All right, hello, and thanks for joining Piper Sandler's 33rd Annual Healthcare Conference, again in a virtual setting here this year. Hopefully, we can all be back in person again next year. This is Jason Bednar of Piper's MedTech team. Pleased to have with me today from Masimo, Vice President of Business Development and Investor Relations, Eli Kammerman. Just for everyone, we were originally anticipating having CFO Micah Young with us today, but he had an unavoidable personal matter that was a late conflict with our scheduled time here today, but Eli, thanks for being with us today, and really appreciate you willing to step in on Micah's behalf. Thanks a lot for inviting us, Jason. I'll get started with questions here in a moment, but for those investors tuning in via the live webcast, please feel free to submit your own questions via the chat box at the bottom of your screen, or you can email them to me directly at jason.bednar@pjc.com, and I'll do my best to ask the questions on your behalf. With that, why don't we get started? A lot we can talk about here, Eli, but the topic that really erupted here late last week with the spread of Omicron, why don't we start with that? It's way too early, I know, to be able to predict how this is all going to play out across healthcare systems in the U.S. and abroad, but I guess, what preparations is Masimo already making to navigate through this latest wave, if any? Then how well prepared do you think the U.S. healthcare system is equipped to navigate this latest variant? At Masimo, we're still conducting all of our safety precaution procedures. Everybody's screened on the way into the building. There's an app we all have to answer questions in every day. And of course, we're still continuing those manufacturing modification practices with increased shuttle buses for the staff in Mexico, as well as increased spacing between employees. Nothing's changing there. With regard to business practices, if anything, this will increase the visibility of the need for continuous monitoring throughout the hospital. With a perception of increased risk of some type of contagion spreading around, people will be more concerned than they were before. So we should expect to see steady demand for our drivers, our circuit boards, as well as our full-fledged monitors, what we call our boards and equipment segment. On the population side, you've got one situation. On the clinical side, you've got another situation. It's important to keep in mind here that the hospitalizations for the Omicron variant have been minimal, if any. Not only that, the symptom set has been described as quite mild. So we're unlikely to see any kind of bump in hospital census related to increased admissions for this particular virus. And that comes directly from the commentary from the clinicians and researchers in South Africa who first recognized this variant. On the other hand, you've got the mass media fanning the flames of hysteria, and that could create additional fear within the population that might cause them to think twice about going to a hospital for a procedure that might be able to be postponed. So at this point, it's really up to what happens in the mass media and whether or not they report the actual facts related to Omicron. Got it. All right. So I do want to talk about some items for 2022 in a moment, but maybe shifting gears, when we think about the sensor volume growth in the context of your bedside and instrument installs the past couple of years, it would seem that bedside utilization is already showing signs of improvement, and that's without elective procedures being back to normal just yet. I think it'd be helpful, Eli, if you could step through the various factors that are influencing this sensor growth that we have seen with your business, including elective procedure levels, COVID patients, and the influence from record contracting that we've been hearing about over the past year. Yeah, sure. Well, first and foremost, our sensor volumes are directly related to our installed base magnitude, and growth in the installed base has a direct impact on sensor volumes. We've seen a nice increase in our installed base on a two-year CAGR basis from 2019 of about 12%. So that is pretty much in line with where our trend line is. We saw a very large step up last year of 17% because of the perceptions of need for increased monitoring across the hospital. This year, things have somewhat gyrated, but installed base growth in the third quarter was 7%. So that's the backdrop for the increase in sensor sales. The second major factor is hospital census or admissions in general. Typically, those rise by about 1%-2% per year with demographics and the aging of the population. So that has a direct impact on our sensor volumes. Finally, what we're seeing is more awareness of the need for monitoring, even in the low acuity settings. Monitors that were previously stagnant or idle now are likely to be used more frequently. That has led to increased practices of monitoring for patients on the general floor. It's always been the case that patients in critical care, the ORs and the ICUs have always been monitored all the time. Nothing's changed there. However, with the benefits to productivity and patient care enabled by continuous monitoring in low acuity, we're seeing a nice expansion there. The main difference, though, is that we expect use volumes of sensors to only be about half that, conservatively speaking, of what we see in critical care. About 25 sensors per box per year is a rough guesstimate for low acuity sensor utilization against 50 sensors per box per year in the high acuity settings of ORs and ICUs. So there's no question that utilization is creeping up nicely, and that's if you measure it in the unit format. If you're measuring it in revenue