Okay, thanks everyone for joining us this morning. I'm Vijay Kumar. I cover devices and life science tools at Evercore. A pleasure to have Masimo with us, seeing this company execute the way you guys have done, and I believe this is your first time at the conference, so thank you for participating.
Thank you for having us.
Representing the company, we have Todd Koning, Senior Vice President Finance, and from the IR team, we have Eli Kammerman, whom I think most of you guys know. If not, then you'll know Eli shortly. Maybe , Todd just starting with picking off on that last conversation we were having, your long-term guide is 8% to 10%. Your business is just crushing it. A 13% organic guide for this year, and that's not a one-year phenomenon. The year before that, you came in well above plan. So what is driving this above plan? Was your guide itself 8% to 10% conservative or in hindsight, or maybe just explain the drivers here?
Yeah. So if you look at our business, 85% of our business is in the pulse oximetry market. We're continuous monitoring the pulse oximetry standard here. It's a $1.7 billion market, growing 3% to 4%. And our long-term guide assumes that we'll grow at a rate of 6% to 8% in that market over the long-term plan time horizon. 10% of our revenues is associated with the differentiated parameters associated with our Rainbow product. And that market is about $1 billion. And that's a market that we have to penetrate and are creating. And so we're growing at a rate of 10% in our long-term guide there. And then finally, our advanced parameters, three different markets there, comprising about 5% of our sales. Our long-term guide assumes 20% growth there. And that's another point of growth. So that's how you get to the 8% to 10%.
Our advanced parameters are comprised of three different markets. One is the capnography market, which is a $500 million market, growing at around 15%, where we have mid-single digit share. Our second market is brain function monitoring, a $125 million market, growing high single digits, where we have mid-single digit share, and finally, regional oximetry is a $125 million market, growing mid-single digits, where we have mid-single digit share, so all told, it's about a $800 million market, growing around 10% or so, and we've got mid-single digit share and plan to grow that at about 20%, so that's how we get our 8% to 10%, and ultimately, you look at the revenue performance that we've had this year and throughout last year, and it's pretty special because you slice it either by product line or you slice it by geography.
We're really hitting it on all cylinders and across the board. So that's been very satisfying for us. When you look at the performance in our core SET technology in that market that grows 3%-4%, we've been growing faster than our 6% to 8% there. Ultimately, that's a function of the share taking that we've been able to do. And ultimately, you look at 2018, and we've said this on the calls before, 2018 was a very good contracting year for us, one of our best ever. And so you've definitely seen, as we've placed that equipment in our customers throughout this year, the sensor contracts start to come through and see that revenue come on, which is driving the growth that we've seen. Additionally, we've seen continued progress with Philips. And that was a big story for us over the last number of years.
And go back to 2016, where we resolved the patent disputes and came out of that relationship with a partnership in terms of co-marketing our Rainbow technology in the Philips monitoring equipment. And we always said that'd be a kind of a 12 to 18-month time horizon from the point at which they've integrated the technology into their monitors to the point at which we would start to see revenue growth on that. And so we're definitely starting to see that revenue growth here now, 18 to 24 months later. And that's been a tailwind for us as well. And then as you look out in the future, that is planting the seeds, if you will, for further adoption of our Rainbow technology, which is kind of that second leg of growth opportunity that the Philips relationship has with us.
That's very helpful color in terms of businesses. Let's start with your biggest piece, pulse oximetry. You mentioned contracting. You mentioned share gains. What is your share in pulse oximetry right now? Is there a theoretical number where your share could go over the long term?
Yeah, we've got a very strong share, sub 50%. And ultimately, we're optimistic that it can continue to grow. We've had a history of taking share in the market. We've got a very competitive product line. We've got a 98% customer retention rate. We're successful in winning new product or new product, excuse me, new customer opportunities. And so when you look at the technology and you look at what we do, we really deliver superior clinical outcomes that help the patient, as well as essentially outcomes that help the life of the clinician as well. So when you have fewer false alarms and more true alarms than the competitors, you're not wasting people's time by chasing after false alarms.
