Masimo Corporation · NASDAQ:MASI
Masimo — Investor Day (May 2019)
118 slides from Masimo's investor day presentation, May 16, 2019
Slide 1: Investor Day
Investor Day Improving Patient Outcomes May 16, 2019 Reducing the Cost of Care®
Slide 2: Agenda
Agenda Registration 8:00am - 8:30am Breakfast 8:30am - 9:40am Managem ent Presentations 9:40am - 9:50am Break 9:50am - 11:00am Managem ent Presentations 11:00am - 1:30pm Lunch and Technology Dem onstrations 1:30pm - 2:00pm Executive Q&A and Closing Com m ents
Slide 3: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS These presentations contain forward-looking statements within the meaning of federal securities laws, including, among others, statements about our expectations, plans, strategies or prospects. We generally use the words “may,” “will,” “expect,” “believe,” “anticipate,” “p
Slide 4: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES The non-GAAP financial measures contained herein are a supplement to the corresponding financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP). The non-GAAP financial measures presented exclude certain items that are more fully
Slide 5: Joe Kiani
Joe Kiani Chairman and Chief Executive Officer
Slide 6: Mission Statement
MISSION STATEMENT Improving Patient Outcomes and Reducing the Cost of Care® GUIDING PRINCIPLES § Remain faithful to your promises and responsibilities § Thrive on fascination and accomplishment and not on greed and power § Strive to make each year better than the year before, both personally and for
Slide 7: Innovation Timeline
Innovation Timeline T h e u s e o f th e tr a d e m a r k P A T IE N T S A F E T Y N E T is u n d e r lic e n s e fr o m U n iv e r s ity H e a lth S y s te m C o n s o r tiu m . O R i is p e n d in g 5 1 0 k c le a r a n c e . N o t a v a ila b le in th e U .S . o r C a n a d a . H a lo In d e x h
Slide 8: Strong Track Record of Growth Since IPO
Strong Track Record of Growth Since IPO Product Revenue ($ in Millions) $918 $830 $738 $674 $599 $557 $517 $465 $406 $356 $300 $260 $200 13.5% CAGR 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 E
Slide 9: Executing on Our Long-Term Plan
Executing on Our Long-Term Plan Product Revenue ($ in Millions) L o n g -T e rm P la n (2 0 1 7 In ve sto r D a y) C u rre n t T ra je cto ry 1 $1, 40 0 $1, 20 0 $1, 00 0 $80 0 $60 0 $40 0 20 17 20 18 20 19 E 20 20 E 20 21 E 20 22 E 20 23 E 20 24 E 1 Current trajectory based on our 2019 guidance of
Slide 10: Revenue Performance by Technology Platform
Revenue Performance by Technology Platform Masimo Revenue Growth % (FY 2018 vs. FY 2017) 3 0% 2 5% 2 0% 1 5% 1 0% 5% 0% SET® ra in bo w® No mo Li ne ®, Sed L n i e®, a nd O3® A c tu a l R e ve n u e G ro w th (F Y 2 0 1 8 vs . F Y 2 0 1 7 ) L T P G ro w th T a rg e ts b y P la tfo rm
Slide 11: Delivering Significant Shareholder Value
Delivering Significant Shareholder Value Total Shareholder Return (12/31/2017 – 5/10/2019) 165 M a s im o (M A S I) 65% U S M e d ic a l D e v ic e s E T F (IH I) 155 N A S D A Q C o m p o site 145 S&P 500 135 28% 125 115 15% 105 8% 95 85 12 /2 9/ 17 03 /2 9/ 18 06 /2 9/ 18 09 /2 9/ 18 12 /2 9/ 18 0
Slide 12: Long-Term Plan
Long-Term Plan GROWTH AND INDUSTRY-LEADING DISCIPLINED CAPITAL PROFITABILITY INNOVATIONS DEPLOYMENT § Revenue growth of 8 – 10% § Innovation never stops at § Reinvest to drive innovation Masimo! § Operating margins of 30% § Strategic acquisitions § Hospital automation § EPS growth of 12 – 15% § Sele
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Slide 14: Strategic Initiatives: Hospital Automation
Strategic Initiatives: Hospital Automation PROBLEM STATEMENT: Care delivery can be inefficient, with a high degree of variability in quality and cost. § Cognitive overload and errors of omission are hurting patients and leading to burn out § Disparate data sources § Complex workflows: manual documen
Slide 15: Opioid Safety in Hospitals
Opioid Safety in Hospitals § Conventional pulse oximetry failed in the general ward due to high false alarm rates § Masimo SET ® enabled monitoring in the general ward § Patient SafetyNet™ is deployed in over 400 hospitals 1 Taenzer A.H.et al. APSF Newsletter 2012. Available at:http://www.apsf.org/n
