Okay. Good morning, everyone. Appreciate the opportunity to be here with you today. My name is Micah Young, and I'm the CFO of Masimo. Before we get started, I just wanted to remind everyone that this presentation will include forward-looking statements that are subject to risks and uncertainties. I'll also be referring to non-GAAP financial measures, so please refer to the investor relations of our website for more information. I want to start by talking a little bit about the Masimo story, give you a brief overview of the history of the company, and how we're evolving here at Masimo. I'm going to follow that with details on how we're automating care. Two of our major initiatives right now are hospital automation as well as opioid safety, and I'll be closing with our financial outlook for 2019.
This morning, we just issued a pre-release on our preliminary revenue for the full year 2018 and the quarter. And we also released our 2019 guidance, both revenue and EPS. So we'll go through that as well. Today, Masimo, our product revenues that we're estimating for 2019 are $910 million, which represents growth of about 11% on a constant currency basis. And we'll talk more about the revenue here in a bit. We have a very broad reach, both around the globe. When you look internationally, we're in over 140 countries. We also impact over 100 million patients each and every year with our technology. We're an innovator in non-invasive patient monitoring and leader in pulse oximetry. Our long-term plan reflects our commitment to improving patient outcomes and reducing the cost of care. And that's been a winning approach in med tech.
We're also committed to long-term financial targets: revenue growth of 8-10%, gross margins of 70%, and if you look at our operating margins, we're targeting operating margins of 30%, and if you think about the cadence of those operating margins, we're committed to delivering at least 100 basis points of operating margin expansion each and every year as we approach 30% margins. The company started with a very important product called Masimo SET, which stands for Signal Extraction Technology. Essentially, through this technology, we solve the unsolvable, which is measuring through motion and low perfusion, and this revolutionized the entire industry. By using our algorithms, we are able to, sorry. We are able to provide accurate readings of oxygen saturation levels. If you look up until that point, 70-90% of alarms are false alarms.
And we've been able to reduce that alarm rate to less than 5% while at the same time improving when alarms should be detected. And if you look at it, we've also made some additional innovation along the way and improved our accuracy once again. And that was last October. In October 2018, we announced further improvements to our accuracy. We've moved beyond just a product company, a pulse oximetry company. We now have a broad portfolio of products. In addition to Masimo SET, we have our Rainbow platform. With one fingertip sensor, you can now have 12-parameter measurements. And then with an acoustic sensor on the neck, you get the 13th measurement. We've also added other non-invasive technology solutions such as NomoLine capnography, SedLine, brain function monitoring, and O3 organ oximetry, or cerebral oximetry.
In addition, we've manufactured our own devices as well as we work through our great OEM partners. We have over 70 OEMs that we work with, and we have some very large OEMs that we work with that we're proud of those relationships. But we also have our own devices as well. And then if you look at what we've put together in terms of assembling additional technology such as Root, which becomes a connectivity hub within a hospital, and I'll talk more about that here in a little bit. And also things like our software solutions, where we have a central monitoring and viewing station such as Patient SafetyNet. We have UniView, which is a central viewing within an OR or a hospital room where you can tailor the views to different clinicians or anesthesiologists to where they can see different views.
All that being said, we have developed a much broader, we're much bigger than just pulse oximetry, and we have a broad portfolio of technologies, and I'm going to talk to you a little bit about how those technologies integrate, but we have evolved as a company going from a product company that manufactures and distributes pulse oximetry to now a broad portfolio technology company, but also, we're evolving to an integrated systems and solutions company, and we are able to automate care by our products being compatible with healthcare IT systems, being able to transport data into the electronic medical records, so I'm going to talk to you on this next slide about the next few slides on how we're automating care, how are we driving hospital automation, and improving workflows throughout the hospitals.
If you look at the challenges in healthcare, and you've probably seen this discussed a lot over the course of this week, it's such a cluttered work environment. There are so many different pieces of equipment taking up real estate in the operating rooms or in the hospital rooms. It creates a cluttered environment, heavy cognitive overload for clinicians, physical workload. There's increasing documentation demands. Workflow is not efficient, so it requires manual documentation. Also, manual assessments like spot checks when you're trying to look at transfusion decisions. It all creates a lack of effective care coordination systems, and a lot of it starts with where all these data sources are disconnected. They're not integrated. It's not interoperable. So let me just go to the next slide and talk to you about, as we think about integrated systems and solutions, it all starts with interoperability, connectivity.