Ultimately, I think that makes a big difference in the selection criteria, in the selection process, and not only why people choose us, but maybe more importantly, why they stay with us.
Interesting. Now, you also mentioned about contracting. 2018 was a solid year for you guys. How is 2019 contracting? How is 2019 shaping out? And does it have any implications when you look at the forward trajectory?
Yeah, so we're quite happy with the progress we're making in 2019. I mean, kind of internally, we feel like we're on track and on plan. And again, we maintain an optimistic outlook towards the future. And I think the history that we've seen continues to be our reality, if you will, in terms of contracting.
Gotcha. And then on the pricing side of the equation, because it's a 3 to 4, that's one of the slower growth end markets. Is there a pricing element here when you look at pulse oximetry?
There has been, for Masimo historically, if you kind of go back six or seven years ago, we saw a significant amount of price pressure and a significant amount of price competition in place, and ultimately, I think Joe and the management team had the foresight to put in floors, pricing floors in place so that we could ultimately say our product delivers value and we should receive the economic benefit of that value that it creates or a portion of it anyways, and so we've put the pricing floors in place, and over the last five years, we've kind of seen the pricing hit that asymptote, and now we see very, very limited pricing decline in our business, and any that we do, we ultimately kind of offset through the CPI clause that we have on our contracts.
Gotcha. And on a net at a corporate level, is pricing net neutral for Masimo or is this a positive driver?
It's more net neutral. I think it's probably positive, the fact that it's not negative in a way.
Indeed, that's a positive. And I guess I didn't hear your answer on the theoretical maximum share. Well, I guess the theoretical maximum could be 100%. But what is, I mean, why can't Masimo be 60% of this market?
I think there's a great opportunity for us to continue to grow share and to meet the customer's needs. I hate to put an actual number on it, but I think we've got the best product out there and feel that all patients being monitored deserve Masimo technology.
Gotcha. Is there anything from a competitive perspective within that market one needs to be aware of within pulse oximetry, anything that's changing?
It continues to be a competitive market with Nellcor. Both Philips and GE have their own house brands as well for pulse oximetry. And I'd say that largely the competitive forces that have been in play remain in play.
Fantastic. Then now switching gears to the more exciting part of the story here. You mentioned 15% of your revenue is, that's growing like double digits and that's Rainbow. I mean, we talked a little bit about Rainbow. How big can Rainbow be for you guys? Is there like a size out there over the longer term?
Yeah, so we think that the Rainbow opportunity is $1 billion or more. The Rainbow monitoring, it's a differentiated technology. We monitor a variety of parameters, probably most notably ORI, PVI, and total hemoglobin. And I think the opportunity is quite strong, especially as you look at total hemoglobin and the adoption of our technology there. We've had hemoglobin available for a while now. And as we've improved the accuracy, I think we're to the point where customers are recognizing that the accuracy level is positive. It's good. And that combined with the fact that we have more clinical data available and peer-reviewed journals, we have clinicians on the podium talking about it. And I think it's the opportunity and now is the time for us really to drive the penetration of Rainbow into the market.
It's a market we have to create because we're the only ones who have it, and we think that's $1 billion or more.
Fantastic. And is there, on the competitive side for Rainbow, you're monitoring a lot more parameters? Is there anyone on the competitive front for that segment of the market?
I'm sorry.
Is there anyone from a competitive perspective, new entrants that one needs to think about on the Rainbow side?
Not really any material competitors on the horizon at this stage. I think we've got strong intellectual property protection. I think we're the ones who are really driving the non-invasive monitoring of hemoglobin, for instance, as an opportunity to improve blood management and overall fluid management.
Talk a little bit about Philips. Is that contributing? I think you mentioned it's helping drive Rainbow. You're now seeing the fruition of the partnership that you laid out a few years ago. Talk a little bit about what Philips does to this part of the business.