Slide 16: Opioid Safety in the Home
Opioid Safety in the Home § We believe we can have the same impact wherever opioids are used, including the home § Opioid SafetyNet™ was selected by the FDA for their Opioid Epidemic Challenge § Granted designation as a breakthrough device
Slide 17: Current Portfolio Market Opportunity
Current Portfolio Market Opportunity1 Total Addressable Market Opportunity $4.5B Current Portfolio Markets 1 ü P u lse O xim e try ü P u lse C O -O xim e try $3.0B ü C a p n o g ra p h y ü B ra in F u n ctio n M o n ito rin g ü R e g io n a l O xim e try ü T e le h e a lth , C o n s u m e r, a n d G
Slide 18: Potential to Expand Our Long-Term Market Opportunity
Potential to Expand Our Long-Term Market Opportunity Total Addressable Market Opportunity Innovation Pipeline Opportunities Pipeline Opportunity $1.0B $5B+ Pipeline Opportunity $0.5B Pipeline Opportunity $0.2B Pipeline Opportunity $1.0B Pipeline Opportunity $1.0B+ $4B+ $15B+ Pipeline Opportunity $1.
Slide 19: Key Takeaways
Key Takeaways § Our relentless focus on patient safety has not only benefited patients, clinicians, and hospitals, but also Masimo shareholders § Dedicated and talented team has consistently delivered on our commitments § Long-term revenue growth of 8 – 10% with upside potential § Hospital Automatio
Slide 20: Bilal Muhsin
Bilal Muhsin Chief Operating Officer
Slide 21: Global Reach
Global Reach 150+ countries 100 Million+ patients Large installed base of Partnerships with impacted each year technology boards and OEMs monitors
Slide 22: Technology Boards and Monitors
Technology Boards and Monitors Growing Installed Base of Masimo Technology Boards and Monitors ~1.7 Million + = sh ip p e d o ve r la s t 1 0 ye a rs Technology Boards Monitors Over 200 multi-parameter monitors and devices from Shipped ~1.7 million technology boards and 70 leading brands have integr
Slide 23: Pulse Oximetry Market: $1.7 Billion Market
Pulse Oximetry Market: $1.7 Billion Market U.S. Hospital Continuous Monitoring Penetration 5 00 § SpO2 is Standard of Care 4 50 § Critical Care (OR, NICU, and ICU) 4 00 § Emergency Medical Settings Thousands of beds 3 50 3 00 2 50 § Expansion Opportunity 2 00 § General floor ~10% penetrated 1 50 § L
Slide 24: Masimo SET
Masimo SET® Measure-through Motion and Low Perfusion™* Pulse Oximetry * M a s im o S E T ® M e a s u r e - th r o u g h M o tio n te c h n o lo g y in c lu d e s S p O 2 a n d P R . C o n tin u o u s m o n ito r in g w ith R R p h a s o b ta in e d C E M a r k in g . N o t a v a ila b le in th e U .
Slide 25: Masimo SET
Masimo SET® § Prior to Masimo Signal Extraction Technology® (SET®), pulse oximetry was unreliable when it was needed most, during patient motion and low perfusion. § Masimo SET® works by recognizing that both arterial and venous blood can move. § Using parallel signal processing engines — DST, FST,
Slide 26: Masimo SET
Masimo SET® Over 100 independent and objective studies have shown that Masimo SET® outperforms other pulse oximetry technologies during motion and low perfusion conditions, providing clinicians with increased sensitivity and specificity to help them make critical patient care decisions.* These indep
Slide 27: Masimo SET
Masimo SET® Masimo SET® had 3% missed true alarms and 5% false alarms versus 43% and 28%, respectively, using competitor technology. 1 S h a h N e t a l. J C lin A n e s th . 2 0 1 2 A u g ;2 4 ( 5 ) :3 8 5 - 9 1 . R e s u lts s h o w n a r e c a lc u la te d b y c o m b in in g s e n s itiv ity a n
Slide 28: Masimo SET
Masimo SET® In the NICU Rates of Retinopathy of Prematurity in Very Low Birth Weight Infants § Post-Masimo SET® and new protocol, the incidence of retinopathy of prematurity (ROP), stages 3 to 4, decreased from 12.5% to 2.5% in very low birth weight infants over a five-year period. In cid e n ce o f
Slide 29: Masimo SET
Masimo SET® In the NICU § Researchers found that Masimo SET® , in combination with changes in clinical policy, led to a reduction in severe retinopathy of prematurity (ROP). 1 C a s tillo A e t a l. A c ta P a e d ia tr . 2 0 1 1 F e b ;1 0 0 ( 2 ) :1 8 8 - 9 2 .