At the heart of our connectivity and interoperability is the Root connectivity platform that we've developed. We launched it a couple of years ago. That serves as a connectivity hub where information can be shared, and it connects all the data sources within a hospital room. If you look at associating a patient, you can scan their badge, and you've got all their data loaded into Root, and it can work back and forth within the hospital network. We have newer technologies that can have access through Root, and data can be connected as well.
As you think about our MOC, which is our Masimo Open Connect, we've developed these ports that allow for not only our newer technologies to connect into Root, but also third parties, smaller companies who are trying to innovate and trying to get a foothold and show what their technology can do, can plug and play into the MOC-9 portals. Then you think about all the third-party devices, the multi-parameter monitors, the infusion pumps, anesthesia machines, ventilators. All those third-party devices can now connect into Root, and that's through our Iris portal. And what Root does is it shuttles all that information into the Iris Gateway, Patient SafetyNet and Iris Gateway. And what that does is Iris Gateway translates that into HL7, and that HL7 gets transported into electronic medical records of the hospital. And that data can flow both directions.
We have developed a lot of software tools that can help with data management and alarm notification. For example, I talked about the Patient SafetyNet, that central viewing station. You can remotely monitor at that viewing station up to 200 patients remotely. You can also have all the alarm notifications, and that can be sent to a software application that we developed early last year and launched. It was Replica. That's a software application for smart devices, smartphones. Clinicians can get alarm notifications. Those alarms can be escalated. If a physician's not on or a clinician's not on call, they can escalate it to the next clinician. It creates an environment of collaboration and data sharing.
Then if you look at UniView as another great example, a surgeon within the OR, the operating room, they can look at a central display monitor, and they can see and really customize the display they want. If they want to see certain vital signs of a patient or the patient status, they can see that patient status. But you can also customize other views for the anesthesiologist in the room or the clinician in the room. So it provides a lot of flexibility. It centralizes the data. It reduces cognitive overload for clinicians. And the last piece is scoring, things that we can provide our early warning scores. If you think about it, we can deploy advanced algorithms that can be used for decision support in the future.
We can also use those algorithms to detect early warning signs of illnesses or a deteriorating patient status, early signs of conditions such as sepsis, so those are some of the things that are very valuable that we can add value to in terms of the healthcare environment. If you look at hospital automation, the main elements of hospital automation are interoperability, that connectivity capability within the hospital system, and that enables automatic execution of a lot of the elements that I'm listing here: data capture with Root and Patient Safety Net, the aggregation of data, and you aggregate that into Root via the MOC-9 and the Iris portals. Translation, being able to take that data, translate it in HL7 through the Iris Gateway, and then transmit it into the hospital network and servers, and then analyzing the data, as I mentioned before, the early warning scores.
And finally, presentation of the data through Patient SafetyNet, UniView, and Replica. So just want to summarize there on you can see where our technologies line up with the key elements of hospital automation. Now I want to talk to you about a second major initiative in addition to hospital automation: opioid safety. There's a major crisis in the United States with opioids. And if you look at it, it involves both legal and illegal drugs in terms of opioids. So in 2017, 72,000 people in the U.S. died of drug overdose. And if you look at that and break that down, 49,000 died of those deaths involved opioids such as heroin, morphine, fentanyl. And you can see the trends. And then they're staggering on how the trend line looks as far as this is just becoming a real epidemic. And what happens is opioids induce respiratory depression.
As you breathe, you're delivering fresh oxygen throughout the body and eliminating carbon dioxide. The opioids interfere with that process, and they cause respiratory depression, which basically starves the organs and tissues of oxygen. And you also see a low blood oxygen level, which can be seen in SpO2 levels. And that's why we, as a company, Masimo, can help with this big crisis in the U.S. And we have some products that can do that. If you look at last May, we talked a little bit over the course of last year about the Utah Senate resolution. And what that was is a resolution on deaths from opioid-induced postoperative respiratory depression. It's called Parker's Bill. It's in memory of Parker Stewart, who was a 21-year-old newlywed, in good health, was prescribed opioids to treat a tonsillectomy procedure that he just had done.
He took half the prescribed dose of opioids, and three days later, he died of respiratory depression, and that was used to shape this bill. If you look at some of the key points of the resolution, it links opioids with respiratory depression, and it encourages doctors to prescribe home monitoring, to alert caregivers to changes in a patient's status due to those who are dealing with opioid-prescribed drugs, so if you look at the basis on how that was formed, our technology, our Radical-97 technology, which is used for home use, for home use monitoring, that was used to shape that legislation, and we've been partnering with a large healthcare system in the state of Utah, and we're at the forefront of this issue. Now, that being said, there's also some being worked on at the federal level. The FDA presented an opioid crisis challenge last year.