Yeah, so the Philips relationship, we, I guess, changed that relationship to really become a partnership at the end of 2016. They spent the bulk of 2017 doing the engineering work to integrate our Rainbow technology into their monitors. We think that Philips has about half of the multi-parameter monitor market. And so we've been underpenetrated in Philips, if you will, in their installed base. And so becoming more penetrated in their installed base has been an opportunity for us to grow not only SpO2, but Rainbow. And so the opportunity to integrate Rainbow into Philips, I think, helps both companies. It helps Philips because they become more differentiated as they try and sell their multi-parameter monitors. And it helps Masimo because it gets more Rainbow-enabled boards out in the marketplace. And so we went through that effort to integrate the Rainbow boards into their monitors throughout 2017.
Exited 2017 saw a significant step up in drivers associated with Philips that kind of went through 2018 as well. And so now we're starting to see the contracts on our side for the sensors, especially with SpO2 sensors coming to fruition. When we signed the Philips agreement, we had a total long-range plan revenue target of 7% to 9%. And then once we've signed the Philips agreement, we added about a point of growth to that to make that 8% to 10%. And so that's kind of how we quantified the impact of the Philips relationship. And then so we're starting to see that revenue come to fruition here now, mostly in pulse oximetry. And then as we make the case and penetrate the Rainbow opportunity, that is just another leg of growth that we can see in the future associated with the Philips relationship.
I guess when I think about the business coming in about plan for the last 24 months, how much of that is tied to Philips? I know the long-term guidance was changed because of Philips. But has Philips been part of the reason why you're coming about plan?
I definitely think it's been a tailwind for us this year. Before that, really not so much, largely because the sales cycle for multi-parameter monitors and everything is kind of 12 to 18 months. And they really didn't get the products integrated into their multi-parameter monitors until the end of 2017. So it probably takes 12 months for that sales cycle and for those products to get integrated, which is why we always thought in 2019 is really when we would start to see kind of the revenue benefit of that relationship, which it feels like we are.
Fantastic. I guess you gave up the board number for 60,000 driver shipments per quarter. And I was going through the transcript and there were some questions on why is Masimo giving this number. And she started to talk about those driver shipments itself. Are we now seeing those numbers because there's opportunity for that number to increase over time?
Yeah. So I think history is important when you think and talk about board shipments. So to your point, we shipped 60,700 in the third quarter, I think a 2.7% growth over the full year or over the prior year. On a year-to-date basis, that growth number is like 7% to 8%. And you compare that to a 2018 number of a 14% board growth. Now, we always knew that 2019 growth rate was going to be a bit challenged because of the comp in 2018. And 2018 was very strong because of the Philips relationship as well as the US Department of Defense contract that they won. So we had two kind of outsized growth drivers, if you will, in 2018, which always were going to make 2019 growth rates a difficult comp.
When you kind of step back and you look at history and you know that 2010 to 2012, we were at about 30,000 boards per quarter. 2013 to 2016, we were at about 40,000 boards a quarter. 2017 and 2018, about 50. And here in 2019, we've gotten up to 60,000. Pre-Philips, our board CAGR was on the order of 5% to 6%. Post-Philips, it's a CAGR of 9% to 10%. And so we feel very good about where we are in terms of absolute numbers of boards being shipped here in 2019. And I think the other thing to understand is that we share the board shipment so that you can kind of do your own math on installed base.
And so if you assume the installed base is 10 years, you would add up all those boards and you'd get to a number of about 1.8 million drivers in the market associated with Masimo. And those drivers, or the installed base is growing at about 7% to 8% right now. And that's accelerated over the last 18 to 24 months from kind of a 5% to 6% growth rate previous to that. And so even if we ship 60,000 kind of for the foreseeable future, it would be replacing 30,000 from the previous 10 years. And you'd still grow mid to high single digits on your installed base. Add to that a revenue per driver growth of about 5% to 6%, which has also been accelerating. And that's how you kind of get the growth rates that we're seeing on the top line.