Slide 30: Masimo SET
Masimo SET® Newborn Screening § In a study of 122,738 infants, critical congenital heart disease (CCHD) screening sensitivity increased from 77% to 93% with the combined use of Masimo SET® and clinical assessment. Z h a o e t a l. L a n c e t. 2 0 1 4 A u g 3 0 ;3 8 4 ( 9 9 4 5 ) :7 4 7 - 5 4 .
Slide 31: Improved Outcomes with Patient SafetyNet and SET
Improved Outcomes with Patient SafetyNet™ and SET® Researchers found improved outcomes following installation of continuous postoperative monitoring. 1 T a e n z e r A H e t a l. A n e s th e s ia P a tie n t S a fe ty F o u n d a tio n N e w s le tte r . S p r in g - S u m m e r 2 0 1 2 . 2 M c G r
Slide 32: SpO2 Accuracy Improvement
SpO2 Accuracy Improvement We Just Raised the SpO2 ARMS* Accuracy for RD SET™ Sensors Standard, Again Past outcomes were achieved with Previous Im proved 3% accuracy during motion. Now Motion 3% 1.5% SpO2 accuracy has improved, providing clinicians with greater confidence when monitoring No Motion 2%
Slide 33: Radius PPG in the Hospital
Radius PPG™ in the Hospital § Tetherless Masimo SET® solution that improves patient comfort and mobility § Reusable + disposable component § 4-day battery life § Compatible with existing Masimo SET ® installed base
Slide 34: PVi - During Surgery
PVi® - During Surgery Over 100 studies have evaluated the utility of Pleth Variability Index (PVi). Study Conclusion Comparing Masimo PVi to Invasive § PVi . . . can predict fluid responsiveness Measurement Technologies non-invasively in mechanically ventilated patients during general anesthesia. Th
Slide 35: Dynamic PVi
Dynamic PVi Compared to PVi, a new dynamic PVi mode is designed to provide: § A reduction in variability under certain conditions § Fewer post-dropout spikes
Slide 36: RRp
RRp® With Respiration Rate from the Pleth (RRp), Masimo provides another method of measuring respiration rate. Measurement Patient Population ARMS* Range 3 RPM Adult/Pediatric 4-70 RPM +1 RPM mean error Changes in the Plethysmographic Waveform During Breathing * A RMS a c c u r a c y i s a s t a t i
Slide 37: Masimo SET
Masimo SET® Pulse Oximetry C o n tin u o u s m o n ito r in g w ith R R p h a s o b ta in e d C E M a r k in g . N o t a v a ila b le in th e U .S .
Slide 38: Masimo rainbow
Masimo rainbow® Pulse CO-Oximetry C o n tin u o u s m o n ito r in g w ith R R p h a s o b ta in e d C E M a r k in g . O R i is p e n d in g 5 1 0 k c le a r a n c e . N o t a v a ila b le in th e U .S .
