Masimo Corporation Q2 FY2025 earnings call

• Added key leadership roles: Chief Commercial Officer Greg Nihan, President of Japan and Asia Pacific Dr. Kaman Wang, Chief Marketing and Strategy Officer Tim Benno, Executive Vice President of Quality and Regulatory Lynette Tore, Chief Information Technology Officer, and promoted Omar Ahmed to Chief Technology and Innovation Officer and [indiscernible] to Executive Vice President of Operations. - Strategic growth waves: Elevating commercial excellence globally with new leaders, accelerating intelligent monitoring by upgrading centers and using AI-based algorithms, and innovating wearables. - Mitigated tariff exposure by over 50%, reducing tariff impact more than originally estimated. - Handled cybersecurity event, implementing measures to recover and fortify systems.

For the second quarter, the core Healthcare business had revenue of $370 million. Healthcare revenue was $370 million, up 7.4% on a constant currency basis. Consumables and service revenue grew 8.4% and capital equipment and other revenue declined 2%. Gross margin was 62.9%, improving 40 basis points year-over-year, driven by operational improvement partially offset by tariff impact. Operating margin was 27.5%, improving 600 basis points year-over-year.

• Projected revenue for fiscal 2025: $1.505 billion to $1.535 billion, 8%-11% constant currency growth. - Updated EPS guidance: $5.20 to $5.45 including tariffs, with 24%-30% EPS growth expected this year. - Tariff assumptions: Products manufactured in Mexico (2% of cost of sales, 30% tariff), Malaysia (18% of cost of sales, 19% target), China (4% of cost of sales, 59% tariff rate), and copper (up to 4% of cost of sales, 50% tariff). - Mitigation efforts reduced tariff impact by over 50%, with further medium-term measures planned.

• Cybersecurity event, although systems are now fortified. - Tariff uncertainties with changing rates and assumptions, including potential impact on various products like those from Mexico, Malaysia, China, and copper. - Fluctuating tariff rates and supply chain challenges.

Q: Could you tell us about the status of the relationship with Philips?

A: The Masimo relationship with Philips remains strong, with ongoing conversations to continue the partnership well into the future, and anticipation of continued increase in Masimo's presence inside Philips' installed base.

Q: How should we think about the second half of board shipments?

A: We're still in the range of $60,000 to $65,000 per quarter, with Q3 expected to be right in that range.

Q: Can you provide an update on the progress with new hemodynamic monitoring technology?

A: Expect to launch a new next-gen route monitor in the back half of next year, with pilots using smart cables on existing monitors ongoing.

Q: What is the assumed tax rate for the year tied to the EPS guidance?

A: At the midpoint of the guidance range, the assumed tax rate is about 23.8%.