The revenue per driver growth has been accelerated because we're starting to see better product mix associated with Rainbow and our advanced parameters as well.
Just on that replacing the drivers, if I'm already doing 60 per quarter, like when I look at the year on year, shouldn't I mean, that imply some acceleration for next year to get to that mid-single? So we're looking at something north of 60,000 for next year. Is that the right way to think about it?
I think we've kind of always said board growth kind of goes in chunks. That's kind of why I shared the history that I did in terms of how long we were sitting at 30s a quarter and 40s and 50s. So at this stage, we haven't given any guidance necessarily for 2020. We feel comfortable that 60,000 around there is the right expectation. I think the point being is even if we do 60 over the next 12 to 24 months, our installed base grows at high single digits.
That's helpful. And then just on sticking on to boards, you mentioned a couple of contracts which helped you guys in 2018. Are there any large contracts or customers out there that one perhaps needs to pay attention to?
I think we continue to feel good about our relationship with Philips and expect the Philips relationship to continue to be a tailwind for growth and from a contract perspective that has an impact. I don't know that we're in a position to share any further details on our specifics, but business is good and we've got a great sales team and a great product.
Gotcha. I guess the other element that you brought up was the revenue per board or the consumable pull-through. Now I was going through the transcript because I guess your traditional consumables is $10 per parameter. And as you go through to this high end, it's like $70 to $100. What drives that conversion from 10 to? Is that you go through Rainbow and all those things which drive the pull-through?
Yeah. So I think if kind of to ground myself on your numbers, our core SET sensor is ASP of $8 to $10. And to your point, a Rainbow sensor can be anywhere from 2 to 5 or 6 times that. So $50 to $60 on the high end there. And ultimately, our ability to continue to grow Rainbow at rates that are faster than our long-term expectation, and at a minimum at rates that are faster than core SET, we'll see a benefit on mix shift. And also, I think we'll have the opportunity to see utilization improvement on our advanced parameters kind of in the capnography, NomoLine, SedLine , O3 as well, which will also kind of come through as favorable revenue per driver.
That data on that aspect, encouraging customers to go through switching or monitoring more parameters, is there any clinical data out there that's encouraging this adoption? We need to do more because it saves money to the system.
Yeah. So I think if you look at the Limoges study that measured total hemoglobin, we had a hospital in France that monitored, I think, about 17,000 patients over the course of a year. About 14,000 of those were in the control arm. About 4,000 or so were in the study arm. And ultimately, what that showed was that you would get a 30% improvement in mortality at 30 days and a 25% improvement in mortality at 90 days. So the use of continuous monitoring of total hemoglobin has a material and significant benefit to mortality. Additionally, we're seeing the ability for us to communicate savings in blood management as well when use of total hemoglobin. So to the extent that you can save a bag of blood that's $500 by spending $50 a sensor, you only have to save one in 10.
And ultimately, we feel like that's pretty good odds and pretty good math in our favor. Additionally, and that's just on the bag of blood, that doesn't necessarily contemplate all of the other costs that are associated with a transfusion and potential negative outcomes that coexist with blood transfusions as well. In addition to that, if you monitor total hemoglobin with the Pleth Variability Index, PVI, for mechanically ventilated patients, you can do better fluid management. And ultimately, if you don't give a patient too much fluid, or if you give them too much fluid, I should say, their stay is typically lengthened. And so that obviously costs the hospital money as well. And so those are just two ways that our Rainbow sensor can save the hospital money and actually give better outcomes for patients.
When you think about those international markets, some of those are single-payer markets. Could we come at a point where, I don't know, Germany or France, just let's roll this out countrywide? Is that sort of a realistic thing that we could see this being rolled out nationwide?
I certainly think as you look at the long-term adoption of this, I think that is certainly a potential. Ultimately, we're at the very early days of the adoption curve. I think we're optimistic and bullish about what we can do with hemoglobin, how we can improve patient outcomes, how we can reduce the cost of care by driving adoption of that technology. It's early days, but yeah, I think what you described is certainly a potential in the long run.