Slide 39: SpHb
SpHb® Continuous hemoglobin monitoring (SpHb) provides real-time visibility to changes in hemoglobin between invasive blood samples. S p H b m o n ito r in g is n o t in te n d e d to r e p la c e la b o r a to r y b lo o d te s tin g . B lo o d s a m p le s s h o u ld b e a n a ly z e d b y la b o
Slide 40: SpHb Utility
SpHb Utility • In a randomized trial of 327 patients undergoing elective orthopedic surgery conducted at Massachusetts General Hospital (MGH), researchers found that the use of continuous, noninvasive hemoglobin monitoring reduced the rate of transfusions when compared to standard care without conti
Slide 41: SpHb Utility
SpHb Utility In a prospective cohort study of 106 neurosurgical patients, researchers found that adding SpHb monitoring to standard-of-care blood management resulted in decreased blood utilization in high-blood-loss neurosurgery, while also facilitating earlier transfusions.1* * Study Protocol: The
Slide 42: SpHb and PVi: Impact on Morbidity and Mortality
SpHb and PVi: Impact on Morbidity and Mortality Clinical Study Investigates the Impact of SpHb and PVi on Anesthesia-related Mortality1 SpHb and PVi Improved Outcomes in Reduction in Mortality Between Non-SpHb/PVi Surgical Patients Group and SpHb/PVi Group § 18,000+ patients § All patients monitored
Slide 43: SpHb Plot Comparison with Rev E vs Rev O
SpHb Plot Comparison with Rev E vs Rev O Masimo engineering data.
Slide 44: Oxygen Reserve Index (ORi)
Oxygen Reserve Index (ORi™) § In Europe, ORi has obtained CE Marking as the first noninvasive and continuous parameter to provide insight into a patient’s oxygen reserve. § ORi is pending 510(k) clearance and is not available in the U.S.
Slide 45: SET and rainbow: Sensor Options
SET® and rainbow® : Sensor Options The Power of the rainbow ® Platform 2 LED 4 LED 8 LED 10 LED O R i, R P V i a n d c o n tin u o u s R R p m o n ito r in g h a v e o b ta in e d C E M a r k in g . N o t a v a ila b le in th e U .S .
Slide 46: RRa Acoustic Respiratory Monitoring
RRa® Acoustic Respiratory Monitoring In a study of RRa vs capnography, researchers concluded that “The data from this study demonstrate that acoustic monitoring provides a very reliable noninvasive, continuous method for estimating ventilatory rate in postsurgical patients at risk for ventilatory co
Slide 47: RRa
RRa Acoustic Respiration Rate (RRa) has been shown to be: § accurate1 ,2 § reliable1 § easy-to-use1 § easy-to-tolerate1 ,3 …enhancing patient compliance with respiration monitoring. 1 M a c k n e t M R e t a l. A n e s th e s io lo g y . 2 0 0 7 ;1 0 7 :A 8 4 ( a b s tr a c t) . 2 G o u d r a B G e
Slide 48: Estimated Potential Savings with Masimo SET and rainbow Parameters
Estimated Potential Savings with Masimo SET ® and rainbow ® Parameters Estimates based on a 250-bed hospital model § SET ® + rainbow: >$3M in annual cost savings
Slide 49: Advanced Parameter Monitoring
Advanced Parameter Monitoring SedLine O3 NomoLine Brain Function – Depth of Sedation Regional Oximetry Capnography and Gas Monitoring
Slide 50: Next Generation SedLine Brain Function Monitoring
Next Generation SedLine® Brain Function Monitoring Next Generation SedLine Brain Function Monitoring helps clinicians monitor the state of the brain under anesthesia with bilateral data acquisition and processing of electroencephalogram (EEG) signals. EEG PSi DSA Burst Suppression
Slide 51: Next Generation SedLine Brain Function Monitoring
Next Generation SedLine Brain Function Monitoring Improved PSi Performance During Low Power EEG Next Generation SedLine uses adaptive signal processing with band-independent features to offer improved PSi performance in cases of low power EEG.
Slide 52: Next Generation SedLine Brain Function Monitoring
Next Generation SedLine Brain Function Monitoring § Reduces Electromyography (EMG) § Next Generation SedLine extracts a clearer EEG signal for computing PSi
Slide 53: O3 Regional Oximetry
O3® Regional Oximetry O3 may help clinicians monitor cerebral oxygenation in situations in which peripheral pulse oximetry alone may not be fully indicative of the oxygen in the brain.
Slide 54: A More Complete Picture of the Brain
A More Complete Picture of the Brain Next Generation SedLine can be used simultaneously with O3 Regional Oximetry on the Root platform for a more complete picture of the brain. The RD SedLine™ sensor is designed for seamless, simultaneous application with O3 sensors.
Slide 55: Capnography and Airway Gas Monitoring Solutions
Capnography and Airway Gas Monitoring Solutions Masimo offers a variety of capnography and gas solutions, including external modules and both mainstream and sidestream options. EMMA™ EtCO2, RR
Slide 56: NomoLine Sampling Lines
NomoLine® Sampling Lines No-moisture sampling lines for intubated and non-intubated patients in low- and high- humidity applications, supporting all patient populations.