format, you're seeing a contribution of mix with a diversified product line getting bigger and bigger, as well as some price benefits, as some of our products cost more than our traditional SET pulse ox sensors. Okay. All right, got it. So maybe let's look now at 2022 or spend a little bit more time looking at 2022 and fully understanding that the team hasn't provided guidance or anything formally just yet, but maybe if we can unpack at least a few different variables, independent variables that we start thinking about how models might come together next year. First focusing on just board shipments, we hosted some meetings with you and Micah a few weeks ago, and I think at the time Micah suggested that 280,000-plus board shipments, the guidance for this year, that's a good new baseline to consider going forward. So I guess with that in mind, which that is good growth off of pre-pandemic levels, what's the right growth rate for boards and instruments? Has that all moved higher as the mix has shifted more towards Masimo branded equipment over the last couple of years, or does the growth rate need to actually come in a little bit because there's been some pull forward of demand? I'm just trying to figure out that growth rate off of that baseline. What's the appropriate context we should be thinking about that in? Yeah, sure. Well, firstly, we have to make sure we're applying the correct definitions to the product categories. We have driver shipments, which are the same thing as board shipments, and those boards can be housed in one of two places. We ship the circuit boards directly to OEM customers like Philips and GE, and we also put the boards in our own brand of monitors. So when we talk about a level of 260,000-280,000 board shipments in a year, that is what we're referring to, those circuit boards and one of those two types of monitors. But then when we talk about boards and equipment, we're also adding our Root box into that category description. Root is a standalone connectivity hub. It doesn't measure anything all by itself. We have a version of it that measures vital signs with some attachments on it, and it can also measure pulse ox levels if there's our workhorse monitor, the Radical-7 Root. But I just want to be clear that board shipments are different than board and equipment sales, with the latter including Root. Okay? Now, when we talk about demand for drivers, typically what we've seen is a stairstep type pattern where there's a ratcheting up, and then driver shipments remain level for two to three years before stepping up again. So we may not see any growth at all in driver shipments, but we can see growth in boards and equipment because the equipment part of that will continue to grow, and that's Root. The other very important point here, though, is that when we talk about growth, we really want people to focus on installed base growth, not the growth of drivers themselves. It's the installed base that drives volumes of our sensors. And as I mentioned, the installed base growth was 7% for the third quarter. A reasonable expectation for installed base growth next year would be in the 5%-6% range. So that's your backdrop for fueling sensor volume growth. Now, for equipment, it's really tough to pinpoint where that could come out next year. Some of our equipment is linked to the Hospital Automation business. Some of it is linked to traditional monitoring, as I just described, and it's really too soon to try to generalize what the board and equipment growth combination could be next year. Okay. Okay. Understood. So maybe let's shift over to sensors, trying to figure out maybe what the right way to think about really a few different key categories where there's been some cross-currents, some really good growth, but then also some growth that's probably been held back because of the pandemic. Things like Rainbow, advanced parameters, Hospital Automation. Let's talk about some of those. Where's the potential growth contributions from maybe these three, the greatest, just across each of those? And can you talk about how growth for these offerings may have been stronger, or where they would have been stronger if not for the pandemic? Yeah, sure. Well, the biggest contributor to growth comes from the biggest segment in our business, which is our SET pulse oximetry business. That segment accounts for about 78% - 80% of our total sales today. Overall, disposable sensors of all types represent about 80% of our business at the same time. And of that 80%, about 80% of that is disposable sensors. So 80% of total for reusable and disposable combined, 80% of that 80% for disposable alone. So we see the biggest bang coming from disposable sensor sales. And those can be sensors for oximetry or for our advanced parameters like capnography, SedLine, and O3, which all measure different things, typically in the critical care setting. Now, one thing we have seen is an expansion of monitoring, which has helped to fuel pulse oximetry growth over the past 18 months, even though elective surgery procedures are below normal levels. That drop-off in elective surgeries has had the biggest impact on those advanced parameter sensor sales. That's because all of those are most strongly linked to surgical procedures. So as surgeries continue to come back from the 85%-90% of normal level where we think they ended the third quarter, we should see a nice rebound in the growth of the advanced parameter group. Now, in aggregate, the advanced parameter category accounts for about 7% of our total sales today. Now, we do have a long-term expectation for that category of 20% per year. So that should add about one and a half percentage points to our overall growth rate each year. Then you've got our SET pulse oximetry business, which we think will account for about 6%-8% of our