. That means they've probably taken that patient too deep. And you can see now studies are coming out talking about how this is associated with delirium, right, and with true outcomes in terms of when my father went into that surgery, he never came out the same, right? That's what we're trying to avoid with these types of solutions. We'll touch on just some of the algorithm improvements to SedLine. One is low power EEG. Just like in SET where we measure kind of the smallest signals, right, for those low perfusion, it's amazing how the brain works for the geriatric and the young patients. The signal starts to shrink. And once you get that low power EEG, typical brain function monitors will start to react incorrectly. You can see here's an episode of low power that comes through. And in the old headline, you see it would start to rise, again, giving a false indication that the patient is not deep enough. And now with the red and the new SED line, you can see it holds all the way through. Now allowing clinicians to trust in that number more, making it more usable for the typical clinician. Now another scenario that typically happened was that you would get these non voluntary muscle movements. Even when the patient's sedated, these muscles move around in the head. And that's kind of like motion with pulse oximetry. And it would introduce something that would disrupt the signal and again giving a false reading for the clinician. That improvement has also been made with our next generation SedLine allowing us to read through these episodes of EMG. The most important organ in the body is the brain and protecting it during surgery is something that everybody is looking to do. There's a lot of movements out there with the ASA Brain Health Initiative. Everybody is looking at how to protect the brain. We've introduced our O3, which is our cerebral oximetry that looks at the oxygenation of the brain. It actually is comprised of 2 detectors and an emitter, and we subtract the shallow and keep the deep to make sure we're only reading where the tissue of the brain is actually oxygenated at. Now again, we wanted a gold standard when we did this study. So we ran a 72 subject study down in Arizona, where we actually measured that we put a catheter all the way up the jugular bulb in order to sample from there, right? And we obtained an absolute accuracy of 4% and a trending accuracy of 3%. And again, for the pediatric patient at 5% with a trending accuracy of 3%. Now a lot of these monitors don't have absolute accuracy. Some of them just claim a trend accuracy. But with the Masimo technology, not only will you have a trend accuracy, but you will also have an absolute accuracy, which means you can trust that first number that shows up on the screen. Now real estate of the forehead is very precious in the OR. And as you go from smaller to larger patients, you have the same problem with forehead space. We've designed our sensors to work in combination. Think of it like a puzzle, right? You can see here, it's like a puzzle approach where you can apply both sensors at the same time and the sensors get smaller as you go to the pediatric sensor set as well, allowing it even for pediatric patients to have the same effect. But not only do we share the same forehead space, but all of these parameters go back to our root device. And you can monitor every single parameter I just talked about from set to rainbow to brain function monitoring, cerebral oximetry and even capnography on that exact same platform. We'll talk about our topography and gas monitoring. On the right here in the yellow is our ISA module. This allows for monitoring of entitled CO2 and respiratory rate, typically of what capnography does. We also have a version called axPlus that also can monitor agents. It has an auto agent ID. So as it detects these anesthetic agents, it will identify them and monitor them for clinicians. We have a version that also adds oxygen, so you can monitor O2. Now we come in different flavors. On the left here, what we call our mainstream technology for intubated patients, you can just snap it into the line or you can do side stream where you can do cannulas. Now these cannulas can go both on for intubated patients or also for just the nasal probes. On the right is our Emma device, and I'll talk a little bit more about that in a second. With our capnography, now we're introducing an entire line of cannulas. Now these cannulas are unique in its features from a Masimo perspective and the way they wick away the moisture. So there's a patented technology at the end of each cannula that would actually collect moisture as you breathe in and out. And even in high humidity scenarios, it will collect the moisture and continuously push it out to the environment. So it evaporates that moisture continuously, not allowing the water molecules to collect. Typically, if you have a water trap type scenario, the water molecules collect and nurses have to go attend to that with alarms to be able to remove it. Here, it will continuously wick it away, allowing for enhanced workflows. So we'll be introducing an entire line of cannulas related to that. We have actually introduced it. Now to our handheld devices. We have a RAD67 caroximeter. The RAD67 caroximeter, which allows for our hemoglobin now measurement to show up on this new device. This was recently cleared by the FDA and now you have a spot check measure of hemoglobin. Within 30 seconds, you can get your hemoglobin reading. And now this probe can also monitor adults through pediatric patients on the same probe down to infants on their toes. Now it's cleared for the adult population in the U. S, but OUS is cleared for the entire patient population. We also have our RAD57, our CO monitor for our fighter fighters. And recently, we've re signed our or they've recommitted from the New York Fire Department to deploy a huge amount of these in the near future. We touched on our little Emma capnographer right here. This is a product, think of like the EMS market. They can literally snap this into the mainstream and immediately within seconds get a true capnography reading entitled CO2 and see the capnography waveform. This is a battery powered device that they can use and continue to monitor the patient as they transport them. And then we have our Mytesat, our fingertip pulse oximeter with MasimoSat on it. Now talking about our markets, let's look at our addressable market. We talked about pulse oximetry in the 1.7 $1,000,000,000 market. Our clinical leadership here, we rank ourselves number 1, market leadership number 1. This market is growing at about 3% to 4% and we are growing about 2x that market today. Rainbow Technology, again, we're the only first ever and only, so we believe that's a $1,000,000,000 market. Looking at capnography with a $550,000,000 market, we believe we have number 1 clinical leadership and we're positioned at number 3 today. But we're also growing at 2x greater than the market. The same applies to SedLine, where we rank ourselves number 1 in clinical leadership, 2nd in the market and growing at greater than 2x the market. And the same for our 3 regional oximetry parameters and sensors. Okay. With that, I think we will take a break. So, Eli, would you like to guide us through that? We're going to take a 10 minute break now, for those of you who need it. The restroom is behind the curtain here through the little passageway. And if anybody wants to have coffee or water, there's a station behind the curtain. Thank you. Please be back in 10 minutes. Okay, everybody. Our 10 minute break is now officially over. I know that was a very quick 10 minutes. So can everybody please return to your seats so we can resume the presentation? All right. I'm now going to hand the floor back to Bilal Moussin, who will continue with our presentation. Thank you. Thank you, Eli. All right. I don't want to ruin the surprise, but our vision for hospital automation, we believe is transformational for hospitals. What you're going to go into today is what we call the discovery lab, and it's our vision for how hospitals of the future should run. Now what you're going to see is what we have out there today, but our vision is going to extend way beyond that. So I'm going to go through a few of the products that we've already launched in hospital automation and we're going to look at some of the impacts that we've seen in the early stages from that. What are the market needs? Cognitive overload and errors of omission, too many devices in the room, too many things to touch, too many things to interact with, how do I get that data centered and in front of me when I need it? Data accessibility, low nurse to patient ratio and having the data where I'm at, 2 of the biggest challenges they have today. Complex workflow, manual charting, how do I input the data, where are the errors generated, how do we deal with these issues? Today, when you look at a hospital and you try to integrate data inside of a hospital, you take a look at what they have from infusion pumps, physiological monitors, anesthesia machine and vents. And then you try to build that out. You introduce an integration hub where it pulls the data, takes it, passes it onto a server from the room into a server and then to the electronic medical record. Now you want to have a central station. You introduce another monitor gateway, pull that data in order to produce a central station. I need alarm management for these devices. Another 2 gateways, a new server for alarm management, a new server for an alarm reporter, and what if I want it on a mobile device, yet another gateway. And then if I wanted a cockpit light display, I need to now add another server that will aggregate in order to display that. This solution is not simple. It gets complex really fast. And each one of these solutions has to find a way to work together in order to get the outputs that the clinicians need. A complex solution that we studied for a while before we introduced our Iris platform. We have something very powerful already in the room. That is our root monitor. That in itself can do all the monitoring parameters, but now also add the ability to aggregate data as a hub within the room. It will pass that data to our Iris platform and now that data can be shared across all the solutions, whether it's Uniview, Patient Safety Net, Replica or to the EMR. What's the difference? Everybody looked at the data differently in the first Each one of those introduced another box, another solution, another vendor in order to solve the problem. What did we introduce? We introduced the Iris Gateway, a high fidelity, low latency bus architecture that we started to work on since 2007, right, that enables us to do all of that, handle parameter data, handle alarms and events, handle high fidelity waveform data and not limiting it to also being able to go with 2 way audio and video. But the 2 way communication is actually not limited to the audio and video. We can do that across all of the different data types. That's where we see the future of how to manage hospital automation is that the flow of data is not limited. As we source all of this data, we can distribute that data to any endpoint. And we're not looking to charge for each little bit and piece of it. We're looking to provide an enterprise solution that can handle it for hospitals. Truly a different view of how to look at it and how to apply it. Let's dig a little bit deeper into some of the solutions. We started off with what's in the root. That's our root connectivity platform or connectivity hub. Now this is a very versatile and customizable patient monitor. You can see from the left here, it starts with our typical rainbow set parameters and a transport monitor with