Slide 57: NomoLine Sampling Lines
NomoLine® Sampling Lines How it Works Gas and condensed moisture from the patient enters through the gas sample tube. Condensed moisture and aspirated water are separated and collected using a hydrophilic absorbent, then diffused through the polymer cover and evaporated into the surrounding air.
Slide 58: Portable Devices
Portable Devices § Rad-67™ Handheld Pulse CO-Oximeter® (SpHb®) § Rad-57® Handheld Pulse CO-Oximeter (SpCO®) § EMMA™ Capnograph § MighytSat® Rx Pulse Oximeter
Slide 59: Large and Growing Markets
Large and Growing Markets Growth Estimates: 2019 – 2024 CAGR SET® rainbow® NomoLine® SedLine® Brain O3® Regional Pulse Oximetry Pulse CO-Oximetry Capnography Function Monitoring Oximetry Market ~$1.7B ~$1B ~$550M ~$125M ~$125M (TAM) Clinical #1 #1 #1 #1 #1 Leadership Market #1 #1 #3 #2 #3 Leadership
Slide 60: Agenda
Agenda Registration 8:00am - 8:30am Breakfast 8:30am - 9:40am Managem ent Presentations 9:40am - 9:50am Break 9:50am - 11:00am Managem ent Presentations 11:00am - 1:30pm Lunch and Technology Dem onstrations 1:30pm - 2:00pm Executive Q&A and Closing Com m ents
Slide 61: Hospital Automation
Hospital Automation
Slide 62: Market Needs and Challenges
Market Needs and Challenges § Many devices with many interfaces Cognitive overload and § Difficult to interpret multiple points errors of omission of data at once § Low nurse-to-patient ratio Data accessibility § Patients out of visual and auditory range § Manual charting and Complex workflows trans
Slide 63: Competitive Solutions
Competitive Solutions Point-of-care Device Middleware Destination Cockpit Cockpit Server Display Pump Gateway Infusion Pump Alarm Manager Monitor Central Gateway Station Physiological Monitor Alarm Reporter Ventilator Gateway Mobile Device Anesthesia/ Ventilator Mobile Data Server Integration Integr
Slide 64: Masimo Solution
Masimo Solution Point-of-care Device Middleware Destination Cockpit UniViewTM Display Infusion Pump Central Patient Station SafetyNetTM Physiological Monitor Iris® Platform Root® Mobile Device ReplicaTM Ventilator EMR Iris®
Slide 65: Iris Platform
Iris® Platform Parameter Data Waveform Data Alarms and 2-way Audio Events and Video High-fidelity, Low-latency Bus Architecture That Enables Unique Solutions Across All Care Areas
Slide 66: Root
Root® Expandable, Versatile, and Customizable Patient Monitoring and Connectivity Hub SedLine® NomoLine® Vital Signs Brain Function Capnography Check Monitoring & Airway Gas Automating Data Collection Radical-7® O3® Radius-7® SET® and Regional Ambulatory rainbow® Oximetry Monitoring
Slide 67: Device Integration
Device Integration Third-Party Devices Root Iris Platform EMR ACE™ (Adaptive Connectivity Engine™) § Easily integrate third-party device data § Seamlessly map parameters to a variety of EMRs
Slide 68: UniView – Cockpit Display
UniView™ – Cockpit Display
Slide 69: Patient SafetyNet – Supplemental Remote Central Monitoring
Patient SafetyNet™ – Supplemental Remote Central Monitoring
Slide 70: Replica – Mobile Data and Alarm Notifications
Replica™ – Mobile Data and Alarm Notifications
Slide 71: Root – with Automated Vital Signs Workflow
Root – with Automated Vital Signs Workflow Continuous Monitor Vital Signs Check
Slide 72: Halo ION – Comprehensive, Personalized, Continuous Patient Score
Halo ION™ – Comprehensive, Personalized, Continuous Patient Score
Slide 73: Iris Device Management System
Iris® Device Management System™
Slide 74: Automation Across the Continuum of Care
Automation Across the Continuum of Care OR ICU Med-S. General IT/Biomed
Slide 75: Masimo Patient SafetyNet
Masimo Patient SafetyNet™ • Researchers found improved outcomes following installation of continuous postoperative monitoring using Masimo SET® 2 1 2 1 1 T a e n z e r A H e t a l. A n e s th e s ia P a tie n t S a fe ty F o u n d a tio n N e w s le tte r . S p r in g - S u m m e r 2 0 1 2 . 2 M c G