Fantastic. And I guess on the new advanced parameters you mentioned, NomoLine, O3, SedLine, what's driving growth for these advanced parameters? It obviously costs more. Why are you gaining share in this market? Or is this also a case like your pulse oximetry, you have the better product and that's enabling you to gain share?
So we definitely have clinically differentiated products in the advanced parameters. And I think that's the beginning point. I think the other point is that we've put more of a focus and have a full portfolio of those products to treat not only the adult, but the pediatric patients as well. So completing our portfolio products has been helpful over the last number of months. And then in particular, when you look at capnography, that's a $500 million market, growing 15%. We've historically only played in the capital portion of that. So half of that market, so $250 million of that market is capital, and the other half is the consumable. And so we have typically had a kind of three-part solution for capnography. We'd have the capital monitoring portion. We had a moisture wicking component or cartridge, which was our differentiator. And then there was the cannula.
What would happen is people would buy our technology, our capital, and the moisture wicking component, which wasn't a consumable, but it wasn't a 10-year life either. Then they would buy the cannula from somebody else. Now we've combined the moisture wicking component, our differentiation, to the cannula. Now we'll have a better opportunity to provide our differentiated product in the form of a cannula and capture more of the cannula sales in the market. So that's a $250 million market opportunity. We've got probably 10% of the capital market, so call it $25 million. Even if we just got to our capital share, got the people who use our installed base and use our cannula, that would be roughly $25 million worth of opportunity for us.
That's interesting. And is that just on the incremental share again on the capital perspective as well? Is there a product differentiation on the capital side, which?
Not necessarily. I mean, it really comes down to the moisture wicking component of the cannula.
Gotcha.
It's the biggest differentiator.
Gotcha. And then something else I was reading in the transcript on your automation, hospital automation. And some of this is, I feel like we talk about AI. We had a few of the health IT companies talking about data integration. What value are you guys providing when you talk about hospital automation? And is there a way for us to model the revenue opportunity on the automation side?
Yeah, so we're really excited about hospital automation, and I just point out that as we kind of talk about our 8% to 10% long-term revenue trajectory, that is really in the three components of pulse ox, Rainbow, and advanced parameters. We think about our hospital automation opportunity and the opioid opportunity that we've talked about at our analyst day to be incremental market opportunities and opportunities to accelerate growth, so that's kind of above and beyond our long-range plan growth rates, but the hospital automation for us is really, it's an enterprise-wide solution that automates the capture of the data in the room, integrates that into the EMR. Now, how is that different from others? Well, we not only take our data integrated to the EMR, we take everybody else's data that's in the room and can integrate that into the EMR.
We capture the high-fidelity signal, and we're device agnostic. We can take it from the infusion pump, we can take it from the ventilator, from the anesthesia machine, and take that data, bring it into the EMR. You have real-time EMR data.
That's fascinating.
The second, if I could just finish, the second thing we do with our hospital automation solution is we take that data and then we present it in a meaningful way for the clinicians. So that might be in the operating room to alleviate the cognitive overload that physicians have. We can take that waveform data in high-fidelity format, and we can essentially present it in any configuration and any way that the physician wants. Because one of the problems they have is they've got all these user interfaces in the OR, and it's difficult to kind of reorient yourself every time. So we can present that in one place, however the physician wants. Another way of taking that data and presenting it in a meaningfully clinical or a clinically meaningful way is through alarm notification called Replica.
And then the third thing we do is we take that data, and then we can do decision support with it. Through our proprietary Halo algorithms, we can look at that data, look at the trends of those data, look at the trends and how they're interacting with each other, and provide decision support in that way. And we think there's more opportunity there in terms of AI and those types of things that you mentioned for us to kind of move forward with that. So it's really a three-part solution in terms of automating data capture and integration to the EMR, presenting the data in a clinically meaningful way that supports workflows. And then the third is to really do the decision support.