the RADICAL 7, can be used in a lot of different care areas as we will see. On the side, you can add our SedLine brain function monitoring to what we call Mach 9, Masimo Open Connect. That's making the route an open connect platform where we provide 3rd parties an SDK for them to develop their own application for their own sensing technology. You'll see we've recently introduced the first module that just came out from m. Dolores and you'll see throughout the year and next year we'll have quite a few of them being introduced in a timely manner. So you can plug in a plug and play solution through the MUC9 to add sedline brain monitoring. The same thing, you can make this a regional oximetry module. Now if you plug in multiple modules, the screen will automatically adjust and allow for all of them to be displayed. If you don't like how it's being displayed, you can simply touch the front of it, drag and drop to adjust the display size, bringing a modern feel to monitors in hospitals today. This is a multi touchscreen device. We were probably the 1st to introduce a multi touchscreen device in the medical device industry. But this device we've built from scratch, everything from the operating system where we baked our own operating systems on top of a Linux based solution, where we can control the security elements of this product, right, to the plastics where we shoot our own plastics and cut our own steel to make the high quality devices we need. Now with this solution is a very customizable display, and you'll see the power of that when you come to how to display these parameters and modules, but most importantly, how to optimize workflows at the end. Now as you can add our capnography as well by just plugging into Mach 9, you can also add our wearable solution with Radius 7. This solution on the general ward has the ability to communicate with the root platform on a secure Bluetooth communication link while in the room. And then when that patient leaves the room, the wireless turns on and it continuously communicates back to our SafetyNet solution. So you don't lose data as this patient is mobile throughout the hospital. Let's assume they go outside of coverage and the Wi Fi drops out. Now this becomes a monitor on its own that the patient is wearing. They'll announce it, the alarm there, but more importantly, it will collect up to 6 hours of data locally on the device. And as soon as that device comes in within Wi Fi or Bluetooth range, that data is transmitted back. That's how we view the continuation of data and how important it is to monitor these patients. At the end there is our vital signs check monitor. This has the ability of taking our exact route device that is deployed out there and with a menu switch, it can become now a Vital Signs Check Monitor, allowing clinicians to optimize how they do vital signs and we'll go through that in a bit. This shows you the versatility of the platform. One thing we touched on, but didn't look at is the back of the route. Not only does this have built in ABGN, radio, Bluetooth, BTLE capability for communication, Ethernet, USB, all the bells and whistles from communication standpoint, but it has 4 ports on the back. Those are the Iris ports, right? Typically, when you want to deploy connectivity gateways, you need a hub within the room. They introduce yet another device typically that just takes those ports from your anesthesia machine or your ventilator, from your multi parameter monitor, from your vent to be able to do that. Now you can simply plug those in to the back of the root device. The same patient association that you do on the root device, not only associates the patient to the root, but associates all the data coming from all the monitoring parameters to that patient and automatically transmits that to the electronic medical record. Now in order to do this efficiently, we have to think there are quite a number of devices out there in terms of monitors, ventilators, how can we get ahead of the game? Also on the other end in terms of electronic medical records, yes, there's a standard of HL7, but every HL7 configuration is different. You need to be able to customize it. And that's where ACE comes into play, an adaptive connectivity engine solution that we've built here at Masimo, allowing us to quickly identify the protocol, parse through it and assign configuration management to it and being able to parse all that data in a very fast pace never seen before from the medical device company. And again, using that to also customize the output that is going to the electronic medical record. We actually do that configuration on-site at the hospital, where it typically would take weeks of time to implement. Truly a powerful technology enabling us to have 3rd party connectivity. Now to Uniview. The vision Joe mentioned about what we want to do and how we want data to be seen and used is actually shown into Uniview here. It's displayed in Uniview. Think of the complex situation in the OR. Think of all the data you need to monitor. Now we know that these displays are not optimal for each type of surgery. That's why what you see here is a sample of what Uniview can do. Uniview is a completely customizable platform. It allows you to drag and drop the different types of data elements you want to display. If you'd like to see a parameter in a gauge form or in a large number or in a waveform, you simply drag that and drop it on the screen and it will lay it out. You get to customize that layout. You can store profiles for your clinicians and optimize what they're trying to do. You can even see trend data on this display. So anything the clinician can think about of what information they need can be customized in a drag and drop form that you will see later in the discovery lab. Truly making this a display that not only can be used by the anesthesiologist or by the surgeon, but you can also make it applicable to the entire care team. You can deploy this on as many TVs as you want within the OR and that data is being sent at sub second latency. So practically in real time view of that data. You can see parameter data, waveform data, alarm data, all available to you on these screens. Now you can also customize these layouts. Here's how it comes alive. We could also customize these layouts to create logical views, right? See if what we're doing to the patient and what the outcome of that is. So whatever you need to adjust to see what outcome you need, you can set up the views as such. We call these logical views. Again, a very powerful tool we think will make an impact. It's already being deployed. Once we set it up actually to demo for ORs, we expect the customer say, okay, let me try this in 1 OR or 2 ORs. But very quickly right now, we're seeing, nope, let's equip all the ORs with this. Because once you go into one room and it has this, the clinicians want it in every single one of their ORs. So we're having great success with this from the start. Now to our patient safety net. We touched on the power of SET and what it brings to the measurements, but also the system and what clinicians interface with is also very important. With this product, you can customize your displays, look at it in terms of icon view or numerical views, monitor your patients, look at 96 hours of full disclosure, not just of our parameter data, all the parameter data that's coming from the multi parameter monitor, from the ventilator anesthesia machine, all is available to you with a simple click. Now that data comes up instantaneously. We have advanced algorithms to how to manage that data and to make sure we can display a large amount of data for any patient instantaneously and you'll be able to see that during the demo. Now from these patients, you can also assign care teams for these patients. So you assign primary clinicians, secondary clinicians and then charge nurses in terms of how you want to escalate alarms. Once alarms fire, you need to make sure they're received by the proper person, right? And if they're not, then you need to take action on it. What we've recently introduced is what we call guaranteed alarm delivery with our notification solutions. We know if you have a smartphone versus a pager, we know if that phone is on or off. So if that phone is off, I know I need to deliver that notification to a different clinician and that automatically escalates. If you've received it and you want to pass it on, we'll show you can just click and you can automatically pass it on to another clinician or accept it yourself. Bringing a lot more in terms of workflow for clinicians, so they can manage. So if a nurse is busy and she knows she can't run, I need to pass this on, she can do that from the palm of her hands and pass that on. Now you assign clinicians here also in terms of how we manage our devices and how we manage our layouts in terms of our patients, it's fully customizable. You can look at who's assigned to you versus what's your floor is doing versus a different floor and all of these are configurable on our patient SafetyNet system. Now the power of SafetyNet and what it did in the central station monitor, we've converted into replica. We use the word replica because we believe it replicates what's happening in the room. You can see here, I have the list of patients that are assigned to me or I can look at the entire floor that I have access to after logging in and I can simply see what's going on. I can click on a patient and I have a live view of data into that room. Sub second latency of data into the palm of my hand. Now if it's set up correctly, you can do this in the hospital or out of hospital depending on how departments set it up. But essentially, the power of SafetyNet and the review of 96 hours of data or live data now is in the palm of their hand. They can also obviously receive notification. But here, it's not only our patient monitor data, it's also everything that's connected through the Iris platform. That was the ECG coming out of the Philips monitor, for example, or this Hamilton ventilator or the ASUS anesthesia machine. All that data is now live in the palm of the hands of clinicians. Here's the example of notification. So if I can decide to accept or forward with a click of a button, I can optimize my workflow to manage care. Now, this Root platform, we looked at it and we said, we can do a lot more than what a typical monitor does. There's complexity in workflows in hospitals, how they chart, what they chart, errors in charting and what they collect and what they forget to collect. So we said, what if we can optimize workflows using this? The first thing we introduce is something here on the left. And with a click of a button, a nurse can walk in and do an EMR push, meaning do the validation of data right there at the bedside. It could be data that's coming from our devices or the 3rd party devices that are connected. She does the review and with one push can send that to the electronic medical record with her signature associated with that push. Moreover, we can collect data from manual inputs that they typically do. What is the level of consciousness for this patient? That's something they can configure on the route so the clinician never forgets to ask and can input it on the route. What is their glucose level, right? What is their pain scale? All of those are inputs now on the device. This is completely customizable in terms of the field they'd want to collect. Now hospitals with EWS scores, as you see there, wanted to configure these EWS scores almost to the nth degree. We believe we have the most configurable EWS score system out there. So if they have their own solution on how they do the scoring, be it what parameters to collect, what weights associated with each