overall growth rate, 6%-8% percentage points each year. And then finally, we're complementing that with Rainbow. Rainbow has suffered from the decline in surgeries, but it is coming back. And at 10% of our business, with a long-term expectation of 10% growth, we expect that to contribute 1% of growth. And that's how we get to our overall long-term growth expectation of 8%-10%. So there's the contributors there. We have upside from some of the newer businesses that we recently acquired. That 8%-10% growth does not include any contribution from the TNI, high-flow respiratory therapy business. It does not include any contribution from the LiDCO, hemodynamic monitoring business. It doesn't include a contribution from Hospital Automation, which is now becoming more meaningful within our revenue line. Hospital Automation is accounting for about 2% of our overall revenues this year. Great. So maybe touch your focusing just a bit more on Rainbow for the moment. Understanding that's been pressured because of elective procedures, elective surgeries that have not been getting done at their normal pace. Understand the long-term view there, but if there is some pent-up demand here, if that comes back, as I think we all would expect it to here at some point over the next couple of years, I mean, when that does, theoretically, it should be above that 10% for a period of time. I guess not to bless that, but I guess, one, is that the right way to think about Rainbow contributions here over the next couple of years? But then also, I know pre-pandemic there was a focus with Rainbow on a risk-sharing model for Masimo. Is that something that is still going to be a strategic focal point when we get back to more of a normal state and elective surgeries are coming back into the fold in a bigger way? Yeah, there's still a lot of upside for Rainbow ahead of us. We're the only company in the world that can measure the Rainbow parameters non-invasively, things like carbon monoxide in the blood, total hemoglobin levels, even methemoglobin. Those are among the most popular measurements. And we see a market potential there of $1 billion, mostly in the surgical arena. At this point, we're only about 12%-13% penetrated into that. So there's still a lot of runway ahead for Rainbow to grow. The thing is, our growth rate expectation for Rainbow is relatively conservative at 10%, and we think that some of the other emerging parts of the businesses will grow faster than that. So to conceive that Rainbow could contribute more than 1% of growth would likely require some type of catalyst that increases the rate of adoption in the ORs. That's possible as more and more data comes out supporting the use of hemoglobin monitoring during surgery on a continuous basis to improve outcomes, especially with regard to lowering mortality and decreasing hospital stays. But that's something that's over the horizon at this point. We will continue promoting that risk-sharing model for Rainbow. It's an important way for us to validate the value of the technology, and it's very user-friendly where our customers are concerned. So now that we've got this new super sensor that will perform all of the Rainbow measurements in one single sensor, we can do promotions like that in the EU, and we expect to be able to do the same thing in the U.S. once that product receives FDA clearance. Great. Yeah, and I do want to come back to the super sensor if we have time, but maybe shifting over to the if we think about again from some of those key smaller categories that are faster growing. You mentioned Hospital Automation. It's been a faster grower, still only 2% of sales right now. I think the last update we had was that you had 75 or so accounts. Not sure if there's a number that you're willing to bless today or provide today that's more updated. I think that was a little bit of a stale number. If not, I'm probably safe to assume it's at least a good deal higher than 75 today. And then in the past, the Masimo team has talked about enhancing Hospital Automation over time, bringing more value to the customer. What are the types of things that you could add on to Hospital Automation over time to bring that value and, again, have that ultimately translate into upside on the P&L? Yeah, sure. When it comes to customer count, there's a few different ways we like to look at Hospital Automation. Firstly, we've got the 400 customers that we brought in with the acquisition of the Connected Care business from NantHealth early last year. However, most of those were capital purchase type of customers rather than subscription fee customers, so that gave us a great opportunity to sell in the Masimo brand of Hospital Automation products, both hardware and software. The other way we like to look at Hospital Automation is the proportion of connected beds that are generating subscription fees, so while I can't really address that 75 figure that you just quoted, what I can say is that about 6,000-7,000 beds now within our 30,000-plus connected bed count are generating subscription fees. Those fees still have a lot of upside because they're at the low end of our intended range of $1,000-$5,000 per bed per year. We start out with maintenance and software upgrade subscriptions, and things can increase from there as more and more software modules are added to that particular location. With Hospital Automation, there's still quite a bit of upside as we leverage, firstly, the Connected Care customer base. Secondly, our customer base for Patient SafetyNet. That's where most of those connected beds are coming from, that 30,000-plus figure I just quoted. Then lastly, we're able to continually introduce more software modules that will allow us to approach our pulse oximetry customers and leverage that market position as well. All right. Great. We