Slide 76: Impactful Beginnings of Hospital Automation
Impactful Beginnings of Hospital Automation Following the implementation of an enhanced monitoring system with Root, Radius-7 and Patient SafetyNet, researchers found increased continuous patient monitoring hours and reduced vital signs documentation time. The study concluded: § 28% reduced average
Slide 77: Market Opportunity
Market Opportunity § Global TAM of ~$1.5B OUS § Capital and service revenue US § 18 – 24 month contracting cycle § Robust pipeline of opportunities US Market Total Penetration Potential Range of ASPs Beds Beds per bed Critical Care 125,000 100% 125,000 General Floor 450,000 50% 225,000 Total 575,000
Slide 78: Market Needs and Challenges
Market Needs and Challenges • Many devices with many interfaces Cognitive overload and • UniView: • Difficult patientmultiple to interpret cockpit points errors of omission • Halo ION: continuous scoring of data at once • Low nurse to patient ratio • Patient • Patients outSafetyNet of visual and Dat
Slide 79: Homecare
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Slide 80: Masimo Homecare Solutions
Masimo Homecare Solutions [ DOCTELLA® }
Slide 81: CareProgram
CareProgram™ Clinician-designed CareProgram Clinician Dashboard Consent Notifications CareProgram Detailed Patient View
Slide 82: Rad-97 for Telemedicine and Homecare
Rad-97 for Telemedicine and Homecare
Slide 83: Hospital Automation
Hospital Automation
Slide 84: Opioid Safety
Opioid Safety
Slide 85: Opioid Definition
Opioid Definition Prescription pain relievers: oxycodone (OxyContin®), hydrocodone (Vicodin®), morphine, codeine, fentanyl Illicit drug use: heroin and synthetic opioids such as fentanyl Opioid receptors work on nerve cells to produce pleasurable effects and relieve pain Primary use of prescription
Slide 86: Opioid Use Frequency
Opioid Use Frequency • 191 million prescriptions per year1 • 92 million adults use a prescription opioid each year2 • 114,000 U.S. emergency department visits per year due to suspected opioid overdose3 • Total economic burden of prescription opioids per year in the U.S. is $78.5 billion4 1C e n t e
Slide 87: Physiological Effects of Opioids
Physiological Effects of Opioids § Opioids are potent respiratory depressants § During opioid overdose, oxygen deprivation leads to brain injury and death § Cardiac arrest is a late complication of opioid overdose and secondary to Add Graphic respiratory arrest and hypoventilation § People can have
Slide 88: Common Approach to Opioid Epidemic
Common Approach to Opioid Epidemic Public Health Efforts to Address Crisis § Reduce availability § Fewer prescriptions § Reduce prescribed doses § Treatment to addiction § Reversal drug availability
Slide 89: The United States Has an Opioid Safety Crisis
The United States Has an Opioid Safety Crisis 47,600 Opioid-related Deaths in 2017 National Drug Overdose Deaths Involving Any Opioid1 National Drug Overdose Deaths Involving Prescription Opioids1 Number Among All Ages, 1999-2017 Number Among All Ages, 1999-2017 50, 000 4 7 ,6 0 0 18, 000 1 7 ,0 2 9
Slide 90: Masimo SET Pulse Oximetry Solution
Masimo SET® Pulse Oximetry Solution § Masimo SET® can provide effective pulse oximetry monitoring in the home just as it already does in the hospital § Patients already use Masimo hospital devices at home § Now we are designing a product specifically intended for monitoring patients on opioids
Slide 91: Opioid SafetyNet
Opioid SafetyNet™ § Addresses the danger of opioid- induced respiratory depression with a convenient, intuitive combination of patient sensor, hub, and smartphone app
Slide 92: Opioid Market Opportunity