parameters, all of that are configurations. Moreover, once the score is shown, if there's an action that needs to be taken based on that hospital's protocol, that action will show up for the clinician on the screen. So if the score hits 8 and they're supposed to call the rapid response team, the screen will show up and say call rapid response team, here's the number. Again, automating workflows of what clinicians are trying to do. On the right is our spot check, vital signs spot check modality. Again, this was a main new trigger to change it from continuous monitoring to that vital signs spot check monitoring. Now what's quite unique here is that we've introduced a 3 step process where a clinician can grab a barcode, associate themselves, now take that on a roll stand and go to the patient. They'll scan the patient with a barcode, it will automatically start to collect all the data as you place the probes with a single button press in Phase III that will send that data to the electronic medical record. Reducing the amount of time it takes to do a vital signs spot check. And that's what it would look like. Now we talked about some of our scoring algorithms. Joe touched on Halo. I'll go into it a little bit more. Halo is this parameter right here and it's shown graphically here. It's an index that starts to rise based on risk of the patient, But it's different than all other indices. It does not take a snapshot in time of the parameters. Everything we've seen with early warning scores and everything, it's like you walk in the room, you see what the parameters are doing and you try to make a decision based on those values. This takes a look at data over time. Now what it does with that data over time, not only can assess if the things are improving or going down based on 1 per parameter, but also looks at one parameter versus the other. If your pulse oximetry is dropping or your oxygenation is dropping and your respiratory rate is increasing, there may be a higher risk. Now it also builds a baseline for the patient. So if my SpO2 is stable at 94, that's where my SpO2 level is. And if Joe's SpO2 is at 100 and we both dropped down to 90, the risk of me dropping down to 90 is not that risky, but Joe going down from 100 down to 90 adds additional risk clinically. That's why it's very important to personalize that score now for the patient based on their baseline. These are just some of the features we have in HALO. Now you can also see what the contributing factors are and where it's coming from. HALO starts with the need of only 3 parameters, which is what our basic three parameters do, SpO2, respiratory rate and perfusion index. But it doesn't stop there. It can now input over 62 parameters into the score and we're adding more. Now it doesn't just need it doesn't just take in parameters from the monitors that we have or from monitors that are connected. It can also pull data back from the electronic medical record to add to that risk assessment score. Now we've exposed all of these elements to clinicians, allowing them now to tune the algorithm with Halo Ion specifically for their patient population, because we know a post neuro award is going to be different than a post ortho award or in one type of ICU setting versus the other. And now those levers are exposed to clinicians to configure it for their patient population. We think this is the start of how we're going to start to look at data and there will be a lot coming in terms of how we're going to use scoring in the future. But we believe this will have an impact on how clinicians rank their patients for nurse assignments, when to determine certain discharge is ready or not and how to see where the criticality or risk is building up for their patients over time. So one last thing here, you can see in this example here, you can see where the 67 is, right? And you're looking at that and you can see where the halo score was over time. You can see the different trends associated with all the parameters and how they deviate from baseline, but you can also see where the contributing factor is here. So you can see this is due to SpO2 and pulse rate where these bubbles are, the greater the bubble, the greater contribution it is to the HALO score. We've done a lot for clinicians in terms of hospital automation and data management. Another key customer for us in the hospital is the IT and biomed teams. They also need to take care of all of these solutions. And just like we've introduced these pathways and communication links for the medical channels or the clinical channels, we've introduced independent channels for diagnostics information for IT and Biomed. So the clinical channels that we communicate on work independently from the technical channels that we use to gather the rest of this information. Now we can gather data about all of the devices that are in the rooms, all the diagnostics, health of the battery, how often was it charged, how the last charge go, what is the capacity left, what is the fan speed, when did it come on, when did it any if there was an error on the monitor, what happened? What time? What is the uptime? All that information that typically take hours, if not days for Biot and IT to try to gather and manage and monitor is available to you on a web based interface to access it. Now that information is really critical, but managing devices in hospitals, it gets very tricky. We've introduced now a way of even software upgrading our devices through this solution, which we call our iOS device management system. So all of our devices are already connected, right? We're passing clinical data back and forth. And now in this new channel that we have, we can pass this technical information back and forth. Now we can send upgrades down to our devices from the IT room. Now we know it has to be clinically safe, so it will actually download 2 images at a time. And it won't upgrade it until somebody goes in and pushes in saying, yes, I want to upgrade and pushes in the password and now that device is upgraded. Think of how complex it is to do upgrades in hospitals today, right, for monitors. This is a solution that we can push an image from here to their server, they can decide when to upload it and with a single click can pass it along to all their monitors that are connected safely and securely. We talked about the different hospital automation solutions and these solutions will apply as you'll see in the discovery app across the entire continuum of care, be it in the OR, ICU, MedSurg, general floor and for our IT and biomed teams. Now, our objective with hospital automation is not to make things just faster and cooler and easier to use. We're looking for the outcomes. Just like we had proven outcomes with Patient Safety Net and what it did for the patients, we're going to expect the same kind of outcomes as they apply more and more of our hospital automation solutions. Already, a study has shown when they've implemented our RADIUS-seven with our SafetyNet solution, it has reduced the average vital signs data collection by 28%. And you can see hospital staff satisfaction ratings were high and no significant increase per patient per day. These are just simple outcomes today. We expect more and more out of these outcomes with our entire 1,500,000,000 Now this comprises of both capital and service revenue. So we sell capital into these solutions, be it with servers or then we also have to sustain these systems for multiyear contracts. And that's what we call our recurring service revenue model. Now contracting cycles are long. It takes about 18 to 24 months and we're still in the beginning of that. So hopefully next year and the year following, we should see more of that start to come through, but we believe we've built a robust pipeline for these opportunities. The way we size up the market, if we look here, we look at critical care beds and the number of them. And we see if we have we anticipate having 100% penetration for them, which gives us a potential of 125 beds. And we range the ASP from 1,000 to 2,000 beds. And we range the ASP from 1,000 to 2,000 depending on the different solutions they want to add. Going back to the challenges that we talked about, cognitive overload and errors of omission and our solutions with Uniview and HALO, data accessibility with patient safety net and replica, Complex workflows, both with our Iris platform solution and the root device within the root. Now we talk about the continuum of care, but we don't stop on the MedSurg floor. The continuum of care really includes the home. More and more hospitals are looking at monitoring their patients in the home. We now have a product called Doctella. This is a cloud based solution that allows us to monitor patients remotely. We have solutions now in the spot check modality here. It can aggregate data from different devices, securely pass the data back and forth between where the clinician is and where the patient is, and it does that in both spot check modality, but also for continuous modality as well. Now clinicians can either review data and charts for these patients or monitor them continuously on a safety net looking platform. Now what's different in hospitals versus the home is in the hospitals you have clinical protocols, clinical staff, everybody managing the care of that patient, when they should take their drugs, when they should take their vital signs, what to apply next if certain actions are needed. In the home, none of those things exist. Doctilla is not only a platform that allows for communication back and forth, but it manages their care program. What does that mean? Now a clinician or a hospital can set up an entire care program, setting up the rules of how to manage patients in the home. All of the conditions, when we want them to take their meds, when to remind them, when they should take their vital signs, if their blood pressure is high, what to do, when to take another blood pressure. That is what we call a care program. They can drag and drop and design these care programs and deploy it to these patients in the home automatically. The patient, all he needs to start is a mobile device. The clinician has a web interface, designs these care programs, it gets pushed down. They can do everything. They can consent on the mobile platform. They will receive notifications on this mobile platform and they can push and share their data securely through the Doctilla interface. Clinicians will receive that information, be able to review their charts and there's a full audit process in the clinician portal to show how much time the clinician has spent reviewing these reports and managing this data. And they can make decisions to say this patient has graduated from one care program to the other based on acuity probably or based on deterioration. And with a push of a button, they can push an entire new care program to that patient. That is what we consider managing care in the home. With our continuous monitoring devices, this is the RAD97 product. And with every single model of it, we can place a camera inside that product that we ship. And now that product can not only monitor the vital signs of this patient with NIBP, with temperature or with capnography, but can also act as a two way communication between clinicians and patients. We think this will make a difference in terms of how they manage care. Imagine 2 scenarios. The first patient doesn't feel comfortable, wants to come into the hospital, but instead of driving in, pushes a button, interacts with a clinician, the clinician asks them a few saved the trip of him coming in. Or the reverse, a saved the trip of him coming in. Or the reverse, a clinician is monitoring and recognizes that this patient is deteriorated and pushes a button, communicates with that patient and says, sir, you need to come in or ma'am, you need to come into the hospital right away before further deterioration. So allowing for not only vital signs monitors to be synced, but also allowing them to communicate through the exact same platform. This is a glimpse of what we consider hospital automation and you'll see more in the discovery lab soon. Opioid safety. I want to say this has become a passion for us at Masimo and we get really passionate when it comes to patient safety. But we truly know the impact that we've made with opioids in hospitals that Joe shared. Those 0 dead embed results that we continuously get after deploying patient safety net, more importantly, Masimo SET is something we looked at we think we can repeat. Let's have a few definitions on opioids. We all know these pain relievers by the names of oxycodine, hydrocodine, morphine and fentanyl. And then there's also illicit versions of them with heroin and now fentanyl is also available illicitly. Now how does it work? Opioid receptors work on the nerves though and they make you feel really good and relieve the pain. But there's also consequences that come with that, which we'll touch on. The primary use of prescription is either to manage 2 situations or 3. It starts off by either you having chronic pain that needs to be managed so you get put on opioids or you go through a surgery and you get put on a short term opioid dose. And then also, if you have injuries or cancer, then sometimes that's part of the chronic management that you go through. These are staggering numbers. 