Absolutely. I feel like just integrating the data, pushing it into EMR, I mean, that itself is a big deal from my understanding of these disparate systems. How are you guys able to do that? I mean, I feel like it's been a challenge for a lot of folks.
So one of the things is that we've had what we call the Patient SafetyNet installed in hospitals for the last 10 years. And that essentially has been some sort of hospital automation. And so we've been kind of working in this space for a long time and have understood the drivers necessary to integrate. We've understood the challenges with the Biomed and the IT organization and feel that we've got a good experience. And so that's what kind of led us into taking that plus some other things that we have been working on and really packaging it to solve this overall challenge that our customers have.
And I think that ultimately has been Joe's vision, which is to really have this kind of cockpit view of the world because there's so much data out there that people interact with it kind of individually, this piece of data, then I interact with that piece of data. But I might be doing an error of omission because I don't know what those two things tell me in combination.
That's fascinating. I guess, how do you price this product? Is there a CAM or a revenue-sizing opportunity for this market?
We've sized the market to be north of $1 billion. We get to that. We kind of say there's 125,000 critical care beds in the U.S. and about 450,000 kind of Med-Surg, general Med-Surg beds in the U.S. And so then you look at kind of very simply kind of the three flavors of kind of high, medium, low installation in terms of which modules you've chosen. And you'll choose different modules based on the different acuity levels most likely in the hospital. So the OR would have kind of the UniView and the full kind of data integration. The ICU may not have UniView, but it would have alarm notifications and all of that. And then the general floor might have more of a Patient SafetyNet option.
And so we kind of think at the low end, $1,000, and at the high end, $4,000-$5,000 per bed per year. So really a SaaS model. And so our opportunity is to really build this installed base of covered beds.
Do you do any health economic studies just to kind of gain traction on the automation side? I feel like the value prop is, it's pretty apparent on our side. But also hospitals are not the, I guess, at the cutting edge of adopting technology. So what drives that adoption?
Sorry, what about adoption?
Drives the adoption of automation?
We're still early days. Excuse me. We're still early days on adoption. We've announced that we've got seven new, excuse me. We have seven pilot studies that are out there at the moment. We've announced those locations in the third quarter call. I'm going to cough again here. We announced that we have seven different pilot studies going on at the moment or pilot installations across the world. The idea there is that we would work with them and give them an opportunity to feel and partner with them going forward. We're optimistic that those pilots will turn into full installations. There's the opportunity for that to turn into reference sites for us. We also have a full installation at our innovation lab in our office in Irvine where we bring customers and show them what hospital automation is and what it means.
So we really think the adoption curve, or not the curve, but the adoption process has to start with people who recognize they have a problem. And then we can start to help them understand how our enterprise-wide solution can actually solve that problem. And I think that's best explained as you see it in action and you see how it works and how it feels. And that's why we went through the effort of building our innovation lab to really show people. And as we've been pitching customers and we've been talking to people and bringing them into our office and showing them that, we've had very good reactions. And that's why we feel really optimistic about what's ahead of us.
We've got a good pipeline, got a great team of engineers and salespeople who are ready to work with our customers to integrate and to really design a solution that meets their need.
Gotcha. The opioid safety monitoring that you mentioned, is there a timing on when you could launch that product? Does it need to be FDA approved or?
Yes. So it does need to be cleared by the FDA. Our solution is really comprised of three things. One is a remote sensor. So it's kind of think of a watch with a finger sensor that has a battery that lasts about four days and then a chip that really has our technology inside of it. That connects wirelessly to a home hub, which would then be the mechanism to communicate to a loved one to signal that you're in respiratory depression or respiratory distress, or that might make the audible alarm that would wake you up or might signal the nearest emergency response team to come and save you. And then it would also connect to your phone and the app on your phone, which is how you would choose which alarm notifications you'd like.