Opioid Market Opportunity § 191 million opioid prescriptions in 2017 § Assume 30% reduction in prescriptions due to efforts to reduce opioid use § 134 million prescription opportunity § Initial focus on 1/3 of the population (chronic pain management and postoperative patients) § 45 million prescript
Slide 93: Utah, First to Act
Utah, First to Act May 2018: Utah State Legislature introduces the “Parker Bill” Utah Resolution Key Points: § Recognizes the effects of sudden death from opioid- induced postoperative respiratory depression § Urges the Department of Health, hospitals, practitioners, and academics to further study t
Slide 94: Measured Approach to Launch
Measured Approach to Launch § Partnering closely with FDA § Starting with cash pay patients § Pursuing reimbursement model
Slide 95: Opioid Safety: Key Takeaways
Opioid Safety: Key Takeaways § Potentially thousands of lives saved a year § Masimo SET® technology is the enabler § Measured market launch to ensure commercialization success
Slide 96: Stacey Orsat
Stacey Orsat President EMEA
Slide 97: Global Health: Scale-up Access to Safe Surgery
Global Health: Scale-up Access to Safe Surgery 5 Billion without access to safe surgery1 § 33% of all deaths/year = 17M deaths § 77 million DALYs (Disability Adjusted Life Years) § In low income countries there is a higher proportion of amenable deaths among health system users than non-users2 § Dat
Slide 98: Global Health: Scale-up Detection of Pneumonia
Global Health: Scale-up Detection of Pneumonia 200 Million pneumonia cases occur each year around the world 1 § 2.6M deaths per year § Children under the age of 5 and the elderly have highest risk § Not enough done globally to identify and treat pneumonia In 2013 The Bill & Melinda Gates Foundation
Slide 99: Global Health: Scale-up Screening for Anemia
Global Health: Scale-up Screening for Anemia 1/3 of the world’s population is anemic1, contributing to: § 9% of disabilities worldwide § 42% increase in mortality during surgery SpHb screening is beginning, with the largest global Hb screening projects conducted by largest international NGO and gove
Slide 100: Corporate Responsibility and Sustainability
Corporate Responsibility and Sustainability Investing in improving our footprint in our world and our community Investing in our Planet and our Team § RD sensors vs. traditional cabled-based sensors led to 84% waste reduction § RD sensors has saved approximately 1.5M lbs of CO2 since 2016 § 1M+ lbs
Slide 101: Investing in Our Community
Investing in Our Community Partnering on broad patient safety initiatives Partnering in housing homeless people in OC
Slide 102: Micah Young
Micah Young Executive Vice President and Chief Financial Officer
Slide 103: Long-Term Financial Goals and Objectives
Long-Term Financial Goals and Objectives MARKET LEADING Revenue growth of 8 – 10% REVENUE GROWTH OPERATING MARGIN Non-GAAP Operating Margins of 30% EXPANSION SIGNIFICANT EPS Non-GAAP EPS growth of 12 – 15% GROWTH STRONG CASH FLOW Adjusted Free cash flow of $300M+ GENERATION DISCIPLINED CAPITAL Strat
Slide 104: Executing on Our Long-Term Plan
Executing on Our Long-Term Plan N o n -G A A P 1 N o n -G A A P 1 Product Revenue Operating Margin EPS $918M 24.0% $3.12 $830M 22.0% $2.65 $738M 18.6% $1.73 +11.5% CAGR +540 bps +34% CAGR 2 01 7 2 01 8 2 01 9 E 2 01 7 2 01 8 2 01 9 E 2 01 7 2 01 8 2 01 9 E 1 N o n - G A A P m e a s u r e s s h o w n
Slide 105: Long-Term Revenue Growth of 8 – 10%
Long-Term Revenue Growth of 8 – 10% Multiple opportunities for upside… Potential to Expand Our Long-term Market Opportunity Total Addressable Market Opportunity Innovation Pipeline Opportunities Pipeline Opportunity $1.0B $5B+ Pipeline Opportunity $0.5B Pipeline Opportunity $0.2B Pipeline Opportunit
Slide 106: Non-GAAP Operating Margin Improvement
Non-GAAP Operating Margin1 Improvement Targeting Long-Term Operating Margins of ~30% ~30% ~600 Basis Points of Operating Margin Im provem ent § Gross margin improvement of ~320 bps 24.0% 22.0% § Operating expense improvement of ~280 bps § SG&A expenses will be the primary driver 18.6% § Maintain our