191,000,000 prescriptions per year. These are all U. S. Numbers that we're going to go through. 92,000,000 adults use a prescription opioid each year. 114,000 U. S. Emergency departments are considered due to opioid or suspected opioid overdose. The burden on the economy of these opioids is calculated about $78,500,000,000 What happens to the physiology? When these patients take opioids, it's very interesting because you really can't tell who would be affected by opioids. We'll go through a few stories, but you can have a 6 foot 4 male athlete, healthy as a rock, just you can see him, you say, wow, he can take half the dose that is prescribed to him and not wake up again. That's what's really concerning is you can't pick out who will be affected by taking opioids. What happens? Once you take these opioids, they start to affect your respiratory and your breathing starts to slow down until you're DSAT. Now if you desat enough, it starts to affect your brain because it also gets deprived of oxygen and then eventually affecting your heart and going into cardiac arrest. But it starts with affecting the respiratory tract and getting a desaturation. What are people trying to do with this opioid epidemic? They're looking at everything, reducing availability, fewer prescriptions, reduction of dosage, treatment to addictions and also having reversible drugs. But what about that patient that is on opioids right now? Number of deaths calculated in 2017, 47,600 deaths due to opioids and then due to prescription opioids 17,000 over 17,000 deaths, staggering numbers. Here's Masimo SET solution to the problem. We know the effect of Masimo SET on those patients on the general care floor where they're using opioids through PCA pumps. We know what it can do in the home today and we know that impact and what it will have. We already have devices today that we deploy in the home in different forms the Rad-ninety seven device that you saw. And now we'll be focusing on a product specifically for patients on opioids. This is our Opioid Safety Net product. Patients go home with prescription opioids and they go to rest. They either take a nap or they sleep. We want each of those patients to be wearing our opioid safety net product. They configure the system when they first get it and all they have to do is slip on that wearable device and go to bed. And this will act as a safety net. If we decide that it's there's a critical situation that has occurred, we will enunciate and try to wake the patient up, but that may not be good enough. So we will fire a notification to a friend or family or loved one depending how they've configured the system, alerting them of the location of the patient and the situation they're in, and hopefully they can get there in time to help out. Now there's an escalation policy built into the system. We'll notify multiple people, but then eventually go to EMS and let them be aware of the situation. This is the safety net we're trying to build for the patients that are on opioids at home. A simple solution, they set up one time, all they have to do is wear this device and we'll notify when things get critical. Now the market opportunity. We talked about 191,000,000 prescriptions. Even if we assume the reduction of that by 30% going down to about 134,000,000 prescriptions, We are only focused on 1 third of that population, which is for chronic pain, right, and for post operative patients. Not to say that the product can't be used for all the others. That's just where we're focusing on initially. 45,000,000 prescriptions, which gives us a market opportunity of over CAD4 1,000,000,000 This is Parker on the left here. Him and his sister both removed their tonsils and they both went home. His sister is much smaller physique than him. Both took opioids. I'm sorry, this is wife, yes, but his sister took, I apologize. But both him and his sister took opioids. And we had a chance to meet with the family and it was really a touching story. His sister didn't have a problem. She took the course that was prescribed to her and she did just fine. On day 3 of taking half of his dose, Parker didn't wake up. Now what does that mean? What does that trigger? Utah legislation recognized this problem. They introduced something called the Parker bill, all right? They recognized the effects of sudden death from opioid induced postoperative respiratory depression, right? They urge the Department of Health and Hospitals to study this further and they encourage physicians to prescribe in home monitoring devices when appropriate for these patients. Now this has already started. There are already institutions in Utah that have picked this up and they've had great results to start monitoring these patients. And we're going to see that hopefully continue everywhere. Now what's our approach to launch? We are partnering closely with the FDA, as Joe alluded to earlier. We're starting with cash payers, right? But we're still pursuing reimbursement models as well. Here are the key takeaways from our opioid safety net solution. We have a potential of saving 1,000 of lives and that's really what we want to do. The differentiating factor in our solution is what makes us successful. And that's not the gadgets that come with it. That's the power of Masimo SET and its ability to monitor these patients accurately, just like it did in the general ward, even when they were moving or had low perfusion. It will do the same for these patients in the home. We will have a measured market launch to ensure commercial success. So we're studying it carefully. We may have iterations to the product that we will do, but we are looking forward in terms of making an impact for these patients. Thank you. Thank you, Stacy. Good morning. Really, really pleased to be here to speak with you. Farrell and Joe overviewed the importance of technology, the importance of everyone working together to improve outcomes and to save lives and talk a lot about different groups of people, babies, adults, those in the hospital, those outside of the hospital, the number of lives that we can impact. Right now, when we look at the world and the health care situation, a lot of what we talked about is about the 2,000,000,000 people who have access to health care. But there are over 7,000,000,000 people in the world. It's 7,000,000,000 and 5,000,000,000, the majority, the majority don't have access to safe surgery. Look around you. That means we count on the table, one of every 3 of you gets access to safe surgery and the other 2 don't. What does that mean for the world? 33% of the people who die every year die because they cannot access surgery for a condition that needs surgery. That means about half of California disappears every year. Now people disappearing, those are dreams, those are lives that are supposed to be making our world better. But there are also lives that are injured and that has a real impact on economy. 77,000,000 disability adjusted life years, people who are injured or not as well as they could be because they didn't have access to safe surgery. It has a huge impact on economies. It creates poverty. It creates orphans. It creates ineffective communities. It's a very real problem that we need to be a part of solving. Now the amazing thing is a lot of the world has mobilized to say, let's scale health care for these 5,000,000,000 people. But the frightening reality is right now in low income countries, the people who are accessing health care have a higher proportion of death than those people who are not. Now that's staggering. That means that people now getting health care in low income countries are dying more than when they didn't get health care. That actually happens here 100 and 100 of years ago too. When health care started, it becomes dangerous. People lost tools and they lost training. So for a period of time, healthcare was dangerous. The data and tools and training made that different. And anesthesiology is a great example of a profession that became educated, deliver safe surgery, brought in tools like pulse oximetry and allowed people to go through the journey of surgery and go home safe as they should. This is extremely important and we believe we can make a very huge difference. We're very excited that over $40,000,000 has been released in funding for in country demonstration projects to start scaling pulse oximetry projects, not just pulse oximetry, but multimodal device monitoring projects to start scaling safe surgery and to see that, that can be possible to scale around the world. So we can do for the 5,000,000,000 people what has been done for the 2,000,000,000, take health care scaling and make it safe, which is both economically impactful and allows for the most important part, lives these days. We're very excited that the focus of this $4,000,000 of demonstration fund has been focused on combination devices that involve pulse oximetry, hemoglobin, respiratory rate and other non invasive measures that Bilal spoke about that allow for a good indication of what is the patient failing. So we just talked about comp of California gone because of rapid access to safe surgery. Now let's talk about disease states. And this is great because this can actually be fun. 200,000,000 lives are impacted by pneumonia every year. How many people in here know someone who's had pneumonia? Pneumonia is something that I used to think about, we shouldn't have pneumonia, right? Pneumonia is something we our doctors should identify we're sick, we shouldn't get sick of pneumonia, but it's everywhere still. 