Now, we've got the sensor has been approved in May as part of our Radius PPG launch. The home hub and the app have been submitted to FDA over the last week or so, and so we're hopeful that we'll get a quick review by FDA. Best I can tell you is it's with them. We're part of the opioid safety challenge, and so it's been a very collaborative process and a good process with FDA. We think that we'll get both an OTC and an Rx approval, and from that perspective, I think we could see some commercial activity in 2020 from an OTC and a self-pay or a cash-pay mechanism, which we think would be probably relatively low revenue opportunity because of the cash play. The real adoption, I think, comes on the back of a reimbursement.
And so reimbursement is not likely before 2021 and could push past that depending on how much data we have and what private payers and CMS ultimately want and need in terms of making a coverage decision.
That's helpful. And then switching on to the P&L, gross margin streak here really, really strong. It's fascinating to see how gross margins have improved for you guys. What's the long-term gross margin profile as that mix improves for you guys? And that should maximum be a 70% gross margin company?
Yeah, I think it can and should be, so as you look at our overall long-range plan, we say 8% 10% long-term growth rates on the top line while achieving 30% operating margins and delivering EPS growth at a rate one and a half times our sales growth, so that's really our 7 year plan. It gets us kind of to 2024. Doing that, we achieve 30% operating margins. We get there at about 100 basis points per year, about half of that coming from gross margin and about half of that coming from SG&A leverage as we want to keep our R&D investment at about 10% of sales because truly we're an innovation machine and believe that's where the future revenue comes from. The leverage we get from gross margin, think of it really kind of in three buckets.
One, as we shift to our new platform called Red Diamond, that's cost-advantaged over its previous platform, so that drives some of the margin impact, and that has kind of a five-year transition life, if you will, as we shift our customers that are on existing contracts to the new product when they renew, and then as we bring on new customers, we bring them on the new platform. The second leg is just leveraging the overhead manufacturing footprint that we have, and then the third leg is to really, we've got this group of engineers who are focused kind of day in and day out on cost reductions, so the kind of Project CORE , so they eat, sleep, and breathe yield improvements, productivity improvements, material improvements, all those types of things.
Fantastic.
They do a great job.
I think our director of research, he's looking at cost savings. So he might want to have a talk with you. Just last one or maybe a quick one-on-one tax rate. We've had some low 20s%. Is there a pathway to maintain such a typical device company and second balance sheet? It's in a good place to be a healthy cash position, thoughts on cap deployment.
Yeah. So from a tax perspective, our non-GAAP tax rate's around 23%. Our tax structure is in place today. So you can think of our tax rate improving as our mix to OUS improves. Our OUS business is growing a couple ticks faster than the corporate average. So that'll matriculate downwards over time. And then I think as you look at our cash, we're really kind of first and foremost, we're focused on innovation, as I shared before, 10% of our sales and R&D. Second thing is we do have a share repurchase program in place and I think board approved about five million shares to be repurchased. We've got about 4.8 million left. We did about 200,000 buybacks in the second quarter, structured pricing plan in place. So that kind of happens as it happens now. And thirdly, M&A.
And so we've really looked at a lot of different things. We've got a pretty broad funnel. We look at things that are adjacent to our existing business. And you should think of us as not a monitoring company, but a monitoring company that's also a healthcare IT company as well and a company that has solutions beyond just monitoring. And so as we do that, we really look at areas that we can leverage our clinical footprint, that leverage the call point that we have, things where we can leverage our signal processing expertise. And then from a financial perspective, things that can be accretive to our 8% to 10% long-term growth rate, support 30% operating margins, and deliver return on invested capital in five years. And so as you look at that, that's really how we've approached our M&A funnel as well.
And so we've looked at a lot of things. Asset prices have been a little bit higher than normal. And so we haven't done a lot. But I think that reflects the discipline that we're putting in the process.
Fantastic. Yeah. I can't complain when a company is growing 13%. You don't need to look at inorganic growth strategies, but otherwise, this was helpful. Thank you for being here.
Thank you.