Late last year, we were selected as one of eight companies by the FDA out of a group of 250 applicants. The FDA review divisions are going to be working with us very closely, as well as the other companies selected, over the next 90 days. That'll be kind of the collaboration phase. It's really to understand the product portfolios of those eight companies and also discuss the regulatory pathway moving forward. Eventually, we will submit one or more formal applications out of this process. We believe, based on discussions and what we've seen, is that that review process will be expedited.
So the key thing about this initiative is we're going to have a new product that's going to be able to address and be used in the home to really alert caregivers of a respiratory depression event or try to get out in front of those type of events by alerting the caregivers and patients or patients' families. So those are some of the things we're working on right now. We have something that's in late-stage development that will be coming out through this process, and so there's more to come. But we're very excited about the opportunity we have to address the opioid crisis in the U.S. These next slides, I'm going to talk a little bit more about our financial outlook for 2019, what are we doing as a company to drive financial discipline and deliver and drive shareholder value.
To achieve our long-term plan of growing revenue 8%-10% over the next six to seven years, there's still some great opportunities. There's multiple areas and sources of revenue growth opportunities. If you look at our SET, Masimo's SET is our main pulse oximetry product. In that platform, there's still a lot of opportunity in that market. It's about a $1.6 billion market or more. We expect that our SET platform is going to grow about 6%-8% in that 8%-10% long-term plan. Beyond that $1.6 billion market opportunity, there's also general floor expansion opportunity. If you look at the critical care beds throughout the hospital system in the U.S., there's about 125,000 critical care beds. If you look at the general floor beds, there's about 425,000 beds.
Not only can we believe that we're starting to get good expansion there, we also have some great opportunities with hospital automation and opioid safety, which I'll talk to you more about here. The second leg is the second source of growth is Rainbow expansion opportunities. We're seeing an increasing adoption of Rainbow. Our long-term plan assumes Rainbow growing 10% per year or better. And there's some great opportunities to continue to drive that adoption. We're also partnering with large OEMs. And we believe that we're going to be able to really drive more and more penetration of that market. And keep in mind, those 12 different parameters on that one fingertip sensor, a lot of those parameters are new market opportunities. They're replacing things like spot checks for transfusion decisions when you're trying to measure hemoglobin levels. So it's continuous monitoring of hemoglobin.
Some of those different parameters that we can measure, those become new market opportunities that are really outside as well of that $1.6 billion SET market. We are making a market for Rainbow. The next source of revenue growth is newer products such as NomoLine capnography, SedLine brain function monitoring, and O3 organ oximetry or regional oximetry. And those three markets represent about a $700-$800 million market opportunity for us. And we have very low share today. Our long-term plan assumes it will grow 20% for those products. And really, those three sources of revenue growth is what makes up our 8%-10% growth. The great opportunity for us is these new revenue growth opportunities such as hospital automation and opioid safety that could help us. We're still a bit early, but those things could help us accelerate that growth profile of the business.
If you look at hospital automation, that's an opportunity to not only drive deeper penetration into existing accounts and customers, but also to expand the market onto the general floor. It's an enabler of general floor expansion. As you think about Patient SafetyNet and the ability to centrally monitor all the patients in a hospital, that gives us that opportunity. Opioid safety gives us the ability to broaden our reach from the hospital, the general floor, where we think that there's going to need to be monitoring post-surgical ward, all the way into the home for home use of products. So now I'm going to talk a little bit about our product revenue and go through the financials and what we announced earlier this morning in terms of our expectations for 2018, as well as our expectations for 2019 and our financial guidance. Driver shipments have been accelerating.
And when I talk about drivers, I'm talking about all of our equipment, both the OEM, the boards that go into OEM devices and monitors for our partners, as well as our direct manufactured devices. Driver shipments have accelerated significantly over the course of 2018. And if you look at this, over two years, they've increased 12% per year. But here recently, we're estimating that we will ship 232,000 drivers in 2018. And that's about a 14% growth for the full year. So we've seen an acceleration in the number of driver shipments, which is a great opportunity for us because those drivers consume future sensors. So the demand is there for the drivers, and that's a leading indicator of the sensor revenue to come. If you look at our product revenue, this morning, we took from our previous guidance was $826 million for 2018.