2.6 1,000,000 people die every year because of pneumonia. That's Manhattan and Boston gone every year. Some of you come from there. Think about the people you know and the things they do that are important, whether they clean the street, whether they run the dry cleaners, whether they're busy inventing ways to clean the ocean, those people need to be here. And there's a lot of people going. The frightening part is it's affecting children under the age of 5, our future. And the elderly, those people who have raised us, they are affected the most. And simply put, not enough is being done. So Joe challenged us. We had to get involved. In 2013, the Bill and Melinda Gates Foundation contacted us and they told us that they had commissioned an independent field trial. Unbeknownst to us, they had brought the MASMOS jet technology into a field trial with many other devices. And they told us that in the low income settings, the last mile of health care, the MassMutual technology works reliably with a low trained community health worker to identify person who is at risk for pneumonia. We had the highest accuracy and the lowest error rate. And that's really important because the reality is there is a discrimination in the world of thinking that perhaps someone in a low income country, roads can't work effective technology. And the Bill and Melinda Gates Foundation proved they can and they can use it well. So they contacted us and they said, we need your help. We're going to find Masimo and work together with Masimo to invent a device that combines together saturation monitoring and respiratory rate and has decision support to tell someone this person has risk of pneumonia. Now everyone who raised their hands about pneumonia, many people have experienced pneumonia or experienced a loved one having pneumonia, it's vague, not feeling so well, just don't want to go to school, not feeling so great, feel tired, don't want to go play basketball. It's just so vague. Oh, you're maybe go to the doctor, they tell you to take some medicine, go back to bed, come back. You have a window of time that you need to address pneumonia with either antibiotics or oxygen or a combination of both. You need to know this is pneumonia. And we're really proud that in 2017, the RAD G device launched, which you heard the music on, that allows for the combination device of screening, polyposimetry and respiratory rate to come out with a recommendation. And the music that was playing, the animation that you see here is important. We talked about children under the age of 5. You have the full kids who are scared, parents who are scared, and we need to manage them to find out how things are going. So the team working together considered this family and what they're going through and how to get a really good reading and make it fun. Healthcare doesn't have to be not fun. Make it fun to get a good reading, find out what's going on and move forward to get good care. In 2018, hundreds of devices were deployed in Ethiopia through UNICEF and the Ariba projects funded by La Taisha Foundation, And they now have a large scale project underway with over 1300 devices being studied for impact on outcomes of pneumonia screening. And the impact project is looking at worldwide screening and screening for pneumonia. Now another reality that we have in healthcare, anemia. 1 third of the population is anemic. One third of people don't have adequate ability to get oxygen around their body every day. And what's that like? People who don't have energy feel like their brain is a little bit fuzzy, find it hard to get going every day. And that's why the disabilities worldwide is really important. 9% of disabilities worldwide are affected by anemia. That's productivity. That's people getting out, going to work and taking care of their families so that their country doesn't have to take care of them for them. It's very important. But let's go back to what we're talking about before, getting through surgery safely, whether that's in a high income setting with a whole Uniview cockpit view or that's in a low income setting with a child having plus lift called palate surgery. If you come into that surgery and you're anemic, you're 42% higher chance of dying in that surgery. That doesn't matter if you're in the U. S. Or in Germany or in Ethiopia. It's a problem that crosses the globe. And we're really proud to know people around the world who are addressing patient blood management and the reality that this can be solved for. What we need to be doing now is screening people hemoglobin levels. We need to know who is anemic because you can manage it. You might know that whether you take diet supplements or manage your diet differently or prepare before surgery, it could be managed. We're very excited that some of the largest hemoglobin screening programs in the world, groups like UNHCR, who are screening the refugee population, World Vision, who are running children's community programs around the world and other very large groups to ensure they monitor hemoglobin to know the chance of their community to thrive and survive are now implementing projects using non invasive hemoglobin screening. That's amazing because it's not just about knowing something is wrong. Like we talked about with Radji, it's about doing it in a respectful way for the family. How do you fingerprint how do you people have donated blood and got the doctor and had your fingerprint to get your hemoglobin checked? Fun? 2. I would rather have blood taken from here than have my finger pricked. Healthcare doesn't need to a really negative experience. So this allows for a positive experience and allows for really life saving data to be collected. For that mother bringing her child to be cared for has a profound impact. Now that's directly working with the community on what we have been founded on, bringing technology to patients to see the outcome. But we also have an intrinsic need and importance to be involved in our community in general. We here are creating a footprint. So all that we're doing as we ship products around the world needs to every day ensure that the health of our planet stays in better and better shape. So now I'll show some pictures of our RD sensor line. And when you move around, say, to the discovery lab and other places, you'll see the RD sensor line. RD, it's two letters. So what does it mean? It's taking a traditionally based table and making a thin and lightweight sensor has an 84% impact on waste reduction. That's huge. As you know, waste has a cumulative consequence. One of the consequences is the CO2 carbon footprint. The RB center since they're launched in 2016 have a 1.5 £1,000,000 impact on CO2, incredible impact. So we can have welcoming technology and also find a way to keep a safe and healthier environment. Now along with that, in the boxes of all of our sensors goes paper, right? The regulatory space requires us to have a bunch of things written down and we need to teach people about our products. But we have, like you all have on your tables, computers and iPhones and other ways to read data electronically. So our teams work together to say how do we get to an eIFU, electronic IFU. It's convenient, cool. But what it takes out of a box has resulted since 2015 in over £1,000,000 of CO2 savings on the environment. A really big deal and I'm really always so proud of everyone who works together to say, let's take what we're doing and always make it better. And every bit counts. And these are really, really big bits. So we have over 20 initiatives that are happening in our facilities where you are today and around the world, whether it's from the ponds to the solar panels on the roofs to many other things you'll see in the building tour today that are changing the world around us as we go. And we challenge everyone we work with to work together to make that possible. Now beyond that, we are a part of a community. We together here are part of a community and we're also part of our communities of the health care systems we're in. So we have been partnering with other groups that we are very proud of and are leading change. We need to be not only a leader, but we need to work in partnership. Patient safety, as Joe and Mal have talked about, is fundamental to our journey, and we can't do that alone. So we're very, very proud to be partnering with patient safety institutes like the Health Safety Declaration for Patient Safety and Anesthesia, the World Federation of Study of Anesthesia Safety Now campaign, the Patient Safety Movement Foundation that are partnership groups helping to take everyone's ideas and drive them further to save patients around the world. But the everyday person also needs our help. They don't need to be in the healthcare system to be important to our community. So we're also investing in our local communities and are working to invest in the homeless shelter in the Orange County area, the Friendship Shelter Group, to also focus on partnering on housing or homeless people who also deserve the same receptivity and love that we talk about when we talk about our patient population. So I really, really appreciate you being here today. And the things that Balal and Joe talked about have come from ideas, ideas from you, ideas from people you know, ideas from the everyday person who wants to change the world. And the same is happening with our global health space. So I'm really looking forward to talking to you guys at the time today about what we can continue to do to change the world for the business and for every person that we interact with. Now I'll turn it over to Maesa. Thank you. All right. Thank you, Sisi. All right. How are we doing? Everybody excited so far to hear about the technology. You guys get to hear from me a lot while I'm on the road. And when I'm out there, I talk about you've got to get back to see our headquarters in Irvine and get to really tour and get the feel of the all the technology and innovation that's going on back here. So I can never do it justice when I talk about hotspot automation, opioid safety like the experts we have in the room. So appreciate you guys coming out. I know it's a long way. I'm kind of excited you're coming my way instead of me traveling out to you all the time. So it's great to have you here. And it's hard to believe I'm coming up on my 2nd anniversary here at Masimo. And it's I look back and how excited I was when I started, but I'm even more excited now. And hopefully, you're starting to see the reason why. I mean, Joe said it best, we never stop innovating here at Masimo. And it's evident by all the technologies that we're bringing together to improve patient safety and patient care. I'm going to jump right into and start out with our long term financial goals, and we'll get you right into the technology demonstrations here in a little bit. We've been I think Joe and I have been promoting this Investor Day for the last 3 earnings calls. So you can see the excitement we have. So you can start to really get in and see all this technology in action. So we'll get you there pretty soon. If you look at our long term financial goals, we laid these out 2 years ago and actually May 2017. And if you look at those financial goals, our revenue growth of 8% to 10%, non GAAP operating margins, our goal is to increase those to 30% over time. And we've talked about we've committed to delivering at least 100 basis points of improvement each and every year. And you'll see in a moment, we've been growing even faster than that. Our non GAAP EPS, our target is to grow 1.5x our revenue growth, which is 12% to 15%. And we've increased our long term free cash flow a little bit. We're now targeting over 300,000,000 dollars of annualized free cash flow over our long term plan. And then I'll get into a little bit on capital deployment. But first, I want to talk about where we are today. And we've been delivering strong performance that have exceeded our all of the financial goals I laid out. When we talk about our guidance and our long term guidance, it's important to understand that we have a high degree of confidence in delivering the targets that we lay out. And we are doing everything we can to not only achieve those targets, but to exceed the targets we've laid out for you. So if you look at our performance over the last 2 years, and this is the 1st 2 years of our