Slide 107: Non-GAAP Gross Margin Improvement
Non-GAAP Gross Margin1 Improvement Targeting Long-Term Gross Margins of ~70% ~70% ~320 Basis Points of Gross Margin Im provem ent 66.8% § Manufacturing scale 66.0% § Design for manufacturability (DFM) 64.2% § Procurement initiatives § Leveraging our installed base +320 bps 2 01 7 2 01 8 2 01 9 E L T
Slide 108: Non-GAAP Operating Expense Improvement
Non-GAAP Operating Expense1 Improvement Targeting Long-Term Operating Expenses of ~40% 45.7% ~280 Basis Points of 44.0% Operating Expense Im provem ent 42.8% § International scale ~40% § U.S. commercial productivity § G&A leverage and efficiency -280 bps 2 01 7 2 01 8 2 01 9 E L TP Targ e t 1 N o n
Slide 109: Strong Cash Flow Generation
Strong Cash Flow Generation Adjusted Free Cash Flow1 TARGETING LONG-TERM $ in Millions FREE CASH FLOW OF $300M+ $300M+ § Execute on our long-term revenue and profitability goals to increase cash flow $222M § Maintain the improvements we made to working capital Royalties in FY 2018 Working Capital Im
Slide 110: Disciplined Capital Deployment
Disciplined Capital Deployment STRATEGIC SHARE REINVESTMENT ACQUISITIONS REPURCHASES Reinvest in the business to drive Execute acquisitions that align Selective share repurchases further innovation well with our long-term strategy § Maintain our R&D investment § Leverage our core competencies § Disc
Slide 111: Key Takeaways
Key Takeaways § Executing on our long-term plan § Long-term revenue growth target of 8 – 10% has multiple opportunities for upside § Hospital Automation § Opioid Safety § Innovation Pipeline
Slide 112: Investor Day Appendix
Investor Day Appendix May 16, 2019
Slide 113: Constant Currency Product Revenue
Constant Currency Product Revenue 1,2 RECONCILIATION OF GAAP PRODUCT REVENUE GROWTH TO CONSTANT CURRENCY PRODUCT REVENUE GROWTH (3) (in thousands, except percentages) YTD 2017 YTD 2018 2019 Guidance GAAP product revenue $ 738,242 $ 829,874 $ 918,000 Constant currency F/X adjustments N/A N/A 6,500 Co
Slide 114: Non-GAAP Gross Margin %
Non-GAAP Gross Margin % 1,2 RECONCILIATION OF GAAP GROSS PROFIT/MARGIN TO NON-GAAP GROSS PROFIT/MARGIN: (3) (in thousands, except percentages) YTD 2017 YTD 2018 2019 Guidance GAAP gross profit/margin $ 522,032 $ 574,892 $ 613,814 Non-GAAP adjustments: Royalty and other revenue, net of related costs
Slide 115: Non-GAAP Operating Expense %
Non-GAAP Operating Expense % 1,2 RECONCILIATION OF GAAP OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES: (3) (in thousands, except percentages) YTD 2017 YTD 2018 2019 Guidance GAAP selling, general and administrative operating expenses $ 273,011 $ 285,417 Non-GAAP adjustments: Acquisition-related
Slide 116: Non-GAAP Operating Margin %
Non-GAAP Operating Margin % 1,2 RECONCILIATION OF GAAP OPERATING INCOME/MARGIN TO NON-GAAP OPERATING INCOME/MARGIN: (3) (in thousands, except percentages) YTD 2017 YTD 2018 2019 Guidance GAAP operating income/margin $ 183,787 $ 208,044 $ 219,938 Non-GAAP adjustments: Royalty and other revenue, net o
Slide 117: Non-GAAP Net Income and Diluted EPS
Non-GAAP Net Income and Diluted EPS 1,2 RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME: (3) (in thousands, except per share amounts) YTD 2017 YTD 2018 2019 Guidance GAAP net income $ 124,789 $ 193,543 $ 186,925 Weighted Average Shares Outstanding - diluted 55,874 56,039 57,599 GAAP Net Inc
Slide 118: Adjusted Free Cash Flow
Adjusted Free Cash Flow 1,2 RECONCILIATION OF FREE CASH FLOW TO ADJUSTED FREE CASH FLOW (in thousands) YTD 2017 YTD 2018 Net cash provided by operating activities Net cash provided by operating activities $ 56,062 $ 239,527 Purchases of property and equipment, net (43,684) (17,126) Free cash flow 12