We've increased that now to $827 million-$830 million range. And if you look at that range, that gives us revenue growth of 11.5%-11.9% on a constant currency basis for 2018. So we are accelerating our growth profile even above our long-term plan right now of 8%-10%. So we're experiencing growth in the range of 11%-12% right now. And that's really coming from the accelerations that we're getting really across the whole business. Our SET business is growing at multiples of the market. The Rainbow adoption rate is rising, and newer products are delivering very strong growth. If you look at 2019, we're estimating revenues of $910 million. And that's about an 11% increase on a constant currency basis versus 2018. Now I'm going to turn to gross margins.
Our total gross margin. I want to show you there's been a lot of concerns over what's the royalty expiration that happened on October of last year going to do to this business. And there's been a lot of concerns. But we've been doing a lot of things over the course of this last year, as well as years before, to set ourselves up to really help drive profitability and grow EPS through that royalty expiration. If you look at the gross margin over the last several years, you can see the impact on this slide of the royalty. For example, in 2018, we gave guidance in October of 66.8% on total gross margin and 65.8% on our product gross margin. That excludes the royalty. So if you strip out that 100 basis points of royalty impact, this is what our product gross margin profile would look like.
Right now, we are guiding 2019 to grow our product gross margins by 100 basis points, going from 65.8% to 66.8%. If you look at how we're doing that, there's several different opportunities that we've had to really drive this kind of improvement. The RD sensor line conversion, we've talked a lot about that, by converting our customers from our older sensor lines to our higher quality, lower-cost sensor line called RD. That is much lower. It's lower cost, so it's going to drive better mix benefit for us in our product gross margins. We also have been doing a lot of work over the years on design for manufacturing. We continue to drive costs out of our products on the way we design them for the manufacturing process.
If you look at manufacturing scale, with our high volumes for revenue, it's helping us leverage our overhead costs of the business. We're getting more and more manufacturing scale. We've done a much better job over the course of the last year on vertically integrating our manufacturing plants. If you look at the last few here, you can see asset efficiencies. When I talk about asset efficiencies, I'm talking more about driving a greater return on investment from our long-term contracts that we get into in terms of with customers. We put a lot of equipment out there into hospitals that comes at a pretty high cost. We're trying to improve the return on the investment of that equipment. We're doing things right now that we expect that's going to drive some improvements in that area as well.
Then if you look at supply chain efficiencies, we've done a lot over the course of the last year and a half to really drive improvements in how we are spreading our inventory across the globe, trying to optimize our logistics, and also drive costs out of freight. For example, we've done a very good job of improving our pricing on our freight costs. And we've also done things logistically that can help us lower costs over the long term. The next slide shows the impact of the royalty. If you exclude the royalty, our operating expenses were hovering in the low 40s over time. But if you strip out the royalties, you can see that we've made some very significant improvements over the years in our core business to really leverage our operating expenses.
And over the course of from 2016 to where we're guiding for 2019, it represents about a 340 basis point improvement. So we've made some substantial improvements over the last several years, especially in 2018. And we're expecting to have another great year in 2019. And we are guiding about 100 basis points improvement from 2018 to 2019. We also want to maintain our innovation. So we want to maintain our R&D investment at 8%-9% while growing SG&A at a lower rate than our revenue growth. And we plan to do that through leveraging our infrastructure, our back office spend, driving efficiencies throughout our sales force in terms of higher revenue per rep, and achieving greater scale internationally and being able to leverage the costs we've invested over the years in our international structure. And then turning to operating margins.
If you look at our operating margins, including the royalty, you can see that they were relatively flat over the years. But if you strip out the royalty that expired last year, our operating margins have shown substantial improvement. In fact, we're guiding to a 200 basis point increase from 2018 to 2019. Our goal is to achieve 24% operating margins. So if you look back at the course of the last several years, going from 2016 to 2019, that's about a 460 basis point improvement in our margins. So significant improvements there. And we are steadily improving to drive to 30% margins. Sorry, I'm running over. And then just to wrap up here, I'm going to skip over to our last slide just to wrap it up. So here's what we're doing to drive shareholder value.
Just to summarize, we're growing revenues and multiples of the market, 8%-10% targeted long-term growth, expanding margins with a target of 30% long-term, leveraging our operational structure to improve our tax rate over time, and targeting long-term double-digit EPS growth, and all that leads to strong cash flow generation. Thank you for your time.