long term plan, we're guiding to $918,000,000 of revenue this On a constant currency basis, the growth over last year is about 11.4%. Over a 2 year period, we're growing our revenues 11.5 percent on the top line. Again, 8% to 10%, we're doing everything we can to over deliver to this plan. If you think about our operating margins, I'm going to be very transparent because we talked about this a lot on the call. If you start out 2017, we're really about 20% because we had a large charge that we ran through because we had an asset write down from this partnership with an OUS partner. So if you start there, we've been averaging even though we delivered 5.40 basis points of improvement over a 2 year period, we've averaged over 200 basis points per year when you kind of normalize for that. So we're delivering even at a faster pace than what we said we were going to do when we laid out the long term plan. And then if you look at our non GAAP earnings, we've been growing that over a 2 year period, 34%. We're guiding this year to $3.12 and we're seeing very strong earnings performance. So this is a great illustration of what we're doing to really do everything we can to exceed the goals we've laid out for you back in 2017. Then if you look at just recapping what Joe mentioned earlier, our current product portfolio that we have today is outperforming our long term goals of 8% to 10% growth. And you can see the trajectory when you take the performance in 2017, 2018 and where we're guiding to 2019 and look and cascade that out, you can see the trajectory of this business, and we are delivering and exceeding our commitments. And that's just with our current portfolio. Now you start to think about the opportunities we have to expand our market in a meaningful way. And it's important to understand that our long term targets of 8% to 10% growth do not contemplate or include any of the opportunities that are out here. So as we learn more about these new initiatives, how we're going to commercialize and the timing and the impact, we're going to roll that into our guidance. You already saw this past year, we came out very strong early in the year, and we guided at the high end of our guidance, and we're exceeding that already. Now we talk about a lot about profitability. Get a lot of questions there about what we're doing. And if you look at it, we've already delivered 5.40 basis points. We still have 600 basis points to go to hit our long term target of 30%. And if you look at how that kind of breaks down, we're getting at roughly half of that 600 basis points through our gross margin improvement. And the operations and manufacturing teams are doing a great job there to drive that improvement. And we're also planning to get half of it through our operating expense leverage in the business. As you think about operating expenses, we want to continue to invest in our innovation. That's the top priority. But so that means that SG and A expenses, our selling, general and administrative expenses will be the primary driver of that improvement. Just heading into gross margins. We have about 3 20 basis points to get to to reach our target of 70% gross margins. If you really break that down and how we think about what are the key drivers there, first is manufacturing scale. We invested a couple of years ago in facility a second facility down in Mexico. And we vertically integrated that facility in 2017, and we saw meaningful improvements through that vertical integration in 2018 and by driving higher gross margins. And really, it's just a matter of now continuing to grow into that facility and scale that and leverage our overhead, And that's a great opportunity for us. And then if you look at number 2, design for manufacturability. We have a dedicated team here at Masimo that is focused on designing products so that they're easier to manufacture. And what I love about it is a lot of companies will look and say, okay, we need 3%, 4%, 5% per year. So let's think of it as iterative. What I love about the team here, and I saw this day 1, this has been a process that's been in place and it's great process. They look at it as what should our technology cost, look at it from a longer lens and how do we get there and what's it take to engineer the products to make sure that we can get there faster. So we don't look at it as 2%, 3%, 4%, 5% a year. We look at it at where we can get to long term and we design everything to get there as fast as we can. And that's going to get you drive a lot more value than an iterative process over time. Oops, jumped ahead too far. And then you think about we're continuing to focus on procurement initiatives, trying to drive cost reductions in our materials. Also, we have a great opportunity. As you saw before, Blond showed all the different sizes of sensors. So going from 2 LED all the way to 10 LEDs. As we continue to sell more of those advanced parameters and kind of move our way through those sensors, it's going to drive more revenue per each unit of equipment that we have out in the field. So if you think about our installed base, our large installed base of technology boards and monitors, as we continue to sell more and more of these advanced parameters, we will get more revenue per unit. So that's going to leverage our installed base and drive profitability there as well. And then there's the operating expenses. And we're going to have the team come up later today after Joe has a session that you don't want to miss. But we're going to bring our Head of Manufacturing, Head of International for EMEA, and we're all going to come up on stage and talk more about these things. But the key areas for driving our operating expense improvement are international scale. If you look at the investments we've made over the years, we've made a lot of investments outside the U. S. And we expect that we're going to be able to leverage those investments. And our expenses will grow at a much slower pace than our revenue growth outside the U. S. So and we also have brought and built out a large FP and A team. I shouldn't say large, not large yet, but we're getting there. We've made a lot of investments to build out a financial planning and analysis team that's really starting to give us all the financial tools that we need to be able to get visibility into what's our profitability by territory and by country. And now we have an opportunity to leverage those tools. And that's going to give us more visibility. We can make better management decisions. We can decide where we want to allocate our resources most effectively to not only improve profitability but drive growth. So that's going to be an important lever for us moving forward. And then if you look at U. S. Commercial productivity, we have a very large footprint when you look at our clinical footprint in the U. S. And we also have a lot more technologies than we've ever had. So we think of that as more balanced portfolio selling. We have an opportunity to sell a lot more technologies in the existing accounts we have today, and that's going to become more efficient for us. And then the last is just really leveraging our investments we've made here corporately, leveraging our infrastructure, and that's going to give us some opportunities as well to drive that profitability improvement. Now moving on to cash flow. If you look at 2018, we made a lot of improvements in our free cash flow. I think in the past, we've been in that $70,000,000 $80,000,000 a year zone. In 2018, we made some significant improvements in our cash conversion cycle. And we improved our velocity of our cash flow by reducing our cash conversion cycle by about 26 days. And if you see how that breaks down, we improved DSO by about 10 days, our DOH by 8 days and then our payables outstanding by another 8 days. So that's increasing the velocity of our cash flow, and it's given us more confidence to raise our long term cash flow targets to over $300,000,000 a year. And really, that's executing on the revenue and profitability goals and also maintaining the improvements that we made in 2018. Even though these are kind of onetime in nature, we are still increasing the velocity of cash flow. It's giving us confidence to get there. Now disciplined capital deployment. We often get a lot of questions here because we do have a very pristine healthy balance sheet. If you look at our cash and investments, we exited last quarter at $593,000,000 of cash and investments, and we also have 0 debt. We do have a revolving line of credit in place, but we have 0 outstanding debt on the balance sheet. So we often get to the question, as you're probably ready to ask me right now, what are you going to do with the cash? As we think about that, number 1, we want to reinvest in our business. We want to if you look at the return on invested capital of this company, it's been because of our innovation. There's not a better way to spend $1 and get the highest return than by reinvesting in Massimo because we believe in the powerhouse of engineering talent that we have in this organization. So that's number 1. And we set the bar high. We often talk about, Joe and I on the call, we have a high confidence in our business, higher than ever. So that's number 1. Number 2 is we're continuously evaluating strategic acquisitions and opportunities. So we go through a very thorough process there. We've had a lot of companies that we're targets that we've looked at over the past year or so, but we take it through a very rigorous process to make sure that we have the right strategic fit. So we evaluate it on what aligns best with our long term strategy. And we want to leverage our core competencies of this business, which is our clinical expertise, our signal processing capability as well as our manufacturing capability. So those are areas that we want to really drive and leverage out of any target if we can. We also want to do things that support our long term financial goals, which is, of course, revenue growth of 8% to 10%, make sure that we're looking at targets that can be accretive to our long term goal of getting to 30%. So they've got to have profitability profile to help us get there. And then ROIC accretive within 5 years. So those are some of the financial targets that we use to evaluate our acquisitions. And then finally, share repurchases. Share repurchase is absolutely an opportunity for us, but that's going to really depend on where market conditions are. But we're going to continue to be opportunistic there as well. So to wrap it up, I hope that it's come across that we are highly confident in our ability to execute on this long term plan. We're executing very well and exceeding all of our expectations so far. And what's great is we have a lot of opportunities for upside. There's a lot of potential here with hospital automation, opioid safety, the innovation pipeline. And I get excited every time I hear Joan Blois just present on these topics. And so I hope that you share the same that you leave here today with the same excitement level. And I think you're going to be even more excited as we get into technology demonstrations here in a little bit. So I'm going to turn it over to Eli. Eli, come back on stage and just give us some logistics. Okay. Thank you, Micah. Okay, everybody. Now the real fun begins. If you're anything like me, you're probably wondering at this point when you're going to get to ask some questions. Your opportunity to ask questions will come sometime around 1:15, 1:30, when we reconvene after lunch and the demonstration sessions. At that point, you'll have some wrap up comments from Joe, including the important information he mentioned earlier, and we'll have an open Q and A. So we urge everyone to stick around to hear that final