have about five minutes left remaining here. A few different topics I'd still like to cover. I mean, I guess, Eli, I talked with you and Micah about this. One of the areas that's really piqued my interest here this year and also late last year has just been that record pace of contracting that you and the team at Masimo have highlighted. Can you talk about what's included in this contracting? Is it mainly SET sensors? Does this branch out to some of the other advanced parameters or Rainbow? So that'd be question one. And then the question two is, are we already seeing the benefits of that contracting in hitting revenue this year? Do we need to wait until the first half of next year to really start to see this flow in? I presume you're talking about the record contracting levels we talked about for the first half of this year and the near record level we had for the third quarter. Now, keep in mind that when we get a new contract signed, when it involves our OEM partners, there's typically about a six-month lag there before that equipment gets fully installed and becomes operational. Now, with Masimo brand equipment, that lag is shorter. It's generally three months or a little bit less. So with those lag periods in mind, we're going to see the biggest impact from the new contracts this year in the fourth quarter and then going into 2022. That's one aspect of it. Regarding the composition of the contracts, for the most part, they're SET pulse oximetry products. If it's OEM brand equipment, of course, it's just sensors. But if it's Masimo brand equipment, it's a package deal where it's our equipment plus the sensors. Occasionally, we will see other products thrown in, especially the Root with Vital Signs version that incorporates pulse oximetry monitoring in combination with the Radical- 7, as I just described. And then we will also have the potential to include some of the advanced parameters. But frequently, we're seeing separate contracts for things like capnography or SedLine and O3. SedLine and O3 are often included in the same contract because those are both forehead sensors. But those contracts are in the minority relative to the pulse oximetry contracts involving our SET products. Got it. Okay. And now going down a totally different line of questioning here, more on the financial side. Despite some of the rising costs out there in supply chain, just some of the conversations I've been having with Micah here over the last quarter, he seems very confident sitting here today, delivering 100 basis points of margin expansion, which is the company's objective. But in this environment where costs and supply chain expenses are inherently volatile, where does that confidence come from? Because he definitely is out there already, even without it turning the calendar to 2022, feeling very comfortable delivering on 100 basis points or, I'll say, 100 basis points for next year. Yeah. Well, firstly, to be clear, the 100 basis points is on the operating margin line, with half of that coming from gross margin and half from SG&A leverage. So for the 50 basis points of gross margin expansion, we are confident there. We've got an ongoing conversion of the customer base to lower-cost RD sensors replacing earlier generation pulse oximetry sensors. We haven't experienced a lot of inflation in most of our components. The one area where we have experienced inflation is in shipping, and that is built into our guidance today. So we think with the conversion of the customer base to the next-gen sensors, as well as the ability we have to raise prices in line with the CPI as part of our long-term contract provisions, improvement. The other 50 basis points coming on the SG&A line comes from selling more products to the same size sales force as we've expanded the product line with some of those acquisitions I mentioned previously, so we do think we're very much on track to move towards our long-term operating margin target of 30% while we move towards our long-term gross margin target of 70%. For us, there's a lot of levers we can operate to get there. Okay. All right. Very fair. Last question for me because I know we're right about at time here. Just on the competition side, Medtronic just out there very recently, again, claiming share gains in pulse oximetry. Data availability from Medtronic is clearly limited. So there's only so much we can analyze externally on our side. But do you suspect they're using share gains loosely in some fashion to claim this is happening? I'm just kind of curious to get your thoughts on how share dynamics might be playing out and how you view it at Masimo. We don't think they're gaining share from us. They might be gaining share from other parties who are in the market, and that's a feasible concept. Philips has about a 20% share of the pulse oximetry function inside their installed base only, which translates into a 10% market share overall. GE also has about a 20% share of the pulse oximetry function in their brand of monitors, which also translates into a 5% share overall for them. So it's possible that Medtronic could be winning share from those two minor players. But as far as we go, we're winning share consistently from Medtronic, from the Nellcor brand. We think we're on track now to post share gains of roughly two percentage points per year moving forward. The pace has picked up over the past year. We've won some business in hospitals that formerly were exclusively their territory. So we're optimistic that our share gains can continue. All right. Excellent. Well, we are a little bit over time. Really great discussion here. Covered a lot of ground here, Eli. Thanks so much and thanks so much for joining us today, everybody. Thanks for tuning in. Be well and happy holidays, everyone. All right. Happy holidays. Bye, Jason. Thanks, Eli.