session. It will be worth your while. Okay. So now if you all look at the backs of your badges, you'll see a colored dot. You all have been divided up into 6 groups because the demonstration sessions are in small rooms, and we want there to be enough room for everybody to see everything easily. On the back of your badge, there's a colored dot that corresponds to a colored flag that you'll see one of our chaperones will have that will lead 3 groups on towards starting now that will rotate among the 3 stations. The other 3 groups will have an opportunity to eat lunch now for about an hour and 15 minutes, while the 3 groups besides those are touring for an hour and 15 minutes, and then the 33 will switch places. Everybody follow that? Okay. So if you have a red, blue or yellow dot on your badge, a primary color, Please now go out through the back hallway and you can have lunch. And then if you have one of the other three colors, please go out through the side doors here and follow your chaperone with the corresponding flag. Thank you. All right. We're ready to begin again. Can everybody please come into the room and take your seats? Okay, great. All right. We're going to now go to our final session of the afternoon. Thank you everybody for sticking around. We're going to give you an opportunity to ask questions in just a little bit. Joining us here today It comes from our ability to have assembled an incredible amount of passionate people that are They love what they do. It's just our job to take care of them because they're really the money, everything else is pretty secondary for them. They just are obsessed with solving these problems and it's what makes us, I think, who we are. I don't know that many people in our engineering team that we've lost truly over the past 30 years. So it's why this innovation engine just keeps humming. So today, I'm going to do something we haven't done before. You've seen kind of what we consider our pipeline opportunity and we've never told you in the past what's in the pipeline until the product is released. Now we're going to do unveil we're going to unveil 2 of them. And the reason I feel comfortable in unveiling them, one, because we believe we have feasibility, and I'd say believe because until you go into the masses, you never know. But the second reason is a little more complicated. And one of the categories, I don't think we have competition anywhere near the product. And then the other one, we actually wouldn't mind healthy competition around it because while we think it's a product that will be financially profitable and good for us, we really got into it because we want to do more good than we wanted to make more money from this product. So let me tell you what they are. So the first two products that I'm going to unveil today, the rest you're going to have to wait, maybe for the next Analyst Day meeting, are 1st, continuous non invasive PAO2, partial pressure of oxygen in the blood. When pulse oximetry first was introduced in the marketplace, anesthesiologists who are used to PAO2, who drew blood, send it to the lab to get the PAO2 did not like pulse oximetry because they said it tells me way too late about something going wrong. Plus, they didn't think it was sensitive. It didn't allow them to be able to really understand what's going on with the patient's physiology, which is now under their hands, their breathing and their heart, everything. So the other one is malaria. We believe we now can detect malaria noninvasive as well as do it better and more effectively even invasively. So let's talk about PAO-two. So it is a much more sensitive parameter to measure for knowing changes in the oxygenation of the blood. And currently, it's one of the most commonly, I guess, wanted measurement. It's about $1,000,000,000 market today just for invasive ABGs that they get here and there. And we believe based on talking to anesthesiologists, intensivists for years that they'll find this really compelling. And let me just show you what I mean by this. So the black line here you see is SpO2. The y axis for SpO2 is 100%, 0 to 100 and the time is in seconds. You see for this patient, it looks like the whole time the patients at 100% saturation. Now, if you did invasive PAO2, you drew blood, you sent it to the lab, the yellow marks what really is happening to the partial pressure of oxygen. As you can see, it starts off below 100, maybe like around 90, 80 millimeter mercury, it goes up to all the way to about 600 and then it comes back down and it goes at some point down to about 60. So, OLL, which we talked about earlier, is our first continuous non invasive way of knowing something about what's going on. So the gray line you see there, that's ORI. So it's showing you even though FQO2 is insensitive to the higher saturation, higher oxygenation level of the blood, ORI detects it, but as you can see, it peaks at about 180 to 200. Now I'm going to show you our non invasive PaO2. Pretty cool, This is continuous non invasive PaO2. And we have about 100 subjects who tested already and this level of accuracy. Now let's talk about malaria. Unfortunately, about half a 1000000 people every year die of undiagnosed malaria that then doesn't get treated. So they get a harm from it, more likely to spread because more mosquitoes fighting them, moving to somebody else and infecting them. And unfortunately, the symptoms can be vague and unknown for about 30 days. So we have now shown feasibility of a point of care, both invasive and non invasive way of detecting malaria. I'm really excited about it because I think the impact this could have on the 5,000,000,000 people that Stacy was mentioning could be profound. I've talked to people that invest heavily in helping those in less fortunate parts of the world and they have various reasons. Some of them do it because they really feel bad for these people, me being one of them. Some of them do it because they think it will help reduce the population increase because they've studied that because unfortunately many parts of the world people are used to losing a lot of the children, whether it was due to anemia or due to malaria, they end up having more children in order to have survivors. And so if you can get rid of some of these big problems facing them, you not only hope we can do what I hope to do, which is help reduce suffering, but even those who are worried about how a population explosion could impact all of us back here. So with that said, I'd like to just finalize what our key takeaways are. Nobody does innovation better than us and we are relentlessly focused and obsessed with solving patient care problems that are challenging, that are the hard stuff to do. And that's not only helped patients, clinicians and hospitals, but it's benefited our shareholders, including ourselves. And we couldn't do it without an incredibly dedicated, talented team of people that deliver on the big commitments we go after. And as Micah said, we have a revenue growth that we believe we can conservatively lay a stake on, which is 8% to 10%, with upside from our innovation like hospital automation, like opioid safety net and now some of the things you've seen in our innovation pipeline. So with that, I'm going to ask my team to come up here and we're going to give you a chance to tell us what you think, answer any questions you may have. So with that, Todd, do you want to help facilitate the growth rate? So obviously, you've met Bilal, you've met Micah, you've met Stacy. We're going to have John Coleman, who is our President of Worldwide Sales and Clinical Affairs and Anant Senthath, who is our Head of Operations and Clinical Research join us. Thank you. All right. So we're going to get started with our Q and A session here. And I've got a couple of questions that I'll ask the panel and then we'll open it up to the audience for questions. We've got a commitment to get you out of here at 2. So we'll keep that commitment to you. In addition, we are going to have the discovery lab open after this in kind of an open house format. So if you have still questions that you'd like to learn more about and investigate that more, that'll be available at 2 o'clock and after. And so you heard a lot about our 8% to 10% revenue targets over the long term horizon. You've also heard about our 30% operating margin target in that time horizon. And so starting from our 24% operating margin guide here in 2019, we expect to get that 30 basis points to 30 basis points at about 100 basis points a year. And about half of that improvement comes from gross margin and about half of that comes from SG and A leverage, All the while maintaining about 9% of our sales in R and D to fuel that innovation pipeline that drove. So the first question we'll ask will be to Anand. So Anand, can you help us think about capacity over the long term and how you achieve your cost reduction objectives? Very good. Thank you, Todd, and greetings. Building on some of the points that Micah had made earlier, Joe and Bilal have talked about our innovation in our R and D. So what we've done over time is consistently invest in innovation and manufacturing, supply chain redesign, taking capacity from passive capacity to what I would call actively managed capacity in which you can squeeze more out of automation, you can squeeze more of redesign of core components. And we've also created a culture of trying to optimize every aspect of the supply chain. Case in point, if you look at our technology boards, you heard mention of 1,700,000 boards that are out there so far. In the past 10 years. In the past 10 years. Thank you. So those boards give us an opportunity both in terms scale and ability to optimize and get leverage from our board manufacturers to optimize that. That would be normal supply chain management, But we are trying to with the R and D innovation improve that by saying what is the latest that's available in consumer tech? All of you now carry cell phones that have chips and capabilities that far exceed what you had a couple of years ago. How could we leverage those advances in technology to bring it to our board? So next time we do a board design, we'll bring in the latest of consumer tech, the latest of CPU technology into our board that reduces cost and increases the capability. So that's just one example of the board. You've seen several examples on the RD sensor. There's a lot of opportunity there. We've got the accuracy improvements. We've got the automation capability and we expect that to continue not only on sensors, but in instruments and systems as well. Thank you. Our next question is for John Coleman. So John, given our U. S. Revenue base and the growth of revenue in the U. S, how are we achieving the operating leverage in the U. S, specifically in our commercial organization? Well, thanks, Todd. We I spoke to several people at lunch about this topic. We have an established sales force in the United States that covers the broad hospital base. So one is just leveraging that set of sales experts in the field immediately. The second way we do it is, as we expand from care area to care area, so as we go from the NICU to the ICU to the OR to the general ward, there's just so much potential just to go into the same hospitals, but deeper and broader in those hospitals. And I think the final area really is, as was referenced in these presentations, between Rainbow and SedLine and Captography and 3, you go into those same set of hospitals and you broadly expand what we're already doing there, go deeper within the hospital, taking full advantage of the placement of routes throughout those hospitals and taking advantage of the fact that we have our integration in the OEM devices. So we've got the sales force. We're moving across the hospitals that we already have across various areas and we're going deeper with all the technologies we have. Thanks, John. And our final question is for Stacy. Stacy, we've talked a lot about international revenue growth being an important component of our revenue growth and international profitability expansion is a key component to our overall story as well. How are we achieving profitability expansion in Europe today? Thanks, Todd. When we look at Europe, while we have good business penetration, we look to constantly apply our best practices. So we have opportunities where Joe, John and others will travel to the area, we look deeper, where we can expand to go deeper. An example of where we made an investment to drive the business further would Switzerland, where we identified that we could add a clinical specialist to the team and be able to drive our business much further. We were able to go to Leuchten Children's Hospital, working with Philips because they're doing a big conversion and bring our PET technology, the new A05 board into the NICU. And then working with the clinicians and our clinical specialists, Keith, about the value of the technology integration. And they now are planning for the AO5 technology and FPHB and SDNET for the whole hospital. So we really are leveraging our clinical specialist team. Our clinical specialty hybrid right out of the hospital, so junior to the industry, let's say, but a great teacher, really valuable. We then apply that same strategy to our distributor network. So in countries like Greece, where we're not going to invest in team members, we taught a distributor to target the Children's Hospital, where they converted to the NICU, and we had just under $1,000,000 hospital conversion, and they now have invested in hemoglobin and Medline for the ORs at the general hospital. So teaching and replicating the clinical strategy. Thank you. All right. So now that we hope we have the pump primed a little bit, what questions do we have out here? Matt? Yes, I think there should be a mic, but if not, you can have this one here. Yes. So as we mentioned earlier, we've set this plan 2 years ago, 8% to 10% top line growth over the long term. It is a multiyear plan, so it's a long horizon. So we don't want to get ahead of ourselves there, but we have a high degree of confidence that we can hit those targets. And as you can see, we're already guiding at or above the high end of that range. This year, for example, we're guiding 11.4% constant currency. So we're already starting to reflect things into our guidance, but that's all based on our current portfolio, to your point. If you look at these new opportunities that have large markets, we're still in still the earlier stages and we're trying to understand how we commercialize, what's reimbursement, different things like that. As we learn more, we'll bring that in. But I think our guidance is very strong today. Our guidance, like I said, 11.5% roughly. And we'll continue to roll that in as we learn more. So I think the main point is, is there's multiple opportunities and shops on goal to increase our guidance over time. Already in a fast track here. It seems like that will be a commercial reality soon. Can you talk any more about how you plan to roll that out? Do you have some visibility on whether you'll have reimbursement or is it going to be out of pocket? Anything like that that you can talk about? We hope to have opioid safety net out the second half this year. Obviously, it requires the product being safe and effective in FDA's view. FDA is working very well with us on it. So it gives us confidence that that hopefully should happen. As far as studying reimbursement, but we're not sure we want it. There's pros and cons to reimbursement and we're going based on where we are planning to price the product and the feedback we're getting, maybe for a while we won't need reimbursement. And then as far as how to launch it, it really depends on what FDA's clearance is going to be. Is it going to be prescription only? Or is it going to be over the counter? And if it's prescription only, of course, the good news is we know that clinicians, the hospitals, the anesthesiologists, and we know how to reach them, the pain clinics and so forth to let them know about the product and have them prescribe it. But this OTC, it provides another opportunity that maybe we can sell it in pharmacies and in other stores like Amazon. And so it's really it's still being formed. We do recognize that while we've had great success in selling to clinicians and professionals and mild experience in selling to consumers with products like the MightySat. We really are new to this consumer healthcare space. So we're assembling a team of people that we think bring experiences like that forward and we're very excited about it. I think with opioid safety net, it feels like it's the 1st digital product we've created. It's either going to be wildly successful or chirp, chirp. So if it's wildly successful, it could redefine our company and our trajectory. But as Michael was saying, we're trying to be measured about it. We want to get ahead of ourselves. It's one of those things that we think you all benefit from sober conservatism. And then hopefully, once we feel like we're on a new slope, we'll let you know. Okay. Thank you. Thank you. Thanks. Mike Matson from Needham and Company. Just wanted to ask about the home monitoring opportunity, exclusive of the opioid product, but where the hospitals are clinicians are monitoring the patients. So what is the incentive for them to do that, especially in a system that's full kind of fee for service? Is there some type of payment that they can get for that? Or are you just going to be targeting situations like COPD where they may get penalized for readmissions? Both. There's 2 types of healthcare providers today in the U. S. The ones that are under the accountable care organization mentality like the Kaiser system as those new ones were created post ACA where they own the cost and the payment fully on those patients and some of those customers had come to us saying, we need a solution that helps us transfer our patients earlier out of the hospital and yet monitor them and yet it's got to be a product that's familiar to them. So the user interface has to be like the product that they use while they're in a hospital. That's why if you look at route and RAD97, they have similar user interface. So that was one subset of customers and that we began developing these products for. The other, as you said, one of the big expenditures of hospitals or the hits to them is people that are returning under 30 days. And tools like DOPTELLA allow patients to learn better how to take care of themselves, they're less likely to come back. And then you add to it the monitoring tools, both spot check, episodic monitoring as well as continuous, it becomes a confidence builder and something that both patients and hospitals benefit from. So we're piloting many projects and we're deploying in many places the solution right now. Okay, thanks. And then just had a question on kind of the emerging markets opportunity, especially in light of this announcement around malaria. So can you maybe just talk about, is that something where these non governmental organizations, nonprofits can start to really pay for a lot of your products and really make that a meaningful part of your business. I mean, we've seen some other companies like Cepheid actually build out a pretty large business in that area. We do believe you can do good and profit from it as well. We believe we're respected by a lot of the major NGOs because we've been working on not just for the last year, but nearly for the last decade and both supporting them and us and them supporting us. Our experience so far says while the NGOs can be helpful in getting things started. Ultimately, we think the success of a product comes from the local countries and their taxpayers, their ministers of health are paying for it. So we have to make sure it's affordable, it's sustainable and it's not something that people expect to be given away. Thank you. Taking so long, what FDA is looking for and if you think you might have to perform any additional clinical trials, if that's something you're concerned about? Sure. I'm going to let Bilal answer that. Thank you. We've been working with the FDA very closely on ORI. And in this last round, we actually had a very, I think, positive indication of where we are with ORI. We have explained how it exactly works and I think we've got a clear direction from the FDA from the indication side and we feel confident on that. They did ask for additional data. However, it's minimal and probably does not require much of field data. So we feel very encouraged at the point we are right now and we're hopeful to getting it cleared soon. Ravi Misra with Berenberg Capital Markets. So I had one on the opioid opportunity and then another one on Iris. Just so maybe on the opioid first, can you help us understand maybe some of the margin structure around that product? I mean, if I'm doing the math correctly, it seems about $100 that you're going to be offering, give or take. How does that fit into the kind of gross margin trajectory that you fit into the long range plan? Well, we were careful to put things in a presentation, so you couldn't do the math. I'm not sure the $100 is exactly accurate, but I think you are in the ballpark. But what I can tell you is that we expected it to keep our margins to the direction we're going. So there's been an incredible amount of design for manufacturability, ingenuity and the development of these devices so that it can be cost affordable to the consumers and yet it won't hurt our business model. And then second, just on Iris, as you're kind of moving from the care room to the server room, can you help us understand how you're planning to roll this product out? I mean, I appreciate it's kind of a long selling cycle in 24 months. Is the business model where you're kind of putting that in at cost and then taking some money on it from the disposals? Can you just give us some clarity on how this would kind of reach the rest? Thanks. So you said you we've actually been in the market, just telling you, to the IT world for quite a while. When we launched our patient safety net solution in 2007, we saw 400 deployments of that now worldwide. All of that required us to actually interface with IT departments to get that to go. Actually, we're probably the 1st company to put medical devices on hospital networks. So we've been doing it. We look at that model as both a capital model of placing capital equipment in when we deploy, but also having a service fee in terms of thinking. So it includes both. We're not looking at placing it per sensor or for a sensor model. We did look at actually bigger opportunities. I think Joe has mentioned this in the past like in Spain, where we look at taking on an entire care area and building that out. And then from that, we do have a service model that is associated, may include sensors in that model as well. I don't know if that explains it exactly, but for us, it's both a capital and a service model associated with it. Well, great. We have hit our 2 o'clock time fence and to be respectful of everybody's time, we want to wrap it up. So on behalf of Joe and the entire executive team, we really appreciate everybody's time and effort to get out here and visit with us and learn more about us. And we'll stick around longer. If whoever has any questions, you're welcome to come. Also the demo lab, if they have any other tours, please you can go ahead and But thank you. Thank you all for coming. Thank you.

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